It’s Déjà vu All Over Again: Does a Mere Statutory Violation Without Any Actual Damage Confer Article III Standing?

by Robert B. Fitzpatrick

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In re Hulu Privacy Litigation, No. 3:11-cv-03764, 2013 U.S. Dist. LEXIS 179934 (N.D. Cal. Dec. 20, 2013) and Sterk v. Best Buy Stores, L.P., No. 11 C 1894, 2012 U.S. Dist. LEXIS 150872, 2012 WL 5197901 (N.D. Ill. Oct. 17, 2012)

I.                   The Issue

During its 2011-12 term, the Supreme Court considered whether a plaintiff had standing to sue under Article III where the plaintiff had alleged a violation of a statutory prohibition, the Real Estate Settlement Procedures Act (RESPA), but had not asserted that the plaintiff had incurred any actual damage.  See First Am. Fin. v. Edwards, 132 S. Ct. 2536, 183 L. Ed. 2d 611 (June 28, 2012).  Importantly, RESPA does not require that the plaintiff show actual injury in order to establish a prima facie case and be awarded damages.  In the face of such statutes, the dispute has arisen as to whether Article III of the Constitution places any limits on Congress’ ability to allow statutory private rights of action, even where the plaintiff suffered no actual injury.  In the First American case, The Ninth Circuit held that the mere statutory violation was an injury-in-fact, even though there was no actual damage. Edwards v. First Am. Corp., 610 F.3d 514, 515-16 (9th Cir. 2010).  After full briefing and oral argument, the Supreme Court, at the term’s end, dismissed the case on the grounds that certiorari had been improvidently granted. First Am. Fin., 132 S. Ct. 2536. 

Now, under another federal statute, the Video Privacy Protection Act (“VPPA”), 18 U.S.C. § 2710 et seq., this standing issue has arisen again.  The VPPA was enacted to prevent what it refers to as “wrongful disclosure” of records of rental or sale of video tapes, or of similar audio visual materials. 18 U.S.C. § 2710 et seq.  Congress passed the VPPA after Judge Robert Bork’s video rental history was published during his Supreme Court nomination.

The district courts appear to be in conflict on the issue of whether a violation of the VPPA can be sufficient to confer standing, or whether an actual injury must also be shown.  The most recent decision on this question, In re Hulu Privacy Litig., 2013 U.S. Dist. LEXIS 179934, 17 (N.D. Cal. Dec. 20, 2013), from a court within the Ninth Circuit, relying on Edwards v. First Am. Corp., finds standing despite the absence of actual damage.  The other, Sterk v. Best Buy Stores, L.P., No. 11 C 1894, 2012 U.S. Dist. LEXIS 150872, 2012 WL 5197901 (N.D. Ill. Oct. 17, 2012), instead concluded that the absence of actual damage defeats standing.

II.                The Sterk Case 

In Sterk, the Plaintiff was a customer of Best Buy, which sells, among other items, movies in DVD and other formats.  Best Buy maintains digital records detailing its customers’ movie purchase histories, and their billing and contact information. Sterk, 2012 U.S. Dist. LEXIS 150872 at *2.  The Plaintiff purchased movies from various Best Buy locations over the course of several years. Id. at *2-3.  Best Buy communicated its records regarding the plaintiff’s name, purchase history, and credit card information from one or more of Best Buy’s corporate subsidiaries, to the parent company, Best Buy Inc. Id. at *3.  The plaintiff claimed that this disclosure was a “wrongful disclosure” within the meaning of the VPPA. Id. at *1-3.  An issue was also raised as to how long the defendants had maintained the records in question, as the VPPA also covers how long such records should be stored. Id. at *9-10.

One major issue in the Sterk case was whether the communications, which were internal communications between two or more corporations within the Best Buy corporate umbrella, constituted a “disclosure” for the purposes of the VPPA. Id. at *8-9.  The court, in an opinion written by Judge John Darrah, ultimately concluded that the plaintiff had failed to adequately plead facts which would support a finding of a disclosure. Id. 

As to the retention of records issue, Judge Darrah concluded that the VPPA does not provide a private right of relief for damages under the record retention provision of the statute. Id. at *13.  While the Judge recognized that the plaintiff had also sought injunctive relief, the Judge did not reach that issue, as he found that the plaintiff had failed to plead an injury-in-fact, and that the plaintiff therefore lacked standing to support his retention claim. Id.

As to standing, Judge Darrah reasoned as follows:

While injury required by Article III may exist when created by statute, that rule only applies where Congress elevates ‘to the status of legally cognizable injuries concrete, de facto injuries that were previously inadequate in law.’ Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61, 112 S. Ct. 2130, 119 L. Ed. 2d 351 (1992)…

None of Plaintiff’s theories establishes an injury-in-fact for his disclosure or retention claims under the VPPA. The SCA and the VPPA require a plaintiff to be ‘aggrieved,’ meaning the individual has suffered an Article III injury-in-fact. See U.S.C. § 2707(a); 18 U.S.C. § 2710(c)(1); Kyles v. J.K. Guardian Sec. Services, Inc., 222 F.3d 289, 295 (7th Cir. 2000). Therefore, a plaintiff must plead an injury beyond a  statutory violation to meet the standing requirement of Article III. Plaintiff argues that a statutory violation is adequate to meet this requirement. However, while Congress is permitted to expand standing to the extent permitted under Article III, Congress cannot abrogate the basic standing requirement that an individual suffer an actual redressable injury-in-fact. Gladstone Realtors v. Village of Bellwood, 441 U.S. 91, 100, 99 S. Ct. 1601, 60 L. Ed. 2d 66 (1979).

Id. at *15-17.

III.             The Hulu Case

On December 20, 2013, Magistrate Judge Laurel Beeler of the U.S. District Court for the Northern District of California denied a defense motion for summary judgment, in a class action suit, brought under the VPPA, against the online video streaming service Hulu.  Magistrate Judge Beeler held that the VPPA defined “any aggrieved person” as a customer whose “personally identifiable information” had been disclosed, and that the VPPA did not require the customer to demonstrate any actual harm resulting from such a disclosure. 18 U.S.C. § 2710(b); In re Hulu Privacy Litig., 2013 U.S. Dist. LEXIS 179934, 17 (N.D. Cal. Dec. 20, 2013).

The case began in September of 2011, when a group of Hulu customers brought a suit alleging that the service violated several federal privacy statutes by tracking customers’ browsing history and sharing their viewing history with Facebook and other Internet companies. In June 2012, Magistrate Judge Beeler dismissed all but the claim under the VPPA.

The court then placed a hold on the VPPA claim, pending the Supreme Court’s ruling in First American Financial v. Edwards, on the issue of whether a statutory violation was sufficient to support a finding of standing, without a separate finding of an actual injury.  As noted above, the Supreme Court ultimately declined to issue a ruling in First American, and instead dismissed the case, finding that the Court had improvidently granted the cert. petition.

After the Supreme Court’s dismissal of First American, Magistrate Judge Beeler addressed other issues in the case. Hulu argued that it did not qualify as a video tape service provider under the VPPA because it did not sell or otherwise provide “video cassette tapes or similar audio visual materials” under the Act. The court looked to the dictionary and to legislative history and rejected Hulu’s argument, concluding that “Congress used ‘similar audio visual materials’ to ensure that VPPA’s protections would retain their force even as technologies evolve.” Similarly, the court rejected Hulu’s argument that the plaintiffs were not protected “subscribers” under the VPAA because they were not paid subscribers. The court reasoned that “if Congress wanted to limit the word ‘subscriber’ to ‘paid subscriber,’ it would have done so.” 2012 U.S. Dist. LEXIS 112916, 24 (N.D. Cal. Aug. 10, 2012).

Following the beginning stages of pretrial discovery and an October 2013 defense motion for summary judgment, Magistrate Judge Beeler then analyzed the standing issue in a December 20, 2013 opinion. In the motion for summary judgment, Hulu argued that an “aggrieved person” under the VPPA must be injured in some way.  Magistrate Judge Beeler noted that statutory analysis “begins with the plain language of the statute, and it ends there if the text is unambiguous.” At *15.   Magistrate Judge Beeler continued:

The plain language of the statute shows that Congress considered a consumer to be an ‘aggrieved person’ under the VPPA if a video tape service provider wrongfully discloses that consumer’s personally identifiable information. Id. § 2710(b). Subsection (b) refers to the ‘aggrieved  person’ in the singular and precedes it with a definite article. Thus, ‘the aggrieved person’ is the consumer whose information was disclosed. Subsection (b) does not refer to ‘an aggrieved person’ or ‘any person aggrieved.’ The consumer, therefore, is ‘aggrieved’ based solely on the disclosure of personally identifiable information to third parties and the video tape service provider is liable to that ‘aggrieved person’ for the relief in subsection (c)…

Nothing in subsection (c) (or any other part of the statute) requires an injury beyond a violation of subsection (b). Moreover, the practical import of the statute is that the words ‘aggrieved person’ in subsection (c) mean the same thing they do in subsection (b)(1): a consumer whose personally identifiable [information] is disclosed by the video provider in violation of the statute. Hulu provides no alternative reading of the plain language of the statute.

Id. at *16-18.

            In arguing that a mere statutory violation was insufficient to confer standing, Hulu pointed to the opinion issued in the Sterk case discussed above. Id. at *26.  In declining to follow Sterk, Magistrate Judge Beeler primarily pointed to the Ninth Circuit’s 2010 decision in the First American Financial case which, given the Supreme Court’s dismissal of the case, remained controlling precedent in the Ninth Circuit. Id. at *27-28. 

            Thus, one could argue that the Sterk and Hulu cases are in direct conflict with one another over the question of whether something more than a statutory violation is needed to demonstrate standing.  Of note, it appears that Magistrate Judge Beeler might not agree that the two cases directly conflict.  In arguing that the two cases are factually distinguishable, Magistrate Judge Beeler noted that in Sterk, the court found that the plaintiff had not adequately alleged a disclosure of the information in question, and that the plaintiff had therefore failed to allege a cognizable claim under the VPPA. In re Hulu Privacy Litig., 2013 U.S. Dist. LEXIS 179934 at *30-31.  It was in that context, Magistrate Judge Beeler reasoned, that the Sterk court had noted that the Plaintiff had also failed to allege any economic harm which was grounded in the facts. Id. at *30.  Thus, Magistrate Judge Beeler concluded, “Sterk does not support a conclusion that injury beyond disclosure is a prima facie element of a VPPA claim.” Id. at *31. 

            Thus, one cannot help but wonder whether Judge Darrah would have found standing had there been an adequately pled disclosure in Sterk.  Given Judge Darrah’s holding that “a plaintiff must plead an injury beyond a  statutory violation to meet the standing requirement of Article III”, one would think not.  But then again, whether the disclosure itself would have caused one or more cognizable harms which Judge Darrah would have found sufficient to confer standing, one can only conjecture.

IV.              Implications in the Employment Law and Other Contexts

            Courts have considered similar standing arguments in the context of employment statutes.  See, e.g., Kendall v. Employees Retirement Plan of Avon Products, 561 F.3d 112 (2d Cir. 2009) (holding that a retirement plan participant and purported class representative lacked constitutional standing to sue under ERISA, despite the allegation that the plan administrator had breached its fiduciary duty, in the absence of an alleged injury in fact distinct from the statutory violation).  The same can be said of many other categories of statutes.  See, e.g., Wilson v. Glenwood Intermountain Properties, Inc., 98 F.3d 590 (10th Cir. 1996) (the Fair Housing Act); Heard v. Bonneville Billing & Collections, Nos. 99-4092 & 99-4100, 2000 WL 825721 (10th Cir. June26, 2000) (The Fair Debt Collection Practices Act); Vermont Agency of Natural Res. v.United States ex rel. Stevens, 529 U.S. 765, 772 (2000) (the False Claims Act). See also Raines v. Byrd, 521 U.S. 811, 818 (1997) (members of Congress lacked standing to challenge constitutionality of legislation, despite having statutory authority to sue, because they failed to show a ‘personal injury’) (internal quotations and emphasis omitted).  So, it is clear that this dispute has potential consequences which reach far beyond the controversy in the Sterk and Hulu cases over the scope of who has standing under the VPPA in particular.

As the Supreme Court has yet to rule on Article III’s power to rein in Congress’ authority to allow private rights of action for those who have not suffered actual injury, cases like Sterk, Hulu, and the others cited above, will no doubt continue to arise. If the Supreme Court chooses to rein in Congress’ power in this area, it will face many obstacles in doing so, including where to draw the line on what constitutes “actual injury”. And, even if the Court requires an actual injury for every case, what constitutes an actual injury will undoubtedly continue to puzzle courts for years to come.

So, the next time you read a standing case dealing with the issues discussed above, you can declare, as Yogi Berra once did, that “It’s like déjà vu all over again!”.  These are issues which we are not likely to see completely resolved anytime soon.

Please be sure to visit our website at http://RobertBFitzpatrick.com

Dr. King's Birthday

We are closed Monday and will not be blogging Monday as we celebrate Dr. King's birthday.

My favorite quotation from Dr. King is: "The arc of the moral universe is long, but it bends toward justice." The quote was actually first uttered by Theodore Parker, an American Transcendentalist, referring then to the abolitionist movement.

Last October the world lost one its great voices, who was clearly inspired, in part, by Dr. King. I refer to the South African reggae singer Lucky Dube. One of my favorite lyrics of his are from his song "Different Colours / One People." One refrain goes as follows:

They were created in the image of God
And who are you to separate them
Bible says, he made man in his image
But it didn't say black or white
Look at me you see BLACK
I look at you I see WHITE
Now is the time to kick that away
And join me in my song


The Psychology of Race in America

I am not a big fan of Bill Moyers, but his interview last Friday evening, January 11th, with Shelby Steele regarding the racial psycho-dynamics of the Obama campaign was spot on. The transcript is available at http://www.pbs.org/moyers/journal/01112008/transcript2.html?print.


Supreme Court Update

Today's conference

The Court granted cert. in MetLife v. Glenn, 06-923; 461 F.3d, 660 (3rd Cir. 2006).

The Solicitor General had filed an invitation-brief (available at http://www.usdoj.gov/osg/briefs/2007/2pet/6invit/2006-0923.pet.ami.inv.pdf) in support of the petition for cert. in this case, which presents the recurring ERISA issue as to the standard of review that the trial court's should utilize in ERISA benefit cases when the plan administrator is the employer, and thus evaluates whether or not to pay claims out of its own pocket. The first question that the Solicitor recommended the Court grant cert. on is whether or not that constitutes a conflict of interest that must be considered in determining the standard of judicial review. The Solicitor also recommended to the Court that it order the parties to brief how the Courts should weigh such conflicts of interest in reviewing discretionary benefit determinations made by such a "dual-role administrator."

The courts have struggled with the delineation of a meaningful standard ever since Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989). As a commentator noted in the fall 2007 issue (vol. 37, no. 1) of The Brief, the publication of the Tort Trial & Insurance Practice Section of the ABA, "This sliding scale approach is hopelessly imprecise . . . " See Teresa S. Renaker, "State Regulation of Discretionary Clauses In Insured ERISA Plans," The Brief, Fall 2007, page 51. Ms. Renaker's fascinating article called my attention to developments occurring at the state regulatory and state legislative levels regarding discretionary clauses, like the one at issue in MetLife. The National Association of Insurance Commissioners and several states have moved to disallow discretionary clauses in certain insurance policies. On December 5, 2004, NAIC voted unanimously to adopt model legislation banning the use of discretionary clauses in disability insurance policies. This model legislation amended the NAIC's Model Act 42 of 2002, which banned discretionary clauses in health insurance policies, expanding it to reach disability policies as well. The article points out that the Federal District Courts are now grappling with the effect in those states that have by regulation banned discretionary clauses, on the standard of review in ERISA cases like MetLife. Some courts have found discretionary clauses invalid, and have applied de novo review. Other courts have continued to apply discretionary review. And, some courts have held that the states do not have the authority to regulate in the area of discretionary clauses.So, if you represent a client in a benefit determination case, in addition to keeping your eye on MetLife, you need to determine what, if any, action the applicable state insurance commissioner has taken in light of NAIC's model legislation.


The Court also granted cert. in Meacham v. Knolls Atomic Power Lab., 06-1505; 461 F.3d 134 (2d Cir. 2006).

The Solicitor General had filed an invite-brief with the Court on December 21, 2007 (available at http://www.scotusblog.com/wp/wp-content/uploads/2007/12/meachamcvsg.pdf) in Meacham v. Knolls Atomic Power Lab., No., recommending that the Court grant cert., limited to the issue of which party has the burden of persuasion in an ADEA disparate impact case to establish "reasonable factor other than age." The government's brief argues, in contrast to the Second Circuit's decision, that the burden should be upon the employer. The government's brief argues that the Court should not accept cert. on the second issue presented by the plaintiffs' petition which is whether an employer's practice of conferring broad, discretionary authority upon individual managers to decide which employees to lay off during a reduction in force constitutes a "reasonable factor other than age."If the Court accepts cert. in Meacham, this will be its second visit to the Supreme Court. When the Court issued its decision in Smith v. City of Jackson, 544 U.S. 228 (2005), holding that disparate impact claims are cognizable under the ADEA, the Court granted the petition for cert. in Meacham I (381 F.3d 61) and remanded it for reconsideration in light of Smith. 554 U.S. 957 (2005).On remand, the Second Circuit held that the employee had the burden of persuasion with respect to the "reasonableness" of the employer's proffered business justification under the ADEA disparate-impact framework. This holding was in agreement with the Tenth Circuit's opinion in Pippen v. Burlington Res. Oil & Gas Co., 440 F.3d 1186, 1200 (10th Cir. 2006). The Second Circuit also found that employment practices based on discretionary decisionmaking are generally immune from challenge under the ADEA, stating: "Any system that makes employment decisions in part on such subjective grounds as flexibility and critically may result in outcomes that disproportionately impact older workers; but at least to the extent that the decisions are made by managers who are in day-to-day supervisory relationships with their employees, such a system advances business objectives that will usually be reasonable."Judge Pooler dissented, holding that the RFOA creates an affirmative defense upon which the defendant bears the burden of persuasion.


The Court also granted cert. in Crawford v. Metro. Gov't of Nashville & Davidson County, 06-1595; 211 Fed. Appx. 373, 2006 U.S. App. LEXIS 28280 (6th Cir. 2006) (petition for cert. available at http://www.scotusblog.com/movabletype/archives/06-1595_pet.pdf).

The 6th Circuit held that the anti-retaliation provisions of Title VII were not violated by the employer’s allegedly retaliatory discharge of plaintiff who had cooperated in the employer’s internal investigation of a co-worker’s sexual harassment allegations against a supervisor, where there was no pending charge with the EEOC.


AT&T Corp. v. Hulteen, 07-543; 498 F.3d 1001 (9th Cir. 2006)

The Court had this case on for decision at conference today whether to grant cert., and, as best I can determine, took no action today one way or the other. The issue in this case is whether Title VII permits an employer, when setting retirement benefits, to discriminate between who took pregnancy disability leave before the Pregnancy Discrimination Act came into effect and other employees who took any other kind of temporary disability leave during that same period.


January 11th Conference

Taylor v. Progress Energy, Inc., 493 F.3d 454 (4th Cir. 2007), re-aff’g 415 F.3d 364 (4th Cir. 2005, vacated and remanded by 2006 U.S. App. LEXIS 15744 (4th Cir. June 14, 2006), petition for cert. filed on October 22, 2007, available at http://www.scotusblog.com/wp/wp-content/uploads/2007/10/progresspetitionappendix.pdf.

The Fourth Circuit, on rehearing and now with the benefit of the amicus brief from the Department of Labor, which disagreed with the Court’s interpretation of a DOL regulation prohibiting waivers of FMLA claims, nonetheless reaffirmed its earlier ruling. Judge Duncan dissented. The Fourth Circuit, disagreeing with the Fifth Circuit’s holding in Faris v. Williams WPCI, Inc., 332 F.3d 316 (5th Cir. 2003), held DOL regulation that prohibits waivers of FMLA claims absent DOL or court approval should be upheld. The Fifth Circuit had held that the regulation only barred the prospective waiver of substantive FMLA rights; whereas the Fourth Circuit held that the regulation applied to all waivers, both retrospective and prospective. In addition, the Fourth Circuit held that the regulation applies to all FMLA rights, both substantive and proscriptive, the latter preventing discrimination and retaliation.

At the Court's January 11th conference, the Court had requested that the Solicitor General file an invitation-brief. Now, this should get real interest. The Solicitor of Labor filled an amicus brief at the Fourth Circuit when the petition for rehearing was filed, and the panel rejected the Department's interpretation of the statute. The Supreme Court, in Auer and Coke, deferred to the Department's interpretation as expressed in Supreme Court briefs. In Auer, the Department's interpretation was first expressed in the Supreme Court brief, and the Court genuflected to it. The Fourth Circuit in Progress Energy, did not genuflect. Should be interesting.


Engquist Redux

When the Supreme Court took Engquist the other day (http://robertfitzpatrick.blogspot.com/2008/01/we-have-been-silent-for-few-days-as-we.html), it passed on a fascinating second issue that the cert. petition presented, that is whether a state "split recovery" punitive damages statute violates the Takings Clause of the Constitution.

The supreme courts in six states have upheld the statutes against federal takings challenges. Cheatham v. Pohle, 789 NE 2d 467, 474075 (Ind. 2003); Evans v. State, 56 P.3d 1046, 1058 (Alaska 2002); Mack Trucks, Inc. v. Conkle, 263 Ga 539, 436, SE 2d 635, 639 (1993); Gordon v. State, 608 So 2d. 800, 801-02 (Fla. 1992) (per curiam); Shepherd Components, Inc. v. Brice Petrides-Donohue & Associates, 473 NW 2d 612, 619 (Iowa 1991). But two state supreme courts have held the statutes violate the federal Takings Clause. Kirk v. Denver Publishing Co. 818 P 2d 262, 273 (Colo. 1991); Smith v. Price Development Co., 125 P 3d 945 (Utah 2005). One U.S. District Court has held that a split recovery statute violates the Excessive Fines Clause. McBride v. Gen. Motors, Corp., 737 F. Supp 1563, 1578 (MD Ga. 1990).


Customer Preference

There is a recent customer preference case, Simple v. Walgreen's Co., 2007 U.S. App. LEXIS 29729 (7th Cir., Nov. 14, 2007), where Walgreen's attempted to defend assignments to its stores based upon racial demographic data, attempting to justify the denial to an African American of a promotion to manage a store in Pontiac, Michigan because Pontiac was not ready to have a black manager. Judge Posner rejected this bit of nonsense out of hand.

Historically, the courts have been loathe to bless customer preference as a justification for employment practices based on a protected characteristic. See Diaz v. Pan Am. World Airways, 442 F.2d 385 (5th Cir. 1970); Gerdom v. Continental Airlines, Inc., 692 F.2d 602 (9th Cir. 1982); Fernandez v. Wynn Oil Co., 653 F.2d 1273 (9th Cir. 1981); 29 C.F.R. 1604.2(a)(1)(iii) (preferences of co-workers or customers are not a BFOQ).

Now, what's interesting is what is going on beneath the radar screen in the interaction between law firms and their clients. Increasingly, I hear reports of clients insisting that, if the law firm wants their business, the law firm must assign African Americans to work on the account. Why is this not as odious in the eyes of the law as Walgreen's saying that Pontiac is not ready for a black manager at its store there?


Background Checks

The Ninth Circuit in Nelson v. National Aeronautics and Space Administration, 2008 U.S. App. LEXIS 498 (9th Cir., Jan. 11, 2008), issued an opinion allowing scientists at NASA's Jet Propulsion Laboratory to continue working until the question of their privacy challenge to the requirement of a new domestic security rule that they submit to background checks was decided.


Black Holes

Some can't sleep nights for fear that an asteroid or meteorite will collide with Earth during the night. Well, for those of you who comfortably sleep despite asteroid phobia and meteorite phobia, let me share with you the latest scientific discovery which undoubtedly will lead to more insomnia. Professor Kelly Holley-Bockelmann of Vanderbilt University has just presented at the American Astronomical Society's annual meeting about renegade black holes roaming the Milky Way. She says that there are breakaway black holes, that have broken away from that giant black hole that sits at the center of our galaxy, and they are, as best she can discern, indiscriminately roaming the Milky Way. They are, of course, invisible, although they do emit Hawking radition. So, any second now, we could be sucked in to a black hole, and no longer exist. The title alone of an article from the Australian News is disquieting -- "Hundreds of hungry black holes may me lurking in our milky way galaxy, waiting to gooble unsuspecting planets and stars that cross their paths." Night, night.

The Iowa Caucus


A Simple Prayer

by

Robert B. Fitzpatrick

Mine eyes have seen . . .
Medgar, dead at the hand of hate,
Ross’ grocery store in Port Gibson, and the voices of hope,
Unita in Mayersville, Eddie Ford, Roosevelt and Pauline, and most especially, our Ms. Daisy, Ms. Minnie Ripley,

Mine eyes have seen . . .
Martin, dead at the hand of hate,
Tut gone forever, but Rosie at Head Start with the sparkling eyes of a child,
Then hope again, Bobby,

Mine eyes have seen . . .
Anna Walentynowicz in Gdansk, and,
The Philosopher King, Václav Havel,
And death yet again, Fr. Popieluszko, but hope alive at St. Stanislas Kostka,

Mine eyes have seen . . .
The smile, the erect bearing, and those wonderful shirts – after Robbin Island, and,
Lucky Dube voicing the hope,
And then death again this last fall as we killed our own, Lucky,

Mine eyes have seen . . .
And, my back straightened with pride this morning,
I thought I saw beyond the horizon,
Or, was it but a dream,

Protect your son, Oh Lord,
Work your will,
And let us see,
Whether the refrain is complete.


Is A Constructive Discharge Claim A Continuing Violation And If So, Who Cares?


In response to my post regarding the opinion in Mayers of the D.C. Court of Appeals,
there has been some discussion that, for example, if a former employee, who alleges that he/she was constructively discharged as a result of an accumulation of intolerable acts, on the 365th day after the resignation/constructive discharge, the former employee's complaint might be time barred if the last of the series of intolerable acts that precipitate the resignation occurred 366 or more days before the filing. Frankly, while that is intellectually interesting, I doubt if any Judge would give the time of day to such an argument. The culminating event, the resignation/constructive discharge, has to be an actionable event even though, in a sense, all of the wrongs that lead the employee to quit Suders-like preceded resignation and, in some cases, could be all outside the one year statute of limitations.

On a nearly silly tangent, I have to assume that Maryland, even after Hass, in a constructive discharge circumstance where the person announces their resignation on day X to be effective on X plus two weeks, the statute of limitations begins to run from the announcement date, not the effective date of the constructive termination.

Having said the above, the discussion regarding my initial post, has led me to revise my conclusion that whether or not the courts denominate constructive termination cases as akin to Morgan - cumulative wrong cases is indeed of significant value to Plaintiffs. Let me explain my thinking.

If constructive termination is viewed as a cumulative wrong, then the entire string of events that eventually "breaks the camel's back" and culminates in a resignation called a constructive termination, under Morgan, so long as there is no break in the chain, the entire chain/string of events is actionable and all of the wrongs committed during the chain are compensable, not just the events that occurred within the one year D.C. Human Rights Act statute of limitations. So, if it is death by a thousand cuts over more than a year, the events before the year before filing are not only evidence, under Morgan they are liability events.

Thus, the jury can consider all of the events no matter how far back in time the chain of events goes, in assessing the amount of the jury's award. So, while maybe a bit esoteric, conceiving of constructive termination as a cumulative wrong is helpful for closing argument and for shutting down arguments that the events prior to the one year period unduly swayed the jury and affected inappropriately the amount of their award.

Also, viewing constructive terminations as cumulative wrongs shuts down arguments by the defense that the events occurred within one year before the resignation in toto do not amount to sufficient intolerability to justify an employee, like the police woman in Suders, saying "enough is enough", and having her resignation viewed as a fit response to the intolerable acts.

Supreme Court Update

MetLife v. Glenn, No. 06-923, 461 F.3d 660 (6th Cir. 2006)

The Solicitor General recently filed an invitation-brief (available at http://www.usdoj.gov/osg/briefs/2007/2pet/6invit/2006-0923.pet.ami.inv.pdf) in support of the petition for cert. in this case, which presents the recurring ERISA issue as to the standard of review that the trial court's should utilize in ERISA benefit cases when the plan administrator is the employer, and thus evaluates whether or not to pay claims out of its own pocket. The first question that the Solicitor recommended the Court grant cert. on is whether or not that constitutes a conflict of interest that must be considered in determining the standard of judicial review. The Solicitor also recommended to the Court that it order the parties to brief how the Courts should weigh such conflicts of interest in reviewing discretionary benefit determinations made by such a "dual-role administrator."

The Fourth Circuit in Carolina Care Plan, Inc. v. McKenzie, 467 F.3d 383, 386-87 (4th Cir. 2006), cert. dismissed, Nos. 06-1182 & 06-1436 (July 30, 2007) held that a plan administrator that also pays plan benefits operates under a conflict of interest that must be taken into account on judicial review of a benefit determination. And, the 4th Circuit in Doe v. Group Hospitalization & Med. Servs., 3 F.3d 80, 87 (4th Cir. 1993) applied abuse-of-discretion review in such cases on a "sliding scale," whereby the plan administrator's decision is reviewed for reasonableness, and the particular degree of deference under Firestone to be afforded depends on the seriousness of the conflict of interest.

Employee Manuals - Disclaimers Of Contractual Intent

The D.C. Court of Appeals over the past decade has issued a series of decisions, finding that the particular language of the employee handbook and the language of the employer's disclaimer of contractual intent read together, raised a question for the jury as to whether or not the disclaimer effectively trumped any contract argument or not. See, e.g, Dantley v. Howard Univ., 801 A.2d 962 (D.C. 2002); Strass v. Kaiser Found. Health Plan of Mid-Atlantic, 744 A.2d 1000 (D.C. 2000); U.S. ex rel. Yesudian v. Howard Univ., 153 F.3d 731 (D.C. Cir. 1998); and Sisco v. GSA Nat'l Capital Fed. Credit Union, 689 A.2d 53 (D.C. 1997).

Over the holidays, I tripped over a 2006 opinion by Judge Lamberth, which draws a brighter line as to when this is a jury issue and when the employer gets summary judgment on this issue. See Youngblood v. Vistronix, Inc., 2006 U.S. Dist. LEXIS 51460 (D.D.C., July 27, 2006).

In Youngblood, the manual used permissive language, that is, repeatedly the word "may". For example, the manual in the disciplinary portion stated that the "employee may be notified" "Vistronix may take disciplinary steps" and "Vistronix may terminate the employee". Judge Lamberth held that such permissive language in conjunction with a disclaimer which stated as follows: "These guidelines do not constitute a contract or promise. Any individual employee can be terminated, at any time, with or without cause and without notice." Additionally, the employer had the employee Youngblood sign a receipt that affirmed his status as an at-will employee and that disclaimed any implied contract. Judge Lamberth contrasted this with Strass, where the handbook used mandatory language, that is, the word "shell".

Then, Judge Lamberth drew the bright line, saying that in Youngblood, there was "no logical incongruity between Vistronix's disclaimer and the language contained elsewhere in the handbook, or in the parties' bargain." In contrast, the disclaimer in Strass is "rationally at odds with some aspect of the parties' bargain, [and] the ambiguity as to the parties' intention raises a question of fact for a jury."

I commend Judge Lamberth's opinion as it seems to harmonize these cases that some of us have read too liberally as suggesting a jury question when there is not one.

Paid Sick and Safe Days Act of 2007

My thanks to Karen Minatelli of District of Columbia Employment Justice Center for being able to provide me with the revised version of this proposed District of Columbia legislation. On the D.C. City Council's website, you can find the original version of the bill, but not the revised version that was voted on by committee this past December.

The legislation provides that an employer of six or more employees shall provide for each employee not less than one hour of paid leave for every 26 hours worked, up to a maximum of 10 days within this minimum standard, per year.

An employer of less than 6 employees shall provide not less than one hour of paid leave for every 52 hours worked, up to a maximum of five days within this minimum standard, per year.

Paid leave so accrued may be used by the employee for an absence resulting for, among other reasons, an absence if the employee or the employee's family is a victim of stalking, domestic violence or sexual violence, provided the paid leave is directly related to social or legal services pertaining to the stalking, domestic violence or social violence. The legislation then lists several covered instances including time to relocate and time to take legal action.

Enforcement action is to be taken pursuant to the terms of the District of Columbia's Family and Medical Leave Act of 1990.

San Francisco, in a 2006 initiative supported by 61% of the electorate requires that employers of more than 10 employees give 9 days sick leave and employers of less provide 5 days of paid leave.

International Employment Law - Corporate Social Responsibility

Over the holidays I read a relatively new book on the toy industry. For those who are interested in where the overwhelming percentage of toys in the U.S. come from, and most particularly, the circumstances under which they are manufactured, I highly recommend chapter 8 entitled "Santa's Sweatshop" of Eric Clark's The Real Toy Story: Inside The Ruthless Battle For America's Youngest Consumers (2007 Free Press).

If you are interested in this issue and want to continue to monitor developments, I recommend China Labor Watch/National Labor Committee (http://www.chinalaborwatch.org/).

It will be interesting to see what effect China's new Employment Contract Law, which went into effect January 1st, will have on the practices described in Mr. Clark's book. For more on the new law, see http://www.chinalawblog.com/2007/11/chinas_new_labor_law_its_a_hug.html.

Federal Legislative Update

Senator Kohl (D - WI) has introduced last year S.1577, the Patient Safety and Abuse Prevention Act. The legislation would require long-term care facilities and providers to conduct criminal history background checks before hiring a direct patient access employee. This requirement would not go into effect until January 1, 2011. It provides immunity from liability for such employers in denying employment if the employer reasonably and in good faith relies upon credible information about such applicant provided by a criminal history background check. The legislation prohibits the hiring of an applicant who has disqualifying information disclosed in the background check. A quick read does not readily indicate whether compliance with the proposed legislation's procedures would trump a negligent hiring or negligent retention claim.

Proposed Legislation Prohibiting Discrimination Against Transgendered Persons

For those who have been following this issue, there is a provocative op-ed in last Friday's Wall Street Journal at W13 authored by the Journal's deputy Taste Editor, Naomi Schaefer Riley entitled Crossing Over (available at http://www.opinionjournal.com/taste/?id=110011050).

E-Discovery

So, you are headed to a Federal Civil Rule 26(f) "meet and confer" conference regarding e-discovery. How do you prepare and what should be discussed? Craig Ball has an excellent piece in Law Technology News entitled "Ball In Your Court: Ask The Right Questions", which can be found at http://www.lawtechnews.com/r5/survey.asp (subscription only). Craig has 50 questions to consider asking.


Off-label False Claims Act Cases

In the last few days, I have made several mentions of off-label FCA cases. There is an interesting off-label Rule 9(b) decision from Judge Kennelly in U.S. Ex Rel. Kennedy v. Aventis Pharmaceuticals, Inc., 2007 WL 2681701 (N.D. Ill., Sept. 13, 2007) and a subsequent denial of a motion for reconsideration found at 2007 WL 3145010 (N.D. Ill., Oct. 23, 2007). In essence, the Judge ruled that an off-label pharmaceutical case survives Rule 9(b) scrutiny even though the complaint did not detail an individual claim that was actually submitted to the government. And, in denying Aventis' motion for reconsideration, the Judge also declined a request for an immediate interlocutory appeal, distinguishing U.S. Ex Rel. Clausen v. Laboratory Corp. of America, Inc., 290 F.3d 1301 (11th Cir. 2002) and U.S. Ex Rel. Russell v. Epic Health Care Management Group, 193 F.3d 304 (5th Cir. 1999).

Disparate Impact

The other day, we wrote about the Supreme Court's request of the Solicitor General for briefing on the testing issues in N.Y. City Board of Education v. Gulino. See http://robertfitzpatrick.blogspot.com/2007/12/board-of-education-of-new-york-city.html. The EEOC has issued a fact sheet on testing which can be found at http://www.eeoc.gov/policy/docs/factemployment_procedures.html, indicating EEOC's continuing interest in challenging tests that have a disparate impact on the basis of race.

While I am not yet prepared to fully dissect the opinion, there is potentially a very important decision from the Sixth Circuit regarding disparate impact and the stringency of the business-necessity defense. The Sixth Circuit's case arises not in an employment context, but in a Fair Housing Act case. Nonetheless, its analysis, and the debate among the judges may well carry over into continuing debates regarding disparate impact and the business-necessity doctrine in employment cases. See Graoch v. Louisville-Jefferson County Metro Human Relations Commission, 2007 U.S. App. LEXIS 26883 (6th Cir., Nov. 21, 2007).

Section 8 Voucher Program

The Graoch case involved the Section 8 voucher program, which is a voluntary program through which the federal government provides rent subsidies to eligible low-income families who rent from participating landlords. While at a later date, I will discuss Graoch's analysis of the business-necessity defense, Graoch is interesting also because it is the second case this month involving the Section 8 program. In Graoch, a landlord, in essence, has been prohibited from withdrawing from a so-called voluntary federal program. In a case before the Maryland Court of Appeals, the landlord was required to participate in the Section 8 program on the ground that a refusal to participate would constitute "source of income" discrimination under the Montgomery County, Maryland anti-discrimination law, MCC, Ch. 27, §§ 27-1 through 27-63. See Montgomery County v. Glenmont Hills Assoc., 2007 Md. LEXIS 719 (Md. 2007).

Ad Damnum Clause

Last week, we summarized the holding in Hoang v. Hewitt Avenue Associates, LLC (see http://robertfitzpatrick.blogspot.com/2007/12/there-is-lots-going-on-at-end-of-week.html). As promised, a few thoughts regarding the implications of this decision. At first blush, one sympathizes with the litigant whose judgment of $1.89 million is reduced to a mere $100,000 because the ad damnum clause in the original complaint sought damages "in excess of $100,000." But, sympathy begins to erode when one sees that the victorious plaintiff never once sought to amend the ad damnum clause to advise the defendant that the plaintiff sought not a mere $100,000, but far, far more. The simple best practice tip to be taken away from this Maryland case is that one should timely amend the ad damnum clause. The Court of Appeals seems to indicate that timely amendments that do not blindside the defense ought to be routinely granted.

Layoffs and ERISA Section 510 Claims

Recently, the Supreme Court denied cert. in Eichom v. AT&T Corp., 484 F.3d 644 (3d 2007). See also the prior opinion in Eichom I of the Third Circuit at 248 F.3d 131 (3d 2001).

As pointed out by guest blogger Colleen Medill in the Workplace Prof blog, "Eichom is symbolic of a new genre of Section 510 claims where the claim of interference is not made by a lone individual who allegedly was targeted for retaliation, but rather stems from a corporation restructuring where employee benefits (most notably, their costs) are a factor in how the reorganization is structured." So, with the possibility of recession looming on the horizon, and the inevitable increase in layoffs, plaintiff and defense lawyers both need to be mindful, as always, of age discrimination claims under both federal and state law, WARN Act claims, challenges to releases under OWBPA, and now this new genre of claim - - a Section 510 ERISA claim.

Mind-reading To Prove Racial Bias

The American Psychological Association (I note using federal grant money from the National Institute of Mental Health) has issued a report entitled "Functional Magnetic Resonance Imaging: A New Research Tool" in which it states at the outset: "A brain scanning technology called functional magnetic resonance imaging (fMRI) isn't quite a mind-reader, but it comes close." The article goes on to opine that the results of fMRI may be able to demonstrate racial prejudice. The report states that: "Even though all of the participants [in research performed by a psychologist] said they weren't prejudiced, their brains told a different story."

Having decades ago fought the good fight over the use of the so-called lie detector in the workplace, one is saddened to see an organization like the APA suggesting that a brain scan might reveal prejudice. With this report in hand, let me count the days before a plaintiff's attorney argues to the court that the alleged discriminating official should have a fMRI administered in a racial prejudice case. Such nonsense can only make those who pine for the good ol' days of the STASI and the gulag happy. Many, in the wake of the pendulum swinging too far to prohibit conduct as sex harassment, have joked about the "sex police". Now, will the race robocops attach scans to our brains to ferret out those who need to be sent to reeducation camps. Garbage like this from the APA belongs one place only - - the trash can. And, NIMH, or at least the taxpayers, should be aghast that our scarce resources are being wasted on garbage like this.

Attention Deficit Disorder

Attention Deficit Disorder, many times called Attention Deficit Hyperactivity Disorder, has been the subject of much litigation under the ADA, both in the employment and educational contexts. Recently, Judge Oliver of the Northern District of Ohio in Braud v. Cuyahoga Valley Career Center, 2007 U.S. U.S. Dist. LEXIS 72123 (N.D. Ohio, Sept. 27, 2007), held that ADHD is not a disability within the meaning of the Americans with Disabilities Act, finding that ADHD did not substantially limit him in any major life activity. In doing so, Judge Oliver opined that the courts "have viewed with skepticism the claims of plaintiffs that have been diagnosed with ADHD who claim to be disabled." See the opinions of Judge Lamberth in Steere v. The George Washington University, et al., 2005 U.S. Dist. LEXIS 4313 (D.D.C., Mar. 22, 2005) and Steere v. The George Washington University School of Medicine and Health Sciences, 2006 U.S. Dist. LEXIS 46671 (D.D.C., July 12, 2006).

Retaliation - Protected Activity

For employers, it is often times difficult to draw the line between what constitutes "protected activity" and what is simply unacceptable bellyaching that can be the basis for termination. Recently, the Sixth Circuit addressed this recurring issue in Fox v. Eagle Distributing Co., 2007 U.S. App. LEXIS 28887 (6th Cir., Dec. 14, 2007). The employee in Fox had filed a charge of discrimination with EEOC, which is clearly protected activity. Thereafter, he repeatedly told co-workers and customers that his employer was out to get him and that he was going to sue the company for millions. In his complaints to customers, he never claimed that his employer was discriminating against him. When the company was informed of what he had been saying to customers, he was fired for a "poor attitude". Not surprisingly, Fox contended that his termination was retaliatory. The Sixth Circuit held that he had not engaged in protected activity because he had not complained to customers that he was a victim of discrimination by his employer.

Clearly, Eagle Distributing Co. is the courageous exception to the rule. Ask yourself - - if you were asked to advise the employer in these circumstances where an EEOC charge has already been filed, and the employee is complaining to customers, would you recommend that your client terminate, and run the risk of the inevitable retaliation claim. Tip of the hat to Eagle Distributing Co.