Why Companies Should Care About the Demise of the Stolen Valor Act

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Written By admin at Friday, July 20th, 2012

Paul Clement talks to reporters outside the Supreme Court after the third and final day of legal arguments over the Patient Protection and Affordable Care Act in March.

Former U.S. Solicitor General Paul Clement told a group of corporate counsel in March that companies should watch out for the  Supreme Court’s ruling on the Stolen Valor Act, a case that at first glance appears to have little to do with business.

The court’s take on the 2006 law, which made it a federal crime to falsely claim to have won military honors, could affect them hugely, he said, because many government regulations are premised on the idea that false speech isn’t protected by the First Amendment.

Now that law has been struck down, Mr. Clement, now a partner at Bancroft PLLC, said the government will have to be more sensitive when it attempts to regulate false speech.

For example, the Department of Justice has won billions of dollars pursuing pharmaceutical companies for promoting FDA-approved drugs for off-label use, reasoning that such promotions mislead customers and that false and misleading speech isn’t protected by the First Amendment.

Now, Clement told Law Blog, that will be a much harder argument to make.

“Some of these pretty broad statements the government has made are not sustainable now,” Clement said. “This Supreme Court case says: it’s more complicated than that.”

He added, “The Stolen Valor case is going to be something that people are going to cite to say that, no, there is actually more First Amendment protections here for companies than you think.”

Mr. Clement said companies can’t take this argument too far though. Fraud prosecutions are often based on speech, so there still exists a legal line when it comes to false speech in business.

But, he said, “Over time the line is going to move a little more favorably to the regulated community and a little more unfavorably to the government.”

Mr. Clement said he wasn’t surprised the Stolen Valor Act was struck down, no matter how disgraceful lying about military honors may be. “This is a very pro-First Amendment Court,” he said.

As for the Supreme Court’s other end-of-term rulings, including on the health law (Mr. Clement led the challenge to its constitutionality) and on the controversial Arizona immigration law (he represented Arizona), Mr. Clement said he’s still processing the decisions.

He did offer one thought.

“Based on the oral arguments, I certainly wasn’t expecting the focal point of the health-care debate to be the tax clause,” he said. “I don’t think I’m alone there.”

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