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Fair Debt Collection Practices

Creditor Did Not Violate Fair Debt Collection Practices Act in Using a False Name

In a recent opinion, the United States District Court for the District of Columbia held that an entity that qualified as a “creditor” under the Fair Debt Collection Practices Act (“FDCPA”) did not violate the FDCPA because it used the same false name in all interactions with the plaintiff.

Plaintiff, Paul A. Mahon, alleged that he incurred a debt of $1,320.00 owed to a company named Certified Anesthesia Services as a result of treatment he received at Sibley Memorial Hospital in Washington, D.C.  Subsequently, Certified Anesthesia Services assigned that debt to Defendant, Anesthesia Business Consultants, LLC (“ABC”).  Plaintiff’s insurer paid ABC $1,207.94.  ABC then sought payment of the outstanding amount, requesting that Plaintiff pay $112.06 with a check addressed to “Surgical and Anes Assoc.”  Plaintiff did so on May 6, 2014, and ABC deposited his check.

Approximately two (2) months later, on July 2, 2014, ABC again billed Plaintiff for $112.06.  Over the next two (2) months, ABC contacted Plaintiff regarding the alleged debt no less than four (4) separate times, despite Plaintiff’s attempts to dispute the debt.  In each interaction with Plaintiff, ABC sought payment to “Surgical and Anes Assoc.”  In October 2014, ABC sold Plaintiff’s debt to another company for debt collection purposes. 

In July 2015, Plaintiff sued ABC, setting forth causes of action for violations of the FDCPA and the District of Columbia fair debt collection statute.  ABC moved to dismiss the lawsuit, arguing that it was not a debt collector within the meaning of the FDCPA, and that Plaintiff’s debt did not arise from a consumer credit sale and therefore did not fall within the ambit of the D.C. fair debt collection statute. 

Judge Rudolph Contreras, writing for the Court, granted ABC’s motion.  The Court noted that the FDCPA applies only to “debt collectors” – a term defined under the statute to include “any person who uses . . . interstate commerce or the mails in . . . the collection of any debts” and “any person . . . who regularly . . . attempts to collect . . . debts owed or due . . . another.”  15 U.S.C. § 1692a(6).  The FDCPA, however, expressly excludes from this definition “any person collecting . . . any debt . . . asserted to be owed or due another to the extent such activity . . . concerns a debt which was not in default at the time it was obtained by such person.”  Id. at § 1692a(6)(F)(iii).  In this case, under the allegations in Plaintiff’s Complaint, ABC fell into the foregoing exclusion because Plaintiff’s debt was not in default at the time ABC obtained it.  Specifically, Plaintiff alleged that ABC obtained his debt before any payment was due.  As a result, ABC was not acting as a debt collector within the meaning of the FDCPA.

In response to this analysis, Plaintiff argued that ABC violated the FDCPA by using a false name (i.e., “Surgical and Anes Assoc.”) in attempting to collect his debt.  In this regard, the Court noted that “creditors” may be held liable under the FDCPA if, “in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting . . . such debts.”  Id. at § 1692a(6).  The Court, nevertheless, concluded that ABC did not fall within this definition.  Although ABC was a creditor collecting its own debt and used a name other than its own in the process of attempting to collect its debt, the circumstances of its collection attempt did not indicate that a third person was attempting to collect the debt.  In fact, every communication that Plaintiff received from ABC was set forth as having come from “Surgical and Anes Assoc.”  Plaintiff apparently did not ascertain ABC’s correct entity name until he filed this lawsuit.  Because ABC consistently used the name “Surgical and Anes Assoc.,” it did not indicate to Plaintiff that a person other than the owner of the debt was attempting to collect it.  As a result, the Court granted ABC’s motion to dismiss Plaintiff’s FDCPA claims.

Turning then to Plaintiff’s claims under the D.C. fair debt collection statute, the Court noted that Plaintiff’s only avenue to federal jurisdiction on these non-federal claims was through supplemental jurisdiction under 28 U.S.C. § 1367.  A District Court’s exercise of supplemental jurisdiction, however, is discretionary where “the claim raises a novel or complex issue of State law.”  Id. at § 1367(c).  In this case, the Court noted that Plaintiff’s remaining claims depended primarily on the interpretation of a term contained in the D.C. fair debt collection statute that only two (2) D.C. cases had even tangentially addressed.  Because the issue was therefore a novel question of local law, the Court declined to exercise supplemental jurisdiction.  Accordingly, the Court granted ABC’s motion to dismiss without prejudice so that Plaintiff could re-file the case in the District of Columbia Superior Court.

Paul A. Mahon v. Anesthesia Business Consultants, LLC (April 13, 2016)

United States District Court for the District of Columbia

Submitted By: Marisa A. Trasatti and Matthew J. McCloskey, Semmes, Bowen & Semmes

Wrongful Termination Claim

Wrongful Termination Claim by Minister Barred by Ministerial Exception

In a recent unreported opinion, the Court of Special Appeals held that the First Amendment’s “ministerial exception” barred courts from considering the merits of a wrongful termination claim asserted against a church even though the claim was not specifically predicated on matters of religious doctrine.

Beginning in 2009, Plaintiff, Edwin R. Melhorn, was employed as a pastor at Cedar Grove United Methodist Church, a church governed by the Baltimore-Washington Conference of the United Methodist Church (collectively, “Defendants”).  On October 16, 2012, Defendants informed Plaintiff that they were terminating his employment because they had “lost faith” in his spiritual leadership.

Subsequently, Plaintiff filed a wrongful termination lawsuit against Defendants, alleging that he was discharged because he refused to commit unlawful acts in connection with the administration of a trust of which Cedar Grove was a beneficiary.  Specifically, Plaintiff averred that, on May 16, 2012, Cedar Grove was informed that it was scheduled to receive a bequest of over $1.2 million from a trust.  Under the terms of the trust, half of that amount was to be used for the operation of the church, and the other half was to be used for the upkeep of a cemetery maintained by the church.  Cedar Grove, however, had sold its cemetery.  Consequently, Plaintiff informed the church that it would be a breach of trust, fraud, and tax evasion to accept the half of the trust bequeathed for the purposes of the cemetery’s upkeep.  Despite Plaintiff’s advice, Cedar Grove instructed Plaintiff to request the full amount of the bequest.  Plaintiff refused to do so, and in August of 2012 he informed the Baltimore-Washington Conference of his concerns.  Two months later, he was informed that his employment was terminated.

Defendants moved to dismiss Plaintiff’s complaint, asserting that the First Amendment’s ministerial exception bars courts from hearing disputes over church doctrines.  In this case, Defendants argued that courts would necessarily be required to ascertain the veracity of Defendants’ statement that Plaintiff was fired because they lost faith in his spiritual leadership.  The trial court agreed and dismissed the complaint.  Plaintiff appealed.

The Court of Special Appeals affirmed.  Judge Reed, writing for the Court, explained that there are two elements that must be shown in order for the ministerial exception to apply: (1) the employee making the claim must be a minister; and (2) “the claim must be the type of claim which would substantially entangle the court in the church’s doctrinal decision-making and internal self-governance.”  In this case, it was undisputed that Plaintiff was a minister. 

As to the second element of the exception, the intermediate appellate court was persuaded that Plaintiff’s claim would involve an entanglement with Defendants’ doctrinal decision-making.  Under Maryland law, the ministerial exception is somewhat broader than the Supreme Court’s holding in Hosanna-Tabor Evangelical Lutheran Church & Sch. v. E.E.O.C., 132 S. Ct. 694 (2012).  Specifically, the Court of Appeals has applied the doctrine to wrongful termination claims, whereas the Supreme Court has only applied it in the context of employment discrimination claims.  In so doing, Maryland has embraced the concept that “religious organizations must be allowed to hire and fire their clergy members without government interference.”  In this case, the Court of Special Appeals believed that it would be impossible to adjudicate Plaintiff’s claims without addressing Defendants’ position that Plaintiff was fired due to Defendants’ lack of faith in his spiritual leadership.  Accordingly, the Court of Special Appeals affirmed the trial court’s decision that the ministerial exception barred Plaintiff’s lawsuit.

The Court also rejected Plaintiff’s argument that he should be permitted to conduct discovery prior to any ruling on Defendants’ motion to dismiss.  In contrast to cases from other jurisdictions that had held discovery was permissible under similar circumstances, in this case, the question of Plaintiff’s termination would necessarily involve inquiry into religious matters.  Because, on its face, Plaintiff’s claim involved such matters, no discovery was warranted. 

Edwin R. Melhorn v. Baltimore Washington Conference of the United

Methodist Church, et al. (March 7, 2016)

Court of Special Appeals of Maryland

Submitted By: Marisa A. Trasatti and Matthew J. McCloskey, Semmes, Bowen & Semmes

Supreme Court Realty Trusts

Supreme Court: Realty Trusts Have Citizenship of Their Shareholders for Purposes of Diversity Jurisdiction

In a recent opinion, the Supreme Court held that the citizenship of a realty trust, a business entity created by Maryland law, is controlled by the citizenship of the trust’s shareholders for purposes of diversity jurisdiction.

Petitioner, Americold Realty Trust, is—as its name would suggest—a realty trust organized under the laws of Maryland.  In 1991, a fire occurred at a warehouse owned by Americold’s predecessors in interest which caused the loss of food stored at the warehouse.  Respondents, “a group of corporations whose food perished in” the fire, filed a lawsuit in Kansas state court seeking to recover their losses.  Americold removed the case to federal district court in Kansas on the basis of diversity jurisdiction, and eventually obtained a verdict in its favor.  Respondents appealed.

On appeal, the Tenth Circuit perceived an issue that the parties had not raised, namely, whether the District Court’s exercise of jurisdiction was appropriate.  In particular, the Tenth Circuit questioned whether the parties had established the basis for diversity jurisdiction.  It ultimately concluded that, because real estate trusts are not corporations, their citizenship is controlled by the citizenship of their members.  Because there was no record of the citizenship of Americold’s shareholders, the Tenth Circuit held that the parties had failed to demonstrate diversity of citizenship and it reversed the judgment of the District Court.

The Supreme Court affirmed.  Justice Sotomayor, writing for the Court explained that the rule regarding the citizenship of corporations originally developed as an exception to the general rule that the citizenship of a business organization was determined by the citizenship of its members.  Congress later codified the exception for corporations at 28 U.S.C. § 1332(c), but it did not change the general rule for other business entities.  As a result, because Americold is not a corporation, its citizenship is controlled by the citizenship of its members.

The Court noted, however, that it had never defined the term “members” in the context of a realty trust.  Consequently, it looked to Maryland law, which defines a realty trust as an “unincorporated business trust or association” which holds and manages property “for the benefit and profit of any person who may become a shareholder.”  The Court was persuaded that the shareholders of a realty trust held the same types of powers and interests as do shareholders in joint-stock companies and partners in partnerships.  Drawing, therefore, from precedent establishing the definition of “member” for those types of organizations, the Court concluded “for purposes of diversity jurisdiction, Americold’s members include its shareholders.” 

The Court distinguished the authority which Americold argued compelled the contrary conclusion.  It explained that, traditionally, a trust was not a legal entity, but rather a fiduciary relationship between individuals. Consequently, suits against trusts were brought against the trustees in their own name, and it was therefore simple to determine the citizenship of the “trust.”  In recent years, however, states have begun to apply the term “trust” to “a variety of unincorporated entities that have little in common with” the traditional notion of a trust.  Americold was itself an example of such a recent creation, as the Maryland real estate trust is a legal entity that can sue or be sued.  As a result, the Court declined to apply rules established in another era in the context of the modern day conception of a trust.

Finally, the Court declined an amicus’ invitation to abolish the distinction between corporations and other business entities for the purposes of diversity jurisdiction.  Because Congress has expressly codified that distinction, the Court stated that “it is up to Congress if it wishes to incorporate other entities into 28 U.S.C. § 1332(c)’s special jurisdictional rule.”

Americold Realty Trust v. Conagra Foods, Inc. (March 7, 2016)

Supreme Court of the United States

Submitted By: Marisa A. Trasatti and Matthew J. McCloskey, Semmes, Bowen & Semmes

Energizer Battery Class Action

Poertner v. Gillette involved the settlement of consumer fraud claims over Duracell batteries where class counsel received almost $5.7 million while their millions of class member clients received only a fraction of that amount, less than $345,000 combined. Over 94% of the cash recovery went to class counsel. Nevertheless, the U.S. Eleventh Circuit held that the district court did not abuse its discretion in approving the settlement because the settlement’s value included other “benefits.” These “benefits” included (a) a cy presdistribution consisting of a charitable donation of batteries that is already part of the defendant’s regular marketing program and (b) injunctive relief that governed a line of batteries the defendant had already discontinued.


Ted Frank, founder of the Center for Class Action Fairness, did not like the settlement when it was first announced, so he did something about it. He bought a pack of batteries included within the class definition and objected to the settlement. He brought his fight to the Eleventh Circuit and filed a petition for certiorari with the U.S. Supreme Court, where it has been distributed for conference on March 18, 2016.


Frank frames the issue this way:


The basic problem is this: While class counsel and defendants have an incentive to bargain effectively over the size of a settlement, similar incentives do not govern their critical decisions about how to divvy it up – including the portion allocated to counsel’s own fees. The defendant cares only about the bottom line, and will take any deal that drives it down. Meanwhile, class counsel have an obvious incentive to seek the largest possible portion for themselves, and will accept bargains that are worse for the class if their share is sufficiently increased.


According to Frank’s Supreme Court petition, the settlement at issue included (1) a claims-made process that valued the settlement at $50 million but realized less than one percent participation due to its publication-only notice and minimal value to class members; (2) an essentially meaningless injunction that applied only to a category of batteries the defendant had already stopped selling; (3) a cy pres distribution allowing the defendant to donate batteries at retail value over five years to a charity it already supports, a practice it advertises aggressively; and (4) clear-sailing and kicker clauses designed to grease the skids of the settlement.


There are conflicts among the Courts of Appeals on approval of class action settlement and on cy pres distributions. Frank is seeking Supreme Court review to improve the outcomes of class action settlement for what he calls the real parties in interest, i.e., the absent class members whose claims are being settled away.


Submitted by John W. Sinnott, Irwin Fritchie Urquhart & Moore LLC, New Orleans, Louisiana (Twitter: @JohnWSinnott)

Asbestos Claim Transparency

Furthering Asbestos Claim Transparency (FACT) Act Goes to Hearing Before Senate Judiciary Committee
On January 8, 2016 the U.S. House of Representatives passed the Fairness in Class Action Litigation Act (H.R. 1927), which includes the Furthering Asbestos Claims Transparency (FACT) Act. The FACT Act is aimed at cutting down fraud in asbestos claims. Specifically, the Act would amend federal bankruptcy law to require asbestos bankruptcy trusts to publish quarterly reports including the names, partial social security numbers, exposure history, and basis for any payments made from the trust to asbestos claimants. The Act would also allow defendant corporations to submit written requests for information to asbestos bankruptcy trusts.

More information on H.R. 1927, please see

A related version of the Furthering Asbestos Claims Transparency (FACT) Act, S. 357, is currently pending in the Senate. On February 3, 2016, the Senate Judiciary Committee held a hearing on this bill. Senator Chuck Grassley (R – IA), Chairman of the Senate Judiciary Committee presided over the hearing. Senator Grassley introduced the bill by explaining that “[asbestos] trusts have assets in excess of $18 billion dollars, but are without any meaningful independent oversight.” Senator Grassley went on to encourage support for the bill, emphasizing that “if funds in the trusts are depleted with fraudulent claims, it is future victims who will pay the price, as compensation for illnesses will be reduced.”

Senator Patrick Leahy (D – VT) followed Senator Grassley and voiced his “serious concerns” for the bill. Specifically, Senator Leahy expressed concerns that a provision in the bill requiring asbestos trusts to file public reports detailing personal information about victims who receive compensation from the trust would “needlessly violate the privacy of [those] victims while requiring no transparency on the part of the [asbestos-producing] companies.” Senator Leahy also questioned the existence of fraud within the asbestos trust system, arguing that most asbestos victims are exposed in multiple ways by multiple companies.

The Judiciary Committee heard testimony from five (5) witnesses – the Honorable Peggy L. Ableman, Senior Counsel, McCarter & English LLP; Elihu Inselbuch, Member, Caplin & Drysdale, Chartered; Mark Behrens, Esquire, Shook, Hardy & Bacon LLP; Ms. Susan Vento (widow of Congressman Bruce Vento); the Honorable Robert M. McKenna, , Orrick, Herrington & Sutcliffe.

Judge Ableman is a retired judge who served in the Delaware State courts for thirty (30) years and spent considerable time in charge of the asbestos docket. In her testimony, Judge Ableman recalled a case from her time on the bench in which an asbestos plaintiff allowed the defendant company, Foster Wheeler (a boilermaker) to believe that it had sole, or at least predominant responsibility for plaintiff’s exposure – completely failing to identify claims of asbestos exposure against other companies until the week before trial. Judge Ableman found this to have been “severely prejudicial” to the defendant, and observed that “[w]hen twenty manufacturers of asbestos are removed from the equation, an honest and fair allocation of fault simply cannot occur.” Each of these other defendants had settled their cases with plaintiff based upon “insufficient data and an incomplete picture of the plaintiff’s total exposure history.”

Mr. Inselbuch has spent the past thirty (30) years of his career representing victims’ rights in asbestos bankruptcy proceedings. Mr. Inselbuch decried the FACT Act as “the latest, but not the first, attempt by asbestos defendants to reduce, minimize and ultimately extinguish their liability to their victims in the tort system.” Mr. Inselbuch provided a detailed history of the development and function of the asbestos trust system to support his position that the FACT Act “is predicated on a fundamental misunderstanding of why asbestos trusts were created, how they work, and the false belief that there is significant fraud in the trust system.”

Mr. Behrens co-chairs the Public Policy Group of Shook, Hardy & Bacon LLP. In his capacity as co-chair, Mr. Behrens spends a substantial amount of time analyzing trends in asbestos litigation. Mr. Behrens’ testimony primarily reflected on written testimony that he had previously provided to a Task Force on Asbestos Litigation and Bankruptcy Trusts of the American Bar Association’s Tort Trial and Insurance Practice Section in 2013. Mr. Behrens’ research led him to conclude that “inconsistent claiming by plaintiffs appear[s] to be the norm” in the asbestos trust system. Mr. Behrens attributed these problems to “a disconnect between the trust and tort systems and lack of transparency with respect to asbestos trust claims,” all of which he testified leads to “suppression of evidence in asbestos tort cases, prevents juries from reaching fully informed decisions as to fault, and promotes gamesmanship.”

Ms. Vento is the widow of Congressman Bruce Vento, who died of mesothelioma. Ms. Vento’s testimony served to provide the perspective of asbestos victims and their families. Ms. Vento paid particular attention to the fact that asbestos victims were largely excluded from testifying before the House of Representatives. Ms. Vento also testified that reports of fraud in the asbestos trust system are exaggerated and are not worth violating the privacy of beneficiaries of the asbestos trusts.

Finally, Mr. McKenna served as the Attorney General of Washington State from 2005 to 2013. In that capacity, Mr. McKenna was heavily involved in investigating online fraud. As a result of this experience, Mr. McKenna came to the conclusion that the FACT Act “is common sense transparency legislation that will discourage fraud and abuse in the asbestos compensation system while protecting asbestos trust claimants’ sensitive personal information and confidential medical records from disclosure.”

The FACT Act will now go through Judiciary Committee consideration and mark-up before possible introduction onto the floor of the Senate.

Submitted By: Marisa A. Trasatti and Caroline E. Willsey, Semmes, Bowen & Semmes

Less is More

I’m back on the speaking circuit after a hiatus due to serving as the Program Chair for last summer’s FDCC Annual meeting.  And, that’s reminded me of a number of useful tips for preparing PowerPoint or Keynote presentations for use in those presentations.


1.         Less is More


You don’t need 25-50 slides.  Your audience is there to listen to you, not read your slides.  Slides illustrate.  Slides remind the audience (and you) where you are.  For a 30 minute presentation in November, we used seven slides, not counting the title slide – two were video clips.  For another program last month had four substantive slides for about 30 minutes allocated to two speakers.  At the Winter Meeting, the presentation I’m participating in currently has five “substantive” slides.


As Steve Jobs said:


“Simple can be harder than complex: You have to work hard to get your thinking clean to make it simple. But it’s worth it in the end because once you get there, you can move mountains.” 


2.         Case and Policy Quotes Belong in the Paper, not the Slides


There are few things as deadly as trying to read 12-16 point type on a slide projected on a screen 50 feet away from the viewer.  Don’t quote the policy or cases in your slides.  It’s acceptable to post case citations – that can help the audience write them down, but quotes should be left in the written materials. 


3.         Write it Yourself; Don’t Have Your Assistant or Paralegal Write It


Too many of us delegate presentation writing to our assistants, a paralegal, or our firm’s marketing department.  Do it yourself.  If you don’t know how, learn.  PowerPoint is not that difficult (and your staff can take care of the more technical aspects after you write it), and Apple’s Keynote is even easier.  The problem with presentations drafted by others is they are not your presentation. They tend to be mechanical summaries of the paper.  They do not flow with your speaking style as well as they should. 


4.         Avoid Gratuitous Graphics.


Google initially achieved fame because it used a plain white screen, not the overly busy screen used by Yahoo and other long-vanquished competitors (anyone remember Alta Vista?).  Just because something is there, does not mean you have to use it. 


Microsoft has infected PowerPoint with a dozens of clip art illustrations, dozens of stock photos and the like.  Don’t use them simply because they are there.  Use illustrations and graphics to make a point.


5.         Test, Test, Test.


Test your presentation.  Don’t just test it in your office.  Test it where you’ll be giving the presentation on the equipment you will use.  Do you have video or audio?  Did you know there is more than one way to embed video and audio in a PowerPoint?  Did you know one of those ways doesn’t work when you move the presentation to a different computer?  Do you know whether your video is set to start on the slide transition, or whether it requires a second click? 


You are giving a presentation to share your knowledge and improve your professional reputation.  “Technical difficulties” during your speech defeat both goals. 


6.         Follow the Wisdom of the Military.


Several years ago an Army General became famous for banning PowerPoint in briefings in his command.  As one Marine General said, “PowerPoint makes us stupid.”    If you wish to read more, consider these articles:


7.         Stay on Time.


Finally, one tip that isn’t directly computer presentation related.  If you are given a specified time for your presentation, nail that time.  Don’t go over.  Don’t go appreciably under.  Don’t stuff 45 minutes of material into a 30 minute presentation so you have to talk at 300 words per minute.  If you want to be invited back by conference organizers, stay on time.  

How do you stay on time?  Rehearse.  Time yourself.  Write your presentation so you can invisibly modify the depth of your discussion on the fly.  

U.S. District Court Examines Standing to Challenge Special Elections

Jackie Nichols v. City of Rehoboth Beach, Sam Cooper, and Sharon Lynninvolved a motion to dismiss a lawsuit filed by a city resident against the city alleging violations under the Fourteenth Amendment and under 42 U.S.C. §§ 1983 and 1988, arising from a special election to authorize the issuance of municipal bonds. The United States District Court for the District of Delaware concluded that the city resident lacked standing to bring the lawsuit because she did not suffer a concrete personal injury, and thus, that the Court lacked subject matter jurisdiction to hear the action. Accordingly, Judge Gregory M. Sleet granted the city’s motion to dismiss.

By way of factual background, Plaintiff Jackie Nichols ("Nichols")was a resident, property owner, and taxpayer of the City of Rehoboth Beach ("Rehoboth").On April 27, 2015, the Board of Commissioners of Rehoboth adopted a resolution proposing the issuance of up to $52,500,000 general obligation bonds of Rehoboth to finance an ocean outfall project (the "Ocean Outfall Project"), and ordering a Special Election to authorize the city to issue these and other objectives. On June 27, 2015, Rehoboth conducted the Special Election. The costs of the Special Election were paid from the Rehoboth treasury. Section 40(h) of the Rehoboth Charter, which governs voting procedures for Special Elections to authorize the borrowing of money, states:

At the said Special Election, every owner or leaseholder, as defined in this Charter, of property, whether an individual, partnership or corporation, shall have one vote and every person who is a bona fide resident of the City of Rehoboth Beach, but who is not an owner or leaseholder, as defined in this Charter, of property within the corporate limits of the City of Rehoboth Beach and who would be entitled at the time of holding of the said Special Election to register and vote in the Annual Municipal Election if such Annual Municipal Election were held on the day of the Special Election shall have one vote whether or not such person be registered to vote in the Annual Municipal Election.

Section 40 of the Rehoboth Charter does not define the phrase "bona fide resident." Section 7(d) of the Rehoboth Charter, relating to the manner of holding annual elections, requires that to be eligible to vote, the term "resident" means "an individual actually residing and domiciled in the City of Rehoboth Beach for a period of 6 months immediately preceding the date of the election." At the Special Election, Rehoboth only accepted as voters those who had been residents for a minimum of six (6) months and property owners. Rehoboth granted the right to vote more than once to those who met the residency requirement and owned (directly or through an entity) property in Rehoboth. Corporations and other artificial entities owning property in Rehoboth were permitted to vote. Individuals who owned multiple parcels in Rehoboth through ownership of multiple artificial entities were permitted to vote one (1) time for each property owned through such artificial entities. After the polls were closed, Rehoboth announced that there were 637 votes in favor of borrowing for the Ocean Outfall Project, and 606 votes against borrowing for the Ocean Outfall Project.

On July 16, 2015, Nichols filed a lawsuit against Defendants, Rehoboth, Rehoboth Mayor Sam Cooper, and Rehoboth City Manager Sharon Lynn (collectively, "Defendants"). In her complaint, Nichols alleged violations under the Fourteenth Amendment of the United States Constitution and under 42 U.S.C. §§ 1983 and 1988. The complaint contained four (4) counts: (1) declaratory relief for the Fourteenth Amendment Residency Requirement, (2) injunctive relief for the Fourteenth Amendment Residency Requirement, (3) declaratory and injunctive relief for the Fourteenth Amendment One Person, One Vote claim, and (4) Delaware State Law-Exceeding Authority. Defendants filed a motion to dismiss and opening brief on August 26, 2015. Nichols filed an answering brief in opposition on September 9, 2015. Defendants filed a reply brief on September 21, 2015.

The Court began its analysis by explaining that Federal Rule of Civil Procedure 12(b)(1) provides that a party may bring a motion to dismiss for lack of subject matter jurisdiction, and that a motion to dismiss for lack of standing is also properly brought pursuant to Federal Rule 12(b)(l) “because standing is a jurisdictional matter.” See St. Thomas-St. John Hotel & Tourism Ass'n v. Gov't of the V.I., 218 F.3d 232, 240 (3d Cir. 2000) ("The issue of standing is jurisdictional."); Kauffman v. Dreyfus Fund, Inc., 434 F.2d 727, 733 (3d Cir. 1970) ("We must not confuse requirements necessary to state a cause of action... with the prerequisites of standing.").

The Court further explained that a party invoking federal jurisdiction “bears the burden of establishing that she possesses the requisite standing to bring an action.” See FOCUS v. Allegheny Cnty. Ct. Com. Pl., 75 F.3d 834, 838 (3d Cir. 1996) (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992)). The Court noted that in examining a challenge to a party's standing, “the court must accept as true all material allegations set forth in the complaint and construe those facts in favor of the nonmoving party,” and that at the motion to dismiss stage, "general factual allegations of injury resulting from the defendant's conduct may suffice." See Warth v. Seldin, 422 U.S. 490, 501 (1975); Storino v. Borough of Point Pleasant Beach, 322 F.3d 293, 296 (3d Cir. 2003); Ballentine v. U.S., 486 F.3d 806, 810 (3d Cir. 2007).

In their motion to dismiss, the Defendants made the following arguments: (1) the challenge to the City's Special Referenda Election was too late, (2) Nichols failed to make any claims whatsoever against Defendants Cooper and Lynn, (3) the State of Delaware was the real party in interest, (4) Nichols lacked standing, (5) Rehoboth did not exceed its authority in paying for an advertisement in support of the Special Referenda Election, and (6) the Court should abstain and stay the case.

The Court first addressed the Defendants’ argument that Nichols lacked standing, as that challenge went to the Court’s jurisdiction. Regarding the standing issue, Defendants argued that Nichols lacked standing to challenge the six (6)-month residency requirement in the charter because she suffered no injury. Specifically, they argued that she was never denied the opportunity to vote in the Special Referenda Election. Nichols responded that she possessed taxpayer standing. She claimed that she was suing in her capacity as a municipal taxpayer to challenge taxpayer-funded elections, the resultant authorization of the issuance of municipal debt instruments, and the expenditure of tax revenues to buy advertisements to influence a bond referendum.

The Court explained that in order to satisfy the standing requirements of Article III, a plaintiff must show: "(1) it has suffered an 'injury in fact' that is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical; (2) the injury is fairly traceable to the challenged action of the defendant; and (3) it is likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision." See Friends of the Earth, Inc. v. Laidlaw Environmental Servs., Inc., 528 U.S. 167, 180-81 (2000) (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992)).

The Court further explained that in a “voting case,” voters need to show a disadvantage to themselves as individuals, which requires "a plain, direct and adequate interest in maintaining the effectiveness of their votes.” See Baker v. Carr, 369 U.S. 186, 206 (1962); Coleman v. Miller, 307 U.S. 433, 438 (1939). The Court noted that a claim of the right possessed by every citizen "to require that the government be administered according to law" does not suffice for purposes of standing. See Fairchild v. Hughes, 258 U.S. 126, 129 (1922). See also Lance v. Coffman, 549 U.S. 43 7, 442 (2007) (Finding that plaintiffs lacked standing where the only injury alleged was that the law had not been followed in the election and not a particularized impact on the plaintiffs' votes).

Upon review of the facts of the case, the Court agreed with Defendants that Nichols lacked standing. First, the Court noted that it agreed with Defendants that Nichols was not contesting the expenditure of tax funds, but the legality of the Special Election. Second, the Court noted that Nichols suffered no particularized injury as a result of the Special Election. The Court explained that Nichols was a property owner in the city who had the right to vote in the Special Referenda Election, and thus, she lacked the concrete personal injury necessary to bring suit. As a result, the Court concluded that it lacked subject matter jurisdiction to hear the action, and thus, granted Defendants' motion to dismiss without considering Defendants’ remaining arguments.

Jackie Nichols v. City of Rehoboth Beach, Sam Cooper, and Sharon Lynn, No. 15-062-GMS (United States District Court for the District of Delaware, December 14, 2015), available at:

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


New Years Resolution - Your Reputation Matters

I don’t make New Year’s Resolutions in the traditional sense.  I simply won’t live up to them.  However, the advent of a new year provides an opportunity to look at opportunities you may not have taken advantage of in the past.


Do you have more work than you and your colleagues can do?  I doubt it. 


So, how do you get more work?  It’s very simple.  Be the person the client is thinking of when something happens that causes them to decide they need to hire counsel.  And, be the person that the client can justify choosing when discussing the retention with management.


There are lots of ways to reach that goal.  First and foremost is good lawyering.  The rest of this post, however, is going to focus on improving your professional reputation with clients, opponents and the courts:

  • Do they know who you are?
  • Is your word good?
  • Do you fight tenaciously but fairly?
  • Are you sensitive to their needs and interests?
  • Have you developed a verifiable expertise?


Most of us tell our witnesses to always assume that they are being observed by jurors or prospective jurors when they are within walking distance of the courthouse.  The same rule applies to us – we must assume we are being observed by clients, other attorneys, including opposing counsel, and judges in everything we do as lawyers.  It only takes one bad experience, or one misunderstanding, to turn a client, another lawyer or a judge against you. 


A now retired judge in one of the jurisdictions in which I practice was notorious for deciding cases based upon initial impressions of the lawyers and parties.  The side where the lawyer, or sometimes, the client, was perceived as a (ahem) “jerk” was very likely to lose.  While I doubt the judge’s mental formulation was “Who’s the _______?” it certainly appeared that way. 


Lawyers engage in reputation-harming conduct both consciously and unconsciously.  The conscious is easy to avoid – no matter what the temptation, don’t lie, don’t cover things up, don’t disregard instructions and don’t practice in areas for which you are unqualified without educating yourself first (at your expense, not the client’s). 


Avoiding unconscious reputation-harming conduct requires more effort, but it’s readily achievable.  First, don’t make a representation you can’t support and abide by.  “I don’t know” or “I’m not certain and need to make some inquiries” are better responses than optimistic guesses.  Better yet, anticipate the questions, make the inquires and be prepared for questions.


Second, avoid cuteness and dirty tricks.  If it sounds too clever, it probably is. 


Third, do you understand what your client really needs?  What does “victory” look like from the client’s perspective?  Does your client need regular reporting even if nothing is happening?  What are the consequences of exceeding a budget?  Do they need to be alerted to possibilities before there is bad news?  Are there bigger picture business considerations for the client that can be affected by how a matter is handled, such that how the matter is handled is more important than its ultimate outcome? 


Finally, verifiable expertise.  Do you belong to organizations, whether the FDCC or others, which have admissions standards that serve as a form of verification?  Do you write or speak on the topic, such that other lawyers or clients may cite or forward your publications or presentations?  Have you sought specialty certification from your state bar, if it is available?  Do other lawyers turn to you for advice?  If your answer to each of these questions is “no,” you can’t build that expertise overnight, but you can start this year.  The lowest barrier to entry is to write something.  Legal publications, whether from your local bar association or national legal and professional organizations are always in need of written content.  Remember a submission may be rejected, not because it is poorly written, but because it doesn’t fit the needs of the particular publication to which it was submitted.  Try someplace else.  If all else fails, do what I’m doing now – turn your publication into a series of short blog posts and submit it, either on the FDCC blog, if you’re a member, on your firm’s blog, if it has one, or on another blog that accepts outside submissions; many do. 


Take the first step towards building your reputation.  It’s the best professional New Year’s Resolution you can make.  

Federal Law Requiring Preclearance to Market Medical Devices Does Not Preempt State Tort Law

In a recent decision, the United States District Court for the Southern District of West Virginia held that federal law requiring that medical device manufacturers obtain preclearance to market their products did not preempt state tort law related to design defects.

Plaintiffs sued Defendants related to Defendants’ design, manufacturing, and distribution of Tension-free Vaginal Tape (“TVT”), “a mesh product [intended] to treat stress urinary incontinence.”  After experiencing complications from the product, Plaintiffs (along with approximately 23,000 other similarly situated individuals) sued Defendants, asserting, inter alia, claims for strict liability design defect and negligent design. 

Defendants moved for summary judgment on the grounds of federal preemption.  Defendants noted that, in PLIVA, Inc. v. Mensing, 131 S. Ct. 2567, 2580-81 (2011), the Supreme Court held that “when a party cannot satisfy its state duties without the Federal Government’s special permission and assistance, which is dependent on the exercise of judgment by a federal agency, that party cannot independently satisfy those state duties for pre-emption purposes,” and thus the state duties were preempted by federal law.  Applying that holding, in Mutual Pharm. Co. v. Bartlett, 133 S. Ct. 2466, 2476 (2013), the Supreme Court held that federal law preempted a state duty affecting generic prescription labels because generic drug manufacturers could not change their labels without permission from the FDA.  Analogizing to these cases, Defendants noted that section 510(k) of the Food, Drug, and Cosmetic Act, codified at 21 U.S.C. § 360(k), required them to obtain clearance from the Food and Drug Administration (FDA) prior to distributing TVTs in interstate commerce.  Thus, if Plaintiffs were successful in establishing that TVTs were defectively designed, West Virginia would essentially be imposing a duty on Defendants to adjust the design of TVTs, which they could not do without obtaining preclearance from the FDA if they wished to continue to market TVTs.  Because they could not unilaterally adjust the design of TVTs, Defendants argued it was impossible for them to comply with both federal law and the state duty.

Judge Joseph R. Goodwin disagreed, stating that he did not believe that Defendants’ argument sufficed to show that the state law posed some impediment to Defendants’ ability to comply with federal law.  First, the Court noted that there is a strong presumption against preemption, especially where the preemption of a state’s police powers, such as a state’s imposition of a tort duty, is at issue.  Absent the clear intent of Congress to preempt such powers, Defendants’ argument would fail.  The Court, therefore, looked to Medtronic v. Lohr, 518 U.S. 470 (1996), a case in which the Supreme Court held that Congress did not intend the 510(k) preclearance procedures to preempt state tort law relating to design defects.  According to the Supreme Court, such procedures were intended simply to ascertain whether a substantially similar product was already in existence on the health market in order to prevent products from gaining an unfair foothold on the market while other products cleared separate regulatory hurdles.  The Supreme Court therefore held that, in light of this limited purpose, the 510(k) procedures preserved the status quo with respect to the possibility that a medical device manufacturer would have to defend itself in a design defect lawsuit.  In view of this precedent, the Court was compelled to conclude that the 510(k) procedures did not preempt state tort law.

The Court rejected Defendants’ attempts to shift the Court’s attention from Lohr.   Defendants contended that, because the FDA could reject their altered design, just like the defendants in Mensing and Bartlett, it could not comply with a state tort duty and the FDA’s approval procedures.  The Court, however, noted that it was a firm impossibility for the state duties at issue in Mensing and Bartlett to be reconciled with federal regulation.  In those cases, the Supreme Court found that it was entirely impossible for generic drug manufacturers to comply with a state duty to adjust the warning labels on their products when federal law required them to maintain warning labels identical to those on the brand name drugs.  By contrast, here, Defendants could both make a reasonably safe product and obtain clearance from the FDA to place it on the market.  As a result, the Court concluded that federal law did not preempt the state tort duty.

United States District Court for the Southern District of West Virginia

Terreski Mullins, et al. v. Ethicon, Inc., et al. (December 4, 2015)

Submitted By: Marisa A. Trasatti and Matthew J. McCloskey, Semmes, Bowen & Semmes

Allegations of Gender Discrimination Were Undermined

Plaintiff’s Allegations of Gender Discrimination Were Undermined by Defendant’s Efforts to Improve Her Work Performance.
In a recent opinion, the United States District Court for the Northern District of West Virginia held that the plaintiff did not adduce evidence sufficient to establish her various claims relating to workplace discrimination and retaliatory discharge.  Plaintiff was hired by Defendant as a warehouse manager in 2009.  In 2011, her supervisors became concerned by certain aspects of her job performance, including improper maintenance of the warehouse, untimely responses to inquiries by employees and clients, and inaccurate inventory packing for customer deliveries.  As a result, her supervisors implemented a Performance Improvement Plan, and counseled her approximately twenty (20) times over the next thirteen (13) months regarding her performance.  When her performance did not improve by February 2013, Defendant fired Plaintiff.

Plaintiff brought suit against Defendant alleging: gender discrimination, retaliatory discharge, and hostile work environment.  She alleged that Defendant asked her to engage in questionable conduct with which she expressed disagreement, including refraining from listing employees with Driving Under the Influence (“DUI”) charges and not filing an incident report for a broken light bulb.  She also alleged that her supervisor yelled at her, referred to her as “sweetheart,” and assigned her secretarial tasks.  Furthermore, Plaintiff alleged that, one week before her termination, she contacted Defendant’s human resources manager and expressed that she felt harassed and disagreed with her supervisors’ assessments of her work performance.  The human resources manager informed her that she could file a complaint and that an investigation could be conducted, but Plaintiff never filed a formal complaint.

After discovery, Defendant moved for summary judgment, arguing that Plaintiff did not establish a prima facie case of gender discrimination, and even if she did, that Plaintiff was fired for a legitimate, nondiscriminatory reason, namely her deficient work performance.  Moreover, Defendant argued that Plaintiff’s retaliatory discharge claim was baseless because Plaintiff was fired over a year after she engaged in a protected activity, and that there was no proof of a hostile work environment. 

The District Court granted Defendant’s motion.  The Court concluded that Plaintiff did not establish a prima facie case of gender discrimination, as the record reflected that Defendant had approximately twenty (20) discussions with Plaintiff regarding her deficient performance in the thirteen (13) months preceding her discharge.  The Court stated: “It would be quite unusual for an employer engaging in discriminatory conduct to pursue such corrective and positive endeavors for the benefit of the plaintiff.”  Furthermore, even if Plaintiff had established a prima facie case, the record contained ample uncontradicted evidence demonstrating that Defendant had fired Plaintiff for the legitimate, nondiscriminatory reason that her work performance was deficient.  In so concluding, the Court noted that evidence that Plaintiff presented indicating that her coworkers thought she had done a good job was irrelevant, as it was only the perception of the decisionmaker, i.e., Plaintiff’s supervisors, which mattered in determining whether the employee’s work performance was adequate.

With respect to Plaintiff’s retaliatory discharge claim, the Court concluded that Plaintiff’s expressions of disagreement with Defendant regarding listing an employee with a DUI charge and not filing an incident report regarding a broken light bulb did not constitute protected activities sufficient to establish a claim for retaliatory discharge.  Even if they did, the expressions occurred over a year before Plaintiff was fired and were inconsequential in nature, which undermined any inference that her eventual discharge was related to the incidents.  Regarding Plaintiff’s conversation with the human resources manager, the Court concluded that merely talking with the manager did not constitute a protected activity where Plaintiff’s supervisors were unaware that the conversation had occurred at the time they fired Plaintiff.  Had Plaintiff actually filed a complaint for harassment, however, she may have been able to establish a prima facie case in this regard.

Finally, regarding Plaintiff’s claim that Defendant created a hostile work environment, the Court determined that Plaintiff’s allegations were “questionable at best” and unsupported by the evidence adduced in discovery.  Plaintiff’s coworkers never observed any instance of harassment as alleged by Plaintiff; and the work that Plaintiff was asked to do was no more “secretarial” than the work other managers did.  Moreover, Plaintiff’s discussion with the human resources manager involved feeling harassed as a result of her work performance, not her gender.  This crucial distinction undermined Plaintiff’s claim that Defendant fostered a work environment hostile to her because of her gender.  As a result, the Court granted Defendant’s motion for summary judgment as to all of Plaintiff’s claims.

Cacie Biddle v. Fairmont Supply Company (September 24, 2015)

United States District Court for the Northern District of West Virginia

Submitted By Marisa A. Trasatti and Matthew J. McCloskey, Semmes, Bowen & Semmes

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