Take the Fifth

• Texas Association of Manufacturers v. U.S. Consumer Product Safety Commission, 17-60836, on petition for review of an order of the CPSC
  • Owen, C.J. (Owen, Southwick, Higginson), administrative law, standing, Administrative Procedures Act
  • Holding that the Consumer Product Safety Commission (“CPSC”) procedurally erred in promulgating a final rule limiting the concentration of 5 phthalates in children’s toys and child care articles under the Consumer Product Safety Act (“CPSA”) and Consumer Product Safety Improvement Act (“CPSIA”), affirming in all other respects, and remanding to the CPSC for further proceedings.
  • Pursuant to the CPSIA’s mandate in 2008, the CPSA underwent an extensive research and analysis process to determine acceptable exposure levels to a range of phthalates in children’s toys and child care articles (phthalates are additives to render plastics softer), resulting in a Proposed Rule, and then further analysis that led to the promulgation of a Final Rule that “(1) makes the CPSIA’s interim prohibition on DINP [diisononyl phthalate] permanent, (2) extends the scope of the CPSIA’s interim prohibition on DINP to ‘any children’s toy or child care article,’ and (3) prohibits four phthalates not prohibited by the CPSIA: DIBP [diisobutyl phthalate], DPENP [di-n-pentyl phthalate], DHEXP [di-n-hexyl phthalate], and DCHP [dicyclohexyl phthalate].”
  • The Court first confirmed that the petitioner manufacturing trade associations had standing to challenge the Final Rule. Because an association has standing if any of its members have standing, “[t]he only issue in this case is whether any member of the Petitioner associations has standing to bring the claim in its own right.” The Court noted that one member of one of the associations, ExxonMobil Chemical Company (“EMCC”) manufactured DINP, though it was unclear from the record whether its DINP was used in children’s toys or child care articles. However, the Court noted that “[t]he Supreme Court routinely recognizes probable economic injury resulting from governmental actions that alter competitive conditions. While the issue is a close one, we are satisfied that the threat of reduced sales to companies that manufacture children’s toys and child care articles is sufficiently concrete that EMCC, and by proxy TCC [one of the petitioner associations], has standing to challenge the Final Rule as it relates to DINP.” The Court also held that EMCC demonstrated economic injury in the form of lost sales based on the stigma attached to its phthalate products from the rule-making, and therefore had stigma-based standing. And, “Even though the other petitioners have not named members that manufacture the prohibited phthalates, the presence of one petitioner with standing is sufficient for Article III purposes.”
  • The Court next held that it had jurisdiction to entertain the challenge to the Final Rule, holding that it was a “consumer product safety rule” subject to judicial review under § 2060(a) of the CPSA.
  • Turning to the rule-making process, the Court held that the petitioners were correct in their challenge that sufficient notice was not provided when the CPSC changed the justification for the Final Rule from the justification that had been provided for the Proposed Rule; specifically, that “the Commission did not provide fair notice when it changed its justification for the prohibition from data showing that the average HI [hazard index] was greater than one in the 95th percentile to data including individual spot samples with HIs greater than one.” The Court held that some mention in response to public comments about the use of spot sampling in the period between the Proposed Rule and the Final Rule did not itself constitute sufficient public notice that spot-sample-based rationale would replace the percentage-based rationale of the Proposed Rule. “Because it was justified with reference to individual spot samples rather than an estimable percentage of the population that had potentially harmful exposure to the phthalates in question, the Final Rule is not a logical outgrowth of the Proposed Rule.”
  • The Court then rejected the petitioners’ argument that “the Final Rule declares five phthalates to be ‘banned hazardous products’ under § 2057c and consequently should hav complied with § 2057’s requirements for such a ban.” The Court held that, under Chevron deference, the CPSC did not act arbitrarily and capriciously in interpreting the CPSIA as imposing a separate set of rule-making requirements such that it did not need to comply with the requirements under § 2058 of the CPSA. “While there may be substantial overlap in the standards imposed by § 2057c(b)(3) and § 2058, Congress phrased the standards differently, indicating that Congress intended the standards in § 2057c(b)(3) to apply instead of the standards laid out in § 2058.”
  • The Court also rejected the petitioners’ argument that the CPSC had impermissibly shifted from the statutory standard of protecting against harm from phthalates to protecting against mere risk. However, the Court held that the petitioners were correct in arguing that the CPSC had failed to evaluate the Final Rule under a “reasonable certainty” standard (i.e., that the Rule would provide a “reasonable certainty” that harm would be avoided) because the use of the term “reasonable” required a cost-benefit analysis and the CPSC had not evaluated the cost of its rule. “[T]he Commission was required to at least consider the costs, as well as the effect on utility and availability of products containing DINP to determine whether to continue the interim prohibition to ‘ensure a reasonable certainty of no harm.'” This same analysis did not apply to the phthalates that were not subject to the statutory “interim rule” (which only included DINP), because the statute provided for a ban on other phthalates under a “certainty” standard and not a “reasonable certainty” standard. Accordingly, the Court held that the CPSC applied the appropriate standard in its rulemaking regarding the prohibition of DIBP, DPENP, DHEXP, and DCHP.
  • Eschewing vacatur, the Court retained jurisdiction, and remanded to the CPSC to provide notice and public comment for the Final Rule’s rationale, and to consider cost in the extension of the statutory interim rule as to DINP.

• U.S. v. Diaz, 19-11112, appeal from N.D. Tex.
  • Smith, J. (Higginbotham, Smith, Dennis), criminal, guilty plea
  • Affirming the guilty plea conviction of the defendant for conspiring to acquire a firearm from a licensed firearms dealer by false or fictitious statement.
  • Defendant argued that her guilty plea could not be knowing and voluntary because “the district court did not inform her expressly that the government would have to prove that she knew she lied to a seller whom she knew to be a licensed dealer.” Reviewing for plain error, the Court held that the conviction under 18 U.S.C. § 922(a)(6) only required knowledge that the defendant was making a false statement, not knowledge that the person to whom the false statement was being made was a federally licensed firearms dealer.
  • The Court then held that the defendant’s additional argument that her prosecution was the result of improperly vindictive prosecutorial motive after she and her husband refused to continue cooperating in an investigation was a violation of her appeal waiver in her guilty plea, which only allowed for appeal in a limited set of issues.
  • The Court then held that the defendant’s ineffective assistance of counsel claim was not appropriate for direct appeal review; accordingly, the Court affirmed the conviction, dismissing the IAC claim without prejudice for post-conviction review.

• Sanchez v. Texas Brine Co., LLC, 20-30208, appeal from E.D. La.
  • Southwick, J. (Barksdale, Southwick, Graves), standing, settlement, insurance
  • Dismissing for lack of standing an appeal by defendant whose insurers were released in settlement agreement from suit arising from sinkhole disaster related to salt mining activities.
  • A landowner class had brought suit against the defendant operator of a salt-mining operation and its insurers for two sets of claims: claims for subsidence damages prior to the collapse of a salt dome and opening of a sinkhole in the vicinity of their properties, and claims for stigma damage after the sinkhole opened. The insurers involved “pre-2012” insurers whose policies covered the operation prior to the sinkhole opening and post-2012 insurers with the policies in effect at the time of and after the sinkhole. Prior to the first bellwether trial, the plaintiffs settled the pre-sinkhole subsidence damages and released the pre-2012 insurers. The defendant (the insured), which was not a party to the settlement and had no claims against it released, brought this appeal to challenge the release of the pre-2012 insurers.
  • The Court evaluated whether Texas Brine, the insured defendant, had standing to challenge the settlement agreement even though it was a non-party to the settlement, on the basis that the settlement stripped it of contribution or indemnity rights. “The settlement dismisses with prejudice all claims against the pre2012 Insurers and dismisses with prejudice all pre-2012 claims against Texas Brine. It does not, though, release Texas Brine from any claims for damages occurring on or after the appearance of the sinkhole on August 3, 2012. Pursuant to Section 10.3 of the settlement agreement, class members agree that if they settle any claims with Texas Brine, Texas Brine must expressly agree in writing not to seek indemnity or contribution from the pre-2012 Insurers, though Texas Brine may still pursue any bad-faith claims against the pre-2012 Insurers.”
  • The Court then held that Texas Brine did not have indemnity rights for post-August-2012-sinkhole claims against it, as to one of the insurers (Zurich) who had a policy in place from March 2011 through March 2012. While Texas Brine argued that the physical process that led to the August 2012 opening of the sinkhole had commenced prior to the expiration of Zurich’s 2011 policy, an “exposure” theory that the occurrence covered under the policy was exposure to the damaging forces; the Court observed, “Texas Brine urges us to eschew the concept that the relevant event for coverage under the policy is when the injury became obvious, a causation theory referred to as manifestation theory.” More to the point, the Court noted that even under an exposure theory, Zurich failed to show that the occurrence of the commencement of land deformation definitively occurred prior to March 1, 2012. Accordingly, the Court held that Texas Brine could not show that it had indemnity rights against a pre-2012 insurer such that it could have standing to challenge the release of the pre-2012 insurers.

Unpublished

• U.S. v. Walker, 19-10383, appeal from N.D. Tex.
  • per curiam (Higginbotham, Costa, Oldham), criminal, sentencing
  • Affirming 87-month prison sentence and forfeiture order, holding that the district court did not err in withholding a guidelines level reduction unless the defendant waived the right to contest forfeiture.

• Lusk v. Warner, 19-20755, appeal from S.D. Tex.
  • per curiam (Stewart, Graves, Higginson), prisoner suit
  • Dismissing as frivolous appeal from denial of Rule 60(b)(6) motion after dismissal of prisoner suit.

• Duke v. City of Irving, 20-10527, appeal from N.D. Tex.
  • per curiam (Jones, Costa, Wilson), prisoner suit
  • Dismissing as frivolous appeal from dismissal of prisoner suit.

• U.S. v. Maravilla, 20-40336, appeal from S.D. Tex.
  • per curiam (Graves, Willett, Duncan), criminal
  • Granting Anders motion to withdraw and dismissing appeal.

• Amanda P. v. Copperas Cove Independent School District, 20-50373, appeal from W.D. Tex.
  • per curiam (Owen, Graves, Ho), Individuals with Disabilities Education Act
  • Affirming district court’s judgment on the administrative record in favor of school district as to provision of special education services and a free appropriate public education to plaintiff’s child.