Blog Posts

Martinez v. Empire Fire & Marine Insurance Co.

10/23/2016

Arguing that an In-State Errand by a Trucking Company Employee That Resulted in an Accident Does Not Trigger a Federally Mandated Insurance Endorsement, Which Applies Only When a Vehicle is engaged in Interstate Transportation of Property For Hire at the Time the Accident Occurs.

This case presented an issue of first impression in Connecticut dealing with the interplay of federal interstate commerce jurisdiction and motor vehicle insurance law, which is usually the province of the states. Congress has given the Secretary of Transportation carefully delimited jurisdiction over the interstate transport of property by motor carriers and directed the Secretary to impose minimum liability insurance coverage amounts in order to protect the public. (These limits are often higher than state-imposed minimums, and thus are a preferred source of recovery in lawsuits.)

At issue here was how to determine whether the federally mandated insurance coverage applies to particular accidents. The defendant was the insurer of a New Haven towing company. The plaintiff, Martinez, was injured in a collision with one of the company’s trucks while the driver of the truck was running a purely local errand for the company to pick up truck parts. Having obtained a judgment against the company in an earlier action, in this action the plaintiff invoked the terms of the federal insurance endorsement in order to obtain from the insurer the unpaid portion of the earlier judgment. To establish interstate commerce jurisdiction (which is required by the federal endorsement), she argued that the court should look to the company’s operations as a whole (which did encompass commerce outside Connecticut), rather than to the route taken by the truck on this specific trip. She also argued that the vehicle parts that were the purpose of the truck driver’s errand, once installed in the towing company’s trucks, would travel in interstate commerce. She also invoked general public policy grounds.

NELF filed a brief in which it emphasized that this is an issue of federal, not state, law. The brief closely read the statutes, regulations, and the endorsement and demonstrated that, as courts elsewhere have overwhelmingly ruled, jurisdiction is to be determined by the nature of the specific trip that caused the accident and not by other, more general considerations. In addition, NELF distinguished a series of cases invariably cited by plaintiffs like Martinez when they argue against the trip-specific rule.

On July 12, 2016, the Connecticut Supreme Court issued its decision adopting the trip-specific rule by a vote of 6 to 1. The decision clearly shows NELF’s influence. The court not only followed NELF’s unique approach in how it distinguished the plaintiff’s cases, it also followed NELF in noting that some of plaintiff’s public policy arguments could be ruled out because they are inconsistent with how federal law addresses intrastate commerce with respect to liability coverage. A little surprisingly, the majority stated that they would have adopted the trip-specific rule even if they had thought it wrong (which they did not) because it is the rule used by the U.S. Court of Appeals for the Second Circuit. The state court explained that, because Connecticut lies within the federal jurisdiction of that circuit, it customarily follows the Second Circuit on federal questions in order to avoid problems like forum-shopping. It is worth noting that NELF alone had argued in favor of the trip-specific rule in part by reminding the state court of this customary deference.

Pending Cases

10/22/2016

Epic Systems v. Lewis; Ernst & Young LLP v. Morris

10/22/2016

Click here to read the brief in Epic Systems v. Lewis

Click here to read the brief in Ernst & Young LLP

NELF will be filing an amicus brief in support of certiorari in both of these cases, arguing that the Supreme Court should grant certiorari and decide that the NLRA does not repeal the FAA’s mandate to enforce class and collective action waivers in employment arbitration agreements. An employee’s NLRA “right to . . . engage in . . . concerted activities for mutual aid or protection” lacks the specificity and directness required by the Supreme Court to override the FAA’s mandate to enforce arbitration agreements according to their terms. NELF argues that, to displace the FAA’s mandate, the NLRA would have to state clearly that employees have the nonwaivable right to pursue group legal action against their employer. Nowhere does the NLRA announce this “contrary congressional command” to displace the FAA’s mandate. Therefore, the FAA should require courts to enforce class and collective action waivers in employment arbitration agreements. The background facts and procedure for each case are provided below.

Epic Sys. v. Lewis (7th Cir.): Jacob Lewis was a technical writer for Epic Systems, a health care software company. Epic required Lewis and certain other groups of employees, as a condition of continued employment, to agree to to submit any future wage-hour and other employment claims to binding individual arbitration only. Lewis consented by email to Epic’s arbitration agreement. (The agreement also contained a nonseverability or “jettison” clause, in which the parties agreed that if the class arbitration waiver were declared invalid, Lewis could only bring a class action in court.) A dispute arose concerning whether Lewis was entitled to overtime pay under the FLSA and state wage-hour law. Lewis filed both a Rule 23 class action and collective (opt-in) under the FLSA. Epic moved to dismiss the complaint and to compel the arbitration of Lewis’ claims on an individual basis. Lewis argued in opposition that Epic’s arbitration agreement was an unfair labor practice, in violation of § 8 of the NLRA, because it interfered with his right to engage in concerted activity for mutual aid or protection under § 7 of the same statute. The federal district court agreed, and the Seventh Circuit affirmed the lower court’s decision.

Ernst & Young v. Morris (9th Cir.): Stephen Morris and Kelly McDaniel were employees of the accounting firm Ernst & Young. As a condition of employment, Morris and McDaniel were required to sign agreements promising to pursue any future work-related claims exclusively through arbitration, and on an individual basis only. Notwithstanding the arbitration agreement, Morris brought a class and collective action against Ernst & Young in federal court, which McDaniel later joined, alleging that Ernst & Young had misclassified Morris and similarly situated employees as exempt from overtime pay under the FLSA and California law. The trial court granted Ernst & Young’s motion to compel, but a 2-1 panel of the Ninth Circuit reversed, agreeing with the employees that the NLRA provided them with a nonwaivable right to pursue group legal action. The dissent agreed with Ernst & Young and with the Fifth Circuit that the NLRA’s “concerted activities” language falls short of the “contrary congressional command” required by the Supreme Court to override the FAA’s mandate.

In particular, NELF will argue that, to escape their contractual obligation to arbitrate disputes on an individual basis only, the employees in these cases would have to show that the NLRA announces a “contrary congressional command” that employees have the nonwaivable right to pursue group legal action against their employer. But the NLRA contains no such contrary congressional command. The statute makes no mention of class actions and was enacted decades before the advent of the modern class action. Nor does the NLRA mention collective actions or even provide for an individual right of action. Congress could not have intended to provide employees with certain nonwaivable procedural rights associated with a nonexistent right of action.

The NLRA’s “right . . . to engage in . . . concerted activities for . . . mutual aid or protection” lacks the specificity and directness that this Court has required for a federal statute to repeal the FAA’s mandate to enforce arbitration agreements according to their terms. Under CompuCredit v. Greenwood, 132 S. Ct. 665, 669 (2012), a contrary congressional command should announce itself clearly on the face of a statute. Such an intent should not be “found” in the interstices of a statute, and certainly not by engaging in a strained and anachronistic interpretation of a vague statutory term such as “concerted activities.”

As with the Credit Repair Organization Act (“CROA”) under review in CompuCredit, the NLRA is also silent on the issue of invalidating the terms of an arbitration agreement. At issue in CompuCredit was whether the CROA overrode the contractual term to submit claims to binding arbitration. At issue here is whether the NLRA overrides the contractual term to arbitrate all employment-related disputes on an individual basis only. In both cases, the federal statute at issue says nothing about the enforceability of the disputed contractual term. Therefore, the FAA’s mandate to enforce the arbitration agreement according to its terms remains undisturbed for both CROA and NLRA claims. Accordingly, Lewis’ class and collective action waiver should be enforced.

This is confirmed by the NLRA’s statement of purpose, which makes no mention of legal action of any kind. To the contrary, the NLRA was expressly intended to avoid “industrial strife” through the “friendly adjustment of industrial disputes,” by protecting the employee’s right to self-organization in order to negotiate on an equal footing with the employer over the terms and conditions of employment. This clear purpose of industrial progress through negotiated compromise is incompatible with the coercive aims of a class or collective legal action, with its attendant threat of exacting an “in terrorem” settlement from the employer.

Finally, NELF intends to argue that the lower courts’ reliance on Eastex, Inc. v. NLRB, 437 U.S. 556 (1978), is entirely misplaced. Eastex did not involve any judicial action taken by employees, did not involve the FAA, and did not even interpret the NLRA’s “concerted activities” language. Instead, that case decided the entirely unrelated issue whether employees acted “for mutual aid or protection” if they acted outside of the immediate employer-employee relationship, by taking political action with respect to work-related issues.

Murr v. State of Wisconsin and St. Croix County

10/21/2016

Click here to read the brief.

Arguing that, in a Regulatory Taking case, Penn Central Does Not Establish a Rule that Two Legally and Economically Distinct Parcels Must be Combined as the “Parcel as a Whole” in the Takings Analysis Simply Because They are Contiguous and Commonly Owned.

This case presents the Supreme Court with an opportunity to take a first step toward clarifying, and hopefully setting some limits to, the “parcel as a whole,” a key concept in regulatory takings law. Since the phrase first appeared in the Court’s 1978 decision Penn Central Transportation Co. v. City of New York, 438 U.S. 104, the term has been adapted to a variety of circumstances. As used in Penn Central, it meant that the economic impact of a government regulation should be evaluated in terms of the entire piece of property in question and not solely in terms of the specific property right targeted by the regulation. The Court observed, “‘Taking’ jurisprudence does not divide a single parcel into discrete segments and attempt to determine whether rights in a particular segment have been entirely abrogated.” Penn Central, 438 U.S. at 130.

Since Penn Central, the concept has been extended by analogy to account for the great diversity of factual circumstances met with in regulatory takings cases. Now, when some or all of a parcel is affected by a regulation, the “parcel as a whole” concept is sometimes invoked as reason for evaluating the impact of the regulation on that parcel by grouping the parcel with other, related parcels, as if the parcels, on analogy with the situation in Penn Central, were “discrete segments” that must not be considered separately from the larger parcel of which they are part. While a wide variety of factors has been employed by courts in determining when to aggregate parcels in this manner, the most common major factors probably are: (i) common ownership, (ii) contiguity with each other, and (iii) unity of use.

This case focuses on the extended application of the concept and asks whether the mere contiguity of commonly owned parcels requires, as a rule of takings law, that such parcels be considered together as the parcel as a whole, even when unity of use or any other factor is absent. NELF has filed an amicus brief in the case, on the merits, supporting the Murrs in their contention that the proposed rule of law should be rejected because it is overly inclusive and unfair to property owners.

The petitioners in this case are the Murrs, four siblings. In 1960, their parents purchased a certain Lot F in rural St. Croix County, Wisconsin. Their father owned a plumbing business, and he placed title to Lot F in his business. Soon after the purchase, the parents built a three-bedroom recreational cabin on the lot. Recognizing the growth potential of the area, in 1963 they purchased a second parcel, Lot E, as investment property. They held the title to Lot E in their own names. Lot E is adjacent to Lot F; both are waterfront parcels approximately 100 feet wide and somewhat over one acre in size. Since its purchase, Lot E has remained vacant and undeveloped. There is no dispute that, as created and as originally purchased, the parcels were separate, distinct legal lots, and that each could have been separately developed, used, and sold.

In the 1990s, the parents made donative transfers to their children, the present petitioners, of developed Lot F and investment Lot E, and for the first time the adjacent lots came under common ownership. In 2004, when the Murr children wanted to sell Lot E and use the proceeds to finance improvements to Lot F, they discovered from officials that they could not develop or sell Lot E separately. Twenty years earlier, in 1975, while the lots were still owned separately by their parents and the plumbing business, local environmental regulations had been adopted requiring a “net project area” of at least one full acre as a prerequisite to development of any lot in that lakeside, environmentally sensitive area of the county.

Lot E has a net project area of only 0.5 acres. The regulations do contain a grandfather provision for any substandard lot created before 1976, as Lot E was, but it permits the separate development and sale of such a lot only if the lot “is in separate ownership from abutting lands.” Because Lots E and F abut and are now both owned by the Murr siblings, the grandfathering exception does not apply to Lot E; the two lots are treated as merged, and the Murrs cannot sell Lot E, although it was acquired by their parents specifically as an saleable investment.

The Wisconsin Court of Appeals rejected the Murrs’ takings claim, ruling that the “parcel as a whole” rule requires combining the two parcels for takings analysis “under a well-established rule that contiguous property under common ownership is considered as a whole regardless of the number of parcels contained therein.” Murr v. State of Wisconsin, 2014 WL 7271581, at *4 (Wis. App. Ct. Dec. 23, 2014) (per curiam) (unpublished). After the Wisconsin Supreme Court denied further review, the Murrs petitioned the U.S. Supreme Court for certiorari, and the petition was granted on January 15, 2016.

In its amicus brief supporting the Murrs, NELF argues that the Court should strike a fair and just balance when identifying the “parcel as a whole.” Invoking the principles of fairness and justice on which the Court has avowedly founded its takings jurisprudence, NELF expresses its concern that the tendency of courts to unduly expand the parcel as a whole creates an unfair risk of undercompensation to property owners. NELF then goes on to illustrate the insufficiency of the two factor rule (adjacency and common ownership) applied by the Wisconsin court. NELF argues that these factors alone are too tenuous, and that the Court should require at least “unity of use” as a third factor in deciding whether to aggregate legally separate. NELF’s argument draws a close analogy to the principles on which severance damages are awarded in eminent domain cases.

Initiative Legal Group v. Maxon

10/20/2016

Click here to read the brief.

Opposing a State Court’s Refusal to Enforce an Arbitration Agreement Contained in a Contract that the Plaintiff has Voided Based on a Technicality of State Law.

This case, a putative class action which is before the United States Supreme Court on a petition for certiorari, asks whether the Federal Arbitration Act (“FAA”) permits a state (here California) to refuse to enforce an arbitration provision that is contained within an agreement that the plaintiff has voided based on a technicality of state law, long after the contract was performed, in an obvious attempt to evade his contractual obligation to arbitrate his claims arising from the agreement.

The plaintiff here, David Maxon, signed a contingency-fee agreement with the Petitioner, Initiative Legal Group (“ILG”) to pursue his wage-hour claim against his former employer, the Wells Fargo Bank. The contingency-fee agreement contained a mandatory arbitration clause covering all disputes between the attorney and the client. After ILG had completed its legal services under the agreement, Maxon filed this court action alleging that ILG had committed legal malpractice in representing him. ILG moved to compel arbitration. It turned out, however, that ILG had inadvertently failed to sign the contingency-fee agreement, and Maxon, invoking a California statute that permits a client to void a contingency-fee agreement unless both parties have signed it, gave notice to ILG that he was exercising his right under state law to void the fee agreement because ILG had not signed it. Maxon then argued that, because he exercised his statutory right to void the fee agreement, the entire agreement, including the arbitration provision, no longer existed. The California trial court and Appeals Court agreed with Maxon, and the California Supreme Court denied further appellate review.

As NELF argues in its amicus brief in support of the Petitioner, the California courts were wrong because under well-settled United States Supreme Court precedent, the mere voiding of the fee agreement does not also void the arbitration clause. As the Supreme Court has held, the FAA preempts such state interference with the enforcement of an arbitration provision. Under the FAA, an arbitration provision is severable from its “container” agreement. “[A]s a matter of substantive federal arbitration law, an arbitration provision is severable from the remainder of the contract.” Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 445 (2006) (Scalia, J., for Court) (emphasis added). This principle of severability is mandated by the plain language of the FAA. “[Section] 2 [of the FAA] states that a ‘written provision’ ‘to settle by arbitration a controversy’ is ‘valid, irrevocable, and enforceable’ without mention of the validity of the contract in which it is contained.” Rent–A–Center, West, Inc. v. Jackson, 561 U.S. 63, 70 (2010) (Scalia, J., for Court) (emphasis in original).

In short, NELF argues that the Supreme Court should grant certiorari, once again, to compel state courts, like those in California, to adhere to the Supreme Court’s arbitration decisions, and to hold that the arbitration provision is enforceable even if the overall agreement is voided under state contract law, for whatever reason--such as illegality, fraud in the inducement, or unconscionability. Unless a party challenges the enforceability of the arbitration provision itself, the arbitration provision survives and must be enforced. See Buckeye, 546 U.S. at 444-46 (challenge to overall loan agreement as usurious, and therefore void ab initio, did not affect enforcement of arbitration provision contained therein). See also Rent–A–Center, 561 U.S. at 70 (challenge to “all-disputes”/scope clause of arbitration agreement as unconscionable did not affect enforcement of separate arbitration clause delegating unconscionability challenges to arbitrator); Prima Paint Corp. v. Flood & Conklin Mfg. Co. 388 U.S. 395 (1967) (challenge to overall agreement as induced by fraud did not affect enforcement of arbitration provision therein).
As of the time of this report, the Supreme Court has not yet decided whether or not to grant certiorari in this case.

Sikkelee v. Lycoming, et al.

10/19/2016

Arguing that the Pervasive Federal Regulation of Aircraft Safety and the FAA’s Certification of the Design of the Aircraft Engine in a Plane that Crashed Preempts the Plaintiff’s State Law Claims of Product Liability Based on Design Defect and Failure to Warn.

This matter was referred to NELF by Textron, a NELF supporter headquartered in Providence, Rhode Island. It involves a pending Third Circuit appeal, Sikkelee v. Lycoming. The respondent, Lycoming Engines, is a division of AVCO, a Textron subsidiary that is also headquartered in Providence. Lycoming sold a certain aircraft engine in 1969. Nearly thirty years later the engine was installed "factory new" on a Cessna aircraft, even though the engine was not actually certified for that particular airframe (Lycoming was not involved in the installation of the engine). Lycoming and others were sued by Jill Sikelee, the widow of a newly licensed pilot who died in a crash of the Cessna, under product liability theories of design defect and failure to warn. The issue that Textron asked us to support is its preemption defense, based on which it obtained summary judgment in the trail court, i.e. that state law standards of care are preempted by the pervasive federal regulation of aircraft safety, and that the FAA's certification of the design of the engine preempts Sikkelle's claims. Because this appeal is in the Third Circuit, after discussion with our Rhode Island Advisory Council member from Textron, Julie Duffy, NELF joined with the Atlantic Legal Foundation, whose remit includes Pennsylvania (indeed, Atlantic Legal was for years headquartered in Philadelphia). NELF and ALF jointly filed an amicus brief supporting Lycoming in the Third Circuit, arguing that the pervasive nature of federal air safety regulation requires preemption of state law claims.

On April 19, 2016, the Third Circuit issued its opinion. Disagreeing with NELF and ALF, it held that the plaintiff’s claims in this case were not pre-empted by federal law. Lycoming moved for a rehearing en banc, and, since that was unsuccessful, is now seeking certiorari from the Supreme Court. NELF and ALF will be filing an amicus brief in support of the Petition for Certiorari.

Chase v. U.S. Postal Service

10/18/2016

Arguing that a plaintiff who alleges that his employer retaliated against him for taking leave under the federal Family and Medical Leave Act must prove that his leave was the but-for cause of the alleged retaliation

This case raises an issue of first impression in the First Circuit in an important area of employment law. In 2013, invoking traditional principles of tort law, the Supreme Court declared that the default rule is that “federal statutory claims of workplace discrimination” must be proven by but-for causation, i.e., it must be shown that the wrong would not have occurred but for the plaintiff’s protected status or conduct. See University of Texas Southwestern Medical Center v. Nassar, 133 S. Ct. 2517, 2525 (2013).* Since then, outside of Title VII, lower courts have shown reluctance to take the Supreme Court at its word, continuing to allow liability to be established when an improper motivating factor has been shown to have played a role in the employer’s decision, even though the factor was not the but-for cause of it.

In this case, a federal district court judge, faced with the task of deciding the causation standard for a retaliation claim arising under the Family and Medical Leave Act, declined to follow the teaching of Nassar; in the mistaken belief that the act is ambiguous on this point, he deferred to a U.S. Dept. of Labor regulation that adopts motivating-factor causation. That standard of causation is clearly wrong. Because Nassar makes but-for causation the default in the absence of statutory language to the contrary, even statutory silence on the subject of causation will not render a statute ambiguous; it merely signals that but-for causation is to be applied. Moreover, so-called Chevron deference to an agency is proper only when the language of a statute is ambiguous, and here the statute is not ambiguous.

Although the defendant employer is the U.S. Postal Service (USPS), an independent agency of the federal government, the law in question applies equally to private businesses, and therefore the outcome of the case should be of concern to NELF and its supporters in the business and legal communities.

In its amicus brief filed in support of the employer in this case, NELF has presented detailed arguments to supplement and strengthen the Post Office's argument that Nassar governs this case. Simply put, NELF makes two points. First, as NELF explains, Nassar establishes that but-for causation is an unspoken background principle of federal legislation and so does not have to be signaled by any special words. To the contrary, it is any other standard that must be clearly stated in a statute. Second, NELF demonstrates that the district court erred in declining to apply Nassar and in finding that the causation required for an FMLA retaliation claim is ambiguous in the statute. NELF argues that but-for causation is the standard to be applied in this case despite the fact that the statute is silent on the issue because, as Nassar stated, but-for causation is a presumption of federal legislation. In making its arguments, NELF rebuts, point for point, the trial judge’s reasons for believing the statute ambiguous and for declining to apply the teachings of Nassar.

*NELF filed an amicus brief in Nassar.

Balles v. Babcock Power, Inc.

10/17/2016

Arguing that When a Stockholder/employment Agreement Provides that a Corporation’s Board of Directors Has the Exclusive Authority to Decide Whether a Senior Executive Should be Terminated for Cause, the Only Issue for a Reviewing Court Should Be Whether or Not the Board Made its Employment Decision in Good Faith.

Click here to read the brief.

This case, which is before the Massachusetts Supreme Judicial Court on an application for direct appellate review, asks how a court should review a decision of a corporation’s board of directors to terminate a senior executive for cause under the terms of a stockholder/employment agreement. A high-ranking executive is generally an employee at will who can be terminated without cause, as in this case. Nonetheless, under the typical stockholder/employment agreement, such as the one here, an executive who is terminated for cause can lose his stock ownership in the corporation, along with any severance package. And, as with many other such agreements, the contract at issue provides a definition of “cause” and also provides, significantly, that “a determination of ‘Cause’ may only be made by the Board of Directors . . . .” (Emphasis added.) Under this clear contractual language preserving the board’s fact-finding prerogative, should a court defer to the board’s decision so long as the board has acted in good faith? Or should a court instead have the discretion to disregard the board’s decision and determine the issue for itself in a trial de novo? The Superior Court in this case took the latter view and reversed the decision of the board of directors of Babcock Power, a high technology company headquartered in Danvers, Massachusetts, to terminate for cause the employment of Dr. Eric Balles, a high-ranking, senior executive employee. As a result, the lower court awarded Balles approximately $2 million in damages and attorneys’ fees.

This case raises an important issue of internal corporate governance that warrants, and NELF supported Babcock Power’s application for Direct Appellate Review and intends to file an amicus brief on the merits as well. In its amicus brief, NELF will argue, inter alia, that, in the circumstances of this case, the board’s decision should be upheld unless the employee can show that the decision was made in bad faith or was otherwise tainted by fraud, and that the Superior Court’s review should have been limited to those issues alone.

Turra v. Deutsche Bank Trust Company Americas

10/16/2016

Click here to read the brief.

Arguing that an Otherwise Valid Foreclosure Should Not Be Invalidated Because the Mortgagee Allegedly did Not Comply Fully with the Requirement Under Massachusetts Law that, Before Taking Possession or Conveying Title, Notice Must Be Given to Tenants, Certain Municipal Officials, and Any Provider of Water and Sewer Services to the Property

Since the collapse of the housing market in 2008, there has been an increased number lawsuits in which a homeowner has sought to thwart or undo a foreclosure on the grounds that the foreclosing party failed to comply with some requirement of the Commonwealth’s nonjudicial foreclosure law. This is another such case, the latest in a string of cases that commenced with U.S. Bank N.A. v. Ibanez, 458 Mass. 637 (2011).

The homeowner here asks the courts to find the foreclosure sale of his property void on the grounds that the mortgagee bank failed to comply with one of a series of statutes that, purportedly, the SJC has declared set out the steps required in order to effect a valid foreclosure sale under the statutory power of sale. This particular statute requires that, within 30 days of the closing, the foreclosing party give notice of the closing to the municipal tax assessor and any sewer or water provider. Since there is no dispute about the failure of the bank to comply with this requirement, the case boils down to whether the SJC really meant what it purportedly said in the six cases the homeowner relies on—and, if so, whether the SJC should continue to mean it.

In its amicus brief, filed in support of the bank, NELF argues that the plaintiff relies exclusively on pure dicta, a point NELF illustrates by analyzing U.S. Bank N.A. v. Schumacher, 467 Mass. 421 (2011), Turra’s strongest case. NELF urges the Court not to be bound by dicta because this important issue has never been placed squarely before the Court and briefed until now. Moving to the substantive legal question raised by this case, NELF demonstrates that the plaintiff’s view of this post-sale notice statute cannot be reconciled with the plain language of G.L. c. 183, § 21, which creates a right to foreclosure by statutory power of sale and which describes all the statutory requirements for the exercise of that power as pre-sale requirements. NELF then shows that the description given in § 21 also excludes from being foreclosure sale requirements other statutes mentioned in the dicta Turra cites, thereby further undermining his argument that the dicta provides a reliable, complete list of statute a mortgagee must comply with. Finally, NELF analyzes the language of the notice statute in question and shows that the statute is not even mandatory, but rather directory.

Chitwood v. Vertex Pharmaceuticals

10/15/2016

Click here to read the brief.

Arguing that a shareholder does not have a right under the Massachusetts Business Corporation Act to inspect a corporation’s books and records after the board of directors has refused his litigation demand concerning alleged corporate wrongdoing.

In this case, which the Massachusetts Supreme Judicial Court has taken sua sponte for direct appellate review, the Court will decide under what circumstances a shareholder may be permitted to inspect a corporation’s books and records after the board of directors has refused his litigation demand concerning alleged corporate wrongdoing. Under the Massachusetts Business Corporations Act, G. L. c. 156D, § 16.02(1), a shareholder has the right to inspect certain corporate books and records if he establishes a “proper purpose” with “reasonable particularity,” among other statutory requirements. At issue, then, is what constitutes a “proper purpose” sufficient to permit a shareholder to inspect the board’s books and records after the board has refused the shareholder’s litigation demand.

NELF will argue, in support of Vertex, that a “demand refused” shareholder should not be permitted to inspect the board’s books and records unless he can show that the board’s decision making process may have lacked the good faith and diligence necessary to warrant protection under the business judgment rule. This is because another key provision of the Act, addressing shareholder derivative actions, expressly codifies the business judgment rule and requires a court to uphold a board’s refusal of a shareholder’s litigation demand, so long as a majority of independent directors “has determined in good faith after conducting a reasonable inquiry upon which its conclusions are based that the maintenance of the [shareholder derivative suit] is not in the best interests of the corporation . . . .” G. L. c. 156D, § 7.44(a). That is, a demand-refused shareholder is limited to seeking judicial review of the board’s decision making process itself, and only when the shareholder has presented a credible threshold challenge to the integrity of that process to overcome its presumptive validity. Therefore, to harmonize the books-and-records provision with the shareholder derivative provision of the same statute, as NELF will argue the Court should do, a demand-refused shareholder who seeks discovery of the board’s documents should be required to persuade the trial court that the board’s decision making process does not warrant protection under the business judgment rule. Accordingly, the shareholder should be required to show that the board’s decision has fallen short of at least one of the three statutory requirements quoted above: good faith, reasonableness, and independence. For these and other reasons discussed below, NELF will argue that the SJC should affirm the lower court’s dismissal of Chitwood’s books-and-records request.

Hall v. Department of Environmental Protection

10/14/2016

Opposing Regulatory Encroachment on Coastal Property Rights.

In 1991, the Massachusetts Department of Environmental Protection (DEP) adopted a new regulation under G. L. c. 91 that reversed longstanding common law presumptions about the ownership of shorefront property. Because the most common means of shoreline increase is accretion (slow and gradual addition of upland at the mean high tide line) and because it is so difficult to prove imperceptible, gradual growth, Massachusetts courts have adopted a rebuttable presumption that a shoreline increase is due to accretion. The presumption is important because accretion accrues to the property owner, whereas shoreline increases due to major storms or unpermitted filling do not. The 1991 DEP regulation, 310 CMR § 9.02, reversed this presumption and placed the burden on property owners to prove that all land seaward of the “historic high tide” level has resulted exclusively from “natural accretion not caused by the owner . . . .”

Following promulgation of its regulation, DEP suggested that owners of shorefront property seaward of the “historic” high tide line, as mapped by DEP, apply for amnesty licenses. NELF’s client, Elena Hall, owns a parking lot on shorefront property in Provincetown that provides Ms. Hall with her sole significant source of income. Approximately one-third of the parking lot and a portion of a small rental cottage on the property are seaward of DEP’s “historic” high tide line. Ms. Hall applied for an amnesty license and DEP issued a license imposing several onerous and costly conditions on Ms. Hall’s right to use her property seaward of the “historic” line.

Ms. Hall filed an administrative appeal with DEP and NELF agreed to take over Ms. Hall’s representation in this test case of DEP’s regulation. During the administrative and any subsequent judicial proceedings in this case, NELF will challenge DEP’s mapping of the “historic mean high water mark” and argue that DEP’s regulation exceeds that agency’s statutory authority and effects an unconstitutional taking of private property. NELF will further argue that a license condition requiring a four-foot-wide public access way across the entire width of Ms. Hall’s upland property to the beach effects a taking of her property requiring just compensation. This is so because the public’s limited rights in tidelands do not include a right of access across private upland property to reach the water or coastal tidelands. DEP has therefore imposed a license condition that bears no relationship to any recognized public right, let alone a public right protected under c. 91 and affected by the licensed use of Ms. Hall’s property.

NELF filed a potentially dispositive memorandum of law, accompanied by a detailed and thorough expert affidavit, with multiple map overlay exhibits, arguing that DEP simply has no jurisdiction over Ms. Hall’s property. In particular, NELF staff worked closely with the experts in scrutinizing carefully the historical maps pertaining to Provincetown Harbor and in determining that the application of the mean high tide line derived from the earliest reliable historical map to Ms. Hall’s property leaves the disputed portion of her property free and clear of the designation “Commonwealth tidelands.” NELF received a piecemeal, informal response from DEP challenging various aspects of NELF’s expert’s methodology.

The Administrative Law Judge then ordered the parties’ experts to meet, with the attorneys present, to exchange opinions and determine whether settlement was possible. While the meeting was productive, settlement is not possible at this time. DEP’s most salient challenge concerned the historic location of a lighthouse upon which Ms. Hall’s expert relied in determining the location of the historic mean high water mark. This challenge led the expert to reexamine the historic location of other lighthouses which he used in his methodology. NELF has also researched and briefed potential legal challenges to DEP’s regulation and license conditions under the Takings Clause and the ultra vires doctrine, which NELF would be prepared to reach should it not succeed on its position with respect to the historic high water mark.

June 2016 Litigation Report - Recent Decisions

6/3/2016

Spokeo, Inc. v. Robins

6/2/2016

Arguing that Article III’s “Case or Controversy” Requirement bars a plaintiff from suing in federal court for the technical violation of a statute that has not caused any concrete harm.

This case was a putative consumer class action pending before the United States Supreme Court on the merits. The plaintiff and putative class representative, Thomas Robins, sought statutory damages in federal court under the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq. (“FCRA”), for a technical violation of that statute that has not caused him any harm. (In particular, Robins alleged that the defendant, Spokeo, Inc., a website operator that provides users with information about other individuals, published false (but favorable!) information about him, such as by misstating his educational level and financial status.) FCRA permits recovery for the bare violation of a statutory right. The case thus raises a constitutional separation of powers issue long familiar to NELF: does Article III of the United States Constitution, which limits the federal judiciary’s jurisdiction to “cases” and “controversies,” confer standing on a plaintiff who alleges a violation of a federal statute but who does not allege any resulting injury? Can Congress create standing in the federal courts that otherwise would not exist by legislative fiat? The Supreme Court has interpreted Article III’s case-or-controversy requirement as mandating “injury in fact”—i.e., a “concrete” and “particularized” harm that is “actual or imminent.” Clapper v. Amnesty Internat’l USA, 133 S. Ct. 1138, 1147 (2013). Despite this clear constitutional requirement of injury in fact, the Ninth Circuit in this case denied the motion to dismiss of defendant Spokeo, Inc., a website operator that provides users with information about other individuals. The lower court concluded that, because FCRA allows a plaintiff to recover statutory damages for the bare violation of a statutory right, the statutory violation is itself an injury in fact sufficient to satisfy Article III.

Notably, NELF briefed the same standing issue in the Supreme Court in 2011, in Edwards v. First American Corp., a case also arising from the Ninth Circuit. (And the Ninth Circuit in this case has based its decision primarily on its Edwards decision.) In Edwards, the Supreme Court granted certiorari but then dismissed the case without reaching the merits, on the basis that certiorari had been improvidently granted. While the Court did not explain its decision, it may have been due to the unique procedural posture of that case. Therefore, this pressing issue of Article III standing, in the absence of any actual injury, remains unresolved. (NELF has also briefed the same issue at the state statutory level, in particular under Mass. G. L. 93A before the Massachusetts Supreme Judicial Court. See Hershenow v. Enterprise Rent–A–Car Co., 445 Mass. 790 (2006)). Moreover, there are several federal statutes, like the ones at issue here and in Edwards (the Real Estate Settlement Procedures Act, 12 U.S.C. §§ 2601 et seq.), that allow plaintiffs to recover statutory damages (and reasonable attorney’s fees) without proving any concrete harm.* Therefore, the issue of Article III standing is of great significance to businesses in our region and the country as a whole. A business’s broad exposure to liability for statutory damages and attorney’s fees under these numerous laws is compounded by the class action mechanism, which is the procedural vehicle of choice for many consumers and employees (and their attorneys) suing under such statutes. Putative class members arguably need only show the bare, classwide violation of a common statutory right to obtain class certification. Businesses are thereby exposed to potential liability for vast, aggregated sums of statutory damages and high attorney’s fees, often resulting in a large settlement on a claim in which no class member has been injured.

NELF, joined by Associated Industries of Massachusetts, argued, on behalf of Spokeo, that Article III requires dismissal of Robins’ complaint because it fails to allege any injury in fact. “Injury in law” under FCRA, based on the bare violation of a statutory right, cannot satisfy Article III’s requirement that the violation must cause some concrete harm. Congress cannot create an injury in fact. It can only provide a private remedy to redress an injury in fact. Therefore, the injury-in-fact requirement under Article III is not satisfied merely because Congress has authorized an award of statutory damages for the violation of a statutory right. A federal court must always exercise independent review of a federal statute, along with the allegations of a plaintiff’s complaint invoking that statute, to determine whether the plaintiff has identified a concrete harm resulting from the violation of a statute. In short, the Article III inquiry to determine an injury in fact “has nothing to do with the text of the statute relied upon.” Steel Co. v. Citizens for a Better Environment, 523 U.S. 83, 97 (1998). As the Court has emphasized, “[i]t is settled that Congress cannot erase Article III’s standing requirements by statutorily granting the right to sue to a plaintiff who would not otherwise have standing . . . .” Raines v. Byrd, 521 U.S. 811, 820 (1997). Simply put, statutory standing to sue in federal court does not automatically create constitutional standing under Article III. In reaching its decision, the Ninth Circuit and other federal circuit courts have apparently disregarded this key precedent and have also misinterpreted other Supreme Court precedent as equating statutory standing with Article III standing. Certiorari should therefore be granted to resolve the confusion among the lower courts on this crucial issue and clarify that injury in fact is not coextensive with injury in law.

NELF initially filed an amicus brief supporting the defendant, Spokoe Inc’s petition for certiorari. When certiorari was granted in April, 2015, NELF filed an amicus brief on the merits in the case. On Monday, May 23, 2016, the Supreme Court issued its decision, agreeing with NELF, 6-2, that the plaintiff lacked standing because he had not demonstrated a concrete injury. Rather than dismissing the case, however, the Supreme Court remanded the case to the lower courts for a determination whether the plaintiff could demonstrate a concrete injury resulting from the alleged breach of the FCRA.

Although the Supreme Court did not dismiss the case outright, as NELF had argued it should do, this is nonetheless this is a victory for the principles underlying NELF’s brief—namely separation of powers and the federal judiciary’s exclusive authority to determine whether standing exists. In short, Congress cannot create standing in federal court for the mere breach of a statutory requirement that Congress has enacted.

*See, e.g., the Truth in Lending Act, 15 U.S.C. § 1640(a)(2)(B)); the Fair Debt Collection Practices Act, 15 U.S.C. § 1692k(a)(2)(B); the Telephone Consumer Protection Act, 47 U.S.C. § 227(b); the Employee Retirement Income Security Act, 29 U.S.C. § 1132(a)(2); and the Video Privacy Protection Act, 18 U.S.C. § 2710(c)(1).

Alfred Gobeille, in His Official Capacity as Chair of the Vermont Green Mountain Care Board v. Liberty Mutual Insurance Company

6/2/2016

Supporting the Broad Sweep of ERISA Preemption with Regard to State Law Requirements

The issue before the United States Supreme Court in this case was whether the preemption provision of the Employee Retirement Income Security Act (“ERISA”) barred a State from imposing reporting requirements on ERISA plans beyond what ERISA itself requires.

The case arose when Liberty Mutual instructed the third-party administrator of its ERISA plan in Vermont not to comply with a subpoena from the State requiring that certain health claims information be collected pursuant to Vermont law. Vermont, like a number of other States (including the other five in New England), has a statute that requires health care providers and health care payers in Vermont to provide claims data and related information to the State’s specialized health care database. The State says that it relies on the data collected to inform its health care policy decisions in a number of ways. As the basis for its refusal to comply with this Vermont law, Liberty Mutual argued, both in the suit it brought in the Vermont federal District court and, subsequently, in the Court of Appeals for the Second Circuit, that since ERISA requires certain forms of reporting by ERISA plans, any additional form of reporting imposed by State law is preempted under ERISA’s broad preemption provision.

Liberty Mutual lost on summary judgment in the district court, but obtained a ruling its favor from the Court of Appeals in a split 2-1 decision. On June 29, 2015, the Supreme Court granted certiorari to hear the matter on the merits, and NELF filed an amicus brief in support of Liberty Mutual.

In its brief, NELF addressed recent Supreme Court ERISA decisions in which the court adopts a “presumption against preemption,” and NELF argued that there exist several reasons for the Court to abandon or limit its use of that presumption. The presumption is usually traced back to Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947), where the Court adopted a working “assumption” that the “historic police powers of the States” should not be deemed to be superseded when “Congress legislate[s] . . . in [a] field which the States have traditionally occupied” unless such preemption was “the clear and manifest purpose of Congress.” As preemption has long been declared by the Court to be a matter of congressional intention, use of the presumption is especially inapt when one is dealing with an express preemption provision, as in ERISA. Such an express provision banishes the need for any kind of presumption because it clearly establishes the fact of Congress’s intention to preempt. From that point on, the actual language, purpose, and context of the statute provide much surer guidance to Congress’s intended meaning than could be given by any presumption unmoored to the statutory text.

Not surprisingly, therefore, while the presumption formulated in Rice may have been adopted by the Court in order to assist it in discerning Congress’s intention, there has been no shortage of scholars who, however much they may disagree among themselves on other legal points, agree that the Court has signally failed to employ the presumption in a consistent methodological fashion.

Moreover, use of the presumption in instances of express preemption is bedeviled by the problem of deciding how narrowly or expansively to define the relevant field of supposed traditional State regulation. Cf. Garcia v. San Antonio Metro. Transit Auth., 469 U.S. 528, 546-47 (1985) (“We therefore now reject, as unsound in principle and unworkable in practice, a rule of state immunity from federal regulation that turns on a judicial appraisal of whether a particular governmental function is ‘integral’ or ‘traditional.’”). The present case exemplified that problem, as the two sides contended over whether the field should be viewed broadly, with the emphasis falling on traditional State health and welfare concerns, or narrowly, with the focus on the novelty of the means by which data is to be collected under the Vermont law. This disagreement was mirrored in the differing views of the majority opinion and the dissent in the appeals court.

Finally, because the judicially fashioned presumption against preemption necessarily works to narrow interpretation, it gives the safeguards of federalism a kind of double weight, beyond the weighting given by Congress when it composed the text of the statute.

For these reasons, the “presumption against preemption” is an entirely inappropriate tool of statutory construction, and NELF urged the Court not to adopt it in this case when determining the scope of the express preemption provision found in ERISA.

On March 1, 2016, the Supreme Court issued its decision in this case. The Court agreed with NELF, 6-2, holding that ERISA preempts Vermont’s statute as applied to ERISA plans.

Green v. Brennan

6/2/2016

Supporting the Lower Court’s Decision that, in a Constructive Discharge Case Brought Under Title VII, the Administrative Filing Period Begins to Run With the Last Allegedly Wrongful Act By the Employer, Not When the Employee Chooses to Resign.

The question presented in this case was, in a claim of constructive discharge under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., does the administrative limitations period begin with the last discriminatory or retaliatory act of the employer before the employee resigns, or does it begin instead with the employee’s resignation? A constructive discharge claim can be understood as “an aggravated case” of discrimination or retaliation, in which the employee resigns and then alleges that the employer committed acts of discrimination or retaliation that were so severe that the employee reasonably felt compelled to quit. For employers, and thus of great importance to many of NELF’s supporters, the crucial difference between a constructive discharge claim and the underlying claim of discrimination or retaliation is remedial. The prevailing employee can recover not only for the employer’s discrimination or retaliation but also for his own act of resigning, as if it were a termination for damages purposes. Thus, the prevailing constructive-discharge plaintiff can recover back pay, and possibly front pay, along with any other (economic and non-economic) damages attributable to the employer’s discriminatory or retaliatory conduct, and punitive damages.

An employee suing under Title VII for any claim must first exhaust his administrative remedies by filing or initiating contact with the Equal Employment Opportunity Commission (“EEOC”) within a specified period of time. Failure to do so will most likely bar the employee from suing in court. In particular, a private-sector employee must file his charge of discrimination or retaliation with the EEOC within 180 or 300 days “after the alleged unlawful employment practice occurred.” 42 U.S.C. § 2000e-5(e)(1). A federal employee, such as the employee in this case, must initiate contact with an EEOC counselor for potential settlement “within 45 days of the date of the matter alleged to be discriminatory or, in the case of personnel action, within 45 days of the effective date of the action.” 29 C.F.R. § 1614.105(a)(1) (emphasis added). The parties in this case have focused on the italicized language as the applicable regulatory provision. As with a statute of limitations, the purpose of this filing deadline is to require employees to act promptly in enforcing their rights, to protect employers from having to defend old claims, and to provide employers with certainty and repose that, after a date certain, they will not have to defend their actions in litigation.

NELF argued, in its amicus brief on the merits, that in a claim for constructive discharge, as with most any other claim of discrimination or retaliation under Title VII, the administrative limitations period begins with the employer’s last discriminatory or retaliatory act, not with the employee’s resignation in response to that conduct. This is required by the plain language of the limitations provision applicable to federal-sector employees under the EEOC regulation, and by Title VII’s general provision applicable to both private-sector and state employees. And the Court has already interpreted Title VII’s limitations provision as focusing on the employer’s challenged conduct, not on the injurious consequences to the employee. Delaware State College v. Ricks, 449 U.S. 250 (1980). Ricks should apply here because the relevant language in the EEOC regulation is synonymous with Title VII’s limitations provision, and because neither provision treats constructive discharge claims differently from the “traditional” discrimination claim discussed in Ricks.

Moreover, NELF pointed out that the Court has observed that Congress would have been well aware of constructive discharge claims when it enacted Title VII. Pennsylvania State Police v. Suders, 542 U.S. 129, 141-42 (2004). And yet Congress made no special allowance concerning the timeliness of constructive discharge claims. Therefore, Congress should be deemed to have rejected any differential treatment for the filing of constructive discharge claims by private-sector and state employees under Title VII. And the EEOC, in turn, should be deemed to have followed suit with its similarly worded provision for federal employees.

Suders also held that, in a constructive discharge claim under Title VII, the employee’s decision to resign is not an action imputed to the employer. Instead, the resignation remains a separate act of the employee. Therefore, the resignation is not an “alleged unlawful employment practice” under Title VII or a “matter alleged to be discriminatory” under the EEOC regulation. While the employer may indeed be liable in damages for the employee’s resignation as if it were a termination, Suders carefully distinguished the employer’s monetary liability from any vicarious liability for the employee’s resignation. The employer is liable in damages for the employee’s reasonable resignation simply because the resignation is a foreseeable consequence of the employer’s proven wrongful conduct.

After all, Suders explained that a constructive discharge claim is merely “an aggravated case” of discrimination or retaliation. A constructive discharge claim is a dependent claim that rides “piggyback” on the underlying claim of discrimination or retaliation. The only difference between a constructive discharge claim and the underlying claim of discrimination or retaliation is the severity of the employer’s wrongful conduct, and hence the applicable measure of damages. There is no reason, therefore, why the limitations period should be any different for the constructive discharge claim merely because the employee is seeking additional remedies that would not apply in the underlying claim of discrimination or retaliation.

Finally, Suders teaches that a constructive discharge claim is an objective inquiry, asking whether the employee’s resignation was a reasonable response to the employer’s challenged conduct. The facts necessary to determine such reasonableness are generally established once the employer has taken official action against the employee, or when a supervisor or co-worker has committed the last in a series of related acts of harassment against the employee before he resigns. At that moment in time, the employee is most likely on notice that resignation may be the only reasonable response to the employer’s allegedly severe conduct. Therefore, this inquiry focuses on the severity of the employer’s disputed conduct. It does not concern the particular timing of each employee’s resignation. Accordingly, the employer’s conduct should begin the limitations period, not the employee’s subsequent resignation in response to that conduct.

On May 23, 2016, the Supreme Court issued its decision. Disagreeing with NELF’s conclusion, the Court held that because “the matter alleged to be discriminatory” in a constructive discharge claim is an employee’s resignation, the limitations period for such actions begins running only after an employee resigns. Justice Alito filed a concurring opinion in which, while he agreed with the Court’s conclusion, he pointed out the problems with the majority’s conclusion and suggested a slightly different framework of analysis. Justice Thomas was the sole dissenter.

<<Previous

Forward>>

Martinez v. Empire Fire & Marine Insurance Co.

Pending Cases

Epic Systems v. Lewis; Ernst & Young LLP v. Morris

Murr v. State of Wisconsin and St. Croix County

Initiative Legal Group v. Maxon

Sikkelee v. Lycoming, et al.

Chase v. U.S. Postal Service

Balles v. Babcock Power, Inc.

Turra v. Deutsche Bank Trust Company Americas

Chitwood v. Vertex Pharmaceuticals

Hall v. Department of Environmental Protection

June 2016 Litigation Report - Recent Decisions

Spokeo, Inc. v. Robins

Alfred Gobeille, in His Official Capacity as Chair of the Vermont Green Mountain Care Board v. Liberty Mutual Insurance Company

Green v. Brennan

The Docket

Categories

Archives