Federal Judge Eldon Fallon, who oversees the thousands of federal Vioxx painkiller cases facing drug maker Merck & Co., denied the plaintiffs' request to certify the personal injury and wrongful death cases as class actions. Plaintiffs allege that Vioxx increases the risk of heart attacks and other ailments, and Merck pulled Vioxx from the market in 2004. Judge Fallon determined that the individual differences among the many plaintiffs and their specific medical histories made any class adjudication unmanageable. The ruling deprives the plaintiffs of leverage to negotiate a comprehensive settlement, as the cases must now proceed on an individual, and more costly, basis. Merck has vowed not to settle, but to try all cases individually. Judge Fallon's order can be found here: Order
Two recent cases confirm that web publishers and operators of other on-line forums cannot be held responsible for content provided by others.
In a case filed in Chicago, a federal district court judge ruled that the federal Communications Decency Act of 1996 barred a federal housing discrimination claim against the popular Craigslist web site. A public interest group filed the action, charging that the site allowed individuals to post discriminatory housing ads. While a publisher of discriminatory ads can be held liable under the Fair Housing Act, the Communications Decency Act states that a provider of "an interactive computer service" cannot be treated as a publisher of content provided by others. This broad protection of on-line forums prompted the judge to dismiss the action.
The California Supreme Court last week similarly held that the Communications Decency Act shielded the operator of an on-line news group from liability for defamation arising from a letter she posted on her site. The court expressed concern about the policy of "blanket immunity for those who intentionally redistribute defamatory statements on the internet," but concluded that the law required dismissal of the action.
Ater Wynne lawyers have again been recognized for their skill, leadership and superior client service. Ater Wynne earlier this month received the award for Service Provider Company of the Year at the 2006 Technology Awards. In addition, six of the firm's partners from both Portland and Seattle were included in The Best Lawyers in America 2007, and 12 partners in the Portland office were recently named Oregon Super Lawyers.
The Oregon Supreme Court, on November 16, 2006, issued a decision that will affect parties' ability to settle insured claims. In Holloway v. Republic Indemnity Company of America, the court held that the anti-assignment clause in a liability insurance policy barred assignment by the insured of both pre-loss and post-loss rights and duties.
Insurance policies typically provide that the insured cannot assign its rights under the policy without the insurer's consent. The issue in Holloway was whether a post-judgment assignment of rights as part of a settlement was barred by the anti-assignment clause. The court held that the assignment was, in fact, invalid under the terms of the policy.
The facts in Holloway reflect a common type of settlement in cases where an insurer declines coverage. In that case a party made a claim against the insured, and the insurance company refused to defend the insured under the terms of the policy. As part of a subsequent settlement, the insured agreed to allow the claimant to enter a judgment against it, and agreed to assign to the claimant its rights to any claim the insured might have against the insurer for breach of the insurance contract or for indemnity (payment of the claim). The claimant then filed suit to recover against the insurer, but the Supreme Court held that the assignment to the claimant was invalid as contrary to the anti-assignment clause of the insurance policy.
States have split on how to interpret anti-assignment clauses. Courts in many states hold that, while such clauses bar a pre-loss assignment, they do not prevent a post-loss assignment. The reasoning is that a pre-loss assignment could unfairly increase the insurer's risk of loss by a new insured, while a post-loss assignment does not increase the insurer's risk. Oregon has joined the states holding that an anti-assignment clause bars an assignment no matter when it occurs.
The result in Holloway is important to insured parties and to those seeking to recover damages from an insured party as they seek to negotiate settlements.
Significantly, though, the Supreme Court in Holloway did not consider the effect of ORS 31.825, which permits the post-judgment assignment of any cause of action an insured has against its insurer as a result of the judgment. The court noted that the plaintiff did not identify any statute that would invalidate the anti-assignment provision of the policy.
This decision is also important whether you are an insured defendant, or a company acquiring a party, because assigned rights under an insurance policy may not really be an asset, or, on the other hand, the assignment may not be protection for a claim or judgment once thought to be settled.
Just as a car needs ongoing maintenance to run well or operate legally, employee benefit plans benefit from periodic check-ups. With Congress making continuous changes to the income tax code and the IRS issuing a never-ending stream of interpretive guidance, most plans will require some amendments this year. Some of the more common amendments and the deadlines are:
401(k) Plans -- All 401(k) plans and plans with after-tax employee or employer matching contributions must adopt a "good faith" amendment implementing the final 401(k) regulations by the end of the 2006 plan year (December 31 for calendar year plans).
Safe Harbor Notices -- The 401(k) regulations modified the required content of 401(k) safe harbor notices by adding additional requirements regarding vesting, distributions and contact information. In addition, because the Pension Protection Act (PPA) shortened allowable vesting schedules for employer profit sharing contributions, the Notice will need to reflect the correct schedule. Plans that adopted automatic enrollment provisions under the PPA must also include information about the deferral procedures. Notices should be distributed to participants by December 1 for a calendar year plan.
ROTH Amendments -- If a plan permitted ROTH after-tax deferrals to a 401(k) plan during 2006, the plan sponsor must adopt a conforming plan amendment by the end of the 2006 plan year.
EGTRRA Restatements -- Individually designed plans (primarily ESOPs, stock bonus or cash balance plans) sponsored by an employer with an EIN ending in 1 or 6 must restate the plan document, and submit it to the IRS for a favorable determination letter if desired, by January 31, 2007.
Discounted Stock Options or Stock Appreciation Rights (SAR) -- New Tax Code section 409A imposes severe income tax penalties on recipients of some "discounted" options or SARs. A discounted option or SAR is one with an exercise price lower than fair market value on the grant date. The IRS is providing a transition period until December 31, 2006 to correct this situation. Typical corrections include increasing in the exercise price, a cash-out of the grant (with a post-2006 payout), replacing the grant with a new grant or conforming the existing grant to the 409A requirements. The decision may impact several other sensitive areas, such as SEC disclosures for public companies, triggering deduction limits or shareholder disclosure and consent.
Additional rules may apply to your particular type of plan or situation. Consulting with your employee benefits expert should be part of your annual year-end cycle to ensure that the plans stay in compliance and that the plan sponsor and participants avoid any unnecessary taxation or penalties.
Voters rejected ballot measures in Oregon and South Dakota -- described in this earlier entry to the Oregon Business Litigation blog -- that would have significantly changed the judicial systems in both states. Oregon's Measure 40, which would have required appellate judges to be elected from geographic districts -- failed by 56-44 percent. Meanwhile, South Dakota's more radical "Jail 4 Judges" measure received support from only 10 percent of the state's voters.
Oregon's many adherents to the open-source movement can rest easy: the antitrust laws are no threat to the distribution of software under the GNU General Public License (GPL). At least that was the conclusion of the Seventh Circuit Court of Appeals in an opinion issued today. Authors who distribute software under the GPL authorize copying and the creation of derivative works, but prohibit charging for the copies and derivatives. The license ensures that all open-source software, such as the Linux operating system, is disseminated free of charge.
In Wallace v. IBM, plaintiff claimed that the GPL made it impossible for him to compete with Linux, either by offering a derivative work or by writing his own operating system, because no one would buy his product as long as Linux is free. Plaintiff claimed predatory pricing by IBM and others. Judge Frank Easterbrook, writing for the majority, concluded that the free distribution of software does not fit the test for unlawful predatory pricing under the Brooke Group case, that nothing in the law requires copyright owners to charge for their intellectual property, and that the widespread use of Linux does not threaten consumer welfare. The court affirmed the judgment dismissing the complaint.
On the ballot in Oregon this Election Day is Measure 40, which would require that appellate judges be elected from geographic districts. While Measure 40 would make significant changes to Oregon's judiciary, it pales in comparison to a measure on the ballot in South Dakota. There, a constitutional amendment called the Judicial Accountability Initiative Law -- or JAIL -- would create a system to punish judges for unpopular decisions. The proposed South Dakota law would create a special grand jury with the power to remove judges from the bench and to cut their retirement benefits. The measure would strip judges of judicial immunity, making them vulnerable to civil lawsuits and criminal charges based on their decisions.
Retired U.S. Supreme Court Justice Sandra Day O'Connor has charged that the goal of the South Dakota measure is "judicial intimidation," and last week at the Ninth Circuit Judicial Conference she warned against threats to judicial independence throughout the country.
Meanwhile, the California Bar Journal reports that Ron Branson, the moving force behind the JAIL initiative, lives in California, and hopes to get a similar measure on the ballot there and elsewhere in future elections.
BOLI has issued a proposed rule regarding the deduction of sick leave for absences that qualify for OFLA and workers compensation leave. The new rule provides that when the leaves run concurrently, the employer may make deductions from the employee's accrued sick leave only with the employee's consent, and only to the extent the amount deducted covers the portion of the employee's daily wage that is not covered by time loss benefits. The amendment is intended to make the rule consistent with ORS 656.240.
BOLI is accepting comments until November 30, 2006. Comments may be sent to Marcia L. Ohlemiller, Rules Coordinator, 800 NE Oregon St. #1045, Portland, OR 97232 or via email at email@example.com.
Without issuing a written opinion, the United States Circuit Court of Appeals for the District of Columbia, on October 31, 2006, stayed a trial court ruling which would have required the big tobacco companies to refrain from using "light," "low tar," and similar phrases in their advertising of so called "light" cigarettes. In addition to the advertising sanctions, trial court Judge Gladys Kessler's underlying order would have required the tobacco companies to make costly corrective public statements about the harmful effects of smoking cigarettes. In the absence of the stay, the companies would have had to comply with the prohibition on advertising phrases and taken the other corrective measures by January 1. The stay by the appeals court allows the tobacco companies to avoid spending millions of dollars complying with the order while they try to convince the appeals court to reverse Judge Kessler's ruling altogether.