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Barnes & Thornburg Labor Relations’ Top Ten Traditional Labor Stories of 2011 (Part 2)

Published in the National Law Review Part 2 of  article by the  Labor and Employment Law Department of Barnes & Thornburg LLP regarding the past year’s labor news:

Here’s the conclusion to our countdown of the top ten traditional labor issues that made the news this year. Our top five are below; see numbers 6-10 in our post yesterday.

5. The Board mandates employee-rights posters, but lawsuits delay implementation

In a move that will affect virtually all private employers, whether unionized or not, the Board approved a final rule in August which requires employers to notify employees of their rights under the NLRA via an 11 x 17 inch poster. A copy of the required poster, along with more information about the posting requirement is available on the Board’s website.

This posting requirement elicited strong opposition from many business groups, including the National Association of Manufacturers, the National Federation of Independent Businesses, and the U.S. Chamber of Commerce, who have all filed lawsuits against the Board challenging the posting requirement. In response to these suits, the Board has delayed implementation of the rule, most recently postponing the effective date of the posting requirement until April 30, 2012.

So for now, employers can leave the NLRB poster off their walls, but all employers should stay informed on this issue as the implementation date approaches.

See our previous coverage of this issue here.

4. Social media becomes a new battleground

Facebook came to traditional labor this year, as the Board put a new emphasis on social media as a form of protected activity. Several complaints were filed against employers during the early part of the year alleging unfair labor practices, after the employers disciplined or terminated employees for posts related to their jobs on their personal Facebook and other social media accounts. In August, General Counsel Solomon issued a report summarizing the cases and detailing the Board’s position on appropriate social media policies.

These actions by the Board caution employers to be wary of protected speech rights under the NLRA before taking action against employees for off-duty Facebook chatter and to also make certain that company policies on social media do not chill or limit discussion regarding working conditions. Recent General Counsel decisions have also brought up the issue of potential surveillance violations if employers monitor employees’ off-duty social media use.

This continues to be a hot issue, and as we move into the new year, employers should stay cautious when it comes to social media.

See our previous coverage of this issue:

– New Facebook Cases – No Protected Concerted Activity, But Is It Surveillance??

– Update on Social Media issues with the NLRB

– Labor & Employment Law Alert – NLRB Sues Non-Union Employer Over Facebook Firing

3. NLRB complaint against Boeing for alleged unlawful transfer of work creates national controversy

By far the traditional labor story that created the most national headlines this year was the Board’s complaint filed against Boeing in April alleging unlawful transfer of work over Boeing’s decision to open a new 787 Dreamliner assembly plant in South Carolina instead of building the new planes at Boeing’s facilities in Washington. The key controversy wasn’t really the Board’s allegation of unlawful transfer of work, but its proposed remedy – shut down the brand new billion-dollar South Carolina plant and move the work to Washington. Unsurprisingly, this suggestion turned some heads in the business world. Accusations of job-killing by the NLRB soon followed, as well as legislation introduced in Congress to prevent the NLRB from mandating such a remedy.

Boeing litigated the issue for much of the year, but ultimately agreed in December to settle the case as part of a new contract with the Machinists union for its Washington facility. The union agreed to keep production of the Dreamliner in South Carolina in exchange for a promise by Boeing to build its new 737 MAX aircraft in Washington. This agreement officially ended the saga for Boeing, as the Machinists union withdrew its charge. As for the Board, it remains to be seen whether negative fallout, if any, from its decision to issue the complaint will affect its public perception in the future.

See our previous coverage of this issue:

– Labor & Employment Law Alert – NLRB Seeks Unprecedented Order Requiring Boeing to Move its New Production Line Across the Country

– An active day at the NLRB

– Boeing and the Union Reach a Tentative Agreement to End Contentious Battle Over Cross-Country Relocation

2. Board implements “quickie election” rules despite strong criticism from dissenting Member Brian Hayes

While it took all year, the Board succeeded last week in finalizing what critics have dubbed its “quickie election” rules. The new rules eliminate avenues for employers to challenge union activity prior to an election and also shorten time periods during which employers can campaign against unionization. The rules had been proposed by the Board in June and generated significant criticism from business groups who found the rules blatantly pro-union and accused the Board of denying employers their rights to free speech.

Also highly critical of the proposed rules was the sole Republican member of the Board, Brian Hayes, who said he considered resigning prior to the Board’s meeting to vote on the rules just to prevent them from being implemented. Member Hayes did not resign, but instead argued for more time to consider the rules, a request that was denied by his fellow Board members. The Board voted 2-1 in November to finalize the rules and the final version was published in the federal register last week.

As we move into 2012, this may not be the end of the issue, however. The rules should take effect in April, but a lawsuit filed by the U.S. Chamber of Commerce challenging the new rules may change this. Stay tuned.

See our previous coverage of this issue:

– Labor & Employment Law Alert – NLRB Election Changes Are Here (BT Alert)

– After A Long Wait, the NLRB Has Finalized the “Quickie Election” Rules

– An active day at the NLRB

– NLRB releases update on “quickie election” vote scheduled tomorrow

– Strategic resignation by Member Hayes may derail scheduled Board vote on “quickie election” rules

1. Behind-the-scenes politics leave an uncertain future for the NLRB

As our list so far has illustrated, 2011 was an active year for the National Labor Relations Board, with several controversial decisions, new administrative rules, and Congressional scrutiny. But all of these issues that we’ve included in our list are really just a byproduct of a more aggressive, and some would say politically motivated, Board. And the composition of the Board, which has driven most of the change we’ve seen this year, not only heads our list for 2011, but provides a starting point for looking into the 2012 crystal ball.

2011 saw an increased politicization of the Board, with a contentious division between the Board’s Democratic and Republican members. Sole Republican member Brian Hayes even went so far as to threaten resignation in November over what he saw as the Board’s unwillingness to take the time to consider the full effects of its controversial “quickie election” rules prior to drafting a final version of the rules. The Board also made the controversial decision to publish those rules without allowing the customary time for dissenting members (in this case, Hayes) to prepare and publish a dissent.

All of this behind-the-scenes politics has played out in the shadow of the looming expiration of Member Craig Becker’s appointment to the Board. President Obama appointed Becker as a recess appointment in 2010, which means that his term expires on December 31. Once his term expires, the Board (which is intended to have five members) will be left with only two remaining members. This loss of quorum will prevent the Board from issuing any new decisions or rules until a third member is appointed, under the U.S. Supreme Court’s New Process Steeldecision.

President Obama has attempted to prevent this from happening by recently naming two additional nominees for Board member positions, both Democrats. (The President also nominated Republican Terence Flynn to the Board last January, but his nomination has not yet been considered by the Senate.) However, the Senate so far has refused to hold a vote on any of the nominees and additionally appears to be avoiding declaring a formal recess so that the President cannot name a recess appointment as he did with Becker.

This collection of events is set to leave the National Labor Relations Board effectively useless come midnight Saturday. As we ring in the new year, the Board may be closing up shop. Stay tuned to BT Labor Relations as we see what 2012 brings.

Disagree with our picks? Let us know in the comments what traditional labor issues you think were most important in 2011.

Fraud, Prescription Drugs, and the Elderly

Recently posted in the National Law Review, Winner of the  Winter 2011 Student Legal Writing Contest,  Nicole J. Ettinger, law student at SUNY Buffalo Law School wrote an article about the elderly population is often a target for those who seek their financial resources:

Buffalo Law

The elderly population is often a target for those who seek their financial resources—from identity theft, to telemarketing schemes, to health care fraud.[1] The elderly population is seen by many in society as a vulnerable group as a whole; this is often because some in the elderly population may be suffering from dementia or other ailments that may cloud those individuals’ memories. Knowledge about how dementia affects an elderly person’s abilities to recall events or fully orient himself can create predatory opportunities for those who wish to take advantage of this common illness.[2] Those who prey on the elderly likely believe the elder has a substantial amount of money and would easily fall for scams.[3] One area of concern involving fraud against and involving the elderly is fraud in prescription drugs, specifically Medicare Part D.[4]

I. Background of Medicare Part D

Medicare Part D, implemented in 2006, came into being under the Medicare Modernization Act of 2003 [hereinafter “MMA”].[5] The MMA provided assistance for paying for prescription drugs for some elderly persons as before Part D, Medicare only covered prescriptions issued from a hospital or doctor’s office.[6] As long as one is eligible for Medicare Parts A or Part B, he is eligible for the optional[7] prescription drug plan, Medicare Part D.[8]

Like Medicare Parts A and B, Part D is administered through the federal government, but unlike A and B, the actual prescription services are delivered through various approved private insurers.[9] There are two types of Medicare Part D Plans: Prescription Drug Plans (PDP) and Medicare Advantage Plans (MA-PD).[10]  PDPs only provide prescription coverage while MA-PDs also provide the medical services that Medicare Part A and B provide, but through a private company.[11]

For Medicare eligible elders with a more limited income, the Low or Limited Income Subsidy, or Extra Help, is available to assist with some or all of Part D prescription costs.[12] A major benefit of the Extra Help program is that these recipients do not have to face the coverage gap, or “doughnut hole,” that comes with most Part D plans.[13] For an elderly individual or couple who do not apply for the Extra Help subsidy, the “doughnut hole” is a certain spending point, $3,6100.00 in 2010 and $2,480.00 in 2011,[14] after which the elderly individual is responsible for paying for the full costs[15] of his prescription medications. After the individual reaches a second spending benchmark—$4,550.00 in prescription drug costs for 2011—catastrophic coverage will be triggered.[16] During catastrophic coverage, the individual will pay for only 5% of drug costs.[17]

To assist with these difficult costs to the elderly, the Patient and Affordable Care Act [hereinafter PPACA] implements a plan for the hole to “close” in 2020.[18] The closure of the doughnut hole means that the individual will be responsible for paying for only 25% of his prescription costs for brand-name drugs, as 50% will be covered by the pharmaceutical company and 25% by a federal subsidy[19] and 25% for name brands.[20] The program starts the closure of the hole gradually, as it began in 2011 with a 50% discount for brand-name prescription medications and a 7% discount for generic prescription medications.[21] Despite the discount programs and forthcoming changes to the Medicare system,[22] the costs of prescription drugs are still a concern and a major financial burden for many elderly people.

Medicare Fraud

With the coming of the Part D program in 2006, some were concerned about the new and extended avenue for fraud—particularly against the elderly. When Part D first began, many predicted a dreary future for Part D, fraught with fraud, a plan some predicted to cause more trouble than it was worth.[23] Along with fraud related to billing, predictions included “enrollment based frauds, improper inducements to enroll, formulary manipulations, acceptance by plans or pharmacy benefit managers (PBMs) of improper inducements from manufacturers to have their drugs on formulary, improper reporting to the government of rebates received from manufacturers, and plan marketing programs.”[24]

Similarly, telemarketers and internet scammers may target the elderly who may not be as wary or meticulous in protecting their information and checking the legitimacy of the programs.[25] Elderly persons may find themselves enrolled in a Part D program with a premium that is too high for their income or one that excludes the prescription drugs they need from coverage.[26] While Medicare Part D was implemented five years ago, these concerns have not diminished.[27] While it is clear that such concerns have materialized, it is less clear how pervasive the fraud has become.[28]

The MMA requires Part D providers to implement a program to protect against fraud and other abuses of Medicare Part D.[29] While the Center for Medicaid & Medicare Services has its own lengthy suggestions, for the most part, each Part D plan is supposed to implement its fraud and abuse prevention through use of its own guidelines.[30] Some opine that flexibility for insurers to choose how to set up and implement their fraud, waste, and abuse monitoring programs provides a structure that “remains ripe for abuse” by these Part D insurers.[31]

One part of the Center for Medicare & Medicaid Services goals to reduce fraud in Part D is the implementation of the Medicare Drug Integrity Contractors program, or MEDICs, which “identif[y] and investigat[e] potential Part D fraud and abuse, develo[p] potential Part D fraud or abuse cases for referral to law enforcement agencies, ac[t] as a liaison to law enforcement, and serv[e] as an auditor of Sponsor and subcontractor Part D operations.”[32] MEDICs collect and investigate the kind of internal fraud that the Part D beneficiary may never be made aware of—such as submission of false claims for services not provided.[33]

The MEDICs rely heavily on reporting of potential fraud and abuse to their agency through complaints.[34] These complaints may come from the elderly individual himself or they can be reported by family members, healthcare providers, and other Medicare plans.[35] MEDICs are also supposed to complete their own internal analysis of potential fraud through “fulfilling requests for information from law enforcement agencies. . .; identifying program vulnerabilities; auditing the fraud, waste, and abuse programs that are part of plan sponsors’ compliance plans.”[36]

MEDICS are also supposed to apply internal methods of fraud and abuse analysis through “analyzing claims data, conducting Internet searches to identify leads, and analyzing complaint data for trends”[37] but this internal investigation has been limited.[38] Out of the 4,194 reports of potential fraud or abuse in 2008, 87% of these were reported from outside, non-MEDIC, sources.[39] For the cases identified through internal research, 93%, or 553 cases, were discovered through analyzing data trends.[40] Once MEDICs determine that the report of fraud and abuse may have legitimacy, they open an investigation. Out of the 4,194 reports in 2008, 1,320 of these cases were investigated.[41] For the cases that the MEDICs chose to investigate, the MEDICs referred sixty-five cases to the Office of the Inspector General and sent thirty-four “immediate advisements” to the Office of the Inspector General as well.[42] For the remaining cases, 257 were referred to state insurance commissioners and the final 39 were sent to CMS for review.[43]

While all of cases that come before the MEDICs are reviewed, not all are investigated. The MEDICs decide to complete an investigation where they find that the subject of their investigation[44] “engaged in a pattern of improper prescription writing or billing, submitted improper claims with actual knowledge of their falsity, or submitted improper claims with reckless disregard or deliberate ignorance of their truth or falsity.”[45]  The way that the investigations are completed is through a case review.[46] If after the MEDICs’ investigatory efforts, they determine potential fraud or abuse, the MEDICs are supposed to seek the assistance of the Office of the Inspector General to decide what should be done.[47] However, regardless of whether cases are referred for further investigation, the MEDICs are required to update CMS monthly with all referrals to outside agencies and their status.[48]

Out of the 1,320 cases investigated in 2008, 40% of identified fraud involved marketing schemes.[49] The marketing schemes involved behaviors ranging from unsolicited door-to-door marketing to individuals[50] to enrolling an elderly individual in a plan without his permission.[51] While the MEDICs report does not specify its definition of “permission,” it is likely that such tactics would include enrolling an individual who may say he agrees, but who does not have the capacity to enroll himself in a Plan without permission of that individual’s guardian or health care proxy.[52] Twenty-one percent of cases involved “drug diversion by beneficiaries”[53]and 15% involved inappropriate prescriptions, or billing for drugs not medically needed.[54]

While the MEDIC program appears to be organized and comprehensive from the outside, the MEDICs are limited in their ability to track and prevent Part D fraud.[55]The three national MEDICs programs reported that the limitations on their authority to access data as well as audit Plan sponsors limited their ability to enforce their mission of identifying and monitoring potential fraud and abuse.[56] For instance, as of 2008, the MEDICs could not gain access to much of the information they needed to complete their reports, as they were required to request information from the plan sponsors and could not receive this data from CMS directly.[57]

One other troubling finding from the MEDIC analysis is that plan sponsors are notrequired to refer identified cases of potential fraud to the MEDICs.[58] Thus, the information that the MEDICs received is what the Part D plans voluntarily provided and so the breadth of the MEDICs investigations were limited by the amount of data they could collect.[59] Perhaps “encouragement” is not sufficient to convince Part D plans to report concerns of fraud and abuse; the Office of the Inspector General suggests mandatory reporting to MEDICs, rather than recommended reporting so that the MEDICs will be made privy to a greater amount of incidents and will subsequently be able to provide greater protection against such fraud.[60]

Beyond the legal or budgetary limitations of the MEDIC programs, some still do not feel that Medicare’s plan for protecting the elderly population against fraud and abuse in Part D programs is sufficient.[61] In one instance of Part D fraud, seventy-four-year-old Mr. Aldridge’s Medicare Part D plan was switched to a Medicare Advantage plan after a Part D plan employee forged Mr. Aldrige’s signature to enroll him.[62] Mr. Aldrige’s doctors did not accept this new healthcare plan.[63] The unapproved switch cost Mr. Aldrige hundreds of thousands of dollars in out –of-pocket prescription drug costs before the problem was straightened out—while the salesman who allegedly committed the forgery that devastated Mr. Aldrige received a $300.00 commission for Mr. Aldrige’s enrollment.[64] Unfortunately, Mr. Aldrige’s story is not unique, there exist horror stories of people and plans who will enroll elderly individuals who lack capacity to contract,[65] who were not proficient in English,[66] those whose life-sustaining medications are not actually covered by the plan,[67] or by garnering enrollment by marketing in a way that  the elderly may wrongfully believe that Plans are government entities.[68]

One writer suggests that Medicare fraud, including Part D fraud, is still so rampant because federal enforcement measures are lacking.[69] CMS has not taken as strong hand on enforcement as needed.[70] In one situation, insurance companies suspended their marketing practices voluntarily after there were reports of fraud against the elderly in their plan, but these companies were permitted to continue their marketing plan just three months later.[71] Reflective of these sentiments is a 2008 survey by the National Association of Insurance Commissioners Senior Issues Task Force, which noted that out of the thirty-six states that participated in the survey, all but two of them had received complaints on the marketing of private Medicare plans within their state.[72]

i.  Medicare Part D Fraud and the Courts

One reason noted for the limited success in monitoring and preventing Medicare fraud and abuse is that the Medicare Modernization Act of 2003[73] preempts state legislation preventing fraud in the marketing and practice of Part D plans.[74]Therefore, if a state wishes to enforce its own stricter regulations against fraud, these efforts may be preempted by federal law.[75] In Uhm v. Humana Inc., a group of elderly individuals brought a class action suit against a PDP with whom they had all enrolled for their Medicare Part D coverage.[76] The elderly plaintiffs argued that due to this PDP plans’ advertising methods, they thought that their prescription drugs would be covered by the plan once Part D began in 2006.[77] However, when the plaintiffs requested information about their plan and requested copies of the forms needed to order their prescriptions, they did not get a response and had to purchase their prescriptions out of pocket—a great expense.[78]

The PDP argued that the plaintiffs’ state claims[79] were preempted by the MMA—the court agreed, reasoning that “the language of the MMA preemption clause is clear: if Part D establishes standards that cover plaintiffs’ claims, then those standards supersede state law, and plaintiffs’ state law claims are preempted.”[80] While the elderly plaintiffs called such a result “absurd,” the court defended by stating that all PDP plans still must report to CMS according to federal regulations and such grievances could result in large fines to the PDP plans.[81] This, however, is likely little consolation to elderly individuals who had to pay for their medication costs out of pocket, especially where it is possible that the MEDICs, who may receive such grievances, may have limited access to other complaints relating to the PDP plan and so may not be aware about the extent of fraud.[82]

Some fraud may seriously risk an elderly individual’s health. In one heinous case, a sole physician at a small clinic, in exchange for $1000 weekly, allowed the two operators of the clinic to use his provider number to order rare medications, which were not medically necessary for the clinic’s patients, but allowed the highest payment from Medicare.[83] The clinic dispensed some medication to their largely poor and elderly patients –despite that the medication was risky.[84] While it was discovered that the clinic was not legitimate, the clinic managed to receive nearly $650,000.00 from Medicare before detection.[85] Such scenarios result in many writers and activists suggesting plans for solutions.[86]

II.  Possible Solutions or improvements to Part D Fraud

One solution scholars have suggested for curbing fraud is to limit the number of plans available.[87] Second, scholars suggest that state laws should not be preempted, to allow for more stringent regulation of Part D plans by the state.[88]

The proposal to reduce the number of PDP and MA-PD plans available is premised on the notion that fewer plans will lead to less confusion, more efficient regulation, and greater standardization amongst the plans.[89] The proposal is worth consideration due to the many choices that are available out there, which may confuse and overwhelm any person seeking to find an appropriate  Part D plan. Further, fewer plans may limit the aggressive marketing tactics some Plans may feel they need to take to stand out from the many others.

The risk that comes with placing federal restrictions on the amount of plans available to Medicare Part D recipients—thus, the elderly and disabled—is that there is an unavoidable hint of paternalism.[90] The proponents of this proposal seek to combat this assumption by claiming that the government limiting the number of Part D plans is comparable to employers acting as a broker while choosing their employee health plans.[91] While this analogy may be disjointed, the proposal still has merit, despite the recognizable shroud of paternalism and possible concerns regarding restrictions on free markets.[92] A system with limited providers may not be a limit on freedom of choice, as the proposal explains that there should still be a sufficient number of options.[93] Some studies show that many elders report confusion and frustration surrounding Medicare Part D.[94] If this is the case, limitations would be helpful in easing the choosing process.[95] As the federal government would be responsible for narrowing the number of insurers issuing Part D, the government would also be responsible for evaluating the Plans’ quality.[96]

Such a system may be beneficial in reducing fraud, if it could be shown that part of the reason that fraud occurs is because there are so many plans in place. A system with limited choice of Part D providers may not directly reduce fraud, but appears that its side effects may lead to such a result. It may be the case that if fewer plans are offered, government oversight could be greater because there would be fewer plans to monitor and audit; further, the quality of plans may improve.[97] Further, beyond concerns of fraud, the other benefit that may come with such a plan would be “simplicity” for the elder in choosing a Part D plan.[98] If limited plans are available, the first time an elderly individual enrolls, he may feel less overwhelmed and more willing to research plans that fit his needs best where the amount to research does not seem so vast and frustrating.[99] While the true effect on providers is uncertain, another benefit of limited Plans may be that Part D plans marketing tactics may become less aggressive if the amount of Plans that are accepted to operate in each state are limited and enforced, so that there are not many plans jumping for a bite at the “apple” all at once. The theory is based on the idea that the plans providers will know that they have been accepted by the government as one of only a few providers in that state and thus, that their competition is limited to far fewer companies. Further, if that Plan attempts aggressive or suspicious marketing, due to the smaller “community” of plans, it is possible the other plans may be more likely to report them, providing for internal enforcement.

The second proposal to for reducing fraud is that federal laws and regulations shouldnot preempt stronger state laws protecting against fraud in Part D plans.[100]Currently the MMA explicitly preempts state laws and regulations relating to enforcement of state fraud and abuse plans because of the fact that Medicare is a federally operated program so, beyond state licensing or solvency laws, state laws are not applicable.[101] The reason that some argue that state laws should not be preempted is that state laws and regulations to monitor and enforce marketing requirements and limitations “offer faster and more responsive remedies” than federal programs.[102]

Such a plan to allow for state enforcement may be a very helpful solution where Medicare’s guidelines on some aspects of Medicare fraud, waste, and abuse programs are merely suggestions, rather than requirements. As discussed above, Part D plans are not mandated to report claims of fraud, waste, and abuse and additionally, the structure for implementing such plans are largely left to the Part D insurer.[103] This is corroborated by evidence presented that the federal government and Medicare do not always take strong efforts to enforce marketing standards. While the news shows recent “crackdowns” on Medicare fraud operations by health care providers,[104] it is not clear how strong the enforcement is for marketing, despite the federal regulations putting forth such standards.[105] At least when Medicare Part D first began, “CMS issued only ‘warning notices’ to plans violating marketing standards.”[106]

States’ ability to enforce their own stronger laws and regulations against Part D providers may be an  effective option for fraud reduction. If Plans, especially those only offered in one state, are held responsible to the states, active state boards such as within Attorney General’s Offices and bureaus of Consumer Fraud could serve as additional pairs of eyes on the providers.[107]

Part III: Conclusion

Proper information about Part D Plans’ abuse and fraud programs along with consumer protection education for the elderly and their caretakers can serve as important methods of protection.[108] For the former, this may include that Part D providers must provide their current and potential enrollees with clear, plain-English information regarding the Plan’s fraud and abuse programs and detailed information on how an enrollee could file a complaint or grievance.

Second, Medicare should fund consumer fraud education programs to be taught at nursing homes and assisted living facilities; for those who may be living alone, this information may provided from Medicare and distributed to the elderly individual’s doctors, families, or the elders themselves.  Additionally, the elderly individual should be taught basic fraud prevention strategies such as to never give out his personal information—especially to someone who calls over the phone or who stops by the individual’s home to enroll them in a plan.[109] Elderly individuals should also be advised not to give their Medicare card or information to anyone they may meet, especially if the person offers free equipment, medication, or prizes in exchange for private information.[110] While such suggestions may seem simplified when contrasted with the fraud reduction suggestions earlier in this paper and in many scholars’ writings, proper consumer protection education may be a first and important step in preventing against fraud until such programs might be implemented to target and monitor fraud from the inside, out.

[1] Fraud Target: Senior Citizens, Federal Bureau of Investigation,http://www.fbi.gov/scams-safety/fraud/seniors (last visited Apr. 28, 2011).

[2] Id. (“Con artists know the effects of age on memory, and they are counting on elderly victims not being able to supply enough detailed information to investigators. In addition, the victims’ realization that they have been swindled may take weeks—or more likely, months—after contact with the fraudster.”)

[3] Supra n.1.

[4] Alice G. Gosfield, Medicare and Medicaid Fraud and Abuse ,§ 1:2 (2010). “’[Defining] fraud and abuse,’ as it is customarily used, to cover misconduct in the delivery and financing of health care.”

[5] Public Law 108-173. See also, Centers for Medicare & Medicare Services, Medicare Prescription Drug Benefit Manual, Chapter 1 at 3. (2008), available athttps://www.cms.gov/PrescriptionDrugCovContra/Downloads/Chapter1.pdf (last visited Apr. 24, 2011).

[6] 42 USCA § 1395y (2002) See also, Medicare Part D: Prescription Drug Program, Evelyn Frank Legal Resources Program (updated Nov. 7, 2010), available athttp://wnylc.com/health/download/6/.

[7] Part D is mandatory for those who receive Medicare and Medicaid benefits, known as “dual eligibles.” See 42 C.F.R. § 423.34(a) (2005).

[8] 42 C.F.R. § 423.30(i)-(ii).

[9] Medicare Part D: Prescription Drug Program, Evelyn Frank Legal Resources Program, 5 (updated Nov. 7, 2010), available at http://wnylc.com/health/download/6/.

[10] See Centers for Medicare & Medicare Services, Medicare Prescription Drug Benefit Manual, Chapter 1 at 3. (2008), available athttps://www.cms.gov/PrescriptionDrugCovContra/Downloads/Chapter1.pdf (last visited Apr. 24, 2011).

[11] Id. at 7.

[12] See 42 CFR § 423.780. To receive Extra Help, the individual must be either eligible for Supplemental Security Income (SSI), Medicaid, Medicare Savings Program, or whose income and resources fall below certain benchmarks. See generally, POMS, 00815.023 Medicare Savings Programs Income Limits, available athttps://secure.ssa.gov/apps10/poms.nsf/lnx/0600815023. See also See 42 CFR §§  423.773, 423.780, POMS HI 03030.025 Resource Limits for Subsidy Eligibility,available at https://secure.ssa.gov/apps10/poms.nsf/lnx/0603030025.

[13] Eighty percent of Part D plans have a gap and do not offer any gap coverage. See Richard L. Kaplan, Analyzing the Impact of New Health Care Reform Legislation on Older Americans, 19 Elder L. J. 213, n. 13, (citing  Jack Hoadley, et. al, Medicare Part D 2010 Coverage Spotlight: The Coverage Gap, Exhibit 1, (2009))(citing Georgetown University/NORC at the University of Chicago’s analysis of CMS PDP Landscape Source Files, 2006-2010, for the Kaiser Family Foundation).

[14] The elderly individual first pays a $310.00 premium and then pays 25% of prescription costs up to $2480.00. POMS HI 03001.005, available at https://secure.ssa.gov/apps10/poms.nsf/lnx/0603001005, See also Pub. L. 118-148.

[15] Referred to as TrOOP, True Out of Pocket Costs. See Centers for Medicare and Medicaid Services, Prescription Drug Benefit Manual. Chapter 9, Part D Program to Control Fraud, Waste and Abuse.

[16] POMS HI 03001.005, available athttps://secure.ssa.gov/apps10/poms.nsf/lnx/0603001005; Announcement of Calendar Year (CY) 2011 Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies and Final Call Letter, Center for Medicaid & Medicare Services (Apr, 5, 2010) available athttp://www.cms.gov/MedicareAdvtgSpecRateStats/Downloads/Announcement2011.pdf at 34.

[17] Id.

[18] See 42 USCA § 1395w-114a , Public Law 111-148.

[19] See 75 FR 29556 (2010)(“For purposes of sections 1860D-14A and 1860D-43 of the Social Security Act (the Act), as set forth in the Patient Protection and Affordable Care Act of 2010, Public Law 111-148 § 3301, and the Health Care and Education Reconciliation Act of 2010, Public Law 111-152, collectively known as the Affordable Care Act), see also, Social Security Act § 1860D-14A(b)(1)(B).

[20] See 75 FR 29556 (2010)

[21]  Patient Protection and Affordable Care Act, 42 USCA § 1395w-114a ; SSA-POMS, HI: 03001.001, available athttps://secure.ssa.gov/apps10/poms.nsf/lnx/0603001001.

[22] One study notes that after the 2006 implementation of Part D, in 2006, the mean yearly out of pocket costs for prescription medications decreased by 32% one year after Part D was put into effect. However, the study notes that this decrease in expenditures is for those who did not have any prescription coverage before Part D (decrease from an average of $963 to $517 between 2005 and 2006), while those who had some prescription coverage or were dual eligible people with Medicaid, Part D did not vary their out of pocket costs for medication very much (from $600 to $582 in 2006). See Christopher Millett, et. al, Impact of Medicare Part D on Seniors’ Out –of-pocket Expenditures on Medications, 170 Arch. Intern. Med. 16 (2010).

[23] See, e.g., Alice G. Gosfield, Medicaid and Medicare Fraud and Abuse, § 1.18- Medicare Part D (2010).

[24] Id.

[25] Fraud Target: Senior Citizens, Federal Bureau of Investigation,http://www.fbi.gov/scams-safety/fraud/seniors (last visited May 5, 2011).

[26] Infra n.103. But see, 42. C.F.R. § 423.38(c)(8)(i) (allowing for disenrollment if there was material representation of the benefits of the plan while marketing the plan to the individual).

[27] See, e.g., In February, 2011, police arrested one hundred and eleven health care professionals across nine different U.S. cities for Medicare fraud.  http://blog.lawinfo.com/2011/02/18/medicare-fraud-111-us-doctors-nurses-arrested/ (last visited Apr. 30, 2011).

[28] See  Rita Isnar, A Glimpse of the Future of Compliance Oversight by CMS: Part D Plans Case Study, Journal of Health Care Compliance, 13 No. 1 JHTHCC 51, (Jan-Feb. 2011), “Despite the requirements and emphasis placed on protecting the Part D benefit, few PDPs have met CMS’s requirements for addressing fraud detection, correction, and prevention by developing an effective compliance program.”

[29] See 42 C.F.R. § 423.504(b)(4)(vi)(H).

[30] 42 U.S.C. § 1395w-104; 42 C.F.R. § 423.505(b)(4)(vi)(H), CMS Manual, Part D Program to Control Fraud, Waste and Abuse, ch. 13, at 3-4.

[31] Supra n.4 at 1189.

[32] CMS Manual, Part D Program to Control Fraud, Waste and Abuse, ch. 13, at 10,

[33] Department of Health and Human Services, Office of the Inspector General,Medicare Drug Integrity Contractors’ Identification of Potential Part D Fraud and Abuse at 5 (Oct. 2009) (all data analyzed in this 2009 report is from 2008).

[34] External complaints are the primary source of fraud reports to the MEDICS. Id. at 3.

[35] Id.

[36] Id. at 2.

[37] Id.

[38] Id. at 8.

[39] Id.

[40] Id.

[41] Id. at ii.

[42] Id. at ii.

[43] Id.

[44] Id. at 5. MEDICs do not only investigate plan providers, but also investigate pharmacies, providers, and even the Medicare enrollee.

[45] Id.

[46] Id. at 4.

[47] Id. (citing Center for Medicare Services, MEDIC Statement of Work, § 6.2 (2d. Ed., Sept. 28, 2007).

[48] Id. at 5.

[49] Id. at 19, Table A-1: Top Five Types of Potential Fraud and Abuse Investigated and Referred to the Office of the Inspector General in Fiscal Year 2008.

[50] See 42 CFR § 422.2268(d). As this paper will soon discuss, Part D plans are prohibited from unsolicited marketing of their plans. See,Federal Trade Commission,Medicare Part D Solicitations: Word to the Wise about Fraud (Apr. 1, 2006)(“Providers may come to your home only if you have invited them to do so.”).

[51] Id.

[52] See, Bloomberg News, Insurers Suspend the Marketing of Some Medicare Plans, printed in New York Times (Jun. 16, 2007) available athttp://www.nytimes.com/2007/06/16/business/16health.html?ref=coventryhealthcareinc (last visited Apr. 22, 2011) (“ Agents also forged signatures, signed up the dead and enrolled mentally disabled people without consulting their guardians.”).

[53] Drug Diversion included visiting multiple physicians to receive more than one prescription for medication, transferring prescription medication to an individual other than the person to whom the medication was prescribed, illegally selling prescription drugs, and forging a prescription. Id. at 19, Table A-1: Top Five Types of Potential Fraud and Abuse Investigated and Referred to the Office of the Inspector General in Fiscal Year 2008.

[54] Id. at 9.

[55] Id. at ii (Executive Summary), supra n.

[56] Id. at i.

[57] Id.

[58]CFR 42 § 423.504(b)(4)(vi)(G)(3) (2010); Medicare Drug Integrity Contractors’ Identification of Potential Part D Fraud and Abuse at iii.

[59] Id. at iii (“One MEDIC office stated it received relatively few referrals compared to the number of plan sponsors in its jurisdiction. The two other MEDICs indicated that while some plans referred incidents of potential fraud and abuse, other plans had never referred any such incidents.”).

[60] Id. at iv.

[61] See Borer, supra n.6.

[62] Id. at 1.

[63] Id.

[64] Id.

[65] Supra n. 80.

[66] Borer, 92 Minn. L. Rev 1165 at 1.

[67] See, e.g., Masey v. Humana, Inc., 2007 WL 2363077 (M.D. Fla.) (Part D plan allegedly characterized their advertisements so that woman believed that her chemotherapy drugs and then had to pay out of pocket when the Plan denied coverage for these prescriptions).

[68] See, Commonwealth of Pennsylvania v. Peoples Benefit Services, Inc., 923 A.2d 1230 (2007)( Non-government approved Part D plan marketed to elderly using symbols and names that the Commonwealth claimed would induce the elderly to enroll because they may believe that this plan was associated with—and approved by— the government).

[69] Supra n.94.

[70] Id.

[71] Id. at 4; supra n.81.

[72] See National Association of Insurance Commissioners Senior Issues Task Force, Second State Survey on Medicare Marketing Issues (Feb. 5, 2008), available athttp://www.naic.org/documents/committees_b_senior_issues_medpp_survey_2n….

[73] 42 U.S.C. § 1395w-26(b)(3) (2003) .

[74] Id. (“The standards established under this part shall supersede any State law or regulation (other than State licensing laws or State laws relating to plan solvency) with respect to MA plans which are offered by MA organizations under this part.”).

[75] 42 U.S.C. § 1395w-26(b)(3) (2003), CMS Prescription Drug Benefit Manual, ch. 9, Program to Control Waste, Fraud, and Abuse at 15.

[76] 2006 WL 1587443.

[77] Id.

[78] Id.

[79] Plaintiffs’ causes of action included “claim breach of contract, violation of state consumer protection statutes, unjust enrichment, fraud, and fraud in the inducement.”Id.

[80] Id.

[81]Id.

[82] Supra part II, see also Department of Health and Human Services, Officer of Inspector General, Medicare Drug Integrity Contractor’s Identification of Potential Part D Fraud and Abuse (Oct. 2009).

[83] See United States v. Silber, 2010 WL 5174588.

[84] Id.

[85] Id. at *1.

[86] See section III of this paper.

[87] See, e.g., Thomas Rice, 35 J. Health Pol. Pol’y & L. 961 (2011).

[88] See, e.g., Borer, 92 Minn. L. Rev. 1165.

[89] Id.

[90]Id. at 963-64. Rice, however, discusses Schwartz’s piece which explains that too many choices in any market may lead to people making poor choices because the plethora of options is “so cognitively burdensome.” Rice also cites studies that have shown that “when more choices are available, the likelihood of investing in retirement vehicles such as 401(k) plans decline, and the quality of choices made among investors is worse.”

[91] Id. at 962.

[92] While such a program may be somewhat paternalistic, it is necessary to note that the entire system of fraud protection could be said to fall within the paternalistic category as well by arguing that the elderly and disabled are a more vulnerable class which may need added protections, as opposed to private, non-Medicare plans.

[93] Id. at 970. Rice suggests between six and fifteen plans, but that the number depends on the state.

[94] Rice, Reducing the Number of Drug Plans for Seniors at 966.

[95] Id.

[96]Id.

[97] This was noted in a comparable program involving competitive bidding for Medicaid providers in Arizona. See Id. at 977.

[98] Id. at 987.

[99] Id. at 989. Individuals frustration with choosing a Medicare program may be the reason why many elders will remain in their Part D program, rather than switching, even when their plan changes the medications it covers or increases its premium.See, Id. at 965.

[100] Borer, 92 Minn. L. Rev. 1165 (2008).

[101] See, 42 U.S.C. § 1395w-112(g); Borer, Modernizing Medicare at 1179. Note, CMS agrees that state laws on marketing of Part D plans are preempted by federal law. See Borer, n. 124 (citing CMS, Questiins and Answers on Preemption, available at http://www.ins.state.ny.us/orgo2008/rg70720.htm.).

[102] Id. at 1185.

[103] See supra, section II, see also¸ Id. at 1188, “Depending on plans to self-police themselves is a dangerous strategy on its face and does not work in practice.”

[104] Supra n.56.

[105] See generally, 42 CFR § § 423.2262.

[106]Borer, 92 Minn. L. Rev. at 1188.

[107] Id. at 1199. Borer points out that the fact that Attorney Generals are elected positions, they will respond to individuals  complaints about problematic Plans or marketing tactics.

[108] Fraud Target: Senior Citizens, Federal Bureau of Investigation,http://www.fbi.gov/scams-safety/fraud/seniors (last visited May 5, 2011.)

[109] Department of Health and Human Services, Information Partners Can Use on: Preventing Fraud (Oct. 6, 2006).

[110] Federal Trade Commission, FTC Consumer Alert: Medicare Part D Solicitations: Words to the Wise About Fraud.

© Copyright 2011

 

 

Happy Birthday National Law Review!

The National Law Review Marks Second Year of Online Publication with Highest Daily Volume of U.S. Visitors among Legal Sites of Its Kind

CHICAGO–(BUSINESS WIRE)–  The National Law Review (www.NatLawReview.com), the fastest growing free, online database of legal analysis, marks its second year on a high note with its numbers continuing to increase, both in article contributors and in readership. 

The database today announced that in its second official year of online   publication, it has increased its readership for more than 60,000 page views per month and now experiences one of the highest daily volumes  of U.S. readers among sites of its kind, as measured by third-party groups like Alexa/Amazon and Quantcast.

 Launched in 2009, The National Law Review provides in-house counsel and  other business professionals, including small business owners, with  free, easy access to analysis of pressing legal issues through its  pnline database. Top law firms, law schools and professional  organizations contribute articles to the site, and The National Law Review helps legal consumers quickly locate this analysis for no charge and without a log-in or password.

“We are thrilled to have reached such significant milestones so early on and feel this growth is a result of the needed service we provide to both in-house lawyers and law firms,” said Jennifer Schaller, co-founder   of The National Law Review and a former in-house attorney. “With our database, we put things in the hands of in-house counsel and professionals, allowing them to find the timely and well-researched legal analysis they need, when they need it, saving them time and money. And for law firms, we provide an effective and affordable way to share their expertise, opening them up to a whole new world of readers and potential clients.”

More than 100 organizations contribute their articles to The National Law Review, including AmLaw firms as well as boutique firms, law schools and professional organizations. In addition to publishing these       contributors’ articles on its site and including them in its database, The National Law Review systematically promotes them through alliances with bar associations and professional associations and through social media outreach.

 When an article appears on The National Law Review’s site, it gives the author(s) continuing opportunities to be read and brings attention to their expertise. Due to The National Law Review’s selection process, third-party credibility is added and articles are routinely referenced by mainstream media, bloggers and professional associations. Some Websites, including media sites, often pick up articles and place them on their Websites, which gives the contributors even greater readership and promotion opportunities.

“When we first were working on this idea, we knew it would be a powerful legal research tool, but we were not aware of how many opportunities an article would have to be read,” said Schaller. “It has truly exceeded   our expectations in terms of the reach our contributors gain with each article that is posted. It’s been wonderful seeing it develop and exciting to see it continuing to grow.”

Based in the Chicago area, The National Law Review is a free and easily accessible database of timely and authoritative legal analysis contributed by many of the nation’s premier law firms, law schools and       professional organizations. The site provides in-house lawyers, small business owners and executives an efficient way to research the legal issues affecting their operations. It also gives law firms an effective and affordable way to augment their existing marketing efforts. For more information about The National Law Review, visit www.natlawreview.com.

 Contact:

The National Law Review
Robin Iori, 248-766-0262

Justice Department Investigation of S&P

Recently posted in the National Law Review an article by Jared Wade of Risk and Insurance Management Society, Inc. (RIMS) regarding the Justice Department investigating S&P:

The Justice Department is investigating Standard & Poor’s for improperly rating the garbage mortgage-backed securities that tanked the economy once the world caught on that they were toxic assets.

The anonymous folks who leaked this info to the press claim that the inquiry began prior to S&P’s downgrade of U.S. debt, but many have speculated that the fervor and depth of the probe has ratcheted up since the nation lost its AAA-status.

Either way, the law dogs are — finally — poking around in the ratings world.

The Justice Department has been asking about instances in which the company’s analysts wanted to award lower ratings on mortgage bonds but may have been overruled by other S.& P. business managers, according to the people with knowledge of the interviews. If the government finds enough evidence to support such a case, which is likely to be a civil case, it could undercut S.& P.’s longstanding claim that its analysts act independently from business concerns.

It is unclear if the Justice Department investigation involves the other two ratings agencies, Moody’s and Fitch, or only S.& P.

Any inquiry should of course involve looking at all three. Each overrated the used diaper mortgage-backed securities to a baffling degree. Whether or not it was incompetence or something more insidious is really the only question, I have. I presume they are capable of both.

But if this investigation focuses solely on S&P then it falls even more into how one talking head on MSNBC’s The Daily Rundown described it: more of a Washington story than a Wall Street one.

Honestly, the only weird thing about hearing today about an investigation going on right now is that it was something I expected to hear in 2008.

In related news, and not just to toot our own horn, but I would feel remiss not to mention that our Risk Management magazine cover story this month was titled “The Future of Ratings” and examines “how rating agencies gained so much power, helped tank the economy and figure into the future of risk assessment.”

I’m not going to pretend that I knew just how much play rating agencies would be getting in August when I commissioned the piece a few months ago. I’m many things, but clairvoyant is not one of them. But the piece speaks to many of the questionable issues surrounding the ratings world that have been curiously dormant in the mainstream media for years until recently.

A wonderful writer, Lori Widmer, did a fine job so please do give it a read.

Risk Management Magazine and Risk Management Monitor. Copyright 2011 Risk and Insurance Management Society, Inc. All rights reserved.

Supreme Court Affirms Clear and Convincing Standard of Patent Invalidity Proof

Posted on July 26, 2011 in the National Law Review an article by Jeremiah Armstrong and Paul Devinsky of  McDermott Will & Emery regarding the Supreme Court of the United States’ decision to  unanimously reject Microsoft’s plea to modify the clear and convincing evidence standard of proof required to invalidate a patent.

Delivering what is likely the final blow to its battle against a $240 million infringement judgment, the Supreme Court of the United States unanimously rejected Microsoft’s plea to modify the clear and convincing evidence standard of proof required to invalidate a patent. Microsoft v. i4i, Case No. 09-1504 (Supr. Ct., June 9, 2011) (Justice Sotomayor) (Justices Breyer and Thomas, concurring).

The appeal stems from a 2009 jury verdict that certain versions of Microsoft Word were found to infringe plaintiff i4i’s patent related to editing and formatting XML documents. Microsoft challenged the validity of the patent, based on the §102(b) on-sale bar, citing i4i’s sales of a software product called S4 more than a year before applying for the asserted patent. The S4 product was never presented to the U. S. Patent and Trademark Office (USPTO) examiner.

The U.S. Court of Appeals for the Federal Circuit squarely rejected Microsoft’s argument that the jury should have been instructed to apply a preponderance of the evidence standard of proof to the issue of patent invalidity. The Federal Circuitalso rejected Microsoft’s request to reduce the willful damages award, partially due to Microsoft’s failure to file a pre-verdict judgment as a matter of law (JMOL).

History

Microsoft petitioned the Supreme Court for certiorari to consider whether an accused infringer that challenges patent validity based on prior art not considered by the USPTO during prosecution must overcome the 35 U.S.C. §282 presumption of validity by “clear and concurring evidence” or whether some lower standard of proof will suffice (see IP Update, Vol. 13, No. 12).

The “clear and concurring” standard of proof has been used by Federal Circuit since its pronouncement in the seminal 1984 case, American Hoist & Derrick v. Sowa & Sons. Prior to the 1982 establishment of the Federal Circuit, most of the regional courts of appeal applied the less differential “preponderance” standard to the issue. However, the Federal Circuit, in setting its rule, took note of the “the deference that is due to a qualified government agency presumed to have properly done its job.”

Microsoft, in its certiorari petition, was supported for review of the Federal Circuit standard of proof by 11 amici representing major corporations, law professors and trade associations. Most of the amici faulted the deference given to the USPTO examiners who have limited time and resources for the examination of any particular application, who examine applications on a strictly ex parte basis and who only infrequently consider non-patent prior art publication or prior products. The amici also note that juries already tend to give undue deference to the decision of the USPTO in issuing a patent, especially in cases where the technology is complex.

Microsoft and the amici characterized the Federal Circuit rule as inflexible and another “bright line” test, a characterization that has resulted in the reversal of several Federal Circuit rulings in recent history, including the KSR obviousness case; a case in which the Supreme Court, in dicta, noted that the rational for showing deference to the USPTO was “much diminished” where the prior art in issue was not before the examiner.

Supreme Court Decision

In its analysis, the Supreme Court considered whether §282 established the standard of proof for invalidity as requiring clear and convincing evidence given the statutory language that a “patent shall be presumed valid” and “[t]he burden of establishing invalidity … rest[s] on the party asserting such invalidity.” While §282 does not explicitly state an invalidity standard, the Supreme Court explained that the language used when the statute was enacted in 1952 was synonymous with the clear and convincing evidence standard that was part of the recognized common law, as described by Justice Cardozo in Radio Corp. of America v. Radio Engineering Laboratories, Inc. Accordingly, the Supreme Court deferred to the opinion of Judge Rich, a primary author of the 1952 Patent Act, in American Hoist & Derrick, where he wrote that under §282 the “burden is constant and never changes and is to convince the court of invalidity by clear evidence.”

The Supreme Court said this strict invalidity standard always applies, even when evidence before the fact-finder was not previously available to the USPTO during the examination process: “[H]ad Congress intended to drop the heightened standard of proof where the evidence before the jury varied from that before the PTO—and thus to take the unusual and impractical step of enacting a variable standard of proof that must itself be adjudicated in each case —we assume it would have said so expressly.”

However the Supreme Court did suggest the use of tailored jury instructions: “When warranted, the jury may be instructed to consider that it has heard evidence that the PTO had no opportunity to evaluate before granting the patent” and “may be instructed to evaluate whether the evidence before it is materially new, and if so, to consider that fact when determining whether an invalidity defense has been proved by clear and convincing evidence.”

Notably, the Supreme Court recognized that new evidence not considered by the USPTO during examination—like the S4 software product in issue here—may “carry more weight” at trial (i.e., “the challenger’s burden to persuade the jury of its invalidity defense by clear and convincing evidence may be easier to sustain”) and, citing its earlier KSR decision, conceded that where prior art was not before the USPTO, “the rational underlying the presumption—that the PTO, in its expertise, has approved the claim—seems much diminished.” As the Supreme Court explained, “if the PTO did not have all of the material facts before it, its considerable judgment may lose considerable force. And, concomitantly, the challenger’s burden to persuade the jury of its invalidity defense by clear and convincing evidence may be easier to sustain.”

© 2011 McDermott Will & Emery

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

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

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

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

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

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

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

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

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

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

© 2011 BARNES & THORNBURG LLP

Global LPO Conference, U.S. – Buyers and Vendors Meet -June 15-16 Grand Hyatt – New York, NY

This conference aims to bring together law firm leaders such as partners, general counsels and other potential stakeholders in the LPO industry to share practical experiences in the nascent services for clients. The New York meeting will focus on how to implement the human and social capital for the benefit of the industry at large. 

The Global LPO Conference – Buyers and Vendors Meet in USA is an event to develop the business relationship of both buyers and vendors. This event will address genuine transformation of the outsourcing landscape from theoretical to practical. Leading authorities from global legal associations will assess the impact of changing policies in the legal offshoring industry. Key law firm partners and general counsel will give their thoughts and apprehensions about offshoring work to countries like India, Philippines, South Africa and others. LPO veterans, on the other hand, will have the opportunity to address those concerns and help buyers find the best possible legal support. Global lawyers and general counsel will learn how to prepare case presentations to win over their boards of management.

For more Information – Please Click Here:

EPA, Clean Air Act & Climate Change: Consider the Facts

This week’s guest blogger at the National Law Review is Jon D. Sohn of  McKenna Long & Aldridge LLP.  Jon provides a great overview of some recent hearings and proposed legislation impacting greenhouse gas regulations at both the state and federal levels:

The U.S. Environmental Protection Agency (EPA) has taken a lot of hits from those opposed to greenhouse gas regulations in the past week.  In the House of Representatives, tough hearings led by U.S. Rep. Ed Whitfield, (R-KY), Chairman of the House Subcommittee on Energy, were held with EPA Administrator Lisa Jackson. Jackson’s testimony followed that of lead witness Senator James Inhofe (R-OK) who promoted his upcoming book, “The Hoax,” which takes aim at the science of climate change.  The House subsequently passed an amendment to the proposed Continuing Resolution that would strip EPA of its authority to regulate GHG emissions and significantly decrease funding for environmental and clean energy programs. Meanwhile, outside of Washington, D.C., the first two permits considered by EPA suggest cleaner facilities and job creation can be compatible with new regulations as opposed to some of the concerns expressed in the hearings and continuing resolution.

This past week, South Dakota issued a draft permit for Best Available Control Technology for greenhouse gases under the Clean Air Act (CAA) to the Hyperion Energy Center. Project owners describe the facility as a “HEC is a 400,000-barrel per day (BPD) highly-complex, full-conversion refinery which will produce clean, green, transportation fuel such as ultra-low sulfur gasoline (ULSG) and ultra-low sulfur diesel (ULSD).” South Dakota regulatory officials found that significant energy efficiency improvements to the refinery were the most cost-effective manner to move forward.  The officials considered carbon capture & storage as an alternative path, but decided that while the technology is technically feasible it is not cost-effective or environmentally appropriate in this instance.  EPA will now have 30-days to review the decision, but don’t expect any radical changes to the State-level decision. Construction will create an estimated 4,500 jobs and when finished, 1,826 permanent jobs will be created for the ongoing operation of the refinery and associated utility plant according to company officials.

In Louisiana, State regulators recently approved an air quality construction and operating permit that includes emissions control requirements for greenhouse gases as well.  The permit clears the way for an iron production facility, the initial phase of the construction of a larger Nucor iron and steelmaking facility in St. James Parish. Under the permit granted, the greenhouse gas limits rely on energy efficiency measures and set a 13 million British thermal units of natural gas per metric ton of direct reduced iron. State regulators estimate the plant will emit 3.39 million metric tons of carbon dioxide per year.  500 construction jobs and 150 permanent jobs will be created according to Nucor, although they would like the facility to be larger and note regulatory uncertainty as a cause of concern. On the other hand, some environmental groups including the Tulane Law Clinic may challenge that the permit is not strict enough. EPA will now conduct a review here as well.

Congress would be well-advised to consider these case studies as it moves forward in its deliberations.

© 2011 McKenna Long & Aldridge LLP

FTC’s Recent Proposal for Protecting Consumer Privacy Online-"Creepy" is the new "Cool" and How to Make Sure It Stays That Way

From David A. Broadwin of Foley Hoag LLP – some predictions about how the FTC and Congress are going to handle information tracking issues.

The other day at Mass TLC’s Mobility Summit I had a brief conversation with Mark Herrmann (an entrepreneur here in Boston) that touched on the FTC’s recent proposal for protecting consumer privacy online.  We were talking about the “do not track” proposal and the consensus in the tech industry that it just won’t fly.

Mark’s comment:

“It is creepy that ‘they’ can and do track you out in the net, but ‘creepy is the new cool.’”

There is just no question that some people accept the fact that they are being tracked and fed targeted online advertising.  It is not just OK by them; it’s a value add.  I don’t disagree.

But, for anyone who has read “1984” (and even a lot of people who haven’t) the notion of being tracked is creepy.  There are a lot of these folks – perhaps a significant majority of the U.S. population – that feel this way.

In 2011 the FTC and Congress are going to pay attention to these concerns. It is good politics.

Prediction #1:

Legislation in this area will be one of the few places where we will see bipartisan consensus in the next Congress.

Why: No Congressperson wants to be opposed to consumer privacy, and they all want to have supported some legislation that passed, when running in the next election.

Mark (and others) made the point that if you really end tracking, you will end Facebook.  So, whatever happens it won’t be that.  However, the political snowball is rolling down the mountain – there will be regulatory activity around consumer privacy.

The only question is: What will be the nature and scope of the activity?

The big boys (those with well established businesses that either make money or have ready access to capital) are going to be lobbying hard for a regulatory framework that does not dent their current business model.

Prediction #2:

The big boys will fight anything that disrupts tracking and they are going to win this battle – no one in Congress wants to run on the platform that they put Facebook (or others) out of business.

But the big boys are going to have to trade something.  The easy things for them to trade are procedural protections for the consumer.

  • The FTC wants the industry to adopt “privacy by design” principles.  This means that companies should adopt internal processes to promote consumer privacy and security protections into their daily practices and to consider privacy issues at every stage of design and development of products and services.
  • The FTC wants the industry to make consumer data more available to consumers.  This means allowing for increased consumer access to data collected.

Prediction #3:

The big boys will trade lots of procedural protections for the consumer to prevent substantive regulation that will directly affect their business models.

Why: The big boys can afford the administrative burden implicit in procedural protections.  It is just a matter of more money, more people and more oversight.  A company that is well established and profitable or that has easy access to capital can afford to write the code, hire an army of new engineers, consultants, lawyers etc. and create an entire Department of Privacy Compliance and Protection.

In fact, to the extent that having to do all that makes it harder for start-ups, it may even be helpful to the established companies.

Some folks I talk to have expressed real concern about this looming regulatory push and how it might affect the entire ecosystem for digital media start-ups.

There is still a chance to influence the inevitable regulation that is upcoming and I am working on assembling a group of industry leaders to do just that.  I recently sent out a letter (here’s a link) to people I thought might be concerned enough to actually do something.

Read it and let me know what you think.

Copyright © 2010 Foley Hoag LLP. All rights reserved.

All About Financing the Startup Company -Starting a New Company These Days in Quite The Headwind…..

For those who may know and love us – The National Law Review is all about the start-up company as we were founded by a few “recessionaires” a few years back with elan resources and an ever growing brood of kids. 

In a world where folks are encouraging you to live your dreams and be all that you can be, we’ve come across very few concrete, actionable resources for small business financing.   We attended the SBA Workshops and even some financing resources designed for women entrepreneurs- while these resources offer much information – it’s somewhat disheartening when more than once it’s been suggested that you should be volunteering to teach there.

Accordingly, we’d like to give a shout out to some of the better resources we’ve come across recently which go beyond  having a balance sheet a marketing plan- for those who may be into that sort of thing: