Tag: Litigation

Federal District Court in Mississippi Provides Good Discussion of Negative Corpus from National Fire Protection Association (NFPA) 921

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The United States District Court for the Southern District of Mississippi recently handed down its opinion in Russ v. Safeco Insurance Company of America, 2013 WL 1310501 and the opinion provides a good example of the 2011 change in NFPA 921 commonly known as the negative corpus.  In Russ, plaintiff was an insured of Safeco Insurance Company at the time he suffered a fire loss for property located in Ovett, Mississippi.  Safeco denied the claim asserting various defenses to coverage, such as plaintiff’s failure to submit to an EUO and that the fire loss was incendiary.  The court had before it several competing motions, including plaintiff’s motion to strike Safeco’s origin and cause expert, primarily on the basis that the investigator’s initial and addendum report conflicted and for the investigator’s alleged failure to follow NFPA 921.

The court set forth in its analysis that NFPA 921 has “established guidelines and recommendations for the safe and systematic investigation or analysis of fire and explosion incidents.  It even cited the 8thCircuit opinion previously reported on this blog, Russell v. Whirlpool Corp., 702 F.3d 450, 454 (8th Cir. 2012).  However, the court also stated that reliance on a methodology other than NFPA 921 does not necessarily render an expert’s opinions, per se, unreliable.  Schlesinger v. United States, 212 WL 407098 (EDNY 2012)  Although the court seemed to recognize that an expert could rely on methodology other than NFPA 921, it found that NFPA 921 was applicable to the Safeco expert’s opinions because “an expert who purports to follow NFPA 921 must apply its contents reliably.”  In other words, this court believed that you did not necessarily have to follow NFPA 921, but if an expert did choose to utilize it, the investigator would be required to follow it in toto.

The court went on to provide a good discussion of the history of the negative corpus which began in 1992.  Negative corpus was initially used to deem a fire incendiary by ruling out the possibility of any accidental cause.  However, in 2011, the NFPA rejected the use of the negative corpus, finding that the process was not consistent with the scientific method.  The court sided with approval in NFPA 921, Section  18.6.5 (2011 Ed.) stating “it is improper to base hypotheses on the absence of any support of evidence . . . that is, it is improper to opine a specific ignition source that has no other evidence to support it, even though all other hypothesized sources were eliminated.”

Applying this rationale to the facts of the case, the court found that no foundational evidence or specific facts such as eye witness testimony or the finding of an accelerant were cited by Safeco’s expert in support of his conclusions. Instead, the investigator simply speculated that the fire was probably caused by human involvement due to the absence of supportive evidence for certain accidental causes.

This case can be used as a good example of how to effectively use NFPA 921 even in jurisdictions where a court has not deemed NFPA 921 the standard.  It can still be argued that if NFPA 921 is utilized, then it has to be used for all of the principles it contains.  In other words, an expert should not be allowed to adopt some NFPA 921 provisions and feel free to disregard others.  It is also a good example of how to utilize negative corpus and its inconsistency with the scientific method to limit an origin and cause expert’s opinions.

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ACI's 3rd National Forum on Securities Litigation & Enforcement

The National Law Review is pleased to bring you information about the upcoming American Conference Institute National Forum on Securities Litigation & Enforcement.

ACI Securities

When

Thursday, February 27 – Friday, February 28 ,2014

Where

Washington, D.C.

ACI’s 3rd National Advanced Forum on Securities Litigation and Enforcement, this time in Washington, DC, is the only event in the industry where experienced in-house counsel, leading litigators, renowned jurists, and regulatory and enforcement officials from federal and state agencies will assemble in our nation’s capital to provide the highest level insights on the most current developments in the field.

Now, more than ever, lenders/issuers, officers and directors, underwriters, auditors, investment managers and broker-dealers need to know how to prepare for and respond to litigation, and how to deal with regulation and enforcement initiatives from various federal and state agencies.

In response, ACI has developed the 3rd installment of its lauded Securities Litigation and Enforcement conference, which will provide practitioners with the knowledge and expert strategies that they need in order to prepare for and defend against the newest claims and claimants.

Join us in Washington, DC, and hear from a highly regarded faculty featuring in-house counsel from the top financial services companies and leading outside counsel from law firms that excel in securities litigation, renowned judges, and key government bodies, including SEC, FINRA, PCAOB, U.S. Attorney’s Offices (EDNY & SDNY), and various state securities departments.

Supreme Court Holds That State Attorney General Actions are Not “Mass Actions” Under Class Action Fairness Act (CAFA)

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On January 14, the Supreme Court of the United States held that lawsuits that are filed in the name of a State Attorney General but seek relief on behalf of a State’s citizens cannot be removed to federal court as “mass actions” under the Class Action Fairness Act (CAFA). See Mississippi ex rel. Hood v. AU Optronics Corp., No. 12-1036 (Jan. 14, 2014). Resolving a split between the Fifth Circuit on the one hand and the Fourth, Seventh and Ninth Circuits on the other, the ruling means that businesses will have to defend AG actions in state courts, and state courts will have to resolve whether such actions can proceed even though the consumers on whose behalf they are brought have agreed to settle their claims in a class action or, conversely, to pursue their own claims individually rather than collectively.

“Mass Actions”

CAFA gives federal courts original subject matter jurisdiction over certain “class actions” and “mass actions.” It defines a “class action” as “any civil action filed under rule 23 of the Federal Rules of Civil Procedure or similar State statute or rule of judicial procedure authorizing an action to be brought by 1 or more representative persons as a class action” and defines a “mass action” as “any civil action . . . in which the monetary relief claims of 100 or more persons are proposed to be tried jointly on the ground that the plaintiffs’ claims involve common questions of law or fact, except that jurisdiction shall exist only over those plaintiffs whose claims in a mass action [exceed $75,000, exclusive of interest and costs].” 28 U.S.C. §§ 1332(d)(1)(B), (d)(11)(B)(i).[1] Excluded from the definition of “mass action” are (among other things) actions in which “all of the claims are asserted on behalf of the general public (and not on behalf of individual claimants or members of a purported class) pursuant to State statute specifically authorizing such action . . . .” Id.§ 1332(d)(11)(B)(ii)(III).

The Hood Case

Jim Hood, the Attorney General of Mississippi, filed a parens patriaeaction that alleged that the companies that manufacture and market liquid crystal display (LCD) panels had engaged in price-fixing that violated the Mississippi Consumer Protection Act and Mississippi Antitrust Act. Hood sought equitable and compensatory relief on behalf of both the State and its citizens. The defendants removed the action to federal court under CAFA and the Attorney General moved to remand. The district court remanded, finding that the suit was not a “mass action” because it fell within the definition’s “general public” exception. The Fifth Circuit reversed. Looking at each claim rather than the action as a whole, it reasoned that the real parties in interest were not only the State but also the individual citizens who had purchased LCD products, and as a result the “claims of 100 or more persons [we]re proposed to be tried jointly.” Id. § 1332(d)(11)(B)(i). Hood then petitioned for certiorari, which the Supreme Court granted.

The Supreme Court’s Decision

Yesterday, the Supreme Court unanimously reversed. Justice Sotomayor’s opinion is a primer on statutory construction:

Respondents argue that the [mass action] provision covers [AG actions] because “claims of 100 or more persons” refers to “thepersons to whom the claim belongs, i.e., the real parties in interest to the claims,” regardless of whether those persons are named or unnamed. We disagree.

To start, the statute says “100 or more persons,” not “100 or more named or unnamed real parties in interest.” Had Congress intended the latter, it easily could have drafted language to that effect. Indeed, when Congress wanted a numerosity requirement in CAFA to be satisfied by counting unnamed parties in interest in addition to named plaintiffs, it explicitly said so: CAFA provides that in order for a class action to be removable, “the number of members of all proposed plaintiff classes” must be 100 or greater, and it defines “class members” to mean “the persons (named or unnamed) who fall within the definition of the proposed or certified class.” Congress chose not to use the phrase “named or unnamed” in CAFA’s mass action provision, a decision we understand to be intentional.

More fundamentally, respondents’ interpretation cannot be reconciled with the fact that the “100 or more persons” referred to in the statute are not unspecified individuals who have no actual participation in the suit, but instead the very “plaintiffs” referred to later in the sentence—the parties who are proposing to join their claims in a single trial….[2]

The Court then rejected the argument that “plaintiffs” should be read as including both named and unnamed parties, finding that such a reading “stretches the meaning of ‘plaintiff’ beyond recognition” and would impose an “administrative nightmare” on the lower courts:

The term “plaintiff” is among the most commonly understood of legal terms of art: It means a “party who brings a civil suit in a court of law.” It certainly does not mean “anyone, named or unnamed, whom a suit may benefit,” as respondents suggest.

…

Yet if the term “plaintiffs” is stretched to include all unnamed individuals with an interest in the suit, then §1332(d)(11)(B)(i)’s requirement that “jurisdiction shall exist only over those plaintiffs whose claims [exceed $75,000]” becomes an administrative nightmare that Congress could not possibly have intended. How is a district court to identify the unnamed parties whose claims in a given case are for less than $75,000? Would the court in this case, for instance, have to hold an evidentiary hearing to determine the identity of each of the hundreds of thousands of unnamed Mississippi citizens who purchased one of respondents’ LCD products between 1996 and 2006 (the period alleged in the complaint)? Even if it could identify every such person, how would it ascertain the amount in controversy for each individual claim?

…

We think it unlikely that Congress intended that federal district courts engage in these unwieldy inquiries. By contrast, interpreting “plaintiffs” in accordance with its usual meaning—to refer to the actual named parties who bring an action—leads to a straightforward, easy to administer rule under which a court would examine whether the plaintiffs have pleaded in good faith the requisite amount. Our decision thus comports with the commonsense observation that “when judges must decide jurisdictional matters, simplicity is a virtue.”[3]

The decision means that the troubling trend of retaining private class action lawyers to file public AG actions in state courts can continue and could conceivably quicken. It also raises a number of interesting questions the Court did not address, for example whether AG actions are barred by agreements to settle class actions brought on behalf of the same consumers,[4] or affected by agreements to resolve claims in individual arbitration rather than representative litigation.[5]

[1]           The defendants did not ask the Court to hold that the case qualified as a “class action,” although they had raised that point below. See Opinion at 4 & n.2.

[2]           Opinion at 5-6 (emphasis in original, citations omitted).

[3]           Id. at 7-10 (citations omitted).

[4]           Cf. New Mexico ex rel. King v. Capital One Bank (USA) N.A., 13-0513, 2013 WL 5944087, at *4-8 (D.N.M. Nov. 4, 2013) (finding that class action settlement barred AG action to the extent it sought compensatory relief).

[5]           Cf. Iskanian v. CLS Transp. Los Angeles, LLC, 206 Cal. App. 4th 949, 964 (2012) (finding that Concepcion requires enforcement of waiver of right to bring representative action under California’s Private Attorney General Act), review granted Sept. 19, 2012 (No. S204032).

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The Seventh Circuit Breaks from the Pack; Prohibits Employers from Challenging the EEOC’s Pre-Lawsuit Conciliation Efforts

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When the United States Equal Employment Opportunity Commission (EEOC) makes a finding of reasonable cause after its investigation of a discrimination charge, Title VII of the Civil Rights Act instructs the EEOC to “…endeavor to eliminate any such unlawful employment practice by informal methods of conference, conciliation and persuasion.” The statute also provides that the EEOC may proceed to filing a lawsuit against the employer only if it “…has been unable to secure from the Respondent a conciliation agreement acceptable to the Commission.” In EEOC v. Mach Mining LLC, No. 13-2456, the Seventh Circuit Court of Appeals (which covers Illinois, Indiana and Wisconsin) recently held that employers may not challenge the EEOC’s pre-lawsuit conciliation efforts as an affirmative defense to the lawsuit. By its decision, the Seventh Circuit broke away from the majority of Federal Courts of Appeal. The EEOC called the ruling in Mach Mining a “landmark” victory in its press release.

As part of its recent initiatives, the EEOC has been very aggressive in filing lawsuits and in the past few years has suffered setbacks with many courts critical of the Agency’s pre-lawsuit investigatory and conciliation efforts. The defense tactic of raising the failure of the EEOC to engage in good faith conciliation efforts as an Affirmative Defense has been widely used by employers’ attorneys in discrimination lawsuits brought by the EEOC. In many cases the EEOC might fail to even attempt face-to-face negotiation, refuse to provide information requested by the employer to assist in conciliation, or simply make a “take it or leave it proposal” before rushing to the courthouse to file a lawsuit.

The essence of the Court’s decision is that conciliation is an informal process in which the EEOC is to “try” to obtain a settlement acceptable to it. The Court also found that Title VII gives the EEOC “sole discretion” to determine whether a conciliation proposal is acceptable and further noted that Title VII is silent as to the standards by which the adequacy of the Agency’s conciliation efforts can be measured. Finally the Court found that permitting the employer to raise inadequate conciliation efforts as a defense to a discrimination claim would undermine the enforcement goals of Title VII. According to the Court, employers could drag out discrimination litigation by turning “what was meant to be an informal investigation into the subject of endless disputes over whether the EEOC did enough before going to court.” At least in Illinois, Wisconsin and Indiana, the EEOC’s methods, the negotiation process and whether the EEOC has acted in good faith in attempting to resolve a charge before filing a lawsuit no longer matters.

Although it is not yet known whether Mach Mining will petition the United States Supreme Court to resolve the split between the Seventh Circuit and the majority of other Courts of Appeal, it is likely this issue will someday be decided by the Supreme Court.

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Steven J. Teplinsky

Of:

Michael Best & Friedrich LLP

Supreme Court Will Review Limelight and Nautilus Re: Patent Infringement Litigation

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Continuing its heightened interest in IP law, on Friday the Supreme Court granted petitions for cert. to review Limelight Networks, Inc. v. Akami Technologies, Inc., U.S., No 12-786 and Nautilus, Inc. v. Biosig Instruments, Inc., U.S., 13-339. The other two grants were in a (c) and TM and so of less interest to this patent attorney.

In Limelight, the Fed. Cir. held that a defendant could be found liable for inducing infringement under 271(b) even if no one party performed the acts necessary to meet the requirement that there be direct infringement of 271(a). In the biotech/pharma space, this question becomes relevant when a testing lab measures the level of a biomarker but a specialist draws the diagnostic conclusion required by the claim.

I had not commented on the Nautilus decision in the past because the Fed. Cir. “rule” holding that a claim term violated 112(2) only if it was “insolubly ambiguous” was favorable to patentees (and, indirectly, to prosecutors). This “rule” has been challenged as essentially too lenient to said ambiguous patent claims – and the Court may consider if the presumption of validity of an issued patent lowers the bar of the statutory requirement of particular and distinct patent claiming.

I don’t think that the Fed. Cir. has erred in attempting to preserve the validity of an issued claim by reading it in view of the specification, even including “inherent parameters”, but the Supreme Court seldom takes up a Fed. Cir. decision to give them praise for preserving patentees’ shrinking bundle of rights.

Article by:

Warren Woessner

Of:

Schwegman, Lundberg & Woessner, P.A.

2014 Update for California Employers

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While 2013 was marked by some novel and interesting judicial and administrative decisions, including Quicken Loans (in which the National Labor Relations Board invalidated certain common employee handbook policies), Vance v. Ball State University (in which the U.S. Supreme Court established the parameters of who could be deemed a “supervisor” for employment discrimination purposes), Nelson v. Knight (in which the Iowa Supreme Court opined that an attractive female employee could be terminated because she was “too distracting” to the small business owner), and Purton v. Marriott (in which the California Court of Appeal addressed an employer’s liability for accidents caused by alcohol consumption at its holiday party), the California Legislature also enacted a number of new bills that become effective in 2014.

Among the most significant of these are the following:

Minimum Wage Increase and Resulting Salary Increase to Maintain Exempt-Employee Status (AB 10)

The California minimum wage will increase to $9.00 per hour, effective July 1, 2014, and to $10.00 per hour effective January 1, 2016. A less-advertised consequence of this increase, however, is the impact it will have on the salary test for preserving an employee’s exempt status. Under California law, a supervisor classified as exempt must be paid a monthly salary that is no less than two times the wages paid to a full-time minimum wage employee. After July 1, 2014, the minimum monthly salary to preserve exempt status under California Labor Code section 515, will rise to $3,120 per month, annualized to $37,440. As this change is scheduled to occur mid-year, employers are advised to make their adjustments early, if needed, to avoid this potential pitfall. In addition, under AB 442 the penalties available for minimum wage violations will now include “liquidated damages.”

Wage Rate Increases for Computer Software Employees and Physicians

Labor Code sections 515.5 and 515.6 provide exemptions for overtime for certain computer software employees and licensed physicians who earn a set minimum wage that is adjusted annually by the Division of Labor Standards Enforcement. Effective January 1, 2014, the minimum hourly rate increased to $40.38 (from $39.90) for computer professionals and to $73.57 (from $72.70) for physicians, reflecting a 1.2 percent increase in the California Consumer Price Index. Affected employers should adjust their rates accordingly.

Meal Periods, Rest Breaks, And Now “Recovery Periods” (SB 435)

For several years, the California Code of Regulations has required employers of outdoor-working employees to allow their outdoor workers the opportunity to “take a cool-down rest in the shade for a period of no less than five minutes when they feel the need to do so to protect themselves from overheating.” (Cal. Code. Regs., tit. 8, § 3395, subd. (d)(3).) Previously, an employer who failed to provide these cool-down recovery periods was subject to a citation issued by the California Division of Safety and Health. But now, effective January 1, 2014, SB 435 provides employees with a right, under California Labor Code § 226.7, to seek recovery of statutory damages each workday that an employer fails to provide an employee with these cool-down recovery periods. Employers with outdoor-working employees should review their current policies and practices to ensure that meal periods, rest breaks, and recovery periods are addressed and afforded. 

Making It Harder For Prevailing Employers To Obtain Attorney’s Fees And Costs In Wage Cases (SB 462)

California Labor Code Section 218.5 allows the “prevailing party” to recover attorney’s fees and costs in any action brought for the nonpayment of wages (e.g., minimum or overtime wages), fringe benefits, or health and welfare or pension fund contributions. SB 462 amends Labor Code Section 218.5 to make it more difficult for employers to obtain attorney’s fees and costs under this section. Indeed, effective January 1, 2014, to obtain attorney’s fees and costs under Labor Code Section 218.5, an employer must not only be the “prevailing party” in such an action, but the court must also find that the “employee brought the court action in bad faith.” On the other hand, due to the enactment of AB 1386, which amends Section 98.2 of the Labor Code, a final order of the Division of Labor Standards Enforcement can create a lien on the employer’s real property to secure amounts due to a prevailing employee-claimant. Unless the lien is satisfied or released, it will continue for 10 years after the date of its creation.

The IRS To Begin Enforcing Its Rule That Automatic Gratuities Are Wages, Not Tips

Restaurants often add automatic gratuities on the bill of large parties (for example, a 20% automatic gratuity for parties of eight or more). Previously, for IRS purposes, these automatic gratuities were considered part of an employee’s “tips,” and thus the employee could pocket their share of automatic gratuities, and it was up to the employee to report them to their employer and on their tax return. Starting in 2014, however, the IRS will treat an employee’s portion of automatic gratuities as the employee’s regular wages and, as such, they will be subject to tax withholdings by the employer. Thus, employees will now receive their portion of automatic gratuities as part of their normal paychecks, and employers will be tasked with the responsibility of actively monitoring these wages, performing the necessary tax withholdings, and correctly reporting these wages to the IRS. Notably, because automatic gratuities will now be considered part of an employee’s regular wages for IRS purposes, employers should analyze whether they are required to account for these automatic gratuities when computing an employee’s overtime rate.

Wage Withholdings (SB 390)

Under Labor Code Section 227, it is unlawful for an employer to willfully, or with the intent to defraud, fail to make agreed-upon payments to health and welfare funds, pension funds or vacation plans, or other various benefit plans. SB 390 amends this provision so that it is now also unlawful for an employer to fail to remit withholdings from an employee’s wages that were made pursuant to state, local, or federal law, such as taxes. SB 390 further provides that in criminal proceedings under this section, any withholdings that are recovered from an employer shall be forwarded to the appropriate fund or plan and, if restitution is imposed, the court shall direct to which agency, entity, or person it shall be paid. 

Criminal History Inquiries (SB 530)

On October 10, 2013, Governor Jerry Brown approved SB 530, which amends California Labor Code Section 432.7 to include additional prohibitions for employers related to pre-employment inquiries into an individual’s prior criminal history. California law already prohibits employers from asking applicants to disclose, or from using, arrest records. Effective January 1, 2014, employers are prohibited from asking job applicants to disclose, or from utilizing as a factor in determining any condition of employment, information concerning a conviction that has been judicially dismissed or ordered sealed. SB 530 exempts employers from the above requirements in the following circumstances: (1) the employer is required by law to obtain such information; (2) the applicant would be required to possess or use a firearm during the course of the employment; (3) an individual who has been convicted of a crime is prohibited from holding the position sought by the applicant, regardless of whether that conviction has been expunged, judicially ordered se
aled, statutorily eradicated, or judicially dismissed following probation; and (4) the employer is prohibited by law from hiring an applicant who has been convicted of a crime.

As with the existing version of Section 432.7, SB 530 allows an applicant to recover from an employer the greater of actual damages or two hundred dollars ($200), plus costs and reasonable attorneys’ fees, for a violation of the statute and the greater of treble actual damages or five hundred dollars ($500), plus costs and reasonable attorneys’ fees, for an intentional violation of the statute. An intentional violation of the statute is a misdemeanor punishable by a fine not to exceed five hundred dollars ($500).

This expanded protection for applicants with criminal conviction records supplements the federal government’s recent efforts on this topic. The U.S. Equal Employment Opportunity Commission has published an Enforcement Guidance on the consideration of conviction records in employment decisions. In order to avoid claims of disparate treatment or impact, the EEOC recommends that employers develop narrow policies that determine the specific criminal offenses that may demonstrate unfitness for particular jobs. The EEOC recommends individualized assessments as opposed to blanket policies. Employers should carefully review their job application form to ensure compliance with these new requirements.

Domestic Worker Bill of Rights (AB 241)

Another wage-and-hour change comes from the Domestic Worker Bill of Rights, which took effect January 1, 2014. The new legislation establishes, among other things, overtime compensation at a rate of one and one-half times the regular rate of pay to caregivers who work more than nine hours a day or more than 45 hours a week. Covered caregivers include those who provide one-on-one care for 80 percent or more of their duties, such as nannies and in-home caregivers of the elderly or disabled. It does not cover babysitters, family members who provide babysitting services, or caregivers of low-income individuals through California’s In Home Supportive Service. Caregivers who work at facilities that provide lodging or boarding are also excluded.

Victims’ Rights to Time Off From Work (SB 288)

Employers may not retaliate or discriminate against employees who are victims of certain felony crimes, domestic violence or sexual assault for taking time off from work to appear in court or to obtain prescribed relief. A new addition to California Labor Code — Section 230.5 — now will also prohibit an employer from terminating or discriminating against an employee who is a victim of certain additional specified criminal offenses from taking time off to appear in court. These specified offenses include vehicular manslaughter while intoxicated, felony child abuse, felony stalking and many other “serious felonies.” The employee-victim may take such time off from work to appear in court to be heard at any proceeding involving a postarrest release decision, plea, sentencing, postconviction release decision, or any proceeding in which a right of the victim is at issue. Employers should include a policy addressing this leave of absence right in their employee handbooks.

Victims of Stalking (SB 400)

Sections 230 and 230.1 of the California Labor Code set forth various protections for victims of domestic violence or sexual assault. SB 400 expands these protections to victims of stalking and also requires employers to provide “reasonable accommodations” to such victims. The bill defines reasonable accommodations to include a transfer, reassignment, modified schedule, changed work telephone, changed work station, installed lock, an implemented safety procedure, or another adjustment to a job structure, workplace facility, or work requirement in response to domestic violence, sexual assault, or stalking, or referral to a victim assistance organization. As with reasonable accommodations for disabilities, employers must engage in a timely, good faith, and “interactive process” with the affected employee to determine effective reasonable accommodations. Again, language should be added to an employee handbook to address this new right.

Family Temporary Disability Insurance Program (SB 770)

Beginning on July 1, 2014, the scope of the family temporary disability program will be expanded to include time off to care for a seriously ill grandparent, grandchild, sibling or parent-in-law. The employee’s certification required to qualify to take such leave to care for a family member must include a number of items, including a statement that the serious health condition warrants the participation of the employee to care for the family member. “Warrants the participation of the employee” includes providing psychological comfort as well as arranging third party care for the family member.

Sexual Harassment Definition Clarified (SB 292)

SB 292 amends the definition of harassment under California law to clarify that sexually harassing conduct does not need to be motivated by sexual desire. This law is intended to overturn the decision in Kelley v. Conoco Companies which had affirmed summary judgment against the plaintiff in a same-sex harassment case on the grounds that the plaintiff had failed to prove that the alleged harasser harbored sexual desire for the plaintiff. This legislation may signal an interest by Sacramento in passing broader “anti-bullying” protections for California employees.

Expansion of Employee Whistleblower Protections (SB 496)

On October 12, 2013, California Governor Jerry Brown signed into law SB 496, which amends Section 1102.5 of the California Labor Code to provide greater whistleblower protections to employees who disclose information related to their employer’s alleged violations of or failure to comply with the law. Specifically, SB 496 now provides that an employee’s disclosure of information to a government or law enforcement agency regarding their employer’s violation of local rules or regulations is a legally protected disclosure. Formerly, employees were only protected if they disclosed information regarding their employer’s noncompliance with state and federal laws. Employees now enjoy complete whistleblower protection for disclosing information if the employee has reasonable cause to believe that the information shows a violation of a state or federal statute, or a violation of or noncompliance with a local, state, or federal rule or regulation. Also, disclosures made to a supervisor of another employee who has the authority to investigate, discover and correct the alleged legal violation is a significant expansion of the protection under SB 496. Interestingly, the statute’s expansion now also includes the circumstance where the employer merely “believes the employee disclosed or may disclose information.” Employers are subject to steep civil penalties, up to $10,000 per violation, if they prevent or retaliate against an employee for an employee’s disclosure of information related to their employer’s violation of the law or refusal to participate in any activity which would result in a violation of local, state, or federal law.

Unfair Immigration-Related Practices (AB 263, SB 666)

AB 263 amends several sections of the California Labor Code, all with the goal of providing greater employee protections for making complaints regarding unsafe, unfair and illegal work practices. First, AB 263 amends Section 98.6 of the Labor Code to include an employee’s written or oral complaint of unpaid wages as a legally protected activity. Employers may not discharge or in any manner discriminate, retaliate or take any adverse action against an employee for making such a complaint regarding unpaid wages owed to them. Under AB 263, employers are now at risk of facing a civil penalty of up to $10,000 per employee for each violation for failing to comply with Section 98.6.

AB 263 further amends the Labor Code by adding protections for immigrant
employees. Under the new Unfair Immigration-Related Practices section of the Labor Code (sections 1019 et seq.), employers may not engage in any unfair immigration-related practice, as defined under the statute, against any employee for the purpose or intent of retaliating against employees for the exercise of any right afforded to them under the law. The term “unfair immigration-related practice” is defined to include: (i) requesting more or different documents than are required under federal immigration law, (ii) refusing to honor immigration-related documents that on their face reasonably appear to be genuine; (iii) using the federal E-Verify system to check the employment authorization status of a person at a time or in a manner not required by federal law, (iv) threatening to file or the filing of a false police report, and (v) threatening to contact immigration authorities. Now, without the threat of reprise from their employer regarding their immigration status, employees are allowed to (1) make a good-faith complaint or disclosure of an employer’s violation of or noncompliance with any federal, state or local law; (2) seek information regarding their employer’s compliance with federal, state or local laws; or (3) inform and assist other employees of their rights or remedies under the law. Employers are subject to heavy sanctions for any unlawful threat, attempt, or actual use of an employee’s immigration status to retaliate against an employee for engaging in legally protected workplace activities. Sanctions may include, but are not limited to, up to a 90-day suspension of the employer’s business licenses and a host of other civil damages.

Another legislative enactment, SB 666, provides that businesses licensed under the Business and Professions Code (including lawyers, accountants, engineers, and contractors) are subject to suspension, revocation, or disbarment if they are determined to have reported or threatened to report an employee’s, former employee’s, or prospective employee’s citizenship or immigration status, or the citizenship or immigration status of a family member of the same, to a federal, state, or local agency because the employee, former employee, or prospective employee exercises a right under the provisions of the Labor Code, the Government Code, or the Civil Code. In addition to any other remedies available, the bill provides for a civil penalty, not to exceed $10,000 per employee for each violation, to be imposed against a corporate or limited liability company employer. The bill contains an important exception, stating that an employer is not subject to suspension or revocation for requiring a prospective or current employee to submit, within three business days of the first day of work for pay, an I-9 Employment Eligibility Verification form. (Beginning not later than January 1, 2015, the DMV will be required to issue driver’s licenses to certain non U.S. citizens, although this particular form of driver’s license may not be used to verify employment eligibility for purposes of a Form I-9.)

Finally, certain unfair immigration-related practices are also a crime. For example, Penal Code section 518 defines “extortion” as the obtaining of property from another, with his/her consent, or the obtaining of an official act of a public officer, induced by a wrongful use of force or fear. Extortion is punishable as a felony by up to four years in jail. AB 524, which amends the Penal Code, provides that “wrongful use of force or fear” now includes the threat to report an individual or their family’s immigration status or suspected immigration status.

Expansion of Leaves of Absence for Emergency Duty (AB 11)

Existing California law requires employers to provide temporary leaves of absence for volunteer firefighters so that they could attend required fire or law enforcement trainings. AB 11 expands the protected leave rights for volunteer firefighters, reserve peace officers, and emergency rescue personnel, and allows for leave for emergency rescue training in addition to fire or law enforcement training. The law applies only to employers with 50 or more employees. Under the law, employees that are fired, threatened with being fired, demoted, suspended, or otherwise discriminated against because they took time off for qualifying training are entitled to reinstatement and reimbursement for lost wages and benefits. Employee handbooks should be revised to comply with this expanded law.

Military and Veteran Status Is Now a Protected Category Under the FEHA (AB 556)

AB 556 broadens the scope of “protected categories” under the California Fair Employment and Housing Act to include “military and veteran status.” Under the law, an employee with “military and veteran status” is defined as a member or veteran of the United States Armed Forces, United States Armed Forces Reserve, the United States National Guard, and the California National Guard. The law provides an exemption in circumstances where an employer makes an inquiry into an employee’s military status to afford the employee preferential treatment in hiring. All equal employment opportunity policies should now include this additional protected category.

Family Friendly Workplace Ordinance

San Francisco’s Family Friendly Workplace Ordinance (“FFWO”) became effective on January 1, 2014. As currently written, the ordinance applies to employers with 20 or more employees, although an amendment is expected to pass early in the year which will clarify that the ordinance applies regardless of where the 20 employees are based. The ordinance provides employees who are employed within San Francisco, who have been employed for six months or more, and who work at least eight hours per week with the right to request flexible work arrangements to assist with caregiving responsibilities. Such requests may include but are not limited to modified work schedule, changes in start and/or end times for work, part-time employment, job sharing arrangements, working from home, telecommuting, reduction or change in work duties, and predictability in the work schedule. The employee may request the flexible or predictable working arrangement to assist with care for a child or children under the age of eighteen, a person or persons with a serious health condition in a family relationship with the employee, or a parent (age 65 or older) of the employee. Within 21 days of an employee’s request for a flexible or predictable working arrangement, an employer must meet with the employee regarding the request. The employer must respond to an employee’s request within 21 days of that meeting. An employer who denies a request must explain the denial in a written response that sets out a bona fide business reason for the denial and provides the employee with notice of the right to request reconsideration. The ordinance also has posting and recordkeeping obligations and prohibits retaliation for exercising rights protected by the ordinance. Employers with any San Francisco based employees (whether they telecommute or otherwise) should consider revisions to employee handbooks, comply with posting obligations (in English, Spanish, Chinese and any language spoken by at least 5% of the employees the workplace or job site), and establish a procedure to timely handle written requests for flexible work arrangements under the FFWO.

Employers throughout California (whether in San Francisco or not) should also be aware of possible discrimination against workers with caregiving responsibilities, as this might constitute employment discrimination based on sex, disability or other protected characteristics. Some of these issues are summarized in the EEOC’s guidance entitled “Employer Best Practices for Workers With Caregiving Responsibilities.” 

Article by:

Of:

Allen Matkins Leck Gamble Mallory & Natsis LLP

I Scream, You Scream, We All Scream For…Ascertainability? Re: How Ben & Jerry’s Defeated an “All Natural” Class Certification Motion

Sheppard Mullin 2012

 

On January 7, 2014, the Northern District of California refused to certify a class of Ben & Jerry’s purchasers who allegedly had purchased ice cream that was falsely advertised as “all natural.” Astiana v. Ben & Jerry’s Homemade, Inc., No. C 10-4387 PJH, 2014 U.S. Dist. LEXIS 1640 (N.D. Cal. Jan. 7, 2014).  This opinion shows the continuing viability of arguments based on ascertainability and the Supreme Court’s decision in Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013) to defeat consumer class actions.  Thus, for many defendants, this opinion will get 2014 off to a delicious start.

In Astiana, the plaintiff alleged that certain Ben & Jerry’s ice creams were not “all natural” because they contained “alkalized cocoa processed with a synthetic ingredient.”  Astiana, p. 4.  After asserting claims under the Unfair Competition Law, False Advertising Law, as well as common law fraud and unjust enrichment, the plaintiff sought to certify a class of all California purchasers of “Ben & Jerry’s ice cream products that were labeled ‘All Natural’ but contained alkalized cocoa processed with a synthetic ingredient.”

The court denied class certification.  First, the court held that the class was not ascertainable so that it was “administratively feasible to determine whether a particular person is a class member.” Astiana, p. 5.  The court found that the plaintiff provided no evidence as to how the plaintiff could tell which consumers purchased ice cream with the synthetic ingredients because the synthetic ingredient was not present in every ice cream labeled as “all natural.”  Furthermore, because cocoa could be processed with a “natural” alkali, the ingredient list that only said “processed with alkali” was insufficient to identify the non-natural ice creams.  Even though only one supplier provided Ben & Jerry’s with the alkalized cocoa, the evidence demonstrated that the supplier did not know whether a synthetic ingredient was used in every instance.  Thus, even if every package was labeled “all natural,” it was impossible to tell which products actually contained the synthetic ingredients that would make the advertised claim false under California law.

Second, applying Comcast, the court held that the plaintiff was required to show “that there is a classwide method of awarding relief that is consistent with her theory of deceptive and fraudulent business practices.”  Astiana, p. 21.  The plaintiff offered no expert testimony on calculating damages, contending, instead, that it would be “simple math” to calculate Ben & Jerry’s profits and award “restitutionary disgorgement.”  The court held that this was insufficient: there was no evidence that the price of Ben & Jerry’s “all natural” ice cream was higher than its ice cream without that label, thus there was no evidentiary model tying damages to plaintiff’s theory of the case.  Since Ben & Jerry’s sold its products at wholesale (rather than to the public directly), these calculations would be extremely difficult, thereby debunking the plaintiff’s claim that the damages could be figured out with “simple math” and proving the need for expert testimony.  In light of the plaintiff’s failure to present evidence of “a damages model that is capable of measurement across the entire class for purposes of Rule 23(b)(3),” class certification was denied.

Astiana demonstrates that plaintiffs seeking to certify class actions involving small consumables will continue to run into ascertainability problems.  See e.g. Carrera v. Bayer, Corp., 727 F.3d 300 (3d Cir. 2013).  Astiana also represents the application of the strong reading of Comcast, essentially telling plaintiffs “No damages expert, no certification.”  If courts continued to adopt this reading of Comcast, plaintiffs will no longer be able to gloss over these significant (and oftentimes difficult) damages issues by simply asserting that the court can certify now and figure out the damages later.

Article by:

Paul Seeley

Of:

Sheppard, Mullin, Richter & Hampton LLP

Wisconsin Supreme Court Upholds Broad Asbestos Exclusion

vonBriesen

 

In Phillips v. Parmelee, 2013 WI 105 (Dec. 27, 2013), the Wisconsin Supreme Court upheld the validity of a broad asbestos exclusion.

In 2006, Daniel Parmelee and Aquila Group (“Sellers”) sold an apartment building to Michael Phillips, Perry Petta and Walkers Point Marble Arcade, Inc. (“Buyers”) covered by an American Family business owners policy. Prior to selling the building to Buyers, Sellers received a property inspection report noting the probable presence of asbestos. However, Buyers claimed Sellers never put them on notice that the property probably contained asbestos and eventually filed suit.

The trial court granted American Family’s motion for declaratory judgment due to the policy’s broadly worded asbestos exclusion. The court of appeals upheld the trial court’s decision.

The asbestos exclusion at issue stated as follows:

This language does not apply to … “property damage” … with respect to:

a. Any loss arising out of, resulting from, caused by, or contributed to in whole or in part by asbestos, exposure to asbestos, or the use of asbestos. “Property damage” also includes any claim for reduction in value of real estate or personal property due to its contamination with asbestos in any form at any time.

b. Any loss, cost, or expense arising out of or in any way related to any request, demand, order, or statutory or regulatory requirement that any insured or others identify, sample, test for, detect, monitor, clean up, remove, contain, treat, detoxify, neutralize, abate, dispose of, mitigate, destroy, or any way respond to or assess the presence of, or the effects of, asbestos.

….

f. Any supervision, instructions, recommendations, warnings or advice given or which should have been given in connection with any of the paragraphs above.

The only issue presented to the Wisconsin Supreme Court was whether the asbestos exclusion in the American Family policy precluded coverage for the losses claimed by Buyers.

First, Buyers argued the term “asbestos” is ambiguous because it is undefined in the American Family policy and there are various forms and meanings of “asbestos.” The court was unpersuaded and found a reasonable person reading the policy would understand the word “asbestos” to mean any form of asbestos.

Buyers then argued the broad language of the asbestos exclusion invites multiple reasonable interpretations and it should be narrowly construed against American Family. The court found the case law cited by Buyers in support of their position to be factually distinguishable because the exclusion language in that policy was materially different from the broad, comprehensive language in the American Family policy, which included a wider range of asbestos-related losses than the case law cited by Buyers.

Finally, Buyers asserted that the Sellers negligently failed to disclose defective conditions or any other toxic or hazardous substances contained on the property. However, the court found nothing in the record to demonstrate the Buyers sustained any loss related to electrical or plumbing issues. Rather, the loss arose from asbestos.

For the aforementioned reasons, the Wisconsin Supreme Court upheld the court of appeals’ decision giving force to American Family’s broadly worded asbestos exclusion.

Article by:

Of:

von Briesen & Roper, S.C.

Design Patent Case Digest W.Y. Industries, Inc. v. Kari-Out Club LLC

Sterne Kessler Goldstein Fox

 

Decision Dates: August 25, 2011 and November 12, 2013

Courts: D. NJ and United States Court of Appeals for the Federal Circuit

Patents: D469,689

Holding: The terms of the ‘689 Patent are construed; AFFIRMED by the Federal Circuit.

Opinion: Plaintiff W.Y. Industries, Inc. sued Kari-Out Club LLC for infringement of U.S. Design Patent D469,689, entitled Rectangular Stackable Container. W.Y. Industries sells rectangular plastic food containers. Kari-Out makes competing food containers. The Court adopted W.Y. Industries’ verbal claim construction and denied Kari-Out’s request to include additional language, which described the functional features of the patented design.

W.Y Industries’ design patent claims the “ornamental design of a rectangular stackable container as shown and described” in the drawings of the patent. According to the Court, construing a design claim as that which is shown in the patent drawings is typical of design patents since, in most cases, drawings better depict a design than a written description. However, when the drawings contain functional features, an enhanced verbal claim construction may help to clarify exactly which features are claimed and which are not. In this case, the parties agreed that certain elements of the patented design are functional. Therefore, the court concluded that a detailed verbal claim construction will be helpful to the jury.

Both parties agreed to a claim construction from W.Y. Industries’ response to an interrogatory. The claim construction specified that the ornamental features of the container include the rectangular shape and radiused corners on the base and lid, certain raised and recessed portions, and particular dimensions; it also identified a number of other specific features. Kari-Out requested to include additional narrative describing the functional features of the design in the claim construction. The Court denied the request for two reasons. First, design patents protect only the aesthetic aspects of a design. Second, Kari-Out’s additional description of the claims was based on information uncovered during a deposition. Claim construction, however, must be rooted in the written record, including “the claims themselves, the written description, and the prosecution history.”

Kari-Out appealed to the Federal Circuit. On November 12, 2013, the Federal Circuit affirmed the District Court decision in a Rule 36 judgment.

Article by:

Of:

Sterne, Kessler, Goldstein & Fox P.L.L.C.

American Conference Institute National Forum on Securities Litigation & Enforcement

The National Law Review is pleased to bring you information about the upcoming American Conference Institute National Forum on Securities Litigation & Enforcement.

ACI Securities

When

Thursday, February 27 – Friday, February 28 ,2014

Where

Washington, D.C.

ACI’s 3rd National Advanced Forum on Securities Litigation and Enforcement, this time in Washington, DC, is the only event in the industry where experienced in-house counsel, leading litigators, renowned jurists, and regulatory and enforcement officials from federal and state agencies will assemble in our nation’s capital to provide the highest level insights on the most current developments in the field.

Now, more than ever, lenders/issuers, officers and directors, underwriters, auditors, investment managers and broker-dealers need to know how to prepare for and respond to litigation, and how to deal with regulation and enforcement initiatives from various federal and state agencies.

In response, ACI has developed the 3rd installment of its lauded Securities Litigation and Enforcement conference, which will provide practitioners with the knowledge and expert strategies that they need in order to prepare for and defend against the newest claims and claimants.

Join us in Washington, DC, and hear from a highly regarded faculty featuring in-house counsel from the top financial services companies and leading outside counsel from law firms that excel in securities litigation, renowned judges, and key government bodies, including SEC, FINRA, PCAOB, U.S. Attorney’s Offices (EDNY & SDNY), and various state securities departments.