The Ninth Circuit Court of Appeals will soon drop its longstanding prohibition against citation of unpublished opinions. Proposed Circuit Rule 36-3 parallels proposed Federal Rule of Appellate Procedure 32.1, which provides for the first time that the circuits may not prohibit or restrict the citation of unpublished opinions. Both rules are expected to become effective December 1, 2006. Circuit Rule 36-3 will allow lawyers to cite unpublished Ninth Circuit opinions -- but only those opinions issued on or after January 1, 2007. The Ninth Circuit is one of four circuits that has until now banned citation to its unpublished cases. Advocates should now be able to tap into a large pool of case law: according to estimates, some 80 percent of federal appellate cases nationwide are disposed of by unpublished opinions and orders.
US District Judge Jack Weinstein certified a class action comprised of tens of millions of smokers of "light" cigarettes going back more than thirty years. Unlike other unsuccessful tobacco class actions in which the plaintiffs seek damages for personal injuries and death, in this suit the plaintiffs seek damages based on the difference in value between the cigarettes they purchased and the allegedly safer cigarettes they thought they purchased. The suit alleges that the tobacco companies perpetrated a fraud of massive scale on the American public when it marketed "light" cigarettes as a safer alternative, when it knew that "light" cigarettes in fact were no safer than the others. Presumably, the plaintiffs believe they can prove that they would have paid less for the "light" cigarettes if they had known the health risks were the same, or, put another way, that the "light" cigarettes had more value to them. They contend that surveys indicate that the vast majority of "light" cigarette smokers chose the products for health reasons. Defendants contend that individual smokers choose their cigarettes for reasons so numerous that class action status is not appropriate. While Judge Weinstein expressed skepticism about the plaintiffs' damages theory, he nonetheless concluded that the case should proceed to trial (set for January) as a class action. Damages are estimated to be about $200 billion, and potentially tripled to $600 billion because the case was filed under the RICO statute. An appeal of the class certification order is sure to follow. A copy of the 540 page opinion and order can be found here.
Plaintiff's attorneys have begun filing ERISA class action lawsuits against Fortune 500 companies in the midwest. The plaintiffs are participants in their employers' 401(k) or profit sharing plans that allow participant-directed investing among a menu of investment options. Defendants are the plan sponsors, their directors, and individuals (usually high-level employees) serving as plan administrator or on a plan administrative or investment committee. Plaintiffs allege that the defendants breached their duties under ERISA by causing the plans to pay excessive fees or expenses, unnecessarily reducing the participants' account balances.
Plan fiduciaries are personally liable to plan participants for any improper or excessive fees paid by the plan, so the stakes in large plans such as these can be millions of dollars. And recent investigations by the U.S. Securities and Exchange Commission and other regulatory agencies suggest that service providers often do not adequately disclose fees. Plan fiduciaries are often not aware of all the expenses paid by the plan and therefore fail to ensure that those fees are reasonable or proper. The large number of providers (third party administrators, investment providers or consultants, recordkeepers, trustees or custodians, etc.) makes tracking plan expenses difficult.
Plan fiduciaries must be extremely diligent in monitoring all plan activities, including who the plan is paying for services and how much those services cost. Although the first wave of lawsuits involve midwestern companies, it is simply a matter of time before local employers are named in similar actions. Already, a well-known Seattle law firm is investigating this issue and inviting plan participants to contact them.
Plan fiduciaries are subject to very high standards of care in how they perform their duties and face personal liability for failing to properly do so. Being ignorant of what those duties are or how much a plan is paying for the services it receives ensures a very painful and expensive learning experience.
Yesterday the Senate Judiciary Committee held a hearing on legislation to split the Ninth Circuit. The current proposal would create new Twelfth Circuit consisting of Oregon, Washington, Alaska, Idaho, Montana, Arizona, and Nevada. California, Hawaii and the Pacific Islands would remain in the new Ninth Circuit. The Associated Press reports that Sen. Dianne Feinstein characterized the Justice Department's new support of the split as political, and not arising from concerns about case backlogs or inconsistent rulings. The Seattle Times quotes Ninth Circuit Judge Richard Tallman as stating that he sees more support for the split in Congress now than in the past. See the Oregon Business Litigation blog's previous coverage of the issue here.
Employers of 100 or more employees, and federal contractors with government contracts of $50,000 or more and 50 or more employees, must file an EEO-1 report each year. The EEO-1 Report is a government survey that requires employers to provide a head count of their employees by job category, and then by gender and designated race and ethnicity categories within each job category. The report must reflect employment numbers from any pay period in July through September of the reporting year.
Covered employers that have not received the EEO-1 packet should contact the EEO-1 Joint Reporting Committee Toll Free at (866) 286-6440, or by e-mail at firstname.lastname@example.org. General information about the EEO-1 Report is available at the EEOC’s web site at www.eeoc.gov. Aggregate EEO-1 data will be made available on the EEOC’s web site, in addition to being compiled in an annual public report.
Any entity receiving (or making) annual payments under Medicaid of at least $5 million has until January 1, 2007 to comply with employment provisions contained in the Deficit Reduction Act of 2005. These provisions require covered entities to educate their workforce about the False Claims Act. The False Claims Act prohibits the submission of false claims to the government for payment and provides protection against retaliation to employees who report suspected violations.
Specifically, the Deficit Reduction Act requires covered entities to: (1) establish written policies for all employees, contractors and agents that provide detailed information about the federal False Claims Act and related administrative and state laws and whistleblower protections under such laws; (2) include in such written policies detailed provisions regarding the entity's policies and procedures for detecting and preventing fraud, waste, and abuse; and (3) include in any employee handbook a specific discussion of the False Claims Act and related laws and the rights of employees to be protected as whistleblowers and the entity's policies and procedures for detecting and preventing fraud, waste, and abuse.
Failure to implement these policies could disqualify a covered from eligibility for Medicaid payments.
Trouble in corporate boardrooms has been in the news this past week, beginning with the fallout from efforts to spy on members of the board at Hewlett-Packard. Meanwhile, at Bristol-Myers there has been a management shake-up as the board fired CEO Peter R. Dolan for mishandling a patent dispute. A key aspect of the Bristol-Myers story is its connection to the company's deferred prosecution agreement. Last year, to avoid prosecution for an accounting scandal unrelated to the current patent matter, the company agreed with the U.S. Attorney in New Jersey to allow a federal monitor to oversee its operations. That monitor, a former federal judge named Frederick B. Lacey, recommended that the board fire Mr. Dolan.
Writing in the University of Chicago Law School faculty blog, Professor Todd Henderson questions the growing use of deferred prosecution agreements. In the post-Arthur Andersen era, corporations may prefer to choose federal oversight instead of prosecution. But it's unclear, for example, whether such oversight will necessarily lead to better corporate governance, and whether a board seeking to please the U.S. Attorney will at the same time be able to maximize shareholder value.
The U.S. Justice Department announced this week that it was reviewing its guidelines for determining when to prosecute corporations for corporate wrongdoing.
The guidelines which were announced in 2003 describe nine factors that prosecutors must consider when weighing whether to indict a company for corporate misconduct. One criterion is whether the company has cooperated with prosecutors by waiving the attorney-client privilege and disclosing confidential legal communications to investigators. Another is whether the company has stopped paying legal fees of employees caught up in the investigation.
These two guidelines have been sharply criticized recently by a federal judge overseeing the trial of former KPMG employees, by the former director of the Justice Department's Enron task force, and by leaders of the American Bar Association. Critics of these guidelines contend that they promote coercive practices and undermine long-established legal doctrines such as the attorney-client privilege, the work-product doctrine, the presumption of innocence, and the right to legal counsel.
Critics of the guidelines, including Senate Judiciary Committee Chairman Arlen Spector and the Committee's ranking Democrat Senator Patrick Leahy, have suggested that Congress may have to pass legislation eliminating these two guidelines if the Department of Justice itself is unwilling to modify them.
The Court of Appeals yesterday addressed an area of uncertainty in Oregon contract law: how definite and certain a contract's terms must be to support the remedy of specific performance. In Earls v. Corning,the parties signed a preprinted form contract to sell real property, but left blank the date for closing the sale. The purported seller passed away a few days after signing the document, and plaintiff purchaser sued the personal representative of her estate for specific performance of the agreement. The trial court found, among other things, that the failure to agree on a closing date made the contract too indefinite to be specifically enforced.
The Court of Appeals reversed. While a contract must be definite in all material respects to be subject to specific performance, there is conflicting case law on whether an agreed closing date is a prerequisite for that equitable remedy. Judge Rosenblum, writing for the court, held that the failure to provide a closing date does not render the contract indefinite, and the court may specify a reasonable time for performance.
After months of political debate, last month the President signed the Pension Protection Act of 2006 (PPA). It's 907 pages of new processes, new rules, and changes for employers to deal with; a copy of the PPA is available at http://www.aspa.org/government/gacpdf/HWC_373_xml.pdf. Some of the more notable changes include:
The PPA has literally dozens of other changes that affect nearly all types of retirement plans. Most provisions are either effective immediately or for the 2007 plan year, so employers have very little time to get up to speed on the changes.