RSS Feed LinkedIn Instagram Twitter Facebook
FMG Law Blog Line

Archive for May, 2015

Employer’s Duty to Monitor Fees of Retirement Plans

Posted on: May 22nd, 2015



By: Joyce M. Mocek

Last week the U.S. Supreme Court, in Tribble v. Edison International, No. 13-550 (S.C. May 18, 2015) held that employers have a continuing duty to keep watch and monitor Employment Retirement Income Securities Act (ERISA) 401K plans to guard against high management fees in the plans.  The Court in its decision essentially shifted the burden in disputes over monitoring fees and costs in retirement plans to the employer.

In Tribble, current and former employees of Edison International argued that the ERISA plan fiduciaries selected mutual funds with management fees that were too high and that this negatively affected their retirement funds.   The lower court dismissed the case, holding that the lawsuit had not been timely filed.  The Supreme Court reversed the lower court, holding that employers and fiduciaries had a continuing duty to monitor investment options and that this duty included removing “imprudent investments.”   This decision, in addition to imposing additional duties on employers, may also have an effect on the financial industry as a whole to lower fees.   Employers should be mindful of this trend of the continuing, albeit heightened, duties placed on companies in the ERISA context.   

Supreme Court Defines Equitable Power of Courts in Approving Transfer of Firearms by Convicted Felons

Posted on: May 20th, 2015

By: Andy Treese and Charles Reed, Jr.

Law enforcement and other government agencies have been given considerable power in confiscating and otherwise prohibiting the use of property owned, used or possessed by persons suspected of criminal activity. What happens to guns owned by a person who lawfully owned them until he was convicted of a felony?  This week, the United States Supreme Court ruled unanimously that convicted felons may transfer their firearms to third parties by court order, when the court is satisfied that the transferee will not give the felon access to the firearms or allow the felon to direct or control their future use.

In Henderson v. United States, 575 U.S. ___ (2015), Henderson was charged with federal drug trafficking offenses. While his felony drug charges were pending, Henderson surrendered his firearms to the Federal Bureau of Investigation.  Henderson eventually pled guilty to the drug charges and, as a result, his firearms could not be returned to him due to his status as a convicted felon pursuant to 18 U.S.C.A. § 922(g). 18 U.S.C.A. § 922(g) provides, in relevant part, “it shall be unlawful for any person– who has been convicted in any court of, a crime punishable by imprisonment for a term exceeding one year; to ship or transport in interstate or foreign commerce, or possess in or affecting commerce, any firearm or ammunition; or to receive any firearm or ammunition which has been shipped or transported in interstate or foreign commerce.”  Henderson requested that the FBI transfer the weapons to a friend who had agreed to buy them, but the FBI denied Henderson’s request giving as a rationale that such a transfer request operated as “constructive possession” in violation of section 922(g). Henderson sought an order from the United States District Court directing the FBI to transfer the weapons, but the District Court adopted the FBI’s rationale in denying the transfer request.  On appeal, the Eleventh Circuit also affirmed the FBI’s rationale for denying Henderson’s transfer request.

Recognizing a split in circuit decisions over whether section 922(g) prohibited a court from approving a convicted felon’s transfer request, the United States Supreme Court held that “when a court is satisfied that a felon will not retain control over his guns, §922(g) does not apply, and the court has equitable power to accommodate the felon’s request.” Citing the legislative purpose of section 922(g), i.e., to keep firearms away from convicted felons who might use the weapons irresponsibly, the Court rejected as overbroad the Government’s attempt to restrict the lawful owner of weapons to divest ownership only through transfer to a licensed gun dealer for sale in the open market.  The Court found that section 922(g) proscribed “possession” of a firearm, but did not proscribe “owning” a firearm. Because possession is only “one of the proverbial sticks in the bundle of property rights,” the Court held that what “matters here is not whether a felon plays a role in deciding where his firearms should go next…[w]hat matters instead is whether the felon will have the ability to use or direct the use of his firearms after the transfer.” Since neither the Eleventh Circuit nor the district court assessed whether Henderson’s transfer request would allow him to retain control over his weapons, the Court remanded the case.

While Henderson involves issues related to the proper analysis of firearm transfer requests under a specific federal statutory authority, this case is a reminder of the balance between individual property rights and the limitations of government as it relates to those property rights. Law enforcement agencies should continue to treat property seized during law enforcement operations as the personal property of the arrestee until directed by a court order otherwise.

“Yer Out!” United States Supreme Court Tosses 4th Pro Se in Forma Pauperis Request Holding that “Three Strikes” Provision Includes Cases Dismissed by a District Court and Pending on Appeal

Posted on: May 20th, 2015

By: Andy Treese and Charles Reed, Jr.

When Congress codified citizens’ access to courts regardless of their ability to pay costs, federal courts quickly became inundated with prisoner lawsuits.  Congress, in turn, enacted the “three strikes” provision in 28 U. S. C. §1915(g) which provides that “in no event shall a prisoner bring a civil action or appeal a judgment in a civil action or proceeding [in forma pauperis] if the prisoner has, on 3 or more prior occasions, while  incarcerated or detained in any facility, brought an action or appeal in a court of the United States that was dismissed on the grounds that it is frivolous, malicious, or fails to state a claim upon which relief may be granted, unless the prisoner is under imminent danger of serious physical injury.” The United States Supreme Court held in Coleman v. Tollefson, 575 U.S. ___ (2015) that the “three strikes” includes cases dismissed by a district court and pending on appeal.

In Coleman, the plaintiff brought three federal lawsuits during his incarceration that had been dismissed on grounds enumerated in §1915(g). Following the appeal of his third dismissal, but before the appellate court’s ruling on that appeal, Coleman filed four new federal lawsuits between April 2010 and January 2011, and moved to proceed in forma pauperis in each one. The district court denied each of Coleman’s four in forma pauperis requests holding that “a dismissal counts as a strike even if it is pending on appeal at the time that the plaintiff files his new action.” The Sixth Circuit agreed with the district court and denied Coleman’s requests, albeit on different grounds.  The United States Supreme Court granted certiorari to resolve whether a dismissal of an in forma pauperis request on a statutorily enumerated ground counts as a strike while an appeal of that dismissal remains pending.  The Supreme Court held that it does.

The Court summarily rejected Coleman’s argument for an expansion of the word “dismissed” in the statute to include appellate activity by citing to the plain language of the statute, treatment of the word “dismissed” in case law and an analysis of congressional intent within the statute from a linguistic and practical matter.  The Court acknowledged that while there was a risk that a litigant that might find themselves wrongfully deprived of in forma pauperis status, that risk was “not great” since there were various remedies to ameliorate any adverse effects of the deprivation within the existing Federal Rules of Civil Procedure.

Serial litigants who file numerous frivolous in forma pauperis lawsuits waste defendants’ resources, the court’s time and impede the prompt resolution of cases.  As those litigants begin to feel the impact of this decision, the benefit to the judicial system will be felt through the weeding out of meritless claims.

Supreme Court Grants Qualified Immunity to Police Officers Involved in Encounter with Mentally Ill Woman, Declines to Address Whether ADA Applies to Arrests

Posted on: May 20th, 2015

By: Andy Treese and Charles Reed, Jr.

This week the United States Supreme Court declined to rule on the issue of whether the Americans with Disabilities Act requires law enforcement officers to provide accommodations to an armed, violent, and mentally ill suspect in the course of bringing the suspect into custody.  At the same time, the Court reversed the Ninth Circuit Court of Appeals and awarded qualified immunity to two San Francisco police officers forced to shoot a woman who charged them with a knife after they entered her home to take her into custody for a mental health evaluation.  .  The case is City and County of San Francisco v. Sheehan, 575 U.S. ___ (2015).  Brian Dempsey and Kevin Stone previously blogged about the case here.  Look for an article with further details on this ruling in our next LawLine newsletter.

The case arose out of an incident at a group home for the mentally ill.  Teresa Sheehan, a resident of the home, threatened to kill a social worker, so the social worker called San Francisco police officers to detain Sheehan for a psychiatric evaluation. When the two female police officers arrived, they entered Sheehan’s room.  Sheehan then attacked the officers with a knife, forcing them out of the room and slamming the door.  The officers called for back-up. But before back-up arrived, the officers re-opened the door because they feared that Sheehan might be planning an ambush.  Sheehan again attacked them with the knife.  In response, the officers pepper-sprayed Sheehan.  When this did not stop Sheehan’s advance, the officers shot Sheehan several times.  She survived and sued, contending that the officers’ entry and use of force were unreasonable under the Fourth Amendment and that they failed to accommodate her mental illness.   The district court granted summary judgment to the defendants, but the Ninth Circuit reversed.

The Court took the case to reach the legal question of whether the ADA applies in the arrest context at all, but San Francisco changed its legal position during the case, so the Court declined to reach the issue.

The Court held that the officers were entitled to qualified immunity because  the “right” recognized by the Ninth Circuit in this case – a right to have the police accommodate a disability before making an entry that was otherwise valid under the Fourth Amendment – was not clearly established, if it existed at all.  A plaintiff cannot “establish a Fourth Amendment violation based merely on bad tactics that result in a deadly confrontation that could have been avoided. Courts must not judge officers with the 20/20 vision of hindsight.”  The Court declined to rely on the Ninth Circuit’s “provocation” theory, which has been sharply criticized, and rejected the notion that expert testimony was sufficient to establish a constitutional violation.  Notably, the Court held that “even if an officer acts contrary to her training…that does not itself negate qualified immunity where it would otherwise be warranted.  Rather, so long as a reasonable officer could have believed that his conduct was justified, a plaintiff cannot avoid summary judgment by simply producing an expert’s report that an officer’s conduct leading up to a deadly confrontation was imprudent, inappropriate, or even reckless.  In close cases, a jury does not automatically get to second-guess these life and death decisions, even though a plaintiff has an expert and a plausible claim that the situation could better have been handled differently.”

Officers dealing with mentally ill subjects are often forced to make tough decisions without the benefit of a “pause” or “rewind” button.  The ruling in this case reiterates the protection afforded to officers for making those decisions, while reminding the lower courts that the Fourth Amendment’s use of force inquiry is based on a constitutional standard of objective reasonableness, rather than hindsight, or second-guessing by a paid expert after the fact.

DOJ Issues Guidance for Best Practices Before, During, and After a Data Breach

Posted on: May 19th, 2015

By David Cole

In response to the increasing number of data breaches around the county, and the public attention being given to them, the Department of Justice (DOJ) recently issued a guidance document intended to help organizations prepare for and respond to data breaches. The document, titled “Best Practices for Victim Response and Reporting of Cyber Incidents,” is based on the DOJ’s experience investigating and prosecuting cybercriminals. The guidelines focus primarily on the proactive and reactive measures an organization should take with respect to data breaches.

Consistent with the NIST Cybersecurity Framework, the DOJ guidance recommends that, before any data breach occurs, organizations should conduct a risk assessment to identify and prioritize critical assets, data, and services.  In addition, the guidance recommends that organizations develop a data breach response plan that has specific, concrete procedures to follow in the event of a data breach.  Once a plan is developed, organizations should test the plan with “table top” exercises, and continually update the plan to reflect changes in personnel and structure. Organizations should also ensure that they maintain necessary technology to detect and respond to data breaches.

In the event of a data breach, the guidance recommends a number of basic steps.  It advises organizations to not use compromised systems to communicate once they become aware of a potential data breach.  After making an initial assessment of the nature and scope of the incident, the guidelines also suggest that an organization minimize continuing damage to its system by taking steps such as rerouting network traffic, blocking a denial of service attack, or isolating all or part of a compromised network. The organization also should record and collect all evidence and information that it can about the unauthorized access that occurred, which may involve imaging the affected computer and retaining all logs and records of the data underlying the incident.  Finally, the guidelines suggest that an organization notify its employees, management, law enforcement (including the Department of Homeland Security), and any potential victims.

The guidelines also warn that, in the event of a cyber-attack, that organizations should not “hack back” or intrude upon the suspect’s network.  “Hacking back” may violate a number of laws, and since many intrusions are launched from compromised systems, “hacking back” can damage or impair another victim’s system. The guidance also recommends that victim organizations continue monitoring their networks after a cyber-attack for any unusual activity to make sure that any unauthorized users are really gone.  After an incident is over, the DOJ recommends a post-incident review to identify deficiencies in planning and execution of the incident response plan.

Lastly, the DOJ suggests that before, during, and after a data breach, organizations work closely with legal counsel who is experienced in handling data breaches. The use of experienced counsel ensures that an organization will receive accurate advice from counsel who is comfortable with addressing the unique and varied issues that arise from a data breach.  To review your organization’s data breach preparedness and evaluate the best ways to implement these guidelines in your organization, please contact David Cole at (770) 818-1287 or [email protected].