Connecticut Defense Lawyers Association

As reports begin to roll in about the results of Roadcheck 2013, we are starting to hear more and more statistics designed to impress upon us the number of purportedly dangerous truck drivers taken off our public highways by the efforts of law enforcement. A closer examination of the statistics that are not being reported by the media is called for.

For those who do not know, Roadcheck is an annual program across the United States, Canada, and Mexico involving 72-hours straight of commercial truck inspections.  This year’s program was conducted June 4-6, 2013.   The Associated Press Reported that one of Maryland’s Roadcheck inspections led to 19 drivers (3% of all drivers inspected) being pulled off the road because they were not “qualified” to operate their respective commercial vehicles. The “enforcers” (their word, not mine), inspected a total of 525 commercial vehicles.  Ohio State Highway Patrol reportedly inspected 1566 vehicles statewide, of which 65 drivers (4%) and 363 vehicles were placed out of service. The five states with the most trucking accidents (California, Texas, Florida, Georgia, and Pennsylvania) have yet to report any statistics of their inspections.    Currently, the United States has 3.5 million truck drivers who move 70% of all freight across the United States. There are an estimated 15 million trucks in the U.S., transporting those goods. The trucking industry has a revenue of over $250 billion (another source reported this to be $650 billion), annually, of which the trucking industry reimburses the U.S. government over $21 billion dollars to keep our road and highways in good condition and over $37 billion in federal and state highway-user taxes. For that privilege, they also boost our economy by paying for almost 54 billion gallons of gas. Even though commercial vehicles only comprise 12% of all vehicles, they paid 36% of all highway-user taxes in 2006.  Those taxes are paid in part by owner-operators, who comprise 1 in 9 of all truckers. Those men and women can expect to earn a mere $37,000 a year. Long-haul truckers can expect to spend a total of 31 days home with their family each year.  Moreover, jobs for truckers are expected to grow more than 20% in the next ten years, and many of those jobs are expected to go to members of our armed forces returning from abroad.  Indeed, more and more trucking companies are marketing themselves as “military-friendly” employers, offering many of the same benefits of military life (travel, camaraderie among fellow truckers, the willingness to serve a vital service to our country).    In terms of safety, commercial trucks comprise only 2.4% of all car accidents, and trucks are actually three times less likely to be in an accident than a passenger car.  Of those accidents, only 16% are the fault of the truck driver—one reason organizations like OOIDA keeps suing the Federal Motor Carrier Safety Administration to correct their online safety statistics.    While there can always be greater safety in the trucking industry, one must question the amount of money spent on such an endeavor, resulting in so few actual violators, percentage-wise. Instead of reporting the number of truckers taken off the roads, the media does the public a disservice by failing to report the increasingly high number of trucks and drivers that passed the inspections.
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Over the past several years the energy drink industry has proven to be wildly popular with consumers, boasting massive gains and a strong foothold in the marketplace.  

According to a recent report from Packaged Facts, in 2012, the total U.S. sales for the energy drinks/shots market totaled more than $12.5 billion and are anticipated to swell to $21.5 billion by the year 2017.  Although energy drink manufacturers have had little trouble establishing their product’s popularity, the industry as a whole has also faced increased legal and legislative scrutiny, particularly the safety of its products and its identification under the FDA as a dietary supplement.

In recent years, the caffeine content of energy drinks has caused many to scrutinize the potential affiliated health risks associated with consuming high quantities of caffeine and the necessity for heightened FDA regulations.  Under current FDA regulations, the amount of caffeine found in soda-type beverages does not have to be included on the labeling when it is at concentrations below .02%.  At such levels, the FDA considers the ingredients to be “generally recognized as safe” or “GRAS.” However, energy drinks have been exempt from this FDA rule as, historically, they have been marketed as dietary supplements rather than soda-type drinks.  As such, energy drinks may have caffeine levels markedly higher than soda-type beverages without being required to disclose the caffeine level.

In 2012, on the heels of an investigation into the possible link between Monster energy drinks and five deaths, United States Senators Richard Blumenthal and Dick Durbin requested the FDA investigate the ingredients in energy drinks and the potential health effects of caffeine on children and adolescents. As a result, on October 22, 2012, the FDA stated it was launching an investigation regarding the five reported deaths and the alleged potential link to the consumption of Monster energy drinks.

Demonstrating the Senators’ resolve on the issue, on November 15, 2012, Senator Durbin took the Senate floor addressing the possible link between 5-hour ENERGY and thirteen deaths, and argued for a highly regulated energy drink market, stating “they are more lethal than alcohol.”  This, and other continued scrutiny, has caused energy manufacturers to react.
In recent months, both Rockstar and Monster have decided to reclassify and market their energy drinks under the FDA regulations as beverages, rather than dietary supplements.  For the first time in a decade, Monster’s cans will disclose its caffeine content, which has long been a hot button issue for consumer protection activists and a centerpiece for energy drink litigation and controversy.  Manufacturers, distributors and product sellers of energy drinks should look very closely at this growing trend in the energy drink industry.  Given the attention from the medical, legal and legislative communities, it is likely that both regulatory changes governing the production and marketing of energy drinks and further consumer driven litigation are on the horizon.  Although both Rockstar and Monster will face some new reporting mandates, the reclassification of these products should help to alleviate the recent legal and legislative scrutiny these companies have faced.  This decision demonstrates the necessity of manufacturers to carefully monitor the legal climate in which it markets its products and to react accordingly to insure the continued hold on market share.
This blog was originally posted by Jonathan Ciottone on June 6. Click here to read the original post on Risky Business.  
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Today, the United States Supreme Court unanimously ruled in Association for Molecular Pathology v. Myriad Genetics, Inc., No. 12-398, that a naturally-occurring DNA segment (or gene) is not patent eligible even if it has been isolated from a genome (reversing the Federal Circuit). The Court also ruled that cDNA (complementary DNA) is patent eligible because it is not naturally occurring (affirming the Federal Circuit). Justice Thomas wrote the opinion for the unanimous Court, and Justice Scalia wrote a short concurrence. We have been following this case for some time (see here, here, and here).

The Court began by restating its position that laws of nature, natural phenomena, and abstract ideas are not patentable subject matter under 35 U.S.C. § 101. The question for the Court was whether Myriad’s patents claimed any new and useful composition of matter.
To answer this question, the Court looked at what Myriad claimed. With respect to the DNA claims, Myriad claimed the DNA segment it found in nature, and it did not change or alter any of the genetic information in that segment. Because it claimed something naturally found in nature, it was not patent eligible subject matter.
With respect to the cDNA claims, the Court reached a different result. The cDNA is not found in nature, but is created in the laboratory. This key difference meant that it was patent eligible subject matter. The Court did not address whether these claims met the other requirements of the patent statute, such as §§ 102, 103, and 112.
The Court was also very clear on what it was not deciding in this case. There were no method claims at issue, such as an innovative method for manipulating genes. Similarly, there were no  claims directed to how this new knowledge might be applied to achieve some useful result. The Court suggested (without holding) that those types of claims would be patent eligible. Finally, it noted that the claims were not directed to naturally occurring genetic code that had been altered to create some new and not natural DNA. The Court refused to suggest how it might address claims like those.
In the end, the Court stated that “[w]e merely hold that genes and the information they encode are not patent eligible under § 101 simply because they have been isolated from the surrounding genetic material.”

This blog was originally posted by Robert Wagner on June 13 on the PIT IP Tech Blog, An Intellectual Property and Technology Law Blog from the Pittsburgh Law Firm of Picadio Sneath Miller & Norton, P.C. Click here to see the original post. 


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On June 8, 2013, President Barack Obama and President Xi Jinping of China issued a joint statement announcing that the two countries have agreed to work together to phase down the consumption and production of hydrofluorocarbons (HFCs), a potent greenhouse gas used in refrigerators, air conditioners, and industrial applications.  While the two countries have (at least for now) sidestepped any collaborative measures to address the consumption and production of carbon dioxide (CO2) -- generally considered to be the most harmful of the anthropogenic greenhouse gases -- the Presidents’ statement asserts that a global phase down of HFCs could potentially reduce some 90 gigatons of CO2 equivalent by 2050, equal to roughly two years’ worth of current global greenhouse gas emissions.

The Presidents’ statement comes on the heels of a pair of federal court actions that likely mark the final demise of two high-profile private climate change litigations in the United States federal courts.  On May 20, 2013, the United States Supreme Court denied certiorari in the case Native Village of Kivalina v. Exxon Mobil, wherein the plaintiffs unsuccessfully sought to sue the defendants under a federal common law nuisance theory for the destruction of the village of Kivalina, Alaska by flooding allegedly caused by climate change.  And on May 14, 2013, the United States Fifth Circuit Court of Appeals affirmed dismissal on res judicata grounds of the plaintiffs’ second lawsuit in Comer v. Murphy Oil, which sought to sue several alleged greenhouse gas emitters in tort for damages caused by Hurricane Katrina.  
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The Baltimore Ravens and the National Football League are asking the Fourth Circuit Court of Appeals to reverse the December 2012 decision of a Maryland federal judge in a long-running copyright dispute with Franklin Bouchat.  The decision at issue entered an injunction that prevents the Ravens and the NFL from selling or showing clips in which the old “Flying B” logo is visible.  The injunction does allow the two entities to use the logo, but, if they do, they must first pay Bouchat royalties.  The judge set the royalties at a one-time fee of $721.65 for all future sales of highlight reels and $100 for each clip shown at future Ravens home games.

The Flying B logo, used by the Ravens from the1996 season through 1998, was allegedly a ripped off of a design that Bouchat created in 1995.  This dispute has generated nine separate lawsuits against multiple parties including the Ravens, the NFL, and NFL licensed merchants.  The current case was back before the district court on remand from the Fourth Circuit.  Originally, the district court held in favor of the Ravens and NFL, stating the use of the logo was protected by the “fair use” doctrine.  The Fourth Circuit disagreed and reversed and remanded the case to determine if an injunction could be granted.
In their recent brief submitted to the Fourth Circuit, the Ravens and NFL argue that the lower court judge went too far.  They assert that the “reasonable compensation” awarded to Bouchat was an unprecedented move by the court because Bouchat sought only an injunction, not royalties.  The Ravens and the League argue that the injunction, triggered by the nonpayment of royalties that weren’t requested, is something that has never been done in copyright law before.
Since the designer did not request royalties, the parties are also challenging the court’s calculation of compensation.  The two stated that “it is well-settled that before a court can calculate a hypothetical royalty rate…” the copyright holder (Bouchat) must first demonstrate the design’s fair market value.  Bouchat did not do this because it was not required to receive the requested injunction.  The Ravens allege that the judge came to the compensation figure by relying on “hypothetical negotiations between the parties.”
This blog was originally posted on Sports and Entertainment Law Insider on June 6. Click here to see the original post.  var addthis_pub="blogengineextensionaddthis";

The Vermont House and Senate have approved a first-in-the-nation bill that provides a legal tool for Vermont companies who face extortionate claims of patent infringement from “patent trolls.”  In brief, the legislation gives Vermont companies the ability to bring a lawsuit against patent owners who – acting in bad faith — threaten to sue, or who actually sue a Vermont company.  Gov. Peter Shumlin signed the bill into law on May 22. The anti-patent trolling bill, as passed by the Vermont House and Senate, has the designation H.299.

The legislation was spearheaded by Vermont Rep. Paul Ralston, D-Middlebury, and Vermont Chamber of Commerce President Betsy Bishop in response to concerns raised by an informal coalition of Vermont companies. These companies, many of whom are my firm’s clients,  have been threatened and injured by extortionate claims of patent infringement asserted by patent trolls.  They have experienced anxiety, frustration and a deep sense of powerlessness after receiving a demand letter from a patent troll.  My colleague Eric Poehlmann and I were instrumental in developing the legal approach that is codified in the new legislation, and I testified three times before House and Senate committees that crafted the legislation.  For the first time, Vermont companies now have a tool to help level the playing field against patent trolls.
The new law allows Vermont companies to seek recovery of their legal fees, damages and other remedies if they can show that the patent troll acted in bad faith.  Whether a company asserting a claim of patent infringement is a “patent troll” or is making a legitimate effort to enforce a patent is notoriously difficult to determine.  Only “bad faith” assertions of patent infringement violate the new Vermont legislation.  The legislation requires a court to apply a multi-factor test to decide whether the patent infringement claim was made in “bad faith.”
The factors the court may look at as an indicator of bad faith include the following:
• If the demand letter sent by the alleged patent troll does not include specific allegations of how the Vermont company’s technology infringes particular claims in the patent; • If the demand letter sent by the alleged patent troll demands that the Vermont company pay a license fee within an unreasonably short period of time; • If the demand letter sent by the alleged patent troll is deceptive; • If the alleged patent troll knew or should have known that the claim of patent infringement is meritless.
By contrast, several factors tend to show that the claim of patent infringement is legitimate, and therefore would not constitute a violation of the Vermont legislation:
• If the alleged patent troll has made a good faith effort to establish whether the target of the claim has infringed the patent and has made an effort to negotiate an appropriate remedy; • If the alleged patent troll is the inventor or a university; • If the alleged patent troll has successfully enforced the patent against another company.
In addition to the right given to Vermont companies to sue the alleged patent troll, the legislation enables the Vermont Attorney General to bring a suit against an alleged patent troll.
The legislation is highly innovative, but does not undermine the rights of patent holders to threaten and bring legitimate claims of patent infringement.  The new law asks the court to make a determination of “bad faith” based on a range of factors.  The structure of the Vermont bill is similar to federal legislation aimed at cybersquatters, enacted in the federal Anti-Cybersquatting Consumer Protection Act. The Vermont legislation is also derived from a series of federal patent decisions that recognize that a defendant in a patent infringement lawsuit can assert a counterclaim under state law if the plaintiff (the patent owner) asserts a patent infringement claim in bad faith.
Accordingly, while we expect that a patent troll sued under the Vermont law may well try to defend by counter-claiming that the Vermont legislation is pre-empted by federal patent law, we believe that a proper claim of bad faith under this legislation will survive a pre-emption challenge.
The Vermont solution is certainly not the end of the effort to curb extortionate patent claims.  A complete solution can only be achieved through changes in federal patent law. Indeed, several proposals for changing federal patent law are under consideration.  In the meantime, this Vermont law will provide a valuable tool for Vermont companies confronted with an extortionate patent claim.
I look forward to our readers’ comments and questions about this legislation.
*This blog was originally posted on May 23 by Peter Kunin for The IP Stone. Click here for the original post.  var addthis_pub="blogengineextensionaddthis";

In spite of the increasing number of spoliation claims crossing our desks, plaintiffs are not automatically entitled to sanctions every time a piece of evidence once in defendant’s control is no longer available. In Georgia, a party asserting that evidence has been spoliated must prove: (1) the destruction or failure to preserve evidence, and (2) that the evidence is necessary, (3) to contemplated or pending litigation, before they are entitled to the any sanctions against the spoliator. Baxley v. Hakiel Industries, Inc., et al., 282 Ga. 312, 313 (2007).

In determining whether spoliation sanctions are warranted, Georgia courts consider the following factors: (1) whether the non-spoliating party was prejudiced as a result of the destruction of the evidence; (2) whether the prejudice could be cured; (3) the practical importance of the evidence; (4) whether the spoliator acted in good or bad faith; and (5) the potential for abuse if expert testimony regarding the evidence is not excluded. Nat'l Grange Mut. Ins. Co. v. Hearth & Home, Inc., 2006 U.S. Dist. LEXIS 97675, *10,*11 (2006) Then, if the court has determined that there has been spoliation, and that sanctions are warranted, the court can decide what sanction to impose. Id.
By now you have probably heard of a recent spoliation case that strikes fear in the heart of every defense lawyer, insurance adjuster, and our clients. For those of you who have not, you can read the decision at Kroger v. Walters, 319 Ga. App. 52 (2012). In Walters, a slip and fall case involving a banana, the trial court struck Kroger's answer on the grounds that Kroger had spoliated evidence (a surveillance video) and acted in bad faith, thereby precluding Kroger from introducing evidence at trial to contest its negligence. While the Court partially reversed the $2.3 million verdict and remanded for a new trial on causation, damages and the claim for attorneys’ fees, it upheld the trial court’s order on spoliation based on the following:
[Evidence that] Kroger had destroyed the video from the date and time of the incident by not preserving it; that the video might have established either actual or constructive knowledge by Kroger of a foreign substance on the floor; that the Customer Incident report states that it was made in anticipation of litigation; . . .that the camera was ‘centered on the exact location of Walters' fall and not the location shown in the prior images produced by Kroger and could have clearly shown the exact conditions at the time of Walters' fall and whether Kroger employees knew or should have known of the dangerous condition in that area.’ Walters, 319 Ga. App. at 55.
Most of our cases, thankfully, do not involve conduct as egregious as was alleged in Walters and Georgia courts have shown a willingness to deny plaintiffs’ spoliation motions. For example, in the more recent Court of Appeals decision in Powers v. Piggly Wiggly, 2013 Ga. App. LEXIS 212 (March 18, 2013), Plaintiff fell while exiting the store and later filed a motion for spoliation after the store had taped over the incident in the ordinary course of business. The Court affirmed the trial court’s refusal to impose sanctions for spoliation, relying on the store manager’s timely response and follow-through, and his understandable reliance on Plaintiff’s initial indications that she was uninjured.
The Court in Powers also relied on previous decisions, noting that “[s]poliation refers to the destruction or failure to preserve evidence that is necessary to contemplated or pending litigation. …We have held that [the mere] contemplation of potential liability is not notice of potential litigation. . . . The simple fact that someone is injured in an accident, without more, is not notice that the injured party is contemplating litigation sufficient to automatically trigger the rules of spoliation.” Powers at *5.
My two cents: remind our insureds to take good care to preserve all evidence that they anticipate could be relevant to a future claim. Often, video surveillance evidence will ultimately be more helpful to us than to plaintiffs! If evidence is lost and spoliation motions are filed, vigorously defend them and know that Georgia courts will most often make the right decision. And finally, what’s good for the goose is good for the gander. I recently filed a motion for sanctions against plaintiffs who had “lost” a video taken just minutes after a catastrophic crash. Suffice it to say that they not only found the video (and abandoned their claim that certain traffic signs were not in place) but are now going to have to defend against my motion for costs and fees.
-This blog was originally posted on the Georgia Insurance Defense Lawyer blog by Susan J. Levy on May 10. Click here to read the original post. 
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Many of you may be familiar with the famous confection known as the Kinder Surprise or Kinder Egg, a toy-filled chocolate that is touted as the single largest children’s candy category in the world. The treat is manufactured by the Italian company Ferrero and has risen to nearly cult status in certain countries. Kinder Eggs are sold worldwide; however, U.S. consumers have likely only tried the confection while traveling abroad or through some other surreptitious means. The candy has been banned in the United States for decades.

This spring, though, U.S. consumers might see something similar to the Kinder Egg in their Easter baskets. Kevin Gass, one of the founders of Candy Treasure LLC located in New Jersey, has developed a safe alternative to the Kinder Egg that meets the approval of both the U.S. Food and Drug Administration (FDA) and the Consumer Product Safety Commission (CPSC).

The FDA has long viewed the practice of intermingling confectionaries with trinkets with apprehension because of the potential choking hazard it presents. In fact, Section 402(d)(1) of the Federal Food, Drug, and Cosmetic Act expressly states that a confectionery is deemed to be adulterated “if it…has partially or completely imbedded therein any nonnutritive object,” unless the nonnutritive object has a functional value and would not be injurious to health.

It is clear that the agency’s thinking on this subject has not changed. Most recently, in April 2012, the FDA reissued its import alert against Kinder Eggs and other similar products containing imbedded, non-nutritive objects, being offered for sale in the U.S. In the alert, FDA explained that “[t]he imbedded non-nutritive objects in these confectionary products may pose a public health risk as the consumer may unknowingly choke on the object.” Individuals attempting to smuggle Kinder Eggs across the border are subject to refusal of admission and could face a potential fine of $2500 per egg.

Despite these restrictions, Gass announced earlier this month that his company’s product has been approved for sale in the U.S. Candy Treasure makes a confection called the Choco Treasure, which, like the Kinder Egg, is a chocolate egg that contains kid-friendly toys, such as figurines, full decks of mini playing cards, 3D puzzles and spinning tops. So how did this New Jersey company circumvent the country’s longstanding ban on the sale of confectionery that has a partially or completely imbedded non-nutritive object?

Gass explains that the Choco Treasure candy egg has a specially designed yellow egg-shaped capsule that contains each toy. There is a plastic ridge around the capsule which physically separates the two halves of the chocolate egg. It also alerts children that there is something hidden inside the chocolate. The capsule has a button that must be pushed in order to break it apart. In addition, the inedible toys contained inside the capsule are larger than those typically found inside the European equivalent. You can see how the concept works at the company’s website here. 

This modification to the traditional Ferrero Kinder Egg is considered acceptable and is permitted for sale in the U.S. Ferrero's similar confection remains illegal, on the hand. FDA explained in a Compliance Policy Guide that if the trinkets are physically separated from candy item by some form of wrapping, this would be a sufficient safety precaution.
So this weekend you can enjoy your confection with nonnutritive objects legally. Or, if you are so inclined, you can sign the petition currently pending to lift the ban on Kinder Eggs.
-This blog was originally posted on March 27 on the Stoel Rives LLP on the Food Liability Law Blog. Click here to see the original post.  var addthis_pub="blogengineextensionaddthis";

Attorneys who practice out of the “virtual” office are becoming more common. Perhaps it is the overhead costs deterring some from shelling out for a physical address, or the ease with which one can practice entirely online, or maybe a bit of both. Whatever the reason, more and more attorneys, especially new bar admitees, are opting for the virtual office. But can an attorney practice entirely online, maintaining the client’s file online, and communicating only with the client via e-mail, all through a secure third -party vendor (i.e. cloud computing) and still be in compliance with his or her ethical obligations? This was the recent issue put before the California State Bar Standing Committee on Professional Responsibility and Conduct in Formal Opinion no. 2012-184.

The issues decided in this opinion concerned an attorney who, through the firm’s website, assigned a password to each client who could then access their individual file online and communicate with the attorney via e-mail through the portal. The attorney may never meet in person with the client, or even communicate with them via telephone. All communications were to occur solely through the secure website.
In its opinion, the Committee found that while the Rules of Professional Conduct and the Business and Professions Code do not directly place any additional or different requirements on attorneys operating out of a virtual office, specific issues are implicated in the virtual setting that may give rise to further due diligence requirements.
For example, an attorney has a duty to maintain her clients’ confidences. (Bus. & Prof. Code §6068(e)(1); Rule 3-100(A).) An attorney utilizing technology in any law practice has a duty to ensure that the duty to maintain her clients’ confidences is met, and all communications occurring via e-mail are secure. However, in the case of the virtual office, where all files are also stored, the attorney has an additional duty to ensure that the third-party vendor securing the site, information, and communications has employed policies and procedures to protect the data that at a minimum equal what the attorney would do on her own to comply with the rule. While an attorney must not be an expert in the technological field to make this determination, an attorney should at least know the basics in analyzing the vendors. Factors to be considered in assessing the vendor include the credentials of the vendor, data security, transmission of information in the cloud, ability to supervise vendor, and terms of service with the vendor. If an attorney is unable to make this assessment herself, she is required to seek an expert opinion.
Another duty that may be implicated in this situation is the duty to provide competent representation, which relies heavily upon the attorney’s ability to communicate with her clients. (Rule 3-500; see also Calvert v. State Bar (1991) 54 Cal.3d 765, 782 (“Adequate communication with clients is an integral part of competent professional performance as an attorney.”) In conducting a legal practice entirely through the virtual office, special considerations must be taken to ensure the attorney is communicating effectively with the client in order to comply with this ethical obligation. For example, from the first interview, the attorney must ensure that she takes in sufficient information from the prospective client to determine if she can provide the legal services in question. The attorney then must ensure that she communicates with the client about the case status and issues, and that the client understands the legal concepts involved sufficiently to make informed decisions. When communicating solely through e-mail, it can be difficult for an attorney to discern whether the client completely understands the issues, whereas in person the attorney would have the ability to read verbal and nonverbal clues.
Once an attorney begins representation of the client, she must keep the client reasonably informed. (Bus. & Prof. Code §6068(m) & (n); rule 3-500.) If an attorney’s communications with a client include merely posting information on a client’s portal, the attorney must take steps to ensure that the client is in fact receiving that information in a timely manner.  It may be wise for the attorney to speak with the client regarding the importance of regularly logging into the portal to check for attorney communications. However, if the attorney does not believe the client is doing this regularly and therefore not timely receiving communications, it may be necessary to communicate with the client by other means to ensure this ethical obligation is complied with.
It should always be remembered that prior to beginning this sort of virtual representation, it must be determined if the client has sufficient knowledge of technology to check his or her portal, and navigate the site for case information and communications. If this is not the case, then the attorney may not be able to provide competent representation in this environment and all representation in the virtual office must cease immediately. The attorney would thereafter be free to represent the client in a non-virtual setting.
While operating a virtual office may provide many attorneys with a more economical and efficient means of connecting with their clients and providing legal services, it also presents ethical issues that are not encountered in a traditional law office setting. Attorneys choosing to go this route must ensure that they are complying with the same rules of professional conduct, however the means of compliance may require some additional due diligence.
This blog was originally posted on Jampol Zimet's Insurance Defense Blog. Click here to see the original post. 

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With the DC Circuit having invalidated President Obama’s recess appointments to the National Labor Relations Board, employers are finding increasingly more ways to challenge the Board’s authority to act.

The Court’s decision in Noel Canning v. NLRB held that the recess appointment of three Board members in 2012 were unconstitutional. Consequently, the Court held, the Board had no authority to decide pending cases because it lacked a quorum. Nearly 1600 published and unpublished Board decisions were declared void as a result.
Employers immediately used the case to challenge the Board’s decisions, including controversial decisions widely perceived as expanding the Board’s historical authority.  As Thomson Reuters reports, employers now are using Noel Canning to challenge the authority of the Board’s regional representatives and administrative law judges, and its ability to issue subpoenas, hold hearings, and preside over union elections.
The Board, for its part, maintains that it has authority to continue operating as usual.
The Supreme Court ultimately will decide the validity of the President’s recess appointments and the numerous decisions flowing from those appointments.
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In a unanimous decision, the Supreme Court affirmed both the lower court and Federal Circuit decisions rejecting Bowman’s patent exhaustion defense relating to his harvesting of second generation soybean seeds featuring Monsanto’s patented genetic trait.

Monsanto invented and patented a genetic alteration that allows soybean seeds to survive exposure to a certain herbicide.  Monsanto sold its patented seeds to farmers, subject to a licensing agreement that only allows farmers to plant the seed for a single growing season.  Thereafter, farmers have to purchase the patented seeds anew each year for planting.  While farmers may sell the crop for consumption or processing, they are not allowed to save any of the harvested soybeans for replanting.

Bowman, a farmer, purchased seeds from an authorized Monsanto affiliate, subject to the aforementioned license for his primary soybean crop.  However, in order to save money on a later season crop, Bowman purchased soybeans intended for consumption or processing from a grain elevator and replanted them, in the hopes that some contained the genetic trait of Monsanto’s patented seeds.  After spraying the late season crop with the herbicide, some of the seeds survived, confirming Bowman’s suspicions.  Bowman then harvested this second crop and replanted the resulting seeds with Monsanto’s patented genetic trait for eight subsequent late season plantings.  Monsanto sued Bowman for patent infringement.

Bowman raised the defense of patent exhaustion, arguing that the prior authorized sale of the soybeans from a farmer to the grain elevator exhausted Monsanto’s patent rights to control what Bowman did with the soybeans and their seeds thereafter.  The Federal Circuit, however, rejected this argument, holding that he had “created a newly infringing article” by replanting the progeny of Monsanto’s genetically altered seeds. 

On appeal, the Supreme Court affirmed, holding that “the exhaustion doctrine does not enable Bowman to make additional patented soybeans without Monsanto’s permission.”  The Court confirmed its prior holding in Quanta Computer, Inc. v. LG Electronics, Inc., 553 U.S. 617, 625 (2008) that under the doctrine, “the initial authorized sale of a patented item terminates all patent rights to that item,” and reiterated that “the exhaustion doctrine is limited to the ‘particular item’ sold.” 

The Court also rejected Bowman’s arguments that he was only doing what farmers have done with seeds for years and that the soybeans’ natural ability to self-replicate or “sprout,” like any other seed, is what “made” the additional soybean replicas – not Bowman.  The Court held that Bowman’s actions in planting the seeds, spraying them with herbicide, and thereafter repeatedly harvesting them exerted control of the reproduction, constituting infringement.

Finally, the Court noted that its decision in this case is limited to the facts at hand, leaving open any further questions regarding the applicability of patent exhaustion to other self-replicating technologies. 

FORGET EXHAUSTION, ARE SELF-REPLICATING TECHNOLOGIES SUBJECT TO SECTION 101 SCRUTINY?

With the recent uncertainty over Section 101 patent eligibility requirements, one might ponder the interplay between Section 101 and self-replicating technologies. This is especially true considering last Friday’s, evenly-split Federal Circuit decision affirming that certain system, method, and media claims directed to computer software for minimizing risk in financial trades were patent ineligible (see CLS Bank International v. Alice Corporation Pty. Ltd., 2011-1301 (Fed. Cir., May 10, 2013).  But at the risk of causing even more tension over the issue, consider whether the progeny of Monsanto’s seeds should be susceptible to a Section 101 challenge. 

Specifically, should the “natural law” exception to patent eligible subject matter apply to any progeny seed carrying Monsanto’s genetic trait?  See e.g. Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289 (2012) (holding that claims directed to a method for measuring the dosage of medication in patients fell under “natural law” and were thus patent ineligible).  In theory, Monsanto’s invention altering the genetics of the seed should be limited to just that – the alteration and subsequent first production of that very seed altered by humans.  Thereafter, the seed’s ability to self-replicate is a natural occurrence – the seed now exists in nature, forever able to replicate with all its genetic traits without further human alteration/intervention (think Bowman’s sprout argument) – a replication process that normally no one would argue is patentable.

The Court’s decision in Monsanto, however, seems to put to rest any such possibility, dismissing Bowman’s attempt to raise the issue as an unsuccessful “blame the seed” argument.  The Court further acknowledged the importance of incentivizing innovation in the field by protecting such technology.  Nevertheless, others inventing self-replicating technologies should be cognizant of the Court’s statement limiting its decision to the specific facts presented in Monsanto (though only related to the issue of exhaustion) in light of the apparent expansion of Section 101 applicability.

In the meantime, perhaps Monsanto will consider inventing seeds that do not self-replicate in such a manner (seedless grapes, anyone?). 

PATENT EXHAUSTION, GOING FORWARD

The Supreme Court’s recent decisions regarding intellectual property exhaustion, including Monsanto and an unrelated copyright case, shed light on the Court’s March 25, 2013 denial of a petition for certiorari requesting the Court address the extraterritorial reach of the patent exhaustion doctrine. 

In Ninestar Tech. Co. Ltd. v. ITC, 667 F.3d 1373 (Fed. Cir. 2012), cert. denied 133 S.Ct. 1656 (2013), alleged infringer Ninestar purchased used/spent Epson ink cartridges in China, refilled them with ink, and then shipped them to the U.S. for resale.  The ITC found Ninestar’s practice to be infringing upon Epson’s patents relating to the ink cartridges.

On appeal to the Federal Circuit, Ninestar asserted the defense of patent exhaustion, arguing that its purchase of the cartridges, even if overseas, exhausted Epson’s U.S. patent rights.  The Federal Circuit, however, rejected the defense, applying Federal Circuit precedent that patent exhaustion does not apply to foreign sales of patented goods.  Ninestar petitioned the high court seeking reversal and an expansion of the patent exhaustion doctrine extraterritorially. 

While awaiting a decision on Ninestar’s petition, however, the Supreme Court issued a decision explicitly expanding the doctrine of first sale/exhaustion with respect to copyrights outside U.S. boundaries in Kirtsaeng v. John Wiley & Sons, Inc., 133 S.Ct. 1351 (2013).  Kirtsaeng, a foreign student studying in the U.S., arranged for family members in Thailand to purchase English-language textbooks and ship them to him in the U.S. for resale.  The foreign printed textbooks were much cheaper, and Kirtsaeng’s sale of the books at U.S. prices resulted in profit.  The publisher of the books sued, asserting copyright infringement.

On appeal, Kirtsaeng successfully relied on the first sale doctrine, arguing that his family members’ authorized purchases of the textbooks exhausted any U.S. copyright restriction on their resale, use, and other enjoyment of the books.  Agreeing with Kirtsaeng, the Supreme Court explicitly held that neither Congress nor the common law expressed any intent that the first sale doctrine should not apply to foreign sales of copyrighted works.

Based on Kirtsaeng, many believed the Supreme Court might grant Ninestar’s petition to address the similar issue of whether patent exhaustion applies to sales or purchases made outside the U.S., or that the Court might at least remand the case in light of Kirstaeng.  But a mere six days after the release of its decision in Kirtsaeng, the Supreme Court denied Ninestar’s petition outright.

Comparing the facts in Ninestar to Monsanto and Kirtsaeng, however, perhaps the Court was hinting that patent exhaustion was not the correct issue presented.  Specifically, Ninestar’s purchase of the spent Epson cartridges and subsequent refilling of those cartridges before resale likely removed the products from any protection under the patent exhaustion or first sale doctrines.  The refurbished cartridges were thus no longer the “particular item” (see above discussion) sold by Epson and initially purchased by Ninestar.  In effect, Ninestar’s practice created a new instance of infringement, just like Bowman’s harvesting and reproduction of seeds constituted new infringement, or unauthorized copying of Monsanto’s patented seeds.  In contrast, Kirtsaeng’s U.S. sales were mere resale of the same “particular items” initially purchased – Kirtsaeng did not run to Kinko’s/Fed Ex, so to speak, and make numerous unauthorized copies of the textbooks to sell.

Accordingly, though the issue of whether patent exhaustion reaches beyond the boundaries of the U.S. still lingers, what appears to be clear is that exhaustion will not save one from infringement liability where the accused instrumentality is not the “particular item” initially purchased. 

 

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In a decision issued on March 7, 2013, the Supreme Court of Florida reaffirmed Florida’s commitment to adherence to the economic loss rule in product liability litigation. In Tiara Condominium Association, Inc. v. Marsh & McLennan Companies, Inc. etc., et al., No. SC10-1022, the high court provides a helpful discussion of the origin and development of the economic loss rule. In summary, the economic loss rule is described as “the fundamental boundary between contract law, which is designed to enforce the expectancy interests of the parties, and tort law, which imposes a duty of reasonable care and thereby encourages citizens to avoid causing physical harm to others.” Thus, economic loss has been defined by Florida courts as “damage for inadequate value, costs of repair and replacement of the defective product, or consequent loss of profits – without any claim of personal injury or damage to other property.” In other words, economic losses are “disappointed economic expectations,” which are protected by contract law, rather than tort law.

Despite the rule’s underpinnings in the product liability context, the economic loss rule has also been applied to circumstances when the parties are in contractual privity and one party seeks to recover damages in tort for damages arising in contract.

In a product liability context, the economic loss rule was developed to protect manufacturers from liability for economic damage caused by a defective product beyond those damages provided by warranty law.  In discussing the development of economic loss rule principles, the Florida Supreme Court analyzed the California Supreme Court’s holding in Seely v. White Motor Co., 403 P.2d 145 (Cal. 1965). In Seely, the California Supreme Court held that the doctrine of strict liability in tort did not supplant causes of action for breach of express warranty.

In that case, the court was confronted with a situation in which plaintiff sought recovery for economic loss resulting from his purchase of a truck that failed to perform according to expectations. The court concluded that the strict liability doctrine was not intended to undermine the warranty provisions of sales or contract law, but was designed to govern the wholly separate and distinct problem of physical injuries caused by defective products. In East River Steamship Corp. v. Transamerica Delaval, Inc., 476 U.S. 858 (1986), the U.S. Supreme Court adopted the reasoning of Seely when it considered the issue of economic loss resulting from defective products in the context of admiralty.

According to the Supreme Court, when the damage is to the product itself, “the injury suffered – the failure of the product to function properly – is the essence of a warranty action, through which a contracting party can seek to recoup the benefit of its bargain.” Recognizing that the extending strict product liability law to cover economic damages would result in “contract law… drowning in a sea of tort,” the Supreme Court held that “the manufacturer in a commercial relationship has no duty either under a negligence or a strict products liability theory to prevent a product from injuring itself.” Thus, from the outset, the focus of the economic loss rule was directed to damages resulting from defects in the product itself.

In a Client Alert, dated July 5, 2011, Stites & Harbison lawyers John L. Tate and Cassidy R. Rosenthal wrote about the Kentucky Supreme Court’s adoption of the economic loss rule in Giddings & Lewis, Inc. v. Industrial Risk Insurers (6/18/11). The Court unanimously held that “a manufacturer in a commercial relationship has no duty under a negligence or strict products liability theory to prevent a product from injuring itself.” The Court wrote: “We believe the parties’ allocation of risk by contract should control without disturbance by the courts via product liability theories.” As discussed by Mr. Tate and Ms. Rosenthal, in Giddings & Lewis, the manufacturer sold a sophisticated machining center to an industrial concern. The parties set forth their mutual obligations in a detailed commercial contract. After seven years of continuous operation and after the contract’s express warranty expired, the machining center malfunctioned in a spectacular fashion – throwing chunks of steel weighing thousands of pounds across the factory floor. The costs to repair the machining center and to get the business up and running again were almost $3 million. After reimbursing the machine’s owner for its losses, a consortium of insurance companies asserted a subrogation claim against the machining center’s manufacturer. With the warranty expired, the insurance companies sued in negligence, strict liability, negligent misrepresentation, and fraudulent misrepresentation. What could be more tortious conduct that this?  

Applying the economic loss doctrine, the Kentucky Supreme Court agreed with Mr. Tate holding that the purchaser could not recover from the manufacturer under any tort theory. The consortium was limited to contractual remedies, all of which expired years earlier.

Despite such groundbreaking decisions, is the economic loss rule under-utilized in products liability and commercial litigation today?  Of course, if personal injury results from an alleged defect, the rule does not apply. However, not infrequently, complaints alleging damages arising from a defective product that purportedly caused economic loss sound in negligence or strict products liability. Are defense lawyers seeking dismissal of these tort claims on the basis of the economic loss rule as often as they should?
This blog was originally posted on the Toxic Tort Litigation Blog on April 3 by Bill Ruskin. Click here to see the original post. 


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DRI and The National Academy of Distinguished Neutrals announced today that they are joining forces to provide you with access to the biographies and calendars of NADN members across more than 45 states.

All DRI members will now have immediate access to NADN's live database of more than 800 top-rated, litigator approved neutrals via www.dri.org/neutrals. This new DRI Neutral Database allows defense counsel to search by state, type of civil dispute, ADR practice expertise and other criteria important to defense counsel. Given NADN's rigorous due diligence interview procedures, DRI members are assured that the neutrals resulting from any searches are considered amongst the top ADR practitioners, as rated by both defense and plaintiff's attorneys in any given state. NADN.org's live calendar functionality will also prove useful to DRI members who may wish to confirm which of the top local mediators or arbitrators is available on a preferred date.

"DRI is excited about partnering with the NADN to make the Academy's database of neutrals available to our entire membership," said John R. Kouris, DRI Executive Director. "In addition to serving as a tremendous resource, the database will provide DRI members with great value."

"We're delighted to partner with DRI in providing defense firms with access to detailed biographies of the nation's top mediators and arbitrators," said Darren Lee, Executive Director of NADN. "Since 2008, we've sought the feedback of defense and plaintiff attorneys in many states in order to identify those neutrals that litigators trust to mediate or arbitrate their own cases. This project has allowed us to compile a terrifically useful roster of proven ADR practitioners - from solo practice mediators, to panelists with respected ADR organizations. We look forward to working with DRI in the years to come, providing its members with a reliable roster of the most experienced ADR attorneys."

The DRI neutral database is for members only - another great benefit of DRI membership.  For more information on this benefit and other resources DRI offers to help grow your practice, visit www.dri.org or call our Customer Service Department at 312.795.1101.

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In today’s connected society, it’s difficult to escape the necessity of joining the world of social media networking. For attorneys, social media may provide fast, easy, and economical means of reaching clients and potential clients and advertising their services. “Victory in court today! Contact me for a free consultation,” and “Just won a million dollar verdict! Tell your friends to check me out,” are examples of common social media postings utilized by attorneys to spread the word of their success and appeal to clients. But are such postings subject to the Rules of Professional Conduct regarding advertising? This was the issue recently decided by The State Bar of California Standing Committee on Professional Responsibility and Conduct.

The Rules of Professional Conduct and the Business and Professions Code place numerous requirements and restrictions on attorney advertisements and communications. Rule 1-400 of the Rules of Professional Conduct entitled “Advertising and Solicitation” provides detailed requirements with which attorney advertising must comply. However, despite its title, it speaks in terms of “communications” rather than specifically “advertisements.”  The rule defines a “communication” as “any message or offer made…for professional employment…directed to any former, present, or prospective client.”  Furthermore, the Business and Professions Code defines an advertisement as any “communication…that solicits employment of legal services.” Therefore, when it comes to social media postings, because such postings are technically communications, they must be carefully analyzed to ensure that the rules are complied with. Despite the fact that these rules do not specifically refer to Facebook or Twitter postings, “there is little doubt that the restrictions [of the rules] indeed apply to computer-based communications.” (The State Bar of California Standing Committee on Professional Responsibility and Conduct, Formal Opinion no. 2012-186.) In light of the foregoing, it was determined by the Standing Committee that the real issue when determining whether a Facebook or Twitter posting constitutes a communication within the meaning of the rules is whether the statement “concern[s] the availability of professional employment” of an attorney. (Rule 1-400(A).)
For example, a Facebook posting stating, “Case finally won! Celebrating tonight,” does not seek employment by the attorney. Whatever the attorney’s subjective intent when making the statement, it does not constitute a communication for purposes of the rules. In contrast, the statement “Victory in court today! My client is delighted. Contact me for a free consultation,” suggests the availability of professional employment and is therefore subject to the rules. This statement furthermore violates Rule 1-400(E), Standard 2 by containing a client testimonial (“[m]y client is delighted!”) without an express disclaimer.
Any social media posting that seeks professional employment and is therefore subject to the rules must comply with the advertising requirements that apply to such communications. Rule 1-400, Standard 5 requires that the communication bears the word “advertisement” or “newsletter”, or other words to that effect. Additionally, any such communication must be retained by the attorney for two years; this rule has been specifically extended to include “electronic media” by Rule 1-400(F). 
While the social media outlets may provide personalized, informal contact with friends and business contacts, it should be remembered by all attorneys that the informal arena does not relieve the attorney of his or her ethical obligations. So, before you press “send” on your tweet, don’t forget to check your statements to ensure they are in compliance with the Rules of Professional Conduct.
*This was originally posted on May 7 on Jampol Zimet LLP’s Insurance Defense Blog. Read the original post here. 
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On April 30, 2013, the California Court of Appeal, Second Appellate District, Division Three, issued its opinion in the matter of Corenbaum v. Lampkin. The opinion addresses an evolving issue in California regarding the admissibility of medical bills when the medical provider has agreed to accept less than the full amount billed in complete payment for services.  The court categorically rejected plaintiff's arguments and held that the full amount billed for past medical services is irrelevant and therefore inadmissible to prove:

- the value of the past medical services; - the value of past pain and suffering; - the value of future medical expenses; -the value of future pain and suffering.
In addition, the amount actually accepted by the medical provider in satisfaction of its services is not hearsay and is admissible to prove all of the foregoing.   The court also held that expert witnesses may not rely on the full value bills as a basis for rendering opinions on the value of future medical services.  The decision is the latest and most significant to interpret the California Supreme Court's Howell decision. It is also very likely to be appealed to the California Supreme Court, but for now, it is the law in California.
For the full opinion, click here. 
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No good deed goes unpunished when it comes to the United States Environmental Protection Agency’s (“U.S. EPA”) efforts to regulate climate change.  Rather, U.S. EPA’s authority to regulate climate change (e.g. greenhouse gas emissions or “GHGs”) is currently being challenged by some States, while other States are simultaneously threatening to sue U.S. EPA for failing to act to address climate change.

Since the United States Supreme Court’s decision in Massachusetts v. EPA, 127 S. Ct. 1438 (2007) holding that U.S. EPA could regulate GHG emissions under the Clean Air Act, various States and industrial groups have challenged U.S. EPA’s subsequent attempts to regulate GHGs.  Most recently, on April 19, 2013, the Attorney General of Texas supported by 11 other state attorney generals, filed a petition for writ of certiorari to the United States Supreme Court claiming that U.S. EPA overreached its authority by regulating GHGs, and requested that the Court overrule its decision in Massachusetts v. EPA on the basis of the “absurd” and detrimental economic consequences of regulating GHGs under the Clean Air Act.

Ironically, on April 17, 2013, 10 different states, the District of Columbia and the City of New York jointly sent U.S. EPA a Clean Air Act Notice of Intent to Sue for U.S. EPA’s failure to promulgate rules on new power plant emissions by the regulatory deadline (the “Notice”).  Under the Clean Air Act, U.S. EPA was required to finalize the New Source Performance Standards for fossil fuel power plants and petroleum refineries by April 13, 2013.  These are contentious standards that have been the subject of millions of public comments, as they effectively bar the construction of new coal fired power plants without prohibitively expensive control technologies.  The States’ intention in filing the Notice is to force U.S. EPA to issue/finalize these rules through court order, or through an agreement with U.S. EPA.

Thus, U.S. EPA now finds itself fighting a two fronted war both trying to defend its action and inaction at the same time.  Given these conflicting positions, U.S. EPA would be justified in feeling that it just can’t win when it comes to climate change, and it appears that the more aggressive states may be the ones that start to drive change in this arena.
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As a general proposition, a defendant at trial suffers unfair prejudice when the court does not permit the jury to learn of certain facts that, if disclosed, would reveal a witness’s bias or self-interest.  If a witness with no apparent motive for lying gives strong testimony favoring one side at trial, that testimony may have a significant impact on the jury.  It is for this reason that all potential bias or self-interest of both fact and expert witnesses must be vigorously explored during pre-trial discovery.

In Polett v. Public Communications, Inc., No. 1865 EDA 2011, slip op. (Pa. Super. March 1, 2013), a verdict for a whopping for $27.6 million in the Court of Common Pleas of Philadelphia County, Civil Division, was reversed on multiple grounds. However, for purposes of this article, we focus on the finding by the Superior Court that it was error for the trial court not to permit the jury to learn that plaintiff’s treating physician, Dr. Richard Booth, an orthopedic surgeon, had been a named defendant earlier in the litigation and had entered into a tolling agreement with the plaintiffs. Under such a tolling agreement, a plaintiff can await the outcome at trial and decide afterward whether to pursue the party with whom she had entered into the tolling agreement.  Dr. Booth's best protection against being sued at a later date was to ensure that the plaintiffs made a substantial recovery at trial.  Is this self-interest?  You bet!

By way of background, in mid-2006, Zimmer, a medical device manufacturer, launched the Gender Solutions Knee, a knee replacement device designed specifically for women. Zimmer hired Public Communications, Inc. (“PCI”), a marketing firm, to produce a sales video, which would include interviews and footage of patients who had undergone successful knee replacement surgery using the device. Plaintiff Margo Polett underwent successful bilateral knee replacement surgery. On account of her good surgical outcome, her treating physician, Dr. Richard Booth, recommended Mrs. Polett to Zimmer as a candidate to participate in Zimmer’s sales video.

Plaintiffs allege that following the videotaping, which involved Mrs. Polett riding on a stationery exercise bike, her condition worsened and she underwent four further surgeries in failed attempts to repair the damage that plaintiffs alleged occurred during the filming of the promotional video.  Dr. Booth admitted in deposition that the “sword of litigation” hung suspended above his head. Substantial evidence was developed during discovery that when Dr. Booth first gave his causation testimony, which supported plaintiffs’ theory of the case, he had a strong incentive to place responsibility on the medical device manufacturer and the filming company and away from himself. Due to his clear self-interest in presenting causation testimony favorable to plaintiffs, the Superior Court determined that the defendants should have been permitted to demonstrate Dr. Booth’s partiality as a doctor who faced the possibility of litigation; who did not think he was at fault; who did not want to alienate his patient; and who squarely placed responsibility for Mrs. Polett’s injuries on the filming company and the device manufacturer.  

In so holding, the appellate court concluded that the probative value of the tolling agreement outweighed the danger of unfair prejudice. Although the use of a tolling agreement for impeachment purposes was a matter of first impression for Pennsylvania courts, other Pennsylvania courts had found that analogous agreements were admissible to show bias or prejudice. Another type of agreement between a plaintiff and a defendant is referred to as a “Mary Carter agreement." These agreements are a means of effectuating a settlement with some but not all defendants in a multi-party lawsuit.  Like the tolling agreement in Polett, evidence of a Mary Carter agreement's existence should be presented before the jury, but they are often shrouded in secrecy and never reach the light of day.

Mary Carter agreements usually incorporate the following basic elements although the terms vary from case to case:

1. the defendant in an multi-party lawsuit who enters into the agreement guarantees that the injured plaintiff  will receive a certain amount, even if the plaintiff fails to receive a judgment against that defendant or the amount of the judgment obtained is less than the guaranteed amount; 2. the agreeing defendant’s liability, which is capped, can be reduced or even eliminated by increasing a co-defendant’s liability; 3. the agreement is kept secret from the jury absent court-ordered disclosure; and 4. the agreeing defendant remains in the lawsuit as a party.   For obvious reasons, Mary Carter agreements have been challenged as being unethical. Arguably, the agreement contravenes the canons of professional conduct concerning candor and fairness; conflicts of interest; unjustified litigation; and taking technical advantage of opposing counsel. Because Mary Carter agreements are collusive agreements between parties with supposedly adverse interests, they create an inherent danger of perjury.

Moreover, these agreements mislead the jury into thinking that the agreeing defendant has interests adverse to those of the plaintiff, when, in fact, the defendant may sometimes share in the proceeds of the plaintiff’s recovery. In my view, lawyers who enter into Mary Carter agreements are walking into an ethical minefield. In New York, these agreements are considered contrary to public policy and are not permitted..

But whether the agreement in question is a tolling agreement or Mary Carter agreement, the finder of fact should be fully apprised of any relevant information that might give rise to bias or interested testimony. It is discouraging that the Polett court seemingly failed to understand this basic premise of trial fairness.

This article was originally posted on March 27 on the Toxic Tort Litigation Blog by Bill Ruskin. You can read the original post here. 
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When an insurer sues for rescission, the insured is generally responsible for omissions and misrepresentations on insurance applications. That being said, when a third party brokers the deal between the insurer and the insured, he too is potentially liable. A recent District Court case out of Northern California case illustrates how a broker can be held liable to the insured for those same omissions and misrepresentations in rescission actions.

In James River Ins. Co. v. DCMI, Inc., 2012 WL 2873763 (N.D. Cal. July 12, 2012), James River Insurance Company brought suit against DCMI, a construction contractor, to rescind the insurance contract taken out. The insurer alleged that DCMI made material omissions and/or misrepresentations about prior claims or threatened litigation against them. DCMI, who used a broker, Powers & Company, to find James River Insurance Company, argued that they were not responsible for the omissions.   DCMI cross-filed to include Powers & Company as a defendant in the suit. Powers & Company filed out the insurance application on behalf of DCMI. DCMI alleged that in doing so the broker neglected to explain material terms and used a pre-filled form. The cross-filing complained of breach of contract, negligence, and breach of duty. Powers & Company moved to dismiss the suit against them for a failure to state a claim regarding all three counts. The trial court denied the motion in relevant part.   The court held that the breach of contract and negligence cause of actions were proper. In doing so, the court explained that under California law, an insurance broker has the general duties found in any agency relationship. This includes the duty to use reasonable care, diligence, and judgment in procuring the requested insurance coverage. Failing to properly fill out an application and explain material terms is a breach of said duty—a breach that can be an element within either cause of action.   In ruling on the first claim, the court held that the use of a pre-filed form and then failing to explain key terms to a client could amount to breach of contract in a broker-relationship. The court explained that a breach of contract claim requires the showing of four elements:  (1) the existence of a contract; (2) the plaintiff’s performance under the contract; (3) that the defendant breached the contract; and (4) the breach resulted in damage to the plaintiff. DCMI’s allegation of an arrangement and then the incorrectly completion of the forms was enough to survive a motion to dismiss.   On the second claim, the court held that although an insured bears the responsibility of omissions in application as to an insurer, the broker can still be liable to the insured. A negligence claim requires the showing of three elements: (1) breach of duty; (2) causation; and (3) damages. The court acknowledged that when an insurer seeks to rescind the insured bears the responsibility of the application. However, the court explained that nothing prevents the insured from then recovering from the broker where the broker is liable. In this case, the use of a pre-filled application and then failing to explain key terms could amount to negligence.   This case is significant because it shows just how far insurance broker liability can go. Even where the law already holds the insured responsible for rescission actions, a broker may be joined to the suit for his own negligence or breach arising out of the contract.

This was originally posted on the Jampol Zimet LLP’s Insurance Defense blog. Read the original post here.



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Recently, the U.S. District Court for the Western District of Louisiana issued the Benoit v. Neustrom opinion. 2013 U.S. Dist. LEXIS 55971 (decided April 17, 2013). Here, the parties sought approval that CMS' future interest could be fully satisfied by funding an MSA for less than full value of the Claimant's future medicals. The parties agreed to resolve a liability claim for a gross amount of $100,000. Defendant had an MSA allocation prepared, which concluded that the Claimant would be expected to incur between $277,758.62 to $333,267.02 in future injury-related care otherwise covered by Medicare. Additionally, Medicare had made conditional payments on the Claimant’s behalf totaling $2,777.88. 

The Court, having previous experience addressing MSA related questions, looked to the 11th Circuit decision in Bradley v. Sebelius for guidance. 621 F.3d 1330 (11th Cir. 2010).  Bradley was an allocation case under the MSP with respect to conditional payments, holding that CMS must respect a judicial allocation based on the merits of the case. Applying the logic that CMS’ recovery can be fully satisfied by identifying that portion of an award which is intended to compensate a Claimant for medical expenses (past and future), the Court agreed with the parties in that an MSA did not need to be fully funded to satisfy Medicare’s interest.  It did, however, disagree with respect to the dollar amount of the MSA. 
Instead of following a strict pro rata approach advocated by the Claimant, the Court instead calculated a ratio of the net settlement proceeds (after costs of procurement and conditional payments by CMS had been subtracted from the gross award of $100,000) against the mean MSA figure. That ratio of 18.2% was then applied to the net proceeds, leading the Court to conclude that an MSA totaling $10,138 would be an appropriate amount with which to satisfy Medicare’s future interest.
This case is yet another example in 2013 (building on recent cases such as Early and Sterrett) depicting that MSA issues cannot be ignored simply because the claim being resolved is a liability claim instead of a workers’ compensation claim.  While the issue must be addressed, the opinions also display that a more sophisticated methodology must be applied which takes into account the inherent differences between liability and workers’ compensation claims.  As such, MSAs in the liability context should rarely be funded for the full value of a claimant’s overall future costs of care otherwise covered by Medicare (as the claimant did not recovery 100 cents on the dollar for such damages).  In applying the allocation logic previously utilized in Bradley for conditional payments, the Court has provided a reasonable and logical path for parties to follow in the short term, with CMS anticipated to provide guidance in 2013 in the form of a Notice of Proposed Rulemaking.  
The DRI MSP Task Force will continue to follow these developments and provide you with practical means for incorporating this guidance into your practice. var addthis_pub="blogengineextensionaddthis";

The U.S. Supreme Court decided in Genesis Healthcare Corp. v. Symczyk, 569 U.S. ___ (2013), that a sufficient Rule 68 Offer of Judgment issued to a lone plaintiff in an FLSA collective action prior conditional class certification and joinder of opt-in plaintiffs moots the entire claim – even if the plaintiff rejects the Offer.  The 5-4 opinion overruled the Third Circuit Court of Appeal, which held that such a mechanism frustrated the purpose of the FLSA’s collective action provision by allowing a defendant to “pick off” the named plaintiff prior to the conditional certification stage.

   Procedural History
The underlying case involved a nurse suing for overtime violations under the Fair Labor Standards Act, 29 U.S.C. § 201, et seq., when her employer automatically deducted 30 minutes from her work day for a mandatory meal period even when she worked through it.  Symczyk sued on behalf of herself and all those similarly situated.  Concurrently with its answer, Genesis served a Rule 68 offer of judgment for $7,500 plus reasonable attorney’s fees, costs and expenses to be determined by the Court, an amount which fully satisfied Symczyk’s damages and included a reasonable attorney’s fee.  Plaintiff did not accept the offer during the prescribed 10-day time period, and a motion to dismiss the case for lack of subject matter jurisdiction followed.  The District Court granted the motion, holding that the employer’s offer of judgment fully satisfied plaintiff’s individual claim and thus mooted the lawsuit because no other class members had opted in.    On appeal, the Third Circuit reversed.  Symczyk v. Genesis Healthcare Corp., 656 F. 3d 189 (3d Cir. 2011).  The appellate court agreed that plaintiff’s individual claim was moot, but not the collective action.  The Third Circuit held that calculated attempts to pick off named plaintiffs with Rule 68 offers of judgment before conditional certification could short circuit the process and thereby frustrate the goals of collective actions.  The case was remanded to permit Symczyk to seek conditional class certification, which would relate back to the date of filing of the Complaint for statute of limitations purposes.  
Supreme Court Opinion
The U.S. Supreme Court reversed.  Justice Clarence Thomas, writing for the majority, held that straightforward “case or controversy” principles governed the Court’s decision.  Justice Thomas first addressed plaintiff’s argument that her individual claim was not moot because she did not accept the offer of judgment.  The majority held that plaintiff’s argument was not properly before the Court, as the Third Circuit affirmed the trial court on this point and no cross-petition to the Supreme Court was filed.  Accordingly, the only issue before the Court was whether the collective action survived in light of the lack of any remaining plaintiffs.  Distinguishing several decisions based on Federal Rule 23 class actions, the Court held that no individuals other than plaintiff had a stake in the litigation at the time of the offer of judgment.  The majority similarly rejected arguments relating to the purpose of the FLSA’s collective action provision.
Speaking for the minority, Justice Elena Kagan wrote a sarcastic but effective opinion, stepping through the door left open by the majority’s refusal to address the question of whether plaintiff’s refusal to accept the offer of judgment mooted her claim.  The dissent questioned how an unaccepted offer of judgment could be deemed a satisfied claim, especially since the plaintiff took nothing in the action.    Impact
The key question following Symczyk is its scope.  Specifically, will it be read to apply only where the employee fails to argue that their individual claim is not moot?  In a footnote, Justice Thomas noted four appellate opinions that either declared the individual claims moot in similar circumstances or authorized lower courts to enter judgment for the plaintiff where an offer of judgment provided complete relief.  See Weiss v. Regal Collections, 385 F. 3d 337, 340 (3d Cir. 2004); Griese v. Household Bank (Ill.), N.A., 176 F. 3d 1012, 1015 (7th Cir. 1999); O’Brien v. Ed Donnelly Enters., Inc., 575 F. 3d 567, 575 (6th Cir. 2009); McCauley v. Trans Union, LLC, 402 F. 3d 340, 342 (2d Cir. 2005).  Symczyk’s impact in these circuits is significant.  In other circuits, the impact will largely depend on how each circuit resolves the mootness argument.  
If other circuits join the position that a sufficient offer of judgment moots an individual claim, Symczyk provides a strategic pawn in putative FLSA collective actions previously rejected by multiple courts.  Employers immediately could pick off the named plaintiff and thwart the collective action process, forcing the plaintiff’s attorney either to 1) accept an attorney’s fee on a single claim and move on; 2) attempt to locate a new named plaintiff to file a new suit against the employer; or 3) make a broader strategical adjustment, such as to file suit exclusively under state wage and hour laws which typically mirror the FLSA, and utilize state law class action procedures.    Advising the Client
Employment attorneys should be cautious in advising their corporate clients about Symcyzk’s impact.  The majority’s failure to address whether Symcyzk’s individual claim was moot leaves lower courts free to address the individual mootness issue on pre-Symcyzk precedent.  Even if a motion to dismiss is successful, a fellow employee’s claim may follow close behind.   Still, there appears to be little downside serving a Rule 68 Offer of Judgment.  Of course, clients should be advised that if the offer is accepted, a judgment will be entered against it.    Spencer Silverglate is the Managing Partner and co-founder of Clarke Silverglate, P.A., in Miami, Florida, with an active trial practice specializing in employment and commercial litigation.  Craig Salner is a Partner at Clarke Silverglate, also specializing in employment and commercial litigation. var addthis_pub="blogengineextensionaddthis";