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On Second Thought, DOJ Now Supports Class Action Waivers

Posted on: June 23rd, 2017

By: Timothy J. Holdsworth

As we predicted might happen in an earlier blog, the Supreme Court granted certiorari to resolve a split among circuits about whether arbitration agreements containing class and collective action waivers violate the National Labor Relations Act (“NLRA”) and are unenforceable under the Federal Arbitration Act (“FAA”).

Although the Supreme Court has not yet ruled on the matter, the case has had some interesting developments thus far. The U.S. Department of Justice (“DOJ”), under the previous presidential administration, had filed a petition for a writ of certiorari on behalf of the National Labor Relations Board, defending the Board’s view that such agreements were unenforceable. The DOJ has now made an about-face and filed an amicus brief supporting class action waivers. The DOJ acknowledged its earlier position, but says it has “reconsidered the issue and has reached the opposite conclusion.” Now the DOJ asserts that the Board’s conclusion as to the interplay between the NLRA and FAA is not entitled to deference and the Board did not give “adequate weight to the congressional policy favoring enforcement of arbitration agreements that is reflected in the FAA.”

The DOJ’s new position is a welcome surprise for employers wishing to use these waivers to limit time-consuming and expensive class and collective action litigation, and creates a unique situation where different branches of the federal government now find themselves on opposite sides of oral argument before the Supreme Court.

For more information, please contact Tim Holdsworth at [email protected].

 

Florida Legislature Rewrites Laws for Condo Community Associations

Posted on: June 22nd, 2017

By: Melissa A. Santalone

Florida House Bill 1237, a bill which proposed significant changes to several laws governing condominium community associations, passed both houses of the Florida Legislature in the 2017 legislative session and is expected to go into effect as of July 1, 2017. The bill, written in response to public outcry over corruption and criminal activity in condo communities in South Florida, revised aspects of the Florida Statutes  to prohibit certain conflicts of interest for condo boards and board members; apply criminal penalties for certain actions by board members; and impose new requirements for financial statements, recordkeeping, and elections, among other things. Here are just some of the key changes pertaining to conflicts of interest and newly criminalized activities:

Conflicts of Interest

  • An association is prohibited from hiring an attorney who also represents the management company for the association.
  • A board member, manager, or management company may not purchase a unit at a foreclosure sale resulting from the association’s foreclosure of its lien for unpaid assessments or take title in lieu of foreclosure.
  • An association, unless it is a timeshare condo association, may not employ or contract with any service provider that is owned or operated by a board member or officer, or any person who has a financial relationship with a board member or officer, or certain relatives of board members or officers, unless the board member or officer owns less than 1 percent of the equity shares.
  • If, after transfer of control to the association, 50% or more of the units in the community are owned by a party contracting to provide maintenance or management services to an association or by a board member or officer of such a party, the contract may be cancelled by majority vote of the unit owners other than the contracting party or the officer or board member of the contracting party.
  • Certain disclosures must be made by any officer or director proposing to engage in activity that is a conflict of interest. If the board votes against taking the action, the officer or director must notify the board in writing of his or her intention not to take the action or to withdraw from office. If the board finds an officer or director violated this provision, the officer or director shall be deemed removed from office.
  • A rebuttable presumption of a conflict of interest exists if, without prior notice, (1) a director or officer of an association or certain of their relatives enters into a contract for goods or services with the association or (2) a director or officer or certain of their relatives holds an interest in a corporation or other business entity that conducts business with the association or proposes to enter into a contract or other transaction with the association.

Newly Criminalized Activity

  • Officers, directors, and managers are prohibited from soliciting, offering to accept, or accepting any kickback for his or her own benefit or that of his or her immediate family, and violation of this provision is considered a violation of the criminal law. A violation of this provision may also subject an officer, director, or manager to civil penalties.
  • Forgery of a ballot envelope of voting certificate used in an election is a felony of the third degree and punishable by up to 5 years in prison.
  • The theft or embezzlement of funds of a condo association is considered a theft and punishable pursuant to Fla. Stat. § 812.014.
  • The destruction of or refusal to allow inspection or copying of an official record of a condo association in furtherance of a crime is punishable as tampering with physical evidence or as obstruction of justice.
  • An officer of director charged by information or indictment with a crime referenced above must be removed from office until the end of his or her period of suspension or the end of his or her term, whichever occurs first.
  • If a criminal charge is pending against the officer or director, he or she may not be appointed or elected to a position as an officer or director of any association and may not have access to the official records of any association, except pursuant to court order.
  • If the charges against the officer or director is resolved without a finding of guilt, the officer or director must be reinstated for the remainder of his or her term in office, if any.

These changes to the laws governing condo community associations will serve to complicate board and board member compliance with the new provisions. For guidance on these changes to condo association law or any aspect of Florida law governing community associations, please contact the attorneys in FMG’s Tampa office.

The Supreme Court Buys Into Argument that Plaintiffs Should Not Be Permitted to Forum Shop

Posted on: June 22nd, 2017

By: Kristian Smith & Robyn Flegal

The U.S. Supreme Court decided one of the most important mass tort/product liability decisions ever Monday, effectively ending forum shopping or “litigation tourism.” In its 8-1 ruling, the Supreme Court in Bristol-Myers Squibb Co. v. Superior Court, No. 16-466 (U.S. June 19, 2017) overturned a California Supreme Court decision that had allowed hundreds of out-of-state patients who took Bristol-Myers Squibb’s blood-thinning medication Plavix to sue the company in California.

For years, plaintiffs involved in “litigation tourism” have relied on broad interpretations of personal jurisdiction to sue large companies in plaintiff-friendly jurisdictions. Ever since “general” personal jurisdiction was limited by the Supreme Court three years ago in Daimler AG v. Bauman, 134 S.Ct. 746 (2014) to those states where a corporation is incorporated or has its principal place of business, plaintiffs have tried to use a similar broad interpretation of “specific” personal jurisdiction to forum shop. The California Supreme Court accepted this theory when it allowed plaintiffs from all over the country to sue Bristol-Myers Squibb in California.

But the Supreme Court didn’t buy it and reiterated that the lawsuit itself must arise out of or relate to the defendant’s contacts with the forum.

The Supreme Court rejected the California Supreme Court’s ruling that any “substantial connection” between a corporate defendant’s activities and California, whether or not causally related to a plaintiff’s claimed injuries, would suffice to support jurisdiction. The California Supreme Court conferred jurisdiction over Bristol Myers-Squibb where the plaintiffs did not reside in the state and did not sue over a drug that they purchased in the state. The Supreme Court called this approach a “loose and spurious” form of general jurisdiction.

As the Court held, “a defendant’s general connections with the forum are not enough.” This means that plaintiffs may “join together in a consolidated action in the States that have general jurisdiction over BMS.” Otherwise, “the plaintiffs who are residents of a particular State… could probably sue together in their home States.”

This ruling ends the days of plaintiffs flocking to accommodating jurisdictions to bring claims against large companies, and it is already having widespread effects. Based on the Court’s ruling on Monday, a St. Louis judge declared a mistrial in a talcum powder trial underway in St. Louis Circuit Court based on lack of personal jurisdiction. The mistrial in St. Louis was declared in a trial where a Missouri man and two out-of-state plaintiffs sued Johnson & Johnson and its supplier Imerys Talc America over a claim that talcum powder in its products caused ovarian cancer. Johnson & Johnson’s lawyers prevailed, arguing that the packaging and labeling company with a plant in Missouri was simply one of the company’s contractors, and played no role in establishing jurisdiction over out of state plaintiffs.

For any questions, please contact Kristian Smith at [email protected] or Robyn Flegal at [email protected].

FAIR or Unfair?

Posted on: June 22nd, 2017

By: Zachariah E. Moura

California FAIR Plan Association v. Garnes (May 26, 2017) __ Cal.App.5th __ [218 Cal.Rptr.3d 246]

Hewing to the rule that “where an insurer’s policy contains terms that conflict with the law, the courts will decline to enforce the impermissible terms and read into the policy the terms required by statute,”[1] the Court of Appeal, First District, held in California FAIR Plan Association v. Garnes that Ins. Code § 2051, coupled with sections 2070 and 2071, sets a minimum standard of coverage that requires an insurer to indemnify its insured for the actual cost of the insured structure, minus depreciation, even if this amount exceeds the fair market value of the structure, where an open fire insurance policy pays “actual cash value,” and there has been a “partial” but not “total loss to the structure.”

The California FAIR Plan Association (“FAIR”) is an insurance industry placement facility and joint reinsurance association created by the California Legislature in 1968 to provide basic property insurance to homeowners who live in high risk or otherwise uninsurable areas. Marlene Garnes, residing in just such an area of Richmond — the “Iron Triangle” (named for the intersecting railroad tracks that frame it) — insured her family home through FAIR, with a policy limit of $425,000.

After her home was damaged (but not destroyed) by fire, Garnes submitted a claim to FAIR seeking indemnity for the costs required to repair her home, less depreciation, the net amount of which was $320,549. FAIR declined and instead paid her the $75,000 it determined represented the fair market value of her property in 2011, and filed a declaratory relief action against her regarding the interpretation of Ins. Code § 2051.

After the trial court granted summary judgment in favor of FAIR, the court of appeal reversed.

The FAIR Policy stated that if the cost to replace or repair a damaged dwelling exceeded its actual cash value, which the Policy defined as “Total Loss,” FAIR would pay the actual cash value, but in any other case, which the Policy described as “Partial Loss,” FAIR would pay the lesser of the cost to repair less reasonable depreciation or the actual cash value.

The court held that Ins. Code § 2051 provides mandatory minimum coverage under an open ACV fire insurance policy. Section 2051 provides that in the case of a “total loss to the structure,” recovery is limited to the lesser of the policy limit or a property’s “fair market value.” (§ 2051, subd. (b)(1).) However, where the loss is a “partial loss to the structure,” recovery is not limited to fair market value but instead is the lesser of the policy limit or “the amount it would cost the insured to repair, rebuild, or replace the thing lost or injured less a fair and reasonable deduction for physical depreciation based upon its conditions at the time of the injury.” (Ibid.)

Because Ins. Code § 2070 requires “[a]ll fire policies” to be on the standard form or provide coverage for fire losses that is “substantially equivalent to or more favorable to the insured than that contained in such standard form fire insurance policy,” the court held that the FAIR Policy was unenforceable to the extent that it purports to cap indemnity for partial losses at fair market value, or to treat a loss that did not destroy the structure as a “total loss.”

The decision may prod a lobbying effort to encourage the Legislature to amend section 2051 by inserting “fair market value” as a cap on recovery. Until then, given the dramatic difference in value to an impoverished homeowner when a fire-damaged home is deemed a “partial loss” rather than a “total loss”, it appears that there will be many factual disputes over what degree of damage qualifies as “total loss to a structure.”


 [1]  California FAIR Plan Association v. Garnes (May 26, 2017) __ Cal.App.5th __ [218 Cal.Rptr.3d 246], citing Howell v. State Farm Fire & Casualty Co. (1990) 218 Cal.App.3d 1446; Julian v. Hartford Underwriters Ins. Co. (2005) 35 Cal.4th 747, 754; and Wildman v. Government Emp. Ins. Co. (1957) 48 Cal.2d 31, 39–40.

For any questions, please contact Zach Moura at [email protected].

What’s in a Name?

Posted on: June 20th, 2017

By: Jeremy W. Rogers

Oftentimes in the law, a seemingly straightforward term or name for something turns out to be not so straightforward. Common meanings need to be defined or else creative attorneys may avoid mandates set forth by statute, for instance. One example may include successful arguments against the applicability of a particular statute to his or her client. Statutes and regulations are rife with definitions that would make a layperson wonder out loud, “Why?” or “Was that really necessary?”

When not included in a statute, however, it is up to the courts to decide what a particular term or name really means, even if it seems obvious. One such situation occurred earlier this year when the Florida Supreme Court decided the definition of the term “sexual intercourse.” This question arose in a case out of the Florida Keys where a man was charged with violating § 384.42, Fla. Stat. which makes it unlawful for a person who is aware they are HIV-positive to have sexual intercourse with any other person without first informing that person of the disease. The State alleged that Gary Debaun violated the law when he had sex with another man without first disclosing he had HIV.  Mr. Debaun went a step further, it seems, and produced a forged lab report saying he was HIV-negative, although that little nugget is not really relevant to the story.  Of course, § 384.42 does not define “sexual intercourse,” and, citing to a prior authority, Mr. Debaun’s attorney successfully argued that “sexual intercourse” was limited only to “penetration of the female sex organ by the male sex organ.”  How very romantic. Because Mr. Debaun and his partner were both male, they did not have “sexual intercourse” under that very narrow definition. The circuit court agreed and dismissed the charges, but the Third DCA reversed, asking the Florida Supreme Court to resolve the issue.

In opposition to Mr. Debaun’s arguments once the case got this far, it was argued that the intent of the statute was not to criminalize the sexual act, but, rather, to criminalize the act of knowingly exposing one’s sexual partners to the disease. This would seem rather clear, and one wonders why there is prior authority setting forth such a narrow definition as the circuit court followed. Nevertheless, after consulting with three separate dictionaries, the Court ruled that the applicable definition is clearly more expansive than simply penile-vaginal penetration. Further reasoning, the Court noted that a more expansive definition would further the purpose and intent of the law. Thus, the Court defined “sexual intercourse” under its plain and ordinary meaning (and, as one court put it, “obvious meaning”). The definition includes penile-vaginal intercourse, anal and oral sexual activity, and is not limited to only heterosexual relations.

Who knew? (sarcasm intended)

For any questions, please contact Jeremy Rogers at [email protected].