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USCIS Reverses Course – STEM OPT Students May Now Work At 3rd Party Client Sites

Posted on: September 18th, 2018

By: Ken Levine

On August 17th U.S. Citizenship and Immigration Services (USCIS) posted an announcement on their website to publicize the agency’s decision to once again allow STEM OPT F-1 students to engage in training programs at a third-party client worksite.  This update supersedes the Agency’s policy change in April 2018 which disallowed STEM OPT students from being placed at 3rd party client sites.

This new guidance essentially restored an employer’s ability to place OPT students in a science, technology, mathematics or engineering (STEM) field at a 3rd party client site, so long as all applicable training obligations are met, and a bona fide employer/employee relationship is maintained for the full duration of the assignment.

This USCIS policy reversal was welcome news for the many U.S. employers who had historically trained their OPT personnel by placing them at 3rd party work sites.  However, it is extremely important that employers be vigilant in ensuring that the training is in full compliance with the I-983 training program. Companies that sponsor their OPT employees for an H-1B visa should expect that USCIS will closely scrutinize the OPT training program details.

For additional information related to this topic and for advice regarding how to navigate U.S. immigration laws you may contact Ken Levine of the law firm of Freeman, Mathis & Gary, LLP at (770-551-2700) or [email protected].

Is “But-For” Causation In California Legal Malpractice Cases In Jeopardy?

Posted on: September 18th, 2018

By: Gretchen Carner & Brett Safford

California attorneys sued for fraud and intentional torts, as opposed to negligent legal malpractice, may be subjected to a different causation standard after the California Court of Appeal’s recent opinion in Knutson v. Foster (2018) 25 Cal.App.5th 1075.  The opinion has caused somewhat of a stir.  “But-for” causation and the “case-within-the-case” analysis are concepts used in virtually every lawsuit by a former client against his or her attorney.  It is axiomatic that a plaintiff, to establish a claim against his or her former attorney, must show that but for the conduct of the attorney, plaintiff would have achieved a better result.

Knutson modifies the causation analysis for certain claims against attorneys. Knutson held that the “but-for” standard should not be used when an attorney is sued by his or her former client for fraud and/or intentional breach of fiduciary duty. The Knutson court premised its reversal of the trial court on a supposed distinction between the “but-for” and substantial factor causation tests. In addition, the Knutson court appears to have abandoned the well-established “case-within-the-case analysis.”

In Knutson, Plaintiff Dagny Knutson filed a lawsuit against her former attorney Richard Foster for fraudulent concealment and intentional breach of fiduciary duty.  Knutson’s claims against Foster arose from his handling of her claim for breach of oral contract against USA Swimming.

Knutson, an internationally ranked swimmer in high school, committed to Auburn University on a full athletic scholarship.  She selected Auburn because Paul Yetter, one of its swimming coaches, was considered an expert in the individual medley, Knutson’s specialty event.  However, in March 2010, the head coach of USA Swimming Mark Schubert told Knutson that Yetter was leaving Auburn and advised her to swim professionally instead of attending Auburn or another university.  Schubert then orally promised her that she would receive training at USA Swimming’s “Center for Excellence” in Fullerton, California as well as room, board, tuition, and a stipend.  The agreement was to last through 2016—after the Summer Olympics in Rio de Janeiro.  Notably, the oral agreement did not include “performance markers,” which Knutson would have to meet to retain her benefits.  Knutson accepted the offer and hired a sports agent.  However, only a few months after moving to Fullerton, USA Swimming terminated Schubert’s employment.

At the suggestion of her agent, Knutson hired attorney Foster after she stopped receiving money from USA Swimming.  Yet, Foster did not disclose to Knutson his close personal ties with high-level persons in the aquatics industry or that he had well-established relationships USA Swimming and other swimming organizations.  Foster also did not disclose that he represented Schubert in 2006, or that following Schubert’s termination from USA Swimming in 2010, he refused to represent Schubert in a wrongful termination action because “he did not want to have a negative relationship with USA Swimming in the future.”

Foster, on behalf of his client, Knutson, ultimately reached a settlement with USA Swimming.  The settlement agreement provided tuition from January to December 2012, but between 2013 and 2016, all payments were contingent upon “perform markers,” i.e., Knutson maintaining a top 25 ranking in the world or a top three ranking in the United States.

After learning of Foster’s conflicts of interest, Knutson sued Foster for fraudulent concealment and intentional breach of fiduciary duty.  The jury found in favor of Knutson on both causes of action, but the trial court granted Foster’s motion for new trial on the grounds that Knudson “failed to adduce evidence of causation and that the jury’s award of damages was excessive.” The trial court also denied Foster’s motion on two other grounds.  Both Knutson and Foster filed notices of appeal.

The Court of Appeal reversed, holding that the trial court erroneously applied the “but-for” test for causation instead of the “substantial factor” test.  The Court explained, “Here, the trial court recognized the different standards of causation between legal malpractice claims and fraud claims, but nevertheless erroneously applied the malpractice standard of causation to the fraudulent concealment claim.  Although the court referred to the substantial factor for causation, it used and applied the but for test.”  After identifying Foster’s alleged concealments and breaches of loyalty, the court then concluded that “[a] substantial factor in Knutson’s decision to enter into the settlement agreement was Foster’s fraudulent concealment of the foregoing facts” and breaches of his fiduciary “caused Knutson harm initially by failing to provide her with all the information needed to make an informed decision about entering into the settlement agreement with USA Swimming and failing to ensure that Knutson’s best interests were being protected by Foster during the negotiations.”

The Court’s analysis in Knutson is problematic because it blurs the relationship between the “but-for” test of causation applied in legal malpractice claims and the “substantial factor” test of causation applied in intentional tort claims.  The “but-for” test has long been the appropriate causation standard for legal malpractice claims.  As explained by the California Supreme Court in Viner v. Sweet (2003) 30 Cal.4th 1232, “In a litigation malpractice action, the plaintiff must establish that but for the alleged negligence of the defendant attorney, the plaintiff would have obtained a more favorable judgment or settlement in the action in which the malpractice allegedly occurred. The purpose of this requirement, which has been in use for more than 120 years, is to safeguard against speculative and conjectural claims.”  (Id. at p. 1241, emphasis added.)  “This method of presenting a legal malpractice lawsuit is commonly called a trial within a trial.” (Blanks v. Seyfarth Shaw LLP (2009) 171 Cal.App.4th 336, 357.)  The “substantial factor” test requires that the “the plaintiff to establish ‘a reasonable basis for the conclusion that it was more likely than not that the conduct of the defendant was a substantial factor in the result.’ ” (Lysick v. Walcom (1968) 258 Cal.App.2d 136, 153, emphasis added.)

Knutson is a significant case because it not only contains a confusing analysis of the distinction between “but-for” causation and “substantial factor” causation, but it could also be read to dispose of the “case-within-the-case” analysis for claims against an attorney for fraud and/or intentional breach of fiduciary duty.  Review by the California Supreme Court is warranted to address the confusion Knutson creates.  Until then, it should be argued that Knutson is an outlier case which can be distinguished on its specific facts.  We will be keeping a close eye on this one.

If you have any questions or would like more information, please contact Gretchen Carner at [email protected] or Brett Safford at [email protected].

Murphy’s Law and The Exception to Georgia’s Impact Rule

Posted on: September 17th, 2018

By: Jason Kamp

Claims for negligent infliction of emotional distress are limited by the Impact Rule in Georgia.  In a recent attempt to keep the sole exception from swallowing the Impact Rule, the Supreme Court of Georgia may have done exactly what it sought to prevent.

The Impact Rule states: “In a claim concerning negligent conduct, a recovery for emotional distress is allowed only where there is some impact on the plaintiff, and that impact must be a physical injury.”  Lee v. State Farm Mut. Ins. Co. et al., 272 Ga. 583, 584 (2000).

The Impact Rule has one exception for the death of a child:

When, as here, a parent and child sustain a direct physical impact and physical injuries through the negligence of another, and the child dies as the result of such negligence, the parent may attempt to recover for serious emotional distress from witnessing the child’s suffering and death without regard to whether the emotional trauma arises out of the physical injury to the parent.

Lee v. State Farm Mut. Ins. Co. et al., 272 Ga. 583, 588 (2000).

The Supreme Court of Georgia recently decided a case concerning the exception to the Impact Rule for the death of a child.  In Coon v. Med. Ctr., Inc., the plaintiff learned during a routine prenatal examination that her unborn baby no longer had a heartbeat. Coon v. Med. Ctr., Inc., 300 Ga. 722, 723 (2017). After labor was induced, the plaintiff’s stillborn child was mixed up with another stillborn at the hospital.  Id. at 724.  The hospital then released the wrong remains to the plaintiff and her family, who unknowingly held services and buried the wrong remains as a result.  Id.  The hospital later realized its mistake and informed the plaintiff.  Id. at 725.  A claim for negligent infliction of emotional harm under the exception followed.

The Supreme Court of Georgia declined to extend the exception, reasoning, “[the plaintiff] did not suffer any physical impact that resulted in physical injury from the hospital’s negligent mishandling of her stillborn child’s remains, nor did the child suffer any physical impact or injury.” Id. at 734-735.

By focusing on the impact element, the Supreme Court implicitly assumed the answer to a threshold question: whether an unborn child is a child capable of dying under the exception.  The court’s reasoning appears to open the exception to all tort cases with a physical impact that results in a failed pregnancy.  This could result in a growth in negligent infliction of emotional distress claims in bodily injury and medical malpractice cases.

Before Coon, the exception to the impact rule assumed the dead child had already been born.  After Coon, that assumption is either gone or open to question.  In its attempt to limit the exception, the Supreme Court of Georgia incidentally expanded it to include a debate on when life begins.  At the end of the Coon opinion, the court remarked, “If we do not insist on a workable limiting principle as a prerequisite to recognition of new exceptions to the physical impact rule, the exceptions will soon will soon swallow the rule.”  Id. at 735.  Unfortunately, Murphy’s Law knows no exceptions.

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

Keeping A Watchful Eye On The FLSA Storm (And Hurricane Florence Too)

Posted on: September 14th, 2018

By: Brad Adler & Koty Newman

Hurricane season has arrived.  So, what are employers to do if they would like to keep their offices open, but employees do not want to work during the storm in the areas affected by the hurricane?

  1. What Are The Rules On Payment Of Exempt Employees’ Salaries?

Generally, if salaried exempt employees perform any work during the workweek, they must be paid their full salary for that workweek, regardless of the number of hours or days that the employee worked.  Thus, if a salaried exempt employee performs any work during the workweek and decides to evacuate the day or days that the hurricane makes landfall, that employee generally still must be paid his or her full salary for that workweek.

There are exceptions to the general rule, particularly if the employer’s office remains open and the exempt employee misses an entire day, but it is important to talk with your legal counsel before deducting from the employee’s salary in such a situation.

  1. What Are The Rules On Payment Of Non-Exempt Employees?

Generally, hourly employees need only be paid for the hours that they actually work.  Thus, if an hourly employee calls out or decides to skip the day that a hurricane comes to town, the employer does not have to pay the hourly employee for that day.

  1. How Does PTO Come Into Play For Absences Associated With A Hurricane?

If an employee misses work because of a hurricane, the employee can utilize PTO so the absence is paid.  Even if an employee who misses work because of a hurricane doesn’t want to use PTO, an employer can force the use of PTO.  That is particularly significant in dealing with an exempt employee who misses a part of a day.  For instance, if an exempt employee leaves work after working 2 hours, an employer can require the employee to utilize 6 hours of PTO for the remaining hours missed that day.

  1. Can An Employer In North Carolina Require Its Employees To Work Through A Hurricane And Can It Fire An Employee Who Fails To Come Into Work?

Unless there is a federal evacuation order, the legality of requiring an employee to show up to work depends on the state law that applies to the situation.

In North Carolina, aside from the impact on morale, we think it creates a legal risk for an employer to terminate an employee for failing to appear at work if that employee is under an evacuation order in response to an oncoming hurricane.  Although North Carolina is an at-will employment state, an employer may not terminate an employee in North Carolina for a reason that contravenes public policy.  See Coman v. Thomas Mfg. Co., 325 N.C. 172, 175 (1989).  The Court in Coman stated that it is the public policy of North Carolina “that the safety of persons and property on or near the public highways be protected.”  Id. at 176.

In fact, Coman proceeded to state that:

[w]here the public policy providing for the safety of the traveling public is involved, we find it is in the best interest of the state on behalf of its citizens to encourage employees to refrain from violating that public policy at the demand of their employers.  Providing employees with a remedy should they be discharged for refusing to violate this public policy supplies that encouragement.

Id. Thus, because requiring employees to show up to work during a hurricane while an evacuation order is in effect could necessarily involve them driving unsafely on the roads, depending on the situation, an employer could be subject to a wrongful termination suit for terminating employees who refuse to appear at work during the hurricane.  Although the plaintiff in Coman was a truck driver, the case still provides a basis for a disgruntled employee to sue his/her employer if the employer chooses to terminate the employee for his/her absence at work during an evacuation order.

Moreover, apart from the safety of the roads, in dealing specifically with mandatory evacuation orders, the power of counties, municipalities, and the governor to issue voluntary and mandatory evacuation orders appears in North Carolina General Statutes §§ 166A-19.30 and 166A-19.31.  The refusal to obey a mandatory evacuation order is a Class 2 misdemeanor in North Carolina.  See N.C.G.S. § 14-288.20A.  Consequently, requiring an employee to come in to work when that employee is under a mandatory evacuation order is requiring the employee to break the law as it appears in the North Carolina General Statutes, and, thus, very likely violate public policy.

If you have any questions or would like more information, please contact Brad Adler at [email protected] or Koty Newman at [email protected].

Arbitrability – Who Decides?

Posted on: September 14th, 2018

By: Ted Peters

The question of arbitrability (i.e., Who decides whether a dispute is arbitrable? The court or the arbitrator(s)?) is as ageless as the conundrum of what came first, the chicken or the egg.  In 2010, the Supreme Court decided Rent-a-Center, Vest Inc. v. Jackson, wherein it concluded that agreements to arbitrate questions of arbitrability are, themselves, enforceable.  That dispute involved an employee who had signed an arbitration agreement that provided for arbitration of disputes arising out of his employment, including discrimination claims.  The agreement expressly provided that the arbitrator, and not a court, had the exclusive authority to resolve any disputes relating to the enforceability of the arbitration agreement.  The Ninth Circuit Court determined that the employee’s argument that the agreement was unconscionable was a matter of fact for the court rather than the arbitrator.  In a split vote, the Supreme Court found otherwise, and concluded that because the employee challenged the agreement as a whole (and not only the delegation provision), the determination had to be made by the arbitrator.

The US Supreme Court will weigh in again on the issue of arbitrability. On June 25, 2018, the Court accepted certiorari in the case of Henry Schein, Inc. v. Archer & White Sales, Inc., a case in which the Fifth Circuit addressed the arbitrability of antitrust claims asserted against a distributor of dental equipment.  The defendants/appellants sought to enforce an arbitration agreement.  The magistrate granted a motion to compel arbitration, concluding that the threshold question of the arbitrability of the claims was vested in the decision of an arbitrator, and not for a court to decide.  The district court, however, reversed, finding that it had the authority to rule on the question of arbitrability and concluded that the claims at issue were not arbitrable.  The Fifth Circuit affirmed finding that submission of the dispute to the arbitrator was not necessary because the assertion of arbitrability was “wholly groundless.”  The appellate court explained that the arbitration clause in question created a carve-out for “actions seeking injunctive relief,” but did not limit the exclusion to “actions seeking only injunctive relief.”  The court reasoned that even though the agreement would allow the plaintiff/respondent to avoid arbitration by simply adding a claim for injunctive relief did not change the clause’s plain meaning.

The decision in Henry Schein underscores that a conflict has developed among the lower courts; some recognizing an exception for “wholly groundless” claims of arbitrability, but others not.  Defendants/appellants seek to have the Supreme Court reject the “wholly groundless” exception, asserting that the Fifth Circuit’s decision cannot be reconciled with the Federal Arbitration Act’s text or its overarching purpose: “to ensure that private agreements to arbitrate are enforced according to their terms.”  The question presented before the Court is simple: “Whether the Federal Arbitration Act permits a court to decline to enforce an agreement delegating questions of arbitrability to an arbitrator if the court concludes the claim of arbitrability is “wholly groundless.”

Oral argument is scheduled for October 29, 2018.

If you have questions or would like more information, please contact Ted Peters at [email protected].