Category: Litigation

The 2020 Election: Previewing the Potential for Shifts in Labor & Employment Law

As Election Day approaches, employers nationwide consider the changes that may come with a victory by Senator Joseph Biden in the Presidential race and/or shift in representation in the U.S. Senate.  While we cannot be certain of what the future holds—either in the election or the subsequent legal landscape—the Bracewell Labor & Employment team has prepared the following information in an effort to highlight areas of employment law that may transform, in both the near and far term, in the event of such changes in the country’s elected officials.

Labor Relations, Collective Bargaining and Union Organizing

  • Senator Biden strongly supports unions, stating that “Everything that defines what it means to live a good life and know you can take care of your family  . . . is because of workers who organized unions and fought for worker protections.”
  • Specifically, he supports:
    • Provisions of the Protecting the Right to Organize Act (PRO Act) – which would institute financial penalties on companies that interfere with union organizing – and supports legislation that would hold company executives personally liable for such interference.
    • Funding a “dramatic increase” in the number of investigators at the National Labor Relations Board (NLRB).
    • Shorter timelines for union election campaigns and bans on mandatory employer meetings with employees during union organizing campaign.
    • Creating a federal right to union organizing and collective bargaining for all public sector employees.
    • Creating a cabinet-level working group that will “solely focus on promoting union organizing and collective bargaining.”
    • Extending the right to organize and bargain collectively to independent contractors.
  • While recent prior Democrat administrations were not able to strengthen organized labor in the way Senator Biden’s platform hopes to achieve, at a minimum, if Senator Biden were to become President, his appointments to the NLRB would return a pro labor union majority to the agency.  In that case, the NRLB decisions and rule making would strengthen union organizing and limits on workplace rules.

Workplace Rules

  • President Donald Trump shifted the limits of employer workplace policies by undoing pro-union rulings the NLRB made under former President Barack Obama.  A Biden Presidency would likely swing such rulings back to where they were in the Obama era.
  • Employees should look for potential changes in the following areas:
    • Facially neutral workplace rules:  The Trump NLRB, in its Boeing Company decision, ruled that an employer does not necessarily violate the NLRA by maintaining a facially neutral work rule, policy or handbook provision that could be reasonably construed to interfere with union or other protected concerted activity protected under Section 7.  This overruled Lutheran Heritage Village-Livonia, which under the Obama administration, was frequently applied to invalidate facially neutral employer rules adopted and applied for legitimate business reasons unrelated to an employee’s Section 7 activity. Examples of Section 7 activity include the right discuss wages and working conditions and the right to organize.
    • Workplace investigations: In its 2015 Banner Health decision, the NLRB prohibited employers from requiring employees to keep workplace investigations confidential.  Last December, the Trump NLRB, in Apogee Retail, reversed the Banner Health decision, finding that employer policies that require confidentiality during internal investigations are per se lawful.
    • Employer e-mail: As a result of the NLRB’s 2014 Purple Communications decision, employers could not prohibit employees from accessing company email for union-related communications.  The Trump NLRB, in its Caesar’s Entertainment decision, restored employer rights to prohibit use of its email systems for non-business purposes.

Employment Law Developments and Enforcement

Senator Biden supports the following legislation:

  • The Equality Act
    • A proposed law that would codify anti-discrimination protections for LGBTQ individuals in employment as well as other contexts, including housing.
    • Ensure protection from associational discrimination – discrimination on the basis of a person’s association with an individual in a protected class.
    • The Equality Act passed the House of Representatives but has not come to a vote in the Senate.
  • Paycheck Fairness Act
    • A proposed law that addresses wage discrimination on the basis of sex.
    • Amends equal pay provisions of the Fair Labor Standards Act to restrict use of the bona fide factor defense to wage discrimination claims, enhance non-retaliation provisions, make it unlawful to require an employee to sign a contract or waiver prohibiting the employee from disclosing information about the employee’s wages and increase civil penalties for violations of equal pay provisions.
    • Prohibits employers from screening job applicants based on their salary history or requiring salary history during the interview or hiring process.
    • Requires EEOC to issue regulations for collecting compensation and other employment data from employers according to the sex, race, and ethnic identity of employees for use in enforcing laws prohibiting pay discrimination.
    • The Paycheck Fairness Act passed the House of Representatives but has not come to a vote in the Senate.

Department of Labor: Independent Contractors, Wage Changes and Federal Contractors

  • As stated above, Senator Biden supports the PRO Act:

    • Increasing the standard to classify workers as independent contractors
    • Expanding the definition of “joint employer”
    • Criminal liability for employer interference with organizing efforts
  • DOL, Wage & Hour/FLSA:  Recent Rules & Potential Changes
    • (Existing) Final Rule increasing the salary threshold to $684/week
      • If the minimum wage is increased to $15/hr, then the salary threshold would likely increase to retain a sufficient gap between exempt and non-exempt employees under the FLSA ($15/hr = $600/wk)
    • (Existing) Final Rule expanded Section 7(i) overtime exemption for retail and service industries by withdrawing the dated list of businesses with “no retail concept.”
      • Likely not affected
    • (Existing) Final Rule allows bonuses or other incentives to salaried, nonexempt employees without defeating the fluctuating workweek” method described in 29 CFR 778.114.
      • Likely not affected
    • (Existing) Final Rule on joint employer describing “vertical” and “horizontal” joint employer scenarios (enjoined by federal district court) to the extent the DOL too narrowly defined joint employment)
      • This may be challenged.
    • Proposed rule adopting the “economic realities” test for  independent contractors and emphasizing the factors of control and opportunity for profit and loss.
      • This may be challenged.
  • Senator Biden’s general proposals:
    • Increased penalties (in addition to current FLSA remedies and liquidated damages) for worker misclassification.
    • Senator Biden proposes to increase DOL/FLSA enforcement effort.
    • Senator Biden proposes to increase staffing of agencies.
    • Senator Biden proposes  greater collaborative enforcement efforts between various labor agencies (NLRB, EEOC, IRS, State unemployment and labor agencies).
  • Executive Orders & the Office of Federal Contract Compliance Programs (OFCCP)
    • Executive Order 13950, “Combating Race and Sex Stereotyping” prohibiting federal contractors from instilling race or sex stereotyping or scapegoating in workplace diversity and inclusion training
      • Likely withdrawn by Senator Biden administration
  • Notably, the OFCCP under the Trump Administration collected greater enforcement fines than expected –  e.g., OFCCP collected more than $21 Million from Dell Technologies, Goldman Sachs and Bank of America primarily relating to gender/race wage disparity claims.

COVID Response – Economic and Public Health Policies Affecting Employers

  • From “Unemployment” to “Employment Insurance”:
    • Focus on maintaining employment at reduced hours, with federal government supplementing worker wages
    • 100% federal financing for short-time compensation plan that is “automatically extended based on economic and health conditions” (without the vote of Congress)
    • Tax credit for employer’s extra health care costs
  • COVID:
    • Create Pandemic Testing Board to “guarantee regular, reliable and free access to testing for all, including every worker called back to the job”
    • Hire 100,000 Americans to conduct contact tracing
    • Ensure emergency paid leave for all who contract COVID-19 or need to care for a loved one with COVID-19
    • “Ensure worker protection and accountability” including tasking OSHA with “setting and enforcing a rigorous emergency temporary standard”
    • Equip small business with a “restart package” to retain and rehire workers
  • Schools – Issuing “basic, objective criteria” at the federal level to guide school reopening and passing significant emergency federal funding for school.

OSHA and Workplace Safety

  • Senator Biden has committed to reinstating a variety workplace safety and health regulations altered during the Trump administration, such as regulations requiring companies to report their workplace injuries.
  • He also has promised to increase the number of investigators in the Occupational Safety and Health Administration (OSHA) and the Mine Safety Health and Administration (MSHA) and to direct OSHA to substantially expand its enforcement efforts.

Employment Agreement Restrictions

  • Senator Biden has promised to will work with Congress to eliminate all non-compete agreements, except the very few that are absolutely necessary to protect a narrowly defined category of trade secrets, and outright ban all no-poaching agreements.
© 2020 Bracewell LLP
For more articles on the election, visit the National Law Review Election Law / Legislative News section.

Spooktacular Severability Ruling Raises Barr From The Dead, Buries TCPA Claims Arising Between November 2015 and July 2020

A few weeks ago, the Eastern District of Louisiana held that courts cannot impose liability under Sections 227(b)(1)(A) or (b)(1)(B) of the TCPA for calls that were made before the Supreme Court cured those provisions’ unconstitutionality by severing their debt collection exemptions.  The first-of-its-kind decision reasoned that courts cannot enforce unconstitutional laws, and severing the statute applied prospectively, not retroactively. Plaintiffs privately panicked but publicly proclaimed that the Creasy decision was “odd” and would not be followed.

So much for that. Yesterday, the Chief Judge of the Northern District of Ohio followed Creasy and dismissed another putative class action.  The new case—Lindenbaum v. Realgy—arose from two prerecorded calls, one to a cellphone and another to a landline. The defendant moved to dismiss, arguing that “severance can only be applied prospectively,” that Sections 227(b)(1)(A) and (b)(1)(B) were unconstitutional when the calls were made, and that courts lack jurisdiction to enforce unconstitutional statutes. The plaintiff opposed the motion, arguing, among other things, that a footnote in Justice Kavanaugh’s plurality opinion in Barr v. AAPC suggests “that severance of the government-debt exception applies retroactively to all currently pending cases.”

The court sided with the defendant. It began by agreeing with Creasy that this issue “was not before the Supreme Court,” and the lone footnote in Justice Kavanaugh’s plurality opinion is “passing Supreme Court dicta of no precedential force.” It then surveyed the law and found “little, if any, support for the conclusion that severance of the government-debt exception should be applied retroactively so as to erase the existence of the exception.” It reasoned that, while judicial interpretations of laws are “given full retroactive effect in all cases still open on direct review and as to all events,” severance is different because it is “a forward-looking judicial fix” rather than a backward-looking judicial “remedy.” In short, severance renders statutes “void,” not “void ab initio.”

Defendants are now two-for-two in seeking dismissal of claims based on the now-undeniable unconstitutionality of the debt-collection exceptions in Section 227(b)(1)(A) or (b)(1)(B). With more such motions pending in courts across the country, this may become a powerful weapon against whatever claims remain after the Supreme Court’s decision in Facebook v. Duguid.

© 2020 Faegre Drinker Biddle & Reath LLP. All Rights Reserved.
For more articles on the TCPA, visit the National Law Review Litigation / Trial Practice section.

Balancing Hospital Visitations and Religious Freedoms During a Pandemic

On October 20, 2020, the Office for Civil Rights (“OCR”) settled two religious discrimination complaints involving access to clergy during the Public Health Emergency. Both complaints arose from a hospital’s failure to permit visits by religious clergy due to COVID-19 visitor restrictions. In the first complaint, a COVID-19 positive new mother requested that a priest visit her newborn son and baptize him. Due to its restrictive visitor’s policy, the hospital refused. In the second complaint, a priest was denied ICU access in order to provide Catholic religious sacraments to an end-of-life patient. 

In connection with resolution of the complaints, OCR provided technical assistance and guidance to the hospitals in order to strike a balance between protecting the hospital’s staff, visitors, and patients and respecting the patient’s right to religious support. OCR approved the following requirements for visiting clergy:

  • Visiting clergy must follow all safety policies put in place by the hospital, including COVID-19 screening protocols;
  • Visiting clergy must adhere to proper infection prevention practices, such as hand washing, physical distancing and wearing a mask;
  • Visiting clergy must complete infection control training;
  • Visiting clergy must use fit-tested Personal Protective Equipment (“PPE”);
  • Visiting clergy must sign an acknowledgment of the risks associated with visiting a patient who tested positive for COVID-19; and
  • In urgent end-of-life situations, an exception to the controls listed above may be made but visiting clergy must self-quarantine for 14 days following the visit.

Hospitals are encouraged to review their visitation policies for compliance with a patient’s right to religious support.

© Steptoe & Johnson PLLC. All Rights Reserved.
For more articles on civil rights and COVID-19, visit the National Law Review Civil Rights section.

California Court of Appeal Rules that Challenge to Google’s Confidentiality Agreements May Proceed Past the Pleading Stage

On September 21, 2020, in a published 2-1 opinion in Doe v. Google Inc., the California Court of Appeal (Dist. 1, Div. 4), permitted three current and former Google employees to proceed with their challenge of Google’s confidentiality agreement as unlawfully overbroad and anti-competitive under the California Private Attorneys General Act (“PAGA”) (Lab. Code § 2698 et seq.).  In doing so, the Court of Appeal reversed the trial court’s order sustaining Google’s demurrer on the basis of preemption by the National Labor Relations Act (“NLRA”) (29 U.S.C. § 151 et seq.) under San Diego Bldg. Trades Council v. Garmon, 359 U.S. 236, 244–245 (1959).  The court held that while the plaintiffs’ claims relate to conduct arguably within the scope of the NLRA, they fall within the local interest exception to Garmon preemption and may therefore go forward.  It remains to be seen whether plaintiffs will be able to sustain their challenges to Google’s confidentiality policies on the merits.  However, Doe serves as a reminder to employers to carefully craft robust confidentiality agreements, particularly in the technology sector, in anticipation of potential challenges employees may make to those agreements.

Google requires its employees to sign various confidentiality policies.  The plaintiffs brought a lawsuit challenging these policies on the basis that they restricted their speech in violation of California law.  Specifically, the plaintiffs alleged 17 claims that fell into three subcategories based on Google’s confidentiality policies: restraints of competition, whistleblowing and freedom of speech.  The claims were brought under PAGA, a broad California law that provides a private right of action to “aggrieved employees” for any violation of the California Labor Code.  PAGA claims are brought on a representative basis—with the named plaintiffs deputized as private attorneys general—to recover penalties on behalf of all so-called “aggrieved employees,” typically state-wide, with 75% of such penalties being paid to the State and 25% to the “aggrieved employees” if the violation is proven (or a court-approved settlement is reached).

In their competition causes of action plaintiffs alleged that Google’s confidentiality rules violated Business & Professions Code sections 17200, 16600, and 16700 as well as various Labor Code provisions by preventing employees from using or disclosing the skills, knowledge, and experience they obtained at Google for purposes of competing with Google.  The court noted that section 16600 “evinces a settled legislative policy in favor of open competition and employee mobility” that has been “instrumental in the success of California’s technology industry.”  The plaintiffs complained that Google’s policies prevented them from negotiating a new job with another employer, disclosing who else works at Google, and under what circumstances the employee may be receptive to an offer from a rival employer.

With respect to their whistleblowing claims, the plaintiffs alleged that Google’s confidentiality rules prevent employees from disclosing violations of state and federal law, either within Google to their managers or outside Google to private attorneys or government officials in violation of Business & Professions Code section 17200 et seq. and Labor Code section 1102.5.  Similarly, it is alleged that the policies ostensibly prevented employees from disclosing information about unsafe or discriminatory working conditions, a right afforded to them under the Labor Code.

In their freedom of speech claims, plaintiffs alleged that Google’s confidentiality rules prevent employees from engaging in lawful conduct during non-work hours and violate state statutes entitling employees to disclose wages, working conditions, and illegal conduct under various Labor Code provisions.  The employees argued this conduct could be writing a novel about working in Silicon Valley or to even reassure their parents they are making enough money to pay their bills—i.e., matters seemingly untethered to a legitimate need for confidentiality.

While Google’s confidentiality rules contain a savings clause—confirming Google’s rules were not meant to prohibit protected activity—the plaintiffs argued that the clauses were meaningless and not implemented in its enforcement of its confidentiality agreements.

Google demurred to the entire complaint, and the trial court sustained the demurrer as to plaintiffs’ confidentiality claims, agreeing that the NLRA preempted such claims.

On appeal, the Court of Appeal recognized that the NLRA serves as a “comprehensive law governing labor relations [and] accordingly, ‘the NLRB has exclusive jurisdiction over disputes involving unfair labor practices, and “state jurisdiction must yield’ when state action would regulate conduct governed by the NLRA.  (Garmon, [supra, 359 U.S.] at pp. 244-245.)”  But the court cautioned that NLRA preemption under Garmon cannot be applied in a “mechanical fashion,” and its application requires scrutiny into whether the activity in questions is a “merely peripheral concern” of the NLRA or where the “regulated conduct touche[s] interests so deeply rooted” in state and local interests.

In analyzing the federal and state issues at state, the Court of Appeal found that several of the statutes undergirding plaintiffs’ PAGA claims did not sound in principles of “mutual benefit” that are the foundation of the NLRA but protected the plaintiff’s activities as individuals.  The court cited several examples, including Labor Code section 242 prohibition of employers preventing employees from disclosing the amount of his or her wages (a statute enacted to prevent sex discrimination) and Labor Code section 232.5, prohibiting an employee from disclosing information about the employer’s working conditions (manifesting California’s policy to prohibit restrictions on speech regarding conditions of employment).  The court likewise found that the NLRA did not protect much of the activity prohibited by the statutes that supported plaintiffs’ PAGA claims, noting that the NLRA did not prohibit rules inhibiting employees from seeking new employment and competing with Google, as plaintiffs alleged Google’s confidentiality rules did.  It further does not protect whistleblowing activity unconnected to working conditions, such as violations of securities law, false claims laws, and other laws unrelated to terms and conditions of employment.

Nevertheless, the court held that, regardless of diverging purposes of the NLRA and the laws that support the plaintiffs’ PAGA claims, plaintiffs’ claims fall squarely in the local interest exception to NLRA preemption.  Where an employer’s policies are arguably prohibited by the NLRA, the local interest exception to NLRA preemption applies when (1) there is a “significant state interest” in protecting the citizen from the challenged conduct, and (2) the exercise of state jurisdiction entails “little risk of interference” with the NLRB’s regulatory function.  The court found no difficulty in determining that an action under PAGA, where the plaintiffs are serving as a “proxy or agent of the state’s labor law enforcement agencies” grows from “deeply-rooted local interests” in regulating wages, hours, and other terms of employment.  It also found that a state’s enforcement of its minimum employment standards, particularly in relation to the plaintiffs claims in this case, were peripheral to the NLRA’s purpose of safeguarding, first and foremost, workers’ rights to join unions and engage in collective bargaining.  Thus, the court held, there was no basis for NLRA preemption in this case.

Particularly in light of this opinion, employers who require employees to execute confidentiality agreements with their employees should be cognizant of the myriad of ways that they can be challenged.  As in the case of Doe v. Google, Inc., such challenges may not be just from individuals bringing claims in their own capacity, but as private attorneys general bringing representative claims on behalf of all California employees.  Nor can NLRA preemption be mechanically applied to preempt claims based upon such agreements.  Employers would be well-advised to review their existing confidentiality agreements and consult experienced counsel before revising or rolling out such agreements.

Copyright © 2020, Sheppard Mullin Richter & Hampton LLP.
For more articles on labor law, visit the National Law Review Labor & Employment section.

Lawsuits for Illegal Strip Searches

DETROIT — Strip searches are routinely performed by law enforcement officers of all types. This ranges from police to prison guards, as well as to TSA agents at airports in the United States.

Private security guards also perform strip searches, including in malls and retail stores.

While some strip searches are legal, others violate the person’s constitutional rights. In general, people have a reasonable expectation of privacy.

A public officer or private guard cannot simply conduct a strip search without a proper legal basis. When an illegal strip search occurs, the victim can file a lawsuit seeking compensation for the violation of protected rights.

The basis for most illegal strip search lawsuits is a violation of the Fourth Amendment of the U.S. Constitution. The text of the Fourth Amendment states:

“The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no warrants shall issue, but upon probable cause, supported by oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.”

The key words in the Fourth Amendment as it relates to an unlawful search are “unreasonable” and “probable cause.” Probable cause is a higher standard than reasonable suspicion. An officer does not have the right to search a person simply because there was a basis for stopping that person. In fact, most illegal strip searches are performed on people who are legitimately stopped or apprehended, but there is no legal basis to perform a subsequent search.

The main requirement is if the person being searched had a reasonable or legitimate expectation of privacy. Probable cause is required only when there is a reasonable expectation of privacy. When a search is disputed, what is “reasonable” is often determined by a judge or jury.

There are often even disputes as to what constitutes a strip search in the first place.

Different parties often have varying definitions of what constitutes a strip search. And, the context of each type of search may vary from one person to another.

For example, a prison guard performing a strip search may have one definition in mind that involves a physical search of the inmate’s body.  Others may have broader definitions as to what they define as a strip search.  Case law, both state and federal, have examined a variety of situations and fact patterns and their decisions form the basis of what is legal and what is not.

Some case law holds that complete nudity is required to be constituted as a strip search. Other cases hold that it is a lesser degree, and that a strip search can be illegal without the person being totally naked. There are many cases that also address the degree of the search itself and how invasive it is on the person being searched. This can vary on the type of crime suspected and the urgency to perform the search to preserve potential evidence against the person.

There have been many illegal strip search lawsuits filed throughout the United States. Most are based upon violations of the Fourth Amendment when asserted against a governmental agency, or person acting on behalf of the government. Other claims are brought under an invasion of privacy theory, and this theory is frequently used in cases against private individuals and entities.

In addition, there have been several class action lawsuits filed by prisoners and inmates at correctional facilities.   These cases allege that a large number of inmates were illegal searched by prison staff and correction officers. Several of these lawsuits have resulted in substantial class action settlements, including a $ 53 million settlement against Los Angeles County for illegal strip searches of thousands of women by law enforcement personnel.

Individual lawsuits seek compensatory damages for the harm suffered by the victim.  This includes both physical pain and suffering as well as mental anguish. The damages inflicted upon the victim often cause serious and permanent psychological harm.

Lawsuits hold the wrongdoers accountable for violating a person’s constitutional rights.  They also serve as a deterrence to future unlawful actions.  This helps to protect every person’s right to be free from an unlawful search and curbs systematic illegal actions of law enforcement.

Sources:

https://www.law.umich.edu/facultyhome/margoschlanger/Documents/Publications/Jail_Strip-Search_Cases.pdf

https://buckfirelaw.com/case-types/sexual-abuse/illegal-strip-search/

https://www.aclu.org/blog/criminal-law-reform/reforming-police/supreme-court-says-jails-can-strip-search-you-even-traffic

https://www.americanbar.org/groups/crsj/publications/human_rights_magazine_home/2013_vol_39/may_2013_n2_privacy/upending_human_dignity_fourth_amendment/

Buckfire & Buckfire, P.C. 2020
For more articles on the Fourth Amendment, visit the National Law Review Constitutional Law section.

Grin and Barrett– Judge that Wrote Ruling Narrowly Interpreting TCPA’s ATDS Definition Sworn In to SCOTUS Ahead of Big Facebook TCPA Challenge

Well, its official

Former Judge Amy Coney Barrett– previously of the Seventh Circuit Court of Appeals– is now Justice Amy Coney Barrett of the US Supreme Court.

Whatever you may think of the GOP moving forward with this nomination in the shadow of the election, this is a great day for callers and advocates of a narrow TCPA read.

You already know the headline: in her previous role on the Seventh Circuit Court of Appeals, then-Judge Barrett had written a critical opinion addressing the TCPA’s ATDS definition and determined that the TCPA only applies to random or sequential number dialers, thus legalizing the vast majority of so-called “robocalls” in the Seventh Circuit footprint and freeing callers from one of the worst-written statute in American history.

Now as a Supreme Court Justice, one of Barrett’s first challenges will be to decipher the precise same portion of the precise same statute as part of Facebook’s huge SCOTUS appeal of the TCPA’s ATDS definition.

At issue, of course, is whether the TCPA applies to any call made “automatically” from a list of stored numbers or only those dialers that have the capacity to dial randomly or sequentially.  As I have explained recently, this is a classic “pathos vs logos” situation-– the statute plainly seems to require random or sequential number generation, yet the near universal disdain for robocalls might lead to a results-based analysis (of the sort the Supremes just engaged in to save this same statute a mere three months ago)

In our latest episode of the insanely popular Unprecedented [VIDEO] Podcast I had the opportunity to ask Plaintiff’s lead counsel- Sergei Lemberg–how he felt about arguing this critical issue back to the exact same Judge who ruled on this very issue in Gadelhak.  You’ll get to hear his answer TOMORROW right here.

The ascension of Justice Barrett is just the latest in a string of seesaw developments in the TCPA ATDS saga, with momentum swinging wildly in favor of one side or the other these last three months. The latest big development was the arrival of Bryan Garner– co-author with Justice Scalia (Justice Barrett’s mentor) of Reading Law, one of the most persuasive works on statutory interpretation– onto the consumer lawyer’s team urging an expansive read of the TCPA. And, of course, just last week nearly 40 state AGs likewise joined the fray in favor of an expansive TCPA read.

But with Justice Barrett arriving on the bench is Facebook now playing with a stacked deck? Certainly Justice Barrett–having already spoken on this issue–has a clear and obvious lean. Yet the trendy Beltway mistrust for “Big Tech” coupled with the fact that the Conservative wing of the Court (now its majority) previously split on whether to keep the TCPA on the books, suggest that this result might not yet be baked.

It all adds up to high drama in the high stakes TCPAWorld ATDS battle.

© Copyright 2020 Squire Patton Boggs (US) LLP
For more articles on the TCPA, visit the National Law Review Communications, Media & Internet section.

Court Affirmed Finding That Testator Had Capacity To Execute A Will, Was Not Unduly Influenced, And That The Appointment of Co-Executors Was Appropriate

In In the Estate of Flarity, a son of the testator challenged the trial court’s probating of a 2004 will and the appointment of two of his siblings, named in that will, as executors. No. 09-19-00089-CV, 2020 Tex. App. LEXIS 7536 (Tex. App.—Beaumont September 17, 2020, no pet. history). The contestant alleged that the testator did not have mental competence. The court of appeals disagreed. The court first addressed the standard for mental competency challenges:

In reviewing evidence addressing a testator’s capacity, we focus on the condition of the testator’s mind on the day the testator executed the will. Under Texas law, whether a testator has the testamentary capacity hinges on the condition of the testator’s mind the day the testator executed her will. Thus, the proponents of the will must prove that, when the testator signed the will, she could understand: the business in which she was engaged, the nature and extent of her property, the persons to whom she meant to devise and bequeath her property, the persons dependent on her bounty, the mode of distribution that she elected to choose among her beneficiaries, a sufficient memory so she could collect the elements of the business she wanted to transact and hold it in mind long enough to allow her to perceive the relationship between property and how she wanted to dispose of it, all so she could form reasonable judgments about doing those things.

Id. Applying those legal principals, the court held that the evidence was sufficient to support the trial court’s finding that the testator had capacity. There was testimony from the two children that were executors that the testator knew what she was doing. The contestant relied on his own testimony that the testator suffered from recurring depression many times in her life, including 2004. The court held:

But there is no expert testimony showing Paula was clinically depressed. There are not medical records in evidence that support Joe’s claim. While Joe argues Paula was not being treated for her condition in 2004, he never established that she was suffering from depression that year, as the parties never developed evidence about whether Paula was or was not seeing doctors at any time for any reasons at a time relevant to the day Paula signed the will. Furthermore, even Joe and Becky never testified that Paula told them at any time in 2004 that she was being treated for depression.

Id. Further, the court held that the testator had a reason for her will and there was no evidence that the executors influenced her:

Generally, the evidence admitted in the trial reflects that Paula chose to give her children a percentage share of her estate based on how much time they spent with her as she aged. Joe does not contend the evidence shows he spent more time with Paula than his siblings. Nor does he suggest that Paula miscalculated how much time he spent with her when compared with his siblings. Instead, Joe argues that Wes and Merrie obtained a larger share because they spent more time with her. That may be true, but that evidence does not show that Merrie and Wes used their influence to get Paula to change her will in a way that favored them during a period that Paula could not freely make that decision on her own.

Id.

Finally, the court of appeals affirmed the trial court’s appointment of the co-executors. The court stated the legal standard as:

When a testator nominates a person to be the executor of her will, the law requires the probate court to appoint that person to that office unless one of the enumerated exceptions in the Estates Code applies. The exceptions allow the probate court to choose someone else other than the person the testator named if the person the testator named renounces the appointment, or the evidence shows the person is “not qualified,” statutorily disqualified, or “unsuitable” for the office. Since the Estates Code requires probate courts to appoint the person the testator nominated in her will absent one of the listed exceptions, Joe was required to prove in the trial that Wes and Merrie were not qualified, statutorily disqualified, or unsuitable for the office. Thus, since Joe is attacking an adverse finding on which he had the burden of proof in the trial, he “must demonstrate on appeal that the evidence establishes, as a matter of law, all vital facts in support of the issue.” To do that, he must show the evidence before the probate court conclusively shows one of the enumerated exceptions to the provisions requiring probate courts to appoint the person the testator designated applies

Id. The court held that evidence from the contestant of hostility was not sufficient to show that the co-executors were not suitable. The court also held that the fact that one of the co-executors let her son live a home owned by the estate without the payment of rent was not a conflict as that could be viewed as a benefit to the estate (having someone protect and upkeep estate property) and that the co-executor was a part owner of the home and had the right to have her son live there without paying rent (in the absence of an objection co-owner). The court of appeals affirmed the trial court in all things.

© 2020 Winstead PC.
For more articles on wills, visit the the National Law Review Estates & Trusts section.

Divorce Rates and COVID-19

With divorce rates spiking, some couples want to know their options for separating in 2020.

All relationships involve a degree of conflict—and it’s normal to argue more during stressful times. From worrying about your health and the health of your loved ones to facing increased financial uncertainty, all of the classic marital stressors have been amplified by the events of 2020.

For some couples, pandemic friction has involved a few more fights about the laundry or the savings account. For others, lockdown has exposed issues that run deeper and offered ample time for reflection, leaving them to wonder about their options for pursuing separation during the pandemic.

Covid’s Impact on Relationships

Relationship counselors consistently rank financial stress, boredom, disagreements about parenting, and arguing about household chores as the most common sources of relationship trouble.

With many couples stuck in the house, homeschooling children, and facing added financial uncertainty, it should come as no surprise that the coronavirus pandemic is placing additional strain on relationships that were already struggling.

Additionally, support systems have become more difficult to access. Venting to friends over coffee or spending a night out on the town just isn’t an option right now. If you’ve been using these outlets to manage stress—or, perhaps, to avoid dealing with deeper problems—-you may find yourself suddenly in the position of having to confront your difference head on.

It’s no surprise that given this, many marriages have reached their breaking point.

Although the recognition of real, substantive problems in a marriage can be a sobering moment, it is also a necessary and hopeful turning point on the road to a healthy future. One of the pandemic’s brighter spots may be that it may prompt a refocusing on values and on what really matters, clarifying when the healthiest and wisest path forward for two people involves separation.

The Pandemic and Divorce Rates

The evidence that the pandemic might lead to an uptick in divorce rates came early this year.

By April, the interest in divorce had already increased by 34% in the US, with newer couples being the most likely to file for divorce. In fact, a full 20% of couples who had been married for five months or less sought divorce during this time period, compared with only 11% in 2019.

Some predict a continuation of this trend, anticipating that divorce rates will increase between 10% and 25% in the second half of the year.

One way of understanding this timeline is through the collective disaster response curve, a model charting the phases through which a community moves in the wake of trauma. The curve shows increased energy and a sense of community cohesion in the period of time immediately following a disaster —it’s the “We’ll get through this together!” phase of disaster response. After a few weeks, the energy wears off, and disillusionment and depression can set in. During this period, couples may begin to struggle.

Experts also observe that when people are experiencing greater stress from sources external to a relationship, they struggle more to problem-solve within their relationships, and may inadvertently take out this stress on each other.

In the most serious cases, tensions can lead to violence, and 2020 saw a 9% increase in outreach to the National Domestic Violence Hotline compared to the same period last year. If you are experiencing domestic violence, there’s help just a phone call away with the National Domestic Violence Hotline here.

Can I still get divorced during the pandemic?

If you’re wondering whether or not you can still get divorced with everything going on, the answer is yes. Deciding to end a marriage is never easy, and with the pandemic altering the rhythms of life, it may feel particularly daunting. But there are many options to start the divorce process in 2020, and finding which path is best for you and your family is essential.

COPYRIGHT © 2020, STARK & STARK
For more articles on family law, visit the National Law Review Family Law / Divorce / Custody section.

“Is You Is or Is You Ain’t:” Membership in an LLC

The New Jersey Superior Court, Appellate Division case Giordano DeCandia v. Anthony T. Rinaldi, LLC d/a The Rinaldi Group and Anthony Rinaldi, (N.J. App. Div., Oct. 5, 2020) per curiam, is about whether the plaintiff was or is a member of the LLC, and the economic consequences of that determination. The Appellate Division affirmed the rulings of the trial court (in a bench trial), except for reversing one of the defendants’ counterclaims. The case is most important for two reasons: first, it underscores the potential for chaos resulting from the uncertainties of oral versus written claims; and second, it reveals that the New Jersey judiciary, even at the intermediate appellate level, still finds a limited liability company (even 27 years after the first NJ LLC statute was adopted) a strange and challenging creature. The critical issue of membership is nicely captured by the rather famous old jazz song written by Louis Jordan and Billy Austin and first recorded on October 4, 1943, just over three weeks after your author was born. As its title invokes, when uncertainty abounds, it is difficult to have more than an ephemeral relationship.

Membership in an LLC

Rinaldi had a construction management and general contracting business in New York and New Jersey. In 2003, he formed the LLC as a manager-managed LLC, with himself as both the sole member and the manager. Plaintiff DeCandia began working for the LLC in 2011, with a compensation package of a salary plus a 10% ownership interest, with the ability (based on the amount of work the plaintiff brought in) to go to 20% of “net profits on that work.” The plaintiff signed an operating agreement on February 14, 2011. The Capital Contribution schedule attached to that 2011 agreement stated that the “plaintiff’s ownership interest is performance-based rather than through capital contributions.” The plaintiff received an LLC membership certificate reciting the arrangement. Rinaldi later testified that “profit-sharing is a prevalent and customary compensation mechanism within the commercial construction industry.” It is worth noting that the LLC’s comptroller also testified that the parties advised of the arrangement and that she had a similar profit-sharing deal. On September 25, 2013, the parties signed an amended operating agreement (the “2013 agreement”), adding two more members as the company grew, and giving them similar percentage interests. The plaintiff received an increase to a 20% interest, and a replacement LLC membership certificate reciting the new terms. The old certificate was voided.

In 2015, Rinaldi and the plaintiff began negotiating a buy-sell agreement, to buy out a deceased member’s interest from the surviving spouse, in case either Rinaldi or the plaintiff died. The Court notes that the initial draft of the agreement said that plaintiff would own “twenty percent of the common stock of the LLC.” On October 19, 2015, the parties, two other LLC “employees” (the Court’s term), and the LLC’s accountant met to discuss the buy-sell agreement, tax implications, and financial liabilities related to being (what the Court calls) “an equity partner.” Plaintiff, per the accountant, purportedly said that he was interested in “profits, not taxes.” The Court also reports, without any clarifying explanation, that plaintiff “wanted to avoid any personal liability on the LLC’s bonds.” The plaintiff may have been referring to payment and performance bonds, which are usual in the construction business, as opposed to debt instruments. In that meeting, Rinaldi disclosed that the LLC was under criminal investigation by the New York City Borough of Manhattan District Attorney after the NY Department of Buildings found that numerous safety violations by the LLC caused death at a construction site. Testimony asserted that the plaintiff became frightened that his LLC membership certificate might expose the plaintiff to criminal liability. Rinaldi told the plaintiff that if he was scared, he should resign and turn his LLC membership certificate over to the LLC’s attorney. Shortly after, the plaintiff did so, without signing the certificate or providing any other “explanatory writing.” No buy-sell agreement was ever entered into with the plaintiff. The Court states that after that October meeting, the plaintiff received his salary plus bonuses, but no “profit-sharing.” The plaintiff never sought to recover his membership certificate.

By March 2017, things had deteriorated to the point that Rinaldi terminated the plaintiff. The plaintiff, apparently anticipating that deterioration had contacted a competitor of the LLC in 2016. On the plaintiff’s last day with the LLC, he sent his wife the LLC’s proposed budget for a job it was bidding on; she forwarded the budget to the competitor, which submitted a rival bid. The plaintiff then met with the executives of the potential customer and urged them to hire the LLC’s competitor. The employment agreement plaintiff signed on April 28, 2017, recited that he did not have an ownership interest in any competitor of his new employer. On September 15, 2017, the plaintiff sued the LLC, and Rinaldi, seeking a declaratory judgment that he was a 20% owner of the LLC and other relief. Defendants counterclaimed that the plaintiff had breached his common law duty of loyalty as an employee AND his duty of loyalty as a member of the LLC. The trial court held against the plaintiff on all claims and granted the defendants’ counterclaims. The Appellate Division upheld the trial court’s rulings on all but the counterclaim for breach of the duty of loyalty as a member of the LLC. That statutory obligation applies to members of a member-managed limited liability company, but the LLC was manager-managed so that the duty applied only to managers; Rinaldi was the sole manager. The plaintiff’s efforts to assert equitable claims relating to minority oppression and the like failed because, as both the trial court and the Appellate Division found, the plaintiff’s double-dealing gave him “unclean hands.”

“Is You Is or Is You Ain’t”

Carefully written documents could have resolved most of the factual ambiguities. But both trial and appeal courts found sufficient basis for concluding that the plaintiff had voluntarily withdrawn from the LLC, one of the acts of dissociation that ends membership. Given the trial, the Court’s determination that the plaintiff was not a member or had withdrawn as a member, it is not clear how the trial court could have found that the plaintiff had violated a duty of loyalty owed by a member of a limited liability company. Even more troubling in both opinions (beyond the occasional inaccurate language, e.g., limited liability companies do not have “common stock;” a member of a limited liability company is not an “equity partner”) is the finding that the concept of a contingent percentage interest in an unincorporated business was mere compensation and did not result in plaintiff owning a membership interest in the LLC. That is simply a misstatement of the law. A person may become a member of a limited liability company with a present, vested interest or with a contingent, earning-based interest. Or as it appears from the recitals noted in the Appellate Division opinion, both. The plaintiff’s original deal was:

  • salary;
  • 10% membership interest; and
  • contingent 10% “profit-sharing” interest based on the work plaintiff brought in

Ultimately, as both courts held that plaintiff had given up “whatever ownership interest he may have held in the LLC,” the issue was moot. But the language in the Appellate Division opinion might well allow a future court to find that someone who is in fact a member of a limited liability company in New Jersey is not a member at law – a troubling risk and a reason to consider forming an unincorporated entity under the law of a jurisdiction other than New Jersey.

©2020 Norris McLaughlin P.A., All Rights Reserved
For more articles on corporate law, visit the National Law Review Corporate & Business Organizations section.

Amazon Ruling Impacts Prop 65 Issues

The 2020 Prop. 65 Clearinghouse conference marked another year of thought-provoking discussion on the current state of Proposition 65 regulations and litigation.  Although the Act is nearly 35 years old, trends in enforcement litigation and defenses are continuously evolving.  The Prop. 65 Clearinghouse does an excellent job of combining perspectives from the various stakeholders and litigants in the field.

Among the panels at this year’s conference, discussing topics from acrylamide litigation to warnings on marijuana products, was an excellent and lively discussion on the affirmative defense under the compelled speech doctrines of the First Amendment.  Briefly mentioned in that discussion was whether we may see an emergence of other protections from the Constitution invoked as defense to Prop. 65 actions.  Due Process and Commerce Clause were briefly mentioned among those other potential areas where we may see further constitutional defenses.

This discussion brought to mind other areas where federal law may preempt California’s Prop. 65.  In particular, and on the heals of the California Court of Appeal’s August 2020 decision in Bolger v. Amazon, the applicability of the federal Communications Decency Act of 1996.  To be clear, Bolger was not a Prop. 65 case.  However, the decision did briefly touch an area of federal preemption that can be used as a defense to Prop. 65 actions brought against Amazon and other online third-party seller platforms.

In Bolger, a woman was severely hurt following an explosion of a replacement laptop battery she purchased on Amazon from a third-party seller.  Amazon raised a number of defenses, including immunity from liability under title 47 U.S.C. section 230 – part of the Communications Decency Act (CDA).

The CDA is extremely important to the free flow of information on the internet as it shields online content platforms from being held liable as the speaker or publisher of third-party content.  Plaintiffs pursuing lawsuits based on state law “may hold liable the person who creates or develops unlawful [online] content, but not the interactive computer service provider who merely enables that content to be posted online.” (Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc. (4th Cir. 2009) 591 F.3d 250, 254; see also, HomeAway.com, Inc. v. City of Santa Monica (9th Cir. 2019) 918 F.3d 676, 681.)

The Bolger Court found that the CDA did not protect Amazon from strict liability for the battery purchased on its website because speech was not the issue.  Liability was not rooted in a failure to adequately warn, for example.  The Court stated that Amazon’s liability in the case did not turn whether Amazon was classified as a speaker/publisher of content on amazon.com that had been provided by the third-party seller.  Instead, Amazon was found liable in Bolger because of its role in the transaction itself that was more akin to that of a “conventional retailer” and the Court subjected Amazon to strict liability as it would have for any other “conventional retailer.”  (In a future CMBG3 post, we will be discussing the ramifications of that retailer label, as well as the split among courts around the country on the issue.)

From a Prop. 65 perspective, the take-away from seemingly unrelated cases like Bolger and HomeAway.com is that CDA immunity may extend to lawsuits where a plaintiff is seeking to pursue a state law cause of action (i.e., enforcement of California’s Prop. 65) against an online platform for content provided by another.  In other words, the CDA could shield a company like Amazon from content-based lawsuits stemming from the alleged absence or inadequacy of a Prop. 65 warning that the third-party seller either neglected to post on the product page, or failed to provide the proper warning under Prop. 65.

For the third-party seller, not only should this be a reminder to review your obligations under regulations like Prop. 65, but also to read your vendor agreements with Amazon, Etsy, Walmart, Shopify and the like.  To keep the theme on Amazon, the Amazon Business Solutions Agreement includes indemnity provisions and regulatory compliance provisions (that specifically call out Prop. 65 compliance) that every vendor should understand.

©2020 CMBG3 Law, LLC. All rights reserved.
ARTICLE BY Gilliam F. Stewart of CMBG3 Law
For more articles on Prop 65, visit the National Law Review Environmental, Energy & Resources section.