In Good Samaritan Medical Center v. National Labor Relations Board, the United States Court of Appeals for the First Circuit reversed the decision of the National Labor Relations Board (“NLRB”) requiring a hospital in Massachusetts to rehire an employee it had terminated for violating the hospital’s general civility policy when he challenged a union representative during her presentation about union membership.    In reaching this decision, the First Circuit closely scrutinized the record and concluded that the NLRB overlooked substantial evidence revealing that the hospital terminated the employee, not because he voiced opposition to union membership, but due to the rude and intimidating manner in which he did so.  The First Circuit recognized that the hospital was entitled to enforce its civility policy (which requires employees to treat coworkers with respect, patience and courtesy, and to refrain from abusive and disruptive behavior), and that the violating employee was not immune from termination solely because the discussion in which plaintiff was engaged when he misbehaved pertained to union membership.  This decision should provide some comfort for all employers who have hesitated to terminate an employee because the employee’s otherwise terminable misconduct is connected, even tangentially, to activity protected by the National Labor Relations Act (“NLRA”).

Section 7 of the National Labor Relations Act (“NLRA”) grants employees the right to form and join unions and the right to refrain from joining a union.  See 29 U.S.C. §157.  Section 8(a)(1) of the NLRA prohibits an employer from interfering with, restraining, or coercing employees in their exercise of these rights.  See 29 U.S.C.§ 158(a)(1).  Employers are expressly prohibited from discriminating “in regard to hire or tenure of employment or any term or condition of employment to encourage or discourage membership in any labor organization.” See 29 U.S.C. §158(a)(3).   Plaintiff Camille Legley (“Legley”) claimed that the hospital violated this provision of the NLRA when it terminated him after he challenged certain statements made by Darlene Lavigne (“Lavigne”), a long-term employee of the hospital, about union membership during his new hire orientation.  Specifically, when Legley understood Lavigne to say that he had to join the union, he objected by interrupting her and speaking to her in a rude and aggressive manner.  While the description of what transpired at the meeting varied from witness to witness, the record revealed that the conversation escalated with both Legley and Lavigne becoming irritated.  After the meeting, Lavigne contacted the hospital’s human resources representative and complained that Legley “really gave [her] a hard time.”  Lavigne also called her union delegate and complained that Legley was very rude during the orientation and repeatedly interrupted her.  Lavigne cried during this telephone call when reporting what had transpired.  Recognizing that Lavigne was extremely upset by how Legley spoke to her, the union delegate contacted the hospital’s facilities manager and reported “how disruptive Legley was at the meeting and how upset he got at Lavigne.”  Based on what was reported to them, the hospital’s manager and human resources manager, citing the hospital’s general civility policy, decided to terminate Legley for his disrespectful behavior during the orientation.

Following a hearing, an Administrative Law Judge (“ALJ”) concluded that both the hospital and the union violated Section 8 of the NLRA by terminating Legley’s employment.  In reaching his conclusion, the ALJ applied the holding in Atlantic Steel Co., 245 N.L.R.B. 814 (1979), which focuses on whether an employee engaged in conduct normally protected by the NLRA  loses the benefit of that protection because his conduct is “opprobrious” or offensive.  The ALJ concluded that Legley did not act in an overly aggressive manner or make any threatening or profane statements.  Instead, the ALJ concluded that “at most, both Legley and Lavigne raised their voices when he said he didn’t have to become a union member and she said that he did.”  The ALJ found that nothing that Legley said or did at the orientation compelled a conclusion that he lost the protection of the NLRA as a result of any misconduct on his part.  Concluding that Langley’s statements about union membership and the tone in which he made them could not be “disentangled,” the ALJ concluded that the hospital’s decision to terminate violated the NLRA.  The NLRB affirmed this decision and ordered the hospital to reinstate Langley and awarded Langley back pay damages.

The First Circuit reversed this decision.  Recognizing that Legley engaged in activity protected by the NLRA by asserting his right not to join a union, the First Circuit opined that “the question is whether Legley was discharged because of his protected activity or for some other, lawful, reason.”  Criticizing  the NLRB for ignoring “substantial evidence” that the hospital fired Legley because of his bad behavior, not due to his skepticism towards the union, the Court engaged in a thorough review of the testimony elicited during the hearing before the ALJ in an effort to determine what actually motivated the hospital’s decision.    The First Circuit found that the ALJ’s application of the holding in Atlantic Steel and focus on whether Legley’s misconduct was bad enough to warrant the loss of NLRA protection was a mistake.  Instead, the First Circuit reasoned that the ALJ should have applied the analysis set forth in Wright Line, 251 N.L.R.B. 1083 (1981), which focuses on whether an employee was terminated because of the protected conduct or because of his unprotected behavior.  Analyzing the testimony provided by the witnesses involved in the decision to terminate, the First Circuit found that “their only concern was Legley’s difficult interaction” with Lavigne at the orientation, not with the fact that he voiced skepticism about joining the union.   Accordingly, the First Circuit reversed the NLRB’s decision and upheld the hospital’s decision to terminate Legley.

The First Circuit’s decision in Good Samaritan Medical Center v. National Labor Relations Board should provide some comfort to employers confronted with difficult personnel decisions involving employee misconduct that is closely connected with conduct that is protected by the NLRA.   Following this decision, employers should find comfort in the fact that both the NLRB and the Courts should longer summarily conclude that a termination decision violates the NLRA simply because an employee’s misconduct is tied to protected activity.  Instead, this decision reflects the need for the NLRB and the Courts to closely scrutinize the facts underlying a termination decision to ascertain the actual motivation for the decision.  So long as the facts reveal that the employer reasonably believed the employee engaged in misconduct and the decision to terminate for such misconduct is consistent with the employer’s policies and practice, the employer’s business decision should be upheld.

shutterstock_633954278In a departure from the recently developing law, a federal court judge from the Eastern District of Pennsylvania ruled that the Americans with Disabilities Act (“ADA”) may cover gender dysphoria, and other conditions related to gender identity disorder – opening the door to expanding employment protections to some transgender individuals under the ADA.

In Blatt v. Cabela’s Retail, Inc., a transgender woman filed Title VII and ADA claims against her former employer claiming that she had suffered disability discrimination and retaliation based on her gender dysphoria. The plaintiff alleged that her gender dysphoria was characterized by clinically significant stress and substantially limited one or more of her major life activities, including but not limited to, interacting with others, reproducing, and social and occupational functions. The employer sought dismissal of the ADA claims on the grounds that gender identity disorders are expressly excluded from coverage under Section 12211 of the ADA. In response, the plaintiff argued that the ADA’s exclusion of gender identity disorders violated her equal protection rights under the Constitution.

What makes this case unique, and its holding potentially narrow, is its reliance on the legal “constitutional-avoidance canon” which, if possible, requires the court to interpret a statute in a way that avoids any constitutional questions raised by the plaintiff. Here, the court interpreted the ADA to allow plaintiff to proceed with her disability discrimination claim because “this interpretation allows the Court to avoid the constitutional questions raised” by the plaintiff.

In reaching its holding, the court noted that two categories of conditions are explicitly excluded from protection under the ADA: non-disabling conditions concerning sexual orientation and identity (e.g., homosexuality and bisexuality), and conditions associated with harmful or illegal conduct (e.g., pedophilia and kleptomania). The court narrowly interpreted these exceptions and found that the ADA does not exclude protection of “conditions that are actually disabling but that are not associated with harmful or illegal conduct” – such as the gender dysphoria affecting the plaintiff. This line of reasoning in many ways mimics how the ADA approaches pregnancy: while the ADA does not cover ordinary pregnancies, complications arising from the pregnancy can trigger ADA protection.

The court also noted that this interpretation is consistent with the Third Circuit’s mandate that the ADA is “a remedial statute, designed to eliminate discrimination against the disabled in all facets of society. . . [and] must be broadly construed to effectuate its purposes.” Thus, the judge wrote, any exceptions in the ADA “should be read narrowly in order to permit the statute to achieve a broad reach.” As such, the Court denied the employer’s motion to dismiss.

This is yet another case in a recent wave of litigation concerning protections for LGBT individuals under the federal employment statutes, including Title VII. This ADA challenge represents a different approach to gender equity litigation that will warrant close monitoring to see how it impacts the development of jurisprudence – particularly since it is possible that the court may not have ever engaged in this exercise had the plaintiff had not raised a constitutional argument. In the meantime, employers should be mindful of their duties under the ADA to accommodate disabling impairments, even if the underlying condition is arguably not covered by the ADA.

The intersection of employment and marijuana laws has just gotten cloudier, thanks to a recent decision by the Rhode Island Superior Court interpreting that state’s medical marijuana and discrimination laws. In Callaghan v. Darlington Fabrics Corporation, the court broke with the majority of courts in other states in holding that an employer’s enforcement of its neutral drug testing policy to deny employment to an applicant because she held a medical marijuana card violated the anti-discrimination provisions of the state medical marijuana law.

Background

Plaintiff applied for an internship at Darlington, and during an initial meeting, she signed a statement acknowledging she would be required to take a drug test prior to being hired.  At that meeting, Plaintiff disclosed that she had a medical marijuana card.  Several days later, Plaintiff indicated to Darlington’s human resources representative that she was currently using medical marijuana and that as a result she would test positive on the pre-employment drug test.  Darlington informed Plaintiff that it was unable to hire her because she would fail the drug test and thus could not comply with the company’s drug-free workplace policy.

Plaintiff filed a lawsuit alleging Darlington violated the Hawkins-Slater Act (“the Act”), the state’s medical marijuana law, and the Rhode Island Civil Rights Act (“RICRA”). The Hawkins-Slater Act provides that “[n]o school, employer, or landlord may refuse to enroll, employ, or lease to, or otherwise penalize, a person solely for his or her status as a cardholder.”  After concluding that Act provides for a private right of action, the court held that Darlington’s refusal to hire Plaintiff violated the Act’s prohibition against refusing to employ a cardholder.  Citing another provision that the Act should not be construed to require an employer to accommodate “the medical use of marijuana in any workplace,” Darlington contended that Act does not require employers to accommodate medical marijuana use, and that doing so here would create workplace safety concerns.  The court rejected this argument, concluding:

  • The use of the phrase “in any workplace” suggests that statute does require employers to accommodate medical marijuana use outside the workplace.
  • Darlington’s workplace safety argument ignored the language of the Act, which prohibits “any person to undertake any task under the influence of marijuana, when doing so would constitute negligence or professional malpractice.” In other words, employers can regulate medical marijuana use by prohibiting workers from being under the influence while on duty, rather than refusing to hire medical marijuana users at all.
  • By hiring Plaintiff, Darlington would not be required to make accommodations “as they are defined in the employment discrimination context,” such as restructuring jobs, modifying work schedules, or even modifying the existing drug and alcohol policy (which prohibited the illegal use or possession of drugs on company property, but did not state that a positive drug test would result in the rescission of a job offer or termination of employment).

The court thus granted Plaintiff’s motion for summary judgment on her Hawkins-Slater Act claims.

With respect to Plaintiff’s RICRA claim, the court found that Plaintiff’s status as a medical marijuana cardholder was a signal to Darlington that she could not have obtained the card without a debilitating medical condition that would have caused her to be disabled. Therefore, the Court found that Plaintiff is disabled and that she had stated a claim for disability discrimination under RICRA because Darlington refused to hire her due to her status as a cardholder.  Importantly, the court held that the allegations supported a disparate treatment theory.

Finally, while noting that “Plaintiff’s drug use is legal under Rhode Island law, but illegal under federal law [i.e. the Controlled Substances Act (the CSA”)],” the Court found that the CSA did not preempt the Hawkins-Slater Act or RICRA. According to the court, the CSA’s purpose of “illegal importation, manufacture, distribution and possession and improper use of controlled substances” was quite distant from the “realm of employment and anti-discrimination law.”

Key Takeaways

While this decision likely will be appealed, it certainly adds additional confusion for employers in this unsettled area of the law – particularly those who have and enforce zero-tolerance drug policies. The decision departs from cases in other jurisdictions – such as California, Colorado, Montana, Oregon, and Washington – that have held that employers may take adverse action against medical marijuana users.  The laws in those states, however, merely decriminalize marijuana and, unlike the Rhode Island law, do not provide statutory protections in favor of marijuana users.  In those states in which marijuana use may not form the basis for an adverse employment decision, or in which marijuana use must be accommodated, the Callaghan decision may signal a movement to uphold employment protections for medical marijuana users.

While this issue continues to wend its way through the courts in Rhode Island and elsewhere, employers clearly may continue to prohibit the on-duty use of or impairment by marijuana. Employers operating in states that provide employment protections to marijuana users may consider allowing legal, off-duty use, while taking adverse action against those users that come to work under the influence.

Of course, it remains unclear how employers can determine whether an employee is under the influence of marijuana at work. Unlike with alcohol, current drug tests do not indicate whether and to what extent an employee is impaired by marijuana.  Reliance on observations from employees may be problematic, as witnesses may have differing views as to the level of impairment and, in any event, observation alone does not indicate the source of impairment.  Employers choosing to follow this “impairment standard” are advised to obtain as many data points as possible before making an adverse employment decision.

All employers – and particularly federal contractors required to comply with the Drug-Free Workplace Act and those who employ a zero-tolerance policy – should review their drug-testing policy to ensure that it (a) sets clear expectations of employees; (b) provides justifications for the need for drug-testing; (b) expressly allows for adverse action (including termination or refusal to hire) as a consequence of a positive drug test. Additionally, employers enforcing zero-tolerance policies should be prepared for future challenges in those states prohibiting discrimination against and/or requiring accommodation of medical marijuana users.  Those states may require the adjustment or relaxation of a hiring policy to accommodate a medical marijuana user.

The Callaghan decision also serves as a reminder of the intersection of medical marijuana use and disability.  Here, the court allowed a disability discrimination claim to proceed even though Plaintiff never revealed the nature of her underlying disability because cardholder status and disability were so inextricably linked.

Finally, employers should be mindful of their drug policies’ applicability not only to current employees, but to applicants as well. In Callaghan, the court found the employer in violation of state law before the employee was even offered the internship or had taken the drug test.

Our colleague Sharon L. Lippett, a Member of the Firm at Epstein Becker Green, has a post on the Financial Services Employment Law blog that will be of interest to many of our readers in the health care industry: “Potential Impact of Trump Tax Reform Plan on Retirement Plans: What’s Old Could Be New Again.”

Following is an excerpt:

While Congress’ attention has most recently been focused on the American Health Care Act, that bill will most likely not be the only proposed legislation that Congress will consider in 2017. It appears that a tax reform plan (the “2017 Tax Proposal”), which could also have a wide-reaching impact, is also on the agenda.

If the 2017 Proposal includes provisions relating to defined contribution retirement plans sponsored by private employers, such as 401(k) plans, the impact will be felt by employers and investment managers, as well as by plan participants. While the Trump Administration has stated that the current version of its 2017 Tax Proposal does not reduce pre-tax contributions to 401(k) plans, speculation continues that a later draft may include curtailment of these contributions or other changes with a similar impact. …

Read the full post here.

An employee on an extended medical leave to recuperate from shoulder surgery posts pictures of his active Caribbean vacation. His employer is justified in terminating him, right?  Maybe not.

On April 19, 2017, the Eleventh Circuit reversed a trial court ruling and held that a former employee had raised a genuine issue of material fact regarding whether he was terminated in retaliation for using FMLA despite the former employee posting pictures from various vacations on Facebook during his time off of work to recuperate from surgery. This case, Jones v. Gulf Coast Health Care of Delaware, LLC, 2017 U.S. App. LEXIS 6766 (11th Circ. 2017), serves as a cautionary tale of why employers need to be careful and consistent while following proper steps when terminating employees—even in situations where the evidence of employee wrongdoing might appear obvious.

The plaintiff, Rodney Jones, was formerly employed as the activity director for the defendant, Accentia Health. His job included desk work as well as regular physical activity.  During his employment, Accentia Health approved Jones’s request for FMLA leave for shoulder surgery.  When Jones was unable to resume his full-time job duties at the end of the 12-week FMLA period, Jones requested a modified duty assignment, which was rejected by Accentia Health. Jones then requested additional time off from work, and Accentia Health granted another 30 days of “non-FMLA medical leave” in order to complete his physical therapy.

During the additional 30 days of leave, Jones twice visited the Busch Gardens theme park and went on a trip to St. Martin. Jones took pictures while on the vacations—including pictures of himself on the beach, posing by a boat wreck, and in the ocean—and then posted those pictures on Facebook.  An anonymous co-worker provided the pictures to management.  When Jones returned to work at the end of the additional time off, Jones was suspended by his supervisor and was later terminated. Accentia claimed that Jones was fired because he “(1) posted photos from his outings in violation of the company’s social-media policies, and (2) displayed poor judgment as a supervisor in posting these photos, even if this activity did not violate the company’s social-media policies.”

The appellate court found that Jones presented sufficient evidence that a fact-finder could conclude that Accentia Health’s stated reasons for the termination were pretexual. In arriving at this decision, the court focused on inconsistencies and contradictions in the reasons presented to Jones.  These inconsistencies included a formal termination letter that didn’t mention the Facebook photos, and failing to let Jones know at any time that he violated the company’s social media policy.

Employers need to be consistent when taking adverse action against an employee when FMLA is involved. This includes making sure that both written and oral communications to the affected employee are consistent and clear. Employers should take the time necessary to gather the proper facts and have better communication with the potentially affected employee before deciding upon a course of action and before letting the employee know what action might be taken. This will help ensure that any eventual adverse action is communicated clearly and consistently to the affected employee and will help limit the potential for allegations of a pretexual termination.

Our colleague Steven M. Swirsky, a Member of the Firm at Epstein Becker Green, has a post on the Management Memo blog that will be of interest to many of our readers in the health care industry: “OSHA Withdraws ‘Fairfax Memo’ – Union Representatives May No Longer Participate in Work Place Safety Walkarounds at Non-Union Facilities.”

Following is an excerpt:

On April 25, 2017, Dorothy Dougherty, Deputy Assistant Secretary of the Occupational Safety and Health Administration (“OSHA”) and Thomas Galassi, Director of OSHA’s Directorate of Enforcement Programs, issued a Memorandum to the agency’s Regional Administrators notifying them of the withdrawal of its previous guidance, commonly referred to as the Fairfax Memorandum, permitting “workers at a worksite without a collective bargaining agreement” to designate “a person affiliated with a union or community organization to act on their behalf as a walkaround representative” during an OSHA workplace investigation. …

Read the full post here.

On April 20, 2017, in Marshall v. The Rawlings Company LLC, No. 16-5614, slip op., (6th Cir. April 20, 2017) the Sixth Circuit Court of Appeals, which covers federal courts in Kentucky, Michigan, Ohio and Tennessee, for the first time adopted the cat’s paw theory of liability in the context of a retaliation claim brought under the Family Medical Leave Act (FMLA), 29 U.S.C. § 2601 et seq.  The term “cat’s paw” was coined by Judge Richard Posner of the Seventh Circuit and introduced in Shager v. Upjohn Co., 913 F.2d 398 (7th Cir. 1990) as a standard by which liability may be imputed to an employer for the discriminatory animus of a biased low-level supervisor.

In Marshall, the company demoted and ultimately terminated the plaintiff-employee after she used FMLA leave to address acute mental health problems.  The employee sued the employer for FMLA retaliation and other employment discrimination claims, alleging two lower-level supervisors exhibited bias against her because she had taken approved medical leave.  The two supervisors allegedly influenced the decision to demote the employee after she returned from leave and the ultimate decision to terminate her employment.  The district court granted summary judgment to the employer and dismissed all claims.

On appeal, a split panel of the Sixth Circuit reversed.  After holding the cat’s paw theory applicable to the employee’s FMLA retaliation claims, the majority determined:

  1. the cat’s paw theory of liability applies even in cases involving multiple layers of supervision between the employee and the ultimate decision-maker;
  2. an employee pursuing a claim of FMLA retaliation under a cat’s paw theory must satisfy the McDonnel Douglas framework and prove that the decision-maker was the cat’s paw of the biased low-level supervisor; and
  3. the honest-belief rule is not applicable in cat’s paw cases because the honesty of the decision-maker’s belief is not relevant to the issue of whether a biased low-level supervisor intentionally manipulated the decision-maker.  Nonetheless, an employer may still protect itself from liability under the cat’s paw theory by showing that the decision-maker conducted an independent investigation and determined that the adverse employment action was justified.

The decision in Marshall emphasizes the importance for employers of conducting reasonable, independent investigations to confirm disciplinary action is justified by objective evidence and clearly documented, particularly where a protected category or activity is implicated.  The ultimate decision-makers should not rely solely upon the recommendation of a subordinate supervisor when making employment related decisions, but rather should probe the subordinate supervisor’s rationale and reach an independent determination of the basis for the adverse action.

Since 2000, the number of wage and hour cases filed under the Fair Labor Standards Act (“FLSA”) has increased by more than 450 percent, with the vast majority of those cases being filed as putative collective actions.  Under 29 U.S.C. § 216(b), employees may pursue FLSA claims on behalf of “themselves and other employees similarly situated,” provided that “[n]o employee shall be a party plaintiff to any such action unless he gives his consent in writing to become such a party and such consent is filed in the court in which such action is brought.”  Despite the prevalence of FLSA collective actions, the legal implications and consequences of being a “party plaintiff” in such an action continue to be addressed.  The Court of Appeals for the Third Circuit recently examined this issue, in an opinion that may prove useful to defendants seeking to obtain discovery from all opt-in plaintiffs in a putative collective action.

In Halle v. West Penn Allegheny Health System, Inc. et al., the named plaintiff filed a putative collective action alleging defendants violated the FLSA by failing to properly pay employees for work performed during meal breaks.  The district court dismissed the collective action allegations based on a related case that had previously been decided, and dismissed the opt-in plaintiffs’ claims without prejudice to re-filing individual actions.  After the named plaintiff subsequently settled his individual claim, three opt-in plaintiffs sought to appeal the district court’s decision.

The Third Circuit held the opt-in plaintiffs lacked the right to appeal, because they were no longer “parties” after the collective action claims were dismissed. The opt-in plaintiffs retained the right to pursue their own individual claims, but they had no right to pursue an appeal from the named plaintiff’s individual final judgment.  The court held that, “[b]y consenting to join Halle’s collective action, these opt-in plaintiffs ceded to Halle the ability to act on their behalf in all matters, including the ability to pursue this appeal.”

In reaching this decision, the Third Circuit engaged in an extensive analysis of the “fundamental question arising from the procedural history of this case: just what is a ‘collective action’ under the FLSA?” Unlike a class action brought under Federal Rule of Civil Procedure 23, where all putative class members are bound by the court’s ruling unless they affirmatively “opt out” of the case, “the existence of a collective action depends upon the affirmative participation of opt-in plaintiffs.”  As the Third Circuit noted, “[t]his difference means that every plaintiff who opts in to a collective action has party status, whereas unnamed class members in Rule 23 class actions do not,” prompting “the as-yet unanswered question of what ‘party status’ means in a collective action.”

The court’s analysis of this issue, while tangential to Halle’s holding, highlights the tension inherent in the language of FLSA § 216(b), which, according to the Third Circuit, “raises more questions than it provides answers.  While the first sentence [of § 216(b)] sounds in representational terms (to proceed ‘in behalf of’ others ‘similarly situated’), the second sentence refers to those who file consents as ‘party plaintiffs,’ seeming to imply that all who affirmatively choose to become participants have an equal, individual stake in the proceeding.”  This tension is particularly significant with regard to defendants’ discovery rights in a collective action.

Under Rule 33 and Rule 34 of the Federal Rules of Civil Procedure, in the absence of any court-imposed limits, a party may serve interrogatories and document requests “on any other party.”  Based on this language, and FLSA § 216(b)’s designation of individuals who opt in to a collective action as “party plaintiffs,” arguably a defendant in a collective action should be entitled to serve discovery requests on each individual who opts in to the litigation, unless the court orders otherwise.  Despite this fact, the Third Circuit noted that, “[f]requently,” discovery in collective actions “focuses on the named plaintiffs and a subset of the collective group,” a limitation that may hinder defendants’ ability to present individualized defenses that may not be applicable to all opt-in plaintiffs.

While the Third Circuit did not fully resolve the question of what it means to be a “party plaintiff,” two aspects of the Halle decision may prove helpful to defendants seeking to assert their right to obtain discovery from all opt-in plaintiffs in a collective action.  First, as noted above, the Third Circuit emphasized that each opt-in plaintiff “has party status.”  This language, when read in conjunction with the Federal Rules of Civil Procedure regarding the scope of discovery, should support defendants’ right to seek discovery from “any other party,” including all opt-in plaintiffs.

Second, in holding that the opt-in plaintiffs had no right to appeal a final judgment involving the named plaintiff, the court emphasized the importance of “the language of their opt-in consent forms, which handed over all litigation authority to named plaintiff.” The Third Circuit noted that courts often rely on the language of the opt-in consent form “to determine which rights opt-in plaintiffs delegated to the named plaintiffs.”  Based on this guidance, defendants may wish to propose including language in the opt-in consent form stating that individuals who join the collective action may be required to provide documents and information, sit for depositions, and/or testify at trial.  Such language may help demonstrate that the opt-in plaintiffs were meant to be treated as active parties to the litigation, with the same rights and obligations as named plaintiffs.

While a court may ultimately exercise its discretion to impose limits on the scope of discovery, particularly in collective actions with a large putative class, the Third Circuit’s analysis in Halle may prove useful to defendants seeking support for their argument that they should be entitled to obtain discovery from each opt-in plaintiff.

Earlier this month, the U.S. Access Board announced that the U.S. Department of Veteran Affairs (“VA”) will adopt the new Accessibility Standards for Medical Diagnostic Equipment.

As mentioned in our January 31, 2017, blog post, “The U.S. Access-Board Releases Long-Awaited Final Accessible Medical Diagnostic Equipment Standards,” the Access Board released its new Accessibility Standards for Medical Diagnostic Equipment (the “MDE Standards”) at the beginning of the year, with an effective date of February 8, 2017.

Despite the February “effective date,” the MDE Standards do not impose any mandatory requirements on health care providers or medical device manufacturers until adopted by a federal enforcing authority.  According to the Access Board, the VA—pursuant to an agreement governing its acquisitions—will require new equipment it purchases to meet the MDE Standards.  It is important to note, however, that the MDE Standards still do not currently impose any mandatory scoping standards on health care providers or medical device manufacturers because the Access Board does not have authority to promulgate rules with the force and effect of law.

We will continue to provide updates as enforcing authorities adopt the MDE Standards either in whole or in part or otherwise modify them.

NuScience Corporation is a California corporation that researches, develops and distributes health and beauty products, including nutritional supplements. In 2009, NuScience obtained by default a permanent injunction in a California federal court against Robert and Michael Henkel, the nephew of a woman from whom NuScience purchased the formula for a nutritional supplement, prohibiting them from selling or marketing NuScience’s trade secrets.  Before the federal court injunction was entered, NuScience terminated the employment of David McKinney, NuScience Vice President of sales and marketing.  McKinney signed a separation agreement wherein he agreed to maintain the confidentiality of certain NuScience-related matters.  What followed might be good book material.

In June 2010, NuScience received an email from a third-party which included an email string between Robert Henkel and McKinney that caused NuScience to conclude Robert Henkel was violating the federal court injunction. Based on the emails, NuScience sued McKinney and Robert Henkel in California Superior Court for misappropriation of trade secrets, among other claims.  (“NuScience I”)  Robert Henkel again did not appear and the court entered a default against him in March 2011.

McKinney appeared in the state court action and was represented by Stephen E. Abraham.  McKinney filed a motion to compel further discovery responses from NuScience and a motion for sanctions against NuScience which NuScience initially opposed.  But before the motion was heard, NuScience filed a request for dismissal without prejudice. McKinney responded to the NuScience voluntary dismissal with a motion for attorney’s fees and costs under the Uniform Trade Secrets Act, California Civil Code Section 3426 et seq. (“UTSA”).  The trial court granted the motion for attorney’s fees, concluded the record showed subjective bad faith on NuScience’s part, and awarded McKinney the $32,842.81 he requested.

NuScience moved for reconsideration contending that after it took Henkel’s default, Henkel called NuScience’s attorney and said NuScience “better back off and leave [them] alone” and that Henkels thereafter began posting threats to publish NuScience’s trade secret formula on the Internet. NuScience’s attorney reported the threat to the FBI, which informed him that it had assigned an agent to investigate and the pending investigation should remain confidential.  NuScience asserted that Henkel then told NuScience’s attorney that he “would release NuScience’s formula to the world unless [NuScience] dismissed this lawsuit” and “cease all enforcement of the federal judgment against the Henkels.”  NuScience asserted that only later did the FBI “reluctantly acquiesce[ ]” and allowed NuScience to discuss the investigation.

The court denied the motion for reconsideration.

NuScience appealed the attorney’s fees award and the Court of Appeal reversed the decision of the lower court. The Appellate Court found that the email exchange between McKinney and Henkel on which NuScience I was premised was evidence that they were engaged in internal experimentation with NuScience’s trade secret formula and further stated McKinney had been using the samples. The court found this was sufficient evidence of actual or threatened misappropriation under the UTSA.  The court further found that the email exchange was evidence that McKinney intended to use the NuScience customer list to market to buyers in Asia and that since McKinney was unlikely to have derived information about customers interested in the formula other than through his employment with NuScience, a trier of fact could conclude McKinney intended to use the information he derived from NuScience’s customer list to compete.

The day after the trial court awarded fees under the UTSA in NuScience I, McKinney filed a malicious prosecution action against NuScience and was represented again by Stephen Abraham (“NuScience II”). NuScience filed a motion to strike under California’s Anti-SLAPP (Strategic Litigation Against Public Policy) statute.  The trial court granted the motion, and rejected McKinney’s claim that the dismissal prior to the hearing on the discovery motion was a favorable determination on the merits, noting “undisputed evidence… that the case was dismissed in response to extortionist threats.”  The court awarded NuScience attorney’s fees of $129,938.75.  The order was affirmed on appeal.

NuScience then filed an action against McKinney, Abraham and his law firm, and two other individuals in March 2014 alleging malicious prosecution and intentional interference with contractual relations against Abraham. Abraham responded with special motions to strike the causes of action.

Abraham attacked the intentional interference cause of action under the California Anti-SLAPP statute on the grounds that the conduct Abraham was alleged to have engaged in – the filing of declarations in federal and state court lawsuits that were signed by McKinney – is protected conduct. The trial court, and subsequently the Court of Appeal, concluded there could be no breach of contract absent a disclosure or public disparagement and the disclosure/disparagement NuScience alleged was Abraham’s public filing of McKinney’s declarations. As such, it was protected activity.

The trial court also granted Abraham’s SLAPP back action in the malicious prosecution claim. The Court of Appeal agreed, finding that NuScience had not demonstrated that the underlying malicious prosecution claim was initiated with malice because, in part, the malicious prosecution was alleged against a former adversary’s attorney, and not the former adversary.  The court held that malice harbored by an adversary may not be attributed to its attorney.  NuScience tried to identify additional evidence of Abraham’s own malice on appeal asserting, in part, that Abraham “told NuScience that he intends to destroy NuScience,” but the court pointed out that the actual evidence stated “NuScience will be out of business in six months” and “NuScience will be done in six months,” which the court stated suggested, at most, that Abraham believed that litigation would be successful and that NuScience’s demise was imminent, “not that he intended to cause its demise.”  The Court of Appeal affirmed the order dismissing the claims against Abraham and affirmed the award of Abraham’s attorney’s fees of $99,595.00.

While the initial trade secret dispute between the parties here was relatively straightforward, this case is worth highlighting because of the extensive litigation that followed. Despite the company’s legitimate interest in protecting its threatened trade secrets, there were certainly unintended consequences as a result of the company’s vigorous advocacy to protect its interests.  NuScience became embroiled in litigation spanning the course of the next eight years, itself even becoming the defendant to a lawsuit.  This serves as a cautionary tale and a reminder of the inherent risk to engaging in litigation.

The case is NuScience Corp. v. Abraham, B264334 (Ca. Ct. of App. 2/1/17).