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Posts Tagged ‘supreme court’

Federal Circuit Scorecard – Title VII & Sexual Orientation Discrimination

Posted on: October 13th, 2017

By: Michael M. Hill

A Georgia case is in the running to be the one the Supreme Court uses to resolve the question of whether Title VII of the Civil Rights Act of 1964 (which prohibits employment discrimination on the basis of sex and certain other characteristics) also includes discrimination on the basis of sexual orientation. The Supreme Court is widely expected to take on this issue at some point, but no one knows exactly when or which case it will be.

In Evans v. Georgia Regional Hospital, 850 F.3d 1248 (11th Cir. 2017), a former hospital security guard alleged she was harassed and otherwise discriminated against at work because of her homosexual orientation and gender non-conformity.  While the trial court dismissed her case, the Eleventh Circuit Court of Appeals partially reversed.  The Eleventh Circuit held that Evans should be given a chance to amend her gender non-conformity claim, but it affirmed dismissal of her sexual orientation claim.

The issue, in most federal circuits, is a distinction between (1) claims of discrimination on the basis of gender stereotypes (e.g., for a woman being insufficiently feminine), which the Supreme Court has held is discrimination based on sex, and (2) claims of discrimination based on sexual orientation, which all but one federal circuit has held is not discrimination based on sex.

At present, this is how things stand now:

  • In the Seventh Circuit (which covers Illinois, Indiana, and Wisconsin), sexual orientation discrimination does violate Title VII.
  • In every other federal circuit, sexual orientation discrimination does not violate Title VII.
  • But no matter where you are, the U.S. Equal Employment Opportunity Commission (EEOC) takes the position that sexual orientation discrimination does violate Title VII.

To make matters more confusing, the full court of the Second Circuit (which covers New York, Connecticut, and Vermont) is considering whether to affirm its past position that sexual orientation is not protected by Title VII or to join the Seventh Circuit. In that case, the EEOC of course is arguing that sexual orientation is a protected category, but the U.S. Department of Justice has filed an amicus brief to argue that sexual orientation is not protected.  In the words of the Department of Justice, “the EEOC is not speaking for the United States.”

The long and short of it is that, until the Supreme Court weighs in, employers need to be mindful of the federal law as interpreted in their circuit, while also understanding that the EEOC enforces its position nationwide whether or not the local federal circuit agrees with it.

If you have any questions or would like more information, please contact Michael M. Hill at [email protected].

Repaying Old Debts – The Supreme Court Limits FDCPA Liability for Scheduling Time-Barred Claims in Bankruptcy

Posted on: October 9th, 2017

By: Matthew M. Weiss

Earlier this year, the Supreme Court handed a victory to debt collectors when it held that the scheduling of a time-barred claim in bankruptcy was not a violation of the Fair Debt Collection Practices Act (FDCPA).

In Midland Funding, LLC v. Johnson, Aleida Johnson filed for personal bankruptcy under Chapter 13 of the Bankruptcy Code in the Southern District of Alabama. Midland Funding, LLC (Midland) filed a proof of claim asserting a credit card debt of $1,879.71. Johnson’s last charge on the account was in 2003, more than 10 years before Johnson’s bankruptcy filing, even though Alabama’s statute of limitations on the collection of debts was six years. Johnson objected to the claim and it was disallowed. Johnson then brought suit against Midland seeking actual damages, statutory damages, attorneys’ fees, and costs for a violation of the FDCPA, 15 U.S.C. § 1692k. After the district court determined that the FDCPA was inapplicable and dismissed the lawsuit, the Eleventh Circuit Court of Appeals reversed the decision, and Midland appealed to the Supreme Court.

In a 5-3 decision (with Justice Gorsuch abstaining), Justice Breyer, writing for the majority, first determined that a claim under the Bankruptcy Code was a “right of payment”, and that a creditor has the right to payment of a debt even after the limitations period expires. The Court also noted that a claim does not automatically have to be enforceable. Further, the definition of claim under the Bankruptcy Code provided that the claim could be “contingent” or “disputed”. Additionally, the Court found that the running of the statute of limitations was meant to be asserted as an affirmative defense by the debtor after the creditor asserted a claim.

Turning to whether the filing of a time-barred claim was “unfair” or “unconscionable” under the FDCPA, the court distinguished bankruptcy from civil cases in which creditors were subject to FDCPA liability for bringing suit on time-barred claims because “a consumer might unwittingly repay a time-barred debt” in a civil case. The Court reasoned that unlike civil cases, the consumer initiates bankruptcy proceedings, and are unlikely to pay a stale claim just to avoid going to court. Additionally, the Court said that the presence of knowledgeable trustees and procedural rules provided additional protection to debtors. The Court also noted that by filing a stale claim that was subsequently disallowed, that claim would be forever discharged, removing the debt from the debtor’s credit report and “potentially affecting an individual’s ability to borrow money, buy a home, and perhaps secure employment.” For all of these reasons, the Court concluded that the filing of a stale claim in bankruptcy was not “unfair” or “unconscionable” under the FDCPA.

The Supreme Court’s decision in Midland Funding legitimizes a major tool of debt collectors, who now can freely assert time-barred claims in bankruptcy proceedings with the hope that both the debtor and the bankruptcy trustee fail to assert a statute of limitations defense. As Justice Sotomayor wrote in her dissent, because debt buyers assume that a certain percentage of old debt will be written off as uncollectible, the Supreme Court’s decision will likely make consumer debt a more valuable commodity based on the assumption that a greater percentage of that debt will be collected in bankruptcy proceedings. Sotomayor had specifically predicted that “debtor collectors may file claims in bankruptcy proceedings for stale debts and hope that no one notices that they are too old to be enforced.”

In light of the Supreme Court’s decision, bankruptcy debtors should be extra vigilant about reviewing claims filed in their bankruptcy cases to determine whether a statute of limitations affirmative defense can be asserted. Conversely, creditors should not become too comfortable because, even though the Supreme Court’s decision precludes FDCPA liability for filing time-barred bankruptcy claims, the Supreme Court expressly declined to extend its holding to creditors who assert time-barred claims outside of bankruptcy.

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

 

Supreme Court Holds Oral Arguments as to Whether EEOC has Duty to Conciliate in Good Faith Before Filing Lawsuit

Posted on: February 5th, 2015

allegory of JusticeBy: Bill Buechner

The United States Supreme Court held oral argument in January regarding whether the EEOC’s decision to file a lawsuit rather than continue the conciliation process is subject to judicial review, and if so, what the standard of review should be.

 At issue is Title VII’s requirement that, if the EEOC determines that there is a reasonable basis to believe that unlawful discrimination has occurred, it must “endeavor to eliminate any such alleged unlawful employment practices by informal methods of conference, conciliation, and persuasion.” 42 U.S.C. § 2000e-5(b).   Title VII’s enforcement scheme provides that the EEOC may file a lawsuit only if the EEOC has been “unable” to secure from the employer a conciliation agreement that is “acceptable” to the EEOC. 42 U.S.C. § 2000e-5(f)(1).

Employers have suspected that, in certain cases, the EEOC is not genuinely attempting to conciliate a charge, but rather would prefer to file a lawsuit for strategic reasons or to advance policy goals.  This is especially true given the EEOC’s stated emphasis in recent years on pursuing class action lawsuits and lawsuits involving allegations of systemic discrimination.

Most circuits (including the Eleventh Circuit and the Ninth Circuit) have held that federal courts have the authority to review whether the EEOC has satisfied its statutory duty to conciliate a charge before filing a lawsuit.  These circuits have disagreed, however, as to what level of review to apply.  Some circuits (including the Eleventh Circuit) have applied a more rigorous level of review to ascertain whether the EEOC has engaged in legitimate negotiations with the employer, whereas other circuits have applied a more deferential standard of review that simply requires the EEOC to show that the employer rejected its initial conciliation demand.  The Supreme Court is reviewing a 2013 Seventh Circuit decision, which held that federal courts do not have the authority to review at all whether the EEOC has satisfied its duty to conciliate before filing a lawsuit.  Mach Mining v. Equal Employment Opportunity Commission, Case No. 13-1019.

During oral argument (see transcript here), several justices expressed skepticism with the EEOC’s position that its conciliation efforts should not be subject to judicial review.  However, the justices appeared to be struggling with what standard of review to apply.  Some justices expressed reluctance with applying a standard of review that is too searching, given the discretion Title VII gives to the EEOC with respect to the conciliation process.  Of course, one cannot make predictions as to how the Court might rule based on comments or questions posed by the justices during oral argument.    The Court will issue its ruling by the end of June.

Employers should keep in mind that an employer’s successful assertion of a failure to conciliate defense may only temporarily delay an EEOC lawsuit while the EEOC satisfies its statutory duty to conciliate.  On the other hand, a failure to conciliate defense may be more significant where the EEOC is seeking to bring a class action lawsuit.

Are You Waiting to be Compensated for Your Time? (Part II): Supreme Court Argument Update

Posted on: October 14th, 2014

84461309By Martin B. Heller and Nina Maja Bergmar

As we previously reported here, the United States Supreme Court is hearing a case regarding whether employees who work at an Amazon.com warehouse should be compensated for the time they spend waiting in a security line.  Last week, the Supreme Court held oral argument on this intriguing case which asks when a workday starts.

Arguing on behalf of Integrity and (surprisingly) alongside the Department of Labor, Attorney Paul Clement submitted that going through security at the end of the work day is not “indispensable” to a warehouse.  In contrast to the sharpening of knives at a butcher’s shop, Mr. Clement argued that screening is merely “part of the egress process” and something that a warehouse facility could do without. As such, he argued that the security line is more analogous to clocking out, which is a “quintessential postliminary activity under the Portal-to-Portal Act” and thus not compensable.

Counsel for Respondent, Attorney Mark Thierman, focused on whether the security screening constitutes a “principal activity.”  Mr. Thierman rejected Justice Antonin Scalia’s suggestion that a principal activity must be a standalone job, arguing that “the concept that it has to be a job in and of itself . . . is wrong.” In support of his argument, Mr. Thierman noted that, while employees are compensated for time spent receiving instructions, there is no such thing as a professional instruction receiver.

The direction the Court takes in this case will be of huge import to employers, especially those requiring security screenings. We will keep you updated on the decision, which likely will be rendered in 2015.

Courts Continue to Question Protections Afforded By Iconic Business Judgment Rule – Georgia Joins the Trend

Posted on: July 21st, 2014

465058199By: Michael Wolak, III

The business judgment rule is an iconic fixture in American corporate jurisprudence reflecting a strong judicial reluctance to question the business judgments of directors and officers.  In its classic form, the business judgment rule insulates a company’s directors and officers from liability for negligence in the discharge of their fiduciary duties for mistakes in the exercise of honest business judgment.  The rule’s underlying rationale is that it is not the function of courts to second guess the business decisions of those who are entrusted with management of the affairs of the corporation, if they arrive at a decision for which there is a reasonable basis, they act in good faith and exercise independent judgment, and are uninfluenced by any consideration other than what they honestly believe is in the best interests of the corporation.

 

Several cases over the past few years, however, reflect a judicial trend towards questioning, and in some instances diluting, the scope of the rule’s protections.  For example, while most jurisdictions have uniformly applied the business judgment rule to both directors and officers, federal district courts in California have continued to follow the 2011 decision in F.D.I.C. v. Perry, 2012 WL 589569 (C.D. Cal. Feb. 21, 2012), which held that California’s common law and statutory business judgment rule applies only to directors, not officers.  See, e.g., F.D.I.C. v. Faigin, 2013 WL 3389490 (C.D. Cal. July 8, 2013).  The Perry court observed that California’s statutory codification of the business judgment rule does not mention “officers” and concluded that the legislative history suggests that the exclusion of officers was intentional because officers are more knowledgeable of the company’s operations and affairs than directors.  The hallmark of the business judgment rule, however, is that courts are not equipped to second guess the business decisions made by those who manage the company’s affairs, which includes directors and officers.  Thus, the underlying rationale for the rule clearly applies to both directors and officers.

 

Other courts continue to clarify and limit the scope of protection afforded by the business judgment rule.  For example, directors and officers typically could prove that a challenged decision was made with the requisite due diligence with evidence that they engaged the advice of outside consultants or experts to assist them in making an informed decision.  The Third Circuit Court of Appeals, however, reversed the grant of summary judgment to directors of a failed non-profit based on application of Pennsylvania’s business judgment rule, despite similar evidence of due diligence.  In Official Committee of Unsecured Creditors v. Baldwin, et al., 659 F.3d 282 (3d Cir. 2011), the district court relied on evidence showing that the directors engaged the advice of outside counsel and considered several options before making the challenged decision to file bankruptcy.  While acknowledging that this evidence could support application of the business judgment rule, the Third Circuit reversed and held that plaintiffs presented evidence demonstrating that the Board received several red flags as to the diligence and competence of two senior officers it relied on in making the decision to file bankruptcy, and eschewed a viability study.  This opinion underscores the need for directors and officers to ensure that each and every component of their decision is fully informed by all material facts available to them.

 

Georgia has now joined this growing trend of judicial questioning and clarification of the business judgment rule’s protections.  On July 11, 2014, the Georgia Supreme Court in F.D.I.C. v. Loudermilk, et al., (Case No. S14Q0454) answered the following question certified by Judge Thomas W. Thrash of the Northern District of Georgia:  Does the business judgment rule in Georgia preclude as a matter of law a claim for ordinary negligence against the officers and directors of a bank in a lawsuit brought by the FDIC as receiver for the bank?  In a comprehensive opinion written by Justice Keith R. Blackwell, a unanimous Georgia Supreme Court answered this question with a qualified negative, holding that “the business judgment rule precludes some, but not all, claims against bank officers and directors that sound in ordinary negligence.”  In enunciating a more “modest” business judgment rule, the Court first reaffirmed that the business judgment rule is a settled part of Georgia common law and that the rule has not been abrogated by Georgia statutory law.  While the Court made clear that the business judgment rule precludes ordinary negligence claims against officers and directors concerning “only the wisdom of their judgment,” the rule is not an absolute bar to ordinary negligence claims alleging that the challenged decision was made without deliberation or requisite due diligence, or in bad faith, thereby overruling Flexible Products Co. v. Ervast, 284 Ga. App. 178, 643 S.E.2d 560 (2007) and Brock Built, LLC v. Blake, 300 Ga. App. 816, 686 S.E.2d 425 (2009), which recognized an absolute bar against all claims premised on a want of ordinary care.  Although Loudermilk involved only bank officers and directors, the Court emphasized its desire to avoid “needless uncertainty” and overruled Flexible Products and Brock Built as to bank and non-bank officers and directors.

 

Whether other jurisdictions will be informed by the Georgia Supreme Court’s decision remains to be seen, but we can likely expect the FDIC and other plaintiffs litigating outside of Georgia to urge their respective courts to adopt the Georgia decision or to look to it for persuasive authority and guidance.  Here in Georgia (or cases in which Georgia law governs), the immediate impact of the decision is that it will now be more difficult for directors and officers to have ordinary negligence claims dismissed at an early stage, especially since sophisticated plaintiffs will not likely challenge merely the wisdom of the business decision.  Directors and officers may feel pressured to settle early to avoid the expense of discovery and protracted litigation, as well as the related risk and uncertainty of defending against mere negligence claims, as opposed to the higher standard of gross negligence.  In the meantime, any future expansion of the protections afforded to officers and directors in Georgia will have to be provided by the Georgia legislature.

 

If the judicial trend towards limiting the business judgment rule’s protections continues, directors and officers will continue to face increased liability exposure.  Whether or not this trend is short-lived, directors and officers should take appropriate steps to maximize the applicability of the business judgment rule to their future decisions, with the view that every business decision will be scrutinized in the future by disgruntled shareholders or creditors.  These steps should include, but are not limited to:

  • Ensuring that each decision is made with due consideration of the interests of shareholders, creditors, and other interested parties
  • Ensuring that each decision has the benefit of outside expert or other professional advice
  • Ensuring that all available material facts are considered and the decision is informed by those facts
  • Ensuring active participation by all directors, especially independent/outside directors
  • Ensuring that all available options or alternative transactions are considered
  • Ensuring that each decision is the product of active and comprehensive deliberation
  • Ensuring that board minutes and other documents accurately memorialize the deliberations, considerations, judgment-calls, rejected alternatives, and written materials that inform the decision