Friday, July 31, 2015

Bank Error in Your Favor

Originally published by Richard Smith.

After the real estate bubble burst in 2008, borrowers attempted all sorts of ways to get out of their obligations. Most notably, debtors repeatedly challenged the ways that their mortgages had been transferred and recorded (or not) by the banks that had held, swapped, sold, and securitized them. Long story short, it hardly ever worked, as courts across the country mostly (but not always) eschewed technical arguments in favor of the big picture of who owed what to whom. But a new opinion from the Dallas Court of Appeals shows that when the bank doesn’t follow the rules in litigation, the debtors may still escape liability on a loan.

In this instance, a pair of individual guarantors for a $748,000 loan were sued by Wells Fargo after the borrower defaulted. While the case was pending, Wells Fargo allegedly assigned the loan documents to another entity, Apex. Wells Fargo’s attorneys later filed a motion for withdrawal and substitution, which the trial court granted. The motion failed to mention the assignment of the loan documents to Apex. The guarantors then filed for no-evidence summary judgment, pointing out that Wells Fargo had conducted no discovery and that the discovery period was closed. The motion argued that there was no evidence to show who owned the guaranty. When Apex appeared and tried to cure that deficiency, the guarantors objected and moved to strike Apex’s summary judgment evidence. The trial court sustained the objections and granted summary judgment. The Court of Appeals affirmed, holding that it was not an abuse of discretion to exclude Apex’s evidence because it had waited 11 months after acquiring the loan to amend Wells Fargo’s discovery responses by disclosing its ownership. That was not “reasonably prompt,” and it act as an unfair surprise to the guarantors to have that come out only in response to their summary judgment motion.

LSREF2 Apex (TX) II, LLC v. Blomquist, No. 05-14-00851-CV

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Transactional lawyers as business advisors? (New 7th Circuit opinion)

Originally published by John Steele.

There’s an interesting new case out of the Seventh Circuit, reinstating a legal malpractice case against a transactional firm for an alleged failure to warn the client that it might be dealing with a Ponzi scheme. Worth reading in its…

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Top 10 from Texas Bar Today: Ascertainability, Empathy, and Vocabulary

Originally published by Joanna Herzik.

To highlight some of the posts that stand out from the crowd, the editors of Texas Bar Today have created a list from the week’s blog posts of the top ten based on subject matter, writing style, headline, and imagery. We hope you enjoy this installment.

10. Section 285 Motion DeniedMichael C. Smith of Siebman, Burg, Phillips & Smith, LLP in Marshall

9. The NCAA Committee on Infractions Has Spoken: East Central University (Division II)Christian Dennie @ChristianDennie of Barlow Garsek & Simon, LLP in Fort Worth

8. EU Demands that Google’s ‘right to be forgotten’ to be Worldwide Searches, Not just in the EUPeter Vogel @PeterSVogel of Gardere Wynne Sewell LLP in Dallas

7. “Insured v. Insured” exclusion inapplicableDavid Coale @600camp of Lynn Tillotson Pinker & Cox LLP in Dallas

6. The Trait of Empathy in Compliance – Thomas Fox @tfoxlaw of TomFoxLaw in Houston

5. The Complexity of Estate Planning in Blended FamiliesRania Combs @raniacombs of Rania Combs Law in Houston

4. Arbitration Ordered Based on Poorly-Drafted Arbitration ClauseRichard Smith @600Commerce of Lynn Tillotson Pinker & Cox LLP in Dallas

3. Can We Kiss Ascertainability Goodbye?Barry Barnett of Susman Godfrey LLP in Dallas

2. Packing Heat in Texas – What employers can do.Rob Radcliff @robradcliff of Weinstein Radcliff LLP in Dallas

1. Tips for Concision: 3. Diminish sesquipedalian vocabularyWayne Schiess, Director of the David J. Beck Center for Legal Research, Writing, and Appellate Advocacy at the University of Texas @UTAustin School of Law in Austin

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“DRIVE, He Said[1] ”—But When??

Originally published by Stanley Taylor.

Hopes  that that the Congress would pass S. 1647, the Developing a Reliable and Innovative Vision for the Economy Act (DRIVE Act),  a six-year, $478 billion transportation funding reauthorization bill before the August recess have, like so many times before, come to naught.  Instead we get a three month extension of the current transportation funding and authorization law, MAP-21, that will provide $8 billion to allow current project funding and implementation to continue.

The three-month extension, H.R. 3236, the Surface Transportation and Veterans Health Care Choice Improvement Act, passed out of the House on Wednesday by a vote of 385-34.  Senate Majority Leader Mitch McConnell, R-Ky, committed to take up the short term funding extension in the Senate before the recess and to continue debate on its long term version of a reauthorization bill with the goal to have a bicameral conference in September to resolve issues. The Senate acted on Thursday afternoon, passing the extension by a vote of 91-4.

In addition to the $8 billion in funding for the Highway Trust Fund — the same amount that had been in the previous five-month extension — the short-term bill also includes more than $3 billion in emergency funding to prevent a shortfall that may have forced several U.S. Department of Veterans Affairs hospitals to shutter temporarily.

The three month extension was necessary to avoid expiration of MAP-21, scheduled to expire unless extended or replaced by this Friday.  The DRIVE Act as proposed by the Senate Environment and Public Works Committee contains an amendment that would reauthorize the Export-Import Bank, whose charter was allowed to expire at the end of June.  However House Majority Leader Kevin McCarthy, R-Calif. has expressed the view that a DRIVE Act bill with such a provision would be DOA in the House.

Funding the DRIVE Act remains an open issue.  Current federal gas tax revenues generate about $35 billion a year for the Trust Fund, about $10 billion a year shy of the amount needed to fund the long term bill.  Among options being considered is a package of offsets totaling $47 billion or so that would augment the fund for at least three years. Some of the proposed offsets, such as a proposal to sell off 100 million barrels of oil in the Strategic Petroleum Reserve, have already met with opposition, however.

The Senate, prior to voting on the extension bill, also approved its version of   the DRIVE Act bill on Thursday by a vote of 65-34.  The House is expected to craft its own version of the long term bill after the recess, which will be harmonized, we hope, with the Senate’s version through the conference process.

[1] (1971). Directed by Jack Nicholson, starring William Tepper, Karen Black, Michael Margotta.

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4 Ways Employers Can Improve Data Security and Reduce Risk in a BYOD World

Originally published by Eric Welter.

Personal electronic devices are a fixture of daily life in the modern era. In the United States, nearly every adult, on average, owns at least one personal electronic device (laptop computer, smartphone and tablets etc.), and increasingly, those who own them also brings them to work.

In the last several years, many employers have instituted “bring your own device” (BYOD) programs in the workplace, permitting employees to use their personal electronic devices to access proprietary networks and data. While such policies can save substantial money by avoiding the cost of buying each employee their own work device, such policies also expose the company to significant risks.

Permitting employees to use their personal devices to access corporate networks, download company files, and upload completed projects to their employers’ servers increases the possibility of file corruption, virus infection of corporate systems, and the misappropriation of proprietary information.

The following are four policy changes employers can make to reduce the risks associated with BYOD policies.

1. Institute a BYOD employment agreement.

Employers should require their employees to sign a BYOD agreement and establish a personal device use policy outlining the permitted uses of their personal devices for work purposes, and imposing data restrictions on the employee.

The agreement and policy should discuss what type of employer data the employee is permitted to download and/or view on the device, as well as a protocol for uploading material to corporate systems. The agreement should also discuss the penalties for violating the provisions of the agreement, potentially including the prohibition of future device use while at work and restricted access to company network resources.

Further, employees should be advised to back up their personal data from the device to another location. Lastly, the agreement should state that the employee is providing the employer and its IT department with access to the device, as well as permitting certain controls over stored data, apps and the use of appropriate security measures. More on this below.

2. Implement app ‘kill switches’, antivirus software and IT access.

As part of the agreement described above, employers should require that employees permit the employer’s IT department or third-party IT provider to have access to the device upon request, and agree to certain controls over use and content.

One possible control is an app ‘kill switch’, which would permit the employer to deactivate and delete an app that is in violation of the BYOD agreement or is otherwise prohibited by the device use policy.

New apps are developed daily, and untested apps or apps developed by a less-than-reputable source can contain malware and viruses that can be transferred from the employee’s phone, tablet or computer to the employer’s network.

Employers should also require the employees to install antivirus software on their device(s) as a precaution to prevent local infection and the spread of any malicious software to other employees’ or corporate systems.

Finally, employers are strongly encouraged to condition BYOD use on the employee’s agreement to surrender the device to the IT department for inspection and potential formatting or other technical adjustments if necessary. Without these protections, employees may not be able to successfully remove all of the malicious material upon discovery and could then impact or re-infect the corporate system.

3. Establish a data breach response protocol.

Effective crisis management requires a pre-established plan to address a given emergency. Employers should work with their IT staff to develop a data breach response protocol that can be implemented should the above-referenced efforts prove ineffective.

Employers should be ready to activate the plan upon learning of a data breach. The protocol may include efforts such as restricting personal device access to corporate systems until the situation is resolved, inspecting data transfer and email traffic to determine the source of the breach, and preparing a press release or corporate statement addressing the breach and the company’s response in order to stay ahead of the crisis. Consult with an IT security professional to determine the best protocol for your enterprise.

4. Provide employee education and training.

While this may appear to be the most obvious step, employee education regarding data risks and training on the appropriate use of personal devices and the response to a suspected breach can be the most effective method of limiting potential harm.

Employers can incorporate a mandatory training into their new employee orientation procedures and distribute updates and refreshers on an annual or as-needed basis.

Requiring employees to certify that they have completed the required data security training as part of their BYOD agreement can also encourage compliance with the education process and reduce the possibility of negligent activity resulting in harm.

Laconic Lookout:

Be prepared for personal device use to increase as new technologies develop. Employers should take a proactive approach to employee device use and data security in the emerging BYOD environment.

Since legal precedent on personal device use in employment situations is still very much in development, employers are advised to stay up-to-date on new security protocols rather than to count on reactive legal remedies.

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Houston Legal Links 7/31/2015

Originally published by Mary Flood.

Top legal news includes: DPS’s McCraw Hammered at Hearing on Bland Case; Sandra Bland’s death may bring new screenings in Texas jails; Galveston County judge to decide whether to reduce former judge’s 600K bond; Families Go to Battle in Probate Court, Only to Leave Without Anything; Texas vs. the Feds: A New Look at the Lawsuits; Teen charged with arson said he was playing with lighter; Neighbors sue Terry Black’s over excessive barbecue smoke in Texas; Father of 18-year-old who committed suicide in Brazoria County Jail still searches for answers; Texas Tech University School of Law Welcomes Scribes (Texas Lawyer); What you need to know about the Planned Parenthood controversy; Spilled Tea During Flight Leads to Lawsuit (Texas Lawyer); Austin Sued on Campaign Limits; Prestigious school admits covering up teacher’s sexual abuse of students; Senate panel passes bill lifting crude oil export ban; Oil Layoffs Lead To Economic Domino Effect & Shell to ax thousands of jobs amid $7 billion in spending cuts.

For the water cooler: Biglaw Firm Sued By A Fortune 500 (Former) Client; US increasingly uses malware in law enforcement, expert says; should a warrant be required?; Shrinking number of law graduates boosts employment rate for class of 2014; Employee is accused of stealing $50K from law firm during her first weeks on the job; Moneyball for Litigation? A Conversation with Premonition’s Toby Unwin; If You Like Watching Lawyers Make Awkward Music Videos… Here You Go; Man charged for claimed Facebook threat to storm courthouse over felony-murder trial; 3 UVA grads sue Rolling Stone over discredited fraternity-rape story; Does SCOTUS Need a Code of Conduct; Law Librarians May Have Killed World’s Biggest Copyright Troll; Lawyer who faked records of court-ordered counseling should get 5-year suspension, panel recommends; These ‘time hacks’ helped lawyer juggle practice with side business; Congressman Moves To Block Pell Grants For Prisoners; Morrissey Claims TSA Officer Groped Him & China cracks down on lawyers said to have ‘sabotaged the legal order.’

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NFL Roundtable: How will Texans handle ‘Hard Knocks’?

Originally published by Ultimate Texans.

Houston Chronicle sports writers John McClain, Brian T. Smith, and Dale Robertson discuss the Houston Texans getting “Hard Knocks” coverage and how the HBO series will depict coach Bill O’Brien. (video by R. Carter)

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EU Demands that Google’s ‘right to be forgotten’ to be Worldwide Searches, Not just in the EU

Originally published by Peter S. Vogel.

Google is fighting a June 2015 order from the French CNIL (Commission nationale de l’informatique et des libertés) that ordered Google to “delist links not just from all European versions of Search but also from all versions globally.”  Google’s Global Privacy Counsel Peter Fleischer blogged on July 30, 2015 about the background of the EU May 2014 ruling:

…the Court of Justice of the European Union (CJEU) established a “right to be forgotten”, or more accurately, a “right to delist”, allowing Europeans to ask search engines to delist certain links from results they show based on searches for that person’s name. We moved rapidly to comply with the ruling from the Court. Within weeks we made it possible for people to submit removal requests, and soon after that began delisting search results.

However Mr. Fleisher’s blog about June CNIL order called this as a “troubling development that risks serious chilling effects on the web” and ultimately:

…the Internet would only be as free as the world’s least free place.

This CNIL order applies to other search engines, but since Google accounts for 90% of the search engine traffic the EU, Google is the target of testing the broadening the ‘right to be forgotten.’

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Thursday, July 30, 2015

D.C. Circuit Affirms Preparer Convictions Over Ineffective Assistance Claims

Originally published by Jack Townsend.

In United States v. Udo, ___ F.3d ___, 2015 U.S. App. LEXIS 12783 (DC Cir. 2015), here, the defendant, a CPA, was a return preparer.  He prepared many false returns falling into a pattern.  The IRS was suspicious and conducted a sting operation.  He prepared a false return for the undercover agent.  He was convicted at trial.  He raised several issues on appeal.  I address only a couple here.

Ineffective Assistance From Promise that Defendant Would Testify and Then Not Testifying

Here are the relevant facts from the opinion:

We recount only the events at Udo’s trial relevant to this appeal. During his opening statement at trial, Udo’s counsel told the jury that the case “comes down to . . . he said, she said.” Trial Tr. 168 (Aug. 1, 2012). Counsel went on to promise that the jury would “hear from Mr. Udo,” who would explain that he acted in good faith based on what his clients had told him about their expenses. Id. at 173. But Udo never testified.

Instead, when the government’s case came to a close, Udo’s counsel asked the court for a ruling limiting any cross-examination of Udo to those issues about which he would testify: his background, his education, and his knowledge of the law and his professional duties. Relying on Brown v. United States, defense counsel argued that a defendant who testifies in his own defense does not waive the Fifth Amendment’s protection from self-incrimination to matters unrelated to his testimony. Cf. Brown v. United States, 356 U.S. 148, 154-55 (1958). In response, the government argued that, at the very least, Federal Rule of Evidence 608(b) permitted questioning Udo about his character for truthfulness. n1 Skeptical of Udo’s request, the court stated that it would be “very, very, very surprised” if counsel was correct. Trial Tr. 67 (Aug. 3, 2012). After a short break to consider the question, the court announced that it would not limit cross-examination before Udo testified, and that his credibility was fair game for the government to examine. n2 Udo’s counsel decided not to call him to testify.
n1 Rule 608(b) allows a party to inquire on cross-examination into specific instances of a witness’s conduct if those instances are probative of the witness’s character for truthfulness. See FED. R. EVID. 608(b).
n2 Udo does not appeal the court’s determination that the government would likely be able to cross-examine him about his character for truthfulness. Cf. Brown, 356 U.S. at 154-55 (“If [a defendant] takes the stand and testifies in his own defense his credibility may be impeached and his testimony assailed like that of any other witness, and the breadth of his waiver is determined by the scope of relevant cross-examination.”).

The Court started by saying the, normally, ineffective assistance of counsel is not raised on direct appeal because a hearing may be required.  Nevertheless, the Court determined that on the record it could adequately address the claim.  In doing so, the Court said that “the government’s case against him was, in a word, overwhelming.”  There was cumulative evidence, and “Udo — a licensed CPA — never introduced a shred of evidence suggesting that he thought that making up these expenses out of whole cloth was somehow permissible.”  That created a high bar for Udo to show prejudice.

Then turning to the claim and resolution.

Udo argues that his counsel was constitutionally ineffective because he incorrectly promised the jury that it would hear from Udo. The false promise was especially prejudicial, Udo argues, because his counsel characterized the case from the start as a “he said, she said” matter that depended on Udo providing the “he said.” Udo points to cases from several of our sister circuits finding ineffectiveness when a defense attorney mistakenly promised that a witness would testify. See McAleese v. Mazurkiewicz, 1 F.3d 159, 166 (3d Cir. 1993); Ouber v. Guarino, 293 F.3d 19, 27 (1st Cir. 2002); United States ex rel. Hampton v. Leibach, 347 F.3d 219,258-59 (7th Cir. 2003); Saesee v. McDonald, 725 F.3d 1045, 1049-50 (9th Cir. 2013).

As an initial matter, “the [Supreme] Court has emphasized the limited nature of any exceptions to the general rule that a defendant must demonstrate actual prejudice.” Ouber, 293 F.3d at 32. That is, only a handful of mistakes by counsel, none in play here, allow a court to presume constitutional ineffectiveness. See Bell v. Cone, 535 U.S. 685, 695-96 (2002) (identifying only three examples of ineffectiveness so damaging that prejudice is presumed). The Court has never said, and we are not prepared to say now, that falsely promising in an opening statement that a witness will testify necessarily prejudices a defendant. We are thus left to look at the evidence against Udo, evaluate the gravity of the harm that counsel’s false promise may have caused, and determine whether Udo suffered prejudice as a result.

Although counsel’s promise was a tactical misstep, it does not raise a “reasonable probability … sufficient to undermine confidence in the outcome.” Strickland, 466 U.S. at 694. We fail to see how the unfulfilled promise in the opening statement had any bearing on how the jury evaluated the credibility of either the videotape or the witnesses. Udo had the same opportunity to cross-examine witnesses and question the veracity of the videotape that he would have had even if counsel had never made the promise. We find no reasonable probability that the jury would have weighed this evidence and come to a different outcome had counsel never promised the jury that Udo would testify.

Nor do the cases Udo cites from our sister circuits give us pause. For one, the Third and Ninth Circuits said only in dicta that the alleged unfulfilled promises in those cases would trigger a claim for ineffectiveness. Both courts eventually concluded that no such promises were even made. See Saesee, 725 F.3d at 1050; McAleese, 1 F.3d at 167. And we agree with the government that the other cases Udo cites are readily distinguishable from Udo’s because each involved a close call whether the evidence supported a guilty verdict. See Hampton, 347 F.3d at 237 (noting that the district court found the prosecution’s case “far from unassailable”); Ouber, 293 F.3d at 33 (calling the case “exceedingly close”). This case was not a close call. The strength of the government’s case against Udo leaves us with no concern that the outcome would have been different had counsel never promised that Udo would testify. We therefore hold that counsel’s unfulfilled promise did not amount to ineffective assistance of counsel because Udo suffered no prejudice. See Strickland, 466 U.S. at 694.

Of course, several lessons are here.  First, defendants in this type of case, generally should not testify.  His counsel realized that truth.  Second, recognizing that truism, should not promise otherwise unless counsel is certain the defendant is going to testify.  Counsel did not realize that truth and thus had to backtrack on the “promise.”

Ineffective Assistance Because of Court’s Instruction About Duties of Tax Preparers.

The Court tried to offer the jury some explanation of the tax preparer’s role and therein led to an erroneous argument by the prosecutor.  The bold face in the following quoted segment is mine.

Udo raises another concern with the court’s explanation about the duties of tax preparers. By agreeing to this instruction, Udo argues, his trial counsel relieved the government of its burden to prove that Udo acted willfully and instead put the defense to the task of proving that his actions were innocent mistakes. Udo points to a statement by the prosecutor in her closing argument: “We’re talking about Mr. Udo who is a CPA, who prepares tax returns, must exercise due diligence in the accurate preparation and filing of tax returns to the IRS. That’s the jury instruction. That’s the law. He knows. He is deemed to know.” Trial Tr. 88 (Aug. 6, 2012).

The government concedes that the prosecutor misspoke. The government always bears the burden of proving all elements of a crime, including intent. By telling the jury that Udo “is deemed to know” the law, the prosecutor incorrectly suggested that Udo bore the burden of proving he did not. The government calls this a mere slip-up during closing argument. More importantly, the government argues, was the court’s instruction to the jury:

Every defendant in a criminal case is presumed to be innocent. This presumption of innocence remains with the defendant throughout the trial unless and until the government has proven he is guilty beyond a reasonable doubt. This burden never shifts throughout the trial. The law does not require the defendant to prove his innocence or to produce any evidence at all.

Trial Tr. 15-16 (Aug. 6, 2012). The court further instructed the jury that “[t]he government has the burden of proving the defendant guilty beyond a reasonable doubt as to each element of the crime charged,” id. at 16; “[t]he statements, arguments and questions of the lawyers are not evidence; they are only intended to assist you in understanding the evidence,” id. at 23; “the prosecution must prove that the defendant knew the deductions and credits were false or fraudulent beyond a reasonable doubt,” id. at 27.

We agree with the government that these instructions clarified any confusion the prosecutor’s misstatement may have caused. This court has previously held that “[t]he jury is presumed to follow the instructions” even in the face of a misstatement of the law by a prosecutor. United States v. Hall, 610 F.3d 727, 741-42 (D.C. Cir. 2010). We apply the same presumption here. The court’s instructions were crystal clear: The government bore the sole burden of proving beyond a reasonable doubt that Udo knew his clients’ returns were materially false. Again, we hold that Udo suffered no prejudice because any alleged ineffectiveness by his counsel did not “undermine confidence in the outcome.” Strickland, 466 U.S. at 694.

Restitution Calculation Reversal

Finally, the court reversed because the restitution award included counts of conviction and relevant conduct.  Restitution can only include relevant conduct.

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EPA Proposes Voluntary Methane Emissions Reduction Program

Originally published by Sandra Snyder.

As a first step toward curbing methane emissions from existing sources, EPA has released a proposed framework for the Natural Gas Star Methane Challenge Program. EPA is scheduled to propose regulations this summer to reduce methane emissions from new and modified sources. Therefore, any sources that exist before the date EPA proposes those regulations would […]

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Part I: Are You New to ASP? Resources of Interest

Originally published by lawschool academicsupport.

If you have joined the academic support/bar preparation professional community for the first time, we welcome you to a rewarding career and wonderful group of colleagues. One thing that ASP is known for is collegiality. There are many experienced ASP’ers…

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Companies Must Consider Impact on Culture, Compensable Time with Employee Security Searches, Particularly In California

Originally published by Eric Welter.

On December 9, 2014, the United States Supreme Court issued a much-anticipated decision in Integrity Staffing Solutions, Inc. v. Busk, 135 S. Ct. 513 (2014), holding that the time warehouse workers spend undergoing security searches before leaving each day is not compensable time under the Fair Labor Standards Act (FLSA).

Although this decision was seen as a big win for employers who require their employees to undergo unpaid pre- and post-shift activities, i.e. security searches, decontamination procedures, site-to-site transportation, etc., employers may still be required to compensate employees for these pre- and/or post-shift activities if the state law applied is more stringent than the FLSA. Moreover, requiring employees to undergo pre- and/or post-shift activities without compensating them for their time spent undergoing such activities has a negative impact on employees’ attitudes and the reputation of the company and its culture.

The Integrity Staffing Solutions decision only addressed claims under the FLSA, and it did not address state laws that may be more stringent. In California, it is likely that time spent waiting for and undergoing security searches is compensable.

Under California law, “hours worked” is defined as “the time during which an employee is subject to the control of an employer, and includes all the time the employee is suffered or permitted to work, whether or not required to do so.” See Industrial Welfare Commission (IWC) Order No. 4-2001.

In 2000, the California Supreme Court cited the IWC’s definition of hours worked and determined that “an employee who is subject to an employer’s control does not have to be working during that time to be compensated.” Morillion v. Royal Packing Co., 22 Cal. 4th 575, 582 (2000). The Supreme Court also held that time employees are required to spend travelling to and from a remote work site on their employers’ buses is compensable. Id.

In 2009, the Central District of California found that defendant employers could not raise a tribal issue of fact that employees were not under their control during the security screenings the employees were required to undergo prior to clocking in for their shifts. Cervantez v. Celestica Corp., 618 F. Supp. 2d 1208, 1218, 1219 (C.D. Cal. 2009).

Accordingly, California will be more stringent in its application of its wage laws with respect to pre- and/or post-shift activities and will likely find that time spent undergoing pre- and/or post-shift security checks is compensable.

Apple Inc., the California technology giant, will soon find out how stringent California law will be with respect to its requirement for employees to undergo unpaid security checks. In 2013, a lawsuit was filed against Apple in the Northern District of California alleging that employees should be paid for the time they spent undergoing security searches at meal breaks and after their shifts.

The case is Friekin v. Apple, 13-cv-03451 (N.D. Cal. 2015). The plaintiffs are seeking to certify a class of more than 12,400 former Apple employees from 52 Apple retail stores throughout California. At a recent hearing, U.S. District Court Judge William Alsup stated “It’s all or nothing. Either this policy is not compensable to anyone, or the entire class wins.” Assuming 12,000 employees were deprived of 15 minutes of pay per person at a minimum wage of $9 an hour, Apple could be hit with damages for compensable time exceeding $60 million, plus millions of dollars in penalties.

Although $60 million is likely little more than a drop in the bucket for Apple, what is more concerning is the effect such unpaid post-shift security searches are having on the attitudes of Apple’s employees and across Apple’s culture. In a 2012 email, one Apple employee described the searches in front of customers as “demoralizing” and felt that “[m]anagers are required to treat ‘valued’ employees as criminals.”

The sentiment generated from these unpaid security checks is not beneficial for Apple, who seems to pride itself on having an employee-friendly culture and which has historically maintained cult-like loyalty from its employees.

Laconic Lookout:

Before implementing unpaid security searches (or any other unpaid pre- and/or post-shift activity), employers must consider the laws of the states in which they operate to determine if they will be liable for compensating their employees for time spent undergoing such activities.

In states that follow the FLSA, employers, in reliance on Integrity Staffing Solutions, have a stronger argument that they do not have to compensate their employees for time spent undergoing pre- and/or post-shift activities.

In states that have more stringent standards than the FLSA, like California, employers must weigh the benefit of requiring their employees to undergo a pre- and/or post-shift activity with the potential detriment of having to pay them for their time.

Additionally, all companies, regardless of jurisdiction, should consider what effect the unpaid pre- and/or post-shift activity will have on the employee’s attitudes and the culture of the company. Such an image consideration is particularly important for large, well-known companies who do not want to have negative publicity from perceived poor treatment of their employees.

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Houston Legal Links 7/30/2015

Originally published by Mary Flood.

Top legal news includes: Few Lawyers Volunteer to Serve on DA’s Panel Investigating Sandra Bland’s; Death (Texas Lawyer); San Jacinto Cancer Victims Blame Dioxin Dump, Call For Removal; Inmates find variety of methods, tools to end their lives (Chron subsc); Houston City Charter Amendments Likely Pushed To Side By HERO Referendum; Texas Civil Rights Project Sues Harris County Sheriff’s Office Over Inmate’s Jail Suicide; Maps show visible racial divides in major Texas cities (Chron subsc); 25 big Texas busts made by U.S. Customs and Border Protection’s during Summer 2015; Texas A&M Wants the Public to Know How it Treats its Dog Mascot, But Not its Lab Dogs; Houston energy companies retreat from borrowing; Law firm moves into new downtown Houston office, plans for growth; Judge declares Texas’ online solicitation statute unconstitutional; Thousands of pot plants seized in East Texas in latest of big pot farm bust; Judge: Local governments, including Houston, will get their BP payments soon; Group set to sue U.S. agency over pipeline safety plans; 2 injection wells shut down after Oklahoma quakes; Miller Energy hopes to avoid bankruptcy & Familiar Houston name joins Forbes’ 2015 Richest Families list.

For the water cooler: Meet ROSS, ‘the world’s first artificially intelligent attorney'; Full transcript of judge’s luggage rant at British Airways lawyers emerges; Disbarred attorney charged with using another lawyer’s name in traffic-court case; 9th Circuit rejects widow’s suit over fatal mountain goat attack in national park; Ex-Wilson Sonsini Employee Sentenced to Two Years for Insider Trading; Attorney quits law, opens brewery in Marysville; Suspect is charged 30 years after fatal family-court-related attacks on judges, others; Woman fell from bed through 3rd-story window while sleeping, is now suing property manager for $230K; Donald Trump’s lawyer apologizes for ‘inarticulate comment’ about marital rape; New TSA Administrator To Explain How Agency Will Fail Differently From Now On; Associate Bonus Watch: A July Bonus Memo?; If We Can’t Make School Less Like Jail, Let’s Make Jail More Like School; Why Hollywood loves lawyers; ‘Smoking gun’ evidence shows Happy Birthday lyrics are no longer protected by copyright, lawyers say & White police officer faces murder case in shooting of black motorist in license-plate traffic stop.

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The Trait of Empathy in Compliance

Originally published by tfoxlaw.

EmpathyCan you empathize with those who work for you, around you and those you report to? While many leaders, particularly those who might be labeled the ‘command and control’ type seem to think that empathy is a negative; I think that it is an important habit for any Chief Compliance Officer (CCO) or compliance practitioner to not only practice but also master. Recently there were a couple of articles in the New York Times (NYT) that discussed this character trait and I found them useful to consider for the leadership toolkit of the CCO or compliance profession.

The first was by Daryl Cameron, Michael Inzlicht and William A. Cunningham, entitled “Empathy is Actually a Choice” and the second was in the Corner Office section by Adam Bryant, entitled “Is Empathy on Your Résumé?”, in which Bryant profiled Stewart Butterfield, the co-founder and chief executive of Slack, a communication service for businesses. The first piece focused on research by the authors and the second was Bryant’s weekly piece on business leadership.

The researchers noted, “While we concede the exercise of empathy is, in practice, often far too limited in scope, we dispute the idea that this shortcoming is inherent, a permanent flaw in the emotion itself…we believe that empathy is a choice that we make to extend ourselves to others. The “limits” to our empathy are merely apparent, and can change, sometimes drastically, depending on what we want to feel.” The authors ended by stating, “Arguments against empathy rely on an outdated view of emotion as a capricious beast that needs to yield to sober reason. Yes, there are many situations in which empathy appears to be limited in its scope, but this is not a deficiency in the emotion itself. In our view, empathy is only as limited as we choose it to be.”

Bryant’s article on Butterfield and his leadership style brought these concepts home. Most interestingly, Butterfield began by self-disclosing, “I’m good at the leadership part. But I’ve always said that I’m a terrible manager. I’m not good at giving feedback. People are like horses — they can smell fear. If you have a lot of apprehension going into a difficult conversation, they’ll pick up on that. And that’s going to make them nervous, and then the whole conversation is more difficult.”

Another insight on leadership was something as simple as meetings. Butterfield said that “if you’re going to call a meeting, you’re responsible for it, and you have to be clear what you want out of it. Have a synopsis and present well. At the same time, if you’re going to attend a meeting, then you owe it your full attention. And if it’s not worth your attention, then say so — but don’t be a jerk about it — and leave the meeting.” So more than simply taking responsibility for one’s own time, he put out the empathy to allow you to consider how your agenda (or lack thereof) may have negative repercussions on others on your team or in your organization.

Another interesting insight from Butterfield were his thoughts on empathy as it related to leadership. This is a sought out trait for employees, as early as in the interview process. He said, “When we talk about the qualities we want in people, empathy is a big one. If you can empathize with people, then you can do a good job. If you have no ability to empathize, then it’s difficult to give people feedback, and it’s difficult to help people improve. Everything becomes harder.”

Similarly to his examples around meetings, Butterfield believes that empathy can express itself as courtesy. He said, “One way that empathy manifests itself is courtesy. Respecting people’s time is important. Don’t let your colleagues down; if you say you’re going to do something, do it. A lot of the standard traits that you would look for in any kind of organization come down to courteousness. It’s not just about having a veneer of politeness, but actually trying to anticipate someone else’s needs and meeting them in advance.”

I found it interesting that on the same day in the same newspaper, theory not only met practice but the practice had a business application. For those out there who feel leadership skills are ingrained into your DNA, the authors pointed out “Likewise, in another recent study, the psychologists Karina Schumann, Jamil Zaki and Carol S. Dweck found that when people learned that empathy was a skill that could be improved — as opposed to a fixed personality trait — they engaged in more effort to experience empathy for racial groups other than their own. Empathy for people unlike us can be expanded, it seems, just by modifying our views about empathy.”

Yet for the CCO or compliance practitioner, Butterfield pointed out specific areas where the trait of empathy can yield great respect for you and your position in any corporation. People rarely think of courtesy and respect as leadership skills but if you can bring these to bear in your compliance practice, you can garner greater influence as not only someone who cares but someone who cares and gets things accomplished. For any corporate disciple which relies on influence to succeed these simple tools can go a long way to providing to you a wider manner to impact corporate culture, become a trusted partner and be a part of any significant business conversation earlier rather than later in the game.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at

© Thomas R. Fox, 2015

Filed under: Adam Bryant, Best Practices, CCO 2.0, Chief Compliance Officer, Compliance, Compliance and Ethics, compliance programs, New York Times Tagged: empathy, NYT

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New Version of Google Patents Launched

Originally published by Robert Clark.

Earlier this month, Google launched a new version of its Google Patents search engine. Like the previous version, the new Google Patents combines patent records from the United States Patent and Trademark Office (USPTO), European Patent Office (EPO), World Intellectual Property Organization (WIPO), Deutsches Patent- und Markenamt (DPMA), Canadian Intellectual Property Office (CIPO), and China’s State Intellectual Property Office (SIPO). What’s different about the new Google Patents is that it uses a machine classification model to integrate Google Scholar’s non-patent materials, which are classified under the Cooperative Patent Classification System. This makes it easier to search for prior art across a wide range of sources, including books and technical journals. The new Google Patents also incorporates Google Translate to allow users to search foreign patent documents using English keywords.

For more information, see “About the new Google Patents” on the Google Help page.

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IRS Announces Curtailment of Determination Letter Program

Originally published by Thompson & Knight LLP.

The Internal Revenue Service recently announced a significant contraction of the determination letter program for individually designed qualified retirement plans. We prepared a client alert that discusses the changes and the implications for employers sponsoring such plans. If you have any questions about the changes and how they affect your employee benefit plans, please contact any of the T&K tax attorneys listed in the alert.

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Arbitration Ordered Based on Poorly-Drafted Arbitration Clause

Originally published by Richard Smith.

The Dallas Court of Appeals has reversed a trial court order denying a motion to compel arbitration. The arbitration clause was contained in a contract between a temporary employee and his employment agency, which gave both parties the right to “elect mandatory, binding arbitration for any claim, dispute, or controversy between you, and our clients or us” [sic]. The plaintiff claimed that the arbitration agreement was unenforceable due to substantive unconscionability, lack of consideration, and lack of essential terms. The Court held that nothing in the arbitration agreement demonstrated that the specific manner of arbitration was a material consideration to the parties, noting that the FAA specifically contemplates circumstances in which the parties have not provided for a method of appointment for an arbitrator. The Court also held that the consideration for the overall contract was sufficient to support the arbitration clause as well. Finally, the Court held that the provision was not substantively unconscionable despite its inclusion of a waiver of the right “to take any legal action” because it was not clear that potentially-unconscionable waiver was actually aimed at waiving substantive claims instead of just waiving the right to do so in court instead of arbitration.

Stride Staffing v. Holloway, No. 05-14-00811-CV

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The Great Google Debate or “I am not touching this”

Originally published by Mark Gediman.

I just returned from the AALL annual meeting in Philadelphia and had an interesting discussion with a colleague about Google.  First, let me set the scene: I was on a panel with Zena Applebaum and we had just answered a question about our favorite CI resources.  A member of the audience then asked why neither of us had included Google in our lists. As I began to answer, Zena wisely tweeted:


There is a debate going on, both within our institutions and in the research community.  Is Google a tool or a resource?  I feel that Google is just a tool, an excellent one that allows us to access a universe of information.  Unfortunately, the quality of the information is always in doubt.  Information from a fake website or a misleading post could be included in the search results, maybe even at the top of the list. The same reasons you don’t rely on Wikipedia apply even more to Google.  Google has never laid claim to delivering only quality, vetted information.  In fact, they have taken great pains to do the opposite.  Look at the disclaimer at the bottom of the page here and listen to the conversation Richard Leiter and Company had with Google Scholar’s Chief Engineer here.

As a researcher, I know the importance of confirming anything I find on Google and noting if the information is suspect and cannot be verified.  In CI as in law, it is important to have a high degree of confidence in the information that your analysis and recommendations are based on.  Google alone does not instill that confidence.

There is a reason we pay for services like Lexis Advance and WestlawNext.  These services ensure that their subscribers have access to current and vetted content, often with editorial review.  I’m not saying Google isn’t useful.  I am on Google several hours each day.  However, it is for these reasons I don’t conduct legal research on Google when I have these services and others like them at my fingertips.  Just like any tool, a thorough understanding of its limitations is necessary to get the most out of it.

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The difference between State and Federal Criminal Defense

Originally published by Steve Jumes.

State and Federal Criminal Defense Comparison
Several differences exist between the state and federal criminal systems. While both systems include similar statutes, standards, and evidentiary rules, the practical application of these rules differs dramatically between the two systems.

Conspiracy Crimes and Non-Conspiracy Crimes

An agreement to commit an illegal act is a conspiracy. For example, If two brothers agree to distribute methamphetamine to customers in the Dallas/Fort Worth area they are said to have conspired to commit possession of controlled substances with intent to deliver. Conspiracy agreements are somewhat similar to, but legally distinct from, preparatory and inchoate offenses such as attempted assault. While both inchoate (which essentially means incomplete) offenses and conspiracy offenses involve crimes that have not been completed, they are distinct in significant ways. First, inchoate offenses can be committed by the actions and mental state of just one person. Second, perpetrators of inchoate offenses do not have to agree with others to commit an offense to be guilty. Additionally, conspiracy cases typically involve unique evidence and a much larger scope than other offenses. While both the state and federal systems include prohibitions of criminal conspiracies, many federal cases allege conspiracy whereas very few state cases involve conspiracy.

Hearsay exception

In the state system, statements of co-defendants cannot support a conviction unless they are corroborated. In other words, there is a skepticism of evidence provided by persons subject to prosecution that is offered against other persons subject to the same prosecution. For example, if Alan is arrested for burglary of a 7-11 and then tells a police officer that he committed the burglary with his friend Brett, that statement alone would not justify the prosecution of Brett.

While the statements of codefendants are considered somewhat suspect in the state system, similar statements are embraced within the federal system. Under the federal rules of evidence, co-conspirator statements are an exception to the hearsay rule. Thus, take the same example as above. If Alan and Brett were accused of conspiring to burglarize the 7-11 then Alan’s uncorroborated statement that Brett committed the burglary would be admissible.

This raises a significant question regarding accuracy and fairness. What is Alan’s incentive when questioned by authorities. Well, it’s two-fold. 1) burn the other guy and 2) take the heat off himself. Obviously, it is better for Alan that Brett be painted as the ringleader or “true perpetrator.” This danger is the impetus for the state requirement of corroboration.

Scope – Number of parties

Federal cases often involve multiple, sometimes 10+ or 50+ defendants. State cases, on the other hand, typically involve 1-2 defendants. This is a massive consideration because the number of defendants dictates the tenor and tone of an investigation. When there are only a few defendants then the risk of snitching is reduced. However, if many defendants are involved then clients rationally assume that at least some defendants will cooperate with authorities. If that is the case then the targeted defendant will feel a tremendous pressure to credibly cooperate. Thus, the right to silence is fatigued when multiple defendants are presented.

Historical v. Corroborated Evidence

Historical cases are built upon the words of witnesses alone. In other words, no physical evidence is presented or any type of proof that is self evidence. Take two examples: First, Alan says Brett helped him burgle but Brett is nowhere to be seen and there is no evidence to back up Alan. Second, Alan says the same thing, but soon afterward Brett is stopped for a traffic violation and a ski mask and merchandise from the 7-11 are found upon a consent search.

In the federal system, much of the evidence is simply established by targets who describe a crime long after it took place. For example, if Alan says Brett gave him 1 ounce of cocaine every week for 3 years between 2011 and 2014, then the federal sentence may be based upon the delivery of 156 ounces of cocaine. What if Brett was only caught with 1 ounce and its only Alan who puts this kind of weight upon Brett? In the federal system it does not matter and Brett is accountable for 156 ounces. Under the U.S. Sentencing Guidelines the difference between 1 ounce and 156 ounces is massive.

In the state system this gargantuan difference would not exist. However, in the federal system, this historical evidence is embraced, used, and relied upon.

Standard of Proof for Enhancement Evidence

Both the state and federal systems allow for consideration of aggravating factors when determining a sentence. Under either system, a person convicted of a theft or fraud charge will be subject to a certain statutory range of punishment.

For example, in Texas a person who stole $100,000 would be subject to a 2nd degree felony range of punishment which includes a sentence between 2 – 20 years. Probation is a possibility depending upon the defendant’s criminal history.

In the federal system, wire and mail fraud cases are described under 18 USC 1341 and 1343. The range of punishment for such an offender is a prison sentence up to 20 years. It is also important to recognize that probation is allowed in the federal system but it is far more hypothetical than practical. In other words, they are relatively rare.

The factors for consideration when determining what part of these ranges should be assessed for a particular offender for a particular crime is based primarily upon a few factors such as a defendant’s criminal history, the facts of the case, any mitigating factors about the offender, and any prior bad acts. Basically, a defendant’s entire life story is under consideration. For example, if the above-described offender has a prior felony conviction for DWI, cheated on his wife, and came from an abusive family. All of these things are fair game in the state system. In the federal system the infidelity may or may not become a factor depending upon the prosecutor and judge. Nonetheless, prior criminal history and mitigating background are relevant sentencing considerations.

While both state and federal sentences involve generalized statutory ranges of punishment, each system approaches sentencing differently. First, in state systems, particularly Texas, sentencing proceedings are referred to as “punishment” proceedings. In the federal system, sentencing is sentencing. In the state system, all extraneous bad acts and criminal history must be proven beyond a reasonable doubt to the factfinder. On the other hand, in the federal system extraneous bad acts and criminal acts offered to increase punishment need only be established by a preponderance of the evidence, or over 50%. To be sure, the preponderance of evidence standard is far lower than a beyond a reasonable doubt standard.

This becomes extremely important in cases where prior bad acts of fraud is offered for two reasons. First, forensic accounting is generally not used to establish extraneous fraud evidence in the federal system because there is no need to reach a high burden that actually goes to the trouble of eliminating possible benign explanations for deposit and withdrawal history. Second, the federal system uses an expansive view of offense conduct describing many bad acts as part of “relevant conduct.”

For example, if Frank is accused of defrauding an airline pilot by selling a fake CD and just taking off with the money. His indictment might simply describe that one relationship and one investment. However, if Frank also sold fake investments to 12 other people, even with different size investments and different occupations, all of these instances will be included in a presentence report as relevant conduct. These actions would absolutely increase Frank’s guideline calculation and will only need to be shown by a preponderance of evidence. Thus, forensic accounting would rarely come into play. In fact, the government would probably just let an agent summarize these extraneous acts to a probation officer who will include these actions within the report. It will become incumbent upon defense counsel to offer alternative explanations and dispute the agent’s summary. Once again, the prosecutor need only establish these acts by a preponderance of the evidence. This means that if the alternative explanations are possible, but unlikely, then the sentencing judge can find that these other 12 investments are relevant for consideration as to Frank’s sentence.

In contrast, in the state system these other alleged victims would not be included as relevant conduct, but would instead be offered as discrete extraneous bad acts or offenses in punishment. The defense would be allowed to argue that the state has not proven these frauds beyond a reasonable doubt, including the disproval of benign explanations for the transfer of money between the alleged victims and Frank as well as any subsequent transaction history. If these instances cannot be shown beyond a reasonable doubt, then the judge or jury could not consider them in assessing Frank’s sentence.


In Texas, either a judge or a jury can decide a sentence. This is extremely rare nationwide. In the federal system however, only judges can impose a sentence. The only exception comes in death penalty cases. In those cases, a jury must find the facts necessary to issue a death sentence.

Steve Jumes and Benson Varghese are experienced state and federal defense practitioners. Steve Jumes is also a former federal prosecutor. For more information on how Varghese Summersett, PLLC can assist your federal defense, call us at (817) 203-2220.

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Better Legal Writing . . . From The Adobe Legal Department

Originally published by Stuart Mauney.

Whereas, the legal profession needs someone to help us write more clearly, and less lawyerly,

Whereas, we want to be understood when we communicate with a client or the court,

Whereas, we do not want others to search a legal dictionary for definitions,

In acknowledgement hereof, the Adobe Legal Department has made its Legal Style Guide available free of charge.

We here at Abnormal Use have reviewed the Adobe guide and highlight several of our very favorite suggestions.

Format your document so it is easy to read.

Use informative headings that clearly signpost the main messages.

Break text into small units—use short sections, or subdivide longer ones.

Use short sentences.

About 20 words per sentence.

Include only one idea.

Break a long sentence down into manageable parts by using further numbering, bullets, tables, or lists.

Avoid legalese or archaic English, and use everyday words.

Among; not amongst.

That/these; not aforementioned.

Above or below; not hereinabove or herein.

Omit surplus words, and use shorter words or phrases.

Then; not “at that point in time.”

Since/because; not “inasmuch as.”

Because; not “in light of the fact that.”

Do not turn verbs into nouns.

Conclude; not “arrive at the conclusion.”

Apply; not “make an application.”

Consider; not “take into consideration.”

“Simplicity is the ultimate sophistication.” (Leonardo da Vinci)

(Hat Tip: Bob Ambrogi).

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Can We Kiss Ascertainability Goodbye?

Originally published by Barry Barnett.

Screen Shot 2015-07-29 at 10.46.19 PMWho says law review notes don’t matter?

A new decision proves that what students write in law journals can matter a great deal.

In Mullins v. Digital Direct, LLC, No. 15-1776 (7th Cir. July 28, 2015), the Seventh Circuit all but adopted a Yale law student’s analysis of, and rationale for freeing class action law from, a godawful “ascertainability” test that threatens to kill class cases involving low-dollar claims. A pair of other circuits had either championed the standard since creating it in 2012 (the Third Circuit) or quietly embraced it (the Eleventh).

Both the Yalie and the panel deserve our thanks.

Shaw’s item

The note in question — Geoffrey C. Shaw, Note, Class Ascertainability, 124 Yale L.J. 2354 (2015) — provides the following overview of itself:

In recent years, federal courts have been enforcing an “implicit” requirement for class certification, in addition to the explicit requirements established in Rule 23 of the Federal Rules of Civil Procedure. The ascertainability requirement insists that a proposed class be defined in “objective” terms and that an “administratively feasible” method exist for identifying individual class members and ascertaining their class membership. This requirement has generated considerable controversy and prevented the certification of many proposed classes. The requirement has taken a particular toll on consumer class actions, where potential class members are often unknown to the representative plaintiffs, often lack documentary proof of their injury, and often do not even know they have a legal claim at all.

This Note explores the ascertainability requirement’s conceptual foundations. The Note first evaluates the affirmative case for the requirement and finds it unpersuasive. At most, Rule 23 implicitly requires something much more modest: that classes enjoy what I call a minimally clear definition. The Note then argues that the ascertainability requirement frustrates the purposes of Rule 23 by pushing out of court the kind of cases Rule 23 was designed to bring into court. Finally, the Note proposes that courts abandon the ascertainability requirement and simply perform a rigorous analysis of Rule 23’s explicit requirements. This unremarkable approach to class certification better reflects what the Rule says and better advances what the Rule is for.

The case

The Seventh Circuit’s ruling came in a lawsuit about a diet supplement. The pills contained glucosamine sulfate, which the seller, Digital Direct, touted for its ability to strengthen joints. Vince Mullins paid something like $70 for a big bottle of the stuff.

Mullins sued Digital Direct for consumer fraud, urging that glucosamine sulfate did nothing for flexibility or cartilage health. He also sought, and the district court granted, an order certifying a damages class of all purchasers of Digital Direct‘s worthless goods.

The Seventh Circuit affirmed. With Circuit Judge David Hamilton (another Yalie) writing for the panel, the court countered the Third Circuit’s view of “ascertainability” at length.

Old school ascertainability — and the new kind

Judge Hamilton started by noting that Rule 23 requires a clear definition of who the class includes. A class definition that uses vague terms (e.g., “buyers of sour-tasting beer”), depends on the class members’ state of mind or other subjective criteria (“buyers of sour beer who didn’t enjoy the taste”), or excludes class members who lose on the merits (“buyers of sour beer who didn’t enjoy the taste but couldn’t persuade the jury to do anything about it”).

The court then turned to the Third Circuit’s “heightened ascertainability requirement” in Marcus v. BMW of North America, LLC, 687 F.3d 583 (3d Cir. 2012), and its offspring. The sister circuit’s test went too far, Judge Hamilton wrote, when it demanded a “reliable and administratively feasible” method for identifying class members who have valid claims:

This second requirement sounds sensible at first glance. Who could reasonably argue that a plaintiff should be al- lowed to certify a class whose members are impossible to identify? In practice, however, some courts have used this requirement to erect a nearly insurmountable hurdle at the class certification stage in situations where a class action is the only viable way to pursue valid but small individual claims.

Mullins, slip op. at 10.

“Err systematically against certification”

Nor did the court find policy arguments for a “stringent” kind of ascertainability test convincing. Citing Mr. Shaw’s note, the panel observed that if courts focus on the ease or difficulty of proving each class member’s right to recover, they “will err systematically against certification.”Id. at 17.

The court also rejected arguments about the “unfairness” to class members of allowing a class action to go forward. In consumer class actions like this one, class members suffer no harm that would legitimately concern them as a result of their inclusion in the class. They would never pursue such small-dollar claims on their own and (as a result of low participation rates in the claims administration process) lose nothing even if some unscrupulous people submit false claims. See id. at 24 (“To deny class certification based on fear of dilution would in effect deprive bona fide class members of any recovery as a means to ensure they do not recover too little.”).

Perfect v. good

As Judge Hamilton summed up, “[w]hen it comes to protecting the interests of absent class members, courts should not let the perfect become the enemy of the good.”  Id. at 20.

To which I say “amen”.

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Wednesday, July 29, 2015

The Complexity of Estate Planning in Blended Families

Originally published by Rania Combs.

blended familyAccording to a Pew Research Study, more than 4 in 10 Americans are part of a blended family.  And while 7 in 10 are satisfied with their step-family relationships, the study revealed that people typically feel a stronger sense of obligation to their biological families.

That’s what makes estate planning for blended families complicated.

If you have children from a prior relationship, making an outright distribution of your estate to your spouse may result in your children being disinherited. Why? Because when you make an outright distribution to your spouse, your spouse has the power to do whatever he or she wants with the inherited assets, which may include leaving assets to your children, or not.

For example, suppose you and your spouse both have two children from prior marriages. You agree to identify each other’s children as your own children for purposes of your Will. You then make outright distributions to each other upon your death, and name all four children as contingent beneficiaries.

Suppose after you die, your spouse and one of your children have a disagreement and become estranged.  Your surviving spouse could change his or her Will and leave all the assets (including assets inherited from you) to his or her biological children only. Or perhaps your surviving spouse finds love again and remarries. He or she may decide to leave all assets (including assets inherited from you) to a new spouse rather than your children.

Below are a few tips to consider as you plan for the complexity of your unique blended family:

  1. Determine your primary objective

The primary objective for some couples is providing for a surviving spouse. Perhaps the couple has been married for decades, their children are grown and successful, and they feel absolutely no obligation to leave their children an inheritance. If you have no concern whatsoever about the risk that your children could be disinherited, then an outright distribution may be an option.

On the other hand, if providing for your children is also important to you, leaving assets to your spouse in trust may be the better option. You can give your spouse access to the income, and perhaps the principal, from the trust to provide for his or her health, support, maintenance, or education, but direct that any remaining assets be distributed to your children after your surviving spouse dies.

  1. Consider your spouse’s relationship with your children

Sometimes, blended families are formed when the couple’s children are very young. In those situations, a strong bond can form between the stepparent and stepchild. Other blended families are formed after children are grown. In those situations, step-relations can be distant and contentious.

Which describes your family?

If your spouse has a strained relationship with your children and you make an outright distribution to your spouse, the likelihood that your children will be disinherited is probably high. In such a situation, consider a distribution to your spouse in trust with an independent trustee or co-trustee administering the trust assets. If there is a high level of distrust between your spouse and children, having an independent trustee involved may decrease the likelihood of conflict about the trust’s administration.

  1. Consider making a bequest to your children at the outset

Rather than leaving all your assets to your surviving spouse, consider distributing a portion of your assets to your children immediately upon your death. This may include personal belongings such as family heirlooms or jewelry,  real property that has been in your family for decades, financial assets, or a portion of the proceeds from a life insurance policy. This way, your children are provided for regardless of whether your surviving spouse makes any provisions for them.

This type of distribution may not be appropriate if an immediate distribution to your children may result in economic hardship for your spouse. In that case, leaving assets to your spouse in trust may be the best option.

  1. Talk about your plans

Whether you are part of a nuclear or blended family, sharing the details of your estate plan can limit disagreements after your death. Yet it is a topic very few people broach with their loved ones.

The likelihood of dissatisfaction increases when heirs are kept in the dark about the details of an estate plan. When details are known in advance, an overwhelming majority of heirs are satisfied with the inheritance process. In contrast, heirs are twice as likely to be unsatisfied with the distribution process when plans are kept secret.

Estate planning for blended families can be complicated. An attorney can explain your options, the ramification of your choices, and customize an estate plan to address your needs.

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Sixth Circuit Continues to Give Meaning to “Equitable Relief”

Originally published by Burke Harvey, LLC.

On June 18, 2015, the Sixth Circuit in Pearce v. Chrysler Group LLC Pension Plan, 2015 WL 3797385, found that a retirement plan participant could state an equitable claim under ERISA for supplemental pension benefits until he became eligible for Social Security benefits, notwithstanding the fact he was terminated prior to receiving the benefits and the Plan document provided that terminated employees were not eligible for those type benefits.

The Sixth Circuit cited to the Supreme Court’s decision in Cigna Corp. v. Amara, 131 S. Ct 1886 (2011), and found that the district court had abused its discretion in denying, on futility grounds, Pearce’s motion to amend his complaint to add equitable claims of reformation, estoppel and surcharge under 1132(a)(3), because “a material conflict between the SPD and the Pension Plan can give rise to a claim for equitable relief.” These equitable claims of (1) reformation; (2) estoppel; and (3) surcharge potentially provide equitable relief when an ERISA participant is precluded from direct relief under that statute for a claim of money benefits.

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Mandamus Granted to Correct Denial of Dismissal on Special Exceptions

Originally published by Richard Smith.

The Dallas Court of Appeals has granted mandamus to correct a trial court’s failure to grant special exceptions and dismiss the plaintiff’s claims against the settlor of a royalty trust. The Court held that a beneficiary of the trust had no authority to interfere with the trustee’s exercise of discretionary powers, concluding that the trustee acted within its discretion by refusing to sue the settlor on claims that were precluded by the terms of the trust instruments. Citing the “practical and prudential” mandamus standard of In re Prudential, the Court of Appeals held that mandamus relief was appropriate because allowing the plaintiff to proceed to trial on behalf of the trust would defeat the trustee’s right to control such litigation. But while the settlor of the trust was dismissed from the lawsuit, and the plaintiff could not sue the trustee on behalf of the trust, the Court held that the plaintiff should have the opportunity to amend her petition to sue the trustee solely on her own behalf.

In re XTO Energy, Inc., No. 05-14-01446-CV

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Section 285 Motion Denied

Originally published by Michael C. Smith.

Following the Supreme Court’s opinion in Octane Fitness changing the standard for award of attorneys fees under Section 285 in patent cases, 285 motions have become significantly more prevalent, providing a vehicle for judicial review of both the reasonableness of a losing party’s claims and its conduct in the litigation – although in practice most cases, at least locally, arise from voluntarily dismissed cases (as in the case of the Federal Circuit’s recent SFA v. Newegg). 

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Contracts – It’s More About the Drafting Than the Suing

Originally published by Charles Sartain.

Posted by Charles Sartain

compressorCo-author Brooke Sizer

It’s been said that your most important decisions are made when you write your contract, not when you have to sue on it. Kachina Pipeline Company v. Lillis agrees.

In a gas-purchase agreement, can the pipeline operator (Kachina) deduct costs of compression from its payments to the producer (Lillis).

“No”, said the Texas Supreme Court. Kachina could not charge Lillis for compression costs incurred after it received the gas in order to sell the gas to the third-party processing facility.

Why? Because according to the words of the contract that was the intention of the parties. This is even if, as the dissent argues, given the way things work in the business the parties couldn’t have meant what the words say.

The case construed the following provision:

Seller shall deliver the gas deliverable hereunder, … at a pressure sufficient to enter Buyer’s pipeline against the working pressure maintained therein from time to time. … neither party … shall be obligated to compress any gas … . If Buyer installs compression to effect delivery of Seller’s gas, Buyer will deduct from proceeds payable to Seller hereunder a value equal to Buyer’s actual costs to install, repair, maintain and operate compression, plus 20% … .

Sequence of Events

2001 – Lillis begins selling gas to Kachina (maybe earlier)

2003 – Kachina installs the Barker Central Compression Station

2007 – Kachina installs additional compression

2005 – The contract is made

2005 to 2008 – Kachina buys, transports, and resells Lillis’s gas according to the contract, deducting marketing fees, which include compression costs.

2008 – Lillis enters into a purchase agreement directly with Davis, constructs his own pipeline to its plant, and objects to Kachina’s deductions.

Lillis would transfer gas from his wells into Kachina’s gathering system and Kachina would pay Lillis a percentage of the proceeds from resale to Davis.

Alternative Readings

If the provision authorized deductions for any compression that aids in the final delivery of gas to Davis, then Kachina had been rightfully deducting Lillis’s share of costs.

If the provision only allowed deductions for compression that Kachina installed post-contract. If Lillis failed to deliver at pressures that overcame Kachina’s working pressure at the point of transfer, no deductions were allowed.

The Result

The contract allowed Kachina to deduct only the costs of compression installed during the term of the Agreement if required to overcome the working pressure in Kachina’s system.  In order to discern the intention of the parties the court relied on the four pretty-much standard rules of construction. We’ve stated them in this blog before and don’t need to repeat them. See page 6 of the opinion.

The Dissent
Three justices dissented. It was illogical for Lillis to pay compression costs prior to 2005, but then no longer have to pay them under the 2005 agreement. The believe the parties really didn’t intend the meaning ascribed to them by the majority. Further, “Lillis testified that, under the 2005 GPA, he expected to keep paying compression costs. And though Lillis’ expectations do not determine the meaning of the agreement … they certainly reflect his perspective on the facts: … Kachina’s compression had been and would be effecting delivery of his gas. [We] would not reward Lillis’ efforts to avoid his acknowledged obligation under the GPA.”

Today’s musical interlude is dedicated to Mr. Lillis, whose testimony almost blew his case.

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Beware of Boards in Governmental Facilities

Originally published by Richard Smith.

600 Commerce always has its eye out for trends in litigation, and a new one may now be emerging: a plague of boards falling off of government walls onto innocent members of the public. A year ago, it was a whiteboard falling off the wall of Dallas Metrocare Services (held: no sovereign immunity because plaintiff pleaded a dangerous “condition” of property with allegation of an improperly secured whiteboard). This time, the Court of Appeals sustained the Texas Health and Human Services Commission’s sovereign immunity claim after a notice board fell on plaintiff Joseph McRae. The Court agreed with the Commission that McRae’s claim was one for premises defect, not for “negligent use or condition” of the notice board. Because it was in substance a premises defect claim, McRae was required to plead, and ultimately prove, that the Commission had actual knowledge of the condition that caused his injuries. But it was not clear that McRae would be unable to cure that defect in his pleading, so the Court remanded the matter to the trial court for further proceedings.

Texas Health & Human Servs. Comm’n v. McRae, No. 05-14-00894

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Fifth Circuit Clears up “Mess” Regarding Stray Remarks

Originally published by Thomas J. Crane.

There are some theories of law that some courts and most defense lawyers rely on to undermine otherwise good discrimination cases. One of those theories is the “stray remarks” doctrine. In general, the stray remarks doctrine holds that some remarks by management are so remote from the adverse personnel action that they are not relevant. Such remarks are said to be “stray.” I find some of these cases to be result oriented. They are produced by judges who seem to be looking for ways to dismiss a discrimination case. After all, if a remark is truly “stray,” does not that pertain more to the weight of the evidence than to its admissibility? If Jim Bob made a racial remark 20 years ago, does not that still have some relevance, however small?

The decision in Goudeau v. National Oilwell Varco, LP, No. 14-20241 (5th Cir. 7/16/2015) helps clear up some of the confusion regarding the stray remarks doctrine. As recently as 2000, the Fifth Circuit warned that the stray remarks doctrine must be viewed “cautiously.” Russell v. McKinney Hospital Venture, 235 F.3d 219, 229 (5th Cir. 2000). In 2012, the Fifth Circuit acknowledged that the circuit’s application of the doctrine has been “somewhat messy.” Reed v. Neopost USA, Inc., 701 F.3d 434, 441, n.5 (5th Cir. 2012). Goudeau attempts to clear up some of that mess. It finds that there are two different situations in which the doctrine would apply. First, the doctrine would apply to a case in which the plaintiff alleges pure direct evidence and in which the McDonnell-Douglas burden shifting paradigm does not apply. In such situations, said the Goudeau court, the stray remarks doctrine would apply. The remark must connect closely to the termination itself in time and to the person who effected the termination.

Second, the doctrine would also apply to cases in which the evidence is circumstantial. Most discrimination cases are based on circumstantial evidence, noted the court. In this second situation, the courts will look at alleged remarks under a “more flexible” standard. To be relevant as part of a circumstantial evidence case, the comments must show: 1) discriminatory animus, 2) on the part of the person that is either primarily responsible for the challenged employment action or by a person with influence or leverage over the relevant decision maker. Goodeau, p. 7 (slip opinion). So, as in this case, the supervisor made comments about the “old farts” working there and asked about the age of two older employees. The supervisor later fired two of the three “old farts.” These comments, said the panel, serve as part of circumstantial evidence case. Such remarks are relevant at the prima facie stage. These remarks along with the doubts about the written warnings serve as evidence of pretext. The higher court reversed the district court’s summary judgment regarding the claim of age based discrimination.

Too, one has to wonder how a district court could grant summary judgment when there are comments like “old farts” made by supervisory officials.

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