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Bar News - April 19, 2013


US Supreme Court Hears NH Preemption Case

By:

Two Preemption Claims
at the High Court

By Kristen Senz

The US Supreme Court heard two New Hampshire cases during the same week last month, both of which involve commercial parties arguing that federal preemption should shield them from liability under state law.

The Court heard oral arguments in Mutual Pharmaceutical Co. v. Bartlett the day before attorneys argued Dan’s City v. Pelkey. There were no New Hampshire Bar members involved in the Supreme Court arguments in Mutual Pharmaceutical, but Christine Craig and Timothy Beaupre from Shaheen & Gordon represented Bartlett in the lower courts; Stephen Judge and Pierre Chabot of Wadleigh Starr & Peters represented Mutual.

Bartlett, of Plaistow, suffered horrific injuries in 2004 after taking sulidnac, a generic pain medication manufactured by Mutual Pharmaceutical Company, which is seeking to have a nearly $21 million federal jury award in her favor overturned. According to court records, the drug caused toxic epidermal necrolysis, a life-threatening disease that left Bartlett disfigured, nearly blind, and unable to eat normally due to esophageal burns.

Mutual Pharmaceutical appealed, arguing in part that the doctrine of federal preemption should override New Hampshire tort laws. The company said that because it reproduced a brand name drug approved by the FDA, it should not be liable for Bartlett’s injuries. In response to Bartlett’s claims that sulidnac should not be on the market, the First Circuit appellate court agreed, ruling that although manufacturers of generic drugs cannot change the chemical composition of the original, they can choose not to make the drugs at all, according to the decision.

In Dan’s City, the plaintiff, a Manchester towing company, argued federal laws that deregulated the trucking industry in the 1990s should preempt New Hampshire consumer protection statutes.

The issue before the high court Mutual Pharmaceutical is how the justices will reconcile it in the context of two previous pharmaceutical cases, according to Ronald Mann of www.scotusblog.com. In Wyeth vs. Levine, the court ruled that manufacturers of brand name drugs could be held liable in state courts for inadequate drug warnings, even if the labels used were the ones approved by the FDA.

In a later ruling, in PLIVA Inc. vs. Mensing, however, the Supreme Court ruled generic drug manufacturers, which cannot legally change FDA-approved labels, are excluded from liability in state courts in claims related to inadequate warnings.

A decision in Mutual Pharmaceutical is expected to clarify whether federal preemption applies in claims related to overall drug defects.

 
WASHINGTON, DC – Neither side could have anticipated that a dispute over a towed 2004 Honda Civic said to be worth less than $500 would end up being argued before the nation’s highest court.

But on March 20, the US Supreme Court heard oral arguments in Dan’s City Used Cars v. Pelkey, a case in which a Manchester towing company was accused of violating the state’s consumer protection statute. The company, which towed the Honda at the request of the owner’s landlord and then sold it to a third party, prevailed in state court by arguing that federal trucking regulations preempted car owner Robert Pelkey’s claims, but that decision was then overturned by the NH Supreme Court.

Kate Strickland, representing Dan’s City, aided by the combined efforts of her colleagues at the Vermont-based Downs, Rachlin & Martin firm, beat the long odds last fall when her appeal was accepted by the US Supreme Court. (Of 8,000 to 10,000 petitions filed each year, about 100 are granted full-argument treatment.)

The epitome of a low-stakes case with big-picture implications, Dan’s City highlights an important aspect of the American justice system, said Andre Bouffard, Strickland’s co-counsel, who argued before the high court last month.

"What some people might consider a small case from a small state can raise important issues that the Court takes very seriously in Washington, DC… That’s not the case in a lot of other parts of the world," said Bouffard, on the Supreme Court steps following an intense one-hour hearing before the nation’s most celebrated legal minds.

The tenor of the questioning by the nine justices during oral arguments suggested that they intend to set clear limits on the scope of the federal preemption authorized by Section 14501 of the US Transportation Code, which was designed to free the trucking industry from complying with an array of state regulations. As the justices hurled a barrage of questions and hypothetical scenarios at attorneys on both sides, it seemed the resulting decision might also reinforce the jurisdiction of state consumer protection laws over the seizure of private property.

The case hinges on whether the storage and sale of an abandoned vehicle that occurs after the vehicle is towed without the owner’s permission is "related to" the primary transportation service provided by the towing company. Strickland and Bouffard argue that the storing and selling of the car after towing it are "related," and thus claims regarding those activities are preempted by federal law.

Brian Shaughnessy, of Manchester-based firm Kazan Shaughnessy Kasten, represents the former owner of the Honda Civic, Robert Pelkey. In his oral argument, he contended the storage and sale are separate from the actual towing or transportation of property.

Bouffard managed to utter two whole sentences before Justice Ruth Bader Ginsburg set about tearing his argument apart. She pointed out that abandoned vehicles aren’t the exclusive province of trucking companies.

"This same thing could happen with a garage owner…" said Ginsburg, who might have seemed soft-spoken and frail, were it not for a Washington Post article published in that morning’s paper that discussed her exercise regimen and ability to crank out 20 push-ups. "So there’s nothing peculiar about being in the towing business that makes this … storage statute apply."

Bouffard responded that Pelkey’s claims were based on the state’s consumer protection laws, not the abandoned vehicle statute, at which point Justices Breyer and Scalia said Bouffard seemed to be arguing against himself.

"It seems to me you are running in the wrong direction," Scalia said. "To the extent you say the case doesn’t involve New Hampshire’s towing law, but involves just its general consumer protection law, it’s even further from being preempted."

From behind the enormous semi-circular bench they share, the justices fired off questions related to both the specific case and the overall challenge of defining the scope of preemption. Justice Sotomayor asked Bouffard to explain why the Court should apply preemption to vehicle storage that takes place after the transportation of property, rather than during the course of the transportation.

"This wasn’t necessarily the end of the transportation," Bouffard responded, referring to a letter from Shaughnessy in which Pelkey sought to have his car towed back to his residence. He added that because "storage" is included in the federal definition of "transportation," the two activities are linked, regardless of when the storage occurs.

Justice Antonin Scalia said the Court limited preemption in Columbus v. Harrah’s Garage and Wrecker Services Inc., which states that the preemption clause is limited to "only laws, regulations, and other provisions that single out for special treatment motor carriers of property."

"Respectfully, Justice Scalia," Bouffard said, "I think those words came from your dissent in that case."

The vast, packed courtroom erupted with laughter. The sound bounced off the high, ornate ceiling. Muffled chuckles were even heard coming from behind the red velvet curtain by the side wall, where members of the press mostly listened without seeing the proceedings.

"Ah," Scalia said. "I forgot that."

Shaughnessy began his argument by criticizing the "broad sweep" reading of the preemption statute by his opponents and noted that the parties dispute whether payment for the towing or storage of Pelkey’s vehicle was ever at issue in the case. Chief Justice Roberts, the primary questioner during Shaughnessy’s argument, challenged the attorney to refute the notion that vehicle storage is an essential part of the towing business. Shaughnessy said the transportation must "relate to the movement of property."

"Here the movement has stopped," he said. "… The services of the motor carrier terminated once the hook was off the tow truck."

Shaughnessy pointed to Rowe v. New Hampshire Motor Transport Association as providing a starting point for the Court’s limitations on preemption. The Court’s decision in that case said that to be "related to" the service of a motor carrier a law must either be a direct regulation of motor carrier services or, if indirect, have a "significant effect" on the company’s ability to provide its services.

Justice Breyer asked whether laws across the country that allow for nonconsensual towing of vehicles would be preempted under the Rowe instructions as Shaughnessy had described.

Alluding to himself as the probable author of the decision in the case, Breyer asked Shaughnessy or Lewis Yelin of the US Solicitor General’s Office, who used part of Shaughnessy’s oral argument time, to respond to the broader issues the case raises, which he called "horrendously important," rather than focusing on the specific state laws at issue in Dan’s City.

Shaughnessy said guidelines for the application of the preemption provision should focus on the deregulation purpose of Congress and argued that if New Hampshire’s consumer protection laws were preempted by federal deregulation, so too were state laws such as those that enable companies like Dan’s City Used Cars to auction or sell abandoned vehicles.

Yelin, of the Solicitor General’s Office, said it is unlikely Congress intended to preempt public safety or consumer protection when it sought in the 1990s to provide the commercial trucking industry with the same freedom from state restrictions the airline industry had enjoyed since the 1970s.

"There’s little reason to think Congress intended to preempt state laws that prevent bad conduct," he said.

In a brief rebuttal following Shaughnessy’s argument, Bouffard pointed to an exemption in the federal preemption provision relative to public safety towing.

Justices Ginsburg and Kagan hinted that they were inclined to side with Shaughnessy. At the close of the proceeding, Kagan told Bouffard that his side needed to "take the bitter with the sweet," presumably meaning that if Pelkey’s claims were preempted, state laws that allowed Dan’s City to auction or trade the car would be, too.

NH Supreme Court Chief Justice Linda Dalianis, at a NH Campaign for Legal Services fundraiser earlier this month, asked guest speaker Linda Greenhouse, who covered the US Supreme Court for 30 years at the New York Times, why she thought the Court decided to hear Dan’s City v. Pelkey. "Oh, they just love preemption cases," Greenhouse replied. "They can’t resist."

In Washington, after the oral arguments were over, Shaughnessy said he was confident he’d scored a victory. "I was surprisingly calm," he said just outside the courtroom, "because I did do a fair amount of preparation."

Shaughnessy brought his family with him to the high court, including his daughter Kimberly, a first-year law student at UNH School of Law. "I think I was more nervous for him than he was for himself," Kimberly said on the courthouse steps.

Strickland, who represented Dan’s City at the lower courts and joined Bouffard at the counsel table before the High Court, said the case is an important one that will have a major impact on the trucking and airline industries, regardless of which way the court rules. "There were several justices who clearly were very familiar with the case," she said.

Like Shaughnessy, Strickland and Bouffard said the oral arguments in the case marked a highlight of their careers. Bouffard, whose practice centers on appellate advocacy, called the day "a special treat."

The US Supreme Court decides all of the approximately 100 cases it hears during a session before breaking for the summer recess in June. To read pleadings in Dan’s City v. Pelkey, please visit www.nhbar.org.

Supreme Court Rule 42(9) requires all NH admitted attorneys to notify the Bar Association of any address change, home or office.

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