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Burned Home; Shot Dog; False Arrest: Country Music or Civil Rights?

Robert C. Lockwood
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David Allan Coe could have written the facts of a recent false arrest case from North Alabama.

David Allan Coe once wrote that the “Perfect Country and Western Song” would include lyrics about Mama, trains, trucks, prison and getting drunk.  A recent false arrest decision issued by Judge Madeline Haikala comes close to meeting those requirements in real life.  See Junkins v. DeJong, No. 5:17-cv-00350-MHH, 2020 WL 1083203 (N.D. Ala. Mar. 6, 2020).

As Judge Haikala noted, the facts of this case are truly tragic for Richard Junkins.  On March 6, 2015, his family’s mobile home caught fire and burned completely.  The water used to extinguish the fire flooded his yard, and his truck became stuck in the mud when the family returned to the home.  Around 10 or 11:00 p.m., Mr. Junkins saw a car driving down the road beside his house, and the family dog, “Mr. Bear,” gave chase.   Mr. Junkins ran after the dog and waved his arms to get the attention of the driver and prevent Mr. Bear from being struck.  Out of breath, he sat down at the curb by his mailbox as the car turned around. Mr. Junkins began walking back to his house and told the driver to “go on.”

The driver was Madison County Sheriff’s Deputy Daniel DeJong.  Deputy DeJong walked up the driveway with his gun pulled and shone a flashlight on Mr. Junkins.  Mr. Junkins walked towards Deputy DeJong and was 12 to 15 feet away when Deputy DeJong turned his flashlight on Mr. Bear who was laying “beside the area that used to be the door of the home.”  Mr. Bear barked twice, but did not move towards Deputy DeJong, who fired twice, killing the dog. Mr. Junkins “became so overcome with emotion that he passed out.”

Deputy DeJong arrested Mr. Junkins for obstructing vehicular or pedestrian traffic and reported that Mr. Junkins was “extremely intoxicated.”  Nevertheless, Deputy DeJong acknowledged that he did not have a conversation with Mr. Junkins and did not observe any alcohol containers lying around.  Mr. Junkins was acquitted by a jury of the traffic obstruction charge.

Mr. Junkins sued Deputy DeJong for violating his civil rights and committing a false arrest.  Deputy DeJong asked Judge Haikala to dismiss that lawsuit using the legal defense of qualified immunity.  Under that defense, Deputy DeJong would be entitled to dismissal if he had “arguable probable cause” to arrest Mr. Junkins for any offense.  Rather than insisting upon the traffic obstruction charge, Deputy DeJong argued that he could have arrested Mr. Junkins for public intoxication because he “was confronted with an erratically and bizarrely acting Junkins who passed out in front of him for no apparent reason.”  Nevertheless, Judge Haikala reached a different conclusion:

No reasonable officer, knowing that he had just entered a citizen’s property, stood 12 to 15 feet from the citizen, and shot the citizen’s dog dead on the citizen’s property, would conclude that the citizen’s loss of consciousness was the result of intoxication. (Doc. 31, ¶¶ 17–19). A reasonable officer in the same circumstances with the same knowledge likely would conclude that Mr. Junkins passed out because he witnessed his dog being killed beside (it would be reasonable to infer) his still-smoldering house.

Junkins, 2020 WL WL 1083203 at *4.

Thus, Judge Haikala refused to dismiss the false arrest claim and ordered the parties to proceed with the discovery phase of the lawsuit.  Notably, this case was decided on a motion to dismiss filed by Deputy DeJong.  Legally, Judge Haikala was required to believe all of the factual allegations that Mr. Junkins put in his complaint.  Potentially, Deputy DeJong could appeal to the Eleventh Circuit Court of Appeals or he could proceed with discovery and attempt to obtain dismiss with a motion for summary judgment after the “real facts” are discovered.

 

Medicare Secondary Payer: Insurance Fails to Protect Medicare

Robert C. Lockwood
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The Eleventh Circuit removed one potential defense that insurance companies possessed to defending claims under Medicare’s Secondary Payer provisions.

The Eleventh Circuit just made it easier to sue insurance companies that fail to protect Medicare’s interest as a secondary payer.  See MSPA Claims 1, LLC v. Kingsway Amigo Ins. Co., No. 18-14980, 2020 WL 728625 (11th Cir. Feb. 13, 2020).  By law, Medicare is a secondary payer.  That means Medicare does not pay for medical bills if somebody else is responsible for the bill.  This is an important requirement for insurance companies.  For example:  Driver A runs a red light and strikes the car operated by Driver B.  Driver B is a Medicare beneficiary.  Driver B goes to the hospital and Medicare pays for the hospital bills.  But, Driver A (and his/her insurance company) are responsible for the injuries.  Because Medicare is a secondary payer, it is entitled to recover its payments from Driver A’s insurance.

Over the last decade or more, Medicare has become increasingly assertive in recovering its payments.  As a result, many insurance companies take active measures to protect Medicare’s interest.  In almost any type of case (including employment disputes), those companies will take active steps to ensure that Medicare has not paid medical bills and will not be required to pay medical bills related to the dispute in the future.  Or, if Medicare has paid bills, the insurance company ensures that Medicare is repaid.

Some insurance companies are not as diligent as others, however.  For example, in MSPA Claims, Kingsway Amigo Insurance settled a car-wreck claim with a Medicare beneficiary for $6,667, but failed to consider that Medicare had paid $21,965 in medical bills.  MSPA Claims sued Kingsway Amigo on behalf of Medicare.  But, Kingsway Amigo was able to convince a federal judge that the lawsuit should be dismissed because of the following provision of the Medicare Secondary Payer Act:

Notwithstanding any other time limits that may exist for filing a claim under an employer group health plan, the United States may seek to recover conditional payments in accordance with this subparagraph where the request for payment is submitted to the entity required or responsible under this subsection to pay with respect to the item or service (or any portion thereof) under a primary plan within the 3-year period beginning on the date on which the item or service was furnished.

42 U.S.C. 1395y(b)(2)(B)(vi).

According to Kingsway Amigo, that provision required Medicare to notify Kingsway Amigo of its payments within three years of making those payments.  Because Medicare failed to do so, Kingway Amigo argued that it could not be sued under the Medicare Secondary Payer Act.

On appeal, the Eleventh Circuit rejected that argument.  At this point, I will note that MSPA Claims contains a lot of legalese, and the author of the opinion, Judge Newsom, does a fantastic job of making the decision understandable.  In short, he found that the three-year requirement of the Act “doesn’t operate as any sort of prerequisite — for anyone.  Rather than imposing a strict requirement, the provision simply allows Medicare to overcome any time limits prescribed by an employer’s group health plan that might otherwise prevent it from requesting reimbursement.  Put simply, the claims-filing provision is a ‘get to’ not a ‘have to.'”  MSPA Claims, 2020 WL 728625 at * 6.  In other words, Medicare is not barred from suing an insurance company simply because it failed to notify that insurance company of claims within three years of making payments.

The MSPA Claims decision simply reinforces that insurance companies and their lawyers need to ensure that Medicare has not made any payments to a claimant/plaintiff before settling a claim.  If an insurance company fails to protect Medicare’s interest, at least one defense has now been rejected by the Eleventh Circuit.

 

 

The ADA Does Not Prohibit An Employer’s Fear of a Future Disability

Robert C. Lockwood
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The ADA does not provide protection to a healthy employee who is terminated because an employer fears that the employee may develop a disability in the future.

The Americans with Disabilities Act protects “persons who experience discrimination because of a current, past, or perceived disability—not because of a potential future disability that a healthy person may experience later.” Equal Employment Opportunity Comm. v. STME, LLC, No. 18-12277, 2019 WL 4314998 (11th Cir. Sep. 12, 2019).

Kimberly Lowe was a massage therapist with Massage Envy in Tampa, Florida.  In September 2014, Lowe asked for time-off so that she could visit her sister in Ghana, a country in West Africa.  Three days before her trip, one of Massage Envry’s owners told her that she would be fired if she proceeded with her travel plans.  The owner “was concerned that Lowe would become infected with the Ebola virus if she traveled to Ghana and would ‘bring it home to Tampa and infect everyone.'”  When Lowe refused to change her plans, the owner terminated her employment.  Although there was an Ebola outbreak in West Africa, there were no occurrences in Ghana.  Lowe traveled to Ghana and did not contract Ebola.

The United States Equal Employment Opportunity sued for Lowe and claimed that she was “regarded as” disabled under the ADA because of the owner’s Ebola fears.  A Florida trial court granted a motion to dismiss filed by Massage Envy, finding that Massage Envy did not perceive Lowe as having Ebola when she was fired.  The Eleventh Circuit affirmed.

The Court found four reasons to conclude “that the disability definition in the ADA does not cover this case where an employer perceives a person to be presently healthy with only a potential to become ill and disabled in the future due to the voluntary conduct of overseas travel.”  First, the Court read the ADA’s “regarded as” language in conjunction with the ADA’s “actual disability” prong, which requires that a disability exist at the time of an adverse employment action.  Second, the Court noted that the ADA protects employees who are terminated “because of an actual or perceived physical or mental impairment.”  Thus, an employer “does not fire or otherwise discriminate against an employee ‘because of’ a perceived physical impairment unless the employer actually perceives that the employee has the impairment.”  As a result, the “regarded as” prong does not “extend to an employer’s belief that an employee might contract or develop an impairment in the future.”

Third, even though the Court was required to interpret the ADA broadly in favor of coverage, it could only “conclude that the terms of the ADA protect anyone who experiences discrimination because of a current, past, or perceived disability—not a potential future disability.”  Fourth, the Court noted that the EEOC’s own interpretive guidance for the ADA found that predisposition to developing an illness or disease is not a physical impairment.  “If a predisposition to developing a disease in the future is not a physical impairment, by analogy, we do not see how Lowe’s heightened risk of developing the disease Ebola in the future due to her visit to Ghana constitutes a physical impairment either.”

The Eleventh Circuit’s opinion is a clear victory for employers.  Nevertheless, the STME case should not be read as giving carte blanche authority to terminate employees based upon a fear of a future medical condition.  Indeed, the key word in the Eleventh Circuit’s holding might be “healthy.”  The ADA protects “persons who experience discrimination because of a current, past, or perceived disability—not because of a potential future disability that a healthy person may experience later.”

Some employers have “eggshell” employees who are prone to injury.  If an employer combines knowledge of past injuries with fear of future injuries to justify an employment action, STME might not provide a defense to an ADA claim.

Cybersecurity: Businesses Secure Big Victory at 11th Circuit

Robert C. Lockwood
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The Eleventh Circuit weakened the ability of the Federal Trade Commission to regulate cybersecurity.

Last week, the Eleventh Circuit Court of Appeals issued a decision which severely weakens the power of the Federal Trade Commission (“FTC”) to impose cybersecurity obligations on businesses.  See LabMD, Inc. v. Federal Trade Commission, No. 16-16270, 2018 WL 2714747 (11th Cir. Jun. 6, 2018).  LabMD was a medical laboratory that conducted diagnostic testing for cancer.  As a result, it was subject to the requirements of the Health Insurance Portability and Accountability Act (“HIPAA”) which imposed obligations to secure patients’ data on LabMD’s computer system.  A billing manager at LabMD installed Limewire software on her computer (in violation of LabMD policy) which allowed her to share music files across the internet.  Unfortunately, Limewire also allowed access to every file on her computer, including personal information on 9,300 consumers.  A data security company, apparently as part of its marketing efforts, accessed the computer and downloaded the consumer information.  It then offered its cybersecurity services to LabMD, but when LabMD declined, the security company forwarded its information to the FTC.

The FTC claimed that the failure to appropriately safeguard LabMD’s network was an “unfair act or practice” under the Federal Trade Commission Act.  The FTC could have entered an order commanding LabMD to eliminate the possibility that employee could install unauthorized programs on their computer.  Instead, the FTC went much further and entered an order regulating all aspects of LabMD’s data-security program.  In short, LabMD was ordered to implement and maintain a data-security program “reasonably designed” to the Commission’s satisfaction.

The Eleventh Circuit found that the FTC’s broad, “reasonableness” requirement was too vague to permit enforcement.  The FTC’s order can be enforced by the FTC itself or a reviewing court. But, in either instance, the FTC or reviewing court would essentially be forced to make a judgment call on whether a particular security measure was “reasonably designed.”  As a practical, matter this meant that every hearing on “reasonableness” would be a specific modification to the FTC’s exceedingly general order.  Thus, the Eleventh Circuit concluded:

The practical effect of repeatedly modifying the injunction at show cause hearings is that the district court is put in the position of managing LabMD’s business in accordance with the Commission’s wishes.  It would be as if the Commission was LabMD’s chief executive officer and the court was its operating officer.  It is self-evidence that this micromanaging is beyond the scope of court oversight contemplated by injunction law.

LabMD, 2018 WL2714747 at *12.

The LabMD decision has far-reaching implications.  The FTC frequently touts its victories in requiring companies to comply with privacy dictates:  FTC Privacy Wins.  Now, the FTC’s compliance power is severely restricted (at least in the Eleventh Circuit).  Rather than imposing general requirements on businesses, the FTC must dictate specific security measures that can be enforced by a reviewing court.

Perhaps more importantly, the LabMD decision also contains language suggesting that the FTC does not have the wide-ranging ability to regulate cybersecurity at almost any business.  The FTC has taken the position that it can regulate cybersecurity any time there is a actual or likely “substantial consumer injury.”  The Eleventh Circuit’s opinion, however, suggests the cybersecurity practice at issue must also violate a “well-established legal standard, whether grounded in statute, the common law or Constitution.”  This part of the opinion is dicta, and is not a binding statement of law.  Nevertheless, it provides businesses with another potential defense to FTC enforcement actions.

The LabMD opinion was issued by a three-judge panel of the Eleventh Circuit.  Potentially, the FTC could ask for every judge in the Eleventh Circuit to review the case as part of an en banc proceeding.  Or, the FTC might try to appeal to the United States Supreme Court.  Thus, there is some chance that the opinion might change.  For now, businesses have earned a big win against regulation by the FTC.

Off Topic Post: My Dad Committed Suicide

Robert C. Lockwood
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My Dad committed suicide.

The news that Anthony Bourdain committed suicide, following closely on the heels of the Kate Spade announcement has got me a little melancholy this morning.  And, it’s got me thinking about my Dad, and my relationship with him.

This was a man who was all about love.  He was joyful, and a hugger.  Goofy and embarrassing.  He gave me my sense of humor, and gave me everything he could within his means.

But, he wasn’t perfect.  He was prone to mood swings, and just didn’t act with common sense sometimes.  For me, the final straw was his breakup with my Mom.  To this day, I really don’t know all of the details, but I unquestionably placed the onus on him.  I shut him off and stopped talking to him.  While I let him have a few brief interactions with my young kids, our relationship was almost nonexistent.

It’s one of the biggest regrets of my life.  I don’t know what he was going through, but my Dad was clearly in a bad place.  He took his life, and I don’t know why – other than a note that I read once and never want to read again.

I don’t think I could have prevented his choice.  But, I could have been more loving and comfortable in my relationship with him.  I could have forgiven him (and arguably myself) for whatever sins I believed he committed.  Most importantly, my kids could have known this glorious man, and known the love that he could give.  And his goofiness.

So, when one of my friends tells me that they aren’t speaking with their parents, I tell them about my regrets and encourage them to reach some kind of resolution.  I try not to sound preachy, but if I’ve done that to anybody, I apologize.  It just stinks not having that relationship with a man that I once adored, and I don’t want my friends to have the same regrets.

I’ve got no words of wisdom for those affected by suicide.  It’s terrible.  Everybody will say:  “Get help before it happens.” But, it’s never that easy when you’re trying to influence another human being.  We can’t control the inner forces that cause loved ones to make this terrible decision.  But, we can try to have a meaningful relationship with them, and love them – even if that’s not enough to save them from themselves.

I miss my Dad.

Cybersecurity – Alabama Data Breach Notification Act.

Richard Raleigh
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The Alabama Data Breach Notification Act imposes cybersecurity obligations on Alabama businesses.

Alabama businesses need to take note.  A recently enacted law, the Alabama Data Breach Notification Act (No. 2018-396), creates new requirements for “covered entities” who have “sensitive personally identifying information” that is the subject of a “data breach.”  A signed version of the act can be found here:  Act No. 2018-396.  The Act mandates certain security measures for businesses and requires notification if a breach occurs.  Failure to comply can result in significant fines, and a violation of the Act is also considered a violation of the Alabama Deceptive Trade Practices Act (Alabama Code Sections 8-19-1, et seq.).

Data breaches can be significant and can have far reaching effects.  In 2015, the U.S. Department of Defense notified more than 20 million former and current government employees that their information was stolen in one of the largest cybercrimes ever carried out against the U.S. Government.  As a result, the Office of Personnel Management provided each of the affected individuals with identify theft protection and awarded a $133 million contract for identity theft protection services to pay for that protection.  (https://www.opm.gov/news/releases/2015/09/opm-dod-announce-identity-theft-protection-and-credit-monitoring-contract/.)  Nearly everyone can recall the 2015 Experian loss of personal data for around 15 million individuals, a loss that included social security numbers.  And, the Target data breach involved as many as 70 million Target customers.  (https://www.forbes.com/sites/maggiemcgrath/2014/01/10/target-data-breach-spilled-info-on-as-many-as-70-million-customers/#24fbec7ce795).  Recently, Saks Fifth Avenue joined the ranks of businesses that have been hacked and whose customers’ information was stolen.  (https://www.usatoday.com/story/money/2018/04/01/data-breach-hits-lord-taylors-saks/476838002/).  These types of events led Alabama Senator Arthur Orr (R – Decatur) and Alabama Representative Phil Williams (R – Huntsville) to sponsor legislation to help protect the sensitive personally identifying information of Alabama citizens.  Senator Orr previously tried to get legislation related to data breach notification through the legislature.  (http://www.decaturdaily.com/news/other_news/state_capital/data-breach-bill-goes-to-governor/article_4b4419fe-fa08-5f91-ba42-dda53deac673.html).  This year, the Alabama Legislature passed the Alabama Data Breach Notification Act.  Governor Ivey signed the bill into law on March 28, 2018.  “Beginning June 1, 2018, private and public entities must establish reasonable data security measures and notify those affected when personal data has been compromised. Any breached entity that determines the compromised information is ‘reasonably likely to cause substantial harm’ must notify those affected as ‘expeditiously as possible’ but no later than 45 days after discovery.” (https://alabamaretail.org/news/alabama-data-breach-notification/).

The requirements of the Alabama Data Breach Notification Act apply to covered entities and to third-party agents.  These terms are defined:

(2) COVERED ENTITY. A person, sole proprietorship, partnership, government entity, corporation, nonprofit, trust, estate, cooperative association, or other business entity that acquires or uses sensitive personally identifying information.

(7) THIRD-PARTY AGENT. An entity that has been contracted to maintain, store, process, or is otherwise permitted to access sensitive personally identifying information in connection with providing services to a covered entity.

Alabama Data Breach Notification Act, Act No. 2018-396.

The Act protects “sensitive personally identifying information,” which is an Alabama resident’s first name or first initial and last name, combined with one or more numbers or other data – such as a social security number, bank account number, medical information, or username and email address information.

The Alabama Data Breach Notification Act requires: (1) reasonable security, (2) investigations, and (3) notification under certain circumstances.

Reasonable Security Measures.  Covered entities and third parties are required to consider, implement, and maintain certain security measures.  The Act contains a list of certain measures that should be considered.  But, the statute explains that “[r]easonable security measures [are] security measures practicable for the covered entity to implement and maintain.”  Factors like the size of the entity, amount of sensitive information, and cost of implementation of measures are considered when determining what security measures should be undertaken.  What constitutes “reasonable security measures” is likely to be the subject of debate in the future.

Good Faith and Prompt Investigation.  If a covered entity or third party determines there has been a breach of security in relation to “sensitive personally identifying information,” they have a duty under the Act to conduct a good faith and prompt investigation.

Notification.  When there is a data breach, covered entities and third parties must notify affected Alabama residents.  Unless an exception in the act applies, they must do so “as expeditiously as possible and without unreasonable delay.”  In any event, notification must occur no later than 45 days after the covered entity or third party determines a breach has occurred and is likely to cause substantial harm.  The Act sets forth the information required to be provided.  Furthermore, if more than 1,000 Alabama residents are affected, the Alabama Attorney General and consumer reporting agencies must be alerted.

Businesses should review the Act and seek guidance from experts to determine appropriate data security measures.  While there will be questions when data breaches occur, such as what are “reasonable security measures” and when is a loss “likely to cause substantial harm,” the Alabama Data Breach Notification Act attempts to provides answers – including recommendations concerning appropriate security measures – in addition to setting forth requirements.

 

Richard Raleigh, a Past President of the Alabama State Bar (2014-2015) and a U.S. Army veteran, is an experienced trial and appellate attorney at Wilmer & Lee, P.A. in Huntsville, Alabama, with a practice concentrated on government contracts law, complex litigation, cybersecurity law, and employment law.  He recently served on the Alabama Law Institute’s Restrictive Covenants and Contracts Study Committee, and he serves on the American Law Institute’s Members Consultative Group for Restatement Third, Torts: Liability for Economic Harm.  Richard also serves on the Alabama Supreme Court Standing Committee on Alabama Rules of Civil Procedure and the Alabama Judicial Compensation Commission, and he represents Alabama in the American Bar Association House of Delegates.  He has a diverse litigation practice, has tried numerous trials in various state and federal courts, and has argued cases before the Fifth and Eleventh U.S. Courts of Appeal, the U.S. Court of Appeals for the Federal Circuit, the Florida 1st District Court of Appeals, and the United States Court of Federal Claims.  Richard is admitted to practice in Alabama and Tennessee as well as various federal courts, including the United States Court of Federal Claims, the United States Tax Court, and the United States Supreme Court.

 

 

Potential Danger from Opt-Out Clauses in Arbitration Agreements

Robert C. Lockwood
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Employers should give careful consideration and attention to whether they want to include an opt-out provision in their arbitration agreements.

As I discussed last week, arbitration agreements are popular with Alabama employers and the Alabama Supreme Court:  The Supreme Court Really Likes Arbitration.  While Alabama has become a favorable venue for arbitration, other jurisdictions, like California, remain hostile.  In particular, some judges find that employment arbitration agreements are unconscionable.  In other words, the employer possesses so much bargaining power in the employment relationship that the employee should not be bound by a “take it or leave it” arbitration policy.  In an effort to avoid such determinations, some employers have inserted opt-out provisions into their arbitration agreements.

In 2016, Brian Berkley wrote a great article discussing the benefit of opt-out provisions:  Can Opt-Out Provisions Save Arbitration Clauses? An opt-out provision gives the employee the opportunity to escape arbitration.  Typically, the provision is buried deep within an arbitration agreement and gives the employee the opportunity to avoid arbitration by providing written notice to the employer within 30 days of signing the agreement or receiving arbitration training.  By inserting an opt-out provision, employers are hoping to convince judges that arbitration is not unconscionable, because the employee had an opportunity to avoid it. The employer is gambling that the employee never discovers the opt-out language buried in the arbitration agreement.

Recently, however, CVS Drug Stores learned that an opt-out provision can create as many problems as it cures. See Hall v. CVS Health Corp., No. 2:17-cv-00289-KOB, 2018 WL 1182603 (N.D. Ala. Mar. 7, 2018).  In that case, Roy Hall sued CVS for, among other things, age and race discrimination.  But, Mr. Hall previously participated in a CVS-sponsored course called Arbitration of Workplace Legal Disputes, and he read and understood materials which informed him that he would be required to arbitrate all employment disputes unless he opted out.  Judge Karen Bowdre, however, found a factual dispute on whether Mr. Hall actually opted out of the arbitration agreement.

Mr. Hall testified that that he mailed a written letter to CVS within 30 days of training, and he opted-out of the arbitration agreement.  Yet, he did not send the letter by certified mail, and he could provide no proof, other than his testimony, that he actually sent the letter.  In contrast, CVS could not “prove a negative.”  It provided Judge Bowdre with affidavits from employees saying that they never received Mr. Hall’s alleged letter.  But, other unidentified employees could have possessed the letter and lost it.

Judge Bowdre decided to resolve the factual dispute by ordering a jury trial.  Under her ruling, a jury will decide whether Mr. Hall actually mailed the opt-out letter, and whether CVS actually received it.

Employers typically want arbitration because it helps to streamline the dispute process and it avoids many of the pitfalls associated with jury trials.  But, the opt-out clause in CVS’s arbitration agreement has caused the exact opposite outcome.  CVS will now have to face the uncertainties of a jury trial, and that trial will further delay the process.

Employers should think carefully before putting an opt-out provision in their arbitration agreement.  For nationwide employers like CVS, an opt-out provision might make sense, because it helps with enforcement in fickle jurisdictions like California.  But, in Alabama, where the courts have been zealously enforcing arbitration agreements, an opt-out provision might actually be counter-productive.

Newsflash! The Alabama Supreme Court Really Likes Arbitration

Robert C. Lockwood
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The Alabama Supreme Court recently compelled arbitration of an employment-related dispute, even though the employer was not a named party to the arbitration agreement.

When I was a young lawyer, the Alabama Supreme Court really disfavored arbitration.  They would find almost any excuse to give somebody their “day in court,” instead of enforcing contractual dispute resolution.  Times have certainly changed.   Binding decisions from the United States Supreme Court, and election of pro-business candidates to the Alabama Supreme Court have lead to a sea-change.  Now, the Alabama Supreme Court almost always enforces arbitration agreements.

This point recently hit home in Bridgestone Americas Tire Operations, LLC v. Adams, No. 1160877, 2018 WL 1355966 (Ala. Mar. 16, 2018).  Ottis Adams was hired by BFS Retail and Commercial Operations (“BFS”) in 2006.  When he was hired, Adams signed BFS’s Employee Dispute Resolution Plan which required arbitration of almost all employment disputes.  At some point, Adams changed employers from BFS to a sister company — Bridgestone Americas Tire Operations, LLC (“Bridgestone”).  Adams left Bridgestone in 2016 and began work for a competitor — McGriff Tire Company.  Bridgestone then sent a letter to McGriff stating that Adams’s employment violated a noncompetition and nonsolicitation agreement signed by Adams.  Bridgestone also suggested that Adams violated a duty of loyalty by selling tires for McGriff while still employed by Bridgestone.

McGriff terminated Adams’s employment, and Adams sued Bridgestone for interference with his business relationship with McGriff and for defamation.  Bridgestone moved to dismiss the lawsuit and compel arbitration.  Adams convinced the trial court that Bridgestone was not a named party to the the BFS agreement, and that court denied the motion.  So, Bridgestone appealed.

The Supreme Court compelled arbitration for two reasons.  First, the BFS agreement required arbitration of “all disputes covered by that plan, not just disputes with BFS.”  Second, the agreement applied to all “sister companies,” “related companies,” and “affiliate companies” of BFS.  Even if Bridgestone was not a named party to the agreement, it fell within the definition of a “sister company,” “related company” or “affiliate company.”

Adams provides guidance to employers who want to avoid trial courts and jury trials.  By broadly wording an  agreement to cover all disputes related to employment, and by making the agreement applicable to any sister companies or affiliates, employers can avoid litigation and compel arbitration.

 

 

Interns: Department of Labor Scraps 6-Factor Test

Robert C. Lockwood
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Many unpaid “interns” are actually “employees” who can sue under the FLSA.

Sometimes, a client will call me and ask whether there are any legal issues if they utilize unpaid “interns.”  Usually, my answer is:  “yes.”  Some employers see job-hungry college students as a source of “free” labor.  But, free labor is exactly the problem that the Fair Labor Standards Act (“FLSA”) was designed to prevent.

Nevertheless, the United State Department of Labor (“DOL”) recognizes that there are circumstances in which a student truly obtains an academic benefit from working-for-free in industry.  So, the DOL has developed a test for distinguishing “employees” (who should be paid) from “interns” (who may work for free).  Under the Obama Administration, the DOL adopted a restrictive six-factor test in 2010.  Under that test, an unpaid intern would be considered an “employee” under the FLSA unless each of the six factors  was met.  As a matter of practicality, if the company received any economic benefit from the “intern’s” services, the DOL considered the intern to actually be an “employee” entitled to minimum wage and overtime.

The DOL’s six-factor test was generally criticized by federal courts around the country, including the Eleventh Circuit Court of Appeals, which reviews cases from Alabama.  See Schumann v. Collier Anesthesia, P.A., 803 F.3d 1199, 1209 (11th Cir. 2015).   Rather than following the DOL’s strict, six-factor test, the Eleventh Circuit follows a more-flexible seven-factor test, borrowed from the Second Circuit Court of Appeals.  That test considers the following elements, none of which is conclusive:

1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.
2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.
On January 5, 2018, the DOL formally scrapped its six-factor test in favor of the more-flexible seven-factor test.  The DOL’s fact sheet with the new test can be found here:  DOL Intern Fact Sheet.    In short, if analysis of the seven factors “reveals that an intern or student is actually an employee, then he or she is entitled to both minimum wage and overtime pay under the FLSA. On the other hand, if the analysis confirms that the intern or student is not an employee, then he or she is not entitled to either minimum wage or overtime pay under the FLSA.”

Assault by the Department Store Santa: A Cautionary Tale

Robert C. Lockwood
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Santa Claus Alabama Employment Law Respondeat Superior
A department store was found responsible for injuries caused by Santa Claus

Merry Christmas!  At about this time last year, I tried to provide some insight on the dangers of Christmas hams in the workplace:  The Dangers of Christmas Hams.  This year, in my never-ending quest to provide hard-hitting legal updates, I bring you a cautionary tale of assault by a department store Santa Claus:  Honeycutt v. Louis Pizitz Dry Goods, Co., 235 Ala. 507 (Ala. 1938).

This case is from 1938, so it’s what a lawyer might call “well-established law.”  As part of its holiday advertising, the Pizitz Department Store in Birmingham sent out into the community a truck with a full band playing music and an employee dressed as Santa Claus.  The band attracted a crowd and the Santa Claus threw presents and candy.  Unfortunately, an “all day sucker” struck Mrs. Linnie Honeycutt in eye.  Here is the Supreme Court’s recitation of the facts:

The evidence is without dispute that the defendant’s advertising scheme attracted several hundred women and children, who surrounded the truck carrying the band; defendant’s servant dressed as Santa Claus. That some of those in the crowd stood from seventy to seventy-five feet away from the truck; and that defendant’s servant standing in the truck threw with great force the articles being distributed into the crowd, and one of said “lollypops” struck plaintiff in the eye, producing an abrasion of the sclera of the eyeball across the pupil, resulting in an infection causing much pain and suffering and, there is evidence tending to show, causing partial dimness of the sight necessitating the use of spectacles which plaintiff had not before had to use.

Honeycutt, 235 Ala. at 509 (emphasis added).

A jury found in favor of Mrs. Honeycutt and Pizitz appealed, arguing that this was just an “accident.”  Unfortunately, the Supreme Court disagreed:  “If the missiles thrown — the lollipops — were of such nature and character as that they were liable to produce injury, and were thrown into the crowd of women and children with such force as to cause injury, the jury was warranted in finding the defendant liable under the [claim of assault and battery].”

The Honeycutt case doesn’t provide any earth-shaking principles of law.  But, it does reinforce one lesson which employers should already know:  employers can be held responsible by a jury for the actions of their employees — even if the employee is Santa Claus.

I hope you have a wonderful Holiday Season.!