Kentucky Supreme Court Justice Hughes Nominated For Sixth Circuit Seat

Earlier this year, President Obama announced the nomination of Kentucky Supreme Court Justice Lisabeth T. Hughes for the Sixth Circuit vacancy created by Judge Martin’s retirement.  sixth circuitJustice Hughes served as a judge in various Kentucky courts for nearly a decade before her appointment to the Supreme Court of Kentucky in 2007.  If confirmed, she will join several former state court judges on the Sixth Circuit, including Judge Cook (Ohio), Judge Griffin (Michigan), Judge Donald (Tennessee), and Judge White (Michigan). Two years ago Justice Hughes was being considered for the Court. While all eyes are currently on the appointment of Judge Garland to the Supreme Court, it is questionable whether any circuit-level appointments will clear the Senate at this time.  If she were confirmed, Justice Hughes would join seven other active female judges on the Sixth Circuit, meaning that half of the active judges would be female. We’ll continue to monitor any progress on the confirmation of Justice Hughes.

© Copyright 2016 Squire Patton Boggs (US) LLP

BREAKING: EPA Water Rule Blocked Nationwide By Sixth Circuit

The Sixth Circuit today stayed the effect of the Environmental Protection Agency’s new “Clean Water Rule” nationwide, while the Court of Appeals considers whether it has original jurisdiction to hear challenges to the regulation or whether those challenges should proceed first in the federal district courts.  Among other reasons, the court said staying the Rule would remove uncertainty and confusion by restoring a uniform definition of “waters of the United States” nationwide.  Before today, the prior regulatory definition of waters of the United States was in effect in 13 states where the federal district court for North Dakota had enjoined the new Clean Water Rule; the new Rule’s definition applied in the rest of the country.

In granting the stay, the Sixth Circuit found that petitioners had a “substantial possibility” of succeeding on the merits of their challenge, for both substantive and procedural reasons.  Substantively, the court questioned whether the  Clean Water Rule’s provisions limiting jurisdiction over certain types of waters to those located within a specified distance from a navigable waterway are consistent with the Supreme Court’s decision in Rapanos v. United States, 547 U.S. 715 (2006).  Procedurally, the court found the rulemaking process by which the distance limitations were established was “facially suspect” because respondents have not shown those provisions were a “logical outgrowth” of the proposed regulations or that the public had “reasonably specific notice” the distance limitations were among the range of alternatives being considered.

As one member of the three-judge panel noted in dissent, the majority’s ruling is unusual in that the court enjoined implementation of the Clean Water Rule while it is still considering whether it even has jurisdiction to hear the challenges to the Rule.  In fact, petitioners have moved to dismiss their own petitions for lack of subject matter jurisdiction while also seeking a stay.  The majority’s statement that there is “no compelling showing that any of the petitioners will suffer immediate irreparable harm” in the absence of a stay is also in some tension with the Supreme Court’s decision in Winter v. Natural Resources Defense Council, 555 U.S. 7 (2008), where the Court held (in the context of a NEPA challenge) that the party seeking a preliminary injunction must show a likelihood—not just a possibility—of irreparable harm absent an injunction.

The court said that briefing on the jurisdictional question will be complete, and the question ready for decision, “in a matter of weeks.”

Copyright © 2015, Sheppard Mullin Richter & Hampton LLP.

Reasonable Expectation of Privacy: Are You Free To Eavesdrop on Pocket Dials?

Most people have experienced a “pocket dial” – be it as the sender or receiver – and some have found themselves in embarrassing situations as a consequence.  But should people reasonably expect that conversations overhead during a “pocket dial” call are private and protected? Should the recipient feel obligated to end the call?  The Sixth Circuit says no.

Yesterday, the Sixth Circuit decided whether a reasonable expectation of privacy exists with respect to “pocket dialed” communications.  Carol Spaw, assistant to the CEO of Cincinnati/Northern Kentucky International Airport, received a call from James Huff, chairman of the airport board.  It didn’t take long for Spaw to figure out that she had received a pocket dial, and that the conversation in the background was not intended for her ears.  Spaw stayed on the line for an hour and a half – taking notes and recording the audio as Huff discussed private business matters with another board member, and later with his wife. Spaw sent the recording to a third party company to enhance the quality, and shared the recording with other board members. Huff and his wife sued Spaw for intentionally intercepting their private conversation in violation of Title III of the Omnibus Crime Control and Safe Street Act of 1968. The district court granted summary judgement in favor of Spaw, finding no “reasonable expectation” that the conversation would not be heard.  On appeal, the Sixth Circuit affirmed in part, reversed in part, and remanded.

Title III only protects communication when the expectation of privacy is subjectively and objectively reasonable.  The Sixth Circuit agreed with the district court that James Huff did not have a reasonable expectation that his conversation was private. Although Mr. Huff did not deliberatelydial the call, he knew that “pocket dials” were possible, and did not take any precautions to prevent them.  The court analogized Huff’s situation to a homeowner who neglects to cover his windows with drapes; under the plain view doctrine, the homeowner has no expectation of privacy in his home when the windows are uncovered. Huff could have easily utilized protective settings on his phone to prevent pocket dials.

The Sixth Circuit reversed with respect to Bertha Huff’s claim.  Bertha Huff was communicating with her husband in the privacy of a hotel room. She had a reasonable expectation of privacy in that context, and she was not responsible for her husband’s pocket dial. The Sixth Circuit feared that affirming the district court’s decision with respect to Bertha’s claim would undermine what we currently consider a reasonable expectation of privacy in face-to-face conversations. The court remanded the case back to the district court to decide whether Spaw’s actions made her liable for “intentionally” intercepting oral communications.

The Sixth Circuit’s decision leaves us with this: if you receive a pocket-dialed call, feel free to listen, record, and share (but be wary of the privacy interest of the other participants in the conversation); if you are a pocket dialer, lock your phone.

Lauren Maynard contributed to this article.

© Copyright 2015 Squire Patton Boggs (US) LLP

Sixth Circuit Appeals Court Upholds $6.1 Million Fraud Judgment Against Blue Cross Blue Shield of Michigan

Varnum LLP

The U.S. Court of Appeals for the Sixth Circuit has affirmed a $6.1 million fraud judgment against Blue Cross Blue Shield of Michigan. The Appeals Court agreed that “BCBSM committed fraud by knowingly misrepresenting and omitting information about the Disputed Fees in contract documents.”  Its misleading information “helped sustain the illusion that BCBSM was more cost-competitive” than its competitors.

The ruling confirms last year’s judgment by a federal court in Detroit, which found that BCBSM collected millions of dollars in hidden fees over a 20-year period from Hi-Lex Controls, Inc. and Hi-Lex America, Inc., along with their self-insured employee health plan. Varnum attorneys representing Hi-Lex showed that BCBSM marked up employee hospital claims by as much as 22 percent and kept the markup. Reports provided to Hi-Lex did not disclose the hidden fees. Internal company e-mails showed that BCBSM’s managers knew customers were unaware of the markups, and that employees were trained to “downplay” the hidden fees if any customers discovered them.

“We are very happy that the judgment was affirmed,” said Varnum attorney Perrin Rynders, whose team has battled the issue for more than three years. “It’s been a long time coming, but we never doubted that this would be the ultimate outcome. We applaud our client who had the courage to stand up for what’s right and persevere through this lengthy legal process. Litigation was not our client’s preferred approach, but BCBSM refused at every turn to accept responsibility for its actions.”

The Hi-Lex matter was the first to reach judgment out of more than 35 similar ERISA cases that Varnum has filed against BCBSM on behalf of companies and their self-insured health plans.

Rynders noted that the ultimate result is a win for more than just those clients who have filed suit. BCBSM apparently discontinued its practice of rolling fees and surcharges into “hospital claims” for its self-insured clients in 2012, shortly after Varnum filed its first group of lawsuits.

“Employers work hard to manage their health care costs. It is upsetting that an organization trusted to help keep costs in line would violate that trust and take advantage of its customers,” Rynders said.  “The cases we are handling are good for companies and workers all across Michigan, because more money will be available for vital health care.”

The Sixth Circuit Court of Appeals issued its decision on May 14, 2014.

The original judgment was issued in May 2013 by U.S. District Court Judge Victoria A. Roberts. It concluded that BCBSM violated the Employee Retirement Income Security Act (ERISA) through its practice of collecting additional compensation without customers’ knowledge. The Court held that BCBSM engaged in illegal self-dealing and breached its fiduciary duties under ERISA.

Judge Roberts entered judgment in favor of Hi-Lex for $6.1 million, including a return of all hidden fees taken from Hi-Lex since 1994 plus interest.