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FMG Law Blog Line

Posts Tagged ‘Discovery’

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].

Is Georgia Game for Growing Bad Faith Liability?

Posted on: July 17th, 2018

By: Jessica Samford

As discussed in my last blog on bad faith, seeking bifurcation can be a proactive means to distinguish the issue of coverage from the issue of bad faith and appropriately manage the all too often unwieldy discovery process before it’s too late.  A recent case in Georgia is an interesting illustration of an insurer’s attempt to bifurcate issues after the discovery stage in a bad faith failure to settle claim in particular and is yet another cautionary example for insurers to carefully consider the increasing potential for extracontractual liability in Georgia.  Whiteside v. GEICO Indem. Co., 2018 U.S. Dist. LEXIS 87868, *3-*4 (M.D. Ga. May 25, 2018).

In that case, the trial court declined to bifurcate the issues of liability and proximate cause of damages at the trial stage as requested by Geico, which sought to have a jury determine whether or not Geico could be held liable for bad faith failure to settle before being presented with evidence of the default judgment entered against Geico’s insured of almost $3 million and causation of same.  Separation of liability and damages issues was not warranted according to the trial court because facts relating to Geico’s claim handling were relevant to both, and Geico’s concerns could be handled through proper jury instructions, special interrogatories, and the verdict form.  See also Whiteside v. GEICO Indem. Co., 2018 U.S. Dist. LEXIS 52761 (M.D. Ga. Mar. 29, 2018).  The trial court did, however, bifurcate the claim for punitive damages from the rest of the jury trial.

The result was a jury verdict of $2 million against Geico for failing to settle in response to a bicyclist’s demand for the $30,000 policy limit based on medical bills of almost $10,000 following a motor vehicle accident.  Previously, Geico had argued there was no coverage due to the insured’s failure to notify Geico of the subsequent lawsuit she was served.  Whiteside v. GEICO Indem. Co., 2017 U.S. Dist. LEXIS 203617, *6, 2017 WL 6347174 (M.D. Ga. Dec. 12, 2017).  Notwithstanding such a flagrant breach of the policy’s notice conditions, the trial court did not see coverage as being an issue since that coverage defense did not exist at the time Geico responded to the demand by offering to settle for about half the limits instead.

These unusual circumstances are certainly noteworthy, and extracontractual damages such as these are becoming less uncommon in Georgia bad faith cases.  FMG’s Insurance Coverage and Bad Faith BlogLine has already geared up to cover the Georgia Supreme Court’s upcoming rulings after granting cert on the scope of what triggers failure to settle liability in Georgia, not to mention the proposed changes to the Restatement of the Law of Liability Insurance and their impact.  Whatever is in the cards for extracontractual liability in Georgia, the risks presented by settlement demands should be evaluated in light of these current trends.

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

9th Circuit Holds Inadmissible Evidence May Support Class Cert

Posted on: May 17th, 2018

By: Ted Peters

Courts around the country are split over whether admissible evidence is needed to support a class certification.  The Fifth Circuit requires it, and the Seventh and Third Circuits appear to be of the same opinion.  In contrast, the Eighth Circuit has indicated that inadmissible evidence can be considered.  On May 3, 2018, the Ninth Circuit join ranks with the Eighth Circuit when it issued an opinion indicating that certification of a class action can be supported by inadmissible evidence.

The case arises out of the district court’s decision to deny class certification to a group of nurses based, in part, on the finding that two of the named plaintiffs had not offered evidence that they were underpaid.  Their only evidence consisted of a paralegal’s analysis of time cards reflecting that hours were not properly calculated.  While perhaps not sufficiently trustworthy to be admitted at trial, the Ninth Circuit concluded that the district court prematurely rejected such evidence when ruling on whether the class could be certified.  The Court stated: “Notably, the evidence needed to prove a class’s case often lies in a defendant’s possession and may be obtained only through discovery.  Limiting class-certification-state proof to admissible evidence risks terminating actions before a putative class may gather crucial admissible evidence.”

The Court also concluded that, because there was no consideration as to whether the employer controlled the nurses after they clocked in, the district court misapplied the definition of “work” under California jurisprudence.  Lastly, the Court was critical of the finding that the law firm representing the putative class action was incapable of properly representing the class, focusing on “apparent errors by counsel with no mention of the evidence in the record demonstrating class counsel’s substantial and competent work on [the] case.”

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

Dealing with Discovery Dangers in Bad Faith Litigation

Posted on: October 25th, 2017

By: Jessica C. Samford

Whenever an insurer could be facing a bad faith claim, what documents may be discoverable during litigation is an important consideration. While the ultimate outcome hinges on specific circumstances of the case, the discovery rules of the applicable jurisdiction is a major factor. Regardless of which state or federal laws apply, counsel often attempt to obtain the broadest scope of documents, which could include the claims file, underwriting file, internal communications, personnel files, claims of other insureds and claims handling procedures.

Although relevancy objections, as well as work-product and attorney-client communication privileges, can be asserted, a proactive rather than reactive approach is better. This is especially true because the scope of protection provided by work-product doctrines for documents created in anticipation of litigation is typically a qualified protection that can be overcome by showing substantial need for the documents and might not protect documents from production in discovery if they were created in the ordinary course of business of claims handling. Even further, it is possible for attorney-client privileges that are asserted based on the relationship between the insured and the attorney hired by the carrier to defend the insured to be waived by the insured. That means that despite the common interest the carrier and the insured once shared in the defense against the third-party claimant, in bad faith litigation, these attorney-client communications could now be discoverable. Therefore, best practice is to keep communications with counsel about defending the insured’s liability separate from communications with counsel about coverage defenses.

One option is to seek to bifurcate or stay discovery on bad faith claims and limit discovery to whether there is coverage under the policy before evidence of bad faith is addressed. The ideal way to accomplish this would be with the consent of opposing counsel early on so that, if necessary, it can be part of a discovery order or, in federal cases, a joint proposed discovery plan for court approval. If opposing counsel does not agree, this relief can be sought by motion to the court.

However, courts may not always grant such relief without consent of all parties. In Virginia, for example, a federal district court recently declined to bifurcate or stay discovery on the bad faith portion of the lawsuit for breaches of contract plus extracontractual attorneys’ fees and costs. Federal judges have the discretion to separate issues “for convenience, to avoid prejudice, or to expedite and economize.” FRCP 42. Delaying discovery on bad faith has been found to meet this standard because bad faith discovery may not ultimately be necessary if it can be established that there was no policy coverage, in the first place, upon which the extra-contractual bad faith claim is based. Similarly, courts applying Georgia law typically follow this reasoning because evidence of bad faith is irrelevant absent coverage.

The court in Virginia, however, noted that the issue of bifurcation was not raised until after considerable discovery and a motion to compel, found “obvious overlap in discoverable evidence that would support” breach of contract as equally as bad faith, and commented that “it would be difficult to imagine a scenario in which there was evidence to support bad faith and not breach of contract.” Hopeman Bros. v. Cont’l Cas. Co., 2017 U.S. Dist. LEXIS 164434. Other courts may be more inclined to agree with persuasive arguments focusing on overreaching discovery requests for documents that are not claim specific, that generate costly (regarding time, effort, and expense) discovery disputes over relevancy and privileged materials, and that is generally more complex an issue, especially if coverage can be determined as a matter of law based on the policy terms and liability allegations themselves.

With advance assistance of counsel, insurance carriers can more effectively evaluate these strategies in defending bad faith claims and navigate these discovery pitfalls in particular.

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