Displaying 6 category results for April 2010.x

U.S. Supreme Court favors plaintiffs on securities fraud statute of limitations

By Heidee Stoller
April 29, 2010

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. 

U.S. Supreme Court: FAA does not mandate class arbitration

By Lori Irish Bauman
April 27, 2010

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."

Ninth Circuit approves massive employment discrimination class action against Wal-Mart

By Lori Irish Bauman
April 26, 2010

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."

See our coverage of the 2007 opinion by a three-judge Ninth Circuit panel approving the class here, and the 2009 order for rehearing en banc here

If you are thinking about hiring unpaid interns, think again

By Stacey Mark
April 23, 2010

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):

  1. The training, even though it includes actual operation of the facilities of the employer, is similar to that which would be given in a vocational school;
  2. The training is for the benefit of the trainees or students;
  3. The trainees or students do not displce regular employees, but work under their close supervision;
  4. The employer that provides the training derives no immediate benefit from the activities of the trainees or students; and on occasion its operation may actually be impeded;
  5. The trainees or students are not necessarily entitled to a job at the conclusion of the training period; and
  6. The employer and the trainees or students understand that the trainees or students are not entitled to wages for the time spent in training.

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

Watching the Ninth Circuit on YouTube?

By Lori Irish Bauman
April 22, 2010

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.

Oregon Supreme Court won't protect medical marijuana users in the workplace

By Heidee Stoller
April 16, 2010
In a divided opinion, the Oregon Supreme Court Wednesday cited federal preemption principles to hold that state employment discrimination laws do not require an employer to accommodate an employee's use of medical marijuana.  Justice Kistler wrote the majority opinion in Emerald Steel Fabricators, Inc. v. BOLI.  Justice Walter filed a dissent, joined by Justice Durham.
Emerald Steel terminated an employee for using marijuana, even though the employee was authorized to do so under the Oregon Medical Marijuana Act.  The employee filed a complaint with BOLI alleging that the employer had discriminated against him by failing to make a reasonable accommodation for his disability as required by ORS 659A.112.  The employer responded that, under ORS 659A.124, it was not required to accommodate an employee who is "engaging in the illegal use of drugs."  Following appeal, the Supreme Court held that the use of medical marijuana was an illegal use of drugs, as defined by ORS 659A.122, because even if such use was authorized under Oregon law, it was prohibited by the federal Controlled Substances Act. 
The court further held that neither of the exclusions in the statutory definition of "illegal use of drugs" supports the employee.  The first exclusion, for drug use authorized under state law, doesn't apply because the Controlled Substances Act preempts the section of the Oregon Medical Marijuana Act that authorizes the use of medical marijuana.  The second exclusion, for drug use "under the supervision of a licensed health care professional," doesn't apply because the Controlled Substances Act does not authorize use of marijuana under the supervision of a health care professional. The court held that the employee's use of marijuana was therefore illegal under ORS 659A.124, and the employer was not barred from terminating his employment.
The court noted that its preemption holding applies only to the section of the Oregon Medical Marijuana Act that authorizes the use of medical marijuana.  It did not hold that the Controlled Substances Act preempts the provisions of the Oregon Medical Marijuana Act that exempt from state criminal liability the possession, manufacture, or distribution of medical marijuana.