Category: Litigation

Health Care Company Asks U.S. Supreme Court to Find False Claims Act Unconstitutional

If one appellant has its way, the False Claims Act (FCA) would be gutted by way of its qui tam provisions struck down as unconstitutional by the United States Supreme Court. That is the position taken by Intermountain Health Care, Inc. (Intermountain), which found itself on the wrong end of an FCA suit brought by a physician who alleges that one of his colleagues submitted improper requests for reimbursement for unnecessary medical procedures.

The teeth behind the False Claims Act are its qui tam provisions, which enable private individuals (known as “relators”) to pursue FCA actions on a “qui tam” basis. “Qui tam” is shorthand for the Latin phrase, “he who sues on behalf of the King as well as for himself.” These provisions provide a financial incentive to report noncompliance, as successful qui tamplaintiffs are statutorily entitled to share up to 30 percent of the government’s recovery in an FCA case.

Procedural Summary

The underlying details in the matter — Intermountain Health Care, Inc., et al. v. U.S. ex rel. Polukoff et al., Supreme Court petition no. 18-911 — allege that a doctor, Sherman Sorensen, conspired with two hospitals (including Intermountain) to perform unnecessary heart surgeries and receive federal reimbursements by fraudulently certifying that the surgeries were medically necessary. After the district court dismissed the complaint for failure to meet pleading requirements, the relator appealed to the Tenth Circuit. There, Intermountain and its co-defendants raised for the first time that the claims against them could not proceed on the grounds that the qui tam provisions of the FCA violate Article II of the Constitution, among other arguments. The Tenth Circuit did not reach the merits of this argument, finding that defendants had forfeited those challenges by failing to raise them at the district court level. The Tenth Circuit reversed the district court’s order and remanded, holding that the relator’s amended complaint did satisfy pleading requirements.

Intermountain, in response, petitioned the Supreme Court for a writ of certiorari, raising two questions: (1) whether the False Claims Act’s qui tam provisions violate the Appointments Clause of Article II of the Constitution, and (2) whether a court may create an exception to Federal Rule of Civil Procedure 9(b)’s particularity requirement when the plaintiff claims that only the defendant possesses the information needed to satisfy that requirement. This post addresses the constitutional arguments only, i.e., the first question.

Merits of the Arguments Raised: Constitutional Challenge

The Appointments Clause provides that the President “shall nominate, and by and with the advice and consent of the Senate, shall appoint…officers of the United States… [and] that Congress may by Law vest the appointment of…inferior officers…in the President alone, in the Courts of Law, or in the Heads of Departments.” U.S. Const. art. II, § 2, cl. 2. Intermountain asserts that the FCA qui tam provisions violate this Clause because (1) relators are officers (not appointed pursuant to the appointments clause and thus in violation of it), or, alternatively because (2) the FCA impermissibly vests a core function of officers in non-officer relators. According to Intermountain, qui tam relators constitute “officers” or “inferior officers” of the United States when they prosecute FCA actions on behalf of the United States, which is unconstitutional without proper appointment.

In support, Intermountain points to qui tam relators’ prosecutorial duties, that they receive compensation from the government, and that they exercise significant authority under federal law. Accordingly, Intermountain claims, relators are in fact “officers” or “inferior officers.” Intermountain posits alternatively that, even if relators are not officers, the FCA still violates the Appointments Clause because it vests the functions of core officers in un-appointed relators.

The relator, Gerald Polukoff, and the Government (which intervened solely on this constitutional issue) opposed, arguing: (1) there is no circuit split on the constitutional argument raised, (2) every circuit that has considered the argument has rejected it, (3) this case is a poor vehicle to consider the issue raised because Intermountain failed to raise it at the district court level, and the Tenth Circuit did not consider it on the merits, and (4) qui tam relators are merely private plaintiffs pursuing a cause of action under federal law and do not constitute “officers.”

The Government’s Opposition details this last point, offering that Intermountain’s position is inconsistent with the Supreme Court’s analysis in Vermont Agency of Nat. Res. v. U.S. ex rel. Stevens, 529 U.S. 765, 772, 120 S. Ct. 1858, 1862, 146 L. Ed. 2d 836 (2000) (discussing relators’ actions as a “private stake” in a “private suit”). The Government also asserts that qui tam relators neither evince the “practical indicia” of federal officers (i.e., “the ideas of tenure, duration, emolument, and duties”) nor are they akin to “independent counsel,” which the Supreme Court considered to be “inferior officers” in Morrison v. Olson, 487 U.S. 654 (1988). The Government posited that a relator “does not occupy a continuing position established by law.” Lastly, the Government responds to Intermountain’s claim that the FCA impermissibly vests “a core officer function” to un-appointed relators on the grounds that relators bring only private suits and do not administer or enforce public law.

On balance, Intermountain faces a steep climb for the Supreme Court to accept review of its constitutional argument. But, if the Supreme Court accepts review, government attorneys, the defense bar, in-house counsel, and relators’ counsel alike have a lot at stake, and all will be watching closely.

 

© 2019 Foley & Lardner LLP
Read more US Supreme Court news on the National Law Review’s Litigation page.

Delta Settles FCRA Class Action for $2.3 Million

We have another multi-million dollar FCRA class action settlement on the books.  In Schofield v. Delta Air Lines, Inc., No. 18-cv-00382-EMC, 2019 U.S. Dist. LEXIS 31535, at *1 (N.D. Cal. Feb. 27, 2019), the district court for the Northern District of California recently issued an order granting Plaintiff’s motion for preliminary approval of class settlement totaling $2.3 million for a class of approximately 44,100 class members.

The plaintiffs in Schofield consist of individuals who applied for employment with Delta Airlines and were allegedly given inadequate disclosure documents when consenting to background checks.  They claim that Delta violated the FCRA; the California Investigative Consumer Reporting Agencies Act (“ICRAA”); the California Consumer Credit Reporting Agencies Act (“CCRAA”); and the California Business & Professions Code by acquiring “consumer, investigative consumer and/or consumer credit reports through background checks from current and former employees without providing proper disclosures and obtaining proper authorizations.”  Plaintiffs argued that the disclosures were inadequate and in violation of the FCRA because they were not clear and unambiguous, contained extraneous information, and did not consist solely of the disclosure.

After the case was removed from San Francisco Superior Court, Delta filed a motion for summary judgment on the basis that the named Plaintiff’s claims under the FCRA, ICRAA, and CCRAA were time-barred by the statute of limitations because he had to bring the action within two years of knowing that background check took place.  Delta’s motion was unopposed as the parties reached a settlement before the opposition was due.

The Settlement Agreement

The settlement agreement released the FCRA and state law claims related to Delta’s “conduct in obtaining background checks on applicants without using a stand-alone authorizing document that complies with the FCRA and accompanying state laws.” Id. at *3-4.  As stated above, the settlement is for $2.3 million for a class of approximately 44,100 class members.

  • Of the $2.3 million, Plaintiff’s counsel is going to seek 25%, but is permitted to seek up to 33.33% of the total settlement amount, or $766,666.66.
  • 60% of the net settlement amount is to be divided evenly among class members on a pro rata basis whose background check Defendant procured or caused to be procured on or after October 17, 2015 through February 14, 2019. Id. at *4.
  • 40% of the net settlement amount is to be divided evenly among class members on a pro rata basis whose background check Defendant procured or caused to be procured from October 17, 2012 through October 16, 2015
  • Finally, if the total number of class members exceeds 46,000, Delta will supplement the settlement fund by $50 per person for each person in excess of 46,000.

Class Certification

As the court notes, where “a class has not yet been certified in [a] case, before determining the fairness of a class action settlement agreement, the Court must determine whether the settlement class meets the requirements for class certification under Federal Rule of Civil Procedure 23.”  Thus, the court had to analyze whether the alleged class satisfies the requirements of FRCP Rule 23(a), which are (1) numerosity; (2) commonality; (3) typicality; and (4) adequacy of representation.

  1. Numerosity

The court quickly checked off this requirement as the class is upwards of 44,100 members.

  1. Commonality

This requirement is met when there are questions of fact and law which are common to the class.  In this case, the motion for preliminary approval defined the common issue as “whether Delta willfully violated the law by using these forms.”  The court found that, “[w]hile some class members may have more specific issues with respect to the statute of limitations, that does not necessarily preclude class certification.”  This requirement was met.

  1. Typicality

To satisfy this requirement, “the claims or defenses of the representative parties must be typical of the claims or defenses of the class.  In this case, the court concluded that all class members, including the class reps, will likely face the same challenge with respect to a statute of limitations defense.  Further, the plaintiff alleged that Delta’s conduct was uniform, so whether Delta obtained consumer reports and when class members should have learned of the report is likely to turn on common evidence or patterns of evidence.  Thus, this requirement was met.

  1. Adequacy of Representation

There are two factors the court looks at here – (1) do the named plaintiffs and their counsel have any conflicts of interest with other class members, and (2) will the named plaintiffs and their counsel prosecute the action vigorously on behalf of the class?  With respect to the first question, the court found no conflicts of interest.  With regard to the second question, the court noted that plaintiff’s counsel moved quickly for settlement, but acknowledged that such a move may very well be the result of the “general weakness of the case rather than a lack of vigorous representation.”

  1. FRCP Rule 23(b)

Finally, the court had to find that the requirements under FRCP Rule 23(b) were satisfied.  Under Rule 23(b), the court must find that questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.

First, the court found that there is a single common issue that drives the litigation—that is whether Delta willfully violated the law by using facially inadequate forms predominates over the individual issues.  Thus, the court concluded that liability can be determined on a class wide basis.  Next, the court noted that the amount in controversy is small and that because litigation costs would dwarf potential recovery, a class action is the superior means of adjudicating this case.

Review and Approval of Settlement

Once the court determined that the FRCP Rule 23 requirements for class certification were met, it had to approve the proposed settlement.  The court analyzed (a) the adequacy of the settlement amount; (b) the settlement process; (c) the presence of obvious deficiencies; and (D) procedural guidance for class action settlements.

  1. Adequacy of the settlement amount

The court preliminarily found that the settlement consideration is adequate despite potential vulnerabilities in plaintiff’s case (ex. overcoming statute of limitations defense; litigating unsettled aspects of law related to claims; finding of willfulness)

  1. Settlement process

The settlement was reached as a result of arm’s length negotiations with a mediator, so the court found that the settlement was reached in a procedurally fair manner.

  1. The presence of obvious deficiencies

The court analyzed the notices to be sent to class members, whether the named plaintiff was receiving preferential treatment by way of the large incentive award (requested $10,000 as an incentive award), and attorney’s fees.  The court found no deficiencies that would lead it to not approve the proposed settlement agreement.

  1. Procedural guidance for class action settlements

The court found that the parties appropriately addressed the Northern District of California’s procedural guidance for class action settlements.

Thus, the court granted preliminary approval of the settlement based upon the terms set forth in the settlement agreement.  The final approval hearing is scheduled for July 11, 2019.  Stay tuned!

 

Copyright © 2019 Womble Bond Dickinson (US) LLP All Rights Reserved.
This post was written by Shane Micheil of Womble Bond Dickinson (US) LLP.

That Agreement Isn’t Worth the Paper It’s Printed On: Settlements, Consent Judgments, and Penn-America Insurance Co. v. Osborne

A settlement is in place. The parties to the litigation have executed an agreement that embodies their negotiations. Some walk away with a release. Others walk away with a check. Still others had their heart set on an assignment of claims against a third-party. Once the consideration changes hands, the parties submit a stipulation of dismissal, or the court enters a consent judgment. Does that mean the dispute is over? For most cases, it does. Occasionally, however, the dispute lives on or is inherited by a third-party against whom claims were assigned. This article explores the circumstances in which settlement agreements are subject to attack in West Virginia, either by the parties or by third-parties against whom they are sought to be enforced.

As a general matter, settlement agreements signal the end of a dispute. They are “highly regarded and scrupulously enforced, so long as they are legally sound.”1 Indeed, because “[t]he law favors and encourages the resolution of controversies by contracts of compromise and settlement . . . it is the policy of the law to uphold and enforce such contracts if they are fairly made and are not in contravention of some law or public policy.”2 In West Virginia, parties to a settlement may only re-open it if they overcome the heavy burden of establishing that the settlement was the result of an accident, mistake, or fraud.3 Given these high hurdles, it is the rare case that a litigant will be successful in directly challenging its own settlement agreement.4

But an agreement that resolves a matter among discrete parties does not necessarily fix the obligations of a non-consenting or non-party insurer. “Most attempts to resolve litigation without the consent of the defendant’s liability carrier involve three components: (1) an assignment of the defendant’s rights against his or her liability insurer to the plaintiff; (2) the plaintiff’s covenant not to execute against the defendant’s assets; and (3) a judgment establishing the defendant’s liability and the plaintiff’s damages.”5 Due to the potential that such agreements will arise from fraud or collusion, many courts “cast a suspicious eye” on them.6

Accordingly, a consent or confessed judgment against an insured party may be subject to attack when it is entered into without the participation of a relevant liability carrier. For instance, in West Virginia, “a consent or confessed judgment against an insured party is not binding on that party’s insurer in subsequent litigation against the insurer where the insurer was not a party to the proceeding in which the consent or confessed judgment was entered, unless the insurer expressly agreed to be bound by the judgment.”7 This is because,

[w]hen dealing with consent judgments, courts must ensure that circumstantial guarantees of trustworthiness exist concerning the genuineness of the underlying judgment. The real concern is that the settlement may not actually represent an arm’s length determination of the worth of the plaintiff’s claim.8

The judiciary’s circumspect approach to consent judgments is especially heightened when the underlying agreement is coupled with a covenant not to execute. A covenant not to execute is an agreement by “which a party who has won a judgment agrees not to enforce it.”9 Such covenants are suspect because they come with perverse incentives. “When the insured actually pays for the settlement of the claim or when the case is fully litigated, the amount of the settlement or judgment can be assumed to be realistic.”10 But when an insured walks away from the agreement with no practical consequences, it has little reason to challenge the amount of the claim, and the accuracy of the judgment becomes questionable.

One potential circumstance is illustrated by Penn-America Insurance Co. v. Osborne, 11 which was decided by the Supreme Court of Appeals of West Virginia in 2017. There, the plaintiff was injured in a timbering accident while conducting work for his employer, H&H Logging Company, on land owned by Heartwood Forestland Fund, IV, Limited Partnership, and leased by Allegheny Wood Products, Inc., for the purpose of harvesting timber.12 The plaintiff sued his employer for deliberate intent and both Heartwood and Allegheny for negligent failure to inspect and/or maintain the land.13 When it came time for the defendants to arrange the defense among their insurers, communications fell apart. H&H requested a defense from its commercial general liability insurer, Penn-America Insurance Company, but Penn-America declined to defend the case against H&H because deliberate intent claims were excluded under the relevant policy.14

For their part, Allegheny and Heartwood requested a defense from Allegheny’s insurer, which accepted coverage. Some time later, Allegheny and Heartwood realized that H&H was contractually obligated to provide them a defense and wrote H&H to demand that it or Penn-America provide a defense. None of the parties ever notified Penn-America that Allegheny and Heartwood had requested a defense against the plaintiff’s allegations. Nonetheless, Allegheny and Heartwood moved for leave to file a third-party complaint for a declaration that Penn-America had wrongfully failed to provide them a defense. The court never ruled on the motion, and the third-party complaint was never filed.15

Thereafter, without providing notice to Penn-America, the parties entered into a settlement agreement, stipulating that Penn-America had damaged Allegheny and Heartwood by breaching its contractual obligation to provide them a defense against the plaintiff’s allegations.16 The key aspects of the agreement are as follows:

Allegheny and Heartwood consented to a $1,000,000.00 judgment for [the plaintiff’s] leg injury, and they agreed to assign to [the plaintiff] any claims they may have had against Penn-America for failing to provide them a defense in the lawsuit. In return, [the plaintiff] covenanted not to execute on the $1,000,000.00 judgment against Allegheny and Heartwood. Instead, he would collect judgment from Penn-America by asserting his assigned claims.17

The plaintiff dismissed his lawsuit against Allegheny and Heartwood and filed a new lawsuit against Penn-America, seeking to recover $1,000,000 as relief for its alleged failure to provide a defense in the plaintiff’s case against Allegheny and Heartwood.18

Ultimately, the Supreme Court of Appeals of West Virginia decided that “the consent judgment [was] not binding on Penn-America, and the assignment of claims to [the plaintiff was] void.”19 As to the enforceability of the consent judgment itself, the court adhered to its prior reasoning that a consent judgment coupled with a covenant not to execute is especially suspect and deserving of scrutiny. It further reasoned that “[n]one of the parties to the pre-trial settlement agreement had any motive to contest liability or an excessive amount of damages.”20 Moreover, the parties valued the claim at $1,000,000 by reference to Penn-America’s coverage, not the plaintiff’s actual injuries. Because “Penn-America was not a party to the lawsuit in which the consent judgment was entered,” the judgment could not be binding on PennAmerica.21

The assignment of bad faith claims by Allegheny and Heartwood fared no better. The Court found that the assignment was based on falsehoods, and that the parties’ agreement bore the hallmark characteristics of fraud and collusion.22 As the Supreme Court of Appeals summarized:

[T]he facts underlying Mr. Osborne’s assigned claims were misrepresented. Moreover, a $1,000,000.00 valuation of a lawsuit for an injured leg, without any cited evidence regarding permanency of the injury, permanent disability, severity, medical expenses, etc., hardly reflects a “serious negotiation on damages.” Lastly, concealment also characterizes the pre-trial settlement agreement because the parties never notified Penn-America of their pre-trial settlement negotiations. Once Penn-America learned after-the-fact of the pre-trial assignment and covenant not to execute, it was prohibited from conducting discovery on the extent of Mr. Osborne’s injuries and damages. Thus, through secretive means, Allegheny and Heartwood awarded Mr. Osborne a $1,000,000.00 windfall for his injured leg with Penn-America’s money.23

In essence, the consent judgment entered by the putative insureds was ineffective to subject the insurer to liability or exposure in a subsequent case brought by the plaintiff.

The reasoning of the Supreme Court of Appeals of West Virginia in Penn-America is the majority approach as to whether a consent or confessed judgment can be binding on a third party.23 For those engaged in settling cases on behalf of their insureds, Penn-America counsels against using the settlement agreement as an instrument to foist liability onto a non-party, especially one that has not been given notice of the negotiations. Moreover, insurers against whom consent judgments are sought to be enforced should bear in mind that the enforcers face a steep uphill battle. The Supreme Court of Appeals of West Virginia, along with the majority of courts, looks askance on enforcing such judgments against non-parties.

1 DeVane v. Kennedy, 205 W. Va. 519, 534, 519 S.E.2d 622, 637 (1999)

2 Syl. Pt. 6, DeVane, 205 W. Va. 519, 519 S.E.2d 622 (quoting Syl. Pt. 1, Sanders v. Roselawn Mem’l Gardens, 152 W. Va. 91, 159 S.E.2d 784 (1968))

3Syl. Pt. 2, Burdette v. Burdette Realty Improvement, Inc., 214 W. Va. 448, 590 S.E.2d 641 (2003) (quoting Syl. Pt. 7, DeVane, 205 W. Va. 519, 519 S.E.2d 622).

4 See, e.g., Burdette, 214 W. Va. 448, 590 S.E.2d 641 (fi nding that a settlement agreement was unenforceable because a party to the agreement had repudiated his signature before the agreement left his attorney’s offi ce, thus resulting in no meeting of the minds)

5 John K. DiMugno, Consent Judgments and Covenants Not To Execute: Good Deals or Too Good to Be True? Part II: Practical Concerns About Collusion and Fraud, 25 No. 1 INS. LITIG. REP. 5 (2003).

6 Id

7 Syl. Pt. 7, Horkulic v. Galloway, 222 W. Va. 450, 665 S.E.2d 284 (2008).

8 Id. at 460, 665 S.E.2d at 294 (quoting Ross v. Old Republic Ins. Co., 134 P.3d 505 (Colo. App. 2006)).

9 Covenant, BLACK’S LAW DICTIONARY (10th ed. 2014).

10 Horkulic, 222 W. Va. at 460-61, 665 S.E.2d at 294-95 (quoting Ross, 134 P.3d 505).

11 238 W. Va. 571, 797 S.E.2d 548 (2017).

12 Id. at 573, 797 S.E.2d at 550.

13 Id

14 Id

15 Id. at 574, 797 S.E.2d at 551.

16 Id

17 Id

18 Id

19 Id. at 575, 797 S.E.2d at 552.

20 Id. at 576, 797 S.E.2d at 553

21 Id. at 578-79, 797 S.E.2d at 555-56; cf. Strahin v. Sullivan, 220 W. Va. 329, 647 S.E.2d 765 (2007) (reasoning that the assignment of a bad faith claim may not be made when the insured enters a covenant not to execute as the insured was never actually exposed to an excess verdict that would support a bad faith claim against his insurer).

22 Penn-America, 238 W. Va. at 579-80, 797 S.E.2d at 556-57

23 LITIGATION & PREVENTION OF INSURER BAD FAITH § 3:50 (3d ed. 2018) (referring to Penn-America as representative of the majority rule “that the consent or confessed judgment is simply not binding where the party from which indemnity is sought was not a party to the previous proceeding”).

 

© Steptoe & Johnson PLLC. All Rights Reserved.
This post was written by James E. McDaniel of Steptoe & Johnson PLLC. 

Two Class Actions Alleging Starbucks Violated FCRA’s Background Report Disclosure Requirements Are Grinding Toward Settlement

Two pending class action lawsuits alleging coffee giant Starbucks violated the Fair Credit Reporting Act (“FCRA”) by relying on flawed background reports to decline employment to over 8,000 job applicants will likely settle in the coming months.  The two suits are being consolidated in the U.S. District Court for the Northern District of Georgia for the purpose of a directing notice to a single nationwide class.

Before taking adverse action against an applicant based on a background report, 15 U.S.C. §1681b(b)(3) requires the employer to provide the applicant with a copy of the report and a written summary of the applicant’s rights under 15 U.S.C. §1681g(c)(1).  The purpose of this requirement is to allow the applicant an opportunity to correct any errors on the report before the adverse action is taken.

In the first suit, pending in the U.S. District Court for the Western District of Washington, the lead plaintiff, Jonathan Santiago Rosario (“Rosario”), alleges that he was denied employment as a Starbucks barista based on an inaccurate background report Starbucks obtained from Accurate Background, Inc. (“Accurate Background”).  Rosario claims he was taken out of consideration for the position based on several criminal charges and convictions that appeared on his report.  Rosario maintains that the report was inaccurate and that Starbucks took the adverse action weeks before he was provided with the report and the written summary of rights.  Rosario argues that he never had a meaningful opportunity to dispute the report and that Starbucks never reconsidered him for the position.

Similarly, the lead plaintiff in the second suit, Kevin Wills (“Wills”) of Georgia, alleges that Starbucks took adverse employment action against him without providing proper notice and a written summary of rights under FCRA.  Starbucks allegedly hired Wills pending the results of his criminal background check.  Starbucks allegedly received a report from Accurate Background stating that “Kevin Willis” of Minnesota had two prior convictions for domestic violence.  As a result of the report, Starbucks informed Wills over the telephone that he could not work for Starbucks.  Days later, Wills received a letter enclosing the background report.

According to an April 17, 2019 order issued by Judge Richard Jones, who presides over the Rosario action, the parties from both cases jointly participated in several sessions with a private mediator and have reached an agreement in principle to settle both cases on a class basis.

On April 24, 2019, Magistrate Judge Catherine M. Salinas issued a report and recommendation in the Wills case recommending that the Clerk in the Northern District of Georgia consolidate the Rosario case into the Wills case.  After fourteen days, if no party objects, the cases will likely be consolidated.

To date, no details about the terms of the settlement have been released.

 

Copyright © 2019 Womble Bond Dickinson (US) LLP All Rights Reserved.
This post was written by Nadia Adams of Womble Bond Dickinson (US) LLP.
Read more on FCRA Litigation on the National Law Review’s Litigation Type of Law page.

Sixth Circuit Erases Chalking of Parked Cars

It’s not often that a dispute over parking tickets ends up in federal court. But that’s exactly what happened this week in Taylor v. City of Saginaw – a case that has already drawn the attention of the national media.

Taylor involved a challenge to “a common parking enforcement practice known as ‘chalking,’ whereby City parking enforcement officers use chalk to mark the tires of parked vehicles to track how long they have been parked.” This practice can be surprisingly effective (as certain blog authors unfortunately can attest). But it is apparently very effective in Saginaw – according to Judge Donald’s decision, one particular parking enforcement officer managed to chalk (and then ticket) Ms. Taylor fifteen separate times between 2014 and 2017.

Armed with a slew of parking tickets, Ms. Taylor filed suit in federal court, alleging that the City violated the Fourth Amendment by chalking her tires without her consent or a valid warrant. The Sixth Circuit agreed, relying upon the Supreme Court’s recent decision in United States v. Jones, 565 U.S. 400 (2012), to hold that chalking constitutes an unreasonable trespass upon a constitutionally-protected area (your car).

At first blush, chalking a car’s tires may not seem like the type of “search” typically raising Fourth Amendment concerns. But as Judge Donald explained, Jones signaled a rebirth of “the seldom used ‘property-based’ approach to the Fourth Amendment search inquiry,” which focuses on physical intrusion to one’s property:

Under Jones, when governmental intrusions are accompanied by physical intrusions, a search occurs when the government: (1) trespasses upon a constitutionally protected area, (2) to obtain information.

In the Court’s view, chalking satisfied both of these requirements: the officer came into contact with Ms. Taylor’s car, in an attempt to obtain information about her (whether she remained in her parking spot too long).

The Court proceeded to hold that the search was unreasonable because the car was parked legally when chalked, and the officer lacked any reasonable suspicion (let alone probable cause) that a crime had been committed. The Court also specifically rejected the City’s assertion of the “community caretaker” exception, explaining that “the purpose of chalking is to raise revenue, and not to mitigate [a] public hazard.”

Taylor is the latest in a series of interesting Fourth Amendment cases playing out on our public roadways. The Sixth Circuit’s decision relied heavily on the Supreme Court’s decision in Jones, which addressed the constitutionality of electronically monitoring an individual’s location by affixing a GPS device to his car.

And the Supreme Court heard argument yesterday in Mitchell v. Wisconsin, which asks whether a statute authorizing a blood draw from an unconscious motorist suspected of driving under the influence provides an exception to the Fourth Amendment warrant requirement.

 

© Copyright 2019 Squire Patton Boggs (US) LLP
Read more news from the Sixth Circuit from the National Law Review on our Litigation Page.

US Supreme Court Agrees to Decide Whether Title VII Prohibits LGBT Discrimination

After considering the petitions at eleven separate private conferences, on April 22, 2019, the U.S. Supreme Court granted certiorari in three cases involving the extent of protection provided by Title VII of the Civil Rights Act of 1964 – if any – against employment-based discrimination on the basis of sexual orientation and gender identity.  As we previously reported here, this issue has been watched closely by the nation, with multiple federal courts, government agencies, and employers reaching differing conclusions.  The Court consolidated the two sexual orientation cases, Altitude Express v. Zarda and Bostock v. Clayton County, Georgia, and allocated a total of one hour for oral argument for both cases.  In the gender identity case, R.G. & G.R. Harris Funeral Homes Inc. v. Equal Employment Opportunity Commission et al., the Court limited its consideration to only the question of whether Title VII prohibits discrimination against transgender people based on (1) their status as transgender or (2) sex stereotyping under Price Waterhouse v. Hopkins, 490 U. S. 228 (1989).

The Court will hear argument in these cases next term, which means that it’s possible that a decision may not issue until as late as June 2020.  We will continue to update you with ongoing developments in these cases.

© Copyright 2019 Squire Patton Boggs (US) LLP

This post was written by Melissa Legault of Squire Patton Boggs (US) LLP.

Read more on the US Supreme Court on the National Law Review’s Litigation Type of law Page.

Split Over Impact of Bristol-Myers Squibb on Class Actions Deepens

Bakov v. Consolidated World Travel, Inc. is the latest salvo in the conflict over whether the Supreme Court’s personal jurisdiction decision in Bristol-Myers Squibb applies in the class action context. As we have blogged in the past, Bristol-Myers concerned claims in California state court made by non-California residents, claims that were not sufficiently connected to California to qualify for specific personal jurisdiction on their own. The Court held that California state courts could not exercise specific jurisdiction over those claims even if they were packaged with claims by California residents in a mass tort action.

Bristol-Myers left two significant questions undecided: (1) whether the Fifth Amendment’s due process clause imposes the same jurisdictional limits on federal courts that the Fourteenth Amendment’s due process clause imposes on state courts; and (2) whether Bristol-Myers’ jurisdictional limit jurisdictional limit on state court mass actions also applies to federal court class actions.

Bakov is a Northern District of Illinois decision that answers yes to both of those questions. The plaintiffs in Bakovalleged that the defendant cruise line directed another company to place calls to the plaintiffs without their consent in violation of the Telephone Consumer Protection Act. They sought certification of a nationwide class action. The court certified a class of Illinois residents but refused to certify a nationwide class, holding that under Bristol-Myersthe court did not have specific jurisdiction over the claims of non-Illinois residents. Courts have reached sharply different conclusions as to whether the jurisdictional limit set forth in Bristol-Myers applies to class actions. Bakovjoins the minority in concluding it does.

Bakov v. Consolidated World Travel, Inc., No. 15 C 2980, 2019 WL 1294659 .

 Carlton Fields Jorden Burt, P.A.

This post was written by Nathaniel G. Foell and D. Matthew Allen of Carlton Fields Jorden Burt, P.A.

Read more Class Action analysis  on the litigation type of law page.

U.S. Supreme Court to Consider Whether Courts Must Defer to an Agency’s Interpretation of its Regulations – a Judicial Policy That Recently Resulted in Dismissal of Litigation Over ‘No Sugar Added’ Claims on 100% Juices

The U.S. Supreme Court heard arguments on March 27, 2019 about whether to overturn the principle of judicial review of federal agency actions that requires a federal court to yield to an agency’s interpretation of an ambiguous regulation that the agency has promulgated.  Under this policy, known as ‘Auer deference’ from the 1997 case Auer v. Robbins, a court must yield to an agency’s interpretation of its own unclear regulation unless the court finds that the interpretation is “plainly erroneous or inconsistent with the regulation.”

Auer deference was the basis for successful defendant motions to dismiss over the past year in a number of class actions concerning ‘No Sugar Added’ claims on 100% juices.  We reported, for example, on the U.S. District Court for the Central District of California granting a motion for summary judgment in favor of Odwalla, in Wilson v. Odwalla Inc. et al. (Case Number 2:17-cv-02763) based on the Food and Drug Administration’s (FDA) interpretation of paragraph (c)(2)(iv) of 21 CFR 101.60 (“Nutrient content claims for the calorie content of foods”) as permitting juice with no added sugar to be considered a substitute for juice with added sugar and similar sugar-sweetened beverages.

Based on the Justices’ comments in the recent hearing, it is not clear if Auerdeference will be intact at the end of June, by which time a ruling is expected.  Many food product labels could face renewed attacks under state consumer protection and false advertising laws if courts are no longer bound by FDA’s interpretation of ambiguous regulatory requirements, including the use of ‘no sugar added” under the regulation on nutrient content claims.

 

© 2019 Keller and Heckman LLP

U.S. Supreme Court to Decide If Immigration Law Preempts State Law Prosecution

Does the Immigration Reform and Control Act (IRCA) preempt states from using information in Form I-9 to prosecute a person under state law? The U.S. Supreme Court has agreed to review a case involving prosecution for identity theft under Kansas law based on information in the Form I-9 Employment Eligibility Verification. Kansas v. Garcia (No. 17-834).

Background

Ramiro Garcia, Donaldo Morales, and Guadalupe Ochoa-Lara did not have social security cards. They were all convicted of identity theft in Kansas for using other people’s social security numbers to gain employment in various restaurants. In September 2017, the Kansas Supreme Court reversed those convictions on the grounds that the state was prohibited from using information found on the defendants’ I-9 forms to prove its case because such prosecution was preempted by the IRCA. State v. Garcia, 401 P.3d 588 (Kan. 2017).

Questions Presented

The State of Kansas petitioned the U.S. Supreme Court for review and, on March 18, 2019, the Court agreed to review the case. The Court will decide the following:

  • Whether IRCA expressly preempts the states from using any information entered on or appended to a federal Form I-9, including common information such as name, date of birth, and social security number, in a prosecution of any person (citizen or alien) when that same, commonly used information also appears in non-IRCA documents, such as state tax forms, leases, and credit applications; and
  • Whether IRCA impliedly preempts Kansas’ prosecution of the defendants.

Kansas Supreme Court Opinion

IRCA expressly limits the use of information on or attached to I-9 forms. The Kansas Supreme Court held that the state may not use such information even if the information could be found elsewhere. In this case, the defendants’ “fake” social security numbers also had been entered on their tax withholding forms. The Kansas Supreme Court’s opinion would prevent all prosecutions by states based on false employment verification data supplied to employers on I-9 forms. Indeed, the broad effect of this was pointed out by Kansas Supreme Court Justice Daniel Biles in his dissent. Justice Biles noted that the decision would “wipe numerous criminal laws off the books” and that Congress “did not intend to immunize [defendants] from traditional state prosecutions for identity theft” by enacting IRCA.

The State of Kansas echoed the argument that the Kansas Supreme Court’s opinion would prohibit the use of all sorts of identifying data in state criminal prosecutions that happened to also be found on I-9 forms.

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Oral arguments in Kansas v. Garcia will take place during the U.S. Supreme Court’s term starting in October 2019.

Jackson Lewis P.C. © 2019

Bomb Squad Officer with Hand Tremors Can Be Temporarily Transferred Pending a Medical Exam

In a common sense ruling, an Arizona federal court has determined that a city was within its rights to temporarily transfer a bomb squad technician pending a medical exam. According to the court’s opinion, the transfer occurred after a fellow employee observed the plaintiff was having hand tremors and reported that the plaintiff had dropped some chemicals with which he had been working. The plaintiff, who argued that the spill was a common occurrence and that any hand tremors were not the cause of him dropping the chemical, sued the city after a neurologist cleared him to return to duty. The plaintiff alleged that the city perceived him as disabled and violated the ADA by forcing him to undergo a medical exam. Finding that the requested medical exam was related to the job the officer performed and was consistent with business necessity, the court rejected plaintiff’s claims and entered summary judgment in favor of the city.

It may seem obvious that a person who is assigned to diffuse bombs and has hand tremors can be temporarily reassigned and asked to undergo a medical exam. Still it’s important to note that the employer in this case benefitted from carefully following protocol. Too often, employers react to a report that an employer may have a physical impairment affecting his work by immediately discharging the worker, transferring him to another job, or asking for a fitness-for-duty examination. The ADA, however, requires the employer to be more thoughtful on how it approaches such a situation.

Carefully following protocol often involves an employer first asking whether the employee at issue showed objective signs of impairment, and then determining whether that impairment poses a danger to the employee or others or affects the employee’s ability to perform essential functions of the job. Based on those preliminary steps, the next step often requires the employer to assess whether a request for a medical exam makes sense in light of the report of impairment and the job the employee is performing. If the answer to those questions are yes, then the employer can temporarily transfer the employee (or place him or her off work) and direct the employee to undergo a targeted fitness-for-duty exam.

The conscientious employer will not make any permanent job decisions, however, until the results of the fitness-for-duty exam are returned and any follow up questions are asked. Moreover, because the very act of asking an employee to undergo a fitness-for-duty exam violates the ADA if it is not job related and consistent with business necessity, employers may choose to consult with their employment counsel before requesting an exam or otherwise taking an adverse employment action against an employee who exhibits a physical impairment at work.

 

© 2019 BARNES & THORNBURG LLP
This post was written by Richard P. Winegardner of Barnes & Thornburg LLP.
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