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Archive for the ‘Commercial Liability’ Category

Using Summary Judgment during the Arbitration Process

Posted on: February 22nd, 2018

By: Erin E. Lamb

Many attorneys assume that once a case is in private arbitration, dispositive motions are against the rules and are no longer a useful tool to resolve cases. How could an arbitrator have the power to consider a dispositive motion? After all, arbitration is sold to all parties as a process that all parties must willingly opt into — in the interest of limiting the complexities of arbitration, not adding to them, as dispositive motions do. Most attorneys participating in arbitration therefore would never think of pursuing dispositive motions, even when faced with res judicata or statute of limitations issues.

This is an incorrect and unduly limiting view of the arbitration process. None other than the Supreme Court of the United States, has upheld the power of an arbitrator to adopt procedures necessary to give effect to the parties’ arbitration agreement. Stolt-Neilsen v. AnimalFeeds International, 559 U.S. 663 (2010).  It’s up to the arbitrator to determine procedural questions by looking at the arbitration agreement. In turn, most arbitration agreements invoke an arbitration providers’ rules. Most rules, including the most recent American Arbitration Association rules (last updated in 2009), indirectly give arbitrators expansive powers and wide latitude in the procedures used to give effect to the arbitration agreement.

The 2009 American Arbitration Association rules, still in effect ten years later, state that arbitrators are required to “take such steps as they may deem necessary or desirable to avoid delay and to achieve just, speedy, and cost-effective resolution of large, complex, commercial cases.” In fact, in AAA commercial cases, the rules directly address dispositive motions: “The arbitrator may allow the filing of and make rulings upon a dispositive motion only if the arbitrator determines that the moving party has shown that the motion is likely to succeed and dispose of or narrow the issues in the case.” The use of “only” makes the rule seem limiting; in reality, it directly gives arbitrators the ability to hear and rule on said motions. Multiple federal courts have affirmed arbitration awards where the arbitrator ruled on a motion for summary judgment or on summary disposition. Some arbitration provider’s rules even specifically allow for it – the JAMS rules specifically allow for the filing of dispositive motions even under objection from the other side.

Simply put, unless your arbitration agreement specifically, plainly, and expressly prohibits dispositive motions, an arbitrator is empowered to grant any relief necessary to reach a final determination of the matter, including dispositive motions. Only in the face of a specific written agreement would an arbitrator be acting outside the contractually delegated authority of the arbitration agreement. This is an important thing to consider for all attorneys in arbitration cases – and at the time of the agreement to arbitrate, not after.

If you have any questions or would like more information, please contact Erin Lamb at [email protected].

Leaked DOJ Memo Unearths New Strategy in Qui Tam Cases

Posted on: February 13th, 2018

By: Samantha L. Skolnick

On January 10, 2018, an internal Department of Justice memorandum (the “Granston Memo”) was leaked to the public, turning heads. The Granston Memo included an in-depth analysis of the DOJ’s position on evaluating dismissals pursuant to the False Claims Act (FCA). The Granston memo outlined the DOJ’s position on FCA claims brought by whistleblowers. Under the FCA, a whistleblower may bring what is known as a “qui tam” action on behalf of the government, which potentially allows said whistleblower to receive a share of any government recovery.  The Granston memo is particularly significant, as it provides those faced with claims of False Claims Act violations with insight into the DOJ’s stance on a range of factors for dismissing these qui tam actions.

Under the FCA, the Attorney General can dismiss a whistleblower’s qui tam action, so long as the whistleblower is given the opportunity to be heard. 31 U.S.C. § 3730(c)(2)(A). Despite this provision, the DOJ noted that this dismissal option has not been actively utilized by the DOJ.  The Granston Memo specifically addresses seven enumerated circumstances where the DOJ should be considering moving to dismiss these qui tam actions:

(1) curbing meritless qui tams;

(2) preventing parasitic or opportunistic qui tam actions;

(3) preventing interference with agency policies and programs;

(4) controlling litigation brought on behalf of the United States;

(5) safeguarding classified information and national security interests;

(6) preserving governmental resources; and

(7) addressing egregious procedural errors.

Of course, the factors above are not mutually exclusive or exhaustive. The DOJ could move to dismiss these actions for multiple or other reasons.

The Granston Memo also sheds light on the increased number of whistleblower filings per year, which appears to have triggered this concern by the DOJ of the underutilized dismissal provision of the FCA. Indeed, the Granston memo mentions the possible negative consequences of the Government’s failure to use the dismissal provision, including generating adverse decisions which affect the government’s ability to enforce the FCA.

Companies or persons facing FCA claims should be particularly aware of the Granston memo, and should argue to the DOJ and/or to the whistleblower themselves that any such claim is subject to dismissal based on the seven factors above. In some circumstances where the government has decided not to intervene, the whistleblower can obtain permission and voluntarily dismiss a qui tam action.

For more information, contact Samantha Skolnick at [email protected]

Eleventh Circuit Rules Florida Strict Liability and Negligence Claims Not Preempted by the MDA

Posted on: February 12th, 2018

By: Robyn Flegal

A panel of the Eleventh Circuit determined in a February 8, 2018 published decision that a Florida district court erred when it ruled that a husband’s claims, brought against a medical device manufacturer after its Life Vest defibrillator failed to shock his wife’s heart, were preempted by federal law.

A defibrillator is worn by patients at risk of sudden cardiac arrest. It delivers a dose of electric current to the heart, depolarizing the heart muscle and ending dysrhythmia. The lower court dismissed the action in January 2017, ruling that the claims against the manufacturer were preempted by the Medical Device Amendment of the Food, Drug and Cosmetic Act. The FDA previously determined the Life Vest device was safe, and the district court agreed with the manufacturer that the allegations improperly contradicted the FDA’s prior approval of the product.

The Eleventh Circuit disagreed with the lower court’s ruling, deciding that the claims were not preempted. The court reasoned that the strict liability and negligence claims were not preempted by the federal regulations because the plaintiff alleged the defect was due to the manufacturer’s purported failure to comply with these regulations—which then caused a violation of Florida’s laws. The Court considered that a 2014 FDA warning letter put the manufacturer on notice that it was in violation of certain regulations. That letter can, now, serve as a basis for the plaintiff’s claims—even though the letter referred to shocks being delivered to patients who did not need them, as opposed to the failure to deliver shock to patients who needed them (as allegedly experienced by the plaintiff’s wife). The Court determined that the complaint’s references to the letter sufficiently stated a claim that was plausible on its face despite this disconnect between the warning letter and facts relating to the plaintiff’s wife’s use of the product.

Medical device manufacturers should be aware of the Eleventh Circuit’s ruling that claims of strict liability and negligence may not be preempted by the Medical Device Amendment. Such manufacturers should be particularly cognizant of this Eleventh Circuit decision where they have received an FDA warning letter.

For more information, please contact Robyn Flegal at [email protected].

Will Innocent Sellers Catch a Break?

Posted on: January 12th, 2018

By: Jeremy W. Rogers

In a products liability case, any party along the line of distribution, from the design and manufacture, all the way down to the seller, may be held liable to a party injured from use of a defective product.  While it is easy to understand holding an entity liable for issues with the design or manufacture of the product, it can be less so with regard to a distributor or seller of the product. Under strict product liability, these entities are held liable because, the argument goes, it is more fair for an entity that places a defective product in the stream of commerce to bear the financial burden of an injury than an innocent consumer. But is that “fair” to an innocent seller or distributor of the product who committed no active negligence?  There are those in Congress and in some states that believe it is not.

In 2007, the Innocent Sellers Fairness Act was introduced into the House of Representatives.  That bill would make it so no seller of any product can be held liable for personal injury, monetary loss, or damage to property unless it can be proven that the seller was actively involved in some negligent act, such as manufacture, design, or installation.  Without proof of such active participation in a negligent act, the seller is, arguably, “innocent.” While the bill was never passed into law, several states have passed similar laws, including Colorado, Delaware, Kansas, Kentucky, Maryland, Minnesota, Mississippi, Missouri, New Jersey, North Carolina, North Dakota, Tennessee, and Washington. Unfortunately, Florida is not one of those states.

However, for those states that have not passed their own law, like Florida, those who support this premise on a national scale have not given up. The bill was re-introduced again in 2015.  Then, in February 2017, it was once again introduced.  Currently, the bill has not made it out of committee, but has been referred to subcommittee. Given the length of time it has been in committee, it does not appear the Innocent Sellers Fairness Act has much opportunity to be passed into law in the near future.  However, given the current makeup of Congress and the business friendly administration, one has to believe that the chances of seeing the bill come up again are good.

If you have any questions or would like more information, please contact Jeremy Rogers at [email protected].

Puff, Puff, Veto!

Posted on: January 10th, 2018

By: Jason C. Dineros

This past Thursday, Attorney General Jeff Sessions rescinded the Obama-era’s relaxations for federal prosecutors of marijuana enforcement. This comes only four days into California’s open recreational use market, and potentially halts what has grown into a niche legal practice as well as a concerted training effort among hospitality operators over the almost five years the federal enforcement relaxations have been in place.

The Obama Administration’s federal enforcement relaxations for marijuana use in 2013, brought with it the development of a viable market industry from what was previously looked upon as taboo—akin to “that stoner stage you went through in high school, but grew out of.” As start-ups were popping up wanting to be frontrunners in an industry that had as much anticipation as whiskey distilleries in the years that followed prohibition, so did the need for legal consultation and representation.  No longer was the idea of marijuana dispensaries becoming as common as corner liquor stores still a far too laughable dream (or overly paranoid nightmare, depending on your take); and concepts such as edible bakeries, “weed lounges,” and cannabis-friendly restaurants were likewise materializing into reality.

But how does an attorney provide advice regarding the sale and distribution of a product that is illegal under federal law, but for all intents and purposes, permitted in 29 different states? Well the fallback rule that developed under the Obama Administration’s relaxations, at least from an ethical perspective, was that providing legal services to the cannabis industry was permissible so long as it did not violate state law.  And with this came an influx in the practice of cannabis law in 29 of the 50 states.

Further expanding to the social aspect of recreational marijuana, while any experienced bartender has likely taught or learned how and when to cut off an overly-imbibed guest, what protocols are in place for training “budtenders”? And even more importantly, for hospitality operators engaged in operations across different states, how can there be any uniform standard operating procedures when what is a legally viable source of potential revenue in one state, can expose the business to significant fines and potential closure in another?  Simply put, until the states begin to react one way or another to Attorney General Sessions’ heightened federal enforcement regulations, the cannabis industry remains one of the most potentially lucrative, risky, and unnavigated industries still in its infancy among the entrepreneurs, attorneys, and hospitality operators involved.

For further information or for further inquiries involving professional liability, commercial liability, or hospitality law, you may contact Jason C. Dineros, the Chair of the Hospitality Law Practice Team of Freeman Mathis & Gary, LLP, at [email protected].