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Judge Richard J. Leon of the US District Court for the District of Columbia has ruled that a federal advisory committee appointed by the FDA to issue a report consistent with the agency’s new authority over the sale of tobacco products was illegally constituted. Three of the voting committee members had conflicts of interest in that they received compensation from companies manufacturing tobacco cessation products, and that they were also frequent expert witnesses in tobacco litigation. The conflicts were so significant that the court held that the committee’s “Menthol Report” was “suspect and untrustworthy”, and barred its use.

The case is Lorillard, Inc. v. US Food and Drug Administration, decided July 21, 2014.

If you have any questions about the content of this blog, please contact the Pillsbury attorney with whom you regularly work or Anthony Cavender, the author of this blog.

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In mid-April 2014, Nebraska Governor signed into law Legislative Bill 961. Of note, it includes revisions to the Nebraska Construction Prompt Pay Act. The Act is set forth in Nebraska Revised Statutes §§ 45-1201 to 45-1210 and Section 8 of L.B. 961. The revised provisions are operative July 18, 2014.

Subdivision (3) of Section 45-1203 is amended to read:

“The owner or the owner’s representative shall release and pay all retainage for work completed in accordance with the provisions of the contract within forty-five days after the project, or a designated portion thereof, is substantially complete. When a subcontractor has performed work in accordance with the provisions of a subcontract and all conditions precedent to payment contained in the subcontract have been satisfied, the contractor shall pay all retainage due such subcontractor within ten days after receipt of the retainage.” (Underline added).

In turn, Subdivision (1) of Section 45-1204 has been amended to read:

“When work has been performed pursuant to a contract, an owner, contractor or subcontractor may only withhold payment… [f]or retainage, in an amount not to exceed the amount specified in the applicable contract, which shall not exceed a rate of ten percent. If the scope of work for the contractor or subcontractor from which retainage is withheld is fifty percent complete and if the contractor or subcontractor has performed work in accordance with the provisions in the applicable contract, no more than five percent of any additional progress payment may be withheld as retainage if the contractor or subcontractor provides or has provided satisfactory and reasonable assurances of continued performance and financial responsibility to complete the work.” (Underline added).

The definitions of contractor, subcontractor and substantially complete have also been revised:

  • The term “contractor” “does not include an individual or an entity performing work on a contract for the State of Nebraska or performing work on a federal-aid or state-aid project of a political subdivision in which the state makes payments to the contractor on behalf of the political subdivision.” Neb. Rev. St. § 45-1202(1).
  • The term “subcontractor” “does not include an individual or an entity performing work as a subcontractor on a contract for the State of Nebraska or performing work on a federal-aid or state-aid project of a political subdivision in which the state makes payments to the contractor on behalf of the political subdivision.” Neb. Rev. St. § 45-1202(6).
  • The term “substantially complete” means “the stage of a construction project when the project, or a designated portion thereof, is sufficiently complete in accordance with the contract so that the owner can occupy or utilize the project for its intended use.” Neb. Rev. St. § 45-1202(7).

Section 8 of L.B. 961 further provides that “Any individual, partnership, firm, limited liability company, corporation, or company may bring an action to recover any damages caused to such person or entity by a violation of the Nebraska Construction Prompt Pay Act. In addition to an award of damages, the court may award a plaintiff reasonable attorney’s fees and costs as the court determines is appropriate.”

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In a decision released Friday in the case of United States of America v. Volvo Powertrain Corp., the DC Circuit affirmed the lower court’s decision finding that a Consent Decree entered into by several engine manufacturers to settle civil complaints that they had violated federal law by equipping certain engines with “defeat devices” to suppress emissions during EPA tests applied to Volvo Powertrain. The terms of the Consent Decree also required these manufacturers to attain EPA emissions standards ahead of schedule.

At issue here were Volvo Penta engines, which Volvo argued were not subject to the terms of the Consent Decree. In a long opinion interpreting the Consent Decree, Judge Srinivasan, writing for a unanimous panel, held that the consent decree, by its terms, did apply to this Volvo plant, noting that certain issues had been forfeited when they were not argued before the trial court. Interestingly, the court also held that the relevant regulations, located at 40 C.F.R. Part 89, apply to all engines for which a manufacturer seeks a certificate of conformity, regardless of whether the engines are sold in the United States.

The action was prompted by a tip from Caterpillar Inc., one of Volvo Penta’s competitors, complaining that these engines should be part of the enforceable provisions of the Consent Decree.

If you have any questions about the content of this blog, please contact the Pillsbury attorney with whom you regularly work or Anthony Cavender, the author of this blog.

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The Seventh Circuit, in the case of State of Michigan, et al. v. US Army Corps of Engineers and the Metropolitan Water Reclamation District of Greater Chicago, once again denied a request by five states bordering on Lake Michigan seeking an injunction against the Corps and the Water Reclamation District. The Asian carp threatens to overwhelm the Great Lakes unless its migration through the Chicago Area Waterway System which connects Lake Michigan with the Mississippi River. The states appear to favor a hugely expensive and environmentally questionable project to physically separate these bodies of water to prevent the carp from entering and pillaging the Great Lakes. The court denied relief, but the opinion by Judge Wood is a masterful exposition of federal common law principles, nuisance law, and the way the 1899 River and Harbors Act is intended to work. The court declined the invitation to step into the middle of this controversy, while it acknowledges that some progress has been reported.

If you have any questions about the content of this blog, please contact the Pillsbury attorney with whom you regularly work or Anthony Cavender, the author of this blog.

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Recently, the DC Circuit held that a Presidential Order prohibiting a transaction to develop wind farms in Oregon because of unspecified national security issues, was violative of the constitutional guarantees of due process. The case is Ralls Corporation v. the Committee on Foreign Investment in the United States (an Executive Branch committee created by the Defense Production Act of 1950). Ralls is an American corporation, but the owners are Chinese nationals. For this reason the purchase of four American limited liability wind farm companies was subject to review by the Committee and a Presidential Order implementing the Committee’s recommendation that the transaction be prohibited.

Although the law under which the President acted provides that his actions and findings are not subject to judicial review, the courts do not view this as prohibiting judicial review when the issues raised are constitutional–in this case, whether the owners’ due process rights were violated. As the court notes, they have never received any notice of the evidence of a national security concern, nor an opportunity to rebut that evidence. Consequently, the court concluded that the Presidential Order deprived Ralls of a constitutionally protected property interest without due process of law, and the matter was returned to the District Court to ensure that Ralls now has an opportunity to at least review any unclassified evidence that the government relied upon in making this disputed decision.

If you have any questions about the content of this blog, please contact the Pillsbury attorney with whom you regularly work or Anthony Cavender, the author of this blog.

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Recently, the DC Circuit decided the case of National Mining Association v. McCarthy. Reversing the lower court, the court held that an “Enhanced Coordination Process” memo and guidance authored by EPA and the Corps of Engineers to coordinate their joint review of coal mining Clean Water Act, 33 U.S.C. §§ 1251, et seq. (“CWA”), water discharge permits was only a procedural rule and not a “final action” subject to review under the APA. The Court of Appeals concludes that the memo only enhances these agencies’ ability to coordinate the application of their duties under the CWA, and does not change their substantive statutory responsibilities.

Responding to the complaint that the memo was in fact a “legislative rule’ whose promulgation was subject to the APA and pre-enforcement review, the court refers to the case law in this area, which it describes as “sometimes byzantine”. The Court of Appeals notes that EPA acknowledged at oral argument that the memo has no legal impact. Therefore, the Court of Appeals concludes that it may not be the basis for an enforcement action against a regulated entity, and, as a “matter of law, state permitting authorities and permit applicants may ignore this final guidance without facing any legal consequences”. Accordingly, the question before the Court of Appeals was not whether judicial review was available, but “whether judicial review is available now”.

If you have any questions about the content of this blog, please contact the Pillsbury attorney with whom you regularly work or Anthony Cavender, the author of this blog.

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The Fourth Circuit Court of Appeals has issued a ruling in the case of Southern Appalachian Mountain Stewards v. A & G Coal Corporation. The Court of Appeals affirmed the lower court’s decision in a Clean Water Act, 33 U.S.C. §§ 1251, et seq. (“CWA”), citizen suit lawsuit that A & G could not assert the “permit shield” defense. A & G operates a coal mine in Virginia, and has a National Pollutant Discharge Elimination System (“NPDES”) permit; the permit application did not list selenium as a pollutant because the coal company argued that it had no reason to believe that this toxic pollutant was discharged from its facility, and that the permit shield defense of CWA Section 1342(k) was available. Sampling at the outfalls disclosed the presence of selenium, but the parties disagree as to whether the concentrations violate any state water quality standards. The Court of Appeals closely examined the disclosures required of an NPDES permit applicant, and determined that A & G had not made an adequate disclosure to trigger the permit shield defense. The failure to fully comply with these disclosure requirements, especially regarding a substance like selenium, meant that A & G could not deploy this defense to liability.

The case will return to the district court to determine whether there is, in fact, a violation of the Virginia water quality standards applicable to selenium. The case has attracted considerable interest; briefs were filed on behalf of the American Petroleum Institute, the National Mining Association, the National Association of Home Builders, and the Virginia Mining Association.

If you have any questions about the content of this blog, please contact the Pillsbury attorney with whom you regularly work or Anthony Cavender, the author of this blog.

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Today, Pillsbury attorney Ray Sweigart posted his client advisory English Contract Law: Has the Camel’s Nose of “Good Faith” Crept Under the Tent Flap? The Advisory discusses Emirates Trading Agency LLC v Prime Mineral Exports Private Ltd [2014] EWHC 2104 (Comm), which involves a challenge brought under Section 67 of the English Arbitration Act 1996 that the tribunal lacked substantive jurisdiction.

If you have any questions about the content of this blog, please contact the Pillsbury attorney with whom you regularly work or Ray Sweigart, the author of this blog.

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On June 23, 2014, the Second Circuit Court of Appeals issued a decision in the case Dormitory Authority of the State of New York v. Continental Casualty Company (2014 WL 2808073), a declaratory judgment action filed by a building owner against the architect’s insurance carrier over the faulty design of a dormitory. The issue in this case was whether two design defects in the structure of the building were “related.” The owner sought a declaration that the design flaws were two separate defects because, if so, two separate policies would have responded to the claims, but if not, there would not have been sufficient limits to remediate both defects. Although this decision has not received much attention yet, the importance lies in the Second Circuit’s agreement that the defects were separate, notwithstanding policy language that attempted to group related wrongful acts.

After the project was completed, it was determined that the architect incorrectly estimated the steel requirement for the structural steel girts and exterior façade (“Steel Girt Defect”). The owner sent a demand letter to the architect in 2002. Separately, it was also discovered that snow and ice were sliding off of the building on the sidewalk below. A study determined that the design of the façade failed to account for temperature variations appropriate for a building in New York (“Façade Defect”). A claim was first asserted against the architect in 2004.

The architect’s professional liability policies are claims-made policies that defined “related claims” as “all claims made against [the architect] and reported to [the insurer] during any policy year arising out of . . . a single wrongful act or related wrongful acts.” The policies further provided that “[a]ll related claims shall be considered a single claim first made and reported . . . within the policy year in which the earliest of the related claims was first made and reported.” The two separate claims implicated two different policies because they were reported at different times.
The district court granted summary judgment in favor of the owner, finding that the Façade Defect was not related to the Steel Girt Defect. On appeal, the insurer argued that the demand letter for the Steel Girt Defect was broad enough to include all design defects in the building. The Second Circuit disagreed and found that the demand letter focused entirely upon the Steel Girt Defect and “could not be fairly read as an omnibus claim concerning all architectural defects . . .”

The insurer also argued that the defects were “related claims” under the policy because they arose out of a single wrongful act or related wrongful acts. The Second Circuit rejected this claim as well, holding that one defect relates to the structural integrity of the building, while the other relates to the building’s aesthetic design. Furthermore, each system had its own distinct engineering considerations and involved different design teams and contractors. The problems also manifested themselves at different times, resulted in different types of damage, and the solutions to each issue were completely different. Importantly, the Court stated, “[t]hat both may have resulted from the generalized negligence of the Architects is an insufficient degree of relatedness.”

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LINKS UPDATED AUGUST 30, 2017

California’s Contractors’ State License Law, Bus. & Prof. Code §§ 7000, et seq., requires all contractor’s license applicants to submit a full set of fingerprints for a criminal background check. Once submitted, the fingerprints are compared to the records of the California Department of Justice (DOJ) and the Federal Bureau of Investigation (FBI) to determine if the applicant has a criminal history. The Contractors State License Board (CSLB) has confirmed that “[t]he number one reason that an application may be denied is the applicant’s failure to accurately disclose his/her conviction record.”

Who Must Be Fingerprinted?
All contractor license applicants and each officer, partner, owner listed on the application must be fingerprinted; the CSLB’s Application for Original Contractor License further explains that “[a]ll corporations must also provide the name(s) of their corporate officer(s): California corporations – president, secretary, and treasurer; foreign corporations – president only.” Applicants for a joint venture license are not required to be fingerprinted.

After a contractor’s license application has been accepted by the CSLB as complete (aka “posted”), each individual listed on the license application is sent instructions on the process for obtaining and submitting fingerprints and a “Request for Live Scan Service” (form BCII 8016). Live Scan fingerprinting services are available at most California local police and sheriff departments, and any public Live Scan site.

Cal. Code of Regs.§ 869.3.  and the CSLB’s FAQs confirm that, if you do not live in California and do not plan to come to California during the application process, or if you do not have access to a Live Scan site, it will permit you to submit fingerprints using hard copy fingerprint cards. Additional fees will apply. It also warns that the processing time required for hard copy fingerprint cards is substantially longer than Live Scan fingerprinting, taking 3 to 6 months or longer.

What Sort of “Convictions” Must Be Disclosed?
A conviction of any kind — misdemeanor and felony — regardless of the nature of the conviction and regardless of when it occurred. A “conviction” means a plea or verdict of guilty or a conviction following a plea of nolo contendere. All convictions are reported to the CSLB, including those that have been sealed, expunged, or reduced under Penal Code § 1203.4 or an applicable code of another state. Failure to disclose all convictions is falsification of the application, which was signed under penalty of perjury, and is grounds for denial.

Will a Conviction Prevent the CSLB From Issuing a Contractor’s License?
The CSLB’s Criminal Background Unit (CBU) reviews on a case-by-case basis all criminal convictions to determine if the crime at issue is “substantially related to the duties, qualifications, and/or functions of a contractor.” The criteria the CBU uses to review a criminal conviction is “whether the crime shows the present or potential unfitness of an applicant or licensee to perform the functions authorized by the license in a manner consistent with the public health, safety, or welfare.” The primary factors in the evaluation of conviction records are (1) the nature and severity of the crimes, (2) the amount of time that has elapsed since the conviction, and (3) any rehabilitation that has been demonstrated by the applicant. In addition, the CBU will review and consider any evidence of rehabilitation submitted by the applicant or licensee. See Cal. Code of Regs. §§ 868, 869.

Depending on the conviction record, the CBU may either clear an applicant’s license application for further processing or request additional documentation or statements from the applicant that may be necessary for the CBU to complete a thorough evaluation of the applicant’s conviction record. If it requests additional information, upon completion of the CBU’s review: (1) the applicant’s license application is cleared for further processing toward licensure, (2) the applicant is offered a probationary license for a specified term in lieu of denial, pursuant to Cal. Bus. & Prof. Code § 7073, or (3) the applicant’s license application is denied based on the applicant’s criminal conviction history.

Additional Resources: CSLB’s Fingerprinting, Disclosure, and Background Review