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

The Court, having previous experience addressing MSA related questions, looked to the 11th Circuit decision in Bradley v. Sebelius for guidance. 621 F.3d 1330 (11th Cir. 2010). Bradley was an allocation case under the MSP with respect to conditional payments, holding that CMS must respect a judicial allocation based on the merits of the case. Applying the logic that CMS’ recovery can be fully satisfied by identifying that portion of an award which is intended to compensate a Claimant for medical expenses (past and future), the Court agreed with the parties in that an MSA did not need to be fully funded to satisfy Medicare’s interest. It did, however, disagree with respect to the dollar amount of the MSA.

Instead of following a strict pro rata approach advocated by the Claimant, the Court instead calculated a ratio of the net settlement proceeds (after costs of procurement and conditional payments by CMS had been subtracted from the gross award of $100,000) against the mean MSA figure. That ratio of 18.2% was then applied to the net proceeds, leading the Court to conclude that an MSA totaling $10,138 would be an appropriate amount with which to satisfy Medicare’s future interest.

This case is yet another example in 2013 (building on recent cases such as Early and Sterrett) depicting that MSA issues cannot be ignored simply because the claim being resolved is a liability claim instead of a workers’ compensation claim. While the issue must be addressed, the opinions also display that a more sophisticated methodology must be applied which takes into account the inherent differences between liability and workers’ compensation claims. As such, MSAs in the liability context should rarely be funded for the full value of a claimant’s overall future costs of care otherwise covered by Medicare (as the claimant did not recovery 100 cents on the dollar for such damages). In applying the allocation logic previously utilized in Bradley for conditional payments, the Court has provided a reasonable and logical path for parties to follow in the short term, with CMS anticipated to provide guidance in 2013 in the form of a Notice of Proposed Rulemaking.

The DRI MSP Task Force will continue to follow these developments and provide you with practical means for incorporating this guidance into your practice.

Categories: Law Suit | Medicare | MSP | Supreme Court

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

Procedural History

The underlying case involved a nurse suing for overtime violations under the Fair Labor Standards Act, 29 U.S.C. § 201, et seq., when her employer automatically deducted 30 minutes from her work day for a mandatory meal period even when she worked through it. Symczyk sued on behalf of herself and all those similarly situated. Concurrently with its answer, Genesis served a Rule 68 offer of judgment for $7,500 plus reasonable attorney’s fees, costs and expenses to be determined by the Court, an amount which fully satisfied Symczyk’s damages and included a reasonable attorney’s fee. Plaintiff did not accept the offer during the prescribed 10-day time period, and a motion to dismiss the case for lack of subject matter jurisdiction followed. The District Court granted the motion, holding that the employer’s offer of judgment fully satisfied plaintiff’s individual claim and thus mooted the lawsuit because no other class members had opted in.

On appeal, the Third Circuit reversed. Symczyk v. Genesis Healthcare Corp., 656 F. 3d 189 (3d Cir. 2011). The appellate court agreed that plaintiff’s individual claim was moot, but not the collective action. The Third Circuit held that calculated attempts to pick off named plaintiffs with Rule 68 offers of judgment before conditional certification could short circuit the process and thereby frustrate the goals of collective actions. The case was remanded to permit Symczyk to seek conditional class certification, which would relate back to the date of filing of the Complaint for statute of limitations purposes.

Supreme Court Opinion

The U.S. Supreme Court reversed. Justice Clarence Thomas, writing for the majority, held that straightforward “case or controversy” principles governed the Court’s decision. Justice Thomas first addressed plaintiff’s argument that her individual claim was not moot because she did not accept the offer of judgment. The majority held that plaintiff’s argument was not properly before the Court, as the Third Circuit affirmed the trial court on this point and no cross-petition to the Supreme Court was filed. Accordingly, the only issue before the Court was whether the collective action survived in light of the lack of any remaining plaintiffs. Distinguishing several decisions based on Federal Rule 23 class actions, the Court held that no individuals other than plaintiff had a stake in the litigation at the time of the offer of judgment. The majority similarly rejected arguments relating to the purpose of the FLSA’s collective action provision.

Speaking for the minority, Justice Elena Kagan wrote a sarcastic but effective opinion, stepping through the door left open by the majority’s refusal to address the question of whether plaintiff’s refusal to accept the offer of judgment mooted her claim. The dissent questioned how an unaccepted offer of judgment could be deemed a satisfied claim, especially since the plaintiff took nothing in the action.

Impact

The key question following Symczyk is its scope. Specifically, will it be read to apply only where the employee fails to argue that their individual claim is not moot? In a footnote, Justice Thomas noted four appellate opinions that either declared the individual claims moot in similar circumstances or authorized lower courts to enter judgment for the plaintiff where an offer of judgment provided complete relief. See Weiss v. Regal Collections, 385 F. 3d 337, 340 (3d Cir. 2004); Griese v. Household Bank (Ill.), N.A., 176 F. 3d 1012, 1015 (7th Cir. 1999); O’Brien v. Ed Donnelly Enters., Inc., 575 F. 3d 567, 575 (6th Cir. 2009); McCauley v. Trans Union, LLC, 402 F. 3d 340, 342 (2d Cir. 2005). Symczyk’s impact in these circuits is significant. In other circuits, the impact will largely depend on how each circuit resolves the mootness argument.

If other circuits join the position that a sufficient offer of judgment moots an individual claim, Symczyk provides a strategic pawn in putative FLSA collective actions previously rejected by multiple courts. Employers immediately could pick off the named plaintiff and thwart the collective action process, forcing the plaintiff’s attorney either to 1) accept an attorney’s fee on a single claim and move on; 2) attempt to locate a new named plaintiff to file a new suit against the employer; or 3) make a broader strategical adjustment, such as to file suit exclusively under state wage and hour laws which typically mirror the FLSA, and utilize state law class action procedures.

Advising the Client

Employment attorneys should be cautious in advising their corporate clients about Symcyzk’s impact. The majority’s failure to address whether Symcyzk’s individual claim was moot leaves lower courts free to address the individual mootness issue on pre-Symcyzk precedent. Even if a motion to dismiss is successful, a fellow employee’s claim may follow close behind. Still, there appears to be little downside serving a Rule 68 Offer of Judgment. Of course, clients should be advised that if the offer is accepted, a judgment will be entered against it.

Spencer Silverglate is the Managing Partner and co-founder of Clarke Silverglate, P.A., in Miami, Florida, with an active trial practice specializing in employment and commercial litigation. Craig Salner is a Partner at Clarke Silverglate, also specializing in employment and commercial litigation.

Categories: Employment/Labor Law | Supreme Court

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On April 16, 2013, the U.S. Supreme Court issued its decision in US Airways, Inc. v. McCutchen (No. 11–1285), deciding the issue of whether equitable defenses, such as the principle of unjust enrichment, can override the reimbursement provision of a health benefits plan established under the Employee Retirement Income Security Act (ERISA). Specifically at issue in the case was §502(a)(3) of ERISA, which authorizes health-plan fiduciaries to bring a civil action to obtain appropriate equitable relief to enforce the terms of a plan. The Court held that such equitable defenses cannot override the clear terms of a plan.

The case arose from a dispute over a health benefit plan provision that required participants to reimburse the plan for medical expenses where the expenses were incurred as a result of the fault of a third party and the participant was able to obtain a recovery from the third party. After a participant in the health plan suffered injuries in a car accident, the plan paid medical expenses in the amount of $66,866. The participant then sued the driver and recovered $110,000 ($40,000 of which went to attorney’s fees). The employer, as a fiduciary of the health plan, then sued the participant under §502(a)(3) seeking reimbursement. In response, the employee asserted various equitable defenses to reduce the plan’s recovery, including unjust enrichment, and also argued that the plan was required to share in the attorney’s fees and costs incurred in obtaining the tort recovery.

The case eventually reached the Third Circuit Court of Appeals, which ruled that in a §502(a)(3) suit and regardless of the terms of an ERISA plan, a court must apply any “equitable doctrines and defenses” that traditionally limited the relief requested. The Third Circuit held that “the principle of unjust enrichment,” for example, overrides a plan’s reimbursement clause if and when they come into conflict. The court also held that the plan was required to share in the participant’s attorney’s fees and costs under the common fund doctrine.

The U.S. Supreme Court held that equitable defenses cannot override the clear terms of an ERISA plan. According to the Court, attempting to enforce the employer’s plan— “the modern-day equivalent of an ‘equitable lien by agreement’”—“means holding the parties to their mutual promises” and “declining to apply rules…at odds with the parties’ expressed commitments.” Because the health plan effectively disclaimed the application of unjust enrichment or other equitable defenses, the Court ruled that the participant could not rely on equitable defenses to defeat “the plan’s clear terms” and thereby reduce the plan’s recovery. However, the Court went on to find that the health plan was silent on the issue of whether it was obligated to share in the attorney’s fees and costs incurred in obtaining the tort recovery. As a result of this silence, the Court held that the common fund doctrine would provide the default rule, requiring the plan to reduce its reimbursement recovery by a pro rata share of the fees and costs incurred in the tort action.

The McCutchen decision reinforces the importance of ERISA plan documents and the fact that plan terms override otherwise applicable equitable principles. It provides important guidance not only for those who litigate these types of cases, but also for those who draft the plans in the first place.

Categories: ERISA | Supreme Court

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Wednesday's United States Supreme Court opinion in Kiobel v. Royal Dutch Petroleum Co. et al., 569 U.S. ___ (2013), has confirmed that the Alien Tort Statute (ATS) has a limited scope and cannot open the doors of United States courts to lawsuits based on ordinary torts committed by companies outside the territorial confines of the United States. Although the Court did not meaningfully address the issue of corporate liability, its narrow holding all but guarantees that ATS will not become an issue in lawsuits against corporate clients in products cases.

At first blush, Kiobel does not appear to be the type of case that would interest product liability lawyers. It involved Nigerian nationals who had obtained asylum in the United States suing foreign corporations that has allegedly aided and abetted the government of Nigeria in committing abuses against its citizens including, among others, extrajudicial killings, crimes against humanity, and torture. It goes without saying that "crimes against humanity" are topics that are generally outside the pale of the average civil defense attorney's resume.

Representing clients in a global marketplace, however, often necessarily means representing clients who have potential exposure to liability abroad. Although your client may not be accused of crimes against humanity, the prospect of a German client with an American office being sued in America for building a product in Guatemala that injured someone in Japan is still daunting. Because ATS has a somewhat broad purpose: to permit federal courts to recognize "certain causes of action based on sufficiently definite norms of international law," 569 U.S. ___ (2013), it is conceivable that a clever plaintiffs' attorney would argue that principles of negligence or product liability were "sufficiently definite norms" of international law to warrant jurisdiction.

Whether that argument would be successful is doubtful. But the Second Circuit, whose opinion the Supreme Court reviewed, had a simple, comforting answer for corporate clients: ATS does not apply to corporations. The hypothetical Japanese plaintiff simply could not sue a corporate defendant in America to recover for her injuries. There would be no need to litigate if the lawsuit involved "sufficiently definite norms of international law."

Wednesday, the Supreme Court skirted the issue of corporate liability, but announced a rule that should provide a similar degree of certainty to corporate clients. Its decision did not turn on the corporate status of the defendant, but whether ATS applies extraterritorially. The Court concluded that it does not.

Writing for the majority, Chief Justice Roberts concluded that ATS was not intended to bring into the United States Courts claims involving torts committed against foreign subjects outside the territorial confines of the United States. The majority noted that, historically, ATS had been used only rarely since its 18th century enactment, and historically used only to address claims that a person had violated the law of nations: violating safe conduct, infringing on the rights of ambassadors, and piracy. Therefore, it held that to warrant jurisdiction under ATS, a plaintiff's claim must "touch and concern the territory of the United States . . . with sufficient force to displace the presumption against extraterritorial application."

No justice dissented from the majority opinion, and even the most critical concurrence—by Justice Breyer, joined by Justices Ginsburg, Sotomayor, and Kagan—tended to confirm that corporate clients will not, in the ordinary course of litigation, be faced with jurisdiction based on ATS. The concurrence advocated reading ATS as permitting jurisdiction over extraterritorial torts when "the defendant's conduct substantially and adversely affects an important American national interest," emphasizing the importance of the United States not becoming a safe harbor for "a torturer or other common enemy of mankind."

In short, although the "easy" ATS answer is now gone, the average corporate client has little to fear from ATS. Negligence and products liability—while serious allegations—are hardly the stuff from which allegations of being a "common enemy of mankind" are made.

William F. Auther is the managing partner of the Phoenix, Arizona office of Bowman and Brooke, LLP, where he has an active trial practice in product liability and business litigation. Amanda Heitz is an associate at Bowman and Brooke.

Categories: Corporate Counsel | Product Liability | Supreme Court

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As was reported yesterday the plaintiffs in the 2011 landmark class action case Dukes v. Wal-Mart haven't given up and are now attempting to pursue regional class cases in federal courts in California, Tennessee, Texas, Florida and Wisconsin. In an attempt to overcome the issues raised by the U.S. Supreme Court, counsel for the Wal-Mart plaintiffs contend the narrower, regional classes pass muster because they are geographically focused and allegedly identify specific store, district and regional practices that led to the alleged discriminatory practices. Counsel for Wal-Mart contends the plaintiffs' class certification motion merely "recycles" arguments previously rejected by the high court, noting the remaining differences between the individual plaintiffs in each of the proposed classes.

Do these new regional classes meet the standards announced in Dukes v. Wal-Mart? How have the plaintiffs overcome the conflicts present in the initial classe, such as including female managers and their female subordinates in the same class?

Categories: Class Actions | Employment/Labor Law

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In almost every case that crosses our desks these days, plaintiffs make an offer of settlement and set a time limit for acceptance, striking fear in the heart of my clients who then ask: will a court find that we acted in bad faith by refusing to settle within the time limit? The seminal case on this issue is Southern General Ins. Co. v. Holt, 262 Ga. 267, 416 S.E.2d 274 (1992). In Holt, the plaintiff’s attorney made a time-limited settlement offer for policy limits of $15,000. The plaintiff’s attorney advised the insurer the plaintiff’s medical bills totaled more than $10,000 and the lost wages exceeded $5,000. The letter included a doctor’s report indicating the plaintiff had a herniated disc, and included medical bills totaling over $6,000. The plaintiff’s attorney later sent proof of additional expenses of over $4,000. In a last letter to the insurer, the plaintiff’s attorney extended the offer to settle within policy limits for five additional days and included in the letter a certified copy of the plaintiff’s complete medical records. The insurer neither sought more time to evaluate the claim nor responded to the offer before it expired. The insurer offered to settle the case within limits only after the plaintiff’s attorney had withdrawn the offer. A jury returned a verdict in favor of the plaintiff for $82,000. The insured assigned to the plaintiff her claim against the insurer for negligent or bad faith refusal to settle within the policy limits. The plaintiff in this suit sought the excess of $67,000, plus interest.

In the affirming the judgment for the amount of excess, the Georgia Supreme Court first noted the insurer may be liable to its insured for failing to settle a claim “where the insurer is guilty of negligence, fraud, or bad faith.” 262 Ga. at 268. While reiterating the equal consideration rule, the Court further stated “[a]n insurance company does not act in bad faith solely because it fails to accept a settlement offer within the deadline set by the injured person’s attorney.” Id. at 269. The Court, however, rejected the insurer’s argument “that an insurance company has no duty to its insured to respond to a deadline to settle a claim within policy limits when the company has knowledge of clear liability and special damages exceeding the policy limits.” Id. (emphasis in the original). The Court found the insurer did more than simply fail to settle within the time frame set by the plaintiff’s attorney. The insurer had information, including medical bills and documented lost wages, which showed special damages alone, exceeded the limits of the insured’s policy. The insurer’s claims representative acknowledged he had the information, but he testified he needed medical documents to support it. The Court noted, however, that neither the claims representative nor the claims manager requested an extension of time to evaluate the plaintiff’s claim. Thus, there was some evidence for the jury to conclude the insurer did not give equal consideration to the interest of its insured.

The issues raised in Holt have percolated through Georgia courts for the past twenty years. Most recently, the Georgia Court of Appeals ruled that Plaintiff’s policy limit demand, without an agreement to assure satisfaction of hospital liens, constituted an excess demand. See Southern General Ins. Co. v. Wellstar Health Systems, Inc., 315 Ga. App. 26, 34 (2012). The Court noted that “had Southern General verified the validity of the liens, made payment directly to Wellstar, and then paid the remainder of its policy limits to Plaintiff, Southern General would have created a safe harbor from liability under Holt and its progeny.” Unfortunately, Southern General had not done so.

As those of us in the insurance defense business know, Holt demands have been abused by some in the plaintiffs' bar who attempt to extract large settlements by setting short time frames for responses to their demands. The General Assembly took note and last term considered HB 1175 which proposed giving insurers a minimum of 60 days to respond to offers of settlement before being subjected to a bad faith claim. Additionally, the Bill mandated that such offers include full and complete copies of the claimant’s relevant medical records. After various groups, including the plaintiffs' bar, made their “contributions” to the Bill, it became too unwieldy to come up for a full chamber vote.

The issue of Holt demands has resurfaced before the General Assembly in 2013 – with both sides of the bar coming together in an attempt to create a standardized practice for communicating settlement offers which provides the defense with all pertinent information as well as the time with which to provide a considered response. While they have fallen a bit shy of the goal, there is at last some light at the end of the tunnel.

A secret group (really) of plaintiffs’ and insurance defense lawyers appointed by the Speaker of the House recently negotiated House Bill 336, which would give insurers at least 30 days to respond to a settlement offer submitted prior to the filing of a lawsuit, before a bad faith claim could be brought. HB 336 would also require that all settlement demands include (1) the specific time period in which the demand must be accepted; (2) the amount of the demand; (3) the identification of all parties the claimant would release; (4) the type of release; and (5) the specific claims to be released. Significantly, HB 336’s application will be limited in its application to claims of personal injury or death arising out of the use of a motor vehicle. Finally, while HB 336 does not require plaintiffs to produce all of their related medical records with their initial demand, it does allow insurers to seek clarification regarding the facts of the case, liens, standing to release the claims, medical records and bills, without these requests constituting a counter-offer.

Those in the know anticipate that HB 336 will move through the House Judiciary Committee unscathed due to its “bipartisan” support. At least HB 336 is a step in the right direction.

This blog was originally posted on the Georgia Insurance Defense Lawyer Blog on February 26. Click here to read the original post.

Categories: Insurance Law | State Supreme Court

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Lance Armstrong is riding a new tour these days, but instead of fresh air and the beautiful landscapes of France, this tour will be inside offices (lawyers’ offices) and courtrooms. Yes, it is the Tour de Courts. Since his confession to doping in an interview with Oprah Winfrey, his legal problems have compiled dramatically.

One of the more public legal disputes is with SCA Promotions (SCA). SCA helps companies run promotions that involve large payouts – payouts that these companies would otherwise not be able to offer. For example, suppose a company sponsors a “half-court shot” during a local college game. A contestant is selected to make the shot. If that contestant makes the basket, he or she wins $250,000. The sponsoring company will pay a percentage of the total prize offering to SCA. If the basket is made, SCA pays the $250,000. It’s an insurance of sorts with the fees acting as a kind of premium.

SCA entered into one of these contracts Lance Armstrong. SCA would pay millions including bonuses if Armstrong won multiple Tours de France. SCA is no stranger to the issue of doping and Lance Armstrong – which is what this current litigation is all about. SCA paid the winnings but withheld his bonuses originally amidst early allegations of doping. However, in the end, a $7.5 million settlement ultimately resolved that dispute. Now that Armstrong has confessed to doping, SCA wants their money back and took Armstrong to court to get it.

Armstrong counters that the original settlement agreement contained a “Will Not Challenge Under Any Circumstances” clause and has filed papers with the court seeking dismissal of SCA’s lawsuit. SCA counters that Armstrong lied during the original dispute and that Armstrong perpetuated fraud in negotiating the original settlement.

This is but one stop on the Tour de Courts for Armstrong and, though one of the most public, not the most serious. Amongst the agencies suing Armstrong is the Department of Justice who accuses him of defrauding the U.S. government (the U.S. Postal Service was a big sponsor).

This upcoming tour will make the mountains classification of the Tour de France seem easy. However, in this tour, there are no additional points for getting to the top first.

*This blog was originally published on April 11 on the Sports and Entertainment Law Insider. Read the original post here.

Categories: Drug and Device Law | Marketing | Media

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On March 27, 2013, a jury in federal district court in Bridgeport, Connecticut awarded Cara Munn, a 20-year-old woman who formerly attended the Hotchkiss School in Lakeville, Connecticut, $41,750,000 in a case styled Orson D. Munn III et al. v. The Hotchkiss School, No. 3:09cv0919 (SRU). The case raises important issues concerning "duty" and "assumption of risk."

The jury determined that Hotchkiss, a prestigious prep school, was negligent for two reasons: (1) in failing to warn plaintiff before or during a school sponsored trip to China during the summer of 2007 about the risk of insect-borne illness on the trip; and (2) in failing to ensure that plaintiff used protective measures to prevent infection by an insect-borne disease while visiting Mt. Pan in China.

In an article appearing in the Connecticut Law Tribune (Vol. 39, No. 13), titled "Tick Bite Leads To Big Verdict," it was reported that the school was faulted specifically for not warning plaintiff (and her parents) that she would be traveling in mountainous and forested terrain. As a result, the jury determined that the plaintiff was not aware that she had to protect herself from insects by wearing bug repellent, long sleeve shirts and trousers, and by avoiding brushy undergrowth.

According to Plaintiffs' Amended Complaint, Ms. Munn's parents had Cara flown back to the United States in July '07, where she was hospitalized for several weeks at Weill Cornell Medical Center in the pediatric ICU and later at the Rusk Institute for extensive rehab. As a result of her severe encephalitis, plaintiff suffered severe neurological and motor injuries, including permanent loss of speech.

The case, which will almost certainly be appealed, raises significant issues concerning duty and the assumption of personal responsibility by parents who agree to have their child travel abroad for educational purposes. Apart from the obvious differences in food, culture and living conditions, traveling abroad carries many potential risks, some of which are foreseeable and some of which are not. Stepping back from the facts presented by this particularly tragic case, should a high school be held responsible for failing to prevent a student from being bitten by a tick in China? What if the tick had bitten her during a field trip to Central Park?

Assuming that the Second Circuit upholds this verdict, what does this case portend for high schools and colleges that plan educational trips abroad? Is there some bright line test that would provide guidance to a school evaluating the safety concerns of its students? Short of wrapping all of their students in cocoons and keeping them closely monitored in classroom settings, how can any school protect against the kind of unforeseen liability presented by this case?

Hotchkiss' Answer to Plaintiffs' Amended Complaint states that plaintiffs' claims should be barred by the doctrine of assumption of risk. The school argues that plaintiffs voluntarily assumed the risk of travel to China as evidenced by their execution of the pre-trip Agreement, Waiver, and Release of Liability. In this agreement, plaintiffs agreed that Hotchkiss "would not be responsible for any injury to person or property caused by anything other than its sole negligence or willful misconduct" (emphasis added). Would legal weight did the court give to this release?

Based upon the Verdict Form presented to the jury, it would appear that the trial court gave short shrift to the language in the release. The jury was asked the following questions: (1) Was one or more of Hotchkiss' negligent acts or omissions a cause-in-fact of Cara Munn's injuries; and (2) Was one or more of Hotchkiss' negligent acts or omissions a substantial factor, that acting alone or in conjunction with other factors, brought about Cara's injuries?

Those inquiries are a lot different from asking whether the jury finds that Hotchkiss' "sole negligence or willful misconduct" caused the injuries. Although the jury determined that plaintiff did not contribute to any degree whatsoever in causing her injuries, it was not asked to consider whether other intervening factors played any role in causing Cara's injuries.

There are circumstances when a school can and should be held responsible when things go wrong on a school outing. Three examples come quickly to mind: (1) sending kids into a war zone despite State Department warnings; (2) sending kids abroad into an epidemic earlier identified by the CDC; or (3) taking non-swimmers for an ocean swim outing without proper supervision.

How is Munn different from these scenarios? Is a random bug bite as foreseeable, if at all, as the kinds of risks discussed in the three scenarios above? According to Hotchkiss' summary judgment memorandum, the CDC reported that plaintiff was the first U.S. traveler ever to have reported TBE after traveling in China. Moreover, no U.S. traveler since plaintiff has developed the disease. Therefore, how unreasonable was it for Hotchkiss not to take precautions against a risk of harm that arguably had such a slight likelihood of taking place? Shouldn't plaintiffs have had to prove that the defendant was on prior notice of the existence of circumstances that could give rise to an injury?

Plaintiffs' expert, Peter Tarlow once led a group of children, including his own son, on a tour of Israel. If a child on that Israel tour had been unexpectedly assaulted by someone holding anti-Zionist views, would Dr. Tarlow expect to be held responsible for any resultant injury because he was "on notice" of decades of endemic unrest in the region?

Two strong CT trial lawyers squared off against each for this eight day trial--for the plaintiffs, Antonio Ponvert of Koskoff, Koskoff & Bieder, one of the New England plaintiff bar's preeminent firms, and for the defendant, Penny Q. Seaman of Wiggin & Dana, one of Connecticut's oldest and most accomplished firms. The bar should expect to see excellent post-trial briefing as events unfold.

*This was originally posted on April 5 on Toxic Tort Litigation Blog. Read the current post here.

Categories: Law Suit | Medical Liability | Toxic Tort

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In a decision made public on April 8, 2013, the United States District Court, for the Northern District of California, effectively put an end to fracking in the Monterey Shale Formation, for the time being, with its opinion in Center for Biological Diversity and Sierra Club v. The Bureau of Land Management and Ken Salzar, Secretary of the Department of the Interior, Case No. 11-6174 PSG. Although the Court made clear that the policy question of whether fracking is a good thing or a bad thing is outside the Court’s bailiwick, it is apparent from the Court’s decision that fracking may continue to be subject to intense judicial scrutiny.

In this case, the plaintiffs challenged the decision of the Bureau of Land Management (“BLM”) and Interior Secretary Ken Salazar’s sale of four oil and gas leases for approximately 2,700 acres of federal land in Monterey and Fresno counties, in California. The Plaintiffs argued that the leases were sold in violation of the National Environmental Policy Act (“NEPA”) and the Mineral Leasing Act of 1920 (“MLA”). The Court found that the lease terms did not violate the MLA, but that the leases were issued in violation of NEPA.

In 2006, BLM prepared a Proposed Resource Management Plan/Final Environmental Impact Statement (“PRMP/FEIS”) which outlined a plan for managing approximately 274,000 acres of land, and 588,197 acres of split estate (surface rights owned by private owners/subsurface mineral rights owned by the United States), including the leased area at issue in this case which lies in the Monterey Shale Formation. This Shale is estimated to contain over 15 billion barrels of oil, or 64 percent of the nation’s total shale oil reserve. The PRMP/FEIS included a Reasonably Foreseeable Development Scenario for Oil and Gas (“RFD”) which projected that no more than 10 development wells would be drilled over the next 15 to 20 years across the entire development area. The PRMP/EIS also addressed the potential impacts of oil and gas development on specific endangered animal species. The report was published and adopted by the BLM in its Record Division (“ROD”), which subsequently established stipulations and conditions to protect endangered species, as well as water and air quality.

In April 2011, BLM proposed an oil and gas lease sale for approximately 2,700 acres and issued a draft Environmental Assessment (“EA”). During the comment period, BLM received many comments related to the potential effects of fracking; however, BLM stated that “these issues are outside the scope of this EA because they are not under the authority or within jurisdiction of the BLM.” This comment would later become important to the Court’s analysis.

In June 2011, BLM issued its final EA, which discussed environmental issues, and evaluated the environmental impacts of three alternatives: 1) a competitive oil and gas lease sale for 2,605 acres of federal mineral estate, including 360 acres of split estate; 2) a competitive lease sale of 6,401 acres of federal minerals for sale, which would include the acreage from alternative number one, plus an additional 3,796 acres of split-estate federal minerals; 3) no proposed sale of the federal mineral estate. Importantly, the EA also evaluated and projected the extent of drilling activity to be conducted and its impacts. Using the 2006 projection in the PRMP/FEIS, and considering the fact that no wells had been drilled on the subject property in the five years since the issuance of the RFD, the BLM projected that no more than one exploratory well would be drilled on the land within the leases. The BLM reserved its analysis of the impacts of fracking until applications for permits to drill were submitted, as it determined that analyzing site-specific impacts would be more feasible. Also important for the Court’s analysis, the EA noted that a discussion of fracking was “not relevant to the analysis of impacts…because the reasonable foreseeable development scenario anticipates very little (if any) disturbance to human environment.”

On June 16, 2011, BLM’s Acting California State Director executed a Finding of No Significant Impact (“FONSI”). Following this, the BLM issued its final Decision Record documenting the decision to offer for oil and gas lease auction eight parcels encompassing the 2,703 acres of federal mineral estate. The Decision Record stated that a NEPA review would be conducted at the well permitting application stage.

Plaintiffs, and others, protested the lease sale; however, the lease sale went forward. In September, 2011 BLM successfully auctioned leases in three parcels, and a fourth parcel was sold “over the counter.” All four leases were subject to standard stipulations as well as three Special Stipulations. All four leases included Special Stipulation No. 1 (Endangered Species Stipulation) and Special Stipulation No. 2 (Cultural Resource Stipulation). Two parcels contain Special Stipulation No. 3, which is a No Surface Occupancy (“NSO”) stipulation. The other two parcels did not contain this stipulation.

Plaintiffs were successful with their challenge under NEPA, with the Court finding that BLM did not meet its obligations under NEPA. NEPA requires federal agencies to take a “hard look” at “every significant aspect of the environmental impact of a proposed action.” It also requires an agency to inform the public that it has considered environmental impacts, and requires agencies to prepare an Environmental Impact Statement (“EIS”) for all proposed federal actions which will “significantly affect the quality of the human environment.” The Ninth Circuit case of Conner v. Burford, 848 F.2d 1441 (9th Cir. 1988) was instructive for the Court. Conner requires an EIS to include a statement of “any irreversible and irretrievable commitments of resources which would be involved in the proposed action should it be implemented.” Relying on Conner, the Court found in the instant case that the two leases categorized as NSO leases, contain a provision preventing any surface-disturbing activities, and, under Conner, did not result in an “irretrievable commitment of resources” Therefore, there was no obligation for BLM to conduct a NEPA analysis at the time of the lease sale for the NSO leases. The other two parcels do not contain NSO provisions. Without NSO provisions, the government does not have the absolute ability to prohibit potentially significant impact on the surface environment, and cannot unilaterally deny drilling rights on the non-NSO leases. As a result, the Court found that BLM was required to conduct a thorough NEPA analysis to determine whether the sale would have a substantial environmental impact.

The Court also found that BLM’s conclusion that the leases would have no “significant environmental impact” was unreasonable. In order to avoid issuing an EIS, a FONSI must contain a statement of reasons as to why the project’s impacts are insignificant. An agency must consider both the context of the action and the intensity of the action. The Court took great fault with BLM’s projection that only one well would be drilled across the four parcels to be leased. The Court found that this projection failed to take into account all “reasonably foreseeable” possibilities, as required by NEPA. Furthermore, the Court was incensed by BLM’s assertion that the issue of environmental impact of fracking was outside of BLM’s jurisdiction. “…if not within BLM’s jurisdiction, then whose?” The Court went through a recitation of facts related to the increase in fracking nationwide, and the fact that the 2006 PRMP/FEIS did not address potential concerns related to fracking that have since come to light.

The Court further found that BLM’s assessment of intensity factors in its FONSI was distorted. First, BLM erroneously held that the leases were not highly controversial. Second, BLM erroneously analyzed the potential effect of the leases on public health and safety. Third, BLM discounted the uncertainty of fracking that could have been addressed in an EIS.

The Court declined the Plaintiff’s request to invalidate the lease sale, and instead is requiring the parties to meet and confer and submit an appropriate judgment by April 15, 2013.

Producers may take solace in the fact that the Court did not tackle the policy issues associated with fracking, and instead based this ruling on BLM’s failure to comply with appropriate procedure; however, the Court did spend time making note of the controversial nature of fracking, the studies by the U.S. House and EPA which take notice of potential contamination risks, and opined that the “…potential risk for contamination from fracking, while unknown, is not so remote or speculative to be completely ignored.” Therefore, if this case is any indication of future judicial review, fracking will continue to be closely scrutinized.

Categories: Environmental Law

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The Connecticut Supreme Court is presently considering whether claims for breach of contract against a contractor for failing to properly construct a building may constitute an “occurrence” under a commercial general liability policy. At issue in Capstone Development Corp. v. American Motorists Ins. Co., No. SC 18886 are various questions certified from a federal district court in Alabama concerning the availability of insurance coverage for defects in the construction of buildings an the University of Connecticut.

Meanwhile, the U.S. Court of Appeals for the Second Circuit has issued a new ruling calling into question an earlier precedent that insurers have relied on in disputing such claims. In Scottsdale Ins. Co. v. R.I. Pools, Inc., No. 11-3529 (2d Cir. March 21, 2013), the Second Circuit reversed a Connecticut District Court’s declaration that a liability insurer did not owe coverage for claims brought against its insured by purchasers of swimming pools for damage the purchasers sustained when cracks developed in their pools.

The District Court had ruled in Scottsdale Ins. Co. v. R.I. Pools, Inc., No. 09-1319 (D. Conn. August 15, 2011) that the insurer had no duty either to indemnify or defend the insured, and was furthermore entitled to the return of funds it had previously expended in the defense of the insured. On appeal, however, the Court of Appeals recently ruled that the District Court had erroneously relied on a distinguishable Second Circuit precedent and therefore remanded the matter for further proceedings in the District Court.

The District Court had relied on Jakobson Shipyard, Inc. v. Aetna Cas. & Sur. Co., 961 9 F.2d 387 (2d Cir. 1992) in finding that the cracking of the concrete resulting from defects in the insured’s work could not constitute an “accident” or “occurrence.” The Second Circuit found, however, that there was a crucial difference between the CGL policy that Scottsdale had issued to R.I. Pools and the Aetna policy as issue in Jakobson. In this case, the Scottsdale “your work” exclusion contained an “exclusion [from coverage] does not apply if the damaged work . . . was performed on [the insured’s] behalf by a sub-contractor.” The court noted:

Whereas Jakobson held that the insured's faulty workmanship could not be a covered occurrence under the policy, the present policies expressly provide that in some circumstances the insured's own work is covered. As coverage is limited by the policy to “occurrences” and defects in the insured's own work in some circumstances are covered, these policies, unlike the Jakobson policy, unmistakably include defects in the insured's own work within the category of an “occurrence.”

While therefore remanding the case for further findings as to whether the underlying claims fell within the sub-contractor exception, the Second Circuit held that there was a duty to defend up until the point at which it is legally determined that there is no possibility for coverage under the policies and that Scottsdale therefore had no right to recoup the defense costs up until then.

Categories: Construction Law | State Law

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