Author: National Law Forum

A group of in-house attorneys developed the National Law Review on-line edition to create an easy to use resource to capture legal trends and news as they first start to emerge. We were looking for a better way to organize, vet and easily retrieve all the updates that were being sent to us on a daily basis.In the process, we’ve become one of the highest volume business law websites in the U.S. Today, the National Law Review’s seasoned editors screen and classify breaking news and analysis authored by recognized legal professionals and our own journalists. There is no log in to access the database and new articles are added hourly. The National Law Review revolutionized legal publication in 1888 and this cutting-edge tradition continues today.

California's Green Chemistry Rulemaking Renewed

Published in the National Law Review on July 21, 2011 an article by Gene Livingston of Greenberg Traurig, LLP about California’s Department of Toxic Substance Control’s announcement of the new target date for new draft regulations to implement California’s Green Chemistry Law.

The new Director of California’s Department of Toxic Substance Control, Debbie Raphael, announced that mid-October is the new target date for new draft regulations to implement California’s Green Chemistry Law. The law called for regulations to be in place by January 1, 2011. However, universal opposition last year to the previously proposed regulations rendered that date impossible. Raphael, demonstrating political acumen, has the support of the legislative authors of the law to take the time needed “to get it right.”

Raphael promised to meet with stakeholders between now and mid-October to inform the rulemaking process, and after the draft regulations are released to seek comments from the Green Ribbon Science Panel at its November 14-15, 2011 meeting on the scientific aspects of the draft regulations. Then, the Director and her staff will produce regulations to launch the formal rulemaking proceeding.

Raphael laid out the principles that will guide the development of the regulations. They have to be “practical, meaningful, and legally defensible.” Those principles are easily embraced by political leaders, business interests, and environmentalists. There is something for everyone. The challenge will be getting consensus on what is practical but still meaningful with numerous aspects of the regulations, starting, for example, with selecting chemicals of concern, prioritizing the products containing chemicals of concern, describing the life cycle factors to assess existing chemicals and products and their possible alternatives, and imposing regulatory mandates, ranging from labels to bans of products.

The resolution of these aspects and others in the regulations will determine whether the green chemistry program sinks of its own weight, stifles innovation, drives up the cost of products, eliminates products in the California market, or becomes a model for other states, stimulates innovation, expands sustainable product development, results in fewer toxic products, and less toxic waste.

The green chemistry regulations can affect every manufacturer selling products in California as well as their suppliers, distributors, and retailers. They need to be aware of the rulemaking activities occurring in California during the next six months, a time period that will be critical as DTSC seeks to write regulations that are indeed practical, meaningful, and legally defensible.

LMA Virginias Chapter – Continuing Marketing Education Conference 10-14-11

The National Law Review is pleased to announce The Continuing Marketing Education program presented by the Legal Marketing Association Virginias Chapter will take place October 14, 2011 University of Richmond’s Jepson Alumni Center, 101 College Road Richmond, VA 23229.

Client Service needs, new trends in business development, marketing communications, and how to set yourself apart from the pack are all topics included in The Continuing Marketing Education program presented by the Legal Marketing Association Virginias Chapter. This is the first local, full-day program developed for legal marketing professionals. attorneys, students and other industry professionals to be presented in the Richmond area.

We have created a unique program designed to provide a comprehensive look into today’s legal marketing issues as well as provide an outlook into what to expect in the future. Our goal is to have in-depth discussions on key topics as the next phase in continuing members’ education. Sessions will focus on a hands-on approach showing attendees “how to get it done” and leaving them with ideas to take back with them to jump-start their next initiative.

LMA Continuing Marketing Education Conference

Embracing Technology of Tomorrow

Posted in the National Law Review an article by Kristyn J. Sornat of Much Shelist Denenberg Ament & Rubenstein P.C. on what innovative technology will be available in the next five years or by the end of the decade.

Think of what new platforms have become available for marketing in the past ten years —social media sites (including YouTube, Facebook and LinkedIn) and the smartphone/tablet with mobile applications and paid search tools, such as Google AdWords. It makes it hard to imagine what innovative technology will be available in the next five years, let alone by the end of the decade. Plenty of gimmicky technology with a significant “cool” factor will be developed by the year 2020; however, the more important trends to watch involve the transformation of legal marketing staples.

CRMs Will Be Easier to Use

Not only will CRMs be more useful, attorneys will be required to use them! By the year 2020, there will be no more excuses as to why attorneys cannot use their firm’s client relationship management (CRM) system to support business development efforts. The most common complaints I hear about our CRM are the following: “It’s too hard to use;” “The process of entering and maintaining my information is too cumbersome;” or “I don’t have time to learn it.” However, I’ve noticed that since the economic downturn (which necessitates working smarter and harder on business development) it has been a lot easier to get the late adopters on board. However, these users still struggle with the functionality of the product.

Over the past decade, software providers have made great strides in improving the user interface of CRM products, and they have gotten smarter by incorporating it into what attorneys do every day — check email. The leading CRM providers in the legal market now allow attorneys to access their products via their email client. Companies like CRM4Legal developed their product with this in mind while others, such as LexisNexis InterAction (with version 6.0), have finally integrated the majority of their main product functionality into Outlook. This integration will make future CRM versions much easier to use. Over the next decade, these companies will take this trend a step further. Not only will using the product be more intuitive for attorneys, but the amount of information automatically pulled into the system will be greater than ever before. In addition to looking up who at your firm “knows” a client, you’ll be able to see what the client was billed in the last year, what practice groups were utilized, where the growth opportunities are and which of your other non-internal contacts have a connection to the client. There may even be access to “personal” preferences for the client (like music and food), and best of all, attorneys will not have to enter this information into the database themselves. Firms have used portal technology to facilitate bringing information into one place, but CRMs will differ from portals by tapping into third-party resources, such as LinkedIn, Facebook and news sources, to deliver unprecedented, one-step access to information that can be useful in pitching a prospect or servicing a client.

The Demise of Email Marketing

In the year 2020, firms will have shifted their efforts from mass email marketing campaigns to other online distribution channels. The effectiveness of email marketing is already on the decline, and over the next decade email clients will become even stricter about the types of information they allow through their spam filters. Compounding this issue, users are now relying on tools like social media, RSS feeds, blogs, search engines and other resources, rather than email, to find the information they need. Firms will no longer have the luxury of knowing they can inform their clients of emerging legal issues just by sending a monthly newsletter or weekly alert. They will need to find new ways to get this information to clients and prospects, preferably through a myriad of distribution channels. To prepare, firms should concentrate on using search engine optimization (SEO) for their websites (especially on pages that tend to get a majority of visitors from email distributions) and encourage attorneys to use social media to proactively share their articles and experience in specific practice areas.

Also, targeted online advertising, such as on LinkedIn and paid search, can be used to promote practice groups and help supplement the lack of exposure for these groups through email alerts. For example, firms can advertise their healthcare practice group to LinkedIn users in the healthcare industry, who have General Counsel as a title and live within 50 miles of the geographic area to which that practice group targets. Another paid search tool that may be useful is Google Remarketing, which allows firms to target ads to users who’ve previously visited their websites. Through this technology, users that find healthcare articles on a firm’s website through Google would later see an ad for the firm’s healthcare practice as they visit other websites or check their Gmail accounts. Legal alerts will still be written, but firms will rely more heavily on searchable syndication services, such as Martindale.com’s Legal Library or The National Law Review’s searchable database. Firms would be wise to prepare themselves for the inevitable by scaling back now on the amount of information they send to contacts through mass email messages. They should start tracking article clicks, opens and other performance data and use it to eliminate contacts from mailing lists. For example, if a contact only opens healthcare alerts or clicks on healthcare articles, a firm should only send them email distributions having to do with healthcare. In the future, if a firm wants anyone to open their email messages, they will need to condition their recipients to expect relevant information in every distribution.

Design for Mobile First

Mobile devices are everywhere, and they are fast becoming people’s primary access point to the Internet and email. In the past five years, although mobile devices have been a consideration when firms design websites and email messages, it hasn’t been a necessity to design for them first. By 2020, mobile devices (including tablets) will play the role which PCs do today. It’s important that firms start preparing for that shift now by creating a pared-down mobile version of their websites if all the pages of the site are not already mobile-friendly. Firms working on a website redesign should make sure they are giving mobile devices and PCs equal consideration. For example, if there is a search section for articles, more search buckets with dropdown choices should be created so that mobile users will have to rely less on typing in search terms. If Flash is utilized to emphasize important information on the website, there should be an alternative way to get that information across to iPhone users, who cannot view Flash animation. Although designing for mobile may inhibit creativity, it is better for mobile users to be able to see and use a highly functional website than to become frustrated by (or unable to view) a beautifully designed website. Mobile apps (currently a hot topic in legal marketing circles) will also be important, just not the way we think of them today. Many firms that have taken advantage of this new technology have focused on providing information that is already accessible on their websites and in other places. In the future, successful law firm apps will have two purposes: to aid users in things they are doing every day and to provide better service to clients. For example, Latham & Watkins has already realized this trend and released a useful app that allows people to search a glossary of legal, business and financial terms. How will apps help firms better service their clients in the future? They may allow clients to view hours billed and balances due, or search a firm’s attorney experience database based on specific criteria for a new matter. As firms develop ideas for apps, they should keep usability in mind so they don’t end up with an app that clients download out of curiosity, but then fails to entice them to come back again.

Website Overhauls

Websites will be vastly different by the end of the decade —not only will they be designed with mobile devices in mind, but they also may incorporate technology that delivers a different homepage experience to each user based on past visits. For example, tailored article and event feeds might display, based on previous visits to practice group descriptions, attorney bios or the user’s past site searches. Other website areas that will be affected will be attorney bios, practice group descriptions and resource centers. Firms should begin thinking about attorney bios more like social media profiles (maybe even connecting LinkedIn profiles with attorney pages), because the lines between websites and social media will be even more blurred. Video will be as important as text in getting marketing messages across on practice group pages, and firms will use articles and descriptions of experience to show practice group expertise rather than just “say”they have it in a lengthy practice group description. In the resource area of the website, firms will add more information that is useful to visitors. CLE webcasts may be a way to drive users to the website, much as articles do today. However, the trick to adding CLE resources will be figuring out how to give people their credit and comply with ethics rules for each state. Firms need to start preparing for what is to come in marketing technology — by 2020, tactics and processes will have evolved into a connected, mobile machine. To embrace this technology of tomorrow, firms should keep an eye on trends involving CRM systems, email marketing, mobile technology and websites, while maintaining caution from being distracted by a high “cool” factor that may not deliver real value to the firm or its clients.

This article was first published in ILTA’s June 2011 issue of Peer to Peer titled “Law2020TM: One Year In” and is reprinted here with permission. For more information about ILTA, visit their website at www.iltanet.org.

ABA's Second Annual National Institute on Consumer Financial Basics 9/19-9/20, 2011

The National Law Review wants to remind you that the ABA’s Second Annual National Institute on Consumer Financial Basics is taking place on September 19 – 20, 2011 at Boston University Center for Finance Law & Policy, Boston, MA.

Description

Facing the most comprehensive revision of federal consumer financial services (CFS) law in 75 years, even experienced consumer finance lawyers might feel it is time to get back in the classroom. This live meeting is designed to expose practitioners to key areas of consumer financial services law, whether you need a primer or a refresher. And importantly, it provides the framework and structure, to help you come to grips with the Dodd-Frank Act and the issues that Dodd-Frank and its Consumer Financial Protection Bureau will present in your practice.

In the pressure cooker of today’s financial services industry, the breadth and complexity of the issues you are facing will overwhelm any seminar on recent developments. It is time to take a step back and think through some of these complex issues with a faculty that combines decades of practical experience with law school analysis. The classroom approach is used to review the background, assess the current policy factors, step into the shoes of regulators, and develop an approach that can be used to interpret and evaluate the scores of laws and regulations that affect your clients.

Program Focus

This program will explain each of the major sources of regulation of consumer financial products in the context of the regulatory techniques and policies that are the common threads in a complex pattern, including:

Price regulation and federal preemption of state price limitations
Disclosure and transparency affecting consumer understanding and market operation
Regulating the “fairness” of financial institution conduct
Privacy and security of consumer data and ID Theft
Consumer reporting: FCRA & FACTA
Fair lending and fair access to financial services
Remedies: regulators and private plaintiffs

Registration:

Click here to view registration options for this program.

Program Times:

Day One:
Monday, September 19 – 8 a.m. – 5:00 p.m.

Day Two:
Tuesday, September 20 – 8 a.m. – 12:30 p.m.

Program Location:

The Boston University Center for Finance, Law & Policy
595 Commonwealth Avenue, 4^th Floor, Boston MA 02215-1704

The New Wave of Insurance Construction Defects? Four States Enact Statutes Favoring Coverage for Faulty Workmanship

Recently posted in the National Law Review an article by Clifford J. Shapiro and Kenneth M. Gorenberg of Barnes & Thornburg LLP about whether construction defects are covered by commercial general liability (“CGL”) insurance policies and briefly discuss four new statutes in various states.

Courts across the country remain split on the issue of whether claims alleging construction defects are covered by commercial general liability (“CGL”) insurance policies. The primary battle ground has been whether such claims involve an accidental “occurrence” within the meaning of the CGL policy coverage grant. Now this issue is getting substantial attention from state legislatures. Four states recently enacted new legislation addressing insurance coverage for construction defect claims, and each statute favors coverage,albeit in different ways and to varying degrees. These statutes signal that the battle over whether construction defects constitute an “occurrence” may have shifted from the courts to state legislatures. The four new statutes are discussed briefly below.

Colorado

Section 13-20-808 of the Colorado Code, effective May 21, 2010, creates a presumption that a construction defect is an accident, and therefore an “occurrence” within the meaning of the standard CGL insurance policy. To rebut this statutory presumption, an insurer must demonstrate by a preponderance of the evidence that the property damage at issue was intended and expected by the insured. The statute expressly does not require coverage for damage to an insured’s own work unless otherwise provided in the policy, leaving that potentially to be decided by Colorado’s courts. In addition, the act does not address or change any policy exclusions, the scope of which will also remain an issue possibly to be determined in court. Thus, it appears that the Colorado statute resolves in favor of coverage that construction defect claims give rise to an accidental “occurrence” under the CGL policy coverage grant, but leaves most other insurance issues affecting coverage in the construction defect context subject to further attention by the courts.

Hawaii

Chapter 431, Article 1 of the Hawaii Revised Statutes provides that “the term ‘occurrence’ shall be construed in accordance with the law as it existed at the time that the insurance policy was issued.” The statute does not declare what the “the law” is now or what “the law” was at any time in the past. However, the preamble explains that the appellate court decision in Group Builders, Inc. v. Admiral Ins. Co., 231 P.3d 67 (Hawaii 2010) “invalidates insurance coverage that was understood to exist and that was already paid for by construction professionals,” and that the purpose of the statute is to restore the coverage that was denied. While not necessarily clear from the appellate court decision, coverage arguably was denied for both defects in the insured’s own work and also consequential property damage caused by faulty workmanship.

Thus, it appears that the legislature’s intent was to allow insurers to deny coverage under policies issued after May 19, 2010 to the extent permitted by the courts based on Group Builders and whatever further judicial decisions may follow, but to require application of the more favorable judicial interpretations of coverage for construction defects that the Hawaii legislature believes existed before that time. In other words, the Hawaii statute appears to be an attempt to preserve more favorable treatment of coverage for construction defect claims for projects currently underway which were insured under policies issued before Group Builders was decided.

This approach, of course, still leaves it to the courts to interpret the applicable law with respect to any particular claim (i.e., the law that existed at the time the policy was issued). But we cannot help but think that the Hawaii courts may be influenced going forward to find more readily in favor of coverage due, at least in part, to the part of the preamble to the legislation that states: “Prior to the Group Builders decision … construction professionals entered into and paid for insurance contracts under the reasonable, good-faith understanding that bodily injury and property damage resulting from construction defects would be covered under the insurance policy. It was on that premise that general liability insurance was purchased.”

Arkansas

Arkansas Code Section 23-79-155 (enacted on March 23, 2011) requires CGL policies offered for sale in Arkansas to contain a definition of occurrence that includes “property damage or bodily injury resulting from faulty workmanship.”It is unclear whether this requirement applies to policies previously issued. The act also states that it does not limit the nature or types of exclusions that an insurer may include in a CGL policy. Thus, the numerous exclusions related to construction defect claims contained in the typical CGL insurance policy are not affected by the Arkansas statute, and the judicial decisions that have interpreted those exclusions presumably remain good law.

South Carolina

Enacted on May 17, 2011, South Carolina Code Section 38-61-70 provides that CGL policies shall contain or be deemed to contain a definition of occurrence that includes property damage or bodily injury resulting from faulty workmanship, exclusive of the faulty workmanship itself. However, whether the South Carolina statute will change the law in South Carolina is unclear because the statute was immediately challenged in court. On May 23, 2011, Harleysville Mutual Insurance Company filed a complaint in the South Carolina Supreme Court seeking injunctive relief and a declaration that the new statute violates several provisions of the U.S. and South Carolina constitutions, particularly with respect to existing insurance policies at issue in pending litigation.

Conclusion

The new state statutes are intended to overrule, at least to some extent, judicial decisions that denied insurance coverage for construction defect claims. The thrust of these statues is to require construction defects to be treated as an accidental “occurrence” within the meaning of the CGL insurance policy. As such, the legislation generally should make it easier for policyholders in the affected states to establish at least the existence of potential coverage for a construction defect claim, and thereby more easily trigger the insurance company’s duty to provide a defense. Whether these statutes will also result in increased indemnity coverage for construction defect claims, however, remains to be seen. Among other things, the statutes generally do not alter the exclusions that already apply to construction defect claims, and they leave the interpretation of the meaning of these exclusions to the courts.

In short, while this new wave of statutes increases the complexity and divergence among the states of this already fractured area of the law, they also appear to increase the likelihood of insurance coverage for construction defect claims in Colorado, Hawaii, Arkansas and South Carolina.

Payments by Enron are "Settlement Payments" under the Bankruptcy Code's Safe Harbor Provisions

An interesting article recently published in the National Law Review by David A. Zdunkewicz of Andrews Kurth LLP regarding the Second Circuit Court of Appeals protecting payments made by Enron to redeem commercial paper prior to maturity as “Settlement Payments” under the Bankruptcy Code’s Safe Harbor Provisions.

In a matter of first impression in In Re: Enron Creditors Recovery Corp., v. ALFA, S.A.B. DE C.V., et al., No. 09-5122-bk(L) the United States Court of Appeals for the Second Circuit sided with two holders of Enron’s commercial paper who received prepetition payments redeeming the paper prior to its stated maturity. The price paid by Enron to redeem the debt was considerably higher than the market value of the debt.

Enron argued that the payments were either preferential or constructively fraudulent transfers and were not “settlement payments” under section 546(e) of the Bankruptcy Code because (i) the payments were not “commonly used in the securities trade,” (ii) the definition of “settlement payment” includes only transactions in which title to the securities changes hands and, therefore, because the redemption was made to retire debt and not to acquire title to the commercial paper, no title changed hands and the redemption payments are not settlement payments, and (iii) the redemption payments are not settlement payments because they did not involve a financial intermediary that took title to the transacted securities and thus did not implicate the risks that prompted Congress to enact the safe harbor.

The Second Circuit rejected each of Enron’s arguments, holding that the payments qualified as “settlement payments” under the Bankruptcy Code’s safe harbor provisions.

As to Enron’s first argument, the Court disagreed that the payments must have been common in the securities trade to qualify as a settlement payment under the Bankruptcy Code. Section 741(8) of the Bankruptcy Code defines “settlement payment” as “a preliminary settlement payment, a partial settlement payment, an interim settlement payment, a settlement payment on account, a final settlement payment, or any other similar payment commonly used in the securities trade.” Enron argued that the phrase “commonly used in the securities trade” modified each of the preceding terms in section 741(8), not only the immediately preceding term. The Second Circuit disagreed and held that the phrase “commonly used in the securities trade” only modified the immediately preceding term in Section 741(8), i.e. it only modified “similar payment.” Thus there is no requirement that the payments made to the holders be common in the securities trade.

As to Enron’s second argument, the Second Circuit found nothing in the Bankruptcy Code or the relevant caselaw to exclude the redemption of debt securities from the definition of a settlement payment. Accordingly, there is no requirement, as Enron argued, that title to the securities change hands for the payment to be considered a settlement payment under the Bankruptcy Code.

Finally, the Second Circuit rejected the third argument advanced by Enron. Enron argued that the redemption of debt did not constitute a settlement payment because it did not involve a financial intermediary that took a beneficial interest in the securities during the course of the transaction. Thus, the argument goes, the redemption would not implicate the systemic risks that motivated Congress to enact the safe harbor provision for settlement payments.

The Second Circuit rejected the argument and held that the fact that a financial intermediary did not take title to the securities during the course of the transaction is a proper basis to deny safe-harbor protection, joining the Third, Sixth, and Eighth Circuits in rejecting similar arguments. The Court stressed that § 546(e) applies to settlement payments made “by or to (or for the benefit of)” a number of participants in the financial markets and it would be inconsistent with this language to restrict the definition of “settlement payment” to require that a financial intermediary take title to the securities during the course of the transaction.

While each case must be determined on a case-by-base analysis, the Second Circuit’s ruling in Enron reflects a continued trend among the Court of Appeals to broadly interpret the safe harbor provisions of the Bankruptcy Code and protect covered transactions.

Avoid Employer Liability with Safe Harbor Provisions under GINA

Recently posted in the National Law Review an article by George B. Wilkinson and Anthony “T.J.” Jagoditz of Dinsmore & Shohl LLP regarding the recently-enacted federal Genetic Information Non-Discrimination Act of 2008, otherwise known as “GINA”.

Employers should take note of the recently-enacted federal Genetic Information Non-Discrimination Act of 2008, otherwise known as “GINA”. Effective January 10, 2011, Congress added yet another acronym to the long list of federal laws impacting today’s employers (OSHA, ADA, FMLA, ADEA, etc). This new law prohibits an employer from requesting an employee’s genetic information and that of his/her family. The Act applies to requests for medical records,independent medical examinations, and pre-employment health screenings.

An employer may not request information about an employee’s health status in a way that is likely to result in exposure of genetic information of the employee and his/her family (which includes relatives up to the fourth degree). “Genetic information” is classified as genetic tests, the manifestation of a disease or disorder, and participation in genetic testing (i.e. studies by market-research firms sampling medications). Clarifications regarding sex, age, and race are not considered genetic information. Family history is considered genetic.

Fortunately, GINA provides safe-harbor language which is designed to protect employers. Inclusion of the safe-harbor language (which is contained within the statute itself) is important in medical records requests and in communicating with physicians who are doing independent examinations. This safe-harbor language will render receipt of the genetic information inadvertent, and therefore allow the employer to avoid liability under GINA.

If the safe-harbor language is given to a health care provider and genetic information is provided, the employer must “take additional reasonable measures within its control” to make sure that the violation is not repeated by the same health care provider. However, such measures are not defined in the act.

U.S. Supreme Court Stresses Importance of Commonality in Decertifying Massive Sex Discrimination Class of 1.5 Million Wal-Mart Employees

Barnes & Thornburg LLP‘s Labor and Employment Law Department recently posted in the National Law Review an article about the U.S. Supreme Court’s reversing the largest employment class certification in history

In Wal-Mart, Inc. v. Dukes, reversing the largest employment class certification in history, the U.S. Supreme Court appears to have limited the circumstances in which federal courts can certify class actions – and not just in employment cases. The Court held that the lower federal courts had erred by certifying a class that included 1.5 million female employees from virtually every part of the country. The plaintiffs sought injunctive and declaratory relief, punitive damages, and backpay as a result of alleged discrimination by Wal-Mart against female employees in violation of Title VII of the Civil Rights Act of 1964.

The Supreme Court held that class certification was improper because the class failed to meet the “commonality” requirement of Federal Rule 23(a)(3), which provides that a class can be certified “only if…there are questions of law or fact common to the class…” The Court noted that the mere allegation of “common questions” is insufficient under Rule 23. “Th[e] common contention… must be of such a nature that it is capable of classwide resolution – which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the [individual class members’] claims in one stroke.”

The Court held that the Wal-Mart class did not meet the standard for commonality, because the evidence showed that Wal-Mart gave discretion to its supervisors in making employment decisions. The named plaintiffs “have not identified a common mode of exercising discretion that pervades the entire company… In a company of Wal-Mart’s size and geographical scope, it is quite unbelievable that all managers would exercise their discretion in a common way without some common direction.” The Court concluded that, “Because [the named plaintiffs] provide no convincing proof of a company-wide discriminatory pay and promotion policy, we have concluded that they have not established the existence of any common question.”

The lack of commonality found in Wal-Mart can arise in class actions of many kinds. Under Wal-Mart, a question is “common” under Rule 23(a)(3) only if it can be decided on a class-wide basis. In the past, many named plaintiffs, and some lower courts, have overlooked this essential point. And, as in Wal-Mart, in many cases a claim of commonality will fail precisely because there is no way to rule on the question without addressing the individual facts relating to each purported class member. Wal-Mart makes clear that such a lack of commonality is sufficient to defeat class certification.

In addition to meeting all of the requirements of Rule 23(a), a class must comply with one of the three subparts in Rule 23(b). The trial court in Wal-Mart had certified the class under Rule 23(b)(2), which allows a class where the defendant’s alleged conduct “appl[ied] generally to the class, so that final injunctive or declaratory relief is appropriate respecting the class as a whole…” Another issue before the Supreme Court was whether such certification was proper where the class sought recovery of substantial backpay based on Wal-Mart’s alleged discrimination.

The Court ruled that the purported class could not be certified under Rule 23(b)(2), holding that “claims for individualized relief (like the backpay at issue here) do not satisfy the Rule.” The Court said that Rule 23(b)(2) “does not authorize class certification when each class member would be entitled to an individualized award of monetary damages.”

Under the analysis in Wal-Mart , in the vast majority of class actions seeking a monetary recovery, the class can be certified (if at all) only under Rule 23(b)(3). Class certification under that provision is often more difficult, because a class plaintiff must prove that common questions “predominate” over individual questions and that a class action is “superior” to individual actions. In addition, under Rule 23(c)(2)(A), individual notice must be given to all members of a Rule 23(b)(3) class at plaintiff’s expense, while such notice is optional, within the trial court’s discretion, if the class is certified under Rule 23(b)(2).

Wal-Mart is an important case in the area of employment law; but the Supreme Court’s holdings on the requirements of Rule 23 are likely to be helpful in defending class actions of all kinds

CFPB has no plan to ban financial products, Warren tells GOP-led committee

Recently posted in the National Law Review by Shirley Gao of the Center for Public Integrity about the new Consumer Financial Protection Bureau:

The new Consumer Financial Protection Bureau, which opens for business next week, does not plan to ban specific financial products, presidential adviser Elizabeth Warren told Congress.

Banning fraudulent financial products and services “is a tool in the toolbox, and that’s where it should stay,” Warren testified at a Republican-led House Oversight and Government Reform hearing on Thursday, the Wall Street Journal, Politico and other media reported. “We have no present intention to ban a product, but we are still learning about what’s out there” she said.

Republicans on the panel, who questioned Warren at a contentious hearing in late May, grilled Warren about whether the CFPB may try to outlaw payday loans and try to regulate new car loans.

“The American people have a right to know how the bureau will advance and enforce its regulatory assignment,” said Committee Chairman Darrell Issa, a California Republican. “Consumers deserve opportunities to choose between lending alternatives and other financial tools that establish credit and give buyers the chance for affordable enhancements to their standards of living.”

A C-span video of the three and one-half hour hearing is posted here.

Banks push to weaken derivatives rules – In a potential win for big banks, federal regulators are considering a weaker version of a plan that initially sought to limit a big bank from controlling more than 20 percent of any one derivatives exchange.

The Commodity Futures Trading Commission is now privately discussing a lower cap after aggressive lobbying by Wall Street, the New York Times Dealbook reports. How aggressive? CFTC officials have held almost 50 private meetings with players including mega-banks such as Goldman Sachs Group Inc. and Morgan Stanley.

New financial data office – A new Treasury Department office tasked with collecting data from banks, hedge funds and brokerages is yet another example of government overreach and a likely target for hackers, Republicans warned Thursday at a House hearing.

The Office of Financial Research was created by the Dodd-Frank reform law with the power to collect and analyze company-specific data to help regulators pinpoint systemic risks to the economy.

The new office “has very broad power and authority with very few checks and balances,” said Texas Republican Randy Nuegebauer . “There is no limit to the information you can require from a company.”

Oil payment rules – Human rights groups urged the Securities and Exchange Commission to hurry up and finalize an energy industry anti-corruption rule that was tucked into the Dodd-Frank law.

The proposed SEC rule would force oil, natural gas and other energy companies listed on U.S. stock exchanges to disclose exactly how much each pays to overseas governments to acquire drilling and production rights. Energy companies have fought the SEC plan, saying the requirement would be overly burdensome and costly.

Evaluating Insurance Policies After Japan’s Earthquake

Posted on July 14, 2011 in the National Law Review by Risk Management Magazine of Risk and Insurance Management Society, Inc. (RIMS) information about an essential first step is to review insurance coverages for losses caused by natural catastrophes.

Shock and tragedy were the emotions most felt throughout Japan when the March earthquake and tsunami ravaged the nation. But companies doing business there have since moved on to planning mode, looking for ways to mitigate their losses, both those already suffered and the inevitable ones to come from similar exposures in the future.

An essential first step is to review insurance coverages for losses caused by natural catastrophes. Of particular importance is the potential availability ofcontingent business interruption insurance coverage for lost sales to Japanese customers or lost supplies from Japanese producers.

Property insurance policies obviously cover direct property damage caused by natural disasters. But those same policies also cover other types of business losses. Time element coverage pays for the lost profits when damaged property affects a policyholder’s day-to-day operations. The amount covered generally depends on the time it takes to resume normal business operations. Time element coverage can be triggered by damage either to the policyholder’s property or a third party’s property, and the most common kinds are business interruption, extra expense and contingent business interruption.

Business Interruption

The purpose of business interruption coverage is to restore the policyholder to the financial position it was in before the property damage occurred. To recover these losses, the lost profits, at a minimum, must relate to the event that caused the policyholder’s property damage. Once the insured demonstrates covered property damage, the measure of the loss generally is the difference between expected profits during the recovery period after the event and actual profits during that period, less any unrelated losses.

Perhaps the only recent U.S. event comparable to Japan’s earthquake is Hurricane Katrina. In Consolidated Cos. v. Lexington Ins. Co., the Fifth Circuit Court of Appeals ruled that business interruption losses resulting from Hurricane Katrina were covered without requiring proof to a level of specificity that the loss stemmed solely from damage to the policyholder’s property as a result of the hurricane. The insurance carrier argued that the policyholder had to prove what its likely performance would have been had Katrina taken place but not damaged the policyholder’s property, reasoning that, even absent damage to the policyholder’s property, profits would have been reduced because of the generally depressed economic conditions following the hurricane. Instead, the court concluded that the loss should be calculated as if Katrina had not struck at all.

Coverage for this interdependent business interruption loss can extend to locations that are distant from the damaged property if the policyholder can show that the undamaged facility operated in concert with the damaged one. An example would be a policyholder’s remote facility outside of Japan that cannot receive inventory because of damage to the policyholder’s manufacturing plant in Japan.

Extra Expense

Extra expense coverage aims to cover additional costs the policyholder incurs to minimize or avoid interruption of its business. Examples of such coverage are: additional utility costs needed to resume business operations; additional costs to store business equipment; moving costs to relocate to temporary facilities; and costs expended for the temporary repair or replacement of property. Most policies also contain a related coverage, similar to extra expense, typically called expense to reduce loss coverage, to reimburse additional costs incurred to mitigate property damage.

Contingent Business Interruption

Many policies protect against profits lost when a policyholder’s supplier or customer cannot conduct business because of property damage “of the type” covered under the policyholder’s policy. This coverage would provide, for example, recovery to a manufacturer of computers outside of Japan that suffers lost profits as a result of a supplier’s inability to provide required components because of damage to the supplier’s Japanese facility. Similarly, a policyholders’ profits affected by property damage to the facilities of a Japanese customer are recoverable. Covered costs also include losses incurred when a civil authority prevents access to the policyholder’s facilities, or when damage to property in the vicinity of the insured property prevents ingress to, or egress from, the policyholder’s facility.

John Banister, Erica Dominitz, Barry Fleishman, Helen Michael, Carl Salisbury and Caroline Spangenberg are all partners at Kilpatrick Townsend & Stockton.

Author: National Law Forum

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