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Open Government, Retaliation and Redress: Case Study from Florida

Posted on: December 6th, 2019

By: Michael Kouskoutis

Florida is well known for its robust public records law, where, upon receipt of a public records request, custodians of public records are required to promptly acknowledge the request, then permit the requested records to be inspected within a reasonable time. Unfortunately for custodians, Florida law does not define “reasonable time,” and awards attorney’s fees for unjustified delays or failures to respond. The 11th Circuit recently examined an interesting case involving a local government’s effort to protect itself against a devious scheme created to take advantage of these open government laws.

In DeMartini v. Town of Gulf Stream, et al., a not-for-profit corporation worked with a law firm to issue nearly 2,000 deliberately vague public records requests to a small Florida town, and then, when the town didn’t promptly or adequately respond, filed or threatened to file lawsuits against the town, demanding attorney’s fees and costs. The town, hemorrhaging attorney’s fees in defending against this scheme, decided to file a RICO action against the corporation. The RICO action made its way up to the 11th Circuit, where the Court, while troubled by the corporation’s scheme, denied the town’s motion for summary judgment on the basis that threatening to file litigation against a government could not trigger liability under RICO.

Soon after, the corporation’s director filed a § 1983 claim against the town, alleging that the town unlawfully retaliated against her when it filed the RICO suit to stop the records requests. In particular, the director argued that filing public records requests is a form of constitutionally protected speech. The trial court granted the town’s motion for summary judgment on the § 1983 claim, which after appeal, also made it to the Eleventh Circuit.

The Eleventh Circuit recently affirmed the grant of summary judgment. The Court reiterated that requesting public records and seeking redress from government is an activity protected by the First Amendment, but that because the town had probable cause to initiate the civil RICO case, the director’s § 1983 claim failed. The Court recognized that the town “had a legitimate interest and motivation in protecting itself, its coffers, and its taxpaying citizens.”

Robust open government laws maybe vulnerable to abuse, but as DeMartini illustrates, courts recognize a government’s ability to protect itself.

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

The Ethical Duty of Technology Competence – The Day is Coming in California

Posted on: December 5th, 2019

By: Renata Hoddinott

Recognizing the emergence of technology, its impact on the practice of law, and the importance of lawyers understanding technology, the American Bar Association modified its Model Rules in 2012 to make clear a lawyer’s duty of competence includes both a substantive knowledge of the law and the competent use of technology. ABA Model Rule 1.1 Comment 8 provides, in part, that, “to maintain the requisite knowledge and skill, a lawyer should keep abreast of changes in the law and its practice including the benefits and risks associated with relevant technology.”

Since then, 38 states* have now adopted some version of Comment 8. In 2016, Florida went even further and became the first state to require lawyers to complete three hours of continuing legal education on technology every three years. In 2019, North Carolina followed suit and requires lawyers to complete one hour of continuing education devoted to technology training every year.

But where California normally leads the nation in many areas, in this it is in the minority of hold-out states which have not adopted a version of Comment 8. While the State Bar of California’s Standing Committee on Professional Responsibility and Conduct has issued several opinions involving technology to date, California has not yet expressly referred to a technology component of a lawyer’s duty of competence in its Rules of Professional Conduct.

There are constantly emerging technologies to assist lawyers in delivering legal services to their clients. In the past, lawyers were deemed competent based on their experience and knowledge of a substantive area of law. As technology evolved, so too did the concept of competence. Types of  technology used  by today’s lawyers include the technology used to run a law firm and practice, case management software, billing software, and email, as well as data security to protect client confidentiality, technology used to present information to the court, electronic discovery, saving client information in the cloud and other third-party service platforms, and the use of social media such as Facebook, LinkedIn, and blogs. There is also the growing area of artificial intelligence or AI which is transforming the way lawyers and law firms perform legal research, due diligence, document review, and even more.

While these technologies offer many benefits to help increase efficiency, minimize mistakes, and decrease labor costs, there are also associated risks and pitfalls. Technology competence includes an understanding of the technology a lawyer currently utilizes in his or her practice, the additional technology available, and the technology that a client or prospective client uses or owns. Lawyers who are not technologically competent may be putting their clients and themselves at a disadvantage, as well as potentially risking a malpractice action in certain cases.

Attorneys must recognize the ways in which technology influences the practice of law in California. While it is not yet mandated as in many other states, that day is coming soon. And while technology continues to advance faster than developments in California law, lawyers should consider their duties of competence, diligence, supervision, and maintaining confidentiality when implementing and using technology.

*The states which have adopted some version of Comment 8 are: Alaska, Arizona, Arkansas, Colorado, Connecticut, Delaware, Florida, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nebraska, New Hampshire, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming.

If you have any questions or would like more information, please contact Renata Hoddinott at [email protected], or any other member of our Lawyers Professional Liability Practice Group, a list of which can be found at www.fmglaw.com.

Holiday Office Parties: Serving Up Both Cheer … and Fear!

Posted on: December 3rd, 2019

By: Melissa Whitehead

There is no doubt that the Holiday Season is in full swing – and that means workplace holiday parties! While these festive events are great for increasing workplace camaraderie and celebrating achievements of the year, they are more well known for the high risk of inappropriate behavior. Somehow, companies that spend all year working to create a positive, healthy and respectful workplace find themselves on a Monday morning in December, calling counsel to ask for guidance in addressing some incident that happened at the office holiday party over the weekend. Here are some tips and things to think about, in hopes that your company can avoid making that dreaded call to counsel that begins with, “So, we had our office holiday party on Friday and…”

To Serve Alcohol or Not to Serve? Alcohol consumption at office parties creates a number of risks for the employer. First, if an employee consumes too much alcohol at the party and makes the poor choice to drive home and gets in an accident, the employer in many states (including California) can be found liable for any damage caused by that employee (including injury to others). Further, and more common, alcohol lowers inhibitions and can make employees feel more comfortable saying and doing things that they would otherwise never do or say in the workplace. This is why holiday parties are a common ground for #MeToo moments and similar issues.

That said, the reality is that most workplaces will serve alcohol at their office parties. Some tips for reducing the risks that come with serving alcohol include: (1) have a bartender or server serving drinks (as opposed to an open bar); (2)  enforce a 2-drink limit per attendee (e.g., drink tickets); (3) pay for transportation home from the party or overnight accommodations; and (4) designate an executive or HR professional to “cut off” attendees that appear over-served. It is also a good idea to send a notice to employees in advance of the party, reminding them that the company’s anti-discrimination, anti-harassment, and rules against hostile work environment are all still in full force and effect during the office party.

To Pay or Not to Pay? Another common question is whether employees must be paid for their time at the holiday party. This generally boils down to whether attendance is mandatory. If an employee is required to attend the party, in most states it will likely be considered “time worked” and subject to minimum wage and overtime rules. This issue can be addressed by holding the party during normal working hours and paying employees for their time as with any other workday. Alternatively, employers should make clear that attendance is optional.

Of course, this blog does not raise or address all risks that come with the workplace holiday party, but following these helpful tips will help you avoid becoming the next viral sensation of the holiday season! Happy holidays!

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

Current Legal Issues Facing Supportive Housing Facilities

Posted on: December 2nd, 2019

By: Joseph Colette

FMG Partner H. Joseph Colette discussed “Current Legal Issues Facing Supportive Housing Facilities” at the Georgia Supportive Housing Association’s 9th Annual Supportive Housing Conference, held at the State Bar of Georgia from November 18th to 19th.

Supportive housing provides at-risk populations, including individuals with physical, mental, or developmental disabilities, veterans, and reentry individuals, with stable housing with needed support services, such as case management, housing, and reasonable accommodations, peer supports, education, training, and other services. Mr. Colette originally assisted the Georgia Supportive Housing Association (“GSHA”) in obtaining its non-profit 501(c)(3) status. The GSHA is a membership network of non-profit housing developers, service providers, statewide agencies and organizations, corporations, associations and individuals with a shared goal: strengthening housing resources in the State of Georgia. The vision of the GSHA is to have a Georgia where individuals with disabilities can choose the housing and supports they need to thrive, obtaining and ensuring their stability, autonomy, and dignity.

Mr. Colette’s presentation included a historical overview of the Fair Housing Act of 1968, Section 504 of the Rehabilitation Act of 1973, the Americans with Disabilities Act of 1990, and the U.S. Supreme Court’s decision in Olmstead v. L.C. Mr. Colette also discussed the evolution of these civil rights laws and insight into the variations in federal and statewide implementation and enforcement activity on the 20th anniversary of the Olmstead decision.

The Fair Housing Act of 1968 (“FHA”), which applies to landlords, realtors, mortgage brokers, insurance agents, zoning codes, etc., prohibits the discrimination in the rental, sale, advertising, design, insuring, and financing of dwellings, and in other housing-related transactions, based on membership in protected classes. The protected classes originally included: race, color, financial status, religion, sex/gender, and national origin. The FHA was amended in 1988 (see the Fair Housing Amendments Act of 1988 (“FHAA”)) to include disability as a protected seventh protected class.

Reasonable accommodations and modifications were also newly-established legal requirements of the FHA. A landlord could not unreasonably refuse to provide a reasonable accommodation of a rule, policy, or procedure to address the needs of a person with a disability, and could not unreasonably deny permission to a tenant to make a modification of the premises to address the needs of a person with a disability. Section 504 of the Rehabilitation Act of 1973, which imposes greater obligations than the FHA,  prohibits discrimination on the basis of disability in any program or activity that receives federal funds. The language of both the later enacted FHAA and the Americans with Disabilities Act of 1990 (“ADA”) are rooted in the Rehabilitation Act of 1973. Section 504 also requires recipients to make reasonable accommodations, including structural changes, to enable access to housing for people with disabilities.

The ADA provides federal civil rights protections to individuals with physical and mental disabilities and guarantees them equal opportunity in public accommodations, employment, transportation, state and local government services, and telecommunications. The integration of individuals with disabilities into the mainstream of society is fundamental to the purposes of the ADA. Title II of the ADA prohibits discrimination by public entities in services, programs, and activities on the basis of disability, and applies to all types of state agencies, counties, municipalities and cities, and executive, legislative, and judicial branches of state and local government.

The passage of the ADA resulted in a myriad of discrimination lawsuits, many of which went before the U.S. Supreme Court. For resolution of these cases, the Court was required to interpret the broad anti-discrimination provisions of the ADA in a variety of specific contexts while at the same time balancing such questions as states’ rights and the definition of disability. One such case was Olmstead v. L.C., 527 U.S. 581 (1999).

In Olmstead, the Supreme Court determined that individuals with disabilities had the right to receive supports in the community rather than in institutions when three conditions were met:

1) The treating medical professionals determined that a community setting was appropriate;

2) The person with a disability did not object to living in the community; and

3) The provision of services in the community was a reasonable accommodation.

All states were required to take steps necessary to serve individuals with disabilities in the community when the aforementioned conditions were met.

Virtually all of the cases after Olmstead involved attempts to place people from individual institutions into the community. The major legal controversies raised by these cases involved interpretation of what is referred to as the “fundamental alteration” defense. A public entity’s obligation under Olmstead to provide services in the most integrated setting is not unlimited.  Therefore, a public entity may be excused in instances where it can prove that the requested modification would result in a “fundamental alteration” of the public entity’s service system.  A fundamental alteration requires the public entity to prove “that, in the allocation of available resources, immediate relief for plaintiffs would be inequitable, given the responsibility the State [or local government] has taken for the care and treatment of a large and diverse population of persons with…disabilities.” See Olmstead, 527 U.S. at 604.

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

KPMG Owes No Damages to College For Not Detecting Student Loan Fraud Scheme

Posted on: November 22nd, 2019

By: Nancy Reimer

After a three-week trial, a Massachusetts jury held on November 19, 2019 that “big four” accounting firm, KPMG LLC, owed no damages to Merrimack College even though it was negligent and did not detect a former Merrimack employee’s student loan fraud during the years it audited the College’s financial statements. The employee did not personally benefit from the fraud but treated student aid given in the form of grants as loans and billed and collected from students for money they did not owe.

After discovery of the fraud, Merrimack’s then-Director of Financial Aid, Christine Mordach, plead guilty to mail and wire fraud.  Mordach began a one-year prison term in August 2014 and was ordered to pay $1.5 million in restitution to the victims of her fraud. The College filed suit against KPMG for failing to detect the major irregularities in the College’s financial statements between 1998 and 2004 arising from Mordach’s fraud.

The case is notable as it is the first known to go to verdict with a jury applying M.G.L. c. 112, § 87 ¾, a statute applicable only to licensed Massachusetts accountants and enacted by the Massachusetts Legislature in 2002. That statute provides in cases of fraud and an accountant’s attest services:

the trier of fact shall determine (a) the total amount of the plaintiff’s damages, (b) the percentage of fault attributable to the fraudulent conduct of the plaintiff or other party, individual or entity contributing to the plaintiff’s damages, and (c) the percentage of fault of the individual or firm in the practice of public accountancy in contributing to the plaintiff’s damages. Under these circumstances set forth in this section, individuals or firms in the practice of accountancy shall not be required to pay damages in an amount greater than the percentage of fault attributable only to their services as so determined.

Before the trial, KPMG had been awarded summary judgment when a trial judge ruled the in pari delicto doctrine barred recovery for the College. In pari delicto (latin for “in equal fault”) is an equitable doctrine which provides when a plaintiff is engaged in wrongdoing, and certainly fraud, a plaintiff cannot benefit by recovering damages from another alleged wrongdoer. The College appealed, and in May 2018, the Supreme Judicial Court of Massachusetts (“SJC”) reversed, ruling for the first time that in pari delicto could succeed as a defense only if the fraud was attributable to “senior management” and, most surprisingly, ruled that Mordach, even though she was the College’s Director of Financial Aid, was not a member of the school’s senior management.  Earlier this year SJC addressed in pari delicto again, overturning summary judgment for an accounting firm in Chelsea Housing Authority v. Michael E. McLaughlin, et al.  and ruling that M.G.L. c. 112, § 87 ¾ superseded the in pari delicto doctrine for Massachusetts licensed accountants for events after its enactment in 2002. After the Chelsea Housing Authority decision, in pari delicto is no longer available as an absolute defense to an accountant where a fraud is committed, and instead, an accountant’s liability is limited to his/her percentage of fault in contributing to the plaintiff’s damages.

The jury deliberated for one and one-half days before returning a verdict for KPMG.  The verdict slip provided a roadmap for how the trial judge interpreted M.G.L. c. 112, § 87 ¾ and its interplay with KPMG’s comparative negligence defense. In answering special questions, the jury found KPMG’s auditors had been negligent when conducting the College’s audits, but that the College was as well.  After being instructed Mordach’s fraud was not to be considered is assessing the College’s contributory negligence, the jury found KPMG’s negligence was only fifteen percent (15%) compared to the College’s eighty-five percent (85%). Although the College asked for damages exceeding $4 million, the jury found the College’s damages were only $100,000. The jury also answered questions under M.G.L. c. 112, § 87 ¾, finding the College suffered a total of $50,000 attributable to any negligence of KPMG for the two years when the statute applied, but that the percentage of fault attributable to KPMG was only seven and one-half (7.5) percent compared to  nine two and one-half (92.5) percent for Mordach. The result was a verdict in favor of KPMG, because under Massachusetts law of comparative negligence, a plaintiff whose own negligence is greater than fifty percent is barred from recovery.

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