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Archive for December, 2014

FINRA Puts the Vice Grip On Confidentiality Provisions Customer Settlements and Customer Arbitrations and Litigation

Posted on: December 10th, 2014


By: John Goselin

FINRA’s Notice to Members 14-40  revises the regulator’s position on the permissible scope and nature of confidentiality provisions that broker-dealers can agree to relating to the discovery process in legal proceedings or as a term in a settlement agreements ostensibly designed to resolve disputes and obtain peace. Although FINRA pays lip service to the concept that broker-dealers are free to enter into acceptable confidentiality provisions, FINRA has now staked out the position that any resolution with a customer that restricts the customer from initiating contact with a regulator is “inconsistent with just and equitable principles of trade” in violation of FINRA Rule 2010 and subjects the broker-dealer to a regulatory disciplinary action. Thus, NTM 14-40 dramatically re-writes the prior guidance provided by FINRA in 2004 in NTM 04-44

Prior to October 2014, a confidentiality provision was consistent with just and equitable principles of trade so long as the customer (or the customer’s lawyer) was free to respond to an inquiry from a regulator without requiring the regulator to obtain a subpoena or invoke some court process. Under the new guidance, the customer (or the customer’s lawyer) must be free to initiate contact with the regulators. NTM 14-40 provides the “magic words” which FINRA has deemed (at least for the moment) to be acceptable for confidentiality provisions:

Any non-disclosure provision in this agreement does not prohibit or restrict you (or your attorney) from initiating communications directly with, or responding to any inquiry from, or providing testimony before, the S.E.C., FINRA, any other self-regulatory organization or any other state or federal regulatory authority, regarding this settlement or its underlying facts or circumstances.

Why the sudden change in policy regarding the scope of confidentiality provisions? NTM 14-40 provides no hint as to the rationale. What is clear is that it just got more difficult for a broker-dealer to obtain a complete and final resolution of a customer dispute. Even after agreeing to a monetary settlement, a customer or a customer’s lawyer will be free to contact regulators in an effort to stir the pot and encourage the regulator to intervene in some manner in what the broker-dealer had hoped was a resolved issue.


Outsourced Labor? Temps? – New Statutory Liability for Companies Using Contract Workers

Posted on: December 5th, 2014

By: Sandra McIntyre

On January 1, 2015, California Labor Code section 2810.3 becomes operative.  It imposes civil liability on companies utilizing non-exempt workers provided by contractors to perform the regular and customary work of the company if the contractor fails to pay the worker’s wages or provide workers’ compensation coverage.  Legal responsibility for wages and workers’ compensation coverage is now shared regardless of whether the company had knowledge of the violations.  Moreover, the provisions of the statute cannot be waived and the worker is not required to first seek relief from the contractor.  However, the worker must give the company at least 30 days’ notice of the violations before filing a civil action against it.  The practical effect of this new statute is that a company is no longer able to deny liability for unpaid wages and/or the failure to provide workers’ compensation coverage by asserting it is not the employer of workers provided by a contractor.

Some businesses are exempt – the statute does not apply to: 1) a business with a workforce of less than 25 workers, including those provided by the contractor; 2) a business with five or fewer workers supplied by a contractor at any given time; or 3) the state or any political subdivision of the state, including any city, county, or special district.   Additionally, it does not apply to workers supplied by nonprofit, community-based organizations that provide services to workers, hiring halls, labor organizations or apprenticeship programs that operate pursuant to a collective bargaining agreement, or a motion picture payroll service company.

To address the new legislation, companies utilizing non-exempt contract workers should ensure their agreements specifically require the contractor to properly pay workers in accordance with California law and maintain valid workers’ compensation insurance coverage.  Those agreements should also require the contractor to defend and indemnify the company for any such failure.

Bart Gary’s Construction Law Handbook 2015 Edition is Now Available

Posted on: December 5th, 2014


Freeman Mathis &  Gary is pleased to announce that Bart Gary’s Georgia Construction Law Handbook, 2015 edition is now available. This is the third annual edition and is expanded to include new topics and recent developments. The 428-page book is devoted to construction law in Georgia, and is intended for all construction professionals as well as the legal profession. It is an organized reference to topics such as construction liens and bonds, typical contract clauses, and regulatory matters for contractors and design professionals. The book is available in either hardcopy or E-Book from ALM, a leading publisher for the legal profession.

For more information, and to purchase a copy of the handbook please, click here.

Author’s   Bio

 Table   of Contents 

11th Circuit Rules Cruise Lines Can Be Sued for Medical Malpractice

Posted on: December 3rd, 2014

By: Laura Broome

The 11th Circuit recently ruled that cruise ships may be sued for medical malpractice, negating any reliance by cruise ship companies upon the defense of immunity in cases of medical malpractice.  In Patricia Franza v. Royal Caribbean Caribbean Cruises, Ltd., 2014 WL 580229 (11th Cir. 2014), the 11th Circuit definitively recognized the right of cruise ship passengers to assert claims against cruise lines for vicarious liability for the medical negligence of the cruise ships’ employees.  This ruling is significant because many cruise ship lines are headquartered in Miami and contractually require their passengers to sue them in the Southern District of Florida, a part of the 11th Circuit.

In Franza, the daughter of a man who died as a result of a fall on the dock of a Royal Caribbean Cruises ship sued Royal Caribbean Cruises under a theory of respondeat superior for the purported negligent medical care her father received from a ship doctor and nurse.  Royal Caribbean Cruises filed a Motion to Dismiss, relying on a 1988 5th Circuit case, Barbetta v. S/S Bermuda Star, 848 F.2d 1364 (5th Cir. 1988).  The ship doctor and nurse Franza were deemed, at least at the stage of the instant motion to dismiss, to be employed by Royal Caribbean Cruises, as opposed to being independent contractors.

In Barbetta, the cruise line was found to be immune from any claim for negligent medical care asserted under a theory of respondeat superior.  This immunity was given regardless of “how clear the ship owner’s control over its medical staff or how egregious the claimed acts of negligence.”  Id.  In Franza, U.S. District Judge Joan Lenard of the Southern District Court of Florida granted the Motion to Dismiss filed by Royal Caribbean Cruises, applying the Barbetta rule.  The 11th Circuit reversed Lenard, noting there was no binding precedent from the Supreme Court or the 11th Circuit concerning whether cruise lines can be held vicariously liable for the medical negligence of their employees.

Justice Stanley Marcus, writing for the 11th Circuit panel, rejected the Barbetta rule, noting that the “roots of the Barbetta rule snake back in to a wholly different world.  Instead of nineteenth-century steamships, we now confront state of the art cruise ships that house thousands of people and operate as floating cities, complete with well-stocked modern infirmaries and urgent care centers….And whereas ships historically went ‘off the grid’ when they set sail, modern technology enables distant ships to communicate instantaneously with the mainland in meaningful ways….In our view, ‘the reasons that originally led’ other courts to adopt ‘the rule have long since disappeared.’”  Id.

The Court also rejected the argument of Royal Caribbean Cruises that the doctor and nurse were independent contractors, despite the fact that the ticket sold to Mr. Franza explicitly stated the onboard medical personnel were independent contractors.  If the doctor and nurse were actually independent contractors, then Royal Caribbean Cruises would not be liable for the actions of the medical personnel under a theory of vicarious liability.  Justice Marcus noted that at the Motion to Dismiss stage, the ticket contract would not be examined, nor would the nurse and doctor be considered independent contractors simply for the reason Royal Caribbean Cruises calls them such.  Instead, Justice Marcus pointed to several allegations in the complaint, including that the doctor and nurse were paid directly by Royal Caribbean Cruises, had to wear Royal Caribbean Cruises uniforms, and were advertised as members of the ship’s crew.  Justice Marcus noted that if these allegations of the complaint, among others, are true, then the conclusion that the doctor and nurse were actual employees of Royal Caribbean Cruises, or at least controlled enough to be removed from independent contractor status, would be supported.  The 11th Circuit concluded that medical personnel who are employees of cruise lines may be sued for the purported negligence of these employees under a theory of respondeat superior, and rejected the Barbetta defense of complete immunity.

It will be interesting to see if cruise lines based out of Miami attempt to clearly define and identify medical personnel as independent contractors, by doing things such as hiring independent medical care provider groups to staff the cruise ships with medical personnel, as opposed to directly paying the doctor and nurse as employees, and further drawing a clear division between the cruise ship staff and the medical personnel (ie – not advertising the medical staff as members of the crew nor having the medical staff wear cruise ship uniforms).