Northwest Business Litigation

Budget cuts force Oregon courts to close on Fridays

Starting March 13, Oregon's circuit courts, tax court, court of appeals, and supreme court will be closed on Fridays due to budget cuts.  The closure will continue until the state legislature allocates more funds.

See this report from The Oregonian.

Rehearing of California wage law case that may impact Northwest employers

The Ninth Circuit recently issued an order withdrawing its 2008 opinion in Sullivan v. Oracle Corp., which applied California wage laws to out-of-state employees doing limited work in California.  The court certified these three questions to the California Supreme Court:

First, does the California Labor Code apply to overtime work performed in California for a California-based employer by out-of-state plaintiffs in the circumstances of this case, such that overtime pay is required for work in excess of eight hours per day or in excess of forty hours per week?

Second, does [California's Unfair Competition Law] apply to the overtime work described in question one?

Third, does [California's Unfair Competition Law] apply to overtime work performed outside California for a California-based employer by out-of-state plaintiffs in the circumstances of this case if the employer failed to comply with the overtime provisions of the [federal Fair Labor Standard Act]?

Our original blog post on the panel opinion is here.

U.S. Supreme Court throws future tribal land acquisitions into doubt

Today, the U.S. Supreme Court issued a decision in Carcieri v. Salazar that might dramatically limit the ability of the United States to take land into trust for certain Indian tribes.  Trust status is important as it allows tax and other regulatory benefits to flow to tribes and their business partners.  Further, Indian gaming facilities must be located on trust land. 

 

The 6-3 decision narrowly interprets the phrase "now under Federal jurisdiction" in the Indian Reorganization Act, 25 USC 479, to mean that the Secretary of the Interior has authority to take land into trust for tribes that were "under Federal jurisdiction" as of 1934.  Only 258 Indian tribes were recognized by the United States in 1934, and approximately 300 tribes have been federally recognized since then.  The decision affects all post-1934 recognized tribes.  It is now unclear whether the United States can acquire new land for these tribes in trust and whether prior trust acquisitions were valid in the first place.     

 

The majority decision does not define "under Federal jurisdiction."  What does "under federal jurisdiction mean"?  Narrowly construed, "under Federal jusisdicition" might mean formal federal recognition, thereby eliminating the ability of many tribes to acquire new trust land.  Alternatively, it might mean something less formal, such as proof of some existing relationship or oversight by the federal government in 1934.  Supporting this alternative position, Justice Breyer's concurrence expressly references the Stillaguamish Tribe in Washington, and indicates that even though the Tribe was not recognized until 1976 "its reasons for recognition in 1976 included the fact that the Tribe had maintained treaty rights against the United States since 1855." 

 

Based on today's opinion, it would seem that for all future (or pending) trust acquisitions, it will be important for newly recognized tribes to prove up the indicia of "under Federal jurisdiction" in 1934.  This might be demonstrated through a recognized treaty right, as in the case of Stillaguamish. Otherwise, tribes and their business partners looking to acquire land in trust status must carefully review the tribe's federal recognition documents to see what is said about federal superintendence in 1934.  More recently recognized tribes might need to hire anthropologists to do additional research into how the tribe was viewed in 1934. 

 

More litigation is likely to follow.  A congressional "fix" might also be in the works.  Stay tuned. 

Stimulus Bill's COBRA subsidy creates new obligations for employers

The economic stimulus package signed into law by President Obama on February 17, 2009, amends the Consolidated Economic Budget Reconciliation Act (COBRA), and creates new and immediate obligations for employers. The new law provides a subsidy to employees of 65% of the applicable COBRA premium, leaving the employees responsible for only 35%.  Here's how it works:

• The program is mandatory for employers required to offer COBRA continuation health coverage, and also for employers obligated to provide COBRA-like continuation coverage under federal and state law (including, e.g., government employers and employers with fewer than 20 employees who must provide continuation coverage under state law).
• Eligible employees are those who are involuntarily terminated from employment and have a qualifying event between September 1, 2008 and December 31, 2009. Individuals whose employment terminated before February 17, 2009, have 60 days to enroll, even if they initially chose not to elect coverage. The 60-day election period runs from the date the individual receives the required special COBRA notice.
• Employers have to pay the 65% of the premiums being subsidized, but get to reduce payroll taxes in the same amount for everyone who opts into the program. If the applicable premiums exceed the payroll taxes, the employers will be reimbursed directly through a program established by the Department of the Treasury.
• Premium assistance is available for up to nine months. The subsidy terminates if the employee becomes eligible for new employer-sponsored health care coverage or Medicare. The availability of premium assistance does not extend the period of COBRA coverage for which the individual is otherwise eligible.
• Assistance is phased out for taxpayers with a gross income in excess of $125,000, up to a maximum of $145,000, at which point no premium assistance is available (limits are higher for those filing jointly).
• Employers must provide notice of the availability of premium assistance. The Department of Labor will be publishing model notices.
• The law is effective for premiums due as of March 1, 2009.
  

Covered employers must review terminations back to September 1, 2008, to determine whether the terminations were involuntary and a new eligibility notice is required.

Stimulus Bill provides opportunities in Indian Country

The American Recovery and Reinvestment Act of 2009, otherwise known as the the Stimulus Bill, provides tribal governments and Indian-owned businesses access to more than just the $2.5 billion in tribal-specific appropriations. Tribes and their business partners can take advantage of numerous grant and bond programs as well.

Tribes have been made eligible for a number of interesting grant programs, including Tribal Clean Water Grants and grant opportunities to extend broadband service through a program operated by the Department of Commerce. 

In addition, the Act provides an important expansion of tax-exempt bond authority for tribes.  Generally, tribes are limited to tax exempt financing for “essential government functions,” which has been narrowly interpreted by the IRS as a function that is customarily performed by a state or local unit of government with general taxing powers. The Act amends the Internal Revenue Code to allow tribes to issue “Tribal Economic Development Bonds", defined as a bond issued by a tribe whose interest would be exempt from taxation if issued by a state or local government.  The bonds cannot be used to finance any portion of a building in which Class II and Class III gaming is conducted, or any property used in the conduct of gaming; proceeds must be used to finance facilities located on the reservation; and must not exceed in the aggregate for all tribes $2 billion, which must be allocated among tribal governments in the manner deemed appropriate by the Secretaries of Treasury and Interior.  Despite these limitations, tribes should be able to take advantage of increased tax exempt financing for a wide variety of on-reservation economic development projects.  This will increase opportunities for businesses engaged in Indian Country.

Out-of-state lawyer gets a pass in federal court

A claim of unauthorized practice of law figured into a dispute over attorney fees resolved this week by the Ninth Circuit.  In a lawsuit for breach of a severance contract filed in federal court in California, plaintiffs sought to recover fees under a California statute.  Defendant argued that plaintiff couldn't recover fees incurred by an Oregon lawyer (the father of the plaintiff's California lawyer) who assisted on the case because that lawyer wasn't licensed in California and wasn't admitted pro hac vice to appear in the matter.  The district court agreed, holding that the out-of-state lawyer was not authorized to work on issues of California law for a California client pending in a California court, and thus was precluded from recovering fees.

On appeal, the Ninth Circuit avoided the thorny issue of unauthorized practice of law under California law (see the 1998 case of Birbrower, Montalbano, Condon & Frank, PC v. Superior Court), noting that admission rules and procedures for federal court are independent of those for state court.  Citing federal case law, Judge Milan D. Smith, Jr. stated that the Oregon lawyer's fees are recoverable because (1) he would readily have been admitted pro hac vice in the case had he applied, and, in any event, (2) his involvement had not risen to the level of an "appearance."  As to the second point, Judge Smith wrote "This court has permitted fee recovery for the work of paralegals, database managers, legal support, summer associates, and even attorneys who have yet to pass the bar."  A lawyer who does not "appear" in the case is like a litigation consultant, and his fees should be recoverable even if he is not admitted to practice before the court in which the case is pending.

Judge Pamela Ann Rymer wrote an extensive dissenting opinion, arguing that California law on unauthorized practice of law should guide the court and would lead to a different result.

See the opinion in Winterrowd v. American General Annuity Insurance Co. here.

Ninth Circuit orders rehearing of biggest-ever class action certification

The Ninth Circuit last week ordered en banc rehearing of the landmark class certification in Dukes v. Wal-Mart.  The order comes two years after a three-judge panel approved the largest class in history, consisting of 1.5 million current and former female employees of Wal-Mart.  The lead plaintiffs claim that Wal-Mart has discriminated against women in making promotions.  A 15-judge panel will now decide whether the district court properly certified the class.  See our earlier coverage of the case here.

Opportunities for Public Comment on OFLA Regs

BOLI will be accepting comments on the new federal Family Medical Leave Act (FMLA) regulations that went into effect on January 16, 2009, to determine whether to amend Oregon Family Leave Act (OFLA) regulations on points where they now differ from federal law.  Anyone interested in presenting comments in person may attend one of the following three Public Comment Forums:

1. Tuesday, February 24, 2009: Portland State Office Building, 800 NE Oregon Street, Room 1-B, Portland, OR 97232, from 4:00-6:00 p.m.
2. Thursday, Febuary 26, 2009:  Eugene City Council Chambers at 777 Pearl Street, Eugene, OR 97401, from 4:00-6:00 p.m.
3. Thursday, February 26, 2009:  Portland State Office Building, 800 NE Oregon Street, Room 1-B, Portland, OR 97232, from 4:00-6:00 p.m.

BOLI is also accepting written comments, which should be submitted to:  Amy Klare, Civil Rights Administrator, 800 NE Oregon Street #1045, Portland, OR 97232.  Written comments will be accepted until 5:00 p.m. on March 6, 2009.

A summary of the new FMLA regulations and points where they differ from OFLA is available here.   See our earlier post on the new FMLA regulations.

U.S. Supreme Court weighs in on beneficiary designations and ERISA plans

Divorce can be a painful event for retirement plans as well as for the parties involved.  A recent U.S. Supreme Court case illustrates some of the difficulties that Plan administrators face from strict statutory requirements and forgetful plan participants. 

William Kennedy participated in his employer's retirement plan.  Like most plans, it allowed Kennedy to designate a beneficiary who would receive his benefit upon his death.  As many participants do, Kennedy designated his then-spouse.  Several years later, they divorced, and Kennedy's spouse waived her right to the benefit in the divorce decree.  However, Kennedy did not revoke or amend his earlier beneficiary designation on file with the plan before he subsequently died.  The plan, relying on the unrevoked designation, paid the former spouse.  Kennedy's estate, citing the waiver in the divorce decree, filed suit claiming the estate was the correct beneficiary due to the waiver in the decree.

A unanimous Supreme Court in Kennedy v. Plan Administrator upheld the plan's action.  The Court framed the issue as whether the divorce decree waiver superceded the beneficiary designation on file with the plan.  The Court held that ERISA required the plan to operate in accordance with its terms, and those terms were explicit: the plan would pay the designated beneficiary.  The drafters of ERISA decided long ago that they did not want plan administrators to have to make inquiries into participants' intent or investigate outside documents or events.  Doing so would greatly complicate plan administration and increase its cost. 

The message to plan administrators is clear: make sure your plan has a clear beneficiary procedure in place that participants know and understand.  And for participants, make sure you tell the plan who you want to get your benefit by updating your designation form on file.