Legal News for Fri 7/5 - Boehringer Ingelhim Fails to Stop Drug Price Plan, FTC Faces Challenges on Noncompete Ban, Accusations Against Mark Meadows Nonprofit

Minimum Competence

This Day in Legal History: Black Sox Scandal Jury Selection

On July 5, 1921, jury selection commenced for one of the most infamous trials in baseball history: the Chicago "Black Sox" trial. Eight players from the Chicago White Sox, including the legendary "Shoeless Joe" Jackson, stood accused of conspiring to throw the 1919 World Series against the Cincinnati Reds. The scandal shocked the nation, casting a shadow over America's beloved pastime and questioning the integrity of the sport.

The players were charged with accepting bribes from gamblers in exchange for intentionally losing the series. The trial attracted immense public and media attention, with fans eagerly following every development. Despite compelling evidence and confessions from some players, the jury ultimately acquitted all eight defendants.

However, the acquittal did not mean exoneration in the eyes of baseball's governing bodies. Newly appointed Baseball Commissioner Kenesaw Mountain Landis took decisive action to restore the sport's integrity. On August 3, 1921, Landis issued a lifetime ban on all eight players involved in the scandal, regardless of the trial's outcome.

The "Black Sox" trial remains a significant moment in legal and sports history, illustrating the complex interplay between law, ethics, and professional sports. The trial's legacy endures, serving as a cautionary tale about the dangers of corruption and the importance of maintaining trust in public institutions.

A federal judge rejected Boehringer Ingelheim’s attempt to block the Biden administration's Medicare Drug Price Negotiation Program, which aims to reduce prescription drug costs. Chief Judge Michael P. Shea ruled against all of Boehringer Ingelheim's claims, stating the program is constitutional. The case centered on whether the Inflation Reduction Act’s provision forcing drug companies to agree to a maximum fair price for selected drugs violates constitutional rights.

Boehringer Ingelheim argued that the program infringed on the First Amendment (compelled speech), Fifth Amendment (due process and takings clauses), Eighth Amendment (excessive fines), the Administrative Procedure Act, and the unconstitutional conditions doctrine. However, Judge Shea determined that participation in Medicare and Medicaid is voluntary, even if economically incentivized, and the federal government can place conditions on participation in its programs. He clarified that Boehringer Ingelheim was not deprived of property interest since it had the option to withdraw before any data submission was required.

Regarding the First Amendment claim, Shea found no support in precedent, likening required communications to standard price regulations. On the Eighth Amendment claim, he noted that Boehringer Ingelheim could not demonstrate a likelihood of success as the argument was novel and lacked precedent.

The case, Boehringer Ingelheim Pharmaceuticals, Inc. v. United States Department of Health and Human Services, highlights ongoing legal challenges to the Biden administration's health plan, specifically targeting the reduction of high drug prices under the Inflation Reduction Act. The key issue here is the First Amendment argument, which was a central but unsupported claim in this case. Judge Shea's ruling emphasized that required communications for regulatory compliance do not constitute compelled speech under the First Amendment.

Judge Tosses Boehringer Bid to Block Biden Drug Price Plan

The Federal Trade Commission (FTC) faced a significant legal challenge when a Texas federal judge halted its rule banning noncompete clauses across the U.S. Judge Ada Brown sided with the U.S. Chamber of Commerce and a Texas tax firm, arguing that the FTC exceeded its authority. This decision, following recent Supreme Court rulings limiting agency powers, underscores the difficulties the FTC may encounter in implementing new regulations.

The FTC's noncompete rule, which was to take effect on September 4, would have impacted around 30 million U.S. workers by prohibiting noncompete clauses that restrict job mobility within the same industry. FTC Chair Lina Khan has been advocating for broader antitrust regulation, including labor markets, but faced opposition from major business groups.

This rule, adopted in April with a narrow 3-2 vote, was a rare move for the FTC, which has traditionally addressed competition issues through legal actions rather than broad rulemaking. Despite the FTC's assertion that it has the authority to issue such a rule, Brown ruled that the FTC Act of 1914 does not permit the agency to create substantive rules on unfair competition.

Legal experts noted that the FTC's limited history with rulemaking poses challenges for the agency, especially in light of recent Supreme Court decisions that reduce judicial deference to regulatory interpretations. This context complicates the FTC's efforts to enforce the noncompete ban, potentially leading to further legal battles.

Brown’s ruling referenced the recent Supreme Court decision in Loper Bright Enterprises v. Raimondo, which overturned the Chevron deference principle, further complicating regulatory actions by the FTC. While this particular decision was limited to the plaintiffs in the case, it sets a precedent that could hinder future FTC regulations.

FTC Noncompete Ban Freeze Signals Tough Legal Road for Agency

US judge partially blocks FTC ban on worker noncompete agreements | Reuters

A liberal group, Accountable.US, filed a complaint with the Washington DC Attorney General alleging that the Conservative Partnership Institute (CPI), a nonprofit organization employing former White House Chief-of-Staff Mark Meadows, improperly funneled money to cover Meadows' legal bills related to investigations into efforts to overturn the 2020 election. The complaint states that CPI gave a $1.2 million grant to Personnel Policy Operations (PPO), another nonprofit, which then transferred $1.1 million to the Constitutional Rights Defense Fund to fund legal defenses for Trump allies, including Meadows.

Accountable.US argues that CPI's actions violate its nonprofit status, which requires operations to benefit the public, not partisan operatives. The complaint calls for the dissolution of CPI and PPO, claiming they serve private interests rather than public purposes. The DC Attorney General has the authority to dissolve nonprofits that fail to operate in the public interest.

CPI, a key organization in conservative circles preparing for a potential second Trump administration, paid Meadows a substantial salary in 2022. The complaint underscores that nonprofits must not engage in political campaigning or private benefit operations to maintain their tax-exempt status. Additionally, another liberal group, Campaign for Accountability, previously filed a similar complaint with the IRS against CPI.

The takeaway here is the requirement for nonprofits to operate for public benefit to retain tax-exempt status. This case raises questions about whether CPI and PPO violated these rules by financially supporting Meadows and other Trump allies.

Mark Meadows Nonprofit Funneled Cash for Legal Bills, Group Says

A $170 million legal fee request from lawyers at Grant & Eisenhofer and three other firms remains unresolved after a Brooklyn federal judge rejected their antitrust settlement with Visa and Mastercard. The settlement, following nearly 20 years of litigation, aimed to reduce the interchange fees merchants pay for credit card transactions. Visa and Mastercard would have paid up to $113.3 million and $56.6 million, respectively, to cover the legal fees if the settlement was approved.

Judge Margo Brodie ruled that the settlement did not sufficiently address the merchants' concerns, despite agreeing with the fee request terms. She argued that Visa and Mastercard could withstand a more substantial settlement, noting that merchants paid $100 billion in interchange fees in 2023 alone. The proposed agreement would have marginally reduced swipe fees and imposed caps for five years but still required merchants to honor all Visa and Mastercard transactions.

The ruling means lawyers must renegotiate better terms with Visa and Mastercard, extending the timeline for any resolution. Despite rejecting the settlement, Brodie's decision cannot be appealed and would be difficult to overturn.

Opposition to the settlement came from major retailers and trade groups, who deemed it inadequate. The National Retail Federation, while not yet addressing the legal fee request, expressed broader concerns over the deal.

In related legal fee news, Tesla and the legal team that voided Elon Musk's $56 billion stock options will argue over compensation, with the plaintiffs seeking around $7 billion, contrasting Tesla's suggestion of $13.6 million. Additionally, firms involved in a $48 million settlement with Progressive over undervalued wrecked cars seek up to $16 million in fees, and Hagens Berman and Cohen Milstein were awarded $51.6 million in a chicken price-fixing case.

Legal Fee Tracker: Lawyers' $170 million payday in limbo in credit card swipe fee case | Reuters

This week’s closing theme is by John Philip Sousa.

This week's closing theme features the renowned American composer and conductor, John Philip Sousa. Known as "The March King," Sousa is celebrated for his extraordinary contributions to military and patriotic music. Born in Washington, D.C., in 1854, Sousa's career spanned more than five decades, during which he composed over 130 marches, as well as numerous operettas, suites, songs, and waltzes. His music epitomizes the spirit and vibrancy of American patriotism, making him a household name and a significant figure in American music history.

Sousa began his musical journey at a young age, joining the U.S. Marine Band as an apprentice when he was only 13. He later became the band's conductor, elevating its status to the finest military band in the country. After leaving the Marine Band, Sousa formed his own civilian band, which gained international fame and toured extensively. His impact on American music extends beyond composition; he also championed music education and the development of the sousaphone, a marching band instrument named in his honor.

Today, we highlight one of his most famous marches, "The Liberty Bell." Composed in 1893, this piece is instantly recognizable and has been used in various contexts, including as the theme for the British comedy series "Monty Python's Flying Circus." "The Liberty Bell" was originally intended for an operetta that never came to fruition, but it found new life as a standalone march. The piece is a perfect example of Sousa's ability to blend melodic ingenuity with rousing rhythmic patterns, capturing the essence of American optimism and pride. The title was inspired by a suggestion from Sousa's wife after they saw a picture of the Liberty Bell in a magazine.

Without further ado, enjoy "The Liberty Bell" by John Philip Sousa.

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