Winter 2013 | Printer Friendly | Contact Us

Introduction to Legal Insights

Welcome to the Winter 2013 edition of Legal Insights, a quarterlypublication produced by AIG's Issue Management Group. Legal Insights isa compendium of updates and analysis of recent court decisions of interestto our claims personnel, corporate risk managers and brokers. The articlesare prepared by attorneys in approved panel law firms and AIG’s own staffcounsel. Read more

Class Action

Class Action Waivers After Concepcion: The Emergence of a Circuit SplitOver the Decision's Impact on Federal Claims Makes a Return to theSupreme Court Likely Read More

California Court Invalidates Law Prohibiting the Use of Class ActionWaiversSherf v. Rusnak/Westlake Read more

Construction Defect

Pennsylvania Superior Court Declares That Second Buyers of HomesHave Same Implied Warranty Rights as Original Buyers in Claims forConstruction DefectsConway v. The Cutler Group, Inc. Read more

California Appellate Court Extends "Completed and Accepted" Doctrine toArchitects' Field OperationsNeiman v. Leo A. Daly Company Read more

Damages

Australian Court Orders Rating Agency to Pay Damages for MisleadingInvestors Read more

Employer Liability

Employers Beware: Obesity as a Disability Under the ADARead more

Remodeling the Disability Access Claim: New Law Aids CaliforniaBusinesses Read more

Evidence

New York Court Holds That Federal Standards of Care Preempt State-LawStandards Governing Hiring, Training, and Retention of PilotsIn re: Air Crash Near Clarence Center Read more

Experts – When to Discuss the Facts and When to Obtain a Report Readmore

Procedure

NY Appeals Court: Claims Disposed of by Motion Practice Not Concludeduntil Appeal from Judgment Is DecidedStrauss v. East 149th Realty Corp. Read more

Topics

Class Action

Construction Defect

Damages

Employer Liability

Evidence

Procedure

Product Liability

Qui Tam

Social Media

WorkersCompensation

Labor Law §240

Regions

Federal

International

Northeast

Labor Law §240

Mid-West

South East

West

Tolling Agreements vs. Statute of Limitations WaiversDon Johnson Productions, Inc. v. Rysher EntertainmentRead more

Product Liability

Court Strikes a Blow Against CPSC Online DatabaseCompany Doe v. Tenenbaum Read more

Massachusetts Board of Pharmacy Enacts Emergency RegulationsTargeting Compounding Activities and Impacting All Registered andLicensed Pharmacies Read more

Qui Tam

California Amends Its False Claims Act to Mirror Federal Law, PreserveFederal Incentive Awards, and Loosen the Reins on Whistleblower Suits Read more

Social Media

Researching Jurors on the Internet - Ethical ImplicationsRead more

California Law Prohibits Requests for Employees' Social Media Passwordsor Information Read more

Workers Compensation

Ohio Supreme Court Recognizes Limited Exception to Time Limit to Notifyan Employer in a Workers' Compensation Retaliation Discharge ClaimLawrence v. City of Youngstown Read more

Ohio Supreme Court Declared that Failure to Issue Personal ProtectiveEquipment Does Not Constitute "Removal of Equipment Safety Guard" foran Intentional TortHewitt v. L.E. Myers Read more

Labor Law §240

Labor Law §240 UpdateMcLean v. 405 Webster Avenue AssociatesZolfaghari v. Hughes Network Systems, LLCAlarcon v. UCAN White Plains Housing Development Fund Corp.Read more

Winter 2013 | Printer Friendly | Contact Us

Back to Main

Introduction to Legal Insights

Welcome to the Winter 2013 edition of Legal Insights, a quarterly publication produced by AIG’s IssueManagement Group. Legal Insights is a compendium of updates and analysis of recent court decisions ofinterest to our claims personnel, corporate risk managers and brokers. The articles are prepared by attorneys inapproved panel law firms and AIG’s own staff counsel.

This edition includes decisions concerning class actions, construction defect, damages, employer liability,evidence, procedure, product liability, qui tam, social media, workers compensation and New York Labor Law§240 as well as articles on statutory changes which may affect claims tendered to AIG.

We hope our readers will find these reports informative and useful. Should recipients become aware of newdecisions they believe will be of interest to others in the claims, risk management and brokerage communities,feel free to send cases to issue.management@aig.com for possible inclusion in future editions.

Back to top

Winter 2013 | Printer Friendly | Contact Us

Back to Main

Class Actions

Class Action Waivers After Concepcion: The Emergence of a Circuit SplitOver the Decision's Impact on Federal Claims Makes a Return to theSupreme Court Likely

California Court Invalidates Law Prohibiting the Use of Class ActionWaivers

Topics

Class Action

Construction Defect

Damages

Employer Liability

Evidence

Procedure

Product Liability

Qui Tam

Social Media

WorkersCompensation

Labor Law §240

Regions

Federal

International

Northeast

Labor Law §240

Mid-West

South East

West

Class Action Waivers After Concepcion:The Emergence of a Circuit Split Over theDecision's Impact on Federal ClaimsMakes a Return to the Supreme CourtLikely

A year ago, the U.S. Supreme Court handed down its ruling inAT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740 (2011), whichenforced a contractual waiver of class arbitration in anarbitration clause under the Federal Arbitration Act ("FAA") in theface of an unconscionability challenge based on state law. Sincethen, the federal circuit courts have digested the ruling's impactin numerous cases. The arbitration clause in Concepcion hadseveral "consumer-friendly" provisions, prompting somecommentators to question whether the Court's ruling was limitedto clauses containing such provisions. The consensus in thecircuit courts is that the answer is no, at least with respect toclaims under state law. However, a circuit split has emergedregarding the impact of Concepcion when the plaintiff's claim isbased on federal statutory law.

The "Consumer-Friendly" Arbitration Clause inConcepcion

In Concepcion, the Supreme Court held that a California statelaw rule invalidating class-action waivers in consumer contractswhere the defendant has allegedly cheated large numbers ofconsumers out of small amounts of money was preempted bythe FAA because that rule stood "as an obstacle to theaccomplishment of the FAA's objectives." The majority opinionrejected the dissent's argument "that class proceedings arenecessary to prosecute small-dollar claims that might otherwiseslip through the legal system." The majority responded that"States cannot require a procedure that is inconsistent with theFAA, even if it is desirable for unrelated reasons." Moreover, themajority noted that "the claim here was most unlikely to gounresolved" because the arbitration clause at issue includedseveral consumerfriendly provisions, including provisions thatrequired AT&T to pay for the costs of all non-frivolous claimsthat proceeded to arbitration and to pay a minimum amount of$7,500.00 plus twice the amount of the claimant's attorney's feesin the event that the claimant were to win an award larger thanAT&T's final written settlement offer.

Some commentators questioned whether the Supreme Court's

willingness to enforce class action waivers was limited toarbitration clauses containing consumer-friendly provisions likethose in Concepcion. The first circuit court to address thatquestion was the Eleventh Circuit, in Cruz v. Cingular Wireless,LLC, 648 F.3d 1205 (11th Cir. 2011). In that decision, whichinvolved only claims under state law, the Eleventh Circuitsuggested that Concepcion was not limited to factual scenariosinvolving consumer-friendly arbitration clauses, but ultimatelyconcluded that it "need not reach the question," because thearbitration clause in Cruz was identical to the clause inConcepcion.

However, just last month, on August 20, 2012, the EleventhCircuit revisited this issue in Pendergast v. Sprint Nextel Corp.,No. 09-10612, 2012 U.S. App. LEXIS 17512 (11th Cir. Aug. 20,2012). The plaintiff attempted to distinguish Concepcion on thebasis that the arbitration agreement at issue did not contain theconsumer-friendly provisions that were present in the contract atissue in Concepcion. The Eleventh Circuit rejected thisargument. The court determined that resolution of the case,which contained only claims under state law, required "only astraightforward application of Concepcion and Cruz," andconcluded that "[t]he Supreme Court in Concepcion expresslyrejected the notion that the state law should not be preempted"even when the arbitration clause at issue "would effectivelyshield the defendant from liability" because the plaintiff could notpractically pursue his claims individually.

Two days later, on August 22, 2012, the Third Circuit reachedthe same conclusion in an unpublished decision in a caseinvolving only claims under state law - Homa v. AmericanExpress Co., No. 11-3600, 2012 U.S. App. LEXIS 17763 (3rdCir. Aug. 22, 2012). The Third Circuit concluded that "[e]ven if[the plaintiff] cannot effectively prosecute his claim in anindividual arbitration that procedure is his only remedy, illusoryor not." The Third Circuit panel acknowledged that some mightview this result as unfair, and accepted the plaintiff's argumentthat enforcing the class arbitration waiver would effectivelyeliminate any potential for recovery on his claims, but noted thatif it adopted the plaintiff's position, "millions of arbitrationprovisions in consumer contracts would be renderedunenforceable inasmuch as the arbitration provisions in suchcontracts typically preclude class-arbitration proceedings."

A Different Rule for Federal Claims?

The U.S. Court of Appeals for the Second Circuit reached adifferent result in In re American Express Merchant's Litigation,554 F.3d 300 (2d Cir. 2009), 634 F.3d 187 (2d Cir. 2011), 667F.3d 204 (2d Cir. 2012), which involved a class arbitration waiverin an arbitration agreement which did not contain consumer-friendly provisions. There, the plaintiff sought to litigate claimsunder the federal antitrust laws. The Second Circuit held thatalthough the class arbitration waiver would be enforceable if theclaims were brought under state law, Concepcion does notrequire courts to find class arbitration waivers enforceable "if theplaintiffs are able to demonstrate that the practical effect ofenforcement would be to preclude their ability to vindicate theirfederal statutory rights." The Second Circuit held that each suchwaiver clause must be considered individually and that, becausethe U.S. Supreme Court's decision in Stolt-Nielsen S.A. v.AnimalFeeds International Corp., 130 S.Ct. 1758 (2010),prohibits courts from ordering parties to participate in classarbitration without a contractual agreement to do so, andbecause the plaintiffs can only effectively pursue their federalstatutory claims through a class proceeding, a decision to strikedown a class arbitration waiver requires striking down the entirearbitration agreement so that plaintiffs can pursue class actions

in court.

Lower courts in the Second Circuit have emphasized thepotential differential treatment of state and federal claims underthe American Express ruling. For example, on August 21, 2012,just a day after the Eleventh Circuit's ruling in Pendergast, theU.S. District Court for the District of Connecticut struck down anarbitration agreement containing a class arbitration waiverbecause enforcing it would effectively deprive the plaintiff of anyreal chance of recovery. Fromer v. Comcast Corp., No.3:09cv2076, 2012 U.S. Dist. LEXIS 117807 (D. Conn. Aug. 21,2012). The district court concluded that, under the SecondCircuit's decision in American Express, "the class action waiverin this case effectively precludes Fromer from pursuing federalstatutory remedies," and thus "the class arbitration waiver isvoid." The district court noted that the reasoning in AmericanExpress "does not apply to [the Plaintiff's Connecticut UnfairTrade Practices Act] claim, and the inability to vindicate thatstatutory right does not provide a basis for [finding] thearbitration agreement unenforceable with regard to that claim."Still, the district court found that the entire arbitration agreementwas unenforceable because it contained a provision whichstated that "[i]f the class action waiver is found to be illegal orunenforceable, the entire Arbitration Provision will beunenforceable, and the dispute will be decided by a court."

These rulings out of the Second Circuit are in direct conflict withthe Ninth Circuit's decision in Coneff v. AT&T Corp., 673 F.3d1155 (9th Cir. 2012). In Coneff, the Ninth Circuit held that "Concepcion is broadly written" and that it requires enforcementof class arbitration waivers, even if the effect of enforcement isto effectively preclude individual plaintiffs from pursuing theirclaims. The plaintiff asserted claims under both state and federallaw, but the Ninth Circuit's analysis did not recognize anymeaningful distinction between these two categories of claims.

In view of the split between the Second and Ninth Circuits,American Express has filed a Petition for Writ of Certiorari to theSupreme Court from the American Express decision. Thepetition asks the Supreme Court to eliminate any distinctionbetween state and federal claims for purposes of enforcing classaction waivers in arbitration clauses, and to reiterate that suchclauses should be enforced in all cases, even when doing sowould effectively eliminate any real chance of recovery forindividual plaintiffs. Based on the sheer volume of consumercontracts containing class action waivers and the SupremeCourt's recent trend of accepting and deciding cases involvingthe FAA, it appears likely that the Petition will be granted.

Conclusion

In sum, the decisions by the Circuits in the year following theSupreme Court's ruling in Concepcion make clear that classaction waivers in arbitration clauses will be en forced as to statelaw claims, even if enforcement effectively eliminates any realprospect of recovery for individual plaintiffs. However, a circuitsplit has developed as to whether Concepcion has the sameeffect where the plaintiff brings at least one claim based onfederal law.

If the Supreme Court agrees to hear the American Expresscase, and ultimately accepts the Second Circuit's approach toclass action waivers in the context of federal claims, the impactcould be dramatic and wide-sweeping: many arbitration clausescould be stricken in their entirety, because many, if not most,arbitration clauses are like the one at issue in Fromer, andexpressly require that the entire clause be struck down if the

class action waiver is found to be unenforceable. This wouldthreaten a massive increase in consumer class actions based onfederal statutory violations. While potential defendants couldmitigate this outcome to some extent by including aConcepcion-style consumer-friendly arbitration clause in everyconsumer contract, thus blunting any argument that consumerswould be deprived of an opportunity to effectively pursue theirclaims individually, such a result still would likely increaselitigation costs and interfere with efforts to streamline privatedispute resolution in a way that the FAA was specificallyintended to avoid .

Contributed by:

Schnader Harrison Segal & Lewis, LLPThe Victor Building750 9th Street, NWSuite 550Washington, DC 20001-4534

Stephen A. Fogdall, Esq.202.419.4208sfogdall@schnader.com

Christopher A. Reese, Esq.215.751.2556creese@schnader.comwww.schnader.com

Back to top

California Court Invalidates LawProhibiting the Use of Class ActionWaivers

Sherf v. Rusnak/Westlake

The California Court of Appeal for the Second District rejectedthe state's attempt to prohibit the waiver of class actionagreements, changing how insurers should approach mandatoryarbitration provisions. In 2011, the Supreme Court of the UnitedStates held in AT&T Mobility, LLC v. Concepcion that theFederal Arbitration Act (FAA) preempts state laws prohibiting theuse of class action waivers in arbitration agreements. ACalifornia Court of Appeal recently applied the Concepciondecision, Sherf v. Rusnak/Westlake, nullifying the state'sauthority to prohibit the waiver of class action rights in arbitrationagreements. Although the defendant in Sherf was not an insurer,this case is of particular importance to carriers because itreinforces the applicability of mandatory arbitration provisions instate court.

California's authority to prohibit class action waivers comes fromthe California Consumers Legal Remedies Act (CLRA), whichcreates a statutory remedy for consumers who suffer damagesas a result of a business' unfair or deceptive practices. TheCLRA expressly permits the use of class actions and assertsthat "any waiver ... is contrary to public policy and shall beunenforceable and void." Cal. Civ. Code § 1751. In Sherf, aconsumer sued his car dealership, alleging the dealershipimproperly charged a statutory tire fee for a vehicle that did notinclude a spare tire. The consumer also alleged that he wasimproperly charged for a tire service contract for a vehicle thatdid not qualify for the service plan. The complaint included aclass action cause of action pursuant to the CLRA. The

dealership moved to compel arbitration, strike the class actionclaims and stay the proceeding until the completion ofarbitration, arguing that the consumer waived his class actionrights in the underlying sale contract.

In its ruling, the trial court acknowledged Concepcion, butreasoned it did not invalidate the CLRA's anti-waiver provisionbecause the provision in the CLRA was "facially neutral." TheCalifornia Court of Appeal disagreed and reversed. The courtreasoned that " Concepcion rejects the argument that classaction waivers in consumer contracts can be invalidated in orderto vindicate statutory rights even if the statutory right is desirablefor other reasons." Sherf at *5. The court held that, underConcepcion, the CLRA could not automatically invalidate theunderlying arbitration agreement. However, since the FAApermits arbitration agreements to be invalidated by generallyapplicable contract defenses, the court remanded the case forthe trial court to decide whether the arbitration agreement wasunconscionable under general principles of California law.

The Sherf case reinforces the strong federal policy favoring theenforcement of arbitration agreements. Therefore, if a particularstate has no regulation prohibiting the use of arbitration clausesin insurance contracts, a reasonable arbitration clause may bebinding and enforceable.

Contributed by:Nelson Levine deLuca & Hamilton LLCOne Battery Park Plaza32nd FloorNew York, New York 10004

Kymberly Kochis, Esq.212.233.2906kkochis@nldhlaw.com

Dominic Anamdi646.405.7594danamdi@nldhlaw.com

Case Hyperlink: http://scholar.google.com/scholar_case?case=15788345714502882775&hl=en&as_sdt=2&as_vis=1&oi=scholarr

Back to top

Winter 2013 | Printer Friendly | Contact Us

Back to Main

Construction Defect

Pennsylvania Superior Court Declares That Second Buyers of HomesHave Same Implied Warranty Rights as Original Buyers in Claims forConstruction Defects

California Appellate Court Extends "Completed and Accepted" Doctrine toArchitects' Field Operations

Topics

Class Action

Construction Defect

Damages

Employer Liability

Evidence

Procedure

Product Liability

Qui Tam

Social Media

WorkersCompensation

Labor Law §240

Regions

Federal

International

Northeast

Labor Law §240

Mid-West

South East

West

Pennsylvania Superior Court DeclaresThat Second Buyers of Homes HaveSame Implied Warranty Rights as OriginalBuyers in Claims for Construction Defects

Conway v. The Cutler Group, Inc.

On the day before the 2012 Presidential Election, thePennsylvania Superior Court elected to extend to remotepurchasers of homes the same implied warranty rights againstbuilders and developers as held by original purchasers. In

Conway v. The Cutler Group, Inc.1 the Superior Court, declaringthis as a case of first impression, held that a second owner of aresidential home has the same right as an original owner torecover against a builder developer for a breach of the impliedwarranty of habitability. The court did not consider whether thesecond powerful implied warranty right – the implied warranty ofreasonable workmanship – was also available to remotepurchasers because the attorney that filed the Conway case didnot plead that warranty.

In construction, the implied warranty of habitability is a fictioncreated by the courts to express what has been determined bythe courts to be a justifiable assumption that when a builderbuilds a structure, it can be safely assumed that it will behabitable. Pennsylvania courts have held that the impliedwarranty of habitability has been breached in a number ofdifferent contexts. Absence of potable water, Elderkin v. Gaster,447 Pa. 118, 288 A.2d 771 (1972); defective furnace emittingexcessive levels of carbon monoxide, Pontiere v. James Dinert,Inc., 627 A.2d 1204 (Pa. Super. 1993); presence of lead basedpaint, Lititz Mut. Ins. Co. v. Steely, 785 A.2d 975 ( Pa. 2001);leaking skylights, Fetzer v. Vishneski, 582 A.2d 23 (Pa. Super.1990); leaky basement, Ecksel v. Orleans Const. Co., 519 A.2d1021 (Pa. Super. 1987); and leaky crawl space, Tyus v. Resta,476 A.2d 427 (Pa. Super. 1984).

In determining in the Conway case that subsequent purchasersshould have the same rights as original purchasers, the courtleaned heavily on a 1990 Superior Court case called Spivack v.Berks Ridge Corporation and reasoned, "the warranty is basedupon public policy considerations and is not a contractuallydependent remedy. ... [W]e see 'no logical reason to limit abuilder's implied warranty to his immediate vendee.'" Then,reaching back all the way to the 1972 Pennsylvania Supreme

Court case of Elderkin v. Gaster, which is the case that started itall, the Conway court stated, "a purchaser of a new home'justifiably relies on the skill of the [builder] that the house will bea suitable living unit.' Elderkin at 776... By the same token, asecond or subsequent purchaser also implicitly relies on thehome builder's skill that the home will be a habitable one."

More and more, the law of construction defect litigationresembles strict product liability. To recover for injuries sufferedfrom a defective product, a plaintiff need only show that theproduct was unreasonably dangerous for its intended use andthat the defect was a proximate cause of the injury. The plaintiffneed not show that the manufacturer knew or should haveknown that the product was defective, i.e., negligence. And anyperson victimized by a defective product – first owner, secondowner or even a bystander – has the same strict liability rightsagainst the manufacturer.

In Conway, the Pennsylvania Superior Court has extended theconstruction defect theory of implied warranty of habitability tothe benefit of persons who buy a home (or presumably any otherbuilding) from the earlier owners. No courts have yet consideredwhether to extend the implied warranty of habitability to

non-owners. 2

A key difference between strict liability under product liability lawand implied warranty under construction defect law, is that abuilder developer can legally disclaim liability for the impliedwarranties of habitability and reasonable workmanship. If thecontract (typically the Agreement of Sale) between the builderdeveloper and the original purchaser contains a properly wordedand conspicuous disclaimer of the implied warranties, such adisclaimer is enforceable and the builder developer cannot beheld liable for breach of the implied warranty.

In construction, proper contract drafting can potentially eliminateor at least reduce the exposure to liability under the law ofimplied warranty.

If you are a builder developer, the attorneys at White andWilliams LLP can review and revise your contracts to getfor you the best protection available according to thecurrent law of the state where your project is being built.Also, if you are a builder developer or general contractor,you can protect yourself with your subcontractors andvendors by contractually shifting the risk to thecompanies actually doing the work and supplyingimportant components such as windows, weatherresistant barriers, steel, concrete and mechanicalsystems.If you are a subcontractor or vendor, negotiating smallchanges in contract language can help you reduce oravoid taking on any more risk for a developer or generalcontractor than absolutely necessary.

You may have gone through contract review and revisions atone point in your recent business past, but as we see with theConway case, the law changes. The attorneys at White andWilliams LLP can make sure that your contract language takesinto account the most recent decisions of the courts and anychanges in laws or regulations to minimize your exposure andmaximize your protection for your projects.

1 2012 Pa. Super. 242, Nov. 5, 2012

2 Such a claim would involve a building that is allegedly not habitable which forthat reason causes property damage to a non-owner. Example – a defectively

built chimney falls onto a neighbor's car parked next door in his own driveway.

Contributed by:

White and Williams, LLP1650 Market StreetOne Liberty Place, Suite 1800Philadelphia, PA 19103-7395

Mark Parisi, Esq.215.864.7180parisim@whiteandwilliams.com

Case Hyperlink: http://www.pacourts.us/OpPosting/Superior/out/a25017_12.pdf

Back to top

California Appellate Court Extends"Completed and Accepted" Doctrine toArchitects' Field Operations

Neiman v. Leo A. Daly Company

In Neiman v. Leo A. Daly Company B234537 (October 30,2012), the California Court of Appeal, Second Appellate Districtaffirmed the granting of a motion for summary judgment onbehalf of an architect based on an affirmative defense of the"completed and accepted" doctrine. Plaintiff, Ellen Neiman, suedthe Santa Monica Community College and others, including theproject architect, after she fell on stairs at a campus theater. Theplaintiff alleged that the stairs did not have contrast markingstrips, which made them a dangerous condition that caused orcontributed to causing her to trip and fall.

Architect Leo A. Daly designed a theater arts building for thecollege. The theater was completed almost two years before theplaintiff's injury. The architect's agreement with the collegerequired him "to observe the construction to completion and inso doing to comply with all requirements of Title 21, CaliforniaAdministrative Code, with respect to such observation. Thisobservation is contemplated to mean that the Architect shallmake such visits to the work in progress as to determine that thework is carried out in accordance with the contract documentsincluding Architect's specifications ..." The plaintiff sued thearchitect not over the design of the theater, but rather based onhis inspections during construction.

The trial court granted the architect's motion for summaryjudgment based on the "completed and accepted" doctrine.Under this doctrine, once a contractor has completed its workand the owner has accepted it, the contractor is not liable tothird parties injured as a result of a patent defect in thecontractor's work. In affirming the judgment below, the Court ofAppeal extended what is essentially a contractor defense to thedesign professional's responsibility to observe the work in thefield. The court distinguished this claim from a claim that thedrawings and specifications contained an error or omission.Here, the contrast marking strips were called for in the designdocuments. The architect, along with the owners and others,failed to discover the absent contrast strips.

"In this action, Neiman does not allege LAD [Leo A. Daily] wasnegligent in preparing the plans and specifications. She claimsLAD was negligent in "failing to see and notify SMCCD and

Turner Construction [the contractor] that the contrast markingstripes required by the plans for the theatre and by the CaliforniaBuilding Code were never placed on the stairs of the MainStage[.]"

The rationale for the doctrine is explained by the court:

"[W]hen a contractor ... completes work that is accepted by theowner, the contractor is not liable to third parties injured as aresult of the condition of the work, even if the contractor wasnegligent in performing the contract, unless the defect in thework was latent or concealed. The rationale for this doctrine isthat an owner has a duty to inspect the work and ascertain itssafety, and thus the owner's acceptance of the work shiftsliability for its safety to the owner, provided that a reasonableinspection would disclose the defect. Stated another way, 'whenthe owner has accepted a structure from the contractor, theowner's failure to attempt to remedy an obviously dangerousdefect is an intervening cause for which the contractor is notliable.' The doctrine applies to patent defects, but not latentdefects. 'If an owner, fulfilling the duty of inspection, cannotdiscover the defect, then the owner cannot effectively representto the world that the construction is sufficient; he lacks adequateinformation to do so.'"

The court held that as a matter of law the absence of contrastmarking strips was a patent defect.: "The absence of stripes onthe stairs is obvious and apparent to any reasonably observantperson. The stripes are designed to be seen by someonewalking down the stairs. Thus, a reasonable inspection shoulddisclose the striping called for in the plans and specifications ismissing."

The court was not persuaded that the defect was latent eventhough the college, the architect, the contractor and arepresentative from the Division of the State Architect all missedit on the final job walkthrough. Had the strips been there, theywould have been readily apparent to anyone walking down thestairs; therefore, their absence is "obvious and apparent."

The completed and accepted doctrine is a useful defense tokeep in mind in construction litigation. The significance of thiscase is that it extends the defense to a design professional'sduties and obligations with regard to the inspection andsupervision of the construction work.

Contributed by:

Wilson Elser Moskowitz Edelman & Dicker, LLP655 West Broadway, Suite 900San Diego, CA 92101

John Clifford, Esq.619.881.3320john.clifford@wilsonelser.com

Edward Garson, Esq.415.625.9330edward.garson@wilsonelser.com

Ian Stewart, Esq.213.330.8830ian.stewart@wilsonelser.com

Case Hyperlink: http://www.courts.ca.gov/opinions/documents

/B234537.PDF

Back to top

Winter 2013 | Printer Friendly | Contact Us

Back to Main

Damages

Australian Court orders rating agency to pay damages for misleadinginvestors

Topics

Class Action

Construction Defect

Damages

Employer Liability

Evidence

Procedure

Product Liability

Qui Tam

Social Media

WorkersCompensation

Labor Law §240

Regions

Federal

International

Northeast

Labor Law §240

Mid-West

South East

West

Australian Court Orders Rating Agency toPay Damages for Misleading Investors

In what has been reported to be a landmark ruling, the AustralianFederal Court has ordered Standard & Poor's (S&P) and theissuing bank (the bank that arranged the derivative product inquestion) to pay 30m Australian dollars (£19m) in damages toseveral Australian local governments. The claim concerned theAAA rating (their safest credit rating) given by S&P to twostructured debt issues in 2006, which later lost almost all of theirvalue. It signals the first ruling on a rating agency's liability forinvestor losses.

The FactsThe claim concerned the rating, sale and purchase of acomplicated structured financial product known as a constantproportion debt obligation (CPDO). The CPDO was a complex,highly leveraged credit derivative, operating over a term of 10years, within which the CPDO would make or lose moneythrough notional credit default swap contracts (CDSs)referencing two CDS indices known as the CDX and iTraxxindices.

The issuing bank (through their previous dealings with S&P) hada good idea of how S&P would model the performance of theCPDO to assess the creditworthiness and the rating. Thus theissuing bank proceeded to model the CPDO in a way to ensurethat they achieved a rating of AAA. When engaging S&P, theissuing bank pressed S&P to adopt its model inputs as the basisfor the rating. Due to a series of errors, omissions andunjustifiable assumptions, S&P rated the CPDO as AAA andauthorised the issuing bank to disseminate that rating topotential investors which the issuing bank did. The issuing bankcreated further versions of the CPDO's all of which received aAAA rating from S&P. These investments were purchased byvarious Australian local governments through an intermediary in2006 and later went on to lose almost all of their value.

DecisionThe court ruled that S&P's rating of AAA was misleading anddeceptive and that S&P along with the issuing bank had beeninvolved in the publication of information and statements thatwere false in material particulars and involved negligentmisrepresentations being made to potential investors. The courtstated that the rating implied that the likelihood of the financialobligations being met was extremely strong. The issuing bankwas also criticised as it was "knowingly concerned" in S&P'smisleading and deceptive conduct and engaged in misleadingand deceptive conduct itself. The court stated that a reasonablycompetent rating agency could not have reached the conclusionthat the derivative should be given a AAA rating. The court has

ordered S&P and the issuing bank to pay 30m Australian dollars(£19m) in damages to several Australian local governments.

CommentWhile the role of the rating agencies (who tend to receive theirfees from the entities which they are rating) came under muchscrutiny during the sub-prime crisis, the ruling is the first of itskind on a rating agency's liability for investor losses and is thefirst time that a rating agency (many of whom have previouslyargued that their ratings are simply opinions) has been taken toa full trial over a structured financial product. S&P has said thatit plans to lodge an appeal against the decision.

The decision means that rating agencies who have previouslybeen unaccountable to investors may no longer be able to hidebehind their disclaimers to protect them from liability. It has beenreported that this decision could signal the way for investors torecover significant losses from S&P and the issuing bank inEurope. However, it remains to be seen whether such a claimwould succeed in other jurisdictions (such as the English courtswhich have proved relatively unsympathetic to some investorclaims, at least those by sophisticated investors) and raisesinteresting questions about the extent to which ratings agenciescan be said to owe a duty to individual investors.

Contributed by:

CMS Cameron McKenna LLPMitre House160 Aldersgate StreetEC1A 4DD London, England

Simon Garrett, Esq.44 (0)20 7367 2786simon.garrett@cms-cmck.comwww.cms-cmck.com

Case Hyperlink: http://www.lemonde.fr/mmpub/edt/doc/20121105/1785835_4e5b_summary_lgfs.pdf

Back to top

Winter 2013 | Printer Friendly | Contact Us

Back to Main

Employer Liability

Employers Beware: Obesity as a Disability Under the ADA

Remodeling the Disability Access Claim: New Law Aids CaliforniaBusinesses

Topics

Class Action

Construction Defect

Damages

Employer Liability

Evidence

Procedure

Product Liability

Qui Tam

Social Media

WorkersCompensation

Labor Law §240

Regions

Federal

International

Northeast

Labor Law §240

Mid-West

South East

West

Employers Beware: Obesity as a DisabilityUnder the ADA

If an employee requests two seats on an airplane on the nextbusiness trip because he/she can no longer comfortably fly inone seat, does the employer have the responsibility to pay forthis accommodation?

Does an employer have to provide health care coverage forbariatric surgery?

More than one-third of United States adults are obese1. Obesityis a label given for a range of weight that is greater than what isgenerally considered healthy for a given height. For example, a5'9" adult weighing 125lbs–168lbs is considered to be at ahealthy weight; 169lbs-202lbs is considered to be overweight;and, 203lbs or more is considered obese. Worldwide, at least2.8 million adults die each year as a result of being overweightor obese; additionally, being overweight and/or obese is the fifth

leading risk factor for death globally2. Excessive weight is alsoattributable to a number of diseases and conditions that canresult in serious injury or death including diabetes, heart diseaseand a number of cancers. As obesity rates in the United Statescontinue to grow, employers are impacted in a number of ways;and the question they must answer is whether obesity is adisability that must be accommodated under the Americans withDisabilities Act.

In the EEOC's ADA Compliance Manual, the issue of obesity isaddressed as follows:

[B]eing overweight, in and of itself, is notgenerally an impairment... On the other hand,severe obesity, which has been defined as bodyweight more than 100% over the norm, is clearlyan impairment. In addition, a person with obesitymay have an underlying or resultant physiologicaldisorder, such as hypertension or a thyroiddisorder. A physiological disorder is animpairment.

In the last two years, over 48 cases involving claimants filingdisability discrimination cases based on obesity have been filedin the United States. These suits involve not only actualdiscrimination based on a person's obesity, but many involve theperceived disability of an obese employee. Weight requirementsin a job posting or assumptions about an individual's ability toperform the job based on weight will continue to get employers

into trouble unless policies are modified to account for this trend.

In September of 2011, the EEOC filed suit in the U.S. DistrictCourt for the Southern District of Texas on behalf of a 600lbforklift operator who was allegedly discriminated against on thebasis of weight. Plaintiff had asked his employer for a seat beltextender in an effort to comply with the safety requirements ofhis job. The employer refused the accommodation and twoweeks later terminated his employment. Plaintiff had receivedpositive performance reviews the previous two years and otherthan needing a large seatbelt, Plaintiff believed that his weightdid not interfere with his job requirements. In July of this year,the EEOC and the employer settled the matter for $55,000 andtraining for managers and human resource employees on thesubject of discrimination laws and compliance.

In addition to not discriminating against someone because ofweight, employers need to be careful in the assumptions theymake about obese individuals and the potential for healthproblems and Workers' Compensation claims. When comparedto employees who maintain the recommended weight, obeseemployees have up to 21% higher health care costs, file 45%more Workers' Compensation claims, and miss up to seven

times more work due to work-related injuries3. Employers needto take caution in making any employment decisions based onthese characteristics. Failing to hire someone because you areconcerned that they will file a Workers' Compensation claim inthe future may result in a finding that you perceived the applicantas disabled and thus violated the ADA.

What are the "takeaways" for employers? A request foraccommodations from obese employees, especially those withan underlying or resultant physiological disorder, should betreated as a request for accommodation from a person with adisability. The employer should work with the employee in aninteractive process to determine if reasonable accommodationsexist. Second, all employers should be proactive in dealing withthe increasing problems associated with obesity in theworkplace. The creation of a wellness program, which iscarefully crafted so as not to discriminate against obeseindividuals, is just one way an employer can attempt to create ahealthier, happier, and less litigious workplace.

1 http://www.cdc.gov/obesity/data/adult.html2 http://www.who.int/mediacentre/factsheets/fs311/en/index.html3 http://www.dukehealth.org/health_library/news/10044

Contributed by:

Gordon & Rees, LLP555 Seventeenth Street, Suite 3400Denver, CO 80202

John Keen, Esq.303.534.5160jkeen@gordonrees.com

Emma J. Skivington, Esq.303.534.5160eskivington@gordonrees.com

Back to top

Remodeling the Disability Access Claim:

New Law Aids California Businesses

The California Legislature has finally responded to concernsabout certain manipulative practices of the plaintiffs' ADA barand enacted a bill ("SB 1186"), with bipartisan support, which theGovernor has now signed into law. The new law, which goesinto effect immediately, takes baby steps toward curtailing themore egregious practices associated with disability accessclaims.

The law is designed to address two specific issues. First, theLegislature noted that some plaintiffs' attorneys will senddemand letters to business owners alleging access violations,but rather than asking for those violations to be corrected, theydemand payment of a quick monetary settlement under threat ofmore costly litigation in the future. This "pay me now or pay memore" approach, in the Legislature's words, does not trulypromote disability access, but erodes public confidence inaccess laws.

Second, the Legislature observed that disability access plaintiffswill often make repeat visits to non-compliant businessestablishments, encounter the same access barriers each time,and demand a monetary settlement in the amount of theirminimum statutory damages (typically $4,000) multiplied by thenumber of visits. This "stacking" of claims often results infive-figure settlement demands which can be used to intimidatebusiness owners into a quick monetary settlement.

SB 1186 was enacted to curtail these practices by opportunisticplaintiffs, and to facilitate greater awareness and compliancewith disability access laws by California businesses. Itimplements the following key changes:

Pre-litigation demand letters regarding construction-related issues may no longer contain a demand formoney, and must be written so that a reasonable personcan understand the basis of the alleged violation.

Plaintiffs may no longer "stack" their claims based onmultiple visits to the same business establishment,unless they can offer a reasonable explanation formultiple visits.

The $4,000 minimum statutory damage award forconstruction-related access violations is reduced toeither $1,000 or $2,000 for businesses who correct theviolations, depending on the size of the business and theamount of time in which the violations are corrected.

Commercial property owners must state, on lease formsor rental agreements executed afterJuly 1, 2013, whether the leased premises have beeninspected by a certified access specialist.

While these changes do not by themselves prevent plaintiffsfrom bringing disability access claims, they may reduce theincentive to do so and give business owners more of anopportunity to correct any access violations before facing alawsuit

Contributed by:

Burnham Brown1901 Harrison Street, 14 th FloorOakland, CA 94612

Cathy L. Arias, Esq.

510.835.6806carias@burnhambrown.com

Brendan Brownfield, Esq.510.835.6732bbrownfield@burnhambrown.com

Back to top

Winter 2013 | Printer Friendly | Contact Us

Back to Main

Evidence

New York Court Holds That Federal Standards of Care Preempt State-LawStandards Governing Hiring, Training, and Retention of Pilots

Experts – When to Discuss the Facts and When to Obtain a Report

Topics

Class Action

Construction Defect

Damages

Employer Liability

Evidence

Procedure

Product Liability

Qui Tam

Social Media

WorkersCompensation

Labor Law §240

Regions

Federal

International

Northeast

Labor Law §240

Mid-West

South East

West

New York Court Holds That FederalStandards of Care Preempt State-LawStandards Governing Hiring, Training, andRetention of Pilots

In re: Air Crash Near Clarence Center

A New York state trial court recently added another voice to thechorus of cases finding that federal law preempts state-lawstandards of care in the field of aviation safety. In In re: AirCrash Near Clarence Center, New York, __ N.Y.S.2d __, 2012WL 4324940 (N.Y. Sup. Ct. 2012), decided on September 21,2012, the Erie County court held that federal standards of careapplied to the plaintiffs' claims of negligent pilot hiring, training,and retention.

The case arises out of the February 12, 2009 crash ofContinental Connection Flight 3407. The plaintiffs alleged that,in addition to the pilot's negligence in operating the airplane,defendants Colgan Air, Inc., and Pinnacle Airlines Corp.negligently hired, trained, and retained the pilot, who allegedlyhad a history of failed flight tests and unsafe flying tendencies.

Colgan and Pinnacle moved for an order stating that federalstandards of care governed the plaintiffs' claims. In response,the plaintiffs first argued that the savings clause in the FederalAviation Act of 1958 ("FAAct") preserves both state remedies andstate standards of care. They also argued that the FAActempowers the Federal Aviation Administration ("FAA") toprescribe "minimum safety standards" for commercial airlineoperators, which indicates Congress's intent merely to create afloor and to leave room for the application of state tort law.Furthermore, the plaintiffs argued that state standards do notconflict with federal law with respect to their claims of negligenthiring, training, and retention. Finally, the plaintiffs argued that, iffederal regulations preempt an ordinary negligence standard ofcare, their claims effectively would be barred because theywould be restricted to examining whether the pilot took andpassed various federally required flight tests.

Rejecting these arguments, the court ordered that federalstandards of care governed the plaintiffs' claims. The court

agreed with the "litany of Federal cases"1 holding that the FAActand the Federal Aviation Regulations (" FARs") "'thoroughlyoccupy' the field of aviation safety by establishing 'complete andthorough safety standards for interstate and international airtransportation that are not subject to supplementation by, or

variation among, jurisdictions.'" The court then concluded thatpreemption applied because the plaintiffs' allegations "fallsquarely within the broad field of air safety." Furthermore, "[w]ithrespect to pilot training, certification and hiring, the regulationsappear to be exhaustive."

The court also had little sympathy for the argument that applyingfederal standards of care would effectively bar the plaintiffs'claims. As the court stated: "Admittedly, the application of thedoctrine of implied preemption to thwart state standards of caremay sometimes affect the ultimate outcome of a case, possiblyresulting in dismissal of a claim." The preemption doctrineprevails nonetheless. In reaching this conclusion, the courtleaned heavily on three federal circuit court cases–Montalvo,508 F.3d 464, Witty v. Delta Airlines, Inc., 366 F.3d 380 (5th Cir.2004), and Greene, 409 F.3d 784–in which "plaintiffs werethwarted in their pursuit of a remedy which, under differentcircumstances, would have been available to them under statecommon law." The New York court appeared to agree with thereasoning in Montalvo, where the Ninth Circuit explained that thepresence of extensive federal regulations regarding in-flightwarnings demonstrated that the FAA had exercised its "authorityto regulate aviation safety to the exclusion of the states." Theloss of certain claims is an inevitable byproduct of that FAAregulation. But the New York court was also careful to note thatit had not reached an opinion about the viability of the plaintiffs'claims, reserving that issue for another day.

While this state trial court opinion is not binding authority in NewYork or any other jurisdiction, it does demonstrate how trialcourts may be expected to apply the growing body of case lawdeclaring that the FAAct and the FARs "thoroughly occupy" thefield of aviation safety and preempt state standards of care. Incases involving claims of negligent hiring, training, and retentionof pilots, aviation defendants may point to this case asillustrative of the proper application of the now-large body offederal cases supporting the exclusive application of federalstandards of care. Defendants should be careful, however, whenrelying on this case in matters not involving air carriers, as someof the FARs upon which the court relied apply only in the aircarrier context.

1 Goodspeed Airport, LLC. v. East Haddam Inland Wetlands & WatercoursesComm'n, 634 F.3d 206 (2d Cir. 2011); US Airways, Inc. v. O'Donnell, 627 F.3d1318 (10th Cir. 2010); Montalvo v. Spirit Airlines, 508 F.3d 464 (9th Cir. 2007);Greene v. Goodrich Avionics Sys., Inc., 409 F.3d 784 (6th Cir. 2005); Abdullahv. American Airlines, Inc., 181 F.3d 363 (3d Cir. 1999); French v. PanAmExpress, Inc., 869 F.2d 1 (1st Cir. 1989).

Contributed by:Morrison Foerster, LLP12531 High Bluff Drive, Suite 100San Diego, CA 92130

Kimberly Gosling, Esq.858.314.5478kgosling@mofo.com

Case Hyperlink: http://caselaw.findlaw.com/ny-supreme-court/1612679.html

Back to top

Experts – When to Discuss the Facts andWhen to Obtain a Report

How many times have you received an expert report withoutrequesting one? It happens more than one would think.Hopefully, you are working with experts who do not preparereports on their own without your request. If you are working withan expert for the first time, it would be wise to communicate withthe expert to ensure that everyone is on the same page when itcomes to a written report. After all, once an expert has issued areport, it cannot be re-written.

This article will address, first, when to discuss the factssurrounding a loss with an expert. Secondly, the essentialcomponents of how an expert report should be written will beaddressed. Finally, the decision for whether to have the expertprepare a report will be discussed.

When to Discuss the Facts with the Expert

Upon the initial retention of an expert, the subrogationprofessional and the expert must communicate about whether anexpert report is expected to be written in the scope of theassignment. An expert needs a clear understanding of the scopeof his or her assignment, and that includes whether the expertissues a report.

1. Is the investigation ongoing?

If the investigation is ongoing, then the subrogation professionalmay want to discuss the facts surrounding the loss with theexpert. It is best, however, to wait until the investigation iscomplete before an expert report is written, assuming one isneeded. This can eliminate the need for supplemental reports,and experts having to change or modify their opinions when newfacts are discovered. A typical subrogation investigation canhave an initial examination, joint scene examination, andevidence examination. A good practice is to ask the expert if theinvestigation is complete before requesting an expert report, orto ask if there is any additional investigation or testing that theexpert would like to complete before his or her opinions arefinalized. Always allow your expert to complete his or herinvestigation, if at all possible, before you obtain his or herreport.

2. Is the cause undetermined?

Sometimes an expert advises that there are multiple possiblecauses for a loss, and an exact cause of the loss isundetermined, or no cause can be determined because ofdestroyed evidence. An expert report with an undeterminedcause may not be fruitful or add any benefit to a subrogationclaim, and may thus not be warranted. However, sometimes anexpert report is still appropriate in certain jurisdictions where anexact cause of a fire cannot be determined. For example, inFlorida, in Cassisi v. Maytag, 396 So.2d 1140 (Fla. 1st DCA1981), a product is presumed defective when a productdamages itself, and there are no remains left to determine theexact cause of the loss. For this reason, the subrogationprofessional needs to be aware of the law for proving causationfor each loss, and should seek the advice of legal counsel whendeciding whether to discuss the facts of a loss with the expert, orhave him or her issue a report in a loss when the cause isundetermined.

3. Is there no avenue for subrogation recovery?

Many subrogation investigations are opened and closed withoutthe issuance of an expert report. A majority of the insurance

companies accept verbal reports from the experts concerningthe causation of a loss. It is not cost effective for insurancecompanies to require written expert reports on claims that clearlyhave no subrogation recovery potential. When there is noavenue for a recovery, it is always best to discuss the facts ofthe loss with the expert and forego an expert report.

How to Write an Effective Expert Report

Effective expert reports should follow the four "C's" rule: clear,complete, convincing, conclusions. An effective format for anexpert report is a listing of the facts in a concise chronologicalorder that leads the reader to a logical conclusion. Thesubrogation professional and expert should work together toensure that the expert has sufficient information needed to writea complete and thorough report that includes a explanation ofthe facts and the conclusions.

Clear – The expert report is intended to provide the reader withan understanding of the claim with an orderly chronologicalstatement of the facts. A well written expert report educates thereader and explains the issues, the investigation, and thediscovery, with an analysis of the expertise applied to the factsand circumstances. The ultimate conclusion should be a logicalresult of the investigation. The expert report does not want tomislead the reader with confused or clouded facts, because thereader will not comprehend the claim, or most important, theconclusion. A photograph is worth a thousand words, andexcellent visual aids can more clearly show the reader theexpert's presentation of the claim. Other great tools arediagrams, charts, graphs, and similar visual summaries.

Complete - The expert report needs to consider all of thecircumstances, even the bad and unfavorable facts. Any bad orunfavorable facts should be addressed, along with a discussionof why those facts have no impact on the ultimate conclusions.There should be no loose ends, or unanswered questions, sothat the reader is left uncertain. As discussed above, it is alwaysbest to wait until the investigation is complete before the expertissues a written report, in order to avoid multiple reports,because the report was written too soon before the completionof the investigation.

Convincing – A good expert report sets forth a clearunderstanding of the claim, with a persuasive explanation that isbelievable, plausible and convincing. The intent is to leave thereader with no doubt that the expert has been thorough. Thestatements must be logically based on the evidence, and thenthe resulting opinions become convincing.

Conclusions – The conclusions and opinions are the finale ofthe expert report. The report needs to have a logical sequenceof events, demonstrating a process that leads to a strongconclusion. Expert reports are not effective when an expert"jumps to conclusions" without the supporting evidence. Someexpert reports have more than one opinion, and each ultimateopinion needs its own support. Such support is a derivative offacts and data accumulated throughout the investigation. Theconclusion should be built off of the analysis set forth earlier inthe report.

Decision to Write an Expert Report

1. Is an expert report needed for pre-suit settlementnegotiations?

Sometimes expert reports are written to help resolve claims in

pre-suit settlement negotiations. At the same time, many pre-suitsettlements occur without any expert report. Expert reports areeffective ways to establish a claim against a responsible party.When an adverse party requests an expert report, thesubrogation professional should understand the reason for therequest, and be confident that the report is truly necessary at anearly stage in the litigation process.

In some instances, an adverse party has no intent to settle aclaim pre-suit, and the request is only to gain access to yourexpert's opinions, knowing that the claim is headed for litigation.If this is the case, then a decision could be made to foregowriting a report. On the other hand, the subrogation professionalmay decide that an exchange of expert reports would bebeneficial to learn the other party's position as to causation andliability. There is no requirement that an expert report beprepared in pre-suit settlement negotiations, but the other partymay need a report to justify the payment of a liability claim andassist the claim in a settlement.

2. Is the case going to Arbitration Forums?

Expert reports are a very effective tool when submitting a caseto Arbitration Forums. Intercompany arbitration is a forum forclaim resolution for insurance carriers that are participatingmembers. Compulsory arbitration is applicable to a maximumamount of $100,000 for a company claim amount in automobile,medical payment, property claims, and uninsured motoristforums. Compulsory arbitration is applicable to a maximumamount of $250,000 for a contribution sought amount in specialarbitration forums. The Arbitration Forums consist of subrogationprofessionals who review written submitted claims, and writtenrebuttals. There are no rules of evidence that control thesubmission of documents in Arbitration Forums. The arbitrationdecisions are binding on the parties. If an expert report is wellwritten, then it can be a cost effective tool to assist in theresolution of your claim in Arbitration Forums.

3. Is the case going to be litigated in State Court?

Every State Court has different rules, procedures, statutes, andcase decisions. Generally, State Courts do not have mandatoryexpert written report requirements, although any State Court canorder an expert report to be written. Be aware that there canalso be differences within a State from County to County, andeven from judge to judge. Each State has its own statutes andcase law that govern the standards of negligence, productsliability, breach of contract, and comparative/ contributorynegligence. The variety of laws may have a direct impact on theopinions that may need to be addressed in an expert report toprove causation or liability. It is best to seek advice of counselwhen dealing with issues of law involved with a subrogationclaim. Note that many situations arise in State Court whereexpert reports are not required, and the verbal opinion testimonyof the expert is presented through deposition and at trial.

4. If the case is going to be litigated in Federal Court, willthe expert report fulfill the obligations under Fed.R.Civ.P.26(2)(B)(i)-(vi)?

Fed.R.Civ.P. 26(2)(B)(i)-(vi) (2012) Disclosure of ExpertTestimony states:

(B) Witnesses Who Must Provide a WrittenReport. Unless otherwise stipulated or orderedby the court, this disclosure must beaccompanied by a written report–prepared andsigned by the witness–if the witness is one

retained or specially employed to provide experttestimony in the case or one whose duties as theparty's employee regularly involve giving experttestimony.

Failure to comply with the mandated provision, may possiblyresult in sanctions against a party, the striking of an expertreport, or the striking of expert testimony, which could then leadto the dismissal of a lawsuit.

An expert report must contain:

i) a complete statement of all opinions thewitness will express and the basis and reasonsfor them;

The report is required to set forth each opinion with a supportedbasis and reason for each. One opinion may have numerousfacts of support. The basis is the foundation, origin and sourceof each fact relied upon in formulating the opinion. The basiscannot be based on speculative or unsupported facts. Thereason is the cause, rationale, explanation and analysis used toreach the opinion. See Loeffel Steel Products, Inc. v. DeltaBrands, Inc. 387 F. Supp. 2d 794 (N.D. Ill. 2005) (excludingreport of damages expert because it did not comply with the rulewhen there was no explanation, written opinions, details oranalysis in the report); R.C. Olmstead, Inc. v. CU Interface, LLC,606 F.3d 262 (6th Cir. 2010) (excluded expert report because thereport did not set forth the facts and outline the reasoning with alogical foundation when it did not include the "how" and the"why" that was so crucial).

(ii) the facts or data considered by the witness informing them;

The intent is that "facts or data" are to include any materialconsidered by the expert from whatever source that containsfactual information. The rule extends the obligation to any factsor data "considered" by the expert in forming the opinions to beexpressed, not only those relied upon by the expert.

There is a relatively new rule that went into effect on December1, 2010, that provides work-product protection for draftdisclosures and most attorney/expert communications underFed.R.Civ.P. 26(b)(4). The subrogation professional needs tononetheless presume that all documents contained in theexpert's file will probably be discoverable in litigation, with a fewexceptions, including the attorney/expert communication. Thus,consider everything in the expert's file will be read by theopposing party, including all e-mail communications. As a result,the subrogation professional should pay attention to what iscommunicated to the expert in writing. The telephone istherefore an excellent way to communicate with your expert.

(iii) any exhibits that will be used to summarize orsupport them;

This requirement is intended to allow the expert to use asummary and exhibits for display at trial, and is usually doneclose to the trial date. For instance, demonstrative evidencesuch as diagrams, graphs, and charts can be effective visualaids for the jury to better understand the expert opinions.

(iv) the witness's qualifications, including a list of

all publications authored in the previous 10years;

An updated resume or curriculum vitae, or "CV", is sufficient todisclose the expert's qualifications. The purpose is to disclosethat the expert is qualified in education, expertise or specialty toprovide expert witness testimony. See Cruz-Vazquez v.Mennonite General Hosp. Inc., 613 F. Supp. 2d 202 (D.P.R.2009) (excluding plaintiff's expert due to failure to providedefendant with updated CV of expert prior to trial). CompareSoufflas v. Zimmer, Inc., 474 F. Supp. 2d 737 (E.D. Pa. 2007)(finding the orthopedic surgeon's CV sufficient when there wasdisclosure of experience of knee and shoulder surgery, trainingcourses, instruction courses, and private practice). If the experthas no publications, then it should be noted in the report,because the failure to provide the information can haveunfavorable results. See Sykes v. Napolitano, 634 F. Supp. 2d 1(D.D.C. 2009) (issuing a technical violation because of themissing list of publications the expert had authored in the pastten years).

(v) a list of other cases in which, during theprevious 4 years, the witness testified as anexpert at trial or by deposition; and . . .

The rule does not require the witness to make the depositiontranscripts available to the other party. As a subrogationprofessional, the list of deposition and trial testimonies, as wellas the resume or curriculum vitae, can be very useful whenworking with an unfamiliar expert. You may find that an experthas the credentials to serve as an expert, but has neither beendeposed nor testified at trial. Knowing this information early inthe investigation can also assist the subrogation professional inselecting an expert, because you may need an expert with boththe credentials and trial testimony. See Sykes v. Napolitano, 634F. Supp. 2d 1(D.D.C. 2009) (holding report that lacked a list ofthe cases in which the expert had testified in the last four yearswas deficient under the rule). But see Currier v. UnitedTechnologies Corp., 213 F.R.D. 87 (D. Me. 2003) (ruling thatalthough plaintiff may not have provided a listing of the othercases in which the expert had testified that would not be groundfor excluding their testimony).

(vi) a statement of the compensation to be paid for the study andtestimony in the case. The purpose of this provision is to let theother party know how much money the expert billed to datethrough the preparation of the report, and the rate for trialtestimony. Compliance includes an invoice outlining the datesworked and the hourly rate charged from the inception of theclaim through the investigation, up to the date of the report. Thestatement should also include the hourly rates charged fordeposition and trial testimony.

5. Are there any additional opinions after the expert reportis written?

Experts are limited to the opinions only stated in the report, andcannot offer new information or theories not included in theirreports. Fed.R.Civ.P. 26(E) requires experts to supplementexpert reports when required. Fed.R.Civ.P. 26(e) states that aparty's duty to supplement extends both to information includedin the report and to information given during the expert'sdeposition. Any additions or changes to this information must bedisclosed by the time the party's pretrial disclosures are due.See Macaulay v. Anas, 321 F.3d 45 (1st Cir. 2003) (precluding

plaintiff's expert witness from testifying to a new theory of liabilitythat had been asserted after the deadline).

6. When should an expert report be prepared for FederalCourt?

The subrogation professional needs to keep in mind that expertreports in Federal Court are due to the other party 90 daysbefore trial, unless a different time is ordered by the court. Theexpert report is therefore usually written shortly before trial, sothat the opinions rendered can take into consideration thetotality of the facts, circumstances, and evidence involved in thecase. Thus, consider that the totality of the facts, circumstances,and evidence may not all be favorable to your position or theexpert's opinions. A well written expert report addresses theunfavorable and negative facts by distinguishing and reasoningwhy those facts are not relevant or material to your expert'sultimate opinions.

Conclusion

In summary, the subrogation professional and the expert are ateam that must work together during the investigation of a claimto determine whether a claim has any subrogation recoverypotential. Whenever a claim has subrogation recovery potential,a decision is then made whether a verbal report from the expertis sufficient, or whether a written report is needed. Whether anexpert report should be written depends on the status of theinvestigation, the forum of where the expert report will be used,and the criteria needed for the report. A good expert report isbased on a complete investigation that chronologically states thefacts, and leads the reader to a logical, clear, and convincingconclusion.

Contributed by:

Butler Pappas Weihmuller Katz Craig LLP777 S. Harbour Island Boulevard, Suite 500Tampa, FL 33602

Mary Jo Kuusela, Esq.813.281.1900mkuusela@butlerpappas.com

Back to top

Winter 2013 | Printer Friendly | Contact Us

Back to Main

Procedure

NY Appeals Court: Claims Disposed of by Motion Practice Not Concludeduntil Appeal from Judgment Is Decided

Tolling Agreements vs. Statute of Limitations Waivers

Topics

Class Action

Construction Defect

Damages

Employer Liability

Evidence

Procedure

Product Liability

Qui Tam

Social Media

WorkersCompensation

Labor Law §240

Regions

Federal

International

Northeast

Labor Law §240

Mid-West

South East

West

NY Appeals Court: Claims Disposed of byMotion Practice Not Concluded untilAppeal from Judgment Is Decided

Strauss v. East 149th Realty Corp.

In a ruling that will be noticed only by appellate lawyers, but willlikely have important consequences for trial strategy, the NewYork Court of Appeals held that orders made at the pre-answeror summary judgment stage that dismiss (1) causes of actionasserted in the complaint or (2) counterclaims or cross-claimsasserted in the answer may be brought up on appeal from thefinal judgment in the case.

In Strauss v. East 149th Realty Corp., 2012 NY Slip Op 07048(October 23, 2012), a breach of contract action arising from afailed merger of two small companies, the trial court granted theplaintiff's motion to dismiss the defendants' counterclaims andthird-party claims for fraud, conversion and tortious interferencewith contract. The defendants did not take an immediate appealfrom that order. The matter went forward to a bench trial, whichresulted in a judgment for the plaintiff, from which the defendantsappealed. The Appellate Division dismissed the portion of theappeal in which the defendants argued that the prior orderdismissing their counterclaims and third-party claims was inerror. The Court of Appeals reversed and remitted the matter tothe Appellate Division to decide the issues raised by thedefendants.

The Court of Appeals' decision turned on the permissive natureof appeals in New York. In New York, an appeal can be taken,as of right, to the Appellate Division, New York's intermediateappellate court, at any stage of the action from any orderdetermining a motion made on notice. See CPLR 5701. Inaddition, an appeal from the final judgment in the case brings upfor review "any non-final judgment or order which necessarilyaffects the final judgment." CPLR 5501(a)(1). The issue inStrauss was whether the non-final order dismissing thecounterclaims "necessarily affected" the final judgment in favorof the plaintiff. The Court of Appeals held that it did, reasoningthat "because Supreme Court's dismissal of the counterclaimsand third-party claim necessarily removed that legal issue fromthe case …, that order necessarily affected the final judgment."

The importance of this ruling for trial lawyers is that claimsdisposed of by motion practice early in the case are not reallyconcluded until an appeal from the judgment is decided. As aresult, even though a claim or defense that has been dismissed

will not be tried, that claim remains a factor in evaluating thecase for settlement purposes if the order dismissing it may notbe sustainable on appeal. While the party whose claim isdismissed can take an interlocutory appeal from the order, thesuccessful party cannot because that party is not aggrieved.The issue can be resolved prior to final judgment, however, if theparty whose claim was dismissed files a notice of appeal butfails to perfect the appeal before it is deemed abandoned. In thatcase, the appeal from the interlocutory order is subject todismissal and, if that appeal is dismissed for failure to prosecute,the issue cannot be raised without leave of court on the appealfrom the final judgment.

Contributed by:

Wilson Elser Moskowitz Edelman & Dicker LLP55 West Monroe Street - Suite 3800Chicago, IL 60603-5001

Melissa A. Murphy-Petros, Esq.312.821.6154melissa.murphy-petros@wilsonelser.com

Robert Spolzino, Esq.914.872.7497Robert.Spolzino@wilsonelser.com

Case Hyperlink: http://www.nycourts.gov/ctapps/Decisions/2012/Oct12/162opn12.pdf

Back to top

Tolling Agreements vs. Statute ofLimitations Waivers

Don Johnson Productions, Inc. v. Rysher Entertainment

Code of Civil Procedure Section 360.5 allows parties to waivethe statute of limitations if the parties follow certain procedures.This case considered whether a written tolling agreementbetween the parties was subject to the same requirements.

On December 7, 1994, plaintiff Don Johnson Productions, Inc.("Johnson") entered into a contract with Rysher Entertainment,LLC ("Rysher") to provide acting services for the "Nash Bridges"television series. In return, Rysher agreed to fund production.The contract was extended in 1997, 1998 and 1999. Rysher wasoperated by 2929 Entertainment, LP which later sold Rysher toQualia Capital, LLC in 2006, which eventually dissolved Rysher(collectively "defendants").

Prior to the airing of the final 2001 season of "Nash Bridges,"Rysher sold worldwide syndication rights for the series to USANetwork. Johnson was not a party to the syndication transactionand did not receive a share in the syndication profits. A disputeensued between Rysher and Johnson regarding his 50%ownership share in the syndication profits. On May 16, 2002, theparties executed a tolling agreement, providing that Johnson'stime to bring any action related to the Nash Bridges series wouldbe tolled to at least May 14, 2002 until and unless Rysherprovided reasonable notice (30 days) to Johnson rescinding thetolling agreement. Neither party attempted to rescind the tollingagreement prior to litigation.

Approximately five years later on February 19, 2007, Johnson

filed a complaint related to the syndication profits dispute againstRysher, alleging breach of contract, conversion, unjustenrichment, and interference with prospective economicadvantage. The complaint sought compensatory damages,injunctive relief, attorney's fees, punitive damages and interest.The parties agreed that Johnson's contract claim vested onMarch 17, 1998 when the accountant employed by Rysherprovided Johnson's employee with a "participation/distributionstatement" for the period ending December 31, 1997 detailingincome for the series.

Defendants alleged that Johnson's 2007 lawsuit was untimelybecause it was filed more than four years after the parties' 2002tolling agreement expired by operation of law. Defendantscontended that California Code of Civil Procedure § 360.5("Section 360.5") required that the 2002 tolling agreement berenewed in writing every four years (i.e., 2006). Section 360.5allows parties to waive the applicable statute of limitationsgoverning a dispute if the waiver is set forth in writing andsigned by the person obligated. A Section 360.5 waiver iseffective for no more than four years unless successivelyrenewed by parties. Defendants argued that the May 16, 2002tolling agreement was executed by Pryor more than four yearsbefore Johnson's 2007 lawsuit such that the tolling agreementexpired in 2006. Defendants contended that absent timelyrenewal of the tolling agreement pursuant to Section 360.5,Johnson's claims were barred under California Code of CivilProcedure §337, setting forth a four-year statute of limitations forwritten contracts.

The Court of Appeal rejected defendants' argument that Section360.5 and its four-year renewal requirement was controlling asto the 2002 tolling agreement between Johnson and Rysher.The court held that the 2002 tolling agreement did not involve awaiver of the right to assert the statute of limitations. Rather, theparties' 2002 tolling agreement "suspended" the running of thestatute of limitations under California law. The court referencedcase law noting that "tolling may be analogized to a clock that isstopped and then restarted." The court pointed out that thelegislative intent of Section 360.5 specifically refers to waivers ofthe statute of limitations, not tolling agreements. After examiningthe language and legislative history of Section 360.5, the courtconcluded that the Section 360.5 four-year renewal requirementdid not apply to the 2002 tolling agreement. There was norequirement that the tolling agreement be renewed after fouryears. Rather, the May 16, 2002 tolling agreement tolled theSection 337 statute of limitations. No party rescinded the tollingagreement. Therefore, Johnson's February 19, 2007 complaintwas timely filed.

Comment

The court confirmed that tolling agreements will be treateddifferently from waivers of the statute of limitations. Tollingagreements simply suspend the applicable statute of limitationsuntil an agreed-upon time. Unlike a waiver, a tolling agreement isnot subject to Section 360.5 requirements of renewal every fouryears, but it is very important when fashioning tollingagreements to clearly state when the statute of limitations will besuspended, the length of the tolling period and/or the type ofnotice required to re-start the running of the statute of limitations.

Contributed by:

Low, Ball & LynchAttorneys at Law505 Montgomery Street, 7th FloorSan Francisco, CA 94111-2584

Karen Moore, Esq.415.981.6630kmoore@lowball.com

Case Hyperlink: http://scholar.google.com/scholar_case?case=13646065949892036580&q=don+johnson+v.+rysher+entertainment&hl=en&as_sdt=2,33&as_vis=1

Back to top

Winter 2013 | Printer Friendly | Contact Us

Back to Main

Product Liability

Court strikes a blow against CPSC online database

Massachusetts Board of Pharmacy Enacts Emergency RegulationsTargeting Compounding Activities and Impacting All Registered andLicensed Pharmacies

Topics

Class Action

Construction Defect

Damages

Employer Liability

Evidence

Procedure

Product Liability

Qui Tam

Social Media

WorkersCompensation

Labor Law §240

Regions

Federal

International

Northeast

Labor Law §240

Mid-West

South East

West

Court Strikes a Blow Against CPSCOnline Database

Company Doe v. Tenenbaum

One of the most controversial aspects of the 2008 law thatstrengthened federal government oversight of consumerproducts was the creation of an online database of incidentreports generated by consumers. While the law permits affectedcompanies to challenge inaccuracies before reports are posted,it has been unclear what happens when the government and theaffected manufacturer disagree whether information to be postedis materially inaccurate. Last week a U.S. District Court sidedwith the manufacturer in its dispute over publication of a reportabout its product and directed the government not to post thereport. (Company Doe v. Tenenbaum, D.Md. No. 11-cv-2958,Oct. 22, 2012.)

Background

The Consumer Product Safety Commission (CPSC) wascharged by Congress in 2008 to create a publicly accessible andsearchable online database of reports of alleged harm relating toconsumer products. See www.saferproducts.gov. Upon receiptof a consumer's report of alleged harm from a product, theCPSC shares the information with the product's manufacturer.The manufacturer has a very brief window in which to contestthe material accuracy of the information as it relates to itsproduct. The CPSC then may determine whether to decline topublish the report, or publish it with corrections or additionsregarding the information in question.

In this case, an incident report was received by the CPSC aboutan injury to a child, close in time or space to the company'sproduct. (The decision and other court documents are redactedas to any information identifying the company or product inquestion, or describing the circumstances or nature of theinaccurate information.) The information was shared with theproduct's manufacturer who contested the information asmaterially inaccurate. The CPSC agreed and revised its report.The company objected again and the CPSC revised again. Thecourt's decision suggests, between redactions, that the disputecentered on whether a causal connection existed between theproduct and injury or whether the two were a "coincidence" ofproximity or timing. Even the CPSC itself, which obtainedscientific counsel, appeared uncertain. Nevertheless, the CPSCfinally insisted on publishing the fourth version. The matter wentto court.

The Decision

The court's decision hinged on the meaning of the term "relatingto" in the phrase "reports of harm relating to the use of consumerproducts." If "relating to," as used in the statute, is synonymouswith "concerning" or "about," the publication mandate is largerthan if "relating to" is read with a narrower, causal type meaningakin to "connected to." The difference is far greater thansemantics. It goes to whether causality is something the CPSCmay ignore. The court effectively said no and sided with thecompany.

The court exhaustively analyzed principles of statutory andregulatory interpretation. It also cited a case where the CPSCaccepted a manufacturer's objection to publication of aconsumer's report of injury due to a leaking gas stove where atechnician later attributed the leak not to the stove but to a loosepipe. It was inconsistent for the CPSC to have declined to postthe gas stove report yet insist on publishing this one. It was anabuse of discretion for the CPSC to have tried to publish thisreport despite the doubts as to causality. Accordingly, the courtgranted summary judgment to the company on its motion for apreliminary injunction, enjoining publication of the report.

Conclusion

This decision, if upheld, could be the basis for other successfulchallenges to publication online of consumer-generated incidentreports heavy on innuendo and coincidence and light on causalconnection.

Contributed by:

Nixon Peabody, LLPKey Towers at Fountain Plaza40 Fountain Plaza, Suite 500Buffalo, NY 14202

Benjamin R. Dwyer, Esq.716.853.8122bdwyer@nixonpeabody.com

James W. Weller, Esq.516.832.7543jweller@nixonpeabody.com

Case Hyperlink: http://www.citizen.org/documents/Company-Doe-v-Tenenbaum-Revised- Memorandum-Opinion-Redacted.pdf

Back to top

Massachusetts Board of PharmacyEnacts Emergency Regulations TargetingCompounding Activities and Impacting AllRegistered and Licensed Pharmacies

The Massachusetts Board of Pharmacy (BOP) enactedemergency regulations effective November 1, 2012, in responseto the deadly fungal meningitis outbreak caused by drug

contamination at a Massachusetts compounding pharmacy.1

Most significantly, the regulations require pharmacies to report

extensive data to the BOP regarding their compoundingactivities. In addition, the regulations implemented new reportingobligations that affect all registered pharmacies and pharmacistsin the state and granted the BOP greater authority to quicklyshut down pharmacies and quarantine products in the event ofimmediate public health and safety concerns.

Reporting on Sterile Compounding Activity

The emergency regulations require all licensed pharmacies thatperform central intravenous admixture services (CIVAS) or sterilecompounding to submit the following information to BOP everysix months:

the total number of prescriptions dispenseddistribution data identifying the states in which theprescriptions were distributedthe status of any non-resident licenses issued by otherstatesclean room hood certifications required byMassachusetts regulationsstatus of CIVAS approvals where applicable

Pharmacies submitting this information must include an affidavitattesting to compliance with all laws and regulations related tosterile compounding. This attestation requires that pharmaciesonly prepare and dispense medication pursuant to a validprescription for a single patient, indicating the BOP's concernthat compounding pharmacies have been mass-producingmedications similar to pharmaceutical manufacturers, which ispotentially in violation of state licensure requirements.

Reporting of Disciplinary Actions and Change inAccreditation Status

All pharmacies and pharmacists registered or licensed inMassachusetts must report to the BOP all "non-routine notices,correspondence and disciplinary actions" within seven businessdays of receipt. These disciplinary actions include, but are notlimited to:

the revocation, suspension, probation, censure,reprimand or restriction of a license to operate apharmacy or practice pharmacythe denial of an application for the renewal of apharmacy licensethe denial or restriction of privileges to practice pharmacytermination from Medicare or state Medicaid programsadverse actions or fines imposed by any state or federalagency

Pharmacies and pharmacists must also report any adversechange in status of accreditation within seven business days.The new regulations also require every pharmacy andpharmacist to provide the BOP with any responsive documentsthe pharmacy or pharmacist submitted to a government agencyin connection with an event listed above.

Reporting Adverse Events

All pharmacies must now report within seven business days alladverse events relating to the preparation of medication in thepharmacy. Regulations previously required the reporting only ofimproper dispensing of prescriptions which result in seriousinjury or death. In addition, pharmacies must report anyabnormal results, including the failure to be certified to operate a

pharmacy in the state, and identification of any environmentalcontaminants in the pharmacy.

Cease and Desist and Quarantine Authority

The BOP also may impose a summary cease and desist noticebefore a hearing takes place in order to stop or to restrictoperations "to immediately protect the public health, safety orwelfare." Similarly, the board may issue a summary quarantine ofproducts prior to a hearing in order to prevent the use ofmedications prepared by or in possession of a registered orlicensed pharmacy for safety reasons. These orders remain ineffect until rescinded by the board or until the board issues afinal decision. A hearing must be granted to the registered orlicensed pharmacy within 21 days of the board action.

While these emergency regulations are effective immediately,the Massachusetts BOP has granted a 90-day comment period,including a public hearing, to consider changes before taking afinal vote.

Impact of Regulations

These regulations will provide the Massachusetts BOP withsignificantly more data on the activities of licensed pharmaciesand will likely result in additional inquiries into these activities.Compounding pharmacies should expect BOP to scrutinize thescope, volume, and nature of compounding activities both insideand outside of the Commonwealth. Moreover, all pharmaciesand pharmacists should be aware that BOP now has the abilityto monitor adverse actions against their licensure or certificationin all states.

We will continue to monitor the impact of these emergencyregulations on Massachusetts-licensed pharmacies as well asother upcoming regulatory developments concerning pharmacycompounding in Massachusetts and other states.

1 See 247 Code Mass. Regs. 6.15, 10.03(1), 10.06, 10.08.

Contributed by:

Holland & Knight10 St. James AvenueBoston, MA 02116

Jeffrey Mittleman, Esq.617.854.1411jeffrey.mittleman@hklaw.comwww.hklaw.com

Back to top

Winter 2013 | Printer Friendly | Contact Us

Back to Main

Qui Tam

California Amends Its False Claims Act to Mirror Federal Law, PreserveFederal Incentive Awards, and Loosen the Reins on Whistleblower Suits

Topics

Class Action

Construction Defect

Damages

Employer Liability

Evidence

Procedure

Product Liability

Qui Tam

Social Media

WorkersCompensation

Labor Law §240

Regions

Federal

International

Northeast

Labor Law §240

Mid-West

South East

West

California Amends Its False Claims Act toMirror Federal Law, Preserve FederalIncentive Awards, and Loosen the Reinson Whistleblower Suits

Introduction

On September 27, 2012, Governor Brown signed Assembly Bill2492 (“AB 2492”) amending California’s False Claims Act,California Government Code §§ 12650, et seq. (“CFCA”). TheCFCA permits the Attorney General (or local prosecutors) tobring a civil action to recover treble damages and civil penaltiesagainst any person who knowingly makes or uses a false recordor statement to either obtain money or property from the state or

avoid paying or transmitting money or property to the state.1 Incertain circumstances, private individuals—knowninterchangeably as “whistleblowers,” “qui tam plaintiffs,” or“relators”—are permitted to file suit in the name of thegovernment; if their suit is successful, they share in any financialaward. In 1987, California became the first state to adopt a FalseClaims Act.

The amendments just signed into law were largely designed toconform the CFCA to the federal False Claims Act, 31 U.S.C. §§3729, et seq. (“FCA”). The amendments, described in moredetail below, take effect on January 1, 2013.

Protecting Federal Incentive Payments Drove RecentChanges To California’s False Claims Act

The impetus for amending the CFCA was to preserveCalifornia’s ability to receive financial bonuses from the federalgovernment for anti-fraud prosecution. Under section 1909 ofthe Social Security Act (“SSA”), states with false claims actstatutes can qualify for federal incentive awards from amounts

recovered pursuant to Medicaid-related false claims.2 To qualifyfor these incentive payments, certain provisions of the state’sfalse claims act must mirror the federal FCA. The FCA has beenamended three times since 2009—by the Fraud Enforcementand Recovery Act of 2009, the Patient Protection and AffordableCare Act in 2010, and the Dodd-Frank Wall Street Reform andConsumer Protection Act in 2010. After these amendments, theCFCA no longer mirrored the FCA, and tens of millions of dollarsin federal financial incentives were at risk of being lost.

In early 2012, the federal Office of the Inspector General of theU.S. Department of Health and Human Services (“OIG”)informed California’s Attorney General that because of the

recent amendments of the FCA, the CFCA no longer met therequirements of section 1909 of the SSA. The OIG notifiedCalifornia that it would only remain eligible for federal incentivesif its statutory scheme was “at least as effective in rewarding and

facilitating qui tam actions” as the FCA.3 California lawmakersresponded to the federal government’s mandate by approvingAB 2492 in August 2012.

AB 2492 Amendments

Key enactments of AB 2492 are highlighted below:

Liability

Prior to the recent amendments, a suit based on a publicdisclosure would be barred under the CFCA unless theparty bringing the action was an “original source”—i.e.,someone who had direct and independent knowledge ofthe information on which the allegations were based. AB2492 alters the original source definition to include aperson “who has knowledge that is independent of, andmaterially adds to, the publicly disclosed allegations ortransactions.”

Under the CFCA, a false claim can arise for knowinglyavoiding or decreasing an obligation to pay the state. AB2492 now incorporates the federal definition of“obligation,” which also gives rise to liability for theretention of an overpayment.

Under the prior law, suits based on public disclosureswere barred. AB 2492 includes a provision requiringdismissal in the event of a public disclosure “unlessopposed by the Attorney General or prosecutingauthority of a political subdivision,” creating the potentialto override the public disclosure bar in the event theprosecuting authority opposes dismissal.

With regard to the statute of limitations, AB 2492provides that if the California Attorney General files acomplaint in intervention, it will relate back to the filingdate of the whistleblower’s complaint.

Penalties

AB 2492 increases the civil penalties for a false claim tonot less than $5,500 and not more than $11,000 for eachfalse claim.

Under the new law, a defendant can recover attorneys’fees if the defendant prevails in the case and the courtfinds that the claim was clearly frivolous, clearlyvexatious, or brought primarily for purposes ofharassment. If the Attorney General has intervened in thecase, then the attorneys’ fees are assessed to thegovernment. If the Attorney General declined tointervene, and the whistleblower proceeded with thecase, then the attorneys’ fees are assessed to thewhistleblower.

Whistleblowers

Whistleblowers are now potentially eligible for a reducedaward even if they planned and initiated the violationupon which the CFCA action was based.

AB 2492 expands anti-retaliation provisions beyond justemployees to contractors and agents.

The amendments to the CFCA increase incentives to bringlawsuits against businesses by enhancing civil penalties,expanding anti-retaliation protections, clarifying the statute oflimitations, and facilitating whistleblower suits. In light of thesechanges, and the public’s ongoing scrutiny of governmentspending, companies would be well-served to revisit theircompliance programs with CFCA issues in mind. Ongoingmonitoring and handling of employee concerns regardingalleged violations of regulations or government contractualrequirements should be prioritized.

1 Cal. Gov’t Code § 12651(a)(1) and (2).2 See 42 U.S.C. § 1396h. Specifically, the federal Deficit Reduction Act of 2005(“DRA”) provides states with a financial incentive to enact state false claimslaws that are at least as effective as the federal law: states are awarded anadditional ten percent of any amount recovered under the state law for falseclaims to the state Medicaid program.3 Bill Analysis, AB 2492 (June 18, 2012), available athttp://www.leginfo.ca.gov/pub/11-12/bill/asm/ab_2451-2500/ab_2492_cfa_20120815_175821_asm_floor.html.

Contributed by:

Simpson Thacher & Bartlett, LLP1999 Avenue of the Stars -- 29th FloorLos Angeles, CA 90067

Deborah L. Stein, Esq.310.407.7525dstein@stblaw.com

K. Lucy Atwood, Esq.310.407.7528katwood@stblaw.com

Back to top

Winter 2013 | Printer Friendly | Contact Us

Back to Main

Social Media

Researching Jurors on the Internet - Ethical Implications

California Law Prohibits Requests for Employees' Social MediaPasswords or Information

Topics

Class Action

Construction Defect

Damages

Employer Liability

Evidence

Procedure

Product Liability

Qui Tam

Social Media

WorkersCompensation

Labor Law §240

Regions

Federal

International

Northeast

Labor Law §240

Mid-West

South East

West

Researching Jurors on the Internet -Ethical Implications

Introduction

As the membership rates of social networking1 websitescontinue to soar, attorneys are increasingly relying on Internetresearch of prospective jurors to gain an advantage at trial. Theease with which litigators can obtain valuable information aboutmembers of the jury pool has made this a prevalent strategy.Anecdotes constantly surface about the trial consultant whomiraculously discovers prospective jurors’ hidden biases throughtheir online activity. Pre-trial Internet research is becoming somuch the standard that the New York City Bar Association(NYCBA) recently suggested that a trial attorney’s failure tothoroughly investigate prospective jurors might be an abdication

of the attorney’s professional duty.2

But there is an apparent conundrum: while litigators may beblameworthy for neglecting to conduct Internet research onprospective jurors, attorneys may also be guilty of an ethicalviolation for performing that very act. In June, the NYCBA issuedFormal Opinion 2012-2, a comprehensive report on the ethicalimplications for lawyers who research jurors on the Internet.Formal Opinion 2012-2 states that attorneys might be in violationof the New York Rules of Professional Conduct if they contact aprospective juror through a social media site – even if thecontact was unintentional. According to the NYCBA, if a socialmedia site automatically notifies a juror when another personhas viewed the juror’s profile page, a lawyer “communicates”with a juror simply by looking at the juror’s publicly availableprofile. Formal Opinion 2012-2 emphasizes that attorneys musteducate themselves about how social media websites workbefore they use them.

At first glance, these ethical views may seem hard to reconcile.On one hand, an attorney could be liable for forgoing Internetbackground checks. On the other, an attorney may be culpablejust by looking at a juror’s publicly available social media profilepage. But these guidelines are not in conflict. By compellingattorneys to learn how various social media sites operate, theNYCBA is empowering attorneys to become experts in this field.If lawyers are armed with knowledge about how these websitesfunction, they can perform precise research that comports withtheir ethical obligations.

Internet Research of Jurors

The number of individuals with online profiles is growing

exponentially. One recent survey estimates that 35% of adultsand 60% of people under the age of 30 now belong to a social

media networking site3. Given those figures, trial lawyers areusing websites like Google, Facebook, and Twitter to learn asmuch as possible about the character traits of prospective

jurors.4 With the assistance of an associate or a paralegal,litigators can conduct realtime background searches on amultitude of potential jurors.

The primary purpose of performing Internet backgroundresearch is to enable trial attorneys to weed out biased jurors

during the voir dire process.5 Litigators can use peremptorychallenges – limited objections that a lawyer may use to strike aprospective juror – if attorneys discover evidence that a potential

juror will be prejudiced against their clients.6

The benefits of Internet background research can be

substantial.7 Historically, trial awyers have depended onconfidential juror questionnaires to obtain backgroundinformation about prospective jurors, but lawyers have criticized

the paucity of information contained in juror questionnaires.8

Now, through the Internet, trial attorneys can obtain informationabout prospective jurors that would otherwise not be disclosedduring voir dire, such as the juror’s political beliefs and economic

philosophies.9 Litigators can also use the Internet to identifyjurors who may be receptive to their clients’ claims or jurors whoseem likely to disregard the rule of law.

For instance, a trial consultant in a products liability caselearned that a potential juror had posted on facebook “that oneof her heroes was Erin Brockovich, the crusading paralegal

known for her work for plaintiffs in environmental cases.”10 In alawsuit involving patent rights, a trial consultant for the plaintiffdiscovered that a prospective juror had previously bloggedabout the unfairness of copyright infringement, and he sought to

keep this juror on the panel.11 And in a somewhat eccentricexample, a potential juror in a personal injury case was rejectedbecause she had blogged about her extensive attempts to

contact extraterrestrials.12

The benefits of pre-trial Internet research were starkly realized ina recent products liability trial in Fort Lauderdale, Florida. Theplaintiff claimed that he was injured after he was forced to cleana machine in a confined space. Before examining prospectivejurors, the plaintiff’s attorney began researching them on socialnetworking sites. During the course of her research, the attorneylearned that one of the potential jurors belonged to a supportgroup for claustrophobics. She selected this juror for the panel,and the juror ultimately served as the foreman. The result: a

verdict in favor of the plaintiff.13

Furthermore, Internet background searches are extremelyefficient. Compared with traditional forms of investigativeresearch, attorneys and their staff members can sift through vastamounts of information on the Internet in a relatively short

amount of time.14 Attorneys inside a courtroom can email thenames of prospective jurors to associates or paralegals, whocan then plug these names into various search engines or socialmedia websites. Electronic data on social media websites canbe retrieved within seconds, and the trial lawyer can receive thebackground information before making a decision about whether

to strike the prospective juror.15

Social media websites may also be used by attorneys to verifythe accuracy of statements made by prospective jurors duringvoir dire. Depending on the jurisdiction, voir dire can be a

frenetic process, and it may not be possible to scrutinize the

background information of each juror. In Dellinger,16 a criminalfraud trial, a juror denied during voir dire that she had a socialrelationship with the defendant. After the jury rendered a guiltyverdict against the defendant, the defendant disclosed that hehad received a message from the juror before the trial through asocial networking site. In the message, the juror sympathizedwith the defendant’s plight and said they would “Talk Soon!” TheSupreme Court of Appeals of West Virginia ultimately held thatthe trial court abused its discretion in failing to order a new trial.

The efficacy of researching potential jurors on the Internet isleading some commentators to suggest that trial attorneys may

be obligated to perform this service.17 Indeed, the NYCBAobserved that clients have begun to assume that their attorneyswill conduct Internet background searches of jurors and that“standards of competence and diligence may require doingeverything reasonably possible to learn about the jurors who will

sit in judgment on a case.”18 One recent scholarly essay proffersthat it may even be malpractice for a trial attorney not to perform

this research.19

To be sure, the New York Rules of Professional Conduct(NYRPC) do not provide any indication about whether pre-trialInternet research is required. Two rules in the NYRPC, however,bear on this issue. Rule 1.1 provides that “[a] lawyer shouldprovide competent representation to a client. Competentrepresentation requires the legal knowledge, skill, thoroughnessand preparation reasonably necessary for the representation.”And Rule 1.3(a) states that “[a] lawyer shall act with reasonable

diligence and promptness in representing a client.”20 So, for thetime being, it seems safe to assume that trial attorneys are notinvariably required to perform this service. But it may not be longbefore that changes. And while pre-trial Internet research mayeventually be an obligatory ethical duty, the NYCBA’s FormalOpinion 2012-2 indicates that when engaging in this conduct,attorneys must be mindful of their ethical responsibilities.

Ethical Rules About Researching Jurors Electronically

Until recently, the ethical rules for lawyers who conduct Internetresearch on potential jurors in New York State were not explicit.The NYRPC provides only that “a lawyer shall not communicateor cause another to communicate with a member of the juryvenire from which the jury will be selected for the trial of a case.”21 In 2011, the New York County Lawyers’ AssociationCommittee on Professional Ethics issued an interpretation of

Rule 3.5(a)(4).22 The Committee determined that it is ethical andproper under Rule 3.5(a)(4) for an attorney to “undertake apretrial search of a prospective juror’s social networking site,provided that there is no contact or communication with theprospective juror and the lawyer does not seek to ‘friend’ jurors,subscribe to their Twitter accounts, send Tweets to jurors or

otherwise contact them.”23 Still, the precise meaning of “contact”and “communicate” in this context had not yet been defined.

In June, however, the NYCBA released its groundbreakingethical opinion on using social media and related technology forpre-trial research. In it, the NYCBA attempted to clarify themeaning of “communication” within the context of Rule 3.5(a)(4).While the NYCBA does not have the authority for policing ethicalviolations in New York State, formal ethical opinions from theNYCBA definitely hold sway. In discerning the meaning“communication,” the NYCBA referenced several sources:Black’s Law Dictionary (9th Ed.), The Oxford English Dictionary,and Local Rule 26.3 of the United States District Courts for theSouthern and Eastern Districts of New York. Ultimately, it

determined that it is irrelevant whether an individual intends tocommunicate with another person; communication isaccomplished when knowledge or information is transmitted fromone person to another. The focal point is on the recipient of the

communication, not on the communicator.24

The NYCBA recognizes that some social media servicesautomatically notify users when their profiles have been viewed.For example, members of LinkedIn, a highly popular professionalnetworking site, receive a message when other LinkedInmembers have viewed their profiles. Other social networking

services that offer this feature include Bebo and Tagged.25 TheNYCBA concludes that

[a] request or notification transmitted through asocial media service may constitute acommunication even if it is technically generatedby the service rather than the attorney, is notaccepted, is ignored, or consists of nothing morethan an automated message of which the“sender” was unaware. In each case, at aminimum, the researcher imparted to the personbeing researched the knowledge that he or she isbeing investigated.

The transmission of the information that theattorney viewed the juror’s page is acommunication that may be attributable to thelawyer, and even such minimal contact raises thespecter of the improper influence and/orintimidation that the Rules are intended to

prevent.26

Still, the NYCBA did not decide that an inadvertent orunintentional communication necessarily constitutes an ethicalviolation – only that it may. The NYRPC may ultimately need toweigh in on this subject.

The NYCBA repeatedly states that attorneys who engage inelectronic background searches of jurors should study thefunctionality of the websites they use. If an attorney is unable tograsp how the social media service works, the NYCBA urges theattorney to proceed with caution and be aware that he or she

may be at risk of violating the ethical rules.27

Reconciling the Two Views

While one may initially believe that Formal Opinion 2012-2creates an ethical dilemma, the fallacy of this assessmentbecomes evident upon closer inspection. Formal Opinion 2012-2simply advises attorneys of the following: (1) you may – if notnow, at some time in the future – be obligated to perform Internetresearch of prospective jurors; (2) you can view the publiclyavailable electronic profiles of prospective jurors as long as youdo not contact or communicate with the juror in any fashion; and(3) before you conduct any research on a social media site youmust first examine how the site works, understand its privacypolicies, and confirm that the site does not notify other users

when their profiles have been viewed.28

If, for example, an attorney planned to use Facebook to researchprospective jurors, the attorney would need to visit theFacebook’s Help Center at http://www.facebook.com/help/?ref=ts. The Help Center is a user-friendly resourceproviding an abundance of basic information about Facebook. Itcontains a glossary of commonly used terms; debunks certainmyths; and describes various features, services, and

applications offered by the service. Most important, the HelpCenter provides a comprehensive explanation of Facebook’sprivacy policies, and it clearly delineates Facebook’s policyabout tracking who views your profile:

Facebook does not provide a functionality thatenables you to track who is viewing your profile(timeline), or parts of your profile (timeline), suchas your photos. Third party applications alsocannot provide this functionality. Applications thatclaim to give you this ability will be removed from

Facebook for violating policy.29

Similarly, LinkedIn users can access the LinkedIn LearningCenter, which contains detailed information about how the siteworks. LinkedIn further offers a function called “Answers” inwhich a user can ask questions about a variety of topics,including questions about various features offered throughLinkedIn. The answers are provided by other users. A simpleinquiry about whether users have the ability to track who viewstheir profile yields an overwhelming number of responses thatyes, indeed, you can (although users’ ability to ascertain theidentity of people who have viewed their profiles varies based onthe type of LinkedIn account they have).

Twitter requires users to subscribe to another user’s Twitteraccount, which has been found to be a blatant act ofcommunication – and therefore it is a prohibited form of jurorresearch. Still, if Twitter users have a public account, it ispossible to access their Twitter accounts through a Googlesearch without notifying the users that one has viewed theirprofile.

The more an attorney understands about a social mediawebsite, the more equipped the attorney will be to takeadvantage of all of the website’s search capabilities. Forexample, the Facebook Help Center provides a cogentdescription of the Facebook Search function, explaining howusers can filter their searches, search public information, orsearch for two things at the same time.

Conclusion

Pre-trial Internet research of prospective jurors is becoming anintegral component of the trial preparation process. Trialattorneys would be well advised to apply this practice wheneverpossible because it may increase the likelihood of a favorableoutcome. But before undertaking this research, attorneys mustbe familiar with the local ethical rules governing this practice.They must also determine whether jurors will receive anotification from the website if another user views their profiles.Fortunately, the leading social media websites provideuser-friendly support software that allows trial attorneys todiscern this information with relative ease. Given the role ofsocial media in our society, investing the time to understand howthese websites function is a worthwhile endeavor.

1. Social media is defined as “[w]eb sites and other online means ofcommunication that are used by large groups of people to share informationand to develop social and professional contacts: Many businesses are utilizingsocial media to generate sales.” See Dictionary.com.http://dictionary.reference.com/browse/social+media?s=t (Mar. 5, 2012).2. See NYCBA Comm. on Ethics Formal Opinion 2012-2.3. Thaddeus Hoffmeister, Investigating Jurors in the Digital Age: One Click at aTime, 60 Kan. L. Rev. 611, 612 n.5 (2012).4. Brian Grow, Internet v. Courts: Googling for the Perfect Juror, Reuters Legal(Feb. 17, 2011).5. Potential jurors are generally selected through a system of examination,

known as voir dire, during which attorneys for each party can object to a juror.6. Thaddeus Hoffmeister, Applying Rules of Discovery to Information UncoveredAbout Jurors, 59 UCLA L. Rev. Disc. 28, 34–35 (2011).7. See Beth Germano, Social Media Changing the Way Juries Are Picked, CBSBoston (Nov. 15, 2010), http://boston.cbslocal.com/2010/11/15/socialmedia-changing-the-way-juries-are-picked (medical malpractice attorneyin Boston claims that social media research of prospective jurors has beenrevolutionary).8. Id.9. See Hoffmeister, Applying Rules of Discovery supra note 6, pp. 32–33.10. Grow, Internet v. Courts supra note 4.11. Carol J. Williams, Jury Duty? May Want to Edit Online Profile, L.A. Times(Sept. 29, 2008), http://articles.latimes.com/2008/sep/29/nation/na-jury29.12. Id.13. Hoffmeister, Investigating Jurors supra note 3, pp. 612, 626. 14. Id. at 630.15. See Hoffmeister, Applying Rules of Discovery supra note 6, pp. 33–34.16. See State v. Dellinger, 696 S.E.2d 38, 40 (W. Va. 2010) (per curiam).17. Hoffmeister, Investigating Jurors, supra note 3, p. 630.18. See NYCBA Comm. on Ethics Formal Opinion 2012-2 I.19. Hoffmeister, Investigating Jurors, supra note 3, p. 631.20. See Rules 1.1, 1.3(a) of the NYPRC.21. See Rule 3.5(a)(4) of the NYRPC.22. NYCLA Comm. on Prof’l Ethics, Formal Opinion 743 (May 18, 2011).23. Id. Indeed, although the New York Appellate Division has not directlyaddressed this question, a New Jersey Appellate Division decision is consistentwith the New York County Lawyers’ Association’s position. In Carino v.Muenzen, 2010 N.J. Super. Unpub. LEXIS 2154, at *10 (Aug. 30, 2010), amedical malpractice case, the trial court ruled that a plaintiff’s attorney could notuse the Internet to obtain information about prospective jurors during juryselection because the plaintiff’s attorney had failed to give advance notice todefense counsel that he would be conducting such research. The juryultimately awarded the defendant a defense verdict, and the plaintiff appealed.On appeal, the Appellate Division determined that trial judge actedunreasonably. Id. at 26. The Appellate Division explained: In making his ruling,the trial judge cited no authority for his requirement that trial counsel must notifyan adversary and the court in advance of using Internet access during juryselection or any other part of the trial. The issue is not addressed in the Rulesof Court. Id. The Appellate Division, however, determined that the plaintiff did notdemonstrate that he suffered any prejudice as a result of the trial court’s error,and the defense verdict was affirmed. Id. at 27.24. See NYCBA Comm. on Ethics Formal Opinion 2012-2 II.B.2.25. Bebo, launched in 2005, is a social media site where users can post blogs,pictures, music, videos, and questionnaires. www.bebo.com. Tagged is a“social discovery site” that enables members to browse the profiles of othermembers, play games, and share tags and virtual gifts. www.tagged.com.26. See NYCBA Comm. on Ethics Formal Opinion 2012-2 II.B.2–3.27. See NYCBA Comm. on Ethics Formal Opinion 2012-2 II.B.3.28. NYCBA Comm. on Ethics Formal Opinion 2012-2 is extremely thorough. Italso provides that an attorney may not engage in deception ormisrepresentation in researching jurors on social media websites anddiscusses an attorney’s obligation to reveal improper juror conduct to the court.29. See http://www.facebook.com/help/?page=11603751514719 (Aug. 4,2012).

Contributed by:

Heidell, Pittoni, Murphy & Bach, LLP81 Main StreetWhite Plains, NY 10601

Robert B. Gibson, Esq.914.559.3100rgibson@hpmb.com

Jesse D. Capel, Esq.212.471.4641jcapell@hpmb.com

Back to top

Reprinted with permission from: New York State Bar Association Journal,November/December 2012, Vol. 84, No. 9, published by the New York State BarAssociation, One Elk Street, Albany, New York 12207

California Law Prohibits Requests forEmployees' Social Media Passwords orInformation

This fall, California joined Maryland and Illinois by enacting a law

sharply limiting employers’ ability to ask applicants andemployees to provide their social media passwords or otherwiseto give employers access to social medial accounts orinformation. The new law goes into effect January 1, 2013.

What Does the Law Prohibit?

Specifically, the new law, AB 1844, “prohibits an employer fromrequiring or requesting an employee or applicant for employmentto disclose a username or password for the purpose ofaccessing personal social media, to access personal socialmedia in the presence of the employer, or to divulge anypersonal social media.”

The new law also prohibits employers from firing, threatening ordisciplining any employee who refuses to comply with anunlawful request to access a social media account or divulgesocial media information.

“Social media” is broadly defined to include any “electronicservice or account, or electronic content,” including, but notlimited to, “videos, still photographs, blogs, video blogs,podcasts, instant and text messages, email, online services oraccounts, or Internet Web site profiles or locations.”

What the Law Allows

Significantly, the law does allow employers to require employeesto divulge social media information in two situations. First, wherethe employee’s social media is “reasonably believed to berelevant to an investigation of allegations of employeemisconduct or employee violation of applicable laws andregulations,” the employer may request an employee to “divulgepersonal social media [information] reasonably believed to berelevant to the investigation,” provided that the social mediainformation is used solely for purposes of that investigation or arelated proceeding. Second, the law does not preclude anemployer from “requiring or requesting an employee to disclosea username, password, or other method for the purpose ofaccessing an employer-issued electronic device.”

Despite the law’s broad prohibitions, it is not clear whatremedies are available to an employee who believes anemployer has violated the law. The law does not specificallygrant employees a right to sue in court for violations, and itstates that the California Labor Commissioner is “not required toinvestigate or determine any violation” of the new law.Nonetheless, employers would be wise to proceed on theassumption that applicants and employees will be able to obtainrelief for violations of the new Labor Code provision.

Contributed by:

Holland & Knight400 South Hope Street, 8 th FloorLos Angeles, CA 90071

Linda Auerbach Allderdice, Esq.213.896.2422linda.allderdice@hklaw.com

Todd Steenson, Esq.312.578.6541todd.steenson@hklaw.com

California Law Prohibits Requests for Employees' Social Media Passwords orInformation, November 13, 2012. Authored by Todd Steenson and LindaAuerbach Allderdice.Reprinted with permission from Holland & Knight. © 2012 Labor, Employmentand Benefits Alert.

Back to top

Winter 2013 | Printer Friendly | Contact Us

Back to Main

Workers Compensation

Ohio Supreme Court Recognizes Limited Exception to Time Limit to Notifyan Employer in a Workers' Compensation Retaliation Discharge Claim

Ohio Supreme Court Declared that Failure to Issue Personal ProtectiveEquipment Does Not Constitute "Removal of Equipment Safety Guard" foran Intentional Tort

Topics

Class Action

Construction Defect

Damages

Employer Liability

Evidence

Procedure

Product Liability

Qui Tam

Social Media

WorkersCompensation

Labor Law §240

Regions

Federal

International

Northeast

Labor Law §240

Mid-West

South East

West

Ohio Supreme Court Recognizes LimitedException to Time Limit to Notify anEmployer in a Workers' CompensationRetaliation Discharge Claim

Lawrence v. City of Youngstown

In a 6-1 decision announced on September 20, 2012, theSupreme Court of Ohio recognized a limited exception to thegeneral rule that a terminated employee must notify his or heremployer of the employee's intent to file a retaliatory dischargelawsuit under Ohio Revised Code Section 4123.90 within 90days after the date of the employee's termination, and held thattrial courts may delay the start of the 90-day notification period ina workers' compensation retaliation case if they find that a firedemployee did not become aware that he or she had been fired"within a reasonable time" after the employer's action terminatinghis or her employment. ( Lawrence v. City of Youngstown,2012-Ohio-4247).

The Court's opinion arose out of a case filed by Keith Lawrence,an employee of the City of Youngstown, who was suspendedfrom his job duties without pay on January 7, 2007. Two dayslater, on January 9, the city placed a notice in Lawrence'spersonnel file indicating that his employment had beenterminated. However, the city did not send a copy of the letter toLawrence by certified mail or present it to him in person.Lawrence subsequently denied that he had received a copy ofthe January 9 letter, and asserted that he did not learn that hehad been discharged until Feb. 19, 2007, almost six weeks afterthe termination of his employment.

On April 17, 2007, Lawrence's attorney sent a letter notifying thecity that he intended to file suit under R.C. 4123.90, alleging thatLawrence's firing was retaliation for his earlier filing of workers'compensation claims. Lawrence filed suit against the city in theMahoning County Court of Common Pleas on July 6, 2007.

The city moved for summary judgment on Lawrence's claim,arguing that the trial court lacked jurisdiction to hear the claimbecause Lawrence had not complied with the 90-day notificationrequirement of R.C. 4123.90. The Court granted the summaryjudgment motion in favor of the city. Lawrence appealed. TheSeventh District Court of Appeals affirmed the trial court rulingregarding when the 90-day notification began to run, but certifiedthat its decision on that issue was in conflict with earlier

decisions of the Sixth and Eleventh District Courts of Appeals.The Supreme Court accepted the case to resolve the conflictamong appellate districts.

Writing for the majority, Justice Robert Cupp pointed to R.C.4123.95, which mandates that Ohio's workers' compensationstatutes "shall be liberally construed in favor of employees." TheCourt concluded, "R.C. 4123.90...places an implicit affirmativeresponsibility on an employer to provide its employee notice ofthe employee's discharge within a reasonable time after thedischarge occurs in order to avoid impeding the dischargedemployee's 90-day notification obligation under R.C. 4123.90."

Further, the Court held that:

"Reading R.C. 4123.90 and 4123.95 in parimateria, we find it evident that R.C. 4123.90anticipates the employee's awareness of theemployee's discharge. Consequently, a limitedexception to the general rule that the 90-dayperiod for employer notice of an alleged R.C.4123.90 violation runs from the employee's actualdischarge is in keeping with the statute'spurpose. The prerequisites for this exception arethat an employee does not become aware of thefact of his discharge within a reasonable timeafter the discharge occurs and could not havelearned of the discharge within a reasonable timein the exercise of due diligence. When thoseprerequisites are met, the 90-day time period forthe employer to receive written notice of theemployee's claim that the discharge violated R.C.4123.90 commences on the earlier of the datethat the employee became aware of thedischarge or the date the employee should havebecome aware of the discharge."

Justice Judith Ann Lanzinger entered a separate opinionconcurring in the majority's judgment. She was joined by JusticePaul E. Pfeifer. Justice Terrence O'Donnell dissented.

While the burden that this holding places on an employer isrelatively minor, and arises only when an employee haspreviously filed a workers' compensation claim, it neverthelessmeans that employers must be proactive when notifying anemployee of his or her termination in order to ensure that the90-day notification provision begins on the date of termination.

Contributed by:

Roetzel & AndressOne SeagateSuite 1700Toledo, OH 43604

Kevin J. Cooper, Esq.419.254.5257kcooper@ralaw.comwww.ralaw.com

Case Hyperlink: http://scholar.google.com/scholar_case?case=4246005937553589408&hl=en&as_sdt=2&as_vis=1&oi=scholarr

Back to top

Ohio Supreme Court Declared that Failureto Issue Personal Protective EquipmentDoes Not Constitute "Removal ofEquipment Safety Guard" for anIntentional Tort

Hewitt v. L.E. Myers

On November 20, 2012, the Ohio Supreme Court narrowlyconstrued the phrases "equipment safety guard" and "deliberateremoval" in the context of Ohio's employer intentional tortstatute. Hewitt v. L.E. Myers, Slip No. 2012-Ohio-5317. In sodoing, the Court rejected a broad construction of the terms thatwould have potentially increased liability of employers. The OhioSupreme Court held that an employer's failure to mandate theuse of certain safety equipment does not constitute removal of asafety guard and an intentional tort.

Employment intentional torts have been the subject of muchlitigation and legislative action in Ohio over the past severaldecades. Most recently, in 2005, the Ohio General Assemblyenacted a statute that only allowed an employer to be sued foran intentional tort if the employer acted with specific intent. Thestatute, however, contained a presumption of an intent to injure ifan employee could demonstrate that the employer deliberatelyremoved equipment safety guards.

Since the enactment of this statute, appellate courts struggledwith determining what constituted the deliberate removal of an"equipment safety guard." Plaintiffs throughout the state urgedcourts to adopt an expansive definition of "equipment safetyguard" to include things such as personal protective equipment.Employers, on the other hand, urged courts to narrowly construethe term to apply only to circumstances where specific barriersprotecting pinch points on equipment were removed or disabled.In issuing its recent decision, the Supreme Court adopted therestrictive view of the statute advocated by employers.Reminger's Appellate Advocacy Practice Group authored anamicus brief on behalf of the Ohio Association of Civil TrialAttorneys urging a restrictive interpretation of the statute.

In Hewitt, an employee was injured while working on overheadpower lines. The employee argued that his employer's failure torequire him to work with rubber gloves and sleeves constitutedthe deliberate removal of an equipment safety guard designed toprotect him from the hazards of his job. A jury returned a verdictin favor of Hewitt and the verdict was affirmed on appeal. TheSupreme Court, however, reversed the verdict and concludedthat the failure to mandate use of personal protective equipmentdid not constitute the deliberate removal of an equipment safetyguard.

Specifically, the Court held that "equipment safety guard" meanta device designed to shield the operator from exposure to orinjury by a dangerous aspect of equipment. The Court went onto hold that "deliberate removal" occurs when an employermakes a deliberate decision to lift, push aside, takeoff, orotherwise eliminate that guard. The Court observed that tobroadly construe these terms to include generic safety relateditems ignored both the meaning of the words in the statute andthe General Assembly's intent to restrict liability for intentionaltorts.

The Supreme Court's decision is significant in reaffirming thefact that Ohio's employment intentional tort statute was designed

to restrict liability of employers. The Supreme Court is currentlyconsidering another case being handled by Reminger'sAppellate Advocacy Practice Group which will hopefully answeradditional questions concerning the application and scope of thestatute.

Contributed by:

Reminger, Attorneys at Law101 West Prospect AvenueSuite 1400Cleveland, Ohio 44115-1093

Brian D. Sullivan, Esq.216.430.2190bsullivan@reminger.com

Case Hyperlink: http://www.supremecourt.ohio.gov/ROD/docs/pdf/0/2012/2012-Ohio-5317.pdf

Back to top

Winter 2013 | Printer Friendly | Contact Us

Back to Main

Labor Law §240

Labor Law §240 Update Topics

Class Action

Construction Defect

Damages

Employer Liability

Evidence

Procedure

Product Liability

Qui Tam

Social Media

WorkersCompensation

Labor Law §240

Regions

Federal

International

Northeast

Labor Law §240

Mid-West

South East

West

Labor Law §240

In this issue, we examine a surprising decision from theAppellate Division, Second Department which declines to extendLabor Law §240 protection to a worker who was injured when hewas struck by a descending counterweight for a dumbwaiter. Wewill also review a case from the Appellate Division, FourthDepartment which addresses the issue of whether the task ofremoving a satellite dish from the outside wall of a gas station isthe type of work encompassed by the statute. Finally, we reviewa case from the Appellate Division, First Department where theissue involves the applicability of Labor Law §240 to a workerinjured while leaving a jobsite after being fired.

Descending Counterweight In Dumbwaiter Was Not A"Falling Object" - Poor Condition Of Rope To Which It WasAttached Was Not "Foreseeable"

McLean v. 405 Webster Avenue Associates

In prior issues of this publication, we have written that thepurpose of Labor Law §240(1) is to protect against such gravity-related accidents as a worker falling from a height or beingstruck by a falling object. In McLean v. 405 Webster AvenueAssociates, 98 A.D.3d 1090, 951 N.Y.S.2d 185 (2nd Dep't2012), at issue was whether a descending counterweight for adumbwaiter was a "falling object" within the meaning of thestatute.

In McLean, the plaintiff was installing protective housing for afiber optic cable in a dumbwaiter shaft in the defendant'sbuilding. While standing on a dumbwaiter cart in the shaft, hewas hit by the counterweight for a dumbwaiter and sustainedbroken vertebrae in his neck. The accident was caused by thefragile condition of the ropes in the dumbwaiter shaft. Theplaintiff commenced this action based upon, among other things,Labor Law §240(1), a claim that was summarily dismissed by thetrial court.

The Appellate Division, Second Department affirmed. In sodoing, the court summarized the law with respect to Labor Law§240(1) and falling objects as follows: "With respect to aworker's injury from a falling object, liability is not limited toobjects falling while in the process of being hoisted or secured,nor is it necessary that the object fall from a higher level than thelevel at which the work is being performed. An object needs tobe secured if the nature of the work performed at the time of theaccident posed a significant risk that the object would fall."Significantly, the court concluded that the statute did not applybecause the defective condition of the ropes was not aforeseeable risk inherent in the work: "[H]ere, it was not the

nature of the work that caused an object to fall on the plaintiff.Rather, it was allegedly the defective condition of the ropes inthe shaft. Where a falling object is not a foreseeable riskinherent in the work, no protective device pursuant to Labor Law§240(1) is required."

The Removal Of A Satellite Dish Is Not An "Alteration" Of ABuilding For Purposes Of The Statute - It's Not SignificantEnough

Zolfaghari v. Hughes Network Systems, LLC

Labor Law §240(1) provides that it applies to "the erection,demolition, repairing, altering, painting, cleaning or pointing of abuilding or structure." In Zolfaghari v. Hughes Network Systems,LLC, 99 A.D.3d 1234, 952 N.Y.S.2d 367 (4 th Dep't 2012), thecourt rejects plaintiff's contention that his work amounted to"alteration" within the meaning of the statute.

In Zolfaghari, the plaintiff was injured when he fell from a ladderwhile attempting to remove a satellite dish attached to theoutside wall of a gas station. The dish was being removedbecause the station was in the process of changing from Exxonto Gulf. The plaintiff asserted a claim under Labor Law §240(1),alleging that his work involved "altering" the building. The trialcourt granted the defendant's motion for summary judgmentdismissing the claim.

The Appellate Division, Fourth Department affirmed. Initially, thecourt stated that to constitute "alteration" within the meaning ofthe statute, the work must involve "making a significant physicalchange to the configuration or composition of the building orstructure" (emphasis in original). The court concluded that theplaintiff's work did not meet that test: "Here, plaintiff's taskinvolved no more than manually unplugging a cord, loosening asmall number of bolts by hand and with a wrench, cutting a wireattached with a hand tool, and lifting the dish apparatus from abracket and face plate that remained attached to the building.That work did not require plaintiff to come in physical contactwith the building itself, involved no power tools, no drilling ofholes, and no feeding of wire through conduits. In short,plaintiff's work did not require that a significant physical changebe made to the gas station building." Interestingly, the courtadded that "the work involved in the removal or 'de-installation'of a satellite dish system is not the same as that involved in theinstallation of such a system within the context of Labor Law§240(1)."

Fired Worker Is Still Protected By The Statute WhileLeaving The Jobsite

Alarcon v. UCAN White Plains Housing Development FundCorp.

Given the extraordinary protection of Labor Law §240, there isconsiderable litigation concerning the scope of the class ofpersons protected by the statute. In the previous issue of thispublication (Fall 2012 Edition), we discussed authority whichholds that the statute does not extend to a worker who wasinjured on the jobsite which is closed. In Alarcon v. UCAN WhitePlains Housing Development Fund Corp., ____ A.D.3d ____,____ N.Y.S.2d _____, 2012 WL 5440090, 2012 N.Y. Slip Op.07413 (1 st Dep't 2012), this court addressed the issue of aworker injured while departing from a jobsite after he was fired.

On the day of the accident, the plaintiff in Alarcon quarreled withhis supervisor, who told the plaintiff that he never wanted to see

him on the jobsite again. The plaintiff stopped work andproceeded to gather his street clothes in order to leave. As hewas so doing, the plaintiff's pants became stuck on a piece ofscaffold pipe, which caused him to lose his balance and fallthree and a half stories. The plaintiff commenced this action andmoved for summary judgment on liability pursuant to Labor Law§240(1) and (2). The trial court granted the motion.

The Appellate Division, First Department affirmed: "[I]n thecontext of this case, the fact that the plaintiff was in the processof exiting the jobsite did not remove him from the protections ofLabor Law §240."

Contributed By:

McGaw, Alventosa & ZajacTwo Jericho Plaza,Suite 300Jericho, NY 11753-1681

Andrew Zajac, Esq.(516) 932-2832Andrew.Zajac@aig.com

Case Hyperlinks:

http://www.leagle.com/xmlResult .aspx?xmldoc=In%20NYCO%2020120926439.xml&docbase=CSLWAR3-2007-CURR

http://scholar.google.com/scholar_case? case=11635526677743510536&q=Zolfaghari+ v.+Hughes+Network+Systems,+LLC&hl=en& as_sdt=2,33&as_vis=1

http://scholar.google.com/scholar_case?case=4903912810749726685&q=Alarcon+v .+UCAN+White+Plains+Housing+Development+ Fund+Corp.&hl=en&as_sdt=2,33&as_vis=1

Back to top

Winter 2013 | Printer Friendly | Contact Us

Back to Main

Federal

Class Action Waivers After Concepcion: The Emergence of a Circuit SplitOver the Decision’s Impact on Federal Claims Makes a Return to theSupreme Court Likely

Employers Beware: Obesity as a Disability Under the ADA

Court strikes a blow against CPSC online database

Topics

Class Action

Construction Defect

Damages

Employer Liability

Evidence

Procedure

Product Liability

Qui Tam

Social Media

WorkersCompensation

Labor Law §240

Regions

Federal

International

Northeast

Labor Law §240

Mid-West

South East

West

Class Action Waivers After Concepcion:The Emergence of a Circuit Split Over theDecision’s Impact on Federal ClaimsMakes a Return to the Supreme CourtLikely

A year ago, the U.S. Supreme Court handed down its ruling inAT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740 (2011), whichenforced a contractual waiver of class arbitration in anarbitration clause under the Federal Arbitration Act (“FAA”) in theface of an unconscionability challenge based on state law. Sincethen, the federal circuit courts have digested the ruling’s impactin numerous cases. The arbitration clause in Concepcion hadseveral “consumer-friendly” provisions, prompting somecommentators to question whether the Court’s ruling was limitedto clauses containing such provisions. The consensus in thecircuit courts is that the answer is no, at least with respect toclaims under state law. However, a circuit split has emergedregarding the impact of Concepcion when the plaintiff’s claim isbased on federal statutory law.

The “Consumer-Friendly” Arbitration Clause inConcepcion

In Concepcion, the Supreme Court held that a California statelaw rule invalidating class-action waivers in consumer contractswhere the defendant has allegedly cheated large numbers ofconsumers out of small amounts of money was preempted bythe FAA because that rule stood “as an obstacle to theaccomplishment of the FAA’s objectives.” The majority opinionrejected the dissent’s argument “that class proceedings arenecessary to prosecute small-dollar claims that might otherwiseslip through the legal system.” The majority responded that“States cannot require a procedure that is inconsistent with theFAA, even if it is desirable for unrelated reasons.” Moreover, themajority noted that “the claim here was most unlikely to gounresolved” because the arbitration clause at issue includedseveral consumerfriendly provisions, including provisions thatrequired AT&T to pay for the costs of all non-frivolous claimsthat proceeded to arbitration and to pay a minimum amount of$7,500.00 plus twice the amount of the claimant’s attorney’s feesin the event that the claimant were to win an award larger thanAT&T’s final written settlement offer.

Some commentators questioned whether the Supreme Court’s

willingness to enforce class action waivers was limited toarbitration clauses containing consumer-friendly provisions likethose in Concepcion. The first circuit court to address thatquestion was the Eleventh Circuit, in Cruz v. Cingular Wireless,LLC, 648 F.3d 1205 (11th Cir. 2011). In that decision, whichinvolved only claims under state law, the Eleventh Circuitsuggested that Concepcion was not limited to factual scenariosinvolving consumer-friendly arbitration clauses, but ultimatelyconcluded that it “need not reach the question,” because thearbitration clause in Cruz was identical to the clause inConcepcion.

However, just last month, on August 20, 2012, the EleventhCircuit revisited this issue in Pendergast v. Sprint Nextel Corp.,No. 09-10612, 2012 U.S. App. LEXIS 17512 (11th Cir. Aug. 20,2012). The plaintiff attempted to distinguish Concepcion on thebasis that the arbitration agreement at issue did not contain theconsumer-friendly provisions that were present in the contract atissue in Concepcion. The Eleventh Circuit rejected thisargument. The court determined that resolution of the case,which contained only claims under state law, required “only astraightforward application of Concepcion and Cruz,” andconcluded that “[t]he Supreme Court in Concepcion expresslyrejected the notion that the state law should not be preempted”even when the arbitration clause at issue “would effectivelyshield the defendant from liability” because the plaintiff could notpractically pursue his claims individually.

Two days later, on August 22, 2012, the Third Circuit reachedthe same conclusion in an unpublished decision in a caseinvolving only claims under state law — Homa v. AmericanExpress Co., No. 11-3600, 2012 U.S. App. LEXIS 17763 (3rdCir. Aug. 22, 2012). The Third Circuit concluded that “[e]ven if[the plaintiff] cannot effectively prosecute his claim in anindividual arbitration that procedure is his only remedy, illusoryor not.” The Third Circuit panel acknowledged that some mightview this result as unfair, and accepted the plaintiff’s argumentthat enforcing the class arbitration waiver would effectivelyeliminate any potential for recovery on his claims, but noted thatif it adopted the plaintiff’s position, “millions of arbitrationprovisions in consumer contracts would be renderedunenforceable inasmuch as the arbitration provisions in suchcontracts typically preclude class-arbitration proceedings.”

A Different Rule for Federal Claims?

The U.S. Court of Appeals for the Second Circuit reached adifferent result in In re American Express Merchant’s Litigation,554 F.3d 300 (2d Cir. 2009), 634 F.3d 187 (2d Cir. 2011), 667F.3d 204 (2d Cir. 2012), which involved a class arbitration waiverin an arbitration agreement which did not contain consumer-friendly provisions. There, the plaintiff sought to litigate claimsunder the federal antitrust laws. The Second Circuit held thatalthough the class arbitration waiver would be enforceable if theclaims were brought under state law, Concepcion does notrequire courts to find class arbitration waivers enforceable “if theplaintiffs are able to demonstrate that the practical effect ofenforcement would be to preclude their ability to vindicate theirfederal statutory rights.” The Second Circuit held that each suchwaiver clause must be considered individually and that, becausethe U.S. Supreme Court’s decision in Stolt-Nielsen S.A. v.AnimalFeeds International Corp., 130 S.Ct. 1758 (2010),prohibits courts from ordering parties to participate in classarbitration without a contractual agreement to do so, andbecause the plaintiffs can only effectively pursue their federalstatutory claims through a class proceeding, a decision to strikedown a class arbitration waiver requires striking down the entirearbitration agreement so that plaintiffs can pursue class actions

in court.

Lower courts in the Second Circuit have emphasized thepotential differential treatment of state and federal claims underthe American Express ruling. For example, on August 21, 2012,just a day after the Eleventh Circuit’s ruling in Pendergast, theU.S. District Court for the District of Connecticut struck down anarbitration agreement containing a class arbitration waiverbecause enforcing it would effectively deprive the plaintiff of anyreal chance of recovery. Fromer v. Comcast Corp., No.3:09cv2076, 2012 U.S. Dist. LEXIS 117807 (D. Conn. Aug. 21,2012). The district court concluded that, under the SecondCircuit’s decision in American Express, “the class action waiverin this case effectively precludes Fromer from pursuing federalstatutory remedies,” and thus “the class arbitration waiver isvoid.” The district court noted that the reasoning in AmericanExpress “does not apply to [the Plaintiff’s Connecticut UnfairTrade Practices Act] claim, and the inability to vindicate thatstatutory right does not provide a basis for [finding] thearbitration agreement unenforceable with regard to that claim.”Still, the district court found that the entire arbitration agreementwas unenforceable because it contained a provision whichstated that “[i]f the class action waiver is found to be illegal orunenforceable, the entire Arbitration Provision will beunenforceable, and the dispute will be decided by a court.”

These rulings out of the Second Circuit are in direct conflict withthe Ninth Circuit’s decision in Coneff v. AT&T Corp., 673 F.3d1155 (9th Cir. 2012). In Coneff, the Ninth Circuit held that “Concepcion is broadly written” and that it requires enforcementof class arbitration waivers, even if the effect of enforcement isto effectively preclude individual plaintiffs from pursuing theirclaims. The plaintiff asserted claims under both state and federallaw, but the Ninth Circuit’s analysis did not recognize anymeaningful distinction between these two categories of claims.

In view of the split between the Second and Ninth Circuits,American Express has filed a Petition for Writ of Certiorari to theSupreme Court from the American Express decision. Thepetition asks the Supreme Court to eliminate any distinctionbetween state and federal claims for purposes of enforcing classaction waivers in arbitration clauses, and to reiterate that suchclauses should be enforced in all cases, even when doing sowould effectively eliminate any real chance of recovery forindividual plaintiffs. Based on the sheer volume of consumercontracts containing class action waivers and the SupremeCourt’s recent trend of accepting and deciding cases involvingthe FAA, it appears likely that the Petition will be granted.

Conclusion

In sum, the decisions by the Circuits in the year following theSupreme Court’s ruling in Concepcion make clear that classaction waivers in arbitration clauses will be en forced as to statelaw claims, even if enforcement effectively eliminates any realprospect of recovery for individual plaintiffs. However, a circuitsplit has developed as to whether Concepcion has the sameeffect where the plaintiff brings at least one claim based onfederal law.

If the Supreme Court agrees to hear the American Expresscase, and ultimately accepts the Second Circuit’s approach toclass action waivers in the context of federal claims, the impactcould be dramatic and wide-sweeping: many arbitration clausescould be stricken in their entirety, because many, if not most,arbitration clauses are like the one at issue in Fromer, andexpressly require that the entire clause be struck down if the

class action waiver is found to be unenforceable. This wouldthreaten a massive increase in consumer class actions based onfederal statutory violations. While potential defendants couldmitigate this outcome to some extent by including aConcepcion-style consumer-friendly arbitration clause in everyconsumer contract, thus blunting any argument that consumerswould be deprived of an opportunity to effectively pursue theirclaims individually, such a result still would likely increaselitigation costs and interfere with efforts to streamline privatedispute resolution in a way that the FAA was specificallyintended to avoid .

Contributed by:

Schnader Harrison Segal & Lewis, LLPThe Victor Building750 9th Street, NWSuite 550Washington, DC 20001-4534

Stephen A. Fogdall, Esq.202.419.4208sfogdall@schnader.com

Christopher A. Reese, Esq.215.751.2556creese@schnader.comwww.schnader.com

Back to top

Employers Beware: Obesity as a DisabilityUnder the ADA

If an employee requests two seats on an airplane on the nextbusiness trip because he/she can no longer comfortably fly inone seat, does the employer have the responsibility to pay forthis accommodation?

Does an employer have to provide health care coverage forbariatric surgery?

More than one-third of United States adults are obese1. Obesityis a label given for a range of weight that is greater than what isgenerally considered healthy for a given height. For example, a5’9” adult weighing 125lbs–168lbs is considered to be at ahealthy weight; 169lbs-202lbs is considered to be overweight;and, 203lbs or more is considered obese. Worldwide, at least2.8 million adults die each year as a result of being overweightor obese; additionally, being overweight and/or obese is the fifth

leading risk factor for death globally2. Excessive weight is alsoattributable to a number of diseases and conditions that canresult in serious injury or death including diabetes, heart diseaseand a number of cancers. As obesity rates in the United Statescontinue to grow, employers are impacted in a number of ways;and the question they must answer is whether obesity is adisability that must be accommodated under the Americans withDisabilities Act.

In the EEOC’s ADA Compliance Manual, the issue of obesity isaddressed as follows:

[B]eing overweight, in and of itself, is notgenerally an impairment… On the other hand,

severe obesity, which has been defined as bodyweight more than 100% over the norm, is clearlyan impairment. In addition, a person with obesitymay have an underlying or resultant physiologicaldisorder, such as hypertension or a thyroiddisorder. A physiological disorder is animpairment.

In the last two years, over 48 cases involving claimants filingdisability discrimination cases based on obesity have been filedin the United States. These suits involve not only actualdiscrimination based on a person’s obesity, but many involve theperceived disability of an obese employee. Weight requirementsin a job posting or assumptions about an individual’s ability toperform the job based on weight will continue to get employersinto trouble unless policies are modified to account for this trend.

In September of 2011, the EEOC filed suit in the U.S. DistrictCourt for the Southern District of Texas on behalf of a 600lbforklift operator who was allegedly discriminated against on thebasis of weight. Plaintiff had asked his employer for a seat beltextender in an effort to comply with the safety requirements ofhis job. The employer refused the accommodation and twoweeks later terminated his employment. Plaintiff had receivedpositive performance reviews the previous two years and otherthan needing a large seatbelt, Plaintiff believed that his weightdid not interfere with his job requirements. In July of this year,the EEOC and the employer settled the matter for $55,000 andtraining for managers and human resource employees on thesubject of discrimination laws and compliance.

In addition to not discriminating against someone because ofweight, employers need to be careful in the assumptions theymake about obese individuals and the potential for healthproblems and Workers’ Compensation claims. When comparedto employees who maintain the recommended weight, obeseemployees have up to 21% higher health care costs, file 45%more Workers’ Compensation claims, and miss up to seven

times more work due to work-related injuries3. Employers needto take caution in making any employment decisions based onthese characteristics. Failing to hire someone because you areconcerned that they will file a Workers’ Compensation claim inthe future may result in a finding that you perceived the applicantas disabled and thus violated the ADA.

What are the “takeaways” for employers? A request foraccommodations from obese employees, especially those withan underlying or resultant physiological disorder, should betreated as a request for accommodation from a person with adisability. The employer should work with the employee in aninteractive process to determine if reasonable accommodationsexist. Second, all employers should be proactive in dealing withthe increasing problems associated with obesity in theworkplace. The creation of a wellness program, which iscarefully crafted so as not to discriminate against obeseindividuals, is just one way an employer can attempt to create ahealthier, happier, and less litigious workplace.

1 http://www.cdc.gov/obesity/data/adult.html2 http://www.who.int/mediacentre/factsheets /fs311/en/index.html3 http://www.dukehealth.org/health_library/news/10044

Contributed by:

Gordon & Rees, LLP555 Seventeenth Street, Suite 3400

Denver, CO 80202

John Keen, Esq.303.534.5160jkeen@gordonrees.com

Emma J. Skivington, Esq.303.534.5160eskivington@gordonrees.com

Back to top

Court Strikes a Blow Against CPSCOnline Database

Company Doe v. Tenenbaum

One of the most controversial aspects of the 2008 law thatstrengthened federal government oversight of consumerproducts was the creation of an online database of incidentreports generated by consumers. While the law permits affectedcompanies to challenge inaccuracies before reports are posted,it has been unclear what happens when the government and theaffected manufacturer disagree whether information to be postedis materially inaccurate. Last week a U.S. District Court sidedwith the manufacturer in its dispute over publication of a reportabout its product and directed the government not to post thereport. (Company Doe v. Tenenbaum, D.Md. No. 11-cv-2958,Oct. 22, 2012.)

Background

The Consumer Product Safety Commission (CPSC) wascharged by Congress in 2008 to create a publicly accessible andsearchable online database of reports of alleged harm relating toconsumer products. See www.saferproducts.gov. Upon receiptof a consumer’s report of alleged harm from a product, theCPSC shares the information with the product’s manufacturer.The manufacturer has a very brief window in which to contestthe material accuracy of the information as it relates to itsproduct. The CPSC then may determine whether to decline topublish the report, or publish it with corrections or additionsregarding the information in question.

In this case, an incident report was received by the CPSC aboutan injury to a child, close in time or space to the company’sproduct. (The decision and other court documents are redactedas to any information identifying the company or product inquestion, or describing the circumstances or nature of theinaccurate information.) The information was shared with theproduct’s manufacturer who contested the information asmaterially inaccurate. The CPSC agreed and revised its report.The company objected again and the CPSC revised again. Thecourt’s decision suggests, between redactions, that the disputecentered on whether a causal connection existed between theproduct and injury or whether the two were a “coincidence” ofproximity or timing. Even the CPSC itself, which obtainedscientific counsel, appeared uncertain. Nevertheless, the CPSCfinally insisted on publishing the fourth version. The matter wentto court.

The Decision

The court’s decision hinged on the meaning of the term “relating

to” in the phrase “reports of harm relating to the use ofconsumer products.” If “relating to,” as used in the statute, issynonymous with “concerning” or “about,” the publicationmandate is larger than if “relating to” is read with a narrower,causal type meaning akin to “connected to.” The difference is fargreater than semantics. It goes to whether causality is somethingthe CPSC may ignore. The court effectively said no and sidedwith the company.

The court exhaustively analyzed principles of statutory andregulatory interpretation. It also cited a case where the CPSCaccepted a manufacturer’s objection to publication of aconsumer’s report of injury due to a leaking gas stove where atechnician later attributed the leak not to the stove but to a loosepipe. It was inconsistent for the CPSC to have declined to postthe gas stove report yet insist on publishing this one. It was anabuse of discretion for the CPSC to have tried to publish thisreport despite the doubts as to causality. Accordingly, the courtgranted summary judgment to the company on its motion for apreliminary injunction, enjoining publication of the report.

Conclusion

This decision, if upheld, could be the basis for other successfulchallenges to publication online of consumer-generated incidentreports heavy on innuendo and coincidence and light on causalconnection.

Contributed by:

Nixon Peabody, LLPKey Towers at Fountain Plaza40 Fountain Plaza, Suite 500Buffalo, NY 14202

Benjamin R. Dwyer, Esq.716.853.8122bdwyer@nixonpeabody.com

James W. Weller, Esq.516.832.7543jweller@nixonpeabody.com

Case Hyperlink: http://www.citizen.org/documents/Company-Doe-v-Tenenbaum-Revised-Memorandum-Opinion-Redacted.pdf

Back to top

Winter 2013 | Printer Friendly | Contact Us

Back to Main

International

Australian Court orders rating agency to pay damages for misleadinginvestors

Topics

Class Action

Construction Defect

Damages

Employer Liability

Evidence

Procedure

Product Liability

Qui Tam

Social Media

WorkersCompensation

Labor Law §240

Regions

Federal

International

Northeast

Labor Law §240

Mid-West

South East

West

Australian Court Orders Rating Agency toPay Damages for Misleading Investors

In what has been reported to be a landmark ruling, the AustralianFederal Court has ordered Standard & Poor’s (S&P) and theissuing bank (the bank that arranged the derivative product inquestion) to pay 30m Australian dollars (£19m) in damages toseveral Australian local governments. The claim concerned theAAA rating (their safest credit rating) given by S&P to twostructured debt issues in 2006, which later lost almost all of theirvalue. It signals the first ruling on a rating agency’s liability forinvestor losses.

The FactsThe claim concerned the rating, sale and purchase of acomplicated structured financial product known as a constantproportion debt obligation (CPDO). The CPDO was a complex,highly leveraged credit derivative, operating over a term of 10years, within which the CPDO would make or lose moneythrough notional credit default swap contracts (CDSs)referencing two CDS indices known as the CDX and iTraxxindices.

The issuing bank (through their previous dealings with S&P) hada good idea of how S&P would model the performance of theCPDO to assess the creditworthiness and the rating. Thus theissuing bank proceeded to model the CPDO in a way to ensurethat they achieved a rating of AAA. When engaging S&P, theissuing bank pressed S&P to adopt its model inputs as the basisfor the rating. Due to a series of errors, omissions andunjustifiable assumptions, S&P rated the CPDO as AAA andauthorised the issuing bank to disseminate that rating topotential investors which the issuing bank did. The issuing bankcreated further versions of the CPDO’s all of which received aAAA rating from S&P. These investments were purchased byvarious Australian local governments through an intermediary in2006 and later went on to lose almost all of their value.

DecisionThe court ruled that S&P’s rating of AAA was misleading anddeceptive and that S&P along with the issuing bank had beeninvolved in the publication of information and statements thatwere false in material particulars and involved negligentmisrepresentations being made to potential investors. The courtstated that the rating implied that the likelihood of the financialobligations being met was extremely strong. The issuing bankwas also criticised as it was “knowingly concerned” in S&P’smisleading and deceptive conduct and engaged in misleadingand deceptive conduct itself. The court stated that a reasonablycompetent rating agency could not have reached the conclusionthat the derivative should be given a AAA rating. The court has

ordered S&P and the issuing bank to pay 30m Australian dollars(£19m) in damages to several Australian local governments.

CommentWhile the role of the rating agencies (who tend to receive theirfees from the entities which they are rating) came under muchscrutiny during the sub-prime crisis, the ruling is the first of itskind on a rating agency’s liability for investor losses and is thefirst time that a rating agency (many of whom have previouslyargued that their ratings are simply opinions) has been taken toa full trial over a structured financial product. S&P has said thatit plans to lodge an appeal against the decision.

The decision means that rating agencies who have previouslybeen unaccountable to investors may no longer be able to hidebehind their disclaimers to protect them from liability. It has beenreported that this decision could signal the way for investors torecover significant losses from S&P and the issuing bank inEurope. However, it remains to be seen whether such a claimwould succeed in other jurisdictions (such as the English courtswhich have proved relatively unsympathetic to some investorclaims, at least those by sophisticated investors) and raisesinteresting questions about the extent to which ratings agenciescan be said to owe a duty to individual investors.

Contributed by:

CMS Cameron McKenna LLPMitre House160 Aldersgate StreetEC1A 4DD London, England

Simon Garrett, Esq.44 (0)20 7367 2786simon.garrett@cms-cmck.comwww.cms-cmck.com

Case Hyperlink: http://www.lemonde.fr/mmpub/edt/doc/20121105/1785835_4e5b_summary_lgfs.pdf

Back to top

Winter 2013 | Printer Friendly | Contact Us

Back to Main

Northeast

Pennsylvania Superior Court Declares That Second Buyers of HomesHave Same Implied Warranty Rights as Original Buyers in Claims forConstruction Defects

New York Court Holds That Federal Standards of Care Preempt State-LawStandards Governing Hiring, Training, and Retention of Pilots

Massachusetts Board of Pharmacy Enacts Emergency RegulationsTargeting Compounding Activities and Impacting All Registered andLicensed Pharmacies

Researching Jurors on the Internet - Ethical Implications

Topics

Class Action

Construction Defect

Damages

Employer Liability

Evidence

Procedure

Product Liability

Qui Tam

Social Media

WorkersCompensation

Labor Law §240

Regions

Federal

International

Northeast

Labor Law §240

Mid-West

South East

West

Pennsylvania Superior Court DeclaresThat Second Buyers of Homes HaveSame Implied Warranty Rights as OriginalBuyers in Claims for Construction Defects

Conway v. The Cutler Group, Inc.

On the day before the 2012 Presidential Election, thePennsylvania Superior Court elected to extend to remotepurchasers of homes the same implied warranty rights againstbuilders and developers as held by original purchasers. In

Conway v. The Cutler Group, Inc.1 the Superior Court, declaringthis as a case of first impression, held that a second owner of aresidential home has the same right as an original owner torecover against a builder developer for a breach of the impliedwarranty of habitability. The court did not consider whether thesecond powerful implied warranty right – the implied warranty ofreasonable workmanship – was also available to remotepurchasers because the attorney that filed the Conway case didnot plead that warranty.

In construction, the implied warranty of habitability is a fictioncreated by the courts to express what has been determined bythe courts to be a justifiable assumption that when a builderbuilds a structure, it can be safely assumed that it will behabitable. Pennsylvania courts have held that the impliedwarranty of habitability has been breached in a number ofdifferent contexts. Absence of potable water, Elderkin v. Gaster,447 Pa. 118, 288 A.2d 771 (1972); defective furnace emittingexcessive levels of carbon monoxide, Pontiere v. James Dinert,Inc., 627 A.2d 1204 (Pa. Super. 1993); presence of lead basedpaint, Lititz Mut. Ins. Co. v. Steely, 785 A.2d 975 ( Pa. 2001);leaking skylights, Fetzer v. Vishneski, 582 A.2d 23 (Pa. Super.1990); leaky basement, Ecksel v. Orleans Const. Co., 519 A.2d1021 (Pa. Super. 1987); and leaky crawl space, Tyus v. Resta,476 A.2d 427 (Pa. Super. 1984).

In determining in the Conway case that subsequent purchasersshould have the same rights as original purchasers, the courtleaned heavily on a 1990 Superior Court case called Spivack v.Berks Ridge Corporation and reasoned, “the warranty is based

upon public policy considerations and is not a contractuallydependent remedy. … [W]e see ‘no logical reason to limit abuilder’s implied warranty to his immediate vendee.’” Then,reaching back all the way to the 1972 Pennsylvania SupremeCourt case of Elderkin v. Gaster, which is the case that started itall, the Conway court stated, “a purchaser of a new home‘justifiably relies on the skill of the [builder] that the house will bea suitable living unit.’ Elderkin at 776…. By the same token, asecond or subsequent purchaser also implicitly relies on thehome builder’s skill that the home will be a habitable one.”

More and more, the law of construction defect litigationresembles strict product liability. To recover for injuries sufferedfrom a defective product, a plaintiff need only show that theproduct was unreasonably dangerous for its intended use andthat the defect was a proximate cause of the injury. The plaintiffneed not show that the manufacturer knew or should haveknown that the product was defective, i.e., negligence. And anyperson victimized by a defective product – first owner, secondowner or even a bystander – has the same strict liability rightsagainst the manufacturer.

In Conway, the Pennsylvania Superior Court has extended theconstruction defect theory of implied warranty of habitability tothe benefit of persons who buy a home (or presumably any otherbuilding) from the earlier owners. No courts have yet consideredwhether to extend the implied warranty of habitability to

non-owners. 2

A key difference between strict liability under product liability lawand implied warranty under construction defect law, is that abuilder developer can legally disclaim liability for the impliedwarranties of habitability and reasonable workmanship. If thecontract (typically the Agreement of Sale) between the builderdeveloper and the original purchaser contains a properly wordedand conspicuous disclaimer of the implied warranties, such adisclaimer is enforceable and the builder developer cannot beheld liable for breach of the implied warranty.

In construction, proper contract drafting can potentially eliminateor at least reduce the exposure to liability under the law ofimplied warranty.

If you are a builder developer, the attorneys at White andWilliams LLP can review and revise your contracts to getfor you the best protection available according to thecurrent law of the state where your project is being built.Also, if you are a builder developer or general contractor,you can protect yourself with your subcontractors andvendors by contractually shifting the risk to thecompanies actually doing the work and supplyingimportant components such as windows, weatherresistant barriers, steel, concrete and mechanicalsystems.If you are a subcontractor or vendor, negotiating smallchanges in contract language can help you reduce oravoid taking on any more risk for a developer or generalcontractor than absolutely necessary.

You may have gone through contract review and revisions atone point in your recent business past, but as we see with theConway case, the law changes. The attorneys at White andWilliams LLP can make sure that your contract language takesinto account the most recent decisions of the courts and anychanges in laws or regulations to minimize your exposure andmaximize your protection for your projects.

1 2012 Pa. Super. 242, Nov. 5, 2012

2 Such a claim would involve a building that is allegedly not habitable which forthat reason causes property damage to a non-owner. Example – a defectivelybuilt chimney falls onto a neighbor’s car parked next door in his own driveway.

Contributed by:

White and Williams, LLP1650 Market StreetOne Liberty Place, Suite 1800Philadelphia, PA 19103-7395

Mark Parisi, Esq.215.864.7180parisim@whiteandwilliams.com

Case Hyperlink: http://www.pacourts.us/OpPosting/Superior/out/a25017_12.pdf

Back to top

New York Court Holds That FederalStandards of Care Preempt State-LawStandards Governing Hiring, Training, andRetention of Pilots

In re: Air Crash Near Clarence Center

A New York state trial court recently added another voice to thechorus of cases finding that federal law preempts state-lawstandards of care in the field of aviation safety. In In re: AirCrash Near Clarence Center, New York, __ N.Y.S.2d __, 2012WL 4324940 (N.Y. Sup. Ct. 2012), decided on September 21,2012, the Erie County court held that federal standards of careapplied to the plaintiffs’ claims of negligent pilot hiring, training,and retention.

The case arises out of the February 12, 2009 crash ofContinental Connection Flight 3407. The plaintiffs alleged that,in addition to the pilot’s negligence in operating the airplane,defendants Colgan Air, Inc., and Pinnacle Airlines Corp.negligently hired, trained, and retained the pilot, who allegedlyhad a history of failed flight tests and unsafe flying tendencies.

Colgan and Pinnacle moved for an order stating that federalstandards of care governed the plaintiffs’ claims. In response,the plaintiffs first argued that the savings clause in the FederalAviation Act of 1958 (“FAAct”) preserves both state remediesand state standards of care. They also argued that the FAActempowers the Federal Aviation Administration (“FAA”) toprescribe “minimum safety standards” for commercial airlineoperators, which indicates Congress’s intent merely to create afloor and to leave room for the application of state tort law.Furthermore, the plaintiffs argued that state standards do notconflict with federal law with respect to their claims of negligenthiring, training, and retention. Finally, the plaintiffs argued that, iffederal regulations preempt an ordinary negligence standard ofcare, their claims effectively would be barred because theywould be restricted to examining whether the pilot took andpassed various federally required flight tests.

Rejecting these arguments, the court ordered that federal

standards of care governed the plaintiffs’ claims. The court

agreed with the “litany of Federal cases”1 holding that the FAActand the Federal Aviation Regulations (“ FARs”) “‘thoroughlyoccupy’ the field of aviation safety by establishing ‘complete andthorough safety standards for interstate and international airtransportation that are not subject to supplementation by, orvariation among, jurisdictions.’” The court then concluded thatpreemption applied because the plaintiffs’ allegations “fallsquarely within the broad field of air safety.” Furthermore, “[w]ithrespect to pilot training, certification and hiring, the regulationsappear to be exhaustive.”

The court also had little sympathy for the argument that applyingfederal standards of care would effectively bar the plaintiffs’claims. As the court stated: “Admittedly, the application of thedoctrine of implied preemption to thwart state standards of caremay sometimes affect the ultimate outcome of a case, possiblyresulting in dismissal of a claim.” The preemption doctrineprevails nonetheless. In reaching this conclusion, the courtleaned heavily on three federal circuit court cases—Montalvo,508 F.3d 464, Witty v. Delta Airlines, Inc., 366 F.3d 380 (5th Cir.2004), and Greene, 409 F.3d 784—in which “plaintiffs werethwarted in their pursuit of a remedy which, under differentcircumstances, would have been available to them under statecommon law.” The New York court appeared to agree with thereasoning in Montalvo, where the Ninth Circuit explained that thepresence of extensive federal regulations regarding in-flightwarnings demonstrated that the FAA had exercised its “authorityto regulate aviation safety to the exclusion of the states.” Theloss of certain claims is an inevitable byproduct of that FAAregulation. But the New York court was also careful to note thatit had not reached an opinion about the viability of the plaintiffs’claims, reserving that issue for another day.

While this state trial court opinion is not binding authority in NewYork or any other jurisdiction, it does demonstrate how trialcourts may be expected to apply the growing body of case lawdeclaring that the FAAct and the FARs “thoroughly occupy” thefield of aviation safety and preempt state standards of care. Incases involving claims of negligent hiring, training, and retentionof pilots, aviation defendants may point to this case asillustrative of the proper application of the now-large body offederal cases supporting the exclusive application of federalstandards of care. Defendants should be careful, however, whenrelying on this case in matters not involving air carriers, as someof the FARs upon which the court relied apply only in the aircarrier context.

1 Goodspeed Airport, LLC. v. East Haddam Inland Wetlands & WatercoursesComm’n, 634 F.3d 206 (2d Cir. 2011); US Airways, Inc. v. O’Donnell, 627 F.3d1318 (10th Cir. 2010); Montalvo v. Spirit Airlines, 508 F.3d 464 (9th Cir. 2007);Greene v. Goodrich Avionics Sys., Inc., 409 F.3d 784 (6th Cir. 2005); Abdullahv. American Airlines, Inc., 181 F.3d 363 (3d Cir. 1999); French v. PanAmExpress, Inc., 869 F.2d 1 (1st Cir. 1989).

Contributed by:Morrison Foerster, LLP12531 High Bluff Drive, Suite 100San Diego, CA 92130

Kimberly Gosling, Esq.858.314.5478kgosling@mofo.com

Case Hyperlink: http://caselaw.findlaw.com/ny-supreme-court/1612679.html

Back to top

Massachusetts Board of PharmacyEnacts Emergency Regulations TargetingCompounding Activities and Impacting AllRegistered and Licensed Pharmacies

The Massachusetts Board of Pharmacy (BOP) enactedemergency regulations effective November 1, 2012, in responseto the deadly fungal meningitis outbreak caused by drug

contamination at a Massachusetts compounding pharmacy.1

Most significantly, the regulations require pharmacies to reportextensive data to the BOP regarding their compoundingactivities. In addition, the regulations implemented new reportingobligations that affect all registered pharmacies and pharmacistsin the state and granted the BOP greater authority to quicklyshut down pharmacies and quarantine products in the event ofimmediate public health and safety concerns.

Reporting on Sterile Compounding Activity

The emergency regulations require all licensed pharmacies thatperform central intravenous admixture services (CIVAS) or sterilecompounding to submit the following information to BOP everysix months:

the total number of prescriptions dispenseddistribution data identifying the states in which theprescriptions were distributedthe status of any non-resident licenses issued by otherstatesclean room hood certifications required byMassachusetts regulationsstatus of CIVAS approvals where applicable

Pharmacies submitting this information must include an affidavitattesting to compliance with all laws and regulations related tosterile compounding. This attestation requires that pharmaciesonly prepare and dispense medication pursuant to a validprescription for a single patient, indicating the BOP's concernthat compounding pharmacies have been mass-producingmedications similar to pharmaceutical manufacturers, which ispotentially in violation of state licensure requirements.

Reporting of Disciplinary Actions and Change inAccreditation Status

All pharmacies and pharmacists registered or licensed inMassachusetts must report to the BOP all "non-routine notices,correspondence and disciplinary actions" within seven businessdays of receipt. These disciplinary actions include, but are notlimited to:

the revocation, suspension, probation, censure,reprimand or restriction of a license to operate apharmacy or practice pharmacythe denial of an application for the renewal of apharmacy licensethe denial or restriction of privileges to practice pharmacytermination from Medicare or state Medicaid programsadverse actions or fines imposed by any state or federalagency

Pharmacies and pharmacists must also report any adversechange in status of accreditation within seven business days.The new regulations also require every pharmacy and

pharmacist to provide the BOP with any responsive documentsthe pharmacy or pharmacist submitted to a government agencyin connection with an event listed above.

Reporting Adverse Events

All pharmacies must now report within seven business days alladverse events relating to the preparation of medication in thepharmacy. Regulations previously required the reporting only ofimproper dispensing of prescriptions which result in seriousinjury or death. In addition, pharmacies must report anyabnormal results, including the failure to be certified to operate apharmacy in the state, and identification of any environmentalcontaminants in the pharmacy.

Cease and Desist and Quarantine Authority

The BOP also may impose a summary cease and desist noticebefore a hearing takes place in order to stop or to restrictoperations "to immediately protect the public health, safety orwelfare." Similarly, the board may issue a summary quarantine ofproducts prior to a hearing in order to prevent the use ofmedications prepared by or in possession of a registered orlicensed pharmacy for safety reasons. These orders remain ineffect until rescinded by the board or until the board issues afinal decision. A hearing must be granted to the registered orlicensed pharmacy within 21 days of the board action.

While these emergency regulations are effective immediately,the Massachusetts BOP has granted a 90-day comment period,including a public hearing, to consider changes before taking afinal vote.

Impact of Regulations

These regulations will provide the Massachusetts BOP withsignificantly more data on the activities of licensed pharmaciesand will likely result in additional inquiries into these activities.Compounding pharmacies should expect BOP to scrutinize thescope, volume, and nature of compounding activities both insideand outside of the Commonwealth. Moreover, all pharmaciesand pharmacists should be aware that BOP now has the abilityto monitor adverse actions against their licensure or certificationin all states.

We will continue to monitor the impact of these emergencyregulations on Massachusetts-licensed pharmacies as well asother upcoming regulatory developments concerning pharmacycompounding in Massachusetts and other states.

1 See 247 Code Mass. Regs. 6.15, 10.03(1), 10.06, 10.08.

Contributed by:

Holland & Knight10 St. James AvenueBoston, MA 02116

Jeffrey Mittleman, Esq.617.854.1411jeffrey.mittleman@hklaw.comwww.hklaw.com

Back to top

Researching Jurors on the Internet -Ethical Implications

Introduction

As the membership rates of social networking1 websitescontinue to soar, attorneys are increasingly relying on Internetresearch of prospective jurors to gain an advantage at trial. Theease with which litigators can obtain valuable information aboutmembers of the jury pool has made this a prevalent strategy.Anecdotes constantly surface about the trial consultant whomiraculously discovers prospective jurors’ hidden biases throughtheir online activity. Pre-trial Internet research is becoming somuch the standard that the New York City Bar Association(NYCBA) recently suggested that a trial attorney’s failure tothoroughly investigate prospective jurors might be an abdication

of the attorney’s professional duty.2

But there is an apparent conundrum: while litigators may beblameworthy for neglecting to conduct Internet research onprospective jurors, attorneys may also be guilty of an ethicalviolation for performing that very act. In June, the NYCBA issuedFormal Opinion 2012-2, a comprehensive report on the ethicalimplications for lawyers who research jurors on the Internet.Formal Opinion 2012-2 states that attorneys might be in violationof the New York Rules of Professional Conduct if they contact aprospective juror through a social media site – even if thecontact was unintentional. According to the NYCBA, if a socialmedia site automatically notifies a juror when another personhas viewed the juror’s profile page, a lawyer “communicates”with a juror simply by looking at the juror’s publicly availableprofile. Formal Opinion 2012-2 emphasizes that attorneys musteducate themselves about how social media websites workbefore they use them.

At first glance, these ethical views may seem hard to reconcile.On one hand, an attorney could be liable for forgoing Internetbackground checks. On the other, an attorney may be culpablejust by looking at a juror’s publicly available social media profilepage. But these guidelines are not in conflict. By compellingattorneys to learn how various social media sites operate, theNYCBA is empowering attorneys to become experts in this field.If lawyers are armed with knowledge about how these websitesfunction, they can perform precise research that comports withtheir ethical obligations.

Internet Research of Jurors

The number of individuals with online profiles is growingexponentially. One recent survey estimates that 35% of adultsand 60% of people under the age of 30 now belong to a social

media networking site3. Given those figures, trial lawyers areusing websites like Google, Facebook, and Twitter to learn asmuch as possible about the character traits of prospective

jurors.4 With the assistance of an associate or a paralegal,litigators can conduct realtime background searches on amultitude of potential jurors.

The primary purpose of performing Internet backgroundresearch is to enable trial attorneys to weed out biased jurors

during the voir dire process.5 Litigators can use peremptorychallenges – limited objections that a lawyer may use to strike aprospective juror – if attorneys discover evidence that a potential

juror will be prejudiced against their clients.6

The benefits of Internet background research can be

substantial.7 Historically, trial awyers have depended onconfidential juror questionnaires to obtain backgroundinformation about prospective jurors, but lawyers have criticized

the paucity of information contained in juror questionnaires.8

Now, through the Internet, trial attorneys can obtain informationabout prospective jurors that would otherwise not be disclosedduring voir dire, such as the juror’s political beliefs and economic

philosophies.9 Litigators can also use the Internet to identifyjurors who may be receptive to their clients’ claims or jurors whoseem likely to disregard the rule of law.

For instance, a trial consultant in a products liability caselearned that a potential juror had posted on facebook “that oneof her heroes was Erin Brockovich, the crusading paralegal

known for her work for plaintiffs in environmental cases.”10 In alawsuit involving patent rights, a trial consultant for the plaintiffdiscovered that a prospective juror had previously bloggedabout the unfairness of copyright infringement, and he sought to

keep this juror on the panel.11 And in a somewhat eccentricexample, a potential juror in a personal injury case was rejectedbecause she had blogged about her extensive attempts to

contact extraterrestrials.12

The benefits of pre-trial Internet research were starkly realized ina recent products liability trial in Fort Lauderdale, Florida. Theplaintiff claimed that he was injured after he was forced to cleana machine in a confined space. Before examining prospectivejurors, the plaintiff’s attorney began researching them on socialnetworking sites. During the course of her research, the attorneylearned that one of the potential jurors belonged to a supportgroup for claustrophobics. She selected this juror for the panel,and the juror ultimately served as the foreman. The result: a

verdict in favor of the plaintiff.13

Furthermore, Internet background searches are extremelyefficient. Compared with traditional forms of investigativeresearch, attorneys and their staff members can sift through vastamounts of information on the Internet in a relatively short

amount of time.14 Attorneys inside a courtroom can email thenames of prospective jurors to associates or paralegals, whocan then plug these names into various search engines or socialmedia websites. Electronic data on social media websites canbe retrieved within seconds, and the trial lawyer can receive thebackground information before making a decision about whether

to strike the prospective juror.15

Social media websites may also be used by attorneys to verifythe accuracy of statements made by prospective jurors duringvoir dire. Depending on the jurisdiction, voir dire can be afrenetic process, and it may not be possible to scrutinize the

background information of each juror. In Dellinger,16 a criminalfraud trial, a juror denied during voir dire that she had a socialrelationship with the defendant. After the jury rendered a guiltyverdict against the defendant, the defendant disclosed that hehad received a message from the juror before the trial through asocial networking site. In the message, the juror sympathizedwith the defendant’s plight and said they would “Talk Soon!” TheSupreme Court of Appeals of West Virginia ultimately held thatthe trial court abused its discretion in failing to order a new trial.

The efficacy of researching potential jurors on the Internet isleading some commentators to suggest that trial attorneys may

be obligated to perform this service.17 Indeed, the NYCBAobserved that clients have begun to assume that their attorneyswill conduct Internet background searches of jurors and that“standards of competence and diligence may require doing

everything reasonably possible to learn about the jurors who will

sit in judgment on a case.”18 One recent scholarly essay proffersthat it may even be malpractice for a trial attorney not to perform

this research.19

To be sure, the New York Rules of Professional Conduct(NYRPC) do not provide any indication about whether pre-trialInternet research is required. Two rules in the NYRPC, however,bear on this issue. Rule 1.1 provides that “[a] lawyer shouldprovide competent representation to a client. Competentrepresentation requires the legal knowledge, skill, thoroughnessand preparation reasonably necessary for the representation.”And Rule 1.3(a) states that “[a] lawyer shall act with reasonable

diligence and promptness in representing a client.”20 So, for thetime being, it seems safe to assume that trial attorneys are notinvariably required to perform this service. But it may not be longbefore that changes. And while pre-trial Internet research mayeventually be an obligatory ethical duty, the NYCBA’s FormalOpinion 2012-2 indicates that when engaging in this conduct,attorneys must be mindful of their ethical responsibilities.

Ethical Rules About Researching Jurors Electronically

Until recently, the ethical rules for lawyers who conduct Internetresearch on potential jurors in New York State were not explicit.The NYRPC provides only that “a lawyer shall not communicateor cause another to communicate with a member of the juryvenire from which the jury will be selected for the trial of a case.”21 In 2011, the New York County Lawyers’ AssociationCommittee on Professional Ethics issued an interpretation of

Rule 3.5(a)(4).22 The Committee determined that it is ethical andproper under Rule 3.5(a)(4) for an attorney to “undertake apretrial search of a prospective juror’s social networking site,provided that there is no contact or communication with theprospective juror and the lawyer does not seek to ‘friend’ jurors,subscribe to their Twitter accounts, send Tweets to jurors or

otherwise contact them.”23 Still, the precise meaning of “contact”and “communicate” in this context had not yet been defined.

In June, however, the NYCBA released its groundbreakingethical opinion on using social media and related technology forpre-trial research. In it, the NYCBA attempted to clarify themeaning of “communication” within the context of Rule 3.5(a)(4).While the NYCBA does not have the authority for policing ethicalviolations in New York State, formal ethical opinions from theNYCBA definitely hold sway. In discerning the meaning“communication,” the NYCBA referenced several sources:Black’s Law Dictionary (9th Ed.), The Oxford English Dictionary,and Local Rule 26.3 of the United States District Courts for theSouthern and Eastern Districts of New York. Ultimately, itdetermined that it is irrelevant whether an individual intends tocommunicate with another person; communication isaccomplished when knowledge or information is transmitted fromone person to another. The focal point is on the recipient of the

communication, not on the communicator.24

The NYCBA recognizes that some social media servicesautomatically notify users when their profiles have been viewed.For example, members of LinkedIn, a highly popular professionalnetworking site, receive a message when other LinkedInmembers have viewed their profiles. Other social networking

services that offer this feature include Bebo and Tagged.25 TheNYCBA concludes that

[a] request or notification transmitted through asocial media service may constitute acommunication even if it is technically generated

by the service rather than the attorney, is notaccepted, is ignored, or consists of nothing morethan an automated message of which the“sender” was unaware. In each case, at aminimum, the researcher imparted to the personbeing researched the knowledge that he or she isbeing investigated.

The transmission of the information that theattorney viewed the juror’s page is acommunication that may be attributable to thelawyer, and even such minimal contact raises thespecter of the improper influence and/orintimidation that the Rules are intended to

prevent.26

Still, the NYCBA did not decide that an inadvertent orunintentional communication necessarily constitutes an ethicalviolation – only that it may. The NYRPC may ultimately need toweigh in on this subject.

The NYCBA repeatedly states that attorneys who engage inelectronic background searches of jurors should study thefunctionality of the websites they use. If an attorney is unable tograsp how the social media service works, the NYCBA urges theattorney to proceed with caution and be aware that he or she

may be at risk of violating the ethical rules.27

Reconciling the Two Views

While one may initially believe that Formal Opinion 2012-2creates an ethical dilemma, the fallacy of this assessmentbecomes evident upon closer inspection. Formal Opinion 2012-2simply advises attorneys of the following: (1) you may – if notnow, at some time in the future – be obligated to perform Internetresearch of prospective jurors; (2) you can view the publiclyavailable electronic profiles of prospective jurors as long as youdo not contact or communicate with the juror in any fashion; and(3) before you conduct any research on a social media site youmust first examine how the site works, understand its privacypolicies, and confirm that the site does not notify other users

when their profiles have been viewed.28

If, for example, an attorney planned to use Facebook to researchprospective jurors, the attorney would need to visit theFacebook’s Help Center at http://www.facebook.com/help/?ref=ts. The Help Center is a user-friendly resourceproviding an abundance of basic information about Facebook. Itcontains a glossary of commonly used terms; debunks certainmyths; and describes various features, services, andapplications offered by the service. Most important, the HelpCenter provides a comprehensive explanation of Facebook’sprivacy policies, and it clearly delineates Facebook’s policyabout tracking who views your profile:

Facebook does not provide a functionality thatenables you to track who is viewing your profile(timeline), or parts of your profile (timeline), suchas your photos. Third party applications alsocannot provide this functionality. Applications thatclaim to give you this ability will be removed from

Facebook for violating policy.29

Similarly, LinkedIn users can access the LinkedIn LearningCenter, which contains detailed information about how the siteworks. LinkedIn further offers a function called “Answers” inwhich a user can ask questions about a variety of topics,

including questions about various features offered throughLinkedIn. The answers are provided by other users. A simpleinquiry about whether users have the ability to track who viewstheir profile yields an overwhelming number of responses thatyes, indeed, you can (although users’ ability to ascertain theidentity of people who have viewed their profiles varies based onthe type of LinkedIn account they have).

Twitter requires users to subscribe to another user’s Twitteraccount, which has been found to be a blatant act ofcommunication – and therefore it is a prohibited form of jurorresearch. Still, if Twitter users have a public account, it ispossible to access their Twitter accounts through a Googlesearch without notifying the users that one has viewed theirprofile.

The more an attorney understands about a social mediawebsite, the more equipped the attorney will be to takeadvantage of all of the website’s search capabilities. Forexample, the Facebook Help Center provides a cogentdescription of the Facebook Search function, explaining howusers can filter their searches, search public information, orsearch for two things at the same time.

Conclusion

Pre-trial Internet research of prospective jurors is becoming anintegral component of the trial preparation process. Trialattorneys would be well advised to apply this practice wheneverpossible because it may increase the likelihood of a favorableoutcome. But before undertaking this research, attorneys mustbe familiar with the local ethical rules governing this practice.They must also determine whether jurors will receive anotification from the website if another user views their profiles.Fortunately, the leading social media websites provideuser-friendly support software that allows trial attorneys todiscern this information with relative ease. Given the role ofsocial media in our society, investing the time to understand howthese websites function is a worthwhile endeavor.

1. Social media is defined as “[w]eb sites and other online means ofcommunication that are used by large groups of people to share informationand to develop social and professional contacts: Many businesses are utilizingsocial media to generate sales.” See Dictionary.com.http://dictionary.reference.com/browse/social+media?s=t (Mar. 5, 2012).2. See NYCBA Comm. on Ethics Formal Opinion 2012-2.3. Thaddeus Hoffmeister, Investigating Jurors in the Digital Age: One Click at aTime, 60 Kan. L. Rev. 611, 612 n.5 (2012).4. Brian Grow, Internet v. Courts: Googling for the Perfect Juror, Reuters Legal(Feb. 17, 2011).5. Potential jurors are generally selected through a system of examination,known as voir dire, during which attorneys for each party can object to a juror.6. Thaddeus Hoffmeister, Applying Rules of Discovery to Information UncoveredAbout Jurors, 59 UCLA L. Rev. Disc. 28, 34–35 (2011).7. See Beth Germano, Social Media Changing the Way Juries Are Picked, CBSBoston (Nov. 15, 2010), http://boston.cbslocal.com/2010/11/15/socialmedia-changing-the-way-juries-are-picked (medical malpractice attorneyin Boston claims that social media research of prospective jurors has beenrevolutionary).8. Id.9. See Hoffmeister, Applying Rules of Discovery supra note 6, pp. 32–33.10. Grow, Internet v. Courts supra note 4.11. Carol J. Williams, Jury Duty? May Want to Edit Online Profile, L.A. Times(Sept. 29, 2008), http://articles.latimes.com/2008/sep/29/nation/na-jury29.12. Id.13. Hoffmeister, Investigating Jurors supra note 3, pp. 612, 626. 14. Id. at 630.15. See Hoffmeister, Applying Rules of Discovery supra note 6, pp. 33–34.16. See State v. Dellinger, 696 S.E.2d 38, 40 (W. Va. 2010) (per curiam).17. Hoffmeister, Investigating Jurors, supra note 3, p. 630.18. See NYCBA Comm. on Ethics Formal Opinion 2012-2 I.19. Hoffmeister, Investigating Jurors, supra note 3, p. 631.20. See Rules 1.1, 1.3(a) of the NYPRC.21. See Rule 3.5(a)(4) of the NYRPC.22. NYCLA Comm. on Prof’l Ethics, Formal Opinion 743 (May 18, 2011).23. Id. Indeed, although the New York Appellate Division has not directly

addressed this question, a New Jersey Appellate Division decision is consistentwith the New York County Lawyers’ Association’s position. In Carino v.Muenzen, 2010 N.J. Super. Unpub. LEXIS 2154, at *10 (Aug. 30, 2010), amedical malpractice case, the trial court ruled that a plaintiff’s attorney could notuse the Internet to obtain information about prospective jurors during juryselection because the plaintiff’s attorney had failed to give advance notice todefense counsel that he would be conducting such research. The juryultimately awarded the defendant a defense verdict, and the plaintiff appealed.On appeal, the Appellate Division determined that trial judge actedunreasonably. Id. at 26. The Appellate Division explained: In making his ruling,the trial judge cited no authority for his requirement that trial counsel must notifyan adversary and the court in advance of using Internet access during juryselection or any other part of the trial. The issue is not addressed in the Rulesof Court. Id. The Appellate Division, however, determined that the plaintiff did notdemonstrate that he suffered any prejudice as a result of the trial court’s error,and the defense verdict was affirmed. Id. at 27.24. See NYCBA Comm. on Ethics Formal Opinion 2012-2 II.B.2.25. Bebo, launched in 2005, is a social media site where users can post blogs,pictures, music, videos, and questionnaires. www.bebo.com. Tagged is a“social discovery site” that enables members to browse the profiles of othermembers, play games, and share tags and virtual gifts. www.tagged.com.26. See NYCBA Comm. on Ethics Formal Opinion 2012-2 II.B.2–3.27. See NYCBA Comm. on Ethics Formal Opinion 2012-2 II.B.3.28. NYCBA Comm. on Ethics Formal Opinion 2012-2 is extremely thorough. Italso provides that an attorney may not engage in deception ormisrepresentation in researching jurors on social media websites anddiscusses an attorney’s obligation to reveal improper juror conduct to the court.29. See http://www.facebook.com/help/?page=11603751514719 (Aug. 4,2012).

Contributed by:

Heidell, Pittoni, Murphy & Bach, LLP81 Main StreetWhite Plains, NY 10601

Robert B. Gibson, Esq.914.559.3100rgibson@hpmb.com

Jesse D. Capel, Esq.212.471.4641jcapell@hpmb.com

Back to top

Reprinted with permission from: New York State Bar Association Journal,November/December 2012, Vol. 84, No. 9, published by the New York State BarAssociation, One Elk Street, Albany, New York 12207

Winter 2013 | Printer Friendly | Contact Us

Back to Main

Mid-West

Ohio Supreme Court Recognizes Limited Exception to Time Limit to Notifyan Employer in a Workers' Compensation Retaliation Discharge Claim

Ohio Supreme Court Declared that Failure to Issue Personal ProtectiveEquipment Does Not Constitute "Removal of Equipment Safety Guard" foran Intentional Tort

Topics

Class Action

Construction Defect

Damages

Employer Liability

Evidence

Procedure

Product Liability

Qui Tam

Social Media

WorkersCompensation

Labor Law §240

Regions

Federal

International

Northeast

Labor Law §240

Mid-West

South East

West

Ohio Supreme Court Recognizes LimitedException to Time Limit to Notify anEmployer in a Workers' CompensationRetaliation Discharge Claim

Lawrence v. City of Youngstown

In a 6-1 decision announced on September 20, 2012, theSupreme Court of Ohio recognized a limited exception to thegeneral rule that a terminated employee must notify his or heremployer of the employee's intent to file a retaliatory dischargelawsuit under Ohio Revised Code Section 4123.90 within 90days after the date of the employee's termination, and held thattrial courts may delay the start of the 90-day notification period ina workers' compensation retaliation case if they find that a firedemployee did not become aware that he or she had been fired"within a reasonable time" after the employer's action terminatinghis or her employment. ( Lawrence v. City of Youngstown,2012-Ohio-4247).

The Court's opinion arose out of a case filed by Keith Lawrence,an employee of the City of Youngstown, who was suspendedfrom his job duties without pay on January 7, 2007. Two dayslater, on January 9, the city placed a notice in Lawrence'spersonnel file indicating that his employment had beenterminated. However, the city did not send a copy of the letter toLawrence by certified mail or present it to him in person.Lawrence subsequently denied that he had received a copy ofthe January 9 letter, and asserted that he did not learn that hehad been discharged until Feb. 19, 2007, almost six weeks afterthe termination of his employment.

On April 17, 2007, Lawrence's attorney sent a letter notifying thecity that he intended to file suit under R.C. 4123.90, alleging thatLawrence's firing was retaliation for his earlier filing of workers'compensation claims. Lawrence filed suit against the city in theMahoning County Court of Common Pleas on July 6, 2007.

The city moved for summary judgment on Lawrence's claim,arguing that the trial court lacked jurisdiction to hear the claimbecause Lawrence had not complied with the 90-day notificationrequirement of R.C. 4123.90. The Court granted the summaryjudgment motion in favor of the city. Lawrence appealed. TheSeventh District Court of Appeals affirmed the trial court rulingregarding when the 90-day notification began to run, but certifiedthat its decision on that issue was in conflict with earlier

decisions of the Sixth and Eleventh District Courts of Appeals.The Supreme Court accepted the case to resolve the conflictamong appellate districts.

Writing for the majority, Justice Robert Cupp pointed to R.C.4123.95, which mandates that Ohio's workers' compensationstatutes "shall be liberally construed in favor of employees." TheCourt concluded, "R.C. 4123.90...places an implicit affirmativeresponsibility on an employer to provide its employee notice ofthe employee's discharge within a reasonable time after thedischarge occurs in order to avoid impeding the dischargedemployee's 90-day notification obligation under R.C. 4123.90."

Further, the Court held that:

"Reading R.C. 4123.90 and 4123.95 in parimateria, we find it evident that R.C. 4123.90anticipates the employee's awareness of theemployee's discharge. Consequently, a limitedexception to the general rule that the 90-dayperiod for employer notice of an alleged R.C.4123.90 violation runs from the employee's actualdischarge is in keeping with the statute'spurpose. The prerequisites for this exception arethat an employee does not become aware of thefact of his discharge within a reasonable timeafter the discharge occurs and could not havelearned of the discharge within a reasonable timein the exercise of due diligence. When thoseprerequisites are met, the 90-day time period forthe employer to receive written notice of theemployee's claim that the discharge violated R.C.4123.90 commences on the earlier of the datethat the employee became aware of thedischarge or the date the employee should havebecome aware of the discharge."

Justice Judith Ann Lanzinger entered a separate opinionconcurring in the majority's judgment. She was joined by JusticePaul E. Pfeifer. Justice Terrence O'Donnell dissented.

While the burden that this holding places on an employer isrelatively minor, and arises only when an employee haspreviously filed a workers' compensation claim, it neverthelessmeans that employers must be proactive when notifying anemployee of his or her termination in order to ensure that the90-day notification provision begins on the date of termination.

Contributed by:

Roetzel & AndressOne SeagateSuite 1700Toledo, OH 43604

Kevin J. Cooper, Esq.419.254.5257kcooper@ralaw.comwww.ralaw.com

Case Hyperlink: http://scholar.google.com/scholar_case?case=4246005937553589408&hl=en&as_sdt=2&as_vis=1&oi=scholarr

Back to top

Ohio Supreme Court Declared that Failureto Issue Personal Protective EquipmentDoes Not Constitute "Removal ofEquipment Safety Guard" for anIntentional Tort

Hewitt v. L.E. Myers

On November 20, 2012, the Ohio Supreme Court narrowlyconstrued the phrases "equipment safety guard" and "deliberateremoval" in the context of Ohio's employer intentional tortstatute. Hewitt v. L.E. Myers, Slip No. 2012-Ohio-5317. In sodoing, the Court rejected a broad construction of the terms thatwould have potentially increased liability of employers. The OhioSupreme Court held that an employer's failure to mandate theuse of certain safety equipment does not constitute removal of asafety guard and an intentional tort.

Employment intentional torts have been the subject of muchlitigation and legislative action in Ohio over the past severaldecades. Most recently, in 2005, the Ohio General Assemblyenacted a statute that only allowed an employer to be sued foran intentional tort if the employer acted with specific intent. Thestatute, however, contained a presumption of an intent to injure ifan employee could demonstrate that the employer deliberatelyremoved equipment safety guards.

Since the enactment of this statute, appellate courts struggledwith determining what constituted the deliberate removal of an"equipment safety guard." Plaintiffs throughout the state urgedcourts to adopt an expansive definition of "equipment safetyguard" to include things such as personal protective equipment.Employers, on the other hand, urged courts to narrowly construethe term to apply only to circumstances where specific barriersprotecting pinch points on equipment were removed or disabled.In issuing its recent decision, the Supreme Court adopted therestrictive view of the statute advocated by employers.Reminger's Appellate Advocacy Practice Group authored anamicus brief on behalf of the Ohio Association of Civil TrialAttorneys urging a restrictive interpretation of the statute.

In Hewitt, an employee was injured while working on overheadpower lines. The employee argued that his employer's failure torequire him to work with rubber gloves and sleeves constitutedthe deliberate removal of an equipment safety guard designed toprotect him from the hazards of his job. A jury returned a verdictin favor of Hewitt and the verdict was affirmed on appeal. TheSupreme Court, however, reversed the verdict and concludedthat the failure to mandate use of personal protective equipmentdid not constitute the deliberate removal of an equipment safetyguard.

Specifically, the Court held that "equipment safety guard" meanta device designed to shield the operator from exposure to orinjury by a dangerous aspect of equipment. The Court went onto hold that "deliberate removal" occurs when an employermakes a deliberate decision to lift, push aside, takeoff, orotherwise eliminate that guard. The Court observed that tobroadly construe these terms to include generic safety relateditems ignored both the meaning of the words in the statute andthe General Assembly's intent to restrict liability for intentionaltorts.

The Supreme Court's decision is significant in reaffirming thefact that Ohio's employment intentional tort statute was designed

to restrict liability of employers. The Supreme Court is currentlyconsidering another case being handled by Reminger'sAppellate Advocacy Practice Group which will hopefully answeradditional questions concerning the application and scope of thestatute.

Contributed by:

Reminger, Attorneys at Law101 West Prospect AvenueSuite 1400Cleveland, Ohio 44115-1093

Brian D. Sullivan, Esq.216.430.2190bsullivan@reminger.com

Case Hyperlink: http://www.supremecourt.ohio.gov/ROD/docs/pdf/0/2012/2012-Ohio-5317.pdf

Back to top

Winter 2013 | Printer Friendly | Contact Us

Back to Main

South East

Experts – When to Discuss the Facts and When to Obtain a Report Topics

Class Action

Construction Defect

Damages

Employer Liability

Evidence

Procedure

Product Liability

Qui Tam

Social Media

WorkersCompensation

Labor Law §240

Regions

Federal

International

Northeast

Labor Law §240

Mid-West

South East

West

Experts – When to Discuss the Facts andWhen to Obtain a Report

How many times have you received an expert report withoutrequesting one? It happens more than one would think.Hopefully, you are working with experts who do not preparereports on their own without your request. If you are working withan expert for the first time, it would be wise to communicate withthe expert to ensure that everyone is on the same page when itcomes to a written report. After all, once an expert has issued areport, it cannot be re-written.

This article will address, first, when to discuss the factssurrounding a loss with an expert. Secondly, the essentialcomponents of how an expert report should be written will beaddressed. Finally, the decision for whether to have the expertprepare a report will be discussed.

When to Discuss the Facts with the Expert

Upon the initial retention of an expert, the subrogationprofessional and the expert must communicate about whether anexpert report is expected to be written in the scope of theassignment. An expert needs a clear understanding of the scopeof his or her assignment, and that includes whether the expertissues a report.

1. Is the investigation ongoing?

If the investigation is ongoing, then the subrogation professionalmay want to discuss the facts surrounding the loss with theexpert. It is best, however, to wait until the investigation iscomplete before an expert report is written, assuming one isneeded. This can eliminate the need for supplemental reports,and experts having to change or modify their opinions when newfacts are discovered. A typical subrogation investigation canhave an initial examination, joint scene examination, andevidence examination. A good practice is to ask the expert if theinvestigation is complete before requesting an expert report, orto ask if there is any additional investigation or testing that theexpert would like to complete before his or her opinions arefinalized. Always allow your expert to complete his or herinvestigation, if at all possible, before you obtain his or herreport.

2. Is the cause undetermined?

Sometimes an expert advises that there are multiple possiblecauses for a loss, and an exact cause of the loss isundetermined, or no cause can be determined because of

destroyed evidence. An expert report with an undeterminedcause may not be fruitful or add any benefit to a subrogationclaim, and may thus not be warranted. However, sometimes anexpert report is still appropriate in certain jurisdictions where anexact cause of a fire cannot be determined. For example, inFlorida, in Cassisi v. Maytag, 396 So.2d 1140 (Fla. 1st DCA1981), a product is presumed defective when a productdamages itself, and there are no remains left to determine theexact cause of the loss. For this reason, the subrogationprofessional needs to be aware of the law for proving causationfor each loss, and should seek the advice of legal counsel whendeciding whether to discuss the facts of a loss with the expert, orhave him or her issue a report in a loss when the cause isundetermined.

3. Is there no avenue for subrogation recovery?

Many subrogation investigations are opened and closed withoutthe issuance of an expert report. A majority of the insurancecompanies accept verbal reports from the experts concerningthe causation of a loss. It is not cost effective for insurancecompanies to require written expert reports on claims that clearlyhave no subrogation recovery potential. When there is noavenue for a recovery, it is always best to discuss the facts ofthe loss with the expert and forego an expert report.

How to Write an Effective Expert Report

Effective expert reports should follow the four “C’s” rule: clear,complete, convincing, conclusions. An effective format for anexpert report is a listing of the facts in a concise chronologicalorder that leads the reader to a logical conclusion. Thesubrogation professional and expert should work together toensure that the expert has sufficient information needed to writea complete and thorough report that includes a explanation ofthe facts and the conclusions.

Clear – The expert report is intended to provide the reader withan understanding of the claim with an orderly chronologicalstatement of the facts. A well written expert report educates thereader and explains the issues, the investigation, and thediscovery, with an analysis of the expertise applied to the factsand circumstances. The ultimate conclusion should be a logicalresult of the investigation. The expert report does not want tomislead the reader with confused or clouded facts, because thereader will not comprehend the claim, or most important, theconclusion. A photograph is worth a thousand words, andexcellent visual aids can more clearly show the reader theexpert’s presentation of the claim. Other great tools arediagrams, charts, graphs, and similar visual summaries.

Complete - The expert report needs to consider all of thecircumstances, even the bad and unfavorable facts. Any bad orunfavorable facts should be addressed, along with a discussionof why those facts have no impact on the ultimate conclusions.There should be no loose ends, or unanswered questions, sothat the reader is left uncertain. As discussed above, it is alwaysbest to wait until the investigation is complete before the expertissues a written report, in order to avoid multiple reports,because the report was written too soon before the completionof the investigation.

Convincing – A good expert report sets forth a clearunderstanding of the claim, with a persuasive explanation that isbelievable, plausible and convincing. The intent is to leave thereader with no doubt that the expert has been thorough. Thestatements must be logically based on the evidence, and thenthe resulting opinions become convincing.

Conclusions – The conclusions and opinions are the finale ofthe expert report. The report needs to have a logical sequenceof events, demonstrating a process that leads to a strongconclusion. Expert reports are not effective when an expert“jumps to conclusions” without the supporting evidence. Someexpert reports have more than one opinion, and each ultimateopinion needs its own support. Such support is a derivative offacts and data accumulated throughout the investigation. Theconclusion should be built off of the analysis set forth earlier inthe report.

Decision to Write an Expert Report

1. Is an expert report needed for pre-suit settlementnegotiations?

Sometimes expert reports are written to help resolve claims inpre-suit settlement negotiations. At the same time, many pre-suitsettlements occur without any expert report. Expert reports areeffective ways to establish a claim against a responsible party.When an adverse party requests an expert report, thesubrogation professional should understand the reason for therequest, and be confident that the report is truly necessary at anearly stage in the litigation process.

In some instances, an adverse party has no intent to settle aclaim pre-suit, and the request is only to gain access to yourexpert’s opinions, knowing that the claim is headed for litigation.If this is the case, then a decision could be made to foregowriting a report. On the other hand, the subrogation professionalmay decide that an exchange of expert reports would bebeneficial to learn the other party’s position as to causation andliability. There is no requirement that an expert report beprepared in pre-suit settlement negotiations, but the other partymay need a report to justify the payment of a liability claim andassist the claim in a settlement.

2. Is the case going to Arbitration Forums?

Expert reports are a very effective tool when submitting a caseto Arbitration Forums. Intercompany arbitration is a forum forclaim resolution for insurance carriers that are participatingmembers. Compulsory arbitration is applicable to a maximumamount of $100,000 for a company claim amount in automobile,medical payment, property claims, and uninsured motoristforums. Compulsory arbitration is applicable to a maximumamount of $250,000 for a contribution sought amount in specialarbitration forums. The Arbitration Forums consist of subrogationprofessionals who review written submitted claims, and writtenrebuttals. There are no rules of evidence that control thesubmission of documents in Arbitration Forums. The arbitrationdecisions are binding on the parties. If an expert report is wellwritten, then it can be a cost effective tool to assist in theresolution of your claim in Arbitration Forums.

3. Is the case going to be litigated in State Court?

Every State Court has different rules, procedures, statutes, andcase decisions. Generally, State Courts do not have mandatoryexpert written report requirements, although any State Court canorder an expert report to be written. Be aware that there canalso be differences within a State from County to County, andeven from judge to judge. Each State has its own statutes andcase law that govern the standards of negligence, productsliability, breach of contract, and comparative/contributorynegligence. The variety of laws may have a direct impact on theopinions that may need to be addressed in an expert report to

prove causation or liability. It is best to seek advice of counselwhen dealing with issues of law involved with a subrogationclaim. Note that many situations arise in State Court whereexpert reports are not required, and the verbal opinion testimonyof the expert is presented through deposition and at trial.

4. If the case is going to be litigated in Federal Court, willthe expert report fulfill the obligations under Fed.R.Civ.P.26(2)(B)(i)-(vi)?

Fed.R.Civ.P. 26(2)(B)(i)-(vi) (2012) Disclosure of ExpertTestimony states:

(B) Witnesses Who Must Provide a WrittenReport. Unless otherwise stipulated or orderedby the court, this disclosure must beaccompanied by a written report—prepared andsigned by the witness—if the witness is oneretained or specially employed to provide experttestimony in the case or one whose duties as theparty’s employee regularly involve giving experttestimony.

Failure to comply with the mandated provision, may possiblyresult in sanctions against a party, the striking of an expertreport, or the striking of expert testimony, which could then leadto the dismissal of a lawsuit.

An expert report must contain:

i) a complete statement of all opinions thewitness will express and the basis and reasonsfor them;

The report is required to set forth each opinion with a supportedbasis and reason for each. One opinion may have numerousfacts of support. The basis is the foundation, origin and sourceof each fact relied upon in formulating the opinion. The basiscannot be based on speculative or unsupported facts. Thereason is the cause, rationale, explanation and analysis used toreach the opinion. See Loeffel Steel Products, Inc. v. DeltaBrands, Inc. 387 F. Supp. 2d 794 (N.D. Ill. 2005) (excludingreport of damages expert because it did not comply with the rulewhen there was no explanation, written opinions, details oranalysis in the report); R.C. Olmstead, Inc. v. CU Interface, LLC,606 F.3d 262 (6th Cir. 2010) (excluded expert report because thereport did not set forth the facts and outline the reasoning with alogical foundation when it did not include the “how” and the“why” that was so crucial).

(ii) the facts or data considered by the witness informing them;

The intent is that “facts or data” are to include any materialconsidered by the expert from whatever source that containsfactual information. The rule extends the obligation to any factsor data “considered” by the expert in forming the opinions to beexpressed, not only those relied upon by the expert.

There is a relatively new rule that went into effect on December1, 2010, that provides work-product protection for draftdisclosures and most attorney/expert communications underFed.R.Civ.P. 26(b)(4). The subrogation professional needs tononetheless presume that all documents contained in theexpert’s file will probably be discoverable in litigation, with a fewexceptions, including the attorney/expert communication. Thus,

consider everything in the expert’s file will be read by theopposing party, including all e-mail communications. As a result,the subrogation professional should pay attention to what iscommunicated to the expert in writing. The telephone istherefore an excellent way to communicate with your expert.

(iii) any exhibits that will be used to summarize orsupport them;

This requirement is intended to allow the expert to use asummary and exhibits for display at trial, and is usually doneclose to the trial date. For instance, demonstrative evidencesuch as diagrams, graphs, and charts can be effective visualaids for the jury to better understand the expert opinions.

(iv) the witness’s qualifications, including a list ofall publications authored in the previous 10years;

An updated resume or curriculum vitae, or “CV”, is sufficient todisclose the expert’s qualifications. The purpose is to disclosethat the expert is qualified in education, expertise or specialty toprovide expert witness testimony. See Cruz-Vazquez v.Mennonite General Hosp. Inc., 613 F. Supp. 2d 202 (D.P.R.2009) (excluding plaintiff’s expert due to failure to providedefendant with updated CV of expert prior to trial). CompareSoufflas v. Zimmer, Inc., 474 F. Supp. 2d 737 (E.D. Pa. 2007)(finding the orthopedic surgeon’s CV sufficient when there wasdisclosure of experience of knee and shoulder surgery, trainingcourses, instruction courses, and private practice). If the experthas no publications, then it should be noted in the report,because the failure to provide the information can haveunfavorable results. See Sykes v. Napolitano, 634 F. Supp. 2d 1(D.D.C. 2009) (issuing a technical violation because of themissing list of publications the expert had authored in the pastten years).

(v) a list of other cases in which, during theprevious 4 years, the witness testified as anexpert at trial or by deposition; and . . .

The rule does not require the witness to make the depositiontranscripts available to the other party. As a subrogationprofessional, the list of deposition and trial testimonies, as wellas the resume or curriculum vitae, can be very useful whenworking with an unfamiliar expert. You may find that an experthas the credentials to serve as an expert, but has neither beendeposed nor testified at trial. Knowing this information early inthe investigation can also assist the subrogation professional inselecting an expert, because you may need an expert with boththe credentials and trial testimony. See Sykes v. Napolitano, 634F. Supp. 2d 1(D.D.C. 2009) (holding report that lacked a list ofthe cases in which the expert had testified in the last four yearswas deficient under the rule). But see Currier v. UnitedTechnologies Corp., 213 F.R.D. 87 (D. Me. 2003) (ruling thatalthough plaintiff may not have provided a listing of the othercases in which the expert had testified that would not be groundfor excluding their testimony).

(vi) a statement of the compensation to be paid for the study andtestimony in the case. The purpose of this provision is to let theother party know how much money the expert billed to date

through the preparation of the report, and the rate for trialtestimony. Compliance includes an invoice outlining the datesworked and the hourly rate charged from the inception of theclaim through the investigation, up to the date of the report. Thestatement should also include the hourly rates charged fordeposition and trial testimony.

5. Are there any additional opinions after the expert reportis written?

Experts are limited to the opinions only stated in the report, andcannot offer new information or theories not included in theirreports. Fed.R.Civ.P. 26(E) requires experts to supplementexpert reports when required. Fed.R.Civ.P. 26(e) states that aparty’s duty to supplement extends both to information includedin the report and to information given during the expert’sdeposition. Any additions or changes to this information must bedisclosed by the time the party’s pretrial disclosures are due.See Macaulay v. Anas, 321 F.3d 45 (1st Cir. 2003) (precludingplaintiff’s expert witness from testifying to a new theory of liabilitythat had been asserted after the deadline).

6. When should an expert report be prepared for FederalCourt?

The subrogation professional needs to keep in mind that expertreports in Federal Court are due to the other party 90 daysbefore trial, unless a different time is ordered by the court. Theexpert report is therefore usually written shortly before trial, sothat the opinions rendered can take into consideration thetotality of the facts, circumstances, and evidence involved in thecase. Thus, consider that the totality of the facts, circumstances,and evidence may not all be favorable to your position or theexpert’s opinions. A well written expert report addresses theunfavorable and negative facts by distinguishing and reasoningwhy those facts are not relevant or material to your expert’sultimate opinions.

Conclusion

In summary, the subrogation professional and the expert are ateam that must work together during the investigation of a claimto determine whether a claim has any subrogation recoverypotential. Whenever a claim has subrogation recovery potential,a decision is then made whether a verbal report from the expertis sufficient, or whether a written report is needed. Whether anexpert report should be written depends on the status of theinvestigation, the forum of where the expert report will be used,and the criteria needed for the report. A good expert report isbased on a complete investigation that chronologically states thefacts, and leads the reader to a logical, clear, and convincingconclusion.

Contributed by:

Butler Pappas Weihmuller Katz Craig LLP777 S. Harbour Island Boulevard, Suite 500Tampa, FL 33602

Mary Jo Kuusela, Esq.813.281.1900mkuusela@butlerpappas.com

Back to top

Winter 2013 | Printer Friendly | Contact Us

Back to Main

West

California Court Invalidates Law Prohibiting the Use of Class ActionWaivers

California Appellate Court Extends "Completed and Accepted" Doctrine toArchitects’ Field Operations

Remodeling the Disability Access Claim: New Law Aids CaliforniaBusinesses

Tolling Agreements vs. Statute of Limitations Waivers

California Amends Its False Claims Act to Mirror Federal Law, PreserveFederal Incentive Awards, and Loosen the Reins on Whistleblower Suits

California Law Prohibits Requests for Employees' Social MediaPasswords or Information

Topics

Class Action

Construction Defect

Damages

Employer Liability

Evidence

Procedure

Product Liability

Qui Tam

Social Media

WorkersCompensation

Labor Law §240

Regions

Federal

International

Northeast

Labor Law §240

Mid-West

South East

West

California Court Invalidates LawProhibiting the Use of Class ActionWaivers

Sherf v. Rusnak/Westlake

The California Court of Appeal for the Second District rejectedthe state’s attempt to prohibit the waiver of class actionagreements, changing how insurers should approach mandatoryarbitration provisions. In 2011, the Supreme Court of the UnitedStates held in AT&T Mobility, LLC v. Concepcion that theFederal Arbitration Act (FAA) preempts state laws prohibiting theuse of class action waivers in arbitration agreements. ACalifornia Court of Appeal recently applied the Concepciondecision, Sherf v. Rusnak/Westlake, nullifying the state’sauthority to prohibit the waiver of class action rights in arbitrationagreements. Although the defendant in Sherf was not an insurer,this case is of particular importance to carriers because itreinforces the applicability of mandatory arbitration provisions instate court.

California’s authority to prohibit class action waivers comes fromthe California Consumers Legal Remedies Act (CLRA), whichcreates a statutory remedy for consumers who suffer damagesas a result of a business’ unfair or deceptive practices. TheCLRA expressly permits the use of class actions and assertsthat “any waiver … is contrary to public policy and shall beunenforceable and void.” Cal. Civ. Code § 1751. In Sherf, aconsumer sued his car dealership, alleging the dealershipimproperly charged a statutory tire fee for a vehicle that did notinclude a spare tire. The consumer also alleged that he wasimproperly charged for a tire service contract for a vehicle thatdid not qualify for the service plan. The complaint included aclass action cause of action pursuant to the CLRA. Thedealership moved to compel arbitration, strike the class actionclaims and stay the proceeding until the completion ofarbitration, arguing that the consumer waived his class actionrights in the underlying sale contract.

In its ruling, the trial court acknowledged Concepcion, but

reasoned it did not invalidate the CLRA’s anti-waiver provisionbecause the provision in the CLRA was “facially neutral.” TheCalifornia Court of Appeal disagreed and reversed. The courtreasoned that “ Concepcion rejects the argument that classaction waivers in consumer contracts can be invalidated in orderto vindicate statutory rights even if the statutory right is desirablefor other reasons.” Sherf at *5. The court held that, underConcepcion, the CLRA could not automatically invalidate theunderlying arbitration agreement. However, since the FAApermits arbitration agreements to be invalidated by generallyapplicable contract defenses, the court remanded the case forthe trial court to decide whether the arbitration agreement wasunconscionable under general principles of California law.

The Sherf case reinforces the strong federal policy favoring theenforcement of arbitration agreements. Therefore, if a particularstate has no regulation prohibiting the use of arbitration clausesin insurance contracts, a reasonable arbitration clause may bebinding and enforceable.

Contributed by:Nelson Levine deLuca & Hamilton LLCOne Battery Park Plaza32nd FloorNew York, New York 10004

Kymberly Kochis, Esq.212.233.2906kkochis@nldhlaw.com

Dominic Anamdi646.405.7594danamdi@nldhlaw.com

Case Hyperlink: http://scholar.google.com/scholar_case?case=15788345714502882775&hl=en&as_sdt=2&as_vis=1&oi=scholarr

Back to top

California Appellate Court Extends"Completed and Accepted” Doctrine toArchitects’ Field Operations

Neiman v. Leo A. Daly Company

In Neiman v. Leo A. Daly Company B234537 (October 30,2012), the California Court of Appeal, Second Appellate Districtaffirmed the granting of a motion for summary judgment onbehalf of an architect based on an affirmative defense of the“completed and accepted” doctrine. Plaintiff, Ellen Neiman, suedthe Santa Monica Community College and others, including theproject architect, after she fell on stairs at a campus theater. Theplaintiff alleged that the stairs did not have contrast markingstrips, which made them a dangerous condition that caused orcontributed to causing her to trip and fall.

Architect Leo A. Daly designed a theater arts building for thecollege. The theater was completed almost two years before theplaintiff’s injury. The architect’s agreement with the collegerequired him “to observe the construction to completion and inso doing to comply with all requirements of Title 21, CaliforniaAdministrative Code, with respect to such observation. Thisobservation is contemplated to mean that the Architect shall

make such visits to the work in progress as to determine that thework is carried out in accordance with the contract documentsincluding Architect’s specifications ….” The plaintiff sued thearchitect not over the design of the theater, but rather based onhis inspections during construction.

The trial court granted the architect’s motion for summaryjudgment based on the “completed and accepted” doctrine.Under this doctrine, once a contractor has completed its workand the owner has accepted it, the contractor is not liable tothird parties injured as a result of a patent defect in thecontractor’s work. In affirming the judgment below, the Court ofAppeal extended what is essentially a contractor defense to thedesign professional’s responsibility to observe the work in thefield. The court distinguished this claim from a claim that thedrawings and specifications contained an error or omission.Here, the contrast marking strips were called for in the designdocuments. The architect, along with the owners and others,failed to discover the absent contrast strips.

“In this action, Neiman does not allege LAD [Leo A. Daily] wasnegligent in preparing the plans and specifications. She claimsLAD was negligent in “failing to see and notify SMCCD andTurner Construction [the contractor] that the contrast markingstripes required by the plans for the theatre and by the CaliforniaBuilding Code were never placed on the stairs of the MainStage[.]”

The rationale for the doctrine is explained by the court:

“[W]hen a contractor … completes work that is accepted by theowner, the contractor is not liable to third parties injured as aresult of the condition of the work, even if the contractor wasnegligent in performing the contract, unless the defect in thework was latent or concealed. The rationale for this doctrine isthat an owner has a duty to inspect the work and ascertain itssafety, and thus the owner’s acceptance of the work shiftsliability for its safety to the owner, provided that a reasonableinspection would disclose the defect. Stated another way, ‘whenthe owner has accepted a structure from the contractor, theowner’s failure to attempt to remedy an obviously dangerousdefect is an intervening cause for which the contractor is notliable.’ The doctrine applies to patent defects, but not latentdefects. ‘If an owner, fulfilling the duty of inspection, cannotdiscover the defect, then the owner cannot effectively representto the world that the construction is sufficient; he lacks adequateinformation to do so.’"

The court held that as a matter of law the absence of contrastmarking strips was a patent defect.: “The absence of stripes onthe stairs is obvious and apparent to any reasonably observantperson. The stripes are designed to be seen by someonewalking down the stairs. Thus, a reasonable inspection shoulddisclose the striping called for in the plans and specifications ismissing.”

The court was not persuaded that the defect was latent eventhough the college, the architect, the contractor and arepresentative from the Division of the State Architect all missedit on the final job walkthrough. Had the strips been there, theywould have been readily apparent to anyone walking down thestairs; therefore, their absence is “obvious and apparent.”

The completed and accepted doctrine is a useful defense tokeep in mind in construction litigation. The significance of thiscase is that it extends the defense to a design professional’sduties and obligations with regard to the inspection andsupervision of the construction work.

Contributed by:

Wilson Elser Moskowitz Edelman & Dicker, LLP655 West Broadway, Suite 900San Diego, CA 92101

John Clifford, Esq.619.881.3320john.clifford@wilsonelser.com

Edward Garson, Esq.415.625.9330edward.garson@wilsonelser.com

Ian Stewart, Esq.213.330.8830ian.stewart@wilsonelser.com

Case Hyperlink: http://www.courts.ca.gov/opinions/documents/B234537.PDF

Back to top

Remodeling the Disability Access Claim:New Law Aids California Businesses

The California Legislature has finally responded to concernsabout certain manipulative practices of the plaintiffs' ADA barand enacted a bill ("SB 1186"), with bipartisan support, which theGovernor has now signed into law. The new law, which goesinto effect immediately, takes baby steps toward curtailing themore egregious practices associated with disability accessclaims.

The law is designed to address two specific issues. First, theLegislature noted that some plaintiffs' attorneys will senddemand letters to business owners alleging access violations,but rather than asking for those violations to be corrected, theydemand payment of a quick monetary settlement under threat ofmore costly litigation in the future. This "pay me now or pay memore" approach, in the Legislature's words, does not trulypromote disability access, but erodes public confidence inaccess laws.

Second, the Legislature observed that disability access plaintiffswill often make repeat visits to non-compliant businessestablishments, encounter the same access barriers each time,and demand a monetary settlement in the amount of theirminimum statutory damages (typically $4,000) multiplied by thenumber of visits. This "stacking" of claims often results infive-figure settlement demands which can be used to intimidatebusiness owners into a quick monetary settlement.

SB 1186 was enacted to curtail these practices by opportunisticplaintiffs, and to facilitate greater awareness and compliancewith disability access laws by California businesses. Itimplements the following key changes:

Pre-litigation demand letters regarding construction-related issues may no longer contain a demand formoney, and must be written so that a reasonable personcan understand the basis of the alleged violation.

Plaintiffs may no longer "stack" their claims based on

multiple visits to the same business establishment,unless they can offer a reasonable explanation formultiple visits.

The $4,000 minimum statutory damage award forconstruction-related access violations is reduced toeither $1,000 or $2,000 for businesses who correct theviolations, depending on the size of the business and theamount of time in which the violations are corrected.

Commercial property owners must state, on lease formsor rental agreements executed afterJuly 1, 2013, whether the leased premises have beeninspected by a certified access specialist.

While these changes do not by themselves prevent plaintiffsfrom bringing disability access claims, they may reduce theincentive to do so and give business owners more of anopportunity to correct any access violations before facing alawsuit

Contributed by:

Burnham Brown1901 Harrison Street, 14 th FloorOakland, CA 94612

Cathy L. Arias, Esq.510.835.6806carias@burnhambrown.com

Brendan Brownfield, Esq.510.835.6732bbrownfield@burnhambrown.com

Back to top

Tolling Agreements vs. Statute ofLimitations Waivers

Don Johnson Productions, Inc. v. Rysher Entertainment

Code of Civil Procedure Section 360.5 allows parties to waivethe statute of limitations if the parties follow certain procedures.This case considered whether a written tolling agreementbetween the parties was subject to the same requirements.

On December 7, 1994, plaintiff Don Johnson Productions, Inc.(“Johnson”) entered into a contract with Rysher Entertainment,LLC (“Rysher”) to provide acting services for the “Nash Bridges”television series. In return, Rysher agreed to fund production.The contract was extended in 1997, 1998 and 1999. Rysher wasoperated by 2929 Entertainment, LP which later sold Rysher toQualia Capital, LLC in 2006, which eventually dissolved Rysher(collectively “defendants”).

Prior to the airing of the final 2001 season of “Nash Bridges,”Rysher sold worldwide syndication rights for the series to USANetwork. Johnson was not a party to the syndication transactionand did not receive a share in the syndication profits. A disputeensued between Rysher and Johnson regarding his 50%ownership share in the syndication profits. On May 16, 2002, theparties executed a tolling agreement, providing that Johnson’stime to bring any action related to the Nash Bridges series wouldbe tolled to at least May 14, 2002 until and unless Rysher

provided reasonable notice (30 days) to Johnson rescinding thetolling agreement. Neither party attempted to rescind the tollingagreement prior to litigation.

Approximately five years later on February 19, 2007, Johnsonfiled a complaint related to the syndication profits dispute againstRysher, alleging breach of contract, conversion, unjustenrichment, and interference with prospective economicadvantage. The complaint sought compensatory damages,injunctive relief, attorney’s fees, punitive damages and interest.The parties agreed that Johnson’s contract claim vested onMarch 17, 1998 when the accountant employed by Rysherprovided Johnson’s employee with a “participation/distributionstatement” for the period ending December 31, 1997 detailingincome for the series.

Defendants alleged that Johnson’s 2007 lawsuit was untimelybecause it was filed more than four years after the parties’ 2002tolling agreement expired by operation of law. Defendantscontended that California Code of Civil Procedure § 360.5(“Section 360.5”) required that the 2002 tolling agreement berenewed in writing every four years (i.e., 2006). Section 360.5allows parties to waive the applicable statute of limitationsgoverning a dispute if the waiver is set forth in writing andsigned by the person obligated. A Section 360.5 waiver iseffective for no more than four years unless successivelyrenewed by parties. Defendants argued that the May 16, 2002tolling agreement was executed by Pryor more than four yearsbefore Johnson’s 2007 lawsuit such that the tolling agreementexpired in 2006. Defendants contended that absent timelyrenewal of the tolling agreement pursuant to Section 360.5,Johnson’s claims were barred under California Code of CivilProcedure §337, setting forth a four-year statute of limitations forwritten contracts.

The Court of Appeal rejected defendants’ argument that Section360.5 and its four-year renewal requirement was controlling asto the 2002 tolling agreement between Johnson and Rysher.The court held that the 2002 tolling agreement did not involve awaiver of the right to assert the statute of limitations. Rather, theparties’ 2002 tolling agreement “suspended” the running of thestatute of limitations under California law. The court referencedcase law noting that “tolling may be analogized to a clock that isstopped and then restarted.” The court pointed out that thelegislative intent of Section 360.5 specifically refers to waivers ofthe statute of limitations, not tolling agreements. After examiningthe language and legislative history of Section 360.5, the courtconcluded that the Section 360.5 four-year renewal requirementdid not apply to the 2002 tolling agreement. There was norequirement that the tolling agreement be renewed after fouryears. Rather, the May 16, 2002 tolling agreement tolled theSection 337 statute of limitations. No party rescinded the tollingagreement. Therefore, Johnson’s February 19, 2007 complaintwas timely filed.

Comment

The court confirmed that tolling agreements will be treateddifferently from waivers of the statute of limitations. Tollingagreements simply suspend the applicable statute of limitationsuntil an agreed-upon time. Unlike a waiver, a tolling agreement isnot subject to Section 360.5 requirements of renewal every fouryears, but it is very important when fashioning tollingagreements to clearly state when the statute of limitations will besuspended, the length of the tolling period and/or the type ofnotice required to re-start the running of the statute of limitations.

Contributed by:

Low, Ball & LynchAttorneys at Law505 Montgomery Street, 7th FloorSan Francisco, CA 94111-2584

Karen Moore, Esq.415.981.6630kmoore@lowball.com

Case Hyperlink: http://scholar.google.com/scholar_case?case=13646065949892036580&q=don+johnson+v.+rysher+entertainment&hl=en&as_sdt=2,33&as_vis=1

Back to top

California Amends Its False Claims Act toMirror Federal Law, Preserve FederalIncentive Awards, and Loosen the Reinson Whistleblower Suits

Introduction

On September 27, 2012, Governor Brown signed Assembly Bill2492 (“AB 2492”) amending California’s False Claims Act,California Government Code §§ 12650, et seq. (“CFCA”). TheCFCA permits the Attorney General (or local prosecutors) tobring a civil action to recover treble damages and civil penaltiesagainst any person who knowingly makes or uses a false recordor statement to either obtain money or property from the state or

avoid paying or transmitting money or property to the state.1 Incertain circumstances, private individuals—knowninterchangeably as “whistleblowers,” “qui tam plaintiffs,” or“relators”—are permitted to file suit in the name of thegovernment; if their suit is successful, they share in any financialaward. In 1987, California became the first state to adopt a FalseClaims Act.

The amendments just signed into law were largely designed toconform the CFCA to the federal False Claims Act, 31 U.S.C. §§3729, et seq. (“FCA”). The amendments, described in moredetail below, take effect on January 1, 2013.

Protecting Federal Incentive Payments Drove RecentChanges To California’s False Claims Act

The impetus for amending the CFCA was to preserveCalifornia’s ability to receive financial bonuses from the federalgovernment for anti-fraud prosecution. Under section 1909 ofthe Social Security Act (“SSA”), states with false claims actstatutes can qualify for federal incentive awards from amounts

recovered pursuant to Medicaid-related false claims.2 To qualifyfor these incentive payments, certain provisions of the state’sfalse claims act must mirror the federal FCA. The FCA has beenamended three times since 2009—by the Fraud Enforcementand Recovery Act of 2009, the Patient Protection and AffordableCare Act in 2010, and the Dodd-Frank Wall Street Reform andConsumer Protection Act in 2010. After these amendments, theCFCA no longer mirrored the FCA, and tens of millions of dollarsin federal financial incentives were at risk of being lost.

In early 2012, the federal Office of the Inspector General of theU.S. Department of Health and Human Services (“OIG”)

informed California’s Attorney General that because of therecent amendments of the FCA, the CFCA no longer met therequirements of section 1909 of the SSA. The OIG notifiedCalifornia that it would only remain eligible for federal incentivesif its statutory scheme was “at least as effective in rewarding and

facilitating qui tam actions” as the FCA.3 California lawmakersresponded to the federal government’s mandate by approvingAB 2492 in August 2012.

AB 2492 Amendments

Key enactments of AB 2492 are highlighted below:

Liability

Prior to the recent amendments, a suit based on a publicdisclosure would be barred under the CFCA unless theparty bringing the action was an “original source”—i.e.,someone who had direct and independent knowledge ofthe information on which the allegations were based. AB2492 alters the original source definition to include aperson “who has knowledge that is independent of, andmaterially adds to, the publicly disclosed allegations ortransactions.”

Under the CFCA, a false claim can arise for knowinglyavoiding or decreasing an obligation to pay the state. AB2492 now incorporates the federal definition of“obligation,” which also gives rise to liability for theretention of an overpayment.

Under the prior law, suits based on public disclosureswere barred. AB 2492 includes a provision requiringdismissal in the event of a public disclosure “unlessopposed by the Attorney General or prosecutingauthority of a political subdivision,” creating the potentialto override the public disclosure bar in the event theprosecuting authority opposes dismissal.

With regard to the statute of limitations, AB 2492provides that if the California Attorney General files acomplaint in intervention, it will relate back to the filingdate of the whistleblower’s complaint.

Penalties

AB 2492 increases the civil penalties for a false claim tonot less than $5,500 and not more than $11,000 for eachfalse claim.

Under the new law, a defendant can recover attorneys’fees if the defendant prevails in the case and the courtfinds that the claim was clearly frivolous, clearlyvexatious, or brought primarily for purposes ofharassment. If the Attorney General has intervened in thecase, then the attorneys’ fees are assessed to thegovernment. If the Attorney General declined tointervene, and the whistleblower proceeded with thecase, then the attorneys’ fees are assessed to thewhistleblower.

Whistleblowers

Whistleblowers are now potentially eligible for a reducedaward even if they planned and initiated the violationupon which the CFCA action was based.

AB 2492 expands anti-retaliation provisions beyond justemployees to contractors and agents.

The amendments to the CFCA increase incentives to bringlawsuits against businesses by enhancing civil penalties,expanding anti-retaliation protections, clarifying the statute oflimitations, and facilitating whistleblower suits. In light of thesechanges, and the public’s ongoing scrutiny of governmentspending, companies would be well-served to revisit theircompliance programs with CFCA issues in mind. Ongoingmonitoring and handling of employee concerns regardingalleged violations of regulations or government contractualrequirements should be prioritized.

1 Cal. Gov’t Code § 12651(a)(1) and (2).2 See 42 U.S.C. § 1396h. Specifically, the federal Deficit Reduction Act of 2005(“DRA”) provides states with a financial incentive to enact state false claimslaws that are at least as effective as the federal law: states are awarded anadditional ten percent of any amount recovered under the state law for falseclaims to the state Medicaid program.3 Bill Analysis, AB 2492 (June 18, 2012), available at http://www.leginfo.ca.gov/pub/11-12/bill/asm/ab_2451-2500/ab_2492_cfa_20120815_175821_asm_floor.html.

Contributed by:

Simpson Thacher & Bartlett, LLP1999 Avenue of the Stars -- 29th FloorLos Angeles, CA 90067

Deborah L. Stein, Esq.310.407.7525dstein@stblaw.com

K. Lucy Atwood, Esq.310.407.7528katwood@stblaw.com

Back to top

California Law Prohibits Requests forEmployees' Social Media Passwords orInformation

This fall, California joined Maryland and Illinois by enacting a lawsharply limiting employers’ ability to ask applicants andemployees to provide their social media passwords or otherwiseto give employers access to social medial accounts orinformation. The new law goes into effect January 1, 2013.

What Does the Law Prohibit?

Specifically, the new law, AB 1844, “prohibits an employer fromrequiring or requesting an employee or applicant for employmentto disclose a username or password for the purpose ofaccessing personal social media, to access personal socialmedia in the presence of the employer, or to divulge anypersonal social media.”

The new law also prohibits employers from firing, threatening ordisciplining any employee who refuses to comply with anunlawful request to access a social media account or divulgesocial media information.

“Social media” is broadly defined to include any “electronicservice or account, or electronic content,” including, but not

limited to, “videos, still photographs, blogs, video blogs,podcasts, instant and text messages, email, online services oraccounts, or Internet Web site profiles or locations.”

What the Law Allows

Significantly, the law does allow employers to require employeesto divulge social media information in two situations. First, wherethe employee’s social media is “reasonably believed to berelevant to an investigation of allegations of employeemisconduct or employee violation of applicable laws andregulations,” the employer may request an employee to “divulgepersonal social media [information] reasonably believed to berelevant to the investigation,” provided that the social mediainformation is used solely for purposes of that investigation or arelated proceeding. Second, the law does not preclude anemployer from “requiring or requesting an employee to disclosea username, password, or other method for the purpose ofaccessing an employer-issued electronic device.”

Despite the law’s broad prohibitions, it is not clear whatremedies are available to an employee who believes anemployer has violated the law. The law does not specificallygrant employees a right to sue in court for violations, and itstates that the California Labor Commissioner is “not required toinvestigate or determine any violation” of the new law.Nonetheless, employers would be wise to proceed on theassumption that applicants and employees will be able to obtainrelief for violations of the new Labor Code provision.

Contributed by:

Holland & Knight400 South Hope Street, 8 th FloorLos Angeles, CA 90071

Linda Auerbach Allderdice, Esq.213.896.2422linda.allderdice@hklaw.com

Todd Steenson, Esq.312.578.6541todd.steenson@hklaw.com

California Law Prohibits Requests for Employees' Social Media Passwords orInformation, November 13, 2012. Authored by Todd Steenson and LindaAuerbach Allderdice.Reprinted with permission from Holland & Knight. © 2012 Labor, Employmentand Benefits Alert.

Back to top

AIG | Privacy180 Maiden Lane, New York, NY 10038© 2013 American International Group, Inc. All rights reserved.

Legal Insights is produced by AIG's Issue Management Group. Issue Management provides technical expertise and support across all claims areas,including tracking emerging liability and claims-related issues, as well as emerging exposures, legislative and tort reform efforts around the country andis a resource for technical bankruptcy claims issues.

For questions or further information, please contact Leeann Irvin at (212) 458-9313, leeann.irvin@aig.com or write to us atIssue.Management@aig.com.

This document is presented for informational purposes only. The information contained herein highlights several developments in the areas of tort andinsurance law and is not intended to represent these developments in their entirety or the entirety of developments in these areas. Neither thedocument nor the information contained herein is intended to be construed as legal advice and should not be considered legal advice. Readers should

refer to the full text of the decisions for additional information and consult with their legal professional(s) regarding the applicability of these decisions totheir business operations. This report may not be reproduced, distributed, or copied without the prior written consent of the AIG companies.