The National Law Forum

Meeting of the Minds at the Inbox: Some Pitfalls of Contracting via Email

This issue comes up regularly when informality creeps into negotiations conducted electronically, bringing up the age-old problem that has likely been argued before judges for centuries: one party thinks “we have a deal,” the other thinks “we’re still negotiating.” While email can be useful in many contract negotiations, care should be taken to avoid having to run to court to ask a judge to interpret an agreement or enforce a so-called “done deal.”

With limited exceptions, under the federal electronic signature law, 15 U.S.C. § 7001, and, as adopted by the vast majority of states, the Uniform Electronic Transactions Act (UETA), most signatures, contracts and other record relating to any transaction may not be denied legal effect solely because they arein electronic form. Still, a signed email message does not necessarily evidence intent to electronically sign the document attached to the email. Whether a party has electronically signed an attached document depends on the circumstances, including whether the attached document was intended to be a draft or final version.

There have been a number of recent cases on this issue, but the bottom-line, practical takeaways are as follows:

Consider an express statement in the agreement that performance is not a means of acceptance and that the agreement must be signed by both parties to be effective.
If you do not believe the agreement is final and accepted, do not begin to perform under the agreement unless there is an express written (email is ok) agreement by the parties that performance has begun but the contract is still being negotiated.
When exchanging emails relating to an agreement, be prudent when using certain loaded terms such as “offer,” “accept,” “amendment,” “promise,” or “signed” or phrases of assent (e.g., “I’m ok with that”, “Agreed”) without limitations or a clear explanation of intent.
Terms of proposed agreements communicated via email should explicitly state that they are subject to any relevant conditions, as well as to the further review and comment of the sender’s clients and/or colleagues. To avoid ambiguity, to the extent finalizing an agreement is subject to a contingency (e.g., upper management or outside approval, or a separate side document signed by both parties), be clear about that in any email exchange that contains near-final versions of the agreement.
Parties wishing to close the deal with an attachment should mutually confirm their intent and verify assent when the terms of a final agreement come together.
While it is good practice to include standard email disclaimers that say that the terms of an email are not an offer capable of acceptance and do not evidence an intention to enter into any contract, do not rely on this disclaimer to prevent an email exchange – which otherwise has all the indicia of a final agreement – from being considered binding.
Exercise extreme caution when using text messaging for contract negotiations – the increased informality, as well as the inability to attach a final document to a text, is likely to lead to disputes down the road.

While courts have clearly become more comfortable with today’s more informal, electronic methods of contracting, judges still examine the parties’ communications closely to see if an enforceable agreement has been reached.

Now, for those who are really interested in this subject and want more, here comes the case discussion….

Last month, a Washington D.C. district court jury found in favor of MSNBC host Ed Schultz in a lawsuit filed by a former business partner who had claimed that the parties had formed a partnership to develop a television show and share in the profits based, in part, upon a series of emails that purported to form a binding agreement. See Queen v. Schultz, 2014 WL 1328338 (D.C. Cir. Apr. 4, 2014), on remand, No. 11-00871 (D. D.C. Jury Verdict May 18, 2015). And, earlier last month, a New York appellate court ruled that emails between a decedent and a co-owner of real property did not evince an intent of the co-owner to transfer the parcel to the decedent’s sole ownership because, even though the parties discussed the future intention to do so, the material term of consideration for such a transfer was fatally absent. See Matter of Wyman, 2015 NY Slip Op 03908 (N.Y. App. Div., 3^rd Dept. May 7, 2015). Another recent example includes Tindall Corp. v. Mondelēz Int’l, Inc., No. 14-05196 (N.D. Ill. Mar. 3, 2015), where a court, on a motion to dismiss, had to decide whether a series of ambiguous emails that contained detailed proposals and were a follow-up to multiple communications and meetings over the course of a year created a binding contract or rather, whether this was an example of fizzled negotiations, indefinite promises and unreasonable reliance. The court rejected the defendant’s argument that the parties anticipated execution of a memorialized contract in the future and that it “strains belief that these two companies would contract in such a cavalier manner,” particularly since the speed of the project may have required that formalities be overlooked.

Enforceability of Electronic Signatures

A Minnesota appellate court decision from last year highlights that, unless circumstances indicate otherwise, parties cannot assume that an agreement attached to an email memorializing discussions is final, absent a signature by both parties. See SN4, LLC v. Anchor Bank, fsb, 848 N.W.2d 559 (Minn. App. 2014) (unpublished). The court found although the bank representatives intended to electronically sign their e-mail messages, the evidence was insufficient to establish that they intended to electronically sign the attached agreement or that the attached document was intended to be a final version (“Can you confirm that the agreements with [the bank] are satisfactory[?] If so, can you have your client sign and I will have my client sign.”).

A California decision brings up similar contracting issues. In JBB Investment Partners, Ltd. v. Fair, 182 Cal. Rptr. 974 (Cal. App. 2014), the appellate court reversed a trial court’s finding that a party that entered his name at the end of an email agreeing to settlement terms electronic “signed” off on the deal under California law. The facts in JBB Investmentoffered a close case – with the defendant sending multiple emails and text messages with replies such as “We clearly have an agreement” and that he “agree[d] with [plaintiff’s counsel’s] terms” – yet, the court found it wasn’t clear as to whether that agreement was merely a rough proposal or an enforceable final settlement. It was clear that the emailed offer was conditioned on a formal writing (“[t]he Settlement paperwork would be drafted . . .”).

Performance as Acceptance

Another pitfall of contracting via email occurs when parties begin performance prior to executing the governing agreement – under the assumption that a formal deal “will get done.” If the draft agreement contains terms that are unfavorable to a party and that party performs, but the agreement is never executed, that party may have to live with those unfavorable terms. In DC Media Capital, LLC v. Imagine Fulfillment Services, LLC, 2013 WL 46652 (Cal. App. Aug. 30, 2013) (unpublished), a California appellate court held that a contract electronically sent by a customer to a vendor and not signed by either party was nevertheless enforceable where there was performance by the offeree. The court held that the defendant’s performance was acceptance of the contract, particularly because the agreement did not specifically preclude acceptance by performance and expressly require a signature to be effective.

ARTICLE BY Jeffrey D Neuburger of Proskauer Rose LLP

Proposed Labor Violation Reporting Rules Target Government Contractors

Proposal makes agency allegations of employment law violations reportable events that could result in denial of federal contracts or termination of existing contracts.

Executive Order 13673 (the Order), signed by US President Barack Obama in July 2014, imposed three new requirements addressing the labor and employment practices of federal contractors and subcontractors: (1) an obligation to report employment law violations, which would be used by contracting officers to determine whether to award a new federal contract or terminate an existing contract; (2) a requirement to provide notices to workers about their Fair Labor Standards Act (FLSA) exemption or independent contractor status; and (3) a requirement that federal contractors agree that claims arising under Title VII or any tort related to or arising out of sexual assault or harassment by their employees and independent contractors will not be arbitrated without the voluntary postdispute consent of an employee or independent contractor, with certain limited exceptions.

E.O. 13673 directed the Federal Acquisition Regulatory Council (FAR Council)—which consists of the Administrator for Federal Procurement Policy, the Secretary of Defense, the Administrator of National Aeronautics and Space, and the Administrator of General Services—to publish implementing regulations through the Federal Acquisition Regulation (FAR) system. The Order also directed the Department of Labor (DOL) to publish guidelines that address transactions deemed to be reportable employment law violations, as well as how contracting officials should use such reported information to determine whether to award a federal contract (or terminate an existing contract). The Order, while effective upon issuance, expressly applies to all solicitations for contracts only as set forth in any final rule issued by the FAR Council.

On May 28, 2015, the FAR Council published a Notice of Proposed Rulemaking implementing E.O 13673.^[1] On the same day, the DOL published proposed guidance.^[2] The proposed rule and guidelines contain many potentially alarming provisions for employers seeking federal contracts, some of which appear to violate contractors’ due process and Fourth Amendment rights. If adopted, the proposals would impose administrative burdens on contractors, increase the complexity of obtaining and keeping federal contracts, and likely lead to an increase in bid protests and litigation.

The proposals offer employers a 60-day period to submit comments in opposition to these provisions. We strongly encourage employers that have or may seek federal contracts to take advantage of this comment opportunity. If you are interested in sponsoring comments, please contact us in the near future; the period for filing comments only runs through July 27, 2015.

Proposed Implementation of the Employment Violation Reporting Obligations

E.O. 13673 requires employers who are prospective awardees of federal contracts to report certain labor law violations that occurred within the prior three years. Awardees of federal contracts must submit reports of labor law violations every six months during the performance of the contract. The reportable violations include “administrative merits determinations,” “arbitral awards or decisions,” and “civil judgments” involving claims or enforcement actions under many federal employment laws.^[3]

The proposed guidelines define “administrative merits determinations” by reference to the specific types of determinations made by a federal enforcement agency, such as the Wage and Hour Division (WHD), Office of Federal Contract Compliance Programs (OFCCP), Occupational Safety and Health Administration (OSHA), Equal Employment Opportunity Commission (EEOC), and National Labor Relations Board (NLRB). Reportable determinations also include, broadly, complaints that a federal enforcement agency files and administrative orders issued through agency adjudication. However, complaints that private parties file with enforcement agencies or in court alleging employment law violations would not trigger a reporting obligation.

Under the proposed guidance, “administrative merits determinations are not limited to notices and findings issued following adversarial or adjudicative proceedings such as a hearing, nor are they limited to notices and findings that are final and unappealable.” Thus, contractors will be required to report mere agency allegations, such as OSHA citations, WHD investigation finding letters, OFCCP show cause notices, EEOC reasonable cause determinations, and NLRB complaints. These disclosures are required even if a contractor is challenging an allegation through formal proceedings. If, at the time of the required reporting, the enforcement agency allegation is withdrawn or reversed in its entirety through additional proceedings in the matter, then there is no reporting obligation.

The DOL will publish additional proposed guidelines that address administrative determinations that state enforcement agencies make under laws that DOL deems to be equivalent to the above-referenced federal laws.

The proposed DOL guidelines define “civil judgments” as any judgment or order entered by any federal or state court in which the court determined that an employer violated any provision of the above-referenced employment laws or enjoined the employer from committing a violation. Civil judgments include orders or judgments that are not final and are appealable, and the employer must report such judgments even if an appeal is pending. Consent judgments are subject to the reporting obligation if they contain a determination that an employment violation occurred or enjoin the employer from violating any provision of the employment laws. However, a private lawsuit that a court dismissed without a judgment would not be a reportable event.

The proposed DOL guidelines define “arbitral awards and decisions” as any award or order by an arbitrator or arbitral panel in which the arbitrator or panel determined that an employer violated any provision of the above-referenced employment laws or enjoined the employer from committing a violation. Arbitral awards include awards and orders that are not final and are appealable, and the employer must report such judgments even if an appeal is pending. Arbitral awards and orders must be reported even if they are subject to a confidentiality agreement.

Under the proposed DOL guidelines, the same alleged violation may trigger several successive reporting obligations. Each transaction must be reported even if the same alleged violation was the basis for a prior report. For example, where an initial agency allegation was reported, the same allegation must later be reported if it is sustained through an administrative order, and must be reported yet again if a federal court affirms it in a review action. However, if the initial reported transaction is reversed or vacated in its entirety through later proceedings, there is no obligation to continue to report the initial transaction in any future contract bid.

The proposed FAR regulations simply incorporate the DOL guidelines by reference and do not modify or expand on the definitions regarding reportable events.

Mechanics of the Contracting Process Under the Proposed FAR Rule

Prior to awarding a government contract, a contracting officer is required to make an affirmative responsibility determination that includes a determination that the apparent successful offeror or bidder has a satisfactory record of integrity and business ethics. The proposed rule requires that the contracting officer consider a prospective contractor’s labor violations in determining whether that contractor has a satisfactory record of integrity and business ethics. Under the proposed FAR rule, all employers bidding on a federal contract would initially provide a representation that there have been or have not been reportable employment law violations. Thereafter, once the contracting officer has initiated a responsibility determination for the prospective contractor, if the employer has indicated covered employment law violations, that employer would be required to enter detailed information describing the violations in the System for Award Management (SAM), including (1) the employment law that was allegedly violated; (2) the relevant matter or case number; (3) the date that the determination, judgment, award, or decision was rendered; and (4) the name of the court, arbitrator(s), or agency that rendered the decision. Further, the contracting officer would be required to solicit from the employer additional information that the prospective contractor views as necessary to establish affirmatively its responsibility, such as mitigating circumstances; remedial measures, including labor compliance agreements; and other steps taken to comply with labor laws.

The contracting officer would review the data provided, and, in consultation with agency Labor Contract Advisors, would determine whether the employer is a responsible source eligible to receive the federal contract. The proposals contemplate that most entities would not be deemed nonresponsible, but instead would be required to agree to a “labor compliance agreement” as a condition of award of the federal contract. The proposals provide little discussion or framework for labor compliance agreements, apparently vesting broad authority in enforcement agencies, the DOL, agency Labor Contract Advisors, and contracting officers to develop, negotiate, and monitor such agreements. Employers should pay particular attention to these proposals because they would place powers in the hands of federal regulators to extract extra-legal “remedial actions” by leveraging an award or continuation of federal contracts. The outlook for those prospective offerors found nonresponsible is equally grim; the likelihood of successfully challenging contracting officer responsibility determinations in the procurement process is very low given the high level of deference accorded such determinations by both the Government Accountability Office (GAO) and the Court of Federal Claims (COFC). Moreover, because the proposed regulation’s definition of “administrative merits determinations” effectively includes notices or findings that amount to little more than alleged violations, it is unclear whether GAO or the COFC could readily find a determination of nonresponsibility to be without a rational basis, even if that decision was predicated on alleged violations that, after contract award, may not be proven.

Post-Award Implications of Labor Violations

Employers awarded contracts would be required to enter current information regarding labor violations in SAM on a semi-annual basis. If, based on this information, the Labor Contract Advisor determines that further consideration or action is warranted… click to continue reading Proposed Labor Violation Reporting Rules Target Government Contractors

ARTICLE BY

William E. Doyle, Jr. & E. Ruscus of Morgan, Lewis & Bockius LLP

Want to learn more about bankruptcy litigation? Join the Federal Bar Association on June 24th for their Fundamentals seminar!

This seminar will consist of three 90 minute sessions, and address numerous issues facing the bankruptcy practitioner, including jurisdiction, venue, local rules, motion practice, trial trips, appellate practice, and practical do’s and don’ts.

This program is suitable for both newly-admitted and experienced attorneys.

Presenters include:
Judge Laura Taylor Swain, Southern District of New York; Judge Martin Glenn, Southern District of New York Bankruptcy Court; and Judge Alan Trust, Eastern District of New York Chapter Bankruptcy Court.

The program will be followed by a cocktail reception.

New Internet Domain Names for Banks: What You Need to Know Now

The world of the Internet is in a state of change. In 2008, the Internet Corporation for Assigned Names and Numbers (ICANN), the administrator of the Domain Name System, approved a new program that enables the creation of an unlimited number of new generic Top-Level Domains (gTLDs). In response, a coalition of banks, insurance companies and financial services associations partnered to establish fTLD Registry Services, LLC (fTLD) in order to apply for and operate the .BANK gTLD on behalf of the global banking community. On September 25, 2014, fTLD was granted the right to operate .BANK as a new gTLD.

The .BANK gTLDs will open up much-needed real estate on the Internet, providing new marketing, branding and cross-selling opportunities for the banking community. Eligible institutions will be able to obtain domain name registrations with a .BANK suffix instead of .COM. In addition, fTLD will implement enhanced control systems to mitigate cyber risks from malicious activities over the Internet. For example, registrants will be required to include charter verification by the registrant’s regulator before they can register a domain name in the .BANK gTLD.

The registration system for the .BANK gTLD became available mid-May 2015 for banks with registered trademarks with ICANN’s Trademark Clearing House (TMCH). The figure below illustrates the timeline for obtaining .BANK gTLDs.

Domains will be awarded on a first-come, first-served basis in all registration periods. The Qualified Launch Program for Founders period was available for founding members of fTLD that have registered their trademarks in ICANN’s TMCH. The Sunrise period will be available for eligible members of the global banking community that have registered their trademark with ICANN’s TMCH. During the 30-day Sunrise period, banks that meet fTLD’s eligibility requirements will have an advance opportunity, before names are available to other eligible members of the banking community, to register domain names that are exact matches to their registered trademarks. The Founders period will be available to the founding members of fTLD that have yet to register their domains. Eligible members of the global banking community that do not meet the Sunrise or Founders requirements can then register their trademarks, on an ongoing basis, during the General Availability period starting June 24, 2015.

The .BANK gTLD provides new opportunities for marketing, branding and other promotional activities. However, once the Sunrise and Founders periods expire, domain names will be granted on a first-come, first-served basis. Institutions, therefore, should review their current marketing plan to determine if and when registration of the newly available .BANK domain names is appropriate.

ARTICLE BY James M. Kane, Daniel C. McKay, II, John E. Munro of Vedder Price

Federal Register Announces TPS Extended for Somalia – I-9 Update Temporary Protected Status

As published in the Federal Register on June 1, 2015, Temporary Protected Status (TPS) designation was extended for Somalian nationals currently living in the United States. Somalia’s TPS extension and re-designation is for an additional 18 months, from September 15, 2015 through March 17, 2017. This action was taken after the Secretary of Homeland Security determined the ongoing armed conflict in Somalia posed a substantial threat to living conditions in the country. Employers should alert all company representatives responsible for the completion of I-9 forms about this development.

TPS Extension and Re-Designation

A country can be designated for TPS due to temporary conditions in the country that prevent the country’s nationals from returning safely, or in certain circumstances, where the country is unable to handle the return of its nationals adequately. Individuals granted TPS benefits are not removable from the United States, can obtain an employment authorization document (EAD) to work in the United States, and may be granted travel authorization to travel outside the United States. The granting of TPS does not, however, result in or lead to permanent resident status.

Somalia was initially designated under the TPS provisions in 1991, with re-designation in 2001 and 2012. The announced extension of TPS designation for Somalia for an additional 18 months, from September 15, 2015 through March 17, 2017, allows current TPS beneficiaries from Somalia to retain TPS through March 17, 2017, so long as they otherwise continue to meet the eligibility requirements for TPS.

For individuals who have already been granted TPS under one of the previous designations, the 60-day re-registration period runs from June 1, 2015 through July 31, 2015. USCIS will issue new EADs with a March 17, 2017 expiration date to eligible Somalia TPS beneficiaries who timely re-register and apply for EADs under this extension. DHS is NOT granting interim work permission through an automatic extension of work authorization, so applicants should file their EAD renewal applications as soon as possible before their current EADs expire in September 2015.

Certain individuals of Somalia who have never applied for TPS may be able to apply under the late initial registration provisions, as long as they (a) can satisfy one of the late initial filing criteria; and (b) meet all TPS eligibility criteria.

ARTICLE BY Ian R. Macdonald of Greenberg Traurig, LLP

Scrutiny of Nail Salon Chemicals Raises Mass Tort Risk

Recent reports purport to link certain chemicals used in nail salon products to serious health problems such as cancer, asthma, respiratory disease, and miscarriages. Though past efforts to impose stricter regulations on these chemicals have been largely unsuccessful, a recent slew of New York Times articles have drawn significant attention to the issue. 126504560 In response, New York Governor Andrew Cuomo issued a number of emergency regulations to protect salon workers, and New York City mayor Bill de Blasio has announced his own efforts to address the issue. These responses could indicate a willingness on the part of lawmakers to revisit the laws regulating the cosmetics industry.

The Food, Drug, and Cosmetics Act of 1938, bans harmful chemicals from cosmetics. The law is over 75 years old and, many believe, outdated. It does not require FDA preapproval before chemicals are marketed, and does not mandate that chemical companies test the effects of the chemicals. Nor does the law require cosmetic chemical manufacturers to share safety information with the FDA. Senators Diane Feinstein (D-CA) and Susan Collins (R-ME) recently introduced a bipartisan bill that would expand FDA oversight of cosmetics. But critics say that the bill does not go far enough because it allows the cosmetic industry to essentially continue regulating itself. The bill may also preempt states’ ability to implement stricter regulations.

OSHA has identified at least twelve chemicals it says causes serious health problems for salon workers. Three of these, dibutyl phthalate, formaldehyde, and toluene, which some have dubbed the “toxic trio,” have been purportedly linked to the most serious problems, such as cancer, lung and kidney failure, birth defects, and miscarriages. These chemicals have been banned in several countries and, in others, require labels indicating the potential consequences of exposure. No such rules currently exist in the United States.

[S]alon workers can be exposed to levels of chemicals that are legal according to OSHA but are still dangerous . . . .

In response to recent New York Times articles highlighting the working conditions of nail salon employees, Governor Cuomo issued emergency regulations to address the potential health hazards these workers face. Thenew rules, which require manicurists to wear gloves and masks and mandate ventilation at salons, are expected to become permanent in the coming months. NYC Mayor Bill de Blasio has also announced steps to address this issue. In addition, NYC’s Department of Consumer Affairs has been visiting salons to collect and test products. The Department indicated it would issue subpoenas to the manufacturers of products labeled free of a certain toxin if the product is found to contain that toxin. The Department has also started a petition directed at the Personal Care Products Council, the cosmetic chemical industry’s main trade group, to urge its members to stop using ingredients linked to certain ailments. The agency has sent similar letters to the FDA and OSHA. David Michaels, the labor secretary who heads OSHA, believes OSHA’s standards are outdated and has said that salon workers can be exposed to levels of chemicals that are legal according to OSHA but are still dangerous to the workers.

The increased regulatory and media focus on the health threats facing salon workers suggests the potential for lawsuits arising from cosmetic chemical exposure. As in other mass or “toxic tort” claims, salon worker lawsuits may involve a large number of defendants, since workers often use a variety of products made by different manufacturers. In states that impose strict product liability on anyone in a product’s chain of distribution, nail salon lawsuits may implicate not only manufacturers, but also wholesale and retail distributors of chemical products. As in other “toxic tort” cases, nail salon lawsuits would likely involve competing expert testimony from toxicologists, industrial hygienists, and epidemiologists regarding a numerous issues not that least of which being general and specific causation.

ARTICLE BY Jamie Lynn Lanphear & Yakov P. Wiegmann of Schiff Hardin LLP

Lawmakers Respond To Results Of TSA Internal Investigation

Upon news that Transportation Security Administration (TSA) screeners failed to detect prohibited items in 67 out of 70 test cases conducted by U.S. Department of Homeland Security (DHS) Inspector General undercover teams, the acting TSA Administrator was reassigned and replaced by Acting TSA Deputy Administrator Mark Hatfield. Undercover agents posed as passengers and attempted to smuggle mock explosives or banned weapons through airport checkpoints.

President Obama has nominated Coast Guard Vice Admiral Peter Neffenger to serve as TSA Administrator and Assistant Secretary at DHS. His nomination is scheduled for consideration by the Senate Homeland Security and Governmental Affairs Committee this week, following his approval by the Senate Commerce, Science, and Transportation Committee last week. DHS Secretary Jeh Johnson also called for a detailed briefing from the DHS Inspector General and directed TSA to implement a series of immediate and near-term actions.

Both House Homeland Security Committee Chairman Mike McCaul (R-TX) and Ranking Member Rep. Bennie Thompson (D-MS) issued statements expressing concerns with TSA’s ability to prevent weapons from getting onto airplanes, calling the test results disturbing and alarming.

The Senate Homeland Security and Governmental Affairs Committee will hold a hearing on TSA oversight with DHS Inspector General John Roth and other government representatives this week, and continued scrutiny from Capitol Hill will certainly follow.

This Week’s Hearings:

Tuesday, June 9: The Senate Homeland Security and Governmental Affairs Committee will hold a hearing titled “Oversight of the Transportation Security Administration: First-Hand and Government Watchdog Accounts of Agency Challenges.”
Wednesday, June 10: The Senate Homeland Security and Governmental Affairs Committee will hold a hearing to consider the nomination of Vice Admiral Peter Neffenger to serve as Administrator of the Transportation Security Administration and Assistant Secretary at the Department of Homeland Security.
Wednesday, June 10: The House Homeland Security Subcommittee on Emergency Preparedness, Response, and Communication will hold a hearing titled “Defense Support of Civil Authorities: A Vital Resource in the Nation’s Homeland Security Missions.”

ARTICLE BY Ludmilla L. Savelieff & Norma M. Krayem of Squire Patton Boggs (US) LLP

Court Dismisses Text-Message TCPA Suit Against AOL, Finding Instant Messaging Service Does Not Constitute an ATDS

On June 1, the Northern District of California dismissed a putative TCPA class action against AOL, finding that the plaintiff had failed to allege that AOL utilized an automated telephone dialing system (ATDS), as required to state a cause of action under the TCPA. In dismissing the plaintiff’s complaint in Derby v. AOL, the court rejected the plaintiff’s arguments that AOL Instant Messenger (AIM), which allows individuals to send instant messages as text messages to cell phones, constitutes an ATDS. Instead, the court agreed with AOL’s argument that AIM relied on “human intervention” to send the messages at issue, which foreclosed the possibility of potential TCPA liability. (Covington represented AOL in this case.) The decision should be beneficial to a variety of services that enable their users to send text messages to cell phones.

The TCPA’s prohibitions include a ban on using an ATDS to call cellular telephones for informational purposes without the prior express consent of the recipient. The FCC and courts have extended the reach of the statute to include text messages. However, the FCC has stated that only equipment that has the capacity to operate “without human intervention” may qualify as an ATDS. The plaintiff in Derby alleged that he received three text messages from an AIM user that were intended for another individual, which the court recognized were “presumably . . . the result of the sender inputting an incorrect phone number.” After the receiving the third message, the plaintiff alleged that he sent a text message to AIM to block future texts from the AIM user, and that he received back a text confirmation of his request.

In analyzing TCPA liability for the first three text messages, the court noted that the plaintiff’s complaint “affirmatively alleges that AIM relies on human intervention to transmit text messages to recipients’ cell phones.” The court followed precedent from other Ninth Circuit district courts rejecting ATDS arguments where the equipment at issue relied on humans to press buttons on phones or manually enter telephone numbers into the system. Since the complaint demonstrated that “extensive human intervention is required to send text messages through defendant’s AIM service,” the court held that the complaint failed to state a claim under the TCPA with respect to the three text messages sent by an AIM user.

The court also analyzed potential TCPA liability for the separate confirmation text message that Derby alleged he had received from AIM. Again citing relevant authority, the court held that “a single message sent in response to plaintiff’s text . . . is not the kind of intrusive, nuisance call that the TCPA prohibits.” The court concluded that Derby, having sent the “block” request from his cell phone, had “knowingly released” his number to AIM and consented to receive a confirmation text from AIM at that number. The court’s opinion advocated for a “common sense” approach to TCPA liability, finding that the statute should not be utilized to “punish the consumer-friendly practice of confirming requests to block future unwanted texts.” Accordingly, the court also dismissed the TCPA claim based on the confirmation text message for failure to state a claim.

ARTICLE BY Caleb Skeath of Covington & Burling LLP

Whistleblower Law Firm Files Amici Curiae Brief in DC Whistleblower Protection Act Case

An amici curiae brief was filed recently in Tucker v. DC on behalf of the Metropolitan Washington Employment Lawyers Association and the Government Accountability Project. The brief urges the DC Court of Appeals to apply the correct burden-shifting framework in DC Whistleblower Protection Act cases. In Tucker, the trial court gave pretext and business judgment instructions, both of which are contrary to the plain meaning and intent of the DC WPA.

The amici curiae brief argues that the DC Court of Appeals should correct the following three errors in the jury instructions:

First, the trial court erred when it instructed the jury to resolve the employee’s claim by performing a McDonnell-Douglas burden-shifting analysis. Applying the McDonnell-Douglas analysis alongside the DC WPA’s standards creates a confusing and contradictory task for the jury. In the second phase of the McDonnell-Douglasanalysis the employer need only argue a legitimate, non-discriminatory reason for its action. In contrast, the DC WPA’s statutory text explicitly mandates that the employer must prove its explanation by clear and convincing evidence, a much higher standard than the preponderance of the evidence. DC Code § 1-615.54(b). Because of this difference, the standards are fundamentally incompatible.
Second, the trial court erred by requiring the jury to reach a decision on the plaintiff’s showing that the employer’s alleged business reasons were pretext, when the DC WPA does not require such a showing.
Third, the trial court erred by instructing the jury to weigh the employer’s evidence of its “business judgment” against the employee’s showing by preponderance of the evidence standard rather than applying the higher, clear and convincing evidence standard to the employer’s evidence. The DC WPA applies different burdens of persuasion to the employee’s and employer’s showings. See DC Code § 1-615.54(b). A whistleblower’s initial showing is weighed under the “preponderance of the evidence.” This means necessarily that the employer’s evidence of a legitimate non-retaliatory reason for the employer’s action – which must be proven by the far more burdensome “clear and convincing” standard – should not be weighed against a whistleblower’s initial showing.

The brief also argues that the standard for causation should track the statutory language – an employee must show that her protected disclosure was a “contributing factor” in a personnel decision, and then DC can prevail if it establishes by “clear and convincing” evidence that it would have made the same decision for independent, legitimate reasons absent the protected disclosure.

ARTICLE BY Jason Zuckerman of Zuckerman Law

Over a Decade in the Making: CMS Releases Long-Awaited Medicaid Managed Care Rule

On May 27, 2015, the Centers for Medicare and Medicaid Services (“CMS”) published a 653-page proposed rule affecting the thirty-nine states (plus the District of Columbia) that use managed care organizations (“MCOs”) to administer their Medicaid benefits. This represents the first major overhaul of the Medicaid managed care system since the rules were established in 2002, now covering approximately seventy percent of all Medicaid enrollees.

Public comments are due July 27, 2015, which gives health plans, providers, consumer groups, and even state Medicaid directors a narrow window to identify potential areas of concern and to propose solutions for formal CMS consideration. While some issues will align important stakeholder groups, others are likely to remain contested during the comment period and up to publication of the final rule.

As a backdrop leading to the publication of the proposed rules, the managed care landscape has become much more complex and variable among the states that have adopted this approach in their Medicaid programs. Because of this, CMS has been contemplating ways to ensure more consistent rules that promote adequate access to health services while also creating more synergy between Medicaid, Medicare, and even the commercial sector via delivery system reforms that improve quality and lower costs.

The proposed rule also addresses some areas of perceived inequity in the Medicaid program that range from behavioral and substance-abuse treatment to long-term care and insurance reforms akin to those in the Affordable Care Act (“ACA”), which was mostly targeted at commercial health plans.

But CMS’s ambitions in proposing the rules need to be tempered by the reality that state Medicaid programs are administered by the individual states: through federal regulations CMS can establish minimal standards for the state Medicaid managed care systems but states may enact state regulations or impose managed care contract terms that go farther than the federal requirements. The managed care community must view federal regulations as a starting, not an end, point.

CMS categorizes the massive Medicaid managed care proposed rule into several issue areas in its Fact Sheet:

Beneficiary Experience

Requires states to improve access to care through regular assessment and certification of a health plan’s provider network and time/distance standards to providers including behavioral health, pediatric dental, and pharmacy.

Updates communication rules directed towards Medicaid/CHIP beneficiaries to include electronic methods, non-English language options, and additional information in provider/drug formulary directories,

Sets standards for care coordination, assessments and treatment plans that include care transition services, initial health risk assessments within 90 days of enrollment, and regularly updated assessments and treatment plans for beneficiaries with special health care needs or long-term services and supports.

Creates a new enrollment selection period of 14 days to allow beneficiaries to research and select managed care plan options.

State Delivery System Reform

Encourages participation in Medicare-led alternative payment models and initiatives.

Establishes minimum reimbursement standards or fee schedules for providers that deliver a particular covered service.

Clarifies “short-term stay” rule that managed care plans are able to receive capitated payments for beneficiaries who are admitted to an institution for mental disease (“IMD”) for no more than 15 days so long as the facility is an inpatient hospital or sub-acute short-term crises residential service.

Quality Improvement

Creates a public notice and comment period to determine a core set of performance measures and improvement projects for states related to managed care plans.

Establishes a Medicaid managed care quality rating system in each state that would report performance information on all health plans, akin to the Medicare Advantage (“MA”) and marketplace ratings.

Program and Fiscal Integrity

Requires certain types of data to be used for rate setting purposes and the level of documentation and detail about the development of the capitation rates such as trend factors, adjustments and the development of non-benefit costs.

Establishes a medical loss ratio (“MLR”) for both Medicaid and CHIP plans using standards similar to Medicare Advantage and the commercial market.

Adds several components to fraud prevention efforts by implementing procedures for internal monitoring, auditing, and prompt referral of potential compliance issues, etc.

Managed Long-Term Services and Supports (“MLTSS”) Programs

Affirms recent updates such as Olmstead, stakeholder engagement requirements, and provider credentialing in the development and implementation of MLTSS programs.

Requires MLTSS-specific elements to be included in a state’s quality improvement strategy and reporting systems to protect MLTSS enrollees.

Children’s Health Insurance Program (“CHIP”)

CMS proposes to align the CHIP managed care regulations, where appropriate.

Alignment with Medicare Advantage and Private Coverage Plans

Importantly, CMS proposed where appropriate and possible, to align the Medicaid managed care regulations with those governing MA and private health insurance plans including the MLR, appeals and grievances, and marketing rules.

Finally, other highlights from the proposed rule include a requirement that Medicaid managed care entities offering outpatient drug coverage must now collect the necessary information for the states to include those managed care drugs in rebate invoices to drug manufacturers pursuant to the Medicaid Drug Rebate Program (“MDRP”) as well as modifications to the rules governing plan appeals and grievance procedures to increase uniformity with the procedures that apply to MA and commercial plans.

Discussion

Alignment with Medicare Advantage and Private Coverage Plans

CMS proposes numerous changes aimed at aligning Medicaid managed care with other health care programs… click here to continue reading…

ARTICLE BY Susan W. Berson, Andrew J. Shin, Ellyn L. Sternfield, Pamela Kramer, Lauren M. Moldawer & Bridgette A. Wiley of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

The National Law Forum