Appellate Practice News/Client Alerts

Under the Supreme Court's jurisprudence, a law must be both neutral and generally applicable before it can restrict the First Amendment rights of individuals to the free exercise of their religious beliefs. In July 2009, a panel of the Ninth Circuit considered whether the neutrality requirement was met by a law that was facially neutral but that was, according to the plaintiffs, adopted with a purpose of discriminating against religious beliefs. The panel issued an opinion holding that facial neutrality was sufficient and adopting a bright-line rule forbidding courts in the Ninth Circuit from examining "the legislative history of the law—its historical background, the events leading up to its adoption, and its legislative or administrative history, including contemporaneous statements by members of the decisionmaking body."

The plaintiffs, including a small business injured by the application of the facially neutral law, filed a petition for panel rehearing (rehearing before the same three judges who issued the opinion) or rehearing en banc (rehearing before a panel of 15 judges of the Ninth Circuit) to challenge the ruling on a number of grounds. Warner Norcross, representing a mix of religious groups (and a law professor) interested in preserving religious liberty, filed a friends-of-the-court (amici curiae) brief addressing a single issue: the Ninth Circuit's rule requiring that the neutrality of a law be judged simply by its text, without consideration for whether law was enacted out of animus towards religion or a particular religious group.

On October 28, 2009, the panel took the rare step of granting rehearing before the panel, vacating its prior opinion, and issuing a new opinion that changed its analysis of the neutrality issue. In its new opinion, the panel granted the relief requested by the amici curiae brief—that "the panel should amend its opinion to allow future panels of this Court to properly consider the historical context when evaluating whether a law that burdens the free exercise of religion is truly neutral"—and removed the rule that forbade considering the legislative history of the law, concluding that it "need not decide whether it was permissible for the district court to rely upon the administrative history of the new rules."
 

The U.S. Supreme Court issued its decision in Altria Group v. Good on December 15, holding 5-4 that a state court lawsuit alleging fraudulent advertising of "light" cigarettes’ health benefits could proceed against Altria, the parent company of Philip Morris. Altria had argued that the lawsuit was pre-empted by the federal Cigarette Labeling and Advertising Act. 

The decision was surprising, according to John Bursch, chair of Warner Norcross & Judd's Appellate Practice Group, given that the Court has recently ruled in favor of the business community in several pre-emption cases. This time, Justice Kennedy changed position and, along with Justices Souter, Ginsburg, and Breyer, joined Justice Stevens' majority opinion.

Justice Stevens wrote that the federal Act does not pre-empt state authority to regulate deceptive advertising, but rather pre-empts only state requirements for additional warning labels. Bursch said it remains to be seen whether this ruling will have any impact on Wyeth v. Levine, the other significant preemption case that the Court will decide this term.

Wyeth asks the Court whether federal law pre-empts a state law personal injury action based on a drug label that met FDA labeling requirements.
 

The U.S. Supreme Court on February, 20, 2008, issued two decisions of interest to the business community.

In Riegel v. Medtronics, Inc., the Supreme Court granted a major victory to medical device manufacturers. In an 8-1 decision, the Court held that federal law preempts state law tort liability for devices that have passed the Food and Drug Administration's pre-market approval process. The Court based its decision on a strict interpretation of the preemption clause of the Medical Device Amendments of 1976, 21 U.S.C. § 360k(a), which prohibits states from imposing any requirement on medical devices that is different from or in addition to requirements the federal government has established. A copy of the opinion can be found at http://www.law.cornell.edu/supct/html/06-179.ZS.html.

In LaRue v. DeWolff, Boberg & Associates, the Court unanimously ruled that individual workers can sue over mismanagement of an ERISA retirement plan. In the past, courts have interpreted the law to permit a breach of fiduciary duty claim only where an employer has injured all plan participants. The case involves plaintiff LaRue's claim that he suffered $150,000 in damages when his employer’s 401(k) program administrator failed to make certain changes that LaRue requested be made to his investment plan. A copy of the opinion can be found at http://www.law.cornell.edu/supct/html/06-856.ZC.html.
 

The U.S. Supreme Court has accepted for review Riegel v. Medtronic, Inc., a case involving liability for medical manufacturers who make faulty products. The Court will decide whether the federal law that authorizes the FDA to pre-approve some medical devices preempts state tort law and therefore state law claims. The plaintiff, Charles Riegel, experienced severe complications when a coronary artery catheter manufactured by Medtronic burst during his angioplasty. Riegel sued Medtronic under a variety of state law claims. Medtronic asserted that Section 360k(a) of the Medical Device Amendments to the Food, Drug, and Cosmetic Act preempted Riegel's claims, because the law forbids states from setting requirements that differ from or add to federal requirements. The District Court held that Riegel's claims were preempted and dismissed them; the U.S. Court of Appeals for the Second circuit agreed. The Supreme Court must decide whether state law claims for defective medical services survived the passage of Section 360k(a).

A decision is expected in the spring of 2007 and will potentially affect thousands of medical device claims across the country. Interested parties should contact the Chair of our Appellate Practice Group for more information about filing an amicus curiae brief in this case.
 

The U.S. Supreme Court has granted a petition for certiorari in LaRue v. DeWolff, Boberg & Assoc, Inc., et al., a case involving the ability of an individual worker to sue her employer for breach of fiduciary duty under an ERISA retirement plan. In the past, courts have interpreted the law to permit a breach of fiduciary claim only where an employer has injured all plan participants. Plaintiff James LaRue participated in his employer's 401(k) program, administered by defendant DeWolff. When DeWolff failed to make certain changes that LaRue had requested for his investment plan, he filed suit, seeking $150,000 in damages. Both the District Court and the U.S. Court of Appeals for the Fourth Circuit held in favor of DeWolff, and the Supreme Court will now decide the issue.

It is expected that the Supreme Court will issue a decision in the spring of 2007. Interested parties should contact the Chair of our Appellate Practice Group for more information about filing an amicus curiae brief in this case.
 

On November 7, 2007, the U.S. Supreme Court will hold oral arguments in Hall Street Assoc., L.L.C. v. Mattel, Inc., a case involving the power to give federal courts greater power to overturn arbitration awards than the Federal Arbitration Act envisions. The issues arises out of a plain vanilla lease dispute that the landlord, Hall Street, and the tenant, Mattel, agreed to resolve through arbitration. But the parties' arbitration agreement was unusual in that it purported to authorize the District Court to override the arbitrator's decision if "the arbitrator's conclusions of law are erroneous" (a standard the Michigan courts apply, but one the federal courts do not). After the arbitrator issued a decision in favor of Mattel, Hall appealed, and the District Court held that the arbitrator had misapplied the law. The Ninth Circuit reversed, holding that the parties did not have the power to contract around the Federal Arbitration Act's list of circumstances meriting judicial review.

It is likely that the Court will issue its decision in early 2007. Interested parties should contact the Chair of our Appellate Practice Group for more information about filing an amicus curiae brief in this case.
 

The U.S. Supreme Court has agreed to review the scope of circumstantial evidence permitted to be introduced at a trial of a federal age discrimination in employment claim. In Sprint/United Management Co. v. Mendelsohn, a company-wide reduction in force resulted in a claim asserted by 51-year-old Plaintiff Mendelsohn, who alleged that her termination violated the Age Discrimination in Employment Act. At trial, the District Court refused to allow Mendelsohn to introduce so-called "me, too" testimony from other employees, not parties to the case, who also alleged the company discriminated against them on account of age. The jury eventually found in favor of Sprint, but the U.S. Court of Appeals for the Tenth Circuit reversed, holding that the testimony was both relevant and admissible, and that the trial court's exclusion of the testimony deprived Mendelsohn of a fair trial.

A decision is expected from the Supreme Court in spring 2007. Interested parties should contact the Chair of our Appellate Practice Group, for more information about filing an amicus curiae brief in this case.
 

On May 21, 2007, the U.S. Supreme Court issued a significant ruling elaborating on federal pleading requirements in Bell Atlantic Corporation v. Twombly. In a 7-2 decision, the Court held that Federal Rule of Civil Procedure 8(a)(2) requires that a complaint contain more than "a formulaic recitation of a cause of action's elements" to survive a motion to dismiss. There must be sufficient factual allegations to raise the right to relief "above the speculative level." In dissent, Justice Stevens argued that dismissing the case "without even looking at any of that evidence marks a fundamental—and unjustified—change in the character of pretrial practice." Though Twombly technically involved the pleading requirements for a claim under Section 1 of the Sherman Act, the ruling extends to all federal court complaints and likely to state court complaints in the 26 states that have adopted the federal pleading standard.

While some commentators have anticipated that the Twombly ruling will make it easier for a defendant to prevail on a motion to dismiss based on the pleadings, the Supreme Court cast some doubt on that supposition just two weeks later in its per curiam opinion in Erickson v. Pardus. In Erickson, the Court reversed a 10th Circuit decision that dismissed a complaint for being "conclusory." Erickson involved a prisoner's pro se complaint, which is held to a lower pleading standard than a complaint filed by a lawyer, but nonetheless suggests that there is still significant room for disagreement regarding whether Twombly signals the abandonment of the notice pleading standard in federal courts.
 

The D.C. Circuit Court of Appeals' March 13, 2007 decision vacating the Maximum Achievable Control Technology ("MACT") standards for hazardous air pollutants promulgated by EPA under Section 112(d)(3) of the Clean Air Act for the Brick and Ceramic Kiln industry (Sierra Club v. EPA, No. 03-1202) ("Brick MACT decision") sends a clear signal that the Circuit, which has exclusive jurisdiction to hear cases challenging MACT rules, believes that EPA has been ignoring clear statutory mandates in adopting MACT standards. Relying upon what the Court considered to be established precedent in the Circuit, specifically Cement Kiln Recycling Coalition v. EPA, 255 F.3d 855 (D.C. Cir. 2001) (per curiam), and National Lime Ass’n v. EPA, 233 F.3d 625 (D.C.Cir. 2000), the Court strongly rebuked EPA.
 

The Sierra Club argues that EPA's methodology in setting floors for brick and ceramics kilns violates the Clean Air Act's plain language as interpreted by Cement Kiln and National Lime II. We agree.
 

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If the Environmental Protection Agency disagrees with the Clean Air Act’s requirements for setting emissions standards, it should take its concerns to Congress. If EPA disagrees with this court’s interpretation of the Clean Air Act, it should seek rehearing en banc or file a petition for a writ of certiorari. In the meantime, it must obey the Clean Air Act as written by Congress and interpreted by this court.
 

The opinion criticized EPA's process of setting MACT standards in a variety of respects, but the most far-reaching impacts will stem from two central holdings. First, the Court clearly declared that EPA must set numeric emission standards for hazardous air pollutants based upon the statutory formula as applied to the "best performing" sources in an industry category. The standards should be applied even where it is recognized that many sources within the category may not be able to achieve the standard irrespective of the extent of control technology that could be applied. Second, the Court significantly limited those circumstances in which EPA can adopt so-called "work practices" in lieu of numeric emission limitations.

The opinion had immediate impact beyond the brick and ceramic kiln industry. In response to the opinion, EPA filed a motion in the D.C. Circuit to voluntarily vacate portions of the Boiler MACT (40 C.F.R. 63, Subpart DDDDD). Legal challenges to these rules had been already brief and argued to the Court. However, EPA acknowledged that in light of the decision in the Brick MACT case, its legal position in the Boiler MACT litigation was, in part, untenable.
 

In a 5-4 decision issued April 2, 2007, the United States Supreme Court held that the Environmental Protection Agency is authorized to regulate emissions from automobiles, concluding that greenhouse gases are "pollutants" as defined by the Clean Air Act. The Court stated that the agency can "avoid taking further action only if it determines that greenhouse gases do not contribute to climate change." Justice Stevens authored the majority opinion, with Chief Justice Roberts and Justices Scalia, Thomas, and Alito in dissent. The full opinion in Massachusetts v. EPA can be reviewed here.

In a separate environmental decision issued April 2, 2007, the Court addressed permitting requirements when a power plant undergoes a "modernization" program involving the replacement of old parts. The Court unanimously sided with the plaintiff environmental groups and the EPA, holding that a company must obtain a permit to effect changes in a power plant that may contribute to air pollution, and that such permits must be based on annual pollution levels, not hourly levels. The full opinion in Environmental Defense v. Duke Energy Corp. can be reviewed here.
 

On February 20, 2007, the Supreme Court established a test for predatory-bidding claims under federal antitrust law. In this case, Ross-Simmons, a sawmill company, claimed that a competitor drove it out of business by bidding up the price of sawlogs to a level that prevented Ross-Simmons from being profitable. The Supreme Court held that to violate federal antitrust laws against predatory bidding, a plaintiff must satisfy a two-part test. The plaintiff must show (1) that the alleged predator is actually selling product below its costs, and (2) that the alleged predator can then recoup its losses by increasing the price above commercially reasonable levels once the competitor is out of business. Because Ross-Simmons conceded that it could not meet this two-part test, the Supreme Court dismissed its claim. This new decision will apply to business situations in which an alleged predator is selling its product at a reduced rate in order to drive a competitor out of business.
 

In a 5-4 decision issued February 20, 2007, the U.S. Supreme Court reversed a $79.5 million punitive damages award against Philip Morris that had been granted to a smoker's widow. The majority held that Philip Morris could not be punished for harm to smokers who were not parties to the suit.

The plaintiff, Mayola Williams, had argued that the punitive damages award was appropriate, because Philip Morris had engaged in a massive fraud on the market that misled the public into believing cigarettes were not addictive or dangerous. Writing for the majority, Justice Breyer disagreed that this was an appropriate basis for a punitive damages award: a state must "provide assurances that juries are not asking the wrong question . . . seeking, not simply to determine reprehensibility, but also to punish for harm caused strangers."

Chief Justice Roberts and Justices Alito, Kennedy, and Souter joined the majority opinion, which did not address whether the award's size was constitutionally excessive, as Philip Morris had also asked. Justices Ginsburg, Scalia, Stevens, and Thomas dissented.
 

On February 20, 2007, the U.S. Supreme Court rejected a First Amendment appeal by Southfield, Michigan, attorney Geoffrey N. Fieger, who had been reprimanded for public comments he made about state appellate judges. The judges had overturned a significant medical malpractice award in favor of Fieger's clients. Litigation regarding the reprimand has resulted in a well-publicized dispute between various justices on the Michigan Supreme Court.
 

On January 19, 2007, the U.S. Supreme Court decided to review a major case involving liability under the federal Superfund law, CERCLA. The case will be an important follow-up to the 2004 case of Cooper Industries v. Aviall Services, which outlined the contours of the right of contribution under Section 113 of CERCLA. In that case, the Court ruled that a plaintiff could not bring a claim for contribution against another liable party unless the plaintiff had either been sued by or settled with the government for those response costs. Now, in United States v. Atlantic Research Corporation, the Court will decide whether a potentially responsible party can bring a claim for cost recovery under Section 107 of CERCLA. The lower courts are split on this issue. If the Supreme Court rules that a potentially responsible party cannot bring such a claim, then that party will be precluded from bringing any claim under CERCLA for response costs unless and until that party is sued by or settles with the government for response costs. Section 107 of CERCLA will then be reserved solely for those innocent parties who are not liable under CERCLA (either as an owner, operator, arranger or transporter).

A decision is expected in the spring of 2007 and will potentially affect thousands of claims for reimbursement of response costs under federal law. Interested parties should contact the Chair of our Appellate Practice Group for more information about filing an amicus curiae brief in this case.
 

On January 19, 2007, the U.S. Supreme Court decided to reexamine the constitutionality of a portion of the McCain-Feingold Act. The Act bans nonprofit corporations from using their corporate treasuries to run television ads naming candidates in the days leading up to elections. In this particular case, during the run-up to the 2006 elections, Wisconsin Right to Life purchased ads opposing Senate filibusters of candidates nominated for federal judgeships and urging viewers to contact Senators Feingold or Kohl. Feingold was in a campaign for reelection at the time. The lower court ruled that the Act was unconstitutional as applied to these types of genuine issue ads, which were not specifically aimed at affecting the outcome of a particular election.

A decision is expected in the spring of 2007 and will affect any nonprofit corporations, including trade associations, that have expressed, or plan to express, a political point-of-view in a television commercial. Interested parties should contact the Chair of our Appellate Practice Group for more information about filing an amicus curiae brief in this case.
 

On January 19, 2007, the U.S. Supreme Court decided to review a case involving the obligations of a plan sponsor when deciding to terminate a pension plan. At issue is whether a plan sponsor's decision to terminate a pension plan by purchasing an annuity, rather than merging the plan with another plan, is a fiduciary decision under ERISA. Although the decision to terminate a plan is clearly a business decision not subject to the fiduciary requirements of ERISA, in Beck v. PACE International Union the lower court and the Ninth Circuit Court of Appeals both held that the plan sponsor violated its fiduciary obligations by not at least investigating the possible merger. That decision conflicts with the rationales advanced by other Courts of Appeal that have held the decision to modify, amend or terminate a pension plan is solely a business decision that is not subject to fiduciary obligations under ERISA.

A decision is expected in the spring of 2007 and will primarily affect any employer who sponsors a nonunion pension plan and has union employees who participate in a multiemployer pension plan. The decision is also likely to affect any employer that either sponsors multiple pension plans or sponsors at least one pension plan and has employees participating in a different pension plan. Interested parties should contact the Chair of our Appellate Practice Group for more information about filing an amicus curiae brief in this case.
 

On January 19, 2007, the U.S. Supreme Court decided to review a major case involving the applicability of the Foreign Sovereign Immunities Act ("FSIA") to corporations owned by a foreign government. Powerex Corp. is a Canadian corporation wholly owned by the British Columbia Power and Hydro Authority, which is a Provincial Crown Corporation owned in its entirety by the Province of British Columbia. Powerex was sued in California state court on a claim of unlawful manipulation of the electricity market in violation of federal law. On appeal to the 9th Circuit Court of Appeals, Powerex claimed that it was immune from suit under the FSIA as an "organ of a foreign state." The 9th Circuit held that Powerex did not qualify for immunity, because it operates independent of and is not directly owned by the Canadian government. The Supreme Court is now set to clarify the standard for corporate immunity under the FSIA.

A decision is expected in the spring of 2007 and will affect the well-established practice of foreign governments using separate legal entities to perform inherently sovereign functions. Interested parties should contact the Chair of our Appellate Practice Group for more information about filing an amicus curiae brief in this case.