Tag: Litigation

Will Obesity Claims Be the Next Wave of Americans with Disabilities Act (ADA) Litigation?

Poyner SpruillIn a new federal lawsuit in the U.S. District Court for the Eastern District of Missouri, Whittaker v. America’s Car-Mart, Inc., the plaintiff is alleging his former employer violated the Americans with Disabilities Act (ADA) when it fired him for being obese.  Plaintiff Joseph Whittaker claims the company, a car dealership chain, fired him from his job as a general manager last November after seven years of employment even though he was able to perform all essential functions of his job, with or without accommodations.  He alleges “severe obesity … is a physical impairment within the meaning of the ADA,” and that the company regarded him as being substantially limited in the major life activity of walking.

The EEOC has also alleged morbid obesity is a disability protected under the ADA.  In a 2011 lawsuit filed on behalf of Ronald Katz, II against BAE Systems Tactical Vehicle Systems, LP (BAE Systems), the EEOC alleged the company regarded Mr. Katz as disabled because of his size and terminated Katz because he weighed over 600 lbs.  The suit alleged Mr. Katz was able to perform the essential functions of his job and had received good performance reviews.  The case was settled after BAE Systems agreed to pay $55,000 to Mr. Katz, provide him six months of outplacement services, and train its managers and human resources professionals on the ADA.  In a press release announcing the settlement, the EEOC said, “the law protects morbidly obese employees and applicants from being subjected to discrimination because of their obesity.”

Similarly, in 2010, the EEOC sued Resources for Human Development, Inc. (RHD) in the U.S. District Court for the Eastern District of Louisiana, for firing an employee because of her obesity in violation of the ADA. According to the suit, RHD fired Harrison in September of 2007 because of her severe obesity.  The EEOC alleged that, as a result of her obesity, RHD perceived Harrison as being substantially limited in a number of major life activities, including walking.  Ms. Harrison died of complications related to her morbid obesity before the case could proceed.

RHD moved for summary judgment, arguing obesity is not an impairment.  The court, having reviewed the EEOC’s Interpretive Guidance on obesity, ruled severe obesity (body weight more than 100% over normal) is an impairment.  The court held that if a plaintiff is severely obese, there is no requirement that the obesity be caused by some underlying physiological impairment to qualify as a disability under the ADA.  The parties settled the case before trial for $125,000, which was paid to Ms. Harrison’s estate.

In June 2013, the American Medical Association (AMA) declared that obesity is a disease.  Although the AMA’s decision does not, by itself, create any new legal claims for obese employees or applicants under the ADA, potential plaintiffs are likely to cite the new definition in support of ADA claims they bring.  In light of these recent developments, obesity related ADA claims will likely become more common.

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Next Time, Buy the CDs, Re: Illegal Music Download

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Following the lead of other courts addressing statutory penalties for illegal music downloading, the U.S. Court of Appeals for the First Circuit upheld a $675,000 fine for downloading and distributing 30 songs.  Sony BMG Music Entertainment  v. Tenenbaum, Case No. 12-2146 (1st Cir., June 25, 2013) (Howard, J.).

For over eight years, Tenenbaum ignored the warnings of his father, his college and the music industry and continued to download and distribute thousands of songs he knew were copyrighted.  In 2007 five record companies sued Tenenbaum under the Copyright Act for statutory damages and injunctive relief.  The record companies only pursued claims for 30 songs, though Tenenbaum admitted at trial he had distributed as many as 5,000 songs.  The trial court held as a matter of law that Tenenbaum had violated the Copyright Act and the jury found his violations were willful.  The jury awarded $22,500 for each of Tenenbaum’s thirty violations (15 percent of the statutory maximum), for a total award of $675,000.  The district court reduced the award to $67,500 finding that the jury’s award violated due process.  The First Circuit vacated the district court’s judgment holding that the principle of constitutional avoidance required the court to first address the issue of remittitur before determining the due process question.  On remand the district court determined remittitur was inappropriate and that the original $675,000 award comported with due process. Tenenbaum appealed the decision solely on due process grounds.

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The Court reviewed two questions: what is the correct standard for evaluating the constitutionality of an award of statutory damages under the Copyright Act; and (b) did the $675,000 award violate Tenenbaum’s right to due process?

The 1st Circuit looked to St. Louis, I.M. & S. Ry. Co. v. Williams, not BMW of North America, Inc. v. Gore, as the proper standard for reviewing the constitutionality of statutory damages under the Copyright Act, noting that Gore applies to punitive damages and the concerns regarding fair notice to the parties of the range of possible awards were “simply not present in a statutory damages case where the statute itself provides notice of the scope of the potential award.”  Under Williams, a statutory damage award only violates due process “where the penalty prescribed is so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable.”

The 1st Circuit examined the purpose of the Copyright Act’s statutory damages and Tenenbaum’s behavior to determine if $675,000 metWilliams’ standard for constitutionality.  The 1st Circuit found that in 1999 Congress increased the Copyright Act’s minimum and maximum statutory awards specifically because of new technologies allowing illegal music downloading.  The record companies presented evidence that Tenenbaum’s activities had led to the loss of value of its copyrights and reduced its income and profits—precisely the harm Congress foresaw.  The Court went on to find that Tenenbaum’s conduct was egregious—he pirated thousands of songs for a number of years despite numerous warnings.  The Court held that “much of this behavior was exactly what Congress was trying to deter when it amended the Copyright Act.”  The 1st Circuit rejected Tenenbaum’s argument that the damages award had to be tied to the actual injury he caused, relying on Williams to find that the damages were imposed for a violation of the law and did not need to be proportional to the harm caused by the offender.

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International Trade Commission Addresses Use of Standard-Essential Patents in Section 337 Investigations

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The International Trade Commission (ITC) addressed for the first time the issue of whether infringement of a patent that has previously been declared “standard-essential” may form the basis for either a limited exclusion order or cease-and-desist order under a § 337, ruling that nothing in the ITC’s enabling statute prevents issuing an exclusion order, even if the complainant is under an obligation to license the patent.  Certain Electronic Devices, Including Wireless Communication Devices, Portable Music and Data Processing Devices, and Tablet Computers, Inv. No. 337-TA-794, (U.S. ITC, June 4, 2013) (ITC, per curiam); Commissioner Pinkert, dissenting).

The complainant, Samsung Electronics, held two patents that it had previously declared to be “standard-essential” to the Universal Mobile Telecommunications System promulgated by the European Telecommunications Standards Institute (ETSI).  ETSI’s Intellectual Property Rights policy required Samsung to offer licenses to such patents on fair, reasonable and non-discriminatory (FRAND) terms.  After licensing negotiations between Samsung and the respondent, Apple, broke down, Samsung filed a complaint at the ITC requesting a limited exclusion order against Apple’s mobile communication products.  After the administrative law judge ruled, on an initial determination (ID), that none of the patents at issue were valid and infringed, the ITC determined to review the ID and sought views from both the parties and the public as to whether Samsung’s declaration of the patents at issue as “standard-essential” should affect either the ITC’s analysis of whether there was a violation of § 337 or what relief should be provided.

In its final determination, the ITC found one of the two patents to be both valid and infringed, and that the proper relief was a limited exclusion and cease-and-desist order directed to the infringing articles.  The ITC first rejected Apple’s argument that the Commission should not investigate an alleged violation of § 337 based on infringement of patents subject to a FRAND undertaking, ruling that under § 337(b)(1), the ITC is required to investigate any alleged violation based upon a complaint under oath, whether or not those patents have been declared standard-essential.  The ITC also rejected Apple’s theory that the Commission “cannot address infringement of standard-essential patents other than in the exceptional scenarios such as where a potential licensee has refused to pay a royalty after a U.S. court has determined that royalty to be FRAND, or where no U.S. court has jurisdiction over the potential licensee in order to set a FRAND rate,” ruling that the remedies provided under § 337 could be imposed in addition to any damages or injunctions available from a district court.

The ITC further determined that Apple had not “properly argued any affirmative defense that would preclude the Commission from finding a violation based on assertion of a declared-essential patent,” such as a breach of contract, promissory estoppel, laches or fraud  The ITC ruled that even if Apple had offered sufficient evidence that the FRAND declaration was a legally enforceable obligation, the patents at issue were actually necessary to practice the standard and that Samsung was required to grant irrevocable licenses under FRAND terms to any party, it still would not have found in Apple’s favor, because the parties’ final offers were sufficiently close to each other that Samsung did not violate its obligation to negotiate in good faith.  Importantly, the ITC found that Samsung was not under any obligation to make an initial offer that was FRAND, because “the SSO intends the final license to be accomplished through negotiation” and “even if it were true that a FRAND agreement that requires Apple to pay Samsung ultimately is not reasonable, the offers that Apple criticizes do not necessarily demonstrate that Samsung has violated its FRAND obligations by failing to negotiate in good faith” (emphasis in original).  Finally, the ITC rejected the theory that whether a patent has been declared standard-essential should be considered when the public interest is analyzed, finding that its consideration of the public interest is limited solely to the four factors listed in § 337(d)(1).

Uncommonly for a Commission opinion, Commissioner Dean Pinkert wrote a dissent arguing that the ITC should not issue an exclusion order based on Samsung’s obligation to license the patents on a FRAND basis, that the evidence indicated Samsung was unwilling to make a FRAND licensing offer with respect to the standard-essential patents and that the absence of a FRAND offer should have a bearing on whether relief under § 337 is in the public interest.  Specifically, Commissioner Pinkert found that it was neither fair nor non-discriminatory for a FRAND-encumbered patent holder to require licenses to non-FRAND-encumbered patents as a condition for licensing the FRAND-encumbered patent.  Commissioner Pinkert also would have found that the statutory language of § 337(d)(1), as well as the legislative history of the statute that “any evidence” of price gouging or monopolistic practices on the part of the complainant would be a proper basis for denying exclusion, suggests that the section should be read broadly.

Practice Note:  The Commission’s rejection of a per se rule barring exclusion orders for patents that have been declared standard-essential is likely to lead to have a number of effects, including increased litigation of standard essential patents at the ITC, counter-suits requesting that a district court rule determine what royalty rate is FRAND and/or requesting that a complainant be enjoined from proceeding before the ITC, presidential review taking on increased importance and potential legislative action to curb the ITC’s jurisdiction.

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In Largest Known Data Breach Conspiracy, Five Suspects Indicted in New Jersey

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On July 25, 2013, the United States Attorney for the District of New Jersey announced indictments against five men alleging their participation in a global hacking and data breach scheme in which more than 160 million American and foreign credit card numbers were stolen from corporate victims, including retailers, financial institutions, payment processing firms, an airline, and NASDAQ.  The scheme is the largest of its kind ever prosecuted in the United States.

The Second Superseding Indictment alleges the defendants (four Russian nationals and one Ukrainian national) and other uncharged co-conspirators targeted corporate victims’ networks using “SQL [Structured Query Language] Injection Attacks,” meaning the hackers identified vulnerabilities in their victims’ databases and exploited those weaknesses to penetrate the networks.  Once the defendants had access to the networks, they used malware to create “back doors” to allow them continued access, and used their access to install “sniffers,” programs designed to identify, gather and steal data.

Once the defendants obtained the credit card information, they allegedly sold it to resellers all over the world, who in turn sold the information through online forums or directly to individuals and organizations.  The ultimate purchasers encoded the stolen information on blank cards and used those cards to make purchases or withdraw cash from ATMs.

The defendants allegedly used a number of methods to evade detection.  They used web-hosting services provided by one of the defendants, who unlike traditional internet service providers, did not keep records of users’ activities or share information with law enforcement.  The defendants also communicated through private and encrypted communication channels and tried to meet in person.  They also changed the settings on the victims’ networks in order to disable security mechanisms and used malware to circumvent security software.

Four of the defendants are charged with unauthorized access to computers (18 U.S.C. §§ 1030(a)(2)(C) and (c)(2)(B)(i)) and wire fraud (18 U.S.C. § 1343).  All of the defendants are charged with conspiracy to commit these crimes.

Two of the defendants have been arrested, with one in federal custody and the other awaiting an extradition hearing.  The other three defendants, two of whom have been charged in connection with hacking schemes, remain at large.

This conspiracy is noteworthy for its massive scale, and for the patience the hackers demonstrated in siphoning data from the networks.  The U.S. Attorney “conservatively” estimates more than 160 million credit card numbers were compromised in the attacks, and alleges that the hackers had access to many victims’ computer networks for more than a year.  Many prominent retailers were targets, including convenience store giant 7-Eleven, Inc.; multi-national French retailer Carrefour, S.A.; American department store chain JCPenney, Inc.; New England supermarket chain Hannaford Brothers Co.; and apparel retailer Wet Seal, Inc.  Payment processors were also heavily targeted, including one of the world’s largest credit card processing companies, Heartland Payment Systems, Inc., as well as European payment processor Commidea Ltd.; Euronet, Global Payment Systems and Ingenicard US, Inc. The hackers also targeted financial institutions such as Dexia Bank of Belgium, “Bank A” of the United Arab Emirates; the NASDAQ electronic securities exchange; and JetBlue Airways.  Damages are difficult to estimate with precision, but they total several hundred million dollars at least.  Just three of the corporate victims suffered losses totaling more than $300 million.

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A Checklist for Employee Reference Checks

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Thorough research during an employer’s hiring phase can prevent undesirable employees from becoming part of a workforce. There is no better way to get an accurate assessment of job applicants than by speaking with people who have actually worked with them. Before picking up the phone, however, potential employers should keep a few things in mind:

Who should inquire?

Someone in HR may typically perform reference checks, but the supervisor or manager who will be interacting with and interviewing the applicant should consider making the calls.  A supervisor or manager will not only benefit from getting the information directly, but they may also have an easier time getting high-level references to speak candidly about the applicant.

Consider obtaining consent

Getting the applicant’s consent before obtaining potentially sensitive information can help insulate you from liability. Further, former employers may be more at ease discussing the applicant if they know the applicant has approved of the contact.

What should be discussed?

Keep it at a professional level; not personal. Anything you ask should be relevant to the position with the goal being to find out about the applicant’s ability and how they will interact with others. Obviously, avoid any questions that could inadvertently lead to a discrimination or unfair hiring practices claim, such as inquiring about the person’s age or religion.

Know what you want to find out beforehand. People provide references whom they believe will say positive things, but this is not always the case. In the event a reference thinks poorly of the applicant, try to find out if their negative opinion is based on articulable, business-related reasons. While comments like, “she just was not a good fit at our company” can be appreciated, it is better to hear comments such as, “she was not a good fit at our company because she was repeatedly absent and needed constant oversight.”

Take notes

Information obtained during a reference check can be valuable evidence if a negligent hiring claim is later made by a third-party. For example, if the applicant is hired and subsequently is violent towards a customer, having records to show that none of the employee’s references offered any indication of violent behavior will support your defense that the hiring was not negligent.

Get necessary releases before going further

An applicant’s express permission is necessary before accessing some records, such as a credit report or criminal background check. Some records may be completely inaccessible, such as workers’ compensation information or medical records. If you have conducted the reference checks and are ready to take your interview process to the next level, make sure that you know what kind of releases are required.

 Maegan Pirtle and Shawn Beloin, Law Clerks for McBrayer, contributed to this article.

Federal Energy Regulatory Commission (FERC) Orders $435 Million Civil Penalty to Barclays Bank and $1-15 Million to Four Traders

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On July 16, 2013, the Federal Energy Regulatory Commission ordered Barclays Bank PLC to pay one of the largest civil penalties in its history — $435 million, 144 FERC ¶ 61.041 (2013). Four traders were also assessed penalties — $15M for trader Scott Connelly, and $1M each to traders Daniel Brin, Karen Levine and Ryan Smith. The Commission also found that Barclays should disgorge $34.9M, plus interest, in unjust profits. Barclays and the traders had elected FERC procedures that require FERC to assess the penalty without formal administrative adjudication, and then pursue enforcement of its assessment in an action in federal district court. The district court action includes a de novo review of the Commission’s findings. Early reports indicate that Barclays will fight the penalty in court.

These penalties were issued after FERC found that Barclays and its traders violated the Commission’s Anti-Manipulation Rule, 18 CFR §1c.2 (2012). The Commission found that Barclays and the traders manipulated California energy markets from November 2006 to December 2008 at the four most liquid trading points in the western U.S. — Mid-Columbia, Palo Verne, North Path 15 and South Path 15, Order at 2. Specifically, the Commission found that Barclays and the traders built a “significant volume of monthly index or fixed-price physical products” at a trading point “in a direction — long or short — opposite to fixed-for-floating financial swaps they held at that point.” The Commission noted that establishing these positions “had the effect of creating physical delivery or receipt obligations which Barclays was unable to meet in actual practice,” and that Barclays and the traders were able to “flatten” these positions (“achieve zero net physical obligations”) at the end of each day through the use of next-day fixed-price or cash physical products traded on the Intercontinental Exchange platform. FERC found that the trading activity at issue was “intended to move the Index rather than respond to market fundamentals and was generally uneconomic.” Order at 4.

The Commission further concluded that Barclays and the traders not only engaged in this manipulative trading scheme, but “they did so with the intent to commit fraud.” The Commission identified seven facts found during its investigation to support its conclusions:

  1. Barclays’ and the traders’ consistent pattern of building substantial positions directionally opposite their large swap positions and the subsequent flattening which would tend to move prices to benefit those swap positions;
  2. how the trading behavior in the “Manipulation Months” differed from months where there was no alleged manipulation;
  3. traders’ communications which discuss and describe the fraudulent scheme;
  4. Barclays and the traders responding to certain allegations, but completely failing to respond to FERC Office of Enforcement staff allegations regarding the building of positions as a manipulative scheme;
  5. the uneconomic nature of the trading;
  6. inconsistency in trader testimony and trader explanations presented in submissions;
  7. the failure of economic, statistical and legal analysis provided by Barclays and the traders to otherwise explain or defend the positions, swaps or trading.

In addition, FERC noted that it “considered various evidence to reach its conclusion concerning intent,” and provided examples of some of the compelling “speaking” evidence that it found demonstrates that the traders understood that they were making the trades to “drive price,” “protect” their positions and ”move” or “affect the Index.”

The parties have 30 days to pay the civil penalties assessed after which, the Commission can pursue enforcement of its assessment in federal district court. The parties continue to have the opportunity to settle the matter with the Commission. Absent a settlement, and unlike the DC Circuit’s decision in Hunter v. FERC, 711 F.3d 155 (D.C. Cir. 2013), this case may produce the first fully-adjudicated case on the merits of the Commission’s market manipulation theories.

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Employment as Consideration in Employee Non-Competes: Less than Two Years is Not Enough

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The Illinois Appellate court very recently clarified a budding dispute among practitioners regarding what type of consideration is necessary to enforce a non-compete or non-solicitation agreement. In Fifield v. Premier Dealer Services, Inc., in which our firm represented the employee and his new employer, the First District Illinois Appellate Court set forth this bright line rule — if the only consideration for a restrictive covenant is employment, then an employee has to work at least two years after signing the agreement before the non-compete or non-solicitation agreement can be enforced. This is true even if the restriction meets all other requirements (e.g., legitimate interest, reasonable scope).

This rule applies whether or not the agreement is signed at the beginning of employment or during, whether the employee quits or is fired. It simply doesn’t matter. Unless the employee has worked two years, the company will not be able to enforce that agreement unless some other adequate consideration is given for the restrictive covenant.

What does this mean to you? It means that if you hire a new employee and require her to sign a non-compete and that employee leaves a year after being hired, you will not be able to enforce that non-compete agreement no matter what. Indeed, based on the Fifield case, if the employee works one year and eleven months and then leaves, the agreement would still not be enforceable.

The same rule would apply if you ask an employee to sign a non-compete during his or her employment. After that agreement is signed, the employee has to work an additional two years for the agreement to be enforceable, provided that the only consideration for the agreement is employment.

And that is the loophole that the court has left employers: providing some other consideration besides employment. For example, if a company gives a real (not an illusory or nominal) signing bonus, the employer would have a fairly good argument that it has provided adequate consideration to enforce the agreement. Perhaps a promotion would work as well, although that is more problematic since a promotion is still basically employment. After promoting its employee, nothing prevents the company from then firing the employee, if employment is at will. If, on the other hand, the employee was hired for a particular amount of time (at least two years) during which he or she could not be fired without cause, that could itself be sufficient consideration since it would arguably constitute two years of employment even if the employee quit early.

Another, albeit untested possibility would be to draft the restrictive covenant in such a way that the post-employment restriction would be equal to the length of time that the employee actually works. So if the employee leaves after one year, then she or he is restricted for one year. To be enforceable, the restriction would likely have to have some maximum period of time. Probably two to three years at the most.

As you can see, this new ruling has significant implications. At the very least, every company should carefully review its non-compete and non-solicitation agreements to see if they are supported by adequate consideration. If they don’t, then you should discuss with your attorneys how best to rectify the situation. You certainly do not want your former employees going to competitors singing, “I can’t get no consideration.”

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Supreme Court Decides Indian Child Welfare Act Case

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In Adoptive Couple v. Baby Girl, — S.Ct. —-, 2013 WL 3184627 (U.S. 2013), the baby girl in question (Baby Girl) was born in Oklahoma to unwed parents, including a Cherokee father (Father) and non-Indian mother (Mother). After the couple broke up during the pregnancy, Father, in response to an inquiry from Mother, text-messaged Mother that he would rather give up parental rights than pay child support. Mother decided to terminate her parental rights and give the baby up for adoption.

The adoptive parents (Adoptive Parents), residents of South Carolina, were present when Baby Girl was born September 15, 2009, and took her home with them shortly after receiving permission from Oklahoma pursuant to the Interstate Compact on Placement of Children. Adoptive Parents began adoption proceedings in South Carolina three days after Baby Girl was born but Father did not receive notice until nearly four months later, in January 2010. when a process server presented him with an “Acceptance of Service and Answer,” which purported to waive the 30-day waiting period, waive notice of hearing and waive any objection to the adoption. Father, a soldier about to depart for Iraq, signed but then immediately changed his mind and sought a stay of adoption under the Servicemember’s Civil Relief Act.

The Cherokee Nation, which had previously indicated that Father was not a citizen, later determined that he was. The South Carolina adoption petition was amended accordingly in March 2010. After establishing paternity through DNA testing, Father challenged the adoption. Adoptive parents argued that, under South Carolina law, there was no need for Father’s consent to the adoption because Father had neither lived with Mother or Baby Girl for the six months preceding the adoption nor paid child support. The South Carolina family court judge ruled that the Indian Child Welfare Act (ICWA) applied and mandated that Baby Girl be turned over to father. After various stay motions were denied, Father returned to Oklahoma with Baby Girl December 31, 2011. The South Carolina Supreme Court affirmed.

On June 25, the Supreme Court in a 5-4 decision reversed. The state court had relied in part on Section 1912(f) of the codified ICWA, which bars termination of parental rights to an Indian child unless the court finds that “the continued custody of the child by the parent or Indian custodian is likely to result in serious emotional or physical damage to the child.” Emphasizing the word “continued,” the Court held that “§ 1912(f) does not apply where the Indian parent never had custody of the Indian child” (Emphasis in original).

The Court also disagreed with the South Carolina court’s conclusion that termination of Father’s rights was barred by Section 1912(d), which requires a showing that efforts have been made “to prevent the breakup of the Indian family,” holding Section 1912(d) inapplicable in Father’s case: “But when an Indian parent abandons an Indian child prior to birth and that child has never been in the Indian parent’s legal or physical custody, there is no relationship that would be discontinued – and no effective entity that would be ended – by the termination of the Indian parent’s rights.” (Internal quotes and ellipses omitted).

Finally, the Court held that Section 1915(a), which mandates preference “in any adoptive placement” for a member of the child’s extended family, other members of the child’s tribe or other Indian families, in that order, did not apply in the case of Baby Girl: “This is because there simply is no ‘preference’ to apply if no alternative party that is eligible to be preferred under § 1915(a) has come forward.”

In an important concurrence, Justice Breyer explicitly left open whether ICWA sections 1915(a), (b) and (f) might apply under different circumstances, e.g., where the Indian father (1) has visitation rights, (2) has paid child support, (3) was deceived about the existence of a child, or (4) was prevented from supporting his child.

In a dissent joined by three other members of the Court, Justice Sotomayor accused the majority of distorting the meaning of the term “continued” to defeat the very purposes for which Congress had enacted the ICWA:

The majority’s hollow literalism distorts the statute and ignores Congress’ purpose in order to rectify a perceived wrong that, while heartbreaking at the time, was a correct application of federal law and that in any case cannot be undone. Baby Girl has now resided with her father for 18 months. However difficult it must have been for her to leave Adoptive Couple’s home when she was just over 2 years old, it will be equally devastating now if, at the age of 3 1/2, she is again removed from her home and sent to live halfway across the country. Such a fate is not foreordained, of course. But it can be said with certainty that the anguish this case has caused will only be compounded by today’s decision.

According to the dissent, “continued” custody, consistent with congressional intent, means prospective custody and does not preclude the application of ICWA’s protections to a non-custodial Indian parent, including (1) the requirement that a proceeding be transferred to tribal court upon the Indian parent’s request, in the absence of good cause to the contrary, as required by Section 1911(b), (2) the requirement that any consent to adoption be in writing and executed before a judge, per Section 1913(a), (3) the requirement of Section 1912(a) that an Indian parent and the child’s tribe receive notice, and (4) the requirement of Section 1912(b) that the Indian parent be provided with legal counsel.

The dissent also sends a message to the state court, which will now consider the case on remand, laying out a scenario that could result in Father having no parental rights but having a relationship with his own daughter through relatives:

[T]he majority does not and cannot foreclose the possibility that on remand, Baby Girl’s paternal grandparents or other members of the Cherokee Nation may formally petition for adoption of Baby Girl. If these parties do so, and if on remand Birth Father’s parental rights are terminated so that an adoption becomes possible, they will then be entitled to consideration under the order of preference established in § 1915. The majority cannot rule prospectively that § 1915 would not apply to an adoption petition that has not yet been filed. Indeed, the statute applies “[i]n any adoptive placement of an Indian child under State law,” 25 U.S.C. § 1915(a) (emphasis added), and contains no temporal qualifications. It would indeed be an odd result for this Court, in the name of the child’s best interests, cf. ante, at —-, to purport to exclude from the proceedings possible custodians for Baby Girl, such as her paternal grand-parents, who may have well-established relationships with her.

In an odd concurring opinion, Justice Thomas blesses the majority for not reaching more fundamental constitutional questions but then embarks on an originalist reimagining of federal Indian law pursuant to which (1) Congress had no authority to enact the ICWA, (2) the doctrine of congressional plenary power is error, (3) congressional power is strictly limited to commercial trade with Indian tribes located beyond state borders, and (4) congressional power does not extend to citizens of tribes. The idea behind concurrences of this nature is to plant seeds that the author hopes will germinate into a majority of the court at some future date.

A Bad Smoke Break: Stringent Documentation of Work Rules Defends Against Unemployment Claims

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A recent Missouri case demonstrates the importance of documentation when defending against unwarranted unemployment claims. The case also underlines the need for the reforms passed by the Missouri General Assembly and pending signature by Gov. Jay Nixon.

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Facts

James Sullivan worked as a part-time cook for nearly a year and a half at Landry’s Seafood House. One day, he disappeared during dinner service and was found 20 minutes later smoking and talking on his cell phone in the parking lot. He was fired and filed a claim for unemployment benefits. In Missouri, when employees are terminated for work-related misconduct, they can be disqualified from receiving unemployment benefits. However, a deputy at the Missouri Division of Employment Security initially determined that Sullivan was eligible for benefits. The restaurant appealed that determination to the Division Appeals Tribunal.

Appeals Tribunal Finds Willful Misconduct

During the hearing, which Sullivan failed to attend, Landry’s Seafood House offered the testimony of a senior kitchen manager. The manager said the restaurant had policies prohibiting employees from smoking at work or leaving their work area without a supervisor’s permission. Landry’s posted signs on its doors to remind employees of the rule and had discussed the policy with employees at shift meetings. Further, Landry’s provided employees with a copy of its policies. Sullivan had signed an acknowledgment of receipt when hired. Sullivan had been counseled for violating the rules in the past and had complied with the policies on several occasions by asking for permission to leave his workstation and clocking out before going outside to smoke a cigarette.

After the hearing, the Appeals Tribunal reversed the determination and found in favor of Landry’s. Sullivan was to be disqualified from receiving unemployment benefits because he was discharged for work-related misconduct. Sullivan appealed.

Court of Appeals Sides with the Employer

The Missouri Court of Appeals upheld the decision in Landry’s favor, finding there was substantial evidence to support it. The court noted that Sullivan was aware of the rules, had signed a written statement acknowledging receipt of the policies, and had been counseled on the rules. The supervisor’s testimony at the hearing established these facts and constituted substantial evidence that Landry’s terminated Sullivan for work-related misconduct. The court explained that Landry’s rule on breaks was also reasonable because a restaurant’s business depends on employees preparing food for its customers in a timely manner. Landry’s rule against smoking on the clock was reasonable because an employer has a right to expect employees to be engaged in meaningful work while being paid.

Bottom Line

At the time of this case, Missouri law defined misconduct as a “wanton and willful” act in order to disqualify a terminated employee from receiving unemployment benefits in Missouri. But as the first decision made by the deputy at the Missouri Division of Employment Security shows, that definition can lead to inconsistent rulings. Although the Missouri Court of Appeals ruled in favor of the employer, it was a time-consuming and expensive undertaking to work through the appeals process to secure a decision that would seem obvious to most people.

During the 2013 Legislative Session, the Missouri Chamber championed legislation to change the definition of misconduct to provide more consistency in unemployment compensation cases. Sponsored by Rep. Will Kraus, a Republican from Lee’s Summit, SB 28 is currently pending signature by Gov. Jay Nixon. House Bill 611 contains similar language and also awaits signature. Proof that you properly communicated your work rules to employees and required them to acknowledge receipt of the rules is key when seeking to establish that an employee’s violation of the rules was intentional. Landry’s actions in this case protected the restaurant from having to pay unemployment benefits to a former employee who violated its well-publicized policies.

Published in the July 2013 issue of Missouri Business, the Magazine of the Missouri Chamber of Commerce and Industry

Federal Judge Finds that Apple Conspired to Raise E-book Prices

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On July 10, 2013, Judge Denise Cote of the Southern District of New York issued a 160-page opinion holding that Apple conspired with five book publishers to raise e-book prices and eliminate retail price competition in violation of Section 1 of the Sherman Act and several relevant state statutes.  United States v. Apple Inc., case number 12-civ-2826 (DLC).  The five publishers – Hatchett, HarperCollins, Macmillan, Penguin and Simon & Schuester – had all previously settled with the U.S. Department of Justice (DOJ).

The opinion stated that as Apple prepared to launch its iPad to the public and sought to concurrently enter the e-book market with its iBookstore, it met with the publishers and agreed to provide them with an “agency model” for e-book pricing that allowed the publishers to set the prices of the e-books themselves, subject to certain price caps.  Apple’s agreements with the publishers also included Most Favored Nation provisions which ensured that Apple could match its competitors’ prices and also provided an incentive for the publishers to lobby Amazon and other retailers to change their wholesale business models to agency models.  According to the court’s opinion, these agency model agreements caused e-book prices to increase, sometimes 50% or more for a specific title.

A separate trial for potential damages will be scheduled later.  Apple said it will appeal the ruling.

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