Jeffrey Bossert Clark*
Three cases with significant implications for environmental and/or
property-rights law are addressed below. Kumho Tire Co. v. Carmichael,
1999 WL 152455 (Mar. 23, 1999), marks the second case since Daubert
v. Merrell Dow Pharm., Inc., 509 U.S. 579, 589 (1993), addressing
the role of federal courts in policing the admission of expert testimony.
Despite a Justice Scalia concurrence calling for the gatekeeping
function in Daubert not to be abandoned, Kumho Tire will likely
make it easier for expert testimony of dubious validity to be admitted
in federal court. Philip Morris is a regulatory takings case that
is refreshing in that it gives preliminary injunctive relief to
business interests from an onerous system of state regulation that
would destroy trade secrets. Finally, Chrysler is the latest example
of a growing body of precedent in the D.C. Circuit refusing to allow
agencies to enforce interpretations of ambiguous regulations against
regulated parties because those parties lacked "fair notice"
of such interpretations. Chrysler is a good case to read in conjunction
with Roger Marzulla's testimony to Congress appearing elsewhere
in this issue.
Kumho Tire is a case that I had watched closely because complex
litigation, whether environmental or commercial, has come to depend
so heavily on expert testimony that practitioners must be readily
familiar with the standards governing its admission. This is particularly
true in a defense-oriented practice where plaintiffs looking for
corporations with deep pockets attempt to rustle up scientists and
other experts on the fringes of the relevant discipline to testify
in favor of the most implausible causation theories. Kumho Tire's
ripples will be felt in all types of federal litigation and perhaps
beyond (to the extent that the States receive Kumho into state law).
The facts of the case are relatively simple. Eight days after Daubert
was decided, a rear tire on a minivan driven by Patrick Carmichael
blew out. An accident followed, killing one of the passengers, and
injuring several others severely. A few months later, the Carmichaels
brought suit against Kumho Tire, which had manufactured the tire.
The plaintiffs'case on causation rested on the testimony of an expert
in "tire failure analysis," Dennis Carlson, Jr. See Kumho,
1999 WL 152455, at *4. Carlson conceded that the blown-out tire
had traveled farit was made in 1988 and had been installed
some time before the Carmichaels bought the used minivan in 1993.
He also conceded deep tread wearfrom 72-100% depending on
the part of the tire inspected. Moreover, he conceded that the tire
had two punctures that had been inadequately repaired. Nevertheless,
Carlson testified that the cause of the tire's failure was not any
of these problems, but rather a manufacturing defect. See id. at
Kumho Tire moved to exclude Carlson's testimony under Daubert.
After subjecting Carlson's analysis to the suggested four-part test
in Daubert 1) whether theory is testable, 2) whether theory has
been the subject of peer review, 3) the known or potential rate
of error of the theory; and 4) the degree the theory is accepted
in the scientific community)), the district court excluded Carlson's
testimony. On reconsideration, the district court conceded that
it had applied Daubert in too mechanical a fashion, but held that
even a flexible application of Daubert factors warranted the conclusion
that Carlson's testimony should be excluded.
On appeal, the Eleventh Circuit applied de novo review.(1) That
court read Daubert to apply solely to scientific evidence and therefore
to be inapplicable to this case where Carlson's testimony was merely
technical in nature, or relying on skill or experience-based observation.
As a result, it remanded to the district court to apply non-Daubert
consideration under Fed. R. Evid. 702 (whatever that might be).
The Supreme Court ruled that the district courts may apply Daubert
in such circumstances. After noting that the parties were in agreement
on this issue, Justice Breyer's opinion set forth the reasons for
the Court's ruling. First, Rule 702 did not distinguish textually
between scientific testimony and other types of expert testimony.
Second, the Court noted that Daubert's gatekeeping rationale is
not limited to scientific evidence. Third, applying different standards
to scientific and other types of expert testimony would prove an
unmanageable and unwise rule. Even pure science can depend on observation
and properly engineered equipment. Citing Judge Learned Hand's famous
article,(2) which was in part the subject of a past Federalist Society
symposium regarding junk science, Justice Breyer noted that because
even technical evidence can be foreign to a lay jury's experience,
technical and scientific evidence should be governed by the same
The Court then moved into the part of its decision that disturbed
Justices Scalia, O'Connor, and Thomascausing them to write
a concurrence. First the majority noted that some of the four Daubert
factors might not be applicable in some cases of non-scientific
expert testimony (or even some cases of scientific testimony). The
remainder of that section of the opinion reads like a strong endorsement
of district-court discretion, emphasizing the fact-specific nature
of the inquiry and that Daubert is intended to be flexible. Despite
a disclaimer that the Court did not intend to disparage Daubert's
gatekeeping function,(3) this case and Joiner are likely to be read
in the lower courts as endorsing most exercises of district-court
discretion. Indeed, one well-positioned commentator has already
flagged this reading of Joiner.(4) "Joiner is a paean to anything
goes." In an attempt to stave off this effect, Justice Scalia
wrote in concurrence that the discretion discussed in Kumho Tire(5)
"is discretion to choose among reasonable means of excluding
expertise that is fausse and science that is junky." (6) "[I]t
is not discretion to perform the function inadequately." (7)
But whether Justice Scalia will be successful or not will likely
depend on the intellectual honesty of the judges who sit on the
inferior federal courts.
Finally, the Court applied the legal rules it formulated to the
facts in Kumho Tire and concluded that the district court had not
abused its discretion. "[T]he court ultimately based its decision
upon Carlson's failure to satisfy either Daubert's factors or any
other set of reasonable reliability criteria." (8) This caused
Justice Stevens to concur in part and dissent in part, arguing that
the application of the standards to the facts was beyond the scope
of the Supreme Court's grant of certiorari.
Growing out of the furor in the States of regulating or penalizing
tobacco companies in new and interesting ways, the State of Massachusetts
devised a statute that would have the effect of destroying tobacco-company
trade secrets if it were complied with. Federal law requires that
tobacco companies provide the Secretary of Health and Human Services
with a list of ingredients in their products. This information is
not provided directly, however. Rather, the manufacturers submit
their ingredient information on a confidential, brand-by-brand basis
to a kind of legal clearing house. That clearing house then satisfies
the disclosure requirements by providing a list of all ingredients,
on a non-brand-by-brand basis, to the Secretary. Unhappy with this
arrangement ("[i]f you smoke Merits you want to know what is
in Merits, and not what may be in every brand of cigarettes on the
market").(9) Massachusetts passed a law requiring brand-by-brand
disclosure and providing no protection for trade secrets. The manufacturers
sued on preemption and Takings Clause grounds.
The First Circuit rejected the preemption challenge,(10) but endorsed
the industry's takings challenge in the context of a preliminary
injunction. That is an unusual result, not only because regulatory
takings cases are difficult to win in any court, but because the
presence of such constitutional issues will often induce a court
to rule in the regulated party's favor on a close preemption question.
After the industry lost its preemption claim, it must have been
very surprised to win on the takings issue. Perhaps not, however
Massachusetts seems to have done a very poor job of arguing
the takings issue. Massachusetts presented only two defenses: 1)
the tobacco companies did not have reasonable, investment-backed
expectations in the nondisclosure of ingredient information, and
2) the Massachusetts statute did not have an element of legal compulsion.
The most significant argument that the State seemed to overlook
was that the Takings Clause is generally not enforceable by an injunction
and that if a compensation remedy is available, it must be exhausted
before any compensation or injunction is ordered. These two limitations
are collectively known as the takings ripeness doctrine.(11) The
Ninth Circuit would not have gone as easy on the plaintiffs, but
would have raised the ripeness issue sua sponte. From the Philip
Morris II opinion it is unclear whether ripeness came up, but if
it had, the only plausible basis for the First Circuit not to have
addressed it seems to be based on a distinction between preliminary
and permanent injunctive reliefperhaps the First Circuit believes
that preliminary injunctive relief does not have to comport with
the takings ripeness doctrine.
Turning to the first question actually presented, the First Circuit
ruled that the industry had adequate investment-backed expectations.
It noted the lengths to which some manufacturers, such as Philip
Morris with regard to Marlboro, went to protect its brands. Massachusetts
relied on Ruckelshaus v. Monsanto Co. 467 US. 986 (1984), which
can be read to reject a takings claim for trade secrets under the
analogous regulatory scheme of the Federal Insecticide Fungicide
and Rodenticide Act ("FIFRA"). Relying on the distinction
set forth in Nollan v. California Coastal Comm'n 483 U.S. 825, 833-34
n.2 (1987) (Scalia, J.), the First Circuit rejected the argument
from Monsanto. According to the First Circuit, the key difference
between this case and Monsanto is that those regulated under FIFRA
received significant benefits under that regulatory scheme, whereas
the tobacco industry received no offsetting benefits under the Massachusetts
law. Massachusetts attempted to reply to that argument by noting
that it was giving the tobacco companies the ability to do business
in the State. Judge Selya easily rejected this argument: "This
construct will not wash. A Monsanto-type exchange requires that
the government grant a benefit of real value to compensate a property
owner for a taking . . . . Permitting a company to continue conducting
business within a state, while a benefit of sorts, lacks sufficient
substance to create a Monsanto-type exchange." (12) Massachusetts'
second defense was really just a repackaged version of its argument
that it endowed the tobacco companies with a significant benefit
by allowing them to do business therebecause ingredient disclosure
was only necessary if the relevant tobacco company wanted to do
business in that state, there was no legal compulsion involved and
the tobacco company should be held to the implicit bargain. Judge
Selya also quickly dispensed with this argument. "[The] statute
forces a party to make a Hobson's choice: either submit ingredient
information containing valuable trade secrets without adequate safeguards
or cease doing business in an important market. That is the essence
of legal compulsion." (13)
Philip Morris II is a case to watch as it develops further
particularly with an eye toward whether the First Circuit upholds
a grant of a permanent injunction, assuming the case does not settle
and the district court enters such an injunction. It is likely not
a cause for too great a celebration, however, because the ripeness
issues that tend to block such takings cases were not addressed.
Since the mid-eighties, the D.C. Circuit has been the pioneer in
developing an administrative law doctrine based on the Due Process
Clause that has important implications for environmental law and
property rights litigation. This doctrine is known as the "fair
warning" or "fair notice" doctrine. Basically, it
prohibits the enforcement of a legal rule, usually a regulation
or an interpretation thereof, against a regulated party that did
not have fair notice of that regulation or the relevant interpretation.
This doctrine must be distinguished from the doctrines of deference
to administrative agencies interpreting statutes that they have
been delegated the authority to interpret (Chevron) and the greater
deference available to agency interpretations of its own regulations.
General Electric Co. v. EPA, 53 F.3d 1324 (D.C. Cir. 1995), is
the best of this line of cases at explaining the interrelationship
between the fair warning doctrine and the doctrines of deference.
If an agency advances a new interpretation of a regulation for the
first time in an enforcement action, for instance, the D.C. Circuit
will refuse to apply that interpretation in that case, with the
result that the regulated party will prevail in the enforcement
action in most cases. On the other hand, this does not mean that
the D.C. Circuit will not defer to that new interpretation. Indeed,
given the strength of the deference afforded to an agency's interpretation
of its own regulations particularly, deference will usually be forthcoming.
Such deference will simply not be applied in the very enforcement
action in which it is announced. One exception to this rule has
been held to exist in General Electricwhere a new agency interpretation
is simply the most natural reading of the regulation or statute
at issue, then it can be applied even in the enforcement action
in which it is announced. This is a small exception, however an
agency that is contending for the straightforward textual reading
of a statute or regulation has no real need to invoke a claim to
United States v. Chrysler Corp., 158 F.3d 1350 (D.C. Cir. 1998)
is the most recent example in the D.C. Circuit's fair warning jurisprudence.
In Chrysler, the National Highway Traffic Safety Administration
("NHTSA") promulgated a vehicle safety standard providing
for the recall of vehicles whose seat belt safety anchorages could
not withstand particular forces. In order to determine compliance
with the safety standard, test procedures were set forth which required
the use of a "pelvic body block", an L-shaped metal block
that represents a human pelvis. The safety standard, did not specify
the placement of this block during testing, however. Chrysler reported
compliance to NHTSA for certain of its vehicles by placing the body
block against the seat back. Later, NHTSA contracted out compliance
testing to a private laboratory, which placed the body block away
from the rear seat to save money. (Placing the body block at the
back increased the likelihood that the seat belt webbing and buckles
would breakthus, the contractor avoided having to pay for
replacement wire rope, which the safety standard permitted to be
used if such breakages occurred.) When testing was done on two Chrysler
models with the body block away from the seat back, they failed.
As a result, NHTSA administratively ordered their recall.
When Chrysler refused to comply with NHTSA's order, NHTSA filed
suit in federal district court seeking not only a recall, but penalties.
Borrowing an interpretation issued in a Federal Register notice
regarding a different, but related safety standard, the district
court ruled that the body block could validly have been positioned
anywhere. In light of confusing statements by NHTSA made at different
times, however, and the fair warning doctrine, the district court
refused to hold Chrysler liable for penalties. It reached a different
conclusion with regard to the recall remedy, however, and ordered
Chrysler to recall the models that NHTSA contended were noncompliant.
Although the district court did not do a very good of explaining
the reason for the distinction, the best basis for such an argument
would have noted that a recall can be conceptualized as remedial
rather than punitive. If a new interpretation can be applied henceforth
from the time it is announced, then a recall, if it is truly remedial
in nature, might seem to pass muster under the fair warning doctrine
because it is designed only to ameliorate future harm.
Chrysler appealed. The D.C. Circuit emphasized at the outset that
NHTSA had two types of recall authority: 1) recalls for safety defects,
and 2) recalls for noncompliance with a safety standard. NHTSA had
claimed in its district court action only that Chrysler's models
should be recalled because they were not in compliance with a safety
standard. In this circumstance, the D.C. Circuit ruled that the
fair warning doctrine applied. Some of its language suggests that
it may even have found a safety-defect recall to be subject to the
fair warning doctrine, however. "[A] recall, which entails
the expenditure of significant amounts of money, deprives Chrysler
of property no less than a fine. We have little doubt that a recall
is a sufficiently grave sanction14 such that the duty to provide
notice is triggered." Chrysler, 158 F.3d at 1354-55. On the
facts, particularly the Federal Register notice on which NHTSA primarily
relied, the D.C. Circuit held that fair notice was not given to
Chrysler. "Chrysler might have satisfied NHTSA with the exercise
of extraordinary intuition or with the aid of a psychic, but these
possibilities are more than the law requires." Id. at 1357.
Like the single strand of dangling thread that, when pulled, eventually
causes a whole garment to unravel, these fair warning cases would
seem to have the potential to destabilize a number of doctrines
in administrative law. First, if the fair warning doctrine is correct,
then it basically means that regulations or interpretations in violation
of the doctrine cannot be applied retroactively. If that is right,
then retroactivity doctrine is threatened. Administrative regulations
are permitted to be retroactive if Congress has clearly authorized
as much. See Bowen v. Georgetown Univ. Hosp., 488 U.S. 204 (1988).
But if applying regulations without fair warning is unconstitutional,
then Congress cannot authorize such regulations simply by legislating
in clear and unambiguous terms. Going further, the fair warning
doctrine also raises the issue of whether Congress itself can make
law retroactively. If an agency cannot make retroactive law by interpreting
a regulation in an enforcement proceeding without violating the
Due Process Clause, why does retroactive rulemaking or legislation
not similarly violate the Due Process Clause?
Second, the fair warning doctrine undermines the notion that an
agency can make new law in a non-rulemaking (i.e., adjudicatory)
procedural mode. The National Labor Relations Board, for instance,
formulates new substantive rules not through notice-and-comment
promulgation of regulations, but simply through the announcement
of new rules in the very cases where they are first applied. How
can this be legitimate when agency enforcement actions brought for
the first time in federal court cannot be based on new rule-based
proceedings? Of course, the whole underpinning of the doctrine giving
an agency its choice of procedural mode need not be destabilized
because it would be possible to allow an agency to adopt new rules
in an adjudication, but simply not to apply them for the first time
in that very adjudication. Most of the utility of proceeding by
adjudication would likely be lost to an agency that used such a
procedural mode, however.
The fair warning doctrine is a highly significant development that
already has great applicability, and has even greater potential
to rationalize administrative law.
* Associate, Kirkland & Ellis (Washington, D.C.).
- In General Electric Co. v. Joiner, 522 U.S.
136 (1997), the Supreme Court reversed the Eleventh Circuit's
decision in another case to apply de novo review to Daubert issues.
The Supreme Court held that the traditional abuse-of-discretion
standard governing the admission or exclusion of evidence was
appropriate in such cases.
- Learned Hand, Historical and Practical Considerations
Regarding Expert Testimony, 15 Harv. L. Rev. 40, 54 (1901).
- Kumho Tire, 1999 WL 1542455, at * 10 (1999)
(referring to "broad latitude").
- Michael H. Gottesman, From Barefoot to Daubert
to Joiner: Triple Play or Double Error?. 40 Ariz. L. Rev. 753
(1998) Georgetown Professor Gottesman argued Daubert on behalf
of the plaintiffs.
- Id., at 775.
- Kumho Tire, at * 15 (1999).
- Id., at * 14 (1999).
- Philip Morris, Inc. v. Harshbarger, 159 F.3d
690, 673 (1st Cir. 1998) [Philip Morris II] (quoting a Massachusetts
- Philip Morris, Inc. v. Harschbarger, 122 F.3d
58 (1st. Cir. 1997) [Philip Morris I].
- See Williamson County
Regional Planning Comm'n v. Hamilton Bank of Johnson City, 473
U.S. 172 (1985).
- Philip Morris II, 159
F .3d at 676-77.
- Id., at 679.