In an extraordinary repudiation of 96-year-old precedent, the Supreme Court today swept away the per se prohibition on resale price maintenance. Since the 1911 case of Dr. Miles Medical Co. v. John D. Park & Sons Co., it has been illegal under the Sherman Act for manufacturers to dictate the prices at which distributors and retailers re-sell products. In the decades since, that case has played a major role in how the retail segment of the economy has been organized. The court's 5-4 opinion in Leegin Creative Leather Products, Inc. v. PSKS, Inc., now firmly rejects the rule of Dr. Miles, and allows manufacturers and distributors/retailers to agree on resale prices, subject only to the rule of reason that applies to all other vertical restraints of trade.
The case presents an interesting study in how courts employ economics in modern antitrust analysis. According to the majority opinion written by Justice Anthony Kennedy, (1) Dr. Miles was based on flawed reasoning, including that resale price maintenance (RPM) violated the antiquated common-law rule against restraints on alienation, (2) many economists have criticized the prohibition against RPM as dampening pro-competitive activity, and (3) the Sherman Act is a "common law statute," which means that courts interpreting it are less constrained by the doctrine of stare decisis.
The dissent by Justice Stephen Breyer responds that (1) economists are not wholly in agreement that barring RPM is harmful to competition, and in any event the job of the court is not to count noses among economists, (2) Congress has had nearly 100 years to overturn Dr. Miles and has chosen not to do so, and (3) the prohibition against RPM is so firmly entrenched in our economy that, even if it the Sherman Act is a common law statute, stare decisis dictates that the court not undo the rule.
See our earlier coverage of the case here.
On June 21, 2007, the United States Supreme Court issued an opinion in Tellabs, Inc v. Makor Issues & Rights, Ltd. which makes it more difficult for plaintiffs to state a claim for securities fraud under Section 10(b) of the Securities Exchange Act of 1934. The Private Securities Litigation Reform Act of 1995 requires plaintiffs to "state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind" - i.e., an intent "to deceive, manipulate, or defraud." In Tellabs, the Court stated that, to qualify as "strong," an inference of fraudulent intent must be more than merely plausible or reasonable - it must be cogent and at least as compelling as any opposing inference of nonfraudulent intent. Accordingly, the Court must take into account plausible, nonculpable explanations for the defendant's conduct as well as inferences favoring the plaintiff. In sum, "[a] complaint will survive . . . only if a reasonable person would deem the inference of scienter cogent and at least as compelling as any opposing inference one could draw from the facts alleged."
The Court rejected the argument that, by engaging in a comparative assessment of competing inferences, a court reviewing a securities complaint would usurp the role of the jury. The Court explained that Congress, as creator of federal statutory claims, "has the power to prescribe what must be pleaded to state the claim, just as it has power to determine what must be proved to prevail on the merits."
From the plaintiffs' view, the decision is not as bad as it could have been. Justice Scalia, in dissent, would have upheld an even stricter pleading standard. Instead of letting plaintiffs proceed on the basis of an inference "at least as compelling as any opposing inference," Justice Scalia would have adopted a test of "whether the inference of scienter (if any) is more plausible than the inference of innocence."
Corporate Board Member magazine has again ranked Ater Wynne LLP as one of the top five corporate law firms in Portland. See details on Ater Wynne's website.
On Monday the U.S. Supreme Court held that joint activity in the underwriting of an initial public stock offering is immune from scrutiny under the antitrust laws. In Credit Suisse Securities v. Billing, plaintiffs claimed that the underwriters of hundreds of IPOs acted together to drive up the fees they earned, in violation of federal antitrust law. Justice Stephen Breyer, writing for the court, held that extensive regulation by the Securities and Exchange Commission of the underwriters' activities precluded the application of antitrust law.
Justice Clarence Thomas was the sole dissenter. He wrote that the claims must proceed because, according to the Securities Act of 1933, securities law remedies do not preempt other existing remedies, including those under the antitrust law.
See our earlier coverage of the case here.
Last week a federal court jury in Portland awarded nearly $1 million in damages to a member of the Oregon National Guard who was wrongfully discharged from his employment with Target Corp. Ater Wynne attorney Mark Turner represented the plaintiff, James Patton, at trial. See the Oregonian's coverage of the case here.
Last month, Oregon joined the small but growing number of states that recognize domestic partnerships of same-sex couples. Many employers question the impact the new law will have on their employee benefit plans, and how they should respond.
Health Insurance and Health Savings Accounts (HSA)
Employers may provide tax-free health insurance benefits to non-employee domestic partners if the partner meets the Internal Revenue Code definition of "dependent." That requires, among other tests, that the domestic partner receive at least one-half of his or her support from the employee. To entitle a domestic partner to benefits, the employer's health plan must expressly provide for such benefits. Employers should review their plan's eligibility provision to ensure that the plan reflects the employer's intent. Employers choosing to offer benefits to a domestic partner may consider requiring an affidavit or other certification process to determine and document the eligibility of the domestic partner.
COBRA does not consider a domestic partner to be a "spouse" entitled to COBRA benefits, and such partners are therefore not entitled to COBRA rights or notices. Despite this, and since COBRA provides minimum coverage requirements, an employer's health plan may offer COBRA benefits to a domestic partner since COBRA does not prohibit an employer from offering continuation coverage to a larger group than required. Again, careful drafting and close consultation with the health plan insurer are required. HIPAA has a slightly different definition of dependent that may require providing a special enrollment period for domestic partners who lose their own coverage.
Dependent Care Assistance Program (DCAP) and Health Flexible Spending Account (FSA)
As above, these plans may provide benefits for domestic partners that satisfy the tax code's definition of dependent, provided that the plan eligibility provision is drafted to do so. Again, the employer should review the plan(s) to ensure they are working correctly.
Many 401(k) or profit sharing plans allow hardship distributions for certain educational or medical-related expenses of the participant's dependent. Such expenses incurred on behalf of a domestic partner that satisfy the dependent definition are eligible for hardship distributions.
One important element that is not available to domestic partners is automatic inheritance of a retirement plan benefit. Federal law limits that automatic right to a "surviving spouse," defined as the surviving member of an opposite-sex marriage. An employee who wishes to have his or her non-employee partner receive any death benefit must complete a beneficiary designation form for that purpose.
Cafeteria (Section 125) Plans
Cafeteria plan rules allow participants to make changes to their elections if the participant has a "change in status event." One such event is a change in "legal marital status." However, registering as domestic partners is not considered a change in legal marital status. Even a same-sex marriage is not a change in status event, again because of the federal law's restrictive definition of "marriage."
Other benefit plans (life insurance, dental, vision, etc.) should undergo a similar analysis. Failing to know and understand the tax consequences of benefit plan coverage in a rapidly evolving area of the law can have an adverse impact on both the employer and the employee.
In the latest of a series of cases interpreting the state's wrongful death law, the Oregon Court of Appeals held on Wednesday that a personal representative cannot pursue a wrongful death claim if the decedent had already recovered damages for personal injury based on the act or omission that underlies the wrongful death action. In Union Bank of California v. Copeland Lumber Yards, the court concluded that the language of the wrongful death statute bars a claim where the decedent previously recovered damages for the same act or omission.
On Wednesday the Oregon Court of Appeals held that employees may sue employers who fail to provide a paid rest period as required by state law. BOLI regulations mandate a ten-minute paid rest period for each four-hour segment worked. The court agreed with the class action plaintiffs' argument that employees are entitled to four hours' pay for every three hours and fifty minutes of work, and that for each rest period missed, employers owe employees an additional ten minutes' pay. See the court's opinion in Gafur v. Legacy Good Samaritan Hospital here.
This result is contrary to a 1999 ruling from Oregon's federal district court -- Talarico v. Hoffman Structures, Inc., 1999 U.S. Dist. LEXIS 20909 -- which held that, while a failure to provide paid breaks may result in administrative sanctions, it does not create a private right of action for lost wages.
In addition to wages for each missed break, an employee will presumably be entitled to penalty wages for failure to pay all wages due pursuant to ORS 653.055 and, if the employee's employment has ended, an additional final pay penalty under ORS 652.150. The Court of Appeals decision will undoubtedly result in a significant increase in class actions for missed break periods.
This week Congress may take the first steps to undo a recent U.S. Supreme Court decision that curtails employment discrimination claims. On May 29, the Supreme Court decided Ledbetter v. Goodyear Tire and Rubber Co., Inc., dismissing a claim for twenty years of sex discrimination manifested as discriminatory pay. A jury had awarded Ledbetter, a female employee who worked in a male-dominated workforce, $3,514,417 in damages, which the trial court later reduced to $360,000. The decision resulted in the dismissal of plaintiff’s Title VII claim because, the court said, she waited too long to file it.
A claim under Title VII must be filed within 180 days after the last discriminatory act occurs. The "act" may be a discrete event, such as a termination or demotion. Or it may consist of a series of events that are not individually actionable, but cumulatively violate the statute, such as harassment that becomes “severe” and thus, actionable, over time. The act underlying plaintiff’s claim was a history of discriminatory performance evaluations that resulted in lower pay raises. As the evaluations all occurred more than 180 days before she filed a claim with the EEOC, the majority of the court held that the claim was time barred. The court reasoned that to hold otherwise would allow a plaintiff to pursue a claim based on a decision that occurred twenty years ago, even if she knew the circumstances at the time.
Well, not exactly, according to Justice Ruth Bader Ginsberg. Writing for the four dissenters, Justice Ginsberg pointed out that employees like Ledbetter who are subject to discriminatory pay practices have no immediate cause to suspect discrimination. (In fact, according one report, Ledbetter learned of the discrimination when she was 60 years old and on the verge of retirement, when she received an anonymous letter stating her pay was significantly less than that of her male co-workers.) Many employers don’t share information about pay differentials, and pay disparities often occur in small increments over time, as they did here. Moreover, employers are not defenseless when employees raise stale claims. They can assert defenses such as waiver, estoppel, and equitable tolling. Reading her dissent from the bench, Justice Ginsberg urged Congress to “correct” the Court.
Congress may grant Justice Ginsberg’s request. Although it cannot revive Ledbetter’s claim, the House Education and Labor Committee is scheduled to hear testimony from Ledbetter today to consider legislation to overturn the Supreme Court’s decision.
Do you have to warn the UPS delivery person about your slippery front steps? Maybe so, according to the Oregon Court of Appeals in an opinion issued yesterday. In Johnson v. Short, the court held that a delivery driver who routinely delivers packages to a residence is a "business invitee" and not a "licensee." The possessor of the premises has a duty to use due care for the safety of his invitee, while he has less responsibility for the safety of a mere licensee. In the Johnson case, the court reversed summary judgment for the defendant and remanded the case for trial on, among other things, whether the delivery man realized just how slick the moss-covered steps were.