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FMG Law Blog Line

Posts Tagged ‘settlement’

EEOC Settlement With Florida Hotel Is A Reminder To Be Careful In Implementing A Mass Termination Program

Posted on: August 1st, 2018

By: Jeremy Rogers

Recently, the EEOC announced a settlement in a lawsuit brought against SLS Hotel in South Beach.  The lawsuit, filed in 2017, followed an investigation into charges made by multiple Haitian former employees who had been terminated in April 2014. They worked as dishwashers in three separate restaurants located in the SLS Hotel.  They alleged that they had been wrongfully terminated in violation of Title VII of the Civil Rights Act on the basis of race, color, and/or national origin. All told, there were 23 dishwashers fired on the same day in 2014, all but 2 of which were Haitian.  On the date of termination, each terminated employee was called into a meeting with the HR department and fired.  When fired, they allege, they were told that they must sign a separation and final release in order to receive their final paychecks.  Prior to termination, they claim that they had been subjected to considerable forms of harassment including verbal abuse (they assert they were called “slaves”), being reprimanded for speaking Creole among themselves while Latinos were allowed to speak Spanish, and being assigned more difficult tasks than non-Haitian employees.

What makes this case interesting is that SLS had re-staffed these positions using a third-party staffing company. The new staff supplied by the staffing company were primarily light-skinned Latinos.The new staff also included at least one employee who had been terminated by SLS, but that individual was also Latino.  Articles about this case from when it was filed,  show that the EEOC took the position that SLS was attempting to hide their discrimination behind the use of the staffing company. SLS, for their part, asserted that they had made the decision to change to the use of a staffing company 2 years before the mass termination. Despite this, the district director emphasized once again, when the EEOC announced the settlement, that the EEOC will not allow companies to hide behind business relationships to engage in discriminatory practices.  This was, according to the EEOC, just such a case.

So how egregious did the EEOC believe this case to be?  They accepted settlement on behalf of 17 workers for the sum of $2.5 million, which works out to just over $147,000.00 per employee if split equally.

If you have any questions or would like more information, please contact Jeremy Rogers at jroger[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].

Insuring Against Rule 68 Offers of Settlement

Posted on: June 28th, 2018

By: Matt Grattan

One tool defense lawyers in Georgia frequently use to induce settlements is an offer of settlement under O.C.G.A. 9-11-68.   Rule 68 allows either party to a tort action to serve a written offer to settle the claim, so long as the offer is made within a certain time and satisfies several other elements under the statute.  If a Rule 68 offer is properly made by a defendant and rejected, that code section allows a defendant to recover its post-rejection attorney’s fees and expenses from a plaintiff in the event the plaintiff does not recover at least 75% of the offered amount at trial.

It is easy to see how the fee-shifting provision in Rule 68 can provide defense attorneys with leverage during settlement negotiations.  Simply put, it forces plaintiffs to put some skin in the game.  Because paying the defendant’s attorney’s fees and costs can significantly reduce or even eliminate a plaintiffs’ award at trial (and in turn a plaintiffs’ attorneys’ fees), plaintiffs may be more inclined to settle rather than face such risks at trial.

The fee-shifting benefit from Rule 68, however, could potentially be diminished by companies like LegalFeeGuard.   Established in Florida in 2012 to combat that state’s offer of settlement statute, LegalFeeGuard has recently started offering insurance policies in Georgia that cover attorney’s fees and costs under O.C.G.A. 9-11-68.  LegalFeeGuard offers no-deductible policies with limits as low as $10,000 and as high as $250,000.   Policies are triggered by a judgment in a bench trial or the return of a verdict in a jury trial, and are available to plaintiffs and defendants for a wide array of cases, including personal injury, breach of contract, and intentional torts.

What does the availability of fee-shifting insurance mean for defense lawyers and their clients?  LegalFeeGuard recently launched in Georgia (and the author is unaware of any other similar companies), so it is tough at this point to determine what kind of impact fee-shifting insurance will have on litigation in Georgia.  But this is certainly a development for lawyers to keep an eye on (particularly since LegalFeeGuard claims on its website to have sold over 1,000 policies in Florida) as such insurance may persuade more plaintiffs to roll the dice and take their case to trial knowing the downside risk of paying fees and costs is reduced, if not altogether eliminated.

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

Georgia Supreme Court Grants Certiorari In Failure to Settle Case

Posted on: June 25th, 2018

By: Bill Buechner

The Georgia Supreme Court recently granted an insurer’s petition for certiorari in a bad faith failure to settle case to consider what constitutes an offer to settle a claim within policy limits and whether an insurer’s duty to settle arises only when the claimant presents a valid offer to settle within policy limits.  First Acceptance Ins. Co. of Georgia, Inc. v. Hughes, 2018 Ga. LEXIS 407 (June 4, 2018).

In Hughes, the insured caused an automobile accident that resulted in his death and injured others, including the claimants (a mother and her minor child, who sustained a traumatic brain injury).   The limits on the policy were $25,000 per person and $50,000 per accident.   After the insurer sent a letter to the claimants’ counsel (and other injured parties) requesting a settlement conference, the claimants’ counsel sent a response letter to the insurer on June 2, 2009 stating that they were “interested in having their claims resolved within your insured’s policy limits and in attending a settlement conference[.]”  The 6/2/09 letter from the claimants’ counsel also explained that the claimants had uninsured/underinsured motorist coverage in the amounts of $100,000 per person and $300,000 per accident.  The 6/2/09 letter continued:

Of course, the exact amount of UM benefits available to my clients depends upon the amount paid to them from the available liability coverage.  Once that is determined, a release of your insured from all personal liability except to the extent other insurance coverage is available will be necessary in order to preserve my clients’ rights to recover under the UM coverage and any other insurance policies.  In fact, if you would rather settle within your insured’s policy limits now, you can do that by providing that release document with all the insurance information as requested in the attached, along with your insured’s available bodily injury liability insurance proceeds.

The accompanying letter from the claimants’ counsel, also dated June 2, 2009, requested various insurance information within 30 days and stated that “[a]ny settlement will be conditioned upon [the] receipt of all the requested insurance information.”

Counsel for the insurer did not consider the letter from the claimants’ counsel as an offer to settle within policy limits and thus did not respond to the letter.   On July 10, 2009 (38 days later), the claimants filed a lawsuit.  On July 13, 2009 ( 41 days later), counsel for the claimants sent a letter to the insurer stating that the 6/2/09 offer to settle within policy limits was withdrawn.  The claimants thereafter obtained a jury verdict in July 2012 awarding $5,334,220 in favor of the minor child.

An administrator for the insured’s estate filed a lawsuit against the insurer asserting that the insurer negligently or in bad faith had failed to settle the minor child’s claim within policy limits.   The trial court granted summary judgment in favor of the insurer, but the Court of Appeals reversed and concluded that there were material issues of fact as to whether the 6/2/09 letters from the claimants’ counsel offered to settle the minor child’s claims within policy limits and whether the offer included a 30-day deadline for a response.  Hughes v. First Acceptance Ins. Co. of Ga., Inc., 343 Ga.App. 693, 697, 808 S.E.2d 103 (2017).

The Georgia Supreme Court granted the insurer’s petition for certiorari and stated that it was particularly concerned with (1) whether there were material issues of fact as to whether the 6/2/09 letter from the claimants’ counsel offered to settle the minor child’s claim within the policy limits and established a 30-day deadline to accept the offer; and (2) whether the insurer’s duty to settle arises “when it knows or reasonably should know settlement within the insured’s policy limits is possible with an injured party or only when the injured party presents a valid offer to settle within the insured’s policy limits?”

The Georgia Supreme Court’s rulings on these issues likely will have a significant impact on Georgia insurers and their exposure to negligent or bad faith failure to settle claims.  Oral argument has been scheduled for September.

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

McDonald’s to Settle its NLRB Case

Posted on: March 30th, 2018

By: Allen E. Sattler

On March 19, 2018, McDonald’s USA LLC (“McDonald’s”) and the U.S. National Labor Relations Board (the “Board”) entered into a preliminary settlement to resolve many long-standing claims made against McDonald’s concerning its alleged labor law violations.  The proposed settlement reportedly includes the resolution of all outstanding labor law charges against McDonald’s, with payments to individual employees ranging from $20 to $50,000.  The primary issue that McDonald’s and the Board were litigating is whether McDonald’s should be considered a joint employer with its franchisee restaurant owners.  If McDonald’s is found to be a joint employer with its franchisees, McDonald’s may be liable for violations of federal labor laws committed by those franchisees.

An entity is considered a joint employer where that entity has sufficient control over the essential terms and conditions of employment of another employer’s employee.  The standard applied by the Board to determine whether sufficient control exists has changed over recent years.   In August 2015, the Board expanded the scope of the standard by holding that an entity’s control over the employee need not be “direct or immediate” and that the entity need not actually exercise its control over the employee to be considered a joint employer.  Rather, the mere reservation of a right to control the employee might be sufficient to establish a joint employment relationship.  Browning-Ferris Industries of California, 362 NLRB No. 186 (August 27, 2015).

In December 2017 and acting under a new administration, the Board overruled its decision in Browning-Ferris and issued a strongly worded critique of that standard, stating that the “Browning-Ferris standard is a distortion of common law as interpreted by the Board and the courts, it is contrary to the Act, it is ill-advised as a matter of policy, and its application would prevent the Board from discharging one of its primary responsibilities under the Act, which is to foster stability in labor-management relations.”   Hy-Brand Industrial Contractors, Ltd., et. al., 365 NLRB No. 156 (December 14, 2017).  The Board accordingly returned to the less-expansive standard that existed prior to Browning-Ferris.  Pursuant to Hy-Brand, a finding of joint employer status requires proof that the entity actually exercised control over the employee, rather than merely reserving the right to exercise control, and the control must be “direct and immediate.”  Also, a joint employer status will not result where the control is “limited and routine.”

In February 2018, the Board vacated its decision in Hy-Brand on ethical grounds, i.e., a disqualified member of the Board failed to recuse himself.  Hy-Brand Industrial Contractors, Ltd., et. al., 366 NLRB No. 26 (February 26, 2018).  The standard as articulated in Browning-Ferris once again became the controlling standard.

The McDonald’s litigation is significant because a trial on the joint employer issue might provide clarification of the appropriate standard to be applied by the Board, particularly in the franchise context, and a decision on the issue can have an enormous impact on other, similarly situated companies.  If the preliminary settlement is approved, the joint employment status of McDonald’s remains an open question.  The litigation will therefore not result in a clarification of the joint employer standard or have any precedential effect on future joint employer cases.  Unless and until the Board re-visits this issue, the standard as articulated in Browning-Ferris appears to be the controlling standard.

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