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Violation of Civil Rights

American Retailer Found in Violation of Title VII of the Civil Rights Act of 1964 for Discriminating based on Religion

In EEOC v. Abercrombie & Fitch Stores, Inc. No. 14–86 (Supreme Court of the United States, June 1, 2015) Defendant corporation, Abercrombie & Fitch Stores, Inc., was found guilty of discriminating against the Plaintiff, Samantha Elauf. The Defendant adhered to a “look” policy, which prohibited employees from wearing black clothing and caps. In 2008, the Plaintiff, a woman who wears a headscarf in accordance with her religious beliefs, applied for a job at the Defendant corporation. The interviewer found the Plaintiff to be qualified for hire based on her interview and application. However, the interviewer reached out to a district manager to clarify whether the head scarf would be banned under the corporation’s “look” policy. The interviewer also informed the manager that she believed the headscarf was worn for religious reasons. The district manager indicated that the headscarf would violate the “look” policy and thus instructed the interviewer to not hire the applicant. Plaintiff was never made aware of this policy and was declined a position with the employer.

Plaintiff filed a complaint with the Equal Employment Opportunity Commission (“EEOC”) and the EEOC filed suit against Defendant. Defendant claimed the “look” policy was not religiously discriminatory because the ban applied to all types of head coverings. The Defendant also claimed that they were not made aware of a reasonable accommodation the Plaintiff would require because she did not ask for any accommodations.

It is a violation of Title VII of the Civil Rights Act of 1964 for an employer to discriminate against an employee or applicant based on that employee’s or applicant’s protected status. These protected statuses include race, color, religion, sex, or national origin. An employer violates the law if he fails to accommodate an employee’s or applicant’s religious practice by making that person’s religious practice, confirmed or not, a factor in the employer’s decision. Further, under Title VII of the Civil Rights Act of 1964 an employer must provide “reasonable accommodation without undue hardship.” This Court addressed whether that reasonable accommodation must be provided even if an applicant or employee does not request such accommodation.

The Court held that for a plaintiff to prevail in a disparate-treatment claim under Title VII of the Civil Rights Act of 1964, an applicant must show that his need for an accommodation was a motivating factor in the employer’s decision. The applicant is not required to show that the employer actually knew of the applicant’s need. Further, the employer could be guilty of violating the law “even if he has no more than an unsubstantiated suspicion that accommodation would be needed.” Thus, motive and knowledge are found to be separate and distinct concepts.

The district court held in favor of the EEOC. The Tenth Circuit reversed and found summary judgment should have been granted in favor of Defendant corporation because the Plaintiff did not raise that she needed a reasonable accommodation for her religious practice and thus, Defendant did not have actual knowledge of Plaintiff’s need for an accommodation. In the 8-1 opinion, delivered by Justice Scalia in which Roberts, C. J., Kennedy, Ginsburg, Breyer, Sotomayor, and Kagan, JJ., joined, the Court reversed and remanded the Tenth Circuit decision.

EEOC v. Abercrombie & Fitch Stores, Inc.No. 14–86 (Supreme Court of the United States, June 1, 2015)  available at:  http://www.supremecourt.gov/opinions/14pdf/14-86_p86b.pdf

Submitted by Marisa A. Trasatti and Nida Kanwal, Semmes, Bowen & Semmes                  

Contractual damages for Elevator Defect

Hotel patron has no right to contractual damages for elevator defect causing injury. On June 26, 2012, Cheryl Freeman was a guest at a Doubletree hotel.   While riding the hotel elevator, the elevator became disabled and stopped between two (2) floors.  The Doubletree employees opened the doors and encouraged the occupants to jump to the floor several feet below.  When Freeman jumped, she landed on the floor and her knees buckled, causing her to fall onto the floor and suffer personal injuries.   At the time, Doubletree had a contract with Atlantic Blueridge Elevator Company (“Atlantic”) for the repair and maintenance of the elevators (“Contract”).   

Freeman filed suit against both Doubletree by Hilton (“Doubletree”) and Atlantic, in the Circuit Court of Norfolk seeking recovery for her personal injuries.   Freeman alleged that she was a third-party beneficiary of the Contract, and was therefore entitled to recover from Atlantic for its failure to maintain and repair the elevator properly and reasonably.  Atlantic filed a demurrer, and Freeman was permitted to amend her complaint on three (3) separate occasions, each time to amend the allegations in support of the breach of contract claim.  Atlantic demurred as to the Third Amended Complaint (“Complaint”), arguing that Freeman failed to plead sufficiently that Atlantic breached the Contract, failed to plead sufficiently her claim as a third-party beneficiary, and that the injuries pled were not contract damages but were the result of the intervening cause of the Doubletree employees.

The Trial Court first reviewed the Complaint and held that Freeman had pled sufficiently the breach of contract claim.  The Complaint alleged that Atlantic had a duty to repair and maintain the elevators that arose from the contract, and failed to satisfactorily complete those duties.   

The Court, however, noted that Freeman had not pled sufficiently that she was a third-party beneficiary of the Contract.   The Court noted that the “essence of a third-party beneficiary’s claim is that others have agreed between themselves to bestow a benefit upon the third party but one of the parties to the agreement fails to uphold his portion of the bargain.” Citing Copenhaver v. Rogers, 238 Va. 361, 367, 384 S.E.2d 593, 596 (1989).  Third-Party beneficiary status does not exist if the benefit is only incidental to the Contract, not “clearly and definitely” agreed to in the Contract.   The Court held that Freeman had failed to plead facts that showed that the Contract, which was attached to the Complaint, was intended to bestow a benefit on Freeman.  “Absent express language in the Contract demonstrating that the contracting parties intended Freeman to be a contractual beneficiary, this Court cannot, based on the facts alleged and in light of the Contract, […] find that Freeman sufficiently pleaded that she is a third-party beneficiary of the Contract.”  

Moreover, even if she had pled adequately her status as a third-party beneficiary, she was not entitled to recovery under the contract.  The alleged damages that she sustained were not a result of the failure to maintain the elevators, but were the result of the Doubletree’s employees’ actions, over which Atlantic had no control.  Freeman was also barred from seeking tort damages for the breach of contract claim, since there were no facts that supported the breach of a common law duty by Atlantic related to the Contract.   

The Court sustained the demurrer, dismissing the breach of contract claim, and did not grant Plaintiff leave to file another amended complaint.  

Freeman v. Doubletree by Hilton, 2015 Va. Cir. LEXIS 29 (unpublished), available at: http://issuu.com/norfolkcircuitclerk/docs/freeman_v_doubletree/1?e=1436973/12448253

Submitted by Marisa A. Trasatti and Gregory Emrick, Semmes, Bowen & Semmes

 

 

 

 

 

Social Media Evidence

In a trilogy of cases, Albert Sublet IV v. State, Tavares D. Harris v. State, and Carlos Alberto Monge-Martinez v. State (Maryland Court of Appeals, April 23, 2015), Maryland’s highest court addressed the authenticiation of social media evidence and confirmed that the current rules of evidence can be applied to this quickly developing source of evidence.  The Court held that in order to authenticate evidence derived from a social networking website, the trial judge must determine that there is proof from which a reasonable juror could find that the evidence is what the proponent claims it to be.  In Sublet, the trial court did not err in excluding the admission of the four (4) pages of the Facebook conversation.  In Harris, the trial court did not err in admitting “direct messages” and “tweets” in evidence.  In Monge-Martinez, the trial court did not err in admitting the Facebook messages authored by the Defendant.

The Court revisited its prior seminal case, Griffin, where the Court stated that authentication of social networking evidence (MySpace posts) can pose significant problems, "because anyone can create a fictitious account and masquerade under another person's name or can gain access to another's account by obtaining the user's username and password".  In Griffin, the Court rejected the mere printout of the screenshot in issue as authentic, because the lead investigator, who had created the document, lacked any knowledge about ownership of or who created the profile.  The Court had suggested, however, that three (3) non-exclusive means of authentication may be available: 1) asking the purported creator if she indeed created the profile and also if she added the posting in question; 2) searching the computer of the person who allegedly created the profile and posting and examining the computer's internet history and hard drive to determine whether that computer was used to originate the social networking profile and posting in question; and 3) obtaining information directly from the social networking website to link the profile and entry to the person who created it.  In this opinion, the Court further expanded on authentication methods.

In Sublet, the proponent of the evidence attempted to authenticate Facebook postings by having the alleged author admit to the profile and the posts. The alleged author, however, testified that she gave out her login name and password to others who would access her page and write things on it.  She denied writing some of the posts that defense counsel was attempting to attribute to her.  No showing was made from which a reasonable juror could have found the Facebook pages to be authentic and therefore, the Court found no error in the trial judge refusing to admit the Facebook postings into evidence.  

In Harris, the State recovered relevant Twitter evidence (direct messages and public tweets) from two (2) of the Defendant's cellular phones.  During discovery, the State notified the defense that it intended to call a detective as an expert witness in the field of forensic examination of cell phones, to testify about analysis and interpretation of digital evidence recovered during the investigation, including the direct messages.  At trial, the State proffered that the detective would testify that, through the use of software, he had retrieved the direct messages from the phone and determined the participants in the conversation, and that they would move into evidence the forensic examination report of the phone the detective had compiled, which included the participants, the content of the conversation, and the times the direct messages were sent and received by the phone.  The trial judge admitted the Twitter evidence because, along with the detective's proffer, there was independent verification of the Twitter account via another witness.  Further, the substance of the conversation referenced a plan to avenge someone, which had only just been hatched in response to events that occurred that same day.  That the plan subsequently came to fruition the following day also indicates that the direct messages were written by someone with knowledge of and involvement in the situation, which involved only a small pool of individuals.  Public tweets from the other phone were also admitted, because they were authored at the same time as the direct messages that had just been authenticated and contained content that could have been only created by a "few people," and the picture on the account was of the Defendant.  The appellate court determined that the direct Twitter messages were authentic and properly admitted.  Moreover, the public tweets were made contemporaneously to the direct messages which were already authenticated, and a reasonable juror could also have found that the public tweets were also authentic.

In Monge-Martinez, the State sought to introduce Facebook messages received by an assault victim and sent by the Defendant reflecting his remorse for his actions.  The victim identified the exhibits as Facebook messages the Defendant wrote to her while she was in the hospital being treated for her injury.  The exhibits were screenshots of the victim's phone displaying the Facebook messages, which the trial judge admitted into evidence.  On appeal, Defendant argued that the messages should not have been admitted because there was no identifying information from the Facebook profile, such as date of birth, nor was there testimony connecting him to authorship of the messages.  The State argued that there was circumstantial evidence connecting Defendant to the messages, because the victim, who had dated him for a year, could attest that he wrote the messages and that the date-time stamps indicated that the messages were sent soon after the stabbing.  The appellate court agreed with the State and observed that the lack of biological information on the evidence, does not by itself, prevent authentication, because the inquiry is context specific, and here, the distinct characteristics of the messages in their context also supported the notion that they were authored by Defendant.  In addition to the social media messages, there were other letters written to the victim by the Defendant expressing remorse, and all messages were in Spanish, which was Defendant's native language, and only a few people were even aware of the stabbing incident.  Therefore, the evidence was properly admitted.

Following Griffin, Maryland High Court Expands on Techniques to Authenticate Social Media Evidence

Albert Sublet IV v. State, No. 42
Tavares D. Harris v. State, No. 59
Carlos Alberto Monge-Martinez v. State, No. 60
(Court of Appeals of Maryland, April 23, 2015), available at:  http://www.mdcourts.gov/opinions/coa/2015/42a14.pdf

Submitted by Marisa A. Trasatti and Colleen K. O'Brien, Semmes, Bowen & Semmes

US District Court Examines The Rooker-Feldman Doctrine

U.S. District Court Examines The Rooker-Feldman Doctrine Kathleen Morgan v. Geoffrey Scott, No.14-1319 (United States District Court for the District of Delaware, March 19, 2015), available at: http://www.ded.uscourts.gov/sites/default/files/opinions/slr/2015/march/14-1319.pdf

In Kathleen Morgan v. Geoffrey Scott, a case involving a motion to dismiss a lawsuit brought by a plaintiff seeking to reverse and remand decisions of the Delaware State Courts, the United States District Court for the District of Delaware concluded that it lacked subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1) and the Rooker-Feldman doctrine espoused by the Supreme Court in  Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923), and District of Columbia Court of Appeals v. Feldman, 460 U.S. 462 (1983). Thus, Judge Sue L. Robinson granted the Defendant's motion to dismiss.

By way of factual background, the parties had known each other for several decades, and prior to this case, the parties had been involved in litigation in the Delaware State Courts. On December 6, 2011, Defendant Geoffrey Scott ("Defendant") filed suit against Plaintiff Kathleen Morgan ("Plaintiff") and Plaintiff's business entity, Turkeys Inc. ('Turkeys"), in the Superior Court of the Stateof Delaware for New Castle County, raising claims including breach of contract, fraud,negligent and intentional misrepresentation, fraudulent inducement, and mutual mistake ("the Scott action"). The claims in the Scott action arose from numerous loans that Defendant had made to Plaintiff and Turkeys. The Scott action went to trial in September 2013, and at the close of evidence, Defendant moved for judgment as a matter of law as to his claim of mutual mistake. The Superior Court granted Defendant's motion and ordered Plaintiff and Turkeys to pay restitution to Defendant in the amount of $300,000.

Plaintiff appealed and, on September 22, 2014, the Delaware Supreme Court affirmed the Superior Court's order granting Defendant's motion for judgment as a matter of law. On March 7, 2014, while the Scott action was still pending on appeal, Plaintiff had filed a lawsuit against Defendant in the Superior Court of the State of Delaware for New Castle County, ("the Morgan action"). Defendant moved to dismiss the Morgan action pursuant to Superior Court Rules 12(b)(6) and 13(a), and on July 11, 2014, the Morgan action was dismissed with prejudice.

Plaintiff then filed the lawsuit at issue, asking the U.S. District Court for the District of Delaware to reverse and remand the October 17, 2013 Superior Court judgment in the Scott action. Plaintiff alleged that, as a pro se litigant, she was denied the full extent of judicial process in the Scott action, and that Defendant had only filed the Scott action "for the "ill-gotten motive of obtaining judgment for use" in a different lawsuit. Defendant moved for dismissal on the grounds that Plaintiff's claims in the case before the court arose out of the subject matter of claims previously adjudicated in Delaware State Courts.

The court began its analysis by discussing to the Rooker-Feldman doctrine, which the court determined to be "dispositive of this case." First, the court noted that the Rooker-Feldman doctrine "refers to principles set forth by the Supreme Court in Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923), and District of Columbia Court of Appeals v. Feldman, 460 U.S. 462 (1983)." The court further noted that because the Rooker-Feldman doctrine "divests the court of subject matter jurisdiction, it may be raised at any time by the court sua sponte." Desi's Pizza, Inc. v. City of Wilkes-Barre, 321 F.3d 411, 419 (3d Cir. 2003); Nesbit v. Gears Unlimited, Inc., 347 F.3d 72, 77 (3d Cir. 2003). The court then explained that federal district courts "are courts of original jurisdiction and have no authority to review final judgments of a state court in judicial proceedings." Rooker Fidelity Trust Co., 263 U.S. 413 (1923); see Power v. Department of Labor, 2002 WL 976001 (D. Del. 2002).The court further explained that the Rooker-Feldmandoctrine "prevents the lower federal courts from exercising jurisdiction over cases brought by 'state-court losers' challenging 'state-court judgments rendered before the district court proceedings commenced.'" Lance v. Dennis, 546 U.S. 459, 460 (2006) (citations omitted).         

Next, the court discussed the facts of the case. First, the court noted that Plaintiff took exceptions to decisions made in the Scott action, specifically the Superior Court's October 17, 2013 Order that granted Defendant's motion for a judgment as a matter of law against Plaintiff in the sum of $300,000, and the September 22, 2014 decision of the Delaware Supreme Court to affirm the Superior Court's October 17, 2013 Order. The court further noted that Plaintiff was asking the court to determine that those State court rulings were erroneously entered and to grant relief by reversing and remanding their decision.

The court explained, however, that the Rooker-Feldman doctrine prohibited the court from maintaining subject matter jurisdiction over a complaint "which effectively s[ought] to reverse and remand orders and judgments entered by the Delaware courts." The court further explained that Plaintiff's complaint was barred because the relief Plaintiff sought would require:"(1) the federal court [to] determine that the state court judgment was erroneouslyentered in order to grant the requested relief, or (2) the federal court [to] take an actionthat would negate the state court's judgment," neither of which the court is permitted to do under the Rooker-Feldmandoctrine.In re Knapper, 407 F.3d 573, 581(3d Cir. 2005).For those reasons, the court granted Defendant's motion to dismiss the complaint on the grounds that it lacked subject matter jurisdiction pursuant to the Rooker-Feldman doctrine and Federal Rule of Civil Procedure 12(b)(1).

Submitted by Marisa A. Trasatti and Richard J. Medoff, Semmes, Bowen & Semmes

Insurance policy void ab initio where not owner occupied

On August 2, 2011, Mr. and Mrs. Harris purchased real property located at 2700 Classen Avenue, Baltimore, Maryland in a foreclosure sale for $7,500. Approximately nine months later, the Harrises contacted Jayne Clark, an insurance agent working with Encompass Home and Auto Ins. Co., through whom the Harrises had purchased insurance for their vehicles and primary residence. At that time, the Harrises indicated they had performed substantial renovations to the property and the interior had been updated. Clark viewed the property using Google Street View and observed that the roof was bent and the stairs were in need of repair.  Mr. Harris indicated that the roof had been repaired but the stairs continued to need repair.  The Harrises also indicated that it was their intention to move to this property and make it their primary residence. At no time did the Harrises indicate that the property had been purchased for $7,500. Based on these representations, Clark issued an owner-occupied insurance policy application with a replacement value limit of $180,000, which the Harrises signed and returned same on or about June 8, 2012. Encompass required as part of its underwriting both that the policy be owner occupied and that the amount of the policy not exceed 70 percent of the market value. 

Eleven (11) days later, on June 19, 2012, a fire occurred at the property, for which the Harrises submitted a claim on or about June 23, 2012.  

During the course of the investigation of the fire, concerns were raised regarding the Harrises’ claim for the fire loss.  The concerns were based on the fact that 1) the property was a “newly added” endorsement; that the property was vacant and unoccupied at the time of the fire; that the property was void of all contents; that the insurance coverage for the property had been acquired approximately one year after the purchase of the property, but only about two (2) weeks before the fire; and that the cause of the fire was determined to be an apparent intentional incendiary. The matter was forwarded to Encompass’s Special Investigation Unit, who further determined there was no furniture or personal property in the property at the time of the loss and that the heat pump was missing.  Further, during an interview, Mr. Harris indicated that the utilities had never been turned on at the property and there had never been a decision to move to the property to make it the primary residence.  As a result of the investigation, Encompass issued a denial of coverage letter and a separate “Material Misrepresentation” Notice, which voided the policy.

Encompass filed suit in the United States District Court for the District of Maryland seeking a declaratory judgment that the insurance policy was void ab initio.  The Harrises filed a counterclaim for breach of contract for not covering the fire loss.  The matter was forwarded to Magistrate Judge Sullivan who conducted a one (1) day bench trial.  Judge Sullivan first reviewed the Court’s jurisdiction under the Declaratory Judgment Act, 28 U.S.C. § 2201(a), which permitted the court to entertain a declaratory judgment action “when the judgment will serve a useful purpose in clarifying and settling the legal relations in issue, and when it will terminate and afford relief from uncertainty, insecurity, and controversy giving rise to the proceeding.” Quoting Penn America Ins. Co. v. Coffey, 368 F.3d 409 (4th Cir. 2004).   After determining that Maryland law applied, Judge Sullivan evaluated the insurer's burden to succeed in voiding an insurance policy ab initio. Where the insurer relied upon a material misrepresentation in the application, the insurer may void the policy ab initio. The Court must determine 1) that there was a misrepresentation and 2) that the misrepresentation was material to the risk assumed by the insurer.  Materiality is determined by “whether reasonably careful and intelligent men would have regarded the fact, communicated at the time of the effecting the insurance, as substantially increasing the chances of the loss insured against.”  Quoting Metro. Life Ins. Co. v. Samis, 172 Md. 517 (1937). Materiality may affect both the estimation of scope of the insurance and whether to issue a policy in the first place.   In this case, Judge Sullivan determined that the insureds misrepresented the value of the property and its status as owner-occupied, both of which were material to the underwriting process for Encompass, as stated in its guidelines. The Court further held that Encompass had no obligation under the circumstances to conduct an investigation before issuing the policy, and had not waived its right to void the policy ab initio. Based on this finding, the Court held that Encompass was not liable for breach of contract.  The Court then issued a declaration that the policy insuring the Harrises’ property was void ab initio.  

Insurance policy void ab initio where not owner occupied. Encompass Home & Auto Ins. Co. v. Harris (D. Md. March 17, 2015) available at:  https://scholar.google.com/scholar_case?case=11592088241571437201&hl=en&as_sdt=6&as_vis=1&oi=scholarr

Submitted by Marisa A. Trasatti and Gregory Emrick, Semmes, Bowen & Semmes

Membership of LLC determines citizenship for diversity

This action was a derivative action brought by Christopher Bunnell, on behalf of OpenOnward, LLC, a software company focused on allowing scientists to post protocols and detailed notes of experiments online for use and review by other scientists.  OpenOnward was formed by Bunnell, a software developer, and Carlo Rago, a cellular and molecular scientist.  After the formation of OpenOnward, Rago sought to develop software to streamline access to research and funding in an effort to aid David Schultz, whose son has Duchenne Muscular Dystrophy, and who was the head of Ryan’s Quest, which is part of Duchenne, an unincorporated organization of corporate entities, working together for common business interests. OpenOnward began discussion with Duchenne to solicit investments for the development of the software, and members of Duchenne provide OpenOnward with $65,000 of grant funding.  In May 2011, Bunnell and Rago submitted a provisional patent application to the USPTO for the new software, and listed Bunnell and Rago as the inventors.  In March 2012, Duchenne published a news release indicating that it had been given access to the patent pending intellectual property, for which Rago subsequently acknowledged he authorized the license, but for which OpenOnward was never compensated.  By October 2012, the software had facilitated $6,000,000.00 in funding.  Shortly thereafter, Rago became a salaried employee of Duchenne, with contractual provisions that required that he provide open access to all OpenOnward technology without compensation to OpenOnward.

In April 2014, Bunnell brought the derivative suit against various Duchenne defendants (“Duchenne”) and Rago, for breach of contract and violation of the Maryland Uniform Trade Secrets Act.  Duchenne removed the action to the Federal Court based on Diversity jurisdiction, and then moved to dismiss the complaint for failure to state a claim.  Bunnell opposed the motion to dismiss and filed an amended complaint, which Duchenne opposed.  On September 11, 2014, Bunnell moved for default against Rago, who had not responded to the original complaint. Rago then moved to dismiss the complaint for failure to state a claim, which Bunnell opposed.

The Court noted that prior to addressing any of the pending motions, it had to determine whether it had a proper basis to exercise subject matter jurisdiction.  The matter was a derivative claim for an LLC.  “An LLC is a citizen of the states of which its members are citizens.”  Bunnell, 2015 U. S. Dist. LEXIS 26472, 8, quoting Gen. Tech. Applications, Inc. v. Exro Ltda,, 388 F.3d 114, 120 (4th Cir. 2004).  As such, OpenOnward, the party on whose behalf Bunnell brought the claim, had the citizenship of its members, Bunnell and Rago.  While the Court noted that it was unclear if OpenOnward was a plaintiff or defendant, it was irrelevant to the analysis.  As there were members on both sides of the matter, it was impossible for there to be diversity, as it would always share common citizenship with the opposing member.  Accordingly, the matter was remanded to the Circuit Court for Baltimore City.  

Bunnell v. Rago, 2015 U.S. Dist. LEXIS 26472, 1 (D. Md. Mar. 4, 2015), Available at:  http://docs.justia.com/cases/federal/district-courts/maryland/mddce/1:2014cv01892/282304/38

Submitted by Maria A. Trasatti and Gregory Emrick, Semmes, Bowen & Semmes

Continuing Breach Theory

Continuing Breach Theory Does Not Apply to Disability Insurance Policy and Plaintiff’s Entire Claim Is Time-Barred  

In Curry v. Trustmark Insurance Company, No. 13-1995 (U.S. Court of Appeals for the Fourth Circuit, Feb. 6, 2015), the Court considered the statute of limitations to a disability insurance policy and specifically rejected the continuing breach theory, which in this case meant that Plaintiff’s entire suit was time-barred.  Plaintiff had filed a lawsuit contending that Trustmark (the “Insurer”) breached the parties’ contract by refusing to pay benefits to Plaintiff under a disability insurance policy.  The district court granted summary judgment on procedural grounds, i.e., disposing of Plaintiff’s claim based on Maryland’s statute of limitations.  With respect to the portion of Plaintiff’s action that fell within the limitations period, the district court ruled against Plaintiff on the merits.  The appellate court affirmed the district court’s judgment, but based on the conclusion that Plaintiff’s lawsuit was time-barred in its entirety.

Factually, the Plaintiff was a chiropractor who operated his own practice.  Pursuant to his disability insurance policy, the Insurer would pay monthly benefits to Plaintiff if a physical disability prevented him from working as a chiropractor.  In order to determine Plaintiff’s eligibility for benefits, the Policy also required him to submit written and continuing proof of loss and, if necessary, to submit to an independent medical examination (“IME”).  In 2003, Plaintiff injured his back while performing an adjustment on a patient.  He underwent spinal surgery and applied for disability benefits in early 2004.  The Insurer began paying benefits to Plaintiff, subject to his providing information regarding the extent of his injury, condition, and expected recovery.  For the next three (3) years, the Insurer paid Plaintiff monthly benefits under his insurance policy, all while attempting to establish his continued disability.  The information provided by Plaintiff was inconsistent and incomplete.  Consequently, in July 2007, the Insurer notified Plaintiff that it had discontinued his benefits, effective June 26, 2007, until it received the information it requested under the Policy.  For the next year, the Insurer and Plaintiff exchanged correspondence regarding the discontinuation of benefits and the scope of the information requested by the Insurer.  During that period, the Insurer extended three (3) additional months of benefits to Plaintiff.  Finally, in the spring of 2008, the Insurer requested that Plaintiff undergo an IME to determine his continued eligibility for benefits, but the Plaintiff refused to submit to the IME unless the Insurer paid him additional benefits that he argued were owed to him from the Insurer.  When Plaintiff failed to attend the IME, the Insurer denied any additional benefits, effective June 30, 2008, and closed Curry’s claim on September 29, 2008.

On July 27, 2011, Curry filed suit against the Insurer, alleging breach of contract.  In ruling on the Insurer’s motion for summary judgment, the district court determined that Plaintiff’s cause of action for breach of contract accrued anew each month benefits were not paid.  Consequently, although the court concluded that Plaintiff’s action for breach between September 25, 2007, and July 27, 2008, was untimely under Maryland’s three (3) year statute of limitations, it addressed on the merits all alleged monthly breaches occurring after July 27, 2008.  Because it found no breach of contract in the Insurer’s requirement that Plaintiff submit to an IME and provide continuing proof of loss as a prerequisite for payment of his benefits, the district court granted summary judgment to the Insurer.

On appeal, the Fourth Circuit observed that the Maryland three (3) year statute of limitations typically begins to run from the date of the alleged breach.  Actions arising from alleged breaches of a continuing contractual obligation, however, are not wholly barred by the statute of limitations merely because one or more of those alleged breaches occurred earlier in time.  Rather, where a contract provides for continuing performance over a period of time, each successive breach of that obligation begins the running of the statute of limitations anew, with the result being that accrual occurs continuously and a plaintiff may assert claims for damages occurring within the statutory period of limitations.  In this case, the district court determined that the Insurer breached the contract each time it failed to pay benefits for a period during which Plaintiff was disabled.  Because it concluded that each failure to pay monthly benefits was a separate and independent breach, the district court found timely the claims for payment that were not due until after July 27, 2008.

The appellate court disagreed.  Although it found no authoritative Maryland precedent applying the continuing breach theory to an insurance disability policy, the Maryland Court of Appeals had opined, in the context of a tort action that a similar theory does not apply to the continuing effects of a single earlier act.  Maryland federal courts had also rejected a broad application of a continuing breach theory of accrual.  In the insurance context, both the Tenth and Eleventh circuits rejected the idea that disability policies are installment contracts giving rise to continuing breaches for each monthly unpaid benefit.  Further, in this situation, the issue was whether the disability benefits were owed in the first place.  While Plaintiff contended that he was disabled under the insurance policy and owed benefits, the policy did not provide Plaintiff with an unconditional right to receive benefits in perpetuity—rather, his receipt of benefits was subject to his providing adequate continuing proof of loss, and the Insurer maintained that it did not owe Plaintiff additional benefits because he failed to provide continuing proof of loss.  Because the alleged breach arose from the Insurer’s denial that it owed Plaintiff benefits at all, no installment contract existed, and the continuing breach theory was not applicable.  The Court was not persuaded by Plaintiff’s argument that his claim accrued only after the Insurer formally closed his claim for benefits on September 29, 2008.  The Court held that Plaintiff’s cause of action for breach of contract arose, and the statute of limitations began to run, when the Insurer terminated Plaintiff’s monthly benefit payments on June 30, 2008.  Thus, the Fourth Circuit affirmed the decision of the district court granting summary judgment in favor of the Insurer, albeit on different grounds than the district court.

Curry v. Trustmark Insurance Company, No. 13-1995 (United States Court of Appeals for the Fourth Circuit), Available at:  http://www.ca4.uscourts.gov/Opinions/Unpublished/131995.U.pdf

Submitted by Marisa A. Trasatti and Colleen K. O’Brien, Semmes, Bowen & Semmes

Trial Court Abused Discretion

In Product Liability Case, Trial Court Abused Discretion by Admitting Opinion of Plaintiff’s Expert In Hyundai Motor Co., Ltd. v. Duncan, No. 140216, 2015 WL 110597 (Va. Jan. 8, 2015), a product liability case involving an automobile crash, the Supreme Court of Virginia held that Plaintiff’s expert’s opinion that the automobile was unreasonably dangerous based on the location of the side airbag sensor was inadmissible because it was premised on an unfounded assumption.  Therefore, the appellate court reversed the judgment of the trial court which had permitted the expert’s testimony after which the jury returned a verdict in favor of Plaintiff.

Factually, Plaintiff alleged injury after he lost control of his vehicle and struck a tree on the driver's side of the vehicle.  Although the vehicle was equipped with a side airbag system, the airbag did not deploy.  The Plaintiff brought an action against the automobile manufacturer Defendant and initially asserted claims for negligence, failure to warn, breach of implied warranty of merchantability, breach of implied warranty of fitness for a particular purpose, and breach of express warranties.  At trial, Plaintiff pursued only the claim for breach of implied warranty of merchantability in which Plaintiff asserted that the vehicle was “defective, unreasonably dangerous, was not fit for the ordinary purpose for which it was intended, and did not pass without objection in the industry in which it was sold.”  Specifically, Plaintiff contended that if the sensor for the side airbag system had been placed in a different location, the airbag would have deployed and prevented Plaintiff’s injury. 

Plaintiff designated Geoffrey Mahon (“Mahon”), a mechanical engineer, as an expert in airbag design to testify that the vehicle was defectively designed.  Mahon expressed the opinion that if Defendant had located the sensor for the side airbag system on the B-pillar of the vehicle (the pillar where the front door closes), approximately 4 to 6 inches from the floor, instead of on the cross-member underneath the driver's seat, the side airbag would have deployed.  Therefore, according to Mahon, the location of the side airbag sensor on the cross-member rendered the vehicle unreasonably dangerous.

Prior to trial, Defendant moved to exclude Mahon's opinions as having an insufficient foundation because Mahon did not conduct any analysis to determine whether the side airbag would have deployed if the sensor had been located where Mahon proposed.  The circuit court denied Defendant’s Motion to Exclude Mahon's testimony, and permitted him to express his opinions at trial, over Defendant's objections.  The jury returned a verdict against Defendant and Defendant appealed. 

The appellate court examined the trial court’s decision to admit the expert opinion for an abuse of discretion.  The Court noted that the expert failed to perform any analysis or calculations to support his assumption about the supposedly proper location for the airbag sensor. Further, the expert admitted that a crash sensing system depends upon a combination of the structure of the vehicle, the sensors themselves, and any algorithm, but the expert did not perform any tests to determine whether a different sensor location, structure, or algorithm would have caused the side airbag to deploy in Plaintiff’s crash.  In short, Mahon's opinion that the vehicle was unreasonably dangerous was without sufficient evidentiary support because it was premised upon his assumption that the side airbag would have deployed if the sensor was at his proposed location—an assumption that clearly lacked a sufficient factual basis and disregarded the variables he acknowledged as bearing upon the sensor location determination.  Therefore, the expert’s opinion was “connected to existing data only by the ipse dixit of the expert” and the “analytical gap” between the data Mahon relied upon and the opinion he proffered was “simply too great.”  Therefore, Mahon's opinion was inadmissible, and the circuit court abused its discretion in admitting it.

Plaintiff relied on the expert’s opinion that the vehicle was unreasonably dangerous to satisfy their burden of proving that Defendant breached its implied warranty of merchantability, and the expert’s opinion was the only support for this claim.  The inadmissibility of the expert’s opinion as a matter of law was fatal to the Plaintiff’s claim and entitled Defendant to judgment as a matter of law.  Accordingly, the appellate court reversed the judgment of the trial court and entered final judgment for Defendant. 

Hyundai Motor Company, Ltd. v. Duncan, No. 140216 (Supreme Court of Virginia, January 8, 2015),Available at:  http://www.courts.state.va.us/opinions/opnscvwp/1131869.pdf

Submitted by Marisa A. Trasatti and Colleen K. O’Brien, Semmes, Bowen & Semmes

Purposeful Availment

Purposeful availment found where foreign corporation solicited business beginning two year relationship In 2009, Universal Leather, LLC (“Universal”), a North Carolina leather wholesaler, was approached by representatives from Koro AR, S.A.(“Koro”), an Argentine company selling finished leather goods.  As a result of in-person solicitations at Universal’s office in North Carolina, Universal and Koro began transacting millions of dollars in business over the course of the next two years.  In 2011, the relationship faltered, and Universal brought suit against Koro in the North Carolina State Court alleging breaches of contract for late deliveries, nonpayment of certain shipping costs, impermissible price increases and defective products.

Koro removed the action to Federal Court and filed a Motion to Dismiss for lack of personal jurisdiction, including affidavits of its employees stating that Koro did not have offices, property or businesses in the United States, that it had never sent representatives to the United States, and that all the work under the contracts were performed in Argentina.  The goods were all sent “F.O.B.,” requiring acceptance of the goods in Argentina.  Universal opposed the motion with affidavits stating that Koro had sent representatives to Universal’s offices in April 2010, and one of the representatives returned at least six (6) times between 2009 and 2010 for the purpose of soliciting business from Universal.  Universal also maintained that Universal and Koro were in regular email contact and had transacted over $5 Million in business.

The Magistrate Judge, in reviewing the conflicting affidavits, found that Koro had not purposefully availed itself of North Carolina jurisdiction, noting that no contract was entered while Koro’s employees were in North Carolina, the contracts were all performed in Argentina and the terms of the shipments declined responsibility for the goods outside of Argentina.  The email communications did not satisfy the necessary minimum contacts, and the representatives’ in-state contacts were not automatically sufficient.  The Court agreed with the Magistrate Judge’s conclusions and dismissed the case.  Universal appealed the dismissal.

The Fourth Circuit first reviewed the law of personal jurisdiction, stating:

A federal district court may exercise personal jurisdiction over a foreign corporation only if: (1) such jurisdiction is authorized by the long-arm statute of the state in which the district court sits; and (2) application of the relevant long-arm statute is consistent with the Due Process Clause of the Fourteenth Amendment.

Universal, __ F.3d at 3.  North Carolina’s long arm statute permits jurisdiction to the extent permitted by due process under the Constitution, so the Court was only required to conduct one analysis.   N.C. G.S. § 1-75.4(1)(d).  The Court also observed that Universal had claimed that jurisdiction was based on “specific jurisdiction,” and stated 

[W]e employ a three-part test to determine whether the exercise of specific personal jurisdiction over a nonresident defendant comports with the requirements of due process. Under this test, we analyze: “(1) the extent to which the defendant purposefully availed itself of the privilege of conducting activities in the forum state; (2) whether the plaintiff’s claims [arose] out of those activities; and (3) whether the exercise of personal jurisdiction is constitutionally reasonable.”

Universal, __ F.3d at 4 (internal citations removed). The Court observed that the trial court had only conducted analysis as to the first prong and limited its own analysis accordingly.  The Court noted that the minimum contacts analysis was case specific and in the business context the court looked at eight (8) factors:

(1) “whether the defendant maintains offices or agents in the forum state;” (2) “whether the defendant owns property in the forum state;” (3) “whether the defendant reached into the forum state to solicit or initiate business;” (4) “whether the defendant deliberately engaged in significant or long-term business activities in the forum state;” (5) “whether the parties contractually agreed that the law of the forum state would govern disputes;” (6) “whether the defendant made in-person contact with the resident of the forum in the forum state regarding the business relationship;” (7) “the nature, quality and extent of the parties’ communications about the business being transacted;” and (8) “whether the performance of contractual duties was to occur within the forum.”

Id.  Typically, a foreign defendant has been found to have purposely availed itself of the jurisdiction when these factors have demonstrated that the defendant substantially collaborated with the resident and that venture is the basis for the dispute.

In finding that Universal had met its prima facie burden of demonstrating purposeful availment, the Court held that Universal was entitled to the benefit of the inferences on contested facts, since there had been no evidentiary hearing prior to the grant of the motion to dismiss.  The Court held that the facts proffered by Universal, when considered as a whole, including the allegations that Koro initiated the contacts and repeatedly reached into the forum to transact business, were sufficient to demonstrate purposeful availment.  The Appellate Court expressly refused to address the remaining two prongs of the personal jurisdiction analysis and remanded the matter with instructions for the trial court to complete the analysis.

Work Product Protection

United States District Court finds that memorandum drafted before the inception of litigation fell within the work product protection

In Parker v. United States Department of Justice Executive Office for the United States Attorneys, the United States District Court for the District of Columbia examined the scope of the attorney client privilege and work product doctrine in the context of a Freedom of Information Act ("FOIA") request.  Writing the opinion of the Court, Judge Amy Berman Jackson held that a memorandum between assistant United States attorneys fell within the attorney-client privilege and work product doctrine, even though no suit had been filed when the requested document had been drafted.  Because the requested document fell within the work product doctrine, it likewise fell within a FOIA exemption that permits an agency to deny disclosure for "memorandums (sic) or letters which would not be available by law to a party other than an agency in litigation with the agency."  5 U.S.C. § 552 (b) (5).

This case stems from a FOIA request filed by Lonnie Parker ("Plaintiff") to the United States Department of Justice Executive Office for United States Attorneys ("Defendant") seeking documents related to the unauthorized practice of law by former Assistant United States Attorney Lesa Gail Bridges Jackson.  Plaintiff's FOIA request sought, inter alia, documents pertaining to disciplinary actions taken against Ms. Jackson.  Defendant did not produce any documents in response to Plaintiff's FOIA request.  Over the course of four (4) years, the parties engaged in litigation regarding the disclosure of documents under Plaintiff's FOIA request.  The only remaining issue between the parties was whether a particular memorandum, called "Document 2," was amendable to disclosure.  Document 2 is a type written memorandum that was located in a file with the Ms. Jackson's name on the folder.  Document 2 was exchanged between assistant Unites States attorneys, and discussed documents involved in the discipline of Ms. Jackson.  With respect to Document 2, Defendant denied disclosure pursuant to Exception 5 under FOIA, which permits agencies to withhold “inter-agency or intra-agency memorandums or letters which would not be available by law to a party other than an agency in litigation with the agency.”  5 U.S.C. § 552 (b) (5).  Specifically, Defendant argued that Document 2 was protected by the attorney-client and work product privileges.

The Court held that Document 2 fell within the scope of the attorney-client privilege and work product protection.  The Court noted that, in order to prevail in a FOIA action, an agency must show that materials withheld from disclosure fall within a FOIA exemption.  Exemption 5 protects from disclosure documents that fall within the ambit of the attorney-client and work product privileges.  The Court found that the attorney-client privilege protects confidential communications from clients to their attorneys made for the purpose of securing legal advice or services.  The Court also found that the attorney work product doctrine protects materials that reflect the mental processes of the attorney.  In this case, the Court held that Document 2 fell within the scope of both privileges.  In the context of the attorney-client privilege, the Court held that the agency, itself, was the "client," and the agency's lawyers were the "attorneys."  Therefore, Document 2 fell within the attorney client privilege.  As to the work product privilege, the Court held that the "prepared in anticipation of litigation" standard is satisfied by demonstrating that a lawyer prepared a document in the course of an investigation that was undertaken with litigation in mind, even though no specific lawsuit has been filed.  In this case, the Court held that Document 2 was prepared in the course of an investigation that was undertaken with litigation in mind.

Submitted by Marisa A. Trasatti and Wayne C. Heavener, Semmes, Bowen & Semmes

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