Pharmaceutical Fracas: Can Misrepresentation Count as Proximate Cause in a Pharma RICO Claim?

BACKGROUND

Pharmaceutical drugs cause side effects – with that notion, there is no dispute. However, the issue of whether patients, physicians, or payors (underwriting insurance companies) are adequately informed of those side effects is often up for dispute. In 2017, Takeda Pharmaceuticals Company finalized a Master Settlement Agreement (MSA), in which it agreed to pay damages to patients who took Actos, a Type II Diabetes medication, and later developed bladder cancer.

In 2017, several additional patients and multiple insurance companies filed a civil Racketeering Influence and Corrupt Organizations Act (“RICO”) action against Takeda for its misrepresentation of Actos’s side effects to prescribing physicians and patients. In Painters and Allied Trades District Council 82 Healthcare Fund v. Takeda Pharmaceuticals Co. (2019), the plaintiffs alleged that neither the patients nor the payors knew the cancer risks associated with Actos at the time of purchase and that neither would have paid for the drug had they known of the risks. The District Court for the Central District of California dismissed the action for failure to state a claim under FRCP 12(b)(6). Plaintiffs appealed to the Ninth Circuit.

To satisfy the standing requirement of a civil RICO claim under 28 U.S.C. § 1964(c), the Ninth Circuit has held that a “plaintiff must show: (1) that [their] alleged harm qualifies as injury to his business or property; and (2) that [their] harm was ‘by reason of’ the RICO violation.” The latter has been interpreted by the Supreme Court to require both proximate and but-for causation in these matters.

In applying these principles to Painters and Allied Trades, the Ninth Circuit reasoned that the patients and the payors were “the most direct victims . . . who suffered economic injury” and thus had sufficiently alleged proximate cause. The Court remanded to the district court for further proceedings. Contention arises on the issue of the standing of the payor, specifically whether a payor can sufficiently allege proximate cause as a result of misrepresentation to prescribing physicians.

THE ISSUE

Is the proximate cause element of a RICO matter satisfied where a third-party payor alleges they would not have underwritten a prescription for a pharmaceutical drug if the drug manufacturer had not misrepresented safety risks to prescribers?

THE SPLIT

In addition to the Ninth Circuit, the First, Second, Third, and Seventh Circuit Courts of Appeals have weighed in on the proximate cause requirements of a RICO matter. The First and Third Circuits both take a similar approach to the Ninth Circuit in Painters and Allied Trades. The Second and Seventh Circuits have held that such an allegation is not a sufficient showing of proximate cause for a RICO case.

The First Circuit ruled similarly to the Ninth Circuit in In re Neurontin Marketing and Sales Practices Litigation (2013), where a jury awarded Kaiser Foundation Health Plan damages for misrepresentation of a drug’s off-label use. Kaiser made its allegations as an insurance company covering the cost of prescriptions (“third-party-payor”). The drug, Neurontin, was manufactured and sold by Pfizer. The FDA approved Neurontin for the treatment of shingles-related seizures and pain. However, Kaiser alleged that Pfizer had misrepresented and promoted the drug to payors and providers as an effective treatment of bipolar disorder, neuropathic pain, and migraines. A public health and economics expert testified that, nationally, approximately 99.4% of Neurontin prescriptions for bipolar disorder, 70% of Neurontin prescriptions for neuropathic pain, and 27.9% of Neurontin prescriptions for migraines, would not have been written if Pfizer had not engaged in a fraudulent misrepresentation campaign. Kaiser thus alleged that its underwriting was a direct result of the misrepresentations. The First Circuit found this allegation, and the chain of causation, to be adequate for proximate cause under RICO. The Supreme Court denied Pfizer’s petition for writs of certiorari addressing this and two other similar matters.

Likewise, the Third Circuit ruled in favor of a class of payors that sued GlaxoSmithKline under RICO for deceptive marketing of Type II diabetes medications. The plaintiffs in In re Avandia Marketing, Sales Practices & Products Liability Litigation (2016)were union health and welfare funds that underwrote Avandia prescriptions for members instead of less expensive alternatives. This decision to cover was based on GSK’s representations to physicians about Avandia being safer than less expensive alternatives (of which Actos was one). Years of regulations and studies proved that this was patently false. In 2010, the Senate concluded that GSK had failed to warn the FDA and the public of the side effects of Avandia, and that GSK had attempted to downplay and misrepresent the potential heart-related risks. The plaintiffs alleged that there was a sufficient connection between the manufacturer’s years-long misrepresentation of Avandia and its underwriting of prescriptions for the drug. The Third Circuit deemed this reliance to be sufficient for the RICO proximate cause requirement. The Supreme Court denied certiorari.

Unlike the First and Third Circuits, the Second Circuit declined to find underwriting as a result of misrepresentation sufficient to allege proximate cause. In UFCW Local 1776 vs. Eli Lilly & Co. (2010), it summarily rejected doctor reliance national misrepresentation campaigns as a sufficient showing of but-for causation. There, Eli Lilly & Co. had minimized the drug Zyprexa’s risk of diabetes and hyperglycemia to patients and prescribers across the United States, Europe, and Asia. It also made “excessive claims of utility” and overcharged for the drug. The Second Circuit ruled that because doctors do not “generally consider the price of a medication when deciding what to prescribe for an individual patient[,]” the doctors’ reliance on misrepresented utility and potential side effects was not a proximate cause of the price that the third-party payors ultimately paid for the drug. This, the Second Circuit reasoned, was too attenuated to award damages to payors under RICO. In combination with other matters against Eli Lilly & Co., the Supreme Court denied certiorari.

The Seventh Circuit in Sidney Hillman Health Center of Rochester v. Abbott Laboratories (2017) made a conclusion similar to that of the Second Circuit. Plaintiffs in Sidney Hillman were insurers that underwrote member off-label prescriptions for Depakote. The drug, manufactured by Abbott Laboratories, was approved by the FDA for treatment of seizures, migraines, and certain conditions related to bipolar disorder. Abbott marketed the drug to physicians as effective in treating schizophrenia, dementia, and attention deficit hyperactivity disorder (ADHD). In 2012, Abbott pleaded guilty to criminal actions and settled civil actions resulting from this off-label promotion. In an opinion by Judge Easterbrook, the Seventh Circuit panel ruled that payors’ claims were too attenuated since the misrepresentation was directed only at physicians. Payors were “several levels removed in the causal sequence[,]” and thus could not satisfy the RICO proximate cause requirement.

LOOKING FORWARD

In the age of increasing opioid litigation, the debate over payor recovery for drug company misrepresentations to prescribing physicians is a debate ripe for review. The Supreme Court has denied certiorari from parties on both sides of this split. However, given the increased scrutiny of pharmaceutical companies as a result of the national opioid crisis, the Court may soon be forced to consider proximate cause requirements in civil RICO matters of “payor versus pharma.”

Hassling with the Hague Convention: Part II

BACKGROUND

Michelle Monasky, a U.S. citizen, married to Domenico Taglieri, an Italian citizen, faced repeated domestic abuse and assault before and during her pregnancy. After Monasky returned to the United States with her and Taglieri’s two-month-old daughter, Taglieri filed a petition under the Hague Convention seeking the daughter’s return to Italy. The court granted Taglieri’s petition, finding that Italy was the baby’s habitual residence.

Monasky sought a stay of the return order, which was denied first by the Sixth Circuit and then by the Supreme Court. Therefore, the daughter was returned to Italy, where an Italian court in an ex parte proceeding had terminated Monasky’s parental rights and made Taglieri “sole custodian with full parental rights” over the daughter.

After a panel of the Sixth Circuit affirmed the district court’s decision, the Sixth Circuit agreed to a rehearing en banc. Applying a different standard than the district court, the Sixth Circuit majority held in Taglieri v. Monasky (2018) that “the parents’ shared intent” determines whether an infant, who is too young to acclimate to her surroundings, has attained a habitual residence in the country from which she was removed. The majority went on to hold that “shared parental intent” does not require the parents to have a “meeting of the minds’ about their child’s future home.” According to the majority, “[a]n absence of a subjective agreement between the parents does not by itself end the inquiry” because a subjective agreement, while sufficient, is “not a necessary…basis for locating an infant’s habitual residence.”

Even though the Sixth Circuit had not previously adopted a “shared parental intent” standard to determine the habitual residence of infants—and even though a remand is normally “required” when the Sixth Circuit adopts a different legal standard than that applied by the district court—the en banc majority declined to remand the case for the district court to apply its new standard to the facts of this case.

THE ISSUE

When an infant is too young to acclimate to her surroundings, is a subjective agreement between the infant’s parents necessary to establish her habitual residence under the Hague Convention?

THE SPLIT

The Second, Third, Fifth, and Ninth Circuits have addressed the question of how to determine habitual residence for infants too young to acclimate to their surroundings. Each concluded that habitual residence is established only if the parents shared a subjective intent—meaning if they reached a meeting of the minds—to raise the child in that country.

The Second Circuit held in Gitter v. Gitter (2005), that absent evidence that a child had acclimated to her surroundings, “a child’s habitual residence is consistent with the intentions of those entitled to fix the child’s residence at the time those intentions were mutually shared.” Applying that standard, the court concluded that because the parents “only mutually agreed to move to Israel on a conditional basis,” their child could only have attained habitual residence in Israel through acclimatization.

Likewise, the Third Circuit explained in Feder v. Evans-Feder (1995) that “the conduct and the overtly stated intentions and agreement of the parents . . . are bound to be important factors” in assessing a child’s habitual residence. With that standard in mind, the Third Circuit further held in Delvoye v. Lee (2003) that when the mother of an eight-week-old infant agreed to give birth in Belgium but to “live there only temporarily,” the infant “did not become a habitual resident” of Belgium before her mother took her to the United States.

The Fifth Circuit similarly held in Berezowsky v. Ojeda (2014), that, to establish a habitual residence, “[a] shared parental intent requires that the parents actually share or jointly develop the intention.” The court went on to explain that, “[i]n other words the parents must reach some sort of meeting of the minds regarding their child’s habitual residence, so that they are making the decision together.” The court concluded that the petitioner did not meet her burden of establishing that the parents “reach[ed] an agreement or meeting of the minds regarding [their child’s] future” and that the petitioner, therefore, was not entitled to an order returning the child to Mexico.

The Ninth Circuit follows the same approach. In Murphy v. Sloan (2014), the court declined to find a child habitually resident in Ireland because “there was never any discussion, let alone agreement, that the stay abroad would be indefinite.”

With Taglieri (2018), the Sixth Circuit took an entirely different approach to ascertain shared parental intent in this case. According to the en banc majority, a “meeting of the minds” between the parents is “not a necessary . . . basis for locating an infant’s habitual residence.” The court reasoned that this lack of subjective agreement “does not by itself end the inquiry.” Under that approach, the en banc majority upheld the return order—even though the district court made no finding that Monasky and Taglieri had ever agreed to raise their daughter in Italy.

LOOKING FORWARD

If any of the four other circuits to address the issue had decided Taglieri v.  Monasky, the absence of any actual agreement between Monasky and Taglieri—as well as the undisputed fact that the eight week-old had not acclimated to her surroundings in Italy—would have led the court to conclude that the daughter was not habitually resident in Italy and that a return order was not appropriate. The Supreme Court heard oral arguments for this case on December 11, 2019, and we await its decision.

Rules of Interrogation: Title IX and the Opportunity to Cross-Examine Complainants

BACKGROUND

Title IX, passed as part of the Educational Amendments of 1972, states that “no person in the United States shall, on the basis of sex, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any education program or activity receiving Federal financial assistance.” Three Supreme Court decisions during the 1990s interpreted Title IX to require schools to respond adequately and appropriately to incidents of sexual harassment and violence perpetrated against students.

In 2011, the Department of Education’s Office of Civil Rights (“OCR”) issued what is referred to as a “Dear Colleague” letter, which provided guidance to schools and reminded them of their obligation to address incidents of sexual assault as civil rights matters under Title IX. In this letter, the OCR under the Obama administration made recommendations regarding procedures schools should follow when addressing a Title IX complaint. One procedural recommendation by the OCR was to discourage allowing parties to personally question and cross-examine each other during a hearing on alleged sexual violence. The OCR reasoned that this method may be “traumatic or intimidating” and would potentially foster a hostile environment. Additionally, schools are not required to allow cross-examination of witnesses.

Most recently, the Department of Education under Betsy DeVos and the Trump administration has announced its intention to issue sweeping changes to the rules governing campus sexual assault. One of the major rules proposed through the early 2019 notice-and-comment procedure was a requirement that schools allow cross-examination of those alleging sexual harassment or assault.

THE ISSUE

In sexual misconduct cases, are schools required to provide a respondent with the opportunity for live cross-examination of the complainant and his or her representatives?

THE SPLIT

In 2018, the Sixth Circuit heard the case Doe v. Baum (2018). John Doe, the plaintiff and initial respondent in a sexual misconduct investigation at the University of Michigan, filed suit after the case made its way through the university’s appeals process. When the investigation was resolved in the complainant’s favor, Mr. Doe voluntarily withdrew from the university but later claimed that the university’s disciplinary procedures were in violation of both the Due Process Clause and Title IX. His argument was that, because the university’s decision turned on a finding of credibility, the school should have been required to provide him with the opportunity to cross-examine the complainant and witnesses. The Sixth Circuit reversed the district court’s decision and held that the University of Michigan did violate the student’s right to due process by failing to afford him the right to cross-examine the complainant and witnesses.

Relying on the decision in Baum, a respondent in a sexual assault investigation at the University of Massachusetts-Amherst filed suit after the university held a hearing and eventually expelled him. The respondent, Mr. Haidak, argued that his rights under Title IX and the Due Process Clause were violated because the university did not provide him with the opportunity to interrogate the complainant. In a split from the ruling in the Sixth Circuit, the First Circuit held in Haidak v. University of Massachusetts-Amherst (2018) that it is not a categorical requirement that schools must provide respondents with the opportunity to cross-examine the complainant, either directly or through a representative. The court explained that a school’s decision to examine the witnesses and parties by using a neutral factfinder would not be so fundamentally flawed in its procedure as to deprive the respondent of their right to due process. The Court reasoned that requiring the right to the kind of cross-examination demanded by Mr. Haidak would cause the disciplinary proceedings to essentially mirror a common law trial, which the First Circuit deemed unnecessary.

LOOKING FORWARD

Title IX administrators anticipate publication of the finalized regulations any day now. The proposed regulations relied heavily on the Baum decision and procedural requirements as outlined by the Sixth Circuit, conflicting with the First Circuit in Haidak. It remains to be seen what procedures will be required by the final Title IX regulations, but it is unlikely we will see any shift away from the rationale and procedures as outlined in Baum.

Educational institutions in the First Circuit will be forced to take into account both the Haidak decision and the new regulations when updating their Title IX policies. Additionally, many universities utilize the method of fact-finding supported by Haidak, which allows for a neutral party to interview the complainant and respondent. The split between the First and Sixth Circuits coupled with the introduction of the new Title IX regulations by the Department of Education will force different institutions to follow different sets of rules depending on the jurisdiction in which they are located. Various Title IX cases are awaiting trial or adjudication across the country, and experts are eager to find out which of the procedural frameworks appear to be the standard. With these rulings, it is becoming increasingly more likely that the Supreme Court will be forced to consider the Title IX procedures.

For further reading, see: First Circuit Splits from Sixth Circuit and Education Department on Title IX (2019), OCR Is About to Rock Our Worlds (2020) by Brett A. Sokolow, and 5 College Title IX Lawsuits to Watch (2019) by Jeremy Bauer-Wolf.

Accuracy v. Finality: The Implications of Habeas Rights Based on AEDPA Interpretations

BACKGROUND

With the release of the film Just Mercy, the debate over balancing the prevention of wrongful convictions against the assurance of finality in serious criminal matters has once again come into the spotlight. This dispute is not only receiving national attention in pop culture, but is also making headlines in the judicial field with the emergence of a new circuit split.

A habeas petition is a method invoked by prisoners seeking an early release by challenging the legitimacy of their detention. In 1996, the ability to file habeas petitions was limited with the passage of the Antiterrorism and Effective Death Penalty Act (“AEDPA”). Under AEDPA, a prisoner has just one opportunity to file a motion to vacate the earlier sentence. A second opportunity is permitted only when the Supreme Court adopts a new and favorable rule of constitutional law. Prisoners are also restricted to just one habeas petition, unless they can demonstrate that AEDPA’s remedy is “inadequate or ineffective.”

THE ISSUE

Can the AEDPA remedy be considered inadequate or ineffective, thereby circumventing the single habeas restriction, when a new rule of statutory construction is adopted by a circuit court?

THE SPLIT

In Hueso v. Barnhart (2020), the Sixth Circuit split from the Fourth Circuit, interpreting AEDPA to increase restrictions on habeas rights. Hueso was convicted of drug trafficking in Alaska. He was initially sentenced to 10 years in prison; however, the term was doubled under a federal sentencing law. The year after his conviction, the Supreme Court rejected the interpretation permitting doubling. At the time, Hueso’s counsel had already filed a Motion to Vacate challenging evidence, which was rejected. Counsel then filed a habeas petition based on the Supreme Court ruling. The court denied the petition based on Sixth Circuit precedent that barred habeas cases from entertaining challenges based on sentencing. However, in 2016, the Sixth Circuit overturned its previous holding, thereby permitting sentencing-based habeas petitions.

As a result, Hueso’s counsel filed another habeas petition, but this time it was rejected under AEDPA. Hueso appealed to the Sixth Circuit, arguing that he should be permitted to file a second habeas under AEDPA because the AEDPA remedy was inadequate and ineffective. The Sixth Circuit denied the appeal on two bases. First, the Sixth Circuit reasoned that the Supreme Court ruling rejecting double sentencing could not be introduced in a subsequent challenge as the decision was made while Hueso’s first Motion to Vacate was pending. The court reasoned that the decision was available at the time of the challenge and, therefore, the failure to mention it barred a second attempt. Second, the Sixth Circuit held that the second habeas petition was correctly denied because the basis of the petition centered on a circuit court decision to permit sentencing-based habeas petitions. The Sixth Circuit rationalized that this decision was not constitutional law, as required under AEDPA, and thus could not be a basis for seeking to file subsequent petitions.

The Sixth Circuit’s reasoning diverged from the Fourth Circuit’s prior interpretation in United States v. Wheeler (2018). Wheeler was charged with conspiracy to possess with intent to distribute cocaine and possession of a firearm. Wheeler entered into a plea deal, agreeing to an enhanced sentence with a mandatory minimum of 120 months. The next year, Wheeler’s counsel filed a Motion to Vacate, citing both inefficient counsel and the fact that the conviction did not qualify for an enhanced sentence. The Motion was denied based on Fourth Circuit precedent allowing a maximum aggravated sentence to be imposed. Wheeler’s counsel sought to appeal by filing a certificate of appealability. While the appeal was pending, the previous precedent relied upon was overturned by the Fourth Circuit with a finding that a district court could only consider the maximum sentence that the particular defendant could receive in enhanced sentence matters. However, Wheeler’s appeal was still denied based on the reasoning that the new decision could not be applied retroactively.

Wheeler’s counsel subsequently filed a habeas petition, arguing that the AEDPA remedy was inadequate and ineffective. In this case, the Fourth Circuit upheld the inadequacy on appeal. The court reasoned:

“[W]e conclude that [AEDPA] is inadequate and ineffective to test the legality of a sentence when: (1) at the time of sentencing, settled law of this circuit or the Supreme Court established the legality of the sentence; subsequent to the prisoner’s direct appeal and first … motion, the aforementioned settled substantive law changed and was deemed to apply retroactively on collateral review; (3) the prisoner is unable to meet the gatekeeping requirements … for second or successive motions; and (4) due to this retroactive change, the sentence now presents an error sufficiently grave to be deemed a fundamental defect.”

LOOKING FORWARD

Following the Wheeler decision, the Solicitor General, on behalf of the United States, filed a writ of certiorari with the United States Supreme Court. The petition was denied in March 2019, before the split emerged. The developing split has the potential for unfortunate consequences for prisoners based solely on the region they are imprisoned in. The split will inevitably result in disparate results concerning a prisoner’s rights to seek relief and retrial in the case of wrongful convictions. In the Sixth Circuit, Judge Karen Nelson Moore acknowledged the disparity in her dissent, pointing out that Hueso would “almost certainly prevail” had he attacked his sentence the first time, and noting that, as a result of the majority interpretation, Hueso would be spending another decade incarcerated.

To Be Eligible or Ineligible: The Implications of Service Animals When Donating Plasma

Background

The Americans with Disabilities Act (“ADA”) prohibits discrimination based on disability. All places of public accommodations are subject to the ADA, and 42 U.S.C. § 12181(7)(F) lists the service-based entities that are considered public accommodations for purposes of the Act, including a catch-all of “other service establishments.” The list includes: “a laundromat, dry-cleaner, bank, barber shop, beauty shop, travel service, shoe repair service, funeral parlor, gas station, office of an accountant or lawyer, pharmacy, insurance office, professional office of a health care provider, hospital, or other service establishment.”

Plasma centers collect donated plasma from humans to be used in medical therapy and research. People who give plasma are paid in return for their donation. Many plasma centers have policies barring ineligible donors, basing eligibility on things like medical history, prescribed medication, and the recency of a new tattoo or piercing, or other “risky” activities. In recent years, one specific plasma center – CSL Plasma, Inc. – has become subject to controversy for its safety policy, which bars all who use service animals for anxiety from eligibility.

The Issue

Are plasma centers considered “service establishments” and therefore subject to the ADA’s prohibition on discrimination for public accommodations?

The Split

The Fifth Circuit has split from the Third and Tenth Circuits on the issue of whether plasma centers are considered service establishments. All three circuits considered the dictionary definitions of the words “service” and “establishment,” referencing Webster’s Third International Dictionary. According to the dictionary, “service” means “conduct or performance that assists or benefits someone or something” and “establishment” means a “place of business.” The issue of whether a plasma center is a place of business is not contested.

 In Silguero v. CSL Plasma, Inc (2018), the Fifth Circuit held that plasma centers are not service establishments, and therefore not subject to the ADA’s prohibition on discrimination. The court first looked at the dictionary definition and reasoned that donors receive no detectable benefit from the act of donation. As Webster’s definition considers a service to be a benefit received, the Fifth Circuit held that the plasma collection cannot be considered a “service.”

In addition, the Fifth Circuit implemented ejusdem generis, a canon of statutory interpretation that interprets a general term in a statute by looking to the preceding examples. The court found that the examples prior to “service establishment,” which included hospitals, barbershops, lawyers, and gas stations among the many, all offered a public a service in exchange for monetary compensation, whereas plasma centers pay the public for donations. As plasma centers do not receive money from the public, and instead give money to the public, the Fifth Circuit further confirmed its holding that plasma centers are not service establishments that must follow the ADA.

The Tenth Circuit disagreed with this interpretation in Levorsen v. Octapharma Plasma, Inc. (2016) and found plasma centers to be service establishments. Instead, the Tenth Circuit reasoned that the “service” requirement was fulfilled as the donors who provided plasma for medical use were indeed “benefited” by the monetary compensation they received in exchange, whether the benefit was altruistic or pecuniary gain.

The Third Circuit agreed with the Tenth and expanded its reasoning in Matheis v. CSL Plasma, Inc (2019). The Third Circuit focused its analysis on the benefit aspect, affirming that the receipt of money is a clear benefit to the donor. Moreover, the Third Circuit diverged even further from the Fifth Circuit, countering the assertion that a public service must involve the receipt of compensation from customers, stating that this emphasis on the direction of compensation is “unhelpful.”

To support this argument, the Third Circuit referenced the fact that § 12181(7)(F) includes “bank” as a service entity. The Third Circuit argued this inclusion made it clear that the Fifth Circuit’s narrow reading was flawed, as customers of banks receive compensation for using the bank’s services. In regard to plasma centers, the Third Circuit held that these facilities “[offer] a service to the public, the extracting of plasma for money, with the plasma then used by the center in its business of supplying a vital product to healthcare providers. That both the center and members of the public derive economic value from the center’s provision and public’s use of a commercial service does not divorce the center from the other listed examples in § 12181(7)(F).”

Accordingly, the Third Circuit ruled that plasma centers were subject to the ADA. The Third Circuit went on to hold that CSL’s service animal policy was not a valid safety rule as its reasoning was speculative and generalized “widely about individuals who use service animals, all of whom CSL apparently views as people with ‘severe anxiety,’” rather than based on medical or scientific evidence.

Looking Forward

The circuit split on the matter of “service establishments” is troubling. Until this split is reconciled, it is possible that other establishments could argue exemption from discrimination on the basis of disability due to the narrow reading of “service” in the Fifth Circuit’s reasoning. It is important to ensure that establishments are not making safety assessments based on generalizations or stereotypes surrounding disability, and that service is not denied to owners of canine caregivers or other service animals.

Pollution’s Travel Plans: The Clean Water Act and Pollution’s Indirect Journey to Navigable Waters

Background

The objective of the Clean Water Act (“CWA”) is to “restore and maintain” the waters of the United States by regulating the pollution of navigable waters. 33 U.S.C. § 1251(a). While the CWA emphasizes maintaining the integrity of the waters as a national goal, it also tasks the States with the primary responsibility of regulating pollution and water resources. 33 U.S.C. § 1251(b).

The CWA bars “the discharge of any pollutant by any person” who does not have an appropriate permit. 33 U.S.C. § 1311(a). The “discharge of a pollutant” is the “addition of any pollutant to navigable waters from any point source.” 33 U.S.C. § 1362(12). The CWA defines “point source” as “any discernible, confined and discrete conveyance, including but not limited to any… well… from which pollutants are or may be discharged.” 33 U.S.C. § 1362(14). Therefore, when a party without a permit discharges a pollutant from a point source to navigable waters, the party violates the CWA. Headwaters, Inc. v. Talent Irrigation Dist., 243 F.3d 526, 532 (9th Cir. 2001). Although the plain language of the CWA may appear straightforward, the law has left much open to judicial interpretation.

The Issue

Is the discharge of pollutants without a permit from a point source into groundwater, which then leads to the discharge of these pollutants into navigable waters, prohibited under the CWA? Or does the CWA ban only the discharge of pollutants from point sources directly into navigable waters?

The Split

The Fourth and Ninth Circuits have interpreted the CWA to ban the indirect discharge of pollutants from point sources via groundwater into navigable waters. Hawai’i Wildlife Fund v. Cty. Of Maui (9th Cir. 2018); Upstate Forever v. Kinder Morgan Energy Partners (4th Cir. 2018). However, the Sixth Circuit has interpreted the CWA as prohibiting only the direct discharge of pollutants into navigable waters and has disallowed pollutants that pass through groundwater from being included in the CWA. Kentucky Waterways Alliance v. Kentucky Utilities Co. (6th Cir. 2018); Tennessee Clean Water Network v. TVA (6th Cir. 2018).

In Hawai’i, a tracer dye study confirmed that the County of Maui’s effluent waste collection wells discharged pollutants into groundwater, which then traveled into the Pacific Ocean. The County of Maui contended that the pollution was not discharged by the wells, but by the groundwater, a nonpoint source and that the CWA requires permits only for point sources that convey “pollutants directly into navigable water.” Holding for the plaintiff, the Court reasoned that because there was ample evidence that the pollution in the Pacific Ocean originated from the county’s wells, which qualify as point sources, it was immaterial that the pollutants travelled through groundwater before entering the Pacific Ocean. The Court stated the because the path of the pollutants from the wells to the navigable waters was “traceable,” the pollutants were discharged from the wells, not the groundwater. Further, the Court emphasized that precedent recognizing CWA liability when a “direct connection” exists between polluting point sources and polluted navigable waters does not preclude CWA liability arising from indirect discharges. The court reasoned that although the pollution passed through groundwater, the discharge was “the functional equivalent of a discharge into navigable water” directly from the wells because the pollutants were traceable back to their original point source.

Presented with the same issue, the Fourth Circuit reasoned in Upstate Forever that if the plaintiff can show “a direct hydrological connection between ground water and navigable waters,” the pollution of navigable waters via groundwater can violate the CWA. The omission of the terms “direct” or “directly” from the CWA, according to the Court, supports that “a discharge through ground water” incurs liability under the CWA when a clear connection between the originating point source and the polluted navigable waters exists. The Court upheld this interpretation of the CWA in Sierra Club, holding that the discharge of pollutants into navigable waters through groundwater without a permit violated the CWA.

However, the Sixth Circuit has interpreted the CWA to have a complete opposite meaning. In Kentucky Waterways Alliance, the court rejected the “hydrological connection theory” outright, disagreeing with the decisions of its sister circuits. The court emphasized that the term “into” in the CWA “indicates directness,” reasoning that the term “leaves no room for intermediary mediums to carry the pollutants.” The court asserted that including pollution which passes through groundwater into navigable waters within the CWA is an overextension of liability. In Tennessee Clean Water, the Sixth Circuit restated its narrow reading of the CWA, holding that “a plaintiff may never—as a matter of law—prove that a defendant has unlawfully added pollutants to navigable waterways via groundwater.” Unlike the Ninth Circuit, the Sixth Circuit concurred with the argument that pollutants passing through groundwater into navigable waters are coming “from a nonpoint source” rather the originating point source.

Looking Forward

The County of Maui and Kinder Morgan petitioners have filed for writ of certiorari for the Supreme Court to review the respective circuits’ decisions. The Supreme Court granted certiorari to County of Maui and began hearing oral arguments for the case on November 6, 2019. This issue will have widespread implications on the scope of environmental protection afforded by the CWA. For instance, dissenting in Tennessee Clean Water, Judge Clay acknowledged that, under the majority’s opinion, a polluter may escape liability under the CWA by taking advantage of the groundwater loophole by intentionally diverting pollutants into groundwater. The Supreme Court’s decision regarding the case will have powerful influence over holding polluters accountable for their waste.

For further reading, see: the EPA’s recent “Interpretative Statement” excluding the pollutants released from a point source through groundwater from coverage and liability under the CWA regardless of hydrological connection; filed brief amici curiae of Former EPA Officials and of Former EPA Administrators in favor of Hawai’i Wildlife Fund; Concerned Residents for Envi. v. Southview Farm (2nd Cir. 1994); Sierra Club v. Abston Construction Co., Inc. (5th Cir. 1980).

Every Step Matters: “But For” Causation in the McDonnell Douglass Framework

BACKGROUND

The McDonnell Douglas Corp v. Green burden-shifting framework requires a three-step process to adjudicate a motion for summary judgment in a retaliation case. Garcia v. Professional Contract Services, Inc.(5th Cir. 2019). First, the former employee must establish a prima facie case for retaliation ­— that the employee engaged in a protected activity; the employer knew about the protected activity; and the employee experienced retaliation because of the protected activity. Second, the burden of proof shifts to the employer to express a legitimate reason for the adverse action against the former employee. Third, the former employee must proffer additional evidence to permit a trier of fact to infer that the employer’s motive is a pretext for retaliation.

THE ISSUE

Does the McDonnell Douglas framework require the “but for” causation to be shown at the initial prima facie stage of retaliation, or only after an employer has provided a reason for the adverse employment action at the final pretext stage?

THE SPLIT

Circuits are split as to whether the “but-for” causation extends to the initial prima facie stage. The Fifth Circuit held in Garcia, that an employee’s prima facie case of retaliation only needs to demonstrate a “but for” causation at the final pretext stage of the McDonnell Douglas framework. The final pretext stage must consider the timing between an employee’s protected activity and an adverse action against her. Sufficiently close timing between the two events can establish “that the adverse action would not have occurred ‘but for’ the employer’s retaliatory motive.” Four months was close enough here. Temporal proximity and other circumstantial evidence of retaliation would satisfy the “but for” causation. Likewise, the Third and Fourth Circuits cited similar holdings. Young v. City of Philadelphia Police Dep’t, (3d Cir. 2016); Foster v. Univ. of Md. – E. Shore, (4th Cir. 2015). If the “but for” causation had to be proved at the initial prima facie stage, the McDonnell Douglas burdening-shifting framework would be superfluous. The employee’s “ultimate burden of persuasion [would be satisfied] without proceeding through the pretext analysis.”

In contrast, the Sixth and Eleventh Circuits require the employee to overcome a heightened “but for” causation standard. In Montell v. Diversified Clinical Services, Inc. (2014), the Sixth Circuit held that the close-timing standard is insufficient when some time elapses; the employee must offer “other evidence of retaliatory conduct to establish causality.” Additionally, the Eleventh Circuit held in Sims v. MVM, Inc. (2013), with regard to Age Discrimination in Employment Act “ADEA” cases, the burden of persuasion remains at all times with the employee to demonstrate “but for” causation at the initial prima facie stage and the final pretext stage.

LOOKING FORWARD

The heightened “but for” causation requirement should only apply in the final pretext stage. Once the employer provides a benign reason for termination, allowing the employee to offer additional evidence will permit a judge to infer whether the termination was actually driven by retaliation.

For further reading, see: Examining Retaliation As a Use of Force: Why State Courts Should Return to the Pre-Nassar, Pro-Plaintiff Framework (2018) by Amber L. Kipfmiller and 5th Circuit Resurrects Whistleblower’s Retaliation Suit Against Government Contractor (2019) by Yvonne L. DeMarino, Esq.

Road to Recovery: Recouping Profits From Trademark Infringement

BACKGROUND

Since 1947, the Lanham Act (also known as the Trademark Act of 1946) has governed trademark infringement litigation in the United States. When a defendant is found to have infringed on a plaintiff’s trademark under § 1125 of the Act, § 1117(a) allows the plaintiff to recover the defendant’s profits from the violation. It was never entirely clear whether the infringement must be willful in order for the plaintiff to recover. However, in 1999, Congress added to the confusion. That year, Congress amended § 1117 of the Act, allowing profits, damages to the plaintiff, and costs to be recovered for a violation under section 43(a) or (d), or a willful violation under section 43(c).

THE ISSUE

The statutory construction of §1117(a) appears to attach the word “willful” only to dilution-related violations under §1125(c). However, the statute requires recovery to be “subject to the principles of equity,” which suggests judicial discretion on the matter. If the courts decide that willful conduct is required for plaintiffs to recover, will that result in unjust enrichment of unwittingly infringing defendants? Or do the principles of equity point the courts away from punishing unintentional violators?

The question dividing the courts is as follows: Does §1117(a) allow a plaintiff to recover a defendant’s profits from an unintentional violation of a trademark?

THE SPLIT

There are two sides to this split: The first view generally requires the defendant’s conduct to be willful in order for a plaintiff to recover profits. This includes the First, Second, Eighth, Ninth, Tenth, and D.C. Circuits. The treatment of willfulness does have some variation within this side. For example, the First Circuit only requires evidence of willful infringement in cases where the parties were not direct competitors. In Fishman Transducers, Inc. v. Paul (2012), the First Circuit described the direct competition rule as an exception to the willfulness requirement.

The second view does not require willfulness for a plaintiff to recover. Instead, willfulness is often treated as one factor in a multi-factor test for recovery, and in other circuits, one situation in which recovery is warranted. This general side is represented by the Third, Fourth, Fifth, Sixth, Seventh, and Eleventh Circuits. The Eleventh Circuit illustrated its multiple-situations approach in Optimum Techs., Inc. v. Home Depot U.S.A., Inc. (2007). In this opinion, the court listed as potential circumstances leading to recovery: “(1) the defendant’s conduct was willful and deliberate, (2) the defendant was unjustly enriched, or (3) it is necessary to deter future conduct.” Based on the logic of the Optimum opinion, the absence of willful conduct may yield a requirement of causation between the infringement and the enrichment of the defendant through sales. There is a strong consideration of unjust enrichment in these circuits.

It should be noted that in no Circuit can a plaintiff automatically recover profits from an infringing defendant. Even when willfulness is not a requirement, recovery is still “subject to the principles of equity” through varying tests.

LOOKING FORWARD

The Supreme Court will directly address this issue in the upcoming term. On June 28, the Court granted the petition for certiorari to hear Romag Fasteners, Inc. v. Fossil, Inc. In this case, Fossil was found to have unwilfully infringed on Romag’s trademark. The Second Circuit applied its longstanding willfulness requirement and affirmed a judgment barring recovery of profits from Fossil. In its respondent brief, Fossil argued that “no meaningful conflict exists,” asserting that in the Circuits hearing the majority of trademark cases (the Second and Ninth), the willfulness requirement prevails. Fossil also claims that even in circuits treating willfulness as a factor, it is rare for a plaintiff to recover in its absence.

As the case awaits adjudication, the Intellectual Property Owners Association has filed an amicus brief in favor of the interpretation requiring willfulness for recovery. In its brief, the Association argued that prior to the addition of the word “willful” in 1999, courts largely held willfulness as a requirement based on the “principles of equity” language of the statute. The American Intellectual Property Law Association disagreed with that statement in its amicus brief, calling a willfulness requirement “antithetical to the principles of equity.” The majority of amicus briefs already filed appear to align more closely with the latter view.

If the petitioners prevail, there is no guarantee that they will recover. However, a verdict for either party would most likely change the standard for recovery in half of the circuits. The decades-long difference in approaches will hopefully be resolved and provide a more uniform law nationwide.

High (Flying) Crimes: Where is Venue Proper for Crimes Committed on an Airplane in Flight?

Background

Determining proper venue for a trial is essential to guarantee the constitutional right to a fair trial. The determination also helps to avoid imposing undue hardship on that defendant in the course of the already strenuous and expensive litigation process by forcing her to defend in “an environment alien” to her. United States v. Johnson (1944).

With regard to criminal proceedings, all crimes must be prosecuted in the district in which the crimes were allegedly committed. In furtherance of this, the Supreme Court has provided a two-part inquiry to determine in which district the alleged crime was committed and, therefore, in which district venue is proper. “(A) court must initially identify the conduct constituting the offense (the nature of the crime) and then discern the location of the commission of the criminal acts.” United States v. Rodriguez-Moreno (1999).

The Issue

The standard seems simple enough, but what happens when the crime takes place in the sky? Where is venue proper when a crime occurs on an airplane during flight? In applying the Rodriguez-Moreno inquiry to an inflight crime, the first part (nature of the crime) will often be fairly straightforward. However, the second part (location of the commission of the crime) poses more difficulty and presents the legal question at issue.

When an inflight crime is committed, is venue proper in the district over which the airplane was flying when the crime occurred or in the district where the airplane lands after the inflight crime occurred? The answer to this question has serious implications for procedural logistics of prosecuting criminal offenses committed on airplanes as well as concerns of unfairness and undue hardship to criminal defendants accused of committing such crimes.

The Split

Traditionally, courts have deemed venue proper in the district in which the airplane lands, as held by the Eleventh Circuit in United States v. Breitweiser (2004) and the Tenth Circuit in United States v. Cope (2012). In their respective decisions, the Eleventh and Tenth Circuits found venue proper pursuant to 18 U.S.C.S. §3237, specifically §3237(a), in which Congress provided the method for ascertaining venue for crimes involving the use of transportation:  “Any offense involving the use of… transportation in interstate or foreign commerce… is a continuing offense and, except as otherwise expressly provided by enactment of Congress, may be inquired of and prosecuted in any district from, through, or into which such commerce… moves.”

The Eleventh Circuit has explained §3237(a) as “a catchall provision designed to prevent a crime which has been committed in transit from escaping punishment for lack of venue… where venue might be difficult to prove.” United States v. McCulley (1982). In Breitweiser, the Eleventh Circuit affirmed Breitweiser’s convictions for abusive sexual conduct with a minor and simple assault and rejected his challenge to the district court’s finding of venue. The Court reasoned venue was proper in the Northern District of Georgia (where the plane landed) pursuant to the “catchall” provision of §3237(a) because the continuing offenses involved the use of transportation in interstate commerce and, “[I]t would be difficult if not impossible for the government to prove… exactly which federal district was beneath the plane when Breitweiser committed the crimes.” The Court held, “[T]o establish venue, the government need only show that the crime took place on a form of transportation in interstate commerce.”

In Cope, the Tenth Circuit affirmed Cope’s conviction for operating a commercial airplane while under the influence of alcohol and rejected his challenge to venue in the District of Colorado. The Court found venue proper pursuant to §3237(a), citing Breitweiser for the proposition that one “need only show that the crime took place on a form of transportation in interstate commerce.” Since Cope committed the offense while operating the plane in interstate commerce, venue was proper in any district Cope had traveled “from, through, or into,” which included the District of Colorado where the plane landed.

The Ninth Circuit split from the Eleventh and Tenth Circuits on this issue in United States v. Lozoya (2019), in which the defendant was convicted of inflight simple assault in the Central District of California where the plane landed. In reviewing Lozoya’s conviction and her challenge to venue, the Court found the provisions of §3237(a) to be not applicable to establish venue in that district. Specifically, the Court found the statutory language “[continuing] offenses involving… transportation in interstate or foreign commerce” inapplicable after applying the Rodriguez-Moreno inquiry to the offense.

The Ninth Circuit determined that (1) as to the nature of the assault, Lozoya committed a single, instantaneous offense which, though it “occurred on a plane… did not implicate interstate or foreign commerce,” and (2) partly because of its instantaneous nature, the crime was likely committed only in the district over which the plane was flying at the time of the offense. Accordingly, the Court held venue would be proper only in the district over which the plane was flying when the crime occurred and reversed Lozoya’s conviction on the grounds of improper venue. The Court acknowledged (and Judge Owens’ dissent emphasized) “a creeping absurdity” in mandating the exact district over which an inflight offense occurred to be pinpointed for the purpose of ascertaining venue. Further, both the majority and dissent raised concerns about the feasibility and potential absurdity of this requirement and the unfair hardship it could impose on defendants. However, the Court did not find these concerns sufficient to overcome the Constitution and binding precedent. The Court also suggested, and the dissent expressed hope, that if Congress deemed this an absurd result, it would enact a new statute to ascertain venue for crimes committed at 30,000 feet.

Looking Forward

Judge Owens concluded by urging the Supreme Court to rule on this split or Congress to act to restore the rule finding venue where the plane lands. It remains to be seen whether the Supreme Court or Congress will take up this issue. In the meantime, frequent fliers, pay close attention if the captain tells you what you’re flying over. You never know when you’ll need venue.

Riding Free From Controversy: Freedom of Speech Guarantee and Public Transit Systems

BACKGROUND

Before an advertisement is displayed on a public bus, it has likely undergone an extensive vetting process, where the transit authority has deemed it acceptable to occupy this space. Each locale often has varying policies regarding which advertisements it will choose to air. Both religious and non-religious groups alike have attempted to circumvent transit authority policies in order to run advertisements with their respective viewpoints.

The First Amendment prohibits government actors from taking action that would violate a citizen’s right to free speech. In the context of monitoring public transport advertising, these violations are often seen as censorship issues — meaning a government actor is attempting to censor certain speech by not allowing a potential ad to run. First Amendment censorship claims are broken down into two categories: content-based discrimination and viewpoint discrimination. Viewpoint discrimination will target a specific view taken by a speaker, rather than disavowing an entire subject. On the other hand, content-based discrimination policies tend to be more blanketed, banning entire subject areas. There are reasonable limits that can be imposed on one’s right to freedom of speech. Thus, courts will often uphold subject-matter regulations, despite limiting one’s free speech rights, because “even protected speech is not equally permissible in all places and at all times.” Archdiocese of Washington v. Washington Metro. Area Transit Authority (2018).

THE ISSUE

With respect to public transportation, is a ban on religious advertisements considered a permissible subject-matter regulation or an impermissible viewpoint regulation under the freedom of speech guarantee of the First Amendment?

THE SPLIT

The Third Circuit and the D.C. Circuit are split on the issue. The disagreement not only lies in how the circuits answered the question, but also in their reasoning. Ultimately, in Archdiocese of Washington v. Washington Metro. Area Transit Authority (2018), the D.C. Circuit held that public transit authorities could reasonably regulate speech on their properties because buses fall under a non-public forum. Whereas in Northeastern Pennsylvania Freethought Society v. City of Lackawanna Transit System (2019), the Third Circuit found that public transit authorities could not prohibit advertisements that discriminate on the basis of viewpoint.

In Archdiocese (2018), the D.C. Circuit addressed the First Amendment question using the forum analysis, assessing whether the restrictions are warranted based on the category of forum that the buses fall under. The court distinguished between public forums and non-public forums. Public forums are places that “have been devoted to assembly and debate, such as sidewalks or parks.” Here, the government’s ability to limit speech is minimal. In contrast, non-public forums are public properties where speech can be regulated if the regulation is reasonable and is not grounded in viewpoint discrimination. The D.C. Circuit reasons that “advertising space on public transit was properly treated as a non-public forum because a ‘bus is plainly not a park or sidewalk or other meeting place for discussion’ but rather ‘only a way to get to work or back home.’” Furthermore, it discussed that the Washington Metro Area Transit Authority’s exclusions were subject-matter discrimination, prohibiting religion as subject matter rather than religious viewpoint.

In Northeastern Pennsylvania (2019), the Third Circuit does not even consider the forum analysis because this would be “putting the cart before the horse.” Instead, the Court requires an assessment of the type of discrimination to take place first, seeing no rationale for addressing the forum if the discrimination is one regarding viewpoint. In the Court’s view, advertisement policies fall within viewpoint discrimination, and are thus impermissible under the First Amendment. Under this holding, the transit authority cannot exclude speech that it considers controversial because this would be an exclusion based on one particular view. Ultimately, the Third Circuit urges that other courts construe viewpoint discrimination broadly in the pursuit of “providing greater protection to private religious speech on public property” and not relegating religious speech to a “second-class status.”

LOOKING FORWARD

First Amendment claims, especially with regard to religious freedom, are rarely clear-cut issues for courts to tackle. However, if this circuit split is left unresolved, the gray area regarding permissible speech only expands. This uncertainty could very well expand past an advertisement on your morning commute, and could have longstanding impacts on how government actors limit speech in various public areas. To ensure that free speech rights are not infringed upon, the Supreme Court will need to address religious speech, determining the permissibility of certain expressions.