• The Collection Company for $300 Billion in Student Loans and 12.5 Million Borrowers Hit With Three Suits

    The states of Illinois and Washington as well as the federal Consumer Financial Protection Bureau (CFPB) have filed suits against Navient, formerly Sallie Mae, and the company responsible for collection of both federal and private student loan obligations. Navient is the loan servicing contractor for the U.S. Department of Education.

    According to the complaints, Navient and its collection agency (Pioneer Credit Recovery) have engaged in the following behaviors:

    • Encouraging student borrowers to opt for forbearance rather than enrolling them in an income-based plan because forbearance accumulates more interest on the loans
    • Misleading borrowers about the terms of renewing enrollment in income-driven repayment plans that cap monthly bills to a percentage of earnings
    • “Peddling” risky and expensive subprime loans that had higher rates and fees to student borrowers
    • Charging active-duty service members high interest rates and late fees (prohibited by federal law) (Navient has indicated that these were processing errors)
    • These practices precluded borrowers from obtaining the lower monthly payments that were available to them under their loan terms.

    Navient has denied all of the allegations and responded that the suit was a political threat made on the even of the presidential inauguration, Navient also responded that the student loan program is poorly designed and that it is forced to work within the program’s parameters that were established by the federal government.

    The CFPB and Department of Education have been embroiled in an ongoing battle with Navient.  Although Navient previously settled the accusations on the active-duty military borrowers by paying $97 million to the Department of Education, an Inspector General’s report concluded that the sampling used for looking at the Navient files was “deeply flawed” because many of those borrowers had loans that did not qualify for the active duty deferment.

    While the litigation continues and the disputes mount in very public statements, student-borrowers could benefit by following these tips in dealing with repayment of their education loans:

    • Research your loan terms.  If you are not sure, you can go to www.nslds.ed.gov and determine the nature of your loan.
    • Determine your grace period to payments to begin.
    • Don’t ignore your lender: communicate.
    • Get the right repayment option for your circumstances.  Perhaps percentage of income is the way to go, and watch out for deferment options – they add to your loan amount.
    • Pay off your most expensive loan first.
    • Research loan forgiveness programs, which are available for those who opt for certain types of government service jobs.
    • Research consolidation and whether that could help with your payments or rate.  

    DISCUSSION STARTERS

    List the issues the CFPB complaint raises about student-loan collection processes.

    What recommendations would you make to those who are in the process of paying off their student loans?

     

  • Hatchamals Don’t Hatch; Breach of Warranty of Merchantability

                                             

    Seems every Christmas there is a must-have toy that becomes hard to get, and every parent frets about securing one for their child. Crazed moms and dads are willing to wait in long lines and pay multiple times the retail value to get their hands on the sought-after toy.

    In December, 2016 that toy was the Hatchamal. Cleverly conceived, it appears as a large egg. By rubbing, tilting and tapping it for about a half hour, the egg “hatches” one of several cute, fluffy animals. The toy originally sold at retail for about $50-60. The price went as high as $350 on eBay, Amazon and other sites. The parents who were successful in finding one awaited with much anticipation their child’s joy on the big day

    Alas, all was not well in happyville. Turns out many Hatchamals did not hatch. Now a class action lawsuit has been started against the manufacturer. The lawsuit alleges false advertising, unfair competition, and breach of the warranty of merchantability.

    False advertising refers to promotions that misrepresent the nature, characteristics, qualities or geographic origin of goods. The resulting injury is usually money the consumer lost by purchasing that item which the buyer would not have done had the advertisement not been misleading.

    Unfair competition refers to economic harm (financial loss) caused by a deceptive or wrongful business practice.

    Breach of warranty of merchantability applies when consumer goods are sold by a merchant (someone regularly in the business of selling the item in question). It is implied into the transaction by law. A warranty is a guarantee or assurance about some characteristic of the merchandise. Merchantability means the good is fit for its ordinary purpose. Stated differently, it will do what it is supposed to do. Thus, a mug should hold hot liquid without cracking. A book bag should withstand the weight of a quantity of textbooks without ripping or fraying. Likewise, a Hatchamal should, well, hatch.

    The lawsuit seeks a court order forcing Spin Master to recall the defective Hatchimals, and monetary damages for the affected consumers.

    The creator of the toy is Spin Master, a company based in Toronto that also produced such popular pastimes as Etch-A-Sketch and Build-A-Bear Workshops. Spin Master launched Hatchamals in October, 2016. Stores were sold out by November.

    The company has not yet responded to the lawsuit but has said that it has increased the number of its consumer care representatives, extended its hours, and increased the capacity for callers in the queue, to help prevent calls from being dropped due to high volume.   Spin Master also added troubleshooting tips and videos to its website. “We are committed to doing everything possible to resolve any consumer issues” the company wrote. “We sincerely apologize and thank everyone who is experiencing an issue for their patience.”

    Said the lawsuit, excitement on Christmas morning was replaced with frustration and tears for many children, and regret among the “dutiful parents who waited hours and days outside retail stores. . . .Whether done intentionally or ironically, as the corporate name suggests, this product was all “spin” without appropriate, responsible, or adequate technological development or functionality.”

    Reviews from unhappy parents on Amazon included the following, “IT NEVER HATCHED! We had to perform a C-Section.”

    For more information, click here.

    DISCUSSION QUESTION:

    What objectives of the law are addressed by imposing the warranty of merchantability on contracts for the sale by merchants of consumer goods?

  • NYC Police Settle Lawsuit for $75 million; The Importance of Probable Cause

    New York City has settled a class action (a lawsuit with multiple plaintiffs, all of whom were injured by the same cause) for $75 million involving aggressive policing. The case accused the NYC Police Department of issuing more than 900,000 criminal summonses (written notifications that one is charged with a crime and is required to appear in court) between 2007 and 2015 that were later found to be without legal justification. The documents had been issued mostly for minor offenses such as disorderly conduct, trespassing and drinking in public. The case claimed the summonses were part of a policy that was “selectively and disproportionately enforced in minority communities.”

    The United States Constitution includes the right against unreasonable searches and seizures. The word “seizures” in this phrase includes arrests. The purpose of this provision is to prevent arbitrary exercise of power by police.

    To avoid that, the Constitution prohibits police from making an arrest unless the officer has probable cause to believe the defendant has committed a crime. This means a threshold amount of evidence, based on apparent facts that can be articulated, that would lead a reasonable and prudent person to believe that the accused has committed a crime.

    If police make an arrest but lack probable cause, the arrest is illegal and therefore invalid. The charges will be dropped, and if the defendant is in jail he will be released.

    The complaint (the pleading that begins a lawsuit) in the case alleged that the unlawful summonses were the result of directives from city officials that officers must meet minimum quota requirements.

    The settlement agreement contains mandatory corrective action. The city must send notifications to all police officers reiterating its policy that quotas and numerical performance goals are banned. Supervisors who impose quotas will be subject to disciplinary action, and officers who have been threatened or retaliated against for failing to comply with a quota are directed to report that to the police disciplinary body. Further, evaluation criteria for officers have been revised to measure overall performance standards and not unduly rely on the number of summonses issued. Additionally, the written form used for summonses has been modified to provide additional space for officers to write more details about the incident so that the presence or absence of probable cause can be more easily determined. Plus, new training programs will be adopted by the NYPD, In addition, the city will allocate $56.5 million to pay each claimant in the class up to $150, and the plaintiffs’ attorneys will receive $18.5 million for their services.

    All settlements in class actions must be approved by a judge following a hearing. The lawyers must convince the judge that the terms of the resolution are fair to the class of plaintiffs. In the NYC case, the terms of the settlement will shortly be presented to Judge Robert W. Sweet of the US District Court in Manhattan.

    Assuming the settlement is approved, members of the class will be notified through the mail. Given the size of the class and the impossibility of locating addresses for all of them, notice will also be disseminated in newspaper advertisements in both English and Spanish, and online.

    One attorney for the plaintiffs summed up the settlement this way, “We have achieved a landmark settlement in a civil rights case that advances the cause of justice.”

    For more information, click here.

    DISCUSSION QUESTION:

    Is the remedy for each plaintiff adequate?  Why or why not?

  • Will Work for Weed: Lawyer’s License Suspended for Taking Marijuana As His Fees

    In a case in which there was a dissenting opinion as well as a concurring opinion asking for a greater punishment, the Louisiana State Supreme Court has suspended a lawyer for one year for “working for weed.”  Lawyer James Mecca had agreed to represent clients in exchange for their furnishing him with marijuana. In re James D. Mecca, --- So.3d ___, 2017 WL 243465 (La. 2017)

    The facts that resulted in the suspension began in late 2013 when the St. Tammany Parish Sheriff's Office was contacted by someone they referred to as a cooperating individual (CI). The CI explained that she initially had been approached by lawyer James Mecca while she was in court and and that Mr. Mecca had offered his legal services in exchange for marijuana. The CI retained Mr. Mecca for legal counsel for three matters over a one-year period and paid him with marijuana. Following this work, Mr. Mecca approached the CI again and offered more representation.  

    Sheriff officers then set up a telephone wiretap to allow the CI to set up the transaction. During a recorded conversation, the CI told Mr. Mecca that he had “a crap load of smoke if you want some of that” (meaning marijuana). When Mr. Mecca asked how much “stuff” the CI had, the CI responded, “A whole backpack full.” Mr. Mecca said, “Oh, my God,” and readily agreed to accept the marijuana to offset the total attorney's fees owed by CI. 

    The sheriff officers then set up the exchange of one-half pound of marijuana (street value of $2500) in a store parking lot. After Mr. Mecca left the parking lot with the marijuana, he was arrested for possession with intent to distribute (as well as for the failure to stop at a stop sign).

    Mr. Mecca entered a guilty plea to possession, completed a 90-day rehab program, and was sentenced to one year’s probation.  The Office of Disciplinary Counsel (ODC) of the Louisiana State Bar charged Mr. Mecca with violations of the code of professional conduct.  Mr. Mecca did not deny the conduct, but explained that his father’s death had started a downward spiral and that the arrest had been the “best thing that could happen” because he was forced to address his alcohol and drug problems. 

    The ODC hearing committee created a five-year contract with the Judge and Lawyer Assistance Program (JLAP) by which Mr. Mecca agreed to be monitored and drug-tested.  However, the disciplinary board reviewed the case and recommended a two-year suspension from the practice of law, which could be deferred with successful completion of the JLAP contract. The Louisiana Supreme Court then ordered a review of the case and ordered a one-year suspension to run concurrently with the JLAP agreement.

    Justice Jeannette Knoll dissented as follows 

    I respectfully dissent from the majority's decision to impose a one-year suspension in this matter. The court's function in disciplinary proceedings is primarily to protect the public, not to punish the lawyer. Furthermore, respondent is contrite and has been an outstanding participant in the Judges and Lawyers Assistance Program. Under these circumstances, I find an actual period of suspension of one year to be unduly harsh. I would impose a less harsh sanction.

    However, Justice Greg Guidry concurred with the opinion but felt the sanction was insufficient;

    I agree with the majority that the respondent has committed professional misconduct warranting discipline; however, I respectfully dissent on the imposed sanction and would impose greater discipline 

    The disciplinary process for lawyers is an administrative one with the various layers here being representative of state bar proceedings around the country. However, state supreme courts hold the ultimate power for disciplinary action against lawyers and can call up cases for review even when neither party has appealed. In this case, the fees collected in drugs proved to be a critical issue for the court and the majority believed that suspension was a necessary part of the case because of the criminal nature of the conduct that was then tied to the lawyer’s professional work.

    Mr. Mecca thanks everyone involved for bringing hi to the point of quitting both alcohol and drugs.  Mr. Mecca is currently involved n helping others through the AA program. You can read more about his recovery here.

    DISCUSSION STARTERS

    Explain the disciplinary process of layers.

    Discuss why people hold such differing views on punishment for missteps by professionals. 

  • Trump Wins Tort Lawsuit; Calling Someone “Dummy” not Defamation

                   

     

    In a tweet posted during the Presidential campaign, the widely-followed now-President Donald Trump called veteran Republican political strategist Cheryl Jacobus a “real dummy.” The attribution followed within hours her interview on CNN during which she raised doubts about Trump’s claim that he was self-funding his campaign, and said the campaign had not been transparent about its financing. Trump’s tweet also claimed that Jacobus had “begged us for a job. We said no and she went hostile.” Trump not being one to let things go easily, he tweeted a few days later that she was a “major loser, zero credibility!”

    In response Jacobus sued for defamation (a demeaning and untruthful statement about a person that is relayed to a third person), claiming Trump’s online attacks falsely portrayed her an unprofessional and spiteful rejected job applicant. She claimed to have lost TV appearances, and received a blitz of online threats from Trump supporters. Further, she claimed it was the Trump campaign that approached her to work as its political director but she declined the job because she thought the now-fired campaign manager, Corey Lewandowski, was a “powder keg.” The lawsuit sought $4 million for emotional distress and damage to her career and reputation.


    Several defenses to defamation exist. One of those defenses consists of statements of opinion. Such comments are protected by the First Amendment right to free speech. So, for example, a restaurant review that is unflattering to the chef, or a movie review that pans the acting of the lead performer both constitute the reviewer’s opinion and will not support a claim of defamation. Another defense is that the statements are obvious exaggerations. Such comments are not believed and thus do not injure the reputation of the person discussed.

    The judge in the Jacobus case recently ruled that, while Trump’s comments were “intemperate tweets clearly intended to belittle and demean plaintiff,” and were likely hurtful, they were nonetheless opinion and therefore protected. As a result, the judge, Manhattan Supreme Court Judge Barbara Jaffe, dismissed the case.

    In her opinion, the jurist also said that “hyperbole” such as these comments should be expected “in the heated public debate that accompanies a presidential campaign, where the listening public anticipates fiery opinions, and back-and-forth rhetoric. . . . Mr. Trump’s tweets about his critics, necessarily restricted to 140 characters or less, are rife with vague and simplistic insults such as “loser’ or ‘total loser’ or ‘totally biased loser,’ ‘dummy’ or ‘dope’or dumb,’ zero/no credibility,’ ‘crazy’ or ‘wacko’ and ‘disaster, all deflecting serious consideration.” She also noted that Trump’s campaign was already abundant with personal attacks. “Indeed, to some, truth itself has been lost in the cacophony of online and Twitter verbiage to such a degree that [such comments] seem to roll of the national consciousness like water off a duck’s back.”

    Jacobus’ lawyer stated he will appeal the decision, describing the decision this way, “Now President Trump has been given a free pass to trample on the free speech rights of any critic.”

    For more information, click here.

    DISCUSSION QUESTION:

    Why are opinions and obvious exaggerations exempted from speech that constitutes defamation?

  • The Rocker Slants and the U.S. Supreme Court

    The rocker band, the Slants, made it all the way to the U.S. Supreme Court. We’ve been covering the issue here on the blog since December 2015. 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, 808 F.3d 1321 (Fed. Cir. 2015).  The U.S. Supreme Court granted certiorari (137 S.Ct. 30 (2016)), and heard oral arguments this past week. Legal analysts say that the justices’ questions reflect 12 questions that leaned pro-Slants and 11 that leaned toward the government’s position. 

    However, a review of the justices’ questions and comments seems to suggest that they have concerns about the bar on disparagement. For example, Chief Justice John Roberts explained his concern to the federal government’s lawyer that he was “concerned that your government program argument is circular.” Chief Justice Roberts explained that when the holder of a trademark complains that the government refuses to register its trademark because it is disparaging, the government’s explanation to that holder is that its program does not register disparaging trademarks. Justice Roberts concluded, “It doesn’t seem to me to advance the argument.” 

    Justice Kagan noted that disparagement bars are another form of viewpoint discrimination and that the government does have the power to prevent and sanction viewpoints.  Justice Beyer noted that the government would not have the power to sanction disparaging speech.  Justice Alito noted that the disparagement bar permits the government to provide the service of trademark protection to some but not to others, solely on the basis of what they want to communicate in their trademark. Justice Ginsberg expressed her concerns about inconsistencies in the government’s decisions on what was disparaging and what was not disparaging.  The lawyer for the federal government explained that, with 300,000 applications per year, there were bound to be some inconsistencies. For example, here are some trademarks that have been approved:

    • “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”

    While the name of a rock band may not be significant enough for the U.S. Supreme Court’s time, the issue is a critical one about the First Amendment and the government’s role in controlling the ability of citizens to protect their speech. In addition, as this blog noted in December 15, 2015, there are some heavy hitters who joined in the case, such as the Washington Redskins, who are trying to maintain their name and trademark.

    The court generally issues its decisions in May and June.  The Slants will soon make judicial history and be responsible for critical precedent.

    DISCUSSION STARTERS

    Explain the statutory framework for the trademark controls.

    Discuss the First Amendment issues in the case.

     

  • The Fake Gas Company That Installed Meters for a Fee

    New York has its share of gas company shenanigans.  First, a restaurant tapped into a neighbor’s gas meter so that it could operate more cheaply.  Then there have been the deaths resulting from explosions of gas lines with quality and repair issues. Now we have employees and entrepreneurs joining together to set up their own gas companies for the installation of meters.  Getting customers was easy.  An employee simply took the calls that had come into the gas company and diverted over to the entrepreneur who would then arrange for an illegal installation of a meter for about $1300 -$2500 per meter. Alan Feuer, “Brooklyn Utility Workers Accused of Meter Scheme,” New York Times, January 13, 2017, p. A13. The private service was more expensive, but it was much quicker than anything the gas company could offer. 

    The scheme was a break for developers who are struggling to keep up with New York City’s housing boom.  In the Brooklyn neighborhoods that are in the process of being gentrified due to the shortage of housing in the city, developers were more than willing to pay because they needed to finish their projects as quickly as possible.

    The problem with the scheme was that gas was flowing into projects without inspection by the gas company and some of the work was not done correctly.  Some of the lines were placed under sidewalks and the utility and the city were not aware of the presence or location of gas lines.

    All tolled, there were 37 people involved in the diverted gas meter installation program, some of whom were employees in the utility, others who were meter installers, and, of course, the outsider who developed the plan and paid those who helped him for finding a way in their work to divert customers to him. 

    The scheme was uncovered unwittingly as the city was conducted a bribery investigation and one of the wiretaps found a discussion about the diverted meter service.  As a result, a separate investigation into the meter madness began. 

    All 37 have entered not guilty pleas to the charges.  The entrepreneur at the center of the deceptive web had his bail set at $750,000 despite the charges being the first he has ever faced.

    The charges include enterprise corruption, commercial bribery, and falsifying business records.

    DISCUSSION STARTERS

    Explain the scheme set up by the parties and why.

    Discuss the dangers of the scheme and why bribery can be so dangerous in business. 

  • Kim Kardashian Robbery Solved with DNA and Fingerprints

                        

    Kim Kardashian was the victim of a $10 million jewelry robbery (larceny by force from the person) while visiting Paris during that city’s Fashion Week. The incident occurred on October 4, 2016 in the early morning. Numerous masked perpetrators made off with the goods including a $4.5 million ring Kardashian’s husband, rapper Kanye West, gave her for their anniversary. The perpetrators were at large until mid-January, 2017 when 17 were arrested (14 males and 3 females), some with ties to organized crime, and most with previous convictions for drug trafficking or robbery. The 17 include not just those participating in the heist, but also some poised to sell the goods, jewelry brokers, and those who extract and cut stones, thereby concealing their origin.

    The perpetrators broke into Kardashian’s upscale rented apartment, held her at gunpoint, bound her wrists, sealed her mouth with duck tape, and left her tied up in the bathtub while helping themselves to her jewels, cellphones and a wallet. They fled on foot and bicycles. It is believed that one of Kim’s chauffeurs may have been complicit, giving the perpetrators critical information about access to the reality star, and details about the layout of the building where she was staying.

    Prior to the robbery, Kardashian had a very active social media presence with millions of followers. She often displayed pictures of her jewelry. Since the incident she has curbed much of that activity.

    The case was partially solved when DNA was found on the restraints used on Kardashian during the incident. Fingerprints also told a story. During the escape, one of the thieves accidentally dropped a diamond-encrusted cross pendant. Fingerprints were lifted from that item which led to additional identifications.

    Security camera images helped to confirm the identities.

    DNA is a powerful law enforcement tool for discovering the guilty and exonerating the innocent. It is also effective in determining paternity by testing DNA samples from both the child and alleged parent. DNA is short for deoxyribonucleic acid. It is unique to every person. DNA is found in all bodily fluids including blood, saliva, semen, and sweat. So it is frequently found on clothing, in chewed gum, on hair and cigarette butts. Only a trace amount is needed. After the DNA is extracted from a crime scene, it is compared to DNA samples from known individuals maintained in a registry. The number of known samples is significant and growing because many states mandate that every person convicted of a crime register a DNA sample.

    Fingerprint evidence remains another important aide for law enforcement. As with DNA, no two people have the same fingerprints. Instead, we each have a unique pattern of ridges and whorls. Also like DNA, police extract fingerprints from crime scenes and look for a match with prints already in police files. Prints can be on file for a variety of reasons – a prior conviction, required for security clearance in a new job, or taken as a child at a parent’s behest to help police identify the youngster in the event of an abduction.

    Bodily sweat mixed with body oils often produces invisible fingerprints on smooth surfaces. Police use chemicals and powders to make such prints visible. Prints are not always complete. Aided by computer enhancement techniques, police can sometimes create a complete print from fragments.

    For more information, click here.

    DISCUSSION QUESTION:

    How important do you think DNA and fingerprint evidence is to the police? Why?

     

  • Truck Drivers: Employees or Independent Contractors?

    Swift trucking company has a business model that includes truck drivers who are employees and independent contractors who drive trucks that they lease from Swift. Over the past two years, Swift has been involved in class-action litigation from independent contractors who say that they are more like employees and entitled to benefits such as health care coverage.  The litigation, which has lasted seven years so far, has been backed by union leaders with the goal of unionizing the large work force of truck drivers around the country. Brian Baskin, “Trucking Firm Hit By Setback on Wages,” Wall Street Journal, January 13, 2017, p. B6.

     argument that the drivers who lease their trucks make is that they are required to make lease payments each month, an amount that forces them to work a certain amount of time that precludes them from working for other companies.  They are limited to working for Swift, but the classic characteristic of an independent contractor is that the contractor works for more than one company.

    Swift tried to get the case back into arbitration, something it says is required under the contract terms for the drivers who have leases.  Virginia Van Dusen was an independent contractor for Swift, who would, under the terms of her agreement, “determine the method, means and manner of performing work and services.”  Under the agreement, Ms. Van Dusen could provide the same trucking services for others. The contract also provided that the parties would agree to arbitrate “[a]ll disputes and claims arising under, arising out of or relating to” the contractor agreement, “including the arbitrability of disputes between the parties.” However, the arbitration argument ended this past summer when a federal appeals court held that the drivers had the right to take these statutory issues to court because they were employees.  As such, they had certain federally protected rights under the Federal Arbitration Act.  In re Swift Transportation Incorporated, 830 F.3d 913 (9th Cir. 2016)

    With the arbitration issue resolved, the case went back to federal district court in Arizona where a federal judge found for the drivers.  The judge noted that “as a practical matter,” the drivers with leases had to drive for Swift and that Swift had a situation with the leased drivers that put it in “full control of the terms of the relationship.“ Virginia Van Dusen et al. v. Swift Transportation Co., Inc. et al., 2:10-cv-00899 (Ariz. 2017)

     Swift has already filed a notice of appeal on the case.  If the decision is upheld, the litigation will continue because the court will need to determine which drivers (there are 600  from around the country who are involved in the suit) are covered as independent contractors under full control and which are truly independent contractors.            

     DISCUSSION STARTERS

     What makes someone an independent contractor vs. an employee?

    What are the benefits of being an independent contractor vs. an employee?  Vice versa? 

  • The Nationwide Injunction Blocking HHS Sex Discrimination Rule

    In Franciscan Alliance, Inc. v. Burwell, several religious health care organizations and eight state attorneys-general brought suit challenging the implementation of a new rule from the Department of Health and Human Services. Under the rule (45 C.F.R. 92.4), which was promulgated to carry out the Affordable Care Act’s (ACA) prohibition against sex discrimination, hospitals and insurers that take federal funds will be required to perform abortions and gender-transition procedures.  The suit challenges the rules on the grounds that the physicians and other health care workers would be required to perform these procedures even though they would run against either their best medical judgment or their religious belief. 

    The court held that although the ACA prohibits sex discrimination, Title IX of the Civil Rights Act (20 U.S.C. Section 1681 (a)(3)) provides an exemption for religious organizations if the prohibition on sex discrimination would require the organizations to violate its religious tenets. The court also noted that the HHS rule disregarded the protections provided in Title IX and, in effect, was a redefinition of what constituted sex discrimination that had been narrowly defined by Congress as the biological distinction between men and women.  The HHS rule substantially expanded the clear and unambiguous legislative definition and, as such, was beyond the agency’s scope of authority (ultra vires). You can find the decision here.

    The court also held that the HHS rule violated the provisions of the Religious Freedom Restoration Act (RFRA).  Under the RFRA, federal law can burden the exercise of religious freedom only if it can be shown that lawmakers have used the least restrictive means in advancing what must be a compelling government purpose. The court found that under the rule (something that all parties conceded), the religious organizations would be required to establish in every case of abortion or gender-transition procedures why they could not perform the procedures.  The rule does not permit religious organizations to object on a moral basis.  The effect would be a burden of paperwork, presentations, and rulings required on a case-by-case basis. Citing the U.S. Supreme Court decision in the Hobby Lobby case (Burwell v. Hobby Lobby Stores, Inc., 134 S.Ct. 2741 (20140), the court held that a law that imposes additional costs on those seeking to practice their religious beliefs was a violation of RFRA. The additional costs imposed on the religious groups would be a substantial burden and an infringement of their religious freedom.

    The effect of the injunction is a nationwide ban on implementation of the HHS rule.  An appeal will be filed by HHS.  The case may be yet another U.S. Supreme Court decision on religious freedoms vs. ACA.

    DISCUSSION STARTERS

    Explain what the rule requires.

    Discuss the impact of the injunction.

  • Employer Directing Chef to Make “Black People Food” Is Not Discrimination

                      

    An African-American sous chef, Armand Appling, worked at a country club owned by Madeleine Pickens, wealthy philanthropist and ex-wife of Oklahoma energy investor T. Boone Pickens. She promoted Appling to head chef at a Nevada dude ranch and wild horse sanctuary which she also owned. Visiting tourists pay $1650/night which includes meals, accommodations in an upscale cottage, horseback riding, and a safari on an all terrain vehicle (ATV)

    Appling was fired from the ranch in 2014. He alleges the termination was retaliation for his objecting to a hostile work environment. This term means a worksite where offensive discriminatory behavior targeting a particular protected class is pervasive and tolerated. Appling’s complaints were based on numerous events. While Appling was still working at the country club, Pickens, who is white, directed Appling to terminate two black kitchen staffers. She referred to one of them as her “bull”, and another as her “ox,” because of the manual labor she assigned to them. Pickens also insisted that a female kitchen worker be dismissed because she had “too much personality.” Pickens told Appling the employees slated for termination didn’t “look like people she would have working at the country club,” and didn’t “fit the image” of the staff she wanted on the premises. At the ranch, Pickins told Appling she wanted to serve her guests “black people food” and not “white people food,” and so directed him to prepare fried chicken, BBQ ribs and corn bread. Pickens chastised Appling for using too much salt saying, “I know that’s hard for you since it’s in your genetics to eat salty food.” Another time, when the chef was plating food, Pickens threw trash at him and said, “Here, you take this out.”

    To prove a retaliation case, plaintiff must first prove facts that would imply the employer had a discriminatory motive for the termination. Defendant must then try to rebut by either articulating a legitimate, nondiscriminatory reason for the adverse employment action against plaintiff, or disprove an essential element in plaintiff’s discrimination claim.

    Pickens’ attorney argued the latter, claiming none of Pickens’ conduct was racially motivated. At worst, the attorney asserted, the circumstances “reflect a non-racial personality conflict and amount to discourtesy, rudeness or lack of sensitivity” but not discrimination.

    Appling’s lawyer responded that people in this country who sought to exclude African Americans from private clubs used code phrases like “they do not fit the image.” Additionally, Appling argued that the words “ox” and “bull” were offensive because they imply ownership of property, and slaves were considered personal property of their owners.

    The judge in the case, US District Court Judge Miranda Du, granted Pickens’ motion to dismiss the case on December 29, 2016. The judge noted that racial hostility is a necessary element to prove that a hostile environment exists, and ruled that Appling’s proof fell short.

    The Nevada judge commented that it is customary in the restaurant business to categorize foods by ethnicity, referencing popular cuisines such as Mexican food, Chinese, and Thai. Said the judge, “The suggestion that such categorizations are inherently offensive is nonsense. This is especially true here, given that Pickens’ alleged comments actually reflect a preference for “black people food” rather than racial hostility against ‘black people’ or ‘black people food.” The judge further held that the ox and bull references were a complimentary nod to physical strength unaccompanied by any overtly racial slurs.

    Interestingly, the judge gave Appling a few weeks to file an amended complaint, meaning the plaintiff has an opportunity to modify the document that commenced the lawsuit to add facts, if he can, to establish racial animus.

    For more information, click here.

    DISCUSSION QUESTION:

    Do you agree or disagree with the judge’s decision that Pickens’ actions did not amount to ? Why or why not?

  • Mariah Carey and the Rockin’ Eve Defamation Threats

    The lead-up to Mariah Carey’s Rockin’ New Year’s Even performance on December 31, 2016 did not bode well.  Her representatives had to ask what time the crystal ball in Times Square descended so that she could be sure to arrive on time.  The stroke of midnight is the general hour for the New Year’s entrance. And something did go terribly wrong.  Ms. Carey did not finish her performance and could not seem to make it through the songs she did begin. 

    A three-song medley was scheduled, but Ms. Carey wandered between silence and murmuring.  She tried to dance through some of the silent parts, explaining to the crowd, “I’m just trying to be a good sport.” The performance, which has gone viral, was so embarrassing for the singer that her representatives asked if it could not be deleted prior to its West Coast airing. 

    Following the disastrous performance, the finger-pointing began.  The Dick Clark production folks noted was that Ms. Carey did not show up to rehearse, sending a body double instead.  Then came the accusations that she intended to lip-sync her performance.  Ms. Carey and her folks fired back that the production folks knew that her earpiece and lyric prompter were not working and that they had deliberately sabotaged her performance.  Dick Clark Productions (dcp) issued a statement, “To suggest that dcp, as a producer of music shows, including the American Music Awards, Billboard Music Awards, New Year’s Rockin’ Eve, and Country Music Awards, would ever intentionally compromise the success of any artist is defamatory, outrageous, and frankly absurd [sic].” Lorena Blas, “Making Waves,” USA Today, January 3, 2017, p. 1D. dcp added, in an effort to make peace and save both artist and production company, “In very rare instances there are of course technical errors that can occur with live television, however, an initial investigation has indicated that dcp had no involvement in the challenges associated with Ms Carey’s New Year’s Eve performance. We want to be clear that we have the utmost respect for Ms Carey as an artist and acknowledge her tremendous accomplishments in the industry.”

    A co-host of the show that night, Jenny McCarthy added, “If Dick Clark were alive today, I guarantee he would be on air right now fighting back. He's not, so I'm going to. Dick Clark Productions has been doing this show for 45 years ... I've never seen a production company ... more prepared, more supportive of their musical guests, so for her to defame them was so incredibly insulting.”

    Apparently, Ms. Carey and her folks realized that they had to staunch the wound.  Ms. Carey spoke out and said that she was “mortified” by her performance.

    Defamation requires proof of a statement that is false and results in damages to the party identified in the statement.  A company can be defamed, and the sabotage comment would be an example of a statement that would damage a production company such as dcp.  Regarding the statements about Ms. Carey’s lack of preparation and lip-syncing, Ms. Carey is a public figure and she would have to prove, if she filed suit against the newspapers publishing them, that the statements are false and also that they were made knowing that they were false or with reckless disregard of their veracity.  

    The events illustrate that the best solution for mistakes in business is sometimes easing into quasi-apologies that save face.  Litigation is always expensive and often serves to draw more views online that only heightens embarrassment. 

    DISCUSSION STARTERS 

    Explain what would be defamatory in the back and forth.

    Discuss what could happen as a result of the statements. 

  • Judge Determines Madonna Is Not Exempt from Co-op Rules; Equal Application of the Law

          

     

    Among many homes owned by the enduring singer Madonna, one is a co-op (explained below) called Harperley Hall, located in Manhattan, NY, valued at $7.3 million. She has owned the unit for eight years.

    In 2014, the co-op adopted new rules that bar everyone but the owner’s immediate family from staying in the apartment when the owner is not “in residence.” Additionally, the rules prohibit the owner’s children under age 16 from staying without an adult at least 21 years old. Madonna has four children ages 20, 16, 10 and 9. Thus, three of her children, her domestic staff, and all others are prohibited from staying in the unit unless she, as the owner, is at home.

    Madonna wants her children, guests and employees to be able to use the place when she is away. She sued the co-op in April, 2016, claiming the rules were unfair as applied to her because she is an “internationally known performer and travels across the globe on a regular basis.”

    Co-ops are a form of property ownership popular among people who want the benefits of ownership but not the maintenance responsibilities that typically accompany home ownership. Co-ops are found in multi-unit structures akin to an apartment building. The structure is owned by a corporation. Shares of stock are sold to buyers who are granted the right to occupy one housing unit.

    The owners elect a board of directors that governs the building based on bylaws, which are rules adopted to direct the day- to-day operations of the building. The board arranges for maintenance of the building including lawn mowing, snow shoveling, roof repairs, parking lot upkeep, etc. Payment for such expenses derives from a monthly maintenance fee each shareholder pays.

    The Board of Directors typically adopt rules binding on all residents of the building intended to foster amicable relations among neighbors. The bylaws may require that, before any new rules are passed, owners receive notice and have an opportunity to provide input. The bylaws will also specify the necessary number of votes needed to adopt new rules. For example, the required vote might be a majority, two-thirds, or three-fourths. Examples of such rules include a prohibition on renting units on Airbnb, restrictions on noise levels, and mandates requiring the owner to be present anytime the unit is occupied. At Madonna’s co-op, the bylaws require that notice be given and a vote of two-thirds is necessary for passage.  

    In a recent decision, the judge rejected Madonna’s argument that, given her career demands and travel schedule, the rules should not apply to her. Instead, the judge noted that everyone is equal in the eyes of the law. The court commented that the rule applies regardless of the reason an owner is away– whether traveling to perform, traveling to sell merchandise, on vacation, or even serving a period in jail.

    For more information, click here.

    DISCUSSION QUESTION:

    1) What do you think prompted the adoption of the co-op rules that Madonna did not like?

    2) Why would a vote of two-thirds rather than a majority be required to adopt a new co-op rule?

  • Ignoring the Boss: Now Legal in France

    In an effort to provide employees with some down time and separation between personal life and work life, a French law, which took effect January 1, takes technology to bed after work hours.  Employees now have legal protection should they choose to ignore the texts and phone messages from their boss that are sent after hours.

    The law does not prevent employers from sending e-mails and other forms of communication, but employers with 50 or more employee must establish a protocol for their workplace that ensures that work does not spill over into after-hours and employees’ personal lives.

    Consultants working with employers have advised that just eliminating the “Reply All” use when the boss communicates with several employees allows employees to respond, if they desire, to the boss without bringing in other employees. Alissa J. Rubin, "'Right to Disconnect' From Work Email and Other Laws Go Into Effect in France," New York Times, January 3, 2017, p. A6. 

    Emotions run high with regard to the law.  France’s minister of education said that the law was necessary because employees were leashed “like dogs” to their work because of the 24-7 contact from their bosses. However, others see the law as yet another step by the French government to regulate all aspects of employment, something that increases costs of compliance by companies. For example, France has had a 35-hour work week since 2000, something that increased costs for companies and resulted in cutbacks of staff.  That work-week is under review because of record-high unemployment rates in France.  The tensions between those demanding workplace rights and companies trying to contain costs and remain competitive is at peak force in France.

    The so-called “right to disconnect” had been proposed in the French Parliament in the past, but had not passed. The fear behind the legislation was that France would lose the ability to compete with countries, such as the United States, where that immediate responsiveness is part of a strategic and competitive business model in a 24-7 world. Generally, the European ideas do make their way into the United States, so the right to disconnect could become an issue here. However, as Matt Lauer of NBC's Today show noted, "Never work here."  

    DISCUSSION STARTERS

    Explain what the law requires and what employers will need to do to comply.

    What are the issues in France regarding employer regulation?