Category: Uncategorized

Busted [Bracket]: Facebook Posts From Employee’s Vacation Undermine FMLA Claims

Ah, the tell-tale signs of March are here.  The winter is starting to dissipate in the northern climes, we’ve set the clocks forward, and Syracuse is bound for another Final Four run.  Unfortunately, most teams won’t be so lucky and many coaches will soon find themselves on a beach.  And why not?  After a long, hard-fought season that fell just a bit short, might as well take a warm-weather vacation – go for a quick swim, maybe hit the amusement park, and take a few pictures of all the fun in the sun and post them to Facebook.  Sounds like a marvelous idea for many NCAA coaches, but not so much for employees out on FMLA leave.  The plaintiff in Jones v. Gulf Coast Health Care of Delaware, a recent case out of a Florida federal court, learned this the hard way.

Background

Rodney Jones, an employee of Accentia Health, took 12 weeks of FMLA leave for shoulder surgery, but was unable to provide a “fitness for duty” certification because, his doctor said, he needed additional therapy on his shoulder.  Accentia permitted him to take an additional month of non-FMLA leave.  Towards the end of his FMLA leave and during his non-FMLA leave, Jones took trips to Busch Gardens in Florida and to St. Martin.  Jones posted several pictures of his excursions to Facebook – including, for example, pictures of him swimming in the ocean (this, of course, during the time in which he was supposed to be recovering from shoulder surgery).

Accentia discovered the photos Jones posted to Facebook and provided him with an opportunity to explain the pictures.  When he could not do so, Accentia terminated his employment.  Jones then sued Accentia, claiming it interfered with his exercise of FMLA rights and retaliated against him for taking leave under the FMLA.

Termination Not Illegal

The court sided with Accentia.  First, Jones’ interference claim failed because Accentia provided him with the required 12 week leave and did not unlawfully interfere with his right to return to work thereafter.  Accentia had a uniform policy and practice of requiring each employee to provide a “fitness for duty” certification before returning from FMLA leave.  When Jones failed to provide such certification at the end of his FMLA leave, he forfeited his right to return under the FMLA.

Second, Jones’ retaliation claim failed because he failed to show Accentia terminated his employment because he requested or took FMLA leave.  Rather, Accentia terminated his employment for his well-documented conduct during his FMLA leave and non-FMLA leave.

Takeaways

This case provides several important lessons for employers.

  1. It is important to provide employees with an opportunity to explain conduct that appears to be an abuse of their FMLA leave entitlement. Employers who defend FMLA retaliation cases based on their “honest belief” that employees were misusing FMLA are much more likely to succeed if they conduct a thorough investigation into the employee’s conduct and give the employee an opportunity to explain the conduct.

  2. Ensure that any “fitness for duty” certification requirement applies uniformly to all similarly-situated employees (e., same job, same serious health condition) who take FMLA leave. The court in this case found that Jones’ interference claim failed, in part, because Accentia’s “fitness for duty” certification requirement applied to all employees similarly-situated to Jones.  Had it enforced this policy on an ad hoc basis, the outcome may have been different.

Article By Daniel R. Long of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
©1994-2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.

A Change to the Suspending and Debarring Official (SDO) Position at NASA

On March 8, 2016, a final rule changed the position of the National Aeronautics and Space Administration’s (“NASA”) suspending and debarring official (“SDO”).  The SDO had been NASA’s Assistant Administrator for Procurement.  The final rule reassigns the position to NASA’s Deputy General Counsel.  Public comments were not accepted because NASA concluded that the change “affects only the internal operating procedures” of the agency.

Not mentioned in this action is Section 861(a) of the National Defense Authorization Act of 2013.  That law applies to the U.S. Department of Defense (“DoD”), the U.S. Department of State (“State”), and the U.S. Agency for International Development (“USAID”), not to NASA, but for those agencies it specifically prohibits the not-uncommon practice of having a procurement officer act as an SDO.  Last year, in International Relief and Development, Inc. et al. v. United States Agency for International Development et al., No. 15-CV-854 RCL (D.D.C.), a federal court concluded that such an arrangement at USAID likely violated Section 861(a).

Section 861(a) precipitated a necessary discussion on the independence and impartiality of SDOs.  It is not hard to imagine how an SDO who also serves as a procurement officer could be predisposed against a contractor.  But even if NASA’s change tacitly acknowledges this concern, it hardly resolves it.  Conditioned already to advocate for a particular client, agency counsel are sure to have predispositions, as well.

Article By Frederic M. Levy & Jade C. Totman of Covington & Burling LLP

© 2016 Covington & Burling LLP

Entrepreneur’s Spotlight: South Loop Strength and Conditioning (Chicago, Illinois)

South LoopWelcome to the latest installment of Entrepreneur’s Spotlight on the Health and Fitness Law Blog.  In this series, we look at successful startups and ventures in the health and fitness industry and interview the hard-working entrepreneurs behind these companies to discuss how they did it and what they learned along the way.

Today, the spotlight is on South Loop Strength and Conditioning (“SLSC”).  SLSC is one of the most popular CrossFit gyms in the greater Chicago area, and is located at 645 S. Clark Street in Chicago, Illinois. For more information on what sets SLCS apart from other gyms in Chicago (and nationwide), please check out its website at http://southloopsc.com/.

SLCS is co-owned and operated by four individuals.  We met with one of the original founders, Todd Nief, to listen to his story.  As you will read below, Todd originally did not have a background in fitness, but he has gone on to obtain a wide variety of certifications, including the following:

  • Certified CrossFit Trainer (CrossFit Level 3)
  • CrossFit Specialty: Movement & Mobility, Running, Powerlifting, Kettlebell
  • DNS “A” Course (Dynamic Neuromuscular Stabilization)
  • DNS Exercise Level 2 (Dynamic Neuromuscular Stabilization)
  • FMS Level 2 (Functional Movement Systems)
  • OPEX CCP Level 2 (Formerly OPT)
  • Poliquin BioSignature Level 2
  • POSE Running Coach
  • Precision Nutrition Level 1
  • SFMA Level 2 (Selective Functional Movement Assessment)
  • USA Weightlifting Level 2

Due to the abundance of information Todd was willing to share, we have decided to break this interview into a two part series.  This is Part I of II.  Part II of II will be posted next week.  If you want to learn more or have questions for Todd, he can be reached at todd@southloopsc.com.

Enjoy!

South Loop

H&F Law Blog: You made the transition to CrossFit owner a few years ago.  Could you please tell us a little bit more about how you made the transition from Environmental Consultant to Gym Owner?

Todd Nief:  This was an entirely accidental transition. I had been doing CrossFit on my own for a few years – mostly training out of a Bally’s. So, I was the weird guy doing weird stuff that I should not have been doing and attempting to lift weights that I had no business lifting. I mostly followed workouts from www.crossfit.com but I also had gone in to CrossFit Chicago to receive a bit of instruction.

I had started going in to Atlas CrossFit on occasion so that I would be able to do workouts with a lot of weight dropping (they did not like that at Bally’s) as well as things like ring muscle-ups. I was not expecting to coach there, but, after being around a bit, I started working with some of the beginner classes there right around the time that I was laid off from my consulting gig.

After spending about a year at Atlas, I wanted to run a facility based upon what I considered to be best practices in coaching and training. So, I started looking into what it would take to open a gym and began heading down that path. Within the CrossFit community, there is a lot of glorification of the gym owner (which makes sense from a business model perspective as well…), so it never seemed that impossible to get into the gym business – especially after seeing some of the back-end of what a successful gym looked like

H&F Law Blog: What was the hardest part of going into business for yourself?  Who did you look to for advice when you first started out?

Todd Nief: Well I certainly had absolutely no understanding of business, sales or marketing. I was a coach and a musician with a chemical engineering degree – as well as a negative attitude towards business based upon a youth spent in punk, metal and hardcore.  So, the most consistently challenging thing for me has been overcoming my own negative and maladjusted thoughts surrounding what it means to own a business and what it means to promote yourself, take money from people, and hold others accountable to your principles (employees, clients, business partners, investors, etc).

We also opened probably about 9 months too late to really reap the benefit of “early adopters” to the CrossFit program. The gyms that opened about a year before us basically had to do nothing to attract clients, since they were some of the first gyms in the city and all they had to do was open up and put “CrossFit” on the door. There was a whole city of people learning about CrossFit and searching out gyms. By the time we opened, there was a certain level of saturation and a lot of the early adopters had already found a home.  So, we were in a position where – to have success out the gate – we would have needed to open at scale and have an understanding of marketing, positioning, sales funnels, and customer experience. Instead, we opened in a little hallway on the second floor of another gym with an attitude towards sales and marketing that resembled a depressed vegan sixteen-year-old talking shit about McDonald’s (I was that teenager).

And, man, we also really got kicked around on the real estate market quite a bit (leases falling through, leases not being countersigned, lack of respect from landlords, etc.)

H&F Law Blog: What was one thing you expected would be easy in owning or managing the business that was actually much more difficult than anticipated?

Todd Nief: I do not know if “easy” is the right word, but the CrossFit community has a lot of cultural push towards a meritocracy of marketing that I think is, at best, misguided and, at worst, disingenuous and pandering.  The assumption is that, by providing a great service to your clients and getting them results, they will do all the marketing for you and you can focus on coaching. This may work in an early adopter environment, but, as soon as the market reaches a certain level of saturation, this is an impossible way to exist and grow a business.

So, I got into the business to coach, and now my main role is understanding how to grow the business – by understanding how to communicate with potential clients and how to reach them.  I do not think I ever thought that marketing was easy, but I also underestimated how much marketing I would be doing.

H&F Law Blog: Conversely, is there anything that you expected would be difficult that turned out to be very easy to manage or figure out?

Todd Nief: This is a tough question for me, since I think that I generally assume that most things will be “difficult” but that I also trust myself to be able to figure them out.

I think that a lot of businesses have a lot of challenges around hiring, finding the right people, and raising cash when they need it. We have certainly had some frustrating, bizarre, and sketchy endeavors in all of these arenas, but we have also had some insanely fortuitous occurrences here as well – one employee leaving and another walking in the door within a few days, one investor flaking out and another reaching out within a few weeks, one lease falling through and another falling into our lap, etc..

Picture--Crossfit Gym

H&F Law Blog: It is my understanding that there are a few different owners of SLSC, and these owners have slightly changed over time without any hiccups in the business.  Speaking from our experience as outside general counsel to gyms with multiple owners, conflicts come up all the time between owners of gyms and we are often asked to interpret poorly drafted or virtually non-existent Operating Agreements or Shareholder Agreements (drafted by other attorneys, of course!).  How has South Loop Strength and Conditioning managed to have multiple owners (including some transition of owners), while running one of the elite CrossFit facilities in Chicago?

Todd Nief: Fortunately, one of my partners is a mergers and acquisitions lawyer, so he was able to get us set up with a pretty sturdy operating agreement when we started the business.  The business started as three of us, and there are now four; over four years we have removed one partner from the operating agreement and added two.

While the operating agreement did make these processes pretty clear in terms of what removal and addition of partners looks like, I think one of the biggest things here has been maintaining a level of respect between partners.  Even when one of our original partners was dissociating (which does not tend to happen if things are going swimmingly), there was never any bad blood and things never became unprofessional in that process. The operating agreement pretty clearly stated that we would buy out his shares for an agreed upon fair market value, so we crunched some numbers, went back and forth on a few things, and came to an agreement pretty quickly.  In terms of adding partners, it was a situation where two people came along at the right time that had an interest in the business and the right skillset to jump in and move us forward, so – similarly – we hashed out agreements that we thought were fair and amended our then-existing agreements.

[Note from Aaron Werner (Health and Fitness Attorney/Interviewer): Be sure you have a very clear and enforceable Operating Agreement (LLCs) or Shareholders’ Agreement (Corporations) when starting or buying a business with other people.  If you are raising outside capital, you need to be very careful about the securities laws involved concerning fundraising and documenting the business deal with your investors.  Be sure to work with an attorney well-versed in Operating Agreements/Shareholders’ Agreements/Other Fundraising Documents.]

H&F Law Blog: What advice do you have for other people that are going to go into business with other co-owners of a gym or studio?  What characteristics in your own business partners makes your partnership work so well?

Todd Nief: This is a somewhat challenging question since I think that this is somewhat similar to hiring – and there are many books and courses and videos and seminars and masterminds on this topic.

There are all kinds of things you can do to vet people, but the only consistent thing that works seems to be working with them to see what happens. Sometimes you make good calls, and sometimes you make bad calls.  And, similarly to hiring, sometimes you meet the right person at the right time, and then you can end up starting some gym together and having to figure out a bunch of stuff that no one ever told you before.

People say all kinds of corny stuff about vision and mission and whatnot, but that is all kind of inspirational quote fodder as far as I am concerned. I think there are basic understandings of how human beings should relate to each other that are essential for an effective partnership – most important is honestly probably generally treating other people with respect, whether that is clients, employees, or your other partners. Once contempt, deceit or manipulation enter a relationship, it can be impossible to salvage.

So, my advice would be to work with people before you enter into a partnership with them so that you know what you are getting into.

To be continued next week…

Article By Aaron D. Werner of Horwood Marcus & Berk Chartered
© Horwood Marcus & Berk Chartered 2016. All Rights Reserved.

An OSHA Violation Today Can Cost You Almost 80% More in Penalties After August 1, 2016

osha-logoThe maximum penalty that the Occupational Safety and Health Administration (OSHA) can assess for a violation of an OSHA standard has been a constant source of consternation within the agency as well as with workers’ rights advocates. The statutory maximum, which currently is set at $70,000 for willful and repeat violations and $7,000 for serious and other than serious violations, has remained unchanged since 1990. The Protecting America’s Workers Act (PAWA), first introduced by Senator Edward Kennedy in 2004, and reintroduced in each congressional session since 2004, sought to increase the maximum amount of statutory penalties as well as make other changes to the Occupational Safety and Health Act. In each congressional session, PAWA died in committee.

But a little known section of the Bipartisan Budget Act of 2015, which authorized funding for federal agencies through September 30, 2017, will change all of this.

Section 701 of the Bipartisan Budget Act of 2015 contains the Federal Civil Penalties Inflation Adjustment Improvements Act of 2015, which requires OSHA and most other federal agencies to implement inflation-adjusted civil penalty increases. The Inflation Adjustment Act requires a one time “catch-up adjustment” that is based upon the percent change in the Consumer Price Index in October of the year of the last adjustment and October, 2015. Subsequent annual inflation adjustments are also required.

On February 24, 2016, the Office of Management and Budget issued guidance on the implementation of the Inflation Adjustment Act. This guidance set the catch-up adjustment multiplier for OSHA penalties at 1.78156 – which roughly equates to an increase in the maximum penalty per violation as follows:

An OSHA Violation Today Can Cost You Almost 80% More in Penalties After August 1, 2016

The Inflation Adjustment Act allows OSHA to request a reduced catch-up adjustment if it demonstrates the otherwise required increase of the penalty would have a negative economic impact or that social costs would outweigh the benefits. But given published comments from OSHA administrators over the years, which were openly critical of the current statutory maximum amount, the prospect for any such reduction request is remote.

OSHA is required to publish the new penalty levels through an interim final rule in the Federal Register no later than July 1, 2016. The new penalty levels will take effect on August 1, 2016. Because OSHA is subject to a six-month statute of limitations, it is possible that violations occurring on or after March 2, 2016 will be subject to the new maximum penalty amounts if OSHA uses the entire six month period before issuing the citation and assessment of penalties.

The Inflation Adjustment Act does not impact OSHA’s discretion to reduce a proposed penalty in accordance with its current procedures, which take into account the size of the employer, the gravity of the violation, the employer’s history of prior violation, good faith compliance and “quick fix” abatement measures. The Act also does not govern those States which have OSHA approved plans. However, because States have to establish that their plan is as effective as federal OSHA, one would expect that OSHA will develop guidance that requires the States to increase their maximum penalty levels to comport with the new federal penalty amounts.

In the meantime, employers would be well-advised to conduct a self-audit of their workplace safety programs to ensure compliance with applicable state and federal OSHA standards.

© Polsinelli PC, Polsinelli LLP in California
  • See more at: http://www.natlawreview.com/article/osha-violation-today-can-cost-you-almost-80-more-penalties-after-august-1-2016#sthash.BKZUg7Sa.dpuf

U.S. Court of Appeals Issues Split WOTUS Ruling

On February 22, a three-judge panel of the U.S. Court of Appeals for the Sixth Circuit (Cincinnati) issued a split 2-1 decision, ruling that it has jurisdiction to proceed with challenges to the Obama administration’s “Waters of the United States” rule, or WOTUS, as opposed to federal district courts. A wide range of government, industry and agriculture interests have filed lawsuits in several district courts across the U.S. challenging the WOTUS rule.

The decision came in the form of three separate opinions, as each judge had a different view of the law on this complex issue. Two judges concluded that the appellate court has jurisdiction over the legal challenges to the WOTUS rule; the third judge concluded that the appellate court lacks jurisdiction over these cases.

It is speculated that the split decision makes it very likely that the state and industry petitioners will seek en banc review of the ruling, meaning that it would go to rehearing before the entire Sixth Circuit for additional review. Challengers will need to petition the court within 45 days to request rehearing.

The decision, which does not answer the legality of the WOTUS rule, but rather which court has authority to review it, means that stay of the WOTUS rule issued last year by the Sixth Circuit will continue in effect until further rulings.

The decision could also be appealed, potentially to the U.S. Supreme Court.

Article By Aaron M. Phelps of Varnum LLP

© 2016 Varnum LLP

Burrito Bowls, Guacamole, &. . .Tweets? NLRB Judge Finds Social Media Policy Unlawful

There’s more bad news this week for restaurant chain Chipotle Mexican Grill, but this time it has nothing to do with the food.

Last year, we heard about an NLRB decision upholding an administrative law judge’s (ALJ) finding that the restaurant had committed an unfair labor practice. According to the decision, Chipotle had allegedly threatened and interrogated employees who engaged in discussions about their pay. The employee at issue in the case had worked at a Chipotle restaurant in St. Louis, Missouri. He was also a union member who participated in strikes and was involved with the “Show Me 15” campaign for a higher minimum wage.

That decision is currently pending appeal, and Chipotle has suffered another NLRB loss this week. An ALJ ruled against the restaurant and found an unfair labor practice charge for what the judge described as the company’s unlawful social media code of conduct. The case involves a Chipotle employee in Havertown, Pennsylvania, named James Kennedy. By way of background, Chipotle employs a national social media strategist who is responsible for reviewing employees’ social media posts to determine whether any of them violate the company’s social media policy.

In early 2015, some of Kennedy’s tweets were reviewed by the strategist, including one where Kennedy had replied to a few customers’ tweets. For example, in response to a customer who tweeted “Free chipotle is the best thanks,” Kennedy tweeted “nothing is free, only cheap #labor. Crew members only make $8.50hr how much is that steak bowl really?” Then, replying to a tweet posted by another customer about guacamole, Kennedy wrote “it’s extra not like #Qdoba, enjoy the extra $2.”

Chipotle’s social media strategist emailed the regional manager, forwarded the tweets, and told the manager to ask Kennedy to delete the tweets and to review the company’s social media policy with him. Kennedy was subsequently terminated following a dispute with management over an unrelated issue.

The ALJ evaluated whether Chipotle maintained an unlawful social media policy based on the following provisions:

  • If you aren’t careful and don’t use your head, your online activity can also damage Chipotle or spread incomplete, confidential, or inaccurate information.
  • You may not make disparaging, false, misleading, harassing or discriminatory statements about or relating to Chipotle, our employees, suppliers, customers, competition, or investors.

Generally a violation of the act based on an unlawful work rule is dependent upon a showing of one of the following: “(1) employees would reasonably construe the language to prohibit Section 7 activity; (2) the rule was promulgated in response to union activity; or (3) the rule has been applied to restrict the exercise of Section 7 rights.” Lutheran Heritage Village-Livonia, 343 NLRB 646, 646–647 (2004). The ALJ found that the company’s social media policy failed on the first and third prongs.

Picking apart the provision, the ALJ relied on other Board decisions which found rules prohibiting “derogatory” statements to be unlawful. The ALJ also took issue with the prohibition on “false” statements, saying, “[M]ore than a false or misleading statement by the employee is required; it must be shown that the employee had a malicious motive.” The ALJ also found no relief based on the policy’s disclaimer which said “This code does not restrict any activity that is protected or restricted by the National Labor Relations Act, whistleblower laws, or any other privacy rights.”

Although the employee was not ultimately terminated for posting the tweets, employers can still get in trouble with the NLRB where social media policies are concerned. Considering NLRB decisions regarding work rules and handbook policies apply regardless of whether the employees are unionized. We’ll follow this case as it makes its way to the full Board.

Article By Jackie S. Gessner of Barnes & Thornburg LLP

© 2016 BARNES & THORNBURG LLP

Burrito Bowls, Guacamole, &. . .Tweets? NLRB Judge Finds Social Media Policy Unlawful

There’s more bad news this week for restaurant chain Chipotle Mexican Grill, but this time it has nothing to do with the food.

Last year, we heard about an NLRB decision upholding an administrative law judge’s (ALJ) finding that the restaurant had committed an unfair labor practice. According to the decision, Chipotle had allegedly threatened and interrogated employees who engaged in discussions about their pay. The employee at issue in the case had worked at a Chipotle restaurant in St. Louis, Missouri. He was also a union member who participated in strikes and was involved with the “Show Me 15” campaign for a higher minimum wage.

That decision is currently pending appeal, and Chipotle has suffered another NLRB loss this week. An ALJ ruled against the restaurant and found an unfair labor practice charge for what the judge described as the company’s unlawful social media code of conduct. The case involves a Chipotle employee in Havertown, Pennsylvania, named James Kennedy. By way of background, Chipotle employs a national social media strategist who is responsible for reviewing employees’ social media posts to determine whether any of them violate the company’s social media policy.

In early 2015, some of Kennedy’s tweets were reviewed by the strategist, including one where Kennedy had replied to a few customers’ tweets. For example, in response to a customer who tweeted “Free chipotle is the best thanks,” Kennedy tweeted “nothing is free, only cheap #labor. Crew members only make $8.50hr how much is that steak bowl really?” Then, replying to a tweet posted by another customer about guacamole, Kennedy wrote “it’s extra not like #Qdoba, enjoy the extra $2.”

Chipotle’s social media strategist emailed the regional manager, forwarded the tweets, and told the manager to ask Kennedy to delete the tweets and to review the company’s social media policy with him. Kennedy was subsequently terminated following a dispute with management over an unrelated issue.

The ALJ evaluated whether Chipotle maintained an unlawful social media policy based on the following provisions:

  • If you aren’t careful and don’t use your head, your online activity can also damage Chipotle or spread incomplete, confidential, or inaccurate information.
  • You may not make disparaging, false, misleading, harassing or discriminatory statements about or relating to Chipotle, our employees, suppliers, customers, competition, or investors.

Generally a violation of the act based on an unlawful work rule is dependent upon a showing of one of the following: “(1) employees would reasonably construe the language to prohibit Section 7 activity; (2) the rule was promulgated in response to union activity; or (3) the rule has been applied to restrict the exercise of Section 7 rights.” Lutheran Heritage Village-Livonia, 343 NLRB 646, 646–647 (2004). The ALJ found that the company’s social media policy failed on the first and third prongs.

Picking apart the provision, the ALJ relied on other Board decisions which found rules prohibiting “derogatory” statements to be unlawful. The ALJ also took issue with the prohibition on “false” statements, saying, “[M]ore than a false or misleading statement by the employee is required; it must be shown that the employee had a malicious motive.” The ALJ also found no relief based on the policy’s disclaimer which said “This code does not restrict any activity that is protected or restricted by the National Labor Relations Act, whistleblower laws, or any other privacy rights.”

Although the employee was not ultimately terminated for posting the tweets, employers can still get in trouble with the NLRB where social media policies are concerned. Considering NLRB decisions regarding work rules and handbook policies apply regardless of whether the employees are unionized. We’ll follow this case as it makes its way to the full Board.

Article By Jackie S. Gessner of Barnes & Thornburg LLP

© 2016 BARNES & THORNBURG LLP

Biotechnology: Case Studies of Hypothetical, Genetically Engineered Organism

Discussed at Second Meeting on Modernizing the Regulatory System for Biotechnology Products to Illustrate Agencies’ Roles and Responsibilities

On March 9, 2016, the second public meeting on the July 2, 2015, memorandum entitled “Modernizing the Regulatory System for Biotechnology Products,” was convened in the U.S. Environmental Protection Agency’s (EPA) Region 6 Office in Dallas, Texas.  Representatives from EPA, the U.S. Food and Drug Administration (FDA), the U.S. Department of Agriculture (USDA), and the White House Office of Science and Technology Policy (OSTP) discussed their current roles and responsibilities regarding biotechnology products under the Coordinated Framework for Regulation of Biotechnology (CF) by reviewing case studies of hypothetical products.

Two documents were released prior to the public meeting:  (1) Table of the oversight of biotechnology products and relevant coordination across EPA, FDA, and USDA; and (2) Regulation of Biotechnology Products — Clarifying Roles and Responsibilities through Hypothetical Case Studies.  A copy of the agenda is available here.

According to OSTP’s blog item on the meeting, the table document summarizes current responsibilities and the relevant coordination across USDA, EPA, and FDA for the regulatory oversight of biotechnology products.  OSTP cautions that it should not be interpreted as a guarantee that specific products in any of the product areas described in the table have been in the past, or will be in the future, determined to be safe by the relative regulatory agencies.

The case studies document states that its intention is to provide general information to developers who believe they have, or are uncertain as to whether they may have, a biotechnology product that is subject to regulation under one or more of the federal laws described in the CF.  It also demonstrates how an innovator might navigate the regulatory framework, starting from research activities in the laboratory to full commercialization of the product.  OSTP states that all of the case studies are of hypothetical products, selected because they cover multiple biotechnology product areas with different characteristics and intended uses, and because they illustrate how agencies coordinate their oversight under the CF.  The case studies discussed included the following hypothetical, genetically engineered organisms:

1. Corn, a field crop used for food.  In the first case study, corn with pesticidal properties is engineered with a plant pest component to have pesticidal activity against certain insects.

2. Plum, a fruit tree/crop used as food.  In the second case study, plum with pesticidal properties is genetically engineered without a plant pest component to resist a fungus.

3. Canola, a field crop, used as food.  In the third case study, herbicide-tolerant Canola is genetically engineered with a plant pest component to tolerate an already registered herbicide.

4. Rose, an ornamental plant.  In the fourth case study, a rose is genetically engineered with a plant pest component to increase the production of a pigment in its petals.

5. Microbial Pesticide, a bacterium that is not considered a plant pest.  In the fifth case study, a microbial pesticide is genetically engineered to enhance its pesticidal properties.

6. Microbial Pesticide, a phytopathogenic bacterium.  In the sixth case study, a microbial pesticide that is genetically engineered to express a pesticidal substance that protects against insects.

7. Algae for Biofuels.  In the seventh case study, a unicellular alga is genetically engineered with a plant pest component to produce industrial oils for conversion into biofuels.

8. Rabbit, an animal.  In the eighth case study, a rabbit is genetically engineered to make a therapeutic protein (recombinant insulin) for treatment of humans lacking this protein activity.

The first public engagement session took place on October 30, 2015, at FDA’s White Oak Campus in Silver Spring, Maryland.  A transcript from the meeting is available online.  The third public meeting will be held on March 30, 2016, at the University of California, Davis Conference Center in Davis, California.

Article By

Biobased and Renewable Products Advocacy Practice Group Bergeson & Campbell, P.C.
©2016 Bergeson & Campbell, P.C.

Early Settlement of Home Depot Consumer Data Breach Claims – Start of Trend?

Last week, a federal court in Atlanta issued an order preliminarily approving a proposed settlement – valued up to $19.5 million – of the consumer claims arising from the 2014 theft of payment card data from Home Depot.  The cash and noncash terms of the proposed settlement are unexceptional.  What is unusual about this settlement is its timing. According to plaintiffs’ brief seeking preliminary approval of the settlement, rather than wait for a decision on Home Depot’s still-pending motion to dismiss, the parties conducted a mediation after argument on the motion, and concluded a negotiated settlement before the motion was decided.  The decision to settle early in the case – before discovery or summary judgment – may signal a recognition that the likely settlement value of the case did not warrant the substantial cost of additional litigation for either side.  Insofar as that logic would apply with equal force in just about any consumer payment card data breach case, the early resolution of the Home Depot case could provide a model for future settlements.

Prior to settlement, Home Depot had followed the standard playbook for defense of a consumer data breach claim, seeking dismissal of the action on standing grounds due to plaintiffs’ inability to establish injury resulting from the theft of credit and debit card numbers.  While defendants have had notable success in defeating consumer data breach claims on standing grounds – primarily because card issuers hold consumers harmless for fraud losses on their cards – recent decisions, exemplified by the denial of the motion to dismiss consumer claims in the Target data breach litigation, have concluded that consumers do suffer injury in the form of “unlawful charges, restricted or blocked access to bank accounts, inability to pay other bills, and late payment charges or new card fees.”  The growing frequency of courts finding standing to bring consumer payment card data breach claims posed for Home Depot the not-inconsiderable risk that the consumer claims would survive its motion to dismiss, requiring Home Depot to proceed to expensive document and deposition discovery.

At the same time, the cost of settling consumer claims has proven to be relatively small, even for classes numbering in the tens of millions of consumers.  The “injuries” that courts have relied upon to find standing still do not add up to large dollar value claims on a per-class member basis.  In the Target case, the claims of the 40 million-member consumer class settled for $10 million.  The small size of the Target settlement relative to the size of the class was not an anomaly.  As previously reported, plaintiffs in Target submitted a chart to the court detailing prior consumer data breach settlements.  The chart showed that the cash cost of a large data breach settlement is typically $1.00 or less per class member.  The Target settlement itself came in at approximately $0.25 per class member.  The pattern revealed in Target’s submission and in the Target settlement itself surely sent a strong signal to both sides as to the likely settlement range for the consumer claims in the Home Depot case.

Meanwhile, even as the motion to dismiss was being considered by the court, the parties were engaged in the process of planning for discovery.  At the time of the settlement the parties had already come to agreement on a scheduling order, merits and expert discovery protocols, a confidentiality agreement and protective order, and a stipulation concerning authentication of documents.  The case settled during the negotiation of a protocol for discovery of electronically stored information.  On top of all of this, plaintiffs had propounded 126 document requests on Home Depot.  Based on those activities, the parties would have understood that the impending costs of document production by Home Depot and document review by plaintiffs would be staggering, as would the subsequent cost to both parties of extensive deposition practice and expert discovery.  Given the benchmark established by Target and other similar cases, the anticipated discovery costs in Home Depot could easily equal or exceed the likely cost to settle the consumer claims.

Unsurprisingly, the proposed Home Depot settlement falls comfortably within the range indicated by the survey of data breach settlements that was submitted to the court in Target.  The Home Depot settlement provides for payment of $13 million to the class, and guarantees that Home Depot will spend $6.5 million to pay for credit protection for the class.  Note, however, that cash payments to class members from the $13 million settlement fund will be distributed on a claims-made basis.  If class members fail to claim the entire $13 million, the undistributed balance may be used to defray the cost of notice to the class and then, if funds still remain, the cost of purchasing credit protection.  If the claim rate is low enough, it is possible that Home Depot’s entire payment obligation under the settlement for the benefit of the class will not exceed $13 million settlement floor.  Either way, the settlement range of $13 million to $19.5 million will yield per-class member benefits for the 40 million class members whose payment card numbers were stolen of between $0.33  and $0.49 per person.  Note that here, as in Target, attorneys’ fees are requested in addition to the class distribution, with the request here equaling $8.475 million.  Home Depot has the right to challenge the fee award, but has waived any right of appeal from the trial court’s fee determination.

It is also worth noting how the cost of the consumer settlement compares to the overall cost of settlement.  As was the case for Target, the cost of settling the consumer claims is a small portion of the overall costs to Home Depot arising from the data breach.  According to a report by Reuters, Home Depot said it had booked $161 million of pre-tax expenses for the breach, including for the consumer settlement, and after accounting for expected insurance proceeds (reported by Home Depot in its last Form 10Q quarterly report to total about $100 million).  Thus, the largest amount that Home Depot could pay in settlement of the consumer claims (including attorneys’ fees) would equal just under 11% of the $261 million in breach-related expenses incurred by Home Depot.  The ability to settle for around 10% of the total data breach exposure – and the opportunity to avoid incurring additional litigation expenses that would drive up both totals – would provide another justification for striking an early deal to resolve the consumer claims.

Article By Kevin M. McGinty of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
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President Obama Announces Merrick Garland as Nominee to United States Supreme Court

In a ceremony in the White House Rose Garden President Obama nominated Merrick Garland to replace Scalia’s on the United States Supreme Court.  Garland would be the 113th justice, and he is a moderate circuit court judge who is well-respected by both Republicans and Democrats.

Finding Scalia’s replacement has already been contentious, but Garland is uniquely situated to handle the politics at hand.  In the mid-90’s, Garland faced a lengthy political battle that delayed his confirmation for the United States Court of Appeals for the District of Columbia Circuit.

Obama has made it clear that he intends to fulfill his constitutional responsibility to nominate a Supreme Court Justice, despite calls that the decision wait for the next president.  Obama, in an email to his supporters indicated three tenets in his decision-making process.  He said he was looking for, “an independent mind, unimpeachable credentials and an unquestionable mastery of law” as well as an understanding of the limits of the court and that “justice is not about abstract legal theory, nor some footnote in a dusty casebook.”

Garland’s career has encompassed these tenets, as he used the law in emotional and difficult situations.  In 1995, he coordinated the Justice Department’s response to the Oklahoma City Bombing, immediately arriving on scene.  His hard work and dedication in that role helped cement his reputation and earned him respect on both sides of the aisle. In his formal announcement in the White House Rose Garden this morning, President Obama described Garland as:

More than just a brilliant legal mind. He is someone who has a keen understanding that justice is about more than abstract legal theory. More than some footnote in a dusty casebook. His life experience…informs his view that the law is more than an intellectual exercise. He understands the way the law affects the daily reality of how the law affects people’s lives in a big complicated democracy and rapidly changing times.

Garland, at 63, is an older nominee.  As a centrist nominee he has been on the list of potential nominees for years. Obama has made it clear that he thinks the Senate should move quickly to consider the nomination, as Garland is a qualified and suitable candidate for the job.  However, the nomination could be contentious, as Republican Senators have indicated an unwillingness to consider a candidate.  Additionally, with the court being evenly split, Garland, if confirmed, would be the deciding vote on many issues.

The White house has created a twitter handle @SCOTUSnom to provide up-to-date information on the nomination process.

Article By Eilene Spear of The National Law Review / The National Law Forum LLC

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