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Archive for October, 2014

Is it Legal to Involuntarily Quarantine People Exposed to Ebola?

Posted on: October 30th, 2014

By: Kevin R. Stone

Recently, a nurse who was exposed to Ebola in West Africa was involuntarily quarantined in a New Jersey hospital. She was then released back to her home in Maine. Although she tested negative for Ebola and displays no symptoms, Maine officials want her to remain quarantined in her home until the 21-day incubation period has passed. Similarly, in Georgia, people who have had contact with an Ebola patient are required to undergo quarantine, even if they show no symptoms. Although quarantine of people exposed to Ebola may provide relief to millions of Americans who are fearful of an unstoppable outbreak, it raises concerns of whether American citizens—especially those who are asymptomatic—can be involuntarily deprived of their liberty.

The federal government, through the CDC, has broad statutory authority to quarantine persons suspected of carrying communicable diseases if they travel inter-state or arrive in the United State from abroad. Likewise, every state has the power to protect the health, safety, and welfare of people within its borders. For example, in Georgia, the government has the authority to isolate persons with communicable diseases likely to endanger the health of others. It may require quarantine of persons who are simply exposed to or suspected of being infected with infectious disease until they are found to be free of the disease.

These laws provide governments with broad discretion to impose involuntary quarantines. However, quarantined individuals are not left without a remedy. They may, in Georgia for example, challenge the quarantine order before a judge who may either uphold or suspend the order. Either party may appeal the order to the Georgia Supreme Court. This process illustrates the delicate balance between the government’s interest in protecting its citizens from deadly disease and individuals’ interest in preserving their rights.


Internet Defamation: Parents Can Be Held Liable for Children’s Facebook Posts

Posted on: October 16th, 2014

By: Wayne S. Melnick

One of the newest and most quickly developing areas of tort liability is regarding torts committed over the internet. The most common “traditional” tort that occurs (or is alleged to have occurred) when it comes to social media posting is for defamation. A recent case is Georgia has just affirmed the potential for parental liability for the posts made by their children in this “wild west” frontier of internet tort liability.

In Boston v. Athearn, 2014 WL 5068649 (Georgia Ct. of App. Case No. A14A0971, decided October 10, 2014), the Georgia Court of Appeals reversed (in part) a trial court decision granting summary judgment to the defendants and sending the case back for trial. In Boston, Alexandria (“Alex”) Boston, through her parents, brought suit against Dustin Athearn, his parents, and other defendants when, posing as Alex, Dustin created a Facebook account and profile and posted photographs and statements in that forum that constituted libel under Georgia law. In a nutshell, Dustin and a female friend of his used the Athearn family computer to create the account and made posts that indicated racist viewpoints and a homosexual orientation. Dustin and the friend also sent out “friend” requests to many of Alex’s classmates, teachers, and extended family members. Within a day or two, the account was connected as Facebook “friends” with over 70 people. Dustin and the friend continued to add information and posted status updates and comments on other users’ pages that were graphically sexual, racist, or otherwise offensive; with some falsely stating that Alex was on a medical regimen for mental health and that she took illegal drugs.

When Dustin’s parents were informed (after the truth was discovered at school), they disciplined Dustin and forbid him for one week from seeing his friends after school. Critically, the unauthorized page, however remained accessible on Facebook for an additional 11 months and was eventually deactivated by Facebook officials approximately 2 weeks after the lawsuit was filed. During the 11 months the unauthorized profile and page could be viewed, the Athearns made no attempt to view the unauthorized page, and they took no action to determine the content of the false, profane, and ethnically offensive information that Dustin was charged with electronically distributing. They did not attempt to learn to whom Dustin had distributed the false and offensive information or whether the distribution was ongoing. They did not tell Dustin to delete the page, they made no attempt to determine whether the false and offensive information Dustin was charged with distributing could be corrected, deleted, or retracted.

In reversing the grant of summary judgment to Dustin’s parents, the appellate court found that there were questions of fact to be resolved by a jury whether Dustin’s parents were “negligent in failing to compel Dustin to remove the Facebook page once they were notified of its existence.” This theory of liability was not grounded in vicarious liability, but rather direct liability – whether Dustin’s parents were, themselves, negligent in failing to supervise and control their child with regard to conduct which posed an unreasonable risk of harming others. The court grounded the potential liability not in the parents’ allowing Dustin original access to the internet, but rather, because they continued to be responsible for supervising Dustin’s use of the computer and Internet after learning that he had created the unauthorized Facebook profile.

This case opens a very potentially slippery slope to parents and what they might be held legally responsible for once they learn of the harm their child is causing on the internet. The message is clear – once parents know their child has done harm with digital weapons, it is incumbent upon the parents to end the harm or potentially face ultimate liability for failing to do so. We will continue to watch this case and see if, after trial, liability is ultimately laid at the feet of the parents.

FINRA Continues Push for Massive, All-Encompassing Securities Transaction Database

Posted on: October 10th, 2014

By: John H. Goselin, II

On September 30, 2014, FINRA issued NTM 14-37  which updated FINRA’s December 2013 proposal (see NTM 13-42 )to develop the Comprehensive  Automated Risk Data System (CARDS).   FINRA proposes to compile a database that tracks every security transaction undertaken within the United States.   It will take years to obtain regulatory approval and implement the CARDS program, but upon completion it will rival what the National Security Administration (NSA) purportedly is doing with analyzing email communications.   By requiring all carrying and clearing firms to periodically submit, in an automated and standardized format,  data relating to the securities and account transactions, holdings, account profile information (excluding personal identifying information) and securities reference data for every securities transaction undertaken by every broker-dealer in the United States, FINRA apparently believes  CARDS  will ultimately permit FINRA to more systematically monitor securities transactions, enhance FINRA’s oversight role and advance investor protection.  The goal is to apply advanced surveillance analytics across the wide expanse of securities transactions and facilitate earlier, and arguably more effective, intervention to protect investors.  As a carrot to help get industry buy-in for CARDS, FINRA even proposes to “share” at least some of these advanced analytics with member firms to enhance supervision and compliance before the regulator feels compelled to intervene and the Firm’s liability costs increase.

CARDS, however, presents a number of problems.  Indeed, the initial proposal resulted in more than 800 comment letters from across the industry.   Cyber security is at the top of the list of concerns for those commenting on the proposal.  The ability of FINRA to protect CARDS and the massive amount of customer data that will be funneling through the system remains subject to much debate.  It should be clear to everyone that a comprehensive database of the nature proposed by FINRA is certain to draw the attention of those countries intent on spying on and/or attacking the U.S. (Russia, China, North Korea, etc.), cyber-terrorists and plain old-fashion thieves.   What is not clear is who will answer to the customers – FINRA or the broker-dealers – when the inevitable security breach occurs.   A second major concern is the uncertain, but likely substantial costs, the 4,100 member firms will incur to both standardize and submit data for use in CARDS.

Yet, the most valuable of CARDS’ purported benefits will be deferred until some uncertain date in the future, and only after a second round of un-quantified costs have been incurred.  CARDS will not, as presently contemplated for its initial stages, be collecting data on the products that FINRA considers the highest risk to retail investors and in the most need of enhanced surveillance and enforcement activity.   Data regarding variable annuities, private placements, direct participation programs, PIPES, non-exchanged traded REITS, unregistered securities, precious metals and direct mutual fund transactions will not  be collected in Phase 1 or 2 of CARDS implementation.  Rather, given the substantial complexities and costs associated with attempting to gather data on these products, FINRA proposes to defer consideration of the who, what, when and where of how CARDS could ever effectively and efficiently aggregate the data that FINRA most needs to some date several years in the future and after substantial investment has already been made into CARDS.    Thus, CARDS will create substantial immediate costs, but without substantial, immediate benefits to consumer protection.

NTM 14-37 requests further industry commentary regarding the revised CARDS proposal.  The comment period is set to expire on December 1, 2014.  And FINRA has been talking directly to clearing firms and industry participants to try to refine its proposal.  Leading industry groups, such as the Financial Services Institute (FSI), are attempting to work with FINRA to more fully shape the CARDS concept.   Once a final proposal for CARDS is prepared, FINRA will need to submit CARDS to the Securities and Exchange Commission for approval before FINRA can implement it.


Insurance Drones: Using Modern Technology to Capture Tough-to-Obtain Data

Posted on: October 9th, 2014

By: Wayne S. Melnick

Last year, I blogged on the possible legal and insurance ramifications of law enforcement drone usage.  The topic of drone-usage in the insurance world again came to the forefront of news when last week USAA asked the Federal Aviation Administration for permission to test drone aircraft for use in future claims assessments.

According to this article, the San Antonio-based insurance company who specializes in coverage for military families “wants to begin testing small, unmanned aircraft systems that can record data over areas that have been damaged as the result of a natural disaster.”  According to Alan Krapf, president of USAA’s property and casualty insurance group, “We’re constantly seeking ways to better serve our members, especially during catastrophes, when getting into neighborhoods immediately after can be dangerous to human life, and applying new technologies is one way we can do that.”

The use of the drones is obvious in that not only could the drones be used to survey large areas affected by natural disaster, but it could also to allow the viewing of otherwise hard to get to areas – such as viewing rooftops suffering hail damage or other property damage claims.  USAA says it has teamed up with Texas A&M University in School Station and Robotocists With no Borders to study how to use drones for its insurance organization.  According to Kathleen Swain, USAA employees underwriter and FAA-rated business pilot and flight instructor, quoted in this article, “We believe this investigation can lead to safer, quicker and far more economical claims service for our members and their communities.  This research could lead to market breakthroughs that assist make an very hard time for individuals a minor simpler.”

The use of drones continues to be a new frontier in insurance examination.  How much expansion will be allowed is, at least for the time-being, subject to FAA approval.  It is expected that as new and creative uses for this tool becomes available, that insurers will continue to seek further expansion of drones use in investigating claims.

California Law Will Provide Paid Sick Leave to Employees

Posted on: October 6th, 2014

By: Frank H. Hupfl, III

Last month, California joined Connecticut and a growing number of municipalities that require employers to provide paid sick leave for employees.  The law, known as the Healthy Workplaces, Health Families Act of 2014 (the “Act”), provides employees with the ability to accrue at least three paid days of sick leave annually.  The law is due to go into effect on July 1, 2015.

Under the Act, employees who work for thirty or more days within a year are entitled to receive paid sick leave.  The leave accumulates at a rate of not less than one hour for every thirty hours worked.  Other key provisions include a notice posting requirement for employers and a three year record retention policy regarding hours worked, paid sick time accumulated and paid sick time actually used.  Importantly, employees must be allowed to use sick time for a family member’s illness as well.

By enacting the law, California becomes the second state to require that employers provide paid sick leave for employees.  New York City, San Francisco and Newark, New Jersey are just a few of the municipalities that already provide similar benefits and this fall, voters in Massachusetts and several other municipalities will decide similar measures requiring paid sick leave.  Interestingly, the United States is the only country among the twenty-two “richest” countries that does not guarantee workers some form of paid sick leave according to a 2009 Center for Economic Policy Research study, but that trend may be changing.

Businesses with employees based in California should review their policies and procedures prior to the July 1, 2015 effective date to ensure compliance with the new law.  Failing to do so could prove pricey; the Act includes penalties for non-compliance ranging up to damages in the thousands of dollars per violation.  As always, be sure to check back with us for any updates on what might be an emerging national trend.