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Archive for November, 2018

Eleventh Circuit Holds That Debt Collector Did Not Violate FDCPA Even Though It Misstated Name of Creditor In Collection Letter

Posted on: November 19th, 2018

By: Bill Buechner

The Eleventh Circuit very recently affirmed a district court’s ruling that a debt collector did not violate the Fair Debt Collection Practices Act even though the collection misstated the name of the creditor to whom the consumer owed the debt.

In Lait v. Medical Data Sys., 2018 U.S. App. LEXIS 31814 (11th Cir. Nov. 9, 2018) (per curiam), the plaintiff incurred medical expenses provided to him by Enterprise Medical Center. A debt collector sent the plaintiff a letter seeking to collect on the debt. The letter indicated that the debt collector was seeking to collect on the “accounts indicated below.” After two intervening paragraphs, the letter listed “Medical Center Enterprise” next to a service date, the plaintiff’s name, and an outstanding balance of $412. The letter did not expressly refer to Medical Center Enterprise as the plaintiff’s creditor.  Id. at *2.

The plaintiff alleged that the collection letter violated 15 U.S.C. § 1692g, which requires that debt collectors provide in writing certain information to a consumer in either the initial communication or within five days thereafter, including the name of the creditor to whom the debt is owed. The plaintiff did not contend that the different word order of the hospital in the letter caused him any confusion. Instead, the plaintiff asserted that the letter failed to “meaningfully convey” the name of the creditor to whom he owed the debt.

The Eleventh Circuit assumed, without deciding, that the plaintiff’s claim was governed by the least sophisticated consumer standard. Under this standard, the court presumes that the consumer “possess[es] a rudimentary amount of information about the world and a willingness to read a collection notice with some care.” Id. at *5 (citing cases).  Applying this standard, the Eleventh Circuit concluded that, because the plaintiff acknowledged that he had received medical treatment at a hospital called “Enterprise Medical Center,” the least sophisticated consumer “could be expected to connect the dots on a collection letter that lists the name ‘Medical Center Enterprise’ next to an outstanding balance.” Id. In other words, “[a] consumer who had been a patient at a hospital would surely understand the hospital to be the creditor when its name was listed next to the amount of the debt.” Id. at *5-6. Accordingly, the Eleventh Circuit held that the letter complied with § 1692g.

The Eleventh Circuit has applied the least sophisticated consumer standard to other sections of the FDCPA, including 15 U.S.C. §§ 1692e and 1692f.  Other circuits, including the Third, Sixth and Ninth Circuit have applied the least sophisticated consumer standard to claims brought pursuant to § 1692g as well. The Eleventh Circuit has suggested in at least one previous unpublished decision that it did not disagree with these other circuit decisions. The panel in Lait, however, suggested that concerns about obscuring information required to be disclosed under § 1692g could be addressed in other sections of the FDCPA. Lait, 2018 U.S. App. LEXIS 31814, at *4 n.2.

Thus, it remains an open question in the Eleventh Circuit as to whether the least sophisticated consumer standard applies to claims under § 1692g, or whether courts should simply consider whether the collection letter contains the information required by § 1692g without considering whether the least sophisticated consumer would understand it.

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

Arbitration Agreements in New Jersey Need More Details

Posted on: November 16th, 2018

By: Chris Curci

On November 13, 2018, the Superior Court of New Jersey, Appellate Division, issued an important decision holding that an arbitration agreement between the employer and employee was not enforceable. Flanzman v. Jenny Craig, Inc., Docket No. L-6238-17.  The arbitration agreement read:

Any and all claims or controversies arising out of or relating to [plaintiff’s] employment, the termination thereof, or otherwise arising between [plaintiff] and [defendant] shall, in lieu of a jury or other civil trial, be settled by final and binding arbitration. This agreement to arbitrate includes all claims whether arising in tort or contract and whether arising under statute or common law including, but not limited to, any claim of breach of contract, discrimination or harassment of any kind.

According to the Appellate Division, this agreement was unenforceable because it “failed to identify the general process for selecting an arbitration mechanism.” What exactly does that mean?

In its effort to clarify this standard, the Appellate Division stated that an employer is not required to “detail in the arbitration agreement the exact manner in which the arbitration” will proceed. However, an employer must identify the “forum” for the arbitration and clearly explain how the employee’s judicial rights to a jury trial are being replaced by the arbitration rights.

For example, the Court noted that it would be sufficient for an employer to (1) identify a forum such as the American Arbitration Association (“AAA”) or the Judicial Arbitration and Mediation Services (“JAMS”), and (2) adopt that forum’s rules and procedures. The Court opined that this would be sufficient because AAA and JAMS’s rules and procedures address numerous procedural issues, such as: (1) notification requirements, (2) how to initiate proceedings, (3) management conferences, (4) discovery, (5) the location of the hearings, (6) the number of arbitrators, (7) how to communicate with the arbitrator, (8) attendance requirements, (9) dispositive motions, (10) evidence, (11) modification of awards, (12) and applications for fees, expenses and costs.

In other words, while the arbitration agreement is not required to “detail the exact manner in which the arbitration will proceed,” an employer must specifically identify a forum such as AAA or JAMS and incorporate that forum’s rules and procedures. This allows the employee to fully understand how his or her judicial rights to a jury trial are being replaced by arbitration.

Employers should review their employee arbitration agreements to ensure their enforceability. If you need help with this or any other employment related question, Chris Curci practices Labor & Employment law in Pennsylvania and New Jersey and is a member of Freeman Mathis & Gary’s Labor and Employment Law National Practice Section. He represents employers in litigation and advises clients on all aspects of employment law. He can be reached at [email protected].

80/20 Hindsight: The DOL Issues Opinion Letter That Concludes The 80/20 Side Work Rule For Tipped Employees No Longer Applies

Posted on: November 15th, 2018

By: Michael Hill

Navigating the laws for paying tipped employees just got a little easier. In a new opinion letter, the U.S. Department of Labor (“DOL”) effectively nullified the “80/20 Rule,” which divided courts throughout the country and became the anchor point for several collective and class actions against employers of tipped employees.

While the federal minimum wage is $7.25/hour, employers of tipped employees, such as waiters, bartenders, and bellhops, are permitted to pay such employees $2.13/hour and take a “tip credit” for the difference between this wage and the federal minimum wage (provided the employees receive notice and the tip credit does not exceed what they actually earn in tips).

The DOL’s 80/20 Rule acknowledged the fact that tipped employees may spend some time performing tasks that do not generate tips. Servers in a restaurant, for example, generally spend time performing “side work” that is incidental but related to serving customers, such as rolling silverware, making coffee, cleaning tables, or sweeping the dining room floor, in addition to waiting tables. Under the 80/20 Rule, an employer still could claim a tip credit for all of such an employee’s time, as long as the employee did not spend more than 20% of his or her time performing “general preparation work or maintenance.”

Strict application of the 80/20 Rule essentially meant employers of tipped employees were expected to monitor each and every task their employees performed and to maintain meticulous time logs accounting for each individual task. Some courts recognized this was infeasible, while others held this to be what the law required. The tide of litigation rolled in, with predictable swearing contests over whether servers and bartenders spent more than 20% of their time performing non-tip-generating tasks.

The DOL now, however, has recognized the confusion its 80/20 Rule generated and clarified that employers may take the tip credit for all of their tipped employees time, no matter how much time is spent on related “side work” tasks, so long as these side tasks are performed contemporaneously with the employees’ customer-service duties or within a reasonable time immediately beforehand or afterwards and the tasks are listed for that job position in the Occupational Information Network (O*NET).

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

 

The Cannabis Industry Takes Another Step Towards Mainstream

Posted on: November 12th, 2018

By: David Molinari

In 1996, the People of the State of California first passed an initiative to legalize medicinal cannabis. The legislature toyed with drafting the statutory framework regulating the medical cannabis industry. Finally, in 2014 the first “legal” medicinal dispensaries began to open throughout the state. The economic impact of medicinal cannabis was so significant that four years later recreational cannabis was overwhelmingly voted into existence. The cannabis industry has elbowed its way to the table claiming a seat alongside tech industry, manufacturing industry and agricultural industry. One tell-tale sign that the cannabis industry has taken steps toward mainstream, its “inventory” is an insurable commodity under a commercial property and general liability insurance policy.

Green Earth Wellness Center operated a retail medical marijuana business and an adjacent growing facility. Atain Specialty Insurance Company issued Green Earth a commercial property and general liability insurance policy. A wildfire broke out and advanced toward Green Earth’s business. Although the fire did not destroy the business, smoke and ash from the fire overwhelmed Green Earth’s ventilation system; causing damage to Green Earth’s marijuana plants. Green Earth made a claim under the policy for loss of its inventory due to the smoke and ash which Atain denied.

Separately, thieves entered Green Earth’s growing facility and stole some of the marijuana plants. Again, Green Earth made a claim under its policy and again Atain denied the claim. Green Earth eventually commenced an action for breach of contract and bad faith. Atain filed a Motion for Summary Judgment raising, among other issues, that in light of federal law and federal public policy, it was illegal for Atain to pay damages to marijuana plants and products. Atain argued that the application of an exclusionary provision in the policy for contraband or property in the course of an illegal transportation or trade requires that coverage be denied; even if the policy would otherwise have provided coverage.

The Court noted that the policy itself did not define the term “contraband.” The Court acknowledged application of federal law, particularly 21 U.S.C. 841(a)(1) that makes possession of marijuana for distribution a federal crime. However, the Court took note that such a federal prohibition has become more “nuanced” as an increasing number of states have enacted regulations for medicinal and recreational cannabis. Enforcement of the Controlled Substance Act in states that have enacted statutes regulating use and distribution is at times ambivalent and erratic. Other than pointing to the federal criminal statutes, Atain offered no evidence that the application of existing federal public policy would result in criminal enforcement against Green Earth. Atain also failed to assert Green Earth’s operations were in violation of state law.

In rejecting Atain’s public policy and illegality defense to coverage for inventory damage, the Court turned to the parties’ intention regarding coverage of Green Earth’s marijuana. The evidence suggested that the parties mutually intended to include coverage for the marijuana plants constituting Green Earth’s inventory. Atain drafted the medicinal marijuana dispensary supplemental application form that asked several questions about inventory: Such as, how much inventory is displayed to customers, how much inventory is kept on the premise during non-business hours and whether the inventory is stored in a locked safe. Before entering the policy, Atain knew Green Earth was operating a cannabis business. Atain knew or should have known at the time of the policy inception that federal law (at least nominally) prohibited such a business; but Atain nevertheless elected to issue the policy and collect premiums.  Atain never sought to disclaim coverage for Green Earth’s inventory before the claims were made. By issuing the policy and taking premiums, it was clear that the carrier would not raise the contraband exclusion to marijuana inventory.

The Court assumed Atain had legal counsel and obtained opinions and assurances from its own legal counsel before embarking on the business of insuring marijuana operations. The Court viewed the case as a breach of contract action. Atain, through its policy, made contractual promises and then breached them refusing to entertain Atain’s argument that the Court must declare the policy unenforceable as against public policy. It was irrelevant under the Court’s analysis that possession and sale of marijuana was a federal crime or that marijuana should under a public policy argument be determined an uninsurable commodity.

The lesson for insurers: the cannabis industry is an expanding multi-billion-dollar industry where entrepreneurs will spend money on insurance premiums to protect its investment and inventory. A carrier entering a policy knowing the insured’s business is cannabis very well may be obligated to cover claims or face the risk of damages for breaching the policy.

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

U.S. Supreme Court Holds All Public Employers Are Covered By The ADEA

Posted on: November 9th, 2018

By: Brent Bean

On November 6, 2018, the U.S. Supreme Court issued its long-anticipated opinion in Mount Lemmon Fire Dist. v. Guido, 586 U.S. __ (2018), which FMG previously discussed here.  At issue was whether the Age Discrimination in Employment Act (“ADEA”) applies to all state and political subdivisions, regardless of the size of their workforce.

The ADEA generally prohibits employers from discriminating in their employment decisions against employees over the age of forty.  29 U.S.C. § 621-634.  The ADEA, however, only applies to private sector employers with more than twenty employees.  To that end, ADEA defines “employer” as:

a person engaged in an industry affecting commerce who has twenty or more employees for each working day in each of twenty or more calendar weeks in the current or preceding calendar year. . . .  The term also means (1) any agent of such a person, and (2) a State or political subdivision of a State and any agency or instrumentality of a State or a political subdivision of a State, and any interstate agency, but such term does not include the United States.  29 U.S.C. 630(b) (emphases added).

The Supreme Court took this case to resolve the circuit split among the Sixth, Seventh, Eighth, and Tenth Circuits on the one hand, all of which had held that the ADEA’s twenty-employee threshold applies to a State or political subdivision, and the Ninth Circuit, on the other hand, which ruled that the ADEA’s twenty-employee minimum does not apply to those employers.

Writing for a unanimous Court, Justice Ginsburg held that the plain language of the statute, “also means,” is additive, rather than clarifying.  As such, there is no twenty-employee threshold for a State or political subdivisions.  The Court rejected the fire district’s argument that the ADEA should be analogized to Title VII, where numerical limits apply to private and public sector employers with equal force.  Instead, Justice Ginsburg wrote, the ADEA, amended in 1974 to cover state and local governments, was more akin to the FLSA, amended that same year, which has no workforce limit.

Accordingly, the ADEA applies with greater scope to cover all state and political subdivisions without limitation to the size of their workforce.  We recommend that public sector employers, especially those which have smaller workforces, revisit their handbooks and training on complying with, and avoiding litigation under, the ADEA.

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