Category: Uncategorized

Update to Price Gouging Prohibitions in Disaster Zones in California

California’s 2017 wildfire season – which caused at least 47 deaths, and destroyed approximately 1.4 million acres of land and 11 thousand structures – was unprecedented at the time, both in scope and destruction. Following the 2017 wildfire season, the pricing of consumer goods and services – which is normally best left to the marketplace under ordinary conditions – experienced abnormal market disruptions, both at the state and local-levels. This led to increased complaints of unlawful “price gouging” for goods and services offered in markets affected by wildfires, including rental housing.

As a result, in January, 2018, the California Committee on Public Safety introduced Assembly Bill (AB) 1919, which amends §396 of the CA Penal Code (California’s price gouging statute).

AB 1919 went into effect on January 1, 2019, and applies to owners/landlords of residential homes, as well as owners of multifamily and hotel properties. Following is a summary of a number of significant restrictions on residential landlords’ ability to increase rents following a disaster under the new law.

PRIOR LAW DID NOT COVER NEW RENTAL UNITS

Under prior law, following a declared state of emergency (either at the State or local level), an owner/landlord could not increase an existing tenant’s rent by more than 10% for a period of 30 days following the declared state of emergency. The prior law did not, however, cover new rental units coming on line during or immediately following a declared state of emergency, nor did it address when (i) a declared state of emergency was extended, or (ii) the Governor or another local authority extended the prohibition on price gouging during a declared state of emergency (both of which happened in each of the past two California wildfire seasons).

Following the 2017 wildfires, these “loopholes” resulted in numerous complaints of unlawful price gouging, with owners of residential housing exploiting the marketplace/displaced residents by increasing existing tenants’ rents by up to 35% following the expiration of the initial 30-day period, or relocating from their homes and offering the same as rental housing at well-above market rent prices. AB 1919 seeks to close such loopholes.

NEW LAW LIMITS THE INCREASE OF RENT ON NEW AND EXISTING UNITS

Under the new law, following a declared state of emergency, an owner/landlord cannot (i) increase an existing tenant’s “rental price” by more than 10% of the then-current rent, or (ii) increase the “rental price” advertised or offered to prospective tenants by more than 10% of the “rental price” advertised or offered to prospective tenants prior to the declared state of emergency, in each case for a period of 30 days following the declared state of emergency or for any period of time that such declaration is extended.

The statutory definition of “Rental Price”, which provides guidance on the various caps on rent increases, is as follows:

  1. For housing rented within one year prior to the declaration of emergency, the “Rental Price” is the actual rent paid by the existing or prior tenant.
  2. For housing not rented at the time of the declaration, but rented, or offered for rent, within one year prior to the declaration, the “Rental Price” is the most recent rent offered before the declaration.
  3. For housing rented at the time of the declaration but which (i) becomes vacant during the declaration, and (ii) is subject to any local ordinance/rule that establishes a maximum amount that a landlord may charge a tenant [e.g., rent control], the “Rental Price” is the greater of (A) the actual rent paid by the prior tenant, or (B) 160% of the “Fair Market Rents” (FMRs) established by the U.S. Department of Housing and Urban Development (FMRs for all counties are posted on the HUD website).
  4. For housing not rented and not offered for rent within one year prior to the declaration, the “Rental Price” is 160% of fair market rent per HUD.

Note that the new law allows owners/landlords to increase the cap on rent increases from 10% to 15% under certain circumstances, including if such owners/ landlords incur costs for furnishing previously un-furnished rental units.

Note also that the new law prohibits vendors or suppliers of building materials (i.e., lumber, construction tools, windows, and anything else used in the building or rebuilding of property) from increasing the cost of such materials by more than 10% for a period of 30 days following a declared state of emergency (with certain exceptions for actually-incurred costs).

In addition, the new law prohibits contractors working on residential or commercial projects from increasing prices for any repair or reconstruction services (i.e., any services performed by a licensed contractor for repairs to residential or commercial property of any type that is damaged as a result of a disaster) by more than 10% for a period of 180 days following a declared state of emergency (again, with certain exceptions for actually-incurred costs).

PENALTIES

Failure to comply with §396 of the Penal Code is a misdemeanor offense and can result in various penalties, including fines of up to $10,000 and up to one year’s imprisonment, in addition to injunctive relief and civil penalties.

CONCLUSION

Given the recent increase in wildfires throughout the state, commercial landlords and investors/developers of multifamily or hotel properties that are active and/or interested in becoming active in wildfire-prone California markets (e.g., Napa, Sonoma, Butte, Lake, Mendocino, Nevada and Yuba Counties, based off of prior declared states of emergency), should be cognizant of the new limits imposed on rent increases by AB 1919.

© 2010-2019 Allen Matkins Leck Gamble Mallory & Natsis LLP
Read more legal news from California on our California Jurisdiction page.

Using Prior FCC Rulings and Focusing on Human Intervention, Court Finds Texting Platform Is Not An ATDS

In today’s world of ever-conflicting TCPA rulings, it is important to remember that, where courts are asked to determine the TCPA’s ATDS definition, their inquiry will revolve around the question of whether that definition includes only devices that actually generate random or sequential numbers or also devices with a broader range of functionalities.  However, it is also important to remember that, when courts are trying to determine whether a calling/text messaging system meets the ATDS definition, focusing on the level of human intervention used in making a call or sending a text message is a separate decisive inquiry that also must be made.

As we’ve previously mentioned, this latter inquiry is important in all types of TCPA cases, but recently the issue has been given special attention in cases regarding text messages and text messaging platforms.  Indeed, this happened again yesterday when the court in Duran v. La Boom Disco determined a nightclub’s use of text messaging did not violate the TCPA because of the level of human involvement exhibited by the nightclub in operating the software and scheduling the sending of messages.

Background

In Duran v. La Boom Disco, the United States District Court for the Eastern District of New York was tasked with analyzing the ExpressText and EZ Texting platforms, which are text messaging software platforms offered to businesses and franchises, whereby the business can write, program, and schedule text messages to be sent to a curated list of consumer mobile phone numbers.

At first glance, the facts in Duran appear to signal a slam dunk case for the plaintiff.  The defendant nightclub had used the ExpressText and EZ Texting platforms to send marketing text messages to the plaintiff after he replied to a call-to-action advertisement by texting the keyword “TROPICAL” to obtain free admission to the nightclub for a Saturday night event.  Importantly, though, after the plaintiff texted this keyword, he never received a second text messaging asking whether he consented to receive recurring automated text messages (commonly referred to as a “double opt-in” message).  He did, however, receive approximately 100 text messages advertising other events at the nightclub and encouraging him to buy tickets, which ultimately led him to bring a TCPA action against the club.

Accordingly, the initial issue that the Duran court was tasked with deciding was whether the defendant nightclub had texted the plaintiff without his prior express written consent.  The court quickly dispensed with it, determining that the nightclub had not properly obtained written consent from the plaintiff, as it had failed to use a double opt-in process to ensure the plaintiff explicitly agreed to receive recurring automated marketing text message and could not otherwise prove that the plaintiff explicitly consented to receiving recurring messages or a marketing nature (which, under the TCPA, the nightclub had the burden to prove).

At this stage, then, things were looking bad for the nightclub.  However, this was not the end of the court’s analysis, as the nightclub could only be liable for sending these non-consented-to messages if they had been sent using an ATDS.  Thus, the court turned to its second – and much more important – line of inquiry: whether the ExpressText and EZ Texting software, as used by the nightclub to text the plaintiff, qualified as an ATDS.

Defining the ATDS Term in the Aftermath of ACA International

In order to determine whether the ExpressText and EZ Texting platforms met the TCPA’s ATDS definition, the court performed an analysis that has become all too common since the FCC’s 2015 Declaratory Order was struck down in ACA International: determining what the appropriate definition of ATDS actually is.  With respect to this issue, the litigants took the same positions that we typically see advanced.  The plaintiff argued that the ExpressText and EZ Texting platforms were the equivalent of “predictive dialers” that could “dial numbers from a stored list,” which were included within the TCPA’s ATDS definition.  The Nightclub countered that predictive dialers and devices that dialed from a database fell outside of the ATDS definition, meaning the nightclub’s use of the ExpressText and EZ Texting platforms should not result in TCPA liability.

The court began the inquiry with what is now the all-too-familiar analysis of the extent to which the D.C. Circuit’s opinion in ACA International invalidated the FCC’s prior 2003 and 2008 predictive dialer rulings.  After examining the opinion, the court found that those prior rulings still remained intact because “the logic behind invalidating the 2015 Order does not apply to the prior FCC orders.”  The court then concluded that, because the 2003 and 2008 ATDS rulings remained valid, it could use the FCC’s 2003 and 2008 orders to define the ATDS term, and that, based on these rulings, the TCPA also prohibited defendants from sending automated text messages using predictive dialers and/or any dialing system that “dial numbers from a stored list.”

However, the fact that the ExpressText and EZ Texting platforms dialed numbers from a stored list did not end the inquiry since, under the 2003 and 2008 orders, “equipment can only meet the definition of an autodialer if it pulls from a list of numbers, [and] also has the capacity to dial those numbers without human intervention.”  And it was here where the plaintiff’s case fell apart, for while the ExpressText and EX Texting platforms dialed from stored lists and saved databases, these platforms could not dial the stored numbers without a human’s assistance.  As the court explained:

When the FCC expanded the definition of an autodialer to include predictive dialers, the FCC emphasized that ‘[t]he principal feature of predictive dialing software is a timing function.’  Thus, the human-intervention test turns not on whether the user must send each individual message, but rather on whether the user (not the software) determines the time at which the numbers are dialed….  There is no dispute that for the [ExpressText and EZ Texting] programs to function, ‘a human agent must determine the time to send the message, the content of the messages, and upload the numbers to be texted into the system.’

…

In sum, because a user determines the time at which the ExpressText and EZ Texting programs send messages to recipients, they operate with too much human involvement to meet the definition of an autodialer.

Human Intervention Saves the Day (Again)

In Duran, the district court made multiple findings that would ordinarily signal doom for a defendant: it broadly defined the ATDS term to include predictive dialers and devices that dialed numbers from a stored list/database and it found the nightclub’s text messages to have been sent without appropriately obtaining the plaintiff’s express written consent.  However, despite these holdings, the nightclub was still able to come out victorious because of the district court’s inquiry into the human intervention issue and because the ExpressText and EZ Texting platforms the nightclub used required just enough human involvement to move the systems into a zone of protection.  In many ways, this holding – and the analysis employed – is unique; however, with respect to the focus on the human intervention requirement, the district court’s decision can be seen as another step down a path that has been favorable to web-based text messaging platforms.

Indeed, over the course of the last two years, several courts have made it a point to note that the human intervention analysis is a separate, but equally important, determination that the court must analyze before concluding that a device is or is not an ATDS.  With respect to the text-messaging line of cases, this has especially been the case, with numerous courts noting that, no matter whether the ATDS definition is or is not limited to devices that randomly or sequentially generate numbers, the numbers must also be dialed without human intervention.  What is interesting, though, is that the courts that have interpreted this line of cases have focused on different actions as being the key source of human intervention.

As we already discussed, the court in Duran noted that the key inflection point for determining whether human intervention exists is based off of the timing of the message and whether a human or the device itself gets to determine when the text message is sent out.  And in Jenkins v. mGage, LLC, the District Court for the Northern District of Georgia reached a similar conclusion, finding that the defendant’s use of a text messaging platform involved enough human intervention to bring the device outside of the ATDS definition because “direct human intervention [was] required to send each text message immediately or to select the time and date when, in the future, the text message will be sent.”  The District Court for the Middle District of Florida also employed this line of thinking in Gaza v. Auto Glass America, LLC, awarding summary judgment to the defendant because the text messaging system the company employed could not send messages randomly, but rather required a human agent to input the numbers to be contacted and designate the time at which the messages were to be sent.

In the case of Ramos v. Hopele of Fort Lauderdale, however, the District Court for the Southern District of Florida found a separate human action to be critical, focusing instead on the fact that “the program can only be used to send messages to specific identified numbers that have been inputted into the system by the customer.”  And another court in the Northern District of Illinois echoed this finding in Blow v. Bijora, Inc., determining that, because “every single phone number entered into the [text] messaging system was keyed via human involvement … [and because] the user must manually draft the message that the platform will sent” the text messaging platform did not meet the TCPA’s ATDS requirements.

Indeed, with the entire industry still awaiting a new ATDS definition from the FCC, there is still much confusion as to how the ATDS term will be interpreted and applied to both users of calling platforms and users of texting platforms.  Fortunately, though, there appears to be a trend developing for text message platforms, with multiple courts finding that human intervention is a crucial issue that can protect companies from TCPA liability.  Granted, these courts have not yet been able to agree on what human action actually removes the platform from the ATDS definition, and, as we’ve noted previously, even if human intervention remains the guiding standard, determining precisely what qualifies as sufficient intervention and when in the process of transmitting a message the relevant intervention must occur remains much more an art than a science.  However, the cases mentioned above are still useful in pointing marketers everywhere in the right direction and present guidelines for ensuring they send text messages in compliance with the TCPA.

 

Copyright © 2019 Womble Bond Dickinson (US) LLP All Rights Reserved.
Read more news on the TCPA Litigation on the National Law Review Communication type of law page.

Wyoming Cements Position as Leading U.S. Jurisdiction for Blockchain with Sweeping New Legislation

In its most recent legislative sessions, Wyoming has undertaken substantial efforts to build on the momentum created by its 2018 enactment of legislation friendly to the blockchain and digital assets industries. In the months that followed that enactment, industry participants and legislators alike ascertained that further reforms and legislation were needed to cement Wyoming’s position as the leading jurisdiction in the sector. Through the public comment and legislative meeting protocols unique to Wyoming, eight blockchain-related bills made it to the floor of the legislature for a vote, all of which were passed and are now poised to become law.

Wyoming’s latest wave of blockchain legislation is, in sum, intended to facilitate the creation of blockchain ventures within the state and to further cement Wyoming’s status as the leading corporate jurisdiction in the United States for blockchain-related ventures.

HB 74- Special purpose depository institutions

In what is perhaps the most groundbreaking legislation among the bills passed, the Wyoming legislature recognized that blockchain businesses in general have difficulty opening and maintaining traditional banking relationships due to FDIC and OCC inclusion of blockchain ventures in the same buckets as firearms and cannabis. Wyoming now will permit corporate entities to charter “special purpose depository institutions,” which will perform all traditional bank functions except for lending. With the lending exclusion, these institutions will be under the primary supervision of the Wyoming Banking Commission and not the federal government. These banks will be required to maintain at least 100 percent of reserves against deposits as well as (a) $5 million of capital, (b) three years of operating expenses and (c) private insurance against theft, cybercrime and other wrongful acts.

SF 125- Digital assets (UCC & Custody)

Custody of digital assets has been a global challenge for investors and industry participants. Wyoming has addressed this concern by specifically authorizing banks (including special purpose ones under HB 74) to hold digital assets in custody under their charter trust powers and in accordance with Rule 206-4(2) of the Investment Advisers Act of 1940. In addition, Wyoming amended its provisions of the Uniform Commercial Code to facilitate the custody of these assets along with the means by which security interests may be perfected. Wyoming is now the only U.S. state with comprehensive UCC provisions to address digital assets, which makes it a favorable jurisdiction for those lending or securing funds through digital assets.

HB 57- Financial technology sandbox (includes reciprocity for overseas regulators)

Those entrepreneurs in the blockchain industry who may require special treatment or waivers of unclear regulation in Wyoming may now seek to avail themselves of a “regulatory sandbox” much akin to the one enacted in Arizona last year. Use of the “sandbox” will require applications to state agencies that may have interests in the requested waiver, including the Wyoming Banking Commission and the Wyoming Securities Commission. The “sandbox” will provide a two-year period of relief from legislation for those ventures, all of which must be domiciled and operating within Wyoming.

HB 62- Utility token amendments

Wyoming broke ground in 2018 with its widely reported utility token “exemption” for digital assets having a pure utility function and were not created for investment purposes or for trading on exchanges. Amendments to this legislation were made to further clarify the definition of “utility token” and define when parties may properly seek a token utility designation from Wyoming authorities.

HB 70- Commercial filing system

Wyoming has legislatively determined that records maintained by the Wyoming Secretary of State, including corporate formation records, are to be implemented on blockchain media. In combination with the Series LLC legislation enacted in Wyoming last year, this provision will provide the basis for the swift formation of corporate entities and other related corporate records through blockchain.

HB 185- Tokenized corporate stock

In recognition of the migration of the blockchain industry from “initial coin offerings” to “security tokens,” Wyoming enacted legislation authorizing and permitting the creation of digital assets that represent certificated shares of stock. A “certificate token” under this legislation has been defined as “a representation of shares” that is (a) entered into a blockchain or other secure, auditable database, (b) linked to or associated with the certificate token and (c) electronically transmittable to the issuing corporation, the person to whom the certificate token was issued and any transferee.

HB 113- Special electric utility agreements

Given that Wyoming utilities produce some of the cheapest and most abundant electricity in the United States, Wyoming has through HB 113 enabled those utilities to negotiate power rates with blockchain companies (including miners) and others without approval from Wyoming’s Public Utility Commission.

SF 28- Electronic bank records

This legislation enables banking institutions to issue securities and maintain corporate records on blockchain to an extent not permitted by other provisions of Wyoming law. In particular, this provision allows for the creation of non-voting shares of Wyoming banking institutions in tokenized form.

Summary

In short, Wyoming has further honed its regulatory ecosystem to become the most blockchain-friendly jurisdiction in the United States. While all legislation will be effective as of July 1, 2019, it should be noted that many blockchain industry participants are already undertaking significant efforts to take advantage of the opportunities this legislation presents. Blockchain companies in United States and abroad should carefully examine Wyoming’s new blockchain legislation with counsel to ascertain suitable business opportunities.

 

© 2019 Wilson Elser
This post was written by Robert V. Cornish Jr. of Wilson Elser.
Read more news about Blockchain on the National Law Review’s Finance Type of Law Page.

California AG Announces Amendment to the CCPA

On February 25, 2019, California Attorney General Xavier Becerra and Senator Hannah-Beth Jackson introduced Senate Bill 561, legislation intended to strengthen and clarify the California Consumer Privacy Act (CCPA), which was enacted in June of 2018. If enacted, this would be the second amendment to the CCPA, following an earlier amendment in September of 2018 that Governor Jerry Brown signed into law Senate Bill 1121, which also clarified and strengthened the original version of the law.

As we reported previously, the CCPA will apply to any entity that does business in the State of California and satisfies one or more of the following: (i) annual gross revenue in excess of $25 million, (ii) alone or in combination, annually buys, receives for the business’ commercial purposes, sells, or shares for commercial purposes, alone or in combination, the personal information of 50,000 or more consumers, households, or devices, or (iii) derives 50 percent or more of its annual revenues from selling consumers’ personal information. Under the CCPA, key consumer rights will include:

  • A consumer’s right to request deletion of personal information which would require the business to delete information upon receipt of a verified request;
  • A consumer’s right to request that a business that sells the consumer’s personal information, or discloses it for a business purpose, disclose the categories of information that it collects and categories of information and 3rd parties to which the information was sold or disclosed;
  • A consumer’s right to opt-out of the sale of personal information by a business and prohibiting the business from discriminating against the consumer for exercising this right, including a prohibition on charging the consumer who opts-out a different price or providing the consumer a different quality of goods or services, except if the difference is reasonably related to value provided by the consumer’s data.

SB 561’s amendments include:

  • Expands a consumer’s right to bring a private cause of action. Currently, the CCPA provides consumer a private right of action if their nonencrypted or nonredacted personal information is subject to an unauthorized access and exfiltration, theft, or disclosure because the covered business did not meet its duty to implement and maintain reasonable safeguards to protect that information. The amendment broadens this provision to grant consumers a private right of action if their rights under the CCPA are violated.
  • Removes language that allows businesses the opportunity to cure an alleged violation within 30-days after being notified of alleged noncompliance.
  • Removes language allowing a business or third party to seek the opinion of the Attorney General for guidance on how to comply with the law. Instead, the amendment specifies that the Attorney General may publish materials that provide businesses and others with general guidance on how to comply with the law.

With an effective date of January 1, 2020 (and regulations not yet proposed), it is expected that additional amendments will be negotiated, drafted, and published. Last month, the California Attorney General’s Office began the CCPA rulemaking process with a six-part series of public forums, allowing all interested persons the opportunity to provide their comments on the new law.

SB 561 comes just days after the AG Becerra together with Assemblymember Mark Levine announced Assembly Bill 1130 to strengthen California’s existing data breach notification law. No doubt, California is leading the way in U.S. data privacy and security law.

Jackson Lewis P.C. © 2019.

This post was written by  Joseph J. Lazzarotti   , Jason C. Gavejian and Maya Atrakchi

One-Two Punch for NJ Employers: State Enacts Minimum Wage Rate Increases and Expands Paid Family Leave Insurance Benefits

New Jersey’s minimum wage rates will steadily climb to $15 per hour, and both the duration and amount of the state’s paid family leave insurance benefits will significantly increase, under two recently enacted laws.

New Minimum Wage Rates

On February 4, 2019, Governor Murphy signed a bill that substantially increases the state’s minimum wage rate for non-exempt hourly workers.

Prior to the bill’s enactment, the state’s minimum hourly wage, as of January 1, 2019, was $8.85. With a few exceptions for seasonal workers (who work between May 1 and September 30), employees employed by a “small business” with fewer than six employees, and agricultural laborers, the minimum hourly wage will rise to $15.00 by January 1, 2024, in accordance with the following schedule:

7/1/19 $10.00
1/1/20 11.00
1/1/21 12.00
1/1/22 13.00
1/1/23 14.00
1/1/24 15.00

For seasonal workers and employees of small businesses, the minimum hourly wage rate increases will be more gradual and will not reach the $15.00 rate until January 1, 2026, based on the following schedule:

1/1/20 $10.30
1/1/21 11.10
1/1/22 11.90
1/1/23 12.70
1/1/24 13.50
1/1/25 14.30
1/1/26 15.00

It will take an even longer period of time for farm laborers to reach a minimum hourly wage rate of $15, given the following schedule:

1/1/20 $10.30
1/1/22 10.90
1/1/23 11.70
1/1/24 12.50

Any further minimum rate increases for farm laborers would be tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers (“CPI-W”).

New Jersey now joins three other states – California, New York and Massachusetts – as well as the District of Columbia in committing to minimum hourly wage rates that significantly exceed the current federal minimum hourly wage rate of $7.25.

Business groups in New Jersey have voiced two principal objections to the new minimum rates. First, the numbers threshold for meeting the “small employer” exception is relatively low – employers with six or more employees do not satisfy it. Second, the New Jersey statute, unlike the California and New York laws, makes no provision for suspending scheduled minimum hourly rate increases in the event of deteriorating economic conditions in the state.

Family Leave Enhancements

On February 19, 2019, Governor Murphy signed into law a bill that substantially expands the job-protected family leave requirements applicable to smaller employers under the New Jersey Family Leave Act (“FLA”), as well as expands the monetary benefits available under the paid family leave insurance (“FLI”) and temporary disability insurance (“TDI”) programs for employees employed in New Jersey.

Under the state’s leave and benefit programs (which must be coordinated with applicable federal requirements), an eligible employee may take time off from work and receive family insurance benefits during such leave to, among other things, care for a newborn child or a covered family member who is suffering from a serious health condition.

Effective immediately,

  • There no longer is a one-week waiting period before FLI benefits may be received.

  • Covered family members under the new law now include siblings, grandparents, grandchildren, and parents-in-law, as well as others related to the employee by blood or who have a “close association with the employee” which is equivalent to a family relationship (though evidence of same must be provided by the employee).

  • FLI benefits may also be taken by a covered employee while taking time off from work pursuant to the NJ Security and Financial Empowerment Act (“SAFE Act”), to assist a covered family member who is a victim of domestic or sexual violence.

  • An employer may not retaliate against an employee with respect to compensation, terms, conditions or privileges of employment because the employee took or requested any TDI or FLI benefits.

Effective June 30, 2019, NJ businesses employing at least 30 employees will be covered by the FLA and may not retaliate against employees returning from family leave by refusing to reinstate them, down from a 50 employee threshold.

Commencing July 1, 2020, the maximum duration of FLI leave benefits will increase from 6 to 12 weeks during any 12-month period; in cases of intermittent leave, the maximum FLI leave will increase from 42 days to 56 days. Further, the dollar amount of weekly FLI benefits will increase from two-thirds of a claimant’s average weekly wage to 85% of an employee’s average weekly wage, capped at $859 per week.

Although FLI benefits are funded entirely by employee contributions, NJ-based businesses have raised concerns that the broader eligibility for FLI leave, and the longer duration of such leaves, will increase business costs due to the need to pay more overtime wages to assure adequate staff coverage, or employ more temporary replacement workers, while eligible employees are out on leave. These increases may also lead to greater work load demands placed on regular employees who must cover while co-workers are out on such leave.

Employer Tips

NJ employers should assure that the wage rates they pay their employees meet the new NJ minimum wage rate thresholds.

Further, NJ employers should review and update their family leave policies to ensure that they comply with the requirements of the new law, which is complicated and substantially amends multiple existing laws.

 

© Copyright 2019 Sills Cummis & Gross P.C.

California Jury Rejects Employee’s Discrimination Claims Against Chipotle

Proving it still is possible to obtain a favorable jury verdict in California (see contrary evidence), a federal jury sided with Chipotle Mexican Grill last Wednesday in a case involving disability discrimination claims by former assistant store manager, Lucia Cortez.

Cortez alleged she suffered a miscarriage at work after years of trying to get pregnant, fell into a depression, and then needed extended medical treatment as a result. In response to her request for leave, her manager gave her 12 weeks of unpaid family medical leave. When Cortez later asked for another month off to “sort out a final doctor’s appointment,” her manager granted her one additional “courtesy week” of leave. Cortez then went behind her manager’s back and got her leave extended by another month by calling the employee benefits center.

Cortez failed to provide any medical documentation when she asked for the additional time off, while at the same time claiming that she might not be medically approved to return to work. When Chipotle informed Cortez that they were about to fill her position, she immediately asked to be put back on the schedule. Her manager refused to put her back on the schedule until she produced a doctor’s note certifying that she was able to return to work.

Cortez never sent Chipotle the required medical documentation and was thereafter fired, but was also told she could reapply for her job without losing any of her tenure or benefits. Instead of simply reapplying once she was able to return to work, Cortez sued Chipotle for discrimination based on an alleged mental disability and failure to accommodate.

Fortunately, the jury sided with Chipotle, finding that Cortez’s leave of absence and her alleged disability were not motivating factors in her termination. The jury found that her failure to return to work was the motivating factor for her discharge and that Chipotle had not failed to reasonably accommodate her alleged disability.

An employer can indeed require an employee to submit documentation from a health care provider, certifying that the employee is able to resume work following a medical leave (Cal. Code Regs. tit. 2 § 11091(b)(2)(E)). This case demonstrates, however, how complicated even a simple leave of absence situation can be in California and how easy it is for disgruntled employees to sue their employer – and to try to get a jury to second-guess the employer. The employer in this case no doubt incurred hundreds of thousands of dollars in costs and attorney’s fees in successfully defending against this action – none of which can be recovered from the employee who justifiably lost the case.

 

© 2019 Proskauer Rose LLP.
This post was written by Anthony J Oncidi and Cole D. Lewis of Proskauer Rose LLP.

The Real Estate Problem of Retail

The retail sky is falling.  At least that is how it appears from recent and unprecedented number of retailers filing for bankruptcy. From iconic stores such as Sears and Toys ‘R’ Us, to department stores such as Bon Ton, to mall stores including Brookstone, The Rockport Company, Nine West, among others.  The reasons given for such filings vary as much as their products but one theme seems to be constant — the inability of retailers to maintain “brick and mortar” operating expenses in the era of online shopping.  Accordingly, it appears that what some retailers actually have is a real estate problem.

Another troubling theme of many retail filings is the use of bankruptcy courts to achieve a quick liquidation of the company, rather than a reorganization.  Chapter 11 filings over the past several years have shown a dramatic shift away from a process originally focused on giving a company a “fresh start” to one where bankruptcy courts are used for business liquidation.  The significant increase in retail Chapter 11 cases and the speed at which assets are sold in such cases is disturbing and provides a cautionary tale for developers and landlords alike.  Indeed, such parties need to be extremely diligent in protecting their rights during initial negotiations as well as when these cases are filed, starting from day one, lest they discover that their rights have been extinguished by the lightning speed of the sale process.

Recent statics suggest that the average time to complete a bankruptcy sale is only 45 days from the petition date.  Moreover, under the Bankruptcy Code, and arguably, best practices, the sale will close shortly after court approval thereby rendering any appeal likely moot.  This leaves little time for parties to protect their rights.

Bankruptcy Code Section 363(f) permits a debtor to sell property free and clear of interests in the property if certain conditions are met.  Unlike a traditional reorganization, which requires a more engaging process, including a disclosure statement containing “adequate information,” a sale under Section 363 is achieved by mere motion, even though it results in property interests being entirely wiped out.  Not only are property rights altered by motion, rather than by an adversary proceeding or a plan process, but these sale motions are being filed in retail cases as “first day motions” and concluded in as short as a month and half.

Even more alarming is that the notice accompanying such motions can be ambiguous as to how it will impact parties such as developers who have multiple interests in retail/multi-use properties.  Often, the reference to the developer and its property is buried in a 20+ page attachment in 8 point font, listed in an order only the debtor (or its professionals) understands.  If that was not concerning enough, these notices are being served by a third-party agent who may not have access to the most updated contact information necessary to ensure that non-debtors are actually receiving the notices in time to properly protect their rights.  It is not uncommon for these notices to be inaccurately addressed and not be received until after an order is entered; an order which will undoubtedly contain a provision that notice was proper.

Notably, despite Section 363(f)’s reference solely to “interests” (the group of things that an asset may be sold free and clear of), these sales are commonly referred to as sales free and clear of “claims and interests.”  Lacking an actual definition, courts have expansively interpreted “interests” to include “claims.”  Indeed, it is now the norm for bankruptcy courts to enter extensive findings of fact and conclusions of law supporting 363 sales that extinguish every imaginable potential claim (rather than merely “interests”).  While consistent with the overall spirit of the Bankruptcy Code to promote maximization of value through the alienability of property, it comes at the expense of those holding an interest in that property, such as a mall or shopping center developer.

Fortunately, there are certain well-accepted exceptions to the courts’ expansive application of “interest.”  Courts generally limit a debtor’s attempt to use Section 363 to strip off traditional in rem interests that run with the land.  When faced with such attempts, courts routinely constrain the interpretation of the statute to block the sale free and clear of an in rem interest.

The majority of state laws have long treated covenants, easements, and other in rem interests that are said to “run with the land” as property interests.  Although clearly falling within the common definition of “interests,” courts routinely hold them not to be strippable interests for purposes of a Section 363(f), as being so ingrained in the property itself that they cannot be severed from it, or, alternatively, that the in rem interests are not included in Section 363(f)’s use of the term “interests.”

The protection afforded to in rem interests should provide forward-thinking transactional attorneys with a valuable opportunity to insulate many rights and remedies for their developer clients.  A hypothetical real estate transaction is illustrative — consider a transaction in which a developer sells two parcels to a large retailer as part of a retail/mixed use shopping center and takes back a long-term ground lease for one of the parcels. There are a number of methods available to document this deal: a sale-leaseback agreement; a separate contract to convey in the future secured by a lien; entry into a partnership, joint venture, or similar agreement. When analyzed with respect to the risk of a potential retailer bankruptcy, these mechanisms are inferior to the use of a reciprocal easement agreement (“REA”) or similar devise that creates an in rem property interest that runs with the land in favor of the developer.

If traditional contractual methods are used, the documents run the risk of being construed as executory contracts in the retailer’s subsequent bankruptcy case, subject to rejection, leaving the developer with only a prepetition claim.  A lien in favor of the developer would only marginally improve its position, as any lien will likely be subordinated to the retailer’s development financing and therefore of little value.  But, based on the current state of the law, a non-severable REA or similar document recorded against the retailer’s property will not be stripped off the property absent consent or a bona fide dispute. Thus, rights incorporated into a properly drafted and recorded REA provide the developer with a level of “bankruptcy-proofing” against a potential future retailer bankruptcy. Further, as REAs in mixed-use developments are the norm in the industry, they are likely to be accepted, if not embraced, by the retailer’s construction lender, making their adoption that much more likely.

The lesson is be forward thinking and be diligent.

© Copyright 2019 Squire Patton Boggs (US) LLP.

Trend to Watch: State Legislatures Target Restaurants for Mandatory Sexual Harassment Training

In the New Year, two states – New Jersey and Illinois – have proposed legislation requiring restaurants to adopt a sexual harassment training policy and provide anti-sexual harassment training to employees.  While it remains to be seen whether these bills will become law, attempts to target and reform working conditions in the hospitality industry are nonetheless noteworthy, particularly given that unlike New York and California, neither New Jersey nor Illinois have enacted broad legislation requiring private sector employers, regardless of occupation, to provide sexual harassment training to staff.

New Jersey Bill (A4831)

New Jersey Bill A4831 requires restaurants that employ 15 or more employees to provide sexual harassment training to new employees within 90 days of employment and every five years thereafter.  This training requirement would go into effect within 90 days of the law’s effective date.

As to the content of the training, the bill specifies that supervisors and supervisees receive tailored content relevant to their positions/roles that include topics “specific to the restaurant industry” in an “interactive” format, including practical examples and instruction on filing a sexual harassment complaint.  Implicitly recognizing the diverse nature of the hospitality workforce, the bill requires that such training must be offered in English and Spanish.

The bill would also require restaurants to adopt and distribute sexual harassment policies to employees (either as part of an employee handbook or as a standalone policy), though it does not prescribe the contents of such policies.

While the bill cautions that compliance with the act would not “insulate the employer from liability for sexual harassment of any current or former employee,” strict compliance is advisable as the bill creates fines for non-compliance – i.e., up to $500 for the first violation and $1,000 for each subsequent violation.

Illinois Bill 3351

Illinois Bill 3351, the proposed Restaurant Anti-Harassment Act, is broader than the proposed New Jersey legislation in that it applies to all restaurants regardless of the number of employees on staff.  Like its New Jersey analogue, this bill requires restaurants to adopt a sexual harassment policy and provide training to all employees.

The sexual harassment policy must contain the following elements:

(1) a prohibition on sexual harassment;

(2) the definition of sexual harassment under Illinois and federal law;

(3) examples of prohibited conduct that would constitute unlawful sexual harassment;

(4) the internal complaint process of the employer available to the employee;

(5) the legal remedies and complaint process through the Illinois Department of Human Rights;

(6) a prohibition on retaliation for reporting sexual harassment allegations; and

(7) a requirement that all employees participate in sexual harassment training.

Like New Jersey’s bill, the Illinois bill requires separate training for employees and for supervisors/managers, and delineates the topics to be covered in each training.  Specifically, the employee training must include: (i) the definition of sexual harassment and its various forms; (ii) an explanation of the harmful impact sexual harassment can have on victims, businesses, and those who harass; (iii) how to recognize conduct that is appropriate, and that is not appropriate, for work; (iv) when and how to report sexual harassment.   The supervisor training must include the aforementioned topics in addition to: (i) an explanation of employer and manager liability for reporting and addressing sexual harassment, (ii) instruction on how to create a harassment-free culture in the workplace, and an (iii) explanation of how to investigate sexual harassment claims in the workplace.  In addition to these requirements, the training programs must be offered in English and Spanish, be specific to the restaurant or hospitality industry and include restaurant or hospitality related activities, images, or videos, and be “created and guided by an instructional design model and processes that follow generally accepted practices of the training and education industry.”

If enacted, employees would need to receive training within 90 days after the effective date of the act or within 30 days of employment and every 2 years thereafter.

Like New Jersey, the Illinois bill contemplates a $500 fine for the first violation and a $1,000 fine for each subsequent violation.

Recommendation

Restaurants should carefully track the progress of these bills and be on the lookout for similar legislative efforts in other states.  Given that a number of states, including New York and California, already require all private employers (of a particular size) to provide sexual harassment training, restaurants operating in Illinois and New Jersey may want to move towards implementing a sexual harassment policy and training program sooner than later.

 

©2019 Epstein Becker & Green, P.C. All rights reserved.

In re Celexa and Lexapro – The First Circuit Weighs in on China Agritech and American Pipe Tolling

The Supreme Court meant what it said in China Agritech, Inc. v. Resh – that is the primary lesson from the First Circuit’s January 30th decision in In re Celexa and Lexapro Marketing and Sales Practices Litigation.  As my partner, Don Frederico, explained in a blog post last year, the Supreme Court observed in China Agritech that its prior ruling in American Pipe & Constr. Co. v. Utah “tolls the statute of limitations during the pendency of a putative class action, allowing unnamed class members to join the action individually or file individual claims if the class fails.”  China Agritech went on to hold that “American Pipe does not permit the maintenance of a follow-on class action past expiration of the statute of limitations.”  The First Circuit, in In re Celexa and Lexapro, rejected a plaintiff’s attempt to read China Agritech narrowly.

In re Celexa and Lexapro involved consolidated prescription drug marketing cases.  Plaintiffs asserted RICO and state-law claims, alleging that defendants fraudulently promoted antidepressant drugs for uses the FDA had not approved – referred to as “off-label” uses.  The same defendants had previously been named in a qui tam action that was unsealed in February 2009.  One of the plaintiffs, Painters, and Allied Trades District Council 82 Health Care Fund (“Painters”), sought certification of two classes of third party-payors that had paid for or reimbursed off-label prescriptions of Celexa or Lexapro. The district court denied class certification.

On appeal, the First Circuit – while brushing aside the district court’s concerns about individual issues of causation and injury – nevertheless affirmed the denial of class certification.  Judge Kayatta, writing for a unanimous panel, concluded that Painters had put forward evidence that could establish causation and injury on a class-wide basis.  He went on, however, to find that the class action was time-barred.

The Court first found that Painters’ individual claims were timely.  The Court concluded that the four-year statute of limitations was subject to the discovery rule and held that, as a matter of law, the limitations period began running in March 2009 after the qui tam action was unsealed.  Painters’ claim was timely because the running of the limitations period was stayed for eight months by a prior class action (the “N.M. UFCW case”).  Because Painters was a putative class member of that prior class action, American Pipe tolling applied to its claim during the pendency of the N.M. UFCW case.

Even though Painters’ own claim was timely, the Court nevertheless held that Painters’ class action was not.  As Judge Kayatta wrote,

China Agritech clarified that [American Pipe] tolling has limits: While a putative class member may join an existing suit or file an individual action upon denial of class certification, a putative class member may not commence a class action anew beyond the time allowed by the untolled statute of limitations.

The Court refused to limit China Agritech to situations in which class certification was denied in the earlier-filed class action.  Painters had argued that, unlike China Agritech, there was no substantive ruling on class certification in the N.M. UFCW case that had preceded Painters’ own action.  The First Circuit, however, held that the decision in China Agritech stood for the broad proposition that the “tolling effect of a motion to certify a class applies only to individual claims, no matter how the motion is ultimately resolved.  To hold otherwise would be to allow a chain of withdrawn class-action suits to extend the limitations period forever.”  The Court, therefore, affirmed the denial of class certification.

After In re Celexa and Lexapro, there is no doubt that China Agritech is no paper tiger in the First Circuit.  The rule is clear:  a class action does not toll the statute of limitations for subsequent class actions.

 

©2019 Pierce Atwood LLP.
This post was written by Joshua D. Dunlap of Pierce Atwood LLP.
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U.S.EPA Announces National “PFAS Action Plan”

The United States Environmental Protection Agency (U.S.EPA) acting Administrator, Andrew Wheeler, held a press conference at EPA Region III in Horsham, Pennsylvania on Feb. 14, 2019, to announce the U.S.EPA’s PFAS Action Plan. Wheeler indicated that similar announcements of and press conferences relating to the PFAS Action Plan were being held simultaneously in each of the U.S.EPA’s ten regional offices, underlying the importance of the announcement. Wheeler stated that the Agency’s plan was the most comprehensive cross-agency plan introduced by the U.S.EPA.

Acting Administrator Wheeler highlighted five key elements of the PFAS Action Plan:

  1. U.S.EPA has initiated actions to develop a Maximum Contaminant Level, or MCL, for PFAS, and specifically for two PFAS compounds, PFOS and PFOA, by the end of 2019. Wheeler stated that this would be the first substance to have an MCL established since the Safe Drinking Water Act was amended in 1996. Wheeler added that the U.S.EPA maintains that the 70 parts per trillion (ppt) standard is a federally enforceable groundwater standard, despite misconceptions to the contrary.

  2. U.S.EPA will continue to pursue enforcement actions utilizing the existing Health Advisory Level for PFAS of 70 ppt or 70 nanograms per liter.

  3. U.S.EPA will expand monitoring and data gathering related to PFAS, including adding PFAS to the toxics release inventory, which should generate additional information on the extent of PFAS in the industry and in the environment. Wheeler indicated that U.S.EPA is using enhanced mapping tools to identify where and in what communities PFAS is in the groundwater and in the environment.

  4. U.S.EPA will expand research into the impacts of PFAS on human health and the environment, studying fate and transport issues associated with PFAS. Wheeler stated that U.S.EPA wants to “close the gap” on the science related to PFAS, including the more recently manufactured perfluourinated compound known as “GenX”,

  5. U.S.EPA will develop a “risk communication toolbox” that will provide information to the public and the regulated community more clearly.

Copyright © 2019 Godfrey & Kahn S.C.
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