Category: Litigation

SCOTUS Slashes Scope of Cybercrime Statute

The Supreme Court handed down a decision significantly narrowing the scope of the Computer Fraud and Abuse Act (“CFAA”), a federal statute that can impose both criminal and civil liability on anyone who “intentionally accesses a computer without authorization or exceeds authorized access”, in its first-ever decision addressing this law.

In a 6-3 opinion in Van Buren v. United States, No. 19-783, authored by Justice Barrett, the Court reversed the Eleventh Circuit’s decision to uphold the conviction of a former police officer who was charged under the CFAA for searching a license plate in a law enforcement database for unofficial purposes.  His conviction concerned a provision of the statute that made it illegal “to access a computer with authorization and to use such access to obtain . . . . information in the computer that the accesser is not entitled so to obtain”.  The officer appealed, claiming that the CFAA did not cover unauthorized use of a database that he was otherwise authorized to access as part of his job.

Recall that the CFAA, which was passed in 1986, is considered to be the primary anti-hacking law and prosecutorial tool against outside actors who are accused of breaking into computer networks (although the statute has also been litigated recently in the commercial context, including in relation to data scraping).  It forbids individuals from intentionally accessing a computer without authorization or “exceed[ing] authorized access.”  The Supreme Court granted certiorari to resolve a split in authority among the Courts of Appeal regarding the scope of liability under the CFAA’s “exceeds authorized access” clause.

The majority opinion closely parsed the language of the CFAA and examined the types of activities that constituted “exceed[ing] authorized access.”  Ultimately, the Court concluded that the provision that Plaintiff had been convicted under “covers those who obtain information from particular areas in the computer—such as files, folders, or databases—to which their computer access does not extend.  It does not cover those who, like [Petitioner], have improper motives for obtaining information that is otherwise available to them.”  Op. at 1 (emphasis supplied).  Justice Barrett’s opinion also focused on the statute’s scope, noting that the government’s broad interpretation would criminalize a “breathtaking amount of commonplace computer activity,” including mundane activities such as using a work computer for personal purposes.

This case is a game changer for pending and future cases brought under the CFAA.  As CPW readers will remember, the hiQ/LinkedIn data-scraping saga ongoing in California federal court had been paused pending a ruling from SCOTUS in Van Buren.  All eyes will be back on that case now, in light of the circumscribed interpretation of the statute adopted by SCOTUS.

© Copyright 2021 Squire Patton Boggs (US) LLP

ARTICLE BY John A. Burlingame,  Kristin L. Bryan and Christina Lamoureux of Squire Patton Boggs (US) LLP
For more articles on SCOTUS, visit the NLR Litigation section.

Judge Looks “Kind”ly Upon Certifying Class in Snack Bar Advertising Suit

In a recent opinion out of the Southern District of New York, Judge William H. Pauley III certified three classes of plaintiffs in New York, California, and Florida who allege that KIND LLC, the manufacturer of KIND Bars, deceptively marketed several products as “all natural” and “non-GMO,” even though they purportedly contain synthetic and genetically modified ingredients.  In re KIND LLC “Healthy and All Natural” Litig., No. 15-md-02645 (S.D.N.Y. Mar. 24, 2021).

The court began its analysis by examining each of the four Rule 23(a) requirements—numerosity, commonality, typicality, and adequacy—and determining that each weighed in favor of class certification.  Most notably, the court found that common questions predominated despite the absence of any uniform definition of the term “natural” because, in its view, all the definitions plaintiffs advanced were consistent with one another.  Plaintiffs offered definitions of “natural” from the dictionary, FDA policy, the USDA, and Congress. In considering these various definitions, Judge Pauley recognized that “these formulations of the definition ‘natural’ differ,” but dismissed these concerns because he believed none “exclude[d] another.”

This decision is somewhat surprising, given the deep reservoir of class certification decisions finding that, where plaintiffs fail to establish a controlling definition for a key term or phrase in the challenged advertisement, individual issues predominate and class certification should be denied.  A number of courts have reached this conclusion in the “natural” labeling sphere:

  • In Astiana v. Kashi Co., the court refused to certify a class bringing “all natural” claims, in part because the plaintiffs were unable to show that “all natural” had a shared meaning amongst the proposed class. 2013 U.S. Dist. LEXIS 108445, *40 (S.D. Cal. 2013)
  • In Thurston v. Bear Naked, Inc., a federal judge in the Southern District of California found commonality and predominance lacking because the plaintiffs “fail[ed] to sufficiently show that ‘natural’ has any kind of uniform definition among class members.” 2013 U.S. Dist. LEXIS 151490, *25 (S.D. Cal. 2013).
  • In Randolph v. J.M. Smucker Co., the court denied class certification where plaintiff had “not demonstrated that an objectively reasonable consumer would agree with her interpretation of ‘all natural,’” while also noting that this failure “unequivocally exposes the fact that there is a lack of consensus” surrounding what constitutes a “natural” product. 2014 U.S. Dist. LEXIS 176731, *14 (S.D. Fla. 2014).

Courts regularly adopt this reasoning in other contexts also. See Pierce-Nunes v. Toshiba Am. Info. Sys., 2016 U.S. Dist. LEXIS 149847 (C.D. Cal. 2016) (holding that the predominance requirement was not satisfied where plaintiffs could not establish a common meaning for the term “LED TV”); In re 5-Hour Energy Mktg. & Sales Practices Litig., 2017 U.S. Dist. LEXIS 220969 (C.D. Cal. 2017) (same based on “energy”); In re Tropicana Orange Juice Mktg. & Sales Practices Litig., 2019 U.S. Dist. LEXIS 102566 (D.N.J. 2019) (same based on “pasteurized”).

The FDA also has not adopted, and has actually declined to adopt, a formal definition of the term “natural,” citing the “many facets of this issue” the agency would have to carefully consider if it were to undertake the task of defining the term.  See 58 Fed. Reg. 2302, 2407 (Jan. 6, 1993).  In doing so, the FDA noted “the ambiguity surrounding use of this term.”  It is difficult to square this ambiguity with the KIND court’s certification decision.

Watch this space as we monitor whether this decision is part of a shifting tide in “natural” certification decisions, or merely an outlier amidst continuing struggles to reach consensus on what “natural” even means.

© 2021 Proskauer Rose LLP.

ARTICLE BY Lawrence I Weinstein,  Jennifer Yang and Alyson C. Tocicki of Proskauer Rose LLP
For more articles on food class actions, visit the NLRLitigation / Trial Practice section.

Aiding and Abetting, Conspiracy, and The Picture of Dorian Gray

It isn’t every day that the Law Court addresses claims of civil conspiracy or aiding and abetting breaches of fiduciary duty, but that is exactly what the court did in Meridian Medical Systems, LLC v. Epix Therapeutics, Inc. – with a bit of literary allusion thrown in.

In Meridian, the Court clearly stated for the first time that

“civil liability can attach for aiding and abetting another’s tortious conduct.”

Meridian involved a business relationship gone bad.  Ken Carr, in his capacity as assignee of the claims of Meridian, sued corporate defendants which had a relationship with Meridian as a result of a licensing agreement.  The complaint asserted that the value of Meridian’s technology was not maximized due to the conduct of Ken Carr’s co-managers at Meridian, which allegedly was encouraged by the defendants.  The complaint included counts for “conspiracy” and “aiding and abetting breaches of fiduciary duty.”

Reviewing the order granting the defendants’ motion to dismiss, the Court emphasized that it must carefully “parse” a complaint to determine whether “its allegations meet the elements of a viable claim.”  Rhetoric and the sheer size of a complaint cannot alone carry the day.  Citing The Picture of Dorian Gray, Oscar Wilde’s famous story of the price of moral corruption, Justice Connors noted that terms such as “corrupt” may “own literary value, [but] it adds no substance to a legal cause of action.”

Meridian stands for two propositions of particular note – there is no tort for “conspiracy” under Maine law, but there can be a claim for “aiding and abetting” in the civil context.  The first was already settled under Maine law, but the second was not.  Until Meridian Medical Systems, the status of the aiding and abetting doctrine has been “uncertain in the civil context.”

The Court ended that uncertainty, stating flatly that a party can be civilly liable for aiding and abetting tortious conduct.  Unlike conspiracy, aiding and abetting focuses not on agreement but on “assistance in committing the underlying tort.” Proof of aiding and abetting in the civil context requires

  1. knowledge that the other’s conduct constitutes a breach of duty, and
  2. substantial assistance or encouragement to the other to so conduct himself.

Thus, “the party whom the defendant aids must perform a wrongful act that causes an injury,” and the defendant must “be generally aware of his role as part of . . . tortious activity at the time that he provides the assistance” and “must knowingly and substantially assist the principal violation.”

The Court, however, provided two important caveats.  “First, the aider and abettor must have actual – and not merely constructive – knowledge that the principal tortfeasor is engaged in tortious conduct.”  This provides an important limit on the scope of civil liability.  “Second the defendant must commit acts constituting substantial assistance in the commission of the underlying tort.”  Substantiality depends on a variety of factors, including the amount of assistance and the defendant’s state of mind.

The Law Court ultimately held that the plaintiff failed to allege knowing, substantial assistance in any breach of fiduciary duty.  Nevertheless, after Meridian, it is clear that while there may be no liability for conspiracy – or even corruption on the scale of The Picture of Dorian Gray – a party may be liable for aiding and abetting tortious conduct.

©2021 Pierce Atwood LLP. All rights reserved.
For more articles on civil conspiracy, visit the NLR Litigation / Trial Practice section.

PREP Act Immunity and Its Application in Shareholder Derivative Litigation: A Modest Proposal

Much has been published recently about the Public Readiness and Emergency Preparedness Act (“PREP Act” or “Act”) in the COVID-19 era.[1]  Its protections, including broad immunity from liability, have been extended to individuals and companies involved in the design, manufacture, distribution and administration of  “countermeasures” against the SARS-CoV-2 virus.  Although the PREP Act has been around for more than 15 years, its defensive application in litigation before COVID-19 was limited.  Now, more than a year into the pandemic, application of the PREP Act is being more actively litigated, primarily in the context of COVID-19 deaths in skilled nursing and assisted living facilities.[2] 

Still unresolved, however, is whether there is any basis for using the PREP Act defensively in shareholder derivative suits which allege that “materially deceptive statements” made by companies trying to make vaccines and other “countermeasures” are covered by the PREP Act.  While there has been no definitive judicial assessment of this question, there are reasons that companies facing such claims should consider seeking such a determination.

The PREP Act: Background

In 2005, Congress passed the PREP Act as a tool to combat public health emergencies.  It empowered the Secretary of the U.S. Department of Health and Human Services (“Secretary”) to issue a “Declaration” that “a disease or other health condition or other threat to health constitutes a public health emergency, or that there is a credible risk that the disease, condition, or threat may in the future constitute such an emergency.”[3]  If such a Declaration is issued, immunity from liability will apply to persons and companies engaged in providing “countermeasures” to combat the perceived public health threat.  Such a Declaration was issued by the Secretary of Health and Human Services in March 2020 in response to the COVID-19 pandemic.  Through various subsequent amendments to the Declaration, as well as guidance and advisory opinions, the scope of immunity was further illuminated and in some ways expanded.

Historical Application of the PREP Act

Prior to COVID-19, few cases invoked the PREP Act.  Among those that did, most favored supporting immunity despite various forms of harm.  Unsurprisingly, most of the cases focused on the vaccine for the H1N1 virus.

In Parker v. St. Lawrence County Public Health Department,[4] the claim was that a child was immunized against the H1N1 virus without parental consent.  The court disposed of this claim, holding that the PREP Act “preempts plaintiff’s state law claims for negligence and battery.”[5]

In Kehler v. Hood,[6] a plaintiff sued a physician and the physician’s employer, claiming that the defendants failed to obtain the plaintiff’s informed consent before administering the H1N1 vaccine.  This led to the development of “a severe case of transverse myelitis.”[7] The defendants then brought a third-party action against the vaccine manufacturer, Novartis Vaccines and Diagnostics.  Novartis moved to dismiss all claims against it under the PREP Act.  The court agreed, held that Novartis enjoyed absolute immunity from liability pursuant to the PREP Act, and dismissed those claims.

Not all cases allowed a defendant to benefit from the PREP Act.  In Casabianca v. Mount Sinai Medical Center,[8]the claim centered on the failure to administer a flu vaccine, which allegedly led to various serious medical consequences.  The Trial Order—not an officially published opinion—determined that withholding a vaccine (as opposed to administering it) was not covered by the statute.  In the COVID-19 context, this reasoning may not apply since the amendments of the Declaration related to the COVID-19 pandemic make clear that failure to administer a covered activity may still be covered by the PREP Act if withholding from one person is related to the need to administer to another.[9]

Application of the PREP Act During the COVID-19 Pandemic

COVID-19 has seen a plethora of lawsuits in which the PREP Act has been invoked.  Many involve skilled nursing or assisted living facilities where COVID-19 countermeasures were not administered and patients/residents passed away.[10]  Some decisions hinged on a determination as to whether the withholding of countermeasures was causally related to the administration of countermeasures to another person.  In other words, were there limited resources and the sued entity made decisions about who would have access to those limited resources?  In most cases, courts ruled that such withholding was not a resource issue and declined to rule that the PREP Act applied.[11] 

In Haro v. Kaiser Foundation Hospitals,[12] an employee of a Kaiser Foundation Hospital was required to report for work 15 minutes before her shift began for COVID-19 medical screening, without compensation for that extra time.  Here, the court also held that the PREP Act did not apply.[13]

PREP Act Immunity and Shareholder Derivative Suits

An unresolved question is whether the PREP Act provides protection to companies and their executives who are sued in shareholder class action suits.  A number of recently filed cases allege that manufacturers who engaged in efforts to formulate COVID-19 vaccines and other therapies, but failed to achieve regulatory approval in the U.S., committed violations of the Securities and Exchange Act of 1934 (“Securities Act”).  These complaints allege generally that (a) the companies and key executives made intentionally false and misleading statements that led investors to purchase securities; (b) the value of the securities was artificially inflated by the allegedly fraudulent statements; and (c) the value then declined upon the failure of the promised vaccine or other countermeasures to obtain regulatory approval.[14]

Undoubtedly, these companies can assert a number of different arguments which may militate in favor of dismissal of these putative class action complaints, most prominently that any statements made were not intentionally false, as required by the Securities Act.  One argument that has not been a traditional defense in shareholder derivative suits is PREP Act immunity.  The argument will need to focus on whether the terms of the PREP Act contemplate immunity to the type of injury alleged in shareholder derivative suits.

The terms of the PREP Act provide a starting point for this defense.  The PREP Act provides a list of the kinds of claims it seeks to limit by virtue of the grant of broad immunity.  Certainly, “garden variety” personal injury claims are covered, including when the harm alleged includes:

(i)    Death;

(ii)   Physical, mental or emotional injury, illness, disability or condition;

(iii)  Fear of physical, mental or emotional injury, illness, disability, or condition, including any need for medical monitoring.[15]

However, the PREP Act also includes an additional category of loss that, by its terms, clearly goes beyond personal injury:

(iv)  Loss of or damage to property, including business interruption loss.[16] 

The question is whether shareholder damages, e.g., the loss in share value alleged in recent shareholder claims, could be a “loss of or damage to property” under the PREP Act.[17]

Shareholder claims generally allege that false or misleading statements by a company and its executives induced a member of the public to purchase shares at inflated value, which subsequently diminished in value when the falsity of the statements became known.  Although there are several cases alleging shareholder losses due to allegedly “false or misleading” claims by companies involved in the manufacture or sale of COVID-19 “countermeasures,”[18] none of the cases considered the question whether “loss of or damage to property” could include diminution in value of the shares in such a company.  Indeed, none of the defendants appear to have pleaded the PREP Act as a defense. There are arguments to be made as to why they should consider doing so.

Like personal injury claims, fraud is a tort, albeit an intentional one.[19]  The PREP Act certainly envisions that some types of covered claims might not merely be ones of negligence or accidental torts since the compensation scheme provides for special treatment of conduct that constitutes “willful misconduct.”[20]  The section on “willful misconduct” makes clear that the only injuries for which there may be an exception to the blanket immunity otherwise granted by the Act, is willful misconduct that results in serious physical injury or death.[21]  The plain meaning of the text shows that for other kinds of “willful misconduct”—for example, willful misconduct causing “loss of or damage to property”—immunity still applies and no damages will be permitted outside of the limited compensation scheme under the PREP Act.[22] 

The question remains whether the statute applies to any harm—intentional or otherwise—other than personal injury.  Rules of statutory construction require that any such inquiry starts with the terms of the statute and whether the language “has a plain and unambiguous meaning with regard to the particular dispute in the case.”[23]  The United States Supreme Court has made clear that ‘‘[o]ur inquiry must cease if the statutory language is unambiguous and ‘the statutory scheme is coherent and consistent.’’’[24]  Here, the statute unambiguously creates a category of harm that is clearly different from the descriptions of personal injuries (or fear of personal injury) described in the preceding three definitional sections.  “Loss of property” suggests a pecuniary loss and supports the notion that the kinds of harm contemplated by the statute is broad enough to include the financial harm described in the shareholder suits.[25]

The terms of the PREP Act are further illuminated by the Declaration, which is statutorily required to invoke the PREP Act to combat a public health crisis.[26]  In his Declaration of March 17, 2020, the Secretary acknowledged that COVID-19 constituted a public health emergency and declared PREP Act immunity to be in effect to encourage “the design, development, clinical testing, or investigation, manufacture, labeling, distribution, formulation, packaging, marketing, promotion, sale, purchase, donation, dispensing, prescribing, administration, licensing, and the use of the Covered Countermeasures.”[27]  Thus, the “desirability of encouraging”[28] these activities lends credence to the argument that statements made in the course of “design, development, clinical testing or investigation”[29] are related to these countermeasures and fall within the purview of the grant of PREP Act immunity.  Clearly, the record shows that Congress recognized the need to impose limits on liability across a range of matters to encourage private industry participation in addressing the current public health crisis.  Extending immunity for shareholder derivative suits is consistent with this goal.[30]

Even the legislative history of the PREP Act provides evidence that the broadest interpretation of the kinds of harm that are covered by the statute’s grant of immunity is appropriate.  While the legislative history surrounding the PREP Act is sparse, particularly regarding the provision regarding “loss of or damage to property,” there is certainly some evidence to support the idea that the immunity should be read broadly.  Although there does not seem to be any specific consideration as to whether allegedly fraudulent statements by “covered persons” are covered by the PREP Act, several opponents of the Act voiced their concern about the breadth of immunity contemplated by the Act and, in doing so, provide guidance as to the legislative intent behind the statute.  For example, then-Senator Joe Biden stated:

[T]his is no typical grant of immunity. No, the breadth of this provision is staggering. A drug maker can be grossly negligent in making or distributing a drug, and still escape liability. It can even make that drug with wanton recklessness and escape scott-free after harming thousands of people.[31]

Then-Senator Hillary Clinton also weighed in on the scope of immunity and implicitly acknowledged that the PREP Act applied to more than just physical injury:

Mr. President, I would like to take this opportunity to object to insertion of a provision in the Department of Defense appropriations bill that would provide sweeping immunity protections to pharmaceutical manufacturers . . . . [T]his provision would grant immunity to all claims of loss, including death and disability, for a broad range of products, including any drug that the Secretary designated as one that would limit the harm caused by a pandemic—a definition so broad as to encompass nearly any drug.[32]

Senator Patrick Leahy also expressed alarm at the breadth of the grant of immunity:

Knowing violations as well as gross negligence would be immunized from accountability. Even if the drug company acted with the intent to harm people, it would nevertheless be immune from criminal conduct unless the Attorney General or Secretary of Health and Human Services initiates an enforcement action against a drug company that is still pending at the time a personal claim is filed.[33]

While it may be true that some opponents of this broad immunity were mainly concerned about immunizing conduct that resulted in physical injury to people, the conduct covered by the immunity granted by this legislation is clearly more than just conduct that causes physical injury.  As Senator Clinton’s comment reflects, there are reasons to conclude that it covers claims of allegedly fraudulent statements made by “covered persons” involved in the manufacture, distribution and administration of “countermeasures.”

Reasons to think otherwise do exist.  For example, the Act does not specifically mention loss of share value as a covered “loss.”  Nor does it reference “fraudulent conduct” as protected by immunity.  And, viewed as a whole, some might argue that the PREP Act seems mostly concerned with protecting “covered persons” from liability for personal injury claims.  Indeed, it might seem counterintuitive that Congress would have wanted to immunize a company or its executives in the face of knowingly false and misleading statements.  This argument, however, misses an important point.  Such conduct would not be completely immunized since the federal government would still be empowered to prosecute such false statements under various laws, including the Securities Act of 1933 and the Securities Act of 1934, pursuant to a carve-out in the PREP Act:

Nothing in this section shall be construed to abrogate or limit any right, remedy, or authority that the United States or any agency thereof may possess under any other provision of law . . . .[34]

Thus, the intent of the PREP Act would actually be promoted by protecting companies involved in trying to create vaccines or other types of treatment for COVID-19 from the burdens placed on those companies by shareholder derivative suits; while preserving the possibility of criminal prosecution by the U.S. Department of Justice and civil liability through governmental action mainly through the U.S. Securities and Exchange Commission.[35]

Conclusion

Until this is tested in the courts, no one can be sure if the hypothesis is correct—that PREP Act immunity should cover certain shareholder derivative suits.  But there appears to be good reason to put this to the test.  Asserting the Act’s immunity in affirmative defenses and moving for dismissal is the best way to find out if the courts will agree.

[1]See, e.g., Erik K. Swanholt, John J. Atallah & Jessica N. Walker, HHS Expands and Clarifies Scope of Immunity under the PREP Act, The National Law Review (Dec. 28, 2020), https://www.natlawreview.com/article/hhs-expands-and-clarifies-scope-immunity-under-prep-act; See also Eric Kraus & Jennifer Shah, COVID-19 Vaccines Unlikely to Create Litigation Opportunities, Law360 (Dec. 7, 2020)

[2] See, e.g., Estate of Smith ex rel. Smith v. Bristol at Tampa Rehab. & Nursing Ctr., LLC, No. 8:20-cv-2798-T-60SPF, 2021 WL 100376 (M.D. Fla. Jan. 12, 2021).

[3] 42 U.S.C. § 247d-6d(b).

[4] Parker v. St. Lawrence Cnty. Public Health Dep’t, 102 A.D.3d 140 (3rd Dep’t 2012).

[5]Id. at 142.

[6] Kehler v. Hood, 2012 WL 1945952, No. 4:11CV1416, 2012 WL 1945952 (E.D. Mo. May 30, 2012).

[7]Id. at *1

[8]Casabianca v. Mount Sinai Med. Ctr., No. 112790/10, 2014 WL 10413521  (Sup. Ct. N.Y. Cnty. Dec. 2, 2014).

[9] 42 U.S.C. § 247d-6d; Fourth Amendment to Declaration Under the Public Readiness and Emergency Preparedness Act for Medical Countermeasures Against COVID-19, 85 Fed. Reg. 79,190-01, 79,197 (Dec. 9, 2020).  See also  Advisory Opinion 21-01 on the Public Readiness and Emergency Preparedness Act Scope of Preemption Provision, https://www.hhs.gov/guidance/sites/default/files/hhs-guidance-documents/2101081078-jo-advisory-opinion-prep-act-complete-preemption-01-08-2021-final-hhs-web.pdf (Jan. 8, 2021).

[10]Anson v. HCP Prairie Vill. KS OPCO LLC, No. 20-2346, 2021 WL 308156 (D. Kan. Jan. 29, 2021).

[11] See, e.g., Baskin v. Big Blue Healthcare, Inc., No. 2:20-cv-2267, 2020 WL 4815074 (D. Kan. Aug. 19, 2020); Eaton v. Big Blue Healthcare, Inc., 480 F. Supp. 3d 1184 (D. Kan. 2020).

[12] No. 20-CV-6006, 2020 WL 5291014 (C.D. Cal. Sept. 3, 2020).

[13] Id.

[14] See, e.g., Leung v. Bluebird Bio, Inc., No. 1:21-cv-00777 (E.D.N.Y. filed Feb. 12, 2021) changed venue to No. 1:21-cv-10335 (D. Mass. filed Feb. 26, 2021); Monroe Cnty. Emps’. Ret. Sys. v. AstraZeneca PLC, No. 1:21-cv-00722 (S.D.N.Y. filed Jan. 26, 2021); Zhukov v. AstraZeneca PLC, No. 1:21-cv-00825 (S.D.N.Y. filed Jan. 29, 2021). [As of Apr. 29, 2021, Monroe Cnty. Emps’. Ret. Sys. v. AstraZeneca PLC and Zhukov v. AstraZeneca PLC were consolidated to In re AstraZeneca PLC Secs. Litig., No. 1:21-cv-00722 (S.D.N.Y. filed Jan. 26, 2021)].

[15] 42 U.S.C. § 247d-6d(a)(1)(A)(i-iii).

[16] 42 U.S.C. § 247d-6d(a)(1)(A)(iv) (emphasis added).

[17] The term “loss of or damage to property, including business interruption loss” has been, and continues to be, extensively litigated in COVID-19-related insurance coverage disputes.  Although the terminology is similar, these cases do not address the PREP Act but rather focus on the terms of the policies at issue.  In some cases, where the policy required “direct physical loss,” courts have ruled that the policy requires “tangible damage” and denied coverage.  See, e.g., Turek Enters., Inc. v. State Farm Mut. Auto. Ins. Co., 484 F. Supp. 3d 492 (E.D. Mich. Sept. 3, 2020). Other cases denied coverage on the basis of a policy’s express “virus exclusion.” See, e.g., Martinez v. Allied Ins. Co. of Am., 483 F. Supp. 3d 1189 (M.D. Fla. Sept. 2, 2020).

On the other hand, there are cases where the business plaintiff seeking coverage successfully drew a distinction between “loss of” and “damage to” property.  See, e.g., Studio 417, Inc. v. Cincinnati Ins. Co., 478 F. Supp. 3d 794, 800-03 (W.D. Mo. 2020) (insurers’ motion to dismiss denied, holding that plaintiff stated a claim, and that “direct physical loss” included the suspension of business due to COVID-19 and related governmental restrictions).

[18] See, e.g., Monroe Cnty. Emps’. Ret. Sys., supra note 9; Leung, supra note 9; Zhukov, supra note 9.

[19] Restatement (Third) of Torts: Liab. for Econ. Harm § 9 (2020).

[20] 42 U.S.C. § 247d-6d(c).

[21] 42 U.S.C. § 247d-6d(d)(1).

[22]See 42 U.S.C. § 247d-6e (which provides for the establishment of an “emergency fund” in the Treasury “designated as the ‘Covered Countermeasure Process Fund’ [to] provid[e] . . . compensation to eligible individuals”).

[23] See Robinson v. Shell Oil Co., 519 U.S. 337, 340 (1997). ‘‘A statute generally ‘should be enforced according to its plain and unambiguous meaning.’’’ Greathouse v. JHS Sec. Inc., 784 F.3d 105, 111 (2d Cir. 2015) (quoting United States v. Livecchi, 711 F.3d 345, 351 (2d Cir. 2013)).

[24]Robinson, 519 U.S. at 340 (quoting United States v. Ron Pair Enters., Inc., 489 U.S. 235, 240 (1989)).

[25] Dictionary definitions provide further support for this view.  For example, the Merriam-Webster online dictionary defines property as “something to which a person or business has a legal title.” https://www.merriam-webster.com/dictionary/property (last visited May 13, 2021).  See also The Oxford English and Spanish Dictionary, which defines property as “[t]he right to the possession, use, or disposal of something; ownership.”  https://www.lexico.com/en/definition/property  (last visited May 13, 2021).

[26] 42 U.S.C § 247d-6d(b)(1).

[27] Declaration Under the Public Readiness and Emergency Preparedness Act for Medical Countermeasures Against COVID-19, 85 Fed. Reg. 15,198-01, 15,201 (Mar. 17, 2020).

[28] 85 Fed. Reg. 15,198-01, 15,201.

[29]Id.

[30] Albeit in another context, the U.S. Supreme Court agreed that a statutory scheme that provided liability protections to encourage private industry participation in an effort to develop nuclear power was proper and constitutional.  Duke Power Co. v. Carolina Env’t Study Grp., Inc., 438 U.S. 59 (1978).

[31] 151 Cong. Rec. S14,242-01, S14,242 (daily ed. Dec. 21, 2005) (statement of Sen. Joseph Biden).

[32]Id. at S14,243 (statement of Sen. Hillary Clinton) (emphasis added).

[33]Id. at S14,247 (statement of Sen. Patrick Leahy).

[34] 42 U.S.C § 247d-6d(f).

[35] See 17 C.F.R. §§ 240.10b-5.  See also Securities Act of 1933 § 24 (“Securities Act”), 15 U.S.C. § 77x; Securities Exchange Act of 1934 § 32, 15 U.S.C. § 78ff(a).

© 2021 Phillips Lytle LLP

ARTICLE BY Eric M. Kraus and John G. Schmidt Jr. of Phillips Lytle LLP
For more articles on PREP Act Immunity, visit the NLRCorporate & Business Organizations section.

Legal Industry News for May 2021: Law Firm Moves, Philanthropy & AAPI Heritage Month

Spring is in the air and we’re back with the first installment of our legal industry column for May. Read on for the latest news on law firm promotions, legal industry philanthropy, research and Asian American and Pacific Islander (AAPI) Heritage Month.

Law Firm Moves & Promotions

Carlton Fields named Shareholder Jason J. Quintero as the Tampa office managing shareholder. Mr. Quintero succeeds Tampa Shareholder Lori Baggett in the role.

“Jason will be instrumental in continuing the strategic growth and direction of the office, as well as continuing to develop Carlton Fields’ strong relationships within our vibrant city. He brings a positive and dynamic approach to this role and I am confident that he will build on the remarkable contributions of his predecessors,” said Gary L. Sasso, President and CEO of Carlton Fields.

Mr. Quintero practiced at Carlton Fields for 16 years, and held leadership roles in the firm and The Florida Bar. He practices in the Construction Practice Group at Carlton Fields, which represents a variety of clients in the construction industry.

“Carlton Fields is a wonderful firm and I’m honored to serve in this new role. The firm is client-focused and actively engaged in the community. I look forward to working with Tampa’s business and community leaders, who genuinely care about our area’s growth, health, prosperity, and success,” Mr. Quintero said. “Our firm’s opportunistic mindset and commitment to excellence, diversity, and collaboration will serve as the driving factors of our success as an invested market leader in the Tampa Bay region, and as we emerge into a post-COVID world.”

Brittain A. Rogers joined Akin Gump in New York as a partner in its corporate practice.  Mr. Rogers represents clients in mergers and acquisitions (M&A), financing and corporate matters.

“Britt’s ability to lead complex M&A and financing transactions as well as his deep ties to the investment management industry are a perfect complement to our leading corporate practice,” said Akin Gump chairperson Kim Koopersmith. “His past credit-side work will also resonate loudly with our special situations and financial restructuring clients, and I am delighted to welcome him to Akin Gump.”

Mr. Rogers previously served as a managing director of Fortress Investment Group, where he served as lead internal counsel for more than $15 billion in completed M&A and financing transactions.

“Akin Gump enjoys a strong reputation for traditional M&A work and for its leading private equity practice as well as for its deep roots across the investment funds world,” Mr. Rogers said. “I was drawn to the firm because of the opportunities I saw to contribute to the growth of its corporate team by working with its investor client base. This is an exciting move, and I am very happy to be here.”

Joseph G. Tirone joined Baker Donelson as a leader of the firm’s Energy Transactions Team and as the chair of the Power and Renewable Energy Team.

Mr. Tirone has nearly 30 years of experience in energy project and infrastructure development, and advises clients in the power and renewable energy, oil and gas, biofuels, and transportation sectors. Before joining Baker Donelson, Mr. Tirone was a leader of the energy team for a transatlantic law firm.

“Joe has established himself as a leading energy transactions attorney. His emphasis on energy project and infrastructure development and finance is a tremendous addition to our Firm’s offering as we position our clients to take advantage of the anticipated surge of infrastructure opportunities,” said James E. Edwards Jr., managing shareholder of Baker Donelson’s Baltimore office.

The National Association for Law Placement (NALP) named Venable’s Director of Career Development Traci Mundy Jenkins as the 2021-2022 President at the association’s business meeting on April 30th. Ms. Jenkins spent one year as NALP’s president elect.

Ms. Jenkins will serve as chief volunteer and as the leader of the NALP board of directors.  She will work with other officers to prepare the association’s annual budget, and will oversee the development of short and long term plans.

During her 18 years at NALP, Ms. Jenkins served as vice chair of the Annual Education Conference, vice chair of strategic planning for the Lawyer Professional Development Section, and as an elected member of the Nominating Committee, among other roles.

Ms. Jenkins’ legal recruiting and development experience includes serving as the president of the Washington Area Legal Recruitment Administrators Association (WALRAA), as well as being a founder and managing partner of a recruiting and consulting company and as assistant dean at the American University Washington College of Law.

Law Firm Philanthropy and AAPI Heritage Month:

The St. Louis Journal named Bryan Cave Leighton Paisner (BCLP) a 2021 Innovation in Philanthropy Award winner for its partnership with Concordance Academy of Leadership, which provides reentry services to individuals released from incarceration. BCLP hires law school graduates for two-year assignments in the program, where they split their time between the Concordance fellowship and with their work for the firm.

“Many people who come out of prison face arrest for outstanding warrants, traffic violations or child support cases that occurred before they went in,” said BCLP Partner Bob Newmark, who served as St. Louis office managing partner when the Concordance collaboration began and helped grow the partnership. “They were never resolved once they were incarcerated, so we try to get them a clean slate.”

BCLP fellows helped clear more than 500 warrants, attended more than 500 court appearances and commuted more than $12,000 in fines for Concordance program participants since 2016. BCLP’s partnership with Concordance helped reduce re-incarceration rates in St. Louis by 44 percent over the past five years.

Proskauer launched a new partnership with the Chinese-American Planning Council (CPC) and its “Learn and Earn” youth-focused programming, which empowers Asian American, immigrant, and low-income communities in New York City through helping provide equitable access to resources and opportunities. CPC is the nation’s largest Asian American social services organization, and supports 60,000 individuals and families.

Their “Learn and Earn” program helps high school juniors and seniors be actively engaged in college preparedness, career exploration, community service, leadership development and more. Proskauer associates Bowon Koh, Scott Tan and Annie Zhang recently participated in a panel discussion moderated by Pro Bono Partner Bill Silverman with over 75 students on public service, careers in law and social justice. Proskauer plans to continue their workshops with CPC into the summer of this year.

DLA Piper  joined more than 45 law firms and a number of Fortune 100 general counsel to form the Alliance for Asian American Justice. The Alliance will support Asian American communities through pro bono legal services such as providing victims of anti-Asian hate crimes with counsel, as well as supplying community support.

“The Alliance for Asian American Justice aims to support and stand up for marginalized, low-income and under-represented Asian Americans who have historically been denied due process and access to crucial legal remedies,” said Cathryn Le Regulski, chair of DLA Piper’s Asian Americans and Pacific Islanders resource group.

DLA Piper will also provide financial support to the National Asian Pacific American Bar Association (NAPABA) and the Asian American Legal Defense and Education Fund (AALDEF) to help them take on anti-Asian cases and provide community based programs.

Legal Industry Research & Technology

The law firm market stabilized as it emerged from the COVID-19 pandemic, according to the Thomson Reuters Peer Monitor Economic Index (PMI) for the first quarter of 2021.

Rate growth remained high while demand fell and law firms cut costs to increase profitability. Office related costs dropped by 37 percent, while lawyer headcount remained stable. Litigation continues to lag, but could increase as courts begin to address case backlogs.

While the Thomson Reuters PMI slipped by seven points to 62, there were indications that the market is returning to pre-pandemic levels. The PMI showed an increase in mergers and acquisitions activity which led to a surge in corporate work. Demand was down by 1 percent compared with the first quarter of 2020.

However, the report concludes that the relatively small decrease in demand is a positive sign that the legal market is continuing the recovery it began in the third quarter of last year.

“While some of the data remains mixed, most signs point to a large law market that is moving towards more normal levels of activity,” said Mike Abbott, vice president, Market Insights and Thought Leadership for Thomson Reuters. “Strategies employed over the last year − such as expanding flexible working arrangements, supporting higher rates and reducing costs − have generally put firms in a good position as the trends show a continued recovery through the first quarter.”

As of Dec 31, 2020, women held 23.7 percent of the board seats among the largest publicly-traded companies on the Russell 3000 Index, according to data from the 50/50 Women on Boards (50/50WOB) Gender Diversity Index.

For the first time, 25 states with 20 or more headquartered companies now have 20 percent or more women directors on their boards. Additionally, 50/50WOB found that within the past six months, 425 companies added 469 women to their boards, and 77 percent did so by expanding their boards.

50/50WOB also found that out of 1,021 women who joined a board in 2020, 23 percent identified as a woman of color, two percent identified as white and 75 percent did not identify.

“The sustained increase and progress for women is positive, but there is work to be done to achieve gender balance and diversity on corporate boards,” said Stephanie Sonnabend, Co-Founder and Chair of 50/50WOB. “In addition to women holding 50 percent of all the corporate board seats, we call for women of color to hold at least 20 percent of all the corporate board seats.”

Wilson Sonsini launched a new digital hub for its Emerging Companies Practice, providing founders, entrepreneurs and venture capitalists with access to a wide range of free legal resources and insights. The digital hub’s launch coincides with a growth in venture capital valuations, fundraising and deal volume.“Helping entrepreneurs thrive is at the heart of everything we do at Wilson Sonsini,” said Raj S. Judge, partner at Wilson Sonsini and co-lead of the Emerging Companies Practice. “Whether it’s leveraging proprietary technology for efficiency in our practice, providing free resources like those found in our Knowledge Bank, or widening access to the global network of banks and VCs we’ve built over the past six decades, Wilson Sonsini aims to arm early-stage start-ups with the very best counsel so that they succeed and win.”

The newly launched site centers around a knowledge bank where Wilson Sonsini Emerging Companies Practice legal experts answer more than 200 of the most common questions from  entrepreneurs and start-ups, including those on IP protection, tax, governance, formation and financing.

Copyright ©2021 National Law Forum, LLC

ARTICLE BY Rachel Popa and Hanna Taylor of The National Law Review / The National Law Forum LLC
For more articles on the legal industry, visit the NLRLitigation / Trial Practice section.

In-N-Out Burger Served with COVID-19 Workplace Safety and Wage Violation Lawsuit

This week’s spotlight among COVID-19 related workplace litigation involves a common trend of employees alleging retaliation for reporting workplace COVID-19 safety hazards along with unrelated wage and hour allegations.

In Becerra v. In-N-Out Burger, a former butcher for the burger joint filed a Private Attorney General Act (PAGA) complaint alleging various violations of the California Labor Code and unfair business practices. According to the complaint, In-N-Out failed to enforce COVID-19 safety measures, including social distancing and requiring employees to wear personal protective equipment (PPE). The plaintiff claims the meat department was full of sick employees, many of whom exhibited COVID-19 symptoms, but In-N-Out did not place them on medical leave.

The plaintiff filed a report with the L.A. Public Health Department regarding the meat department’s alleged failure to observe safety protocols, and he informed other butchers of their right to report workplace safety concerns. The plaintiff contends that, as a result of his reporting workplace conditions and encouraging other employees to report, In-N-Out retaliated against him by giving him a “final warning” for attendance violations.

In-N-Out reports that it terminated the plaintiff’s employment because he provided false documentation about an absence and exhausted his sick leave. The plaintiff alleges that his previous absences were excused, and that he and similarly aggrieved employees were terminated for attempting to use sick leave. He also claims that In-N-Out failed to pay separated employees their final wages and provide accurate wages statements.

The plaintiff’s allegations are based in the early months of the pandemic when PPE was sparse and employers grappled with how to adjust their workplaces.  However, the alleged wage-related claims will cover a larger time frame.

Employers have learned a lot over the past year in terms of COVID-19 workplace safety.  Employers should remain vigilant, focusing on proper safety protocols and keeping potentially sick employees out of the workplace.

© 2021 BARNES & THORNBURG LLP

ARTICLE BY Colleen Naumovich and Kathleen M. Anderson of Barnes & Thornburg LLP
For more articles on COVID-19 Workplace Safety and Wage Violations, visit the NLR Coronavirus News section.

Potato, Potahto… Email, Slack

First came email.  Then came Slack, WhatsApp, Zoom, Teams, texts, and a host of social media platforms where we can communicate…in writing…and those communications are saved as electronically stored information (ESI).  “Collaboration software,” like Slack, Zoom, and Teams, is the newest eDiscovery challenge.  But the challenge lies in the preservation, capture, and review, as well as the analysis of proportionality, and not in the question of whether it is discoverable.

The United States District Court for the Central District of California recently ruled that Plaintiff’s Slack messages were both relevant and proportional to the needs of the case and ordered their production.  Benebone LLC v. Pet Qwerks, Inc., 2021 WL 831025 (2/18/21).  The main points of contention between Plaintiff and Defendant focused on the cost to extract, process, and review 30,000 Slack messages.

Although the Court described Slack as a relatively new communication tool, it was part of Plaintiff’s internal business communications and there was no real dispute that Plaintiff’s Slack messages were likely to contain relevant information.

On the topic of burden and proportionality to the needs of the case, the court held a (Zoom) hearing and determined that “requiring review and production of Slack messages by Benebone is generally comparable to requiring search and production of emails and is not unduly burdensome or disproportionate to the needs of this case.” Id. at *3.

One of the key takeaways from this case is to get an eDiscovery expert. Defendant’s expert testified that there are readily available third-party tools for collection and review of Slack and that searches of the data could be limited to certain Slack channels, users, or custodians (similar to focusing an email search on custodians and time frames).  Defendant’s estimate of cost for the project was vastly different than Plaintiff’s unsupported estimates ($22,000 compared to $110,000-$255,000).  To that end, Defendant’s expert proposed that contract attorneys could do first-level review at a rate of $40 an hour as opposed to a $400 an hour attorney rate.  Plaintiff failed to provide a declaration or testimony from an eDiscovery expert.

When facing federal litigation, your case will involve electronically stored information. Slack is considered a more dynamic form of ESI, making search, collection, and processing more difficult.  Choosing the right application programming interface (API) is important as Slack data is exported in JSON format, which is difficult to decipher and requires the right processing to get to more user-friendly data for review purposes.  Additionally, the level of subscription used impacts what can be recovered.

©2021 Strassburger McKenna Gutnick & Gefsky

ARTICLE BY Gretchen E. Moore of Strassburger McKenna Gutnick & Gefsky
For more articles on Slack and WhatsApp, visit the NLR Corporate & Business Organizations section.

Lawsuit Loans: Are the Pros Worth the Cons?

The lawsuit loan industry is loaning plaintiffs more than $100 million in the United States each year, but at what price to the injured and their loved ones?

This type of funding is also known as a lawsuit cash advance, lawsuit funding, settlement funding, and pre-settlement funding. No matter what you call it, having the ability to take out a cash advance against a pending settlement has helped thousands of people to cover their costs during the litigation process. That doesn’t mean it’s without its risks.

Lawsuit loans are typically funded by hedge funds, private investors, or banks that are willing to loan money to plaintiffs with the promise of a hefty return on their investment. Critics of lawsuit loans have pointed out that the legal standards other types of lenders are bound to do not apply to this type of lending, since it is largely unregulated in most states.

The business of lending to plaintiffs arose over the last decade, part of a trend in which banks, hedge funds, and private investors are putting money into other people’s lawsuits. But the industry, which now lends plaintiffs more than $100 million a year, remains unregulated in most states, free to ignore laws that protect people who borrow from most other kinds of lenders.

Why People Take Out Lawsuit Loans

According to a 2019 survey by Charles Schwab, 59% of Americans are one paycheck away from homelessness. This situation certainly hasn’t improved now that the country has been in the grip of a pandemic for the past year. Many people are already struggling to make ends meet, and an accident could quickly put the average person in dire financial straits.

When someone is injured in an accident that was caused by another party’s negligence, they may lose their ability to work, either temporarily or permanently. This can quickly push a family that was barely making it over the financial brink and into a never-ending cycle of late notices, collection calls, and eviction notices.

Before there is any discussion about whether or not the pros of a lawsuit are worth the cons, we must consider the fact that this is not solely a theoretical discussion about whether or not certain types of lending are predatory in nature or whether or not there is enough regulation. The pros and cons of lawsuit loans must be considered against the real-life financial consequences a particular plaintiff may be facing during their lawsuit before a judgment can be made.

The Benefits of Lawsuit Loans

There are plenty of benefits to taking advantage of pre-settlement funding, especially if you’re a plaintiff who is in a financial bind. The biggest of these benefits, of course, is being able to have food in your refrigerator, functioning utilities, and a roof over your head while you’re out of work and struggling to recover from an accident. But the benefits go beyond basic survival needs.

Insurance companies often pressure the victims of injury accidents to settle for an unfair amount because they know they are in a bad situation and looking for an immediate solution. They may drag the settlement process out hoping the plaintiff will cave in out of financial necessity. In addition to this, personal injury attorneys may also feel pressured into covering their clients’ expenses during the claims process. This can be a tremendous expense.

One of the benefits of lawsuit loans that plaintiffs appreciate most is in some types of funding, such as pre-settlement funding, you will not be required to repay the loans if your case fails to settle or get a court award. This, of course, is only a benefit if you are certain the type of funding you are signing up for does not require repayment. It is critical that any plaintiff clearly understands the terms of the financing before they sign any agreements.

The Drawbacks of Lawsuit Loans

The main disadvantage of lawsuit loans is the cost. While it is true that an attorney may be able to get a much larger settlement if the plaintiff can afford to hang in there throughout negotiations, many accident victims and their families are still shocked when the final bill comes in.

This is only a drawback if you aren’t well-informed about what the interest rate will be and what that figure may look like in relation to your estimated settlement. It can also become a drawback if you take a larger lawsuit loan than you need. However, if you only take what is needed and you are realistic about what your settlement will look like after you’ve paid the interest, settlement funding can keep you afloat during this difficult time.

Another disadvantage of lawsuit loans is the fact that you may not qualify, especially if the lender does not require you to pay the loan back if your case isn’t successful. These lenders are taking a huge risk, so in order to qualify for settlement funding your case must be likely to reach a favorable conclusion for the injured party.

What Borrowers and Their Attorneys Need to Know

Lawsuit loans can mean the difference between seeing that justice is done and being further victimized by insurance corporations that put profits before human lives. They can also send a plaintiff into sticker shock and leave them feeling angry if they don’t do their homework and understand what they’re getting into before they sign on the dotted line.

When you’re looking for a lender, whether for yourself or for a client, be sure to choose a lawsuit loan provider who believes in complete transparency throughout the process. If a lender won’t work with you on a personal level to make sure you clearly understand the terms of the loan, it’s better to take your business elsewhere.

So, are the pros of lawsuit loans worth the cons? The answer is…it depends on the plaintiff’s situation. If you or your client can make it through the lawsuit without accepting funding, it’s probably your best option to do so. However, if you’re struggling and there’s no end in sight, you may find that the drawbacks of settlement funding are well worth the advantages.

© 2021 High Rise Financial LLC

ARTICLE BY Melissa J. Fleming of High Rise Financial LLC
For more articles on lawsuit loans, visit the NLR Financial Institutions & Banking section.

Supreme Court to Hear Arguments regarding Natural Gas Act and Eminent Domain Power

On April 28, the Supreme Court will hear oral argument in PennEast Pipeline Co., LLC v. New Jersey et al., No. 19-1039, a case with significant implications for pipeline projects.  The main issue is whether the Natural Gas Act (NGA) delegates the federal government’s eminent domain power to Federal Energy Regulatory Commission (FERC) certificate holders and allows them to sue a state to condemn land in which the state claims an interest, or whether the Eleventh Amendment immunizes states from such lawsuits.

Factual and Legal Background

In 2018, following an extensive application and approval process that included public participation and numerous route modifications, FERC granted PennEast a certificate of public convenience and necessity allowing it to construct and operate a nearly 120-mile natural gas pipeline to transport gas in Pennsylvania and New Jersey.

The state of New Jersey has an interest in several properties in the pipeline’s approved route.  Section 717f(h) of the NGA provides that when any holder of a public convenience and necessity certificate cannot obtain by negotiation or contract the necessary rights-of-way to construct, operate, and maintain an interstate pipeline, it “may acquire the same by the exercise of the right of eminent domain” in federal district court.  Under that provision, PennEast brought several in rem actions against New Jersey in district court to establish just compensation and obtain by condemnation the rights-of-way that it had been unable to obtain.

New Jersey moved to dismiss, asserting Eleventh Amendment sovereign immunity from the suit.  The district court rejected New Jersey’s argument and granted the condemnation orders.  However, the Third Circuit disagreed, and vacated the district court’s ruling.  The Third Circuit expressed doubt that the United States can delegate to a private party the federal government’s exemption from Eleventh Amendment immunity that allows it to sue states.  The Third Circuit likened such delegation to an abrogation of sovereign immunity, which Congress can accomplish only through certain federal powers.  Regardless, the court held, the federal government’s eminent domain power and its exemption from state sovereign immunity “are separate and distinct,” and Section 717f(h) delegates only the former, not the latter.

The Third Circuit noted that its “holding may disrupt how the natural gas industry, which has used the NGA to construct interstate pipelines over State-owned land for the past eighty years, operates.” The Third Circuit stated that as “a work-around,” eminent domain actions could be filed by some “accountable federal official.” On January 30, 2020, in response to PennEast’s petition for a declaratory order interpreting the Third Circuit’s decision, FERC issued an order “confirm[ing its] strong belief in” the correctness of PennEast’s position.  FERC also disclaimed the authority to file condemnation actions itself, in place of natural gas companies.

On February 3, 2021, the Supreme Court granted PennEast’s petition for a writ of certiorari.  In addition, the Court instructed the parties to brief and argue a second issue—whether the Third Circuit properly exercised jurisdiction over the case.

Eleventh Amendment Arguments

New Jersey argues that the federal government cannot delegate its exemption from state sovereign immunity to allow private parties to bring condemnation suits against states, but even if it could, Congress did not clearly do so through the text of the NGA.  Thus, New Jersey asserts that the Court “need not conclusively resolve the constitutional question” because the text of the NGA disposes of the issue presented.

By contrast, PennEast asserts that the NGA’s delegation of the federal government’s eminent domain power necessarily includes the ability to sue states.  Concluding otherwise, PennEast argues, would overlook the history of eminent domain proceedings and the fact that Section 717f(h) includes no exception for state-owned properties.  It would also frustrate the NGA’s fundamental purpose of facilitating interstate pipelines.  PennEast also emphasizes that the condemnation actions are in rem proceedings that do not implicate the same state sovereign immunity concerns that in personam suits implicate.  Finally, PennEast argues that the Third Circuit’s decision “not only gives states a veto power over federally approved pipelines but creates gravely misaligned incentives, as a private property owner seeking to preclude construction of a pipeline could do so by granting an easement to a state that shares its opposition.”

A coalition of 19 states—including some facing potential suits regarding pipeline projects—filed an amicus brief in support of New Jersey, primarily based on “the constitutional questions that undergird [New Jersey’s] statutory analysis.”  PennEast’s argument on the merits is supported by numerous industry amici and the federal government.  Those industry amici argue that the Third Circuit’s decision will have significant negative impacts on the industry’s ability to reliably supply the country with affordable natural gas.  Similarly, the federal government has emphasized that an affordable and reliable interstate natural gas supply is a general purpose of the NGA, which the Third Circuit’s decision threatens.

Other Jurisdictional Arguments

In June 2020, the Supreme Court invited the Solicitor General to file a brief expressing the United States’ views on the certiorari petition.  The United States subsequently filed a brief characterizing the case as a “collateral attack on [PennEast’s] authority to execute the terms of the FERC-issued certificate.”  It, therefore, argued that the lower courts lacked jurisdiction to entertain the case because Section 717r(b) of the NGA vests exclusive jurisdiction for direct review of the certificate in the D.C. Circuit or the circuit in which the certificate-holder has its principal place of business.

PennEast and New Jersey both argue that the lower courts properly exercised jurisdiction; neither party understands New Jersey’s Eleventh Amendment challenge as a collateral attack on the FERC certificate.

***

The Supreme Court is expected to return a decision before the term ends in late June.

Copyright © 2021, Hunton Andrews Kurth LLP. All Rights Reserved.

ARTICLE BY Kate Perkins of Hunton Andrews Kurth
For more articles on SCOTUS, visit the NLR Litigation / Trial Practice section.

What Is Law? California Has Some Answers, But I Prefer Cicero’s

Lawyers deal with the law every day, but seldom pause to ask the existential question – What is law?   Conveniently, the California legislature has provided some definitions.  Section 22 of the Civil Code defines “law” in decidedly magisterial terms:

“Law is a solemn expression of the will of the supreme power of the State.”

How is that the supreme power express its will?  The answer can be found in Section 22.1 of the Civil Code which declaims that the “will of the supreme power is expressed” by the Constitution and statutes.   Notably absent is any mention of the judicial precedents.

Section 160 Evidence Code provides a broader and seemingly open-ended definition:

“‘Law’ includes constitutional, statutory, and decisional law.”

Section 113816 takes the approach that law is law only if it is applicable, but omits the constitution and judicial precedent:

“‘Law’ means applicable local, state, and federal statutes, regulations, and ordinances.”

The great Roman lawyer, Marcus Tullius Cicero, answers the question by quoting the learned men of his time as defining law as “Lex est ratio summa, insita in natura, quae iubet ea quae facienda sunt, prohibetque contraria (Law is the highest reason, ingrafted in nature, which commands what must be done and prohibits the contrary)”.   De Legibus 1:18.   Cicero also observed that ignorance of the law leads to more litigation than knowledge of the law (“Potius ignoratio iuris litigiosa est quam scienta“).  Id.

© 2010-2021 Allen Matkins Leck Gamble Mallory & Natsis LLP

ARTICLE BY Keith Paul Bishop of Allen Matkins Leck Gamble Mallory & Natsis LLP
For more articles on the nature of the law, visit the NLR Litigation / Trial Practice section.