|North Florida Chapter News and Information|
|Chapter President's Letter|
|By Blake Gibson, Managing Division Counsel and Vice President, Black Knight Financial Services|
Dear ACC North Florida Members:
I find it hard to believe that the first quarter of the year is already coming to an end. We have had a great start to the year with an excellent CLE from Holland & Knight on cybersecurity and data privacy, and our Chapter hosted our first Women’s Roundtable event at Moxie Kitchen + Cocktails. Our next two events are going to be great: our annual family event hosted by McGuireWoods during a Jacksonville Suns baseball game (April 21), and an event on in-house innovation presented by a panel of out-of-town in-house counsel and hosted by Nelson Mullins (April 28). You will find a complete listing of our upcoming events in this newsletter and on our Chapter Website. Also, we will be emailing our members soon about the launch of the topic/industry/group-specific Roundtable events that we announced in our last newsletter.
As I also mentioned in our last quarterly newsletter, the North Florida Chapter recently formed a Community Outreach Committee to provide our members with pro bono and community engagement opportunities. I am also pleased to report that we have officially commenced the Community Outreach Committee. The Wounded Warrior Project legal department graciously hosted the event at their office, where about 30 local in-house attorneys brainstormed on how our Chapter might best engage and support pro bono and other community service opportunities around North Florida. A veteran who was wounded in Iraq defending our country’s freedom spoke to our group at the end of our meeting. The veteran had a very moving story and charge to our group to take time for things that are important. It truly galvanized those present to further action within our community.
After much discussion and many great ideas, we landed on the following four areas as our primary areas of focus:
(1) Traditional Pro Bono (such as wills and estate planning Saturdays, access to justice especially for small entities, and collaboration with local nonprofits);
(2) Community Outreach and Service (non-legal service events hosted by the Chapter such as serving meals at the Sulzbacher Center, Habitat for Humanity, and partnering with local firms in their charitable outreaches);
(3) Legal Education (teaching legal or constitutional seminars for high school students, partnering with law school students to allow for internships, etc.); and
(4) Guardian Ad Litem (partnering with local Guardian Ad Litem programs and initiatives by connecting our litigation members with local needs).
In order to achieve our goals, we are going to focus on one of the above four categories each quarter. While that doesn’t preclude us from being involved with multiple events in a quarter, it does ensure that we will cover all areas at least once annually.
For Q1 2016, we focused on the Legal Education component and a group of our ACC members helped judge and encourage a group of local high school students at an oratory competition hosted by the Rotary Club of South Jacksonville. As we finalize our other events, our Community Outreach Committee will send out emails notifying our members of upcoming opportunities. Thank you all for your support and involvement here. We are really excited at the number of members who came to the kick-off event, for those who have offered great ideas for getting engaged in the community, and for those who have already signed up to host and staff initiatives. If you want to join this committee and assist from a leadership and planning perspective, please let me know. We would love to have you join.
We look forward to seeing you at an event in 2016!
President, ACC North Florida Chapter
Managing Division Counsel & Vice President
Black Knight Financial Services
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|Upcoming Events & Past Events Recap|
|By Rodolfo Rivera, ACC North Florida Board Member|
1) ACC Mid Year Meeting will be held April 10-12, 2016 in New York, NY. This is a new one-and-a-half day conference, offering intensive education for senior in-house counsel on three tracks: Contracting Skills & Strategies, Corporate Governance & Board Service Best Practices and Financial Industry Compliance & Data Management. Register for the Mid-Year Meeting
2) Jacksonville Suns Game, April 21, 2016. Family Fun Night sponsored by McGuire Woods. Additional details to come. Sponsored by McGuire Woods. More info ...
3) Legal Service Management Workshop, April 26-27, 2016 at the Hyatt Regency in Minneapolis, MN. Two days of hands-on training in implementing value-based fees and key management techniques to improve control and efficiency, plus take-home tools and resources, and opportunities to network with others committed to driving value. More info.
4) Nelson & Mullins CLE & Happy Hour, April 28, 2016. Save the Date! More details to come! More info ...
5) Save the date! CLE sponsored by Marks Gray, August 30, 2016. Location to be announced. More details to come! More info ...
6) Networking Social - Save the date! September 16, 2016. Sponsored by Marks Gray. More info ...
7) Annual Ethics CLE and ACC NFL Chapter Meeting, October 6, 2016. Sponsored by McGuire Woods. More info ...
8) The ACC Annual Meeting in 2016 will be held in San Francisco Oct 16-19. The call for programs is now open. 2016 ACC Annual Meeting Home Page
9) SAVE THE DATE: Holiday Party and CLE, December 6, 2016, sponsored by Jackson Lewis. More info ...
Please be sure to check our Chapter page for other upcoming events by clicking here.
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|FAQ: FY2017 H-1B Preparation - Staying Ahead of the Game|
|By: Giselle Carson, Esq. (Marks Gray, P.A.)|
With the upcoming H-1B filing season fast approaching, it’s time to start planning accordingly.
The demand for cap-subject H-1Bs is again expected to be high in 2017. Therefore, it is imperative that employers, employees, and their immigration counsel start petition preparations early. Establishing job descriptions, salary, O*Net codes, DOL registration, posting required notices, and credential verification are only a few of the details that must be considered during preparation.
What is the H-1B visa?
The H-1B visa classification is designed for foreign workers who will be employed in a professional occupation that requires at least a bachelor's degree or its equivalent and specialized knowledge.
How many H-1B visas are available?
There is an annual limit of 85,000 cap-subject H-1B visas available which include 65,000 visas for foreign nationals holding a Bachelor’s degree or its equivalent (minus 6,800 carved out for Chile and Singapore H-1Bs) and 20,000 for those holding U.S. advanced degrees such as Master’s. This is what is known as the H-1B visa cap which is congressionally mandated. Not all H-1B visas are subject to this annual cap.
Who is not subject to this cap?
Cap-exempt petitions can be filed including for those current H-1B holders who need an extension, a change of employer or amendments to the terms of the employment (such as part time to full time or other material job change). Also, exempt are petitions filed by institutions of higher education, related or affiliated non-profit entities, non-profit research organizations and governmental research organization.
When can be file for cap-subject H-1B visas?
USCIS’ fiscal year (FY) runs from Oct 1st to September 30th. H-1B petitions can only be filed within six months from the employment start date. Thus, the filing period for FY 2017 begins April 1, 2016. USCIS typically accepts H-1B cap-subject petitions for the first five business days starting April 1st. Because of the very short filing period and the considerable work that needs to occur before filing, it is very important to start early to prepare a properly completed H-1B.
Will there be a lottery for H-1B visas in 2016?
Considering the history of an H-1B lottery each year for the past three years, the restrictions in other visa categories like the L-1s and the strong economic outlook; it is most likely that there will be a lottery. The fact that currently certain H-4 workers can apply to obtain an employment authorization document might lessen last year’s demand slightly. In 2015, 233,000 new cap-subject H-1B petitions were filed during the first week of April including 50,000 from U.S. advanced degree holders. In 2014, 172,500 petitions were filed.
How does the lottery work?
USCIS conducts an electronic random selection (lottery) of the 20,000 advanced-degree petitions. Unselected petitions from the advanced-degree lottery are added to the electronic random selection process for the 65,000 general H-1B visas. The selected petitions undergo a first screening to eliminate petitions that do not comply with the filing requirements. About two months after the lottery is completed, USCIS begins returning the unselected petitions along with the filing fees.
What happens if my petition is selected?
About two to three weeks after the completion of the lottery, USCIS will begin issuing receipt notices for the selected petitions. Those petitions filed using premium processing service will be processed first and receive the first notices.
The receipt number has a 13-digit alphanumeric receipt number, such as EAC-17-010-34567. The three letters indicate the filing center (EAC for Eastern Adjudication Center located in Vermont and WAC for Western Adjudication Center located in California). The next two digits are the filing year. You can use this number to track the processing of the petition.
What is premium processing service?
Premium processing provides expedited handling for certain petitions for an additional $1,225 fee. It allows you to you to know the status of your petition within 15 calendar days from USCIS’ acceptance of your filing. Traditional processing can take between 5 and 6 months.
Who should apply for these visas?
- Foreign students in the US in F-1 status getting ready or having completed their degree. Often these students are in F-1/OPT or CPT at the time of the H-1B visa filing.
- Professional outside the U.S. seeking to come and work in the U.S.
- Foreign nationals in the U.S. in other valid status, such as H-4, L-1, TN (Mexican and Canadian citizens), E-3 (Australian citizens), H-4 (H-1B dependents), E-1/E-2 (investors) and P-1 (athletes).
What are the filing fees?
Filing fees vary, and will depend on various factors, such as size of the petitioning organization, and the number of employees in H-1B status. Typical fees include:
- Base filing fee: $325
- Anti-fraud fee: $500
- Education and training fee: $750 (25 or less employees) or $1,500 (26 or more employees)
Who is responsible for paying the H-1B related fees?
Employers are. The regulations provide that employers may not require an H-1B employee to pay for H-1B costs considered “employer’s business expense” which are attorney fees and other costs connected to the H-1B filing and program functions.
Can a person self-petition for an H-1B?
Typically, no. The filing must show a valid employer-employee relationship.
What is the validity period of an H-1B?
H-1Bs are valid for 3 years. Additional, extensions may be approved for an additional 3 years. Once an H-1B professional has been counted towards the H-1B cap, he or she can obtain H-1B extensions and change employers without regard to the cap.
H-1B professionals who are at certain stages of the permanent residence process can file to receive post six years extensions.
When can the employee begin working under the new H-1B?
Upon acceptance and approval of the H-1B petition, employees can start on October 1, 2016, the start of FY2017.
How do students in OPT status transition to an H-1B?
Many F-1 students obtain Optional Practical Training (OPT) upon graduation and are working for their petitioning employers at the time of the H-1B filing. If they have current employment authorization at the time of the filing, that authorization is automatically extended from April 1st until October 1st using USCIS’ “cap-gap” rule.
Students working for E-verify participating employers, and with certain degrees in a STEM (Science, Technology, Engineering or Mathematics) field may be able to apply for an OPT extension of up to 17 months. Please note that upcoming regulations affecting such extensions may be pending.
What are some common H-1B visa alternatives?
Employers who have missed the H-1B cap filing period, or whose petitions weren’t selected during the lottery must wait until 2017 to file again. However, few alternatives remain, such as:
- O-1 – available to individuals with extraordinary abilities
- TN - available to nationals of Canada and Mexico and limited to certain professional occupations
- E-3 – available to Australian nationals
- H1-B1 – available to professional from Chile and Singapore
- L-1 - available to intra-company transferees
- E-1/E-2 - available to investors
Click here to open flow chart
Giselle Carson, Esq. is a Shareholder at Marks Gray, P.A. in Jacksonville, Florida, where she leads the U.S. and Global Immigration law practice. She is the current President of The Jacksonville Bar Association. A Martindale-Hubbell AV® Preeminent™ rated attorney, Ms. Carson represents domestic and multi-national employers and individuals. She is a published author and regularly presents on a variety of employment and business immigration topics. Her articles have appeared in The Florida Bar Journal, Immigration Law Today, The Jacksonville Business Journal, and The Florida Times Union. She can be reached at GCarson@marksgray.com.
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|Three Ways that Early Claim Investigation Can Decrease Litigation Costs|
|By Jenifer S. Worley, Esq. (Saalfield Shad, P.A.)|
The drive to reduce litigation costs is an ongoing discourse between corporate clients and retained counsel. Corporate defendants historically have followed a reactive or “wait and see” approach, assigning retained counsel once litigation is initiated by a Plaintiff, and allowing Plaintiffs’ attorneys to lead the course of litigation. However, Florida is a litigation charged society, with one of the highest rates of civil claims filed per year.(i) Initiating measures at the corporate level requiring early and thorough investigation of incidents that could result in eventual litigation can significantly reduce both litigation costs and prevent a Plaintiff’s lawyer to incur “added value” to a meritless claim. Companies who are subject to frequent litigation, such as those operating retail establishments, should take the position that litigation is foreseeable every time an accident occurs, and establish an early claim investigation process that immediately gathers information necessary for future litigation, protects information that must be preserved, and allows a company to evaluate and prioritize claims which should be resolved or litigated soon after the incident has occurred. Introduction of this approach can reduce future litigation costs in three significant areas:
ONE: Gathering Information Relevant to Potential Future Litigation Early Reduces Discovery Costs Associated of Potential Future Litigation
Data collected by the National Center for State Courts (NCSC) published in 2013 revealed that after trial, discovery is the second most time-intensive stage of litigation, encompassing between one-fifth and one-quarter of total attorney hours.(ii) Creating a corporate policy requiring early accident investigations can reduce investigation by retained counsel once suit is filed, which in Florida could be up to four years after the incident itself.
A corporate policy requiring early investigations should include at a minimum an incident report prepared by an employee with knowledge of the incident who can memorialize the facts of the incident as well as identify potential witnesses. Where litigation is foreseeable, this report will be protected from disclosure in future litigation.(iii) In Florida, this privilege extends to internal investigation reports for information gathered in anticipation of litigation by corporate non-attorney employees. This policy encourages open and frank communication by employees of relevant information regarding accidents.(iv)
Also critical to an investigation are the names of eyewitnesses and corporate employees with knowledge of an incident. It is imperative that as many witnesses as possible be identified and their contact information obtained and preserved. If a case proceeds to trial, it is the testimony of eyewitnesses, and particularly those that are not employed by your corporation, that will be given the most credibility. However, the recollections of corporate employees should also be memorialized. It is preferable that written or recorded statements be obtained of any employees involved in an incident that foreseeably could give rise to litigation, as a future recollection of the event could very well be unreliable.
Finally, taking photographs of an area is important to confirm the location and the condition of the area at the time the accident occurred. The photographs should be taken as soon as possible after an incident occurs. The investigation file should document who took the photographs, as well as the date and time they were taken. Though may seem obvious, preserving the photographs and other investigative materials is as important as gathering the information in the first place.
TWO: Early Preservation of Relevant Information Prevents “Added Value” to Claims
Identifying as soon as possible any electronic documents that may be relevant to future impending litigation can reduce litigation costs by preventing future adverse effects of failing to preserve the evidence. Once the information has been retained, it must be adequately preserved, as a failure to retain and preserve records can result in an adverse inference against the party that discarded or destroyed the evidence. Further, any and all materials created as part of an investigation should be preserved and maintained by the company in a format to prevent loss or destruction.
Florida courts may impose sanctions, including striking pleadings, against a party that intentionally lost, misplaced, or destroyed evidence, and a jury could infer under such a circumstance that the evidence would have contained indications of liability.(v) If the evidence was negligently destroyed, a rebuttable presumption of liability may arise.(vi)
Courts have recently seemed more willing to allow sanctions or an adverse inference, where evidence has been destroyed or lost by a party, even if the evidence was not necessary to Plaintiff’s burden of proof. The Florida Supreme Court recently held even where there is no legal duty to preserve evidence and no specific policy requiring email communication be preserved, finding an adverse inference against the party was warranted where the party should have reasonably foreseen litigation would ensue.(vii)
The imposition of sanctions for loss or destruction of evidence can give value to a meritless claim, or add value to a claim that was defensible or could be mitigated by other evidence. Particularly if your company has real time surveillance in an area where an incident occurred, assume you will receive a request for some point of the surveillance and immediately preserve any footage. It is recommended that as soon as a company has notice a claim has occurred that was captured on video, the video of the incident be preserved to include at least one hour before and the event. Having surveillance and losing it the video is as harmful to a corporation as not preserving it in the first place, and sanctions can be imposed in both scenarios.
Typically a “preservation letter” will be sent by a claimant’s counsel immediately after the attorney has been retained. However, even if the surveillance has not yet been requested via a preservation letter from an opposing attorney, the best practice is to immediately identify surveillance and other relevant electronic materials and maintain it in a place that would protect it from loss or destruction. Arguably, once an incident report is prepared in anticipation of litigation, a defendant can be found on notice that a claim may ensue, and a better practice is to preserve and protect any real time surveillance which may depict the incident.
THREE: Early Investigation of Claims Allows a Company to Evaluate and Analyze Information and Communicate More Effectively With Retained Counsel
Early work by a corporation in thoroughly investigating a claim can drive strategy for future handling and more effective communication with retained counsel. Armed with a thorough understanding of the favorable and negative relevant facts, claims can be more effectively evaluated for early settlement if appropriate. If a claim is targeted for litigation, the possible outcomes can be more accurately determined. Further, a prior understanding of the potential evidence that could be presented should the case proceed to trial encourages better communication with retained counsel as to the anticipated outcome of the litigation.
Many companies have in place an excellent investigation procedure, and for those, continuous educating for employees is important to emphasize the importance of early and thorough investigation of incident. For companies that do not have an investigation procedure in place, a policy should be created to identify, gather, and preserve information regarding an accident as soon as notice is received that an incident has occurred. Early work performing investigations can drive strategy for eventual handling of a claim and reduce costs incurred by retained counsel as litigation progresses. Finally, if litigation is pursued, a retained defense attorney who is handed a complete and thorough investigation of an incident can move from a reactionary role to one that directs the course of the litigation, and is better prepared to successfully accomplish the goals of its corporate client.
(i) In 2013 Florida had 768,943 reported civil state court claims, or 3,933 per 100,000 population. www.courtstatistics.org. Court Statistics Project, published 2013 data.
(ii) Court Statistics Project, Estimating the Cost of Civil Litigation, www.courtstatistics.org.
(iii) Marshalls of MA, Inc. v. Minsal, 932 So.2d 444, 448 (Fla. 3rd DCA 2006).
(iv) Millard Mall Services, Inc. v. Bolda, 155 So.3d 1272 (Fla. 4th DCA 2015).
(v) League of Women Voters of Florida v. Detzner, 172 So.3d 363, 391 (Fla. 2015) (quoting Martino v. Wal-Mart Stores, Inc., 908 So.2d 342, 346 (Fla. 2005)).
(vi) Osmulski v. Oldsmar Fine Wine, Inc., 93 So.3d 389 (Fla. 2nd DCA 2012).
(vii) League of Women Voters of Florida, 172 So.3d at 391.
Jenifer Worley, is a partner with Saalfield Shad, P.A. Ms. Worley has 20 years of experience in all aspects of litigation representing hospital systems in medical malpractice matters, and retail and hospitality businesses in premises liability matters. She holds a distinguished AV rating by Martindale-Hubbell. Ms. Worley is admitted to practice in Florida, Alabama and Georgia. She is also admitted to the U.S. District Court Middle District of Florida, U. S. District Court Northern District of Alabama, U. S. Court of Appeals, Eleventh Circuit and U. S. District Court Southern District of Georgia. Ms. Worley can be reached at Jenifer.Worley@saalfieldlaw.com.
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|Lost ESI – What Does New FRCP 37 Mean For You?|
|By Leslie A. Wickes, Esq. (Adams and Reese LLP)|
The law governing the discovery of electronically stored information (“ESI”) continues to evolve. New amendments to the Federal Rules of Civil Procedure apply to all proceedings commenced after December 1, 2015, and to pending proceedings “insofar as just and practicable.” Rule 37 governs the sanctions for failing to respond to discovery requests. As to ESI, Rule 37(e) previously provided that “[a]bsent exceptional circumstances, a court may not impose sanctions under these rules on a party for failing to provide electronically stored information lost as a result of the routine, good-faith operation of an electronic information system.” Under this prior version of Rule 37, court opinions applied significantly different standards for imposing sanctions or curative measures on parties who fail to preserve ESI, which according to the Rule’s drafters, caused litigants to “expend excessive effort and money on preservation in order to avoid the risk of severe sanctions if a court finds they did not do enough.” The new Rule 37(e) is intended to bring more uniformity and predictability to the issue of sanctions, specifying certain measures a court may employ if ESI is lost and the findings necessary to justify those measures. The revised Rule 37(e) provides:
(e) Failure to Preserve Electronically Stored Information. If electronically stored information that should have been preserved in the anticipation or conduct of litigation is lost because a party failed to take reasonable steps to preserve it, and it cannot be restored or replaced through additional discovery, the court:
(1) upon finding prejudice to another party from loss of the information, may order measures no greater than necessary to cure the prejudice; or
(2) only upon finding that the party acted with the intent to deprive another party of the information’s use in the litigation may;
(A) presume that the lost information was unfavorable to the party;
(B) instruct the jury that it may or must presume the information was unfavorable to the party; or
(C) dismiss the action or enter a default judgment.
While this new version of the rule does not set forth an express duty to preserve ESI, it does implicitly acknowledge the general common law duty to take reasonable steps to preserve information as soon as a party knows or reasonably should know about the actual or prospective litigation to which the information is relevant. The duty to impose a litigation hold has to be analyzed on a case-by-case basis. Generally, the duty to preserve is triggered once a party is on notice that it will become involved in litigation or takes steps to commence litigation. However, a triggering event can easily occur long before suit is filed. Courts have found that pre-litigation discussions, demands and agreements may trigger a litigation hold. Retaining counsel or experts may likewise constitute a trigger. In some instances, a litigation hold is triggered as a result of an accident or event. In other instances, a litigation hold may arise or expand after litigation is commenced. The comments to Rule 37(e) now make clear that courts should consider not only when a party was on notice but also the scope of the notice itself. A triggering event may provide limited information such that the “scope of information that should be preserved may remain uncertain.” The Rule’s comments further counsel that “[i]t is important not to be blindsided to this reality by hindsight arising from familiarity with an action as it is actually filed.”
If a court finds that relevant ESI was lost, Rule 37(e) now dictates a multi-step analysis to determine whether and to what extent sanctions are appropriate:
1. Did the party fail to take reasonable steps to preserve the ESI? Even if ESI is lost, no sanctions are appropriate if the party took reasonable steps to preserve the ESI. As under the new rule, the routine, good-faith operation of an electronic information system is a relevant factor, but the definition of “reasonable steps” is intended to vary depending on the circumstances. Particularly, the preservation efforts should be considered in proportion to the available resources given the particular information at issue.
2. If the party failed to take reasonable steps to preserve the ESI, can the ESI be restored or replaced? Even if the information is lost and reasonable steps were not taken, no sanctions are appropriate if the information can be replaced or restored through additional discovery. Any costs associated with restoring or replacing the information must be considered in proportion to the importance of the information in the litigation. A party should not be forced, for example, to restore or replace information that is duplicative or of minimal relevance.
3. If the ESI cannot be restored or replaced, did the party intend to deprive the other party of use of the ESI in the litigation? If the lost ESI cannot be restored or replaced, new Rule 37(e) permits the court to impose severe sanctions if the party who lost the information intended to deprive another party of use of the information in the litigation. The rule permits the court to dismiss the action, enter a default judgment, presume or instruct the jury it may presume that the lost information is unfavorable to the party who lost it. Upon a finding of intent to deprive, the court may impose sanctions even if no party was prejudiced as a result of the lost information. However, contrary to caselaw applying the previous version of the rule, the sanctions of dismissal or adverse inference instructions may be imposed only if there is a finding of intent to deprive and only if lesser measures are not sufficient.
4. If there was no intent to deprive, was there prejudice? If the lost ESI cannot be restored or replaced and there was no intent to deprive, then sanctions may be imposed only if a party has been prejudiced. Even then, the sanctions must be “no greater than necessary to cure the prejudice” and may not include the sanctions of dismissal or adverse-interest instructions. Case law instructs that lesser sanctions may include financial penalties, attorneys’ fees and adverse evidentiary rulings. The rule does not place the burden to prove prejudice on either party, instead leaving the issue to the Court’s discretion.
The revisions to Rule 37(e) are intended to recognize that preservation of ESI differs depending on its volume, complexity, cost and what is at stake. Perfection is neither possible nor expected. Federal courts addressing lost ESI must impose sanctions in accordance with the limitations of new Rule 37(e) and may no longer rely upon their “inherent authority” or on state law to determine what sanctions or curative measures are appropriate. While the new rule still leaves much for interpretation, in-house counsel should take comfort in the adoption of this more uniform standard that encourages reasonable measures to address lost ESI and limits the availability of harsh punishments.
March 9, 2016
Leslie A. Wickes serves as Special Counsel and Partner-in-Charge of the Jacksonville Office at Adams and Reese LLP. Her practice focuses on business litigation, particularly disputes related to insurance claims, coverage, reinsurance and agencies/administrators.
Adams and Reese is a multidisciplinary law firm with nearly 300 attorneys and advisors strategically located in 16 offices across 15 markets throughout the southern United States and Washington, D.C. The American Lawyer includes Adams and Reese on its list of the nation’s top revenue-producing law firms – the AmLaw 200.
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|Corporate Convictions and the Yates Memo on Its Half-Year Anniversary|
|By: Nathan A. Adams, IV (Holland & Knight LLP)|
Deputy Attorney General Sally Quillian Yates announced a new U.S. Department of Justice (DOJ) policy, now known as the "Yates Memo," on Sept. 9, 2015, setting forth "six key steps" designed to hold individuals accountable for illegal corporate conduct.(2) Those critical of the DOJ for the relative few white-collar criminal prosecutions accompanying large settlements insisted that the memo was long overdue, whereas others discredited it as a DOJ attempt to coerce waiver of the corporate attorney-client privilege and various constitutional rights such as that against self-incrimination. On the half-year anniversary, the Yates memo has inspired few convictions, but the delay may be primarily due to the pace of criminal investigation itself. There are signs that the Yates Memo is beginning to take effect.
The biggest DOJ settlement so far this year did not involve a conviction: the $3.2 billion settlement with Morgan Stanley in February. But Morgan Stanley advised that it had reached an agreement in principle with federal prosecutors as early as Feb. 2015.(3) The Oct. 29, 2015, indictment of the former president of pharmaceuticals firm Warner-Chilcott PLC in connection with a $125 million False Claims Act (FCA) settlement may be more exemplary of what is to come, (4) along with a string of settlements excluding any release for individuals.(5) The government charged W. Carl Reichel with conspiring to pay kickbacks to physicians, a felony punishable by five years in prison and a $250,000 fine. The DOJ recently said that it also has "a lot" of Foreign Corrupt Practices Act" (FCPA) cases in the pipeline.(6)
The "six key steps" of the Yates Memo, designed to enable the DOJ to "most effectively pursue the individuals responsible for corporate wrongs," are these:
- In order to qualify for any cooperation credit, corporations must provide to the Department all relevant facts relating to the individuals involved in corporate misconduct;
- Criminal and civil corporate investigations should focus on individuals from the inception of the investigation;
- Criminal and civil attorneys handling corporate investigations should be in routine communication with one another;
- Absent extraordinary circumstances or approved departmental policy, the Department will not release culpable individuals from civil or criminal liability when resolving a matter with a corporation;
- Department attorneys should not resolve matters with a corporation without a clear plan to resolve related individual cases, and should memorialize any declinations as to individuals in such cases; and
- Civil attorneys should consistently focus on individuals as well as the company and evaluate whether to bring suit against an individual based on considerations beyond that individual's ability to pay.
The first "key step" of the Yates Memo has received the most attention. In the aftermath of the Enron scandal, the DOJ issued the Thompson Memo, which authorized federal prosecutors to indict companies that refused to waive their attorney-client privilege at the government's request. With the McNulty Memo, the government backed off this position from 2006 to mid-2015 by affording cooperation credit when companies merely furnished nonprivileged factual information regarding potentially culpable personnel.(7) The Yates Memo once again pits a company's interests against those of its employees. It may make companies state actors when in cooperation with prosecutors and in furtherance of the companies' pursuit of cooperation credit, they coerce employees to waive their Fifth Amendment rights to cooperate in investigations by threatening their jobs.(8) In these circumstances, uncounseled statements may be criminally inadmissible.(9) The earlier that prosecutors participate in corporate internal investigations, the less Upjohn warnings are enough to put employees on notice of the threats that they face.
The third "key step" of the Yates Memo is another reason you can expect employees to be less cooperative in investigations because they are more likely to be held accountable in some fashion, whether civilly or criminally. The Yates Memo suggests we will see more parallel investigations; most are likely to occur in connection with FCA claims. In September 2014, Assistant Attorney General Leslie R. Caldwell announced that "all new qui tam complaints" would be "shared by the Civil Division with the Criminal Division as soon as the cases are filed."(10) There are some protections. First, civil investigations may not lawfully be conducted as a sham to collect evidence for a criminal investigation.(11) Criminal prosecutors may not ordinarily provide evidence gathered during a grand jury investigation to their civil counterparts, (12) but they can share evidence obtained through other means such as by search warrant.(13) Second, civil investigators do not have a duty to disclose the pendency of a parallel investigation, but it is a due process violation if government agents affirmatively mislead or deceive witnesses into believing an investigation is exclusively civil when it is parallel.(14)
One thing is certain: the Yates Memo signals the DOJ's renewed commitment to prosecute corporate executives in the very sectors that are the backbone of the North Florida Chapter of the ACC: financial, healthcare and transportation. The best defense for companies remains a robust ethics and compliance program designed to deter, identify and remediate violations of laws and regulations, together with equally strong employee training and reporting avenues. The program must also be sufficiently resourced. In November 2015, the DOJ announced its first-ever full-time compliance expert, Hui Chen, whose job is to "drill down" and measure the effectiveness of corporate compliance programs to distinguish shams.(15) Relatedly, management must respond promptly and decisively to issues escalated through the compliance program.
After the Yates Memo, thorough internal investigations are more important than ever. The DOJ has announced that it will require certification from companies that they have fully disclosed all information about individuals involved in wrongdoing before finalizing a settlement agreement.(16) DOJ spokesman Peter Carr said, "Companies cannot just disclose facts relating to general corporate misconduct and withhold facts about the individuals involved."(17) The certification requirement is evolving, but is likely to create renewed friction with the attorney-client privilege, even as it creates another avenue for the government to unwind final settlements.
For companies already in litigation with the government, the Yates Memo requires counsel to pay close attention to how to treat employees, including whether to retain separate counsel for them. Attorneys must watch for signs of parallel proceedings and evaluate how a resolution in one arena of an actual or potential parallel proceeding may affect the other. Counsel must likewise weigh an individual's Fifth Amendment right not to incriminate himself against the potential for a court-ordered "negative inference" jury instruction in a civil case for refusing to answer questions.
(1) Nathan A. Adams, IV is a Partner in the Tallahassee Office of Holland & Knight LLP. He holds a Ph.D. and M.A. from the University of Florida and J.D. from the University of Texas School of Law.
(2) Memo from Sally Quillian Yates to U.S. Dep't of Justice attorneys (Sept. 9, 2015) http://www.nytimes.com/interactive/2015/09/09/us/politics/document-justice-dept-memo-on-corporate-wrongdoing.html.
(3) Justin Baer, Morgan Stanley to Pay $2.6 Billion to Settle Mortgage Cases, WALL ST. J. (Feb. 25, 2015).
(4) Dep't of Justice News Release, Warner Chilcott Agrees to Plead Guilty to Health Care Fraud Scheme and Pay $125 Million (Oct. 29, 2015) https://www.justice.gov/usao-ma/pr/warner-chilcott-agrees-plead-guilty-health-care-fraud-scheme-and-pay-125-million
(5) William F. Johnson, Analyzing Early Returns on the Yates Memo, N.Y.L.J. (Mar. 3, 2016).
(6) Ben DiPietro, DOJ's Caldwell: Plenty of FCPA Cases in Pipeline, WALL ST. J. (Feb. 23, 2016).
(7) Ashby Jones, Thompson Memo Out, McNulty Memo In, WALL ST. J. (Dec. 12, 2006).
(8) See United States v. Stein, 440 F. Supp. 2d 315, 330-33 (S.D. N.Y. 2006) (accountants' inculpatory proffers regarding possible accounting fraud of employer are "attributable" to government, as required before Fifth Amendment rights of statement makers would be violated, where government commands or significantly encourages entities to make the specific action alleged to violate Fifth Amendment, as well as where government is "entwined" in management or control of specific conduct at issue).
(9) Id. (suppressing accountant statements).
(10) Remarks by Assistant Attorney General for the Criminal Division Leslie R. Caldwell at the Taxpayers Against Fraud Education Fund Conference (Sept. 17, 2014) https://www.justice.gov/opa/speech/remarks-assistant-attorney-general-criminal-division-leslie-r-caldwell-taxpayers-against
(11) United States v. Kordel, 397 U.S. 1, 11 (1970) (government acts in bad faith if it brings a civil action solely for the purpose of obtaining evidence in a criminal prosecution, and does not advise the defendant of the planned use of evidence in a criminal proceeding).
(12) Fed. R. Crim. Proc. 6(e).
(13) United States v. Harris, No. 1:09-CR-0406, 2010 WL 4962981 at *14 (N.D. Ga. Oct. 22, 2010) ("courts have universally approved the passing of information -- particularly from the S.E.C. to the criminal investigative agency.")
(14) Compare United States v. Scrushy, 366 F. Supp. 2d 1134 (N.D. Ala. 2005) (because government manipulated simultaneous civil and criminal investigations of defendant for its own purposes, including the transfer of defendant's deposition into district for venue purposes, and failed to advise the defendant about the criminal investigation of which he was a target, the utilization in criminal case of deposition given by defendant in connection with SEC civil investigation departed from the proper administration of justice); Harris, 2010 WL 4962981 at *13 ("the critical evidence that Defendants must establish in order to make the necessary showing of a due process violation … is either that 'the government made affirmative misrepresentations or conducted a civil investigation solely for the purposes of advancing a criminal case.") with United States v. Stringer, 535 F. 3d 929 (9th Cir. 2008), cert. denied, 555 U.S. 1049 (2008) (reversing the district court's ruling suppressing testimony where defendants had been identified consistently as "targets" yet the government failed to alert them to the possibility of criminal exposure beyond presenting a standard form that is given to every individual, whether or not a target, prior to testifying).
(15) DiPietro, supra note 5.
(16) Stephen Dockery, U.S. Justice Dept to Require Certification of Cooperation in Investigations, WALL ST. J. (Feb. 4, 2016).
Nathan "Nate" A. Adams IV is a partner practicing in complex commercial and appellate litigation with a special emphasis on hospitality, healthcare, educational, nonprofit and religious organizations.
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|Update on DOL Revisions to FLSA’s White Collar Exemptions|
|By Julie K. Adams and Melanie A. Zaharias (Littler Mendelson P.C.)|
The Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, recordkeeping, and youth employment standards. The FLSA provides an exemption from both minimum wage and overtime pay for employees employed as bona fide executive, administrative, and professional employees, referred to as the “white collar exemptions.” On June 30, 2015, the U.S. Department of Labor unveiled its proposed revisions to the required salary levels for the white collar exemptions.
Changes to the Salary-Level Test
The DOL proposed that the required salary level for the administrative, executive and professional exemptions be increased to match the 40th percentile of weekly earnings for full-time employees. Practically, this means that the DOL has proposed increasing the current minimum salary of $455 per week (or $23,660 per year) to about $970 per week (or $50,440 per year) by the time the final rule is issued. In addition, the DOL proposes increasing the required salary for the highly compensated employee exemption to equal the 90th percentile of weekly earnings which, in effect, increases the exemption’s salary threshold from $100,000 annually to about $122,148 annually. The DOL has further proposed that the minimum salary thresholds be automatically adjusted upwards on an annual basis “to make sure that they maintain their effectiveness” by using either a percentile of weekly earnings or inflation. The Obama Administration estimates that more than 4.5 million workers will become eligible for overtime under the DOL’s proposed revisions, and that number will grow every year as the minimum salary threshold increases annually.
Changes to the Duties Test Possible
The DOL did not make any specific proposals, at least for now, to change the duties test for the white collar overtime exemptions. The DOL did, however, request public comment on whether changes should be made to the duties test and what those changes should be. Remarks by President Obama and the Secretary of Labor indicate that they are particularly concerned that the current exemption tests allow for the exemption of employees who are performing too much nonexempt work. Accordingly, the DOL specifically sought comments related to time spent on nonexempt duties and how that should impact the duties test. The DOL’s request for comments about the duties test signals that significant changes could be forthcoming when the final rule is published. Notably, to the extent the DOL changes the duties test when the final rule is published, its failure to effectively announce such changes now could lead to litigation challenging the DOL’s formal rulemaking compliance. At a minimum, the lack of clear guidance from the DOL will prevent employers from making final decisions about potential reclassifications prior to the issuance of the final rule.
So, What’s Next?
On July 6, 2015, the proposed revisions issued by the DOL were published in the Federal Register. The DOL established a 60-day period for the public to submit written comments to the proposed rules. The 60-day public comment period closed on September 4, 2015. The DOL received approximately 250,000 comments, which it is currently analyzing. Once the DOL finishes reviewing the comments and finalizes the proposed rule, the rule must then be approved by the Office of Management and Budget before they are published. The final rules are not expected to be published until mid-to-late 2016 based on recent comments by the Solicitor of Labor and the DOL’s semi-annual regulatory agenda. Specifically, according to Solicitor of Labor Patricia Smith’s remarks at a recent ABA Midwinter Meeting of the Federal Labor Standards Legislation Committee, the DOL’s Final Rule regarding the White Collar Exemption will be published in July 2016, with an effective date of 60 days later.
Next Steps for Employers
What should employers be doing now to prepare for the DOL’s changes to the white collar exemptions regulations? Even though the DOL’s revisions to the white collar exemptions are far from final, employers should review their current workforce and identify where changes may need to be made to ensure compliance. For example, employers should determine whether they want to provide a salary increase to exempt employees who are paid on a salary basis at an amount below $50,440 or reclassify them so that this transition can be made within the 60-day grace period. Of course, changes should not be implemented until after the DOL actually publishes the final rule. Although changes to the duties test are not incorporated in the proposed rule, employers should also be prepared for the DOL to make a few but impactful changes to the duties test. Such changes could range from revising the definition of primary duty to require that employees spend more than 50% of their time on exempt work, as in California, to eliminating the concurrent duties provisions for executive employees. Finally, employers should also evaluate the status of all employees that management classifies as exempt and identify any positions that may be misclassified under the current regulations.
Julie K. Adams is Of Counsel in Littler’s Charlotte office and Melanie A. Zaharias is an associate in Littler’s Orlando office. For further information, please contact your Littler attorney at 1.888.Littler, Ms. Adams at email@example.com or Ms. Zaharias at firstname.lastname@example.org.
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|Eleventh Circuit Decides Employee Hardship Must Be Considered in Florida Restrictive Covenant Cases in Federal Court|
|By Sean P. Walsh, Jackson Lewis P.C.|
The Eleventh Circuit has recently added what may end up being a significant hurdle for Florida employers seeking the enforcement of restrictive covenants or non-compete agreements in federal court. In Transunion Risk and Alt. Data Solutions v. MacLachlan the Eleventh Circuit vacated a trial court’s order granting a preliminary injunction against a former employee because the trial court failed to consider the potential harm the injunction posed to the former employee. The Eleventh Circuit’s decision will come as a surprise to many, as it apparently contradicts Florida’s restrictive covenant and non-compete statute, Fla. Stat. § 542.335 (“Section 542.335”), which states that a court “[s]hall not consider any individualized economic or other hardship” that might be caused to a former employee. It is not clear what the full effect of the decision will be, but it presents a dramatic change in the way federal courts must approach Florida restrictive covenant and non-compete cases. A summary of the Eleventh Circuit’s decision follows.
In MacLachlan, the United States District Court for the Southern District of Florida granted a preliminary injunction enforcing a non-compete agreement against MacLachlan, the former CFO for Transunion Risk and Alternative Data Solutions, Inc. (“TRADS”). MacLachlan became TRADS’s CFO following its acquisition of his former employer, and upon hire, he entered into a one (1) year “Noncompetition and Solicitation Agreement” (the “Agreement”). Several months after his hire, MacLachlan resigned and went to work for a direct competitor in the same capacity, in violation of the Agreement. After discovery of MacLachlan’s new employment, TRADS brought an action to enforce the Agreement in the Southern District, under diversity of citizenship. After holding an evidentiary hearing, the Southern District granted a preliminary injunction that prohibited MacLachlan from working in a competitive capacity for one (1) year or until the final resolution of the case, whichever is sooner.
MacLachlan appealed the decision to the Eleventh Circuit, which vacated the order and explained that Section 542.335, which prohibits a court from considering individualized hardship, applies only to the enforceability of restrictive covenants, not to the enforcement. The Eleventh Circuit explained the Southern District erred when it applied Section 542.335 in determining whether the injunction was the appropriate remedy, after it determined the Agreement was legally enforceable. The Eleventh Circuit remanded the case, and directed the Southern District to consider the hardship to MacLachlan when balancing the harms of granting versus not granting an injunction. The Eleventh Circuit based its decision on the standard for granting a preliminary injunction in general, under Rule 65 of the Federal Rules of Civil Procedure (“Rule 65”), which requires a court to balance the harms to the parties before deciding whether to grant an injunction.
The MacLachlan decision creates a significant split in the way Florida and federal courts are required to approach the enforcement of Florida restrictive covenant agreements. Specifically, the holding appears to contradict the clear language of Section 542.335, which states a court cannot consider the potential hardship to the former employee. It remains to be seen what the full effect of the decision will be, and whether Florida courts will change their approach to enforcing restrictive covenants, especially considering that Florida’s injunction statute is applied almost identically to Rule 65. Regardless, employers may want to think twice before bringing an action to enforce a restrictive covenant in federal court, or at the very least, seriously consider the negative effect an injunction will have on its former employee before moving forward. In the near future, the impact of the MacLachlan decision will become clearer as attorneys use it to argue against the enforcement of restrictive covenant actions in Florida and federal courts alike.
Sean Walsh is an Associate in the Jacksonville, Florida, office of Jackson Lewis P.C. Mr. Walsh represents and counsels small and large businesses on all aspects of employment-related issues. He has represented employers in federal and state disputes and litigation involving allegations of discrimination, wage and hour claims, trade secrets, non-compete, non-solicitation, non-disclosure agreements and various employment-related common law claims.
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