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The Pennsylvania Supreme Court held on Oct. 27, 2015 that a nursing home that had required arbitration of disputes “in accordance with the National Arbitration Forum Code of Procedure” could not compel arbitration of claims of abuse and neglect. Wert v. Manorcare of Carlisle, Pa., LLC, No. 62 MAP 2014.

When plaintiff admitted her mother into defendant’s skilled nursing facility, she signed an agreement that all disputes be resolved by arbitration exclusively “in accordance with the National Arbitration Forum Code of Procedure.” Within six months, plaintiff’s mother died, allegedly due to abuse and neglect. Plaintiff filed suit and the nursing home filed preliminary objections, seeking to enforce the arbitration agreement. The trial court overruled the objections, finding the agreement unenforceable because NAF had entered into a consent decree in 2009 that barred it from administering arbitrations of consumer disputes. The court held that this provision was integral to the agreement and was therefore not severable from the remainder of the arbitration agreement. The Pennsylania Superior Court affirmed, and the Pennsylvania Supreme Court granted review.

The American Association for Justice filed an amicus curiae brief supporting plaintiff, authored by CCL Senior Counsel Jeffrey R. White. The brief emphasized that the nursing home was not simply asking the court for a substitute arbitrator, but for an alternative arbitral forum and administrator, which would require extensive rewriting of the parties’ agreement. Moreover, § 5 of the Federal Arbitration Act, which the nursing home heavily relied upon as authority for appointing a substitute arbitrator, does not authorize the court to appoint a substitute arbitral forum.

The Pennsylvania Supreme Court affirmed in a 3-2 decision. The court found the NAF designation integral and non-severable, “[d]oing otherwise would require this Court to rewrite the Agreement.” The court noted AAJ’s argument regarding the scope of § 5 of the FAA, but found it unnecessary to reach that issue. “Regardless of whether Section five may apply where there is a lapse in the administrator, by its own rules, the NAF must administer its code unless the parties agree to the contrary.” The court also held that plaintiff’s own testimony that she did not read the agreement was not relevant to whether the NAF designation was integral. “[P]remising the integrality of a contractual term on the subjective understanding of a far less sophisticated non-drafting party is ill-advised public policy that would further distort an already lopsided balance of power.”

In a case held in abeyance during the pendency of CCL’s successful Eleventh Circuit appeal on behalf of the City of Miami, Florida, the City of Miami Gardens filed an amended complaint, asserting that Wells Fargo Bank had violated the Federal Housing Act by steering minority borrowers to more expensive and riskier loan products than they qualified for, resulting in foreclosures of properties, the loss of tax revenues for the city, and additional expenses in remediating neighborhoods and properties in the areas of the city affected by foreclosures. In response, Wells Fargo made a motion to dismiss the amended complaint, arguing that the handful of loans identified as within the statute of limitations period had not yet created any damage to the city and, thus, did not qualify as being within the statute of limitations.  In the alternative, the Wells Fargo motion sought a more definite statement.

In a responsive brief filed by CCL October 26 on behalf of Miami Gardens, CCL argued that the FHA states that the limitations period does not begin to run as long as the impermissible conduct continues. Thus, any improper steering that continues into the limitations period satisfies the statute of limitations and allows prior loans to come within the limitations period for consideration by the court. In addition, the brief points out that the average length of time between a loan closing and foreclosure in these situations is greater than three years. As a result loans within the two-year statute of limitations period are unlikely to move into foreclosure. Besides, the brief points out, it is the misconduct and not the damage that is examined for statute-of-limitations purposes.  The brief was written by CCL’s Valerie Nannery and Robert S. Peck, Joel Liberson of Trial and Appellate Resources, and Lance Hartke and Sara Clasby Engel of Harke Clasby & Bushman.

CCL attorneys participated in the quarterly meetings of AAJ’s committees and Board of Governors in Washington, DC. During the Legal Affairs Committee meeting, discussions centered around developments on federal and state court rules and cases of interest pending in the Supreme Court of the United States. Participating in the meeting and providing background information to the committee members were CCL attorneys Valerie Nannery, Jeffrey White, and Robert Peck.

CCL President Robert S. Peck chaired the Fall Board of Overseers meeting of the RAND Institute for Civil Justice in Pentagon City, Virginia on October 22. The ICJ is a think tank that conducts empirical research of issues affecting the civil justice system. During the meeting, members of the board were treated to previews of some of that ongoing research. Former Mississippi Governor Haley Barbour spoke at the board diner that evening about his experiences in dealing with a disaster after Hurricane Katrina struck. Peck is serving an unprecedented third year as chair of the board.

CCL President Robert S. Peck described issues being litigated in courts around the country that affect civil litigation at the American Association for Justice’s State Summit, a gathering of state trial lawyer presidents and executive directors in Washington, D.C. on October 21. Peck reviewed some of the cases pending this term before the U.S. Supreme Court, including four cases in which CCL serves as counsel of record: two under the title of Wal-Mart v. Braun, as well as Ortiz v. United States and Johnson & Johnson v. Reckis. The Wal-Mart cases involve undercompensation of Pennsylvania workers for their paid rest breaks, in which Wal-Mart attacked the use of extrapolation for records the company deliberately stopped keeping to avoid liability. Ortiz is a challenge to government immunity for medical malpractice at a military hospital that resulted in brain damage to a newborn. The U.S. Court of Appeals for the Tenth Circuit, in contrast to decisions from other circuits, held the government immune, which also results in discrimination against mothers in the military, when the immunity would not apply if the military member was the father. Finally, in Reckis, Johnson & Johnson is arguing that a significant verdict for a young girl’s catastrophic injuries resulting from Children’s Motrin, which had not relevant warning at the time, is preempted.

Peck also described some of the challenges to damages caps the CCL is undertaking, including one now pending in the Oklahoma Supreme Court.

CCL was retained by the Abel Law Firm of Oklahoma City to assist in bringing an appeal challenging the constitutionality of Oklahoma’s recently enacted cap on noneconomic damages in all tort cases involving bodily injury.

In Beason v. IE Miller Services Inc., the jury awarded plaintiff James Todd Beason $14 million for the serious and permanent injuries, pain, and disfigurement he suffered when he was struck by part of a crane that collapsed while being negligently operated by an employee of the defendant. The jury awarded Mr. Beason’s wife $1 million for her separate damages caused by the defendant’s employee’s negligence. After the jury determined the damages, the trial court judge applied Oklahoma’s cap on noneconomic damages, 23 O.S. § 61.2(F), and reduced the jury’s verdict by more than $5 million.

After the court denied the Beasons’ motion to modify the judgment to conform to the evidence and the jury’s verdicts, CCL President Robert S. Peck and Senior Litigation Counsel Valerie M. Nannery prepared the Petition in Error and filed a motion asking the Oklahoma Supreme Court to retain the appeal rather than delegating the decision to Oklahoma’s Court of Civil Appeals. Although previous legislatures have enacted caps on damages, the Oklahoma Supreme Court has never specifically addressed whether caps on compensatory damages are constitutional. CCL urged the court to finally settle the matter and resolve whether the statute capping damages violates the state’s requirement for a general verdict, the constitutional guarantee to trial by jury, separation of powers, or the state’s equal protection or special legislation protections.

Plaintiffs filed the appeal on September 22, 2015, and the Oklahoma Supreme Court granted CCL’s motion to retain the appeal on October 6, 2015. The Oklahoma Attorney General has made an appearance in the case.

In a petition for certiorari filed today, CCL asked the U.S. Supreme Court to review a Tenth Circuit decision that dismissed claims made on behalf of a child who suffered a severe brain injury as a result of malpractice committed at a military hospital during her delivery. In doing so, the court relied upon the U.S. Supreme Court’s decision in Feres v. United States, 340 U.S. 135 (1950), which carved out an exception to the Federal Tort Claims Act for claims made by active-duty members of the military service that are incident to that service. The Tenth Circuit held that the newborn’s injuries were derivative of the active-duty mother’s and therefore foreclosed under Feres. In contrast, if active-duty parent of the injured child was an active-duty father, Feres would not have stood as an obstacle to seeking compensation through the courts. In addition, several federal circuit courts, notably the Fourth and Eleventh Circuits, treat the baby as a separate patient from the mother, enabling the child to present a claim. The result is that some babies, injured in identical fashion, have a cognizable claim and some do not, either because of what part of the country the delivery took place or because of the gender of the parent.

The petition, filed in Ortiz v. United States, asks the Supreme Court to resolve the split in the circuits and determine whether the differential treatment of children based on a parent’s gender comprises an unconstitutional form of gender discrimination.  CCL President Robert S. Peck serves as counsel of record in the case. He was joined on the petition by Laurie M. Higginbotham of Austin, TX, James E. Puga and Bruce Braley of Denver, CO, and Joseph F. Bennett of Colorado Springs, CO. A response to the petition from the U.S. Solicitor General is the next likely step in the case.

CCL President Robert S. Peck told invitees of the Congressional Civil Justice Caucus that the upcoming Supreme Court term has enormous potential to change class actions, but was more likely to find that the cases before it do not provide the vehicles for significant changes. Peck made the presentation October 9 in a House Judiciary Committee hearing room, with American Tort Reform Association General Counsel, Victor Schwartz, providing an alternative view.

Among the cases discussed were Tyson Foods v. Bouaphakeo, a case about compensating chicken processing plant workers in Iowa for the time it takes for them to “don and doff” protective clothing, as required by their contracts. In the case, the defendant has argued that the case is not susceptible for class-action treatment because a small percentage of the workers were not eligible for compensation and others took different amounts of time at the task. Peck said that these arguments ignore the rules and precedents that apply to employment law, which are likely to figure prominently in the upcoming oral argument, making it a poor vehicle for establishing a new class action precedent.

Another case discussed was Spokeo, Inc. v. Robins, a case that raises the question of whether Congress can create a cause of action for a statutory injury when there allegedly was no particular and concrete injury suffered. The case revolves around a claim that an online profile of the plaintiff by a company that publishes reports used by employers, which provided inaccurate information about him, including that he was employed and married with children, when he was not. Robins claimed the false information harmed him in seeking employment. He sued under the Fair Credit Reporting Act, which obligates those publishing covered reports like this one to take steps to ensure accuracy and creates a cause of action when the reports are inaccurate. The case is set to be argued November 2.

In a case involving a commercial dispute between an Indiana and German company, CCL President Robert S. Peck argued that the Indiana company’s victory in the first trial of the matter should be reinstated. Slurry Systems, Inc., which had been awarded an Army Corps of Engineers contract, to build a retaining wall in Illinois for the McCook Reservoir, had leased, with an option to own, an enormous cutter manufactured by Bauer, a German company. However, constant problems with the cutter caused the project to drag on. Moreover, even though the contract required a new cutter, the one delivered was more than two years old.

After a jury trial, Slurry won a verdict of $3 million in compensatory damages. However, the judge presiding over the case ordered a new trial on his own motion for two reasons: 1) the jury failed to specify an amount for an equitable adjustment that would have increased the amount of the verdict, and 2) the jury awarded “monstrously excessive” punitive award on a claim in which no damages were awarded. Peck argued that the trial judge had an obligation to harmonize the jury’s verdict with the evidence, or order a damages-only retrial. He added, the punitive damages should have merely been stricken. If the first trial did not count, Peck said, then the second trial was flawed because Bauer adopted a new legal theory, in violation of the rules governing new trials. Therefore, the second trial should not count either, making a third trial the only logical next step. The case is now under advisement.

On September 29, CCL filed an amicus brief for the American Association for Justice, once again asking the U.S. Supreme Court to dismiss the petition in a case involving the Article III standing requirements in federal class actions. Tyson Foods, Inc. v. Bouaphakeo, No. 14-1146.

Plaintiffs in this case are hourly workers at a Tyson pork processing facility in Iowa. Employees were paid from the time the first piece of work arrived at their workstation until the last piece was finished. They were also paid four additional minutes to compensate for time donning and doffing required protective or sanitary equipment or clothing. Plaintiffs brought a class action alleging that donning/doffing activities constituted compensable work under the Fair Labor Standards Act for which they were not fully compensated. Plaintiffs’ expert testified, based on observations of a sample of workers, that workers in two areas of the plant spent an average of 21 minutes and 18 minutes performing these activities. Another expert calculated the amount of overtime pay owed to the class if Tyson had properly credited the workers with donning/doffing time. The expert noted that 212 members of the class would not have been eligible for additional overtime, even if properly credited with donning/doffing time. The jury returned an aggregate verdict in favor of the class. The Eighth Circuit Court of Appeals affirmed.

The Supreme Court granted certiorari to review two questions, including whether a class action may be certified “when the class contains hundreds of members who were not injured.”

In an amicus brief prepared by CCL Senior Counsel Jeffrey R. White, AAJ submitted that this question is not properly presented in this case. The complaint alleged that all members of the class were undercompensated due to the pay system used by Tyson. The fact that the class subsequently limited the relief sought does not retroactively deprive the 212 ineligible workers of Article III standing. Moreover, the record reflects that plaintiffs’ expert removed those 212 workers from her calculations of the class damages; they did not contribute to the amount claimed by the class. Finally, Tyson lacks standing to challenge the allocation of an aggregate award among class members that will not affect the amount of Tyson’s liability. If the Court reaches the merits, AAJ argued, it should affirm the general rule followed by federal courts that allegations of concrete injury by the named plaintiff in a class action is sufficient to establish standing under Article III.