One of the primary points of contention in data breach actions is when, and whether, sufficient damages exist to meet the standing requirements under Article III. Circuit courts across the country have come to different conclusions, with some requiring a showing of actual damage and others allowing the existence of the breach to essentially serve as confirmation that the data will be used illicitly. According to a recent brief in support of certiorari, the DC Circuit falls into the latter category and a review by the Supreme Court is necessary to resolve the current circuit split.
Similar to the fallout from Enron, the Great Recession of 2007 saw many accounting firms back in the cross-hairs for allegedly failing to warn of the impending financial doom. Many of these entities (turned plaintiffs) were massive companies with billions in assets, leading to protracted and expensive litigation. While some cases settled to avoid further legal costs, one major accounting firm was recently found liable for violating audit standards for one of its major bank clients prior to the Great Recession. The presiding judge is now set to proceed to the damages phase of the trial, where it will be determined the extent to which damages were caused by the violations.
One of the most common problems facing a would-be plaintiff considering a malpractice case is when to file suit. Similarly, those that defend professionals must consider whether to move to stay proceedings if applicable. Especially with accountants and attorneys, causation and damages are difficult to calculate until the underlying matter has concluded. This means that the notoriously long legal process can often come into conflict with the statute of limitations, or create evidentiary problems. The decision is whether to wait many years for the underlying action to conclude and damages to materialize, or continue with the malpractice action in the midst of unresolved issues although the facts are still fresh in witness’s minds. In a recent Texas appellate decision, the court ruled that the case should proceed immediately.
The New Jersey Supreme Court recently declined to dismiss a medical malpractice case for an attorney’s failure to file a timely affidavit of merit (AOM). The court based its decision in large part on the trial court’s failure to schedule a preliminary conference (called a "Ferreira" conference in NJ) to discuss the sufficiency of the AOM. The court further stated that it would order improvements to the courts’ automated case management system to ensure the electronic notification of both the AOM filing obligation and the scheduling of such Ferreira conferences.
Professionals assume a duty of care to their clients. Accordingly, professionals may be held liable for damages to clients that are proximately caused by their negligent acts. In many cases, the link between the professional’s negligent act and the client’s injury is clear, such as a missed deadline that waives a client’s rights. The limits of foreseeability become more difficult to define when the professional’s alleged misconduct triggers independent acts by third parties, such as a government investigation of the client.
With the recent wave of allegations concerning employment-related conduct, there may be in uptick of employers engaging outside firms to conduct internal investigations. While these can be kept in-house, high profile cases and social media often results in the publication of these reports to the public. Consider the NFL’s investigation of the Miami Dolphins known as “bullygate.”
In a decision addressing the facts necessary to plead a breach of fiduciary duty claim against a broker, a California federal district court considered the difference between an “ordinary” broker-customer relationship, and one which rises to the level of a fiduciary relationship.
Friendship has taken on new meaning in the age of social media. Old acquaintances, former classmates, co-workers, professional contacts, public figures, family, and close companions may all be similarly situated as a “friend” on social media, regardless of the level of personal interaction with each. Social media users therefore often apply more liberal standard when accepting new network friends than they would in their personal lives. Professionals, however, may need to be more cautious.
Today’s employees demand flexibility. In turn, many employers are moving towards a “results orientation” business model and getting away from the standard 9-5 schedule. In other words, the employer cares less about when employees get the work done, and only cares that the work gets done effectively. Employment laws are only beginning to catch up to this shift in work hours. Take for example the recent decision where the Third Circuit confirmed that the FLSA requires employers to compensate employees for breaks of 20 minutes or less where the employer allowed employees the flexibility to log off their computers at any time they wished.
Huge cybersecurity breaches at major retailers caught the attention of the public and have made headlines. Now, more recent breach at one of the major credit reporting agencies has the attention of Congress. 48 states and the District of Columbia already have some form of legislation governing security breaches. These statutes typically begin by laying out who is subject to the requirements, such as businesses and information brokers, and what information is considered protected “personal information.” The laws then outline what constitutes a breach, the requirements for providing notice, and exemptions to the law. What's next, Congress?
Captive insurance companies have long been a popular vehicle for companies that require insurance in areas where it is hard to find coverage. Although the IRS has been somewhat suspicious of captives for some time, it was not until the past several years that microcaptives, or captives for smaller companies, apparently piqued the interest of the IRS. After the Tax Court issued an opinion over the summer, several other similar cases have gone to trial and await opinion. The result of these cases will have a significant effect on professional firms who facilitated the creation of these microcaptives, as the businesses hit with improper deductions and tax penalties will likely look for somewhere else to lay the blame.
Cases turn on the evidence. In the case of an employment discrimination or retaliation claim, the key may lie in the employee file maintained by the employer. One common piece of documentation created and maintained by many employers is performance evaluations. In Walker v. Verizon, a federal district court in Pennsylvania ruled on a case illustrating how important documentation can be in defending these claims.
Employers rely upon employees to get the job done. Usually, the “job” requires the employee’s physical presence at work. But injuries and medical conditions throw a wrench in the works. Most employers are at least generally aware of the implications of various federal and state laws governing treatment of employees with medical conditions and injuries. Yet, there is plenty of gray area where employers may be subject to liability. Take for example the recent decision in Severson v. Heartland Woodcraft, Inc. where the Seventh Circuit decided whether an employer could terminate an employee who requested a multi-month leave of absence from employment.
Attorneys and their clients must make strategic decisions during litigation whether to take certain actions that are available to them. Should you move for dismissal or answer the complaint? Should you seek more specific answers to written discovery, or just save your questions for a deposition? These are common questions that do not necessarily have a “right” answer. However, the Pennsylvania Supreme Court recently ruled that waiting too long to decide on a motion to recuse may result in the request being untimely.
Making a referral is most often understood as a recommendation as to the quality of that professional’s services or products. In turn, there are different tort theories that are recognized in many states for negligence in doing so, and potential liability for the actions of a referred professional. What is far less common is to allow liability to flow through several parties even absent independent conduct or a theory of agency.
There are several federal laws with protections for pregnant employees and those employees experiencing complications from birth. Depending on the circumstances, FMLA, ADA and/or the Pregnancy Discrimination Act (“PDA”) may be triggered. In Hicks v. Tuscaloosa, the Eleventh Circuit ruled on a case involving an employee’s post-pregnancy lactation and need to nurse her newborn.
Today it seems as though cyber-security protections are always a half-step behind hackers. For every patch that quietly protects from one type of ransomware, there’s another WannaCry infecting a major company or financial institution. Of course, cyber-security is an important concern for all businesses, including professionals, a point which is still gaining awareness across the country. As these less technologically sophisticated businesses learn more about the importance of cyber-security in the modern world, it can be easy to forget that there are many everyday protections that are just as valuable as the software that protects your data.
Navigating the waters of employee leave is tricky business for employers. At the federal level, FMLA requires "covered" employers to provide employees with job-protected and unpaid leave for qualified medical and family reasons. The question of the appropriate causation standard that must be proven in an FMLA claim is not unanimous among the Circuit Courts. In Woods v. START Treatment & Recovery Centers, the Second Circuit put its stake in the ground.
Professional liability insurance is necessary to any responsibly-run professional practice. The limits of coverage available under an E&O policy help to protect professionals against financial loss. However, the limits of coverage between different policies do not necessarily offer the same protection, even if the face value would appear to be same. For instance, a policy may specify that costs of defense are included in the limits of coverage, a/k/a “burning limits,” which reduces the amount available to satisfy a judgment or pay a settlement as the case progresses. Generally, a policy will state limits of coverage available for each “claim” made against the insured, as well as aggregate limits that cap the amount of damages if multiple claims are brought. Separate claims are easy to distinguish when separate lawsuits are filed by different parties involving unrelated acts. However, do separate claims exist when a single lawsuit is filed that alleges several different instances of misconduct?
New York has joined a growing list of states with ethics boards limiting an attorney's ability to participate in online legal service providers like Avvo and LegalZoom. Similar to other jurisdictions, the New York ethics board authored an opinion honing in on the so called “marketing fee” charged by Avvo for attorney use of its website. Although the opinion declines to decide a list of other potential ethical issues with the company, it concludes that the “marketing fee” is actually a referral fee in violation of Rule 7.2(a) of the New York Rules of Professional Conduct.
Marijuana laws are evolving in the US. Marijuana is a Schedule 1 drug under the Controlled Substances Act, and has no accepted medical use under federal law. However, 29 states and Washington, D.C. have passed laws that decriminalized medical or recreational marijuana use. Nonetheless, many employers have longstanding zero tolerance drug use policies. The question remains, how should employers reconcile their internal policies with the laws requiring employers to accommodate employees with certain medical conditions? The answer is hazy.
Many business deals begin with a handshake or a quiet conversation. Corporate America is filled with side deals and compromise and promises. Often, these arrangements are perfectly acceptable. But, the intersection between business and politics is a different animal; there are strict regulations regarding governmental contracts and bids and proposals. Transparency is key. Attorneys engaged by governmental contractors must be careful. The recent indictment of a Pennsylvania mayor and an outside attorney in what is being alleged as a pay-to-play scheme is a reminder of the fine line attorneys must walk. In addition to the target-attorney being named, the indictment is littered with references to other attorneys allegedly involved in the scheme. This involvement spans from contributions to the mayor’s various campaigns to presence at meetings to discuss city contracts. While many clients may battle for the throne, attorneys must steer clear of even the appearance of impropriety.
Federal civil rights actions are somewhat unique in that they allow the prevailing party to be granted “reasonable attorney’s fees.” An employer on the wrong side of a decision or verdict could leave it paying (a) damages; (b) its attorney's fees and (c) its adversary's attorney's fees. But what are “reasonable” attorney fees? In Sommerfield v. City of Chicago, the Seventh Circuit shed some light on this important question.
Most jurisdictions require that a plaintiff establish allegations of accounting malpractice through expert testimony. Moreover, accounting experts are often relied upon to establish damages. Accordingly, the vast majority of litigators, even those outside of the malpractice community, will encounter a CPA expert witness. This may be daunting for attorneys. Fortunately, there’s a handy, but underutilized, guide. The special reports to the AICPA Code of Professional Conduct include ethical standards required of every CPA. The reports provide a readymade guide for evaluating the efficacy and admissibility of a CPA expert’s testimony. Using these standards as a benchmark should help practitioners retain and oppose an accounting expert.
Most employers know of the requirement to adjust any aspect of the working environment which may conflict with an employee’s religious beliefs. At the federal level, under Title VII, an employer must make reasonable accommodation for the religious observances of its employees, short of incurring an undue hardship. But what are religious accommodations? What proof may an employer request in order to establish that the employee is being sincere? The 4th Circuit recently examined a religious accommodation scenario that ended in an award of nearly $600,000 in damages and other benefits to the employee.
Most employers and business owners are generally aware of the requirements set forth by the ADA to accommodate accessibility to buildings and facilities by individuals with disabilities. These guidelines may impact the type of material used or the design of entrances, doorways and the like. However, how many business owners understand that these regulations also govern the Internet? The advancement of technology continues to make it easier for consumers to purchase goods and services without venturing outside. While websites allow companies to market to more consumers, the use of Internet services also expose employers and business owners to liability of the site isn't compliant with the ADA. The Southern District of Florida addressed this issue in Gil v. Winn-Dixie Stores, Inc.
In Justice Neil Gorsuch’s first written opinion for the Supreme Court, he handed down a major victory for the secondary debt market by ruling that debt buyers do not fall under the definition of “debt collector” for purposes of the FDCPA. Under the FDCPA, debt collectors are subject to strict requirements when attempting to collect debts and violating these rules leads to significant liability. Until now, a split among the circuits existed as to whether the term “debt collector” includes entities that purchase debt originally owned by another party. The Supreme Court therefore granted writ in Henson v. Santander Consumer USA, Inc. in order to resolve the inconsistent application across jurisdictions.
The recent instances of violence in the workplace remind us of the complex task facing employers. Employers must maintain a safe work environment for employees while operating within the parameters of the many laws that protect employment interests. Reportedly, every year, approximately 2 million Americans fall victim to workplace violence. According to OSHA and the Bureau of Labor Statistics Census of Fatal Occupational Injuries, homicide is the fourth highest cause of workplace fatalities in the United States. The scope of what and how workplace violence may occur is broad. It can involve conduct between employees, employees and customers, and employees and non-employees (e.g. a spouse). Given the serious nature and risk associated with workplace violence incidents, it is imperative that employers take steps to prevent such acts from occurring.
Agreements within employment contracts and employee handbooks continue to be subject to strict scrutiny by the NLRB. In a recent decision, the Sixth Circuit enforced an NLRB Order finding multiple NLRA violations for prohibiting employees from engaging in “collective bargaining.” The issue should be of interest to all employers given the common misconception that the NLRA only applies to unionized employers.
One strike, you’re out? The isolated use of a racial slur may be enough to establish a hostile work environment claim. While the Second Circuit did not squarely answer the question in the affirmative, in Daniel v. T & M Prot. Res., LLC, the court allowed the claim to proceed. To establish a hostile work environment claim, a plaintiff must show: that the workplace was permeated with discriminatory intimidation that was sufficiently severe to alter the conditions of the work environment and that a specific basis exists for imputing the conduct that created the hostile environment to the employer. So what does severe or pervasive mean in this context? Can an isolated incident rise to the level of pervasive?
You can learn a lot about reputational harm and hiring decisions from the NFL. A college football player potentially lost millions recently as his draft stock tumbled in the wake of a rape investigation weeks before the NFL Draft. Granted, the player was selected in the first round, but at a lower pick than originally projected. Reportedly, numerous teams called the player within 48-hours of the disclosure of the investigation to hear his version of events. Some teams reportedly administered a polygraph test to the player. But what's enough? What steps must an employer take to investigate potential employees? A related question: what's the potential reputational cost to the employer? These are critical employment decisions.
Debt collectors recently won an important victory in the U.S. Supreme Court, which ruled that filing a stale claim in bankruptcy court does not run afoul of the Fair Debt Collection Practices Act (the “FDCPA”). Although the Opinion does not affect a debtor’s potential claim for sanctions under frivolous filing rules, it does remove at least one potential avenue for recovery.
Attorneys are expected to act as zealous advocates for their clients. As such, attorneys often pursue claims on behalf of their clients even when the legal theory of recovery is unclear or the facts developed in discovery favor a defense verdict. In some cases, however, attorneys may pursue recovery even where they know that the claims are without merit or the theory of liability is contrary to an established rule of law. When an action is clearly frivolous, the defendants may be entitled to bring an action of their own against both the plaintiffs and counsel for wrongful use of judicial proceedings.
Is it reasonable for an Assistant Principal to return to her job if she has medical restrictions that prohibit her from interacting with potentially unruly students? The 7th Circuit examined this situation in Brown v. Milwaukee Bd. of Sch. Directors, which addresses “reasonable accommodations” under the ADA. Of course, the ADA requires employers to make “reasonable accommodations” that will allow a qualified individual with a disability to perform the essential functions of her job. So what is a reasonable accommodation? It depends on the company, the essential functions of the job, and the medical restrictions of the applicant or employee.
The recent departures of high-profile executives and the flurry of harassment lawsuits provide plenty of teaching moments for employers. Notably, these very public exits and lawsuits are a prime example of why employers must act decisively when complaints of harassment arise in the workplace. Unfortunately, this situation is all too familiar for some employers. Some employers may be tempted to overlook the conduct of top performers even though it may open the door to liability. However, it is critical that allegations of harassment be taken seriously and that prompt investigations are conducted by employers. Sometimes it's necessary to bring in third-parties to conduct a thorough investigation particularly if higher level executives are involved or if there is a pattern of troubling allegations.
Arbitration agreements are relatively common in nursing home agreements but often are not enforced by courts. One basis courts rely upon in refusing to enforce arbitration agreements are state court rules that require certain claims to proceed to trial. The U.S. Supreme Court recently declined to hear the appeal of a Pennsylvania Supreme Court decision requiring a survival claim to proceed to arbitration, despite a local rule that requires trial for such claims. The decision provides some clarity on how courts will assess clashes between the Federal Arbitration Act (FAA) and contrary state laws at a time when clarity is needed on this topic in light of the recent decision by CMS (Center for Medicare & Medicaid Services) to postpone its ban on arbitration agreements in nursing homes.
It is not uncommon for attorneys to join forces to defray costs. This often means sharing office space, support staff, and equipment. Some attorneys take this a step further, advertising themselves as a partnership even if their practices remain separate. Such arrangements should be made with caution, however, as they may lead to vicarious liability among the so-called partners.
There was considerable activity within the professional liability community in 2016. As a result, there was much to discuss. As we've done in past years, we've taken a close look at what was most interesting to you in 2016 with an eye toward maintaining your interest this year. Like 2015, thousands of you read about the risk management issues facing a response to legal audit letters. You were also very interested in the FLSA and FMLA. Many readers were interested in the tricky concept of pleading the Fifth Amendment in the civil context. Next, the most read post focused on how an eroding malpractice policy could spur litigation. Finally, in terms of the most read posts, you were interested in when a malpractice claim arises.
Many professionals do not end their careers where they started. Professionals are on the move. The vast majority of professionals are impacted by the transition of a colleague from one firm to another. In fact, with the increase in online media covering the legal industry in particular, news of partner transitions is readily available. In a recent California case, a trustee of a bankrupt law firm has taken the position that the dissolved firm should retain all ongoing legal fees from cases started at the firm. This could have significant impact on how professionals transition their practice.
Attorneys strive to be zealous advocates for their clients. Not surprisingly, when defending depositions, attorneys are often tempted to object to questions that they perceive to be damaging to their client’s case, even if the question itself is not improper. Attorneys should be cautious, however, to avoid making excessive objections that are not likely to be sustained.
Attorneys are people too. In the midst of negotiating/litigating on behalf of clients, attorneys also manage their own day-to-day lives. Attorneys sign leases, enter into contracts, negotiate with vendors and otherwise engage in discussions that are personal in nature. It may be tempting for attorneys to seek leverage by boasting their title as "esquire" or to disclose the attorney's affiliation with a particular law firm. But, to do so may trigger legal and ethical implications.
When it comes to interesting ethical quandaries, the case of U.S. v. Martin Shkreli is the gift that keeps on giving. As we discussed in a previous post, Martin Shkreli has asserted the “advice-of-counsel” defense in the securities fraud case he is facing in the Eastern District of New York. Since our last post, Shkreli has served a document subpoena on one of the law firms that represented several of his companies, as well as him personally. What complicates this matter, however, is the fact that many of these companies are now defunct and therefore lack any active individuals who can waive the attorney-client privilege on their behalf.
The professional-client relationship often begins with a retainer agreement/engagement letter: a contract that defines the terms and scope of professional services. Accordingly, when a client files suit alleging professional malpractice, the claims will generally sound in both contract and tort. Whether a claim is asserted as a breach of contract or tort can have important implications with regard to the statute of limitations and other potential defenses. For instance, depending on the state, a tort claim may be time-barred where a breach of contract claim is not.
Determining the length of the statute of limitations is easy but the trick often comes in figuring out when the statutory period begins running. In the legal malpractice context, this may often present the difference between dismissal or protracted litigation. A recent New York Supreme Court decision has shed some further light on why it remains important for all parties to know the applicable statute and accrual date, and highlights yet another situation in which a Court will employ a jurisdictional accrual rule to bar a claim.
At one point or another, many attorneys will encounter a lawsuit they believe to be potentially frivolous. These claims often lead to frustration for the defending attorney and client who may face two difficult alternatives: (a) settle the case in order to avoid defense costs or (b) expend time and money in defending a meritless claim. A recent case out of Pennsylvania may give some hope to those forced to defend weak claims and might give pause to anyone considering such a suit in the future.
World Wrestling Entertainment is punching back in a class action lawsuit filed by several of its former wrestlers. However, the WWE’s recent court filings take aim at the plaintiffs’ attorneys as much as the plaintiffs’ legal claims. The case provides us with a timely example of the ramifications of failing to carefully read pleadings before filing.
Competence is essential to a successful practice. Competence requires that professionals develop the skill set and knowledge base to meet their clients’ needs and keep up with changes in their practice area. In the modern age, remaining competent also entails that professionals understand and incorporate new technology into their practice. Utilizing new technologies helps to expand professional capabilities, promotes efficiency, and enables professionals to remain competitive. But keeping up to date with technology is not simply good advice for professionals who want to get ahead – it may also be an ethical obligation.
In a widely watched and long-awaited decision, the North Carolina Supreme Court definitively determined that an independent auditor has no fiduciary duty to the company, overturning a 2014 Court of Appeals decision finding that such a duty existed. The court, however, was evenly divided on the issue of whether the company’s claims were barred by the defenses of in pari delicto and contributory negligence, leaving undisturbed (albeit without precedential value) the Court of Appeals’ decision that the defenses did not bar the remaining claims. Certified public accountants live to fight another day for the validity of the in pari delicto defense in North Carolina.
Although some law firms are slow to embrace new technologies, debt collection firms appear to be the exception to this general rule. Most of these firms use sophisticated computer software to retrieve information from their creditor-clients, and use the program to automatically populates legal forms. This process saves a significant amount of time for attorneys in a high-volume field, allowing them to file hundreds of basic pleadings in a single day. However, this process has come under increasing scrutiny from both debtors’ rights firms and the government.
Although some law schools are notorious for offering elective courses like “space law” that are of limited practical use to most attorneys, there is still a set of core classes that are invariably recommended. Courses such as tax law and corporate law often fall into this group, as most lawyers will have to consider tax repercussions or the structure of a company at some point in their careers, regardless of their practice area. One big firm is now learning that despite the dearth of classes in insurance law, it is a subject that every attorney should become familiar with.