“Imagine a Margarita on a counter. And then imagine if you could snap your fingers and it would turn into powder. That’s Palcohol….without the magic.”
So says Mark Phillips, the creator of Palcohol. Phillips created Palcohol, a witty play on “Powdered Alcohol,” so that he could have a drink while “hiking, biking, camping and kayaking” without carrying a heavy bottle around. According to the product’s website, “Palcohol is just a powder version of vodka, rum and three cocktails….with the same alcoholic content.” The powder is available in vodka, rum, cosmopolitan, “powderita” and lemon drop flavors. The site discusses applications in medicine, energy, hospitality, the military, and manufacturing. Phillips’ company, Lipsmark, says the product is expected to hit store shelves later this summer.
Palcohol is sold in a flat 1-ounce pouch measuring approximately 4 inches by 6 inches. Consumers would mix this powder into a glass of water, soda or juice to create an instant mixed drink. Critics warn that the product’s main feature — how easy it is to store and carry — is also its biggest flaw. For example, Dr. Pat Charles, the Superintendent of Middletown, CT Schools stated, in support of a Connecticut ban of the product, “[t]he ability to conceal powdered alcohol is problematic for schools and law enforcement. The ease of transporting it and the flavors proposed also make me concerned that it would lead to abuse, not just by young people but even for those of age. This product must not be allowed to come into our state.”
After federal regulators approved Palcohol nationally in March, a number of states also moved to regulate Palcohol. According to the National Conference of State Legislatures, 39 states and Washington, D.C. have either passed bills or have bills under debate to restrict powdered alcohol.
“With packets small enough to fit into a child’s pocket, it will be harder for schools and parents to identify and confiscate this substance from our youth,” said Grace Barnett, spokeswoman for Texans Standing Tall, at a House Licensing and Administrative Procedures Committee hearing in March. Texans Standing Tall is a nonprofit that advocates against youth drug and alcohol use. Educators are fearful that youth may abuse powdered alcohol. For example, NASPA, Student Affairs Administrators in Higher Education, recently hosted a series of seminars titled, “Addressing Palcohol: Comprehensive Prevention Tactics for Novel Alcohol and Substance Abuse Concern.”
State regulators have voiced concerns over the ease in which Palcohol can be inconspicuously sprinkled onto food or snuck into venues such as concert halls and stadiums. Vermont Liquor Control director Bill Goggins recently expressed this in an interview with a New York news station, adding that this feature adds to the appeal of powdered alcohol to underage individuals.
Senator Chuck Schumer (D, N.Y.) has even asked the Food and Drug Administration for an outright ban on the substance, calling it “the Kool-Aid of teenage binge drinking,” and said the product “is nearly guaranteed to promote unsafe drinking among teenagers and young adults, among others.”
Concertgoers, underage students, spiking drinks, snorting powder – can somebody please tell me what does any of that has to do with insurance?
In a post-palcohol world, consider whether any of the following are far-fetched:
What coverage exists for a concert venue when a concertgoer is injured by someone who ingested Palcohol that security did not confiscate, and sues the arena. Does it matter that it is nearly impossible to control covert smuggling?
What claims will arise if a school finds that teens bring Palcohol to school to get intoxicated in class? Are any of them covered?
Palcohol may be a paradigm shifting product. Society is all too aware of the methods and problems of underage drinking and excessive drinking among adults. All these current problems with alcohol are based upon a highly regulated liquid that is also hard to conceal in any material quantity. Palcohol, and certainly additional products that will mimic Palcohol’s design, disrupts that model. With this disruption arrives new realities of unexpected liability for companies, municipalities, schools and others. We all know where they will turn next.
©2015 Drinker Biddle & Reath LLP. All Rights Reserved
Employers Who Permit After-Hours Work Should Exercise Caution in Light of an Anticipated Increase in Nonexempt Workers
Following the directive issued in March 2014 by President Obama, the U.S. Department of Labor published a proposed new rule in the Federal Register and is accepting comments through September 4, 2015. The new rule would extend overtime protections to nearly five million workers by raising the minimum salary threshold to $50,440 per year for employees to qualify for “white collar” exemptions in 2016, with automatic future adjustments. According to a 2013 report published by the Economic Policy Institute, in 2013 only 11 percent of salaried employees in the United States qualied for overtime pay.
If enacted, the Department of Labor’s proposed changes would raise the overtime salary ceiling for qualied employees to sweep millions of Americans into the overtime system.
© 2015 Wilson Elser
A recently released study assessing current trends in the use of IT outsourcing found that spending on IT outsourcing is rising at a rate in step with IT operational budgets as a whole, led by large organizations (those with IT operating budgets of $20 million or greater) that spend 7.8% of their IT budgets on outsourcing at the median. The study’s findings also highlight a number of trends within organizations’ IT outsourcing priorities:
Shifting Trends in Some IT Outsourcing Functions. The study found that the outsourcing of some IT functions is growing, while outsourcing of other functions is shrinking. For example, more organizations are outsourcing IT security, e-commerce systems, and application hosting, while fewer organizations are outsourcing help desk, desktop support, and application maintenance functions.
Continued Growth of Software as a Service. Application hosting was the most frequently outsourced IT function identified in the study. It found that 65% of organizations that currently outsource application hosting intend to increase the amount of work outsourced for that function.
Outsourcing Versus In-House. Among organizations that outsource IT functions, the study showed help desk and web/e-commerce operations were the IT functions with the largest percentage of work moved to outside service providers. Application hosting and IT security were the IT functions for which organizations tend to perform the most work in-house.
Potential for Cost Savings and Value. Among the functions examined by the study, outsourcing of disaster recovery and desktop support were found to have the greatest potential for reducing costs. The outsourcing of web/e-commerce, desktop support, disaster recovery, and IT security were found to deliver the best overall value for organizations by saving money and improving service levels
On August 27, 2015, the Food and Drug Administration (FDA) released draft guidance on nonproprietary naming of biological products. The agency’s draft guidance proposes that the core nonproprietary name for originator biological products, related biological products, and biosimilar products be appended with a unique, four-letter suffix designated by the FDA in order to distinguish each product and minimize inadvertent substitution of products that are not interchangeable.
A New Naming Convention
The proposed framework for the naming convention includes the nonproprietary name — otherwise known as the proper name — of the originator biological product along with a designated four-letter suffix attached to the core name with a hyphen. Importantly, a related, biosimilar, or interchangeable product will share a core name with the originator biological product, but will also include a distinct four-letter suffix. This convention will indicate a relationship among the products while highlighting the unique identification of each product.
For example, two products sharing the core name of replicamab might have the following nonproprietary names:
The FDA has not yet decided whether the nonproprietary name for an interchangeable product should also include a unique four-letter suffix or whether it should be assigned the same proper name and suffix as its reference product. The draft guidance notes that the agency is seeking comment on these alternative approaches.
Which Products Are Covered?
The FDA’s proposed naming convention would apply both prospectively and retrospectively to biological products licensed under sections 351(a) and 351(k) of the Public Health Service Act, although the agency is still considering how the convention should apply to interchangeable products. As indicated in the draft guidance, the FDA believes that the designated suffix is warranted for both newly and previously licensed biological products in order to advance a number of goals, including (1) ensuring that patients only receive the biological products intended to be prescribed to them, (2) facilitating manufacturer-specific pharmacovigilance, (3) encouraging the routine use of designated suffixes, and (4) avoiding any inaccurate perceptions of the safety and effectiveness of biological products based on their path to licensure.
Designating a Suffix
Applicants and current license holders may propose their own suffix, which should consist of four lowercase letters devoid of any meaning. Proposed suffixes should not be promotional, include any abbreviations commonly used in clinical practice, contain or suggest the name of any drug substance, or look too similar to the name of a currently marketed product or another product’s suffix designation. The FDA will evaluate a proposed suffix and notify the applicant of its determination. Given the FDA’s previous selection of “sndz” for Sandoz’s Zarxio (filgrastim-sndz), it will be interesting to see the approach and development of these suffixes.
Comments and suggestions on the draft guidance are due by October 27, 2015, at www.regulations.gov. (Docket No. FDA-2013-D-1543).
Relatedly, the FDA issued a proposed rule to be published in the Federal Register on August 28, 2015, that would designate “the official names and the proper names” for six biological products that qualify as either a reference product, a related biological product, or a biosimilar product. As the agency explains, its proposed action with respect to the six products covered by the rule is meant to encourage the routine usage of designated suffixes.
© 2015 Foley & Lardner LLP
DOD Issues Interim Rule Addressing New Requirements for Cyber Incidents and Cloud Computing Services
On August 26, 2015, the Department of Defense (DoD) issued an interim rule that imposes expanded obligations on defense contractors and subcontractors with regard to the protection of “covered defense information” and the reporting of cyber incidents occurring on unclassified information systems that contain such information. Nearly three years in the making, this interim rule replaces the DoD’s prior Unclassified Controlled Technical Information (“UCTI”) Rule, imposing new baseline security standards and expanding the information that is subject to safeguarding and can trigger the reporting requirements. Additionally, the interim rule implements policies and procedures for safeguarding data and reporting cyber incidents when contracting for cloud computing services.
© 2015 Covington & Burling LLP
As more names emerge from the dark web data dump of Ashley Madison customers, lawyers around the globe have found a very willing group of would-be plaintiffs. Interestingly, all of these plaintiffs are named “Doe,” which must only be a coincidence, and certainly has nothing to do with the backlash that certain well-known ALM clients have experienced. All kidding aside, the size of the claims against ALM is staggering with one suit alleging more than $500 million in damages. How these plaintiffs will prove their damages is a question for another day, but the fact that ALM — which reported earnings of $115 million in 2014 — may soon face financial ruin must give any spectator pause.
The plaintiffs’ bar is certainly not the lone specter haunting ALM’s corridors these days. Although the company touts its cooperation with government officials in attempting to bring criminal charges against the Impact Team, that cooperation will be punctuated by the all-but-certain FTC enforcement action to come — assuming that the FTC’s data breach enforcement team were not among the 15,000 email addresses registered to a .mil or .gov account.
How will that enforcement action proceed? In many cases, the FTC initiates its investigation with a letter, sometimes called an “Access Letter” or an “Informal Inquiry Letter.” Although there is no enforceable authority behind such a letter, companies typically conclude that cooperation is the best course. For more formal investigations (or when the access letter is ignored), the FTC will issue “Civil Investigative Demands,” which are virtually the same as a subpoena, and are enforceable by court order. After collecting materials, the investigators will – in order from best case scenario to worst – drop the matter altogether, negotiate a consent decree, or begin a formal enforcement action via a complaint.
There is, of course, a lot more to an action than what I’ve listed above, which deserves a series of posts of their own. For today, the pressing question is – what’s going to happen to ALM when the FTC calls? Under the circumstances, it would make sense for ALM to push as hard as it can for a consent order, given that the likelihood of succeeding in litigation against the Commission is vanishingly low – there is little doubt that ALM failed to comply with its own promised standards for protecting customer data. And, in light of recent revelations about what really happened when customers paid to “delete” their Ashley Madison accounts, ALM will want to forestall the threat of a separate, non-data breach related unfair business practices suit any way it can.
Every consent order looks different, but the FTC has made a few requirements staples of its agreements with offending businesses over the last two decades. These include:
Establishing and maintaining a comprehensive information security program to protect consumers’ sensitive personal data, including credit card, social security, and bank account numbers.
Establishing and reporting on yearly data security protocol updates and continuing education for decision makers and data security personnel.
Working to improve the transparency of data, so that consumers can access their PII without excessive burdens.
Guaranteeing that all public statements and advertisements about the nature and extent of a company’s privacy and data security protocols are accurate.
ALM will undoubtedly offer to take all of these steps, and more, in negotiations with the Commission. But as I mentioned above, the torrent of lawsuits ALM faces in the next year or so may moot any consent decree with the FTC. If ALM liquidates in the face of ruinous lawsuits and legal bills, the FTC’s demands will be meaningless. ALM, then, is likely an example of a company that would have benefited from a more minor security breach and subsequent FTC imposition of the kind of remedial measures that may have stopped this summer’s catastrophic data breach. An ounce of prevention is worth a pound of cure, they say, and ALM may learn that lesson at the cost of its business.
Internet commenters and legal analysts alike are buzzing about the Ashley Madison hack. The website — which billed itself as a networking site for anyone who wanted to discretely arrange an extramarital affair — has already been named in several class action lawsuits, with claims ranging from breach of contract to negligence. As more names are unearthed (and more personal data divulged), additional lawsuits are sure to follow. For those lucky enough to be watching this spectacle from the sidelines, there are some important questions to ask. In the next few posts, I’ll consider some of these issues.
It seems clear that the Impact Team (the group responsible for breaking into Ashley Madison’s servers) were singularly focused on exposing embarrassing personal information as well as sensitive financial data. What is less clear is why they chose Ashley Madison’s parent company Avid Life Media (“ALM”) as the target. Certainly, the general public’s reaction to the data breach was muted if not downright amused, likely because the “victims” here were about as unsympathetic as they come. Still, the choice of Ashley Madison, and the way the hack was announced, demonstrates an important point about data security: self-described “hacktivists” may target secure information for reasons other than financial gain.
The Impact Team appears to be more motivated by shaming than any identifiable monetary benefit, although it is entirely possible that money was a factor. Interestingly, the intended damage from the leak was designed to flow in two directions. The first, and most obvious, was to Ashley Madison users, who clearly faced embarrassment and worse if their behavior were made public. The second direction was to ALM itself, for “fraud, deceit, and stupidity.” In particular, the Impact Team referred to ALM’s promises to customers that it would delete their data permanently, and keep their private information safe. Obviously, that didn’t happen. ALM made matters far worse for itself when it scrambled to provide a response to Impact Team’s threat, and made promises of security it could not keep. Now, in addition to a class action lawsuit alleging half a billion dollars in damages, ALM faces the wrath of a recently emboldened FTC.
One takeaway from this situation from a legal perspective is how ALM was targeted. Black hat groups often solicit suggestions for whom to attack, but typically in a secure fashion that would prevent early warning. LulzSec, responsible for the data breach at Sony Pictures in 2011, made a habit of seeking input as to what government entity or business to target, but kept those suggestions, and the contributors, secret. The Impact Team broke from that pattern, and announced before the breach, that they would release private information unless ALM shut down Ashley Madison and sister site “Established Men.” Other than a similar demand made to Sony Pictures Studios regarding the film The Interview, I can think of no other instances where hackers/hacktivists telegraphed that a cyber attack was coming.
Realizing this, a few questions immediately sprang to mind:
- What do you do if your company gets a warning from a web group?
- How many businesses have received such warnings and silently complied, just to avoid loss of sensitive information or damage to their reputation?
- What happens to officers and directors who receive these warnings and do nothing? Is that a breach of fiduciary duties? Negligence? A civil conspiracy?
Ultimately, all of these questions merge into the two ongoing themes of data security: How do you protect critical information, and what do you do if you can’t?
In my upcoming articles I will get into the particulars of how some companies respond to cyberattacks, but for now, it makes sense to highlight the importance of planning ahead for your business. Even a basic cyber security protocol is better than a haphazard, post hoc response, and there are many resources that provide guidance about best practices. Longer-term planning requires expertise and commitment, but education can begin any time.
I’ll paraphrase Ashley Madison — Life is short: make a plan.
On August 11, 2015, a United States District Court judge halted a years-long effort by the United States Fish & Wildlife Service (“FWS”) to smooth the federal permitting path for wind energy. Shearwater et al. v. Ashe, No. 14-CV-02830-LHK (N. D. Cal.)(August 11, 2015). Specifically, the judge set aside a rule allowing for activities such as wind energy projects to kill bald eagles and golden eagles for up to 30 years.
FWS’s efforts began back in the current administration’s first year with the first ever authorization for either individual or programmatic take permits of bald or golden eagles under the Bald and Golden Eagle Protection Act (“BGEPA”) of 1940. (Decision at p. 6) The FWS explained at the time that “the rule limits permit tenure to five years or less because factors may change over a longer period of time such that a take authorized much earlier would later be incompatible with the preservation of the bald eagle or the golden eagle.” (Decision at p. 7, citing 74 Fed. Reg. at 46,856). As explained in the court’s decision, the FWS downplayed anticipated use of the new permits for wind energy projects, stating that “the wind power facility could obtain a programmatic permit only ‘[i]f [advanced conservation practices] can be developed to significantly reduce the take’ resulting from ‘the operation of turbines.’” (Decision at p. 8, citing 74 Fed. Reg. 46,842)(emphasis supplied).
Shortly after adopting its new 5-year rule, however, there was a significant increase in wind energy projects. Decision at p. 9. In response, the FWS developed its Eagle Conservation Plan Guidance, a voluntary guidance, which introduced advanced conservation practices or ACPs for the wind energy sector, including experimental ACPs (i.e., scientifically unproven). Id.
The wind energy industry, although undoubtedly pleased to have secured a programmatic take permit for the accidental or incidental killing of bald and golden eagles, commented on the 5-year permit program, complaining that a 5-year permit was unworkable in that projects were developed for a useful life of twenty to thirty years, and the shorter permit term made financing difficult. As a result of its concern that wind energy projects were not able to get permits as a result of the uncertainty of potential future regulatory changes regarding the killing of eagles, FWS proceeded with efforts to move to a 30-year permit “as soon as possible.” Decision at p. 10. The court notes that “[a]t bottom, FWS issued the Proposed 30-Year Rule ‘[b]ecause the industry has indicated that it desires a longer permit.’” Id.(emphasis supplied).
Internal debate ensued at the FWS regarding the proposed 30-year permit rule. Despite concerns and staff opinions that an EIS would be needed to support the rule, FWS Director Dan Ashe instructed his staff not to conduct further NEPA work, that an NGO lawsuit was unlikely, and to proceed. Id. at p. 13-16. The rule was finalized and effective as of January 8, 2014. A lawsuit followed five months later.
The FWS’s efforts to accommodate wind energy development and facilitate additional permitting through its 5-year and 30-year eagle take permits appear to pre-date the recent Clean Power Plan, which notably incentivizes the development of wind and other non-emitting energy sources. The effort, though, certainly is consistent with the Clean Power Plan and this administration’s encouragement of renewable energy sources.
In its August 11th ruling, the court concluded that FWS failed to comply with NEPA, set aside the 30-year rule and remanded the rule for further consideration by FWS. During the remand of the rule, the 5-year permit should still be available as an option for applicants.
© Steptoe & Johnson PLLC. All Rights Reserved.
In 2008, the Department of Homeland Security (DHS) issued an emergency regulation that added 17 months of employment eligibility to recent graduates holding student visas who received a degree in Science, Technology, Engineering and Mathematics (STEM). This 17-month period was in addition to the 12-month period of employment authorization that applies to all recent college graduates holding student immigration status.
Recently, a federal court vacated the 17 month additional employment eligibility period for STEM graduates.Washington Alliance of Technology Workers v. U.S. Department of Homeland Security, U.S. District Court, District of Columbia. The Court upheld DHS’s authority to issue the regulation but vacated the regulation itself because no notice and comment period was provided before the regulation was issued. Furthermore, the Court stayed its decision until February 12, 2016, in order to allow DHS to issue a regulation using the appropriate notice and comment process. The Technology Workers Union, which filed the lawsuit challenging the 17 month addition of employment eligibility, is appealing the case to the D.C. Circuit Court of Appeals.
The President had noted in his November 2014 announcement regarding administrative steps to improve the immigration system that DHS would issue regulations expanding the employment authorization opportunities of recent college graduates. The result in the Washington Alliance case may encourage DHS to timely issue its new regulation using a notice and comment period so as to allow people already enjoying the use of a 17-month STEM graduate employment authorization period to continue working without interruption.
A component of the President’s proposed administrative steps to improve the immigration system referenced an enhanced role for colleges/universities in ensuring a connection between a student’s field of study and the job held by the recent graduate. We do not yet know what that additional role will be, nor do we know whether the Court of Appeals will agree with the lower court with regard to the authority of DHS to allow post-graduation employment authorization or at least the extended STEM authorization. Further, we do not know whether DHS will complete its work in time to avoid a disruptive gap in regulations after February 12, 2016. Given the fact that tens of thousands of people are currently working pursuant to extended employment authorization for STEM graduates, there is great interest in bringing clarity to this issue. If you have an employee working on extended employment authorization for recent graduates, please keep an eye on developments in this area. You may need to perform an I-9 re-verification in February of 2016.
When we open our medicine cabinet, we take for granted that the drugs we find there are safe and properly labeled. Many physicians privately worry, however, about the safety and efficacy of prescription drugs.
About 85% of the prescription drugs sold in the United States are manufactured offshore. Many of those offshore drugs are made by generic companies, foreign contract manufacturing companies and sometimes, offshore facilities owned by the so-called “big pharma” manufacturers themselves. Wherever manufactured, drugs distributed in the United States must meet certain current good manufacturing practices or cGMP standards.
Recently the Food and Drug Administration (FDA) began ramping up inspections of offshore manufacturing facilities and the results are shocking. Although cGMP violations have been found worldwide, experts are particularly worried about drugs made in China and India.
Earlier this month the FDA cited three facilities in Bangalore, India that manufacture drugs for Mylan. Headquartered in the U.K., Mylan is the second largest generic and specialty pharmaceutical company in the world. With approximately 30,000 employees worldwide and revenues of $7.72 billion (USD), Mylan certainly qualifies as big pharma.
The FDA says it inspected three of Mylan’s Indian plants between August of 2014 and February of this year. It found “significant” cGMP violations at all three facilities.
Worse, the FDA says that in all three instances Mylan’s response to the three inspections lacked “sufficient corrective actions.”
cGMP standards are in place throughout the manufacturing process to insure the potency and quality of the finished pharmaceuticals. The FDA wants to insure that there are no contaminants in the finished product as well as insuring the finished product is neither stronger nor weaker than advertised.
As a result of the inspections, the FDA concluded a likelihood that the finished drugs from all three plants were adulterated. Those findings are certainly bad news for consumers. It’s also bad for physicians as well. It’s hard for doctors to get dosages correct or monitor for side effects if a drug has inconsistent potency or the presence of contaminants.
In the case of Mylan’s Bangalore, India facilities, the violations were numerous and included:
gloves and sterile gowns for use in aseptic environments had holes and tears
personal sanitation violations
clean room violations
discolored injection vials
lots with failed assays or contaminants
At least one of the facilities had similar violations dating back to a 2013 inspection.
Overall, the FDA noted, “These items found at three different sites, together with other deficiencies found by our investigators, raise questions about the ability of your current corporate quality system to achieve overall compliance with CGMP. Furthermore, several violations are recurrent and long-standing.”
The FDA declared that continued noncompliance could result in drugs from these facilities being blocked from importation and distribution within the United States.
Mylan has had previous problems with U.S. regulators. In 2000 Mylan paid a $147 million fine to settle charges that the company raised the price of generic lorazepam by 2,6000% and generic clorazepate by 3,200%. The FTC had charged that the company raised the price of lorazepam, the generic equivalent of the brand name antianxiety medication Ativan, from $7 per bottle to $190. Although Mylan agreed to the payment of the fine, it denied any wrongdoing.
Only the FDA can punish drug companies for cGMP violations but if there is proof of an adulterated product entering the commerce stream, the federal False Claims Act can come into play. That law allows private individuals to file a lawsuit against a wrongdoer and receive a percentage of whatever is recovered by the government. Last year the Justice Department paid $635 million in whistleblower awards under the False Claims Act.
Whistleblowers in cGMP cases have received tens of millions of dollars. Dinesh Thakur, a former Ranbaxy executive, received $48 million for information about adulterated generic drugs.
To qualify for a whistleblower award, one must possess inside, “original source” information about a cGMP violation resulting in an adulterated drug or under / over potency medication being approved for sale by Medicaid, Medicare or Tricare. (Most drugs are approved.)
While we believe that contaminated drugs are relatively rare, industry sources tell us that potency issues are rampant. That means the drugs in your medicine cabinet may have little or no active ingredients.
© Copyright 2015 Mahany Law
In construction projects that are performed either on behalf of a municipality or a state agency, a general contractor and potentially a sub-contractor are typically required to post payment and/or performance bonds with the county or municipality. A general contractor or sub-contractor is required to post a payment and/or performance bond, because this ensures that sub-contractors or suppliers are paid, and enables the Township or state agency to have the work completed should the contractor fail to do so in a timely fashion. As a supplier or sub-contractor on such a municipal or state project, it is important to know your rights with regard to making a claim against a payment bond.
The most important thing that any sub-contractor or supplier must do prior to providing materials or services for a public contract is to provide the proper notice as required by N.J.S.A. 2A.44-145. This strict notice requirement specifies that the sub-contractor or supplier notify the party who posted the payment bond for the project in writing via certified mail of their intent to provide materials or services for the project. This is a prerequisite to being able to make a claim against the bond, or to receive a payment for materials and services with regard to the project if they are not paid by the sub-contractor or general contractor. As such, it is very important that any sub-contractor or supplier provide the appropriate notice to the party that posted the bond prior to performing any work or providing any materials.
If proper notification has been sent and a sub-contractor or supplier did not receive payment for materials or services provided, they may make a claim against the bond posted by the general contractor or the sub-contractor. It is always suggested that a sub-contractor or supplier obtain a copy of the bond posted by the general contractor or sub-contractor before providing materials or services. This is to ensure that any claim against the bond is made in a timely manner and is not forfeited by failing to comply with the terms of the bond, which require that a claim be made within a certain specified period of time.
Assuming that you have complied with the time requirements of the bond, a sub-contractor or supplier would first send a Notice of Demand for Payment to the bonding company with a copy to the contractor who posted the bond. Typically, the bonding company will require the production of any and all documents which justify the payment sought by the claimant that was not tendered by the sub-contractor or general contractor. Upon receipt of this information, the bonding company will make a determination whether payment is due for the materials and services which were provided.
COPYRIGHT © 2015, STARK & STARK
Attend the 20th Annual Law Firm Leaders Forum Oct 8-9 in NYC – Brought to you by the Legal Executive Institute
When: OCT 08 – 09, 2015
Where: New York, NY – The Pierre
Join us this October as the Thomson Reuters Legal Executive Institute proudly presents the 20th Anniversary of Law Firm Leaders at The Pierre Hotel in Midtown Manhattan.
Continuing the forum’s unrivaled tradition of industry-defining content and professional networking, the 2015 program offers a comprehensive update on the state of the legal profession and the ongoing challenges affecting law firm leadership throughout the AmLaw 150.
This year’s key topics include:
- Restoring Professionalism to the Practice of Law
- Leading Change: A Presentation from Heidi Gardner, Lecturer on Law & Distinguished Fellow, Center on the Legal Profession, Harvard Law School
- The Meaning of Client Relationships in the 21st Century
- Data Privacy & Cybersecurity in the Global Law Firm
Call to register: 1-800-308-1700
Immigration law practitioners have been receiving Requests for Evidence (RFEs) on most L-1B (Intracompany Transferee-Specialized Knowledge) petitions for new issuance as well as L-1B renewals. These RFEs, requiring burdensome responses, in fact may misinterpret the term “specialized knowledge.”
In March, 2015 USCIS, in an effort to clarify adjudication standards, issued a draft L-1B Adjudication Policy Memorandum (PM-602-0111), soliciting comments from the public as well as stakeholders.
On July 17, 2015, USCIS issued a Request for Comments on Draft RFE Template for Form I-129 involving L-1B Intracompany Transferees-Specialized Knowledge.
On August 17, 2015, the final policy memorandum was published.
So how could an RFE template be proposed when an interpretive memorandum on which it is based has not been published in its final form? Moreover, has USCIS even considered the comments it solicited on the Draft Memorandum and Draft RFE Template in these proceedings?
The Draft RFE Template appears to be based upon language in the draft (now final) memorandum which was still the subject of considerable comment from stakeholders when the Draft RFE Template was issued. All of this leads to more confusion, ambiguity, and uncertainty in the application process. This also gives rise to a need for burdensome and generally unnecessary documentation at the initial filing in response to an RFE, or both.
The L-1 saga will continue.
I am often asked how long a practice must maintain medical records. The answer depends on the type of provider you are and your risk tolerance. Providers should generally consider the following in establishing their record retention policies:
1. Patient care. The primary consideration should be patient care. Some practices (e.g., oncology) may want to retain medical records longer than the relevant regulatory requirement or statute of limitations period because the records may be important to future patient care. If your electronic records program allows, you may want to retain the records permanently.
2. Statutory or Regulatory Requirements. State and federal regulations require hospitals and certain other institutional providers to maintain medical records for specified periods, but those laws usually do not apply directly to physicians or physician groups. There are numerous guides online. For example, HealthIT.gov published a 50-state survey of record retention requirements. The Idaho Department of Health and Welfare published a helpful but incomplete summary of federal record retention regulations. CMS published a MedLearn article on recordretention. AHIMA is usually a good source for online guidance about record retention laws and regulations.
3. Accreditation, payer or other contract requirements. Some provider contracts, payer requirements, or accreditation standards may require providers to keep records for a certain time. For example, Idaho’s Medicaid Provider Handbook requires providers to maintain records to support claims for five years. Check your relevant contracts to ensure your record retention policies comply with any such requirements. You may also want to check with your liability insurer to determine if they have any record retention requirements or suggestions.
4. Statute of limitations. If there are no more paramount concerns, physicians should generally retain medical records for at least the applicable statute of limitations period to ensure the practice has the records necessary to defend its care or charges if challenged. In most cases, maintaining the records for ten (10) years should get you past relevant state or federal limitations periods, including those for malpractice, contract, or fraud and abuse claims. Beware that many states toll the statute of limitations period for claims by minors; if so, you may want to keep records of minors until the later of either (i) six years after the date of treatment, or (ii) three years after the minor reaches the age of majority, depending on your applicable state statute of limitations for malpractice claims.
If your records are subject to a pending claim or investigation, you should retain the records through the resolution of the claim or investigation. Destroying records that are subject to pending claims or investigations may result in liability under state or federal laws; common law claims for destruction of evidence; or adverse judgments because you lack the evidence to defend yourself.
Copyright Holland & Hart LLP 1995-2015.
When entering into IT agreements with vendors, it is important to understand the type of agreement being negotiated, the services being provided, and who will be using the services within your organization. The category of “IT agreements” generally includes cloud application agreements, service agreements, installed applications, and online presence management. When negotiating IT agreements, the legal team should work closely with the business and IT teams to ensure that the correct level of importance is placed on the agreement and that provisions are added or revised in a way that clarifies the parties’ responsibilities in connection with the services being provided and also addresses the potential unwinding of the relationship. To provide maximum clarity and flexibility in connection with purchased IT services, consider the following key provisions when negotiating IT agreements:
Performance Standards (or “teeth”)
Performance standards are critically important, but it is difficult to know where standards should be set and what services are most critical without consulting with your IT group. The IT group can help determine how critical the services are and build appropriate performance standards around the applicable services. Types of performance standards include quality assurance, service levels and credits (which often include measurement and monitoring and notice of performance issues), and customer satisfaction surveys.
Consider the benefits versus the risks of including a long multiyear initial term and automatic renewal terms. Vendors love a long term and often offer pricing concessions to lock in long terms, but a long term can significantly increase risk to the customer if the relationship goes south. Some companies prefer automatic renewal because there is less paperwork, but others view automatic renewal as another milestone that needs to be managed and a potential risk if the relationship with the vendor is strained.
Termination and Termination Assistance
Consider including a termination for convenience clause. Termination for convenience provides an easier mechanism for unwinding a deal when a vendor is not knocking it out of the park, especially if the vendor’s obligations are not clear. Customers should also strongly consider negotiating for termination assistance services to further mitigate the risks associated with unwinding an unsatisfactory deal. If the IT services include storage or processing of customer data, termination assistance provisions should include return and migration of customer data and require the current vendor to cooperate with the new vendor. Specific disengagement plans can be negotiated up front if necessary.
Language should be added to protect all data provided in connection with the use of the services. This language can include security obligations (remember, this is not insurance), obligations to mitigate or cover the costs associated with data breaches, a duty to notify, and rights to audit and review security representations.
If proprietary rights are important to the agreement—for instance, if a vendor is developing new technology or using important customer technology—make sure that the contractual language around proprietary rights clearly states who owns the core technology and any improvements, interfacing elements, and data.
Add provisions that require the vendor to maintain adequate cyber-liability insurance, especially if the vendor is storing or processing customer data.
Representations and Warranties
Consider adding situational representations and warranties (e.g., PCI compliance or EU Data Privacy compliance) applicable to particular services being provided, in addition to standard representations and warranties for IT agreements, such as conformance with specifications. For each representation and warranty, consider the remedy that should apply in the event that it is breached.
The vendor should agree, at minimum, to indemnify the customer for third-party claims related to the services being provided.
Limitation of Liability
If the vendor negotiates for a limitation of liability provision, make sure appropriate exclusions for confidentiality, data breach, and indemnification are negotiated. It is also important for these exclusions to be carved out of standard limitations on indirect, special, and consequential damages, because many of the losses associated with confidentiality, data breaches, and indemnification claims might otherwise be barred by such provisions.
Uber Ordered to Buckle Up for Litigation: Taxicab Plaintiffs Ride out (in part) Uber’s Motion to Dismiss False Advertising Claims
A group of California taxicab companies sued Uber in federal court in San Francisco for falsely advertising the safety of Uber rides and for disparaging the safety of taxi rides. Uber moved to dismiss plaintiffs’ Lanham Actclaim, contending that the safety-related statements were non-actionable puffery and were not disseminated in a commercial context. Uber also moved to dismiss plaintiffs’ California unfair competition law (“UCL”) claim for lack of standing, and moved to strike plaintiffs’ request for restitution under the UCL and California’s false advertising law (“FAL”).
Declining to put the brakes on the lawsuit in its entirety, the court granted in part and denied in part Uber’s motion. L.A. Taxi Cooperative, Inc. v. Uber Technologies, Inc., 2015 WL 4397706 (N.D. Cal. July 17, 2015).
The court agreed that some of Uber’s statements were non-actionable puffery. For example, Uber’s claim that it was “GOING THE DISTANCE TO PUT PEOPLE FIRST” was “clearly the type of ‘exaggerated advertising’ slogans upon which consumers would not reasonably rely.” It would be impossible to measure whether or how Uber was fulfilling this promise. Likewise, Uber’s statement “BACKGROUND CHECKS YOU CAN TRUST” was puffery because it made no specific claim about Uber’s services. The court therefore dismissed plaintiffs’ claims as to these non-actionable statements.
On the other hand, the court did not agree that Uber was merely puffing when it claimed it was “setting the strictest safety standard possible,” that its safety is “already best in class,” that its “three-step screening” background check process adheres to a “comprehensive and new industry standard,” or when Uber compared its background check process to the taxi industry’s background check process. These statements were not puffery because “[a] reasonable consumer reading these statements in the context of Uber’s advertising campaign could conclude that an Uber ride is objectively and measurably safer than a ride provided by a taxi . . . .”
The court also rejected Uber’s argument that, because certain advertising claims were preceded by phrases like “Uber is committed to” or “Uber works hard to” – for example, “We are committed to improving the already best in class safety and accountability of the Uber platform . . .” – that the advertising claims were merely aspirational and therefore non-actionable. The challenged statements did more than assert that Uber was committed to safety, the court found; they included statements regarding the objective safety and accountability of Uber’s service. A reasonable consumer might rely on such statements, so the court denied Uber’s motion to dismiss in this regard.
The court found that certain advertising statements Uber made to the media were non-commercial speech and therefore not actionable under the Lanham Act or California state law. These statements were made in response to journalists’ inquiries, and were “inextricably intertwined” with the journalists’ independent – and largely critical – coverage of Uber’s safety record, which was a matter of public concern. Accordingly, the court granted Uber’s motion and dismissed plaintiffs’ claims relating to these non-actionable statements.
But the court did find Uber’s statements on ride receipts to be commercial speech. Following a completed ride, Uber emails its customers a receipt that includes a $1.00 “Safe Rides Fee.” Uber explains to customers who click on a link in the receipt that the fee was intended “to ensure the safest possible platform for Uber riders,” that Uber would put the fee towards its “continued efforts to ensure the safest possible platform,” and that “you’ll see this as a separate line item on every uberX receipt.” Uber contended that such statements related to a past transaction, rather than a prospective transaction that Uber sought to induce, and therefore did not amount to commercial speech. The court disagreed, finding that “the complaint adequately allege[d] that the statements relating to the ‘Safe Rides Fee’ [were] made for the purpose of influencing consumers to use Uber’s services again.”
On the California UCL claim, the court found that the taxicab plaintiffs lacked standing because they did not allege that they relied on Uber’s allegedly false or misleading advertising. In dismissing this claim, the court explained that it was declining to join the minority of California federal courts that have permitted UCL claims to proceed where the plaintiff pled potential consumers’ reliance rather than the plaintiff’s own reliance.
Finally, the court found that plaintiffs did not have a viable claim for restitution under California’s UCL and FAL because that remedy is limited to “money or property that defendants took directly from [a] plaintiff” or “in which [a plaintiff] has a vested interest,” and the complaint failed to allege that plaintiffs had an ownership interest in Uber’s profits that they sought to disgorge.
© 2015 Proskauer Rose LLP.
Where, when, and how we work has changed profoundly since I started practicing law but employment and privacy laws have not evolved to keep up with technological change and the reality of the “everywhere” workplace.
I would like to think that employment lawyers can provide some practical solutions to addressing policies that help draw the line between personal and business and yet protect valuable business assets.
Social media policies, integrating multi-jurisdictional privacy and employment laws, the gig economy … all of these developments are impacted by rapid technological change but legal developments have lagged.
Just think about the last “non-traditional” place you worked. In line at the grocery store? In your car? Where is your workplace?
Thirteen companies have agreed to settle with the Federal Trade Commission (FTC) charges relating to their participation in the U.S.–EU and U.S.–Swiss Safe Harbor Frameworks. Seven companies allegedly failed to renew their Safe Harbor self-certifications, including a sports marketing firm, two software developers, a research organization, a business information firm, a security consulting firm, and an e-discovery service provider. Another six allegedly failed to seek certification under the Frameworks, but nevertheless claimed in their privacy policies to be certified, including an amusement park, two sporting companies, a medical waste service provider, a food manufacturer, and an e-mail marketing firm. Last year, fourteen companies settled with the FTC over similar claims, and advocacy group named 30 companies in a complaint alleging that they were out of compliance with the Safe Harbor Frameworks.
The European Commission’s Directive on Data Protection prohibits the transfer of personal data to non-EU countries that do not meet the EU standard for privacy protection, so the U.S. Department of Commerce (DOC) negotiated the Safe Harbor Frameworks to allow U.S entities to receive such data provided that they comply with the Directive. To participate in the Safe Harbor Frameworks, companies must annually self-certify that they comply with seven key privacy principles for meeting EU’s adequacy standard: notice, choice, onward transfer, security, data integrity, access, and enforcement. Only appropriately self-certified companies may display the Safe Harbor certification mark on their websites, and the FTC is charged with enforcing violations.
This enforcement action is a reminder of the importance of maintaining current Safe Harbor status for those who elect to participate the program. It is also a reminder that companies must act in accordance with their published privacy policies, and periodically review their privacy policies to ensure that they remain current and reflect companies’ actual practices.
© 2015 Keller and Heckman LLP
Amarin Ruling Solidifies Off-Label Marketing Options but Raises Questions About False Claims Act Enforcement Action
The Southern District of New York recently ruled in Amarin Pharma, Inc. et al. v. Food and Drug Administration, et al. that a drug company may engage in “truthful and non-misleading speech” about off-label uses of an approved drug without the threat of a misbranding action under the Federal Food, Drug, and Cosmetic Act. No. 1:15-cv-03588 (S.D.N.Y., Aug. 7, 2015). This important decision—which arose out of Amarin’s constitutional challenge seeking to make certain statements about unapproved uses of a triglyceride-lowering drug, Vascepa—builds on recent Second Circuit precedent that allows drug makers more regulatory latitude, at minimum in the Second Circuit, to provide truthful and non-misleading scientific information about unapproved uses for their products. However, the ruling also serves as a reminder of potential False Claims Act (FCA) liability associated with off-label marketing of pharmaceuticals and devices.
Amarin filed its complaint against the Food and Drug Administration (FDA) after the company received a Complete Response Letter (CRL) from the FDA in connection with its application for approval of a new indication. The CRL indicated that, while clinical studies revealed that Vascepa reduced triglyceride levels, based on its data review, the FDA advised that additional clinical data would be needed before it could approve the drug for additional uses beyond the original approval for “very” high levels of triglycerides. Despite the fact that Amarin sought to make truthful and non-misleading statements about its product to “sophisticated healthcare professionals,” including the physicians who joined Amarin in the lawsuit, the FDA concluded there was insufficient support for approval of the supplemental application for a new indication and stated that any communications about off-label uses of Vascepa could result in enforcement action.
While the FDA described Amarin’s First Amendment claims as a “frontal assault on the framework for new drug approval that Congress created in 1962,” the court rejected all of the government’s counterarguments. Relying on the Second Circuit’s decision in United States v. Caronia, 703 F.3d 149 (2d Cir. 2012), the court held that Amarin could engage in the following activity:
Distribute summaries and reprints of the relevant studies in a manner or format other than that specified by the FDA
Articulate, in connection with Vascepa, the off-label claim permissible for use on chemically similar dietary supplements
Make proactive truthful statements and engage in a dialogue with doctors regarding the off-label use
While the Amarin decision is welcome news for the industry, drug manufacturers must still take care to analyze promotional statements to ensure that the content can be successfully defended as “truthful” and “non-misleading” speech. As the Amarin court acknowledged, manufacturers not only face potential criminal exposure for “false” or “misleading” misbranding, but the promotion of off-label use can give rise to civil claims under the FCA. FCA enforcement in off-label cases—which proceed on a theory that a company caused false claims to be submitted to government health care programs for non-covered and non-FDA-approved uses—have been a huge source of FCA recoveries in recent years. In FY2014, for example, the Department of Justice (DOJ) recovered over $2.2 billion in FCA actions against pharmaceutical and medical device companies stemming from off-label promotion. Regulatory enforcers and qui tam whistleblowers will not hesitate to allege FCA violations where circumstances, for example, allow the inference that narrowly couched promotional statements may have been “truthful” but still factually incomplete and, thus, misleading. The Amarin decision highlights the fact-specific nature of the risk analysis. Amarin relied on truthful statements about Vascepa’s off-label use that were largely derived from an FDA-approved study and writings from the FDA itself on the subject. Rather than shooting from the marketing “hip,” Amarin appears to have invested in building a defensible factual scientific record and preemptively sought an FDA opinion regarding the off-label use of Vascepa before engaging in those communications.
While it remains unclear whether the FDA will appeal the Amarin decision to the Second Circuit, the agency’s decision to let Caronia stand without further appeal suggests that there may be reluctance on the part of regulators to risk a higher court expanding the reach of the Caronia holding across the country. Pharmaceutical and device manufacturers should still proceed cautiously as the FDA determines how it will respond following the Amarin ruling. For example, the FDA updated its draft guidance regarding the dissemination of scientific and medical journal articles following the Caronia decision in February 2014 and agreed in June 2014 to conduct a “comprehensive review [of its] regulatory regime governing communications about medical products,” with the intent of issuing new guidance by June 2015. As the Amarin court noted, this revised guidance is still forthcoming and may be further revised in light of this decision.
© 2015 McDermott Will & Emery
The Airport Cooperative Research Program (ACRP) has recently published a guidebook on Renewable Energy as an Airport Revenue Source. The link to the guidebook on the ACRP website is here. David Bannard is a co-author of the guidebook, for which the lead authors were Stephen Barrett and Philip DeVita of HMMH.
Airports are exploring non-traditional revenue sources and cost-saving measures. Airports also present a unique and often accommodating environment for siting renewable energy facilities, from solar photovoltaics (PV) to thermal, geothermal, wind, biomass and other sources of renewable energy. Although the guidebook focuses on the financial benefits of renewable energy to airports, it also notes other business and public policy benefits that can accrue from use of renewable energy at airports.
The guidebook includes case summaries of 21 different renewable energy projects at airports across the United States and in Canada and the U.K. Projects summarized include solar PV, wind, solar thermal, biomass, and geothermal technologies. In addition the guidebook examines factors to be considered when evaluating airport renewable energy projects, conducting financial assessments of airport renewable energy and issues relating to implementing airport renewable energy projects. Airports present unique challenges and opportunities for development of renewable energy facilities. The ACRP’s recent publication helps both airport operators and renewable energy providers and financiers understand and address many of these complex issues presented in the airport environment.
© 2015 Foley & Lardner LLP
On August 18, 2015, EPA released additional components of President Obama’s Climate Action Plan. The four separate actions are intended to reduce greenhouse gases and other emissions from the oil and natural gas sector. The newly-released components include:
1) Additional New Source Performance Standards;
2) New Control Techniques Guidelines;
3) Proposed revisions to the regulatory definition of covered oil and gas equipment; and
4) A proposed Federal Implementation Plan for Indian Country New Source Review.
Each is discussed in turn.
New Source Performance Standards
First, EPA has proposed additional New Source Performance Standards that will:
Reduce 95% of the methane and VOC from compressor stations, specifically requiring modifications to wet seal centrifugal compressors and replacement of rod packing at reciprocating compressors based on a set number of hours of operation or route emissions into a closed vent system.
Establish a standard bleed rate limit across all natural gas-driven pneumatic controllers.
Establish a lower standard (zero) bleed rate limit at natural gas processing plants.
Reduce emissions from all pneumatic pumps at different rates and with different technologies.
Require “green completions” at hydraulically fractured well sites, using capture and combustion devices to reduce emissions.
EPA reconsidered various issues from the 2012 proposals, and is proposing actions concerning such issues as storage vessel monitoring, Leak Detection and Repair requirements, monitoring methods, and fugitive emission issues.
Although EPA has proposed the above New Source Performance Standards, EPA is also soliciting comment on “alternative approaches” that would meet the above guidelines. EPA appears willing to consider alternative approaches because it has encouraged companies to reduce emissions in numerous ways voluntarily over the last several years, including as recently as June 2015 with its modified Energy Star program, and EPA indicates it does not want to impede equivalent reduction strategies.
VOC emission Guidelines from certain oil and gas facilities
Second, EPA is proposing Control Techniques Guidelines (CTGs) for reducing VOC emissions from certain oil and gas facilities in the northeast Ozone Transport Region. These guidelines, proposed under Clean Air Act (CAA) Section 172(c)(1), will be used by states to set “reasonably available control technology” for existing sources of emissions. CTGs are recommendations for technologies and practices to reduce emissions from existing sources in certain ozone non-attainment areas. States may be required to modify their State Implementation Plans for certain sources within two years after the final CTGs are issued.
Amendments to what facilities are “adjacent” for permitting purposes
Third, EPA is proposing to define the term “adjacent” for purposes of evaluating when oil and gas equipment and activities are considered part of the same source. EPA proposes two alternatives: One defines “adjacent” by reference to proximity; the other in terms of function. EPA requests comment on both definitions. Either approach represents a potential change to current definitions as many oil and gas development wells are located in close proximity but in such a manner as that avoids meeting EPA’s traditional test as a “common source.” “Common sources” can be classified as “major sources” with more stringent emission limits.
Proposed Federal Implementation Plan for Indian Country
Last, EPA is proposing a Federal Implementation Plan (FIP) for Indian Country Minor New Source Review. EPA required tribes administering the CAA to establish minor New Source Review programs in 2011. This FIP will be imposed in areas where acceptable programs have not been implemented. Because many oil and gas well sites are “minor” new sources, the FIP will provide guidance on air permitting for drilling in tribal territories.
More information, including the proposed rules and fact sheets, can be found at EPA’s website: http://www.epa.gov/airquality/oilandgas/actions.html.
© 2015 Schiff Hardin LLP
In a mild surprise given the current constitution of the Board (read – majority appointed by President Obama), the NLRB declined to assert jurisdiction in ruling on the petition of Northwestern University’s scholarship football players to unionize. However, in a display of special teams not seen on a football field in Evanston, Illinois since the days of John Kidd, the NLRB reached its decision without determining if scholarship players were “employees” under the National Labor Relations Act. Even with this limitation, it is clear competitive balance considerations for NCAA Division I sports has received great deference as a policy matter in a legal dispute.
I will not take this opportunity to point out my initial forecast that the NLRB would find this case extremely unique for its jurisdiction and the original decision by the Chicago NLRB regional office would be reassessed given the potential effect on permissible amateurism. Not doing it. It is sufficient to note this decision affirms the desire of the NLRB to see the student-athlete/employee question answered by Congress and/or the NCAA member institutions, although not necessarily in that order.
A fair question in reading the Board’s decision is whether the same result would have occurred if the “Power 5” conferences had not recently enacted measure to provide athletic aid for the full cost of attendance and extra benefits for scholarship athletes. Since Northwestern University, as a member of the Big Ten, is subject to these new rules, it provided a floor for the enhancement of student-athlete benefits. The Board noted this enhancement, even though it occurred after the scholarship football players filed their petition and there is no indication it would have been sufficient for collective bargaining purposes.
As the National Labor Relations Act does not cover public employees, it is important to remember the majority of Division I student-athletes participating in revenue-generating sports attend state universities. The ability of public employees to organize for collective bargaining is governed by state law. While the NLRB’s decision notes that Ohio and Michigan have recently enacted legislation which precludes union organization by student-athletes of their state universities (putting those perpetual lovebirds, the University of Michigan and The Ohio State University in the same basket), keep an eye on states like Connecticut and Pennsylvania which have recently considered legislation that goes the opposite direction to explicitly provide student-athletes the status of employees for purposes of collective bargaining.
Since this legal issue is by no means resolved, private NCAA institutions are still advised to make sure that NCAA and university-sponsored rules which govern practice time, academic advice and progress, athletic-related activities, and student-athlete wellness are monitored for compliance. As a best practice, institutions should consider third-party compliance audits which not only uncover hidden legal vulnerabilities, but also are helpful in defusing the concerns which could lead to an organizational effort by the football or basketball team.
©1994-2015 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
Last year, Judge John G. Koeltl of the Southern District of New York ruled that individuals who served as volunteers at the 2013 Major League Baseball All Star Weekend FanFest, a four-day event centered around the All Star Game, were not entitled to minimum wage because they were “employed by an establishment which is an amusement or recreational establishment . . . [which did] not operate for more than seven months in any calendar year.” On Friday, the Court of Appeals for the Second Circuit affirmed that decision. Chen v. Major League Baseball, 2014 U.S. Dist. LEXIS 42078 (S.D.N.Y. Mar. 25, 2014).
The appeals court’s ruling focused on what constituted the operative “establishment” for purposes of applying the exemption: Major League Baseball conceded that if the “establishment” included the league along with FanFest, MLB did not meet the criteria. Citing Supreme Court precedent interpreting the now-repealed “retail or service” exemption, the Court concluded that an establishment for purposes of the seasonal amusement or recreational exemption is a “distinct physical place of business.” Because the Complaint conceded that FanFest took place at New York City’s Javits Center, and not at MLB’s offices or any other physical place controlled by MLB, that “physical separation [wa]s determinative.” Having established FanFest as the operative “establishment”, the Court ruled that Plaintiff’s Complaint itself clearly established the two exemption criteria: FanFest operated for not more than 7 months and was “amusement or recreational nature.” As to the latter, Plaintiff’s characterization of FanFest as a “theme park” established its qualifying nature.
Chen is a highly technical ruling, but instructive to employers having multiple establishments potentially qualifying for the exemption. The opinion, like Judge Koeltl’s below, declined to address Plaintiff’s claim that if the amusement or recreational exemption was inapplicable Plaintiff was entitled to minimum wage for all hours worked and could not be treated as an unpaid volunteer.
President Obama Drafts Executive Order That Would Require All Federal Government Contractors and Their Subcontractors to Provide Paid Sick Leave
President Obama recently drafted an executive order that would require companies that contract with the federal government to provide paid sick leave to their employees. Under the draft order, federal contractors and their subcontractors would be required to provide at least 56 hours (7 days) of paid sick leave per year to employees. Employees would be able to use such leave for the following reasons:
1. For their own care;
2. To care for a family member, including a child, parent, spouse, domestic partner or other individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship; and
3. To seek medical attention, obtain counseling, seek relocation assistance from a victim services organization or to take legal action if the need for such services or leave relates to domestic violence, sexual assault or stalking.
In addition, paid sick time accrued by a former employee would need to be reinstated to the employee if he/she is rehired within 12 months after separating employment.
Under the draft order, the Secretary of the Department of Labor would be required to publish detailed regulations implementing the order by September 30, 2016. The order would generally apply to contracts solicited or entered into on or after January 2017.
A copy of the proposed order can be found here (New York Timessubscription may be required).
The People’s Bank of China—the country’s central bank—devalued its notoriously tightly controlled currency (Chinese Renminbi) by 1.9 percent against the U.S. dollar between Monday night and Tuesday morning, Aug. 11, 2015. Such devaluation represents the greatest single-day markdown since 1994, following years of international political rhetoric concerning China’s exchange rate control.
Precisely because the Chinese government kept the yuan tied to a strong dollar, the exports of other countries have become more competitive as their currencies have fallen against the yuan over the past year. This has resulted in a weakening export sector, upon which the Chinese economy is very much dependent. Other contributing factors to the currency devaluation are the country’s slowing, albeit still net-positive, second-quarter GDP in comparison to prior years and, perhaps, a desire to reign in capital outflows from China, which totaled $162 billion for the first half of this year alone. Add to this backdrop the fact that the central bank has repeatedly cut interest rates to boost lending and spur a slowing economy over the past year, thereby also decreasing returns on domestic investments and forcing investors to look outwardly for higher yields.
While Beijing is focused on the country’s growth and macroeconomic prosperity, the move raises questions as to how a weaker yuan will affect the very active market of Chinese foreign investors.
However, the question now is how the devaluation of the yuan will impact foreign direct investment by Chinese in the real estate sector and as well in EB-5 investments.
©2015 Greenberg Traurig, LLP. All rights reserved.
Earlier this week, the Online Trust Alliance released a draft framework of best practices for Internet of Things device manufacturers and developers, such as connected home devices and wearable fitness and health technologies. The OTA is seeking comments on its draft framework by September 14.
The framework acknowledges that not all requirements may be applicable to every product due to technical limitations and firmware issues. However, it generally proposes a number of specific security requirements, including encryption of personally identifiable data at rest and in transit, password protection protocols, and penetration testing. In addition, it proposes the following requirements:
Conspicuous disclosure of all personally identifiable data collected.
Data sharing is limited to service providers that agree to limit usage of data for specified purposes and maintain data as confidential or to other third parties as clearly disclosed to users.
Disclosure of the term and duration of the data retention policy. In addition, the framework goes on to state that data generally should be retained only for as long as the user is using the device or to meet legal requirements.
Disclosure of whether the user has the ability to remove or anonymize personal and sensitive data other than purchase history by discontinuing device use.
Disclosure of what functions will work if “smart” functions are disabled or stopped.
For products and services designed to be used by multiple family members, the ability to create individual profiles and/or have parental or administrative controls and passwords.
Mechanisms for users to contact the company regarding various issues, transfer ownership, manage privacy and security preference.
In addition, the draft framework makes various other recommendations that go above and beyond the proposed baseline requirements, although acknowledging that the recommendations may not be applicable to every device or service.
© 2015 Covington & Burling LLP
On August 10, the Board of Governors of the Federal Reserve System (Board) clarified Regulation II (Debit Card Interchange Fees and Routing) regarding the inclusion of transaction-monitoring costs in the interchange fee standard.
Regulation II implements, among other things, standards for assessing whether interchange transaction fees for electronic debit transactions are reasonable and proportional to the cost incurred by the issuer, as required by section 920 of the Electronic Fund Transfer Act (EFTA). On March 21, 2014, the US Court of Appeals for the DC Circuit reversed an earlier decision by the US District Court for the District of Columbia and largely upheld Regulation II against a challenge to the rule by merchant groups. The court of appeals found that one aspect of the rule––the Board’s inclusion of transaction-monitoring costs in the interchange fee standard––required further explanation, and remanded the matter for further proceedings. Specifically, the court of appeals agreed with the Board’s position that “transactions-monitoring costs can reasonably qualify both as costs ‘specific to a particular transaction’ (section 920(a)(4)(B)) and as fraud-prevention costs (section 920(a)(5)).” The court held, however, that the Board had not adequately articulated its reasons for including transactions-monitoring in the interchange fee standard rather than in the fraud-prevention adjustment. Among other rationales, the Board explained the following:
Section 920(a)(4)(B) [of the EFTA] specifically directs the Board to consider in establishing the interchange fee standard the costs “incurred by the issuer for the role of the issuer in the authorization, clearance or settlement of a particular transaction.” Transactions-monitoring is an integral part of the authorization process, so that the costs incurred in that process are part of the authorization costs that the Board is required by the statute to consider when establishing the interchange fee standard.
It remains to be seen what action, if any, various challengers to the rule will take following the issuance of the clarification by the Board.
On July 8, 2015, the Internal Revenue Service (the “IRS”) identified as reportable transactions certain derivative contracts that reference a basket of assets. The transactions identified by the IRS are referred to by the IRS as “basket option contracts” or “basket contracts.” In these transactions, a purchaser enters into a contract that is denominated as an option, a notional principal contract (e.g., a swap), a forward contract or other derivative contract with a counterparty to receive a return based on the performance of a notional basket of referenced assets (the “reference basket”). The reference basket may include (1) “actively traded personal property” (e.g., publicly traded stock), (2) interests in hedge funds or other entities that trade securities, commodities, foreign currency or similar property, (3) securities, (4) commodities, (5) foreign currency, or (6) similar property or positions in such property. The purchaser or a designee named by the purchaser will either determine the assets that comprise the reference basket or design or select a trading algorithm that determines the assets. While the contract remains open, the purchaser has the right to request changes in the assets in the reference basket or the specified trading algorithm.
The purchaser generally takes the position that short-term gains and interest, dividend and other ordinary periodic income from the performance of the reference basket is deferred until the instrument terminates and, if the instrument is held for more than one year, that the entire gain is treated as longterm capital gain. According to the IRS, the purchaser may be using the instrument to inappropriately defer income recognition, convert ordinary income and short-term capital gain into long-term capital gain and/or avoid U.S. withholding tax.
Anyone who has participated in a basket option contract, basket contract or substantially similar transaction is now subject to certain IRS reporting obligations. The following parties are generally considered participants by the IRS and are, therefore, subject to these reporting obligations: (1) the purchaser, (2) if the purchaser is a partnership, any general partner of the purchaser, (3) if the purchaser is a limited liability company, any managing member of the purchaser, and (4) the counterparty.
Each participant in a basket option contract, basket contract or substantially similar transaction that was in effect on or after January 1, 2011 must report the transaction to the IRS, provided that the period of limitations did not end on or before July 8, 2015. If a participant has already filed its tax return for a year in which it participated in a basket option contract, basket contract or substantially similar transaction and the period of limitations has not ended, the participant needs to report the transaction to the IRS by November 5, 2015. Significant penalties and an extended statute of limitations may apply if a reportable transaction is not timely reported. In addition to the reporting obligations, a participant in a reportable transaction must also retain copies of all material documents and other records relating to the transaction.
© 2015 Vedder Price
Cutoff dates for EB-2 China and India retrogress to January 1, 2006. Cutoff dates for EB-3 China, India, and the Philippines advance to December 22, 2004.
The US Department of State (DOS) has released its September 2015 Visa Bulletin. The Visa Bulletin sets out per-country priority date cutoffs that regulate the flow of adjustment of status (AOS) and consular immigrant visa applications. Foreign nationals may file applications to adjust their statuses to that of permanent residents or to obtain approval of immigrant visas at a US embassy or consulate abroad, provided that their priority dates are prior to the respective cutoff dates specified by the DOS.
What Does The September 2015 Visa Bulletin Say?
The September 2015 Visa Bulletin shows a large retrogression of visa numbers for EB-2 China and India, and an advancement of six and a half months for the EB-3 China, Philippines, and India allotments. The cutoff date for F2A applicants in China, India, Philippines, and the worldwide categories will advance by two and a half months in September. The cutoff date for F2A applicants from Mexico will advance by three months.
EB-1: All EB-1 categories will remain current.
EB-2: The cutoff date for applicants in the EB-2 category chargeable to China will retrogress by nearly eight years, and the cutoff date for applicants in the EB-2 category chargeable to India will retrogress by two years and nine months. For both categories, the cutoff date has been set at January 1, 2006. The EB-2 category for all other countries will remain current.
EB-3: The cutoff date for applicants in the EB-3 category chargeable to the worldwide category and Mexico will advance by one month to August 15, 2015. The cutoff date for applicants in the EB-3 category chargeable to China, India, and the Philippines will advance by six and a half months to December 22, 2004.
EB-5: The cutoff date for applicants in the EB-5 category chargeable to China will advance by three weeks to September 22, 2013. The cutoff dates for applicants in the EB-5 category chargeable to the worldwide category remain current.
The relevant priority date cutoffs for foreign nationals in the EB-2 category are as follows:
China: January 1, 2006 (retrogression of 2,905 days)
India: January 1, 2006 (retrogression of 1,004 days)
Rest of the World: Current
The relevant priority date cutoffs for foreign nationals in the EB-3 category are as follows:
China: December 22, 2004 (forward movement of 204 days)
India: December 22, 2004 (forward movement of 204 days)
Mexico: August 15, 2015 (forward movement of 31 days)
Philippines: December 22, 2004 (forward movement of 204 days)
Rest of the World: August 15, 2015 (forward movement of 31 days)
The relevant priority date cutoffs for foreign nationals in the EB-5 category are as follows:
China: September 22, 2013 (forward movement of 21 days)
Rest of the World: Current
Developments Affecting The Eb-2 Employment-Based Category
Mexico, the Philippines, and the Rest of the World
The EB-2 category for applicants chargeable to all countries other than China and India has been current since November 2012. The September Visa Bulletin indicates no change to this trend. This means that applicants in the EB-2 category chargeable to all countries other than China and India may continue to file AOS applications or have applications approved through September 2015.
The August Visa Bulletin indicated a cutoff date of December 15, 2013 for EB-2 applicants chargeable to China. The September Visa Bulletin indicates a cutoff date of January 1, 2006, reflecting a retrogression of 2,905 days (nearly eight years). This means that applicants in the EB-2 category chargeable to China with a priority date prior to January 1, 2006 may file AOS applications or have applications approved in September 2015.
The August Visa Bulletin indicated a cutoff date of October 1, 2008 for EB-2 applicants chargeable to India. The September Visa Bulletin indicates a cutoff date of January 1, 2006, a retrogression of two years and nine months. This means that applicants in the EB-2 category chargeable to India with a priority date prior to January 1, 2006 may file AOS applications or have applications approved in September 2015.
Developments Affecting The Eb-3 Employment-Based Category
The August Visa Bulletin indicated a cutoff date of June 1, 2004 for EB-3 applicants chargeable to China. In September, the cutoff date for EB-3 applicants chargeable to China will advance by six and a half months to December 22, 2004. This means that applicants in the EB-3 category chargeable to China with a priority date prior to December 22, 2004 may file AOS applications or have applications approved in September 2015.
The August Visa Bulletin indicated a cutoff date of June 1, 2004 for EB-3 applicants chargeable to India. In September, the cutoff date for EB-3 applicants chargeable to China will advance by six and a half months to December 22, 2004. This means that applicants in the EB-3 category chargeable to India with a priority date prior to December 22, 2004 may file AOS applications or have applications approved in September 2015.
The August Visa Bulletin indicated a cutoff date of June 1, 2004 for EB-3 applicants chargeable to the Philippines. In September, the cutoff date for EB-3 applicants chargeable to China will advance by six and a half months to December 22, 2004. This means that applicants in the EB-3 category chargeable to the Philippines with a priority date prior to December 22, 2004 may file AOS applications or have applications approved in September 2015.
The August Visa Bulletin indicated a cutoff date of July 15, 2015 for EB-3 applicants chargeable to Mexico. The September Visa Bulletin indicates a cutoff date of August 15, 2015, reflecting forward movement of one month. This means that applicants in the EB-3 category chargeable to Mexico with a priority date prior to August 15, 2015 may file AOS applications or have applications approved in September 2015.
Rest of the World
The August Visa Bulletin indicated a cutoff date of July 15, 2015 for EB-3 applicants chargeable to the worldwide category. The September Visa Bulletin indicates a cutoff date of August 15, 2015, reflecting forward movement of one month. This means that applicants in the EB-3 category chargeable to the worldwide category with a priority date prior to August 15, 2015 may file AOS applications or have applications approved in September 2015.
Developments Affecting The F2a Family-Sponsored Category
The August Visa Bulletin indicated a cutoff date of December 15, 2013 for F2A applicants from Mexico. The September Visa Bulletin indicates a cutoff date of February 1, 2014, an advancement of three months. This means that applicants from Mexico with a priority date prior to February 1, 2014 may file AOS applications or have applications approved in September 2015.
The August Visa Bulletin indicated a cutoff date of December 15, 2013 for F2A applicants from all other countries. The September Visa Bulletin indicates a cutoff date of March 1, 2014, reflecting forward movement of two and a half months. This means that F2A applicants from all other countries with a priority date prior to March 1, 2014 may file AOS applications or have applications approved in September 2015.
Developments In The Coming Months
It is anticipated that EB-2 visa numbers for China and India will advance again at the start of the 2016 fiscal year (October).
Regarding the Diversity Visa (“DV”) program, the US Department of State has warned that “[e]ntitlement to immigrant status in the Diversity Visa (“DV”) category lasts only through the end of the fiscal (visa) year for which the applicant is selected in the lottery. The year of entitlement for all applicants registered for the DV-2015 program ends as of September 30, 2015. . . Numbers could be exhausted prior to September 30.”
How This Affects You
Priority date cutoffs are assessed on a monthly basis by the DOS, based on anticipated demand. Cutoff dates can move forward, backward, or remain static. Employers and employees should take the immigrant visa backlogs into account in their long-term planning and take measures to mitigate their effects. To see the September 2015 Visa Bulletin in its entirety, please visit the DOS Website.
Today, EPA Administrator Gina McCarthy visited Durango, CO to inspect response efforts relating to the release of waste water from Gold King mine, and meet with state, local and tribal officials and community members. Tomorrow, Administrator McCarthy will visit the response efforts in Farmington, NM. More details about the visit will be released as they become available.
While in Durango, Administrator McCarthy attended a briefing at the Unified EPA Area Command where she discussed promising new data from August 7th, 8th, and 9th that is showing water quality levels in the Animas River near Durango similar to pre-event conditions. EPA is continuing to work with local community officials tasked with making decisions about public health. Later this afternoon EPA scientists will be meeting with those officials to discuss the new data and any decisions moving forward.
Photos: Photos from EPA Administrator Gina McCarthy’s trip to Durango, CO to inspect response efforts relating to the release of waste water from Gold King mine, and meet with state, local and tribal officials and community members.
Audio: Audio from EPA Administrator Gina McCarthy’s remarks and press conference at the Unified EPA Area Command in Durango, CO, on response efforts relating to the release of waste water from Gold King Mine.
Following the briefing, the Administrator held a press briefing at the Unified EPA Area Command in Durango. The following remarks can be attributed to EPA Administrator Gina McCarthy:
No agency could be more upset about the incident happening, and more dedicated in doing our job to get this right. We couldn’t be more sorry. Our mission is to protect human health and the environment. We will hold ourselves to a higher standard than anyone else.
I want to assure the general public as well as the leaders in the states, the counties and the tribal leaders, that we are working hand in hand with our partners to expedite this review, to expedite some return to normalcy in terms of using this river.
The river is returning to pre-event conditions. This is very good news, but we will be working with our partners so they have a chance to review this data thoroughly and have a chance to talk through this data in terms of what it means to their decisions moving forward. We are going to let this high quality and reliable science be our guide.
From this point on, the data will continue to come out. And that’s what’s going to influence decisions on what should happen in this river and in the affected counties.
For additional information on the response to the Gold King Mine release www.epa.gov/goldkingmine
This article first appeared in the EPA Newsroom.
Spring Forward, but Fall Behind: The September 2015 Visa Bulletin Brings Unwelcome News for Indian and Chinese “Green Card” Applicants in the Employment-Based Second Preference Category
Today, the Department of State (DOS) released the last visa bulletin for the 2015 fiscal year. Notably, major retrogressions are seen in the employment-based second preference category (EB-2) for both India and China. The EB-2 India category has retrogressed from October 1, 2008 toJanuary 1, 2006. The EB-2 China category has retrogressed almost eight years, from December 15, 2013 to January 1, 2006.
The employment-based third preference category (EB-3) for Mexico and Worldwide advances by one month. EB-3 China advances by six months and EB-3 India also saw an almost six- month advancement as well.
September is the last month of the government’s fiscal year and DOS has evaluated how many visa numbers are left to be issued. After performing this calculation, DOS adjusts the cutoff dates accordingly. Over the past six months, we have seen significant forward movement in the EB-2 category for India and China, and as such more petitions were filed and numbers were used. The retrogression stops this forward momentum for September, however once the new fiscal year begins October 1st more visa numbers should become available.
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Death Threats against Co-Workers Defeat Employee Disability Discrimination Claim, Federal Court Rules
A depressed employee who was fired for threatening to kill his co-workers was not a qualified individual entitled to protection under the Americans with Disabilities Act, as the employee could not perform essential job functions, with or without an accommodation, a federal appeals court in San Francisco has ruled, affirming judgment in favor of the employer. Mayo v. PCC Structurals, Inc., No. 13-35643 (9th Cir. July 28, 2015). The Ninth Circuit has jurisdiction over Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington.
Timothy Mayo was a welder for PCC Structurals, a manufacturer of specialized aircraft parts. Mayo was diagnosed with major depressive disorder in 1999, but medication and treatment enabled him to continue working without incident until 2010, when he began to feel he was being bullied by his supervisor. Mayo told three different co-workers that he wanted to kill the supervisor. He told one co-worker that he felt like bringing a shotgun to work and “blowing off” the heads of the supervisor and another manager. He told another co-worker that he wanted to “bring a gun down and start shooting people.” Mayo said he wanted to start shooting at 1:30 p.m., because by that time all of his supervisors would be at the worksite, thereby presenting him with a maximally target-rich environment.
Mayo’s co-workers reported the threats to the employer. When questioned, Mayo told an HR representative that he “couldn’t guarantee” he would not carry out the threats. PCC immediately suspended Mayo and called the police. The police took Mayo into custody for six days on the basis that he was an imminent threat to himself and others. After his release from police custody, Mayo spent two months on Family and Medical Leave Act and Oregon Family Leave Act leave. Mayo’s psychologist and a nurse practitioner cleared him to return to work and suggested that Mayo be assigned a different supervisor. Instead, PCC terminated Mayo’s employment.
Mayo brought an Americans with Disabilities Act case against PCC, arguing that his threats were the result of his diagnosed major depressive disorder and that PCC Structurals failed to accommodate him (by following the suggestion of his doctor that he be assigned a different supervisor).
The District Court granted summary judgment to the employer, holding that Mayo could not establish a prima facie case of disability discrimination. Mayo was unable to show he could perform the essential functions of his job with or without a reasonable accommodation and, therefore, he was not a “qualified individual” under the ADA.
Expressed Homicidal Ideation in Workplace Bars ADA Discrimination Claim
The Ninth Circuit affirmed the lower court decision. Its holding was straightforward: Mayo was not a “qualified individual” under the ADA because he could not perform the essential functions of his job:
An essential function of almost every job [including Mayo’s] is the ability to appropriately handle stress and interact with others.
The logic of our holding is that compliance with such fundamental standards is an “essential function” of almost every job.
Writing for the panel, Judge John B. Owens stated that threatening the lives of one’s co-workers “in chilling detail” on multiple occasions indicates that an employee cannot appropriately handle stress and interact with others. The Court also held that, even when the threatening comments can be traced back to a disability, such as major depressive disorder, the employee’s inability to handle stress and interact with others renders him unable to perform essential job functions and negates a claim under the ADA.
The Ninth Circuit’s decision brings it in line with several sister Circuits that have held employers cannot be forced to choose between accommodating a disability and creating an unsafe workplace for other employees. The Court said:
The [ADA] does not require an employer to retain a potentially violent employee. Such a request would place an employer on a razor’s edge — in jeopardy of violating the [ADA] if it fires such an employee, yet in jeopardy of being deemed negligent if it returned him and he hurts someone. The [ADA] protects only “qualified” employees, that is employees qualified to do the job for which they were hired; and threatening other employees disqualifies one.
While acknowledging prior cases holding that conduct resulting from a disability “is considered to be part of the disability,” the Ninth Circuit ruled that when it comes to overt threats to kill co-workers, employers have no obligation to “simply cross their fingers and hope that violent threats ring hollow …. [W]hile the ADA and Oregon disability law protect important individual rights, they do not require employers to play dice with the lives of their workforce.”
Addressing Mayo’s claim that PCC Structurals should have reasonably accommodated him by following his psychologist’s suggestion that he be assigned a different supervisor, the Ninth Circuit stated:
Giving Mayo a different supervisor would not have changed his inappropriate response to stress – it would have just removed one potential stressor and possibly added another name to the hit list.
The Court was faced with a person clearly disabled by major depression who manifested that disability through very specific threats of violence. While being sensitive to the realities of mental illness, the Court ultimately was forced to decide whether safety of the workplace must take primacy over the otherwise extant protections of the ADA for disabled employees. The Ninth Circuit came down on the side of workplace safety. Its ruling can be summarized as “Safety first. ADA second.”
The decision applies only to misconduct that takes the form of violence (or the expression of homicidal or violent ideation in the workplace). The Court did not hold that all forms of employee misconduct fall outside the ADA. Indeed, it emphasized that its holding was limited to “the extreme facts . . . of an employee who makes serious and credible threats of violence.” It stated that employees who are rude, gruff, unpleasant, or anti-social may have a “psychiatric disability” and, thus, be a “qualified individual” under the ADA. Where non-violent misconduct stems from a disability, it will continue to be deemed a part of the disability, requiring employers to attempt accommodation to mitigate future disability-driven misconduct.
A New York federal jury awarded $1.6M in compensatory damages to a whistleblower in a Sarbanes-Oxley whistleblower retaliation lawsuit. The verdict is consistent with a recent trend of large jury verdicts in whistleblower retaliation claims, including a six million dollar verdict in the Zulfer SOX case. According to the verdict form, the full amount of the verdict awarded to whistleblower Julio Perez was for compensatory damages. Under the whistleblower provision of SOX, there is no cap on compensatory damages.
While employed at Progenics Pharmaceuticals as a Senior Manager of Pharmaceutical Chemistry, Perez worked with representatives of Progenics and Wyeth to develop Relistor, a drug that treats post-operative bowel dysfunction and opioid-induced constipation. In May 2008, Progenics and Wyeth issued a press release stating that the second phase of trials “showed positive activity” and that the two companies were “pleased by the preliminary findings of this oral formulation” of Relistor. Within two months of the issuance of the press release, Wyeth executives sent a memo to Progenics senior executives informing them that the second phase of clinical trials failed to show sufficient clinical activity to warrant a third phase of trials. The Wyeth memo specifically stated: “Do not pursue immediate initiation of Phase 3 studies with either available oral tablets or capsule formulations.”
Perez saw the confidential Wyeth memo and on August 4, 2008, he sent a memo to Progenics’ Senior Vice-President and General Counsel in which he alleged that Progenics was “committing fraud against shareholders since representations made to the public were not consistent with the actual results of the relevant clinical trial, and [Plaintiff] think[s] this is illegal.” The next day, Progenics’ General Counsel questioned Perez about the confidential Wyeth memo. Progenics then terminated Perez’s employment, claiming he had refused to reveal how he had obtained the Wyeth memorandum.
Perez brought suit under SOX, alleging that Progenics terminated his employment because of his August 4, 2008 Memorandum, and denying that he refused to answer questions about his access to the Wyeth memo. Progenics again claimed that it terminated Perez’s employment because he failed to explain how he got the memo. The memo’s intended recipients denied giving Perez a copy of the memo. During the litigation, Perez argued that the memo was distributed widely within Wyeth and that he had not “misappropriated” it.
Following an investigation, OSHA did not substantiate Perez’s SOX complaint. Perez removed his SOX complaint to federal court in November 2010. On July 25, 2013, Judge Kenneth Karas issued an order denying Progenics’ motion for summary judgment. The case was hard-fought, with more than 120 docket entries concerning pre-trial matters. Perez was represented by counsel when he filed his SOX claim in federal court, but proceeded pro seshortly before Progenics moved for summary judgment through trial.
Recent Sarbanes-Oxley Whistleblower Jury Verdicts
On March 5, 2014, a California jury awarded $6 million to Catherine Zulfer in her SOX whistleblower retaliation against Playboy, Inc. (“Playboy”). Zulfer, a former accounting executive, alleged that Playboy had terminated her in retaliation for raising concerns about executive bonuses to Playboy’s Chief Financial Officer and Chief Compliance Officer. Zulfer v. Playboy Enterprises Inc., JVR No. 1405010041, 2014 WL 1891246 (C.D.Cal. 2014). She contended that she had been instructed by Playboy’s CFO to set aside $1 million for executive bonuses that had not been approved by the Board of Directors. Id. Zulfer refused to carry out this instruction, warning Playboy’s General Counsel that the bonuses were contrary to Playboy’s internal controls over financial reporting. Id. After Zulfer’s disclosure, the CFO retaliated by ostracizing Zulfer, excluding her from meetings, forcing her to take on additional duties, and eventually terminating her employment. Id. After a short trial, a jury awarded Zulfer $6 million in compensatory damages and also ruled that Zulfer was entitled to punitive damages. Id. Zulfer and Playboy reached a settlement before a determination of punitive damages. The $6 million compensatory damages award is the highest award to date in a SOX anti-retaliation case. Id.
The Ninth Circuit recently affirmed a SOX jury verdict awarding $2.2 million in damages, plus $2.4 million in attorneys’ fees, to two former in-house counsel. Van Asdale v. Int’l Game Tech., 549 F. App’x 611, 614 (9th Cir. 2013). The plaintiffs, both former in-house counsel at International Game Technology, alleged that they had been terminated in retaliation for disclosing shareholder fraud related to International’s merger with rival game company Anchor Gaming. Id. Specifically, plaintiffs alleged that Anchor had withheld important information about its value, causing International to commit shareholder fraud by paying above market value to acquire Anchor. Van Asdale v. Int’l Game Tech., 577 F.3d 989, 992 (9th Cir. 2009). When the plaintiffs discovered the issue, they brought their concerns about the potential fraud to their boss, who had served as Anchor’s general counsel prior to the merger. Id. at 993. International terminated both plaintiffs shortly thereafter. Id.
In addition, a former financial planner at Bancorp Investments, Inc. who alleged that he was terminated for disclosing trade unsuitability obtained a $250,000 jury verdict in the Eastern District of Kentucky in late 2013. Rhinehimer v. Bancorp Investment, Inc., 2013 WL 9235343 (E.D.Ky. Dec. 27, 2013), aff’d 2015 WL 3404658 (6th Cir. 2014).
Zulfer, Van Asdale, and Rhinehimer highlight the importance of the removal or “kick out” provision in SOX that authorizes SOX whistleblowers to remove their claims from the Department of Labor to federal court for de novo review 180 days after filing the complaint with OSHA.
© 2014 Zuckerman Law