|North Florida Chapter News and Information|
|Chapter President's Letter|
|By Monique Brown, Data Privacy Lawyer/AVP, Counsel (Deutsche Bank)|
Dear ACC North Florida Chapter Members,
As the fall season approaches, I hope everyone enjoyed a great summer. Summer gives us an opportunity to unplug, relax, and recharge our batteries. We will continue with our robust calendar of events this fall and I encourage those of you who haven’t been to an event lately to attend. Our meetings truly offer a unique educational and peer networking opportunity tailored for in-house counsel.
Next month we will have Board of Director elections and a brief chapter annual meeting. Also, I hope you can attend the National ACC Annual Meeting. This year’s Annual Meeting will be held in October in Austin, Texas. It is an excellent opportunity to engage with fellow in-house counsel from around the globe. I plan to attend and hope you can as well and enjoy a few days of education, discussion, networking, and fun. You can learn more about the National ACC Annual Meeting on the ACC website at www.acc.com.
I look forward to seeing each of you soon at one of our upcoming events.
Monique N. Brown, ACC North Florida President
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Sept 20, Nelson Mullins Community Service/Social Event at Wicked Barley 5:30 PM. Please join our sponsor Nelson Mullins for a toy drive and socializing! More info ...
Oct 11, McGuireWoods Ethics CLE with Tom Spahn and Annual Meeting of Members. Please join us for a CLE presented by McGuireWoods ethics expert Tom Spahn, followed by the annual meeting of the members of ACC North Florida Chapter. More info ...
Oct 25, Shutts & Bowen CLE - ADA for Websites/Happy Hour. Please join Shutts & Bowen for an informative CLE on what you should be doing to make your website compliant with the ADA, followed by a cocktail hour at the Grape & Grain in San Marco. More info ...
Nov. 2, Jimerson & Cobb - Social/Networking - Golf Outing at White Oak Plantation
Dec 12, Jackson Lewis CLE and Holiday Party at Epping Forest. More info ...
Do you have pictures from a past event to include in the newsletter? Please send those to Anna.Shea@fisglobal.com.
Please be sure to check our Chapter page for additional information on upcoming events by clicking here.
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ACC North Florida Chapter is pleased to welcome these new members:
|Welcome NEW Members for the ACC North Florida Chapter!|
Rebecca Chandler Perkins, Availity, LLC
Santiago Garces, Exactech, Inc
Farrell Wilkerson, Availity, LLC
Matt Cornwell, Fortegra Financial Corporation
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|Community Outreach Committee Update|
|Heidi Anderson (Fanatics, Inc.) and Megan Wilson (Fidelity National Financial)|
The Community Outreach Committee would like to thank the many ACC members who have supported our charitable initiatives in 2018 thus far. Whether it is in small group settings such as our panel discussions with local pre-law students or in larger group settings such as our upcoming service social, we hope that these events continue to inspire our members to engage with our community and build lasting relationships with fellow lawyers and non-lawyers alike.
If you have not been able to join us at a Community Outreach event yet or if you’d like to continue your participation, please sign up
to attend our next event:
What: Service Social and Brewery Tour
When: Thursday, September 20th, 5:30 – 7:30 (tour begins at 6:30)
Where: Wicked Barley Brewing Company, 4100 Baymeadows Road, Jacksonville, FL 32217
and meet us there.
Optional: Bring a new, unwrapped toy or a small amount to donate to Wolfson’s Children’s Hospital.
Extra Incentive: All ACC Member attendees will be entered into a drawing and one winner will receive a free registration for the ACC Annual Meeting in October 2018 in Austin or in 2019 at a location TBD valued at up to $1,775. Must be present to win.
We look forward to seeing you at Wicked Barley to network with peers, learn about the brewing process, and contribute to a great cause.
If you cannot make it on September 20th, be on the lookout for an announcement of another service opportunity as the holiday season approaches.
In the meantime, don’t forget the ongoing opportunity to assist income-qualifying individuals with advance directive documents, the next two of which are September 18th and October 16th. To support JALA in this or a future initiative, click here: sign up
And, as always, we welcome all feedback and suggestions for how we could improve the Community Outreach Committee’s programs and service. Please contact Heidi Anderson (email@example.com
) or Megan Wilson (firstname.lastname@example.org
) to share your ideas.
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|Past Event Recap - Adams and Reese, LLP (Luncheon at the River Club)|
On August 23, 2018, Adams and Reese, LLP hosted a luncheon at the River Club. Adams and Reese partner Lucian Pera, presented “The Legal Ethics Year in Review: News Corporate Counsel can use.” Lucian speaks nationally on legal ethics, professional responsibility and media law.
(Photos by Leslie Wickes and Katharine Hartland)
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|Past Event Recap - Jimerson and Cobb (CLE & Social)|
On September 6, 2018, Jimerson & Cobb, PA hosted a CLE and Social at Pinot’s Palette with moderator Charles Jimerson: “Panel: Discovery on Cell Phones, Social Media, and Emails: What In-house Lawyers Need to Know to Preserve and Obtain Key Evidence.”
(Photos by Caroline Prieto)
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|World Affairs Council - Upcoming Events|
|By Barbara Johnston, ACC Board of Directors (General Counsel, Regency Centers)|
ACC North Florida's annual sponsorship of the World Affairs Council of Jacksonville allows us to offer our members the unique opportunity to attend fascinating lectures on global issues of significance given by distinguished personalities from the U.S. and around the world, which gives our chapter added depth and provides thought-provoking stimulation to all who attend. If you are interested in attending one of these wonderful events, please reach out to Barbara Johnston at BarbaraJohnston@regencycenters.com. The following is a list of upcoming events for the fourth quarter of 2018.
Global Issues Evenings
Tuesday, September 25
"Africa in Focus"
Ambassador D. Bruce Wharton (Ret.)
United States’ Under Secretary of State for Public
Diplomacy and Public Affairs (2016-2017); U.S.
Ambassador to Zimbabwe (2012-2015)
Tuesday, October 16
"The Changing Role of America in the World" sponsored by the ACC
Walter Russell Mead
Global View Columnist, The Wall Street Journal
Tuesday, November 13
"Understanding China: How the West Got China Wrong"
Beijing Bureau Chief, Newsweek
Global Business Luncheons
Tuesday, October 16, 2018"Liberal Trade & the National Interest: Protectionism's Allure & Hazard"
Walter Russell Mead
Global View Columnist, The Wall Street Journal
TBD, October 2018
"The Changing Global Dynamic of Commercial Aviation"
Chief Executive Officer, United Airlines
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|Fraudulent Transfers 101: What You Need to Know When Following the Money Trail|
|By Charles B. Jimerson, Esq. & Brandon C. Meadows, Esq. (Jimerson & Cobb, P.A.)|
The debt collection process is based upon a creditor’s right to repayment from the liquidation of a debtor’s assets. In Florida, there are many judicial procedures available, which allow creditors to identify, seize, lien, levy and force the sale of a debtor’s assets in order to satisfy the indebtedness owed to the creditor. Unfortunately, many creditors face the difficult reality that an insolvent debtor with little-to-no assets is essentially “judgment proof,” and the debt is uncollectable. In some circumstances, however, the debtor may have engaged in transferring or concealing assets in an effort to delay or hinder collection activities by its creditors. In those cases, the creditor has a powerful set of remedies against the debtor and the subsequent transferees under the Uniform Fraudulent Transfer Act (“UFTA”).
All creditors should have a basic understanding of their rights and remedies when a debtor engages in fraudulent transfers to avoid collection. Such knowledge can be the difference between writing off a debt entirely as uncollectable and satisfaction of the debt by judicial process or leveraging settlement with the debtor.
What are Fraudulent Transfers?
Under Florida’s version of UFTA (“FUFTA”), a fraudulent transfer is generally defined as “a transfer made or obligation incurred by a debtor if made with actual intent to hinder, delay or defraud any creditor of the debtor” or a transfer made “without receiving a reasonably equivalent value in exchange for the transfer or obligation.” FLA. STAT. § 726.105(1)(a)-(b). Fraudulent transfer statutes are designed to bring the transferred or concealed assets back into the reach of a creditor by avoiding the transaction or imputing a money judgment against the transferees of the assets.
Actual and Constructive Fraud
FUFTA addresses two distinct categories (or types) of fraudulent transfers. The first type is an “actual” fraudulent transfer, which focuses on the transferor’s intent to delay, defraud or hinder creditors (Fla. Stat. § 726.105(a)), whereas the second type is a “constructive” fraudulent transfer, which focuses—not on the transferor’s intent—but rather, the economic effects of the transaction (Fla. Stat. §§ 726.105(1)(b); 726.106(1) and 726.106(2)). Proving actual intent of a debtor can be difficult, so FUFTA provides a list factors—or “badges of fraud”—from which a court may infer the debtor’s intent. See Fla. Stat. § 726.105(2). Proving a constructive fraudulent, on the other hand, requires proof that the debtor (i) did not receive reasonably equivalent value for the asset; and (ii) the transfer rendered the debtor insolvent. Fla. Stat. §§ 726.105(1)(b); 726.106(1) and 726.106(2).
1. Was there an exchange of reasonably equivalent value?
FUFTA does not define “reasonably equivalent value.” Accordingly, whether value is reasonably equivalent must be determined on a case-by case basis. In re Dondi Fin. Corp, 119 B.R. 106, 109 (Bankr. N.D. Tex. 1990). The determination of whether a debtor has received reasonably equivalent value in exchange for the transfer of his assets requires a factual analysis. In re Chase & Sanborn Corp., 904 F.2d 588 (11th Cir. 1990). “Value” has been interpreted fairly broadly, and has been defined as a comparison between “what went out” with “what was received.” In re Dealers Agency Services, Inc., 380 B.R. 608, 619 (Bankr. M.D. Fla. 2007) quoting In re Leneve, 341 B.R. 53, 57 (Bankr. S.D. Fla. 2006).
Therefore, the focus is on the “economic reality” of the situation. In re Miami General Hosp., Inc., 124 B.R. 383, 394 (Bankr. S.D. Fla. 1991) (analyzing the reasonably equivalent value provided to the debtor even in the case of “indirect” benefits to the financial strength of the debtor). In this regard, courts consider many factors, including the good faith of the parties, the disparity between the fair value of the property and what the debtor actually received, and whether the transaction was at arm's length. See e.g. In re Dealers, 380 B.R. 608; In re Vilsack, 356 B.R. 546 (Bank. S.D. Fla. 2006).
2. Did the transfer render the debtor insolvent?
Under FUFTA, a debtor is considered “insolvent” when the “sum of the debtor’s debts is greater than all of the debtor’s assets at fair valuation.” Fla. Stat. § 726.103(1). This definition is known as the “balance sheet test.” Additionally, there is a presumption of insolvency when a debtor “is generally not paying his or her debts as they become due.” Fla. Stat. § 726.103(2). In other words, “Cash Flow” insolvency gives rise to a presumption of “insolvency” under FUFTA.
3. If a creditor proves a fraudulent transfer, what are the creditor’s remedies?
FUFTA sets forth six primary remedies available to creditors: (1) avoidance of the transfer; (2) attachment of the asset; (3) injunctive relief to prohibit further transfers; (4) appointment of a receiver; (5) levy and execution; and (6) “any other relief the circumstances require”—also known as the “catch-all provision.” Fla. Stat. § 726.108(1)–(2).
Creditors typically seek the remedy of avoidance of the transfer or a money judgment against the transferee of the asset. “[FUFTA] is either an action by a creditor against a transfer directed against a particular transaction, which, if declared fraudulent, is set aside thus leaving the creditor free to pursue the asset, or it is an action against a transferee who has received an asset by means of a fraudulent conveyance and should be required to either return the asset or pay for the asset (by way of a judgment and execution).” Yusem v. South Florida Water Mgmt. Dist., 770 So. 2d 746, 749 (Fla. 4th DCA 2000).
If the creditor does not seek to unwind the transaction to put the asset back into the hands of its debtor, the creditor may seek a money judgment against the transferee. The money judgment will be in the amount of the value of the asset transferred, as measured at the time of the transfer, or the amount necessary to satisfy the creditor’s claim, whichever is less. Fla. Stat. § 726.109(2).
Fraudulent transfer actions provide creditors with powerful set of remedies to reach assets that were previously placed out of reach of the creditor. If a creditor determines that its debtor has engaged in a transaction to render itself otherwise “judgment proof”, the creditor should scrutinize the transaction by determining whether the transfer was truly an arm’s length transaction for reasonably equivalent value. If you have any questions regarding issues relating to fraudulent transfers or commercial collections, Jimerson & Cobb, P.A. can assist you. For more detailed discussions on complex collection mechanisms, our firm regularly provides educational seminars on advanced creditors’ rights and fraudulent transfer proceedings.
Charles B. Jimerson is an A-V rated, board certified lawyer whose practice focuses on business litigation, construction law, banking law and eminent domain law. Jimerson & Cobb, P.A. is an award winning law firm with a practice emphasis on litigation and specialized experience in the financial services, real estate development and construction, and manufacturing and distribution sectors. Jimerson & Cobb, P.A. has been named to the Jacksonville Business Journal’s 50 Fastest Growing Companies each year for the past four years, and in 2016 and 2017 was honored as one of the 50 fastest growing law firms in the country. Mr. Jimerson’s online profile can be found at: http://www.jimersoncobb.com/attorneys/charles-b-jimerson/
Brandon C. Meadows is an attorney with the law firm of Jimerson & Cobb, P.A. His practice encompasses a wide range of legal issues affecting businesses, including business disputes, corporate governance matters, and corporate creditors’ rights. Mr. Meadows’s online profile can be found at: https://www.jimersoncobb.com/attorneys/brandon-c-meadows/
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|NLRB General Counsel Issues Guidance Regarding Handbook Rules|
|By Frederick Miner (Littler Mendelson, P.C.)|
On June 6, 2018, NLRB General Counsel Peter Robb issued a lengthy 20-page Memorandum (GC 18-04) providing detailed guidance regarding enforcement of “Handbook Rules Post-Boeing.”
In The Boeing Co., 365 NLRB No. 154 (Dec. 14, 2017), the Board established a new standard governing the validity of employer rules, policies and handbook provisions under the National Labor Relations Act. The Board now considers whether a facially neutral rule, when reasonably interpreted, would interfere with rights under the Act. If so, it will strike a balance between (i) the nature and extent of the potential impact on employee rights; and (ii) legitimate justifications supporting maintenance of the rule. The Board no longer will find rules unlawful merely because they could be interpreted as covering potentially protected activities.
The Board also established categories of rules based upon the results of its balancing of interests: Category 1 rules are lawful because they do not restrict rights under the Act, or because the justifications for the rules outweigh their tendency to restrict those rights; Category 2 rules warrant individualized consideration of whether they prohibit or interfere with employee rights, and if so, whether the impact is outweighed by other, legitimate considerations; and Category 3 rules are unlawful because they would restrict rights protected by the Act in a way that outweighs justifications associated with them.
The Board’s categories will effectively delineate rules that are “in-bounds” or “out-of-bounds” for purposes of the Act. For instance, categorizing a workplace “no recording” rule as lawful under Category 1, as the Board did in The Boeing Co., facilitates prompt resolution (and dismissal) of charges challenging them. Employers can have increased confidence about adopting such a rule in the future. The categories will also assist employers in avoiding, or if necessary self-correcting, rules that are treated as unlawful under Category 3, or in customizing rules under Category 2 to maximize their value (and therefore their justifications).
Until all possible rules are categorized through the Board’s traditional case-by-case dispositions, the key questions will involve how to predict whether potential rules fall into Categories 1, 2 or 3. For now, the General Counsel’s recent Memorandum takes a big step toward explaining how the Board’s Regional offices will initially categorize many common workplace rules under the Board’s new standard as a matter of enforcement policy.
Of greatest interest to employers, the Memorandum is full of helpful illustrations of the policies that it categorizes. For instance, it provides several examples of the no recording and civility rules that the Board endorsed as lawful in The Boeing Co. It proceeds to categorize a number of other common workplace rules as lawful under Category 1, and provides illustrations of such rules. These include rules pertaining to:
- insubordination, non-cooperation, or on-the-job conduct that adversely affects operations;
- disruptive behavior;
- protection of confidential, proprietary and customer information or documents;
- prohibiting defamation or misrepresentation;
- restricting use of the employer’s logos or other intellectual property;
- requiring authorization to speak for the employer; and
- banning disloyalty, nepotism or self-enrichment.
The Memorandum also provides as illustrations of generally unlawful rules falling within Category 3, confidentiality rules that restrict discussing wages, benefits or working conditions, and rules against joining outside organizations or voting on matters concerning the employer. A short section of the Memorandum identifies a few rules warranting individualized scrutiny under Category 2.
The General Counsel’s recent Memorandum increases confidence that many workplace policies previously ruled invalid will not be challenged under the Board’s new legal standard. While wide-ranging in the scope of rules it considers, the Memorandum is not comprehensive, and a number of blanks remain to be filled in. Areas not addressed include how the General Counsel and the Board will categorize rules prohibiting harassment as a general matter, requiring participation in workplace investigations, treating arbitration proceedings as confidential, and restricting access to the employer’s email system for non-business uses. Guidance about the use of disclaimers to support lawful rules following The Boeing Co. also would be valuable.
Employers should avoid over-reliance on categorizations of rules. Remember that the reach of The Boeing Co.’s new standard is limited to the maintenance of workplace rules. Application of rules, even lawful rules, in a manner that interferes with employee rights, will continue to be found unlawful by the Board. Effective rules should be drafted with enough specificity so that they can be applied easily and consistently in a lawful manner.
About the author: Frederick Miner is a shareholder in Littler’s Phoenix office. He may be reached at email@example.com
© 2018 Littler Mendelson. All Rights Reserved.
LITTLER MENDELSON®, ASAP® is a registered trademark of Littler Mendelson, P.C.
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|Cyber Insurance – Do You Even Need It?|
|By Tanya L. Cronau (Nelson Mullins Riley & Scarborough LLP)|
Cyber-attacks can lead to both internal losses and external liabilities, and both small and large businesses have become increasingly more vulnerable to them over the years. Clearly, then, businesses are now making cybersecurity awareness a top priority. What is not as clear is how a business can adequately insure itself against the risk of a cyber-attack. With carriers promoting cyber insurance policies and courts inconsistently finding coverage for cyber-attacks in other types of policies, businesses are left wondering what type of cyber insurance policy is adequate – or whether one is needed at all. This article discusses some key cases interpreting different types of liability policies, and provides some insight on the types of coverage issues to be aware of.
If your business owners policy provides a form of computer fraud coverage, you might generally be receiving coverage for monetary losses directly caused by the use of any computer. However, it is important to understand how courts have interpreted both the “use of any computer” provision and the word “direct” when determining whether computer fraud directly caused a loss.
As to the former, take a look at your company’s platform. When funds are transferred outside of the company, is the transfer triggered via email request or an automated transfer system? If so, a loss might satisfy the “use of any computer” standard. The Sixth Circuit recently decided (and denied rehearing in) American Tooling Center, Inc. v. Travelers Casualty and Surety Company of America, 895 F.3d 455 (6th Cir. 2018). In American Tooling, an insured company (ATC) communicated with its outside vendors through email. A third party intercepted one of these emails, pretended to be ATC’s vendor, and requested that ATC wire invoice payments to a new bank account. ATC did so pursuant to internal practice and procedure, and eventually realized that the transfers were being made fraudulently. Its insurer, Travelers, argued that the impersonator’s activity did not constitute the “use of any computer.” The Sixth Circuit disagreed, finding that this did constitute fraudulent use of “any” computer because the fraudulent act in question was the impersonator’s use of its own email system. The court reasoned that if Travelers had intended coverage to only extend to the fraudulent use of ATC’s own computer (vis-à-vis a hacker), it could have limited the provision with more express terms.
In an unpublished decision, Interactive Communications International, Inc. v. Great American Insurance Company, 731 Fed. Appx. 929 (11th Cir. May 10, 2018), the Eleventh Circuit analyzed the issue in a similarly broad manner. In Interactive Communications, an insured company (InComm) sold pre-paid debit cards. InComm experienced internal losses as a result of individuals requesting duplicate redemptions under the same pre-paid card. Specifically, the individuals found a loophole whereby they were able to call InComm’s automated phone system and make concurrent redemptions under the same card. Here, then, the fraudulent activity occurred through the use of a telephone. However, because the phone call allowed the callers to manipulate InComm’s automated system, the court reasoned that the activity qualified as the “use of any computer.”
Ironically enough, the more checks your company has in place with respect to funds transfers, the more attenuated a chain of causation becomes, and the less likely it is that a court will find that a fraudulent activity “directly” caused a loss. For example, both of the insureds in American Tooling and Interactive Communications had policies and procedures in place, which were followed before the funds at issue were eventually released from the companies’ control. The Eleventh Circuit, which focused on the temporal nature of the word “directly,” found that the fraudulent activity did not “directly” cause the insured’s loss because the loss did not occur immediately and the actions of other parties were involved. The Sixth Circuit, on the other hand, employed a more loose proximate cause standard and found that the fraudulent activity did “directly” cause the loss at issue because the fraudulent activity precipitated the entire chain of events that ultimately led to the company’s loss.
Data Breach Coverage
More often than not, a standard commercial general liability policy will not cover a company’s liability for a loss of customer data under Coverage A. Coverage A generally provides coverage for liability arising out of bodily injury or property damage, and these policies typically contain an exclusion providing that electronic data does not constitute “property.” However, the Fourth Circuit recently found coverage for data breach liability under Coverage B (which generally provides coverage for liability arising out of personal and advertising injury).
In Travelers Indemnity Company of America v. Portal Healthcare Solutions, LLC, 644 Fed. Appx. 245 (4th Cir. 2016), a class action suit was brought against an insured medical records vendor for its failure to safeguard the confidential medical information of various patients. As a result, patients’ medical records were available online and were retrievable via a simple internet search. The vendor’s liability policy defined “personal injury” to include the electronic publication of personal information. Although there were no allegations that third parties actually viewed these records, the court found that the definition of “publication” was satisfied because the records were made available for public viewing.
Very recently, the Fifth Circuit found a potential for data breach coverage under a directors and officers liability policy. In Spec’s Family Partners, Limited v. Hanover Insurance Company, 2018 WL 3120794 (5th Cir. Jun. 15, 2018), an insured specialty retail chain (Spec’s) was involved in a dispute with its credit card payment processor. Hackers infiltrated Spec’s’ payment system, which resulted in fraudulent transactions, and the payment processor was required to reimburse banks for the costs associated with the fraudulent charges. The payment processor’s right to recovery against Spec’s was based in theories of both contractual indemnification and negligence. Specifically, the payment processor claimed that Spec’s negligently failed to adhere to industry standard data security requirements. Spec’s’ carrier, Hanover, attempted to avoid a defense obligation under the rationale that its policy included a contractual liability exclusion. Despite the exclusion, the court found that a potential for coverage existed by virtue of the fact that a portion of the claim resounded in negligence, rather than solely contractual indemnity.
Whether your company’s platform makes it more vulnerable to internal loss or external liability (or more likely, both), these cases show that there is at least some potential for cybersecurity coverage under either business owner, commercial general liability, or directors and officers liability policies. Of course, your company should vet insurance coverage/risk transfer issues through your in-house legal department, insurance carrier, and insurance coverage counsel in order to ensure you are adequately protected against the risks inherent in your specific business.
practices insurance coverage with Nelson Mullins Broad and Cassel in its Jacksonville office. Prior to her role as coverage counsel, she worked as a senior claims analyst adjusting complex construction defect claims along both the West and East Coasts.
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|ADA in the Digital Age – Website Accessibility Lawsuits on the Rise|
|By Sean Walsh (Jackson Lewis P.C.)|
In ensuring compliance with the Americans with Disabilities Act (“ADA”), companies must look beyond physical barriers moving forward, in light of a recent wave of lawsuits alleging that inaccessible websites violate the ADA. In fact, through the first half of 2018, there have been over three hundred (300) such lawsuits filed in Florida alone. As with physical barrier cases, many of the website cases have been brought by a small group of plaintiffs filing multiple lawsuits. Companies should keep a close eye on the law as it develops, and consider a proactive approach to updating their websites before being faced with a denial of access lawsuit.
Under Title III of the ADA, owners of a place of public accommodation are prevented from discriminating “on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation….” See 42 U.S.C. § 12182(a). Numerous “private entities are considered public accommodation for purposes” of Title III, including hotels, restaurants, and other retail establishments (a more complete list can be found at 42 U.S.C. § 12181(7)). Traditionally, Title III has been applied to the physical facilities of places of public accommodation; however, as technology has developed, courts are now requiring company websites to be accessible by persons with disabilities.
In the Eleventh Circuit, the springboard for ADA website access claims is Rendon v. ValleyCrest Prods., Ltd., in which the court found that Title III also applies to “intangible barriers.” 294 F.3d 1279, 1283 (11th Cir. 2002). In the Rendon case, the intangible barrier was not a website, but an “automated telephone contestant selection process [that] was not conducted at a physical location.” Id. at 1280.
The Eleventh Circuit recently re-iterated its Rendon holding, this time in a lawsuit alleging website inaccessibility, explaining that “[t]he prohibition on discrimination is not limited to tangible barriers that disabled persons face but can extend to intangible barriers as well.” See Haynes v. Dunkin' Donuts, LLC, 2018 U.S. App. LEXIS 21126, *3 (11th Cir. July 31, 2018)(reversing order granting motion to dismiss where it appeared that company’s “website is a service that facilitates the use of [its physical] shops, which are places of public accommodation”).
As another recent example, in Gil v. Winn-Dixie Stores, Inc., the plaintiff sued under Title III alleging that the defendant’s website was inaccessible, and denied him full and equal enjoyment of the defendant’s goods, services, and facilities. 257 F. Supp. 3d 1340 (S.D. Fla. June 12, 2017). The parties took the case to trial, and ultimately the plaintiff prevailed (an appeal is currently pending, with oral argument scheduled for October 4, 2018). In its Verdict and Order following trial, the court explained as follows:
Where a website is heavily integrated with physical store locations and operates as a gateway to the physical store locations, courts have found that the website is a service of a public accommodation and is covered by the ADA. Nat'l Fed'n of the Blind v. Target Corp., 452 F.Supp.2d 946, 953-55 (N.D. Cal. 2006); see also Gomez v. J. Lindeberg USA , Inc., No. 16-22966, ECF No. 23, at *3, 2016 U.S. Dist. LEXIS 187771 (S.D. Fla. Oct. 17, 2016) (Williams, J.) (finding that a plaintiff stated a claim that the defendant's website violated the ADA because the plaintiff alleged that the website was inaccessible to blind individuals and allowed customers to purchase the defendant's clothing online and search for store locations). On the other hand, where a website is wholly unconnected to a physical location, courts within the Eleventh Circuit have held that the website is not covered by the ADA. Gomez v. Bang & Olufsen Am., Inc., No. 16-23801, at 8, 2017 U.S. Dist. LEXIS 15457 (S.D. Fla. Feb. 2, 2017) (Lenard, J.) (holding that a website that is wholly unconnected to a physical location is generally not a place of public accommodation under the ADA); Access Now, Inc. v. Sw. Airlines, Co., 227 F. Supp. 2d 1312, 1321 (S.D. Fla. 2002) (Seitz, J.) (dismissing complaint because the plaintiffs failed to establish a nexus between the defendant's website and a physical, concrete place of public accommodation); Kidwell v. Fla. Comm'n on Human Rels., No. 2:16-403,2017 U.S. Dist. LEXIS 5828, 2017 WL 176897, at *4 (M.D. Fla. Jan. 17, 2017) (holding that a website is not a public accommodation under the ADA, and dismissing the plaintiff's ADA claim in part because the plaintiff could not demonstrate that the website's inaccessibility prevented his access to a specific, physical, concrete space).
257 F. Supp. 3d at 1348-1349.
Based on this recent trend, the court found that the company’s “website is heavily integrated with [its] physical store locations and operates as a gateway to the physical store locations.” Id. at *20. In fashioning its remedy, the court issued an injunction requiring conformity with the Web Content Accessibility 2.0 Guidelines, which were “virtually adopted” by “federal government’s Access Board” in January 2017, and also were “adopted as an international organizations standard in 2012.” Id. at 13-15, 23.
In light of this wave of decisions, companies should consider reviewing their websites for accessibility, and making any needed changes before being faced with a lawsuit. Doing so may not only prevent litigation, but may also help stave off claims for attorneys’ fees based on case law holding that “a plaintiff who initiates a lawsuit that causes the defendant to voluntarily remedy ADA violations is not a prevailing party for purposes of attorneys’ fees, and is not entitled to collect costs and fees.” Kallen v. J.R. Eight, Inc., 775 F. Supp. 2d 1374, 1381 (S.D. Fla. 2011); also Access 4 All, Inc. v. Casa Marina Owner, LLC, 458 F. Supp. 2d 1359, 1366 (S.D. Fla. 2006) (“The resort’s voluntary decision to remedy any alleged barrier to access does not entitle Plaintiff to attorneys’ fees”).
In the near future, the impact of these decisions and the trend of website litigation trend will become clearer as courts have more opportunity to develop the law with new lawsuits being filed nearly every day. The best-prepared companies will keep a close eye on these developments, and should take a proactive approach to ensuring website accessibility.
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.
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|If You Liked This Railroad Argument, You’ll Love “Competitive Access”|
|By Paul R. Hitchcock (Holland & Knight LLP)|
A small, little noticed case at the Surface Transportation Board offers a look into the regulatory crystal ball.
The unintended consequences of regulatory action
may sometimes come as a surprise, but often there are clues that could inform
decision makers—if they know where to look.
Two colossuses of the rail industry, Union
Pacific Railroad (UP) and BNSF Railway Company, are butting heads over UP's
right (or lack of a right) to perform switching operations on a BNSF main line
in Washington state. As readers of this blog are certainly aware, each
privately-owned railroad operates over its own proprietary rail lines, and only
in limited cases does the owner share rights to use its tracks with another
railroad. Such an arrangement—called trackage rights—was entered into by
predecessors of UP and BNSF in 1909. The purpose of the arrangement was to
allow each railroad to reach and serve a jointly-owned switching railroad which
picks up and delivers traffic to customers on behalf of both UP and BNSF.
By prior practice, UP exercised its trackage
rights to reach the switching railroad by stopping its train on BNSF's main
line, leaving some cars on the main, and then delivering and picking up cars
from the switching railroad. In 2014, BNSF began constructing a new third main
line through this portion of its network. During the construction, UP changed
its operations to add more, shorter trains that would not require it to leave
cars on the main.
After the construction was completed, UP resumed
its former operation, but in April of 2018, BNSF advised UP that it must no
longer block any of the main line tracks in order to perform the switching
movement. Because the owner of a rail line controls operations on its tracks,
UP must comply with BNSF's directions. Unable to resolve their differences, the
two railroads moved to private arbitration under the trackage rights agreement.
Arbitration is generally quicker than the
courts, but it is not instantaneous. Dissatisfied with the new status quo, UP
went to the Surface Transportation Board (STB) asking it to issue a declaratory
order and a preliminary injunction permitting UP to conduct operations pursuant
to its interpretation of the trackage rights agreement until the arbitration
could be concluded.
The issues before the STB had little to do with
how the two railroads should operate. The questions the agency had to decide
went to whether UP had presented a sufficient basis to entitle it to a
preliminary injunction. Fundamentally, the agency concluded that UP hadn't made
a sufficient showing that the operations directed by BNSF would cause UP
irreparable harm. Hence, UP won no interim relief.
So, what does this case have to do with the metaphorical
regulatory crystal ball? Well, for some time the STB has been considering
adopting a new rule that would force railroads to perform operations and use
each other's tracks in the name of creating competition. Under the STB proposed
rule in Reciprocal Switching, EP 711 (Sub-No. 1) a non-owner of track could
seek to force the owner to perform switching operations for its benefit.
Further, a customer wanting to gain access to the non-owner could also seek an
order to require the owner to perform the switching operation.
The UP-BNSF dispute is characteristic of the
kind of disagreements that will inevitably arise if two railroads are forced
into arrangements that one, or both, don't welcome. UP has operational
inefficiencies if it has to run more, smaller trains to serve the customers on
the switching railroad. BNSF has invested in adding capacity to its network
with a third main line and doesn't want its arch competitor blocking that line,
or either of the other two, to save UP money. If UP prevails, service to BNSF
customers may degrade. If BNSF prevails, service to UP customers may degrade.
It's a classic example of "everybody's right and everybody's wrong."
Without a doubt, the STB was happy not to have
to decide on the operational merits whether UP would get its preliminary
injunction or not. Some set of customers is going to be unhappy in the short
run; they may or may not be the same set of customers who are unhappy in the
long run after the arbitration concludes.
These kinds of railroad-railroad operating
disputes will occasionally arise, but today they flow from private agreements
entered into voluntarily by knowledgeable experts who are qualified to make the
trade-offs that need to be made, and who fully understand how those agreements
will affect their operations. If you think this dispute is a mess, just think
of what will happen if the STB adopts government-compelled switching.
The case is docketed as Finance Docket No. 36197, Union Pacific
Railroad – Petition for Declaratory Order and Preliminary Injunction.
Paul R. Hitchcock is a senior policy advisor in Holland & Knight's Jacksonville office. He has more than 40 years of legal experience in the transportation industry, specifically in the freight rail arena. Mr. Hitchcock brings a pragmatic approach to counseling clients, which he developed during his lengthy career with CSX Corp., one of the largest railroad operators in the U.S. During his tenure at CSX's operating subsidiary, CSX Transportation, Mr. Hitchcock served as General Commerce Counsel, a vice president level position responsible for the company's commercial legal and regulatory matters.
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|An Insider’s Perspective on Navigating the Florida DBPR Regulatory and Professional Boards|
|By Christopher M. Cobb, Esquire (Jimerson & Cobb, P.A.)|
Many business and industries in Florida find it necessary to obtain some form of license in order to conduct business in this state. Florida’s Department of Business and Professional Regulation (“DBPR”) is the state agency in charge of licensing and regulating businesses and professionals within Florida. The DBPR is a governmental agency under the control of the executive branch subject to the requirements of the Administrative Procedure Act, found in Chapter 120, Florida Statutes. The DBPR’s stated goal is to license efficiently and regulate fairly.
The DBPR breaks down its regulation into businesses and professions. It regulates seven (7) businesses including, but not limited to, Condominiums and Cooperatives, Hotels and Restaurants, Pari-Mutuel Wagering, Tobacco and Alcoholic Beverages. The DBPR’s regulation of professions is more expansive dealing with licensing, testing, education and discipline of some thirty (30) professions including, but not limited to, Architecture and Interior Design, Certified Public Accounting, Construction Industry, Electrical Contractors, Engineers, Building Codes and Standards, Mold-Related services, Real Estate and Veterinary Medicine. Similarly, the medical profession is governed by the Florida Board of Medicine under the Department of Health.
There are many profession Boards under the DBPR. The Board members are gubernatorial appointees who are confirmed by the Florida Senate. Many of the profession Board have Executive Directors who oversee the Board and will serve as a liaison between the Board and the DBPR. The Executive Directors are responsible for ensuring the effective operation of the Boards, meetings and Board business and can serve as great resource for information when negotiating the administrative and regulatory process. The Florida Boards are:
A. Division of Professions:
– Architecture & Interior Design
– Building Code Administrators & Inspectors
– Regulatory Council of Community Association Managers
– Construction Industry Licensing
– Electrical Contractors’ Licensing
– Employee Leasing Companies
– Landscape Architecture
– Pilot Commissioners
– Veterinary Medicine
B. Division of Certified Public Accounting
– Florida Board of Accountancy
C. Division of Real Estate
– Florida Real Estate Commission
– Florida Real Estate Appraisal Board
A potential licensee and/or current license holder may have to appear before anyone of the above Boards for a number of reasons including, but certainly not limited to, an appeal of a Board ruling, an application for name change, an application for initial licensure, a disciplinary hearing or an informal hearing. While Formal Administrative hearings are handled by the Department of Administrative Hearings and administrative law judges, if the matter relates to a profession, the ultimate decision will eventually work its way through the administrative process to the respective Board that over sees the profession.
While I could spend countless pages detailing the administrative process from notification of a complaint through an administrative complaint, hearings, stipulations and so on, this article is written to provide you with general tips for appearing in front of an administrative Board in Florida. When you are appearing in front of an administrative Board for any reason, understand the power that Board has over your client’s ability to earn a livelihood in their chosen profession. The following are five (5) tips for appearing at a Board hearings:
1. Familiarize yourself with the procedures of the Board in front of which you will be appearing. This can be accomplished by viewing the Board during a hearing prior to yours. The meetings are open to the public and the published agenda includes dates, times and locations are provided months in advance and can be found on the DBPR website. By viewing the Board at a hearing prior to your own, you can develop an understanding of the style, timing and procedures followed by the Board and will be better able to adhere to same at your own hearing.
2. Know the reason you are appearing, i.e., informal hearing to approve a settlement stipulation, consideration of a Petition for Declaratory Statement, or appeal of denial of licensure. Outline the issues that will be addressed at the hearing and do it quickly! The Board members are also professionals and they do not like listening to lawyers drone on about high level legal concepts. Get to the point. By preparing an outline of the issues to be addressed, you will be able to narrow the scope of your preparation to the decision points at hand. Be mindful that your hearing is not the only hearing scheduled before that particular Board during that session and any time you can streamline the process for the Board by providing direct, intelligent and succinct answers, you increase your chances of prevailing.
3. Be prepared to provide direct responses to questions. Be prepared to fully explain the issue with specific dates and events as well as documentary evidence if available. Do not attempt to “wing it” and provide hackneyed responses to the Board’s questions. They have heard every excuse you can imagine and many that you cannot. If you have taken steps to address a perceived deficiency, prepared to discuss those steps in detail and provide the reason for taking the steps. You cannot over prepare for an appearance in front of an administrative Board, but certainly, familiarity with the Board and the process is an incredible advantage.
4. Do not become angry during the hearing. While this may be hard in the face of various intrusive questioning, it is important to remain calm and continue to provide the outlined response you prepared to give. Even if you disagree with a Board member’s contention or statement, be respectful in your response and do not raise your voice. Remember, in almost every instance, you need the Board more than they need you and you need to show that you are professional and well-mannered in dealing with both other professionals (i.e., the Board members) as well as with the public in general. Also, and adverse ruling will have some form of appeal rights and you may eventually be back before that same Board. If you mouth off, they will remember you.
5. Finally, dress professionally. Remember this is a hearing in which other professionals are taking time from their everyday duties and jobs to assist the state in protecting the general public. The Board members rightfully take their duties seriously and it is in your best interest to show that you respect their time and efforts. Along with being prepared and respectful in answering, by dressing appropriately, you convey, before you even speak that you are taking the hearing seriously and that you recognize the serious nature of the business at hand. It is important that while the Board members are professionals and are to weight each situation on its merits, they are all human beings and many times people begin to make assumptions about individuals based on those individuals appearance. It is better to be overdressed for the occasion than regret your casual attire after the fact.
By following the above tips, you will be ahead of those who are unprepared and appear to be less than fully invested in the process. This will allow you to distinguish yourself from others appearing at administrative Board hearings and will show that you are a trustworthy individual who should be allowed to represent and serve the general public in your chosen field or profession.
Christopher M. Cobb is an A-V rated, board certified lawyer whose practice focuses on construction litigation, condominium law, and business litigation. Mr. Cobb was the 2017 Chairman of the Florida Construction Industry Licensing Board. Jimerson & Cobb, P.A. is an award winning law firm with a practice emphasis on litigation and specialized experience in the financial services, real estate development and construction, and manufacturing and distribution sectors. Jimerson & Cobb, P.A. has been named to the Jacksonville Business Journal’s 50 Fastest Growing Companies each year for the past four years, and in 2016 was honored as the 28th fastest growing company in the country. Mr. Cobb’s online profile can be found at: http://www.jimersoncobb.com/attorneys/christopher-m-cobb/
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|Remote sellers face new sales tax landscape post the U.S. Supreme Court’s Decision in Wayfair|
|By James Floyd (Adams and Reese, LLP)|
Historically, the Commerce Clause limited a state’s ability to require out-of-state retailers to collect and remit sales tax. The Supreme Court’s 1992 decision in Quill Corp. v. North Dakota held that such obligation could be imposed only on retailers who established a substantial nexus with the taxing state through their physical presence. With the explosion of e-commerce, several states passed legislation to impose the obligation to collect and remit sales tax on online retailers with no physical presence in a stated attempt to level the playing field for its brick and mortar retailers. The laws vary in the methodology used to redefine the necessary substantial nexus that triggers the sales tax obligation. In certain states, for example, laws require an out-of-state retailer to collect and remit sales tax if “cookies” are placed on an in-state resident’s web browser or contracts are entered into with in-state entities through “click through” agreements.
E-commerce retailers Wayfair, Overstock and Newegg challenged South Dakota’s expanded sales tax legislation, and on June 21, 2018, the United State Supreme Court issued a long-awaited opinion on the issue. In South Dakota v. Wayfair, Inc., et al., 585 U.S. ____ (2018), the Court overruled prior precedent and refused to strike down the South Dakota law under which remote sellers lacking a physical presence in the state are required to collect and remit sales tax. South Dakota’s law obligates remote sellers to collect and remit sales tax if they deliver more than $100,000 of goods or services into South Dakota or engage in 200 or more separate transactions for the delivery of goods or services into South Dakota, “as if” those remote sellers have a physical presence there. In overturning its previous rulings, the Court stated that physical presence is not a “necessary interpretation” of the Commerce Clause’s nexus requirement. By requiring physical presence, the Court’s earlier precedent “created rather than resolved market distortions,” and was arbitrary and formalistic, treating “economically identical actors differently.” In other words, the court found the physical presence rule was “unworkable” in light of modern e-commerce and the internet. The Court remanded the action for consideration of the remaining portions of the Commerce Clause analysis, namely whether the statute creates an undue burden on interstate commerce or unfairly discriminates.
While the Wayfair decision resolved the “physical presence” challenge to South Dakota’s statute, many questions remain:
1. The Court did not determine a practicable limit on what contacts would generally be sufficient to satisfy the Commerce Clause’s nexus requirement. Instead, the Court only found South Dakota’s law constitutional.
- Could a company doing only a minor amount of business in a particular state be obligated to collect and remit sales tax to that state?
- Would a state law without sales minimums similar to South Dakota be constitutional?
- Are state laws that attempt to impose sales tax on businesses through other types of contacts such as “click through” or “cookies” sufficient to withstand scrutiny?
2. Will states be able to retroactively collect sales tax from online sellers for prior years? South Dakota’s law did not apply retroactively, and therefore, the issue was never affirmatively addressed by the Court. The Court, however, noted the lack of retroactivity in the South Dakota law was relevant to consideration of the potential burden on sellers.
3. What to do with marketplace distributors like Amazon or eBay who serve as vehicles for individuals to sell goods? Will they be required to remit for small sellers that use their platform?
4. What if a state is not a member of the Streamlined Sales and Use Tax Agreement (“SSUTA”)? The SSUTA’s goal is to provide uniformity and reduce administrative and compliance costs arising from payment of taxes. The Court noted that South Dakota is a member. Many states, however, are not members, likely resulting in variances in tax laws that will complicate compliance.
In a post-Wayfair world, companies should take a fresh look at their obligations to collect and remit sales tax in each state in which they ship products or provide services. Many states already have regulations that require payment of sales taxes for online purchases where the seller does not have a physical presence in the state. Meanwhile, other states that do not have legislation imposing sales tax obligations on companies may pass laws implementing such requirements in light of Wayfair. Companies should also examine whether a particular state has a safe harbor provision that does not require collection of sales tax unless thresholds are met.
States’ compliance and enforcement efforts may also change post Wayfair. The potential for inconsistent and varying state and local tax laws could significantly increase compliance costs. The potential expense of complying with tens or hundreds of different taxing jurisdictions is daunting. In particular, start-ups or newly formed companies that conduct business over the internet could face significant barriers to entry and unexpected compliance costs that may hinder their growth and success. Whether an overly burdensome taxation scheme violates the Commerce Clause is unknown and the issue is likely to be raised in future litigation or through federal legislation. One thing remains certain - given the large increase in potential revenue now available to states, enforcement of sales tax laws and collection efforts are likely to increase.
James Floyd is an associate in the Jacksonville, Florida office of Adams & Reese LLP. He practices primarily in the business litigation group, where he represents and advises businesses in a variety of commercial disputes including breach-of-contract, fraud, professional negligence, insurance disputes, and real estate matters.
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|Three Years In: Has the New “Relevance and Proportionality” Standard of Rule 26(b)(1) of the Federal Rules of Civil Procedure Changed the Landscape of Federal Court Discovery?|
|Jeffrey S. York and J. Morgan Foster (Shutts & Bowen LLP)|
Three Years In: Has the New “Relevance and Proportionality” Standard of Rule 26(b)(1) of the Federal Rules of Civil Procedure Changed the Landscape of Federal Court Discovery or Are We Still Fighting Over What Is “Relevant” and “Reasonably Calculated to Lead to the Discovery of Admissible Evidence”?
Before December 1, 2015, every federal court litigator responding to discovery had a computer macro keyed in at the ready to spit out “Objection, the discovery sought is neither relevant nor reasonably calculated to lead to the discovery of admissible evidence.” And the inevitable discovery battle lines would be drawn from there.
Key Changes to Fed. R. Civ. P. 26(b)(1)’s Scope of Discovery
But on December 1, 2015, substantial changes to the provisions of Rule 26(b)(1) of the Federal Rules of Civil Procedure defining the scope of discovery were implemented, illustrated as follows (bold/underlining indicates added language, strikethrough indicates deleted language):
(1) Scope in General. Unless otherwise limited by court order, the
scope of discovery is as follows:
Parties may obtain discovery regarding any nonprivileged matter that is
relevant to any party’s claim or defense and
proportional to the needs of the case, considering the importance of the issues
at stake in the action, the amount in controversy, the parties’ relative access
to relevant information, the parties’ resources, the importance of the
discovery in resolving the issues, and whether the burden or expense of the proposed
discovery outweighs its benefit.
Information within this scope of discovery need not be admissible in
evidence to be discoverable.
the existence, description, nature, custody, condition, and location of any
documents or other tangible things and the identity and location of any
documents or other tangible things and the identity and location of persons who
know of any discoverable matter. For
good cause, the court may order discovery of any matter relevant to the subject
matter involved in the action. Relevant
information need not be admissible at the trial if the discovery appears
reasonably calculated to lead to the discovery of admissible evidence. All discovery is subject to the limitations
imposed by Rule 26(b)2(C).
Fed. R. Civ. P. 26(b)(1), as amended December 1, 2015.
“Proportional to the Needs of the Case” and Enumerated Considerations
Amended Rule 26(b)(1) now requires that in addition to the requirement that discovery be relevant to any party’s claim or defense, it must also be “proportional to the needs of the case,” and six enumerated considerations are included for courts to apply to determine whether discovery is “proportional:”
• the importance of the issues at stake in the action;
• the amount in controversy;
• the parties’ relative access to relevant information;
• the parties’ resources;
• the importance of discovery in resolving the issues; and
• whether the burden or expense of the proposed discovery outweighs its benefit.
Importantly, and many practitioners may not realize this, but all of these “proportionality” considerations (except for “the parties’ access to relevant information,” which is a newly added consideration) were previously listed in Rule 26(b)(2)(iii) and were required to be applied by a court, upon motion or on its own, to limit the frequency or extent of discovery provided under the Rules or local rules if these considerations were present in any given case. See Carr v. State Farm Mut. Auto Insurance Co., 312 F.R.D. 459, 463-4 (N.D. Tex. 2015) (discussing changes between old and new versions of Rule 26(b)(1)&(2)). Essentially, these five considerations were moved up into Rule 26(b)(1) and “the parties’ access to relevant information” was added as a sixth.
Regardless of whether five of the six “proportionality” considerations were already in the prior version of the rule, they were buried at the bottom of it, and clearly, the Advisory Committee that drafted the new Rule meant to emphasize a new discovery scope standard by featuring the “proportional needs of the case” as a requirement for legitimate discovery alongside the requirement that discovery be “relevant to any party’s claim or defense,” limitations to the old standards in large part to rein in discovery aggressiveness in the area of e-discovery. Fed. R. Civ. P. 26 advisory committee’s note (2015) (genesis of 2015 amendments arose at least partially out of a need to ensure proportionality in light of the advent and proliferation of e-discovery).
Deletion of “Relevant to the Subject Matter of the Action” and
“Reasonably Calculated to Lead to the Discovery of Admissible Evidence”
In a one-two punch, the Advisory Committee not only dropped in the “proportional needs of the case” standard into the forefront of Rule 26(b)(1), but deleted what had traditionally been the former battleground of discovery disputes. Prior to December 1, 2015, regardless of whether discovery sought passed the “relevant to any party’s claim or defense” test, a party could still obtain discovery upon a showing that it was “relevant to the subject matter involved in the action” and “reasonably calculated to lead to the discovery of admissible evidence.” See Carr, supra (citing prior language of Rule 26(b)(1)). Naturally, parties seeking discovery skipped over whether discovery was “relevant” to a claim or defense and asserted it fell within the broader scope of “relevant” to the subject matter of the action and “reasonably calculated to lead to the discovery of admissible evidence.” By the same token, parties resisting discovery lodged the standard objection that the discovery sought was “neither relevant nor reasonably calculated to lead to the discovery of admissible evidence.”
Pre-December 1, 2015 discovery disputes were thus decided by federal courts premised upon analyzing the answer to the question in any given case: “Is the discovery sought relevant to the subject matter involved in the action and reasonably calculated to lead to the discovery of admissible evidence?” If it was, the discovery was fair game without more. See, e.g., S.E.C. v. Brady, 238 F.R.D. 429 (N.D. Tex. 2006); In re Cooper Tire & Rubber Co., 568 F.3d 1180, 1188 (10th Cir. 2009) (discussing the two-tiered discovery process including “attorney managed discovery of information relevant to any claim or defense of a party” and “court-managed discovery that can include information relevant to the subject matter of the action”).
After December 1, 2015, however, these two standard phrases were no more. One could presume that these deletions along with the addition of the now-prominent “proportional needs of the case” standard signaled a radical departure from previous discovery concepts. Among other things, and as stated previously, in addressing the 2015 amendments to Rule 26(b)(1), the Advisory Committee recognized that the issue of the cost of discovery was “exacerbated by the advent of e-discovery” and acknowledged “the need for continuing and close judicial involvement in the cases that do not yield readily to the ideal of effective party management.” Fed. R. Civ. P. 26 advisory committee’s note (2015).
Post-December 1, 2015 Federal Court Application of New Rule 26(b)(1)
On December 1, 2018, the new version of Rule 26(b)(1) will have been in place for three full years. How have federal courts during that period analyzed the new Rule, and how has the addition (or, more accurately, the elevation) of the proportionality standard and eradication of the traditional “relevant to the subject matter” and “reasonably calculated to lead to the discovery of admissible evidence” language impacted how discovery disputes are framed and resolved by federal courts now as opposed to before December 1, 2015? The answer is that the case law is still developing on the issue. To date, commentators and jurists alike have concluded that some courts have gotten it wrong, and others have gotten it right, in terms of applying the new concepts set forth in the post-December 1, 2015 version of Rule 26(b)(1).
Courts that have gotten it wrong.
Some courts after December 1, 2015 have arguably ignored the new version of Rule 26(b)(1) by continuing to rely upon pre-December 1, 2015 precedent deciding discovery issues under the language of the old Rule.
For example, in Signatours Corp. v. Hartford, No. 14-1581 RSM, 2016 WL 2930435 (W.D. Wash. May 19, 2016), which pertained to a motion to compel production of documents in a copyright infringement case, the court did not discuss proportionality at all, only relevancy. Id., at *2. Then, after citing the text of the new Rule 26(b)(1) in full, the court nevertheless then defined relevancy as “relevant information for purposes of discovery is information ‘reasonably calculated to lead to the discovery of admissible evidence. . . . Surfvivor Media, Inc. v. Survivor Prods., 406 F.3d 625, 635 (9th Cir. 2005).” Id..
In other post-December 1, 2015 decisions, other federal courts deciding discovery scope issues and applying Rule 26(b)(1) have continued to cite to the United States Supreme Court case of Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340 (1978), where the Court decided a class action discovery dispute by squarely relying upon the old language of Rule 26(b)(1) it effect then but since deleted and characterizing the Rule’s “key phrase,” “relevant to the subject matter involved in the pending action,” as “construed broadly to encompass any matter that bears on, or that could reasonably lead to other matter that could bear on, any issue that is or may be in the case.” Id. at 351; see, e.g., Louisiana Crawfish Producers Association-West v. Mallard Basin, Inc., Civil No. 6:10-1085 c/w 6:11-0461, 2015 WL 8074260 at *2 (W.D. La. Dec. 4, 2015)(“The term ‘relevant’ in Rule 26 is ‘construed broadly to encompass any matter that bears on, or could reasonably could lead to other matter that could bear on, any issues that is or may be in the case”) (quoting Oppenheimer verbatim); see also United States ex rel. Shamesh v. CA, Inc., 314 F.R.D. 1, 8 (D.D.C. 2016) (“Like before, relevance is still to be construed broadly to encompass any matter that bears on, or that reasonably could lead to other matter that could bear on” any party’s claim or defense) (quoting Oppenheimer in part); Lightsquared, Inc. v. Deere & Co., 13 Civ 8157 (RMB)(JCF), 2015 WL 8675377 at *2 (S.D.N.Y. Dec. 10, 2015)(same). One commentator has labeled this “The Oppenheimer Problem” and reports that as of November 2017, multiple federal district court orders in multiple states still cite Oppenheimer to define the scope of discovery in Rule 26(b)(1). See Gregory L. Waterworth, Proportional Discovery’s Anticipated Impact and Unanticipated Obstacle, 47 U. Balt. L. Rev. 139,155-159, n. 201-208.
Courts that have gotten it right.
Other federal courts, however, have refrained from applying old law to the new Rule 26(b)(1) in post-December 1, 2015 discovery disputes and have attempted to engage in a meaningful analysis and prospective application of Rule 26(b)(1)’s new concepts along with the deletion of old standards that the Advisory Committee intentionally removed from the new Rule.
In Carr, cited supra, decided six days after the new Rule 26(b)(1) took effect, the court undertook a detailed discussion of the changes to Rule 26(b)(1) and determined that the changes did not alter the allocation of burdens upon the parties in showing that discovery is warranted by Rule 26(b)(1) or resisting discovery as outside the scope of the Rule. According to the Carr court: (i) the party seeking discovery must be prepared to make a showing “of many or all of the proportionality factors” in Rule 26(b)(1) to justify discovery; and, (ii) the party resisting discovery must be prepared to specifically object and show that the requested discovery “does not fall within Rule 26(b)(1)’s scope of proper discovery (as now amended). . . .” Id. at 468-9.
In Sibley v. Choice Hotels International, CV 14-634(JS)(AYS), 2015 WL 9413101 (E.D.N.Y. Dec. 22, 2015), where the plaintiff had sought onerous discovery and defended it as “reasonably calculated to lead to the discovery of admissible evidence,” the court noted that “Rule 26 now defines the scope of discovery to consist of information that is relevant to the parties’ ‘claims and defenses’” and that “the discretionary authority to allow discovery of ‘any matter relevant to the subject matter involved in the action’ has been eliminated.” Id. at * 2. The court then applied the proportionality standard to hold that the plaintiff’s extensive discovery requests were disproportional to the needs of the case and denied all pending motions to compel and closed discovery. Id. at *4-8.
Later, in 2016, the court in the multidistrict litigation In Re: Bard IVC Filters Products Liability Litigation, 317 F.R.D. 562 (D. Ariz. 2016), decided by Judge David G. Campbell, who was also the Chair of the Advisory Committee that advocated and designed the 2015 amendments to Rule 26, the court applied the relevancy and proportionality standards as set forth in Rule 26(b)(1) to the parties’ discovery dispute over electronically stored information (“ESI”) generated by foreign entities, to determine that the ESI was not relevant to a claim or defense because there were no foreign plaintiffs in the litigation and applied several proportionality considerations to determine that the ESI was of dubious importance in resolving the issues in the litigation and outweighed by the burden and expense imposed upon the producing party if required to produce the ESI requested. Id. at 566. As an aside, Judge Campbell also identified multiple cases decided in the latter part of 2016, at least 8 months after the implementation of the new version of Rule 26(b)(1), where courts were still using the “reasonably calculated to lead to the discovery of admissible evidence” language no longer set forth in Rule 26(b)(1) to define the scope of discovery, noting: “Old habits die hard.” Id. at 564, & n.1.
Similarly, in Cole’s Wexford Hotel, Inc. v. Highmark, Inc., 209 F. Supp. 3d 810 (W.D. Penn. 2016), after an in-depth critical analysis of cases still citing Oppenheimer and applying old law to post-December 1, 2015 discovery disputes, the court concluded that the party seeking discovery had not shown that the discovery was “relevant to any party’s claim or defense” and therefore determined that a proportionality analysis was not required. Id. at 823-33.
Case law from other jurisdictions is in accord. See Noble Roman’s, Inc. v. Hattenhauer Distrib. Co., 314 F.R.D. 304 (S.D. Ind. 2016) (information relevant to a claim or defense is not discoverable if not proportional to the needs of the case); Samsung Electronics America, Inc. v. Yang Kun Chung, 321 F.R.D. 250 (N.D. Tex. 2017) (in order to be discoverable, matter must be both relevant and proportional); Kehle v. USAA Cas. Ins. Co., Case No. 17-80447-CV-MARRA/MATTHEWMAN, 2017 WL 6729186 (S.D. Fla. Dec. 28, 2017) (same).
Relevance, Proportionality, and Application of Rule 26(b)(1): A Practitioner’s Takeaway
After three years, the new Rule 26(b) scope of discovery standards newly-minted as of December 1, 2015 have not produced any meaningful Federal Circuit-level decisions and only a handful of reported district court decisions specifically addressing the changes effected as of December 1, 2015. This is to be expected, and there are several unreported district court decisions that have applied the new Rule’s concepts, rightly or wrongly, to discovery disputes arising after the December 1, 2015 effective date of the amended Rule.
It is also true that, as the Chairman of the Advisory Committee propounding the new Rule 26(b)(1) has lamented, “old habits die hard.” In light of the continuing reliance by some courts on the Oppenheimer case and the formerly broad scope of discovery inherent in the prior language of the Rule permitting discovery “relevant to the subject matter involved in the action” and “reasonably calculated to lead to the discovery of admissible evidence,” some practitioners may conclude that discovery battles, for or against certain discovery, can still be waged in reliance on these old, abandoned standards.
But, the old language is old and gone, and the new language is what is in place. The case law will soon catch up to this fact. In the interim, what is the practitioner’s takeaway with respect to advocating for or resisting against discovery propounded in a federal case? As a party propounding discovery, a practitioner should be mindful at a threshold level of crafting discovery that can be defended as “relevant to any party’s claim or defense” in the case. If this threshold inquiry fails, the discovery will be disallowed. Next, a practitioner must also be prepared to defend outstanding discovery as meeting many or all of the considerations listed in Rule 26(b)(1) to satisfy a court that the discovery sought is “proportional to the needs of the case.” Otherwise, even discovery relevant to a claim or defense will not be allowed. Likely, this two-tiered analysis will take place mostly in cases where ESI discovery is a hot-button and involved issue.
As the party resisting discovery, a practitioner should not construe the new Rule 26(b)(1) requirements imposing limitations not present in the old Rule as carte blanche license to object to every discovery request under the Sun. Rather, as demonstrated by the Carr decision, the objecting party is obligated to object with specificity, not with boilerplate objections such as “not relevant or reasonably calculated to lead to the discovery of admissible evidence” as in the days of old before December 1, 2015. Rather, a party resisting discovery must be prepared to specifically object and inform the court, within the four corners of the objection: (i) why the discovery sought is not “relevant to any party’s claim or defense” in the action; and, (ii) why the discovery sought is not “proportional to the needs of the case,” with specific reference to all or some of the enumerated proportionality considerations set forth in Rule 26(b)(1).
Jeffrey S. York is a partner in the Jacksonville office of Shutts & Bowen LLP, where he is a member of the Business Litigation practice group.
Jeff has more than 20 years of experience handling complex business litigation matters for a vast array of corporate and individual clients. He is Martindale-Hubbell AV® rated and recognized as one of the Best Lawyers in America® in commercial litigation. Jeff is licensed to practice in all state and federal courts in Florida and Georgia and the United States Courts of Appeals for the Eleventh Circuit and District of Columbia.
J. Morgan Foster is an associate in the Jacksonville office of Shutts & Bowen, where she is part of the Business Litigation Practice Group.
Morgan obtained her law degree from the Florida State University College of Law. She worked as a law clerk during her time in school, and participated in an externship with two Circuit Judges at the Second Judicial Circuit of Florida in Tallahassee. Morgan also participated as a Pupil member of the Chester Bedell American Inn of Court from 2014-2015.
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