A lawyer has an ever evolving duty to safeguard confidential client information. We don’t just lock our doors and keep our voices down—we encrypt our files, we scrub our metadata—and now, we tackle the issue of how we safeguard our communications with foreign clients. 

The 2008 amendments to the Foreign Intelligence Surveillance Act permit the Director of National Intelligence and the Attorney General to jointly authorize warrantless electronic surveillance, for one-year periods, targeted at a foreigner who is abroad. There is limited, if any, protection for foreigners engaged in communications with American attorneys. Communications that American lawyers take for granted—our phone calls and e-mails with client—may be subject to interception when they involve a foreign client. 

The Edward Snowden scandal brought apparent legitimacy to this previously hypothetical concern. The documents already “disclosed” through the Snowden affair reveal N.S.A. actions in the foreign monitoring of communications between an American Law Firm and its foreign client. As explained in a recent New York Times Article, Spying by N.S.A. Ally Entangled U.S. Law Firm by James Risen and Laura Poitras, the Snowden documents reveal that the American firm was monitored while representing a foreign government in a trade dispute with the United States. Although the surveillance was conducted by the government of Australia, the documents demonstrate apparent acquiescence, approval, and use by the United States government - notwithstanding the very trade dispute at issue. 

If you think the Supreme Court would not stand for this, it appears five justices might disagree. When the ACLU challenged the 2008 amendments in Clapper v. Amnesty International, lawyers raised the concern that their communications would be targeted and intercepted as part of the Act. The Court dismissed these concerns as “speculative,” and declined to provide protection.  It is unclear whether that position would remain the same in this post-Snowden era. Nevertheless, the best way to safeguard foreign client information may be the oldest: face-to-face. On the bright side, if your client is in a tropical paradise, perhaps you finally have that excuse to expense your long awaited client visit. 

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On Friday, the Supreme Court announced that it granted certiorari and will hear Limelight Networks, Inc.’s appeal from the Federal Circuit’s fractured en banc decision in Akamai Technologies, Inc. v. Limelight Networks, Inc. (U.S. Supreme Court Case No. 12-786, Federal Circuit Case No. 2009-1372)

Akamai sued Limelight, alleging that it directly infringed and induced others to infringe its patented method for more efficiently delivering content on the internet by placing content elements on replicated servers and modifying a web page to retrieve certain information from those replicated servers, as opposed to the original servers. Limelight maintained a network of servers that replicated content providers’ web pages, but Limelight did not modify the web pages. Instead, it provided instructions for the content providers to do so themselves.

So, the key issue in the Limelight case involves whether a defendant may be held liable for patent infringement if it performed only some of the steps of a claimed method in a patent, another independent party (or parties) performed the remaining steps, and no single individual performed all of the steps. These joint infringement issues have created enforcement issues for patentees in the past, especially where the claims of the patent are written in such a way that more than one party will likely perform the steps in the claim.

It is important to note that the case did not involve the situation where a defendant contracts with or controls the actions of the other individual. The Federal Circuit has long recognized (and continues to recognize) that in those circumstances, the actions of the controlled party are imputed to the controlling party, and the controlling party is liable for direct infringement. Instead, the question presented in Limelight is whether there can be infringement when two independent parties together perform all of the steps in a method claim.

Under prior Federal Circuit precedent, there could not be infringement of a method claim unless a single entity performed all of steps in the claim, either directly or through its control of all the parties performing the steps. This sometimes led to situations where a patentee was left with no recourse when multiple, independent parties performed the steps of the claim. This was the circumstance in Limelight, and the district court entered JMOL in favor of Limelight because no single entity performed all of the steps in the claim.

In a 6-4-1 en banc decision, the Federal Circuit radically disagreed as to what the law should be in these circumstances. The majority (in a per curiam decision), chose to recast the question from one of whether there can be direct infringement when multiple, independent parties perform the steps in the claim to whether there can be liability for induced infringement in these circumstances. First, the majority found that infringement occurs whenever all of the steps are performed, even if there is no direct infringement because no single entity performed all the steps. It then concluded that if one party (the inducer) causes, urges, encourages, or aids another such that this infringement occurs, that party could be liable for inducing infringement. The majority did note that induced infringement is not a strict liability offense, like direct infringement is. Instead, to be liable, a patentee must show that the inducer knew of the patent, that it induced another to perform some (or all) of the steps, and that all of the steps were ultimately performed by either itself or the induced party.

Judge Linn, in a dissent joined by three other judges, strongly disagreed with the majority’s analysis and its decision to recast the question originally presented to the en banc panel. It believed that the prior Supreme Court and Federal Circuit case law correctly required that a single party perform all of the steps in a method claim for there to be infringement and that the majority’s decision was improper policy making. In particular, the dissent noted that this approach has been the law for a long time and that Congress has had numerous opportunities to fix any “mistakes” by the courts, but has chosen not to. In particular, the dissent noted that Congress expanded what constitutes patent infringement on other occasions to address ANDA applications and extra-territorial infringement, without changing the law of joint infringement.

Finally, Judge Newman, writing only for herself, took an entirely different approach and advocated abolishing the single-entity rule entirely. She would hold that all parties involved in performing any of the steps in a method claim could be liable as direct infringers.

Having lost at the Federal Circuit, Limelight petitioned for a writ a certiorari, which the Supreme Court granted. The Supreme Court invited the US Solicitor General to file an amicus brief before deciding whether to grant the writ. The Solicit General sided with Limelight, urging that the Supreme Court reverse the Federal Circuit and affirm the prior approach, as advocated in Judge Linn’s dissent.

Joint infringement can be a difficult problem for patentees, especially when they have written their claims in a way that requires or allows multiple parties to perform the steps in a method claim. The Federal Circuit’s complete change in direction has the potential to create greatly expanded liability for defendants, so the Supreme Court’s decision potentially will have broad implications for both patentees and defendants. 

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On August 21st, the U.S. Court of Appeals for the Ninth Circuit in Richards v. Ernst and Young held that an employer’s arbitration agreement could be enforced, despite any limitation on joint or class actions.

The decision came after defendant; Ernst & Young LLP appealed the district court’s decision denying its motion to compel arbitration of state wage and hour claims brought by its former employee, Michelle Richards. The district court ruled that the defendant had waived its right to arbitration by failing to raise the agreement as a defense early in litigation. However, plaintiff Richards’ action was consolidated with other former employees’ claims at a later date.

In reversing the district court’s decision, the Court of Appeals noted that waiver of a contractual right to arbitration is not favored. Therefore, any party arguing waiver of the right has a heavy burden of proof which includes demonstrating: (1) knowledge of an existing right to compel arbitration; (2) acts inconsistent with that right; and (3) prejudice to the party opposing arbitration resulting from the inconsistent acts.

The plaintiff argued prejudice as a result of the defendant’s failure to compel arbitration at an earlier date, after she had already provided pretrial information and incurred expenses. However, the Court of Appeals ruled this was insufficient prejudice. Plaintiff further argued she was prejudiced as there were meritorious arguments and as a result of compelling arbitration, some of her claims were dismissed. However, the Court noted that one of her claims was dismissed without prejudice, which did not constitute a decision on the merits. Furthermore, another of her claims was resolved when it was determined that she lacked standing to bring the claim- a decision that precedes and does not involve any analysis of the merits.

Last of all, the plaintiff argued that the Court should follow a decision of the National Labor Relations Board (NLRB) in D.R. Horton, 357 N.L.R.B. No. 184, 2012 WL36274 (Jan. 3, 2012) in which it was held that an arbitration agreement that did not allow employees to file joint, class, of collective employment related claims was invalid. The Court of Appeals declined to entertain the argument, as it was not properly raised before the district court for argument. However, it more importantly noted that it, as well as a majority of courts, have declined to follow the NLRB’s decision because it conflict with explicit pronouncements of the U.S. Supreme Court and the Federal Arbitration Act (FAA) 9 U.S.C. §§ 1–16. It specifically noted that the U.S. Supreme Court recently reiterated the importance of courts enforcing arbitration agreements, including those whose subject matter involves claims of federal law violations.

This case is important for employers, who may be able to limit their exposure to class actions by utilizing mandatory arbitration agreements such as the one in this case. Employers should be careful to understand the benefits of litigation versus arbitration and seek advice from an experienced attorney regarding the use of such an agreement in its employment contracts.

This blog was originally posted on September 19 on the Jampol Zimet website. Click here to read the original entry. 


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The U.S. Supreme Court’s decision in Mutual Pharmaceutical Co., Inc. v. Bartlett, No. 12-142, decided June 24, 2013, may assist defense counsel in defending product liability cases involving FIFRA-regulated products such as herbicides and pesticides. Although Bartlett involved design defect claims against manufacturers of generic drugs, which are regulated by FDA, the principles enunciated in Bartlett potentially have much greater application.

In Bartlett, the court held that the Federal Food, Drug and Cosmetic Act preempts state-law design defect claims against manufacturers of generic drugs. The court rejected outright plaintiff’s contention that under the so-called “stop-selling” theory, a generic manufacturer could comply with both federal and state law merely by removing its drug from the market.

In rejecting that argument, Justice Samuel Alito, writing for the majority, held that “the incoherence of the stop-selling theory becomes plain when viewed through the lens of our previous cases. In every instance in which the court has found impossibility pre-emption, the ‘direct conflict’ between federal and state law duties could easily have been avoided if the regulated actor had simply ceased acting.”

Thus, in reversing the First Circuit decision, the court slammed the door on plaintiffs hoping to circumvent the preemption defense by contending that a manufacturer might merely stop selling the product.

In an article in Law360 titled, “Bartlett’s Benefits Will Extend Beyond Generic Drug Makers,” 6/28/13, commentators offer the view that pesticide manufacturers may now be protected from plaintiff alleging a stop-selling theory of liability.  If the case’s holding is so extended, plaintiffs should no longer be able to allege that an herbicide manufacturer should not have placed a pesticide into commerce in the first instance. In essence, this is a variation of the often espoused argument that a product should not be marketed because its risks outweigh any potential benefits.  After all, the whole point of federal regulation is the underlying assumption you are going to market the product. 

This blog was originally posted on July 2 by William A. Ruskin on Toxic Tort Litigation blog. Click here to see the original post. 


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Today, the United States Supreme Court unanimously ruled in Association for Molecular Pathology v. Myriad Genetics, Inc., No. 12-398, that a naturally-occurring DNA segment (or gene) is not patent eligible even if it has been isolated from a genome (reversing the Federal Circuit). The Court also ruled that cDNA (complementary DNA) is patent eligible because it is not naturally occurring (affirming the Federal Circuit). Justice Thomas wrote the opinion for the unanimous Court, and Justice Scalia wrote a short concurrence. We have been following this case for some time (see here, here, and here).

The Court began by restating its position that laws of nature, natural phenomena, and abstract ideas are not patentable subject matter under 35 U.S.C. § 101. The question for the Court was whether Myriad’s patents claimed any new and useful composition of matter.

To answer this question, the Court looked at what Myriad claimed. With respect to the DNA claims, Myriad claimed the DNA segment it found in nature, and it did not change or alter any of the genetic information in that segment. Because it claimed something naturally found in nature, it was not patent eligible subject matter.

With respect to the cDNA claims, the Court reached a different result. The cDNA is not found in nature, but is created in the laboratory. This key difference meant that it was patent eligible subject matter. The Court did not address whether these claims met the other requirements of the patent statute, such as §§ 102, 103, and 112.

The Court was also very clear on what it was not deciding in this case. There were no method claims at issue, such as an innovative method for manipulating genes. Similarly, there were no  claims directed to how this new knowledge might be applied to achieve some useful result. The Court suggested (without holding) that those types of claims would be patent eligible. Finally, it noted that the claims were not directed to naturally occurring genetic code that had been altered to create some new and not natural DNA. The Court refused to suggest how it might address claims like those.

In the end, the Court stated that “[w]e merely hold that genes and the information they encode are not patent eligible under § 101 simply because they have been isolated from the surrounding genetic material.”

This blog was originally posted by Robert Wagner on June 13 on the PIT IP Tech Blog, An Intellectual Property and Technology Law Blog from the Pittsburgh Law Firm of Picadio Sneath Miller & Norton, P.C. Click here to see the original post. 


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With the DC Circuit having invalidated President Obama’s recess appointments to the National Labor Relations Board, employers are finding increasingly more ways to challenge the Board’s authority to act.

The Court’s decision in Noel Canning v. NLRB held that the recess appointment of three Board members in 2012 were unconstitutional. Consequently, the Court held, the Board had no authority to decide pending cases because it lacked a quorum. Nearly 1600 published and unpublished Board decisions were declared void as a result.

Employers immediately used the case to challenge the Board’s decisions, including controversial decisions widely perceived as expanding the Board’s historical authority.  As Thomson Reuters reports, employers now are using Noel Canning to challenge the authority of the Board’s regional representatives and administrative law judges, and its ability to issue subpoenas, hold hearings, and preside over union elections.

The Board, for its part, maintains that it has authority to continue operating as usual.

The Supreme Court ultimately will decide the validity of the President’s recess appointments and the numerous decisions flowing from those appointments.

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In a unanimous decision, the Supreme Court affirmed both the lower court and Federal Circuit decisions rejecting Bowman’s patent exhaustion defense relating to his harvesting of second generation soybean seeds featuring Monsanto’s patented genetic trait.

Monsanto invented and patented a genetic alteration that allows soybean seeds to survive exposure to a certain herbicide.  Monsanto sold its patented seeds to farmers, subject to a licensing agreement that only allows farmers to plant the seed for a single growing season.  Thereafter, farmers have to purchase the patented seeds anew each year for planting.  While farmers may sell the crop for consumption or processing, they are not allowed to save any of the harvested soybeans for replanting.

Bowman, a farmer, purchased seeds from an authorized Monsanto affiliate, subject to the aforementioned license for his primary soybean crop.  However, in order to save money on a later season crop, Bowman purchased soybeans intended for consumption or processing from a grain elevator and replanted them, in the hopes that some contained the genetic trait of Monsanto’s patented seeds.  After spraying the late season crop with the herbicide, some of the seeds survived, confirming Bowman’s suspicions.  Bowman then harvested this second crop and replanted the resulting seeds with Monsanto’s patented genetic trait for eight subsequent late season plantings.  Monsanto sued Bowman for patent infringement.

Bowman raised the defense of patent exhaustion, arguing that the prior authorized sale of the soybeans from a farmer to the grain elevator exhausted Monsanto’s patent rights to control what Bowman did with the soybeans and their seeds thereafter.  The Federal Circuit, however, rejected this argument, holding that he had “created a newly infringing article” by replanting the progeny of Monsanto’s genetically altered seeds. 

On appeal, the Supreme Court affirmed, holding that “the exhaustion doctrine does not enable Bowman to make additional patented soybeans without Monsanto’s permission.”  The Court confirmed its prior holding in Quanta Computer, Inc. v. LG Electronics, Inc., 553 U.S. 617, 625 (2008) that under the doctrine, “the initial authorized sale of a patented item terminates all patent rights to that item,” and reiterated that “the exhaustion doctrine is limited to the ‘particular item’ sold.” 

The Court also rejected Bowman’s arguments that he was only doing what farmers have done with seeds for years and that the soybeans’ natural ability to self-replicate or “sprout,” like any other seed, is what “made” the additional soybean replicas – not Bowman.  The Court held that Bowman’s actions in planting the seeds, spraying them with herbicide, and thereafter repeatedly harvesting them exerted control of the reproduction, constituting infringement.

Finally, the Court noted that its decision in this case is limited to the facts at hand, leaving open any further questions regarding the applicability of patent exhaustion to other self-replicating technologies. 

FORGET EXHAUSTION, ARE SELF-REPLICATING TECHNOLOGIES SUBJECT TO SECTION 101 SCRUTINY?

With the recent uncertainty over Section 101 patent eligibility requirements, one might ponder the interplay between Section 101 and self-replicating technologies. This is especially true considering last Friday’s, evenly-split Federal Circuit decision affirming that certain system, method, and media claims directed to computer software for minimizing risk in financial trades were patent ineligible (see CLS Bank International v. Alice Corporation Pty. Ltd., 2011-1301 (Fed. Cir., May 10, 2013).  But at the risk of causing even more tension over the issue, consider whether the progeny of Monsanto’s seeds should be susceptible to a Section 101 challenge. 

Specifically, should the “natural law” exception to patent eligible subject matter apply to any progeny seed carrying Monsanto’s genetic trait?  See e.g. Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289 (2012) (holding that claims directed to a method for measuring the dosage of medication in patients fell under “natural law” and were thus patent ineligible).  In theory, Monsanto’s invention altering the genetics of the seed should be limited to just that – the alteration and subsequent first production of that very seed altered by humans.  Thereafter, the seed’s ability to self-replicate is a natural occurrence – the seed now exists in nature, forever able to replicate with all its genetic traits without further human alteration/intervention (think Bowman’s sprout argument) – a replication process that normally no one would argue is patentable.

The Court’s decision in Monsanto, however, seems to put to rest any such possibility, dismissing Bowman’s attempt to raise the issue as an unsuccessful “blame the seed” argument.  The Court further acknowledged the importance of incentivizing innovation in the field by protecting such technology.  Nevertheless, others inventing self-replicating technologies should be cognizant of the Court’s statement limiting its decision to the specific facts presented in Monsanto (though only related to the issue of exhaustion) in light of the apparent expansion of Section 101 applicability.

In the meantime, perhaps Monsanto will consider inventing seeds that do not self-replicate in such a manner (seedless grapes, anyone?). 

PATENT EXHAUSTION, GOING FORWARD

The Supreme Court’s recent decisions regarding intellectual property exhaustion, including Monsanto and an unrelated copyright case, shed light on the Court’s March 25, 2013 denial of a petition for certiorari requesting the Court address the extraterritorial reach of the patent exhaustion doctrine. 

In Ninestar Tech. Co. Ltd. v. ITC, 667 F.3d 1373 (Fed. Cir. 2012), cert. denied 133 S.Ct. 1656 (2013), alleged infringer Ninestar purchased used/spent Epson ink cartridges in China, refilled them with ink, and then shipped them to the U.S. for resale.  The ITC found Ninestar’s practice to be infringing upon Epson’s patents relating to the ink cartridges.

On appeal to the Federal Circuit, Ninestar asserted the defense of patent exhaustion, arguing that its purchase of the cartridges, even if overseas, exhausted Epson’s U.S. patent rights.  The Federal Circuit, however, rejected the defense, applying Federal Circuit precedent that patent exhaustion does not apply to foreign sales of patented goods.  Ninestar petitioned the high court seeking reversal and an expansion of the patent exhaustion doctrine extraterritorially. 

While awaiting a decision on Ninestar’s petition, however, the Supreme Court issued a decision explicitly expanding the doctrine of first sale/exhaustion with respect to copyrights outside U.S. boundaries in Kirtsaeng v. John Wiley & Sons, Inc., 133 S.Ct. 1351 (2013).  Kirtsaeng, a foreign student studying in the U.S., arranged for family members in Thailand to purchase English-language textbooks and ship them to him in the U.S. for resale.  The foreign printed textbooks were much cheaper, and Kirtsaeng’s sale of the books at U.S. prices resulted in profit.  The publisher of the books sued, asserting copyright infringement.

On appeal, Kirtsaeng successfully relied on the first sale doctrine, arguing that his family members’ authorized purchases of the textbooks exhausted any U.S. copyright restriction on their resale, use, and other enjoyment of the books.  Agreeing with Kirtsaeng, the Supreme Court explicitly held that neither Congress nor the common law expressed any intent that the first sale doctrine should not apply to foreign sales of copyrighted works.

Based on Kirtsaeng, many believed the Supreme Court might grant Ninestar’s petition to address the similar issue of whether patent exhaustion applies to sales or purchases made outside the U.S., or that the Court might at least remand the case in light of Kirstaeng.  But a mere six days after the release of its decision in Kirtsaeng, the Supreme Court denied Ninestar’s petition outright.

Comparing the facts in Ninestar to Monsanto and Kirtsaeng, however, perhaps the Court was hinting that patent exhaustion was not the correct issue presented.  Specifically, Ninestar’s purchase of the spent Epson cartridges and subsequent refilling of those cartridges before resale likely removed the products from any protection under the patent exhaustion or first sale doctrines.  The refurbished cartridges were thus no longer the “particular item” (see above discussion) sold by Epson and initially purchased by Ninestar.  In effect, Ninestar’s practice created a new instance of infringement, just like Bowman’s harvesting and reproduction of seeds constituted new infringement, or unauthorized copying of Monsanto’s patented seeds.  In contrast, Kirtsaeng’s U.S. sales were mere resale of the same “particular items” initially purchased – Kirtsaeng did not run to Kinko’s/Fed Ex, so to speak, and make numerous unauthorized copies of the textbooks to sell.

Accordingly, though the issue of whether patent exhaustion reaches beyond the boundaries of the U.S. still lingers, what appears to be clear is that exhaustion will not save one from infringement liability where the accused instrumentality is not the “particular item” initially purchased. 

 

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No good deed goes unpunished when it comes to the United States Environmental Protection Agency’s (“U.S. EPA”) efforts to regulate climate change.  Rather, U.S. EPA’s authority to regulate climate change (e.g. greenhouse gas emissions or “GHGs”) is currently being challenged by some States, while other States are simultaneously threatening to sue U.S. EPA for failing to act to address climate change.

Since the United States Supreme Court’s decision in Massachusetts v. EPA, 127 S. Ct. 1438 (2007) holding that U.S. EPA could regulate GHG emissions under the Clean Air Act, various States and industrial groups have challenged U.S. EPA’s subsequent attempts to regulate GHGs.  Most recently, on April 19, 2013, the Attorney General of Texas supported by 11 other state attorney generals, filed a petition for writ of certiorari to the United States Supreme Court claiming that U.S. EPA overreached its authority by regulating GHGs, and requested that the Court overrule its decision in Massachusetts v. EPA on the basis of the “absurd” and detrimental economic consequences of regulating GHGs under the Clean Air Act.

Ironically, on April 17, 2013, 10 different states, the District of Columbia and the City of New York jointly sent U.S. EPA a Clean Air Act Notice of Intent to Sue for U.S. EPA’s failure to promulgate rules on new power plant emissions by the regulatory deadline (the “Notice”).  Under the Clean Air Act, U.S. EPA was required to finalize the New Source Performance Standards for fossil fuel power plants and petroleum refineries by April 13, 2013.  These are contentious standards that have been the subject of millions of public comments, as they effectively bar the construction of new coal fired power plants without prohibitively expensive control technologies.  The States’ intention in filing the Notice is to force U.S. EPA to issue/finalize these rules through court order, or through an agreement with U.S. EPA.

Thus, U.S. EPA now finds itself fighting a two fronted war both trying to defend its action and inaction at the same time.  Given these conflicting positions, U.S. EPA would be justified in feeling that it just can’t win when it comes to climate change, and it appears that the more aggressive states may be the ones that start to drive change in this arena.

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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.
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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.
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