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California Lawyers Who Ignore Lienholders Do So At Their (Disciplinary) Peril

Posted on: October 20th, 2020

By: Greg Fayard

In personal injury law, California lawyers regularly must deal with medical liens. For example, lienholders have certain rights to proceeds from a settled case and expect to be paid. In the past, if a California lawyer ignored or mishandled a medical lien on personal injury proceeds, the lienholder could pursue the attorney for the amount owed.

But now, under Rule 1.15 of the Rules of Professional Conduct, California lawyers can now be disciplined for ignoring or mishandling lienholder rights. That is, money from a California lawyer’s client trust account can only be released to the client or a lienholder if there is NO dispute as to who gets what.

Until the dispute over the personal injury funds is resolved, California lawyers have to keep the money in their client trust account. If a lawyer does not do this, and disburses funds that were supposed to go to a lienholder, the lawyer can now be disciplined by the State Bar. This means a California lawyer who is not careful with handling medical liens now is subject to both civil and disciplinary exposure.

If you have any questions or would like more information, please contact Greg Fayard 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.

Seeking Sanctions Against a Dishonest Plaintiff

Posted on: October 19th, 2020

By: Jennifer Adair

Sanctions for discovery abuses are not a weapon reserved for the plaintiff, and defense attorneys should not shy away from pulling this arrow from their quiver when misrepresentations by the plaintiff are so egregious that a vigorous cross-examination at trial simply will not suffice. Rather, defendants should consider whether to petition the court for the relief necessary to obtain a just result.

In two recent automobile accident cases in Georgia, our firm encountered plaintiffs who claimed both in written discovery and in depositions that they never experienced prior similar injuries. Through the diligent pursuit of medical and claim records, we uncovered that both had extensive relevant medical histories – even to the extent of surgery! – which they concealed from the defense.  Not only did the plaintiffs misrepresent their medical histories, but they failed to disclose those providers whose records would expose their dishonesty.  Those deceptions went to the very heart of the case – whether the motor vehicle accident at issue was the cause of the injury alleged.

Time after time, courts have authorized sanctions for false and misleading discovery responses, up to and including striking the pleading of the offending party. The courts have recognized that a false discovery response is graver than a total failure to respond because the other party may never learn that the response it received is false.  Counsel should carefully consider the issues faced in each case, and the laws of each jurisdiction, to craft proposed sanctions that address the specific harm caused by the plaintiff. In the examples above, we requested, in the alternative:

  • Striking of plaintiff’s complaint
  • Precluding plaintiff from offering any evidence or testimony as to the condition about which she was dishonest
  • Striking plaintiff’s causation experts, who were not accurately informed of her medical history
  • Precluding plaintiff from cross-examining defense causation experts
  • A limited reopening of discovery as to the subject matter of the false response
  • A jury charge on spoliation
  • Attorney’s fees and expenses
  • Finding plaintiff in contempt of court

In both matters, we were successful in persuading the trial court to preclude the plaintiffs from giving any testimony or other evidence of any condition for which they lied about prior treatment. In effect this prevented each from offering evidence of or obtaining any recovery whatsoever for multiple surgeries. The remedies available in other jurisdictions vary, but the policy reasons for awarding such sanctions hold consistent. Similarly, while a personal injury case more frequently lends itself to similar dishonesty, the obligation to provide truthful discovery responses is universal and sanctions should be considered as a strategy any time the opposing party lies.

Faced with a dishonest plaintiff, defendants and their attorneys should carefully consider which cases are appropriate for requesting sanctions. Cases involving a legitimate misunderstanding or a highly nuanced discrepancy are unlikely to evoke a harsh response. Further, if the plaintiff is not aware that the defendants have learned he was dishonest, there may be a strategic advantage to saving the information for use at trial as impeachment so that the plaintiff will not have an opportunity to get his story straight. Seeking sanctions is a strategic decision for attorneys and their clients, but can be an important tool in combatting the unscrupulous plaintiff.

For more information, please contact Jennifer Adair at [email protected].

Keeping Politics Out of the Office: First Amendment Considerations for Public Employers In the Age of Social Media

Posted on: October 13th, 2020

By: Taryn Haumann

As we approach another hotly contested presidential election, Americans are frequently turning to social media to share their political ideologies or engage in debates. In the weeks leading up to the election, as well as the days immediately following, employers could see conflict arise in the workplace relating to their employees’ postings on social media. For public employers, the decision on how to handle these situations becomes even more complicated due to the employees’ First Amendment protections.

On October 6, 2020, a Sixth Circuit three-judge panel in Bennett v. Metropolitan Government of Nashville, No. 19-5818, weighed in on this scenario. In Bennett, the court held that a public employee’s use of a racial slur when discussing politics on Facebook was not sufficiently protected by the First Amendment, and the speech did not outweigh the government agency’s interest in having an efficient workplace and effectively serving the public.

The court’s ruling overturned the U.S. District Court’s determination that a 911 operator’s use of a racial slur when discussing the groups of voters who supported Donald Trump was protected political speech that outweighed the government’s interest in policing her conduct. Following the 2016 presidential election, the employee posted a response to a comment on her public Facebook page celebrating Trump’s victory. The employee, who was White, used a racist slur historically used to demean Black people, while also stating that “rednecks” and “[L]atinos” voted for Trump. Following the employee’s comments, her coworkers and members of the public complained to the Metropolitan Government of Nashville (“Nashville”).  Following paid administrative leave and a due process hearing, the employee was terminated, and she subsequently sued Nashville for retaliation under the First Amendment. 

The Sixth Circuit applied the balancing test outlined by the United States Supreme Court in Pickering v. Board of Education, 391 U.S. 563 (1968) to determine whether the employee’s interests in free speech outweighed the government employer’s interest in efficiency in the workplace. In deciding the employee’s comment was not sufficiently protected speech, the court considered the following factors: whether the statement disrupts harmony among co-workers or impairs supervisory discipline, has a determinantal impact on close working relationships, impedes the performance of the employee’s duties or the workplace’s general operation, or undermines the employer’s mission.

In short, the employee’s derogatory comments caused an uproar in the workplace, and the district court failed to fully consider the importance of harmonious relationships in the workplace. The employee’s post caused “substantial” disruption and increased stress levels across the entire agency. The employer even brought in counselors to address the tension. The court recognized the employer had an undeniable interest in maintaining an effective workplace, promoting employee harmony, and efficiently serving the public, which ultimately outweighed the employee’s interest in using racially offensive language in a Facebook comment.

Whether you are a public or private employer, it is important to remind your employees to be cognizant of what they post on social media—particularly if their profiles are public. For employers, one of the best tools is to include a social media policy in your employee handbook that adequately addresses the complexities of social media in the modern workplace. For instance, it can be helpful for an employee to decline to identify herself as an employee of your organization, or for the employee to post a “disclaimer” that her opinions or views expressed are those of the employee and not the employer. However, as seen in Bennett, certain postings can still cause major disruption in the workplace and negatively reflect on the employer.

If you have questions about an employee’s social media presence, or would like to discuss implementing social media policies at your place of business, please contact Taryn Haumann directly at [email protected].

Eleventh Circuit Rejects Class Action Representative’s Incentive Award

Posted on: October 12th, 2020

By: Matthew Foree

The Court of Appeals for the Eleventh Circuit recently confronted the issue of incentive awards commonly given to class representatives as part of class-wide settlements. The court held in Johnson v. NPAS Sols., LLC, which can be found here, that such an award was inappropriate. 

Plaintiff Charles T. Johnson filed the underlying case as a Telephone Consumer Protection Act (“TCPA”) class action. The case proceeded to the settlement phase during which Johnson moved to certify the class for settlement purposes. The trial court preliminarily approved the settlement and certified the class. The court also appointed Johnson as the class representative and permitted him to petition the Court to receive an amount not to exceed $6,000 as an incentive award to acknowledge his role in prosecuting the case on behalf of the class members. Such awards are common in the class action context. 

After the class members were notified of the settlement, only one class member, Jenna Dickenson, objected to the settlement. This class member, the appellant in the Eleventh Circuit case, objected to the settlement on various grounds, including that the incentive award contravened U.S. Supreme Court precedent and created a conflict of interest between Johnson and the other class members. The trial court overruled the objection and approved the settlement. Dickenson filed the present appeal.

In reviewing the issue, the Eleventh Circuit considered Dickenson’s argument that the trial court’s approval of the incentive award contravened Supreme Court precedent. The court considered the two cases that Dickenson relied on, both of which were decided in the late 1800s.  See Trustees v. Greenough¸105 U.S. 527 (1882) and Central Railroad & Banking Co. v. Pettus, 113 U.S. 116 (1885). The Eleventh Circuit determined that Greenough and Pettus established limits on the types of awards that attorneys and litigants can recover. Specifically, the Eleventh Circuit determined that Greenough and Pettus provide a rule that a “plaintiff suing on behalf of a class can be reimbursed for attorneys’ fees and expenses incurred in carrying on the litigation, but he cannot be paid a salary or be reimbursed for his personal expenses.” The court analogized an incentive award for a class representative to a salary for “personal services” prohibited by the Supreme Court. Interestingly, the court stated that modern-day incentive awards present more pronounced risks than salary and expense reimbursements, as they not only “compensate class representatives for their time (i.e., as a salary), but also to promote litigation by providing a prize to be won (i.e., as a bounty).” Accordingly, the court reversed the lower court’s approval of the incentive award.

The Eleventh Circuit’s decision in Johnson comes as somewhat of a surprise, given the proliferation of incentive awards in the TCPA class action context. It remains to be seen how broadly this case will be interpreted and whether other courts will use this reasoning to prevent such awards. It also remains to be seen how this will affect the “incentive” for individuals to serve as class representatives, at least in cases in the Eleventh Circuit.

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

Pandemic Brings Increase in Ransomware Payments Prompting New Advisories from OFAC and FinCEN on Sanctions Risks

Posted on: October 12th, 2020

By: Caitlin Tubbesing

On October 1st—the first day of National Cybersecurity Awareness Month—the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) and Financial Crimes Enforcement Network (FinCEN) warned companies working with victims of ransomware attacks of potential sanctions for facilitating ransomware payments. Ransomware attacks have increased during the COVID-19 pandemic and the resulting shift to remote operations as cyber actors target online systems companies rely on to conduct business. The guidance provides a timely warning to cyber insurers, digital forensics, and financial services institutions that payment of a ransom to a sanctioned jurisdiction or individual may be a violation of OFAC regulations and federal law which could result in sanctions.

As a part of its sanctions program, OFAC has a database of designated malicious cyber actors, including perpetrators of ransomware attacks and facilitators of ransomware transactions, and imposes sanctions on those “who materially assist, sponsor, or provide financial, material, or technological support for these activities.” Pursuant to the International Emergency Economic Powers Act  and the Trading with the Enemy Act, individuals and entities are prohibited from engaging in direct or indirect transactions with those on OFAC’s Specially Designated Nationals and Blocked Persons List, in addition to other blocked persons, and those covered by a national or regional embargo. OFAC may impose civil penalties for violating these federal laws irrespective of whether it was known or there was even a reason to know it was engaging in a transaction with a prohibited individual, entity, or jurisdiction.  

The sanctions are intended to target and temper the proliferation of ransomware attack payments, which implicate significant national security concerns. Payments made to sanctioned persons or jurisdictions could be used to fund activities adverse to American interests and policy objectives. Payments may also encourage cyber actors to continue to engage in these attacks. In addition to the national security nexus, OFAC observed that payments are no guarantee that access to stolen data will be restored to the ransomware attack victim.  

Companies working with ransomware attack victims should account for the sanctions risks associated with ransomware payments and implement a risk-based compliance program incorporating the following five components: (1) management commitment; (2) risk assessment; (3) internal controls; (4) testing and auditing; and (5) training.  Victims and companies involved in responding to ransomware attacks should also report attacks to OFAC and law enforcement and are encouraged to cooperate with law enforcement before and after the attack. Financial companies responsible for facilitating ransomware payments should determine whether filing a Suspicious Activity Report (SAR) with FinCEN is proper or required.

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

Additional Information:

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**