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A Discussion with SBA Administrator Jovita Carranza: Current Issues and the FY2021 Budget

House Small Business Committee News - Wed, 02/26/2020 - 11:30am

The Committee on Small Business will hold a hearing titled, “A Discussion with SBA Administrator Jovita Carranza: Current Issues and the FY2021 Budget.” The hearing is scheduled to begin at 11:30 A.M. on Wednesday, February 26, 2020 in Room 2360 of the Rayburn House Office Building.

The Honorable Jovita Carranza was sworn in on January 7, 2020, as the 26th Administrator of the United States Small Business Administration (SBA). Members will hear Administrator Carranza’s vision for the agency, explore the Administration’s FY2021 budget request, and have an opportunity to discuss the opportunities and challenges that exist for small businesses participating in the SBA’s programs.

To view a livestream of the hearing, please click here. 

Hearing Notice 

Hearing Memo 

Witness List 


The Honorable Jovita Carranza
U.S. Small Business Administration
Washington, DC

*Witness testimony will be posted within 24 hours after the hearing’s occurrence

Justice Kavanaugh Hints at Future Consideration of Nondelegation Doctrine

WLF Legal Pulse - 12 hours 22 min ago

By Brett A. Shumate a Partner, and John Cheretis, an Associate, with Jones Day in its Washington, DC office.

Editor’s note: This is Brett Shumate’s inaugural post as the WLF Legal Pulse‘s Featured Guest Commentator on Administrative Law & Separation of Powers. Brett joins 13 other private practitioners and one law professor who write regularly for our blog on specific legal and policy matters. Before joining Jones Day, Brett was the Deputy Assistant Attorney General for the Civil Division’s Federal Programs Branch at the U.S. Department of Justice.

In a recent statement concerning the Supreme Court’s denial of certiorari in a case from the Sixth Circuit, Paul v. United States (contained in a November 25 order of the Court), Justice Kavanaugh appeared to prime the Court for future consideration of a potentially significant limitation on federal agency rulemaking authority. While acknowledging that the case in question was an improper vehicle to examine the issue, Justice Kavanaugh suggested that the Constitution’s “nondelegation doctrine” may prohibit Congress from delegating its authority to decide “major policy questions” of great economic and political importance to federal agencies.

In his statement, Justice Kavanaugh suggested that the Court currently allows administrative agencies to issue rules involving major policy questions where Congress has either (1) expressly decided the major policy question itself, and merely delegates the authority to regulate and enforce the decision to the agency, or (2) expressly delegates both the authority to decide as well as the authority to regulate and enforce the decision to the agency. It is this latter category, according to Justice Kavanaugh, that may be impermissible under the nondelegation doctrine.

Justice Kavanaugh cited an opinion authored by then-Justice Rehnquist arguing that major national policy decisions must remain under the purview of the elected branches, and thus may not be delegated by Congress to the Executive Branch. He also cited Justice Gorsuch’s dissenting opinion in Gundy v. United States. In Justice Kavanaugh’s view, the nondelegation doctrine would prevent Congress from expressly delegating unbridled regulatory authority to decide major issues.

This is not Justice Kavanaugh’s first foray into the major questions debate. While serving on the D.C. Circuit, Judge Kavanaugh discussed judicial standards for determining whether a challenged rule is aimed at resolving a “major policy question.” In 2017, the D.C. Circuit denied a petition to rehear a three-judge panel’s decision in USTelecom Ass’n v. FCC, which upheld the FCC’s 2015 net neutrality rule as a valid exercise of agency rulemaking authority. In dissent, then-Judge Kavanaugh argued that the FCC could not rely on an ambiguous grant of rulemaking authority contained in an older statute as a basis for claiming novel authority to promulgate such a major and sweeping rule.

In so doing, Judge Kavanaugh surveyed recurrent themes in Supreme Court precedent to identify several factors to consider in deciding whether an agency action involves a question of great economic and political importance: (1) the amount of money involved for regulated parties, (2) the overall impact on the economy, (3) the number of people affected, and (4) the degree of congressional and public attention to the issue. Judge Kavanaugh also indicated that judicial skepticism of an agency’s issuance of a “seemingly major rule” should be heightened when “an agency relies on a long-extant statute to support the agency’s bold new assertion of regulatory authority.”

By taking Justice Kavanaugh’s lead, the nondelegation doctrine may emerge as a powerful tool of constitutional restraint against overzealous agency rulemaking of major questions. Using the factors Judge Kavanaugh identified in his net neutrality dissent, ambitious agency rules may be susceptible to future challenge as the product of an impermissible grant of congressional rulemaking authority, even if Congress has expressly granted authority to decide major questions.

The post Justice Kavanaugh Hints at Future Consideration of Nondelegation Doctrine appeared first on Washington Legal Foundation.

Categories: Latest News

Fight over TCPA’s Constitutionality Advances to U.S. Supreme Court

WLF Legal Pulse - Tue, 02/18/2020 - 2:03pm

Robert W. Quinn is a Partner with Wilkinson Barker Knauer LLP in Washington, DC and serves as the WLF Legal Pulse‘s Featured Expert Contributor on Communications Regulation.

This U.S. Supreme Court Term could prove to be very consequential for Congress, telemarketing firms and consumers alike as it relates to the Telephone Consumer Protection Act (TCPA). The Court currently has before it two cases (one in which certiorari has been granted while the other is still pending) that could go a long way toward forcing Congress to update the nearly 29-year old statute.  The first case, Amer. Ass’n of Political Consultants, Inc. et al. v. FCC, 923 F.3d 159 (4th Cir. 2019) cert. granted sub nom., Barr v. American Association of Political Consultants, et al., 205 L. Ed 449, 2020 U.S. LEXIS 2, 2020 WL 113070 (U.S. Jan. 10, 2020) (No. 19-631) (“Barr”) will determine whether Congress’ addition, in 2015, of a TCPA exemption for federal government debt-collection communications, renders the entire statute unconstitutional.  Even if the TCPA survives the constitutional challenge in Barr, the second case, Duguid v. Facebook, 926 F. 3d 1146 (9th Cir. 2019) petition for cert. filed sub nom, Facebook, Inc. v. Duguid, (U.S. Oct. 17, 2019) (No. 19-511) could result in Congress having to update the technology provisions of the TCPA should it desire the law to capture and restrict modern telemarketing equipment and processes.

For the uninitiated, the TCPA places several different types of restrictions on the ability to contact consumers, including through the use of automated telephone equipment.  While consumer groups at first generally regarded the law as a success (particularly with the advent of the FTC’s Do Not Call Registry), the advance in telemarketing technology combined with the sheer increase in in the number of fraudulent telemarketing calls—particularly robocalls—has led regulators to expand the reach of the law to its very breaking point.  The result has been consumer frustration (because the scam robocalls keep coming), business frustration (because legitimate business calls increasingly get captured in the regulatory web and class-action lawsuits) and political frustration (because nothing seems to fix the problem).  Given those issues, and national presidential and congressional elections, TCPA activity will be cresting in 2020.

The TCPA’s main provisions as implemented by the FTC and the FCC are straightforward: the law prohibits companies from making unsolicited contact with consumers on telephone numbers the consumers have enrolled on the FTC’s Do Not Call Registry (with certain specified exceptions).1  It also places significant additional restrictions on the use of automated telephone dialing systems to call consumers on cellular phones or the use of prerecorded or artificial voice technology in calls to both residential or cellular telephone number (once again with specified exceptions).  Because the TCPA provides for statutory damages of up to $500 per violation (with the possibility of treble damages for violations deemed intentional or willful), it has been a hotbed for litigation.  Congress left the primary restrictions in the TCPA untouched from its 1991 enactment until 2015, when it amended the TCPA to exempt telephone calls made using automated and prerecorded technologies where “the call is made solely to collect a debt owed to or guaranteed by the United States.”2

At issue in Barr is the effect of that 2015 statutory revision on the TCPA’s constitutionality. In the underlying litigation, plaintiffs (several political organizations) argued that the newly created exemption for federal government debt collection, as implemented by the FCC, was a facially unconstitutional content-based restriction of speech in violation of the First Amendment.  The district court agreed that the government debt-collection amendment was indeed a content-based restriction.  However, after applying a strict scrutiny analysis, the court concluded that the FCC-implemented restrictions were narrowly tailored to further a compelling governmental interest and, thus, a permissible content-based regulation.  On appeal, the Fourth Circuit agreed with the lower court that the government debt-collection amendment was a content-based restriction, but disagreed with its conclusion that the amendment was narrowly tailored to serve a compelling governmental interest.  To rectify this constitutional infirmity, the Fourth Circuit chose to excise the offending amendment rather than invalidate the entirety of the TCPA, noting that the statute had been “fully operative” for twenty-four years before the offending amendment was enacted.

Interestingly, there is no split in the circuit courts on this issue because the Ninth Circuit reached the same conclusion in the Duguid case we will discuss below.3  The United States government, however, has a different view. Therefore, in Barr, the government is challenging the conclusion that the government debt-collection exemption constitutes a content-based restriction in the first instance (and is defending the severability of that provision should the Court disagree).  According the government, the exemption is akin to the Fair Debt Collection Practices Act and the Fair Credit Reporting Act, which impose requirements on communications on debt collection and the creation and use of credit reports.  Rather than being viewed as content-based restrictions on speech, those statutes have long been interpreted to hinge on the economic nature of the relationship between the parties.

But even if the United States prevails and the TCPA is left largely intact, the Duguid case, should the Court grant certiorari, could force Congress to rethink the automated technology provisions of the TCPA, which changes in technology and business practices have rendered nearly obsolete. As described above, § 227(b)(1) of the TCPA prohibits, without prior express consent, the use an automatic telephone dialing system (“ATDS”) for calls made to cellular telephones, among other restrictions.  The statute defines an ATDS to be “equipment which has the capacity (A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.”4  However, over the years, the industry has moved beyond technology that utilizes “random or sequential number generators.”  In the era of big data and profile creation, telemarketers and other callers don’t want to address a “random” market—they want to contact consumers whom they have reason to believe have an interest in purchasing their products.

The FCC foresaw that technology change in 2003, and sought to sweep “predictive dialers,” i.e., equipment that can be programmed to store and automatically dial telephone numbers, into the ATDS definition, irrespective of whether the equipment actually generated the numbers itself, let alone whether the numbers dialed were at random or sequential.5  The FCC also sought to expand the TCPA definition by sweeping in any equipment which had the capacity “to store or produce telephone numbers” and then dial such numbers at random or in sequential order6—again regardless of whether the equipment was being used in that manner.  In 2008 and again in 2015, the FCC reaffirmed and expanded those findings, rejecting again that to be an ATDS, the equipment must be presently able to generate at random or sequential telephone numbers.7  Two things are evident from this history.  First, the TCPA definition of a specific ATDS technology is now outdated in the marketplace today.  Telemarketers and other businesses have largely abandoned random or sequential dialers in favor of technology that allows more targeted consumer contact.  Second, in its efforts to forestall that technical obsolescence, the FCC crafted a definition so broad as to encompass virtually any modern telephone.

Something must give; if that FCC viewpoint is correct, every person who asks Siri or Alexa to call their mother is potentially violating the TCPA (unless of course your mother has provided you prior consent or you fall into one of the other narrow exceptions).  In Duguid, the triggering events for the alleged TCPA violations were security alert text messages purportedly intended for a customer who had not updated his/her telephone number (and consequently went to a person who had no relationship to Facebook or the security issue being flagged).

In 2018, the D.C. Circuit weighed in, rejecting the FCC’s definition along with its line of decisions expanding the ATDS definition through the years. ACA Int’l. v. FCC, 885 F.3d 687, 702-703 (D.C. Cir. 2018).  The Third and Eleventh Circuits have subsequently followed the ACA D.C. Circuit lead, while the Ninth Circuit has taken a different approach.  Dominguez ex rel. Himself v. Yahoo, Inc., 894 F.3d 116, 121 (3d Cir. 2018); Glasser v. Hilton Grand Vacations Co., LLC, _ F.3d _, 2020 WL 415811 (11th Cir. 2020); but see Marks v. Crunch San Diego, LLC, 904 F.3d 1041, 1049 (9th Cir. 2018).  Given the circuit court split on the issue and its the implications, odds may be good that the Court will grant certiorari soon. And if it does, the TCPA could be headed for big changes even if it survives the constitutionality challenge in Barr.

The post Fight over TCPA’s Constitutionality Advances to U.S. Supreme Court appeared first on Washington Legal Foundation.

Categories: Latest News

WLF Urges Supreme Court to Provide FAA Guidance to California’s Courts

WLF Legal Pulse - Fri, 02/14/2020 - 12:10pm

“California’s courts plainly need to be told—again—how to apply the Federal Arbitration Act.”
—Corbin K. Barthold, WLF Senior Litigation Counsel

Click here for WLF’s brief.

(Washington, DC)— Washington Legal Foundation today filed an amicus curiae brief urging the U.S. Supreme Court to review a California Supreme Court ruling inconsistent with the Federal Arbitration Act.

The FAA establishes a federal policy favoring arbitration. To operate properly, however, the FAA must apply consistently across the nation. The California Supreme Court has repeatedly created inconsistency. It has done so in this case by striking down an arbitration agreement that, in its view, provided the parties too much procedure. It declared the agreement unconscionable on the ground that it set forth rules that look more like ordinary civil litigation than like California’s administrative wage-dispute resolution process.

WLF’s brief argues that the California Supreme Court’s ruling is nothing more than a thinly veiled attempt to ban wage-dispute arbitration altogether, in gross defiance of the FAA. The brief also places the ruling in context, showing that it is simply the latest in a long line of recent California high court decisions that discriminate against arbitration. Finally, the brief discusses the California courts’ improper use, when looking at arbitration clauses, of a special, distorted version of the contractual unconscionability defense.

Celebrating its 43rd year as America’s premier public-interest law firm and policy center, WLF advocates for free-market principles, limited government, individual liberty, and the rule of law. 


The post WLF Urges Supreme Court to Provide FAA Guidance to California’s Courts appeared first on Washington Legal Foundation.

Categories: Latest News

Challenges and Benefits of Employee-owned Small Businesses

House Small Business Committee News - Wed, 02/12/2020 - 11:30am

The Committee on Small Business will hold a hearing titled, “Challenges and Benefits of Employee-owned Small Businesses.” The hearing is scheduled to begin at 11:30 A.M. on Wednesday, February 12, 2020 in Room 2360 of the Rayburn House Office Building.

The Committee will meet to discuss the employee ownership mode, which gives employees a direct investment in the success of the business. Members will have the opportunity to learn about the benefits of employee ownership for business owners, their employees, and their local economies. The hearing will also explore some of the challenges businesses face in converting to an employee-owned model, as well as ways current federal programs can be optimized to minimize those challenges.

To view a livestream of the hearing, please click here. 

Hearing Notice 

Hearing Memo 

Witness List 

Mr. Daniel Goldstein
President and CEO
Cedar Rapids, IA

Mr. R.L. Condra
Vice President of Advocacy and Government Programs
National Cooperative Bank
Arlington, VA

Mr. John Abrams
CEO and Co-Owner
South Mountain Company
West Tisbury, MA

Mr. Mark Gillming
Senior Vice President
Messer Construction Co.
Cincinnati, OH

*Witness testimony will be posted within 24 hours after the hearing’s occurrence

Fear and Loathing at the Department of Labor: Has the OFCCP Become a Law Unto Itself?

WLF Legal Pulse - Tue, 02/11/2020 - 4:47pm

The Framers of our Constitution elevated one historical insight above all others. Concentrating power in the hands of a single branch of government, they agreed, is the antithesis of liberty. An “accumulation of all powers, legislative, executive, and judiciary, in the same hands,” James Madison warned in Federalist 47, “may justly be pronounced the very definition of tyranny.”

The modern administrative state may be a softer form of absolutism than that of Charles I, but it is no less tyrannical. Take the phenomenon of federal agency adjudication. An agency investigates American citizens for alleged administrative offenses. Then it prosecutes and tries them for those offense, not in a court of law, but in the agency’s own administrative star chamber. Beyond allowing the agency to be the investigator, prosecutor, and judge in its own case, agency adjudication in practice often allows the agency to decide cases based on its own internal policies, not on Acts of Congress.

To appreciate the perils of administrative adjudication, one need look no further than to the Office of Federal Contract Compliance Programs. As a division of the Department of Labor, the OFCCP enforces anti-discrimination provisions in federal contracts. The OFCCP’s chief method for rooting out discrimination by contractors is a jarringly blunt statistical calculus. If a company’s workforce is off—even if by a few percentage points—from the minority composition of the available applicant pool, the OFCCP assumes the company has engaged in discrimination.

The OFCCP rarely considers whether anyone has even complained about the company’s hiring or promotion practices, much less whether the company’s hiring and promotion decisions are in fact biased. Indeed, it often proceeds against the accused contractor with zero evidence of discriminatory animus or motive. Under the OFCCP’s approach to discrimination, intent doesn’t matter. Nor does the diversity of the company’s board, or its longstanding commitment to, and investment in, an outreach plan that identifies and recruits qualified minority candidates.

The OFCCP’s stark statistical analysis has produced some curious results. In 2012, it forced FedEx into a $3 million settlement. According to the Labor Department’s own press release, “The affected workers, include men and women as well as African-American, Caucasian and Native American job seekers, as well as job seekers of Hispanic and Asian descent.” In other words, the agency claimed that FedEx discriminated against virtually every class of worker in one way or another. Who benefited from this indiscriminate discrimination? We are left only to guess.

If it suspects a federal contractor or subcontractor of violating one of the anti-discrimination provisions in a government contract, the OFCCP doesn’t refer the matter to the DOJ to sue for breach of contract in federal court. Nor does it refer the company to the EEOC for further investigation and possible action under Title VII. Instead, the OFCCP brings an administrative enforcement action against the accused before the Labor Department’s own administrative law judges. Appeals from that adjudication? The Labor Department decides the appeal, too.

Rather than pursue contractual damages, the OFCCP seeks—in a case of alleged “pay bias,” for example—individualized back pay awards and other “make whole” relief on behalf of the contractor’s employees. It may impose hiring quotas or require linkage agreements between contractors and Labor Department job-training programs to ensure that employers identify and recruit qualified workers. The ultimate sanction is debarment, the loss of a company’s federal contracts. None of these, of course, are traditional contract remedies.

Yet the most extraordinary thing about the OFCCP’s adjudication process is that Congress has never authorized it. With a straight face, the OFCCP claims an LBJ-era executive order—Executive Order 11,246—as the source of its authority to conduct administrative adjudications. But that order identifies no statutory authority for the OFCCP’s adjudicative process. It requires only that government officials include a set of anti-discrimination provisions in government contracts. And it contemplates that the Department of Labor may, after consulting with the contracting agency, sanction an offending contractor by cancelling the contract or by suspending the contractor’s ability to contract with the government. It doesn’t authorize an entire regime to bring, prosecute, and then adjudicate discrimination claims, or to obtain injunctive relief and back pay for employees of government contractors. Not even EEOC can do that without going into court.

Secretary of Labor Eugene Scalia has long criticized administrative overreach by the Labor Department. In a 2014 op-ed in the Washington Post, for example, he complained that then-President Obama’s Labor Department was wielding executive orders “to bypass Congress.” Such orders, he rightly observed, lack “the democratic pedigree of laws passed by both houses of Congress.” Yet since Secretary Scalia assumed his post in September 2019, the OFCCP has seemingly grown more strident under his watch. At the same time, Secretary Scalia has had nothing to say about OFCCP’s ultra vires enforcement regime.

To be clear, the question the OFCCP’s conduct raises is not whether claims of discrimination and contractual violations should be tried and adjudicated; they should be. The question is where and under what lawful standard. Congress rarely gives agencies broad and unfettered authority to investigate, prosecute, and adjudicate lawsuits entirely in-house. But as we have seen, that hasn’t stopped agencies like the Labor Department from asserting and exercising that authority.

And while the OFCCP’s decisions are ultimately subject to judicial review in federal court, Chevron deference allows the agency to effectively interpret the relevant law as well as enforce it. Chevron tells the judge that she must understand the law, if unclear, to mean not what she interprets its text means, but what the agency says it means. In the context of an Executive Order, this unites the powers of making, enforcing, and interpreting laws in the same hands. At best, it obliterates the Constitution’s separation of powers. At worst, it erects a modern form of tyranny.

Also published by Forbes.com on WLF’s contributor page.

The post Fear and Loathing at the Department of Labor: Has the OFCCP Become a Law Unto Itself? appeared first on Washington Legal Foundation.

Categories: Latest News

The Innovation Pipeline: From Universities to Small Businesses

House Small Business Committee News - Tue, 02/11/2020 - 10:00am

The Committee on Small Business Subcommittee on Innovation and Workforce Development will hold a hearing titled, “The Innovation Pipeline: From Universities to Small Businesses.” The hearing is scheduled to begin at 10:00 A.M. on Tuesday, February 11, 2020 in Room 2360 of the Rayburn House Office Building.

A major reason for the rise of the U.S. as a technological power is a long tradition of close relationships and frequent collaboration between small businesses and a large network of world-renowned research universities. From licensing deals and tech transfers to patents and startups, the innovation that emerges from U.S. educational institutions is invaluable to the development of local and regional economies. This hearing will cover the innovation pipeline from universities to small businesses and the indispensable role of universities in economic development and urban revitalization.

To view a livestream of the hearing, please click here. 

Hearing Notice 

Hearing Memo 

Witness List 

Dr. John Younger
Vice President of Science and Technology
University City Science Center
Philadelphia, PA

Ms. Sheila Martin
Vice President of Economic Development and Community Engagement
Association of Public and Land-grant Universities
Washington, DC

Mr. Ethan Mann
Vice President of Marketing and Business Development
Sharklet Technologies, Inc.
Aurora, CO

Dr. Gregory P. Crawford
Miami University
Oxford, OH

*Witness testimony will be posted within 24 hours after the hearing’s occurrence

WLF Welcomes Mayer Brown LLP Partner Evan Tager to Our Legal Policy Advisory Board

WLF Legal Pulse - Fri, 02/07/2020 - 10:02am

“Evan Tager is an accomplished appellate advocate and an influential legal-policy thought leader. WLF is honored that he has agreed to join the Board.”
—Constance Larcher, WLF President and CEO

(Washington, D.C.)—The Washington Legal Foundation (WLF) and the Chairman of its Legal Policy Advisory Board, Jay B. Stephens, are pleased to announce that Evan M. Tager, a partner with the law firm Mayer Brown LLP, has joined WLF’s Board.

Evan is a member of Mayer Brown’s highly respected Supreme Court & Appellate and Class Actions practices. He has delivered over 50 appellate arguments before the U.S. Supreme Court, state supreme courts, and federal and state courts of appeal. Notably, Evan has represented either a party or an amicus in every U.S. Supreme Court case involving punitive damages in the last two decades. In addition to shaping legal precedents on punitive damages, Evan has made a major impact on the enforceability of arbitration provisions in contracts.

In addition to his appellate acumen, Evan takes a strategic and analytical approach to shaping how legal decision makers and the public view the impact of laws and court rulings on free enterprise. He edits Mayer Brown’s Guideposts blog on punitive damages and serves as the WLF Legal Pulse’s Featured Expert Contributor on Judicial Gatekeeping of Expert Evidence. He has published extensively on punitive damages, class actions, and expert testimony. Evan was the lead author on WLF’s recently published Monograph, Admissibility of Expert Testimony: Manageable Guidance for Judicial Gatekeeping.

“We are honored that Evan has agreed to join our Advisory Board,” said WLF President and CEO Constance Larcher.  “He has brought numerous litigation opportunities to our attention, and has regularly answered the call when we’ve asked him to write a paper or blog post. Evan shares WLF’s conviction that legal victories for the cause of free enterprise can be achieved not only in court, but also through educating policy makers on the bench and in regulatory agencies.”

WLF’s Legal Policy Advisory Board includes over forty distinguished professionals from the government and the legal, academic, and public policy communities who serve on a volunteer basis. 

Celebrating its 43rd year, WLF is America’s premier public-interest law firm and policy center advocating for free-market principles, limited government, individual liberty, and the rule of law.

The post WLF Welcomes Mayer Brown LLP Partner Evan Tager to Our Legal Policy Advisory Board appeared first on Washington Legal Foundation.

Categories: Latest News

WLF Asks Ninth Circuit to Enjoin New California Law That Targets Pharmaceutical Settlements

WLF Legal Pulse - Thu, 02/06/2020 - 10:53am

“If California had deliberately set out to stifle drug innovation and constrict America’s vital supply of affordable drugs, it could have hardly enacted a more potent law to do so.”
—Cory Andrews, WLF Vice President of Litigation

Click here for WLF’s brief

WASHINGTON, DC—Earlier today, Washington Legal Foundation (WLF) urged the U.S. Court of Appeals for the Ninth Circuit to enjoin a controversial new state law that imposes staggering liability on drug makers for merely carrying out federal policy. WLF’s amicus curiae brief was joined by the National Association of Manufacturers and the U.S. Chamber of Commerce.

For more than 35 years, patent-litigation settlement has been the chief market-entry vehicle for low-cost generic and biosimilar drugs. The U.S. Supreme Court largely blessed this practice in 2013 in FTC v. Actavis, refusing to condemn as presumptively anticompetitive patent settlements that include a so-called reverse payment.

But a new California law erects the very presumption that Actavis rejected. Under Assembly Bill 824 (AB 824), every pharmaceutical patent settlement is presumed unlawful if it gives a generic manufacturer “anything of value,” including an “exclusive license,” and postpones generic market entry for even a day. And every company that enters into such a settlement on terms found to violate the law is liable for three times “California’s share of the market for the brand drug at issue in the agreement.” Worse still, every person who merely “assists in” such a settlement must pay a civil penalty no less than $20 million.

As WLF’s brief argues, by elevating state law over federal law, California’s AB 824 erects several major obstacles to the accomplishment of federal law, frustrates the policy aims of Congress, and is thus preempted under the Supremacy Clause. In particular, the law poses discrete roadblocks to Congress’s aims under federal food-and-drug law, federal patent law, and federal antitrust law.

Celebrating its 43rd year, WLF is America’s premier public-interest law firm and policy center advocating for free-market principles, limited government, individual liberty, and the rule of law.


The post WLF Asks Ninth Circuit to Enjoin New California Law That Targets Pharmaceutical Settlements appeared first on Washington Legal Foundation.

Categories: Latest News

Taking Care of Business: How Childcare can Support Regional Economies

House Small Business Committee News - Thu, 02/06/2020 - 10:00am

The Committee on Small Business Subcommittee on Rural Development, Agriculture, Trade, and Entrepreneurship will hold a hearing titled, “Taking Care of Business: How Childcare can Support Regional Economies.” The hearing is scheduled to begin at 10:00 A.M. on Thursday, February 6, 2020 in Room 2360 of the Rayburn House Office Building.

When quality childcare is affordable and accessible, the impacts are felt by families, businesses, and regional economies. Breakdowns in childcare arrangements cost working families $8.3 billion in lost wages, and businesses nationwide lose more than $4.4 billion per year due to employee absences resulting from breakdowns in childcare arrangements. Access to childcare supports regional economic growth because it has a positive impact effect on workforce participation providing small firms with a productive and talented pool of workers. With affordable accessible care, employers report fewer absent workers, less turnover, increased stability in the workforce, and more satisfied workers. This hearing will explore the role of childcare in stimulating regional economic growth.

To view a livestream of the hearing, please click here. 

Hearing Notice 

Hearing Memo 

Witness List 

Ms. Cindy Cisneros
Vice President, Education Programs
Committee for Economic Development of the Conference Board (CED)
Arlington, VA

Dr. Veronique de Rugy
Senior Research Fellow
Mercatus Center
George Mason University
Arlington, VA

*Witness testimony will be posted within 24 hours after the hearing’s occurrence

FDA’s Laudable “CURE ID” Program Fatally Undermines Agency’s Censorship of Off-Label Speech

WLF Legal Pulse - Wed, 02/05/2020 - 12:12pm

Richard A. Samp retired on December 31, 2019 after a three-decade career as Washington Legal Foundation’s Chief Counsel.

The Food and Drug Administration announced in December its launch of CURE ID, an Internet repository for information about off-label uses of FDA-approved medical products. FDA asserts that “crowdsourcing” off-label information will assist healthcare providers by offering guidance on treating difficult-to-treat diseases. But FDA’s active promotion of off-label speech fatally undermines what was left of its already shaky claim that it is entitled to suppress truthful speech by drug manufacturers.

The Supreme Court has long recognized that the First Amendment, subject only to narrow and well-understood exceptions, bars the government from imposing content-based controls on speech. FDA has nonetheless asserted authority to severely restrict what drug manufacturers can say about their products, even speech that is neither false nor misleading. In general, FDA limits manufacturer speech to information contained on a product’s FDA-approved labeling. Courts have been highly skeptical of FDA’s various rationales for its restrictions on truthful manufacturer speech. Those rationales have been rendered unintelligible by FDA’s decision to facilitate the very same off-label speech by others.

CURE ID Serves Important Health Care Functions

FDA deserves praise for its decision to launch CURE ID. As FDA acknowledges, many patients would receive sub-optimal care if their doctors were limited to prescribing drugs only for FDA-approved uses. Over the course of their medical practices, doctors routinely discover that a patient who does not respond to treatment with a drug labeled as safe and effective for his condition will nonetheless respond to other drugs not so labeled (generally referred to as “off-label” uses). In some fields such as oncology, the great majority of medically accepted treatments involves off-label uses of FDA-approved drugs and medical devices.

Doctors’ ability to effectively employ off-label uses of FDA-approved products is predicated on their access to reliable information about the effectiveness of new off-label treatments. FDA’s launch of CURE ID advances that educational process; it will provide doctors with invaluable information in deciding how to treat patients who have not responded to FDA-approved treatments. The program encourages doctors to share clinical outcomes whenever they prescribe FDA-approved drugs for off-label uses. FDA’s press release announcing the launch of CURE ID asserted, “The systematic collection of real-world experience in the app will help identify drug candidates for additional study, encourage further drug development, and may serve as a resource for practitioners making individual patient treatment decisions in the absence of established safe and effective options.”

FDA’s First Amendment Defenses

So now that FDA is in the business of promoting widespread dissemination of off-label information, how does it justify its continuing efforts to bar drug manufacturers from doing likewise? In defending its ban over the past 25 years, FDA has relied on three principal arguments: (1) the First Amendment is inapplicable because it is regulating manufacturer conduct (i.e., the marketing of a drug for an unapproved new use), not manufacturer speech; (2) the ban prevents the dissemination of false or misleading information; and (3) the ban encourages manufacturers to undertake the “well-controlled” (i.e., massively expensive) clinical studies necessary to obtain FDA approval to add the new use to its product label.

Federal courts have universally rejected FDA’s First-Amendment-is-inapplicable defense. Courts have held that FDA is, in fact, regulating speech when it relies on a manufacturer’s off-label speech as its basis for concluding that the manufacturer is marketing a drug for an unapproved new use.

Court have also been wary of FDA’s claim that the ban is necessary to prevent the dissemination of false or misleading information. Of course, the Constitution doesn’t prevent FDA from suppressing commercial claims unsupported by any reliable clinical data. But the First Amendment does not permit FDA to put a hold on manufacturers’ speech until after the agency has reviewed and has blessed the data supporting the claims.

A federal judge flatly rejected that FDA argument in Washington Legal Foundation v. Friedman, explaining, “[I]n asserting that any and all scientific claims about the safety, effectiveness, contraindications, side effects, and the like regarding prescription drugs are presumptively untruthful or misleading until FDA has had the opportunity to evaluate them, FDA exaggerates its overall place in the universe.” 13 F. Supp. 2d 51, 67 (D.D.C. 1998). That argument is even less tenable now that FDA, by launching CURE ID, is actively promoting crowd-sourced clinical data that it has not sought to verify.

What About Manufacturer Participation in CURE ID?

Conspicuously absent from those invited to contribute clinical data to CURE ID are drug manufacturers. Only “health care providers” are invited to supply off-label information to the Internet-based repository. In other words, in launching CURE ID, FDA is not signaling an intent to loosen its ban on manufacturer off-label speech.

As a scientific question, that policy makes little sense. The manufacturer of an FDA-approved product is very likely to be very familiar with all available data regarding off-label uses of its product. It is the entity best positioned to distinguish scientifically validated off-label information from off-label information that lacks solid scientific support. Thus, by preventing manufacturers from being part of the conversation, FDA is likely causing medical professionals to make worse decisions on whether to make off-label use of FDA-approved products when treating their patients.

As to the constitutional question, FDA’s launch of CURE ID undermines its remaining First Amendment defenses. FDA argues that suppressing truthful off-label speech encourages manufacturers to seek new labeling authority as a means of garnering increased sales revenue. There is little evidence that FDA’s policy has ever had that desired effect. But even if the policy once had that effect, it is far less likely to have that effect now that FDA has launched CURE ID. By facilitating the dissemination of off-label information (and thereby encouraging increased prescriptions for off-label uses), FDA greatly reduces manufacturer incentive to invest in the well-controlled studies necessary to obtain labeling authority for those uses. And in the absence of evidence that commercial speech suppression directly and substantially advances an important government interest, the First Amendment prohibits speech suppression.

The post FDA’s Laudable “CURE ID” Program Fatally Undermines Agency’s Censorship of Off-Label Speech appeared first on Washington Legal Foundation.

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SBA Management Review: Office of Credit Risk Management

House Small Business Committee News - Wed, 02/05/2020 - 11:30am

The Committee on Small Business will hold a hearing titled, “SBA Management Review: Office of Credit Risk Management.” The hearing is scheduled to begin at 11:30 A.M. on Wednesday, February 5, 2020 in Room 2360 of the Rayburn House Office Building. 

The hearing will allow Members to learn about SBA’s Office of Credit Risk Management (“OCRM”), which was codified during the 115th Congress as part of the Small Business 7(a) Lending Oversight Reform Act of 2018. Members will also be able to explore the current administrative challenges facing OCRM, as well as ways to continue strengthening the Office and its operations.

To view a livestream of the hearing, please click here. 

Hearing Notice 

Hearing Memo 

Witness List 

Ms. Susan E. Streich 
Office of Credit Risk Management 
United States Small Business Administration 
Washington, DC

*Witness testimony will be posted within 24 hours after the hearing’s occurrence

Upcoming Briefing—High Court Halftime: The U.S. Supreme Court’s October Term 2019 at Midpoint

WLF Legal Pulse - Tue, 02/04/2020 - 1:55pm

Thursday, February 13, 2020, 1:00 p.m. EST

2009 Massachusetts Ave., NW, Washington, DC or Live Online


Elaine J. Goldenberg, Munger, Tolles & Olson LLP
Sarah M. HarrisWilliams & Connolly, LLP
Andrew J. Pincus, Mayer Brown LLP
Jay B. Stephens, Kirkland & Ellis LLP (moderator)

The post Upcoming Briefing—High Court Halftime: The U.S. Supreme Court’s October Term 2019 at Midpoint appeared first on Washington Legal Foundation.

Categories: Latest News

A Word For Business As Usual: Now As Ever, Corporate Success Is American Success

WLF Legal Pulse - Tue, 02/04/2020 - 1:11pm

Yamamoto Tsunetomo was a rōnin and monk of the mid-Edo period. After his death in 1719, one of his students compiled his sayings into a treatise on Bushido called Hagakure (“In the Shadow of Leaves”). Tsunetomo believed that a samurai must be quiet, selfless, rigorous, and fanatically devoted to service and duty. The highest good, Tsunetomo taught, is found in single-minded and self-effacing commitment to one’s craft. “Throughout your life advance daily,” he urged, “becoming more skillful than yesterday, more skillful than today. This is never-ending.” The master samurai never thinks he has succeeded.

Even Tsunetomo was not entirely rigid. “It is foolish,” he observed in a lighter moment, “to live within this dream of a world seeing unpleasantness and doing only things you do not like.” But “it is important never to tell this to young people,” he warned, “as it is something that would be harmful if incorrectly understood.”

Yet today the young see the message of self-indulgence everywhere. They learn that they can do as they like by simply adopting their teachers’ opinions. Want to skip class? No problem—do so in protest of gun violence or fossil fuels.

If a bright and agile youth is careful always to conform her thinking to the latest trends, she can keep at this game all her life, always pretending that gratification and decadence is discipline and sacrifice. No matter her profession—media, scholarship, law, whatever—the savvy operator can put her desires before her obligations, can even claim with a straight face that they’re the same thing, not only without fear of losing anything of substance, but confident of being showered in rewards and plaudits by all the right people.

The higher one rises, in fact, the less is one obliged to stick to one’s real job. The whole point of index investing, for instance, is to move money away from the people who think they can predict the future. But Larry Fink, who, as the head of BlackRock, oversees many of the world’s largest index funds, has wants of his own. He wants to lecture his clients about “sustainability-integrated portfolios,” so he does. He wants to use his clients’ shareholder votes to promote his environmentalism, so he does.

“A company cannot achieve long-term profits without embracing purpose,” Fink writes in a recent letter to other CEOs, “purpose” being his corporate-speak euphemism for progressive activism. A company that lacks “purpose” is bound, in his view, to “hike prices ruthlessly,” “shortchange safety,” and “fail to respect its clients.” Sure, Fink’s belief in a link between profit and progressivism is just an article of faith. Sure, his depiction of any CEO who doesn’t share that faith as a lawless, price-gouging Gordon Gecko is ridiculous. Sure, it’s not even his money to begin with. But sound index investing is not nearly as gratifying as crusading, and, more than that, being seen to crusade, for social justice.

Last year 181 members of the Business Roundtable announced their “fundamental commitment” to “all” of their “stakeholders.” The CEOs who signed this statement cannot be blamed for trying to remind a spoiled and disenchanted public that well-functioning corporations solve problems and make life better for everyone. But talking about “stakeholders” invites confusion. Had the idea been to confirm that a company should develop useful products, treat customers and employees well, obey the law, and dabble in charity, no declaration about “stakeholders” would have been needed. A company seeking to generate returns for shareholders already had good reason to do each of these things. So although it praises “the free-market system,” the Roundtable’s statement can easily be seen, perhaps mistakenly, as endorsing the notion that a corporation is owned by society as a whole.

Rest assured that “society” in this context will mean whoever shouts the loudest, and that no one shouts louder than subversive malcontents. They come in many forms. One is the proverbial protestor waving a bullhorn in a hapless barista’s face. Another is Senator Elizabeth Warren, who promptly wrote several of the Roundtable’s members, insisting that they endorse her bill to subject companies to various forms of political discipline. The common thread among the reformists, among those who claim to speak for “society” and “the people,” is a desire to get corporations out of the business of generating wealth for society and money for the many people who hold shares.

Of course, no trade strays farther from the job at hand than the movie trade. It’s understandable. If your product happens to make you famous, you might well mistake your fame for wisdom. The more prominent the actor, the more certain one may be that his Oscar speech will have nothing whatsoever to do with acting.

But at least Hollywood can, on occasion, make art. Andrew Dominik’s 2012 film Killing Them Softly is a darkly beautiful example. It is a great movie. One might even call it a great samurai movie. Jackie Cogan (Brad Pitt) is a hitman—an American samurai. He lives by a code no less than Tsunetomo did. Indeed, he, like Tsunetomo, is a kind of rōnin: he is a loner upholding the austere values of his order even as others—such as Mickey (James Gandolfini)—grow fat and careless.

Cogan completes three mob hits for $45,000. He meets a handler in a bar to collect. He learns that the bosses now intend to pay only $30,000. On a television beside the liquor, Barack Obama is giving his 2008 election victory speech. “Recession prices,” the handler says. He cautions Cogan to remember that they are in a “relationship” business. “Out of many, we are one!” Obama declares behind them. This line, the handler insists, is for Cogan.

Cogan does not buy it. “America is not a country,” he responds, his eyes narrowing. “It’s just a business.”

The viewer is meant to be repulsed by Cogan’s cynicism. But there is another way to see things. In the mob world, it’s Cogan who has played by the rules. He did the job; he did it without a fuss; he’s owed the agreed price. It’s the handler, meanwhile, who is using a false appeal to virtue to shirk responsibility.

America is just a business. Sure, it sounds harsh. But compared to what? In a fraying republic, “Stick to business” might be the soundest possible admonition.

Also published by Forbes.com on WLF’s contributer page.

The post A Word For Business As Usual: Now As Ever, Corporate Success Is American Success appeared first on Washington Legal Foundation.

Categories: Latest News

January 2020 Month in Review

WLF Legal Pulse - Tue, 02/04/2020 - 10:30am

To read more about the items below, click the link above for a PDF of the newsletter.


WLF urges the Massachusetts Supreme Judicial Court to ensure that civil litigation in the Commonwealth is procedurally fair to all parties. (In re Mass. R. Civ. P. 51)

WLF urges the Fourth Circuit to vacate a trial-court order that amounted to a de facto administrative rulemaking. (In re Cigar Ass’n of America)


The Department of Labor issues its final Joint Employer Rule, which sets out a narrow, four-part test for whether a business may be deemed a “joint employer” of another company’s employees. (In re Joint Employer Status under FLSA)

The U.S. Supreme Court denies certiorari to the Ninth Circuit, which held that a bare procedural harm under a state privacy statute satisfies Article III’s injury-in-fact requirement. (Facebook, Inc. v. Patel)

The Ninth Circuit denies rehearing in a decision that misconstrues the Federal Arbitration Act’s saving clause. (Tillage v. Comcast)

The Eighth Circuit holds that Missouri’s New Deal-era restrictions on the truthful commercial speech of alcohol makers, distributors, and retailers violate the First Amendment. (Mo. Broadcasters Assoc. v. Taylor)

The California Supreme Court declines to review whether, to constitute an appealable, final order, a trial court order must expressly resolve all issues and leave nothing else to be decided. (State Farm v. Lara)

The post January 2020 Month in Review appeared first on Washington Legal Foundation.

Categories: Latest News

Ninth Circuit Shuts Down Claim that “Diet” in Diet Soda is Unlawfully Deceptive

WLF Legal Pulse - Fri, 01/31/2020 - 5:51am

It’s already the end of January, and for those of you who resolved to lose a few pounds this year, it may be time to check on your progress. Among other changes to your eating habits, perhaps you switched to diet soda. If so, did you switch because you thought “diet” implied that the soft drink is a weight-loss or weight-management tool?

That may sound a bit far-fetched, but this impression has provided the factual and legal basis for numerous consumer-fraud class actions filed in New York and California federal courts. It’s been two years since we’ve written about this odd strain of food-labeling cases. Thanks to a December 30, 2019 Ninth Circuit ruling (yes, the Ninth Circuit) in Becerra v. Dr. Pepper/Seven Up, this should be the last post we publish on the subject.

In the Food Court

Becerra filed suit in the Food Court (Northern District of California) alleging the defendant’s use of “diet” in Diet Dr. Pepper was a false or deceptive promise that the soda “would ‘assist in weight loss’ or at least ‘not cause weight gain.'” Diet Dr. Pepper would not assist in weight loss, Becerra claimed, because it contained aspertame, a sugar substitute that some studies associate with weight gain. After allowing Becerra to amend her complaint three times, the district court ultimately ruled the lawsuit failed to state a valid claim and dismissed it with prejudice. Becerra appealed.

In the Ninth Circuit

The three-judge panel not only affirmed the Northern District’s decision, it also selected the opinion for formal publication in the Federal Reporter. Why is this significant? The Ninth Circuit has developed an unfortunate preference of not formally publishing its decisions on food-labeling consumer-fraud cases. “Unpublished” decisions don’t have precedential effect, though parties can cite them in court papers. Becerra stands as binding precedent for all district courts in the Ninth Circuit.

The opinion focuses on the reasonableness of Becerra’s belief that the term “diet” implies the product will assist in weight loss. Under California law,  plaintiffs alleging deception must establish a probability that a “significant portion” of consumers, “acting reasonably under the circumstances,” could be misled. As we’ve written previously, too many trial judges in the Ninth Circuit have held that a jury, not the court, should make the “reasonable consumer” determination in consumer-fraud cases.

Notably, the Becerra panel didn’t defer to a jury. It performed the reasonable-consumer determination and concluded as a matter of law that no reasonable consumer would be misled by “diet” the way Becerra claimed to be. The court rejected Becerra’s selective quotation of dictionary definitions, explaining that Dr. Pepper employed “diet” as an adjective, not a verb or noun as the plaintiff argued. Reasonable consumers, the court explained, understand “diet” to be a relative term in the context of soft drinks and their calorie counts.

The court also found that the ads and trade-association articles Becerra referenced in his argument either failed to support his perception of “diet” or instead substantiated Dr. Pepper’s counterargument.  And while the survey’s results he presented nominally supported Becerra’s claim, the court found that the survey was too limited in scope and too flawed in its design to “salvage” the plaintiff’s reasonableness argument.

Second Circuit Set the Stage

The Ninth Circuit isn’t the first federal circuit that seems to have grown tired of these diet-soda class actions. In the spring and summer of 2019, the Second Circuit considered appeals in three copycat consumer-fraud suits filed in New York federal courts.

First, the appeals court affirmed the lower court’s dismissal of Manuel v. Pepsi-Cola Co., a case we discussed here in May 2018.  In a March 15 Summary Order (i.e., unpublished, no precedential value), the panel agreed with the Southern District of New York that the studies Manuel cited on aspartame and weight gain could not establish a causal connection. Thus, Manuel could not “raise a plausible inference that the use of the word ‘diet’ is false, inaccurate, or misleading.”

Then, on April 17, a Second Circuit panel in Excevarria v. Dr. Pepper Snapple Group, Inc. affirmed (in a Summary Order) the Southern District’s dismissal of claims identical to Manuel’s, reasoning that the scientific studies Excevarria cited did not support his fraud claim.

Finally, on June 27, a third Second Circuit panel reviewed “substantially identical claims (from the same attorney, no less) [that we summarily rejected] in the past few months.” Frustrated by the repetition, the panel decided not to merely release another Summary Order: “Here, we employ a published opinion to reject Plaintiffs’ claims.” The court in Geffner v. Coca-Cola Co. found the plaintiff’s belief that “diet” equated with weight loss or management “implausible on [its] face.” The court found the advertising Geffner referenced in support of his claim that Diet Coke is a weight-loss device to be at most “puffery.”

The court also explained that reasonable consumers understand what “diet” means in the broader context of the product and the packaging. Finally, the court found Diet Coke’s compliance with federal labeling requirements to be “persuasive evidence of the meaning of the label ‘diet’ in the diet-soda context.”

The End (?)

Not one single court has allowed a diet-soda lawsuit to proceed to trial. Two federal appeals courts, which heretofore have been reluctant to throw out claims based on the reasonable-consumer test, have published opinions laying waste to the plaintiffs’ legal theory.

Conceivably, the law firm responsible for these class actions could track down other litigious diet-soda consumers in different parts of the country and hope for more favorable results. But it’s more likely that the lawyers will reach into their bag of tricks and move on to the next legal theory or industry target.

In the meantime, we applaud the Second and Ninth Circuit panels for establishing well-reasoned precedents in an area of litigation where good law is in short supply. When consumer-fraud defendants are before district court judges who are reluctant to make the reasonable-consumer determination as a matter of law, these companies can point to decisions like Becerra and Geffner. We also applaud the soft-drink companies for investing considerable resources to achieve these positive outcomes. They helped create precedents that other, less profitable businesses may use to defend themselves.

Also published by Forbes.com on WLF’s contributor page.

The post Ninth Circuit Shuts Down Claim that “Diet” in Diet Soda is Unlawfully Deceptive appeared first on Washington Legal Foundation.

Categories: Latest News

Circulating Opinion: Flecha v. Medicredit, Inc.

WLF Legal Pulse - Thu, 01/30/2020 - 5:07pm

Fifth Circuit, New Orleans, LA

Digesting an opinion by The Honorable Andrew S. Oldham

U.S. Court of Appeals for the Fifth Circuit, Case No. 18-50551

Decided January 8, 2020

Judge Oldham was nominated to the Fifth Circuit on February 12, 2018 by President Donald J. Trump and confirmed on July 18, 2018.  He had no role in WLF’s selecting or editing this opinion for our Circulating Opinion feature. 

Introduction to the Opinion: In Flecha v. Medicredit Inc., 2020 WL 91267 (Jan. 8, 2020), the Fifth Circuit, per Judge Ho, reversed a class certification order. After the plaintiff failed to pay a medical bill, the medical center contracted Medicredit, which sent her a debt-collection letter. On behalf of herself and other recipients of similar letters, Flecha alleged that because Medicredit knew that the medical center would not sue over unpaid bills, the debt-collector made a false threat in violation of the Fair Debt Collection Practice Act when it warned recipients that failure to pay could result in a legal action. Flecha’s lack of any evidence of the medical center’s actual intent not to sue her or other class members deprived the class of a common issue, Judge Ho reasoned. For the same reason she could not prove commonality under FRCP 23, the plaintiff could not prove typicality or predominance.

Judge Oldham agreed that the district court erred in certifying the class. But because numerous unnamed class members would be unable to prove an injury in fact, he would have reversed the district court on jurisdictional grounds. His concurrence cogently reasons that courts should not except class actions from the “venerable principle” that plaintiffs must show Article III standing at every stage of litigation. The enormous power that judicial certification of a class bestows on a single plaintiff, Judge Oldham explains, compels courts first to be sure they have jurisdiction over the claim.

ANDREW S. OLDHAM, Circuit Judge, concurring:

I agree with the Court’s conclusion that “[c]ountless unnamed class members lack standing.” Ante, at ––––. In my view, that lack of standing is sufficient to decide the case.


Standing is “an essential and unchanging part of the case-or-controversy requirement of Article III.” Lujan v. Defs. of Wildlife, 504 U.S. 555, 560, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). With it, the Constitution empowers us to hear a case before us and decide the relevant issues of law. Without it, we can do nothing but announce the fact and dismiss the case. See Ex parte McCardle, 74 U.S. (7 Wall.) 506, 514, 19 L.Ed. 264 (1868). After all, “[h]ypothetical jurisdiction produces nothing more than a hypothetical judgment.” Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 101, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998).

It’s unclear to me why these venerable principles would not apply with equal force at the class-certification stage. A plaintiff must show standing at each “successive stage[ ] of the litigation.” Lujan, 504 U.S. at 561, 112 S.Ct. 2130; see also Arizonans for Official English v. Arizona, 520 U.S. 43, 64–65, 117 S.Ct. 1055, 137 L.Ed.2d 170 (1997). Nothing in Rule 23 could exempt the class-certification stage from this requirement. See Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 613, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997) (“Rule 23’s requirements must be interpreted in keeping with Article III constraints ….”); FED. R. CIV. P. 82 (“These rules do not extend … the jurisdiction of the district courts.”); accord Ortiz v. Fibreboard Corp., 527 U.S. 815, 831, 119 S.Ct. 2295, 144 L.Ed.2d 715 (1999). If anything, I’d think our standing analysis would be particularly rigorous at this stage, given the transformative nature of the class-certification decision. Cf. Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 351, 131 S.Ct. 2541, 180 L.Ed.2d 374 (2011) (noting certification stage requires “rigorous analysis”).

Not only can certification change the number of plaintiffs from one to one million, but it also can dramatically change the rights and obligations of the plaintiffs. Class certification is the thing that gives an Article III court the power to “render dispositive judgments” affecting unnamed class members. Plaut v. Spendthrift Farm, Inc., 514 U.S. 211, 219, 115 S.Ct. 1447, 131 L.Ed.2d 328 (1995) (quotation omitted); see also Cooper v. Fed. Reserve Bank of Richmond, 467 U.S. 867, 874, 104 S.Ct. 2794, 81 L.Ed.2d 718 (1984) (“There is of course no dispute that under elementary principles of prior adjudication a judgment in a properly entertained class action is binding on class members in any subsequent litigation.”). That means, for example, that a post-certification judgment can prevent unnamed class members from bringing their claims again. See Taylor v. Sturgell, 553 U.S. 880, 894, 128 S.Ct. 2161, 171 L.Ed.2d 155 (2008); Cooper, 467 U.S. at 874, 104 S.Ct. 2794. It also means we must consider unnamed class members’ standing before adjudicating the merits of their claims: “The exercise of judicial power, which can so profoundly affect the lives, liberty, and property of those to whom it extends, is therefore restricted to litigants who can show ‘injury in fact’ resulting from the action which they seek to have the court adjudicate.” Valley Forge Christian Coll. v. Americans United for Separation of Church & State, Inc., 454 U.S. 464, 473, 102 S.Ct. 752, 70 L.Ed.2d 700 (1982).


It’s true that the Supreme Court in both Amchem and Ortiz avoided the Article III standing question. The Court did so, in part, by stating that certification “pertain[s] to statutory standing.” Ortiz, 527 U.S. at 831, 119 S.Ct. 2295. And at the time, the Court held statutory standing “may properly be treated before Article III standing.” Ibid. That makes sense where both questions—whether the plaintiffs can sue under Rule 23 and whether the plaintiffs have Article III standing—are jurisdictional.

But the Supreme Court subsequently told us they’re not. In Lexmark Intern., Inc. v. Static Control Components, Inc., 572 U.S. 118, 134 S.Ct. 1377, 188 L.Ed.2d 392 (2014), the Court emphasized that the label “statutory standing” is “misleading” because the inquiry “does not implicate subject-matter jurisdiction, i.e., the court’s statutory or constitutional power to adjudicate the case.” Id. at 128 n.4, 134 S.Ct. 1377 (quotation omitted). That suggests it’s a merits question whether the unnamed class members can sue under Rule 23—not a jurisdictional one. See id. at 128, 134 S.Ct. 1377; Steel Co., 523 U.S. at 89, 118 S.Ct. 1003. And if Steel Co. teaches us anything, it’s that we must do jurisdiction before the merits. That’s why our precedent holds that “though the certification inquiry is more straightforward, we must decide standing first, because it determines the court’s fundamental power even to hear the suit.” Rivera v. Wyeth-Ayerst Labs, 283 F.3d 315, 319 & n.6 (5th Cir. 2002).

Article III is just as important in class actions as it is in individual ones. See Tyson Foods, Inc. v. Bouaphakeo, ––– U.S. ––––, 136 S. Ct. 1036, 1053, 194 L.Ed.2d 124 (2016) (Roberts, C.J., concurring) (“Article III does not give federal courts the power to order relief to any uninjured plaintiff, class action or not.”). It’s why the Court has reminded us that “[i]n an era of frequent litigation, class actions, sweeping injunctions with prospective effect, and continuing jurisdiction to enforce judicial remedies, courts must be more careful to insist on the formal rules of standing, not less so.” Ariz. Christian Sch. Tuition Org. v. Winn, 563 U.S. 125, 146, 131 S.Ct. 1436, 179 L.Ed.2d 523 (2011). I’d do so here.

The post Circulating Opinion: <em>Flecha v. Medicredit, Inc. </em> appeared first on Washington Legal Foundation.

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