MAYER, BROWN & PLATT
SUPREME COURT DOCKET REPORT
1999 Term, Number 18 / June 26 and June 29, 2000
On June 26 and June 29, 2000, the Supreme
Court agreed to decide a total of eleven cases (four of which have been
consolidated into two cases). Five of the post-consolidation cases are of
potential interest to the business community. Amicus briefs in support of the
petitioner in the Buckman case described first below are due on Monday,
August 14, 2000, and amicus briefs in support of the respondent are due on
Wednesday, September 13, 2000. Amicus briefs in support of the petitioners in
the other cases are due on Thursday, August 10, 2000, and amicus briefs in
support of the respondents are due on Monday, September 11, 2000. Any questions
about these cases should be directed to Donald Falk (202-263-3245) or Eileen
Penner (202-263-3242) in our Washington office.
1. Preemption — "Fraud on
the Agency" Claims — Medical Device Amendments. The Medical Device Amendments of 1976 (MDA), 21
U.S.C. § 360c et seq., expressly preempt any state requirements relating
to the safety or effectiveness of a medical device that are "different from, or
in addition to, any requirement applicable * * * to the device" under federal
law. 21 U.S.C. § 360k(a). The Supreme Court granted certiorari in Buckman
Co. v. Plaintiffs’ Legal Committee, No. 98-1768, to decide whether
federal law preempts state-law tort claims alleging fraud on the Food and Drug
Administration (FDA) during the regulatory process for obtaining clearance to
market certain medical devices.
The MDA categorizes medical devices into
three groups, based on the degree of regulation it concludes is necessary to
provide reasonable assurance of safety and effectiveness. 21 U.S.C. § 360c(a).
The FDA requires Class III devices, or those that present "a potential
unreasonable risk of illness or injury" (21 U.S.C. § 360c(a)(1)(C)), to undergo
a premarket approval process. 21 U.S.C. §§ 360c(a)(1)(C), 360e(d). This approval
process is not required for Class III devices that were on the market when the
MDA was enacted. 21 U.S.C. § 360e(b)(1)(A). To allow competition with these
"grandfathered" devices, manufacturers may also bypass the premarket approval
process, so long as they can show (through a premarket notification process)
that their devices are "substantially equivalent" to the "grandfathered"
devices. 21 U.S.C. § 360e(b)(1)(B). That procedure is often called the "Section
510(k) process," referring to the MDA section codified at 21 U.S.C.
Petitioner The Buckman Company ("Buckman"),
is a regulatory consultant for medical device manufacturers, helping them to
navigate FDA procedures. Buckman, on behalf of a manufacturer, sought Section
510(k) clearance for an orthopedic bone screw device. After twice unsuccessfully
submitting the device for clearance as a pedicle screw for use in spinal
surgery, Buckman, upon the FDA’s suggestion, separated the screw into its
component parts and sought 510(k) clearance for each part. The FDA determined
that the parts were substantially equivalent to pre-MDA devices, and granted the
After the bone screws had been on the
market, doctors regularly engaged in perfectly legal off-label use of the screws
in spinal surgery. After a national television program ran a story on alleged
harm caused by use of the screws as spinal fixation devices, thousands of
plaintiffs filed lawsuits against all conceivable defendants, including Buckman.
The claims were consolidated in a multidistrict litigation. The only claim
against Buckman was a state tort titled "fraud on the agency," alleging that
Buckman had deceived the FDA as to the "intended use" of the device. In an
unpublished opinion, the district court granted summary judgment for Buckman,
reasoning that the claim was impliedly preempted because the FDA has exclusive
authority to enforce the MDA and because the claim was inconsistent with
Congress’s decision not to include a private right of action under federal
A divided panel of the Third Circuit
F.3d 817. The majority concluded that state-law "fraud on the agency" claims
are neither expressly nor impliedly preempted by the MDA. In the majority’s
view, the MDA does not expressly preempt "fraud on the FDA" claims because the
Section 510(k) process does not establish any federal "requirement" that
is "applicable to the device." Id. at 823 (citing Medtronic v.
Lohr, 518 U.S. 470
(1996). In equally sweeping fashion, the majority — adopting the position of
a distinct minority of courts of appeals — broadly declared that plaintiffs’
common law claims do not impose any state "requirements" "with respect to" the
bone screws. The Third Circuit also rejected implied preemption arguments,
seeing no inconsistency between the exclusive authority of the FDA to enforce
the MDA and plaintiffs’ common-law claims.
Judge Cowen dissented. Unlike the majority,
he was greatly troubled by permitting judges and juries hearing "fraud on the
FDA" claims "to displace the FDA’s judgment about whether a manufacturer has
engaged in improper marketing." 159 F.3d at 833. Judge Cowen observed that
"[t]he majority endorses a claim of ‘fraud on the FDA’ under circumstances that
will expose manufacturers to fraud liability for seeking desirable innovations
in a product’s use, distort the penalty scheme established by the [Food, Drug
and Cosmetic Act] and its regulations, and generate substantial liability when
manufacturers respond to doctors’ widely accepted practice of purchasing medical
products for off-label uses." 159 F.3d at 829.
On October 4, 1999, the Supreme Court
invited the Solicitor General to file a brief expressing the views of the United
States. The Solicitor General’s brief recommended that review be granted and
argued that "fraud on the agency" claims are impliedly preempted because the
common-law duties concern the duties of persons in connection with their
submission of applications to a federal agency for benefits or regulatory
approval, an area involving "uniquely federal interests" that "warran[t] the
displacement of state law." Boyle v. United Technologies Corp., 487
U.S. 500, 504-505 (1988).
This case is of obvious interest to
manufacturers of medical devices, but also is of broader interest to the
business community. In recent years, plaintiffs increasingly have sought to
avoid express preemption by resorting to "fraud on the agency" arguments under a
variety of federal statutes (including the Boat Safety Act and the Federal
Insecticide, Fungicide, and Rodenticide Act). If the Third Circuit is affirmed,
the Supreme Court’s decision could allow state-law juries to impose common-law
liability and punitive damages on the basis of communications made to federal
agencies during the federal regulatory process. Mayer, Brown & Platt
represents the petitioner.
2. Choice of Law —
Res Judicata Effect of Judgment of Federal Court Sitting in Diversity. The
Supreme Court granted certiorari in Semtek International Inc. v. Lockheed
Martin Corp., No. 99-1551, to determine the res judicata effect of the
judgment of a federal court sitting in diversity.
Semtek International Inc. brought contract
and tort claims against Lockheed Martin Corp. in state court in California.
After Lockheed Martin removed the case to federal court based on diversity, the
district court dismissed the case as time-barred by the two-year statute of
limitations applicable under California law. Semtek then refiled in Maryland
state court because Maryland — which is the site of Lockheed Martin’s corporate
headquarters — would apply a three-year statute of limitations that had not
expired. The Maryland trial court dismissed the action as res
The Maryland Court of Special Appeals
affirmed. 736 A.2d
1104 (1999). The court first held that federal law governs the res judicata
effect of an action that has been dismissed by a federal court. Because the
dismissal of an action as untimely "operates as an adjudication upon the merits"
unless the "order for dismissal otherwise specifies," Fed. R. Civ. P. 41(b) —
and the California dismissal order explicitly "dismissed" the action "in its
entirety on the merits," 736 A.2d at 1106 (quoting order) — the Maryland court
held that the California dismissal barred further litigation of the dispute.
Id. at 1107-1108.
In looking to federal law to determine the
res judicata effect of a federal court judgment in a diversity case, the
Maryland Court of Special Appeals relied on decisions from the Fourth and Fifth
Circuits. 736 A.2d at 1108 (citing Brooks v. Arlington Hospital
Ass’n, 850 F.2d 191 (4th Cir. 1988), and Agrilectric Power Partners,
Ltd. v. General Electric Co., 20 F.3d
663 (5th Cir. 1994)). Semtek, on the other hand, relies on an 1874 Supreme
Court decision — assertedly followed by the Eighth, Ninth, and D.C. Circuits —
holding that the res judicata effect of the judgment of a federal court sitting
in diversity "is such as would belong to judgments of the State courts rendered
under similar circumstances." Dupasseur v. Rochereau, 88 U.S. (21
Wall.) 130 (1874). Semtek also contends that, even under a federal standard,
dismissals on limitations grounds should not have res judicata effect
notwithstanding Rule 41(b).
This case is of potential importance to all
businesses that may be subject to litigation that could be brought in several
different States. Many businesses have a strong interest in ensuring that
uniform and certain principles govern the finality of judgments rendered by
federal courts sitting in diversity. Other businesses may wish to promote the
flexibility resulting from the use of state law to determine the finality of
Intellectual Property — Trade Dress Protection for Subject Matter of
Expired Utility Patents. The Supreme Court granted certiorari in TrafFix
Devices, Inc. v. Marketing Displays, Inc., No. 99-1571, to decide
whether federal trade dress protection extends to non-functional aspects of a
product configuration that had been covered by an expired utility patent.
Utility patents confer on the inventor the exclusive right to make or sell the
patented product for a limited time (currently 20 years), and generally protect
functional advances in a science or art that result in a new or improved product
or process. By contrast, trade dress protection under Section 43(a) of the
Lanham Act, 25 U.S.C. § 1125(a), is not time-limited, but extends only to
non-functional elements of a product’s appearance that identify the product with
a particular source or vendor.
Marketing Devices, Inc. (MDI) manufactures
a wind-resistant traffic sign. After MDI’s utility patent on the sign’s
dual-spring base expired in 1989, TrafFix Devices, Inc. copied MDI’s design and
sold the copied signs. MDI sued TrafFix in federal district court, asserting
several federal and state claims. In particular, MDI contended that TrafFix had
infringed MDI’s trade dress by copying the precise configuration of the MDI
springs, including the non-functional aspects of that configuration. The
district court granted summary judgment to TrafFix, holding that the dual-spring
design had been disclosed in the patent as functional, and therefore could not
be protectable trade dress.
The Sixth Circuit reversed. 200
F.3d 929 (1999). The court of appeals held that the disclosure of the
dual-spring configuration in the utility patent did not foreclose trade dress
protection, because "the appearance" of the configuration that would be
protected as trade dress could "be separated" from the "functional design"
protected by the patent. Id. at 939. The Sixth Circuit disagreed with a
Tenth Circuit decision that flatly precluded trade dress protection for any
"product configuration" that "is a significant inventive component of an
invention covered by a utility patent." Ibid. (quoting Vornado Air
Circulation Systems, Inc. v. Duracraft Corp., 58 F.3d 1498 (1995)).
Rather, in the Sixth Circuit’s view, "[s]o long as it is possible to protect the
appearance without protecting the design, a per se rule is not necessary."
As the Sixth Circuit observed, the Federal,
Fifth, and Seventh Circuits also permit trade dress protection for some product
configurations disclosed in utility patents. See 200 F.3d at 939 (citing
Midwest Industries, Inc. v. Karavan Trailers, Inc., 175
F.3d 1356 (Fed. Cir. 1999); Sunbeam Products, Inc. v. West Bend
Co., 123 F.3d
246 (5th Cir. 1997); Thomas & Betts Corp. v. Panduit
F.3d 277 (7th Cir. 1998)). Those decisions are in tension with several
Supreme Court decisions rejecting state-law protection for product
designs that had been disclosed in utility patents. See, e.g., Bonito
Boats, Inc. v. Thunder Craft Boats, Inc., 489
U.S. 141 (1989).
This case is of substantial importance to a
wide variety of businesses holding utility patents that disclose design
elements, as well as businesses that may wish to use designs disclosed in
expired patents. In determining the relationship between trade dress protection
and the patent system, the Court will determine the extent to which the issuance
of a patent may preclude other types of federal intellectual property protection
for a product.
4. First Amendment —
Media Law — Liability for Publishing Unlawfully Intercepted Communications.
The Supreme Court granted certiorari in Bartnicki v. Vopper,
No. 99-1687, and United States v. Vopper, No. 99-1728, to decide
the constitutionality of federal and Pennsylvania wiretapping statutes that
impose civil liability on individuals who use or disclose information that they
have reason to know was obtained by others through an unlawful interception of a
wire, oral, or electronic communication.
Gloria Bartnicki, the chief negotiator for
a Pennsylvania teachers union, and Anthony Kane, the union’s president, held a
confidential telephone conversation in which they discussed the status of the
union’s ongoing contract negotiations with a local school board. Bartnicki used
a cellular telephone. An unknown person illegally intercepted the conversation,
recorded it, and anonymously delivered a copy of the recording to Jack Yocum,
the president of a local taxpayers’ association formed for the sake of opposing
the union’s bargaining demands. Yocum passed the recording to Frederick Vopper,
a radio talk show host. Vopper played the tape repeatedly on his program, which
was broadcast by two local radio stations.
Bartnicki and Kane sued Vopper, Yocum and
the radio stations in federal court under Title III of the Omnibus Crime Control
and Safe Streets Act of 1986, as amended, 18 U.S.C. § 2511(1)(c) and (d), and
the Pennsylvania Wiretapping and Electronic Surveillance Control Act, 18 Pa.
Cons. Stat. § 5703. Those statutes subject to civil liability any person who
intentionally discloses or uses the contents of communications that they have
reason to know were obtained through the illegal interception of wire, oral or
electronic communications. The defendants moved for summary judgment on the
ground that the statutes violated the First Amendment. The district court denied
summary judgment but certified the constitutional questions for an interlocutory
appeal. The Third Circuit accepted the appeal, and the United States intervened
to defend the constitutionality of the federal statute.
The Third Circuit reversed. 200
F.3d 109 (1999). Applying intermediate scrutiny, the court of appeals
concluded that the provisions were not narrowly tailored to accomplish the
government’s interest in preventing illegal wiretapping. "The connection between
prohibiting third parties from using or disclosing intercepted material and
preventing the initial interception is indirect at best." Id. at 125-126.
Moreover, the court found, the government’s interest was adequately served by
the provisions that directly punish "the offender, i.e., the individual
who intercepted the wire communication and who used or disclosed it." Id.
at 126. The court also observed that the provisions, which prohibit an
individual from disclosing information she or he has "reason" to know was
obtained unlawfully, likely would deter the media from publishing any
communications of unclear origin, including communications that were not, in
fact, obtained illegally. Id. at 127. District Judge Louis Pollak
(sitting by designation) dissented, finding that the privacy values served by
the statutes were sufficient to sustain them under intermediate
The Third Circuit expressly declined to
follow a decision of the D.C. Circuit upholding the constitutionality of the
same provision of the federal wiretapping statute. See 200 F.3d at 128-129
(citing Boehner v. McDermott, 191
F.3d 163 (D.C. Cir. 1999). The Third Circuit distinguished Boehner on
the ground that, in that case, the defendant "was more than an innocent
conduit": he "knew who intercepted the conversation," accepted the tape from
them and even "promised the interceptors immunity for their illegal conduct."
Id. at 128 (citing Boehner, 191 F.3d at 475-476). In contrast, the
Vopper defendants "ha[d] not been shown to have ‘entered into’ any
transaction with the interceptors." Id. at 129.
Media companies have a significant interest
in the outcome of this case. Cellular telephone use has rapidly increased in
recent years. In contrast to traditional land-line telephone communications,
cellular telephone communications are vulnerable to interception by parties who
possess relatively inexpensive and technologically unsophisticated surveillance
devices. Increasingly, therefore, media companies may receive from anonymous
sources information that was illegally obtained. Exposure to civil liability for
publishing such information (or, as the statutes provide, "using" leads provided
by illegally obtained information to pursue legal sources) not only will
penalize media organizations financially, but may curtail their journalistic
5. Farm Credit
System — Federally Chartered Instrumentality — Immunity from State Income
Tax. The Supreme Court granted certiorari in Missouri Director of
Revenue v. CoBank ACB, No. 99-1792, to decide whether federal Farm
Credit System member institutions are exempt from state income tax. The
farmer-owned lending cooperatives that belong to the Farm Credit System are
"federally chartered instrumentalities of the United States," 12 U.S.C. §§ 2071,
2141, and are explicitly exempt from state taxation of their "notes, debentures,
and other obligations." Id. § 2134. The current Section 2134 reflects
1985 amendments to the Farm Credit Act that deleted a provision expressly
exempting member institutions from state income tax.
CoBank ACB, a Farm Credit System member
institution, sought a refund of Missouri state income taxes paid by its
predecessor (and System member), the National Bank for Cooperatives. The
Missouri Director of Revenue rejected the refund request, and the state
Administrative Hearing Commission denied relief.
The Missouri Supreme Court reversed. 10
S.W.3d 142 (2000). The court held that federal instrumentalities are immune
from state taxation unless Congress has expressly waived that immunity. The
court reasoned that the amendment eliminating the immunity provision of the Farm
Credit Act was not an express waiver. Rather, any "[c]ongressional consent" to
state income taxation discernible in the amendment was "not express, but merely
implied," and therefore did not waive immunity. Id. at 143.
The decision of the Missouri Supreme Court
appears to conflict with a decision of the New Mexico Court of Appeals
permitting state income taxation under a parallel immunity provision governing
federal Production Credit Associations. See 12 U.S.C. § 2077. See Production
Credit Ass’n v. Taxation & Revenue Dep’t, No. 20078, 2000
WL 300857 (N.M. App. Feb. 1, 2000), review denied, 997 P.2d 820 (N.M. 2000).
In supporting certiorari, an amicus brief submitted by 11 state attorneys
general observed that the Court had previously granted certiorari on the
Production Credit Association immunity issue, but had decided the case on other
grounds. See Arkansas v. Farm Credit Services, 519
U.S. 1085 (1997).
This case is of obvious importance to
financial institutions that compete with members of the Farm Credit System in
the agricultural lending sector. The case has more general significance for
lenders and other businesses that are, or that compete with, federal
* * *
Finally, in Mitchell v. Helms, a
case handled by Mayer, Brown & Platt, the Court held on June 28, 2000 that a
neutral program of lending secular educational materials to private schools
(including parochial schools) does not violate the Establishment Clause. The win
brings the Firm's record to 2-1 in cases it argued this Term.
The Court will be in recess until Monday,
October 2, 2000.
This Mayer, Brown, Rowe & Maw Supreme Court Docket Report provides information and
comments on legal issues and developments of interest to our clients and
friends. The foregoing is not a comprehensive treatment of the subject matter
covered and is not intended to provide legal advice. Readers should seek
specific legal advice before taking any action with respect to the matters