• Debt Collectors Who Can Sue But Not Be Sued

    Some companies in the collection industry have discovered a way to sue for payment of debts and not ever face the debtors. Companies such as Midland Funding, Encore, and Square-Two purchase debt from creditors. The large pools of uncollected (and perhaps deemed uncollectible debt) do not include much documentation. A Federal Trade Commission study found that only 12% of the debts purchased by debt buyers have documentation. Jessica Silver-Greenberg and Michael Corkery, “Creditors Sue, Then Block Use of Courts to Fight Back,” New York Times, December 23, 2015, p. A1.

    The debt buyers follow a strategy of simply filing suit against the debtors. In some cases, the statute of limitations has expired, in others the debt has actually been repaid. And part of the strategy is to flood the state courts with suits, overwhelming them with sheer volume. For example, in 2014, there were 20,000 collection suits filed in Maryland and 67,000 in New York. Debtors rarely respond to the suits and the result is that the collection firms win 95% of those cases.

    When the debtors have their bank accounts attached or liens filed against their homes, they realize that a debt that was expired or paid has been litigated. Debtors then band together to file suits against the creditors or collection agencies. Those suits are, however, dismissed because the debtors had arbitration clauses in their credit agreement and those clause not only require them to pursue their claims through arbitration but prohibit class actions. Individual debtors, who do not have the resources to hire lawyers alone, are required to fight the debt issue one by one.

    Some state attorneys general have caught on to the practice and are challenging the collectors and the suits. For example, Midland Funding paid a $1.2 million settlement with the state of Maryland for engaging in unlicensed collection in that state. Midland maintains that it is properly licensed. However, judges have not recognized that defense in the collector suits and have still dismissed debtor suits for unlawful collection and required them to go to arbitration.

    Consumer lawyers continue to work on these types of cases because a review of the documentation for the debts reveals actual rights. For example, in some credit agreements, collectors are prohibited from using arbitration for collection. In addition, some of the agreements between the original creditor and the collector purchasers also prohibit the collection companies from using arbitration. Reading the paperwork underlying the debts and the sale of the debts is critical.

    There are podcasts available in which lawyers discuss the arbitration dismissal tactic. They refer to the arbitration requirement as the “silver bullet” for successful collection.

    Spokespersons for the collection companies clarified their actions, indicating that litigation is always a last resort in collection. Encore’s spokesperson says that litigation is used in only 5% of its collection cases.

    The Federal Trade Commission is continuing its investigation into the collection industry and its practices. At the state level, the focus is on the litigation and licensing. The “silver bullet” may also earn some legislative attention as consumer complaints rise. For debtors, there are two important lessons: Always respond to notice of suits and read your paperwork from the creditor to be sure you know your rights on litigation and arbitration. There are also sites that provide debtors with advice in exercising their arbitration rights to avoid the collector suits.


    Explain the loophole the collection agencies have found.

    What type of regulatory or legislative action might be taken to deal with the arbitration dismissal issue?

  • “Auntie ‘Maim’” and the Suit Against Her Nephew for the Hug That Broke Her Wrist

    Jennifer Connell attended her nephew’s 8th birthday party in 2011. Technically, Ms. Connell is not Sean Tarala’s aunt but a first cousin once removed (Ms. Connell is a cousin to Michael Tarala, Sean’s father). Sean has just always called her his aunt. When Ms. Connell arrived at the party, Sean was so excited to see her that he jumped into her arms, causing her to fall and break her wrist. She has had two surgeries on the wrist and faces another.

    Ms. Connell filed suit against her nephew and his father, Michael Tarala who was the owner of the home where the party was held. Ms. Connell’s lawyers insisted that the lawsuit was not one against Michael and his father, but a question of whether there was liability on the part of the property owner for the injury.

    The insurance company did not believe that it was liable and refused to pay the $127,000 in medical bills Ms. Connell experienced. Prior to trial, the insurance company offered her $1 to settle the case. The company’s refusal to pay was based on its belief that the homeowner (Mr. Tarala) had not done anything wrong, and that Sean had not behaved unreasonably. .

    Going back to the basics of landowner liability, there are three types of folks who enter your property: trespassers, licensees, and invitees. The lowest level of duty is to trespassers, and the obligation of landowners is to not intentionally injure the trespasser (i.e., no man-traps set up in advance to catch intruders). Licensees include social guests, and as originally established, were owed a higher duty of care – a duty to not intentionally injure as well as a duty to warn licensees of any defects they are aware of on the property that could injure them. The highest duty is owed to invitees, a duty that encompasses not just the warning but the duty to fix defects and prevent injuries. Invitees include repair personnel in homes and customers in businesses.

    Over the years the distinction between the lesser duty to licensees and that of invitees has blurred with social guests able to recover more often for the failure of landowners to fix defects and prevent injury. Some states even classify social guests as invitees.

    The burden of proof at the trial was one of Ms. Connell showing that Sean presented some kind of danger that Mr. Tarala was aware of and should have taken steps to control. The jury was fairly clear that Sean did not engage in unreasonable behavior for an 8-year-old. In 25 minutes of deliberations the jury found for Mr. Tarala and Sean. Sean presented a particularly sympathetic figure during the trial because of his age and also because his mother had died suddenly in 2013. The optics of the case were not in Ms. Connell’s favor on many levels. Ms. Connell appeared with Sean on the Today show and both expressed love for each other and that the suit was simply for insurance recovery.  

    Insurance companies are required to pay only when there is homeowner liability. The purpose of the trial was to determine whether Mr. Tarala had any liability for the injury to Ms. Connell’s wrist. Without a breach of duty, there is no liability. Just because someone is injured does not mean that there is a right of recovery.


    Explain the duties of landowners to guests.

    What factors worked against recovery in this case?

  • Judge Removed for Crude Emails; Personal Notes on Work Computers Are Not Private


     Some people think judges are above the law. Not true. Here’s proof. Also, here’s why you should not use your computer at work to transmit private communications. As this article evidences, your employer can examine them and impose discipline, including termination, based on the content.

    In most but not all states, the state Supreme Court is the highest court and has exclusively appellate jurisdiction. Appeals from those state supreme courts are taking directly to the United States Supreme Court (subject to receiving certiorari, authorization by the high court to argue a case before it). A judge on the Pennsylvania Supreme Court, Judge Michael Eakin, has been suspended for sending and receiving emails containing pornography, and jokes mocking minorities, women, gays and lesbians, feminists, drunken college girls, and in one circumstance, nuns. Examples include mocking Muslim children as suicide bombers,calling Mexicans “beaners, (a derogatory slang term that refers to Mexicans) , and joking about domestic assault victims. Some included photos of nude or topless women and “chauvinistic” emails about visiting strip clubs on annual golf trips. The communications also included exchanges that made lewd references to two of the judge’s female staff members.

    Every state has a judicial disciplinary tribunal that investigates allegations of misconduct by judges. In Pennsylvania it is called the Court of Judicial Discipline. A three-judge panel of that court (a group of three judges who sit together on a case, in contrast to single-judge situations)   determined that the judge’s crude exchanges “tainted the Pennsylvania judiciary in the eyes of the public.” The panel further found that Judge Eakin had “detracted from the dignity” of his position, and “engaged in conduct so extreme that it brought the judicial office into disrepute.”  

    As a result, he was suspended until a trial is held to determine if his actions in fact violated judicial conduct rules, a set of regulations that govern the conduct of judges while they are serving in their official capacity. A proven violation of those rules typically leads to punitive action including the possibility of removal from office. The trial is expected to occur early in 2016. The judge’s suspension pending trial is with pay. The judge’s annual salary is $203,409.

    The off-color emails were sent and received from Judge Eakin’s private email account and not his court online address, but he made two serious mistakes in addition to engaging the communications. First, he used the court’s computer, and second, the communications were exchanged with a friend who was a state employee and used his work email address. It was this latter circumstance that led to the disclosure of the notes.

    An earlier, initial review by the Court of Judicial Discipline determined that the emails were mostly “unremarkable” and cleared the judge of wrongdoing. But thereafter it was discovered that the attorney for the initial panel, who assisted in the initial investigation, was a friend of Judge Eakin and had worked on his retention campaign in 2011 (unopposed judicial elections in which voters decide whether a judge should remain in office) . Criticism grew about the apparent conflict of interest and a second review was undertaken, leading to the misconduct charges.

    The panel’s accusations do not suggest that the judge’s in-court opinions were tainted with bias. And he insisted they were based on “thoughtful reasoning and facts, not biases.”

    The three-judge panel stated that the suspension should not be viewed as a guilty verdict. Guilt or innocence will be decided at the trial.

    For more information, click here.


    1) Should the judge be removed from office?  Why or why not?

    2)  Identify the conflict of interest created by the attorney who represented the first panel.  


  • The Band “Slants, ” the Washington Redskins, and Trademark Law

    Simon Tam, the front man for the rock band, The Slants, wanted to register the band’s name with the U.S. Patent and Trademark Office. The examiner denied the registration because of a 70-year-old provision in the Lanham Act (15 U.S.C. §1052) that prohibited the registration of names and marks that are disparaging, “immoral,” or “scandalous.” Mr. Tam appealed the denial, and he had some fairly high-powered amici (friends of the court) on his side, including the Washington Redskins, themselves in a battle of survival for their trademark.

    Initially, the federal court of appeals for the federal circuit upheld the denial by the U.S. Patent and Trademark office. However, upon rehearing, the court held on December 22, 2015, that the trade name should not have been denied. In re Tam, 785 F.3d 567 (Fed. Cir. 2015) and In re Tam, 2015 WL 9287035 (Fed. Cir. 2015)

    The argument that Mr. Tam made successfully was that the Lanham restriction was a violation of the First Amendment. In a 2-1 decision, the court held that, “. . . the First Amendment forbids government regulators to deny registration because they find the speech likely to offend others.” The court held that the First Amendment protects speech “even when the speech inflicts great pain.” Some examples of the types of registrations cited by the court as painful, but protected, included:

    • “Stop the Islamisation of America”

    • “Mormon Whiskey”

    • “Khoran” as a name for a wine

    • “Christian Prostitute”

    • “Amoshhomo”

    • “Ride Hard Retard”

    • “Have you heard that Satan is a Republican?”

    • “Democrats shouldn’t breed”

    • “Republicans shouldn’t breed”

    The government could appeal the case to the U.S. Supreme Court. There are other cases, such as that of the Washington Redskins, pending that have the First Amendment challenge at the heart of their cases. Five Native Americans brought the suit asking for cancelation of the “redskins” name and symbol. Pro-Football, Inc. v. Blackhorse, 2015 WL 4096277 (E.D. Va. 2015). The lower court canceled the trademark. The Washington Redskins have appealed.

    Because the Federal Circuit is the circuit that hears the challenges to registration denials, the court’s decision carries great weight. The U.S. Supreme court would next to grant certiorari in order to clear up the conflicts in the other circuit courts with this decision.


    Explain the conflicts in the Lanham Act with the First Amendment.

    What does the case teach us about judicial challenges to federal regulatory holdings?

  • Fired Coach Sues USC; Alcoholism and the Americans with Disabilities Act



    Football is big at the University of Southern California. The head coach, Steve Sarkisian, breathed rarified air. That is, until he showed up intoxicated at a team practice, and again at an alumni event. Following that second incident, Sarkisian publicly apologized for “my behavior and my inappropriate language.” The next day he entered an in-patient treatment facility. Also on that day he was fired by the college.

    The coach has now begun a lawsuit against the school seeking $30 million. He claims the school wrongfully terminated him, breached his contract, and discriminated against him on the basis of a disability, alcoholism. His claim for damages includes $12.6 million in salary for the remainder of his contract. Presumably what he really wants is his job back, called in law reinstatement.

    The gist of the lawsuit is that he is an alcoholic, his alcoholism is a disability, and his firing violated the Americans with Disabilities Act (ADA). The complaint, lengthy at 31 pages, also alleges that the stress of the job contributed to the alcoholism. The coach argues the university was obligated to accommodate his disability by giving him time off to get treatment.

    According to the complaint, Sarkisian has completed rehabilitation and now is “sober and ready to return to coaching.” The university’s attorney responded to the lawsuit by saying the school will “vigorously” defend itself. The lawyer asserted, “The record will show that Mr. Sarkisian repeatedly denied to university officials that he had a problem with alcohol, never asked for time off to get help, and resisted university efforts to provide him with help.”

    Disability law is complicated as it relates to alcohol, and also drugs. The ADA  protects "qualified workers with a disability." A qualified worker is someone who is able to perform the essential functions (fundamental duties) of the job either with or without reasonable accommodations ( modifications to a job or work site that enable a qualified worker with a disability to satisfy the obligations of a job) .If an employee cannot fulfill the main job requirements, he is not protected under the ADA.

    The word disability is defined by the statute as a physical or mental impairment that substantially limits  one or more major like activities.  Examples of major life activities include working, and also performing manual tasks, seeing, hearing, eating, walking, standing, lifting, speaking, breathing, learning, and communicating. 

    A plaintiff claiming alcoholism as a disability must prove that the condition substantially limits one or more of these major life activities. That will be the coach’s first hurdle in the lawsuit. If Sarkisian is able to prove that the alcoholism is a disability, the relevant law includes the following.

    An alcoholic employee is not excused from adequate performance of his work responsibilities.  If his work is unsatisfactory , or he is abusing alcohol on the job, the employer can discipline, including termination.   An employer however must treat the alcoholic employee like other subpar employees.  The employer cannot discipline the former more harshly than the latter.

    An employer is not required to permit the addicted worker to arrive late to work due to a hangover, but  is required to accommodate the employee's appointments for treatment by permitting him to adjust his schedule, unless to do so creates an undue hardship (significant difficulty or expense) to the employer.  

    So, arguably the fact that the coach was twice drunk on the job is sufficient grounds to discipline him, including termination. If he had not been drunk or if the school wanted to retain him, the university would have to accommodate his alcohol treatment which may mean providing flexibility in his schedule to permit him to attend appointments. But when the coach leaves mid-season for in-patient treatment, rendering him unavailable to do the job, the college will have a good argument that a lengthy absence constitutes an undue hardship. Watch for rulings from the judge as the case unfolds.

    For more information, click here.


    Should alcohol be a disability under the ADA?  Why or why not?


  • Caterpillar Supplier Wins $74 Million from Caterpillar for Stolen Trade Secrets

    Miller UK Ltd. designed a coupler in the 1990s, known as the Bug, a device that allowed operators of excavators to change scoops and other attachments without having to get out of the cabs of their machines. First marketed in 1999, the coupler took the small British firm to international recognition. The device was so popular that Miller UK’s sales grew exponentially. Caterpillar became its largest customer.

     Miller UK expanded its production in Newcastle, England and entered into a joint venture in China in order to obtain production capacity there. Miller UK undertook the expansion of its business based on assurances that Caterpillar would remain its major customer. James R. Hagerty, “Caterpillar Supplier Wins Lawsuit,” Wall Street Journal, December 22, 2015, p. B2.

     However, being Miller UK’s biggest customer meant that Miller UK felt the need to respond to Caterpillar requests. Caterpillar began to ask Miller UK for confidential information about the coupler product. Miller UK trusted the company and gave Caterpillar the coupler design information. In 2008, Caterpillar told Miller UK that it was developing its own coupler and would no longer be purchasing the couplers.

    Miller UK filed suit, but the company was so devastated by the loss of Caterpillar’s business that it had to recruit investors for its suit in order to finance the litigation. Mattathias Schwartz, “Should You Be Allowed to Invest in a Lawsuit?” New York Times Magazine, Oct. 22, 2015.

    Testimony at the trial by a Caterpillar engineer was a critical point of the trial. A lawyer for Miller UK asked, “You took the design information that was in the Miller model and then you designed your work on top of it?” The engineer responded, “That’s correct, sir.”

    The design of the coupler would have been a trade secret. However, a trade secret requires that the information remain secret, with access tightly controlled. That Miller UK turned over the design plans and other information about the coupler was problematic, but Miller UK executives testified that they were so thrilled to be working with Caterpillar that they turned over the information, trusting fully in Caterpillar’s honesty. Caterpillar ordered 10,000 couplers per year from Miller. Caterpillar orders were 28% of Miller’s business and an even larger share of its profits.

    The jury verdict means that the jurors were more swayed by Miller UK’s argument than they were by Caterpillar’s defense that Miller UK volunteered the design information.

    Once the Caterpillar contract ended, Miller UK had to lay off ¾ of its work force, about 400 people. The Chinese joint venture partner also had to be compensated for the losses in gearing up those facilities. Miller went from 8 million pounds per year in earnings to a 1 million pound loss. Total damages awarded Miller UK were $74 million. Those who financed the litigation will need to be paid, a figure that is generally 20 to 60% of damages. Caterpillar is appealing the case.

    The damages for taking trade secrets are generally tied to the economic losses experienced as a result of the use of the trade secrets. In this case, the layoffs and damages for factory expansion were established easily.

    The case is an interesting one for suppliers who find themselves almost captive to a single customer. Efforts to please the large customer sometimes require meeting demands that would not be permitted with a larger customer base. Vendors in such situation should have contract provisions on the sharing of confidential or proprietary information related to their products and/or sales. The large buyers should exercise caution in demanding information and should establish a paper trail for permissive access and use.


     Is there anything Miler UK could have done to provide itself with better protection for its product?

     Explain why Miller UK was so willing to turn over the design to Caterpillar.

  • Pharma CEO Who Raised Prices on Drug Almost 5000% Is Arrested for Securities Fraud

    Martin Shkreli, 32, the CEO of Turing Pharmaceuticals who, In September 2015, raised the price of the company’s drug, Daraprim, from $13.50 per pill to $750 per pill, was arrested on securities fraud charges on December 16, 2015. He was freed on a $5 million bail bond. He was arrested at 6:30 AM in his apartment and entered a not guilty plea to charges that he was running a Ponzi scheme at his former company. The full indictment appears below.


    Mr. Shkreli founded MSMB Capital and had investors place $3 million with that firm The indictment alleges that he spent the money and, at one point, the fund had only $310. When MSMB Capital collapsed, he founded MSMB Healthcare with $5 million from 13 total investors. According to the indictment, instead of the 1% management fee that he had promised investors, he took that as well as a 20% profit incentive for compensation. MSMB Healthcare then invested in Retrophin, another pharma company that had no products or assets. Retrophin was founded for the purpose of acquiring older pharmaceuticals that would then be sold for higher prices, which was the strategy with Daraprim.

    There is litigation from investors over the Retrophin investment. Mr. Shkreli has indicated that he Is innocent and that what should be a civil litigation matter has turned into a government action. He insists that investors made money, and that he would prevail in both the civil litigation and the government criminal case. Lawyer Evan Greebel was also charged in the indictment. Mr. Shkreli has offered statements in response to the civil action on a pharma blog:

    Hi Guys,

    This is Martin Shkreli. The 8-k is completely false, untrue at best and defamatory at worst. I am evaluating my options to respond. Every transaction I've ever made at Retrophin was done with outside counsel's blessing (I have the bills to prove it), board approval and made good corporate sense. I took Retrophin from an idea to a $500 million public company in 3 years--and I had a lot of help along the way.

    I am happy to explain any transaction. I am confident that anyone who looked into the transactions would find them perfectly legal, reasonable and quite intelligent (the results of the company speak for themselves). I welcome any scrutiny by any party and have faith any investigation will be resolved without issue--it would not be the first time and it won't be the last that my moves have been looked at--this is not my first rodeo and I have too many scars to do something stupid.

    By the way, it is nice to see the rational community here, and I will enjoy joining some of the discourse here on various companies and drugs.

    Martin Shkreli


    It seems that part of his defense could be to throw the indicted lawyer under the bus.

    There will be congressional hearings on his pricing of pharmaceuticals. When presidential candidate Hillary Clinton asked that he lower prices on drugs, he tweeted, “lol.” Presidential candidate Bernie Sanders returned Mr. Shkreli’s $2,700 campaign contribution. At a recent panel discussion on the pharma industry, Mr. Shkreli indicated that his owed a duty to his investors to maximize profits and that is why he engages in acquiring pharmas and then raising the prices of their drugs, drugs that are usually important in treating infections in very ill patients. For example, Daraprim is used to fight infections in cancer patients and patients with HIV.

    The indictment alleges that Mr. Shkreli used his company as a piggy bank, recruiting new investors to cover his spending and falsifying returns statements to keep the investors believing. In early December 2015, Mr. Shkreli purchased the only copy of Wu-Tang Chan’s album, “Once Upon a Time in Shaolin,” for $2 million. The FBI has promised to seize all assets to prevent further losses.


    Explain Mr. Shkreli’s business model and approach to returns for investors.

    What is the basis of the federal charges against him?

  • Christmas Contract Breaches and Product Problems

    It’s that time of year when the contract breaches are more acute because time is of the essence. And defective products spell disaster for the companies and the kiddos. In 2013, UPS experienced the wrath of consumers for late deliveries of packages. Amazon offered gift cards and refunds and UPS became a target for investigation of various delivery issues, including falsification of delivery times so as to avoid penalties for late delivery. Contract performance and damages become more acute because time is of the essence for deliveries, retailers, and consumers.

    This Christmas season brings us the flaming hoverboards. Swagway, the top seller of two-wheeled scooters or hoverboards, has had Amazon request information from it to  establish the safety of the hoverboards. This product could be classified as inherently dangerous..

     Amazon has begun pulling certain of the hoverboards from its site. The Consumer Product Safety Commission (CPSC) has received 11 reports of fires that involved hoverboards. The CPSC has made one recommendation: don’t charge the hoverboards before wrapping them. The CPSC has also warned that there are counterfeit boards out there with fake batteries and other problems that might be responsible for some of the safety problems. Brett Molina and Elizabeth Weise, “Amazon Stops Selling Some Hoverboards Over Safety,’ USA Today, December 15, 2015, p. 1A. “Some of the incidents that we’ve seen are the battery, as it’s charging, will shoot out from the device, or the device itself will catch fire when it’s in use,” said Claire Marsalis with the Tennessee State Fire Marshal’s Office. Read more: http://www.wsmv.com/story/30718583/safety-officials-share-warnings-about-hoverboards#ixzz3ug8zmKk5

    With this being one of the top gifts for 2015, the lack of a supply and the refusal to sell will result in investigations and litigation as well as demands for refunds on hoverboards that have burst into flames.

    Currently, American, Delta, Southwest, and United have banished hoverboards from flights because the devices use lithium batteries, and, therefore, makes them dangerous to transport. Delta has indicated that the batteries can spontaneously overheat and result in fires. Carrying hoverboards as gifts on those flights to family and friends is now a problem.

    Snapfish is feeling the wrath of its customers because it experienced “unprecedented volume” in Christmas card orders and, as a result, has been unable to fulfill many of the orders in time for the holidays. Matthew Diebel, “Photo Service Faces Season’s Beratings From Customers,” USA Today, December 16, 2015, p. 1A. The company has simply promised delivery “as soon as possible.”

    Christmas presents a unique challenge for businesses because the schedule is unforgiving. If retailers promise delivery by a date certain, the failure to deliver is a breach of contract. Some retailers limit the damages in the fine print on their website or among the “I agree to these terms” click spot. However, the legalities are the least of their problems in the Christmas time frame. Customers are particularly irate when Christmas is ruined. The legal damages may not be their priority. They take to social media sites and post their experiences, something that catches the attention of potential customers and affects future business.

    Retailers and delivery companies need preliminary planning in order to avoid the non-legal damage fall-out to reputation and trust. Plan B is necessary during the peak holiday periods. For example, Snapfish may need to book extra printing facilities or have provisions for expedited shipping should they get behind on orders. For delivery services, extra vans, trucks, and employees are in order to be prepared for the Christmas rush.

    Companies with new products should have their introduction well before the Christmas rush so that any problems with use, charging, and defects can be ironed out before the rush. With the hoverboards, there is no way to recoup lost Christmas sales or even get information out in order to explain issues, correct designs, or reverse the consumer fears that come with each story.

    Preparation, anticipation, and extra costs prevent the contract disputes of Christmas.


    Explain the types of Christmas contract breaches.

    Discuss the legal and other forms of damages companies may experience when there are delays or product problems.

  • Mens Rea: The Bobby Unser Snowmobile Crime Reforms: Making Sure All Crimes Require Proof of Intent

    Skylar Capo, an 11-year-old young lady from Virginia, saved a baby woodpecker from the attack of a her domestic cat. Skylar was visiting her dad when the near-death experience of the tiny bird occurred. When Skylar’s mom, Alison, came to pick her up, Skylar asked to take the bird home so that she could nurse it back to health. The two stopped at Lowe’s on the way home and took the woodpecker with them because they were concerned about leaving the tiny creature in a hot car. While they were in the store a woman who said she was with the U.S. Fish and Wildlife Service confronted the two and told them that it was a crime under the Migratory Bird Act to transport a woodpecker.

    Two weeks later, the Fish and Wildlife Officer showed up at Alison’s home with a Virginia state trooper. They issued Alison a ticket that required payment of a $535 fine. Neither Alison nor Skylar were aware of the bird transport prohibition, so Alison refused to take the ticket from the officer, explaining that they had released the bird. A week Alison received the ticket and notice of fine and criminal penalty of up to one year in jail.

    When Alison and Skylar went public with their story, the U.S. Fish and Wildlife Service said the ticket was a “clerical error” and apologized. The ticket was withdrawn.

    In a case that ended up at the appellate level, Bobby Unser (three-time Indy winner) and a friend went snowmobiling near Unser’s ranch in northern New Mexico. While on their short ride, a ground blizzard resulted in near zero visibility was near zero. The two men got lost trying to find their way back to the truck. One machine crashed when they went into a ravine, and Mr. Unser’s snowmobile eventually stopped working. The two lost men spent the night in a snow cave. The next day they found a barn, sometime around midnight, and called for help from a phone in that barn. They were treated for frostbite, dehydration and exhaustion.

    Because he had driven into National Forest area during the blizzard, Mr. Unser was convicted of unlawful possession and operation of a motor vehicle within a National Forest Wilderness Area (16 U.S.C. § 551). He was sentenced to pay $75.  On appeal, the decision was affirmed.  U.S. v. Unser, 165 F.3d 755 (10th Cir. 1999).

    And then there is the Yates v. U.S., 135 S.Ct. 1074 (2015) case.  John Yates, a commercial fisherman, caught undersized red grouper in federal waters in the Gulf of Mexico. Yates ordered a crew member to toss the undersized fish back into the sea. For this offense, he was charged with, and convicted of, violating 18 U.S.C. § 1519, the obstruction of justice reforms under Sarbanes-Oxley. In a 5-4 decision, the court reversed the criminal conviction.

    These three cases have in common the element of mens rea, or the intent to commit a crime.  These cases have come to the attention of congress and the House has passed reforms that would require the government to prove that those charged intended to commit the crime, knowing that what they were doing was a crime.  "Not Guilty As Charged," Wall Street Journal, December 5, 2015, P. A12. The goal of the reforms is to prevent conviction for what the hearings found to be “nearly invisible” rules about which those charged were unaware.  The Senate will still need to act on the bill, but the accidental violations by citizens will no longer be subject to prosecution of federal laws that they are not aware of.  Ignorance of law is generally not a defense, but this legislation would make It a defense to criminal charges if the defendant can show lack of knowledge.    


    Explain the mens rea requirement in criminal statutes.

    What is the issue with ignorance of the law? 

  • T-Mobile: New York AG and Consumer Financial Protection Bureau Investigating Complaints About Ads for Phone Loans

    T-Mobile’s CEO, John Legere, has made T-Mobile the “best wireless carrier,” according to consumer reports. T-Mobile has also passed by Sprint to become the third largest wireless carrier in the United States. Kaja Whitehouse, “T-Mobile in Hot Seat Over ‘Deceptive’ Advertising,” USA Today, December 8, 2015, p. 2B.

    That growth and recognition is largely the result of Mr. Legere’s ads that tout T-Mobile’s program of equipment installment plans. Under this T-Mobile plan, customers receive their phones on two-year loans. Those plans must be paid off in 24 months and have a lump sum due if the customer exits the plan. However, T-Mobile indicates in its ads that customers can switch phone plans at any time. The complaints coming in at the federal and state levels relate to that exit claim. No government agency has accused T-Mobile of deceptive ads. Rather the agencies are investigating pursuant to consumer complaints.

    In reality, under the T-Mobile terms, customers may actually end up paying more under the equipment installment plan that if they were to simply break a traditional service contract. The allegations in the complaint are based on the age-old advertising ploy of “bait-and-switch.” A business advertises one product or service, but then talks the potential customer into a different, more expensive product or service because the product or service actually advertised does not truly exist.

    In October 2015, T-Mobile settled a class-action suit for deceptive advertising about its insurance program. Just as the case was about to be heard by the Ninth Circuit Court of Appeals, T-Mobile announced that it had reached a settlement with the class-action plaintiffs. In that case, Wineesa Cole brought a class-action suit claiming that she had enrolled in the Asurion insurance program in 2004 on the basis of claimed representations by T-Mobile sales representatives that Asurion would insure her phone against theft or loss for a monthly premium of $3.99 with a deductible of $35.

    In September 2005, though, when Cole lost her phone and made a claim, Asurion told her the insurance program’s terms had changed when it changed underwriters in July 2005 and that she now would have to pay a $110 deductible. Asurion also told Cole that her phone would be replaced with a refurbished phone that could be worth less than the deductible. Cole v. Asurion, 2008 WL 5423859 (C.D. Cal. 2008).

    These types of false advertising claims are investigated frequently at the state and federal levels. The power of consumers comes in when either the agency or the individual consumers bring an action seeking to recover damages and/or penalties for claims found to be false.

    T-Mobile has not responded publicly to the allegations, except to note that there are no formal complaints against the company from any government agency. The investigations will proceed to determine the content of the ads and the actual terms of the cellular contracts. Remedies could include customer refunds, waiver of penalties for switching carriers, and/or new contracts.


    Explain what “bait and switch” is.

    Describe T-Mobile’s history on advertising issues.

  • Henna Tattoos Form Basis of Religious Discrimination Lawsuit


    A Muslim receptionist at a New Jersey hospital has sued her employer claiming it violated her right to freely practice her Muslim religion. Specifically, she alleges she started receiving negative performance evaluations and was threatened with disciplinary action because she came to work with henna tattoos on her hands.

    Henna is a paste made from crushed and mixed dried leaves from the henna plant and is popular for use by Muslim women as a dye for temporary body art primarily on hands and feet. Using henna ink designs in this way is a traditional ceremonial practice in plaintiff’s faith. The patterns are typically intricate and occupy much of both sides of one’s hands and part of the arms. Thsee skin drawings last on the average 10 days- two weeks, and gradually fade away. Permanent tattoos are forbidden in certain denominations of Islam.

    The employer, Cooper University Hospital, has a policy prohibiting visible tattoos or markings. Plaintiff is 53 and has been employed by the hospital for 24 years. Per the complaint, in the past she had always received positive evaluations.

    The hospital’s tattoo policy reads as follows, “Every effort should be made to cover or conceal tattoos. Tattoos or markings that are offensive or portray violent/threatening images must be covered.” The complaint states that her superiors demanded that she conceal the tattoos even though they symbolize her religion.

    An employer has a duty to reasonably accommodate religious practices of its employees. This means the employer must attempt to institute workplace adjustments that enable workers to comply with religious rituals. Such accommodations might include flex scheduling, voluntary job swaps, job restructuring, allowing time off, reassignments, transfers, and change of job assignments.

    The duty to accommodate religious practices arises from the Civil Rights Act of 1964. That law provides employees significant protection from discrimination based on religion. When bringing a religious discrimination case, plaintiff must first demonstrate a bona fide religious belief. In other words, plaintiff’s commitment to the religion must be genuine (a sincerely held belief), and not just invented for purposes of obtaining some desired benefit at work. Next, plaintiff must prove the employer failed to accommodate her religion and she was disciplined for practicing it. To avoid liability, the employer must then prove that needed accommodations would create an undue hardship. An undue hardship exists if the costs to accommodate are substantial, or needed accommodations create risks to health or safety of workers or customers. If the employer declines to make reasonable accommodations and cannot prove undue hardship, the employer will be liable for violating the worker’s religious freedom.

    In the lawsuit, plaintiff seeks monetary damages and attorney’s fees.

    In a precedent, a worker at Red Robin Gourmet Burgers sported a religious-based tattoo on his hands, each encircling his wrists and less than a quarter-inch wide. His religion, called Kemet, precludes purposefully covering the markings. The restaurant has a policy of no visible tattoos. The server was fired and he sued claiming religious discrimination. The court was satisfied that defendant had a sincerely held belief in Kemet. The restaurant’s justification for the no tattoo requirement was that it seeks to present a family-oriented and child-friendly image. The court determined the eatery failed to present any evidence that visible tattoos are inconsistent with these goals. Said the court, “Hypothetical hardships based on unproven assumptions typically fail to constitute undue hardship.” Thus the restaurant’s motion for summary judgment was denied.EEOC v. Red Robin Gourmet Burgers, Inc., 2005 WL 2090677 (Wash., 2005).   The case either was settled or proceeded to trial. (The results were not published.)

    The hospital too may have difficulty proving undue hardship from the presence of visible tattoos.

    For more information, click here.


    Can you think of an undue hardship the employer might assert in this case?


  • The Jock Tax – Cities Cannot Collect It From NBA and NFL Players Unless They Really Work in the City

    Twenty-one states and eight cities have what is commonly called a “jock tax.” These are municipal taxes that were passed primarily to obtain revenue from athletes, coaches, trainers, and highly paid entertainers when they are present in the city for purposes of earning income. So, all the professional sports events and concerts bring revenue from the players and artists in the form of a municipal tax.

    However, in denying certiorari on a case on appeal from the Ohio Supreme Court, the U.S. Supreme Court has provided players and artists with a tax exemption from the jock tax. The case was an appeal from cases brought by Indianapolis Colt player, Jeff Saturday, and Chicago Bear linebacker, Hunter Hillenmeyer, challenging the city of Cleveland’s collection of municipal taxes from them.

    In 2008, the Colts paid Jeff Saturday $3,577,561.11 in compensation and attributed $178,878 (approximately 5% of Mr. Saturday’s total compensation) to a game the Colts played in Cleveland during 2008. The calculation employed the “games played” method of calculation. For example, if the team played 20 games, then 1/20 of the income, or 5%, is allocated to each of the cities involved as the required jock tax. The Colts withheld the allocated Cleveland tax, or $3,594. However, Mr. Saturday did not travel to the Cleveland game because he stayed in Indianapolis and participated in rehabilitation for a knee injury, as ordered by the team’s physician.

    Mr. and Mrs. Saturday, who filed a joint tax return, applied for a refund from Cleveland. Cleveland refunded $322. The Saturdays appealed to the board of review, which upheld the amount of the payment and the refund. The Saturdays then appealed the refund amount to the Board of Tax Appeals (BTA), and the BTA affirmed the decision of the review board. The Saturdays appealed that decision to the Ohio Supreme Court. Saturday v. Cleveland Bd. of Review, 33 N.E.2d 46 (Ohio 2015). The city of Cleveland argued that even though Mr. Saturday was not present for the game, there was a part of his salary that was attributable to the playing of the game in Cleveland and was, therefore, taxable. The Ohio Supreme Court held that the city did not have extraterritorial jurisdiction and could not collect income tax on income that was not earned from individuals who were not physically within the state.

    The city of Cleveland appealed to the U.S. Supreme Court, but the Court denied certiorari. 2015 WL 5866985. The court denied a review because there are clear constitutional standards for taxation of non-residents. Those constitutional standards require that there be some jurisdiction over the individual, through physical presence in the state or through income-producing operations in the state. Under the interpretation of the taxation authority under the Constitution, the U.S. Supreme Court has held that the physical presence is a prerequisite to collecting tax from an out-of-state individual.

    The court’s denial of the appeal provides professional sports players with an exemption from the jock tax. The Saturdays received a full refund of the $3,594. The U.S. Supreme Court’s denial of the appeal means that professional athletes and entertainers have an exemption that can reduce their municipal taxes. The next issue will be taxes at the state level, which also mandate payment from income earned in the state. The decision here may provide another player with the impetus to challenge state income taxes collected from athletes and players who participate in events in states other than their residences. IN the mean time, many players plan on filing for refunds!


    Explain how the municipal tax is computed.

    Explain why Cleveland could not collect the tax.

    Mr. Hillenmeyer also received a refund of $5, 062 from Cleveland.

  • When You Are Injured on a Train in Austria, You Can’t Sue the Railroad in the United States

    In its first of the 2015-2016 term, the U.S. Supreme Court issued a 9-0 decision in a tragic accident case involving a U.S. citizen traveling in Austria.  In OBB Personenverkehr A.G. v. Sachs, 135 S. Ct. 1172 (2015), 2015 WL 7722430, Carol P. Sachs, of Berkeley, California, filed suit against an Austrian entity because she was injured in an accident that occurred as she tried to board a moving train in Innsbruck, Austria.  As a result of injuries sustained, had to have both of her legs amputated.

     Ms. Sachs filed suit in federal district court in California against OBB Personenverkehr (OBB) for (1) negligence; (2) strict liability for design defects in the train and platform; (3) strict liability for failure to warn of those design defects; (4) breach of an implied warranty of merchantability; and (5) breach of an implied warranty of fitness.  The federal district court dismissed (695 F.3d 1021 (9th Cir. 2012)) the case on the basis of the Foreign Sovereign Immunities Act , an act that governs U.S. courts’ jurisdiction over a foreign state in the United States. Ms. Sachs appealed.  The Ninth Circuit’s initial decision affirmed the decision, but following an en banc hearing (705 F.3d 112 (2012)), the case was remanded for trial. (737 F.3d 584 (2013)).  OBB appealed to the U.S. Supreme Court. 

     OBB operates a railway that carries nearly 235 million passengers each year on routes within and outside Austria. OBB is wholly owned by OBB Holding Group, a joint-stock company created by the Republic of Austria. OBB—along with 29 other railways throughout Europe—is a member of the Eurail Group, an association responsible for the marketing and management of the Eurail pass program. Ms. Sachs purchased her Eurail pass online from The Rail Pass Experts, a Massachusetts-based company that sells a form of a Eurail pass that is available only to non-European residents and is unlimited in usage.    

     On appeal, Sachs argued that while OBB is owned by the Austrian government it was engaged in commercial activity, which is not entitled to immunity. The question the court focused on was whether the sale of the ticket was sufficient to constitute commercial activity, something for whichsuit in the United States in allowed. The court noted that the essence of Ms. Sach’s claims was at the point of her injury, which was in Austria.  The sale of the ticket, which was done through a U.S. entity in the United States, was not involved in her injuries. 

     The court also noted that the Eurail pass is an effort of 30 railway systems in total and that OBB is only 1/30 of the Eurail sales program in the United States. The Foreign Sovereign Immunities Act requires substantial commercial contact in the United States and a joint sales effort by 30 railroads using a U.S. online travel agent was not the stuff of substantial commercial activity.

     The case clarifies issues of jurisdiction when foreign governments engage in tourism activities through U.S. agents.  The case also means that Ms. Sachs must seek recovery in Austria.  However, tort law in Austria is significantly different from the liberal U.S. standards and government ownership would provide almost complete immunity.  In other words, the reason the battle went to the U.S. Supreme court is because the plaintiff had no other avenue for recourse for the loss of her legs and because the defendant could not afford to be subject to suits in all countries in which residents might buy Eurail passes on the Internet. Both travel choices of consumers and marketing activities by foreign entities are impacted by this important decision.


     Explain the Foreign Sovereign Immunities Act.

    What does the decision mean for traveling U.S. citizen suits for injuries sustained in other countries?