The ChamberPost

The Supreme Court and Federal Jurisdiction Law

by Robin Conrad

Today’s unanimous Supreme Court decision in Hertz Corp. v. Friend overturned a controversial Ninth Circuit test for determining a multistate corporation’s citizenship. The Court ruled that for diversity jurisdiction purposes, a corporation is a citizen of the place where its headquarters is located. The Court said the decision would “promote greater predictability” to businesses operating across state lines, as well as for plaintiffs trying to decide whether to file a lawsuit in state or federal court.

In an amicus brief filed last year, the National Chamber Litigation Center (NCLC) urged the Court to hear the case to settle a broiling conflict among the federal courts about how to decide what constitutes a corporation’s place of citizenship for the purposes of ‘federal diversity jurisdiction.’ Diversity jurisdiction allows federal courts to decide lawsuits between citizens of different states. After the Supreme Court agreed to hear the case, NCLC filed another brief, criticizing the Ninth Circuit’s complicated, multi-factor test as unpredictable and litigation-inducing. NCLC argued that the Ninth Circuit’s test made it easier for trial lawyers to bring massive class actions in plaintiff-friendly state courts.

You can read the full opinion here.

Not So Fast: Trial Lawyers Lobby For Their Own Federal Bailout, But the Constitution Stands in the Way

by Robin Conrad

Yesterday, at the urging of lobbyists for the plaintiffs bar, President Obama ordered federal agencies to review a decade’s worth of regulations, to strip out "preemption" language that set a single, national regulatory standard for myriad consumer products. According to a report in BusinessWeek, the President's decision will "rewrite" the legal rules for everything from "pharmaceuticals to …. food sweeteners." 'Preemption' is the constitutional principle that when federal and state laws collide, the federal laws trump, or "preempt," the state laws. Practically speaking, preemption enables companies to do business across state lines without being burdened by 50 conflicting sets of rules and regulations.

So why are the trial lawyers lobbying so aggressively to get the Obama Administration to abandon agencies' analyses that their regulations preempt state laws? Because when a federal rule "preempts" conflicting state rules, it often means that trial lawyers can't sue businesses whose products conform to federal standards. In other words, the trial lawyers are lobbying for their very own federal bailout.

But the President can't unilaterally declare that certain federal statutes or regulations don't preempt conflicting state laws. Preemption is not simply a policy choice – it's a constitutional principle. Agencies have included preemption language in regulations because solid evidence on the record proves that the federal law in fact trumps state laws. The Chamber plans to closely monitor the federal agencies to make sure that any regulatory changes comply with the law and conform with the constitutional principle of preemption.

Plaintiffs' Bar's Quest for Cash Could Leave Employees High and Dry

by Robin S. Conrad

On Wednesday the National Chamber Litigation Center filed an amicus brief in a controversial class action lawsuit against perhaps the largest 401(k) plan in the country. Wal-Mart's 401(k) plan hold about $10 billion in savings for its nearly 1 million employee participants.

The plaintiffs' theory – unsupported by any actual facts – is that Wal-Mart shortchanged its plan participants by choosing investment funds that allegedly charged excessive administration fees. The district court tossed the case, noting that the plan participants were free to choose other options outside the plan and to decide whether they thought the fees were unreasonable. The plaintiffs now appeal that decision in the Eighth Circuit.

If the lawsuit prevails, the plan participants might receive, at most, mere dollars in compensation.  But the attorneys representing them stand to earn tens of millions in attorneys fees.

And, as NCLC explained in its amicus brief, this lawsuit is just the tip of the iceberg; the plaintiffs bar is hoping to turn this novel legal theory into their newest cash cow – between September 2006 and November 2007, at least eighteen virtually identical lawsuits were filed against major employees.

So what impact will this litigation have on employees – whose interests the plaintiffs' bar is allegedly protecting? Most likely, it will be harder and less likely for employers to sponsor retirement plans. A victory in this case would expose employers that choose to offer carefully selected and negotiated retirement plans to incredible litigation risks.

Fortunately, there's a bright light: the Seventh Circuit recently declared that these 'fee disclosure' lawsuits are meritless. The Eighth Circuit should follow the Seventh Circuit's lead and bring some rationality to ERISA litigation.

You can check out NCLC's amicus brief in Braden v. Wal-Mart on our website.

A Significant Step Toward Fairness, Rationality in Asbestos Litigation

by Robin S. Conrad

Today, the Illinois Supreme Court took a significant step toward bringing some common sense to the asbestos litigation quagmire that's bogging down our court system.

It has been decades since asbestos was manufactured in this country, yet asbestos exposure litigation continues to be a mainstay of the plaintiffs' bar. Tort lawyers are engaged in a never-ending search for new classes of plaintiffs who are more and more removed from the actual asbestos exposure. Asbestos litigators have also pushed for creative and unfair rules that allow them to convert weak claims into sledgehammers to pressure defendants to settle.

One such clever legal tactic has been to use the so-called "Lipke rule" to prevent defendants from showing juries that the defendant may not have caused the plaintiffs' injury. Denied the reasonable opportunity to prove that they weren’t responsible for the plaintiff's injuries, defendants were often forced to settle.

But today, the Illinois Supreme Court joined the mainstream of courts and said that defendants do have a right to present evidence that bears on causation. The Court relied on many of the arguments advanced by NCLC in its amicus brief in Nolan v. Weil-McLain.

You can check out the decision at NCLC’s website.

The Takings Clause

by Robin Conrad

Yesterday, the Washington Post carried an op/ed by George Will condemning a radical legal decision by the Illinois Supreme Court that allows the government to transfer income from a business to other projects, in violation of the Constitution's "Takings Clause." Will rightly observed that the Illinois Supreme Court's decision invites all sorts of political mischief, including ‘predatory taxation' – schemes that take money from disfavored businesses and transfer that money to politicians' favored businesses.

The National Chamber Litigation Center recently urged the U.S. Supreme Court to strike down the Illinois decision. NCLC argued that the Illinois court got the law wrong when it held that the U.S. Constitution's Takings Clause applies only when a government takes land, but not when it takes money. If the Illinois decision is allowed to stand, NCLC warned the high court, state and local governments will be tempted to mitigate their recent budget shortfalls by expanding so-called ‘regulatory takings.' The case is Empress Casino Joliet Corp., et al. v. Giannoulias, et al. You can check out the Chamber's brief on NCLC's website.

Bipartisan Consensus on Immigration

by Robin Conrad

The Patchwork of State Immigration Laws Is Creating a Bigger Immigration Problem.

Diverse organizations from across the political spectrum are rallying behind the U.S. Chamber’s lawsuit challenging an Oklahoma immigration law, HB 1804. So far, 28 different groups have filed amicus curiae – or "friend of the court" – briefs expressing support for our argument that the employment provisions of 1804 violate federal immigration law, and are bad public policy. Civil rights groups such as the ACLU, labor organizations like Change to Win, business groups including Human Resource Initiative, and thirteen state chambers of commerce have all weighed Oklahoma’s legislation and found it wanting.

The amicus support in our case, Chamber of Commerce, et al v. Edmondson, et al., is more proof of the widespread bipartisan opposition to the emerging patchwork of conflicting and confusing state immigration laws. Last year alone, state legislatures proposed 1,400 immigration laws, and enacted 240 immigration laws. Many of these laws fly in the face of federal immigration law, which already provides the exclusive system for verifying the work authorization status of employees. 

That includes the Oklahoma law which punishes employers with tax penalties and the threat of lawsuits if they don’t use a federal pilot program called "E-Verify" to check whether employees are eligible for employment.  The problem is, E-Verify is a broken system that often flags the wrong employees as "unauthorized." And on top of that, Congress expressly said that its use had to be voluntary, not mandatory. 

It’s time to have a national discussion about immigration policy and to craft a national solution. But the bipartisan support in our litigation shows that we can all agree that it’s not the role of the states to set national immigration policy. 

Copies of all of the amicus briefs and a complete list of the organizations supporting the Chamber can be found here.

The Supreme Court is Back - Preemption is Front and Center

by Robin Conrad

The Supreme Court is back in session with a very important case right out of the gate. The media, of course, is spinning Altria Group v. Good as a "tobacco" case; but they would be wise to head the words of Justice Hugo Black, who once explained that Supreme Court cases "affect far more than the immediate parties." This federal preemption case will affect any American business that complies with federal laws and regulations, only to find that it has been unwittingly dragged into a state court for violating conflicting state laws. 

I recently explained to the Christian Science Monitor and other news organizations just how important federal preemption is to the American economy:

"For most businesses, federal preemption is the hot-button issue of the term," says Robin Conrad of the US Chamber of Commerce's National Chamber Litigation Center.

"The court finds itself once again in the thick of an explosive national debate over whether, how, and when federal law displaces state law," Ms. Conrad told reporters in a recent briefing.

"For companies trying to compete in a fast-paced global economy, the question comes down to who gets to regulate your business," she said. "Should it be a single set of uniform national rules, or should your business be regulated by 50 attorneys general, thousands of municipalities, and hundreds of disparate jury verdicts?"

A Victory for Employers and Workers

by Robin Conrad

The U.S. Supreme Court ruled today on Chamber of Commerce of the United States v. Brown and rejected California’s attempt to place the state’s thumb on the scale in the unionization debate.  California Assembly Bill (AB) 1889, enacted in 2000 in response to union lobbying efforts, expressly prohibited employers from using state grant and program funds to "assist, promote, or deter union organizing."   The Court recognized that a state has a legitimate interest in spending its money for legitimate purposes.

But it was not lost on the court that the true purpose of AB 1889 was to silence employer speech about unions by subjecting employers to huge compliance burdens, including segregated accounting systems, onerous recordkeeping requirements, treble damages, private rights of actions and attorneys fees.  And there was nothing 'neutral' about the pro-union exceptions to California's spending ban, which allowed the use of state funds to circumvent secret-ballot elections by entering into voluntary recognition agreements (otherwise known as card-check or “neutrality” agreements) with a union.

As a result of today’s U.S. Supreme Court ruling in Chamber of Commerce of the United States et al.  v. Brown et al., states may no longer restrict employers’ rights to communicate with their employees about unionization.  The decision by an overwhelming majority of the Court shuts the door on attempts by other states to use their spending powers to get around federal labor laws.  The impact of the Court’s decision will be sweeping.  At least 20 states either have similar laws or have proposed to enact laws that also restrict federally protected employer speech about unionization.  This decision will ripple through the legal system and likely result in the invalidation of similar legislation in these states.

My colleague at the Chamber, chief legal officer and general counsel Steven Law, said it best:

"It’s simply unethical for a state to use taxpayers’ funds to tie the hands of employers in union organizing drives.  And not only is it unethical, but today the Supreme Court declared that it’s unlawful under the National Labor Relations Act for a state to muzzle employers’ speech rights."

Patience is a Virtue

by Robin Conrad

In Slate's article "Big Business's Big Term" we will ignore the fact that Mr. Kendall's bias is buried in the bio box at the bottom.  We will also ignore the fact that his portrayal of me as "gushing" is sexist if not insulting. Instead, let's focus on the last paragraph of the article in which Kendall concedes that "The game is not rigged. Rather, by investing heavily in legal strategy and working patiently in case after case, the chamber has won victories that have gradually shifted the ground rules in its favor." -- and thank him for the compliment.

Economic Impact of Immigration

by Robin Conrad

A recent study paid for by one of the defendant’s in a federal court case challenging that Arizona’s immigration statute alleges that "Illegal’s depress wages by $1.4 billion in Arizona."  That study, however, did not consider, review or analyze the economic benefits of immigrants, such as the money they spend on goods and services in Arizona, as well as the amount of taxes they pay to the state and local governments. 

There is a more comprehensive study (PDF) on the overall economic benefits that immigrants (legal and illegal) bring to Arizona. The author of this study demonstrates that immigrants contribute a net gain to the Arizona economy of nearly $1 billion.

The defendant’s so-called expert in the Arizona case is virtually alone among his peers in his conclusions about the negative effect of illegal immigrant workers on the wages of low and unskilled legal workers.  A more detailed report (PDF) -- that was not prepared for litigation -- demonstrates that nearly all other comprehensive economic studies performed to date have come to the opposite conclusion.