Lawsuit Proceeds Against Monsanto for Manufacture of PCBs

Last year, we told you about a lawsuit brought by three California cities against Monsanto Company, alleging that Monsanto is liable for PCB (polychlorinated biphenyl) contamination in San Francisco Bay. The cities—San Jose, Berkeley, and Oakland—sued Monsanto for allegedly creating a public nuisance not by discharging PCBs, but just by manufacturing them.

In September 2016, the court dismissed the suit, holding that the cities had not alleged a property interest in the contaminated water in question, a requirement of California public nuisance law. However, the court allowed the cities to amend their complaint, and the cities took advantage of that opportunity.

The cities filed an amended complaint, setting forth their property interest in the water in greater detail. Once again, Monsanto moved to dismiss the complaint. This time, however, Monsanto was not successful. Not only did the court hold that the cities sufficiently alleged a property interest in the water, but it held that the cities had adequately pled that Monsanto caused the nuisance.

In their amended complaint, the cities allege that “Monsanto knew PCBs were dangerous, concealed that knowledge, promoted the use of PCBs in a range of applications, and gave disposal instructions that were likely to cause contamination.” The cities allege that Monsanto provided an incinerator for the disposal of liquid PCB waste, but it just instructed customers to dispose of solid PCB waste in “a well operated, properly operated landfill . . . .”

Monsanto countered these allegations noting that there were no regulations at the time to prevent disposal of PCB waste in landfills, and that its recommendations regarding disposal were not mandatory. Despite that, the court found that the cities allegations were “sufficient to show a causal connection between Monsanto’s actions and the alleged public nuisance.”

Monsanto further argued that any alleged contamination was caused by third parties who were actually responsible for the disposal of the PCBs. The court disagreed. According to the court, under California law, third party actions do not preclude Monsanto’s liability if the acts are “reasonably foreseeable, and should have been anticipated.” And, based on the cities’ allegations, widespread PCB contamination was reasonably foreseeable. In addition, the court distinguished other cases in which manufacturers were not held liable by noting that the cities allege that Monsanto is directly liable for the nuisance because they gave improper disposal instructions.

Ultimately, the court denied Monsanto’s motion to dismiss, but granted Monsanto the opportunity to file another motion to dismiss or stay the case based solely on whether the cities had exhausted their administrative remedies.

Unfortunately for manufacturers, this case is not an anomaly. There is a growing trend in the pursuit of public nuisance claims against manufacturers, in part as a way to side-step traditional products liability laws. And with this victory, plaintiffs may gain some traction—at least for now—to pursue similar claims against other manufacturers.

The cases, pending in the U.S. District Court for the Northern District of California, are City of San Jose v Monsanto Co. et al., No. 5:15-cv-03178; City of Oakland v Monsanto Co. et al., No. 5:15-cv-05152; and City of Berkeley v. Monsanto Co. et al., No. 5:16-cv-00071.

What Will 2017 Bring For Manufacturers: Environmental, Health & Safety Edition

This post is the last in our three-part series about what manufacturers can expect in 2017. In my humble opinion, we saved the best for last – Environmental, Health & Safety.

Citizen Science

With increasing awareness of environmental issues and advancing monitoring technologies comes a rise in citizen science. Citizens—be it a single person or a community group—are increasingly relying on their own data and devices to evaluate a host of environmental and product issues. Readily available and portable monitoring technology allows citizens to test the air at a factory fence line, water discharges, even product contents, in a quick and efficient manner.

While many citizens are not actually using this data to bring lawsuits, they are at least using it to for screening purposes. The citizen-gathered data may lack the reliability that comes from professionally collected data, but it is not entirely inaccurate. At the very least, citizens are and will continue to use this data as a negotiating tool, and it may lead to the collection of further—and more reliable—data that may be presented to a government agency or used against manufacturers in a lawsuit.

Novel Theories of Liability for Manufacturers

We all know that there is an extensive network of environmental laws in the United States that, for a number of environmental problems, defines unlawful behavior, the liable parties, and even the policies and procedures to remedy a potential problem. But when that network of environmental laws does not provide a satisfactory solution, public entities have not hesitated to turn to alternative methods to protect human health and the environment. We have previously reported on the cases being advanced by a number of west coast cities against Monsanto Company, alleging that Monsanto created a public nuisance solely by manufacturing polychlorinated biphenyls (PCBs). And a California court has already held lead pigment manufacturers liable for creating a public nuisance by manufacturing lead pigment, which was subsequently used to manufacture lead paint, which was subsequently used in buildings throughout the state.

If the laws and regulations do not provide a mechanism to bring a claim against a manufacturer, the question of legal liability will not stop there. In 2017, we can expect manufacturers to be subject to claims for liability, perhaps from where we least expect it.

Increased Visibility of Violations, Worker Injuries and Illnesses

It is 2017, and the federal government is finally making its way into the digital age. Across the board, more agencies are requiring electronic submission of information, and they also plan to publicize this information electronically. From environmental permit monitoring requirements to Occupational Safety and Health injury and illness reports, 2017 will usher in increased visibility of a company’s data and information. The agencies have all announced varying rationales for this increased transparency, from nudging business towards better health and safety practices to increasing public outcry. But whatever the motive, with increased information will likely come increased enforcement.

Rise of NGO Enforcement

It goes without saying that it is hard to crystal ball where we will be in the regulatory arena a year from now. Just yesterday, President Trump signed an executive order announcing that, for every new regulation, any agency must identify at least two existing regulations to be repealed. While we have yet to see this order implemented, it is clear that this administration is intent on reducing regulations across the board.

A reduction in regulations, however, will not necessarily mean a lack of enforcement; it may just mean a change in the enforcer. Since Trump’s victory, money has been pouring in to non-governmental organizations (NGOs) aimed at protecting the environment. These organizations may face legal challenges in the face of a lax regulatory environment, but we can expect them to get creative with novel legal theories to protect the environment. And while many of these theories will likely be advanced against the current administration, the business community will be part of the mix as well.

Manufacturing Law Predictions for 2017:  Labor and Employment

As has been our tradition, January is the time to predict the big developments in the coming year which will impact on manufacturers.  Notwithstanding my “Lawyer’s Shrug,” here is my take on 2017.

Minimum Wages.  Even though President Trump ran on a populist platform to raise wages for American Workers, I believe it unlikely Congress will raise the minimum wage in 2017 and I believe the Department of Labor will halt its efforts to revise upward the minimum salary threshold for white collar workers.  I expect to see more states, however, raise the mandated minimum wage for hourly workers and (like the New York recent wage order) raise the salary threshold for exempt employees.  These changes impact greatest on manufacturers with multi-state locations and in lower wage localities.  Expect greater enforcement actions by state governments and the private plaintiffs’ bar.

The National Labor Relations Board.  President Trump will likely nominate two Republican conservatives to fill vacant positions on the NLRB.  Additional vacancies which arise during the next four years may be filled by either conservative Democrats or conservative unaffiliated or third party nominees.  Expect to see the beginning of the roll-back on the pro-labor initiatives of the Obama-era.  I do not expect to see a repeal of the NLRB’s “Quickie Election Rule” in 2017, although I would not be surprised if the amendment process was begun toward the middle or end of 2017.  I just do not think there is enough time to complete the appointment and amendment process in the remaining eleven months.

Immigration.  I do not expect Congress will provide any meaningful guidance on immigration.  Expect at least some high-profile workplace “raids” to round up undocumented workers and substantial fines on the employers which have hired them.

Multi-Employer Pension Plans.  Several multi-employer pension plans are expected to become insolvent in 2017.  Under the current statutory scheme, once insolvent, the Pension Benefit Guarantee Corporation (PBGC) assumes management of the fund and cuts benefits for all participants.  As the first funds begin to fail, the PBGC will again warn Congress and the President that it does not have sufficient funds to cover the expected shortfall in subsequent years.  My hope is that these events will cause Congress to revisit the impending crisis and develop a plan for the long term.  While that may be my hope, I do not expect it to happen in 2017.  Rather, I expect the Treasury Department to begin approving so-called “Rescue Plans” submitted under the 2014 Multi-Employer Pension Reform Act.  (None of the plans to have been submitted under that law have been approved as of yet.)

I think these predictions are reasonably safe bets.  That said, I can also safely predict that after the last eight years of the Obama Administration, the sudden change in governing philosophy will come with some unexpected surprises.

Things Manufacturers Should Be Watching In 2017 In The Areas of Corporate Compliance / Litigation

As is our annual tradition, this is the first in a series of posts that provide industry and legal outlooks for manufacturers as we head into 2017.  I will start with corporate compliance and litigation.  Matt will follow with labor/employment.  And, Megan will conclude the series with Environmental Health & Safety (EH&S).

Here are issues I will be watching in 2017.

  • Will Conflict Minerals Compliance Become More Complicated? 

In 2017, we will be watching as the European Union continues down the path of adopting comprehensive conflict minerals regulations relating to the importing of certain materials.  The EU proposal is broader in geographic scope than the U.S. law, but applies to a narrower set of companies (mostly, importers).  In addition, we will see if Congress amends the U.S. law, which continues to be heavily scrutinized.

  • What will be the ultimate impact of the Volkswagen Scandal?

As 2016 ended, Volkswagen continued to reach agreement on billions of dollars of fines and continue to face widespread litigation.  This past week, there was word that one of the company’s in-house lawyers could be implicated in the criminal investigation.  What remains to be seen is whether the scandal is an isolated incident or a warning bell to manufacturers across the world.

  • Is IoT Here To Stay?

One of the hottest industry issues in 2016 was the IoT or the “Internet of Things.”  Led by General Electric, manufacturers continue to redefine themselves as technology companies.  In 2017, not only will I be watching how manufacturers use IoT to support finished products, but also whether cyber attacks will continue.

  • Will Business to Business Disputes Continue To Increase?

There continued to be a substantial uptick in disputes in 2016 with respect to commercial contracts in the supply chain.  While these disputes almost never end in litigation, manufacturers and     distributors (regardless of their leverage) are taking a hard look at their contract review protocols.  We are helping many manufacturers develop “playbooks” that help identify risk irrespective of the size of the contract.

The 2017 “Manufacturers’ Lawyer’s Shrug”

I am a really big fan of the NPR radio show, “Car Talk,” where two Boston auto mechanics took callers’ questions and tried to answer them.  Since the November 8 election, I have freely adapted one of their signature phrases – I call it the “Manufacturers’ Lawyers’ Shrug.”  Basically, when I attend any event and someone asks me what will happen with labor and employment policy in the next four years under the Trump Administration, I simply shrug my shoulders and mutter, “I have no idea!”

When asked, “what is the government planning to do with the multi-employer pension plans facing insolvency, some as early as February 2017?”  I shrug.

When it is said, “Do you think the NLRB will overturn the ‘Quickie Election Rule’?”  I shrug.

“How does the Amended White Collar Exception Rule look going forward?”  Another shrug.

During the campaign, neither candidate addressed these or numerous other policy issues.  The Trump Administration will hit the ground with a broad range of issues and can be expected to make some unpredictable choices.

For those looking to try to plan for 2017 and beyond, the U.S. Chamber of Commerce has published a comprehensive set of recommended policy changes.  Read the Report.  Among other things, the Chamber recommends:

  • Re-examination of the NLRB’s new (and more strict) joint employer test;
  • Repeal of the NLRB’s “Quickie Election Rule;”
  • Overturning of the “micro-bargaining units” approach of Specialty Healthcare;
  • Overturning of the line of NLRB cases banning the waiver of class actions in arbitration (the D. R. Horton Rule);
  • Overturning the NLRB’s decision making unlawful employer policies prohibiting the use of company email systems to for unauthorized purposes (the Purple Communications Rule);
  • Revision of the standards for deferring to arbitration decisions under the NLRB’s Collyer decision and its progeny;
  • Adoption of new rules mandating that unions return employee signed authorization cards on demand and honor employee “do not call” and “do not contact” instructions;
  • Rules banning unions from accessing private property without the property owners’ permission; and
  • Rules strengthening the principles of federal preemption of state labor laws in conflict with employer rights under the NLRA.

Even if only a few of these broad changes come to pass, 2017 promises to be another “Year of Change.”

EPA Identifies First Ten Chemical Substances For Evaluation Under New TSCA

Thank you to my colleague, Emilee Mooney Scott, for her contributions to this post. Emilee is an associate in our Environmental & Utilities Practice Group.

As we outlined earlier this year, the Toxic Substances Control Act (“TSCA”) was recently updated to provide EPA with much broader authority to regulate “existing” chemical substances (i.e., those that are already in use in commerce).

In general, EPA’s review of existing chemical substances under its new TSCA authority will follow these three steps:

  • Prioritization: screening process to identify chemical substances that may pose an unreasonable risk of injury to health or the environment and designate them as “high priority” for further study.
  • Risk Evaluation: evaluation of a high priority substance to evaluate whether it does in fact pose an unreasonable risk of injury to health or the environment.
  • Risk Management: for substances that do present an unreasonable risk of injury to health or the environment, EPA will develop a rule to mitigate such risk.

In the TSCA reform bill, EPA was also directed to identify the first ten substances for risk evaluation (skipping over the prioritization step) by December of this year. EPA released that list on November 29.  The first ten substances to be evaluated are:

  • 1,4-Dioxane (solvent, stabilizer)
  • 1-Bromopropane (solvent)
  • Asbestos (wide variety of uses, e.g. building materials)
  • Carbon Tetrachloride (precursor in refrigerant manufacturing, solvent)
  • Cyclic Aliphatic Bromide Cluster (flame retardant)
  • Methylene Chloride (solvent)
  • N-methylpyrrolidone or “NMP” (solvent)
  • Pigment Violet 29 (pigment)
  • Tetrachloroethylene, also known as perchloroethylene or “perc” (dry cleaning)
  • Trichloroethylene or “TCE” (solvent)

These substances were selected from EPA’s 2014 Update to the TSCA Work Plan for Chemical Assessments (“TSCA Work Plan”).  As EPA identifies further chemical substances for prioritization and risk evaluation, it must select at least half of them from the TSCA Work Plan.  By December of 2019, EPA must have at least 20 risk evaluations in progress at a time.

By June of 2017, EPA must publish the scope of the risk evaluations on each of the ten chemical substances above, which will trigger a public comment period allowing stakeholders to weigh in.  The risk evaluations must be completed within three years (i.e., by December 2019) and if EPA determines that any of the substances pose an unreasonable risk to human health or the environment, then EPA must issue a risk management rule within two years of the completion of the risk evaluation.  In short, while EPA has identified its first ten substances, the final rules resulting from this process are approximately five years away.

EPA Issuing Rules on TCE, NMP and methylene chloride

Separately, EPA had been using its pre-existing TSCA authority to evaluate risks posed by substances on the TSCA Work Plan.  EPA is expected to release proposed rules on NMP and methylene chloride in the coming weeks. The proposed rule on TCE was issued on December 7.  The proposed TCE rule would prohibit the manufacture, import, processing, and distribution in commerce of TCE for use in aerosol degreasing and for use in spot cleaning in dry cleaning facilities.

The fact that EPA has also identified TCE, NMP and methylene chloride for review under its new TSCA authority suggests that the new risk evaluations may address different use scenarios, and/or that EPA is providing itself some insurance in the face of a change in administrations.

So, what does this mean for you?  You may wish to take a look at your chemical use to see if you use any of the ten chemical substances listed above, or any other chemical substances listed in the TSCA Work Plan.  If you do use any TSCA Work Plan substances, watch for opportunities to provide comment as EPA develops the scope for its risk evaluation and any eventual risk management rule.  Alternately, remain alert to opportunities to transition away from at-risk substances on your own time, before new regulations force a transition.

OSHA Updates General Industry Personal Fall Protection and Walking-Working Surfaces Standards

Special thanks to my colleague, Diana Neeves, for her contributions to this post.  Diana is an attorney in our Environmental & Utilities Group.

At the end of last week, OSHA issued its long-awaited final rule on walking-working surfaces and personal fall protection systems for general industry.  The new rule is intended to update the standards to align with general industry practice, consensus standards, and, in many respects, standards for the construction industry.  It provides employers greater flexibility in fall protection by permitting selection from a variety of fall protection measures based on the circumstances.

Guardrails and toeboards are no longer the preferred fall protection measure when workers are working four feet or more above a lower level.  Instead, employers may choose from a variety of fall protection measures, depending upon the particular circumstances and activities, such as:

  • Guardrail system: a barrier, such as a railing, placed along the edge of a walking-working surface, intended to prevent workers from falling.
  • Safety net system: a netting system placed beneath the work area, intended to catch falling workers before they hit the ground or another lower level structure.
  • Personal fall arrest system: a combination of equipment used on one’s person to arrest or stop a fall, such as a body harness, anchorage, and connector. Body belts may not be used as part of a personal fall arrest system.
  • Positioning system: a supportive system of equipment used with a body belt or harness that allows one to work on an elevated vertical surface, such as a window, with both hands free.
  • Travel restraint system: a combination of equipment used on one’s person, intended to prevent a worker from going over an unprotected edge of a walking-working surface.
  • Ladder safety system: a system attached to a fixed ladder, intended to prevent workers from falling, typically comprised of a carrier, safety sleeve, lanyard, connectors, and body harness.

The final rule also consolidates and streamlines the standards for ladders into one section that addresses both general requirements for all ladders and type-specific ladders requirements. In addition, the use of Rope Descent Systems (RDS) is codified for the first time in the general industry.  The rule imposes a 300-foot height limit for the use of RDS and requires building owners to certify in writing that their RDS meets OSHA standards.

The final rule, which becomes effective on January 17, 2017, is expected to prevent 29 fatalities and 5,842 workplace injuries each year.

OSHA Issues Recommended Practices for Safety and Health Programs

 

Thank you to my colleague, Tavo True-Alcala, for his contributions to this post. Tavo is an analyst in our Environmental & Utilities Group.

In October, OSHA released its new Recommended Practices for Safety and Health Programs, which were issued to incorporate the experience and advances gained since the previous set of recommendations was released in 1989. Rather than being prescriptive, the recommendations provide guidance on key health and safety strategies that can be implemented in any workplace.

The recommended practices are focused on seven core areas and provide tools and resources to support implementation. The core areas and action items include the following:

  • Management Leadership. Owners, managers, and supervisors should make health and safety a core organizational value and to demonstrate this priority through action items like:
    • Communicating their commitment to health and safety programs;
    • Defining program goals;
    • Allocating resources; and
    • Expecting performance.
  • Worker Participation. Workers have the most to gain or lose from safety and health programs, and have the most knowledge of the potential hazards. For a program to be successful, workers should be:
    • Encouraged to participate in all aspects of the program;
    • Encouraged to report safety and health concerns; and
    • Provided access to safety and health information.
  • Hazard Identification and Assessment. All employers should proactively work to identify and assess all potential workplace hazards and prevent accidents by:
    • Collecting existing information about workplace hazards;
    • Inspecting the workplace for safety hazards;
    • Identifying health hazards;
    • Conducting incident investigations;
    • Identifying hazards from emergency and nonroutine situations; and
    • Characterizing identified hazards, developing control measures, and prioritizing hazards for control.
  • Hazard Prevention and Control. In order to minimize the risk presented by workplace hazards, employers should:
    • Identify control options;
    • Select appropriate controls;
    • Develop and update a hazard control plan;
    • Select controls for nonroutine operations and emergencies; and
    • Follow up to ensure selected controls are effective.
  • Education and Training. All employers should provide proper training to make sure that employees are aware of workplace hazards and can work productively and safely. A good health and safety program should:
    • Provide program awareness training;
    • Train employers, managers, and supervisors on their role in the program;
    • Train workers on their specific roles in the program; and
    • Train workers on hazard identification and controls.
  • Program Evaluation and Improvement. Once a program is established it is wise to:
    • Monitor performance and progress;
    • Verify that the program is implemented and operating; and
    • Correct any shortcomings and identify opportunities for improvement.
  • Communication and Coordination on Joint Employer/Multiemployer Worksites. Communication is increasingly important as more workplaces are shared by regular employees of a host company as well as workers employed by contractors or assigned by staffing agencies. In these situations all parties involved must work together to ensure worker safety, which can be accomplished by:
    • Establishing procedures to communicate safety and health policies and potential hazards before contractors or staffing agencies come on site,
    • Ensuring that contractors and staffing agency workers have a communications plan to provide information to the employer;
    • Including safety specifications in bid documents; and
    • Coordinating with contractors to ensure consistency in safety and health expectations.

OSHA provides a self-evaluation tool for employers to track the progress they make in implementing the recommended action items. OSHA encourages employers to follow these recommendations not only as a way to prevent workplace illnesses and injuries, but also because of the indirect benefits like improved products and service, better employee recruitment and retention, and better morale that such efforts can have in the workplace.

Election 2016:  WOW, Just WOW

I had a blog piece almost done.  It was going to give an overview of another NLRB case which threatened to overturn settled law and expand the rights of unions to organize.  I was going to use it as another “Year of Change” post.

Then the votes got counted.

Wow.

After eight years of ever more progressive employment regulations for manufacturers, we are faced with a new sea of uncertainty.

The Affordable Care Act, Dodd-Frank, the NLRB’s Expedited Election Rule, the DOL’s Revised Persuader Rule, the future of multi-employer pension funds and the DOL’s new overtime regulation (to name just a few):  All up for grabs.

To make matters more challenging, most manufacturers will have to make key compliance decisions within the next few weeks.  They do not have the luxury of waiting until the inauguration of President Trump on January 20.

Let’s just take one example.  As noted in previous posts, on December 1, the DOL’s new overtime regulation takes effect.  Under that new regulation, any employee who makes less than $47,476 must be paid at least minimum wage and time-and-a-half for overtime.  Many employers determined that for cost or other considerations it was easier to pay the increased salary than to convert the employee to an hourly wage rate.  These employers are likely preparing notices right now – today – to advise their employees of the change in pay.

What will the Trump Administration do to that new overtime regulation?  Will President Trump, who campaigned on a pledge to help the American worker, repeal a regulation which increases worker wages?  Will the regulation be altered to exempt non-profits or other industries suffering from economic stagnation?  If the regulation is amended, will those changes to retroactive to December 1 and will the outgoing DOL sit on the sidelines if manufacturers refuse to comply with the new regulation?  If the regulation is repealed or revised, will manufacturers roll back wage increases given to employees when it was in effect?

These are just some of the challenges facing manufacturers today  And today, like most other people in America, I simply do not have the answers.

Complying With Conflict Minerals Laws: Global Best Practices for Manufacturers and Distributors

Last month, I gave a presentation to manufacturers and distributors throughout the United States on Conflict Minerals Laws.   The program was sponsored by the United States Department of Commerce.  These laws attempt to curb the acquisition of certain minerals from a certain part of Africa that are believed to support regional conflicts.

Here are some the key points from my presentation:

  1. The Conflict Minerals laws and regulations are some of the most well known, but least understood laws/regulations that face manufacturers/distributors today.
  2. Although most publicly traded companies have elaborate compliance programs in place, privately held companies must also comply or face commercial pressure from their business partners and potentially sanctions from the U.S. Government.
  3. There has been litigation that has resulted in a “trap for the unwary” (i.e., whether products need to be described as “conflict free”).  I can provide more details for those interested.
  4. The SEC expected that 6,000 companies would be impacted by the original law, but only 1,281 companies filed the “Form SD” in 2015.   The real question is whether the Government is going to do anything about that discrepancy.  Some companies are pressuring the Government to punish those that are not complying.
  5. For those doing business internationally, manufacturers/distributors need to stay apprised of efforts in the European Union to adopt a similar law (although there are some key differences) and potentially in Japan in the future.

If you would like more information about my presentation, please contact me at jwhite@rc.com.

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