Tag: Litigation

10 Tips When Hiring a Federal Appeals Lawyer

When hiring a federal appeals attorney, it is important not to take your decision lightly. There is a good chance that the outcome of your appeal will have a major impact on your life or business—whether positive or negative—and your choice of counsel will have a major impact on your chances of success.

For many people, their first instinct is to engage their trial counsel for their appeal. On its face, this makes sense. Trial counsel is already intimately familiar with the facts of your case, and trial counsel is—or should be—well aware of the grounds that are available for seeking relief at the appellate level.

But, while trial counsel can be a good option in some cases, defendants should not engage their trial counsel by default. There are many circumstances in which hiring trial counsel to continue forward with an appeal will not be the right choice. There are several factors to consider, and considering all of these factors is essential for making an informed decision.

“Some lawyers are better equipped to handle federal criminal appeals than others. This is not a slight toward lawyers who don’t handle federal appeals, but rather simply an acknowledgment that federal appeals are a unique practice area just like white collar criminal defense, healthcare fraud defense, or defending against allegations of serious violent crimes. If you need to appeal the outcome of your federal criminal case, it is imperative that you choose a lawyer who has been there many times before.” – Dr. Nick Oberheiden, Founding Attorney of Oberheiden P.C.

Due to the unique challenges involved in successfully pursuing a federal criminal appeal, the considerations involved in choosing a federal appeals attorney are not the same as those involved in choosing trial counsel for a federal criminal case. This is important to keep in mind, and understanding the unique nature of the federal appeals process will help you make an informed choice about your appellate representation.

How To Choose Appellate Counsel for a Federal Criminal Appeal

So, how should you choose appellate counsel for your federal criminal appeal? Here are 10 tips to keep in mind when hiring a federal appeals lawyer:

1. Understand that an Appeal is Not a Re-Trial

The first thing to understand that will help you make an informed decision about your choice of appellate counsel is that an appeal is not a re-trial. As a result, being an effective trial lawyer does not necessarily translate to having the skills needed to provide effective representation at the appellate level. The federal trial and appellate processes are very different, and many of the arguments and strategies that work at trial are completely irrelevant to the process of seeking relief from an unjust conviction or sentence on appeal.

For example, while providing effective trial representation requires the ability to effectively question witnesses and argue the facts to the jury, providing effective appellate representation requires persuasive writing abilities and the ability to effectively argue the law to a panel of judges who aren’t necessarily focused on the defendant’s guilt or innocence. On appeal, the focus is instead on determining whether errors at the trial level entitle the defendant to the opportunity to pursue a different outcome.

2. Focus on Hiring a Lawyer with Significant Federal Appellate Experience

Given the unique nature of the federal appeals process, relevant experience is undoubtedly the most important factor to consider when choosing a lawyer to represent you. This means experience handling federal criminal appeals in cases similar to yours—and ideally experience handling federal criminal appeals in the U.S. Circuit Court of Appeals that will hear your case. Although, this latter consideration is definitely the less important of the two. While each U.S. Circuit Court of Appeals has its own rules of practice, it is far easier to adapt to a new set of procedural rules than it is to get up to speed on the substantive issues involved in a complex federal case.

3. Carefully Consider Whether Your Trial Counsel is Your Best Option

As we touched on above, continuing to work with your trial counsel for your federal criminal appeal may or may not be your best option. As a baseline, you should only consider engaging your trial counsel for your appeal if he or she has extensive experience in federal appellate practice. While some lawyers handle trials and appeals, many devote their careers to handling one type of case or the other.

Even if your trial counsel also has significant experience, you will still want to weigh other factors as well. How effective was your trial representation? Do you have any concerns about whether your trial counsel was able to effectively preserve your grounds for appeal? Does your attorney have other major trials in the pipeline? These are all important questions to consider when making your decision.

4. Expand Your Search

When choosing a federal appeals attorney, you don’t necessarily have to stay local—and, in fact, staying local might not be your best option either. There are federal appeals lawyers who handle cases throughout the country; and, depending on where you live or your business is located, your local options may be fairly limited. You can (and should) expand your search to law firms with a nationwide presence, and you can (and should) choose a lawyer based on relevant experience rather than geographic proximity.

5. Schedule a Consultation to Discuss Your Appeal

Whether you are considering your trial counsel or you are looking elsewhere for your appellate representation, you should schedule a consultation to discuss your appeal. Before you invest in an appeal, you need to make sure it makes sense to move forward. Scheduling a consultation also gives you the opportunity to speak with a lawyer one-on-one and decide whether he or she seems like the right choice to handle your case on appeal.

6. Do Some Legwork Yourself

In addition to scheduling a consultation, you can also do some legwork to help you make an informed decision—and to help yourself and your lawyer begin preparing for your appeal. When it comes to choosing a federal appeals lawyer, this includes taking steps such as:

  • Visiting the lawyer’s website and reading about his or her experience

  • Reading client reviews and testimonials online

  • Preparing a list of questions to ask during your initial consultation

When it comes to preparing for your appeal, some of the steps you can take to prepare in advance of your initial appellate consultation include:

  • Taking notes about any potential grounds for appeal that you have discussed with your trial counsel

  • Taking notes about any other specific issues during your trial that you think may have led to an unjust result

  • Familiarizing yourself with the unique aspects of federal appellate practice

7. Do Not Fall for a Sales Pitch

While a lawyer should only be willing to take your case if he or she is capable of representing you effectively, you still need to be careful to avoid falling for a sales pitch. Unfortunately, if you schedule a consultation with a lawyer who isn’t the right choice to handle your case, there is a possibility that he or she may still try to convince you otherwise. While these instances are relatively rare, they do happen. If you feel like a lawyer is pressuring you to move forward with an engagement, this is most likely a sign that you should choose someone else for your federal criminal appeal.

8. Schedule Another Consultation if Necessary

This brings us to another important point: If you schedule a consultation with a lawyer and you are not confident in the lawyer’s ability to handle your appeal effectively for any reason, you should not hesitate to schedule another consultation at another firm.

9. Make Your Decision Carefully

If it is not already abundantly clear, when hiring a federal appeals attorney, you need to make your decision carefully. You should not rush, and you should not make your decision out of convenience or the desire to avoid putting in effort. Your effort to find the right lawyer for your appeal will be well worth it. Whether you are facing a conviction as an individual or your business has been convicted of corporate fraud or any other crime, you need to have unwavering confidence in your counsel’s ability to provide strategic and efficient appellate representation. The more effort you put into choosing the right lawyer, the more confidence you will have in your decision.

10. Make Your Decision Promptly

Finally, while it is important not to rush your decision, you still need to make your decision promptly. Under the Federal Rules of Appellate Procedure, you only have 14 days to file a Notice of Appeal. While a Notice of Appeal is a simple form filing, you cannot afford to risk any mistakes or delays. So, whether it has been hours or days since the trial court’s decision, finding the right federal appeals lawyer to represent you (or your business) needs to be your top priority.

Article By Dr. Nick Oberheiden of Oberheiden P.C.

For more litigation legal news, click here to visit the National Law Review.

Oberheiden P.C. © 2023

New York Adult Survivors Act

New York’s Adult Survivors Act[1] (“ASA” or “the Act”) (S.66A/A.648A) became effective on November 24, 2022. The Act provides a one-year lookback window for people to seek civil remedies for sexual abuse they experienced after they turned 18, regardless of what year the abuse occurred. This law adds critical energy to the ongoing momentum of the #MeToo movement, allowing survivors to file suit against both their abusers and the institutions that enabled them.

The one-year lookback window lasts until November 23, 2023, so as of today, survivors have just over ten months to take advantage of the law. The following guide provides context and recommendations for understanding and using New York’s Adult Survivors Act.

What does the ASA do?

The ASA creates a one-year lookback window for sexual assault survivors to pursue civil claims in court for abuse that may have occurred years earlier, as long as they were over 18 at the time. Previously, a person who experienced sexual abuse only had a few years to file a lawsuit in New York before their claim would be time-barred. This meant that survivors had little time in which to come to terms with the abuse they experienced, find an attorney, prepare a case, and file an action. For those who missed that small window, the ASA reopens the courthouse doors. So until November 23, 2023, whether you experienced abuse in 2015, 2000, or 1985, you can file a claim in court and seek recovery for what happened to you.

What does the law cover?

Sexual offenses covered by the ASA span a wide range of behaviors, including but not limited to forcible touching, rape, sexual assault, sexual misconduct, and other forms of sexual abuse. Not every sexual offense is covered under the ASA,[2] and an attorney can help assess whether your claim falls within its provisions.

Who can you sue?

Another powerful provision of the law is who it allows to be named as a defendant. Survivors are not limited to suing their abusers—they can also hold accountable the institutions that insulated those abusers from justice. These institutions can include entities that had responsibility to keep the survivor safe and to control the actions of the abuser. Claims against the institutions can involve both intentional and negligent acts. If your abuser was part of a larger organization that contributed to or failed to prevent, notice, or stop the abuse, the ASA empowers you to go after that organization.

This provision comes directly from New York’s 2019 Child Victims Act (“CVA”).[3] Over 10,000 people have used the CVA to sue institutions that had a role to play in their abuse, including churches, hospitals, overnight and day camps, and schools. For example, a large number of CVA cases name the Roman Catholic Church and the Boy Scouts of America as institutional defendants. The ASA provides a similar recourse to justice: oftentimes, survivors are subject to abuse by people who hold power over them. For minors, these people could be coaches, religious leaders, teachers, mentors, or other caregivers. For people over 18, those in power may be employers, professors, or community leaders. The ASA enables adult survivors to sue the institutions that gave their abusers power and protected those abusers from answering for their actions.

The institutional defendant provision of the ASA opens significantly larger opportunities for recovery, as institutions oftentimes have deeper pockets than individual abusers. Examples of institutions that could face liability under the ASA include employers, colleges and universities, social organizations such as fraternities and sororities, medical practices, and facilities that house people with disabilities. Any entity that knew about or should have known about and stopped the abuse could be on the hook.

Who is it for?

The ASA opens the courts to people who were over the age of 18 when they experienced sexual abuse but are otherwise unable to file due to missing the statute of limitations. You can use the ASA even if you have previously tried to file but had your suit dismissed as untimely.[4]

It is important to note that if you have resolved or released your claims through a settlement process, you may not file under the ASA. For example, the nearly 150 women who received payment from a settlement with Columbia University Irving Medical Center and New York Presbyterian Hospital based on sexual abuse by Dr. Robert Hadden cannot use the ASA to file new suits as their claims have been fully resolved.

Why do we need this?

The Adult Survivors Act is a game-changer for people who were previously unable to file claims for sexual abuse due to a short statute of limitations. In 2019, New York extended the statute of limitations for certain civil lawsuits related to sex crimes from five to 20 years. But that law did not apply retroactively, so survivors who experienced abuse just a few years prior were still barred from seeking justice.

The ASA honors the lived reality of sexual abuse. Like the CVA before it, the ASA recognizes sexual abuse can take years to process, and those years often extend far beyond the short filing windows New York historically placed on these types of claims.

Survivors have many reasons for waiting to come forward with claims of sexual abuse. Some face retaliation by their abusers, some fear the risk of community backlash, and others lack the resources to seek legal representation. Finally, “[t]rauma takes time,” as New York State Senator and ASA champion Brad Hoylman said when promoting the then-bill. Many sexual assault and sexual abuse survivors need years to process what they endured. This can be particularly true when an abuser uses power, manipulation, or threats to coerce submission to sexual contact, a common tactic of notorious abusers Harvey Weinstein, Kevin Spacey, and Dr. Robert Hadden. Understanding the event as sexual abuse, reconciling yourself with your experience, and deciding how to move forward can take decades. The ASA is an effort to respect this process and empower survivors to hold their abusers accountable.

Why would I file a lawsuit about what happened to me?

For many people, surviving sexual abuse is not something that can be “fixed” by any kind of legal action. But the remedies available through civil suits can serve as a proxy for some measure of justice, and that proxy can enable survivors to move forward.

Successful ASA plaintiffs can recover economic, compensatory, and punitive damages from both the individual abuser and the institution. Many survivors suffer financial loss in addition to the mental, emotional, and physical harm of the abuse itself. If your boss sexually harasses you and then terminates you when you protest, you may find yourself without an income. If a classmate assaults you, you may forfeit tuition money after deciding to leave campus for your safety. Civil courts can make you financially whole and further compensate you for the pain of the experience and the efforts you must make to heal. Courts can also provide other remedies, requiring the people who perpetrated or allowed abuse to do or stop certain behaviors, thereby protecting other potential future targets of abuse and assault.

How do I use the ASA?

The first thing you should do is consult an attorney. These cases can be complicated, and plaintiffs still maintain the burden of proof, so you want the expertise of an experienced lawyer. There are several firms that regularly bring these kinds of actions, and many will provide you with a free consultation. If you decide to move forward with your case after a consultation, your attorney will work with you to determine the best strategy. This strategy may include going to court, or it may involve seeking a resolution that works for you outside of court.

As you go through the process of finding an attorney, please know that you deserve counsel that is compassionate, knowledgeable, and focused on your needs and interests as a client. This is about what happened to you, and your attorney is there to guide you. You should feel heard, understood, and respected.

When do I need to file?

You must file your claim by November 23, 2023.

While the ASA is a powerful effort by New York to support the rights of sexual abuse survivors, it is time-limited. November 23, 2023 is the cutoff date for filing a claim, but if you are interested in seeking recovery under the Act, you should take action now. It may take time to find the right attorney for you, and your lawyer will need additional time to put together your case. If you and your lawyer decide to pursue a resolution without going to court, that process could take even longer.

Ten months sounds like a long time, but in the legal world, it can move very quickly. Start considering whether you want to take advantage of the ASA and reach out to an attorney as soon as possible.

What happens after I file?

This will come down to conversations you have with your attorney. Filing is the first major step in the process. Following that process through might include discovery, more court filings, and hearings before a judge or a jury.

What else should I consider?

Take care of yourself as you think about your next steps. Reach out to trusted loved ones and mental health professionals. It is critical that you ground yourself in what is best for you.

FOOTNOTES

[1] New York Governor Kathy Hochul signed the ASA into law on May 24, 2022. The ASA passed the New York Assembly by a majority vote of 140 in favor to 3 against after receiving unanimous support in the state Senate one month prior.

[2] Article 130 of the New York Penal Law lists offenses covered under the ASA.

[3] The CVA came into effect in 2019, providing a two-year lookback window for people who experienced abuse as minors. The CVA amends N.Y. C.P.L.R. § 208 (2019) and allows victims to initiate civil action against their abusers and enabling institutions. As to victims where civil actions were barred before the CVA took effect, N.Y. C.P.L.R. 214-g (2020) creates a lookback period to file a claim. Since 2019, over 10,000 people have filed lawsuits in New York against abusers and the institutions that protected them.

[4] The ASA can revive your claim only if it was dismissed for failure to file by the statutory deadline. If your claim was dismissed for other reasons, this law cannot fix that.

For more labor and employment news, click here to visit the National Law Review. 

Katz Banks Kumin LLP Copyright ©

Another Lesson for Higher Education Institutions about the Importance of Cybersecurity Investment

Key Takeaway

A Massachusetts class action claim underscores that institutions of higher education will continue to be targets for cybercriminals – and class action plaintiffs know it.

Background

On January 4, 2023, in Jackson v. Suffolk University, No. 23-cv-10019, Jackson (Plaintiff) filed a proposed class action lawsuit in the U.S. District Court for the District of Massachusetts against her alma matter, Suffolk University (Suffolk), arising from a data breach affecting thousands of current and former Suffolk students.

The complaint alleges that an unauthorized party gained access to Suffolk’s computer network on or about July 9, 2022.  After learning of the unauthorized access, Suffolk engaged cybersecurity experts to assist in an investigation. Suffolk completed the investigation on November 14, 2022.  The investigation concluded that an unauthorized third party gained access to and/or exfiltrated files containing personally identifiable information (PII) for students who enrolled after 2002.

The complaint further alleges that the PII exposed in the data breach included students’ full names, Social Security Numbers, Driver License numbers, state identification numbers, financial account information, and Protected Health Information.  While Suffolk did not release the total number of students affected by the data breach, the complaint alleges that approximately 36,000 Massachusetts residents were affected.  No information was provided about affected out-of-state residents.

Colleges and Universities are Prime Targets for Cybercriminals

Unfortunately, Suffolk’s data breach is not an outlier.  Colleges and universities present a wealth of opportunities for cyber criminals because they house massive amounts of sensitive data, including employee and student personal and financial information, medical records, and confidential and proprietary data.  Given how stolen data can be sold through open and anonymous forums on the Dark Web, colleges and universities will continue to remain prime targets for cybercriminals.

Recognizing this, the FBI issued a warning for higher education institutions in March 2021, informing them that cybercriminals have been targeting institutions of higher education with ransomware attacks.  In May 2022, the FBI issued a second alert, warning that cyber bad actors continue to conduct attacks against colleges and universities.

Suffolk Allegedly Breached Data Protection Duty

In the complaint, Plaintiff alleges that Suffolk did not follow industry and government guidelines to protect student PII.  In particular, Plaintiff alleges that Suffolk’s failure to protect student PII is prohibited by the Federal Trade Commission Act, 15 U.S.C.A. § 45 and that Suffolk failed to comply with the Financial Privacy Rule of the Gramm-Leach-Bliley Act (GLBA),  15 U.S.C.A. § 6801.  Further, the suit alleges that Suffolk violated the Massachusetts Right to Privacy Law, Mass. Gen. Laws Ann. ch. 214, § 1B, as well as its common law duties.

How Much Cybersecurity is Enough?

To mitigate cyber risk, colleges and university must not only follow applicable government guidelines but also  consider following industry best practices to protect student PII.

In particular, GLBA requires a covered organization to designate a qualified individual to oversee its information security program and conduct risk assessments that continually assess internal and external risks to the security, confidentiality and integrity of personal information.  After the risk assessment, the organization must address the identified risks and document the specific safeguards intended to address those risks.  See 16 CFR § 314.4.  

Suffolk, as well as other colleges and universities, may also want to look to Massachusetts law for guidance about how to further invest in its cybersecurity program.  Massachusetts was an early leader among U.S. states when, in 2007, it enacted the “Regulations to safeguard personal information of commonwealth residents” (Mass. Gen. Laws ch. 93H § 2) (Data Security Law).  The Data Security Law – still among the most prescriptive general data security state law – sets forth a list of minimum requirements that, while not specific to colleges and universities, serves as a good cybersecurity checklist for all organizations:

  1. Designation of one or more employees responsible for the WISP.
  2. Assessments of risks to the security, confidentiality and/or integrity of organizational Information and the effectiveness of the current safeguards for limiting those risks, including ongoing employee and independent contractor training, compliance with the WISP and tools for detecting and preventing security system failures.
  3. Employee security policies relating to protection of organizational Information outside of business premises.
  4. Disciplinary measures for violations of the WISP and related policies.
  5. Access control measures that prevent terminated employees from accessing organizational Information.
  6. Management of service providers that access organizational Information as part of providing services directly to the organization, including retaining service providers capable of protecting organizational Information consistent with the Data Security Regulations and other applicable laws and requiring service providers by contract to implement and maintain appropriate measures to protect organizational Information.
  7. Physical access restrictions for records containing organizational Information and storage of those records in locked facilities, storage areas or containers.
  8. Regular monitoring of the WISP to ensure that it is preventing unauthorized access to or use of organizational Information and upgrading the WISP as necessary to limit risks.
  9. Review the WISP at least annually or more often if business practices that relate to the protection of organizational Information materially change.
  10. Documentation of responsive actions taken in connection with any “breach of security” and mandatory post-incident review of those actions to evaluate the need for changes to business practices relating to protection of organizational Information.

An organization not implementing any of these controls should consider documenting the decision-making process as a defensive measure.  In implementing these requirements and recommendations, colleges and universities can best position themselves to thwart cybercriminals and plaintiffs alike.

Article By Ericka A. Johnson and Julia B. Jacobson of Squire Patton Boggs (US) LLP

For more cybersecurity and data privacy legal news, click here to visit the National Law Review.

© Copyright 2023 Squire Patton Boggs (US) LLP

The Scope of Attorney-Client Privilege Over Dual-Purpose Communications

The Supreme Court will evaluate the scope of attorney-client privilege when applied to communications shared between counsel and client that involve both legal and non-legal advice (“dual-purpose communications”). The decision of the highest court will have long-lasting implications for both business organizations and their retained counsels. The potential outcome of this case cannot be understated.

In this matter, the grand jury issued subpoenas to an anonymous law firm seeking documents related to the government’s investigation of the firm’s client. The law firm had provided both legal and business services to the client by advising on tax-related legal issues and preparing the client’s annual tax returns. When the law firm and client (“Petitioners”) withheld certain correspondence on the grounds that they were protected by attorney-client privilege and the work-product doctrine, the government moved to compel the production of those documents. The district court held that, while the correspondence contained a “dual-purpose,” they were not protected by attorney-client privilege because the primary purpose of the correspondence was to obtain business tax advice and not legal advice.

On appeal, Petitioners argued that the appellate court should apply the “because of” test rather than the “primary purpose” test. The “because of” test asks whether the dual-purpose correspondence was made because of a need for legal advice. The application of this test would expand the scope of attorney-client privilege and protect the correspondence at issue. The Ninth Circuit Court of Appeals, however, rejected Petitioners’ argument and affirmed the district court’s decision. Petitioners appealed the Ninth Circuit’s decision, and the Supreme Court granted certiorari on October 3, 2022.

The Supreme Court’s decision in In re Grand Jury 21-1397 will be of particular significance for in-house counsels who regularly provide both business and legal advice to their employers. For outside counsels, the outcome of this case will shed light on the standard to be applied for asserting privilege over dual-purpose communications. Oral argument occurred on January 9, 2023 at the Supreme Court.

For more litigation news, click here to visit the National Law Review.

© Polsinelli PC, Polsinelli LLP in California

ANOTHER TRILLION DOLLAR CASE:? TikTok Hit in MASSIVE CIPA Suit Over Its Business Model of Profiting from Advertising by Collecting and Monetizing User Data

Data privacy lawsuits are EXPLODING and one of our country’s most popular mobile app — TikTok’s privacy issues keep piling up.

Following its recent $92 million class-action data privacy settlement for its alleged violation of Illinois Biometric Information Privacy Act (BIPA), TikTok is now facing a CIPA and Federal Wire Tap class action for collecting users’ data via its in-app browser without Plaintiff and class member’s consent.

The complaint alleges “[n]owhere in [Tik Tok’s] Terms of Service or the privacy policies is it disclosed that Defendants compel their users to use an in-app browser that installs JavaScipt code into the external websites that users visit from the TikTok app which then provides TikTok with a complete record of every keystroke, every tap on any button, link, image or other component on any website, and details about the elements the users clicked. “

Despite being a free app, TikTok makes billions in revenue by collecting users’ data without their consent.

“The world’s most valuable resource is no longer oil, but data.”

While we’ve discussed before, many companies do collect data for legitimate purposes with consent. However this new complaint alleges a very specific type of data collection practice without the TikTok user’s OR the third party website operator’s consent.

TikTok allegedly relies on selling digital advertising spots for income and the algorithm used to determine what advertisements to display on a user’s home page, utilizes tracking software to understand a users’ interest and habits. In order to drive this business, TikTok presents users with links to third-party websites in TikTok’s in-app browser without a user  (or the third party website operator) knowing this is occurring via TikTok’s in-app browser. The user’s keystrokes is simultaneously being intercepted and recorded.

“Specifically, when a user attempts to access a website, by clicking a link while using the TikTok app, the website does not open via the default browser.  Instead, unbeknownst to the user, the link is opened inside the TikTok app, in [Tik Tok’s] in-app browser.  Thus, the user views the third-party website without leaving the TikTok app. “

The Tik-Tok in-app browser does not just track purchase information, it allegedly tracks detailed private and sensitive information – including information about  a person’s physical and mental health.

For example, health providers and pharmacies, such as Planned Parenthood, have a digital presence on TikTok, with videos that appear on users’ feeds.

Once a user clicks on this link, they are directed to Planned Parenthood’s main webpage via TikTok’s in-app browser. While the user is assured that his or her information is “privacy and anonymous,” TikTok is allegedly intercepting it and monetizing it to send targeted advertisements to the user – without the user’s or Planned Parenthood’s consent.

The complaint not only details out the global privacy concerns regarding TikTok’s privacy practices (including FTC investigations, outright ban preventing U.S. military from using it, TikTok’s BIPA lawsuit, and an uptick in privacy advocate concerns) it also specifically calls out the concerns around collecting reproductive health information after the demise of Roe v. Wade this year:

“TikTok’s acquisition of this sensitive information is especially concerning given the Supreme Court’s recent reversal of Roe v. Wade and the subsequent criminalization of abortion in several states.  Almost immediately after the precedent-overturning decision was issued, anxieties arose regarding data privacy in the context of commonly used period and ovulation tracking apps.  The potential of governments to acquire digital data to support prosecution cases for abortions was quickly flagged as a well-founded concern.”

Esh. The allegations are alarming and the 76 page complaint can be read here: TikTok.

In any event, the class is alleged as:

“Nationwide Class: All natural persons in the United State whose used the TikTok app to visit websites external to the app, via the in-app browser.

California Subclass: All natural persons residing in California whose used the TikTok app to visit websites external to the app, via the in-app browser.”

The complaint alleges California law applies to all class members – like the Meta CIPA complaint we will have to wait and see how a nationwide class can be brought related to a CA statute.

On the CIPA claim, the Plaintiff – Austin Recht – seeks an unspecific amount of damages for the class but the demand is $5,000 per violation or 3x the amount of damages sustained by Plaintiff and the class in an amount to be proven at trial.

We’ll obviously continue to keep an eye out on this.

Article By Puja J. Amin of Troutman Firm

For more communications and media legal news, click here to visit the National Law Review.

© 2022 Troutman Firm

U.S. Supreme Court Refuses Review of Case Involving Technical Issue With Plaintiff’s EEOC Charge

Refusing to weigh in on the impact of a plaintiff’s failure to verify her discrimination charge filed with the Equal Employment Opportunity Commission (EEOC), the U.S. Supreme Court lets stand the lower court’s conclusion that the plaintiff’s failure to verify her charge barred her from filing a lawsuit. Mosby v. City of Byron, No. 21-10377, 2022 U.S. App. LEXIS 10436 (11th Cir. Apr. 18, 2022), cert. denied, No. 22-283 (U.S. Nov. 7, 2022).

Background

Rachel Mosby served as the fire chief of Byron, Georgia, for 11 years. One month after she came out as transgender, the city fired her.

Mosby filed a charge of discrimination with the EEOC, alleging violations of Title VII of the Civil Rights Act and the Americans with Disabilities Act (ADA). Title VII states that charges filed “shall be in writing under oath or affirmation and shall contain such information and be in such form as the Commission requires.” 42 U.S.C. § 2000e-5. This process is called “verification.” The parties did not dispute that Mosby did not properly verify her charge.

The City of Byron submitted a position statement with the EEOC on the merits of Mosby’s claim, but it did not raise the fact that Mosby failed to verify her charge. Mosby never amended her charge to meet the verification requirement.

After receiving a “right to sue” letter from the EEOC, Mosby sued the City of Byron. Before answering Mosby’s complaint, the City of Byron moved to dismiss because Mosby failed to verify her charge, requiring dismissal as a matter of law. After converting the City’s motion to dismiss to a motion for summary judgment, the district court held the failure to verify the charge barred Mosby’s Title VII and ADA claims.

Jurisdictional or Procedural?

Whether EEOC’s charge filing requirements are prerequisite to filing a lawsuit is jurisdictional or procedural remains in dispute. While procedural requirements can be waived or cured, jurisdictional requirements cannot. In 2019, the Supreme Court provided guidance in Fort Bend City v. Davis, 139 S. Ct. 1843, in which it held that a charge’s lack of verification does not strip the federal courts of jurisdiction to consider in a subsequent federal lawsuit. Unlike a jurisdictional issue, the Court reasoned, the lack of verification can be waived or forfeited by the parties. Accordingly, the Court held that an employer forfeited the issue of verification when it failed to raise it promptly at the outset of litigation.

Eleventh Circuit’s Reasoning

In appealing the dismissal of her claims to the U.S. Court of Appeals for the Eleventh Circuit (which has jurisdiction over Alabama, Florida, and Georgia), Mosby argued that Fort Bend required a finding that the City of Byron waived its verification defense because it did not raise the defense in its position statement submitted with the EEOC. The Eleventh Circuit disagreed. In the Supreme Court decision, the Eleventh Circuit said, Fort Bend City did not raise the verification defense until four years and “an entire round of appeals all the way to the Supreme Court” had passed. By contrast, the City of Byron raised the defense in a pre-answer motion to dismiss before causing “a waste of adjudicatory resources.”

The Eleventh Circuit affirmed the lower court, holding that “a charge neither filed under oath or affirmation nor subsequently cured by amendment fails to satisfy the statutory requirement that an employee submit [her] charge to the Commission.” The Fifth Circuit reached a similar conclusion in 2021, making these the only two circuits that have addressed the issue. See Ernst v. Methodist Hosp. Sys., 1 F.4th 333.

Takeaway for Employers

An employer responding to a charge of discrimination filed with the EEOC should evaluate whether the claimant properly verified the charge. If not, preserve the defense by raising it as soon as practicable at the EEOC charge stage and in any ensuing litigation.

Article By Stephanie L. Adler-Paindiris and Stephanie E. Satterfield of Jackson Lewis P.C.

For more litigation and Supreme Court legal news, click here to visit the National Law Review.

Jackson Lewis P.C. © 2022

What Brokers, Company Insiders, and Others Need to Know about Securities Litigation

Individuals, companies, and firms involved in all aspects of the securities industry face litigation risks daily. From whistleblower lawsuits and U.S. Securities and Exchange Commission (SEC) enforcement actions to Financial Industry Regulatory Authority (FINRA) arbitration and private-right-of-action cases under the Securities Exchange Act of 1934, all types of securities litigation present risks for civil liability. In some cases, securities litigation can present risks for criminal penalties as well.

With this in mind, there is a lot that brokers, company insiders, investment advisers, and others need to know when targeted in lawsuits and investigations. When brokers, company insiders, and others make informed decisions based on the advice of experienced counsel, they can significantly mitigate their risk in both private and governmental securities litigation.

“Securities litigation can present substantial risks for individuals, companies, and firms. Whether facing allegations in civil litigation, SEC enforcement proceedings, or FINRA arbitration, the key to mitigating these risks is to build and execute a comprehensive, strategic and forward-thinking defense.” – Dr. Nick Oberheiden, Founding Attorney of Oberheiden P.C. law firms.

Answers to 10 Frequently Asked Questions (FAQs) about Securities Litigation

Here are answers to 10 frequently asked questions (FAQs) about securities litigation:

1. What Are Some of the Most Common Claims Against Brokers and Brokerage Firms in Securities Litigation?

Brokers and brokerage firms have faced a growing volume of litigation in recent years. This includes private litigation involving individual investors as well as litigation involving the SEC. Investigations, lawsuits, and arbitration filings targeting brokers and brokerage firms primarily focus on acts and omissions constituting investor fraud, though brokers and brokerage firms can face a variety of other claims in securities litigation as well.

Some examples of common claims against brokers and brokerage firms in securities litigation include:

  • Making unsuitable investment recommendations

  • Unauthorized trading and account churning

  • Charging excessive fees and commissions

  • Failing to disclose or misconstruing material information (especially in connection with structured products and other high-risk investments)

  • Failure to supervise or implement adequate internal controls

2. What Are Some of the Most Common Claims Against Company Insiders and Issuers in Securities Litigation?

Securities fraud lawsuits and enforcement actions targeting company insiders and securities issuers can also involve an extremely broad range of allegations. These cases are typically very different from those targeting brokers and brokerage firms; and, while both falls under the umbrella of “securities litigation,” the resemblances between the two categories are minimal. Some examples of common claims against company insiders and issuers in securities litigation include:

  • Accounting and recordkeeping violations

  • Submitting false SEC filings

  • Insider trading

  • Market manipulation

  • Selling unregistered securities and conducting unregistered IPOs

3. What Are Some of the Most Common Triggers for Securities Fraud Lawsuits and Investigations?

Many securities fraud lawsuits and investigations result from investor complaints. Typically, investors will have concerns about losses in their portfolios that they believe cannot be explained by ordinary market forces. These concerned investors will contact plaintiffs’ lawyers to help them file claims alleging fraud in federal courts, district courts or FINRA arbitration.

In some cases, concerned investors will file whistleblower claims with the SEC. The SEC has an obligation to investigate all whistleblower complaints that meet the basic filing requirements, and SEC whistleblowers can receive substantial compensation awards.

The SEC also initiates investigations on its own. Questionable EDGAR filings, market activity, media reports, and referrals from other federal law enforcement agencies can all trigger SEC investigations that may lead to civil or criminal enforcement action. The SEC also monitors activity on social media and other online platforms, and activity on these platforms is increasingly serving as the basis for SEC enforcement activity.

4. What Types of Claims Are Most Likely to Lead to Class Action Securities Litigation?

While all securities litigation presents liability risks for the individuals or entities targeted, companies and firms targeted in class action litigation face risk on an entirely different scale. Class action lawsuits lead to devastating liability that can threaten companies’ and firms’ viability as a going concern.

The types of claims that are most likely to lead to class action securities litigation are those that involve violations affecting large groups of investors. Inadequate brokerage controls that lead to systemic unsuitable investment recommendations, omitting material information from companies’ 10-K or 10-Q filings, mismanagement of investors’ funds, and market manipulation resulting in widespread losses are all examples of issues that can lead (and have led) to securities-related class action lawsuits.

5. How Does the SEC’s Whistleblower Program Work?

The SEC’s Office of the Whistleblower accepts tips from company employees, investors, and others who believe they have information about securities fraud. When a whistleblower complaint spurs enforcement action resulting in sanctions of $1 million or more, the whistleblower can receive between 10% and 30% of the amount collected.

As a result, individuals have a strong financial incentive to come forward and work with the SEC. Additionally, even if the SEC declines to pursue enforcement action based on a whistleblower’s tip, the whistleblower can still choose to pursue a claim directly, and whistleblower compensation awards are higher in these cases. Due to these incentives, whistleblower litigation is a key component of the SEC’s overall securities law enforcement strategy.

6. When Is It Advantageous to Settle a Securities Fraud Lawsuit or Arbitration Claim?

When facing substantiated allegations of securities fraud, settling will often prove to be the most cost-effective solution. However, targeted individuals and entities must be careful not to settle too soon, as there are numerous ways to fight securities fraud allegations even in scenarios that seem highly unfavorable (more on this below).

So, when is it advantageous to settle? Simply put, the costs of settling need to be less than the costs of any other alternative. This includes not only legal costs and any potential judgment liability, but reputational and administrative (i.e. suspension or debarment) costs as well.

7. When Can the U.S. Department of Justice Pursue Criminal Securities Fraud Litigation?

The U.S. Department of Justice (DOJ) pursues criminal securities fraud litigation in cases involving intentional (or apparently intentional) securities law violations. According to the DOJ’s website, the Department’s Market Integrity and Major Frauds (MIMF) Unit, “focuses on the prosecution of complex securities, commodities, cryptocurrency, and other financial fraud and market manipulation cases.” In criminal securities fraud cases, the DOJ can seek penalties ranging from substantial fines to long-term imprisonment for company executives and other insiders.

8. What Remedies Can Investors Seek in Securities Litigation?

In private securities litigation and FINRA arbitration, retail investors can seek compensatory damages for their fraudulent investment losses. An investor’s losses may be deemed fraudulent if they result from either: (i) broker fraud or mismanagement (i.e., making unsuitable investment recommendations), or (ii) a drop in the value of their securities that is not attributable to ordinary market forces. Along with the recovery of their lost principal and investment earnings, investors can seek to recover interest, fees, and other costs as well.

9. What Remedies Can the SEC Seek in Securities Litigation?

When pursuing enforcement actions against brokers, brokerage firms, company insiders, and issuers, the SEC can seek a range of civil and administrative penalties. These include fines, disgorgement, and restitution as well as cease-and-desist orders, suspension, and debarment from the securities industry.

10. What Defenses Can Individuals, Companies, and Firms Use to Protect Themselves in Securities Litigation?

While securities litigation can involve a broad range of allegations and present substantial risk for liability and other penalties, targeted individuals and entities may be able to successfully defend themselves by several means. Whether securing a favorable result means avoiding liability entirely or negotiating a favorable settlement, the key to success is making informed decisions in light of the available opportunities.

For brokers and brokerage firms, some examples of potential defenses include:

  • Misguided Allegations – In many cases, investors (and their counsel) simply lack an adequate understanding of the law. Demonstrating that an investor’s allegations are misguided can serve as an efficient and complete defense against liability.

  • Investor Authorization – One particular area of confusion for many investors is the area of authorization (including discretionary authorization). If an investor is challenging a trade that he or she authorized, providing documentation of authorization can be sufficient to avoid liability.

  • Statutory and Regulatory Compliance – Brokers and brokerage firms will also be able to successfully defend against securities fraud allegations by demonstrating compliance with the relevant statutes, regulations, or FINRA rules.

For company insiders and issuers, some examples of potential defenses include:

  • Compliance with Pre-Arranged Trading Plans – In cases involving insider trading allegations, company insiders can avoid liability by demonstrating compliance with a pre-arranged trading plan.

  • Good-Faith Disclosure – Issuers accused of withholding material information or publishing incomplete or misleading information can often defend against fraud allegations by demonstrating good-faith efforts to maintain disclosure compliance.

  • Qualifying for a Registration Exemption – Issuers can qualify for registration exemptions in various scenarios. If security is exempt, then offering security without registration is 100% permissible.

The fact that these are just examples cannot be overemphasized. Securities litigation can involve an extraordinarily broad range of allegations under numerous laws, rules, and regulations. In many cases, targeted companies and individuals will be able to assert a successful defense by focusing on discrete elements of the plaintiff’s or SEC’s burden of proof. From asserting the applicable statute of limitations to preventing class certification, several technical defenses can prove highly effective in securities litigation as well. As with all types of litigation, the key is to explore all viable defenses, build a comprehensive and cohesive defense strategy, and then execute that strategy while remaining prepared to adapt as necessary.

Article By Dr. Nick Oberheiden of Oberheiden P.C.

For more securities and SEC legal news, click here to visit the National Law Review.

Oberheiden P.C. © 2022

Actual Malice in the Age of #fakenews

Public figures are fighting back against fake news.

In the most recent headline from the world of celebrity defamation cases, E. Jean Carroll is suing former President Trump for statements he made after she accused him of sexual assault. In a 2019 book and excerpt in New York magazine, Carroll, a longtime advice columnist for Elle magazine, accused Trump of sexual assault in the mid-1990s. Trump responded that Carroll was “totally lying” and not his “type.” Carroll sued Trump for defamation, claiming his statements had harmed her reputation. But Carroll—like all public figure defamation plaintiffs—has an uphill battle before her. To succeed, Carroll will have to prove that Trump’s statements were false, and—because Carroll is a public figure—she will also have to show that Trump acted with “actual malice.” The actual malice standard often proves to be too high a threshold for most public figures to cross, and most cases are lost on that prong—regardless of whether the statement was false. In fact, Johnny Depp was one of the few public figures in recent years to win a defamation suit.

So, what would it mean if the actual malice requirement was rescinded?

The seminal decision in New York Times Company v. Sullivan and its progeny are the backbone of defamation law in this country. These cases hold that public officials and public figures claiming defamation must prove that the allegedly defamatory statement was made, “with knowledge that it was false or with reckless disregard of whether it was false or not.” In other words, with “actual malice.” On the other hand, a private figure, or one who has not sought out the limelight, need only show the false statement was made negligently. Prior to Sullivan, all plaintiffs fell under the negligence standard.

Public figures who must meet this “actual malice” standard fall into two categories: (1) all-purpose public figures, with “pervasive fame or notoriety,” like Johnny Depp; and (2) limited-purpose public figures, like Carroll, who, in the words of Gertz v. Robert Welch, Inc., achieve their status by “thrust[ing] themselves to the forefront of particular public controversies in order to influence the resolution of the issues involved.” The Court rationalized that both categories of public figures have “invite[d] attention and comment.” Moreover, because “public figures enjoy “greater access to the channels of effective communication” than private individuals, they are better able to “contradict the lie or correct the error.”

In today’s age of social media, do these justifications still hold true? When Sullivan and its progeny came down, there was a clear delineation between public and private figures. Typically, public figures had media access, and private figures did not. Today’s social media landscape muddles that line. We are all just one post, tweet, or TikTok away from becoming public figures.

In 2019, in a case strikingly similar to Carroll’s, the Supreme Court declined to review a defamation case filed by Kathrine McKee against Bill Cosby. In 2014, McKee publicly accused Cosby of forcibly raping her 40 years earlier. In response, Cosby’s attorney authored and subsequently leaked an allegedly defamatory letter. Excerpts of the letter were disseminated via the Internet and published by news outlets around the world. McKee argued that the letter deliberately distorted her personal background to “damage her reputation for truthfulness and honesty, and further to embarrass, harass, humiliate, intimidate, and shame” her. Applying Sullivan and its progeny, the Court concluded because McKee had “‘thrust’ herself to the ‘forefront’” of the public controversy over “sexual assault allegations implicating Cosby,” she was a “limited-purpose public figure” who needed to show actual malice—regardless of whether the statements about her were false.

In a lone dissent, Justice Clarence Thomas noted that “in an appropriate case, [the Court] should reconsider the precedents” requiring public figures to satisfy an actual-malice standard. Justice Thomas later double-downed on his proffer in his dissents in Berisha v. Lawson, and most recently in Coral Ridge Ministries Media, Inc. v. Southern Poverty Law Center. In Berisha, pointing to the shift in the media landscape since Sullivan, Justice Neil Gorsuch joined Justice Thomas in calling to review the Sullivan decision, noting our new media world “facilitates the spread of disinformation.”

According to these Justices, in recent years Sullivan has become less of a shield and more of a sword. The “actual malice” standard allows spreaders of conspiracy theories, false accusations, and fake news to be virtually untouchable. In an era where misinformation spreads like wildfire, has the actual malice standard allowed journalists to become sloppy and irresponsible? Under this legal standard a journalist is better off printing a story without fact-checking. In fact, failing to thoroughly investigate, standing alone, does not prove actual malice. If the Court abolished that standard, public figures would be like every other defamation plaintiff and would only need to show that the false statement was made carelessly. In other words, instead of the defendant knowingly printing misinformation, a plaintiff would only need to show that the defendant didn’t bother checking if the information was true or false before making it.

Under this precedent, for years reporters, and individuals alike have been shielded from consequences of publishing falsehoods about public figures. Removing the “actual malice” standard would have sweeping effects on journalists and news platforms, and would make reputable news organizations more vulnerable to attack and open to further scrutiny. But responsible journalists would still remain protected. Truth remains an absolute defense to a defamation claim.

Between 2018 and 2020 the number of defamation suits filed increased by 30%. With “fake news” on the rise, more individuals falling into the “public figure” category, and technology moving at warp speed, the Court may have no choice but to rethink Sullivan. While it is unlikely that that 50 years of settled precedent would be overturned, Sullivan just might, at the very least, be revisited.

Article By Melissa Sarsten Polito of Epstein Becker & Green, P.C.

For more litigation and legal news, click here to visit the National Law Review.

©2022 Epstein Becker & Green, P.C. All rights reserved.

Supreme Court Questions Whether Highly Compensated Oil Rig Worker Is Overtime Exempt

On October 12, 2022, the Supreme Court of the United States heard oral arguments in a case regarding whether an oil rig worker who performed supervisory duties and was paid more than $200,000 per year on a day rate basis is exempt from the overtime requirements of the Fair Labor Standards Act (FLSA).

The case is especially significant for employers that pay exempt employees on a day rate. It could have a major impact on the oil and gas industry in the way that it recruits, staffs, and compensates employees who work on offshore oil rigs and at remote oil and gas work sites. In addition, depending on how the Supreme Court rules, its decision could have much broader implications.

During the arguments in Helix Energy Solutions Group, Inc. v. Hewitt, the justices questioned whether, despite the employee’s high earnings, he was eligible for overtime compensation because he was paid by the day and not on a weekly salary basis. There is no express statutory requirement that an employee be paid on a “salary basis” to be exempt from overtime requirements, but such a requirement has long been included in the regulations issued by the U.S. Department of Labor (DOL) applicable to the FLSA’s white-collar exemptions. Notably, Justice Brett Kavanaugh suggested during the arguments that the regulations may be in conflict with the text of FLSA, although Helix did not raise this issue in its petition for certiorari.

Background

The case involves an oil rig “toolpusher,” an oilfield term for a rig or worksite supervisor, who managed twelve to fourteen other employees, was paid a daily rate of $963, and earned more than $200,000 annually. Between December 2014 and August 2017, when Michael Hewitt was discharged for performance reasons, he worked twenty-eight-day “hitches” on an offshore oil rig where he would work twelve-hour shifts each day, sometimes working eighty-four hours in a week. After his discharge, Hewitt filed suit alleging that he was improperly classified as exempt and therefore was entitled to overtime pay. The district court ruled in favor of Helix.

In September 2021, a divided (12-6) en banc panel of the U.S. Court of Appeals for the Fifth Circuit held that Hewitt was not exempt from the FLSA because his payment on a day-rate basis did “not constitute payment on a salary basis” for purposes of the highly compensated employee (HCE) exemption that is found in the FLSA regulations.

The Fifth Circuit further concluded that the employer’s day-rate pay plan did not qualify as the equivalent of payment on a salary basis under another FLSA regulation because the guaranteed pay for any workweek did not have “a reasonable relationship” to the total income earned. In other words, the court found that the employee was not exempt because the $963 he earned per day was not reasonably related to the $3,846 the employee earned on average each week.

Oral Arguments

Oral arguments at the Supreme Court focused on the interplay between the DOL’s HCE regulation, 29 C.F.R. § 541.601, and another DOL regulation, 29 C.F.R. § 541.604(b), which states that an employer will not violate the salary basis requirement under certain limited circumstances even if the employee’s earnings are computed on an hourly, daily, or shift basis.

At the time of Hewitt’s employment, the HCE exemption required an employee to be paid at least $455 per week on a “salary or fee basis” and to earn at least $100,000 in total annual compensation. Those threshold amounts have since been increased to $684 per week and $107,432 per year.

The other regulation, 29 C.F.R. § 541.604(b), states that an employee whose earnings are “computed on an hourly, a daily or a shift basis” may still be classified as exempt if the “employment arrangement also includes a guarantee of at least the minimum weekly required amount paid on a salary basis regardless of the number of hours, days or shifts worked, and a reasonable relationship exists between the guaranteed amount and the amount actually earned. The reasonable relationship test will be met if the weekly guarantee is roughly equivalent to the employee’s usual earnings at the assigned hourly, daily, or shift rate for the employee’s normal scheduled workweek.”

Hewitt earned double the minimum total compensation level for the HCE exemption. Since the minimum salary level for the exemption was only $455 per week, and Hewitt was guaranteed that he would be paid at least $963 per week for each week he worked at least one day, Helix argued that he was exempt from the FLSA’s overtime requirements because the HCE exemption was completely self-contained and to be applied without regard to other regulations, including the “salary basis” test and the minimum guarantee regulation. Hewitt argued that the HCE exemption required compliance with either the “salary basis” test or the minimum guarantee regulation since he was admittedly paid on a day rate basis.

However, Justice Ketanji Brown Jackson suggested that it was not that simple. Justice Jackson said the question of salary basis is more about the “predictability and regularity of the payment” for each workweek. “What he has to know is how much is coming in at a regular clip so that he can get a babysitter, so that he can hire a nanny, so that he can pay his mortgage,” Justice Jackson stated. Justice Jackson echoed the language of the salary basis test requiring that an exempt employee be paid a predetermined amount for any week in which she performed any work.

Similarly, Justice Sonia Sotomayor asked Helix, “so what you’re asking us to do is take an hourly wage earner and take them out of 604, which is the only provision that deals with someone who’s not paid on a salary basis.” Justice Sotomayor additionally raised the FLSA’s goal of “preventing overwork and the dangers of overwork.”

In contrast, Justice Clarence Thomas suggested that Hewitt’s high annual compensation relative to the average worker is a strong indication that he was paid on a salary basis and should be exempt. “The difficulty is just, for the average person looking at it, when someone makes over $200,000 a year, they normally think of that as an indication that it’s a salary,” Justice Thomas stated.

Justice Kavanaugh asked if the issue of whether the DOL regulations conflict with the FLSA is being litigated in the courts. He said, “it seems a pretty easy argument to say, oh, by the way, or maybe, oh, let’s start with the fact that the regs [sic] are inconsistent with the statute and the regs [sic] are, therefore, just invalid across the board to the extent they refer to salary.” He further stated, “if the statutory argument is not here, I’m sure someone’s going to raise it because it’s strong.”

Key Takeaways

It is difficult to predict how the Supreme Court will rule in this case. A decision that requires strict adherence to the regulation’s reasonable relationship test, even when the minimum daily pay far exceeds the minimum weekly salary threshold, would have a significant negative impact on the manner in which certain industries compensate their workers. It also could lead to even more litigation by highly compensated employees, many of whom make more money without receiving overtime pay than what many people who currently are paid overtime compensation make.

Depending upon its breadth, a decision that the regulations are in conflict with the statutory text of the FLSA could provide a roadmap for additional challenges to other parts of the regulations. This could have a wide-ranging impact, as the DOL currently is in the process of preparing a proposal to revise its FLSA regulations. Then again, if a future litigant takes up Justice Kavanaugh’s invitation to challenge whether the salary regulations are overbroad compared to the language of the FLSA, the current effort to revise the regulations regarding exemptions for executive, administrative, and professional employees may be moot.

Article By Andrew P. Burnside, Steven F. Pockrass, and Zachary V. Zagger of Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

For more supreme court and litigation legal news, click here to visit the National Law Review.

© 2022, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.

4 Frequently Asked Questions About MSO Investigations and 3 Defense Strategies

In the last decade, Management Services Organizations, or MSOs, became popular service providers and investment tools for the medical and health care field. Unfortunately, the way some MSOs are structured, they can violate several important laws against healthcare fraud, like the Stark Law or the Anti-Kickback Statute.

Because this is such a novel issue in the medical field, lots of healthcare providers have questions about it. Some want to know how they can defend themselves if they get accused of wrongdoing for their activity with an MSO.

Dr. Nick Oberheiden is an MSO investigation lawyer at Oberheiden P.C. Here are some questions that he frequently gets asked and a few defense strategies that can help.

FAQs About MSO Investigations

1. What are MSOs?

An MSO is a company that provides administrative services to medical professionals. They can help healthcare providers with their:

  • Human resources
  • Operations
  • Coding and billing services
  • Office space management
  • Compliance
  • Contract management

Healthcare companies can either contract with an MSO to provide these services or can outright sell the administrative wing of their practice to an MSO so they can focus on the medical side of their business.

2. Why are MSOs Problematic?

MSO arrangements can become legally problematic when they act as an investment tool for medical professionals. Physicians could buy an ownership stake in an MSO that provided services to, say, a pharmacy. Those physicians could then begin referring patients to that same pharmacy.

In theory, that referral is going to a company – the pharmacy – that neither the physician nor his or her immediate family members have a financial interest in. In reality, though, the distinction gets blurred if the MSO – and therefore the physician – makes money off the referral. This can arguably amount to a kickback, which is unlawful.

3. Is Law Enforcement Actually Looking Into MSOs?

Yes, the justice department or the U.S. Department of Justice (DOJ) has recently begun investigating MSOs that appears to be a medium for illegal kickbacks from one healthcare provider to a referring physician.

Together with the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG), the DOJ has taken the position that MSOs that are only indirectly recouping physicians for referrals is enough to violate anti-kickback laws. In one case, the agencies are pursuing False Claims Act (31 U.S.C. § 3729) violations in addition to violations of the Stark Law (42 U.S.C. § 1395nn) and the Anti-Kickback Statute (42 U.S.C. § 1320a-7b).

However, not all MSOs have come under the scrutiny of federal law enforcement. The DOJ has not declared a blanket rule that all MSOs are unlawful. Instead, it is only targeting those that show the signs of potential healthcare fraud.

4. What are the Potential Penalties for Investing in the Wrong MSO?

At this stage, it is hard to tell. MSOs are still a new development, and we are only seeing the very first charges getting filed against physicians who invest in the “wrong” MSOs. Courts have not yet ruled whether MSOs can facilitate a kickback or amount to a false claim.

If courts do go along with the DOJ’s interpretation of the law, then physicians can face steep penalties for sending business to another healthcare facility that contracts with an MSO that they own or invest in.

The Anti-Kickback Statute is a criminal law that carries up to five years in prison for a conviction, as well as fines of up to $25,000 and program exclusion. The Stark Law is a civil law that, while it does not carry criminal sanctions or jail time, does impose:

  • Denial of payments provided
  • Disgorgement of ill-gotten gains
  • Civil penalties of up to $15,000 for each violation
  • Treble damages
  • Program exclusion

Defense Strategies for Investigations into Your MSO

If you do have an ownership stake in an MSO and are concerned about a potential investigation, or if you are interested in investing in one of these new companies and want to do it right, there are several things that you can do. While every case is unique, here are three defense strategies and compliance procedures that MSO investigation attorney Dr. Nick Oberheiden often recommends considering.

1. Look for Signs That an MSO is Problematic

Not all MSOs are attracting the attention of federal law enforcement. Instead, it is the ones that do not comply with the requirements of anti-kickback statutes and illegal referrals.

Some signs that an MSO is lacking in that department include:

  • A lack of a compliance officer in the company
  • No training regarding important laws like HIPAA, the Stark Law, or the Anti-Kickback Statute
  • The MSO is paid on a percentage basis, rather than through a flat fee (payments should be at fair market value rates)
  • The MSO charges unreasonably high service fees
  • There are incentives for investing physicians to refer clients to the company

All of these are strong signs that the MSO is at risk of civil or even criminal action for healthcare fraud and illegal referrals. Unfortunately, many of these signs also give an investing physician the power to increase his or her return on the investment – a feature that makes the investment seem especially lucrative.

2. Tighten Up the Compliance

If you are invested in an MSO and suddenly see proof that it was too good to be true, you are not powerless. You are a partial owner, after all. You can push the company to tighten up its compliance with anti-kickback laws. In the best cases, this can successfully protect you and avoid scrutiny from law enforcement. Even if it does not, though, it can reduce the restitution that you can be made to pay, and the efforts to fix the MSO can be used to show your good intentions.

3. Stress the Distance Between an MSO’s Ownership and Its Clients

At this point, we still have not seen whether law enforcement’s interpretation of the law will get adopted by a court. Until we know for sure that an indirect payment is enough for anti-kickback liability, a strong defense should be that the MSO’s ownership was too far removed from the MSO’s clients to amount to a violation of the law.

As Dr. Nick Oberheiden, an MSO investigation attorney at Oberheiden P.C., says, “The law is still very much in flux at this point. Kickbacks are generally seen to be direct payments for referrals, and the whole point of the MSO investment opportunity was to avoid that exact setup.”

Article By Dr. Nick Oberheiden of Oberheiden P.C.

For more healthcare and health investigations legal news, click here to visit the National Law Review.

Oberheiden P.C. © 2022