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Archive for December, 2015

Drug Distributors May Find Themselves Without a Defense

Posted on: December 23rd, 2015

By: Michael Bruyere and Kristian Smith

Rising prescription drug abuse has put drug distributors under scrutiny in the last few years. Now, pharmaceutical companies are being sued for the economic costs associated with the epidemic, but they may not be able to rely on their insurance companies for a defense. Pending a decision by the 11th Circuit, insurers may not have to provide a defense to pharmaceutical companies in “pill mill” lawsuits.

The state of West Virginia brought suit against Anda, Inc. (which, along with its parent company Watson Pharmaceuticals Inc. is now known as Actavis Inc.) and nearly a dozen other pharmaceutical companies in June 2012, claiming these companies supplied their drugs to “pill mills” or pharmacies that did not monitor the distribution of their drugs. The suit also claims Anda and the other companies did not report “suspicious” pill orders to the authorities. West Virginia alleges that the companies’ distribution of controlled substances without effective monitoring or controls cost its hospitals, courts, jails and other facilities $430 million in 2010 and projected a cost of $695 million by 2017.

Anda had insurance coverage under Travelers Property Casualty Co. of America and St. Paul Fire & Marine Insurance Co. for various policies it had purchased from 2001-2013. Travelers and St. Paul sued Anda in 2012, seeking declaratory judgment that their policies did not require them to defend against the claims against Anda. The insurers claimed that they had no duty to defend Anda because the state of West Virginia didn’t allege damages “for” or “because of” bodily injury,” a requirement to trigger coverage under Anda’s policies.

In March, a Florida district court judge agreed with Travelers and St. Paul and granted them summary judgment, ruling that West Virginia’s suit didn’t assert claims on behalf of individuals for bodily injury they suffered but instead sought relief from the “massive costs suffered by the state due to Anda’s distribution of drugs allegedly in excess of legitimate medical need.”

Anda appealed to the 11th Circuit, arguing in its opening appellate brief that prescription drug abuse necessarily causes bodily injury and the resulting damages are not excluded from coverage just because they are brought by the state and not an individual. Travelers and St. Paul disagreed, and in their December 16th brief argued that alleging that a class of nonparties has suffered narcotics addiction to support a claim for economic loss does not convert the claim into one for “bodily injury.” In addition, the insurers argued that Anda’s insurance policies contain an exclusion for claims “arising out of” or “resulting from” products sold, handled or distributed by Anda. As stated in Travelers’ brief, “There is no plausible way for Anda to argue that narcotics addiction does not ‘arise out of’ or ‘result from’ the very same narcotics that cause the addiction. In short, Anda’s response to the ‘no bodily injury’ argument walks itself directly into the scope of the products exclusions.”

The 11th Circuit’s pending decision is complicated by two opposite federal decisions on this issue handed down in March 2014– one by the 4th Circuit and one by a federal court in Kentucky – that held insurers of other pharmaceutical companies implicated in West Virginia’s suit must defend their insureds against West Virginia’s claims, thereby broadening the scope of the insurers’ various policies.

The West Virginia trial is scheduled for October 2016.


Zenefits Offering Payouts to Former Employees Not Paid Out for PTO

Posted on: December 17th, 2015

By: Allison Shrallow

The perks of working at a startup know no bounds.   From restaurant-quality meals, in-office massages, yoga classes, transportation, and beer and wine on tap to game rooms, dog-friendly offices, and casual dress code, startup culture blurs the line between work and play. There is one perk startup employees love to boast about the most to their corporate counterparts: flexible time off (“FTO”).  FTO provides employees with unlimited paid sick and vacation days.   While the majority of American workers are restricted to two to three weeks paid time off a year – and must accrue the time off prior to use – many tech workers are free to perpetually globetrot as long as their work is satisfactory and deadlines are met.  While FTO is undoubtedly a draw to potential employees, it benefits California employers as well.   California treats accrued paid time off (“PTO”) as wages, which must be paid out to employees upon their separation of employment.  By contrast, employees do not accrue FTO, so there is no payout upon separation from the company.

Ironically, Zenefits, an online HR startup, is in the midst of a legal debacle as a result of a decision to offer its employees what it likely construed as a hassle-free FTO policy. In what Zenefits refers to as a clerical error, its 2014 employee handbook included a PTO policy.  The 2015 handbook changed the policy to an FTO policy.  Recently, former employees have alleged they were not paid accrued PTO upon separation from Zenefits, per the 2014 policy.  In an effort to thwart potential lawsuits, Zenefits has offered former employees approximately $5,000 in exchange for a waiver of their right to sue Zenefits for any violations of California labor laws.

To avoid this issue, California employers should take care to either pay out accrued PTO upon conversion to an FTO policy, or maintain records of the accrued PTO and pay it out upon separation of employment. For example, if an employer switched from PTO to FTO in 2011 and an employee accrued 20 hours of PTO prior to the company’s switch, the employee is entitled to be paid out for her PTO when she separates from the company – even if that is ten years from now.  Employers wanting to transition their vacation policies from PTO to FTO should consult with their labor and employment attorney to ensure the new policy is in line with California’s labor laws and none of the employees’ accrued PTO is forfeited.

When is Housework Not Housework? Differences in Interpreting Georgia and Federal Minimum Wage Laws

Posted on: December 17th, 2015

By: Michael Hill

When it comes to interpreting statutes, the devil is in the details. The Georgia Supreme Court ruled recently that employees for third-party providers of in-home personal care services were not prohibited from receiving Georgia’s minimum wage even though these same workers were exempt from the federal minimum wage. Anderson v. Southern Home Care Servs., Inc., No. S15Q1127 (Ga. Nov. 23, 2015).  The workers in this case provided in-home care to elderly, infirm, and medically homebound patients.  Their work required them to visit more than one patient at different homes throughout the day, but they contend they were not compensated for the time they spent traveling between homes.  They thus filed suit to collect on that allegedly uncompensated travel time.

            Their employers argued that they were exempt under both the Georgia Minimum Wage Law (“GMWL”) and the federal Fair Labor Standards Act (“FLSA”), and thus their employees were not entitled to a minimum wage.  Both laws exempt “domestic” work, but each does so in a slightly different way.  The FLSA exempts domestic work like preparing meals, making beds, and washing clothes, and, until 2015, a federal regulation explicitly permitted third-party providers of these services to claim this exemption.  The GMWL also exempts domestic work from the minimum wage, but there is no state regulation addressing whether third-party employers are entitled to the exemption.  Acting with a free hand, the Georgia Supreme Court concluded that work is not domestic work unless performed in the home of the employer.  Here, the in-home personal care workers were working in the homes of their employers’ clients—not in the homes of their employers themselves.  Thus, they may be entitled to a minimum wage under Georgia law.

            This case is a reminder that, even when state and federal statutes use similar language and seem to provide the same exceptions, they may not be interpreted the same way.

Litigation Could Force Flesh-Detection Injury Mitigation Technology Into All Tablesaws

Posted on: December 15th, 2015

By: Dan Nicholson

Following a big win for plaintiff, William Anderson, against Ryobi and Homelite manufacturer, Techtronic Industries North America, Inc. in Florida last month, the internet has been buzzing on what lies ahead for table saw manufacturers and consumers (1). During trial Anderson argued that by neglecting to include flesh detection safety technology in their design Techtronic Industries was liable for the plaintiff’s injuries – including the amputation of three fingers. The jury was convinced, finding the defendant manufacturer 25% (Anderson was 75% negligent for removing the blade guard) liable for his injuries, leading to an award of damages. Significantly, the U.S. District Court denied the Manufacturer’s motion for judgment as a matter of law and new trial stating that data regarding flesh-detecting injury mitigation technology’s viability and availability was justifiably enough evidence to convince the jury of the manufacturer’s negligence.

This case, however, is just the most recent of many involving the implementation of skin-sensing technology on table-saws. In 2011 a jury awarded a Massachusetts man $1.5 million after he also successfully argued that defendant table saw manufacturers were negligent in not including flesh-detecting safety technology.(2) Again the argument relied on the practicality of including such safety technology, with the jury deciding it was cost efficient and feasible to utilize. Other cases have gone in saw manufacturers’ favor, including a case out of Utah, currently being appealed, where defendant Techtronic Industries North America finds itself in litigation against plaintiff Benjamin Fortune.(3) During the initial trial, upon defendant manufacturer’s motion, the court was unmoved by the plaintiff’s evidence that the defendant was negligent in not including flesh-detection technology as a fail-safe feature. In this case the court, not the jury, ruled that the lack of such technology didn’t render the manufacturer’s saw inherently and unreasonably dangerous and that an ordinary consumer could appreciate the danger of the saw despite its exclusion. This is not to say juries are immune from siding with Manufacturers: An Illinois jury in 2013 came back in favor of manufacturers Ryobi and One World Technologies after plaintiff claimed his saw had been designed defectively without flesh-sensing injury mitigation technology.(4)

From a legal perspective these results mean a couple of things. Each state has its own laws regarding strict product liability and negligence, so it is difficult to predict how future lawsuits will end, depending on the state a complaint is filed and the jury you are dealing with. On a micro level that means we may be seeing more lawsuits involving flesh-detecting safety technology.

On a macro level this could mean big changes for manufacturers in their production of table saws. Manufacturers of any product are legally held out to an “industry standard” when considering the safety of their products. This is defined generally as the knowledge of an expert in that product, including all the safety advances that may be available and viable to the product. For example if one manufacturer produces a vastly safer product than a competitor, it may open up the competitor to potential lawsuits – they knew a safer alternative existed, so why didn’t they implement it? The industry standard for any given product isn’t set in stone however, it ebbs and flows with the times as technology improves. In the legal world everything from consensus of independent experts, safety testing standards, manufacturer standards, or even indirectly, lawsuits, can influence what is “industry standard.” Hypothetically, if big manufacturers keep losing money to lawsuits in one state, they may respond by implementing flesh-detection technology in their saws. If enough big name manufacturers follow, the industry standard will change, and any that don’t may soon find themselves the target of injured consumers. Don’t think that this stops with manufacturers though. it is possible this trend could have a rippling effect: For example, it could change the practices of many associated industries. If the industry standard for manufacturers is that saws without flesh-detecting safety technology are too dangerous to sell to consumers, what about the contractor who requires his workers to use that now “old-school” saw?

Is this the proper course for the courts to take in regards to table saw safety? There is a recognizable downfall to courts requiring manufacturers to implement all advanced safety technology, especially when such technology increases costs. Juries are hard to control, but they can be reliable as to the changing times and there is faith that table saw manufacturers will respond to these recent lawsuits by innovating new ways to implement flesh-sensing safety technology in a cost effective manner.

(1) Anderson v. Techtronic Indus. N. Am., Inc., 613CV1571ORL40TBS, 2015 WL 7429060 (M.D. Fla. Nov. 23, 2015)

(2) Osorio v. One World Techs. Inc., 659 F.3d 81 (1st Cir. 2011)

(3) Fortune v. Techtronic Indus. N. Am., 2:13-CV-813 TS, 2015 WL 2201782 (D. Utah May 11, 2015) 4 Stollings v. Ryobi Techs., Inc., 725 F.3d 753 (7th Cir. 2013)

A Bumpy Road Ahead: More Uber Drivers to Join Misclassification Class Action Lawsuit

Posted on: December 11th, 2015

By: Allison Shrallow

Living in San Francisco, the mecca of all things tech, can make a person very accustomed to getting everything on-demand. Need groceries? Use Instacart.  Want someone to clean your home? Try Handy.  Looking for a date?  Consider Bumble. The push-button economy has become so commonplace that it is difficult to imagine our lives without it.

Oh but there was a time. For most long-term San Franciscans, the prospect of attempting to hail a cab in 2009 remains in the forefront of their minds.   And then one day a miracle happened.  A little company by the name of Uber came to be.  The idea was simple enough.  Need a ride?  Push a button.  At first Uber only offered Town Cars and was seen as more of a luxury.  However, in an effort to capture more customers, Uber began offering UberX, marketed as a less expensive, more efficient option than taxis.

Uber classified their drivers as independent contractors, granting drivers with the personal flexibility to work when and for as long as they wanted.   As independent contractors, Uber was not required to pay for their drivers’ health insurance, social security, paid sick days or overtime.  Further, Uber was under no obligation to reimburse its employees for mileage and other employment-related expenses.  Uber’s current business model allows drivers to pocket 80% of the fare with the remaining 20% going to the company.   As a result of having very little overhead and expenses, customers receive low fares.

This might all change as a result of a lawsuit filed by three drivers in 2013 alleging Uber misclassified them as independent contractors rather than employees. These drivers sought to represent California Uber drivers in a class action lawsuit against the ride-hailing service.  On September 1, 2015, a court certified a class of all California drivers who have driven for Uber since August 2009 to June 2014, and who did not sign an arbitration agreement.   However, on December 9, 2015, the court expanded the class of drivers to include those who signed Uber’s 2014 and 2015 arbitration agreements, concluding the agreements contained a non-severable Private Attorney General Act waiver that rendered the entire arbitration agreement unenforceable on public policy grounds.  As a result, the majority of Uber’s 160,000 California drivers will be allowed to join the class action lawsuit.  Uber has stated it will file an immediate appeal.

The case is scheduled to go to trial in June of next year. If the court finds Uber misclassified its drivers as independent contractors, Uber could be liable for vehicle-related and phone expenses for all drivers who joined the lawsuit, and,  going forward,  it would be required to pay significant sums on wages, insurance, and reimbursable expenses for its drivers.   It would also most likely create a ripple effect throughout the entire push-button economy, prompting workers at other on-demand app companies to file suit, a move that most likely would require other companies to change their business model to account for the higher cost of doing business.  This in turn would almost certainly result in customers having to pay more for services to which they have grown accustomed and workers losing the flexibility that attracted them to these companies in the first place.