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Recently in Preemption Category


Vinny Sidhu
Legal Intern, Manhattan Institute's Center for Legal Policy

A couple of weeks ago, the California Supreme Court decided a potentially very impactful case dealing with the enforceability of arbitration agreements made between companies and their consumers/employees.

In Sonic-Calabasas A, Inc v. Moreno, the court ostensibly agreed with the U.S. Supreme Court's rulings in Concepcion and Italian Colors Restaurant that federal preemption applied over any state rulings that attempted to control the scope of consumer arbitration agreements under a specific formulation of the unconscionability doctrine.

However, the Sonic court then opened up the door to the potential introduction of a new unconscionability standard that would be substantively similar to the previously-discredited standard.

In the prior U.S. Supreme Court rulings, the Court specifically overruled the Discover Bank rule, which mandated that consumer arbitration agreements that did not include clauses allowing for class action suits were effectively unenforceable. The Supreme Court has held that the Federal Arbitration Act's mandates apply, regardless of any state "substantive or procedural policies to the contrary," including any any specific state standards for arbitration applicability.

Andrew J. Pincus and Archis A. Parasharami of the Mayer Brown law firm have written an op-ed discussing the various issues involved.

Johnson & Johnson (through a wholly-owned subsidiary) manufactures Benecol Regular and Benecol Light Spreads. J&J has had to defend against multiple suits, including one by a Thomas Young, who filed a consumer fraud class action against alleging that Benecol's labeling was false and misleading In particular, the complaint focused on Benecol's claims, on its packaging, that Benecol was: (1) "Proven to Reduce Cholesterol"; and contained (2) "NO TRANS FAT."

In fact, Benecol does contain a tiny amount of partially hydrogenated oil (aka trans fat): an amount that FDA called "insignificant." As for the "Proven to Reduce Cholesterol" claim, Young asserted that it must be false too, because Benecol is allegedly rendered so unhealthy by virtue of containing "dangerous, non-nutritious, unhealthy partially hydrogenated oil" that the cholesterol claim is misleading. So Young sued, invoking New York and New Jersey consumer laws.

In April 2012, the federal district court granted Johnson & Johnson's motion to dismiss the complaint, ruling inter alia that Young's claims were expressly preempted by the Federal Food, Drug, and Cosmetic Act (FDCA), 21 U.S.C. ยง 301 et seq., which (since the adoption of the Nutrition Labeling and Education Act (NLEA) in 1990) expressly preempts any state law "requirement" regarding food labeling "that is not identical to the requirement[s]" imposed by federal law. FDA regulations "require that trans fat levels less than 0.5 grams per serving 'shall be expressed as zero.'" Thus, even if the trans fat claims were misleading under New York and New Jersey statutes, these laws could not be enforced. Young disagreed and appealed to the Third Circuit, arguing that his state consumer protection claims were not preempted because they were "not inconsistent" with FDA regulations. The alert reader has doubtless noted, however, that the statutory test is not whether state requirements are "consistent" with FDA requirements;, but whether they are "identical." Thus did the Third Circuit today affirm that NLEA pre-empts state consumer laws as regards food product labeling.

Another victory for common labeling standards for goods marketed nationally, and for amicus Washington Legal Foundation, which filed a persuasive brief for the winning side!

Justice Kennedy's majority opinion in Arizona v. US suggests that the biggest problem with the Arizona immigration measure (SB 1070) is that it conflicts with Congress's (non-existent) right to control what foreigners think of us.

The majority recognizes (as did the Obama administration) that SB 1070 isn't trumped by Congress's constitutional power to establish a "uniform rule of Naturalization." The Ariz. law does not change the rules of naturalization (who can enter the country and under what conditions can they stay); rather, it adds certain state penalties to what are already violations of federal law.

Instead, the majority relies on a mythical all-encompassing federal power over "the status of aliens" -- a power which, according to the majority, flows from the executive's power over foreign affairs. Thus, the federal executive branch must have exclusive control over the mechanisms for enforcing immigration law because of the "fundamental" requirement that foreign countries concerned about the "status, safety, and security of their nationals" must be able to deal with one government, not 50. Justice Kennedy cites the amicus brief filed by Argentina (I kid you not) for the proposition that the federal government must control the "perceptions" that aliens have of this country.

Even assuming that it is a worthwhile goal to give foreign governments the convenience of one-stop shopping and a more friendly "perception" of the US, these considerations must yield to the Constitution. As usual, the money quote is from Scalia's dissent:

The Constitution gives all those on our shores the protections of the Bill of Rights--but just as those rights are not expanded for foreign nationals because of their countries' views . . . neither are the fundamental sovereign powers of the States abridged to accommodate foreign countries' views. Even in its international relations, the Federal Government must live with the inconvenient
fact that it is a Union of independent States, who have their own sovereign powers.

By ignoring this "inconvenient fact," the majority casts aside the most basic aspect of state sovereignty: the right to control a state's borders. In the founding era, and for many decades thereafter, the operative assumption was that the states had the exclusive power to exclude undesirable aliens. Jefferson and Madison objected to President Adams' Alien Acts (part of the "Alien and Sedition Acts") on the grounds that the power to determine whether aliens are "dangerous" belonged to the states and had never been delegated to the federal government. In Mayor of New York v. Miln (1837), the Court upheld a New York statute that gave the City the power to turn away any passengers arriving in the Port of New York who the Mayor thought might become a burden on the City.

What we're seeing today is another example of the Court's tendency to interpret the Constitution in a way that the Justices imagine will be most congenial to foreign (mainly European) sensibilities. This approach has already done violence to federalism (e.g., through holdings that the president can invade states' rights via the treaty power); and of course has turned the Eighth Amendment into a mere appendage of the UN Charter.

Paul Taylor, Chief Counsel to the Subcommittee on the Constitution for the House Judiciary Committee, lays out a comprehensive argument for federal tort reform in The Federalist Papers, the Commerce Clause, and Federal Tort Reform published in the Suffolk University Law Review.

In the modern era, Congress has enacted many federal "tort reform" statutes that supersede contrary state laws. However, some question the appropriate constitutional role of Congress in enacting federal tort reform. The Federalist Papers, the authoritative exposition on the Constitution written by James Madison and Alexander Hamilton, describe the need for a new federal Constitution that gave Congress the power to regulate "Commerce ... among the Several States." This Article explores in detail the extent to which the arguments presented in the Federalist Papers, many of them too often overlooked, support Congressional efforts to enact federal tort reform. Indeed, the authors of the Federalist Papers advocated for a Commerce Clause that Congress could use to remove state barriers to trade that weakened the national economy. The examples Madison and Hamilton gave illustrating the need for the Commerce Clause encompass by their logic many federal tort reforms regarding both state products and personal liability law, insofar as such reforms are required to counteract significant negative impacts on America's free enterprise system and thereby facilitate the free flow of voluntary commerce between willing buyers and willing sellers nationwide.

Gregory Conko, a senior fellow at the Competitive Enterprise Institute, a Washington D.C.-based think tank, asked an important question in a piece published on our sister blog Medical Progress Today. Who should be liable when a patient is injured by a generic drug?

In a case called Conte v. Wyeth, a California Intermediate Appellate Court in San Francisco held that, since plaintiffs can't sue a generic manufacturer for negligent failure to warn, then they should be able to sue the innovator manufacturer who had some control over the contested labeling -- even if the patient didn't take the innovator's product, and even if the innovator is no longer manufacturing the off-patent drug and therefore no longer keeping its labeling up to date.

Conko tackles the "reasonably foreseeable" theory that emerged from the Conte decision and discusses the potential implications that the broad adoption of such tort theory can have on innovation. While the analysis doesn't call for a particular legal solution, Conko provides insight into a potential Supreme Court issue.

We've previously discussed a series of lawless cases in Nevada against Teva Pharmaceuticals and Baxter Healthcare over the misuse of propofol by the Desert Shadow Endoscopy Center, whose ludicrously unsanitary practices caused dozens of cases of hepatitis C: May 19, 2010; May 24, 2010; ; June 17, 2010; March 4. The culpable doctor and entities are bankrupt, so lawyers have been going after the deep pocket, aided by judges that refuse to apply federal law barring such lawsuits or to permit the corporate defendants to defend themselves by letting juries know the real facts of the case. As we noted in November, procedural shenanigans have promoted the scheduling of a case involving a plaintiff-friendly judge making improper rulings while staying a related case in another courtroom where the judge is following the law.

Over the last week, a jury in the Sacks v. Endoscopy Center of Southern Nevada LLC case found the pharmaceutical defendants liable again: $20 million in "compensatory" damages, and $162 million in punitive damages. A third jury awarded $14 million in compensatory damages to another plaintiff, and is considering punitives. None of the press or blog coverage adequately indicates how scandalous and abusive these verdicts are. [LVRJ; Reuters/Frankel; AP/WaPo; Pharmagossip; Pharmalot]

(I'll be at UNLV Law in February discussing the propofol litigation.)

A Health Affairs study (summarized by Reason) puts to rest the hoary claim that Medicare is more "efficient" than privately administered insurance programs: even without the high corporate executive pay and advertising of private insurance, Medicare's administrative expenses per enrollee are higher than private insurance. And that's before we get into the fact that Medicare underspends on fraud prevention, losing tens of billions a year that way.

Medicaid will get only more expensive if the Supreme Court affirms a Ninth Circuit decision in a pending case, Douglas v. Independent Living Center of Southern California. The Ninth held that Medicaid providers could sue states over their Medicaid reimbursement policies and ask for courts to adjudicate disputes over whether the states were complying with federal law—though the federal law has no such provision for private action. If so, that's a one-way ratchet for increased costs to state and federal taxpayers, with outlays being decided by judges even more unanswerable to voters than the existing regulatory mechanisms. Oddly, the Chamber of Commerce finds itself in the position of supporting an implied cause of action, arguing that one can enforce the Supremacy Clause in any preemption situation. It seems to me that the Solicitor General's brief has the better of the argument in suggesting that Ex parte Young-style suits are limited to cases where plaintiffs are claiming immunity under federal law to state regulatory action, rather than a broad cause of action to resolve inter-governmental disputes. It's hard to see where the Chamber's limiting principle is: if parties can sue states in an implied cause of action to force compliance with the parties' preferred statutory and regulatory construction, why can't parties sue other private parties in Buckman style claims over alleged regulatory non-compliance? So, yes, I'm siding with the Obama administration against the Chamber of Commerce. More: NYT, NCLC resource page; ABA resource page. The case will be argued at the start of the term on October 3.

Rehearing sought in Mensing

Plaintiffs have filed a long-shot petition for rehearing in PLIVA v. Mensing. Beck explains why it's a dumb petition.

In two major decisions today that will interest the readers of this site, the Supreme Court held that the class alleging gender discrimination against Wal-Mart was improperly certified in Wal-Mart v. Dukes and that the EPA's governance of carbon-dioxide regulation under the Clean Air Act displaced the federal common law public nuisance suit brought by various states and municipalities in AEP v. Connecticut. The holding in both cases was unanimous, though not without underlying disagreement. In Dukes, the justices split 5-4 over whether to dismiss the suit outright (the majority decision) or whether to remand for further consideration as a 23(b)(3) class action (Justice Ginsburg's position, joined by Justices Breyer, Kagan, and Sotomayor). In AEP, the justices split 4-4 on whether the plaintiffs had standing to sue (presumably the same split as in Massachusetts v. EPA), and Justice Alito wrote separately, joined by Justice Thomas, to emphasize that his decision rested on the assumption that the Clean Air Act applied to carbon dioxide emissions (the position he rejected in Massachusetts v. EPA) (Justice Sotomayor, who was involved in the suit below, recused).

Those who didn't see our earlier discussion on Dukes, which pulled in various thinkers and practitioners, should check it out now and compare with the actual decision. The Manhattan Institute also wrote a fair amount on the AEP global-warming-as-public-nuisance case in last fall's Trial Lawyers, Inc.: Environment.

Josh Blackman summarizes Dukes here and AEP here. Walter Olson assesses Dukes here. And as Blackman notes, the Dukes decisions, both majority and dissent, are replete with citations to our dear departed friend Richard Nagareda's published writings, both The Preexistence Principle and the Structure of the Class Action, 103 Colum. L. Rev. 149, 176, n. 110 (2003) and Class Certification in the Age of Aggregate Proof, 84 N. Y. U. L. Rev. 97, 131-132 (2009).

The American Association for Justice has filed its first quarter lobbying disclosure form with the Clerk of the House, reporting $850,000 in lobbying expenses for the period, down from the $910,000 reported in the fourth quarter of 2010. The report filed with the House Clerk's Office indicates continued lobbying on familiar issues, such as:

  • Notice pleadings in federal courts (Iqbal/Twombly)
  • Preemption of state causes-of-action involving drug manufacturers
  • Various bills to restrict pre-dispute arbitration provisions in contracts.
  • S. 623/H.R. 592 (Sunshine in Litigation Act of 2011); relating to the use of protective orders, sealing of cases, and disclosure of discovery information in federal civil cases. (See earlier POL post.)

In light of the new Republican control of the U.S. House, the trial lawyers are also lobbying some new issues and pieces of legislation. These jumped out at us:

  • H.R. 966/S. 533 (Lawsuit Abuse Reduction Act of 2011); to amend Rule 11 of the Federal Rules of Civil Procedure to make sanctions mandatory.
  • S. 299/ H.R. 10 (Regulations From the Executive in Need of Scrutiny Act of 2011); to provide that major rules of the executive branch shall have no force or effect unless a joint resolution of approval is enacted into law.
  • H.R. 1 (Full-Year Continuing Appropriations Act); specific interest in House Amdt. 85 to defund the Equal Access to Justice program, and House Amdt.159 to defund the the Consumer Product Safety Commission Product Safety Database.
  • H.R. 887(no short title); to direct the Secretary of the Interior to submit a report on Indian land fractionation, and for other purposes, specific interest in the modification of attorney's fees. (This is a post-Cobell piece of legislation from Rep. Don Young (R-AK).

The GOP House has also elicited an increased level of lobbying against federal medical liability reform, specifically, H.R. 5, the Help Efficient, Accessible, Low-cost, Timely Healthcare (HEALTH) Act and malpractice reforms generally. The AAJ continues to go outside its own lobbying shop to pay Patton Boggs to work the health care issue, among others, to the tune of $130,000 for the quarter, as well as Forscey and Stinson, $50,000.

The AAJ has also added another lobbying firm to handle medical liability and health care issues, Van Heuvelen Strategies, LLC. Bob Van Heuvelen is the former chief of staff to Sen. Kent Conrad (D-ND), who is not seeking reelection in 2012.




Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.