USLAW Magazine - USLAW NETWORK, Inc

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SPRING | SUMMER | 2015

ALLOCATING RISK BY CONTRACT

Indemnification, Hold Harmless, and Insurance Provisions

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TRANSPORTATION CONTRACTS FOR LEGAL COMPLIANCE & RISK MANAGEMENT They Aren’t Just for Rates Anymore!

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REPUTATION DAMAGE CONTROL IMPACT OF FTC’S BROADENED SCOPE Insuring the Cost of Mitigating Reputational Harm Following a Cyber-Attack or Data Breach

MORE THAN JUST DIGITIZATION

Effects of an Electronic Health Record on Quality, Patient Satisfaction and Operations

Creeping In On Your E-Business

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From the Chair's Desk

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FEATURES:

Table of Contents

Transportation Contracts for Legal Compliance & Risk Management – They Aren’t Just for Rates Anymore! – Kenneth R. Hoffman • Dysart Taylor Cotter McMonigle & Montemore, P.C.

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Love Me Tender – Don’t Be Cruel J. Michael Kunsch • Sweeney & Sheehan, P.C. and Linda G. Thoede • iHeartMedia, Inc.

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Litigation Evaluation and Strategy Processes – Food Contamination and Containment Nicholas M. Cardascia and Frank A. Cecere • Ahmuty, Demers & McManus

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More Than Just Digitization – Effects of an Electronic Health Record on Quality, Patient Satisfaction and Provider Operations – Ryan Holt • Sweeny, Wingate & Barrow, P.A.

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Data Breach Starter Kit – Essential Considerations to Reduce Risk Maureen Frangopoulos and Colin Gainer • SmithAmundsen

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Reputation Damage Control – Insuring the Cost of Mitigating Reputational Harm Following a Cyber-Attack or Data Breach – John J. Jablonski • Goldberg Segalla LLP

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Cybersecurity – The New Professional Risk (Part 1 of 4: Cyber Crime and the Vulnerability of the Healthcare Industry) – Karen Painter Randall and Steven A. Kroll • Connell Foley LLP

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Return to Tarasoff – More Liability for Mental Health Professionals? – Eric J. Neiman • Williams Kastner

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Just What the Doctor Ordered? Tips for Employee Wellness Programs Amber Davis-Tanner • Quattlebaum, Grooms & Tull, PLLC and Ellen M. Tipping • Murchison & Cumming, LLP

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Bitter Business Disputes – Four Practical Tips on Making a Successful Lost Profits Claim Mhare O. Mouradian • Murchison & Cumming, LLP

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Allocating Risk by Contract – Indemnification, Hold Harmless, and Insurance Provisions John D. Cromie and Neil V. Mody • Connell Foley LLP

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President Obama’s Executive Action on Immigration Policy Offers Only Temporary Reprieve for Some – Jennifer Parser • Poyner Spruill

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Cross-Border Discovery Disputes and 28 U.S.C.1782 – Leveling the Playing Field Max C. Rudolf and Jordan S. Cohen • Wicker Smith O’Hara McCoy & Ford P.A.

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Franchising Risk Factors – Is the Franchisor Responsible for a Franchisee’s Negligence? Michael P. Lowry • Thorndal Armstrong Delk Balkenbush & Eisinger

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Impact of FTC’s Broadened Scope – Creeping In on Your E-Business Susan Childers North • LeClairRyan and Lisa Butler • Ferguson Enterprises, Inc.

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Not Just Fun and Games – Assumption of the Risk, Liability Waivers and Exculpatory Clauses in Recreational Settings – Robyn Farrell McGrath and Jude J. Steininger • Sweeney & Sheehan, P.C.

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The Loss of ESI and the Adverse Inference Instruction: How New FRCP 37(e) Might (and Might Not) be a Prudent Change – James J. Lofrese • Traub Lieberman Straus & Shrewsberry, LLP

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Discovery Dilemma: How to Plan for the “Big One” Without Incurring Big Fees Dennis Kiker • Granite Legal Systems

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Honesty Now the Best Policy in Canadian Contract Law Robert Ford, Sean Bawden and Brent Craswell • Kelly Santini, LLP

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Construction Contracts for Projects in Canada – AIA Documents and CCDC Comparison Roy Nieuwenburg • Clark Wilson LLP

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Breaking Up Is Hard To Do. Or is it...? – Jonathan Cornthwaite • Wedlake Bell LLP

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DEPARTMENTS: Five Minutes With… Tom DeMatteo of ABC Bus Companies, Inc. Linda G. Thoede of iHeartMedia, Inc. Brian Christensen of the Kohler Co. Firms On the Move Successful Recent USLAW Law Firm Verdicts / Transactions USLAW NETWORK Source Book Spotlight on Partners

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About USLAW 2015 Membership Roster

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The articles contained herein are for informational purposes only and are not intended to be the basis for decisions in specific situations nor a substitute for legal counsel. Copyright © 2015 USLAW NETWORK, Inc. All rights reserved.

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Chair’s Desk Publisher ROGER M. YAFFE Editor CONNIE WILSON

On behalf of USLAW – and the current issue’s authors in particular – I am pleased to share with you the Spring/Summer 2015 issue of USLAW Magazine. As you flip through the pages you will see terrific articles tackling the hottest legal and business issues such as data breaches, cyber security & privacy as well as insightful pieces on the latest healthcare laws, transportation issues, insurance regulations and much more.

Art Director JEFF FREIBERT • COMPASS CREATIVE BOARD OF DIRECTORS C. ERIK GUSTAFSON, CHAIR LeClairRyan • Alexandria, VA THOMAS L. OLIVER, II VICE CHAIR AND PRACTICE GROUP DIRECTOR Carr Allison • Birmingham, AL LEW R. C. BRICKER, SECRETARY-TREASURER SmithAmundsen LLC • Chicago, IL JILL ROBB ACKERMAN, ASSISTANT TREASURER Baird Holm LLP • Omaha, NE

USLAW Magazine is just one of the many complimentary resources we make available to you throughout the year. From client conferences to regional events to monthly webinars, compendiums and a host of social media and mobile app options, USLAW delivers ready-to-use legal resources. We also look forward to seeing you at other industry and regional events we host throughout the year. The Driving the Dialogue series has created an important forum for highly interactive discussions on issues vital to your business and our popular gatherings at industry conferences create new and strengthen existing networking opportunities. When your schedule permits, please join us. Another opportunity to receive insight tailored to your highest priority needs is one of our newest resources is LawMobile, powered by USLAW NETWORK. LawMobile is a fully customizable education program that delivers training, information and instruction on some of today’s top legal topics, jurisdictional differences and legal decisions. And the beauty of LawMobile is that USLAW comes to you! We bring a select team of USLAW member attorneys to talk about the issues you tell us you want and need to learn about. If there is any topic that is of particular interest and priority to you, please reach out to your USLAW team to arrange for a presentation. As we look at the landscape of legal information and resources and how we can best help you, I’d like to extend special thanks to USLAW’s Client Leadership Council members for their input and for supporting our continued commitment to being client-focused in all of our efforts as a NETWORK. I’d also like to acknowledge our dedicated corporate partners who share their knowledge and resources while standing at the ready to help you with your legal matters. Please enjoy this issue of USLAW Magazine, stay in touch with us throughout the year and please reach out to me or any of us within USLAW if we can assist you with anything or simply answer a question you might have.

C. Erik Gustafson LeClairRyan • Richmond, VA

NICHOLAS E. CHRISTIN, FIRM MANAGEMENT DIRECTOR Wicker Smith O'Hara McCoy & Ford P.A. • Miami, FL JOHN D. CROMIE, EMERGING INDUSTRIES DIRECTOR Connell Foley LLP • Roseland, NJ AMI C. DWYER, CLIENT LIAISON DIRECTOR Franklin & Prokopik, PC • Baltimore, MD NEIL A. GOLDBERG, MEMBERSHIP MANAGEMENT DIRECTOR Goldberg Segalla LLP • Buffalo, NY BRADLEY A. WRIGHT, IMMEDIATE PAST CHAIR Roetzel & Andress • Cleveland, OH EDWARD G. HOCHULI, CHAIR EMERITUS Jones, Skelton & Hochuli, P.L.C. • Phoenix, AZ JOHN E. HALL, JR., CHAIR EMERITUS Hall Booth Smith, P.C. • Atlanta, GA MICHAEL R. SISTRUNK, CHAIR EMERITUS McCranie, Sistrunk, Anzelmo, Hardy, McDaniel & Welch, PC • New Orleans, LA MARK A. SOLHEIM, CHAIR EMERITUS Larson • King, LLP • St. Paul, MN SHERYL J. WILLERT, CHAIR EMERITUS Williams Kastner • Seattle, WA NOBLE F. ALLEN Hinckley, Allen & Snyder LLP Hartford, CT

MICHAEL P. SHARP Fee, Smith, Sharp & Vitullo, L.L.P. Dallas, TX

ROBERT D. FORD Kelly Santini LLP Ottawa, Ontario, Canada

RICHARD K. TRAUB Traub Lieberman Straus & Shrewsberry LLP Hawthorne, NY

KEVIN L. FRITZ Lashly & Baer, P.C. St. Louis, MO NICOLÁS JACA OTAÑO Rattagan, Macchiavello, Arocena & Peña Robirosa Buenos Aires, Argentina DAN L. LONGO Murchison & Cumming, LLP Los Angeles, CA SHAWN M. RAITER Larson King, LLP St. Paul, MN

RODNEY L. UMBERGER Williams Kastner Seattle, WA KENNETH B. WINGATE Sweeny, Wingate & Barrow, P.A. Columbia, SC EX OFFICIO MEMBER RICHARD ISHAM Wedlake Bell LLP London, England

ROGER M. YAFFE, CHIEF EXECUTIVE OFFICER [email protected], (800) 231-9110, ext. 1 JULES MILLION, DIRECTOR OF EVENT SERVICES [email protected], (800) 231-9110, ext. 2 LAURIE HAMMELL, EXECUTIVE ASSISTANT TO THE CEO [email protected], (800) 231-9110, ext. 3 CONNIE WILSON, COMMUNICATIONS SPECIALIST [email protected], (800) 231-9110, ext. 4 LINDA GARCIA, MEMBERSHIP SERVICES [email protected], (800) 231-9110, ext. 5 3111 N. University Drive, Suite 400 Coral Springs, FL 33065 • Phone/Fax 800.231.9110


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Transportation Contracts for Legal Compliance & Risk Management THEY AREN’T JUST FOR RATES ANYMORE! Kenneth R. Hoffman

As Samuel Goldwyn reportedly said, “A verbal contract isn’t worth the paper it’s written on.” Every first-year law student learns all the standard reasons for advising clients to use written contracts: to document the deal (memories tend to get fuzzy, especially when a deal goes south and money is involved) as to price, payment terms, obligations of each party, etc. We also learned that some contracts, such as those involving an interest in real estate or ones that cannot be performed within one year, must be in writing in order to be enforceable. However, there are some transactions and agreements that must be in writing in order to be legal at all, not just enforceable, and in order to protect the parties and their officers, directors, and principals from the risk of serious liability. A number of transportation contracts fall into this category, and rates and charges are not the primary issues. Because of the requirements of the recently enacted federal statute known as “MAP-21” (officially the “Moving Ahead for

Dysart Taylor Cotter McMonigle & Montemore, P.C.

Progress in the 21st Century Act”), it is imperative that truckers (motor carriers), freight forwarders, freight brokers, and the shipper customers of each of those, use written contracts. The law states: “For each agreement to provide transportation service … the [trucker, broker, or forwarder] shall specify, in writing, the [Federal Motor Carrier Safety Administration] authority under which the person is providing such transportation service.”1 (Emphasis added) The purpose of the law is to require each party to a transportation agreement to specify what hat they are wearing in the transaction. This requirement is especially critical for transactions involving parties that might be authorized to wear more than one hat. For example, some companies have FMCSA authority to provide both trucking and freight broker services. That company and its shipper customers need to know (and

must now specify in writing) if the company is acting as a motor carrier or a broker in each transportation transaction. The same is true for companies that hold any one, or a combination of motor carrier, freight forwarder, or freight broker authority. A licensed motor carrier is not allowed to provide brokerage service unless it also holds broker authority, nor is a motor carrier allowed to provide freight forwarder service unless it has a freight forwarder registration.2 Similarly, a freight forwarder and/or a freight broker cannot perform motor carrier service unless it also holds a separate FMCSA registration as a motor carrier.3 Motor carriers are no longer allowed to broker shipments to other carriers under the guise of “convenience interlining.” To constitute a legitimate interline operation, the originating motor carrier must physically transport the shipment for at least part of the trip and must retain liability for the cargo and for payment of the connecting carriers.4


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However, in any transaction in which freight brokerage service is involved (which includes all or most third-party logistics or 3PL service providers), not only must the broker be identified as such in writing for each transaction, it is also critically important for the parties to make sure the transportation service provider is actually authorized by the FMCSA to provide freight brokerage service. MAP-21 includes some real teeth designed to deter violations and to compensate victims of those violations regarding unauthorized freight brokerage. One of the new statutory provisions specifies that “[a]ny person who knowingly authorizes, consents to, or permits, directly or indirectly, either alone or in conjunction with any other person,” the provision of interstate freight brokerage service without registering as a broker and satisfying the $75,000 financial security (surety bond or trust fund) requirements applicable to brokers is liable to an “injured party for all valid claims incurred without regard to amount.”5 This private cause of action is in addition to the $10,000 civil penalty for each violation. The statute does not define what constitutes “a valid claim.” Because the law is still relatively new, the courts have not had a chance to weigh in on the scope of that term; however, at least one case is pending. The liability for civil penalties and private causes of action extends, jointly and severally, “to (1) any corporate entity or partnership involved; and (2) to the individual officers, directors, and principals of such entities.”6 In addition, an injured party may be entitled to recover attorney fees from the violators.7 People rightfully tend to sit up and take notice when the law extends the risk of joint and several liability not only to their business or employer, but to them personally. A Rate & Load Confirmation document

can satisfy the basic statutory requirement for a written specification of the role each party is playing in the transaction and the authority under which the service provider is operating. These documents have been common in the industry for years, but many companies still need to revise their forms to include their “hat designation” information. Moreover, most Confirmation forms are single page, bare-bones statements of rates and charges along with pick-up and delivery instructions. The better practice is to have a detailed master contract, and use a Confirmation document for each individual transaction. The Confirmation document should refer to the master contract as the governing agreement. In addition to specifying each transportation service provider’s role in the transaction to avoid the risk of liability for violating the freight broker registration provisions, all motor carrier, freight broker and freight forwarder transportation contracts should address a number of other issues that are keys to risk management, some of which have peculiarities for the transportation industry. Examples include responsibility for loss or damage of cargo; cargo legal liability insurance for truckers and freight forwarders (particularly considering that there is no longer any law or regulation requiring that coverage); contingent cargo liability insurance for freight brokers; cargo claims filing and processing; indemnification; compliance with California Air Resources Board rules; back-solicitation/ non-circumvention; liability for payment of freight charges; availability of federal preemption of certain claims and suits based on state or local laws or regulations; and waiver of various statutory rights or obligations. Many of these issues are subject to default rules by statute or regulation, but those statutes and rules may be waived in contracts between shippers and carriers. In fact, “contract carriage” is defined in federal law as “service provided under an agreement entered into under [49 U.S.C.] section 14101(b).”8 That statute allows a motor carrier or freight forwarder to enter into a contract with a shipper (except for certain household goods shipments), if the shipper and carrier, expressly and in writing, waive any or all rights and remedies under the otherwise governing federal laws. The parties may not waive the provisions governing registration, insurance, or safety fitness.

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There are numerous types of transportation agreements to which the written “hatdesignation” provision applies, including: • Carrier/Shipper • Carrier/Broker • Broker/Shipper • Broker/Carrier • Broker/Co-Broker • Freight Forwarder/Shipper • Freight Forwarder/Carrier • Freight Forwarder/Broker

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49 U.S.C. § 13901(c) 49 U.S.C. § 13902(a)(6) 49 U.S.C. § 13903(d) & § 13904(d) 49 U.S.C. § 13902(i) 49 U.S.C. § 14916(c) 49 U.S.C. § 14916(d) 49 U.S.C. § 14704

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49 U.S.C. § 13102(4)(B) 49 U.S.C. § 14706 49 U.S.C. § 14705 49 U.S.C. § 13708 49 U.S.C. § 13710 49 U.S.C. § 14501(b) & (c)

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The courts have tended to strictly construe the law regarding “express waiver.” A specific reference to §14101(b) is highly recommended. On the other hand, both parties should carefully consider the implications of a blanket waiver of “any and all rights and remedies.” It is often advisable to keep certain federal statutory provisions effective and applicable, and to do so by specifically excluding them from the waiver. Examples of key rights and remedies that should be considered for non-waiver include: cargo liability under the Carmack Amendment;9 time limits for certain claims;10 disclosure requirements for rates and charges11 procedures and time limits for overcharge and undercharge claims;12 and federal preemption of state laws related to rates, routes, or services.13 By not waiving the provisions of these statutes the parties also preserve their opportunity to take their case to federal court in the event of a lawsuit. Even if federal law would govern a case brought in state court, the federal courts are likely to be more knowledgeable about these statutes and the extensive body of court decisions interpreting them. Since economic deregulation of the trucking industry several decades ago, and the resulting demise of mandatory tariffs and the filed-rate doctrine, it has always been a good idea to have written transportation contracts to at least assure everyone knows what rates and charges apply. Now MAP-21 has made written disclosure of the precise role of the service provider a legal requirement applicable to every transportation transaction involving trucking, freight forwarding, or freight brokering. Because the parties to these transactions must have a written document, they should take the opportunity to protect themselves and their businesses by using a complete contract that addresses numerous other legal compliance and risk management issues inherent in surface transportation in the United States. If drafted well, that contract will be worth far more than the paper it’s written on.

Ken is a Shareholder in the Kansas City firm of Dysart Taylor Cotter McMonigle & Montemore. He represents motor carriers, shippers, and transportation intermediaries regarding contracts, cargo claims litigation, and regulatory matters, both domestic and international. Ken is a Past President of the Transportation Lawyers Association. His e-mail is [email protected].


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LOVE ME TENDER DON’T BE CRUEL J. Michael Kunsch Sweeney & Sheehan, P.C. Linda G. Thoede iHeartMedia, Inc.

It all starts with good intentions. Corporate partners, wanting to preserve important business relationships, allocate responsibility fairly, and avoid aiding claimants with infighting among potential defendants, negotiate indemnity agreements. These agreements, found in nearly all commercial contracts, should streamline the claim handling process by placing the investigation and defense in the hands of the entity with the most information and expertise to efficiently assess and resolve the dispute. Increasingly, however, disputes arising from such agreements cause additional litigation and harm the good will they were intended to preserve. It doesn’t have to be this way. THE INDEMNITY AGREEMENT Whether you are a retailer entering into a service contract with a maintenance

company, security provider or snow removal contractor, contracting to sell goods manufactured by another entity, or arranging for an entertainer to perform at your venue, recognition of risks and allocating them is a sound business practice. A typical indemnity provision contains the following: [Indemnitor] shall indemnify, defend and hold harmless [Indemnitee] from and against (i) any and all losses, costs, expenses (including, but not limited to, attorney’s fees), damages and liabilities arising out of or in connection with any material breach by [Indemnitor] of any of its representations, warranties, covenants or agreements contained herein and (ii) any and all losses, injuries and damages to any person or property arising out of or sustained in connection with [Indemnitor’s] acts or omissions (or

those of its employees, agents and/or contractors) in connection with the obligations set forth herein. It is agreed that this indemnity agreement applies to claims made by employees of [Indemnitor] against [Indemnitee] and constitutes a waiver of any defenses available to [Indemnitor] under a Workers Compensation Act. The foregoing indemnities shall not extend to any claims arising solely from the negligence or willful misconduct of [Indemnitee], its agents, employees, representatives or contractors. The indemnity provisions shall survive any expiration or termination of this Agreement. The indemnity agreement is usually paired with an obligation for the Indemnitor to obtain insurance for claims arising out of its actions and contractual ob-


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ligations. It is the interplay between the contracting parties and the Indemnitor’s insurance carrier which often results in contentiousness. WE HAVE AN INDEMNITY PROVISION – NOW WHAT? To illustrate how an indemnity agreement and resulting tender should work, consider the following scenario: a venue operator retains a security company to provide supervisors and guards during an event pursuant to a contract which contains the indemnity provision above. The security company provides a certificate of insurance identifying the venue operator as an additional insured “with respect to claims arising out of the negligence of the named insured’s operations.” During the event, a patron is injured when caught between two others who engage in fisticuffs. Subsequently, the injured patron’s attorney sends a letter to the venue operator, alleging that her client was injured as the result of inadequate security. When the operator receives the notice, it sends a letter to the security company and its insurer, tendering the claim. As drafted, the indemnity provision should be unassailable in light of the clear facts and relatively separate obligations of the parties. But what facts govern the tender? And what if the fight involved two intoxicated individuals who had clearly been over-served inside the venue by employees of the venue operator, therefore implicating potential negligence of the operator or another subcontractor? Even in the clearest case, questions like these provide a basis for someone so inclined to delay accepting the tender under the guise of investigating, requesting documents, or a myriad of other excuses, thereby frustrating the purpose of the agreement.

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2. Investigate the facts – Tendering your defense requires an examination of the facts underlying the claim in order to apply them to the contractual terms. Gather and preserve relevant information wherever it can be located, including incident reports, witness statements, police reports, social media and video. 3. Understand the contract – Once you have an understanding of the facts, assess who was responsible for the activity complained of and identify relevant contractual provisions, including the scope of the duties undertaken by the contractor, indemnity obligations and insurance requirements. It is important to note that your contractor and its insurer likely owe you separate and distinct obligations under the contract and applicable law. 4. Draft the tender letter carefully – Preserving the business relationship between Indemnitor and Indemnitee is usually key. It is obvious that the tender letter must contain a statement of the relevant facts (including, where appropriate, citations to attached investigation documents) and an outline of the relevant contractual provisions. However, the language utilized must be appropriate in light of the relationship between the parties. If the Indemnitor is a close business partner, words like “demand” may be misunderstood as aggressive, even if they track legal requirements. It may be important to involve employees outside of the corporate legal or risk management departments who understand the business relationship and their counterparts at the other entity, such as sales or marketing personnel, and have them review the letter for content and tone.

SUGGESTED BEST PRACTICES FOR PURSUING TENDERS So what is the aggrieved Indemnitee to do when what it believes is a clear tender is unacknowledged or denied? Are there best practices which can facilitate the tender and avoid recriminations? Fortunately, the answer to this question is yes.

In addition, it is important to request a written acknowledgment and response to the tender within a certain (reasonable) timeframe. This defines the terms of the acceptance or denial and positions the parties for future communications. It also may be important if facts arise later which cause the tender to be rescinded.

1. Assemble your documents – It is critical for the in-house attorney or risk manager to have contracts and insurance information for the specific event, venue or location available from the outset, together with an understanding of the operations. These documents will assist in identifying the interested parties and their contact information and helps define the obligations you seek to enforce.

5. Consider notifying your business partner that the tender is coming – Especially when the commercial relationship is important and you want your counterparts at your partner to understand that the tender is not a move of aggression but one of contract and convenience, picking up the phone and calling the Indemnitor prior to sending the letter may assist to avoid misunderstandings and facilitate a quick

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response. We live in an electronic world, but the value of personal relationships must be preserved and maintained. 6. Request separate responses from the Indemnitor and its insurer – As explained above, the obligations you are owed are likely different. If the insurer resists the tender based on a policy provision or some other issue between the carrier and it’s insured, this does not prevent the insured from fulfilling its contractual indemnity agreement. CONCLUSION Pursuing and litigating tenders and indemnity agreements can be frustrating. Despite the best intentions of contracting parties, avoidance or denial of tenders has become almost a business cliché. While there is no guarantee of success even in the subjectively most straightforward fact scenario and clear contractual indemnity language, conducting early investigations and following established protocols can make the difference between acceptance and either delay or denial and preserve important commercial relationships.

J. Michael Kunsch is a shareholder in the Philadelphia office of Sweeney & Sheehan. He concentrates his practice in the areas of product liability and general litigation, including the defense of general liability matters for retailers, concert promoters, entertainment venues and movie theaters. He is AV Preeminent-rated and has been recognized from 2011-2015 as a Pennsylvania Super Lawyer®. He can be reached at [email protected]. Linda G. Thoede manages the high-risk general liability and auto liability litigation for iHeartMedia, Inc., the leading media company in America, and Clear Channel Outdoor, Inc., one of the world’s largest outdoor advertising companies. Ms. Thoede works with outside defense counsel nationwide to ensure proactive management of the insured litigation. Prior to joining Clear Channel Communications, Inc. in 2006, Ms. Thoede acted as associate counsel for a Fortune® 200 insurance and financial services company headquartered in San Antonio, Texas.


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Tom DeMatteo joined ABC Bus Companies, Inc. in 1996, a nationwide distributor and finance company for tour, mid-size and transit buses. ABC has 11 locations nationThomas D. DeMatteo wide. As senior vice presABC Bus Companies, Inc. ident, general counsel Senior Vice President, General Counsel & & secretary, Tom is reSecretary sponsible for all legal affairs of the company, including nationwide litigation management, national and international business transactions, distribution and sales contracts, leasing and secured transactions, real estate, employment law, regulatory affairs and corporate risk management. Tom was also appointed interim Chief Operating Officer of ABC following the death of the CEO and subsequent realignment of senior management. Tom is chair of USLAW’s Client Leadership Council and recently shared some of his USLAW insights with USLAW Magazine. USLAW IS ABC’S NATIONWIDE LEGAL DEPARTMENT ABC has nationwide legal needs so the footprint of the NETWORK matches up well with our company’s business. And, it’s not just about having local counsel where you need them, it’s about having fully vetted, well-respected, knowledgeable and responsive counsel when and where you need them. I love being able to walk in a room and everyone knows him or her (my USLAW member attorney) and that we mean business. USLAW delivers that for ABC. THE LIST I have worked with many USLAW firms on a variety of legal matters since first being introduced to USLAW. For example, Neil Goldberg (Goldberg Segalla) helps me manage catastrophic litigation around the

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Tom DeMatteo of ABC Bus Companies, Inc. Tom DeMatteo sits down for a quick one-on-one with USLAW Magazine.

country. His product liability expertise coupled with insurance expertise is critical for our business. He also helped me negotiate a multi-million dollar distribution agreement with a Belgian company. Fritz Seitz (Murchison & Cumming, LLP) helps us with product liability litigation in California. John Cromie (Connell Foley) helped ABC negotiate and close the acquisition of a service center in Jersey City. Mark Solheim (Larson • King) handles our complex commercial litigation, and Jim O’Connor (Baird Holm) helps us with technology matters. These are just a few of the many USLAW member firms that have assisted us in regions around the country in recent years. FROM A TO Z Whether it is a catastrophic legal matter, bankruptcy, real estate, technology or an acquisition-based transaction, I have the confidence that I have the legal network I can tap and attorneys I can work with who have the subject-matter expertise I need as well as the regional knowledge that may be required. MY TOP THREE From a professional development standpoint, there are three things that stand out for me with USLAW. First and most important is the opportunity to develop relationships with highly respected attorneys nationwide. This is followed by the terrific educational opportunities presented at various conferences and special events along with compendiums, directories, webinars and more. Finally, the opportunity to connect with other clients and industry leaders who come together through USLAW allows me to stay current about legal and industry trends. USLAW IS… A nationwide network of preeminent trial and business attorneys.

USLAW DIGIKNOW USLAW DigiKnow is USLAW’s bi-weekly digital e-newsletter featuring insights and perspectives on today's trending legal issues. Articles and posts and are written by USLAW member attorneys who are subject matter leaders from our USLAW Practice Areas and the USLAW membership in general. Through USLAW DigiKnow, we share legal, legislative and jurisdictional news as well as promote upcoming USLAW events, webinars and podcasts that might be of interest to you and your colleagues. It is an excellent resource to keep abreast of new case law, important verdicts and other pending legislation.

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LITIGATION EVALUATION AND STRATEGY PROCESSES

Food Contamination and Containment Nicholas M. Cardascia and Frank A. Cecere

Foodborne contaminates and pathogens have become an increasingly persistent liability exposure for clients such as restaurants and food manufacturers. According to the Centers for Disease Control and Prevention (CDC), Foodborne illness affects an estimated 48 million people each year, resulting in 128,000 hospitalizations and 3,000 deaths.1 These cases present difficult and unique challenges to defense counsel and require management of not only the case at bar, but potential consumer fallout and misinformation resulting in consumer distrust and relinquishment of brand loyalty. As a general principle, a plaintiff will likely look to name any and all parties involved in the chain of distribution of the contaminated food including the food processing company, the retailer, and any suppliers, wholesalers, and distributors in between. Foodborne contaminate lawsuits generally fall under the category of defective product liability claims. While a plaintiff will usually have various claims that may be brought, this article will focus upon three of the most common claims: (1) strict liability; (2) negligence; and (3) breach of warranty. STRICT LIABILITY CLAIMS Many states have adopted strict product liability laws that relieve a plaintiff from the burden of having to show that the manufacturer or supplier of a contaminated food product was not sufficiently careful in making or distributing the product. While these strict liability laws differ from state to state, courts have generated two common tests when dealing with foodborne contaminates: the “reasonable expectations” test and the “foreign-natural” test.

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The reasonable expectations test states that a product defect may be actionable under a strict products liability theory if the product is not reasonably safe. Liability is determined by a negligence-like risk/benefit inquiry that looks at the likelihood that the product will cause injury if not properly made, and the reasonableness of the actions or inactions taken by the defendants in ensuring that the product was safely made.2 In order to establish liability under the more defense friendly foreign-natural test, a plaintiff must show that the substance or material is not natural to the type of food served and can legitimately be called a foreign substance. Moreover, the plaintiff must show that the substance he encountered when eating was not one that he ought to have anticipated or been on his guard against.3 NEGLIGENCE CLAIMS In addition to a strict liability claim, an injured plaintiff may also bring a negligence claim and argue that the defendants were negligent in manufacturing or supplying the contaminated food product. In order to prove negligence, a plaintiff must show that the defendants failed to exercise reasonable care in making or distributing the contaminated food product and that as a result of this negligence, the plaintiff was caused to suffer some tangible harm. In the restaurant context, “reasonable care” means that the restaurant has a duty to maintain a safe environment, produce safe products, and eliminate unreasonable dangers.4 Assuming due care principles apply, all entities in the distribution chain will be judged by their compliance (or non-compliance) with the Good Agricultural Practices,


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Good Manufacturing Practices, and Hazard Analysis and Critical Control Points plans. A defendant will be held liable if a plaintiff can show that it is reasonably certain that the food product, when put to normal use, would be dangerous if it were defective. A product is defective if the defendant fails to use reasonable care in designing, making, inspecting, and testing a product.5 In practice, this turns into an inquiry of whether or not a restaurant owner, and his or her suppliers, used ordinary care to remove from the food, as served, such harmful substance as the consumer would not ordinarily anticipate.6 BREACH OF WARRANTY CLAIMS In addition to strict liability and negligence claims, a plaintiff may also bring a claim for breach of warranty. Most states impose minimum standards on products. If these minimum standards are not enforced, a defendant may face exposure for breach of an implied warranty. In addition, any food contamination that constitutes a violation of any express guarantees supplied by the food processor may expose a defendant to liability under express warranty principles. The legal standard under an implied warranty theory is whether the product was fit for the ordinary purposes for which such goods were used. That inquiry focuses on the reasonable expectations of the consumer for the product when used in the customary, usual, and reasonably foreseeable manner, without regard to the feasibility of alternative designs or the manufacturer’s or seller’s reasonableness in marketing it in that unsafe condition.7 In analyzing a plaintiff’s claims for breach of warranty, the court will again look to either the reasonable expectations test or the natural-foreign test discussed above. As such, under the reasonable expectation test, liability is determined by a negligence-like risk/benefit inquiry with the focus on the likelihood that the product will cause injury if not properly made, and the reasonableness of the actions (or inactions) taken by

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the seller, supplier, and manufacturer in ensuring that the product was made safe.8 Under the foreign-nature test, liability will depend on whether the customer should have had the reasonable expectation of encountering the object, whether foreign or natural.9 PREVENTATIVE MEASURES Counsel should advise their clients of the following preventive steps that can be taken in order to minimize liability exposure. Supply chain management is critical to preventing future exposure. Open communication between the Purchasing Team and Food Safety Management Team should be a top priority. This communication will work to limit public concern and identify any potential issues before the contaminated product reaches the initial stages of food preparation. Additionally, a well-trained staff with prior knowledge of suppliers, along with management enforced purchase specifications and guidelines, will ensure products meet client, consumer, and legal expectations. Once food products reach the client’s food preparation stage, regular quality assurance and product testing will help ensure that any contaminated product or foreign materials do not enter the consumer product. Upon retaining these test products, laboratory testing for food allergens, shelf life studies, and contaminant identification, will provide safety mechanisms for consumers while containing future legal costs and expenses for the client. Ultimately, if litigation does occur as the result of foodborne contamination of a client’s product, steps can be taken to minimize the client’s exposure. In defending such cases, attorneys must be cognizant to demand that plaintiff isolate and identify the source of illness. And records of the plaintiff’s medical condition must be reviewed immediately prior to and subsequent to the date of loss, as these records may shed light on the source of the illness and potentially identify a differing cause of

CDC Estimates on Foodborne Illness in the United States, http://www.cdc.gov/foodborneburden/estimatesoverview.html Rudloff v. Wendy’s Restaurant of Rochester, Inc., 12 Misc.3d 1081, 821 N.Y.S.2d 358 (2006) citing Denny v. Ford Motor Co., 87 N.Y.2d 248 (1995) Mitchell v. T.G.I. Friday’s, 140 Ohio App3d 459 (2000) citing Mathews v. Maysville Seafoods, Inc. (1991), 76 Ohio App.3d 624, 602 N.E.2d 764 quoting Mix v. Ingersoll Candy Co. (1936), 6 Cal.2d 674, 682, 59 P.2d 144, 148 Clark v. Darden Restaurants, Inc., 2013 WL 104052 NY PJI 2:120 Vitiello v. Captain Bill’s Restaurant, 191 A.D.2d 429, 594 N.Y.S.2d 295 (2nd Dept., 1993), Stark v. Chock Full O’Nuts, 77 Misc.2d 553, 554, 356 N.Y.S.2d 403 (1974) Rudloff v. Wendy’s Restaurant of Rochester, Inc., 12 Misc.3d 1081, 821 N.Y.S.2d 358 (2006) citing Denny v. Ford Motor Co., 87 N.Y.2d 248, 256-59, 639 N.Y.S.2d 250, 662 N.E.2d 730 (1995) Id., 12 Misc.3d 1081, 821 N.Y.S.2d 358 (2006) citing Denny v. Ford Motor Co., 87 N.Y.2d 248 (1995) Mitchell v. T.G.I. Friday’s, 140 Ohio App3d 459 (2000) citing Mathews v. Maysville Seafoods, Inc. (1991), 76 Ohio App.3d 624, 602 N.E.2d 764 quoting Mix v. Ingersoll Candy Co. (1936), 6 Cal.2d 674, 682, 59 P.2d 144, 148

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the plaintiff’s alleged sickness. In the event of suit, the following experts should be retained in order to adequately defend against a foodborne illness claim: (1) a standard of care expert in food handling requirements, regulatory requirements, and industry practices; (2) an epidemiologist, an expert in the study of patterns, causes, and effects of health and disease conditions; and (3) a medical causation clinician with expertise in infectious diseases. Retention of these experts early in litigation will help to determine if all safety standards and practices were adhered to and if the alleged illness was the cause of your client’s mishandling or contamination of food products. Additionally, if these experts opine that the plaintiff was harmed as a result of your client’s negligence, early diagnosis of any wrongdoing will help defer legal expenses and provide for early settlement resolution. CONCLUSION Foodborne illness litigation is a complicated and ever changing regulatory area of the law. The FDA, in conjunction with various other regulatory bodies, continues to promulgate new regulations and rules concerning supply verification and in-house preparation and hazard analysis. It is of the utmost importance that counsel explore and understand the dynamic and evolving circumstances by which raw food eventually reaches consumers as a finished product in order to adequately and effectively defend foodborne illness lawsuits.

Nicholas M. Cardascia is a partner in the appellate practice group at Ahmuty, Demers & McManus. He is a 1988 graduate of St. John’s University School of Law. He advises on all aspects of litigation and has extensive appellate experience in all areas of the firm’s practice. Frank A. Cecere is the Managing Partner of Ahmuty, Demers & McManus. He has significant experience handling a wide range of the firm’s legal matters, including high-exposure construction site litigation, professional liability, premises liability, environmental/toxic tort actions and related general liability cases. He can be reached at [email protected].


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More Than Just Digitization EFFECTS OF AN ELECTRONIC HEALTH RECORD ON QUALITY, PATIENT SATISFACTION AND PROVIDER OPERATIONS Ryan Holt

Any analysis of the current American healthcare system must acknowledge the role of the Affordable Care Act (“ACA”) as the predominant legislative and regulatory catalyst in our health services system. However, perhaps the earliest area of provider adaptation has come not as a response to the regulatory scheme of the Affordable Care Act, but rather as an effort to satisfy “Meaningful Use” requirements of its precursor, the American Recovery and Reinvestment Act of 2009 (“ARRA”). THE ACT ARRA is known in common parlance as “the Stimulus.” As a response to the Great Recession, Congress passed ARRA to address

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a number of economic issues, including healthcare. Title XIII of ARRA is referred to as the Health Information Technology for Economic and Clinical Health Act (“HITECH”) and was intended to address myriad healthcare issues including quality, information technology, and privacy. In fact, HITECH establishes an office within the Department of Health and Human Services (“DHHS”) to coordinate nationwide health technology, ensure improvement of quality, and to generally increase efficiency. Indeed, in response to the efficiency requirements of the ARRA and ACA, burgeoning topics such as population health management, accountable care organizations, and the network of patient-centered medical homes have been

regular topics of discussion in healthcare media and at conferences on effective governance and management. Perhaps HITECH’s most notable efficiency requirement is the implementation of the Electronic Health Record (“EHR”). At first mention, EHR is often viewed simply as medical record digitization. However, HITECH empowers the DHHS National Coordinator, in conjunction with a standards committee, to answer the question: “What should a viable EHR system look like?” Practically, the EHR systems implemented by providers throughout the country will not only digitize health records but will do much more. HITECH calls for the following: collection of population health data for internal


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and external quality reporting, standardization of certain treatment with order sets for physicians, assistance in determining preventative health care treatment for at-risk patients, reduction of fragmented treatment for patients who visit multiple providers for chronic conditions, and reduction of the paperwork patients must complete at every visit to their providers. To encourage EHR implementation, ARRA creates “incentives for adoption and meaningful use of certified EHR technology.” Hospital based physicians who satisfactorily demonstrate meaningful use of EHR technology are eligible for these incentives, as are hospitals for inpatient services. Implementation of a viable EHR system occurs in stages. The Center for Medicare and Medicaid Services (“CMS”) has established objectives for each of these stages, including the use of computerized entry of orders, maintenance of active medication and allergy lists for patients, inclusion of demographic data, and notations on vital signs and smoking status. Implementation of the EHR, plus its meaningful use, will result in incentive payments. IMPLEMENTATION PROCESSES The first step toward CMS incentive payments is the implementation of an EHR program at the provider level. Again, because EHR is more than simply scanning and digitizing patient medical records, implementation is easier said than done. EHR implementation involves drastic – and expensive – changes to provider software to ensure that the EHR complies with the objectives of the health information technology regulatory scheme. CMS has even established an approved list of vendors whose products meet the EHR requirements. Writing in February 2013 for the Healthcare Financial Management Association in “The Total Cost of EHR Ownership,” Steven Eastaugh observed that EHR operation costs will exceed $2 million for the average 350-bed hospital. Original contract prices can be in the tens of millions of dollars. Of course these costs are related not only to software licensing and upgrading, but also to installation and troubleshooting. EHR installation has proved to be both financially overwhelming and operationally daunting. In an August 2014 piece for Healthcare IT News, Erin McCann profiles seven EHR implementation disasters which resulted in medication errors, delays in treatment, budget deficits and resignations of high-level hospital executives.

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MEANINGFUL USE PAYMENTS HealthIT.gov reminds EHR participants that early participation leads to maximum incentive payments, and failure to participate will even result in financial penalties beginning in 2015. CMS indicates that it will make up to $27 billion in EHR incentive payments, allowing thousands of dollars in payments to eligible medical professionals and $2 million or more to hospitals. In its October 2014 report, the Office of the National Coordinator of the DHHS reported that as of June 2014, 75% of professionals and 92% of hospitals had received incentive payments for implementation. IMPLICATIONS ON HEALTHCARE The nascent spread of EHR raises the question of its full potential. As technology improves and providers pass the learning curve associated with a paperless system, the opportunity for new uses of EHR is boundless. The use of EHR for data collection presents new opportunities for analysis and better outcomes. Internally, this data mining will provide suggestions on how to improve procedural breakdowns. Practically, these analytics may help identify waste in supplies or pinpoint lags in emergency room response time. Data collection will also help to pinpoint the frequency of Serious Reportable Events, defined in the National Quality Forum’s 2011 report as “unambiguous, largely preventable, and serious, as well as adverse, indicative of a problem in a healthcare setting’s safety systems, or important for public credibility or public accountability.” This data will also improve patient care. At the macro level, providers will have a clearer picture of population health, which may direct growth in certain practice areas or help to reduce readmissions. At the micro level, holistic data on an individual patient may help to predict or identify certain risks. Once providers adapt to the significant technological changes which characterize EHR, healthcare delivery is expected to change further. EHR software allows practitioners to create “order sets” or import those already developed by other professionals. Order sets establish a pre-determined method for specific procedures or even basic, but frequent, tasks. For instance, one order set may prompt the administration of one drug with the identification of a specific condition. Another order set may provide suggested responses after entry of a certain symptom. The use of order sets standardizes medicine and helps to reduce error. Of course, the arrival of this new technology has the potential for many unin-

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tended consequences. For example, this standardization may remove a practitioner’s prior inclination to analyze the single patient before him or her and treat the unique health concerns presented. This can be remedied with discipline and a flexible software that permits modification of order sets by each provider and the preservation of such order sets in a bank available to the user. Perhaps the greatest, and yet unformed, of these consequences is the impact order set usage will have on malpractice standards of care. For instance, if physicians in a certain community are more likely to use Order Set A for an appendectomy and defendant-doctor used Order Set B, has he or she breached the standard of care? These are questions that courts will likely answer in an EHR-dominated world. From a patient perspective, the advent of EHR increases the accessibility of medical records. Providers and EHR software producers have created “patient portals,” which allow patients to directly access records via online websites or handheld device applications. A key aim of a viable EHR system, as stated by the Office of National Coordinator in its October 2014 report, is the integration of a patient’s medical record between providers. The transferability and accessibility of a patient’s record despite geographical and organizational limitations appears to end an era of hectic coordination between patients, past providers, and current providers. CONCLUSION While the present-day healthcare debate revolves around the ACA – both its requirements and its uncertain future – providers have already begun complying with earlier regulations from HITECH. Despite the cost of implementation, a complete EHR system presents unique opportunities to monitor quality of care, improve treatment, and involve patients. More than just record digitization, EHR presents a radical change to the healthcare industry and time alone will tell its real impact.

Ryan Holt joined Sweeny, Wingate & Barrow, P.A. after a clerkship on South Carolina’s Circuit Court. He has litigated and tried cases on behalf of small businesses as well as regional and national corporations. His community involvement includes serving as a board member for a health services district anchored by a 400-bed hospital.


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DATA BREACH STARTER KIT

Essential Considerations to Reduce Risk Maureen Frangopoulos and Colin Gainer

INTRODUCTION Target, Home Depot, and Sony are just some of the corporations that have made headlines in the recent past not for their services, but for their exposure to large data breaches. Even with continuing advances in data security, data breaches remain a serious risk to companies, and the large breaches continue to make headlines. From human error to cyber terrorism, there is a broad area of data risk that companies must traverse in order to defend against data breaches. Unfortunately, the risk appears to be proportional to data usage, and data consumption is not slowing down. The Internet, mobile devices, and cloud-based data storage are just some examples of technology that have spread rapidly in the corporate world, and these technologies all carry inherent data breach risks. Moreover, the government is well aware of the risks posed by data breaches, and it often looks to businesses to carry the burden of protecting data disclosed or obtained from individuals. A company’s failure to do so may not only result in regulatory action, it can also damage a company’s reputation. Therefore, businesses need to im-

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plement data prevention plans, and they also need to be prepared to respond quickly to a data breach, if one occurs. LESSONS FROM REGULATORY ENFORCEMENT AND DEFINING “REASONABLE SECURITY” In the area of regulatory enforcement against companies, the Federal Trade Commission has emerged as the lead enforcer of privacy violations by utilizing its Section 5 authority. To those companies developing and revising their privacy plans, a common concern is the lack of an explicit set of standards from the FTC which outlines what the agency is looking for regarding “reasonable security.” The lack of standards is a common discussion topic in the industry. In lieu of a set of standards, the FTC points companies in the direction of its enforcement actions and resulting settlements for guidelines on what will not encompass “reasonable security” to try and then piece together what should constitute “reasonable security.” Privacy professionals have started to compile a list of presumed standards pursuant to these enforcement actions from a

comprehensive study of them.1 We will not delve into an exhaustive overview of all a company should be doing in light of what the FTC has said in the past during enforcement actions, but below is a summary of the top “must haves” as we interpret them from data security settlements with the regulatory agency. First and foremost, a company must develop a privacy program with designated leaders including a chief privacy officer to enforce a company’s privacy policies within an organization. Privacy policies and data security should be considered and integrated into any new business product, model, plan, etc. rather than the afterthought of a business decision. A company should routinely audit its existing privacy and security practices, preferably utilizing a third-party auditor, for assessment of a company’s compliance with its program. An organization’s privacy and security leaders should continuously focus on risk considerations and keep adequate records of their assessments. Second, a company must keep its privacy promises. We routinely see the FTC cracking down on companies when they break privacy


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promises and fail to enforce their own privacy programs. The FTC also keeps a close eye on a company’s business decisions that could implicate their privacy promises (i.e. Facebook’s acquisition of WhatsApp). Advising consumers of policy changes and respecting user choices are a must. Third, take a hard look at general security to safeguard data such as a company’s password requirements, encryption procedures, unauthorized detection methods, and software use to comply with industry standards. For example, simple measures such as assigning unique passwords and login abuse detection systems prevent attacks against user credentials. Ensure antivirus software is updated and firewalls are active. Encryption and e-mail authentication on incoming and outgoing e-mail should be used. Mobile devices also need to be considered. Requiring authentication to unlock a device, locking out a device after a set number of failed attempts, using encrypted data, and remote wipes of lost or stolen devices are all prudent methods to minimize risk. The development of a data breach prevention plan is ongoing, and a business must regularly test its systems to check the vulnerability for breach. The plan must also be updated in response to the vulnerabilities exposed during these tests, as well as in response to changes in data breach security standards external to the company. Furthermore, some basic guidelines for the collection of personal identifying information are only to collect/retain what is needed to complete the required task and allow minimum access to avoid inadvertent disclosure by employees. Retain information for a reasonable time period and destroy in a manner that renders personal identifying information undecipherable. Lastly, it is absolutely clear in the industry that employee training on privacy policies and data security is a must. This training should be done routinely (at a minimum, yearly) and not just with an employee’s on-board training. Employees should know about the type of data retained, the risks associated with it, detecting and reporting, and breach response. It is wise for a company to have a comprehensive privacy program, but this program is useless without adequate training to enhance compliance with it. Looking forward, the next wave of security concerns will likely focus on the issues

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a company faces with cloud computing and we will probably see an increase in future FTC settlements dealing with enforcement in this area. Cloud computing presents a whole different set of privacy and security risks and a company must be aware of those in the contract stage so as to negotiate in its best interests. THE INEVITABLE DATA BREACH AND THE POST-BREACH RESPONSE Even with reasonable security, the inevitable data breach will occur. In the event of a breach, a response plan is necessary, as it enables a business to move quickly to assess the situation of the breach and mitigate damages. A written breach response plan needs to be developed and should identify the employees that will be handling each incident – the response team. Ideally, the response team should be comprised of employees knowledgeable in the company’s technology infrastructure and its management, as well as employees involved in legal and public relations. The plan should also cover procedures on preserving evidence, limiting exposure, handling internal and external communications about the breach, and compliance with applicable regulations (e.g. data breach notification rules). The plan should be tested at least quarterly with the key breach response players to ensure everyone knows their role, should a breach occur. This testing can include running through different breach scenarios to see whether the team thinks a particular incident would trigger notification to law enforcement, the public, etc. Preservation of evidence is a critical early step in responding to a breach. An employee, or consultant, with data forensic skills needs to be utilized to assess the details of the breach, such as the type of breach and its scope. Determining what types of data have been exposed will guide the course of the response. For example, a breach concerning protected health information will activate mandatory reporting requirements. It is recommended to have a working list of forensic experts, who have all been properly vetted, so you know the price scheme ahead of time and how you will work together post-breach. Often, these experts are a great tool to guide you through the steps, in conjunction with outside counsel, to handle a breach response. A business needs to be knowledgeable with all applicable state statutes and federal

See Bailin, Patricia “Study: What FTC Enforcement Actions Teach Us About the Features of Reasonable Privacy and Data Security Practices,” International Association of Privacy Professionals, Sept. 19, 2014, available at https:// privacyassociation.org/news/a/study-what-ftc-enforcement-actions-teach-us-about-the-features-of-reasonableprivacy-and-data-security-practices/.

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regulations. As mentioned in the example above, a business may have a duty to notify individuals, law enforcement, and/or administrative agencies. Data breach reporting laws also vary from state to state, and multiple state laws or regulations may be involved, depending on the scope of the breach. In addition, credit monitoring services may also be required to be provided to affected individuals. Insurance issues should also be addressed in the early stages of a breach. If a company has data breach coverage, it should contact its insurer immediately to report the claim and trigger coverage. Moreover, insurers are often experienced with data breaches and may provide additional assistance or guidance. Depending on the circumstances, outside counsel should strongly be considered. Importantly, counsel can perform an investigation of the breach in a way that maintains confidentiality of communications with the attorney-client privilege. Outside counsel also can determine what regulatory compliance issues are involved, which may avoid or reduce fines, penalties, and audits. CONCLUSION As data breaches become more sophisticated, a company must be vigilant in protecting its data, and having a comprehensive data security and privacy program is a necessary component of the corporate world these days. No program exists that will make a business completely riskfree, but a successful program will equip a business with the knowledge and tools necessary to minimize the risk as well as the damage that can occur in the aftermath.

Colin Gainer is an attorney with SmithAmundsen in Chicago. A member of the Data Security & Breach team, Colin counsels health care entities on patient privacy concerns, electronic medical records and HIPAA and HITECH compliance. Maureen Frangopoulos is an attorney with Smith Amundsen in Chicago. As part of the Data Security & Breach team, Maureen addresses privacy issues, helping her clients to implement sound data practices and work through the myriad of issues resulting from a breach.


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Reputation Damage Control INSURING THE COST OF MITIGATING REPUTATIONAL HARM FOLLOWING A CYBER-ATTACK OR DATA BREACH John J. Jablonski

Companies in nearly every industry face a daily and increasing risk in relation to cyber attacks and data security breaches. Some have learned the hard way that the resulting damage to the reputation of the corporate entity, or one or more of its brands, can be even more financially impactful than the actual costs and third-party claims suffered as a result of such a data breach. Last year’s Target data security breach, and the massive wake of negative publicity that immediately followed, clearly showed that a single data security breach incident, whether instigated by external hackers or by insider disgruntled employees, can have a massive short and long-term financial impact on the corporate entity. Short-term ex-

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penditures may include: investigating the incident; stopping the breach from continuing and/or being replicated; rectifying, rebuilding, or reinforcing its internal security systems; and then the follow-on costs of compensating third parties such as consumers, suppliers and banks for any financial loss and damage they have suffered as a result of the data breach. Whilst these expenses and costs can be defrayed by way of cyber liability insurance, itself a relatively new insurance product developed to deal with the loss of intangible property and these short-term financial repercussions, typical cyber liability insurance products do not provide protection or support for what is potentially a much bigger

issue – that of the reputational damage suffered by the corporate entity. Especially in this new world of trigger-happy tweeting and the viral spread of negative publicity, the resulting plummet of public opinion could ultimately lead to a company-fatal event. Most cyber liability insurance policies (CLIPs) appear to provide some financial recompense for the costs of crisis management. But the real value of such crisis cover to the insured corporate entity is, quite frighteningly, nothing at all. This is because most CLIPs limit the amount of the crisis cover provided to the costs of a public relations consultant chosen and appointed by the insurer, and only once its consent has been given following a review


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of the coverage position under the CLIP. This, of course, causes a significant delay to the insured in attempting to mitigate or neutralize the reputational damage, limits the insured as to whom it can engage to provide the services, and limits the scope of the services required. Also and very significantly, the amount of the financial cover provided is usually a very small percentage of the limit of indemnity (LoI) for the CLIP. This, if used, reduces the LoI and/or is only available if the LoI has not been expended in dealing with the covered data breach claim (as was the position in the Target claim under its CLIP), or is a very small fixed-dollar sub-limit. For example, in a CLIP with a $10 million LoI, this can be as low as $25,000 (a negligible amount in the world of crisis management fees) and where such a CLIP may have an “each and every claim” excess of $50,000, that will be applied. However there is some good news in that stand-alone reputational risk insurance products are now beginning to emerge. These have been specifically designed to help insureds identify the appropriate specialized service providers – and to indemnify the associated high costs – required to mitigate and neutralize the impact of the reputational damage suffered by the insured following a cyber attack, data breach, or other type of crisis event. Most of these reputational risk insurance products cover the costs incurred in employing crisis communication consultants, public relations agencies, specialist lawyers, digital communication experts, media communication consultants, polls and market research services providers, and other necessary professional services. There are also varying options in respect of LoIs of anywhere from $1 million to $25 million, self-insured excesses, co-insurance and length of policy period. While these products offer a much better and broader support and cost-defraying mechanism for the insured, there are still significant issues that must be dealt with and agreed between the parties (via, we strongly recommend, a specialist insurance broker who understands the reputation arena) prior to inception of the reputational risk insurance policy (RRIP) in order for the cover provided to be a properly effective tool. The insured must take into account that the premium likely to be demanded by the insurer will be very high compared to most standard insurance products i.e., 3–10 percent of the LoI. That, however, needs to be set against the average cost of around $100,000 for just the first week of the engagement of a crisis communication consultant. The most important issues to be con-

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sidered and dealt with prior to inception of the RRIP are: 1. What constitutes a crisis event that damages or potentially damages the insured’s reputation, triggering cover under the RRIP? Some RRIPs define this as the notification of a claim under any other insurance policy the insured has in effect, whereas some RRIPs will have finite, defined crisis events only. However there are one or two RRIPs which have a combination of both of the above and allow for additional crisis events to be defined by the insured prior to inception and which are usually the subject of additional premium. 2 Can the insured instruct the specialized service providers required immediately after the crisis event damaging the insured’s reputation occurs, so as to ensure and maximize the mitigation potential? At least one insurer in its RRIP provides a “threshold” level of costs that can be incurred by the insured (subject to compliance with the RRIP’s terms and conditions) before the insurer’s consent is required. This takes away any time delay and allows for the immediate retention of the required service providers which should also help to reduce the ultimate costs incurred in attempting to mitigate the reputational damage suffered. 3. Can and do the suite of specialized service providers need to be agreed upon with the insurer before the RRIP? If so, who provides the recommendations for these providers? Some insurers already have a general panel of service providers where rates and servicelevel agreements have been negotiated. However, the insured is normally able to recommend specialized service providers in its field, and those can then be vetted and approved by the insurer and named in the RRIP. 4. Subject to the LoI of the RRIP not being reached, how will it be determined that the reputational damage suffered by the insured following a crisis event has been mitigated, signaling that any ongoing costs will no longer be paid by the insurer? This issue raises further questions that may or may not be set out in the RRIP. For example, if the decision is to be made by the insurer, it should be able to demonstrate to the insured’s satisfaction that it has the inhouse expertise. If it is to be left to the agreed crisis communications consultant or

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other service provider, how is the inherent conflict in so doing to be dealt with? If an independent reputational monitoring agency is to be used to provide algorithmic analysis, are both parties happy to abide by the findings, as it is likely the monitoring agent’s costs will be paid for by the insurer? If a dispute arises between insured and insurer with regard to this issue, is an independent arbitrator to be agreed upon and is there a dispute resolution mechanism contained in the RRIP wording? The current reputational risk insurance products in the market deal with some or most of these issues – but none deals with all. However, as this is a very new market for insurers and each is trying to establish itself as the market leader, it is fair to speculate that most will be willing to bespoke their RRIPs based on the specific requirements and recommendations of the insured prior to inception. Indeed, from an insured’s point of view, it is an opportune time to be involved in the development of an insurance product that is likely to become more costly with tighter coverage clauses as the claims related to such RRIPs develop over time. As a footnote, some, although very few, insurers have tried to take things a step further and, either in addition to the above product or as a stand-alone product itself, indemnify the insured in respect of the financial loss it has suffered as a result of the reputational damage inflicted following a crisis event. However, in a very new and specialized insurance product and market, the potential coverage issues and likely massive cost of such insurance premium mean this is probably a step too far. In our opinion this should be regarded as an area to be explored by insureds, their lawyers, and their brokers once they have negotiated the reputational risk insurance product and put it to the test.

John J. Jablonski is CoChair of the firm’s Cyber Risk Practice Group. A nationally recognized writer and speaker on the protection and preservation of data, his comprehensive understanding of technology, data systems, and how businesses use technology helps drive innovative solutions for clients’ data security, privacy, protection, management, preservation, and cyber liability problems. Jonathan L. Schwartz, a partner in the firm’s Cyber Risk and Global Insurance Services Practice Groups, contributed to this article.


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CYBERSECURITY

The New Professional Risk

PART 1 OF 4: CYBER CRIME AND THE VULNERABILITY OF THE HEALTHCARE INDUSTRY Karen Painter Randall and Steven A. Kroll

The cyber-attack on Sony Pictures Entertainment at the end of 2014 has brought cybersecurity to the forefront of mainstream media and pop culture. Although the data stolen from Sony included, among other things, embarrassing emails between Sony’s top executives, other industries, including healthcare, took notice as no business is insulated from attacks and the harm that is caused. This includes damage to reputation and millions of dollars estimated to be incurred in first and third party claims as a result of a hacking incident. In the first of a four-part series touching on various professional, business and insurance sectors, this article will discuss cyber and privacy issues facing the healthcare industry in today’s evolving technological climate. CYBER THREATS TO THE HEALTHCARE INDUSTRY The digitization of the healthcare industry has provided many benefits to both patients and doctors alike. However, the use of this new technology has also seen the development of new levels of risk and privacy issues. According to multiple reports, electronic data in the healthcare sector is

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among the most vulnerable. In fact, the Federal Bureau of Investigation (“FBI”) recently issued a warning to healthcare organizations that their IT systems and medical devices were at risk for increased attacks from hackers due to lax cybersecurity standards and practices. The FBI cited a report from the SANS Institute, a non-profit organization that indicated healthcare security strategies as being deficient in preventing cyber threats that could expose confidential and sensitive patient data. It also referred to the annual Ponemon Institute report, which said that 63% of health organizations surveyed reported a data breach in the past two years at an average loss of $2.4 million per data breach. With digitized healthcare records, the creation of HealthCare.gov and the exchange of electronic protected health information (“ePHI”) online, the healthcare industry, from small providers to pharmaceuticals, has become the perfect target for cyber criminals. In fact, health data appears to be much more valuable than credit card information to hackers who operate in the black market because the data can be used to facilitate identity theft, access bank accounts or obtain prescriptions for controlled substances.

WHAT IS HIPAA? The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) and its implementing regulations provide federal protections for the privacy and security of PHI held by covered entities and their business associates. The responsibility for HIPAA oversight and enforcement efforts rests with the U.S. Department of Health & Human Services Office for Civil Rights (“HHS-OCR”). To fulfill this requirement, HHS-OCR published what are commonly known as the HIPAA Privacy Rule and the HIPAA Security Rule. The Privacy Rule, or Standards for Privacy of Individually Identifiable Health Information, establishes national standards for the protection of certain health information. The Security Standards for the Protection of Electronic Protected Health Information (the “Security Rule”) establish a national set of security standards for protecting certain health information that is held or transferred in electronic form. The Security Rule operationalizes the protections contained in the Privacy Rule by addressing the technical and non-technical safeguards that organizations called “covered entities” must put in place to secure individuals’ ePHI.


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The Security Rule requires covered entities to maintain reasonable and appropriate administrative, technical, and physical safeguards for protecting ePHI. Specifically, covered entities must: (1) ensure the confidentiality, integrity, and availability of all ePHI they create, receive, maintain or transmit; (2) identify and protect against reasonably anticipated threats to the security or integrity of the information; (3) protect against reasonably anticipated, impermissible uses or disclosures; and (4) ensure compliance by their workforce. HHS-OCR recognizes that covered entities range from the smallest provider to the largest, multi-state health plan. Therefore, the Security Rule is flexible and scalable to allow covered entities to analyze their own needs and implement solutions appropriate for their specific environments. What is appropriate for a particular covered entity will depend on the nature of the covered entity’s business, as well as the covered entity’s size and resources. HIPAA VIOLATIONS CAN BE SIGNIFICANT In the wake of data breaches across the country, and with impermissible uses and disclosures of ePHI remaining at the top of HHS-OCR’s list of most frequently investigated compliance issues, HIPAA has received a great deal of attention recently. While punitive measures are rare, it appears that HHSOCR’s enforcement activity is designed to send a message to covered entities that safety measures must be taken to protect ePHI. On May 7, 2014, HHS-OCR announced a record $4.8 million settlement with New York Presbyterian Hospital and Columbia University stemming from a breach involving a data network shared by the two entities. The breach occurred in September 2010, when a Columbia physician attempted to deactivate a personally owned server and, while doing so, inadvertently made the medical information of 6,800 patients accessible via pubic internet search engines. Ultimately, HHS-OCR’s investigation revealed that neither organization had conducted an accurate and thorough risk analysis, or developed a satisfactory risk management plan, which lead to the above settlement. On January 2, 2013, HHS-OCR announced that the Hospice of North Idaho (HONI) agreed to pay $50,000 and enter into a Corrective Action Plan as part of a settlement involving a breach of unsecured ePHI. This was significant in that it was the first settlement by HHS-OCR involving a breach affecting less than 500 individuals. HONI had self-reported in February 2011 that an unencrypted laptop containing ePHI of 441 patients was stolen in June 2010. In response, an investigation into the breach

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indicated that HONI failed to conduct a risk analysis of the security of ePHI transmitted using portable devices, and failed to adopt or implement sufficient measures to ensure the confidentiality of ePHI transmitted using portable devices “to a reasonable and appropriate level.” HIPAA requires that breaches of unsecured PHI affecting 500 or more individuals be reported to the Secretary of HHS and the media within 60 calendar days after discovery of a breach. However, the settlement with HONI sends the message to the healthcare industry that HHS-OCR is investigating even relatively smaller disclosed breaches of unsecured PHI to identify and penalize noncompliance with HIPAA. Moreover, it confirms HHSOCR’s lack of tolerance for the storage of ePHI on unencrypted portable devices. PREVENTING A BREACH On March 28, 2014, HHS-OCR released a free security risk assessment (“SRA”) tool to help businesses comply with HIPAA. Specifically, the SRA tool is a software application that allows covered entities to conduct and document their risk assessment. Besides this software, healthcare organizations must not only put into place solid security policies, but enforce them. For example, a weak password, unlocked door, or unsecured USB port can all lead to serious security holes. Moreover, physical security at the healthcare data center level is mandatory. This means utilizing biometric scanners, locked racks, delegated sets of administrator duties and good security systems. Although this operational change may be costly, the alternative is the potential loss of hundreds of thousands of patient records. Furthermore, healthcare organizations must deploy proper security for their systems, which includes network scanners, virtual appliances and other technologies placed within the infrastructure to scan for anomalies or irregular behavior. These are just a few of the steps that must be taken in order to avoid being scrutinized by the HHS-OCR. Ultimately, a covered entity under HIPAA must be cognizant of the mandates of the Security Rule, but review and modify their security measures to continue protecting ePHI in a changing environment. CONCLUSION Recently, in January 2015, Anthem, the second-largest health insurance company in America, announced that a database containing personal information of approximately 80 million of its customers and employees had been hacked. Investigators were still looking into the extent of the incursion, though Anthem stated it was likely that "tens of millions" of records were

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stolen. Reportedly, while no credit card information was compromised, the breach exposed names, addresses, birthdates, Social Security numbers, email addresses and employment information of employees and customers of Anthem -- including income. Moreover, to date, no medical information such as insurance claims or test results were targeted or obtained, thus, it does not appear that HIPAA will apply. Nevertheless, the Anthem incident has been reported as the largest health care breach to date. According to industry executives, the data security threats facing the healthcare industry will only intensify in 2015 as cyber criminals believe hospitals and health systems are not taking necessary steps to protect its wealth of data including confidential personal and medical information, credit card information, demographic details and insurance beneficiary data. Last year, 164 PHI data breaches were reported to the HHS-OCR, according to the fifth annual Redspin data breach report. Approximately 9 million patient records were affected resulting in a 25% increase of PHI data breaches in 2013. Thus, the healthcare industry must heed the FBI’s warnings and boost security measures or face continued serious consequences.

Karen Painter Randall is a Complex Litigation Partner with Connell Foley LLP in Roseland, NJ, and CoChair of the Firm's Cyber Security and Data Privacy and Professional Liability Practice Groups. She provides representation and advocacy services to professionals and businesses in a wide variety of complex litigation matters and is a veteran trial attorney in state and federal courts. Ms. Randall, a former Chair of USLAW’s Professional Liability Group, is designated a Certified Civil Trial Attorney by the Supreme Court of New Jersey. Steven A. Kroll is an Associate with Connell Foley LLP in Roseland, NJ. In addition to representing professionals in various areas, Mr. Kroll concentrates his practice in the areas of professional liability, general insurance litigation and employment law handling matters in both New Jersey and New York. Mr. Kroll received his J.D. from Rutgers-Newark School of Law in 2009, cum laude, and received the distinguished award of Order of the Coif.


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RETURN TO TARASOFF

More Liability for Mental Health Professionals? Eric J. Neiman

Forty years ago, the California Supreme Court decided the landmark case of Tarasoff v. Regents of Univ. of California, 17 Cal. 3d 425, 551 P.2d 334 (1976). In that case, the court held that when a psychologist knows, or should know, that a patient presents a serious risk of violence to another person, a duty arises to use reasonable care to protect the intended victim against the danger. There was an immediate outcry from mental health professionals who were concerned, rightly, that they might be legally responsible for unforeseeable events and would be required to violate patient confidentiality to avoid liability. The Tarasoff decision resulted in years of litigation, court decisions, legislation, commentary, and scholarly writing around the country. In the ensuing years, most states adopted some form of a mandatory or permissive duty to warn law. These laws generally included a degree of immunity for providers who acted in good faith. Until recently, there were relatively few new developments in the area of the liability of mental health and other medical professionals for violent acts by their patients. Recent appellate cases suggest that liability for mental health professionals may now be expanding, in spite of state laws intended to limit liability.

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RECENT CASE LAW In a decision that expands the liability of mental health professionals, the Washington Court of Appeals ruled in Volk v. DeMeerleer, 337 P.3d 372 (Wn. Ct. App. 2014), that a psychiatrist could be liable for homicides committed by a patient, even though the patient never identified the victims as targets of violence. The case involved a double murder-suicide in July 2010, in which the patient, who had received outpatient treatment for his mental illness with the same psychiatrist for nine years, killed his former girlfriend and one of her children, and attacked another of her children with a knife. The patient last saw his psychiatrist three months before the killings, and although he reported that he had suicidal thoughts when he was depressed, the patient had not expressed any intention to harm his then girlfriend or her children. The trial court granted summary judgment in favor of the defendant health care providers. The Washington Court of Appeals reversed the trial court, holding that a jury should decide whether the psychiatrist met the standard of care. The court noted that “[u]nder Tarasoff and its offspring, [the psychiatrist] would be granted summary judgment” because the patient never identified his former girlfriend and her children as a target of violence. Despite Tarasoff, the court

chose to extend a mental health provider’s duty of care to all foreseeable victims, rather than only victims identified by the patient. The court explained that because Washington decisions have not placed limitations as to who is foreseeably endangered, there was a jury question. Similarly, in Graham v. Valueoptions, Inc., 2010 WL 5054442 (Ariz. Ct. App. Oct. 28, 2010), the trial court held that the defendant mental health providers could owe a duty to unknown victims after their patient killed two men he did not know. The case proceeded to trial and the jury awarded $11 million in compensatory damages and $25 million in punitive damages. Interpreting prior Arizona case law that relied on Tarasoff, the Arizona Court of Appeals affirmed the trial court result. The court held that even though the mental health professional’s duty under Arizona law was limited to foreseeable victims, there was nothing in prior case law that held or implied that that duty “could never extend to cases involving foreseeable victims who were previously unknown to the patient.” Rather, whether victims previously unknown to the patient and his mental health providers were foreseeable was a question for the jury. In many states, foreseeability has been a gradually expanding concept, with appellate courts allowing juries to decide whether


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bad outcomes should be predicted and prevented. Those states may see results like those in Washington and Arizona, with potential liability even when the victim is unidentified. However, there are recent court decisions that are more sympathetic to the idea that mental health providers cannot protect the general public. In January of this year, the Montana Supreme Court held in Woods v. State ex rel. Montana State Hosp., 2015 WL 161830 (Mont. Jan. 13, 2015), that Montana State Hospital did not violate a statutory duty to warn a patient’s former girlfriend of a risk of his violent behavior following his release from involuntary commitment at the hospital. Because the patient had not made a specific threat of future violence by specific means toward the former girlfriend, the mental health professional’s duty to warn was not triggered. The decision was based on a law enacted in 1987 in response to Tarasoff, through which the Montana Legislature specifically declined to impose the common law principles of foreseeability adopted in Tarasoff. The Woods court refused to extend a mental health provider’s duty beyond the “extremely narrow” language of the statute requiring a clearly identified or reasonably identifiable victim. In reaching its decision, the Woods court relied on a Kentucky

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Supreme Court case in which the court held that a mental health professional’s statutory duty to warn arises “only when the patient has communicated to the mental health professional, directly or indirectly, by words or gestures, that he will commit an act of physical violence. Simply being a threat of physical violence does not constitute communicating a threat of physical violence.” Similarly, in Fredericks v. Jonsson, 609 F.3d 1096 (10th Cir. 2010), the Tenth Circuit held that a psychologist did not violate her duty to warn under Colo. Rev. Stat. § 13-21-117. Although the psychologist's patient was convicted of stalking the plaintiff neighbors and had reported frequent violent fantasies involving the neighbors, prior to the incident he reported to the psychologist that he no longer had violent thoughts directed at them. The court held that the statutory duty to warn was triggered “only when the patient himself predicts his violent behavior (by communicating – that is, expressing – his threat to the mental health provider).” COMMENT The decisions in Volk and Graham suggest a trend that will alarm mental health and other providers in the same way the profession reacted to the Tarasoff decision in 1976. The trend would be toward increas-

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ing liability for health professionals for the violent acts of their mental health patients, even in states with duty to warn laws, and even when there is no specific threat to a victim. If foreseeability is the only issue, in many states juries will define the scope of liability, often in cases involving shocking facts and tragic outcomes. Defending these cases will be challenging, but it is critical to focus on confidentiality considerations that are at the heart of the therapist-patient relationship, the known limitations on predicting violence, state laws limiting duties to warn, and the difficult judgments that healthcare professionals must make every day.

Mr. Neiman is office lead member in the Portland office of Williams Kastner. He is a member of the firm’s Health Care Practice Group and Behavioral Health Team. His practice focuses on healthcare litigation and health law, including behavioral health, medical staff, provider issues, managed care, UCR, compliance and risk management. He is admitted to practice in Oregon, Washington, and Idaho, and has actively served as a pro tem circuit court judge in Oregon since 1991.


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Tips for Employee Wellness Programs Amber Davis-Tanner Quattlebaum, Grooms & Tull, PLLC Ellen M. Tipping Murchison & Cumming, LLP

Workplace wellness programs have gained popularity over the past several years. According to the Equal Employment Opportunity Commission (“EEOC”), 94 percent of employers with more than 200 employees and 63 percent of companies with fewer employees have some sort of wellness program.1 These programs take many forms. Employers promote health for their employees in many ways, including subsidizing gym memberships or healthcare premiums, providing access to weight-loss or smoking-cessation programs, and improving healthful snack selections in break rooms. Employers can conduct voluntary medical examinations and activities to further a voluntary wellness program.2 A wellness program is voluntary “as long as an employer neither requires participation nor penalizes employees who do not participate.” Id. However, there is very little guidance about what constitutes a reward or penalty. In 2013, the EEOC stated in an informal guidance letter that it “has not taken a position on whether and to what extent a reward amounts to a requirement to participate, or whether withholding of the reward from non-participants constitutes a penalty, thus rendering the program involuntary.”3 Amid the uncertainty, wellness programs have come under fire by the EEOC in recent months. In late 2014, the EEOC filed three lawsuits alleging that companies violated various federal statutes with their wellness programs. Accordingly, companies wishing to implement wellness programs must be aware of the risks.

CHALLENGES BY THE EEOC The first of the EEOC’s lawsuits concerning wellness programs was EEOC v. Orion Energy Systems. In that case, the EEOC alleges that an employee was required to undergo a medical examination and answer inquiries related to possible disabilities. The EEOC alleges those requirements violate the Americans with Disabilities Act (“ADA”) because they are medical examinations not related to the employee’s job, and the examinations are not voluntary. The medical examination included a fitness component that required the use of a range-of-motion machine, a disclosure of medical history, and a blood draw. When the employee refused to participate in the wellness program, the company declined to pay any portion of her insurance premium, even

though the company paid the full premiums for employees who participated in the wellness program. The EEOC alleges the employee was soon terminated in retaliation for attempting to exercise her rights under the ADA. In late September, the EEOC filed EEOC v. Flambeau, Inc. That case also involves an alleged violation of the ADA as well. The EEOC alleges that an employee on medical leave was unable to complete biometric testing and a health-risk assessment, which included a blood draw and medical history. Because the employee was unable to complete the testing, the EEOC alleges that Flambeau terminated the employee’s health insurance, even though Flambeau paid 75 percent of an employee’s insurance premium if that employee participated in the wellness program. In EEOC v. Honeywell International, the EEOC alleged that the company’s wellness program violates Title VII of the Civil Rights Act (“Title VII”), the ADA, and the Genetic Information Nondiscrimination Act (“GINA”). According to the complaint, the company’s wellness program was not voluntary because employees and their spouses were being required to undergo biometric testing. The biometric testing included a blood draw and would test for blood pressure, HDL cholesterol, total cholesterol, height, weight, waist circumference, nicotine, and cotinine. The complaint further alleges that if the employee or spouse refuses to participate in the biometric testing, the employee will lose HSA contributions from Honeywell and that the employee will be charged up to $2500 in surcharges. The EEOC is expected to publish some guidance regarding workplace wellness programs in early 2015. In the meantime, these


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three cases bring significant uncertainty to the world of wellness programs. Until courts provide some clarity on the issues in Orion, Flambeau, and Honeywell, it is imperative that companies understand how wellness programs interact with various federal laws when they have or are considering these programs. THE AFFORDABLE CARE ACT AND THE HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT The Affordable Care Act (“ACA”) specifies that one of its objectives is to promote “participatory wellness programs.” The ACA and the Health Insurance Portability and Accountability Act (“HIPPA”) set out the rules for two categories of corporate wellness programs – (1) those available without regard to an individual’s health status, and (2) “health-contingent wellness programs.” The former is known as a participatory wellness program and may include programs that subsidize health club memberships, rewards for attendance at company-sponsored health education, or completion of a health risk assessment without requiring them to take further action. “Health-contingent wellness programs” may require individuals to meet a specific standard to obtain a reward. Examples of health-contingent wellness programs include rewarding non-smokers or quitters, or persons who achieve specified cholesterol level or weight as well as to those who fail to meet that biometric target but take certain additional required actions. As to the incentives allowed by the ACA for employee participation in such programs, they are flexible but would not appear to include the shifting of all premium to an employee who declines to participate. The rule which has been jointly proposed by six federal agencies, “Incentives for Nondiscriminatory Wellness Programs in Group Health Plans,” states: “[T]hese proposed regulations would continue to permit rewards to be in the form of a discount or rebate of a premium or contribution, a waiver of all or part of a cost-sharing mechanism (such as deductibles, copayments, or coinsurance), the absence of a surcharge, the value of a benefit that otherwise would not be provided under the plan, or other financial or nonfinancial incentives or disincentives.”

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THE AMERICANS WITH DISABILITIES ACT AND THE GENETIC INFORMATION NONDISCRIMINATION ACT The ADA and GINA also each authorize employers to obtain medical and family health history information as part of a voluntary wellness program, if certain requirements are met. The individual receiving the services must give prior, voluntary, knowing, and written authorization. Under the ADA, an employer is otherwise barred from inquiring into health conditions unless they are job-related and consistent with business necessity. Under GINA, an employer is barred from using individuals’ genetic information when making employment decisions. GINA also prevents the request or purchasing of genetic information, and strictly limits the disclosure of such information. Further, GINA prohibits “offering inducements” to obtain family medical histories from employees. However, GINA does allow employers to offer financial inducements for participation in disease management programs or other programs that encourage healthy lifestyles, such as programs that provide coaching to employees attempting to meet particular health goals (e.g., achieving a certain weight, cholesterol level, or blood pressure). WHAT CAN EMPLOYERS DO? So, then, under the ACA, ADA, HIPPA and GINA, employers are expressly authorized to offer wellness programs in which they may obtain employee health information and to provide rewards or incentives. As noted at the beginning of this article, sometime in 2015, the EEOC is expected to finally issue some guidance to employers as to what the agency deems to be a penalty rather than a reward. In the meantime, employers are not without guidance from other agencies. In particular, the Department of Labor has published FAQ sheets which do provide guidance, and they are the same guidance currently in the proposed rules for the ACA. Reward, Don’t Penalize Do not penalize employees for declining participation by refusing to pay any part of their insurance premiums. As to healthcontingent programs, the rules would allow a maximum reward of 20 percent to 30 per-

1 “EEOC Lawsuit Challenges Orion Energy Wellness Program and Related Firing of Employee,” http://www.eeoc.gov/eeoc/newsroom/release/8-20-14.cfm. 2 “Enforcement Guidance: Disability-Related Inquiries and Medical Examinations of Employees Under the Americans With Disabilities Act,” http://www.eeoc.gov/policy/docs/guidance-inquiries.html. 3 “ADA: Voluntary Wellness Programs & Reasonable Accommodation Obligations” (January 18, 2013) http://www.eeoc.gov/eeoc/foia/letters/2013/ada_wellness_programs.html.

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cent of the cost of health coverage, and increase the maximum reward to as much as 50 percent for programs designed to prevent or reduce tobacco use. Adherence to these limits should afford protection from enforcement by the EEOC, as the agency tasked to consider whether incentives constitute discrimination under the ADA’s standards. Protect Privacy As to programs in which employees consent to any collection or disclosure of health information (blood tests, biometric screening, blood pressure, family history), the employer should ensure that the program scrupulously safeguards the privacy of that information. Who has access to that information and for what purpose? Is it available to any individual who could conceivably affect the employee’s employment? Such access, when the information is not job-related and consistent with business necessity, could be another source for a claim under the ADA. Do Not Require Family Participation Regardless of whether GINA is intended to protect an employee from disclosure of his or her spouse’s health information, programs requiring the participation of a spouse are especially dangerous, in the opinion of the authors. This is because that crosses over to requiring the participation of a third party as a condition of the employee obtaining a benefit to which he or she would otherwise be entitled based solely on their own consent, as authorized by the ADA, GINA, HIPPA and the ACA. Amber Davis-Tanner is a litigation attorney at Quattlebaum, Grooms & Tull, PLLC in Little Rock, Arkansas. She has been recognized as an Associate to Watch by Chambers USA’s Guide to America’s Leading Lawyers for Business and named a Future Stare in Litigation by Benchmark Litigation. Ellen M. Tipping is a partner in the Irvine, California, office of Murchison & Cumming, LLP. She specializes in employment law, providing advice, counsel and representation to employers in State and Federal Court and administrative proceedings. She is admitted to practice in both California and Nevada.


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In today’s marketplace, competition is fierce and the stakes are high.

BITTER BUSINESS DISPUTES

Bitter business disputes often arise inflicting signif-

FOUR PRACTICAL TIPS ON MAKING A SUCCESSFUL LOST PROFITS CLAIM

icant damage to companies. The most common types of business disputes arise when a company’s operations are prevented or interrupted. To successfully win your case, you will need an expert to provide an opinion on your company’s lost profits arising from the business dispute. It is vital that your expert’s opinion meet certain criteria or you could lose your case. Every court in the United States is the gatekeeper to the admissibility of your expert’s opinion. The following are four practical tips in assisting litigation counsel, in-house counsel, and C-level executives.

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In many states, the evidence code is similar to Rule 702 of the Federal Rules of Evidence. In California, an expert’s opinion must also be perceived by or personally known to the witness, or made known to him at or before the hearing. (California Evid. Code, § 801, subd. (b).) The Federal Rules of Evidence prescribe the minimum requisites. It is important to understand that the value of your expert’s opinion rests not in the conclusion reached but in the factors considered and the reasoning employed in reaching that conclusion. (People v. Coogler (1969) 71 Cal. 2d 153, 166.

not supported by the record, upon matters which are not reasonably relied upon by other experts, or upon factors which are speculative, remote or conjectural. If this is the case, a Court would undoubtedly rule that your expert’s conclusions have no evidentiary value and exclude their testimony. (Hyatt v. Sierra Boat Co. (1978) 79 Cal. App. 3d 325, 338-339. In those circumstances, the expert’s opinion cannot rise to the dignity of substantial evidence and the verdict or decision in your favor becomes susceptible to being appealed. When a trial court has accepted an expert’s ultimate conclusion without critical consideration of his reasoning, and it appears the conclusion was based upon improper or unwarranted matters, the judgment must be reversed for lack of substantial evidence. For example, in the California case In re Marriage of Hewitson, the expert attempted to determine the value of a closely held corporation by using the selling price/book value ratio of publicly traded corporations. Due to the differences in the two types of companies being compared, the analogy was improper and the judgment based upon the expert’s testimony was not supported by substantial evidence. (In re Marriage of Hewitson, supra, 142 Cal. App. 3d at pp. 885-887). Courts have also reversed a determination of the value of a business because the lower court accepted the testimony of an expert who had relied upon false assumptions and improper factors, and who had failed to consider all of the relevant factors that established value.

2. BASED ON SUBSTANTIAL EVIDENCE You must make certain that your expert’s opinion is based on substantial evidence. A common pitfall parties want to avoid tumbling into is their expert basing their opinions on assumptions which are

3. ASCERTAINED WITH REASONABLE CERTAINTY Where the operation of an established business is prevented or interrupted, as by a tort or breach of contract or warranty, damages for the loss of prospective profits

1. COMPLY WITH THE EVIDENCE CODE Whether you are in State or Federal Court, your expert’s testimony must comply with the corresponding evidence code for that jurisdiction. First, you must select an expert that is qualified as an expert by knowledge, skill, experience, training, or education. Rule 702 of the Federal Rules of Evidence requires that your expert’s testimony pass the following test: (a) the expert’s scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue; (b) the testimony is based on sufficient facts or data; (c) the testimony is the product of reliable principles and methods; and (d) the expert has reliably applied the principles and methods to the facts of the case.

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that otherwise might have been made from its operation are generally recoverable. Your expert’s opinion must, however, also be ascertained with reasonable certainty. Reasonable certainty is established through past volume of business, historical data and other provable data relevant to the probable future sales. On the other hand, if you are not an established business, your expert will have more work to do to prove your lost profits claim. Lost profits for an unestablished business may not be recoverable if your business has no clear track record because it is too uncertain, contingent or speculative. Grupe v. Glick, 26 Cal.2d 680, at 693. However, if your expert is able to establish lost profits with reasonable certainty using economic and financial data, market surveys and analyses, business records of similar enterprises and the like, you still may be able to successfully prove your loss of profits claim for an unestablished business. Furthermore, you are not required to show the amount of lost profits with mathematical precision so long as your expert’s opinion is ascertained with reasonable certainty. Berge v. International Harvestor Co.,142 Cal. App. 3d 152 (1983). 4. TRUST BUT VERIFY President Ronald Reagan’s signature phrase “trust but verify” also applies to your expert. You should meet with your expert and have him verify the information you provide. Your expert should not rely just on deposition testimony of where objective evidence existed, but should also consider effects of competition on opinions on lost profits. Expert testimony can be excluded if it is based on the assumption that there are no potential competitors. See Heary Bros. Lightning Protection Co. v. Lightning Protection Inst., 287 F. Supp 3d 1038 (D Ariz 2003). If your expert follows these four practical tips, you are well on your way to successfully proving your lost profits claim in your bitter business dispute and recovering damages. Mhare O. Mouradian, a partner at Murchison & Cumming, LLP, is a member of the firm’s Business Litigation and Business & Real Estate Transactions practice groups. Mr. Mouradian has a broad range of experience encompassing all aspects of business law and litigation. Most recently Mr. Mouradian served as co-chair and successfully represented a U.S. national franchise in a 10day breach of contract bench trial and obtained a decision in excess of $850,000 in favor of his client. He has also negotiated numerous favorable settlements for his clients.


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Allocating Risk by Contract INDEMNIFICATION, HOLD HARMLESS, AND INSURANCE PROVISIONS John D. Cromie and Neil V. Mody

Risk allocation is a common feature of commercial agreements. To appropriately allocate risks, contracting parties must pay careful attention to provisions concerning: (i) indemnification; (ii) hold harmless; and (iii) insurance coverage requirements. When properly drafted, analyzed and documented, these separate but interdependent provisions can facilitate the allocation of risk. CONTRACTUAL INDEMNITY PROVISIONS In simple terms, “indemnify” typically means an obligation to reimburse following a loss. A contractual indemnification provision may effectively transfer the risk from the entity providing goods or services to the entity receiving them (or vice versa) in the event of a loss stemming from the contractual relationship. A major limitation on indemnity clauses, however, is that they may be drafted to “cap” the amount to be spent or duration of indemnity, or to exclude certain categories of risk. Moreover, some jurisdictions, by law, do not allow indemnification for the sole and/or concurrent negligence of the indemnitee. As a result, a contractual indemnification provision may potentially be deemed unenforceable depending upon

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circumstances of the loss. For this reason, commercial contracts often include hold harmless and insurance provisions to “bootstrap” protections that indemnity clauses are intended to provide. HOLD HARMLESS AGREEMENTS Another common feature, the hold harmless provision is a promise not to hold another party responsible for damages or other liability arising from a transaction, thereby limiting one entity’s exposure to claims. The hold harmless provision, however, will typically only protect the entity from exposure to claims by the other party to the contract, and not from third parties who may claim injury arising from its performance. Thus, the allocation of risk arising from a contractual relationship can rarely be effectuated through a hold harmless provision alone. INSURANCE REQUIREMENTS Given the limitations on indemnification and hold harmless provisions, commercial contracts often include requirements for an entity to procure some form of insurance coverage on behalf of the other. To successfully manage risks, however, it is critically important that contracting parties en-

sure that all protections they believe are embraced are in fact contained in the contract and insurance documents. NEGOTIATE RISK ALLOCATION PROVISIONS UP FRONT As a deal point, negotiations concerning the nature and extent of insurance that one party is required to procure on behalf of another should be among the least contentious in the entire contract. This is because typically both parties – the named insured and the entity seeking additional insurance coverage – have a shared interest in making sure they have sufficient insurance to cover reasonably anticipated risks. As a result, one would expect the contracting parties to work together to ensure that whichever insurance product is purchased is appropriate for the risks they face. In practice, however, the insurance provisions of a commercial contact are often overlooked and should be more carefully considered before an occurrence takes place. For example, in Mutual Benefit Ins. Co. v. Politopoulos, 75 A.3d 528 (Pa. Sup. Ct. 2013), a restaurant property owner sought additional insured coverage under a policy procured by the restaurant tenant pursuant to a contract between them. After the con-


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tract incepted, an employee of the restaurant was injured and sued the property owner, who in turn sought coverage. After reviewing the claim, however, the insurer declined coverage pursuant to an employers’ liability exclusion contained in the policy. At the trial court level, the insurers’ declination was upheld, but an appellate court more recently found that coverage may exist based upon a separate severability of insureds provision. In 2015, the highest court in Pennsylvania is expected to decide whether the restaurant owner qualifies for additional insured coverage. Thus, while litigation cannot always be avoided, contracting parties may attempt to limit protracted disputes such as those in Politopoulos by carefully reviewing contracts and insurance policies before a loss takes place. THE CONTRACT IS NOT AN INSURANCE POLICY Moreover, it is important to keep in mind that the insurance company is rarely, if ever, a party to the commercial contract, and is therefore only required to provide coverage pursuant to the terms of its policy. In City of Cedar Rapids v. Insurance Company of N. Am., 562 N.W.2d 156 (Sup. Ct. Iowa), the city and a hotel owner were parties to a hotel lease agreement. The agreement required the hotel to obtain liability insurance naming the city as an additional insured. After the contact was signed, a hotel guest fell through a plate glass of a second-floor skywalk system, sustaining injuries. The coverage question, however, turned on the specific language of the additional insured endorsement, which only conferred coverage with respect to a “designated premises” in the hotel, a ballroom. Since the injury took place at the skywalk, and not the ballroom, the city was not entitled to coverage. Rather, the court explained that if the hotel failed to procure the insurance required by contract, “the city must look to the hotel for recourse and not the insurance company.” Id. at 158. Similarly, in Raymond Corp. v. National Union Fire Ins. Co., 5 N.Y.3d 157, 833 N.E.2d 232, 800 N.Y.S.2d 89, New York’s highest court found that the additional insured endorsement a forklift manufacturer procured on behalf of its installation vendor did not provide coverage for the vendor’s negligent acts. After the contract was entered, the vendor’s technicians improperly fit the guide rollers, which caused them to wobble, jam, and ultimately injure a worker. The additional insured endorsement provided that the vendor was to be included as an insured “but only with respect to ‘bodily injury’ or ‘property damage’ arising out of ‘your products.’” Since the injuries stemmed from the installation vendor’s neg-

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ligence, not the manufacturer’s defective product, the court ruled the vendor had no rights to coverage. See id. at 162-63. In other words, the question of whether an entity qualifies as an additional insured will generally turn on the language of the insurance policy as opposed to the underlying contract. In Franklin Mut. Ins. Co. v. Security Indemnity Ins. Co., 275 N.J. Super. 335, 646 A.2d 443 (N.J. App. Div. 1994), a law firm sought additional insured coverage following a slip and fall accident at a restaurant to which it leased space. Under the policy the restaurant had purchased, the law firm qualified as an additional insured “with respect to the liability arising out of the ownership, maintenance, or use” of the leased premises. Id. at 445. Since there was a substantial nexus between the steps where the accident occurred and the leased premises, the court found the liability arose out of the “use” of the premises within the meaning of the additional insured endorsement. Id. at 446. If, however, the policy had contained an additional insured endorsement more similar to those considered in Cedar Rapids or Raymond Corp., the entity seeking coverage may have found itself with no coverage at all. See also Tropani v. 10 Arial Way Assoc., 301 A.D.2d 644 (2d Dept. (N.Y.) 2003) (holding contractual requirement for party to be named as additional insured must be “expressly and specifically stated”); In re Deepwater Horizon, No. 13-0670 (Tex. Sup. Ct., Feb. 13, 2015) (finding underlying transactional documents may be relevant to additional insured dispute “if the policy directs us elsewhere” such that additional insured status is “inexorably linked” to extent of indemnity obligations). Despite the importance of insurance policy language, few commercial contracts actually require a party to provide the other entity with a copy of the policy. As a result, many entities will enter into contracts assuming they qualify as additional insureds, but will never actually see the insurance policy until after an occurrence. To avoid these surprises, contracting parties should amend their agreements to require the other party to forward copies of all insurance policies naming them as an additional insured before the contract incepts. INSURANCE CERTIFICATES ARE NOT POLICIES Finally, the majority of jurisdictions have found that a certificate of insurance alone is not sufficient to confer insured status on a party. See, e.g., Tribeca Broadway Assoc. LLC v. Mount Vernon Fire Ins. Co., 774 N.Y.S.2d 11, 13 (N.Y. App. Div. (1st Dept.) 2004) (certificate of insurance is “not a con-

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tract to insure the designated party nor conclusive proof, standing alone, that such a contract exists”). Accordingly, an entity seeking additional insured coverage pursuant to a contract should request not only a certificate of insurance, but also complete copies of the policy jacket, declarations, and all endorsements, including any additional insured endorsement. By addressing risk allocation provisions up front, contracting parties will be far better poised to respond in the event of a claim, because they will have negotiated how and where the risks arising from their contractual relationship should be allocated. CONCLUSION The allocation of risk is a critical component of commercial contracts spanning various industries. When appropriately negotiated and drafted, indemnification, hold harmless, and insurance provisions can work symbiotically to spread risks of loss. Each of these components, however, contains its own inherent limitations and must be carefully evaluated. In particular, contracting parties should review these risk allocation provisions with a knowledgeable professional before the contract is signed. By addressing risk allocation language up front, the parties to a contract can most effectively assess and seek to minimize risks accompanying a contract.

John D. Cromie, chair of Connell Foley LLP’s Corporate and Business Law practice group, has more than 20 years of experience in the areas of corporate and business law, mergers and acquisition, real estate and banking law. He counsels a wide variety of clients, ranging from Fortune 500 public companies to privately owned mid-cap enterprises and start-up ventures, in complex contract negotiations and other business transactions. Neil V. Mody is a partner in Connell Foley’s Insurance Coverage Practice Group. He represents insurers in connection with complex coverage issues implicating various lines of insurance, including personal, property, casualty, excess, marine, contractors, environmental, reinsurance, and various forms of specialty and professional risk policies (such as D&O, E&O, EPL, cyber, tech, and management liability issues).


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PRESIDENT OBAMA’S EXECUTIVE ACTION ON IMMIGRATION POLICY OFFERS ONLY TEMPORARY REPRIEVE FOR SOME Jennifer Parser

On November 21, 2014, President Obama made an announcement regarding several areas of the U.S. immigration policy, most significant of which addresses approximately 4.4 million undocumented aliens living in the U.S. without documentation. While these changes obviously affect many, they also reflect limits to the President’s executive authority as they offer only temporary reprieve until Congress enacts changes to current law. This article addresses changes in immigration policy, some of the related considerations of which employers should be aware, and how these changes can impact their businesses. DEFERRED ACTION FOR PARENTS OF U.S. CITIZENS AND LAWFUL PERMANENT RESIDENTS Based upon the current Deferred Action for Childhood Arrivals (DACA) program, the President authorized creation of a new deferred action program, Deferred Action for Parental Accountability or DAPA, also called Deferred Action for Parents of Americans, to be operational within 180 days. An alien living in the U.S. without documentation can apply to be eligible for “deferred action” which will allow him or her to remain in the U.S. for three years. Based thereon, the U.S. Department of Homeland Security (DHS) will defer for three years a deportable individual from being removed from the U.S. if he or she:

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1. Has a child who is a U.S. citizen or lawful permanent resident, known as holding a green card as of November 20, 2014; 2. Is not an “enforcement priority” under DHS policy, meaning a criminal, suspected terrorist, gang member or felon (but this does include certain misdemeanors); 3. Has continuously resided in the U.S. since before January 1, 2010; 4. Is physically present in the U.S. when DHS initiates this program and at the time of applying; 5. Presents no other factors, at the discretion of DHS, making a granting of deferred action inappropriate; and 6. Passes a background check. Like DACA, the DHS decision to allow a parent to remain will be made on a caseby-case basis – approval may be revoked and approval will not automatically put someone en route to permanent U.S. residence or citizenship. Further, an individual eligible for this relief can get a Social Security number and will receive employment authorization if economic need can be demonstrated, but will not be eligible for government benefits under the Affordable Care Act or other government subsidy programs. Eligibility for state benefits such as driver’s licenses, in-state tuition and professional licenses will be left to the discretion of each state.

DEFERRED ACTION FOR CHILDHOOD ARRIVALS (DACA) This executive action will not legalize the status of the parents of “Dreamers” (young people who received temporary status under DACA). However, the DACA program has been expanded. Currently, the only eligible DACA recipients are those who were born before June 15, 1981, arrived in the U.S. prior to January 1, 2007, and were under the age of 31 as of June 15, 2012. The cut-off age of 31 will be eliminated and the cut-off date for arrival in the U.S. will be extended to January 1, 2010. DACA recipients will receive three years’ relief instead of two, reflecting the same policy for eligible parents under DAPA. IMPLEMENTATION OF DAPA AND DACA The expansion of both deferred action programs comes with additional enforcement activities. A memo to all agencies will provide directions to focus on national security threats, illegal entrants with criminal convictions and recent unlawful entrants. By the same token, DHS has instructed Immigration and Customs Enforcement (ICE) and Customs and Border Protection (CBP) to apply these new directives to DACA and DAPA eligible individuals already in custody, removal or those scheduled for deportation. Financing for both DAPA and DACA will come from a filing fee of $465 per application.


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SECURE COMMUNITIES PROGRAM TO CHANGE Obama’s executive action authorizes the replacement of the controversial Secure Communities program to a Priority Enforcement Program. Secure Communities uses a federal information-sharing database between ICE and the Federal Bureau of Investigations. Under the Secure Communities program, when an individual was arrested by local law enforcement for a criminal violation of local, state or federal law, the arresting officer would automatically notify ICE. At that time of notification, ICE made a decision whether immigration enforcement was warranted. The process will change under the President’s executive action so that, instead of local law enforcement automatically notifying ICE of an arrest, ICE will request local law enforcement to notify it of an arrested individual’s pending release. Also, the DHS has designated the Office of Civil Rights and Civil Liberties to monitor state and local law enforcement to ensure there is no biased policing. PROSECUTION AND DEPORTATIONS OF THREE GROUPS Four groups that will continue to face prosecution and removal are as follows. 1. Suspected terrorists, felons, gang members and those who entered the U.S. illegally after January 1, 2014; 2. Those that pose a risk to national security; 3. Those with convictions of felonies, aggravated felonies, significant misdemeanors (domestic violence, burglary, firearm offenses, DUI and drug trafficking) and three or more misdemeanors (excluding traffic violations); 4. Those who ignored removal orders and reentered the U.S. after January 1, 2014. OTHER IMMIGRATION REFORM Some of the more salient points of Obama’s executive action touching other areas of immigration law include: • Re-registration will be available to allow people who are legally in the U.S. and awaiting green cards to adjust their status to that of lawful permanent residents when such status has been approved (but there have been no green cards available due to those individuals’ countries of nationality being over-subscribed). This policy alone is estimated to benefit 400,000 individuals. • Travelling outside the U.S. while a lawful permanent resident petition is pending will not result in the traveler being inadmissible when attempting to re-enter the U.S. • There will be a clarification of the standard of extreme hardship for waivers of

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unlawful presence in the U.S. for some relatives of U.S. citizens and lawful permanent residents. Clarification will also be provided for the standard by which a national interest waiver entitling individuals to remain in the U.S. can be granted to foreign inventors, researchers and founders of start-ups that benefit the U.S. Authorization to remain in the U.S will be granted for eligible inventors, researchers and founders of start-ups who do not qualify for a national interest waiver, but who have been awarded substantial U.S. investor financing or those that promise innovation and job creation through development of new technologies or cutting edge research. Spouses of H-1B visa holders may work if they are on the path to permanent U.S. residence. Greater clarity will be provided to interpret the “specialized knowledge” requirement for L-1B nonimmigrant visa status, a visa for transferees from a foreign parent or affiliate. The use of the Optional Practical Training Period, an authorized period of work authorization for foreign graduates from U.S universities and colleges, currently at 29 months for STEM graduates and 12 months for all others, will be expanded and extended. The required labor certification by the U.S. Department of Labor, a precursor to applying for lawful permanent residence will be modified to move more smoothly. As of 2013, family members of U.S. citizens who are eligible for a waiver of inadmissibility for the three or 10 year bar if they left the U.S could travel abroad to be processed for permanent residence once the waiver was granted. The USCIS has been directed to expand the family members eligible for this stateside processing to include adult children of U.S. citizens and permanent residents as well as the spouses and minor children of permanent residents. The new White House Task Force on New Americans will present recommendations to improve integration of immigrants in the U.S. and assist the communities that receive them.

WHY NOT MORE? Many ask why the President did not just grant permanent residence to DACA- and DAPA-eligible individuals. This area was carefully researched by the White House and Department of Justice legal staff who determined that while the executive branch can defer action, it cannot grant status such

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as permanent legal residency and U.S. citizenship, actions only possible through Congress. Notably missing is any action for temporary agricultural workers who do not qualify for some type of relief through their U.S. or permanent resident children. As a result, the President has asked the Secretaries of DHS, Agriculture, Commerce, Labor and Education, the U.S. State Department, working in consultation with the White House, Attorney General and non-governmental constituencies to submit recommendations for additional action to him by March 20, 2015. DHS Secretary Jeh Johnson also issued a memorandum to support U.S. employers seeking to hire and retain highly skilled foreign workers. This includes faster processing for employment-based permanent residence, removing any penalty for changing jobs while awaiting permanent residence visa status, and preventing recipients of U.S. higher education from leaving the U.S. for easier immigration policies elsewhere. CONCLUSION The President’s immigration reform is a step towards a more inclusive and better coordinated immigration system. Precedents for executive action relating to immigration include every U.S. President since 1956, most notably the executive action known as “Family Fairness” which resulted in the 1986 Immigration Reform and Control Act under President Reagan, giving three million undocumented aliens a path to legalization. Actual conferring of permanent residence and U.S. citizenship remained then and continues to lie within the purview of Congress.

Jennifer Parser’s practice includes a broad range of immigration and labor and employment matters. She is a multi-lingual attorney able to handle all immigration matters, including H-1B visas, L-1A, L-1B, and H visas, J-1 visas, E-1, E-2, and Australian E-3 visas, F visas and the OPT period option, deferred action program for undocumented youth, O and P visas, TN visas, PERM labor certifications, permanent resident, investor-, employment-, and family-based visa petitions, deportation and political asylum cases, and naturalization and renunciation matters. Jennifer may be at [email protected] or 919.783.2955.


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Cross-Border Discovery Disputes and 28 U.S.C.1782

Leveling the Playing Field Max C. Rudolf and Jordan S. Cohen

With the rise of multinational corporations and increased globalization, it is increasingly common for American companies to find themselves involved in litigation abroad. Most foreign or international tribunals’ pretrial procedures are vastly different, especially in regard to discovery and proof-gathering – with many taking a hostile view of the United States’ liberal approach to pretrial discovery. In an effort to promote cross-border judicial assistance, the Legislature created a mechanism in 28 U.S.C. § 1782 whereby a foreign tribunal or litigant can petition a U.S. federal court for discovery from a U.S.based individual or entity located in that court’s jurisdiction for use in the foreign proceedings. The Legislature took the first step with the aim that other nations would follow suit and provide similar means of assistance to our courts. Unfortunately, they largely did not. This created an environment where a foreign litigant could avail itself of liberal, American-style discovery here while simultaneously hiding behind the more restrictive discovery rules where the action is pending, thereby creating a discovery imbalance. When the foreign party has no U.S. presence, or at least no information here

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relevant to the proceedings, the American party can find itself without recourse. Outright opposition to a Section 1782 application is a Herculean task, rarely successful when the statutory requirements are met. This article explores another – often overlooked – option available to American parties who find themselves on the receiving end of a 1782 request. Instead of outright opposition to the discovery application, the American party can argue that the court should condition any grant of aid to the foreign applicant on the foreign party engaging in reciprocal discovery under the Federal Rules for use in the foreign proceedings. This will not only maintain the procedural parity between the parties, but could also give the American party access to information it would not otherwise be able to obtain in the foreign proceedings.

the discovery is sought, and courts often solely rely on the allegations contained in the application and grant the application ex parte. When this is the case, the court will provide the receiving party a certain amount of time to object to the discovery or seek other relief, such as moving to quash the application or modify it. The initial inquiry by the receiving court focuses on section 1782’s four statutory requirements: 1. The request must be made by a foreign tribunal or by any interested person. 2. The request must seek evidence. 3. The evidence must be “for use in a proceeding in a foreign or international tribunal.” 4. The person from whom discovery is sought must reside and be found in the district of the district court ruling on the application for assistance.

THE SECTION 1782 APPLICATION, THE STATUTORY REQUIREMENTS, AND THE INTEL FACTORS A section 1782 request for judicial assistance is initiated by the applicant petitioning the federal district court where the discovery sought is located. There is no notice requirement to the party from whom

In the seminal 2004 case Intel Corp. v. Advanced Micro Devices, Inc., the United States Supreme Court held that when the four statutory requirements are met, the district court is authorized, but not required, to grant a section 1782 discovery application.1 The Supreme Court then outlined four non-exhaustive factors to guide the district


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court’s discretion, known as the Intel factors: 1. Whether the person from whom discovery is sought is a participant in the foreign proceeding, because the need for section 1782 aid generally is not as apparent when evidence is sought from a nonparticipant. 2. The nature of the foreign tribunal, the character of the proceedings underway abroad, and the receptivity of the foreign government or the court or agency abroad to U.S. federal-court judicial assistance. 3. Whether the section 1782 request conceals an attempt to circumvent foreign proof-gathering restrictions or other policies of a foreign country or the United States. 4. Whether the request is otherwise unduly intrusive or burdensome. Practically speaking, the courts tend to grant the discovery aid when the statutory requirements are met, unless the discretionary factors heavily weigh against doing so. Instead of taking an obstructionist tack – which risks an outcome were your opponent reaps the benefit of broad discovery here with no commensurate benefit to the American entity – there is another option. If the American party believes, on balance, engaging in reciprocal American-style discovery would be beneficial to it (for example, if the foreign litigant has information which it cannot obtain through the discovery procedures in the foreign jurisdiction), then the American party can petition the district court to condition its grant of discovery aid on the foreign party engaging in reciprocal discovery under the Federal Rules. This approach has been endorsed by the Supreme Court and one of the principal architects of 28 U.S.C. § 1782, and applied a number of times by courts in the Second Circuit.2 Taking this approach alleviates the concern many courts have expressed over the practical effect of granting one-sided discovery and thereby creating a discovery imbalance in the foreign proceedings. While the Second Circuit has led the way with this approach since the early 1990s, other Circuits have been slow to follow suit. However, there is no reason this tactic cannot be advanced in other Circuits, provided an appropriate Intel argument is advanced.

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ARGUING FOR RECIPROCAL DISCOVERY: MAKE YOUR OPPONENT LOOK UNREASONABLE When you or your client first receives notice that your foreign adversary is seeking discovery assistance pursuant to section 1782, you should begin laying the groundwork for seeking reciprocal discovery. The strategy suggested by these authors is based largely on commentary by Professor Hans Smit, the “chief architect” of section 1782, whose writings on the subject have been relied upon by the Supreme Court. Professor Smit has argued that reciprocal discovery is warranted when there is “evidence that the American party seeks, but the foreign party effectively withholds.” This goes to the heart of the third Intel factor. Upon receiving notice of a section 1782 application, after determining what “discovery” has already occurred in the foreign tribunal, the American party should send a letter to the foreign litigant offering to engage in reciprocal discovery (and noting this would avoid court intervention). Keep in mind this letter may be an exhibit in support of your request for reciprocal discovery, so your client should appear to be simply making a reasonable request, which could be rejected only if the 1782 applicant is attempting to circumvent foreign proof-gathering restrictions and create a discovery imbalance. Professor Smit noted just such a catch22 in his commentary on the purpose behind giving the district court wide discretion in granting its assistance: [The drafters of s 1782] realized that a satisfactory solution would be reached by the imposition of such a condition [for reciprocal discovery], since both parties would then have the benefit of the same American discovery, with the foreign party unable to complain of its having to extend to the American party what it itself, with the help of an American court, sought from it.3 Throughout this process, every action should be designed to make your client appear ready and willing to engage in fair, reciprocal discovery, while the other side looks like an obstructionist attempting to gain a strategic edge in the foreign proceedings. Further support for your request for reciprocal discovery can come from an expert in the foreign jurisdiction’s laws who can explain in an affidavit the foreign discovery

1 Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 124 S. Ct. 2466 (2004). 2 See, e.g., In re Esses, 101 F.3d 873, 876 (2d Cir. 1996); Euromepa S.A. v. R. Esmerian, Inc., 51 F.3d 1095, 1101-02 (2d Cir. 1995); Application of Consorcio Minero, S.A. v. Renco Group, Inc., 2012 WL 1059916 (S.D.N.Y. Mar. 29, 2012); and Minatec Finance S.A.R.L. v. SI Group Inc., 2008 WL 3884374 (N.D.N.Y. Aug. 8, 2008). 3 Smit, “Recent Developments in International Litigation,” 35 S. Tex. L. Rev. 215, 237-38 (1994).

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rules and the status of the proceedings. And just because you are seeking reciprocal discovery does not mean you are foreclosed from objecting to discovery requests that fall outside the ambit of discoverable information under the Federal Rules, or those which are “unduly intrusive or burdensome.” To that end, in preparing your reciprocal request from the foreign litigant, you should try to mirror their unobjectionable requests as much as possible. The authors recommend submitting the reciprocal request in writing in early communications with American counsel for the foreign litigant. It is important to note that despite the section 1782 application, the court does not have the authority to order the foreign litigant to engage in reciprocal discovery. Instead, the court can condition its grant of discovery aid on the foreign litigant engaging in reciprocal discovery. If the foreign litigant refuses, you do not have the obligation to provide one-sided discovery, thereby maintaining procedural parity in the foreign proceedings. With a well-crafted strategy, an American party can prevent the foreign litigant from using section 1782 as a sword and the foreign restrictions on proof-gathering as a shield. American entities involved in litigation abroad should be aware of this often overlooked option, and continue to educate the courts about their ability to maintain a discovery balance in the proceedings abroad by conditioning relief upon reciprocal discovery. While the Legislature’s aim in enacting section 1782 may never be fully realized, a wider adoption of this remedy would at least help alleviate the unintended consequence of creating a discovery imbalance abroad. Jordan S. Cohen is a partner in the Ft. Lauderdale office of Wicker Smith. His practice includes complex commercial litigation, class action litigation, e-discovery, intellectual property, and commercial transactions. He can be reached at [email protected]. Max C. Rudolf is an associate in the Ft. Lauderdale office of Wicker Smith. He specializes in complex civil litigation in a wide range of matters, with an emphasis on commercial litigation, products liability, intellectual property, and federal court practice. He can be reached at [email protected].


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FRANCHISING RISK FACTORS

Is the Franchisor Responsible for a Franchisee’s Negligence? Michael P. Lowry

Franchising has many benefits for the right business model. It enables the franchisor to rapidly expand despite limited capital and gain immediate insight for a local market. For the franchisee, franchising mitigates the risk of starting a new business by offering an established business or product. But when will the franchisor be responsible for the negligence of the franchisee? WHAT IS A FRANCHISE SYSTEM? Franchises are everywhere. 7-Eleven, Arby’s, Wendy’s, Whataburger, Red Robin, Steak’N’Shake, TGI Friday’s, Motel 6 and many other businesses are direct examples of domestic franchises. Some companies like California Pizza Kitchen and the Darden brands even

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franchise internationally. Typically in franchise relationships, the franchisee operates an independent business but uses the franchisor’s trademark or trade name under license. In exchange for using the franchisor’s trademark, the franchisee typically must comply with a detailed franchise or license agreement designed to protect the integrity of the trademark by setting uniform quality, marketing, and operational standards.

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For Wendy’s, this helps to ensure that a Frosty is a Frosty is a Frosty no matter what restaurant a customer visits. WHEN IS A FRANCHISOR LIABLE FOR THE FRANCHISEE’S NEGLIGENCE? If a franchisee’s employee is negligent, courts have used two alternative tests to decide whether the franchisor can also be held liable. One creates expansive liability to the franchisor, the other is more focused upon the actual relationship between the franchisor and franchisee. The first, older test is the traditional “control or right to control” model. This is the same model used to determine whether an employee is within the course and scope of employment when the negligent act occurred. This test tends to create expansive liability to the franchisor. “If the operational standards included in the typical franchise agreement for the protection of the franchisor’s trademark were broadly construed as capable of meeting the ‘control or right to control’ test that is generally used to determine respondeat superior liability, then franchisors would almost always be exposed to vicarious liability for the torts of their franchisees.” Kerl v. Rasmussen, 682 N.W.2d 328, 331-32 (Wis. 2004). Yet the right-to-control test has lost favor. “A few older cases were willing to treat general quality and operational requirements in franchise agreements as indicia of control sufficient to get the plaintiff past summary judgment on that issue.” Kerl, 682 N.W.2d at 338 at n.5. The right to control test does not represent the modern cases concerning franchisor and franchisee relationships. “The more recent cases reject the general proposition that the contractual quality and operational standards in a franchise agreement give rise to a basis for franchisor vicarious liability, opting instead for a more precisely focused test.…” Id. Rainey v. Langen, 998 A.2d 342 (Me. 2010) applied the right to control test to a collision involving a delivery driver for a Domino’s Pizza franchise. The injured plaintiff sued and also named the franchisor, Domino’s Pizza, LLC. Rainey applied the right to control test but, perhaps acknowledging its problems, re-stated the test as focusing “on a franchisor’s control over a franchisee’s performance of its day-to-day operations.” Id. at 349. This “test allows a franchisor to regulate the uniformity and the standardization of products and services without risking the imposition of vicarious liability.” Id. Domino’s franchise agreement imposed typical requirements upon the franchisee. But “although the quality control require-

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ments and minimum operational standards are numerous, these controls fall short of reserving control over the performance of [franchisee]’s day-to-day operations.” Id. at 350. “In the end, the quality, marketing, and operational standards present in the Agreement and Guide do not establish the supervisory control or right of control necessary to impose vicarious liability.” Id. Rainey seems to stand somewhere between the traditional right to control test and the modern standard, known as the “instrumentality test.” This test looks beyond the franchise agreement and imposes liability on the franchisor only when it has control or a right of control over the daily operation of the specific aspect of the franchisee’s business that was negligent. This test focuses on the reality of a franchise relationship and acknowledges the mere presence of detailed contractual obligations does not mean the franchisor is managing the franchisee’s day-to-day operations. “To the contrary, the imposition of quality and operational requirements by contract suggests that the franchisor does not intervene in the daily operation and management of the independent business of the franchisee.” Id. at 338. The modern test also acknowledges that these contractual requirements are required to protect the integrity of the trademark that is vital to the franchise’s viability. If common franchise agreement provisions concerning marketing, operational requirements, uniform quality, and a right of inspection do not automatically impose liability on a franchisor, what will? In Kerl an employee of an Arby’s franchise left work without permission during his shift and murdered his former girlfriend, before then committing suicide. The victim’s estate attempted to hold Arby’s Inc., the franchisor, responsible for the franchisee’s alleged negligent supervision of the employee. No liability was imposed because Arby’s lacked control over the instrumentality that supposedly caused the harm: day-today supervision of employees. Patterson v. Domino’s Pizza, LLC, 333 P.3d 723 (2014) presented this question to the Supreme Court of California in the context of a sexual harassment claim. It concluded a “franchisor will be liable if it has retained or assumed the right of general control over the relevant day-to-day operations at its franchised locations.” Id. at 743. Although using different terminology, this test is substantively similar to the instrumentality test. Patterson reviewed the franchise agreement and the facts of how the franchise operated, but concluded Domino’s did not have control over the “day-to-day as-

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pects of the employment and workplace behavior of [the franchisee’s] employees,” so Domino’s could not be held liable for the sexual harassment at issue. Viado v. Domino’s Pizza, LLC, 217 P.3d 199 (Or. App. 2009) applied the instrumentality test to another delivery driver. It acknowledged the franchise agreements standards for delivery drivers but concluded “none of them gives Domino’s the right to control the physical details of the manner of driving.” Id. at 211 (emphasis in original). “[P]laintiff’s evidence must establish more than the fact that Domino’s set hiring and training standards for delivery drivers or standards for delivery vehicles. … Setting those standards for a franchisee’s employees and having the right to actually control how the franchisee’s employees perform the physical details of driving are two different things.” Id. Consequently Domino’s was not liable. HOW CAN A FRANCHISOR PROTECT ITSELF? Just like in tax and other areas, the franchise agreement must be sufficiently specific to enforce trademark standards, but not too specific to effectively give the franchisor day to day control over the franchisee’s specific operations. This is a fine line to walk, but modern courts seem willing to accept that establishing operational standards alone is not sufficient to impose liability against a franchisor. Finally, franchisors are frequently defended under tenders of defense. It is vital that the attorney defending the franchisor understand when liability might be imposed and push to develop facts to support the franchisor’s eventual motion for summary judgment. Too often it seems the defense counsel assigned to defend the employee, franchisee and franchisor together simply assumes the franchisor is liable without fully pressing the issue. Deciding whether a franchisor is liable for a franchisee’s negligence is often fact specific to the incident involved. Using a well-planned discovery strategy, however, facts can usually be developed to terminate the franchisor’s liability.

Michael P. Lowry is a shareholder in Thorndal Armstrong Delk Balkenbush & Eisinger’s Las Vegas office. He represents retail, restaurant and hospitality clients in administrative and litigation matters. He also authors Compelling Discovery, a legal blog honored in 2013 and 2014 by ABA Journal.


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IMPACT OF FTC’S BROADENED SCOPE

Creeping In On Your E-Business Susan Childers North LeClairRyan Lisa Butler Ferguson Enterprises, Inc.

For retailers who have eBusiness lines, the Federal Trade Commission’s (“FTC”) new regulations will affect the way you do business. The amendments in 16 C.F.R. §435 went into effect December 8, 2014. Has your business made the necessary adjustments to comply? The regulation prohibits sellers from soliciting mail, Internet, or telephone order sales unless they have a reasonable basis to

expect that they can ship the ordered merchandise within the time stated on the solicitation or, if no time is stated, within thirty days. The regulation further requires a seller to seek the buyer’s consent to the delayed shipment when the seller learns that it cannot ship within the time stated or, if no time is stated, within thirty days. If the buyer does not consent, the seller must promptly refund all money paid for the un-

shipped merchandise. See 79 Fed. Reg. 55,615 (September 17, 2014) (to be codified at 16 C.F.R. §435). The change in the definition to include Internet sales is no surprise. For example, in 1993, the predecessor rule to 16 CFR §435 called the Mail Order Merchandise Rule was amended from a 1975 version1 to cover telephone (including merchandise using telephone Internet ac-


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cess) and it was renamed the Mail or Telephone Order Merchandise Rule.2 Now, under 16 C.F.R. §435, it is called the Mail, Internet or Telephone Order Merchandise Rule to clearly define Internet sales as an area of governance for the FTC. Overview of the new requirements: The changes were threefold: (a) the definition of the areas controlled by the FTC was expanded to clearly include Internet sales versus just mail or telephone sales; (b) the parameters related to a retailer’s advertised ship dates were clearly defined; and (c) the rules related to the timeliness of and content of refunds to customers were prescribed. The most significant change for retailers to note relates to 16 C.F.R. §435.2 – this section discusses what retailers must now do regarding shipment dates of the ordered merchandise and changes thereto. As of December 8, 2014, it is an unfair trade practice for eBusinesses to fail to ship within the communicated ship by date. This is because the FTC found that deceptive practices were still prevalent regarding Internet orders of merchandise.3 In addition, data showed that shipment dates are important to consumers and consumers rely on this information; therefore sellers should have a reasonable expectation of when they can ship ordered merchandise.4 If a seller lacks this reasonable basis (which it must prove by documentation), then it is considered deceptive and an unfair business practice.5 The regulations require that the seller must ship by the stated shipment date and, if the seller provides no ship date, then the merchandise must ship within thirty days of the date the order is completed by the buyer. Next, if the communicated ship date is revised, eRetailers must provide a mechanism through which purchasers can cancel the order or agree to the revised shipment date. If the revised date changes, then orders are deemed canceled; unless, purchasers specifically agree to the further revised date. If the eRetailer cannot provide a revised date or the revised date is more than 30 days from the original ship date, the order is deemed canceled unless the purchaser specifically agrees to the continued delay. In addition, the purchaser must be informed that s/he has a continuing right to cancel the order at any time so long as the purchaser notifies the eRetailer of cancelation prior to actual shipment. This new change poses major problems

for eRetailers selling special order and often non-refundable, non-cancelable goods. This is because often times shipment dates are provided by the manufacturer of the merchandise and the eRetailers have little to no control of actual ship dates. The problem is exacerbated by the fact that many standard vendor agreements between eRetailers and manufacturers have “no cancelation” provisions if shipment dates change. Indeed, these agreements typically state that stated shipment dates are mere estimates and time is never of the essence. Keep in mind that eRetailer analytics prove that shorter ship dates result in sales conversion. The new provision regarding refunds, and timeliness of refunds, 16 C.F.R. §435.1, is less likely to have a major impact. The new regulations modify the time within which sellers must provide refunds for third-party credit transactions (for example, Visa or MasterCard) from one billing cycle to seven (7) working days. However, for sellers who have their own credit cards, the rule remains the same – one billing cycle. The change for third party credit transactions should not cause any additional work because sellers already are required to comply with Regulation Z (12 CFR 1026.12(e)), which has a seven (7) working day refund period.6 Next, the amendments permit more flexibility by allowing refunds to be consummated by any means that is at least as fast and reliable as first class mail for all payment methods.7 This change should provide sellers with the authority to deliver refunds by cheaper and more convenient means, if available, and thus provide buyers with quicker refunds. Moreover, for nonenumerated payment methods, the amendments address both the means and timing of refunds. The amendments provide alternative methods for making refunds when consumers pay by non-enumerated means: (1) sellers can always use cash, checks or money orders; or (2) they can use the same method as that used by the buyer.8 Sellers must provide refunds within seven working days when a buyer uses a non-enumerated payment method. These changes should simplify compliance for sellers.9 So, what are some best practices for eRetailers trying to comply with the FTC’s amendments, including changing processes to provide all the required notices to purchasers? See top three tips below: • Analyze your current process and policies

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40 Fed. Reg. 51582 (Nov. 5, 1975). 58 Fed. Reg. 49096 (Sept. 21, 1993). See Fed. Reg. 55616 (Sept. 17, 2014). Id. Id.

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79 Fed. Reg. 55617-18 (Sept. 17, 2014). Id. Id. Id.

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relating to ship dates for Internet sales (as well as mail and telephone sales). Develop and implement a compliant process which provides the proper notifications to the purchasers and the proper consent options as well as the option to cancel orders. • Review your vendor agreements to make sure your cancelation rights with manufacturers align with the rights of the purchaser. Vendor agreements should contain provisions that revised ship dates can result in cancelation of orders, and vendors/manufacturers will have to accept the return of products. • Check your Terms of Use on your Internet sales pages and consider including a waiver of class actions for each purchaser. It is unclear what exact liabilities and exposure may result from these amendments. Class action consumer litigation is a hot area for plaintiff’s attorneys. Now that shipment dates can be considered unfair business practices, these claims are likely to join other consumer protection claims around the nation. Therefore, without implementing the proper processes to assure compliance, these amendments will lead to another round of expensive litigation for eRetailers. Be sure to consult with your legal counsel and business partners.

Susan Childers North is a shareholder in the Labor and Employment Practice Area Team and co-leader of the Retail Industry Team at LeClairRyan. Her practice includes counseling and litigation of employment matters, including class actions. She has been in Virginia’s Top 50 Women Lawyers since 2012 and in Virginia’s “Legal Elite” in Labor and Employment Law since 2004. Lisa R. Butler is an assistant general counsel with Ferguson Enterprises, Inc. Ferguson is a $14B distributor of plumbing and related products with over 1700 brick and mortar retail locations and multiple ebusinesses. Lisa supports Ferguson’s ebusinesses which consist of Power Equipment Direct, Inc., Build.com, Inc. and various Ferguson Online domains. In addition, she supports Ferguson’s internal business departments – IT and Treasury and manages trademark matters. Lisa graduated TC Williams School of Law.


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Not Just Fun and Games ASSUMPTION OF THE RISK, LIABILITY WAIVERS AND EXCULPATORY CLAUSES IN RECREATIONAL SETTINGS Robyn Farrell McGrath and Jude J. Steininger

Nothing is quite as exhilarating as flying down the slopes, fresh powder underneath your skis and brilliant sunshine in a cloudless blue sky. As you stand in the long line for ski rentals with your six-year-old son, you cannot wait to introduce him to your favorite winter sport. By the time you get to the counter, you pay your money, sign a paper and grab your skies. You worry that your little guy may have some trouble with the lift, so you ask the attendant to stop it so the two of you can hop on safely. Although he agrees, the lift does not stop and you struggle to get your son up onto the lift. After a valiant effort, you lose the battle and fall with him to the snow below. He escapes with a couple of bruises. You dislocate a shoulder and fracture a hip. Suit is filed against the ski resort, alleging that your injuries are due to the negligence of the lift operator. But wait…remember that paper you signed? That card contained a release of liability and an exculpatory clause that

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promised that a skier would accept all of the risks inherent to skiing, including use of the ski lift, and would not sue the resort for any negligence on the part of the resort or its employees. That cannot be enforceable, can it? After all, who reads those things? Liability waivers and exculpatory clauses are valuable tools for those who operate recreational and entertainment facilities such as ski resorts, gyms, skating rinks, paintball courses, and other venues in which sporting and recreational activities take place. The common law doctrine of assumption of the risk may bar some actions by plaintiffs who are injured due to an inherent risk of the recreational activity. However, whether a plaintiff knowingly assumed the risk of injury is typically a jury question and requires a defendant to take a case through trial to be vindicated. Express liability waivers and exculpatory clauses provide a better chance for a defendant to make an early exit from litigation though

summary judgment. These waivers and clauses constitute an express assumption of the risk by a party who is engaging in an activity or sport with inherent dangers of personal injury. But because these waivers and clauses protect commercial enterprises from the consequences of their own negligence, they are generally disfavored in the law and are subject to the strictest scrutiny. When handling any type of matter involving an express liability waiver or exculpatory clause, it is vital to understand how the jurisdiction treats these attempts to avoid liability. Are they even enforceable in the jurisdiction or are they void as against public policy? If not void, what characteristics must the provision possess to be enforceable? Does it make a difference if the claimant has paid a fee for use of the facility or participation in the event? Can parents effectively waive the rights of a minor child to bring a personal injury claim? The enforceability of liability waivers and exculpa-


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tory clauses in recreational settings is rarely as simple as reading the contractual provision and requires an understanding of how those provisions will be treated in your jurisdiction. ARE THEY ENFORCEABLE? Two states, Louisiana and Montana, have enacted statutes adopting the extraordinary position that liability waivers and exculpatory clauses are unenforceable as a matter of law. These statutes render null and void any clause that excludes or limits the liability of a party for negligent conduct. Virginia has limited the enforceability of exculpatory clauses in cases involving personal injury, enforcing the clauses only in cases involving property damage. A few other states generally permit liability waivers and exculpatory clauses, but limit their enforceability under certain circumstances. For example, New York has enacted a statute which renders null and void any exculpatory clause pertaining to proprietary amusement and recreational activities and venues. The statute renders “[a]greements exempting pools, gymnasiums, places of public amusement or recreation and similar establishments from liability for negligence void and unenforceable.” As another example of a state that limits the enforceability of exculpatory clauses under certain circumstances, New Jersey courts have held that exculpatory clauses are unenforceable as to a decedent’s heirs, indicating that the clauses are never enforceable against anyone other than the individual who signed the waiver. These states constitute the small minority holding that exculpatory clauses are unenforceable as a matter of law. ENFORCEABILITY: THE MAJORITY VIEW Generally, exculpatory clauses will be enforceable in the vast majority of states where three conditions are met: (1) the clause must not contravene public policy; (2) the contract must be between persons relating entirely to their own private affairs; and (3) each party must be a free bargaining agent to the agreement so that the contract is not one of adhesion. Public policy plays an important role in determining the enforceability of liability waivers and courts have developed a list of factors to identify waivers and exculpatory clauses that violate public policy interests in protecting consumers who participate in recreational and sporting activities. For example, courts consider whether a certain business or activity is the subject of public regulation which mitigates against enforcing a liability waiver. Other considerations include whether the

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party seeking the waiver is performing a necessary service or a service which constitutes a public accommodation. If the business possesses either a “decisive bargaining strength” or the waiver is contained in standard contract of adhesion, the waiver will likely be unenforceable. As a practical matter, liability waivers and exculpatory clauses in recreational settings rarely provide the public the opportunity to “bargain” with respect to the clauses. However, courts have held that, when a consumer has the ability to choose to forego the activity without suffering damage, the contract does not present a contract of adhesion. For example, a plaintiff who was injured on a piece of exercise equipment while working out in a gym argued that the exculpatory clause in the membership agreement should not be enforced because it constituted a contract of adhesion. In rejecting that argument, the court recognized that the plaintiff could have freely chosen not to become a member of the gym and, therefore, the membership contract was not a contract of adhesion and the exculpatory clause was enforceable. Those states that will enforce liability waivers and exculpatory clauses impose exacting requirements on the language and appearance of the waiver. Generally, courts require the clauses to state the intention of the parties with the greatest particularity, so that there can be no doubt regarding the intent of the parties. Because the clauses are disfavored in the law, the language is strictly construed and any ambiguity is interpreted against the party seeking protection of the waiver. Some courts require use of the word “negligence,” as well as language that expressly states that the waiver releases the owner for its own fault and/or wrongful acts. Most states do not permit exculpatory clauses to protect against gross negligence or reckless conduct. Regarding appearance of the waiver, courts are much more likely to enforce a clause that is prominently featured within the text, set off by a larger, different font in a conspicuous location in the document. Thus, although the majority of jurisdictions will enforce liability waivers, they are reviewed by the courts with a critical eye that will focus on any reason that the clause should not be enforced. ENFORCEABILITY AGAINST MINORS Most courts that have considered the question have held that a parent or guardian may not bind a minor child to a pre-injury release of a prospective tort claim arising from the minor’s participation in a recreational activity or use of a commercial recreational facility. Public policy protects the best interests of the child, and courts

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have therefore been reluctant to enforce any waiver by parents or guardians of personal injury claims. A small minority of states have held that a parent does have the ability to bind a minor child to a waiver of liability, especially in the context of public school extracurricular activities and schoolsponsored events. Given the disfavor with which courts view liability waivers and exculpatory clauses, enforceability will always prove to be a risky proposition for any recreational or sporting facility. Even in those jurisdictions that will enforce such a provision, the courts will subject the clause to microscopic evaluation. In order to maximize the potential for enforceability of the waiver, the clause should be drafted with every consideration given to including the characteristics that have been found to be enforceable in the jurisdiction. As discussed above, some state courts require very specific wording and the best chance of success can be created by incorporating the wording of a clause that has been found enforceable by the highest appellate court. It is clear that expansive, boilerplate language will simply not be enforced.

Robyn Farrell McGrath is a partner at Sweeney & Sheehan, P.C. in Philadelphia. She handles a wide variety of litigation matters at the trial and appellate levels, including general liability, products liability, human services, education, employment and civil rights cases. Her clients include small and mid-size businesses, Fortune 50 corporations, and public sector entities. In addition to her litigation practice, Ms. McGrath is a frequent lecturer to claims handlers and both insured and self-insured clients on litigation strategy, trial techniques, and settlement evaluation. She can be reached at [email protected]. Jude J. Steininger is an associate at Sweeney & Sheehan, P.C. in Philadelphia. He practices in the areas of product liability, premises liability, and matters of general liability. Prior to joining Sweeney & Sheehan in the Fall of 2014, Mr. Steininger attended the Villanova University School of Law where he served as an Online Editor of the Law Review. He can be reached at [email protected].


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THE R’S HAVE IT: RELATIONSHIP, REPUTATION, RESPONSIVENESS Linda Thoede is senior corporate counsel-litigaLinda G. Thoede tion for iHeartMedia, iHeartMedia, Inc. Inc. (formerly Clear Senior Corporate Counsel- Litigation Channel Communications, Inc.), the leading multi-media company in America, and Clear Channel Outdoor, Inc., one of the world’s largest outdoor advertising companies. She manages the high-risk general liability and auto liability litigation for iHeartMedia, Inc. Prior to joining iHeartMedia, Inc. in 2006, Linda acted as associate counsel for a Fortune® 200 insurance and financial services company in San Antonio, Texas. Linda is a member of the Client Leadership Council and recently sat down with USLAW to talk all-things USLAW. WHY ARE YOU WORKING WITH USLAW NETWORK ATTORNEYS? At the very top of my list are three reasons: relationship, responsiveness and reputation. RELATIONSHIP STRONG It is often said that the people are the cornerstone to USLAW and after meeting and working with many member attorneys over the years I couldn’t agree more. Clients are hiring lawyers not law firms, and getting to know the attorneys and having the confidence in their recommendations is invaluable. A few quick examples of this include: • Renée McElhaney – then-chair of USLAW – introduced me to Dick Ford of Wicker Smith. As I learned more about his practice and we talked about my cases, Wicker Smith has handled several cases for iHeartMedia and Clear Channel Outdoor and is now my preferred counsel for Florida. They truly go the extra mile. • I was working a case in Las Vegas with a non-USLAW member firm, but I wasn’t happy with the handling of it and at the same time I was introduced to Thorndal, Armstrong, Delk, Balkenbush & Eisinger during a USLAW Client Conference. After talking with a Partner at Thorndal, soon thereafter, I submitted a substitution of counsel for that case and I assigned the case to Thorndal, not necessarily because I had an existing relationship with them – which I didn’t at that time – but based of the reputation of USLAW and the confidence in the recommendation I received. The outcome was a positive result for iHeartMedia. Examples like this happen time and time again from Bert Randall (Franklin & Prokopik), my first introduction to USLAW, to Fritz Seitz (Murchison & Cumming) to

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Linda G. Thoede of iHeartMedia, Inc. Linda Theode sits down for a quick one-on-one with USLAW Magazine.

Larry Schechtman (SmithAmundsen) to Jill Ackerman and Jennifer Tricker (Baird Holm LLP), Mike Sharp and Scott Self (Fee Smith), Mike Kunsch (Sweeney & Sheehan) and many more. These introductions – and at times case assignments – have repeated many times throughout the years. USLAW’s reputation leads the way for us. JURISDICTION STRONG: WHERE I NEED COUNSEL In my previous position I managed litigation on a regional basis and only covered two states. When I came to IHeartMedia, Inc., I began managing litigation in all 50 states. Needless to say, I didn’t have affiliation with outside counsel in all of those states at the time. I was able to start engaging counsel

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and creating a preferred counsel listing. Once connected with USLAW and using different outside counsel in various states I was able to broaden our legal counsel reach. For instance, when I had a case in DC – and as a result of the excellent job Bert Randall (Franklin & Prokopik) did on a previous case I had – I worked with Bert’s colleague, Tamara B. Goorevitz, who was licensed in Washington, D.C. And so it went from there. Each experience with outside counsel from each state started building my connections, trust and relationships with USLAW. LEADING THE WAY WITH RESPONSIVENESS, RESPECT We were working a serious injury and wrongful death case with JJ Jackson of Thorndal Armstrong Delk Balkenbush & Eisinger in Las Vegas. Sadly, while we were handling that case, JJ unexpectedly passed away. JJ was a good friend and an excellent lawyer. His firm called me and notified me right away since we were right in the middle of this big case. I was so sad to hear about JJ, but at the same time very appreciative and grateful for the way the other partners in that firm handled the tragic event. Paul Eisinger took the case and he, Chris Curtis and Phil Goodhart just took great care of it for us. We ended up settling for a very nominal amount. In spite of the tragic and sad circumstances, the firm really covered and were able to get the job done with a great result. READY, SET, MEDIATE We have been working on a case with Wicker Smith that went to mediation and I can’t say enough about the excellent job Mark Ruff did with mediation. With the preparation, expertise and team assembled, the plaintiff’s counsel was taken off guard. We had a powerful PowerPoint presentation that included surveillance work via Marshall Investigative, a USLAW corporate partner, plus a tremendous amount of data and compelling material. So, we had all of our ducks in a row and caught the other side off guard (who showed up with only a yellow pad). Although we ended up not settling at mediation, Mark called all of the right shots and we were able to mitigate our damages and drive down the value of the case. We did all of our homework and continued negotiations after mediation. SUCCESS IS… For me, success is having that relationship with outside counsel and working together to achieve the desired results for the company. Our goal is always to do what is in the best interest of the company. To work together (with our outside counsel) and to have the relationship, reputation, responsiveness and respect to achieve those desired results is the ultimate goal. We get that when working with USLAW member firms and attorneys.



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The Loss of ESI and the Adverse Inference Instruction: How New FRCP 37(e) Might (and Might Not) be a Prudent Change James J. Lofrese

BACKGROUND Today, there is an enormous volume of electronically stored information, or “ESI,” on company hard drives, backup tapes, and cloud storage systems, and the volume of data will only continue to grow. Such data is also contained in social media postings and within a number of devices, such as cell phones and automobile event data recorders. Experts believe that, within six years, there will be 26 billion devices on the Internet, more than three for every person on earth. When it comes to complying with existing discovery rules, preserving such ESI has been problematic. Relevant documents are

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sometimes deleted during routine purging carried out pursuant to a company’s data retention protocols. Other times, methods used to locate discoverable, electronically stored documents fail to locate key items. In short, ESI has become a digital haystack within which some needles will invariably become lost. When this occurs, a party may claim “spoliation” – the destruction, significant alteration or failure to preserve evidence for another’s use in pending or reasonably foreseeable litigation. As discussed in the USLAW NETWORK’s Compendium of Law on the Spoliation of Evidence,1 some jurisdictions recognize spoliation of evidence as

an independent tort, while the majority prefer to impose remedies to sanction the wrongdoer and cure prejudice. The most commonly debated remedy today is that of an adverse inference, a potentially powerful game changer that allows a jury to presume that the lost evidence is harmful to the one who lost it and helpful to the innocent party. The issue most often discussed is whether, and to what extent, the intent of the spoliator should be considered as a factor when imposing this remedy. UNCERTAINTY PREVAILS There is a glaring lack of uniformity among the federal courts regarding the


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level of culpability required before an adverse inference should be imposed against one who spoliates evidence. Some circuits will impose the remedy upon proof of willfulness, gross negligence, or even ordinary negligence, while others insist upon nothing less than a showing of bad faith.2 In short, one who is sanctioned for losing relevant evidence in one circuit might go unsanctioned in a different circuit for the same conduct. NEW RULE 37(E) The dissimilarity among the circuits has caused concern to businesses that manage large amounts of ESI. Acting out of fear that they might be sanctioned for innocently losing relevant information, these companies often incur great expense in the over-preservation of massive amounts of data that might become needed in future litigation, even litigation which is never ultimately commenced. Motivated both to alleviate this concern and to eliminate the split in authority, the Standing Committee on the Rules of Practice and Procedure approved a proposed amendment to rule 37(e) of the Federal Rules of Civil Procedure which, if adopted by the Supreme Court and Congress, will go into effect on December 1, 2015. When ESI is lost, the new rule will prohibit federal courts from imposing adverse inferences or dismissing cases except when there is a “finding that the party acted with the intent to deprive another party of the information’s use in the litigation.”3 No longer will negligence, gross negligence, or even willfulness suffice to justify an adverse inference at the federal level. WILL THE NEW RULE PROMOTE UNIFORMITY? While the new rule will certainly promote harmony among the circuits, it may actually create inconsistency within many circuits. This is because the new rule applies only to the loss of ESI, leaving federal courts

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free to follow existing precedent to the loss of all other types of evidence. To illustrate the issue, consider the second circuit cases of Osberg v. Foot Locker, Inc.4 and Taylor v. City of New York,5 where both courts applied existing law to impose adverse inference instructions against defendants who negligently destroyed evidence. In Osberg, the plaintiff sued his employer, claiming that it miscalculated his pension benefits. The employer failed to promptly issue a litigation hold to preserve documents related to the claim, and relevant paper records were negligently destroyed. In Taylor, an inmate claimed that the New York City Department of Corrections wrongfully allowed him to be assaulted by other inmates while in custody. The assault involved two separate incidents three hours apart, and footage of all three hours was digitally captured. However, the officer in charge only saved clips of the two separate incidents, negligently allowing the rest of the footage to be deleted. As discussed above, new rule 37(e) only allows for an adverse inference when evidence is destroyed with intent to deprive, and evidence in both Osberg and Taylor was only negligently destroyed. However, since the lost footage in Taylor was digital (ESI) and the lost documents in Osberg were paper (non-ESI), the new rule would only prevent an adverse inference in the Taylor case, leaving the jury in Osberg free to assume that the defendants destroyed the documents because they were harmful to their defense. Should different standards be applied in cases like Osberg and Taylor simply because of the way we classify the lost evidence? Some think not. As expressed by one source, “ESI may be the biggest issue in discovery today, but the destruction or loss of documents and tangible things is just as important as the destruction or loss of ESI.”6 The Advisory Committee acknowledges that “the dividing line between ESI and other evidence may in some instances be unclear.” Given the explosion of ESI,

USLAW NETWORK, Fall 2014, which can be found at http://www.uslaw.org/files/Compendiums2014/Spoliation/ USLAW_2014_Spoliation_of_Evidence_Compendium_of_Law.pdf. See, Dalcour v. City of Lakewood, 492 Fed. Appx. 924 (10th Cir. 2012) (bad faith required); Residential Funding Corp. v. DeGeorge Fin. Corp., 306 F.3d 99 (2d Cir. Conn. 2002) (negligence can be sufficient); Silvestri v. General Motors Corp., 271 F.3d 583 (4th Cir. 2001) (substantial prejudice alone can justify dismissal). Report to the Standing Committee, Advisory Committee on Civil Rules, May 2, 2014, at http://www.uscourts.gov/ uscourts/RulesAndPolicies/rules/Agenda%20Books/Standing/ST2014-05.pdf (hereinafter, “the May Report”). 2014 U.S. Dist. LEXIS 104538 (S.D.N.Y. July 25, 2014). 293 F.R.D. 601 (S.D.N.Y. 2013). As expressed by Wilbur A. Glahn, III and set forth in the Summary of Rule 37(e) Comments, May Report, page 74. May Report at page 40. Pegasus Aviation I, Inc. v. Varig Logistica S.A., 118 A.D.3d 428 (1st Dep’t 2014) (using standard identical to that used in second circuit in case where ESI was lost through ordinary negligence); Squitieri v. New York, 248 AD2D 201 (1st Dept., 1998) (dismissal for negligent disposal of allegedly defective street sweeper); Kirkland v. New York City Hous., 236 AD2d 170 (1st Dept., 1997) (dismissal for unintentional disposal of allegedly defective stove); Brookshire Bros., Ltd. v. Aldridge, 438 S.W.3d 9 (Tex. 2014) (finding of bad faith required for adverse inference).

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however, it reasons that “courts are wellequipped to deal with this dividing line on a case-by-case basis, and that the reasons for limiting the rule to ESI outweigh the potential complication presented by the issue.”7 WILL THE NEW RULE REDUCE THE OVER-PRESERVATION OF ESI? New Rule 37(e) will have no immediate impact at the state level, where courts will continue to use their own standards when imposing adverse inference instructions. States like Texas will continue to insist upon proof of bad faith, while states like New York can still impose such sanctions upon a finding of mere negligence.8 Whether state courts will voluntarily adopt standards similar to new rule 37(e) is unknown. One thing is fairly certain: they won’t do so any time soon. Thus, for those entities exposed to litigation at the state level, new Rule 37(e) may do little to take the edge off, and the motivation to over-preserve ESI will remain. CONCLUSION Proposed amended rule 37(e) represents a praiseworthy effort to address valid concerns by sophisticated entities burdened with the often insurmountable task of preserving massive amounts of ESI in a way that complies with the demands of existing discovery rules. It is also a significant step in establishing uniformity among the federal circuits by setting forth a single standard to use when dealing with the loss of relevant ESI. However, the debate will continue among those who feel that the new standard should apply to the spoliation of all evidence, not just that which is electronically stored, and state courts will continue to follow their own rules when imposing adverse inferences. Thus, managers of ESI should remain diligent in their preservation efforts of not only ESI, but all documentation and evidence which is reasonably anticipated to become relevant in future litigation.

James J. Lofrese is a Senior Trial Counsel in the Hawthorne, New York, office of Traub Lieberman Straus & Shrewsberry, LLP. James practices insurance defense litigation and has tried a wide array of cases ranging from labor law and premises liability actions to automobile accident cases. He can be reached at [email protected].


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DISCOVERY DILEMMA:

How to Plan for the

“BIG ONE” Without Incurring

BIG FEES Dennis Kiker

“eDiscovery is expensive.” This is a common refrain, particularly among attorneys and companies for which the bulk of litigation involves smaller matters with relatively limited exposure – slip and fall cases, routine employment litigation, and the like. It is inspired by tales (not unfounded) of large eDiscovery cases in which the cost of discovery alone runs into the tens and even hundreds of thousands of dollars. For the vast majority of USLAW NETWORK firms, those types of cases are simply not part of their reality. Still, we all know the risk. eDiscovery aside, we all understand that among the daily fare of routine cases with modest exposure there may lurk the “big one” – the case in which issues arise that multiply the potential exposure and transform the case from routine into bet-the-company litigation. USLAW NETWORK attorneys are excellent lawyers fully capable of handling the toughest issues in the most challenging case. But, when the case gets more complex, it is very likely that the scope of discovery, including eDiscovery, will as well. Consider some of the most well-known cases in the eDiscovery milieu. If any eDiscovery case can properly be described as venerable, it is Zubulake v. UBS Warburg

Granite Legal Systems

LLC, 217 F.R.D. 309 (S.D.N.Y. 2003) (Zubulake I). Spanning four major eDiscovery opinions in addition to Zubulake I, Judge Shira Scheindlin helped to define eDiscovery case law for the following decade and beyond. What kind of case was Zubulake, you ask? Surely some multi-district litigation or class-action, or perhaps a large commercial case between multi-national corporations? No, Zubulake was an employment discrimination case in which the plaintiff (who has since become something of an eDiscovery celebrity in her own right) alleged sexual discrimination. The case ultimately resulted in a $29.3 million verdict – including $20.2 million in punitive damages, at least some of which were no doubt a result of the court’s adverse inference instruction regarding deleted emails. Zubulake is not an anomaly in eDiscovery lore. Perhaps the best decision on the admissibility of electronically stored information (ESI) in support of motions for summary judgment or at trial is Lorraine v. Markel Am. Ins. Co., 241 F.R.D. 534 (D. Md. 2007), authored by Judge Paul Grimm. Well worth the read for its excellent presentation of evidentiary law and the corollary impact on how ESI should be collected, the case involved a pretty simple insurance coverage dispute.

The plaintiffs sought compensation for a boat that suffered $36,000 in damages during a storm. The insurer contended that only $14,100 of the damage was covered, so the parties were litigating over the vast sum of $22,900. It is likely neither side suspected their small matter would be the subject of an 80-page decision. More recently, in an age discrimination case, Judge Terence Kemp of the Southern District of Ohio imposed discovery sanctions including the preclusion of evidence that the plaintiffs were terminated for performance reasons (somewhat significant in a discrimination case), as well as attorney’s fees and costs. Brown v. Tellermate Holdings Ltd., No. 2:11-cv-1122, 2014 WL 2987051 (S.D. Ohio July 1, 2014). The court noted: Over the past decade, much discussion has been devoted to the topic of how the prevalence of electronically stored information (ESI) either has impacted, or should impact, discovery in civil actions filed in state and federal courts. While the preservation, review, and production of ESI often involves procedures and techniques which do not have direct parallels to discovery involving paper documents, the underlying principles governing discovery do not change just because ESI is


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involved. Counsel ELECTRONIC DISCOVERY still have a duty REFERENCE MODEL (perhaps even a heightened duty) to co-operate in the discovery process; to be transparent about what information exists, how it is maintained, and whether and how it can be retrieved; and, above all, to exercise sufficient diligence (even when venturElectronic Discovery Reference Model / 2014 / v3.0 / edrm.net ing into unfamiliar territory like ESI) tant that attorneys think about possible to ensure that all representations made to sources of ESI in every case, regardless of opposing parties and to the Court are whether that information will ever be coltruthful and are based upon a reasonable lected or used. The client’s duty is to preinvestigation of the facts. As another serve potentially relevant information, and Judge of this Court has observed, “trial it is the inadvertent destruction of ESI – counsel must exercise some degree of largely as a result of failing to identify that oversight to ensure that their client’s eminformation in the first place – that has ployees are acting competently, diligently likely resulted in more sanctions than anyand ethically in order to fulfill their rething else. By taking sufficient time at the sponsibility to the Court,” Bratka v. start of a matter to identify potential sources Anheuser–Busch Co., 164 F.R.D. 448, 461 of ESI, including not only email and docu(S.D.Ohio 1995) (Graham, J.). That ments created by individuals, but also enterholds true whether the bulk of the inforprise data such as the salesforce.com data mation relevant to discovery is ESI or rethat was the subject of the Brown case, attorsides in paper documents. neys can help their clients avoid inadvertent destruction of ESI without incurring any sigThough it is true that many of the significant costs. Moreover, lawyers should denificant eDiscovery cases over the past liberately revisit the identification step as decade have involved large-scale litigation, the case matures and the issues become these opinions are by no means outliers. more clear to ensure that potentially releeDiscovery can become an issue in virtually vant information remains available should any case. And, while attorneys may be prethe need arise. pared for the “big one” in terms of trial skills and litigation expertise, the question PRESERVATION remains how lawyers and their clients can Having identified potentially relevant be prepared for the big eDiscovery case information, companies must take reasonwithout incurring unreasonable expenses in able steps to preserve that information. every routine case? The answer lies in how Most often, this involves simply issuing a attorneys approach identification, preservawritten legal hold notice and monitoring tion and collection of information. If done compliance. In some situations, however, properly, attorneys can take steps to ensure preservation may require more. A good exthat their clients are adequately prepared ample is with departing employees. It is very for virtually any eDiscovery issue in every common for IT departments to erase the case without incurring unreasonable costs. hard drive and repurpose the computer equipment used by terminated employees. IDENTIFICATION If the employee is subject to a legal hold, eDiscovery attorneys and experts are steps must be taken to preserve potentially fond of presenting the subject as a process, relevant information on that computer beas shown above in what is known as the fore it is wiped and reissued. Similarly, there Electronic Discovery Reference Model. are often enterprise systems (again, conThe first step in the process from a dissider salesforce.com) that are in active and covery standpoint is “identification,” but constant use. The data in those systems can many attorneys give this step far too little atchange minute to minute. It is sometimes tention and generally leap directly to the necessary to capture data from such systems preservation stage. Particularly with regard to ensure it is properly preserved. to ESI, identification is critical. It is impor-

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COLLECTION As noted at the start of this article, most routine cases do not require that attorneys collect a great deal of ESI. There may be exceptions for preservation reasons, but, quite often, preparing for the “big one” involves only identification and preservation of potentially relevant ESI. When collection is necessary, either as part of the response to routine discovery or for preservation purposes, it is critically important that it be done properly to ensure that the collected information is not changed in the process. Common methods of “dragging and dropping” to a flash drive or printing to PDF will permanently change the document being collected. Whenever collecting ESI, attorneys should ensure that the person responsible for the collection has the necessary qualifications and tools to do so properly, so that, in the event, however unlikely, that the collection procedures are challenged, they can be defended. CONCLUSION I have written before that every case is an eDiscovery case. This is true because virtually all information is generated and stored electronically. That does not mean that every case is a big eDiscovery case, any more than every matter that you handle will turn into major litigation. However, just as you hone your skills and plan your trial strategy so that you are prepared if and when the worst happens, so too should you plan your discovery response so that you are prepared if the big eDiscovery case hits.

Dennis Kiker is a consultant at Granite Legal Systems in Houston, Texas, specializing in eDiscovery consulting and technology. He is a MartindaleHubbell AVrated attorney and legal consultant working with law firms and their clients to facilitate and improve discovery response. He is a member of the State Bar of Arizona and the Virginia State Bar. He can be reached at [email protected] or 713-652-0881.


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USLAW

H NESTY

Now the Best P LICY in Canadian

C NTRACT LAW Robert Ford, Sean Bawden and Brent Craswell

INTRODUCTION Courts in Canada have historically been reluctant to interfere with the freedom to contract. Perhaps the best example of this principle has been their unwillingness to acknowledge that a duty of good faith governs the parties to an agreement. For decades, judges across this country have expressed a fear that the adoption of a good faith doctrine would lead to the imposition of unreasonable judicial standards. The prevailing wisdom was that such “judicial moralism” would result in an atmosphere of commercial uncertainty that would suppress business. However, in November of last year, the Supreme Court of Canada finally took the opportunity to modernize Canada’s stance on the duties owed between parties in their performance of a contract. With their decision in Bhasin v. Hrynew (2014 SCC 71), the Supreme Court brought Canada’s contract law in line with most other jurisdictions, including the United States.

Kelly Santini, LLP

BHASIN v. HRYNEW The case contained three main parties. The corporate defendant Canadian American Financial Corporation (“CanAm”) was a company that marketed education savings plans to investors through agents, known as enrollment directors. Both the plaintiff, Bhasin, and the individual defendant, Hrynew, were enrollment directors. Bhasin had been an enrollment director for nearly a decade. He had signed several agreements with Can-Am, including one in 1998 which carried a three-year term. These “enrollment director agreements” laid out the rights and obligations of the parties. The 1998 agreement contained provisions which allowed Can-Am to terminate the agreement on short notice for misconduct or other cause. It also provided that the contract would automatically renew, unless one of the parties gave six months’ written notice to the contrary. Bhasin and Hrynew were competitors in the marketplace. Hrynew had proposi-

tioned Bhasin with a merger numerous times in the past, but Bhasin had always refused. Hrynew, who was well-connected in Calgary business circles, tried to get Can-Am to apply pressure on Bhasin to merge, but this tactic was also unsuccessful. In late 1999, the Alberta Securities Commission raised concerns about CanAm’s compliance with securities regulations. The Commission required that Can-Am appoint a “provincial trading officer” (“PTO”) to review its enrollment directors for compliance. Can-Am appointed Hrynew to that position. This meant that Hrynew would have access to all the confidential records of the other enrollment directors, including Bhasin. Bhasin protested having a competitor review these records. Can-Am represented to Bhasin that Hrynew was under a duty of confidentially in his role as PTO, and that the Commission had rejected an earlier proposal to have an external PTO appointed. Neither of those representations was true.


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While Hrynew carried out his review, Can-Am told the Commission that it was considering reorganizing its business. In their new proposed structure, Bhasin’s business would be absorbed by Hrynew’s. Bhasin heard news of the proposed reorganization through a third party, and asked representatives of Can-Am if it was true; Can-Am did not provide Bhasin with a straight answer. Bhasin never allowed Hrynew access to his records. Can-Am threatened to terminate its agreement with Bhasin as a result of this perceived misconduct. Can-Am did not prematurely terminate the contract, but it did give notice of non-renewal in May of 2001, effectively rendering Bhasin’s business worthless. The issue at all levels of court was whether Can-Am owed Bhasin a duty of faith, and, if so, whether it breached that duty. THE DECISION In ruling in favour of Bhasin, the Supreme Court of Canada established two new tenets of contractual interpretation. First, the Court held that good faith, as a concept, is an organizing principle of contract law. In Canadian law, an “organizing principle” is a standard which underpins the law and supports more specific legal doctrines. An organizing principle cannot be breached in and of itself, but it allows the common law to develop new rules in a principled fashion. The Court put the new organizing principle to immediate use to justify a novel duty: the duty of honesty in contractual performance. The scope of the duty was discussed at length by the Court in the Bhasin decision. Essentially, the duty does not rise to the level of a fiduciary duty; parties need not place the needs of the other party in advance of their own. The duty only requires that the parties not lie or otherwise knowingly mislead each other about matters directly linked to the performance of the contract. The Court held that Can-Am’s several acts of dishonesty towards Bhasin were so connected to their performance of the agreement that there was a breach of the new duty of honesty in contractual performance. COMPARATIVE LAW In arriving at this decision, the Court noted that §1-304 of the U.C.C. imposes an obligation of good faith in the performance of all contracts governed by that Code. The Canadian Supreme Court cited evidence that there had been judicial recognition of a duty of good faith and honesty in contractual performance in the United States as far

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back as the 1930s, far before the enactment of the U.C.C. The purpose of highlighting the American experience was to pacify the fears previously expressed by judges regarding the effects such a duty may have on commercial certainty. The Supreme Court clearly took solace in the fact that “such broad conceptions of the duty of good faith have not impeded contractual activity or contractual stability” in jurisdictions like the United States. IMPLICATIONS OF THE DECISION FOR U.S. BUSINESSES Given that this decision largely brings Canadian contract law in line with its American counterpart, the adjustment to doing business in Canada should not be overly drastic. The real risk at this time is that the duty of honesty in contractual performance, as described by the Supreme Court, is somewhat vague. Perhaps more unsettling is the fact that the rule is completely untested. American companies could find themselves in front of a judge with a new Supreme Court rule that they are eager to apply, even if the fact scenario does not exactly allow for it. This situation has already manifested itself. In Lavrijsen Campground v Eileen Reville, Steven Reville and Douglas Reville (2015 ONSC 103), the parties negotiated a share purchase agreement for a campground property. The defendant vendors did not disclose documents to the plaintiff purchaser which, although not specifically requested by the purchaser, would have assisted them in determining the value of prepaid rentals for the year of the sale. As a result, the purchaser was undercompensated at closing by over $70,000. In finding the vendors liable, the trial judge relied on the new rule in Bhasin to transform the “active non-disclosure” of the vendor into an intentional act which was equivalent of an intentional misrepresentation. The Bhasin decision expressly stated that there was no duty of disclosure; parties simply must not mislead each other. The judge in Lavrijsen Campground, however, took a very broad conception of the term “mislead.” A related concern that is also highlighted by the Lavrijsen Campground decision is that the duty established in Bhasin was intended only to govern contractual performance. It is difficult to see exactly how non-disclosure in the pre-closing phase of a transaction could constitute contractual performance. At this juncture, it is unclear whether Lavrijsen Campgrounds will be seen as a proper adaptation of Bhasin. While the decision in Lavrijsen Campgrounds may ulti-

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mately be reversed on appeal, what is clear is that trial courts in Canada have heeded the call issued by the Supreme Court to expect more from parties in their performance of contracts. At the moment, the rule in Bhasin appears to be a convenient catch-all to punish a party who acts distastefully, which is exactly the type of judicial moralism that was feared for so long by Canadian courts prior to Bhasin. In the current judicial climate, it is advisable that American companies take steps to protect themselves. Representations and warranties insurance may provide one option; the vendor in Lavrijsen Campground would have certainly benefitted from it. Additionally, the Supreme Court mentioned that parties were free to define the standard of honest performance required of them in any given contract. It is likely that the Court will require some minimum standard of honesty, but that is not made clear by Bhasin. Parties would be wise to draft language in their contracts that expressly excludes any positive duty to disclose documents that have not been requested, or to define exactly what qualified as “contractual performance.” If not, they could find themselves as unwilling test subjects for a new Canadian legal experiment.

Bob Ford is a corporate attorney with more than 20 years experience. His practice is dedicated to servicing the needs of technology and life sciences companies and those investors that fund them. He advises on domestic and cross border equity and debt financings, mergers and acquisitions, technology/life sciences licensing transactions and corporate reorganizations. Sean Bawden has been providing proactive employment law advice to both employers and employees since he began practicing in 2008. He is the author of the employment law blog “Labour Pains,” which in 2014 was named “Best Employment Law Blog in Canada.” The authors would like to acknowledge and thank student-at-law Brent Craswell for his research and drafting assistance with this article.


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Roy Nieuwenburg

U.S. STANDARD DOCUMENTS OR CANADIAN – WHICH WAY TO GO? As a Canadian law firm with an extensive construction law practice, we are often asked to review or prepare construction contracts for U.S. clients engaged in construction projects in Canada. A frequent choice has to be made as to whether to use U.S. forms of standard documents (and adapt them as needed for the Canadian context) or use the Canadian standard industry documents (and adapt them as needed in the other direction). This article touches on some of the pros and cons and related consideration for this decision.

USLAW

Clark Wilson LLP

THE LEADING SOURCES – AIA AND CCDC The American Institute of Architects (AIA) is responsible for the “AIA Contract Documents® THE INDUSTRY STANDARD.” The slogan says it all – these contract documents are the industry standard in the U.S. In Canada, the leading source is the Canadian Construction Documents Committee (CCDC). The CCDC is a national joint committee formed in 1974. The CCDC is comprised of volunteer members of the Association of Consulting Engineering Companies-Canada, the Canadian Construction Association, Construction

Specifications Canada, and the Royal Architectural Institute of Canada, and includes owner representatives from the public and private sectors. DIFFERENCES IN SCALE The AIA appears to have vast resources. They produce a broad array of documents. This is evident from their “Document Families” framework. The AIA Contract Documents are divided into nine families based on project type or delivery method. Documents in each family provide a consistent structure and text to support the major contracts needed. The “Document


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Families” framework makes it easy to select the most appropriate standard forms for the project. Drafting work for syntax and terminology is minimized. The CCDC documents do a good job of covering the bases, but do so less extensively and, by comparison, in some areas are more rudimentary. This is to be expected, given that the CCDC is not able to leverage the economies of scale available to U.S. counterparts. CUSTOMIZATION AND SUPPLEMENTARY CONDITIONS The AIA documents appear to be reasonably balanced. For a project in the U.S., the AIA documents would require some customization to suit the preferences and specific requirements for the project and the client. They are otherwise pretty much “ready to go.” Significant supplementary conditions are indispensable, I would say, for the CCDC documents. Not surprisingly, use of such supplementary conditions is pervasive. In my experience this is particularly important for the owner/client wishing to engage a contractor. For a project in Canada for a U.S. client, the usual supplementary conditions would be needed if CCDC is followed, and in addition the preferences and specific requirements for the project and the client would have to be incorporated. AIA – A USER-FRIENDLY FOUNDATION The AIA documents are geared to be user-friendly. A user can make edits in the body of the text. When the final version is generated for execution, the software program demands that all edits will be conspicuously identified (as, of course, they should be). In contrast, the CCDC documents prohibit such edits in the body of the documents. This is enforced by asserting copyright. Users are constrained to making changes through supplementary conditions. This requires cross-referencing the applicable paragraphs and sections, which is laborious and can be unwieldy. There is a lot more “flipping of pages” back and forth when working with the CCDC forms. CONTRACTOR AND / OR ARCHITECT BASED IN CANADA? If the contractor is U.S. based, and a U.S. architect is leading the project, with a U.S. client needing to construct a tenant fitout or facility in Canada, then there is a lot to be said for using the AIA documents (which everyone will be familiar with) and adapting as needed.

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If the contractor or the architect or both are Canadian, they will likely be more accustomed and comfortable with the CCDC documents. Use of the CCDC documents can serve a vital function: the contractor can feel assured that the contractor need only focus on the supplementary conditions proposed by the owner, satisfied that the rest of the contract terms will be sufficiently friendly to the contractor. SOME AREAS TO CONSIDER Whether the contract is based on AIA or CCDC, you will want to address a number of issues. To give a sense of the kinds of subjects to consider, here is a sampling: • Liens will stymie funding draws. If the owner has duly paid all progress claims owed to the contractor, then from the owner’s perspective the contractor should be responsible under the contract to obtain and register at the land title office a discharge of any liens that are filed (or get a Court order cancelling the liens, if necessary). Commonly the AIA and CCDC standard forms do not adequately provide for this. Under the builders lien legislation in Canada, typically a construction lender will not fund the next draw if one or more liens appear on title. • Notice that landlord will not be responsible. Commonly a notice must be filed at the applicable land registry or posted on the worksite so that the landlord is not responsible for work engaged by a tenant. Failure to address this adequately may result in the tenant being in default under the lease (which can result in termination of the lease, or withholding of a tenant improvement allowance to be paid by the landlord). • Canada’s tendering framework. The Supreme Court of Canada case of Ron Engineering established a contracting framework for competitive bidding in Canada that appears to be counter-intuitive to those accustomed to the U.S. model. This framework incorporates a duty to treat all bidders fairly and to act in good faith. What appears to be fair to one party is often perceived to be unfair from the vantage of another – yet legally you will be expected to be fair to all. Unless appreciated and managed, this can give rise to unexpected liability. • Worker Safety. The occupational health and safety obligations are typically more strident in Canada and call for the designation of a “prime contractor” to be re-

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sponsible. Owners need to be aware of this and clearly designate responsibility. • Payment certifier. Canadian jurisdictions formally impose responsibilities on the person required to be identified as the “payment certifier.” This needs to be recognized and addressed in the contract. In addition, if the architect is designated for this role and does not have a presence in the applicable jurisdiction, then the architect may be unwilling to complete the prescribed certifications without performing the necessary field reviews. This may necessitate engaging a local architect accredited in the jurisdiction (who will want to be separately compensated for the field reviews). • Liquidated damages. Many U.S. parties are surprised by the constraints under Canadian law for liquidated damages. This frequently requires customization. • Federal procurement. Federal procurement involves another layer of considerations. THE BIG PICTURE Of course the legal terms of the contract are just one component of the big picture. Getting the specs right (or the owner’s statement of requirements) of course is critical. The selection of the “right contractor” is critical. Attentiveness and diligence in managing the progress of the work is critical. If there are problems or the project goes sideways, then having stellar legal terms won’t assuredly save the day. But they will help, and often they are essential. U.S. clients engaged in construction projects in Canada will want to arrive at a contract matching their usual expectations, to the extent practicable, and be aware of areas where differences arise. This can be done on the U.S. platform (AIA documents) or the Canadian platform (CCDC documents). Either way, some massaging is required.

Roy Nieuwenburg has practiced in Vancouver, B.C., Canada, since 1980 and has extensive experience in construction, procurement and tendering. He is cochair of Clark Wilson LLP’s Infrastructure, Construction and Procurement Law Group and Editor of the firm’s Construction Law Bulletin.


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Breaking Up Is Hard To Do.

Or is it...? Jonathan Cornthwaite

Wedlake Bell LLP

USLAW


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INTRODUCTION The European Parliament’s resolution at the end of November 2014 suggesting a possible break-up of Google has prompted a flurry of commentaries by political pundits. But the legal background to this remarkable development also deserves analysis. To what extent do EU institutions have the power to break up business conglomerates? And how has the EU’s anti-trust investigation into Google helped to fuel the resolution? This article discusses these issues, and will draw out from them some lessons that are important for any U.S. business wary of the long reach of EU competition law. WHAT’S GOING ON? “GOOGLE SHOULD BE BROKEN UP, SAY EUROPEAN MPs”…”EUROPEAN PARLIAMENT VOTES YES ON “GOOGLE BREAK-UP” MOTION”. The headlines that reported the Parliament’s vote were (as headlines often are) potentially misleading, so it is worth briefly rehearsing what actually happened, for all is not necessarily as it seems in the wacky world of EU politics. The parliamentary motion in question was passed by a strong majority – 384 to 174, with 56 abstentions. But the European Parliament is a different type of beast from the average parliamentary assembly: thus, this motion was in fact non-binding, and does not as such require the European Commission to take any action (though it will inevitably place much pressure on it to do so). And, contrary to the impression given by various headlines, Google was not in fact expressly cited in the motion (nor, incidentally, was any other individual company); instead, the motion made a non-specific call “to consider proposals with the aim of unbundling search engines from other commercial services” in the long run. But, though the motion avoided mentioning it by name, there can be no doubt that Google – which controls around 90% of the search engine market in the EU – was its principal target. WHY WAS THE MOTION BROUGHT? The trail of gunpowder that led to the motion can be traced back at least to 2010, when the European Commission announced that it had instituted proceedings against Google under Article 102, the much-feared provision of the Treaty on the Functioning of the European Union that prohibits abuse of a dominant position. The institution of the proceedings was prompted by a flurry of complaints made by Google’s rivals, ranging from the way that Google’s algorithms supposedly demote its rivals’ sites in the search engine results, to

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alleged restrictions on the portability of advertising data to competing online platforms. Now, dominance per se does not contravene EU competition law; it is only if the dominance is abused that infringement of Article 102 will or may occur. But the greater the degree of dominance, the easier it is for regulators to be persuaded that abuse has in fact taken place. And in this connection there is no shortage of complainants: to date, evidence has been submitted to the European Commission by some 20 different parties. The Article 102 proceedings have now been dragging on for more than four years, and it is clear that movers and shakers within the EU have become increasingly restless at the lack of any conclusive outcome to date. The former EU Competition Law supremo in fact came close to striking settlements with Google on more than one occasion, but in each case the deal had to be abandoned due to lobbying by the complainants. Since then the temperature has clearly risen, with a demand by Germany’s Justice Minister last Autumn for the disclosure of Google’s secret algorithms on the grounds of “transparency,” followed shortly thereafter by heavy lobbying by German politicians for a much tougher degree of Internet governance. The pressure on Margrethe Vestager, the EU’s new Commissioner for competition, to resolve the matter is therefore massive. WHAT LESSONS CAN BE LEARNED? Washington has, not altogether surprisingly, complained about what it sees as the increasing politicization of the case. But, politics apart, what lessons does this saga hold for U.S. companies troubled by the potential impact of EU competition law? Firstly, it reminds us that the reach of Article 102 is a very long one, and extends far beyond the geographical limits of the EU. For example, if your abusive conduct has an effect on trade between EU member states, it is no defense for you to argue that you are physically based outside the geographical limits of the EU. Secondly, it reminds us that the consequences of infringement can be very severe indeed. The main sanction, of course, is fines, and U.S. companies have the gloomy distinction of holding the record for fines imposed by the European Commission for abuse of dominance. Intel’s abusive dominance resulted in the highest-ever individual fine for infringement of Article 102 (€1.06b), whilst the total fines that have been imposed by the European Commission on Microsoft (paradoxically,

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one of the principal complainants against Google!) exceed an eye-watering €1.6b. But it is sometimes forgotten that the European Commission has other weapons in its armoury as well, for, where it finds an infringement of Article 102, it is empowered to impose a structural remedy, or indeed any behavioural remedies that are proportionate to the infringement committed. The threat of using these powers has repeatedly induced those accused of abusive dominance to submit to binding commitments to (for example) sell business divisions to rivals, or to divest capacity to competitors. Thirdly, it needs to be remembered that a finding of infringement is increasingly likely to trigger “follow-on” or “piggyback” legal proceedings for damages. In the past, victims of abusive dominance tended to be sluggish in seeking redress against the perpetrators in the civil courts, but that is changing, for companies and firms are showing themselves increasingly disposed to bring private enforcement actions, and governments are strongly encouraging them to do so. Fourthly, let us not forget that you don’t have to be the size of Google, Intel or Microsoft to fall foul of an abusive dominance allegation. The size of the relevant product market (in turnover terms) is not the relevant factor in assessing dominance; and Article 102 (and its national equivalents in the various EU member states) can be – and have been – used in small markets against very small companies. And finally, the Article 102 proceedings are a useful reminder of what a very important part anti-trust provisions play in EU business law. Anti-trust law was of course an American invention (it is generally taken to have begun with the Sherman Anti-Trust Act 1890), but since then the Europeans have, to put it mildly, proven themselves ready, willing and able to adopt it, too. Whatever the outcome of the Article 102 proceedings against Google, they demonstrate that the pupil has learned well from the master!

Jonathan Cornthwaite specializes in (amongst other things) competition law at Wedlake Bell LLP, where he has been a partner since 1988 and where he heads the Competition Law Team. Wedlake Bell is an English law firm based in central London with a leading corporate and commercial practice, and a member of USLAW.



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Brian Christensen is Director – Insurance & Risk Management for Kohler Co. of Kohler, Wisconsin. He has been with Kohler Co. for 19 years and his current responsibiliBrian Christensen ties include, among Kohler Co. Director – Insurance & other things, managing Risk Management all product and general liability claims worldwide, with a supervisory role in claims litigation in the U.S. He works closely with defense counsel in defending cases, negotiating settlements, preparing cases for trial, and testifying. Brian, a member of USLAW’s Client Leadership Council, recently spoke with USLAW Magazine about his connection with USLAW and how he and his business benefit from USLAW. ON FINDING LOCAL COUNSEL I’ve been connected with USLAW for several years and it has been a very good partnership for a couple of key reasons – and finding local counsel tops that list. In the past if there was a need for counsel in a particular state, we went through our TPA and asked for a recommendation. It was hit or miss and we found we just didn’t have connections in the markets where we needed them. Now, through our relationship with USLAW NETWORK, we have connections not only through current USLAW partners but also through others we’ve made as a result of our involvement with USLAW. For us, it all started with Phil Isenbarger of Bingham Greenebaum Doll LLP. We had worked with Phil for many years before hearing of USLAW. He introduced us to USLAW and we’ve benefited from the many resources USLAW offers, especially finding local counsel. We can pick up the USLAW member directory or contact Phil or any of the other USLAW attorneys and ask who can help us in this particular state. Having that as a resource has been fantastic. CONFERENCES DELIVER MORE THAN EDUCATION USLAW conferences and special events are another big plus for us. On the education front, USLAW conferences offer us the chance to hear different topics presented by local or industry peers as well as local counsel. These events also are about getting to know the people – putting faces with names. This helps us get to know the attorneys. It breaks down any barriers in being able to reach out and ask general questions down the line. Recently, I picked up the phone and reached out to a USLAW member in

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MINUTES WITH

Brian Christensen of the Kohler Co.

Brian Christenson sits down for a quick one-on-one with USLAW Magazine.

Florida, introduced myself as being with USLAW (as a client) and asked a question about workers’ comp in Florida. In this particular example, the attorney I called responded quickly to my inquiry, indicated he didn’t have the answer but connected me with someone who did and I got my questions answered. They didn’t set up a file, they were amendable to just answering a quick question and providing brief local insight. This makes this a priceless relationship. The opportunity to do this is priceless.

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LOCATION, LOCATION, LOCATION Our business footprint is in all 50 states and beyond. As such, I have used – or made recommendations to our legal group and businesses outside of the U.S. – attorneys outside of the U.S. who are part of the NETWORK. Knowing that there is local counsel in jurisdictions where we might need them in the U.S. and around the world has proven helpful in several situations. NETWORK IN ACTION We had a fleet of semis involved in an accident a few years ago in Mississippi. We historically had very little activity in Mississippi, especially on transportation, so I went to the USLAW Directory, looked up Jim Moore of Copeland, Cook, Taylor and Bush in Mississippi whom I had met previously at a USLAW event. I shared with him the situation and he and his team were fantastic. This case eventually went to trial and resulted in a complete defense verdict. Having the ability to reach out to a proven attorney in a jurisdiction in which we needed local counsel combined with Jim’s (and his team’s) knowledge, mannerism, and billing were all very pleasing to Kohler and it was a big success. That is NETWORK success. USLAW IS….. It is simply a great resource. A knowledge resource. For us it’s become a longterm partnership. There is so much knowledge that is made available to us for free – like compendiums for product liability for example. Also, there are no strings attached to the relationship. You don’t have to pay annual dues, you don’t have to sign up an attorney. There is mutual benefit – we get great service at very reasonable billing fees and attorneys obviously get a client. To us it’s been a win-win on both sides. WORKING TOGETHER USLAW attorneys are responsive, knowledgeable and professional and offer reasonable billing fees that fit our structure. For every case, a win is different. It might not always be a defense verdict. It might mean a reasonable payout when an unreasonable demand was being made or simply solving a problem whatever that might be. USLAW attorneys work with us towards the desired result. That’s been the biggest plus for us. In all of those respects USLAW’s been a great fit for Kohler Co.


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Firms on the Move

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Ahmuty Demers & McManus partner Michael J. Rabus was named German American of the Year by the New York State Grand Council of Steuben Associations in Civil Service, an organization comprised of the German American Clubs of The New York City Police Department, New York City Fire Department, Nassau, Suffolk and Rockland County Police Departments, the Police Department of the Port Authority of New York and New Jersey, The Court Officers of the State of New York and the United States Customs Service and Border Patrol. Mr Rabus also serves as the President of the German American Committee of Greater New York

Philip J. McManus, Ahmuty Demers & McManus founding partner, was honored with the Lifetime Achievement Award by the New York City Trial Lawyers Alliance. Bingham Greenebaum Doll LLP (BGD) partner James J. Bell has been elected vice president of the 2015 Indianapolis Bar Association (IBA) Board of Directors.

Phil L. Isenbarger, a partner at Bingham Greenebaum Doll LLP, has been named the 2015 IBA delegate to the American Bar Association. As delegate, he currently sits as a voting member on the IBA Board. Briana Clark, a senior associate at Bingham Greenebaum Doll LLP, has been elected to the 2015 Board of Directors of the Indianapolis Bar Foundation. Bingham Greenebaum Doll LLP publishes a quarterly magazine focusing on a variety of trending legal topics. To download a free copy, visit http://www.bgdlegal.com/magazine. Carr Allison attorneys Judson Wells, Bill

Sisson, Caroline Pryor and Justin Parsons have received two-year appointments from the Poarch Band of Creek Indians to serve as Ethics Officer and alternate Ethics Officers, respectively. In their capacity as Ethics Officers, they will represent the Poarch Band of Creek Indians Ethics Board in the investigation and prosecution of ethics complaints and preparation of advisory opinions. The Poarch Band of Creek Indians is the only federally recognized Indian Tribe in the state of Alabama, operating as a sovereign nation with its own system of government and bylaws. The Tribe operates a variety of economic enterprises, which employs hundreds of area residents. Poarch Creek Indian Gaming manages three gaming facilities in Alabama, includ-

USLAW

ing: Wind Creek Casino & Hotel Atmore; Wind Creek Casino & Hotel Wetumpka; and Creek Casino Montgomery. Mandy Ketchum, managing director of Dysart Taylor, was selected as president-

elect of the Association for Women Lawyers - Greater Kansas City Chapter. She will serve a one-year term that will entail planning the annual “CLE in the City” conference. Mandy was also elected to serve a two-year term on the Missouri Bar Board of Governors representing District 12. Goldberg Segalla founding partner Thomas F. Segalla led the team of lawyers who wrote the inaugural edition of the Reinsurance Professional’s Deskbook: A Practical Guide, a new treatise co-produced by leading

legal publisher Thomson Reuters and DRI – The Voice of the Defense Bar, the largest organization of defense lawyers in the country. The Reinsurance Professional’s Deskbook is a comprehensive resource that explores in depth traditional insurance and reinsurance concepts as well as emerging trends in today’s insurance markets, with a focus on practical assessment and application to address the toughest challenges facing insurance, reinsurance, and legal professionals. Segalla served as Editor in Chief while seven attorneys from Goldberg Segalla’s Global Insurance Services Practice Group were among the book’s 35 contributing authors and editors. They include Daniel W. Gerber, Co-Chair with Mr. Segalla of the Global Insurance Services team, as well as immediate-past New York Superintendent of Insurance James J. Wrynn, lead London partner Clive O’Connell, Jeffrey L. Kingsley, Patrick B. Omilian, Aaron J. Aisen, and Alex J. Yastrow. Goldberg Segalla LLP launched a new blog: Trial by Fire: Defense Strategies and Other Developments Impacting Fire Science Litigation. This blog covers the latest legal developments impacting the fire litigation community, including those charged with investigating fires, companies whose products are at risk for a claim, and insurance carriers. Discussions and blog posts will review nationwide developments in fire litigation as well as legal and scientific principles and methodologies surrounding the investigation of fire claims and the issues unique to fire-related litigation. To access the blog, visit www.firesciencelitigation.com. Hall Booth Smith, PC Partner Beth Boone

is serving in her second term as Treasurer of Georgia Legal Services Program. She has served on the Board of Directors as the


USLAW

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Glynn County Bar Association’s representative since June 2010. She is in her second elected term as the Treasurer of this statewide, non-profit law firm, which provides basic civil legal representation to lowincome residents across the state. Jones, Skelton & Hochuli has designed and launched the JSH Reporter to provide informa-

tion about changes in the law and how these affect a variety of industries, as well as to provide updates on what is happening within the firm. To view the most recent publication, visit www.jshfirm.com/ publications.aspx. Also keep an eye out for the Spring 2015 edition set to launch in April 2015. To receive a print copy of the JSH Reporter, email [email protected]. David Potts of Jones, Skelton & Hochuli has been named the new Arizona Legislative Liaison for the Defense Research Institute’s Young Lawyer Division. DRI’s Legislative Liaison Subcommittee is responsible for tracking relevant legislation in all fifty states. As the Arizona Legislative Liaison, Potts will provide legislative reports once every four weeks to the members of the Legislative Liaison Subcommittee, who will compile the reports for publication. The Tumbleweed Center for Youth Development recently appointed James Osborne, General Counsel and Partner at Jones, Skelton & Hochuli, to its Board of Directors. The Tumbleweed Center for Youth Development opened in 1972 and provides emergency shelter and services for runaway and homeless youth. With more than a dozen direct service programs, Tumbleweed Center for Youth

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Development currently provides care for over 3,000 homeless, conduct disordered, abused, abandoned, neglected, and at risk youth between the ages of 11-22. Labour Pains, an employment law blog penned by Sean Bawden, an attorney with Kelly Santini LLP in Ottawa, Ontario, Canada, was named best practitioner blog in the Canadian Law Blog Awards (aka – the Clawbies). Sean’s blog was selected from more than 500 law blogs published in Canada and ‘Labour Pains’ was named best of the 43 employment law blogs. LeClairRyan announced the launch of a

new blog exploring the full range of legal issues in estate litigation. “Estate Conflicts,” which went live at www.estateconflicts.com, is written primarily by LeClairRyan partner William W. Sleeth III, with additional posts by several members of LeClairRyan’s Private Wealth Services team. Matthew J. Brandes, who leads Simmons Perrine Moyer Bergman PLC’s family law practice, was appointed co-chair of the Iowa Supreme Court’s Family Law Case Processing Reform Task Force. As stated in its order, the Task Force is being asked to help the Supreme Court identify best practices for accessible, transparent and consistent family law processes to ensure litigants and family members affected by family law cases are all receiving the best services and processes the Iowa court system can deliver. SmithAmundsen’s Moses Suarez was re-

cently elected for a six-year term to the Professional Liability Underwriting Society (PLUS) Midwest Steering Committee.

Suzanne Newcomb was appointed to Indy SHRM’s Legislative Affairs Committee for 2015, and to the NAWBO-Indianapolis Corporate Partners Committee. Lew Bricker and Rebecca Remington of SmithAmundsen in Illinois co-authored

“Bodily Injury, Wrongful Death, Survival, Compensatory and Punitive Damages – A State by State Summary” in the Illinois Chapter, American Bar Association, Commercial Transportation Litigation Committee, 2014. SmithAmundsen’s Gary Zhao was inducted into the Fellows of the American Bar Foundation (ABF) on recommendation of his peers. Admission to The Fellows is limited to less than one percent of the lawyers licensed in each jurisdiction, and acknowledges attorneys who have demonstrated in the course of their career “extraordinary leadership in the profession, service to society.”

Kenneth Wingate, managing partner of Sweeny, Wingate & Barrow, PA, in Columbia, South Carolina, has been appointed chairman of South Carolina First Steps to School Readiness by Governor Nikki Haley. SC First Steps is a statewide initiative for improving early childhood development and school readiness. Thorndal Armstrong Delk Balkenbush & Eisinger attorney Michael Lowry’s legal

blog, “Compelling Discovery,” was included among the country’s top 100 legal blogs for 2014, as determined by the editors of the ABA Journal. This is the 2nd year in a row for this honor.

COMPENDIUMS OF LAW SPOLIATION OF EVIDENCE

Compendiumof Law

USLAW regularly produces new and updates existing Compendiums providing a multi-state resource that permits users to easily access state common and statutory law. Compendiums are easily sourced on a state-by-state basis and are developed by the member firms of USLAW. Current Compendiums include: Retail, Spoliation of Evidence, Transportation, Construction Law, Nullum Tempus, Workers’ Compensation, Surveillance, Offers of Judgment, and a National Compendium addressing issues that arise prior to the commencement of litigation through trial and on to appeal.

...learn more at www.uslaw.org


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Successful Recent USLAW Law Firm Verdicts

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Ahmuty Demers & McManus (Albertson, NY) Representing long time USLAW client, Benetton U.S.A. Corporation in Weiss v Benetton before New York’s Appellate Division Second Department, Ahmuty Demers & McManus (ADM) was able to successfully reverse the decision of the trial level Court that denied their motion for summary judgment. The case involved claims stemming from Benetton’s drawing on a letter of Credit to recover for unpaid receivables. Plaintiff executed an irrevocable Letter of Credit in the amount of $500,000 in favor of Bennetton U.S.A. Corporation to secure goods purchased by a friend who later became a victim in the Madoff scandal. The Letter of Credit was renewed annually. The goods were purchased from a related Benetton company. When the related company wasn’t paid, Benetton U.S.A. presented the Letter of Credit and the money was paid to the related company. The plaintiff claimed fraud and breach of contract. ADM demonstrated that Benetton U.S.A. was the beneficiary of the Letter of Credit and that the plaintiff couldn’t recover under breach of contract or unjust enrichment theories. Frank Cecere and Frederick Stoller handled the matter with Nicholas Cardascia and Glenn Kaminska on the appeal. Bingham Greenebaum Doll LLP (Indianapolis, IN) Janet P. Jakubowicz, Benjamin J. Lewis and Natalie D. Montell of the Bingham Greenebaum Doll LLP Litigation practice group are currently representing the lead plaintiff in a very significant trust case, pending in United States District Court and captioned Osborn v. Griffin, et al. which involves a complex series of trust and estate transactions dating back to the mid 1980’s. The case arises from disputes among the ten surviving children of John L. Griffin, founder of Griffin Industries, Inc. Four of Mr. Griffin’s daughters filed suit against three of their brothers who were involved with the management of the company and their parents’ trusts and estates. The brothers are being accused of failing to follow the terms of their parents’ wills and trusts, in order to enrich themselves while excluding their sisters. Judge William O. Bertelsman recently granted summary judgment in favor of the plaintiffs on their breach of fiduciary duty claims, and denied the defendants’ requests for summary judgment. A jury trial regarding the damages payable to BGD’s client is scheduled to begin on May 5, 2015. Plaintiffs will seek an award of over $350 million in compensatory damages, plus attorneys’ fees and punitive damages.

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Carr Allison (Birmingham, AL) Bricker S. Daughtry and Brad J. Booth in the firm’s Birmingham, Alabama, office recently obtained an arbitrator’s decision in favor of an employer in a union grievance arbitration. The union alleged the 30-year employee had been terminated without cause in violation of the collective bargaining agreement. The employer contended the termination was proper as the employee was observed assisting in the theft of company property. After a lengthy arbitration, the decision was in favor of the employer in full. The union sought reinstatement and back pay for the aggrieved employee. Goldberg Segalla (Buffalo, NY) Goldberg Segalla LLP acted as primary trial counsel in the defense of a commercial aviation disaster, one of only a few such trials conducted in the United States in the last 30 years. Partnering with Condon & Forsyth LLP, the firm defended the regional airline and its parent company in the litigation that arose from the February 2009 crash of Colgan Flight 3407 in a suburban neighborhood northeast of Buffalo-Niagara International Airport. The cause of the crash, which resulted in the deaths of 50 people, was pilot error leading to aerodynamic stall, followed by erroneous response to the stall. Litigation followed in United States District Court and in New York Supreme Court. The federal court cases were consolidated for discovery in multi-district litigation in the Western District of New York, while the state court cases proceeded under a combined case management plan. Except for a 13-month period during which a bankruptcy stay was in effect, litigation proceeded aggressively for more than five years. More than 200 depositions of fact and expert witnesses were conducted. Extensive motion practice ensued, on issues relating to discovery, the reliability of proffered expert testimony, the application of the legal standard of care, the limiting of trial evidence, and the viability of punitive damage claims. Intensive mediation led to the successful resolution of all federal cases by early 2014. Litigation of the state court cases continued thereafter. Key rulings were issued by the State Supreme Court justice in the summer of 2014 establishing the legal standard of care to be applied to determination of liability, and dismissing plaintiffs’ punitive damage claims. All but one of the remaining state court cases resolved shortly thereafter. The final litigated matter, brought by the survivors of a decedent killed in a home struck by the plane, proceeded to trial in September 2014. Following nine weeks of trial, a confidential, favorable resolution of the case was reached, bringing the trial to a close.


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Ebeltoft . Sickler . Lawyers (Dickinson, ND) Ebeltoft . Sickler . Lawyers of Dickinson, N.D., and two of its partners, Nicholas Grant and Paul Ebeltoft, obtained summary judgment for Travelers Property Casualty Company of American in a complex, multi-party coverage and indemnity case in the District of North Dakota, Judge Daniel Hovland, Star Insurance Company v. Continental Resources, Inc., et. al., Case No.:4:12-cv-121. The case arose after personal injury claims were made following a well explosion. The decision from the federal court for the District of North Dakota reflects and strengthens a current trend in the Eighth Circuit, which is to look to the indemnity contract, and not solely the insurance policy, when resolving certain coverage questions. The injured were employees of Cyclone Drilling, who was contracted to the well operator, Continental Resources, Inc. (“Continental”). M-I, LLC (“M-I”), insured by Travelers, was the mud consultant and had a Master Service Contract (“MSC”) with Continental. Star instituted this action to determine the scope of the indemnity agreements between Continental and its contractors and the priority and limits of coverage provided by multiple insurers. Star argued that, based on the Travelers policy issued to M-I under which Continental qualified as an additional insured, Continental was entitled to defense and indemnity from Travelers and M-I and that the Travelers policy was primary. This conclusion was in direct conflict with the language of the MSC, which required Continental to defend and indemnify M-I, a duty Continental had accepted without reservation. In granting summary judgment in favor of Travelers, the Court held that both the question of indemnity and which insurer is primary or excess was determined by applicable MSCs, not the language in the insurance policies. The Court found that the MSC required Continental to indemnify M-I for the injuries sustained by Cyclone employees. Accordingly, Travelers and M-I had no duty to defend or indemnify Continental, nor to contribute to the settlement of the underlying injury claims. Hinckley, Allen & Snyder LLP (Hartford, CT) After 15 arbitration hearing days before three arbitrators appointed by the American Arbitration Association, attorneys for Hinckley Allen – Timothy Corey and Peter Martin – obtained an award in the amount of $5,359,643.83 on September 30, 2014, in favor of Stonington Water Street Associates, the developer of a large mixed use condominium project in Stonington, Conn., against Beyer Blinder Belle Architects & Planners LLP, the architect, for defective design and deficient construction administrative services resulting in severe water leaks through the project’s windows, doors and masonry. This case began with an April 2008 state court action and ended with this September 2014 arbitration win. This is believed to be the largest arbitration award against an architect in Connecticut.

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Johnson, Trent, West & Taylor (Houston, TX) The defendant, a Texas-based flooring subcontractor, improperly installed carpet in a $22 million performance art theater in Austin, Texas. The subcontractor refused to make the necessary repairs and the general contractor filed a breach of contract suit. After a 4-day jury trial, the jury rendered its verdict finding the subcontractor had breached the contract. The jury awarded full damages and attorney’s fees. Jones, Skelton & Hochuli (Phoenix, AZ) Mike Hensley and Jeff Collins obtained summary judgment in a declaratory judgment/ coverage litigation involving the choice of law (Minnesota or Arizona) and the stacking of Uninsured or Underinsured motorist coverage (UM/UIM). Mr. and Mrs. Plaintiff traveled to Arizona, from Minnesota, and were involved in a car/motorcycle collision. As they went through an intersection, a car turned in front of them causing the accident. Both Plaintiffs suffered severe injuries with the combined medical expenses exceeding a million dollars. Plaintiff’s motorcycle insurer paid out $100,000 in UIM coverage for each Mr. and Mrs. Plaintiff. Plaintiffs sought to “stack” additional UM/UIM coverage from policies they had on other cars and motorhomes. The JSH client insurance companies denied they owed any UM/UIM coverage, contending Minnesota law applied and under Minnesota law they did not owe UM/UIM coverage on top of what was already covered. Plaintiffs then sued the carriers who insured their motorhome and auto seeking $250,000 for Mr. and Mrs. Plaintiff, under each of the two polices, for a total of $1 million. One of the major issues to be decided by the Court was the choice of law. Plaintiffs argued that staying in their motorhome for multiple months made them Arizona residents, so Arizona law should apply. The JSH lawyers argued the Plaintiffs were not residents of Arizona and the choice of law analysis dictated that Minnesota law should apply in the “stacking” analysis. The Court agreed with JSH’s client’s position based upon the relevant facts in the context of the controlling Arizona case of Beckler v. State Farm. The Court denied Plaintiff’s Motion for Summary Judgment and granted JSH’s client’s Cross-Motion for Summary Judgment finding the Plaintiffs were not entitled to “stack” the UM/UIM coverage from their other vehicles, saving JSH’s client $1 million in additional UM/UIM payments. Larson • King LLP (St. Paul, MN) Larson • King LLP trial lawyers Mark Solheim and Tony Novak successfully defended one of the firm’s clients in a recent jury trial arising out of multi-million dollar train derailment. The derailment resulted in the evacuation of a nearby town and substantial remediation to clean up approximately 30,000 gallons of hazardous chemicals. The incident received significant

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media coverage and the case was tried in Minnesota Federal District Court before Judge David Doty. The parties presented extensive evidence from pathologists and reconstruction experts who opined on the circumstances giving rise to the derailment. The jury returned a complete defense verdict on October 21, 2014.

Lewis Roca Rothgerber LLP (Denver, CO) Lewis Roca Rothgerber LLP proudly announces that Gregory B. Kanan, Tamara F. Goodlette, Jaclyn Casey Brown and Edward A. Gleason, in partnership with Dallas firm Carrington, Coleman, Sloman & Blumenthal, have successfully brought to conclusion a habeas corpus death penalty case in Texas involving the capital murder conviction of Manuel Velez. Velez and the woman he was living with were charged in the 2005 death of her infant son. In 2008, Velez was convicted after the mother pled guilty to injuring the child and received a ten-year sentence in exchange for her agreement to testify against him. At trial, the defense made numerous egregious errors, including failing to present evidence of the mother’s abuse of her children. They also failed to challenge the testimony of the state’s medical experts concluding that the child died of injuries that could only have occurred during the two weeks before his death. At the request of Velez’s pro bono habeas corpus legal team, the neuropathologist who analyzed the child’s brain tissue for the state conducted further analysis on the tissue samples and concluded that the child had sustained a brain injury much earlier than government experts had testified at trial – critically, when Velez was living in another state. On April 2, 2013, the trial court recommended and the Texas Court of Criminal Appeals affirmed that Velez’s conviction be overturned and that he be given a new trial. After numerous subsequent discussions with the District Attorney, who had initially vowed to retry Velez for first degree murder and once again seek the death penalty, Velez was offered a plea of “no contest” to reckless injury to a child with a sentence of 15 years. After being imprisoned for nine years, four of which have been spent on Death Row, Velez will soon be eligible for parole with credit for time served and good behavior. This tremendous result was achieved through the efforts of Kanan, Goodlette, Brown, Gleason and many other lawyers and staff over a period of six years.In 2013, the American Bar Association presented Kanan, Goodlette, Brown and Gleason with its Exceptional Service Award for Pro Bono Death Penalty Representation for their work in securing Velez’s retrial.


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Successful Recent USLAW Law Firm Verdicts Continued

Modrall Sperling (Albuquerque, NM) Following a week-long trial brought against one of the nation’s largest retail pharmacy chains, Alex C. Walker, Tiffany Roach Martin, and Tomas Garcia obtained a defense verdict in a wrongful death case alleging its pharmacists had improperly filled excessive levels of prescriptions for pain medications. Plaintiffs claimed that the decedent, a 28year-old mother of three, had been prescribed excessive quantities of drugs by a pain doctor who, by the time of trial, had been federally indicted on charges that he prescribed medications to patients outside the usual course of practice and without a legitimate medical purpose, and who had 21 patients – including the decedent – die from overdose. The claim against the pharmacy was that its staff knew that it was dispensing excessive quantities of medications to the decedent, knew that the combination of medications it was dispensing to the decedent was potentially deadly, knew that any pain prescriptions from the prescribing physician in question warranted increased scrutiny (he was the top pain prescriber in the state; the second on the list was the entire staff of medical residents at a major hospital), and knew that the decedent was abusing her prescriptions and engaging in drug-seeking behavior. Plaintiffs’ counsel asked the jury for damages well into seven figures. The decedent, it turned out, died from a combination of her prescription drugs and illicit street drugs. However, the experts were unable to say that the illegal drugs alone would have killed her, making a “no causation” defense impossible. Accordingly, the defense fought the duty/breach elements, premised on individual responsibility. While acknowledging their professional obligations, the pharmacists successfully defended by establishing that they are not doctors, do not have access to patient charts, are not tasked with policing the medical profession, and do not make independent treating decisions before dispensing prescriptions.

Poyner Spruill LLP (Raleigh, NC) On February 2, 2015, Lisa P. Sumner and Jill C. Walters obtained an order from the United States District Court for the Eastern District of North Carolina affirming the dismissal of claims brought against their client, AgCarolina Farm Credit, ACA, based on the Perishable Agricultural Commodities Act (“PACA”), codified at 7 U.S.C. §§ 499a-s. The underlying complaint was filed against AgCarolina and a sweet potato broker, Bissett Produce, Inc. AgCarolina was a secured creditor of Bissett with a first lien on its accounts receivable. Bissett filed a voluntary Chapter 11 bankruptcy petition in early 2013, and claims in excess of $1,000,000 were asserted against the debtor by a group of sweet potato growers who had transferred their crops to Bissett for sale to third parties. Following distribution of some, but not all, of the debtor’s sweet potato sale proceeds to AgCarolina for application to the secured debt, the growers filed an adversary proceeding against AgCarolina and Bissett seeking to enforce an alleged statutory trust under PACA giving the growers a superior interest in the sweet potato sale proceeds. On de novo review and affirming dismissal of the growers’ complaint by the Bankruptcy Court pursuant to Federal Rule of Civil Procedure 12(b)(6), the District Court rejected the argument that the growers were exempt from PACA’s notice requirements. The growers had argued that because Bissett was required to perfect the growers’ trust rights against thirdparty buyers, there was no need for the growers to perfect their own PACA trust rights against Bissett by giving written notice. The growers further argued that it was impossible for them to give such notice because they did not know the price for which Bissett would sell the potatoes at the time the potatoes were transferred to Bissett. The District Court disagreed with both arguments. The growers have appealed the District Court’s decision to the Fourth Circuit Court of Appeals, where it will present an issue of first impression. Snyder Law, LLP (Santa Barbara, CA) In a case of national significance handled by Snyder Law, LLP, a California Court of Appeal concluded in a written, published opinion that the FMCSRs (Federal Motor Carrier Safety Regulations) do not apply to the process of unloading, where the transit is complete and unloading is occurring on private property. The court reasoned that the primary purpose of the FMCSRs is to prevent accidents and injury to the public on the highway. The case can be found at www.courts.ca.gov/opinions/documents/ E056989.PDF. In this case, the plaintiff driver was an owneroperator working for Landstar. During the process of unloading large, empty propane tanks at an AmeriGas yard, he was severely injured when a number of the tanks fell from his stepdeck trailer after straps securing the load had been removed. An untrained AmeriGas employee was using a spyder forklift to remove the tanks and apparently bumped the trailer or the load.

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Plaintiff sued AmeriGas and Landstar, ultimately settling with AmeriGas and dismissing Landstar. AmeriGas pursued a cross-complaint for indemnity/contribution against Landstar. In an earlier appeal in this matter, the same Court of Appeal held that the FMCSRs provide a right for an injured commercial driver to sue for his own injuries for an alleged violation of the FMCSRs. [AmeriGas Propane L.P. v. Landstar Ranger, Inc. (2010) 184 Cal.App.4th 981.] The case was remanded to the trial court and proceeded to trial with that holding. Barry Snyder and former associate, Adrian Lambie, tried the case to Judge John Pacheco over three days. Although the trial court appreciated that, given the earlier record on appeal, AmeriGas had sufficiently alleged a claim for indemnity/ contribution against Landstar for alleged violations of the FMCSRs by Landstar, it found no facts to support the allegation at trial. The trial court and then the Court of Appeal each concluded that the FMCSRs do not address and do not apply to loading and unloading.

Sweeny, Wingate & Barrow, P.A. (Columbia, SC) Sweeny, Wingate & Barrow, P.A. attorneys Mark Barrow and Ryan Holt recently obtained a voluntary dismissal from Plaintiff’s counsel in the midst of jury deliberations at the close of a 10day trial in the United States District Court for the District of South Carolina. Barrow and Holt represented a toller who blended a chemical according to the formula of the co-defendant chemical manufacturer. The co-defendant provided a central ingredient along with instructions on where the final product should be sent. The toller retained a third-party trucking company it had used for nearly 30 years without incident. The trucker, who had made the delivery before without incident and who ran his carrier’s safety training, delivered the product to a utility station in South Carolina where the product was used to deodorize sewer lines. The product was stored in a series of plastic containers connected by PVC pipe which had been constructed by utility workers without the approval of an engineer. After offloading the deodorizer, the truck driver used air pressure to clear his hose of remaining chemical, unaware that the Plaintiff had closed off the system. The pressurization caused a valve to rupture and Plaintiff was sprayed with the chemical. He claimed severe respiratory dysfunction and black-boarded $1.3 million in future medical bills and $1 million in lost wages. A vocational rehabilitation specialist determined that he was 100% vocationally disabled. In closing, Plaintiff’s counsel requested nearly $5 million. In the absence of South Carolina law on any duty to use reasonable care in the selection of a competent carrier, the Court charged Schramm v. Foster, 341 F.Supp.2d 536 (2004), a Maryland US District Court decision. After hearing the testimony of 35 witnesses, the jury indicated that it had reached a verdict as to the toller, but not as to the manufacturer. The Plaintiff voluntarily dismissed the toller.


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Traub Lieberman Straus & Shrewsberry LLP (Hawthorne, NY) TLSS Attorneys Eric D. Suben and Meghan E. Ruesch, on behalf of Max Specialty Insurance Company, obtained summary judgment allowing the insurer to recoup sums incurred in defending the insured in an underlying third-party action for which no coverage was owed. In ruling in favor of the insurer on the coverage issue, the court had previously held that the insurer could recoup defense costs. TLSS then sought a money judgment, submitting a motion supported by copies of defense invoices. The insured opposed the motion, arguing that the reasonableness of the fees so incurred had not been established. The court rejected this argument. While TLSS had established a prima facie case by submitting invoices establishing the amount of the fees incurred for the insured’s defense, and evidence that the insured had not paid same despite demand, the insured failed to raise a triable issue of fact. The court specifically observed that while the reasonableness of fees might be a defense in an attorney fee dispute action, it was not a proper objection to a claim for recoupment where, as here, a prima facie case had been established. Accordingly, the court awarded the insurer the full of amount of defense costs with interest from the date of the underlying summary judgment on the merits of the coverage issue. Max Specialty Insurance Company v. WSG Investors, LLC, Index No. 24133/12, New York Supreme Court, Queens County (slip op. Nov. 24, 2014).

Successful Recent USLAW Law Firm Transactions Bingham Greenebaum Doll LLP Bingham Greenebaum Doll Alcohol Beverage Team was praised by firm client The Bardstown Bourbon Company, LLC CEO and company officials after their new distillery was given preliminary approval by the Kentucky Economic Development Finance Authority. Jeffrey A. McKenzie, Christopher W.D. Jones, Bradley E. Dillon, Michael J. Holtz, Reza A. Rabiee and Donza Luckett worked tirelessly to turn the client’s project into a reality. The team represented the greenfield development of their dis-

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tillery to be located on a 100-acre parcel of land in Bardstown, Kentucky. As a result, the company will invest more than $25 million to build the facility for the distillation, aging and bottling of premium bourbon and other spirits. BGD advised the company on all aspects of the deal and helped them obtain $1.3 million in state and local economic incentives.

Bingham Greenebaum Doll LLP Bingham Greenebaum Doll LLP attorneys William J. Kaiser, Jr., Amy Gilliatt, Peter L. Thurman Jr. and Brian D. Zoeller assisted and supported firm client Jasper Engines & Transmissions in connection with the expansion of its manufacturing operations. The team helped structure the multi-million dollar acquisition of Weller Truck Parts, a family-owned business headquartered in Michigan with over 800 associates and 29 production and distribution facilities throughout the United States. Klinedinst PC (San Diego, CA) Klinedinst’s Corporate and Securities group recently helped secure financing for an online business lender. The transaction involved a public company domiciled overseas investing in the peer-to-peer financing platform. Klinedinst PC advised LiftForward, Inc., a leading online lender to small and medium-sized businesses, in its successful Series A Preferred Stock financing round. LiftForward raised $2.3M of capital from a prominent Guernsey-domiciled public company. Lead attorney Christian Fonss, as well as Mariel Estigarribia and John Klinedinst represented LiftForward in all phases of the transaction. Hinckley, Allen & Snyder LLP (Hartford, CT) Hinckley Allen represented Bankwell Financial Group, Inc. (NASDAQ: BWFG), a Connecticut bank holding company of Bankwell Bank, in its acquisition of Quinnipiac Bank & Trust Company on October 1, 2014. The acquisition will add approximately $100 million in assets to Bankwell. The merger of Quinnipiac into Bankwell Bank will expand Bankwell’s presence into New Haven County. William W. Bouton led a team of Hinckley Allen attorneys on the transaction, including Arthur T. Corey and David S. Hirsch. Hinckley, Allen & Snyder LLP (Hartford, CT) Hinckley Allen represented Propark America with its acquisition and financing of Expresso Airport Parking for a total purchase price of $18.6 million. Expresso is a 14-acre off-airport parking facility located in San Leandro, California, servicing the Oakland International Airport. Propark America is one of the nation’s leading parking companies, providing full-service parking solutions across all parking markets including office buildings, retail centers, corporate campuses, airports, universities, medical institutions, municipal facilities, stadiums, residential buildings and hotels. Headquartered in Hartford, Connecticut, Propark operates more than 500 locations in convenient markets

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across the United States. William S. Fish, Jr. led the team of Hinckley Allen attorneys on the transaction, including Sarah M. Lombard, Todd M. Gleason, Kathryn A. Primiano and Andrew S. Rogovin.

Modrall Sperling (Albuquerque, NM) Working shoulder to shoulder with its client BHP Billiton New Mexico Coal, Inc. (BBNMC) and other co-counsel, Modrall Sperling completed a series of interrelated transactions between BBNMC and subsidiaries, Arizona Public Service Company, the Navajo Nation and Navajo Transitional Energy Company, LLC (NTEC), a wholly owned enterprise of the Navajo Nation (“Nation”). The transaction marks one of the most substantial and innovative recent energy transactions in Indian country. The successful closing followed lengthy due diligence, detailed discussions promoting creative deal structures, navigation of Navajo Nation legislative and executive processes, and an evolving power plant regulatory regime. The multi-faceted transaction included, among other elements, the sale of BHP Navajo Coal Company (BNCC), the owner/operator of the Navajo Mine, a large surface coal mining operation on the Navajo Reservation, to NTEC and for operation of the mine for a period of years by a BBNMC subsidiary. The Mine is the sole supplier of coal to the Four Corners Power Plant (FCPP), and the $85 million purchase price will be paid through coal sales to FCPP. Hand in hand with completing those steps, the negotiators crafted new and amended coal supply agreements with owners of the FCPP, a coalfired generating station located on the Navajo Reservation in northwestern New Mexico, to ensure a market for the coal reserves that NTEC acquired. The transactions allow (a) continued operation of the Navajo Mine and the FCPP; (b) preserving hundreds of high-paying jobs for the predominantly Native American workforces of the mine and plant; and (c) continued significant royalty and tribal tax revenue streams for the Navajo Nation to support its governmental services. Modrall Sperling was counsel for the BHP Billiton entities involved.


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2001. The Start of Something Better. Mega-firms...big, impersonal bastions of legal tradition, encumbered by bureaucracy and often slow to react. The need for an alternative was obvious. A vision of a network of smaller, regionally based, independent firms with the capability to respond quickly, efficiently and economically to client needs from Atlantic City to Pacific Grove was born. In its infancy, it was little more than a possibility, discussed around a small table and dreamed about by a handful of visionaries. But the idea proved too good to leave on the drawing board. Instead, with the support of some of the country's brightest legal minds, USLAW NETWORK became a reality.

Fast-forward to today. The commitment remains the same as originally envisioned. To provide the highest quality legal representation and seamless cross-jurisdictional service to major corporations, insurance carriers, and to both large and small businesses alike, through a network of professional, innovative law firms dedicated to their client's legal success. Now as a network with more than 6,000 attorneys from nearly 100 independent, full practice firms with roots in civil litigation, spanning the United States, Canada, Latin America, Europe, Asia and Africa, USLAW NETWORK remains a responsive, agile legal alternative to the mega-firms.

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How USLAW NETWORK Membership is Determined. Firms are admitted to the Network by invitation only and only after they are fully vetted through a rigorous review process. Many firms have been reviewed over the years, but only a small percentage were eventually invited to join. The search for quality member firms is a continuous and ongoing effort. Firms admitted must possess broad commercial legal capabilities and have substantial litigation and trial experience. In addition, USLAW NETWORK members must subscribe to a high level of service standards and are continuously evaluated to ensure these standards of quality and expertise are met.

USLAW in Review. • All vetted firms with demonstrated, robust practices and specialties • Efficient use of legal budgets, providing maximum return on legal services investments • Seamless, cross-jurisdictional service • Responsive and flexible • Multitude of educational opportunities and online resources • Team approach to legal services The USLAW Success Story. The reality of our success is simple: we succeed because our member firms' clients succeed. Our member firms provide highquality legal results through the efficient use of legal budgets. We provide cross-jurisdictional services eliminating the time and expense of securing adequate representation in different regions. We provide trusted and experienced specialists quickly. When a difficult legal matter emerges – whether it’s in a single jurisdiction, nationwide or internationally – USLAW is there. Success. For more information, please contact Roger M. Yaffe, USLAW CEO, at (800) 231-9110 or [email protected]

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USLAW DIGIKNOW USLAW DigiKnow is USLAW’s bi-weekly digital e-newsletter featuring insights and perspectives on today's trending legal issues. Articles and posts and are written by USLAW member attorneys who are subject matter leaders from our USLAW Practice Areas and the USLAW membership in general. Through USLAW DigiKnow, we share legal, legislative and jurisdictional news as well as promote upcoming USLAW events, webinars and podcasts that might be of interest to you and your colleagues. It is an excellent resource to keep abreast of new case law, important verdicts and other pending legislation.

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USLAW CONNECTIVITY In today’s digital world there are many ways to connect, share, communicate, engage, interact and collaborate. Through any one of our various communication channels, sign on, ask a question, offer insight, share comments, seek advice and collaborate with others connected to USLAW. Please check out USLAW on Twitter @uslawnetwork and our LinkedIn group page.

USLAW MAGAZINE

FALL | WINTER | 2014

USLAW Magazine is an in-depth publication produced twice annually and designed to address legal and business issues facing commercial and corporate clients. Released in Spring and Fall, recent topics have covered managing litigation in a tighter economy, cyber security & data privacy, changes in M&A strategies, sidestepping legal challenges during a workforce reduction, best practices in e-discovery policies, and weighing the pros and cons of litigation versus mediation, social media and the law, patent troll taxes and much more.

WHAT HAPPENS WHEN YOU FINALLY REACH MILLIONAIRE ACRES How a Few Words Can Trigger Millions More in Insurance Coverage

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How the Long Island Rail Road Could Be a Model for All Employers

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FULL-COURT PRESS The Legal Challenges Facing the NCAA

ACTUAL SERVICE THROUGH A VIRTUAL COMMUNITY Trends in Service of Process by Social Media

USLAW EDUNET SOCIAL MEDIA MONITORING:

HOW TO UTILIZE SOCIAL MEDIA, THE INTERNET AND TECHNOLOGY TO BENEFIT YOUR CASES

A wealth of knowledge offered on demand, USLAW EduNet is a regular series of interactive webinars produced by USLAW practice groups. The one-hour programs are available live on your desktop and are also archived at USLAW.org for viewing at a later date. Topics range from Medicare to Employment & Labor Law to Product Liability Law and beyond.

USLAW MEMBER AND ATTORNEY DIRECTORIES Several USLAW NETWORK practice groups have compiled detailed directories of the active attorneys within their group. These directories showcase the attorneys’ specific areas of experience, education, industry memberships, published articles, and in some cases representative clients. These directories are available as downloadable PDFs.

DIRECTORY OF ATTORNEYS

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CLIENT LEADERSHIP COUNCIL Take advantage of the knowledge of your peers. USLAW NETWORK’s Client Leadership Council is a hand-selected, diverse group of prestigious USLAW firm clients that provides expertise and advice to ensure the organization and its law firms meet the expectations of the client community. In addition to the valuable insights they provide, CLC members also serve as USLAW Ambassadors, utilizing their stature within their various industries to promote the many benefits of USLAW NETWORK.

The USLAW NETWORK Rapid Response App locates USLAW attorneys quickly when timeliness is critical for you and your company. Offered for Transportation, Construction Law and Product Liability, this resource provides clients with attorneys' cell and home telephone numbers along with assurance that USLAW will be available 24/7 with the right person and the right expertise. Available at uslaw.org and the USLAW 24/7 App.

PRACTICE GROUPS USLAW prides itself on variety. Its 6,000+ attorneys excel in all areas of legal practice and participate in USLAW’s active groups and communities including Banking & Financial Services, Business & Advisory Services, Business Litigation, Construction Law, Data Privacy & Security, E-Discovery, Employment & Labor Law, Healthcare Law, Insurance and Risk Management Services, International Business & Trade, Internet, Privacy & Media, IP and Technology, Product Liability, Professional Liability, Retail, Transportation, White Collar Defense, Women’s Connection, and Workers’ Compensation. Don’t see a specific practice area listed? No worries as USLAW firms cover the gamut of the legal profession and we are sure to find a firm that has significant experience in the area of need.


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2015 USLAW Partners

S-E-A OFFICIAL TECHNICAL FORENSIC ENGINEERING AND LEGAL VISUALIZATION SERVICES PARTNER OF USLAW NETWORK

★★★ ★★USLAW

PREMIER PA R T N E R

www.SEAlimited.com 7349 Worthington-Galena Road Columbus, OH 43085 Phone:(614) 888-4160 Fax: (614) 885-8014 J. Kenneth Corwin National Account Executive 7349 Worthington-Galena Road Columbus, OH 43085 Phone:(800) 782-6851 Email: [email protected] Chris Torrens Vice President 1110 Benfield Boulevard, Suite B Millersville, MD 21108 Phone:(800) 635-9507 Email: [email protected] Jared Henthorn Manager 7349 Worthington-Galena Road Columbus, OH 43085 Phone:(800) 782-6851 Email: [email protected] A powerful resource in litigation for more than 40 years, S-E-A is a multi-disciplined forensic engineering and fire investigation company specializing in failure analysis. S-E-A offers a complete investigative service including: mechanical, biomechanical, electrical, civil, and materials engineering, as well as fire investigation, industrial hygiene services, and a fully equipped chemical laboratory. These disciplines interact to provide thorough and independent analysis that will support any subsequent litigation. S-E-A's full-time staff of investigators, engineers and chemists are licensed/ registered professionals who are court-qualified experts in their respective fields. S-E-A is proud to be the new sponsor of visualization services for USLAW NETWORK. Since 1980, S-E-A has provided visualization services for litigation support to attorneys, corporations and insurance companies. We use the most current technology to prepare accurate and court-qualified demonstrative pieces for litigation support. Our onstaff engineers and graphics professionals coordinate their expertise to prepare exhibits that will assist a judge, mediator, or juror in understanding complex principles and nuances of your case. S-E-A can provide technical drawings, camera-matching technology, motion capture for biomechanical analysis and accident simulation, 3D laser scanning and flythrough technology for scene documentation, presentation, and computer simulations. In addition, S-E-A can prepare scale models of products, buildings or scenes made by professional model builders or using 3D printing technology, depending on the application. Please visit www.SEAlimited.com for examples of these capabilities. For more information, please contact Chris Torrens at 800-635-9507 or Ken Corwin at 800-782-6851.

U.S. Legal Support, Inc OFFICIAL COURT REPORTING PARTNER OF USLAW NETWORK

★★★ ★★USLAW

PREMIER PA R T N E R

www.uslegalsupport.com 363 N. Sam Houston Pkwy. E., Suite 1200 Houston, TX 77060 Phone:(800) 567-8757 Fax: (713) 653-7172 Charles F. Schugart President & CEO 363 N. Sam Houston Pkwy. E., Suite 1200 Houston, TX 77060 Phone:(832) 201-3834 Email: [email protected] Jim Cunningham Director of Record Retrieval Division President, Midwest 200 West Jackson Boulevard, Suite 600 Chicago, IL 60606 Phone:(312) 236-8352 Email: [email protected] Pete Giammanco Director of Court Reporting Division President, Western 15250 Ventura Boulevard, Suite 410 Sherman Oaks, CA 91403 Phone:(818) 995-0600 Email: [email protected] Lee Ann Watson Senior VP Sales & Marketing 363 N. Sam Houston Pkwy. E., Suite 1200 Houston, TX 77060 Phone:(832) 201-3872 Email: [email protected] U.S. Legal Support, Inc. founded in 1996 is a privately held company with over 45 offices located across the United States. As one of the leading providers of litigation services, they are the only litigation support company that provides, court reporting, record retrieval and litigation, eDiscovery and trial services to major corporations and law firms nationwide. Their management team is truly unique with division presidents who are experts in the litigation services industry. All are involved in the day-to-day processes and have the autonomy to make immediate decisions regarding client questions and concerns. This, along with their proven ability to organize resources, results in long-term client relationships. U.S. Legal Support is the proud official Court Reporter Partner of USLAW NETWORK, providing access to over 2000 superior court reporters equipped with state-of-the-art technology. Client services include a complete online office with 24/7 access, offering the ability to easily schedule or reschedule court reporting jobs online, view and download transcripts and exhibits, and review invoices. With their specialists and offices positioned across the country U.S. Legal Support has the ability to provide you with national resources and local expertise. They look forward to showing you their Power of Commitment.

Galaher Settlements OFFICIAL STRUCTURED SETTLEMENT PARTNER OF USLAW NETWORK

www.galahersettlements.com 39674 North 104th Street Scottsdale, Az 85262 Phone:(630) 718-1213 Fax: (630) 339-4413 Jim Ebel, CPCU, ARM President Cell: (630) 327-7213 Email: [email protected] Dave Latz 413 Reserve Court, Joliet, Il 60431 Phone:(815) 744-7077 Email: [email protected] Daniel Weberg P.O. Box 660, Alton, NH 03809 Phone:(603) 875-7930 Email: [email protected] As one of the largest providers of structured settlements, Galaher Settlements offers clients integrated claims solutions from a team of industry experts supported by leading-edge technology. We have a staff of more than 50 seasoned professionals located coast-to-coast with more than 600 years of combined experience. Our team has successfully closed more than 50,000 structured settlements over the past 30 years. We offer a full range of settlement solutions, including: • Convenient, cost-effective single-source integrated claims solutions • A full suite of powerful claim settlement tools • Unique expertise in consultative approaches to resolving claims • Local jurisdictional insights and knowledge through our national presence • Multiple settlement options • Structured Medicare set-aside allocations • Integrated claims strategies to lower costs and enhance administrative efficiencies Additionally, our team is available to attend mediations and pre-trial settlement conferences and to assist in post-settlement services. We review all settlement agreements and work with counsel to ensure the appropriate structured settlement language is included to guarantee tax-free status. There’s more than just one product, service or area that sets us apart, including our depth of knowledge, experienced team and overall strategic approach. Our technology – notably the Settlement Processing Information Network (SPIN) structured settlement diary-based file management system – offers integrated modules to facilitate document creation, review and storage, reports, accounting functions, quoting, license administration and more for comprehensive management and tracking of our clients’ cases. Learn more. Contact Galaher Settlements today. 800-288-7005 | www.galahersettlements.com


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Granite Legal Systems

Litigation Insights

Marshall Investigative Group

OFFICIAL E-DISCOVERY PARTNER OF USLAW NETWORK

OFFICIAL JURY CONSULTANT PARTNER OF USLAW NETWORK

OFFICIAL INVESTIGATIVE PARTNER OF USLAW NETWORK

www.granitelegal.com 1201 Louisiana Street, Suite 350 Houston, TX 77002 Phone:(713) 652-0881 Jeffrey R. Hewett, JD Chief Executive Officer Phone:(713) 652-0881 Email: [email protected] Steve Mack Consultant Phone:(713) 240-0634 Email: [email protected] Dennis Kiker, JD Consultant Phone:(804) 350-8444 Email: [email protected]

www.litigationinsights.com 9393 W. 110th Street, Suite #400 Overland Park, KS 66210 Phone:(913) 339-9885 Twitter:@LI_Insights Merrie Jo Pitera, Ph.D. Chief Executive Officer Phone:(913) 486-4159 Email: [email protected] Twitter:@MerrieJoPitera Adam Bloomberg Vice President – Managing Director of Visual Communications Phone:(214) 658-9845 Email: [email protected] Twitter:@adambloomberg Jill Leibold, Ph.D. Director of Jury Research Phone:(310) 809-8651 Email: [email protected] Twitter:@DrJillLeibold

www.mi-pi.com 416 W Talcott Road Park Ridge, IL 60068 Phone:(855) 350-6474 (MIPI) Fax: (847) 993-2039 Doug Marshall President Email: [email protected] Adam M. Kabarec Vice President Email: [email protected]

Granite Legal Systems proudly supports USLAW NETWORK firms and their clients throughout the discovery process from legal hold planning through trial support, ensuring that they have the information required for timely and cost effective client representation. Granite professionals work with law firms and corporations to define discovery obligations and plan defensible responses. To these engagements, Granite offers seasoned industry veterans with versatile skill sets who understand and implement technology resource requirements, address team structure & responsibilities, and assure effective quality control processes for all phases of the project. Our consultants and project managers are attorneys, legal assistants, and experienced technologists with extensive litigation and technical expertise. Our ability to provide comprehensive discovery support services to our clients, including investigation, documentation, as well as solution design and implementation capabilities distinguishes Granite Legal Systems from other eDiscovery companies. Granite’s broad technical skills enable our team to identify and implement cost-effective, repeatable and supportable solutions to recurring discovery issues. We are uniquely qualified to handle discovery assessment, collection, and production projects involving complex data sources, outdated or legacy systems, and other challenging discovery issues.

Since 1994 Litigation Insights has been a nationally recognized leader in the trial consulting field. Litigation Insights is proud to be the new sponsor of jury research services for USLAW NETWORK. We have worked with several member law firms over the years and are excited about the opportunity of working with more of the USLAW membership. In a business often characterized by transitory relationships, we have made it a point to build long-lasting partnerships both with clients and our own team members. Our clients hire us when their cases are complex, difficult and unclear. They bring us in when issues are volatile, emotions are high and millions of dollars are at risk. We’re asked to consult on tough litigation because we’ve seen so many tough cases and, more importantly, we’ve provided valuable insights.

Granite Legal Systems was founded by industry veteran Jeffrey Hewett in 2004 to develop an innovative eDiscovery solution (eCollector) and has since grown to provide complete eDiscovery services, specializing in solving complex, technically challenging discovery problems.

At Litigation Insights, we have the experience to help you quickly interpret your case details. We ask the right questions, listen to the answers and help you develop compelling stories and visuals that speak genuinely to your audience. Whether you’re working toward an expedient settlement, or battling through weeks in the courtroom, we help you determine the most convincing details of your case so you can incorporate them and tell your story more effectively.

Online at www.granitelegal.com On LinkedIn at www.linkedIn.com/ company/granitelegal

Litigation Insights has been certified as a Women’s Business Enterprise by the Women’s Business Enterprise National Council (WBENC). For more information on how can help with jury research, trial graphics or trial presentation please contact any of our executive staff below.

• Investigating claims for over 30 years • A nationwide firm specializing in insurance fraud investigations • Providing coverage throughout the United States That is what Doug Marshall, the founder of Marshall Investigative Group is proud to offer, including a complete array of services for Cargo, Disability, Liability and Workman’s Compensation claims. Some of those services are activity/background checks, employment, health history, internet research, public records, skip tracing, statements, subrogation and surveillance. And now with a special focus on social media monitoring, M.I.G. can provide real time investigation and analysis as part of its total investigative package. Our private investigators provide the knowledge and skills necessary to extract the information you need to successfully evaluate your claim. We use investigators from diverse backgrounds like criminal justice, information technology and business, who share their knowledge with others in the firm. Our goal is to exceed your expectations by providing prompt, thorough and accurate information whether that is to establish proper reserves or to document claimant activities. With M.I.G. Doug Marshall insists on conducting our investigative business with the highest degree of integrity, confidentiality and productivity. After 30 years in the business of delivering what you need, the Marshall Investigative Group, knows how to value each and every customer and produce the results you require. We are confident that our extraordinary investigative work, provided on a timely basis, will make a difference in your bottom line. We will be happy to discuss your case and respond to any questions you may have. Please contact Doug Marshall to discuss your case at (855) 350-6474 or email him at [email protected].


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201 5 USLAW Partners

MDD Forensic Accountants OFFICIAL FORENSIC ACCOUNTANT PARTNER OF USLAW NETWORK

www.mdd.com 750 Hammond Drive NE, Building 14 Atlanta, GA 30328 Phone:(404) 252-0085 Fax: (404) 255-0673 Jack Damico 750 Hammond Drive, Building 14 Atlanta, GA 30328 Phone:(404) 252-0085 Fax: (770) 255-0673 Email: [email protected] Shannon Rusnak The Mellie Esperson Building 815 Walker Street, Suite 1800 Houston, TX 77002 Pone: (713) 621-3010 Fax: (713) 621-5635 Email: [email protected]

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Matson, Driscoll & Damico is a leading forensic accounting firm that specializes in providing economic damage quantification assessments for our clients. Our professionals regularly deliver expert, consulting and fact witness testimony in courts, arbitrations and mediations around the world. We have been honored to provide our expertise on cases of every size and scope, and we would be pleased to discuss our involvement on these files while still maintaining our commitment to client confidentiality. Briefly, some of these engagements have involved: lost profit calculations; business disputes or valuations; commercial lending; fraud; product liability and construction damages. However, we have also worked across many other practice areas and, as a result, in virtually every industry. Founded in Chicago in 1933, MDD is now a global entity with 22 U.S. and 21 international locations. In the United States, MDD’s partners and senior staff are Certified Public Accountants; many are also Certified Valuation Analysts and Certified Fraud Examiners. Our international partners and professionals possess the appropriate designations and are similarly qualified for their respective countries. In addition to these designations, our forensic accountants speak more than 30 languages. Regardless of where our work may take us around the world, our exceptional dedication, singularly qualified experts and demonstrated results will always be the hallmark of our firm. To learn more about MDD and the services we provide, we invite you to visit us at www.mdd.com. You are also welcome to contact John A. Damico, one of MDD’s founding partners, at [email protected] or 404.252.0085.

One, two, three...fast. USLAW 24/7 allows you to easily and quickly search for Transportation, Construction Law and Product Liability Rapid Response Attorneys from our 6,000+ member database. You’ll gain rapid access to detailed USLAW Member Firm and Lawyer profiles, contact information and more. Easy, direct “email the attorney” links makes immediate contact hassle-free. Plus, USLAW 24/7 keeps you up-to-date on additional resources available to our member firms’ clients.

Put the power of Rapid Response at your fingertips. NOW AVAILABLE FOR DOWNLOAD. SEARCH USLAW 24/7


Already knowin Alr ow wing the answers rs when you yyo waalk into courtt isn isn’t’t unfair,r, it’’s un-stupid. At S-E-A, we’ve lived A ed with the bur burden of proof every day ffo for the last 45 years. In n the pr process, we’ve e assembled a multimulti-disciplinary team eam of scientists scien , forensic fo engineers and resear esearchers all focused fo ocused on find finding real answers. Answers ers that tha will stand up to testing t take advantage in the lab,, the field and in ccourt. So o choosing to tage of our experience e and expertise tise ethical, it is conclusive evidenc that you are is not only ethical e evidence e just as smart smar as your clients hope you ou are. ar all Jason Baker aatt 800-782-6851 or vist www.SEAlimited.com w m ffor fo more information. fo Call

THE ENGINEERING & SCIENCE BEHIND BEHIN THE ANSWERS Proud Par artner US LAW AW Network, Inc. since 2004

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At USLAW NETWORK, we know your legal and business goals are critical to your company’s success. We also know your time is important and budgets are limited. Your job requires you to stay current on relevant and vital legal topics, decisions, and jurisdictional differences. Look no further than USLAW. We are pleased to offer a completely customizable one-stop educational program that will deliver information on today’s trending topics that are applicable and focused solely on your business. In order to accommodate the needs of multiple staff, we go one-step further and provide LawMobile right in your office or pre-selected local venue of your choice. USLAW comes to you as we bring a select team of USLAW member attorneys to talk about the issues you tell us you want and need to learn about. We will focus on specific markets where you do business and utilize a team of attorneys to share relevant jurisdictional knowledge important to your business’ success. Whether it be a one-hour lunch and learn, half-day intensive program or simply an informal meeting discussing a specific legal matter, USLAW will structure the opportunity to meet your requirements – all at no cost to your company.

When it comes to customized legal education, think LawMobile powered by USLAW NETWORK. Let us deliver USLAW to your doorstep. Contact Roger Yaffe at [email protected] or (800) 231-9110, ext. 1 for more information.

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SAMPLING OF TOPICS THAT CAN BE PRESENTED... • ADA, FLMA, employee data privacy and more: Employment law training to ensure you are maximizing employee management and minimizing risk within current policies and regulations. • Cyber. Data. Privacy: Addressing privacy and protection laws, managing data and understanding the risks of working in complex social media and digital world. • Updates on state and federal law changes that may impact your business and employees. • Making sure you stay on the right side of the road: An in-depth review of state and federal transportation law and the impacts to your interstate business. • Regulatory review for specific practice areas • Surveying the healthcare landscape: what you need to know to ensure your business is compliant uslaw.org • 800-231-9110