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Litigation Funding – The Struggle to Peek Behind the Curtain

Posted on: October 17th, 2019

By: Joshua Ferguson

Continuing a nationwide trend, this past month the U.S. District Court for the District of New Jersey rejected a discovery request into the plaintiff’s litigation funding arrangements. Re: Valsartan N-Nitrosodimethylamine Litigation, MDL Docket No. 2875, No. 19-2875, D. N.J., Camden Vicinage.

Litigation funding is where a third party provides the financial resources to enable Plaintiff’s litigation or arbitration cases to proceed. The litigant obtains all or part of the financing to cover its legal costs from a private commercial litigation funder, almost always with repayment at exorbitant interest rates.   It seems a natural conclusion that these same litigation funders would have an “interest” in the results of the outcome to secure their “risk”, but the courts have concluded otherwise on several occasions.

Similar to arguments in other matters involving concerns over litigation funding, defendant in the New Jersey District court action argued disclosure was necessary to determine whether the plaintiffs were the “real parties in interest” in the case.

The court noted a “plethora of authority” from courts across the United States concluding that such information is irrelevant to the claims and defenses at issue.

The “plethora of authority” includes numerous cases, including a 2019 decision in Northern District of California that noted that “the courts simply held that fee and litigation funding agreements could be discoverable when there was a specific, articulated reason to suspect bias or conflicts of interest.”  MLC Intellectual Property LLC v. Micron Technology, Inc., No. 14-cv-03657, 2019 WL 118595 (N.D.Cal. Jan. 7, 2019)

Until and unless the Government steps to slow litigation funding through regulation, any chance of success on securing discovery as to litigation funding will require actual proof of bias or conflict of interest.

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

‘Tis the Season. The HOA v. The Holiday Display

Posted on: October 15th, 2019

By: Nicole Graham

Piling the family in the car to drive through the neighborhood and see holiday displays is a time-honored tradition. With Halloween and the winter holiday season quickly approaching it is a good time to review the HOA’s guidelines on exterior, seasonal décor. Costly disputes between the HOA and an overly-festive homeowner may be avoided with clearly-expressed, seasonal guidelines that do not go beyond the scope of the HOA’s authority.
In Sainani v. Belmont Glen Homeowners Ass’n., 831 S.E.2d 662 (VA 2019), a fight over two strings of holiday lights between an HOA and homeowners went up to the Supreme Court of Virginia. The seasonal guidelines were intended to promote harmony in the community; avoid discourteous and unsafe conditions affecting property values; to avoid religious issues in the community; and to avoid the prolonged display of lights and decorations outside the respective holiday. The seasonal guidelines permitted “tasteful special decorative objects and lighting that are consistent with recognized Federal Holidays, Religious Holidays, Valentine’s Day and Halloween” for a specific length of time. The guidelines further required decorative lights be turned off by midnight each evening.

One home in the community displayed a string of lights on its front door and another string of lights on the railing along the back-deck in celebration of several Hindu, Sindhi, and Sikh religious holidays throughout the year. The HOA sent the homeowners letters outlining their violation of the seasonal guidelines.  The homeowners did not respond.  A hearing was held.  The homeowners did not appear. The review board who oversaw the hearing imposed a $10 per day fine for each day the violations went uncorrected for a period of up to 90 days. The homeowners did not correct the violations or otherwise respond.  Litigation ensued.

The homeowners argued the seasonal guidelines exceeded the HOA’s authority under its declaration of restrictive covenants and were thus unenforceable. The HOA claimed the seasonal guidelines were authorized by the declaration of restrictive covenants governing the community.

The Virginia Supreme Court sided with the homeowners and found the HOA’s justification for the seasonal guidelines was not reasonably related to any restrictive covenant and their enforcement was, therefore, arbitrary, capricious and unreasonable. The Court noted that restrictive covenants are to be construed most strictly against the grantor and persons seeking to enforce them, and substantial doubt or ambiguity is to be resolved in favor of the free use of property and against restrictions. The Court found none of the covenants in the declaration could be construed to authorize the seasonal guidelines. The only restrictive covenant that directly referenced exterior lighting was inapplicable because it merely prohibited directing exterior lighting outside the boundaries of the lot and causing any adverse visual impact to adjacent lots, whether by location, wattage or other features. The seasonal guidelines did not mention “adverse visual impact” and did not regulate location, wattage or other features. The seasonal guidelines only regulated the dates and number of days during which the residents may display decorative lighting. The Court concluded the seasonal guidelines exceeded the scope of the exterior-lighting covenant.

Both parties incurred far more in attorneys’ fees and costs than the $900.00 imposed by the HOA before the case was finally concluded. At the trial court level, the HOA had incurred approximately $40,000.00 in attorneys’ fees and costs to fight over two strings of lights it did not have the authority to regulate. For further information or questions, please contact Nicole Graham at [email protected].

U.S. SUPREME COURT HEARS ORAL ARGUMENTS IN TITLE VII SEXUAL ORIENTATION AND GENDER IDENTITY CASES

Posted on: October 11th, 2019

By: Bill Buechner

The United States Supreme Court heard oral arguments on Tuesday in three related and closely-watched Title VII cases. The question presented in the first two cases, which have been consolidated as Bostock v. Clayton County, ** is whether Title VII prohibits discrimination on the basis of sexual orientation. The third case, R.G. & G.R. Harris Funeral Homes, Inc. v. Equal Employment Opportunity Commission, et al., presents a related but different question as to whether Title VII prohibits discrimination on the basis of gender identity. A transcript of the Bostock oral argument in these cases can be reviewed here. A transcript of the Harris oral argument can be reviewed here, and audio of the oral arguments will be available by the end of the week on the Supreme Court’s website.

In Bostock, counsel for the employees argued that discrimination based upon one’s sexual orientation is a subset of sex discrimination. In an attempt to illustrate this point, counsel for the employees repeatedly cited a hypothetical example of a male employee who dates a female and is not terminated and a female employee who dates a female and is terminated. Counsel for the employers argued that sex and sexual orientation are different concepts and that the hypothetical invoked by the employees does not necessarily demonstrate sex discrimination because it changes two variables: the employee’s sex and the employee’s sexual orientation. Counsel for the employers also pointed out that the Court has always required an employee asserting a claim for sex discrimination under Title VII to demonstrate that one sex is being treated more favorably than the other sex.

The oral argument reflected what appeared to be a sharply divided Court, with justices on the liberal wing of the Court appearing to be sympathetic to the employees’ argument that discrimination based upon sexual orientation should constitute sex discrimination under Title VII. On the other hand, justices on the conservative wing of the Court appeared to agree with the employers’ argument that discrimination based upon sexual orientation is separate and distinct from sex discrimination, that it therefore is not protected by Title VII, and that its addition falls within the purview of Congress and not the Court.

In response to questions by Justice Samuel Alito, counsel for the employees conceded that if a decisionmaker decides not to hire an applicant because of the applicant’s sexual orientation and does not know the applicant’s sex at the time of that decision, then there is no viable claim for sex discrimination. Counsel for the employees also conceded that sexual orientation and sex are different concepts. These responses arguably provide further support for the employers’ contention that a ruling in favor of the employees would in effect be a judicial amendment to Title VII.

Justice Neil Gorsuch, who is generally regarded as a conservative justice, asked counsel for the employers whether sex may be at least a motivating factor along with sexual orientation, when an employer makes a decision based on sexual orientation. Counsel for the employers responded that sex is not even a motivating factor in that scenario. Justice Gorsuch later asked counsel for the employee in the Harris case whether a decision of this magnitude should be made by the legislature and not by the courts. In response, counsel for the employee asserted that there has not been any upheaval with respect to lower court rulings in favor of transgendered employees.

The arguments in Harris substantially overlapped the arguments made in Bostock, with even more focus on bathroom usage and whether (for example) prohibiting a biological male who identifies as female from using the women’s restroom violates Title VII. Counsel for the employee, Aimee Stephens, argued that the funeral home terminated her for identifying as a woman only because she was assigned the male sex at birth and for failure to comply with stereotypes about how men and women should behave. Counsel for the funeral home responded that sex and transgender status are different concepts and that a ruling in favor of the employee would invalidate all sex-specific policies based on sex, such as bathroom usage, showers, overnight facilities and dress codes.

Jeffrey M. Harris of Consovoy McCarthy in Arlington, Va. presented oral argument in Bostock on behalf of Clayton County and Altitude Express, Inc. (the employer in the second sexual orientation case). Stanford University law school professor Pamela S. Karlan presented oral argument on behalf of the employees in Bostock (Gerald Bostock and the estate of Donald Zarda). David D. Cole of the American Civil Liberties Union presented oral argument in Harris on behalf of the employee (Stephens). John J. Bursch of Alliance Defending Freedom presented oral argument in Harris on behalf of the funeral home. In addition, the U.S. Solicitor General, Noel Francisco, participated in oral argument in support of the employers in all three cases.

We anticipate that the Court will issue its ruling by the end of June.

** FMG attorneys Jack Hancock, Bill Buechner and Michael Hill represented Clayton County.

A Dog Walks Into a Bar with its Owner: Service Animals Welcome Accessories Please Leave at the Door

Posted on: October 9th, 2019

By: David Molinari

The Americans with Disabilities Act (ADA) provides people with disabilities equal access to employment, state and local government programs and goods and services.  Businesses open to the public including hospitality venues must comply with the ADA and are prohibited from discriminating against individuals with disabilities.  The ADA requires businesses (hospitality establishments) open to the public allow individuals to bring in their service animals even if the establishment has a “no pet” policy.

A trend encountered in the hospitality industry is clientele demanding the venue accommodate their pet who does not meet the requirements of a “service animal.”  Staff is often faced with an immediate decision that has rippling consequences; a possible violation of the ADA resulting in civil penalties, possible damages and an award of the opposing party’s attorney’s fees.

A service animal is any dog that is individually trained to do work or perform tasks for the benefit of an individual with a disability; including a physical, sensory, psychiatric, intellectual or other mental disability.  Service animals are working animals.  They are not pets.

Customers often blur the line with animals that provide emotional support, companionship or comfort.  These are not considered service animals because the animal does not perform a specific task associated with an individual’s disability.

The task performed by a service animal must be directly related to the disability of the person handling the animal.  Such tasks include, but are not limited to: guiding a person who is blind or has low vision, alerting a person with hearing loss, picking up or retrieving objects, alerting individuals to the presence of allergens, providing physical support or assistance with balance, assisting a person with psychiatric disabilities by interrupting impulsive behaviors.

For frontline staff dealing with customers in the hospitality industry, staff may not be able to immediately recognize a disability that is not obvious.  Therefore, staff should be trained to ask two questions: first, is the animal a service animal; and second, what task has the animal been trained to perform?

The hospitality venue and staff must refrain from asking about the nature or extent of the person’s disability, requesting the handler demonstrate the service animal’s task or requiring documentation proving the animal has been certified, trained or licensed.

A service animal must always be under the handler’s control.  Service animals must have harness, leash or other tether unless the handler’s disability prohibits such use or the animals’ task is adversely impacted by the use of a harness, leash or tether.

The hospitality venue must keep in mind that a service animal is a working animal; not a pet.  The staff must refrain from distractive actions around a service animal such as attempting to pet, feed or distract the animal.  Under no circumstances should the venue attempt to extract an extra fee or surcharge from a customer with a service animal.  This includes hotels that require a deposit for customers with pets, as well as restaurants, bars or other hospitality venues.

If a service animal is disruptive, threatening or not housebroken, the venue may ask the handler to remove the animal.  The venue must allow the individual with the disability the option of returning to the establishment without the animal.  Other customers who may have allergies or fears of dogs is not a valid reason for denying access to a disabled individual with a service animal.  The venue must try to separate the person with the allergy or other aversion from the disabled person with a service animal.

If further information is needed, please feel free to contact me at [email protected]; (619) 687-3000.

How Technology is Changing the Construction World

Posted on: October 8th, 2019

By: Aaron Miller

The construction industry is growing at an enormous rate.  The Bureau of Labor Statistics expects the industry to add over 800,000 jobs between 2016 and 2026, finishing top amongst goods-producing industries.  Part of the reason for such a high rate of growth in the construction industry is the advent of new technology which not only enables contractors to keep costs down, but has been a big factor in the construction industry being able to add more jobs at such a high rate.

One of the fastest-growing technological advancements assisting the construction industry are drones.  While lower-end models can cost a few thousand dollars, the upper models can cost anywhere from $10,000 to $15,000.  Although this may seem like a substantial cost, there are substantial cost-savings and benefits associated with the use of drones.  Drones can assist with multiple areas of construction, such as 3-D mapping for site surveying of unstable or inaccessible terrain, inspections of unsafe locations, and damage assessments.  It is expected that over the next few years, the influx of new models into the market will make the cost much more palpable, even for smaller projects.

While drones are readily available to assist in construction projects in the present, technology will drastically change the construction industry in the not so distant future.  Researchers at MIT are currently working on robots, called Fiberbots, a digital fabrication platform that utilizes a series of small robots that work cooperatively to create fiber-based structures.  While the robots have so far only built tubular structures that are more for show than utility, the structures did survive outside during the Massachusetts winter, proving that they could be used in the future on permanent construction projects. In addition, the robots would be able to reach tighter areas less suitable for a human worker.

With the advent of new technology, comes new legal concerns as well.  The use of drones and robots opens up users to a variety of new legal issues. For example, who is contractually responsible for the use of the technology, the provider or the purchaser?  Is additional training for construction workers required? How should risk be allocated if an injury or building defect occurs due to use of the advanced technology?  While the advent of AI and other new technology will no doubt benefit the construction industry, we can expect legal developments will follow.

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