On Tuesday the U.S. Supreme Court addressed when a securites fraud claim accrues and the statute of limitations begins to run. The plaintiff investors in Merck & Co. v Reynolds alleged that Merck & Co. knowingly misrepresented the heart attack risks associated with Vioxx. Justice Breyer, writing for the majority, held that, due to delayed discovery of the claim, the two-year statute of limitations did not bar the investors from bringing a securities fraud action under Section 10(b) of the Securities Exchange Act.
Claims by private plaintiffs under Section 10(b) must be brought no later than the earlier of "two years after the discovery of the facts constituting the violation," or five years after the violation. 28 U.S.C. § 1658(b). The Court held that the two-year period begins to run when a plaintiff actually discovers “the facts constituting the violation,” or when a reasonably diligent plaintiff would have discovered such facts—whichever comes first. The court held that the limitations period does not begin to run at “inquiry notice,” or the point at which a reasonably diligent plaintiff would investigate the facts, because the point at which a plaintiff would begin investigating is not necessarily the point at which a plaintiff would discover “the facts constituting the violation.”
The Court rejected Merck’s argument that facts showing scienter—“a mental state embracing the intent to deceive, manipulate, or defraud”—are not among “the facts constituting the violation” for purposes of delayed accrual under § 1658(b). Noting that “the state of a man’s mind is as much a fact as the state of his digestion,” the Court held that the “‘fact’ of scienter ‘constitut[es]’ an important and necessary element of a § 10(b) ‘violation.’” The court held that it would frustrate the purpose of the discovery rule if the limitations period began to run before the plaintiff discovered any facts related to scienter. The court also held that facts tending to show a materially false or misleading statement were ordinarily insufficient to establish scienter; instead it is often necessary for plaintiffs to discover facts specifically related to a defendant’s state of mind.
Justice Scalia, joined by Justice Thomas, concurred in part and concurred in the judgment. Justice Scalia argued for an even more plaintiff-friendly result, stating that the statute of limitations should begin to run when a plaintiff actually discovers facts constituting the violation, rather than when a reasonably diligent plaintiff should have known such facts.
Today the U.S. Supreme Court held that the Federal Arbitration Act (FAA) does not require class arbitration unless the parties' arbitration agreement expressly provides for class arbitration.
In Stolt-Nielsen, S.A. v. AnimalFeeds Int'l Inc., AnimalFeeds claimed that Stolt-Nielsen violated the antitrust laws by charging supracompetitive prices. The parties' agreement provided for arbitration of all disputes arising from the contract. AnimalFeeds initiated an arbitration claim on behalf of a class of purchasers, and Stolt-Nielsen disputed that class arbitration was available under the contract. While the arbitration clause was silent on the issue of class arbitration, the arbitration panel determined that it was appropriate to proceed with a class arbitration, and the Second Circuit agreed.
The Supreme Court reversed, holding that, because the parties did not expressly agree to arbitration of claims by a class of claimants, class arbitration was not available. According to Justice Alito, writing for the majority, despite the FAA's policy favoring arbitration of disputes, "a party may not be compelled under the FAA to submit to class arbitration unless there is a contractual basis for concluding that the parties agreed to do so."
An en banc panel of the Ninth Circuit Court of Appeals today authorized a huge class-action lawsuit to proceed against Wal-Mart. At issue in Dukes v. Wal-Mart are claims that the company has a policy of discriminating against women in pay and promotions. The plaintiff class is estimated to number 1.5 million current and former employees.
The en banc panel split 6-5 in favor of certifying the class. Judge Michael Daly Hawkins, writing for the majority, states "the district court acted within its broad discretion in concluding that it would be better to handle some parts of this case as a class action instead of clogging the federal courts with innumerable individual suits litigating the same issues repeatedly." Pointing to the unwieldy size of the class and lack of evidence of a company-wide policy of discrimination, the dissent by Judge Sandra Ikuta states "No court has ever certified a class like this one, until now. And with good reason."
With summer fast approaching, you may be considering hiring students or others as unpaid interns. While students and displaced workers may be grateful for the opportunity to gain experience and willing to work without pay, most employers should resist the temptation to take advantage of the "free" labor. If your business derives a benefit from the work an intern performs, he or she will most likely qualify as an employee and must be paid at least minimum wage.
A recent article on OregonLive.com illustrates the point. The article recounts the stories of summer interns on whose behalf the Oregon Bureau of Labor and Industries (BOLI) pursued wage claims against the companies that the provided the internships. In all cases, the interns prevailed.
Although there is no bright-line test for determining when an internship does or does not qualify as employment, the Department of Labor and BOLI both rely on the following six factors, first announced by the U.S. Supreme Court in Walling v. Portland Terminal Co., 330 US 148 (1947):
All of the foregoing factors must be met for the person to qualify as an unpaid intern. For a more detailed explanation of the type of program that will qualify as an unpaid internship, see BOLI Technical Assistance FAQ on Interns and Trainees.
The Ninth Circuit Court of Appeals has a YouTube channel. So far it includes two videos, one about the court's history and the other about perfecting a civil appeal.
Given the recent controversy over broadcasting the "Prop 8" gay marriage trial, the channel probably won't be showing federal court trials any time soon.