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FMG Law Blog Line

Archive for April, 2018

What Should I Do If The Government Invites Our Company To Participate In A Program?

Posted on: April 25th, 2018

By: Kenneth S. Levine

The FMG Immigration Section was recently asked to address a client’s question on how they should respond to an emailed “invitation” by the USCIS E-Verify Unit for their company to participate in a quality control program.  First, it is extremely important for clients to be aware that USCIS or ICE agency inquiries/requests are typically not sent by email.  This email turned out to be an exception.

Once we confirmed that the email was in fact legitimate, our focus shifted to the nature of the actual invitation.  In this case, the USCIS E-Verify Unit was inviting our client to participate in a quality control initiative meant to refine and improve the E-Verify system.  The invitation mentioned that participation was not mandatory, and that if our client decided to participate USCIS would then provide a list of corporate documentation to submit.

We advised our client to send a response confirming that the email had been received and that they’ve elected not to participate.  I have yet to run across any situation where it would be advisable for a company to willingly provide internal corporate documents based on nothing more than a government invitation. In fact, a standard rule of thumb is that a company should never provide internal records to a government agency absent a legal obligation to do so.

In the email USCIS sought to characterize their invitation as inconsequential and nothing to be concerned about.  However, the simple act of handing over records to USCIS could easily prompt an investigation if document errors/violations are discovered during the agency’s review.  While it is reasonable to assume that the government would be less aggressive or punitive under these circumstances, there are no guarantees.

Government emails soliciting companies to voluntarily submit their documentation for “quality control purposes” is a new and novel concept.   This type of invitation should always be turned down.

For additional information related to this topic and for advice regarding how to navigate U.S. immigration laws you may contact Kenneth S. Levine of the law firm of Freeman, Mathis & Gary, LLP at (770-551-2700) or [email protected]

Schiff Hardin Requests 5th Circuit To Dismiss Insurer’s Malpractice Suit

Posted on: April 25th, 2018

By: Barry S. Brownstein

Schiff Hardin, LLP, asserting that it has immunity under Texas law, has appealed to the Fifth Circuit seeking to end a suit filed by Ironshore Europe DAC, alleging that the law firm’s bad advice in connection with a product liability trial cost it $34 million.

Schiff Hardin defended Dorel Juvenile Group Inc. in a products liability suit over an allegedly faulty car seat. Ironshore, Dorel’s excess insurer, was not paying for the defense, but was regularly monitoring the litigation with Schiff Hardin to make sure the suit would not trigger its policy, which kicked in after $6 million in primary coverage had been exhausted.

Ironshore claimed it was blindsided when Dorel was hit with a $34 million verdict and sued Schiff Hardin for negligent misrepresentation, claiming that Schiff Hardin misrepresented the amount in which the plaintiffs were willing to settle.  In addition, Ironshore claimed that the firm repeatedly told Ironshore that the suit was going “pretty well” even into trial.  Schiff Hardin asked the panel to overturn a district court ruling allowing Ironshore to continue with some of its negligent misrepresentation claims, saying they are immune from suit for any statements made in the course of representing its client.

The district court partially granted Schiff Hardin’s motion, dismissing the claims based on predictions about the future and subjective claims about the trial by Schiff Hardin and allowing the portions of the claims based on allegations that Schiff Hardin failed to inform Ironshore of important developments in the case, such as settlement offers.

In its appeal, Schiff Hardin argued that the court had incorrectly ruled that the Texas state law that protects law firms from liability to nonclients for actions taken while representing a client has an exception for negligent misrepresentation.  That exception, according to Schiff Hardin, only applies if the damages result from an attorney acting entirely outside the scope of representing their client.

In sum, Schiff Hardin asserted that it is was immune from suit by Ironshore, since it was acting within the scope of representing Dorel when it made any alleged negligent misrepresentations or omissions, and its conduct was of the kind in which defense attorneys engage when communicating with their clients’ insurers.

If you have any questions or would like more information, please contact Barry Brownstein at [email protected].

Antisocial Media: Court Critical of Cop Capturing Curious Citizen’s Cellphone

Posted on: April 23rd, 2018

By: E. Charles Reed, Jr.

The Eleventh Circuit Court of Appeals has held that a police officer violates clearly established law by seizing a bystander’s cellphone at an accident scene in the absence of exigent circumstances.

With the rise of social media and the availability of devices with cameras, newsworthy events and potential evidence of criminal or civil liability can be captured by citizens with fortuitous timing and cellphones. While the methodology of capturing potential evidence has changed, constitutional principles associated with law enforcement’s gathering of that evidence has not. One law enforcement official recently learned this lesson the hard way in Crocker v. Beatty, 2018 U.S. App. LEXIS 8290 (Apr. 2, 2018).

In May 2012, Deputy Steven Beatty arrived at an accident scene involving an overturned SUV.  By the time Beatty had arrived, several bystanders, including a citizen named James Crocker, had taken photographs and video of the scene with their cell phones. Crocker captured images of empty beer bottles, the overturned vehicle and emergency personnel, but no images of the persons involved in the accident. Beatty approached Crocker, took his cellphone and instructed him to leave the area and wait for instructions about when his phone would be returned. Crocker refused to leave and offered to delete the footage in return for his phone. Instead, Beatty placed Crocker under arrest for resisting an officer without violence.

On appeal at the summary judgment stage, the Eleventh Circuit affirmed the trial court’s denial of qualified immunity for Beatty. First, the court rejected the argument that Beatty’s seizure was justified by exigent circumstances because Crocker was a non-suspect bystander with no motive to delete any photographs. The fact that Crocker’s cellphone could later be lost did not create an exigency.

More importantly, the Court held that the right to be free from warrantless seizures of personal property was established with “obvious clarity” in May 2012 such that Beatty should have known his conduct violated federal law. “Our case law has sent a consistent message, predating 2012, about the warrantless seizure of personal property and how exigent circumstances may arise. The technology of the iPhone simply does not change our analysis. To hold otherwise would deal a devastating blow to the Fourth Amendment in the face of sweeping technological advancement. These advancements do not create ambiguities in Fourth Amendment law; the principles remain as always. Because of this, Beatty is not entitled to qualified immunity.”

The Court did not address, and may not have been presented with, the policy implications for agencies responding to mass-casualty or critical incidents in metropolitan centers – where hundreds of witnesses may be present, each with different video clips taken at different times and from different angles.  However, the takeaway from this case is while technology may push products further and further into the future, the prudent law enforcement officer will apply the legal authority of the past to minimize being held liable for his or her actions.

Charles Reed is member of Freeman, Mathis, & Gary’s Government Section and regularly defends government employees in in civil rights cases.  He can be reached at [email protected] or by phone at 678-399-6351.

SEC Fiduciary Rules Proceeds on Split Vote

Posted on: April 19th, 2018

By: Theodore C. Peters

The Securities and Exchange Commission (“SEC”) conducted a public hearing on April 18, 2018 to address a series of SEC proposals governing securities professionals.  Recall that the Department of Labor previously sought to promulgate a “fiduciary rule” which encountered numerous legal hurdles and ultimately was struck down by the Fifth Circuit.  Concurrently, over the last 11 months, the SEC has been working on its own set of rules to provide the securities industry with more clarity concerning advice standards.  After a two hour hearing, the SEC Commissioners split over whether to proceed with the next step in the rule making process.  Chairman Jay Clayton and Commissioners Michael S. Piwowar, Robert J. Jackson Jr. and Hester M. Peirce voted in favor of the proposals; Commissioner Kara M. Stein vociferously rejected the proposals.

At issue were three proposals: (1) a rule to establish a standard of conduct for broker-dealers and their associated persons when making a recommendation of any securities transaction or investment strategy involving securities to a retail customer; (2) a rule requiring registered broker-dealers and registered investment advisers to provide a brief relationship summary to retail investors; and (3) a formal SEC interpretation of the standard of conduct applicable to investment advisers.  Various SEC staffers introduced each of the proposals with candid remarks, tacitly admitting that there was room for improvement with respect to each component of the proposal package.

The so-called “Regulation Best Interest” would mandate that broker-dealers and their registered representatives who make recommendations to a retail customer act in the best interest of the customer at the time the recommendation is made, without putting the financial or other interest of the broker-dealer ahead of the retail customer.  To comply with this obligation, a broker-dealer would need to do three things: (1) disclose key facts about the relationship (including material conflicts of interest); (2) exercise reasonable diligence/care/skill to i) understand the product, ii) have a reasonable basis to believe that the product is in the customer’s best interest, and iii) have a reasonable basis to believe that a series of transactions is in the customer’s best interest; and (3) establish/maintain/enforce policies and procedures designed to identify and disclose and then mitigate or eliminate material conflicts of interest.

The Form CRS (customer relationship summary) rule would require investment advisers and broker-dealers (and their associated persons) to provide retail investors with a short-form (4 pages maximum) disclosure summary that would identify key differences in the principal types of services offered, the legal standards of conduct that apply to each, applicable fees and conflicts of interest.

In connection with the proposal regarding a Commission interpretation of the standard of conduct for investment advisers, the SEC seeks a Commission-sanctioned interpretation as to the duty owed by an investment adviser to his/her clients.  The proposed interpretation reaffirms, and in some cases clarifies, certain aspects of the fiduciary duty owed by an investment adviser.

Republican Commissioner Michael Piwowar candidly admitted that the failed DOL Fiduciary Rule was “terrible,” “horrible,” and “very bad.”  He expressed greater faith in the SEC proposals, though he said that the proposals could be improved in several respects.  He stated that the proposed Regulation Best Interest represented a “solid building block,” but noted that there was much room for improvement.  As for the proposed Form CRS template, Piwower suggested that it was “as comprehensible as Herman Melville’s Moby Dick.”  Despite having misgivings as to all three proposals, he voted in favor of them.

Democratic Commissioner Robert Jackson, who admitted being an advocate of the DOL Fiduciary Rule, also professed to have concerns over the proposals.  He stated that the standard set forth in Regulation Best Interest was too ambiguous and he feared that such ambiguity would be used by lawyers to defend transgressing brokers.  As for the proposal concerning mitigation of conflicts of interest, Jackson stated that “some conflicts should simply be banned outright.”  Despite his concerns, Jackson stated that he was “reluctantly voting to open the proposals for comment.”

Republican Commissioner Hester Peirce concurred with many of the prior comments concerning clarity (or the lack thereof) of the proposals.  She stated that “disclosure should be the centerpiece of reform,” and that she was in favor of requiring brokers to provide more details in connection with their disclosures of services offered and fees charged. Peirce believes that the proposed Regulation Best Interest was mislabeled, stating that it would be more accurate to call it a “suitability-plus” standard.  Lack of clarity in the proposal leads to increased cost of compliance, Peirce said, and suggests an “impossible standard” to satisfy which could lead to a decline in the number of registered broker-dealers. Commissioner Peirce stated that the proposals were an “excellent start toward reform,” and voted in favor of them.

Democratic Commissioner Kara Stein blasted the proposals as too weak.  She said the Commission had the opportunity to propose meaningful proposals, but failed to do so.  Critically, Stein said the Regulation Best Interest provided broker-dealers with a safe harbor and did nothing to require that they put customers’ interests first.  Noting that the proposed regulation lacked any definition of “best interest,” Stein said the proposal might mislead investors and might as well be called “Regulation Status Quo,” because it simply reaffirms that broker-dealers are required to meet their suitability obligations.  Not surprisingly, Commissioner Stein voted against the proposals.

Chairman Jay Clayton acknowledged his fellow Commissioners’ comments and stated that “much work” was still needed before the proposals could be adopted as final rules.  Calling for a vote, Commissioners Piwower, Jackson, Peirce and Clayton voted in favor; Commission Stein voted against.  With majority approval, the SEC’s rule package will now be submitted for a 90-day public comment period.

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

New Clarity for California CCP 998 Offers

Posted on: April 18th, 2018

By: Gretchen S. Carner

California Code of Civil Procedure section 998 settlement offers (“998 offer”) are valuable settlement tools, often under-utilized in prevailing party attorneys’ fees cases.  The California Court of Appeal has bolstered defendants’ ability to confidently make valid 998 offers, exclusive of attorneys’ fees, so that a motion for attorneys’ fees can be brought after acceptance of the offer.

The California Court of Appeal recently held that a defendant’s 998 offer to pay the plaintiff $12,500 “exclusive of reasonable costs and attorney[ ] fees, if any” was clear and unambiguous.  (Timed out LLC v. 13359 Corp. (Feb. 27, 2018, No. B280301) ___Cal.App.5th___ [2018 Cal. App. LEXIS 262].)  In Timed Out LLC v. 13359 Corp., plaintiff sued defendant for misappropriation of a model’s right of publicity under Civil Code section 3344 (section 3344).  Section 3344(a) provides for “prevailing party” attorneys’ fees and costs.  After trial, the court awarded plaintiff $4,483.30 “exclusive of any costs [or] attorneys’ fees that may be set by noticed [m]otion.”

Defendant submitted a cost bill that included post-offer attorneys’ fees and costs.  Plaintiff moved to strike the cost bill on the grounds, among others, that the 998 offer was invalid because the terms “exclusive of attorneys’ fees, if any” was ambiguous.  The Court of Appeal concluded that the usual and ordinary meaning of the term “exclusive of” in this context is that the settlement amount did not include fees and costs, and that one could not fairly interpret the phrase “if any” to require a concession that plaintiff may not be entitled to any attorney fees if it accepted the 998 offer.  The 998 offer did not deny Plaintiff’s right to recover attorneys’ fees and costs, nor could it have reasonably been interpreted to do so.  The offer provided that Defendant would pay $12,500, which was ‘exclusive of,’ meaning not including, reasonable costs and attorneys’ fees.  Where a 998 offer does not expressly preclude the recovery of fees and costs, a prevailing party may seek them.  Defendant was awarded its post-offer attorneys’ fees and costs.

The take away here is that defendants in any case where statutory attorneys’ fees and costs are at stake, should think about serving early 998 offers to cut off and limit their potential liability for significant attorneys’ fees that quickly add up during protracted litigation.  In addition, if the plaintiff does not obtain an award greater than defendant’s 998 offer (plus plaintiff’s actual award of attorneys’ fees and costs), the defendant is entitled to recover its post-offer attorneys’ fees and costs.  This should give great pause to plaintiff’s counsel who have weak or meritless cases.

If you have any questions or would like more information, please contact Gretchen Carner at [email protected].