Is Your Claim Timely? The Third Circuit Clarifies

Brian J. Sommer, Esquire
bjs@muslaw.com

The Third Circuit's recently issued opinion in Pension Trust Fund for Operating Engineers v. Mortgage Asset Securitization Transactions, 2013 U.S. App. LEXIS 19166, (3rd Cir. 2013), clarified the use of the discovery rule to determine the timeliness of plaintiffs' cases alleging violations of the Securities Act of 1933.  Consequently, parties now have clearer guidance as to what standard the federal courts in Pennsylvania, and elsewhere within the circuit, are to apply and what factors they are to consider when determining whether or not to dismiss an investor's claim for being stale and untimely.

Two issues were before the Third Circuit.  First, were the plaintiffs required to affirmatively plead that they brought their claim within the statute's one-year statute of limitations and second, what standard was to be applied to make that determination.  As to the first issue, the Court concluded that the plaintiffs did not need to affirmatively plead that they filed their claims within the one-year statute of limitations because the statute, on its face, does not require the inclusion of an explanation of compliance with the same.  To the contrary, it was to be left to defendants to assert the statute as an affirmative defense.

As to the second issue, the Third Circuit determined that the discovery rule and not inquiry notice was to be applied when determining the timeliness of an investor's complaint.  Under the discovery rule, the clock begins to run on a plaintiff's claim when either (a) the plaintiff did, in fact, discover the operative facts, or (b) when a reasonably diligent plaintiff would have discovered the facts constituting the violation of the securities laws which gives rise to their claim.  Consequently, the discovery rule's standard is more flexible and is better situated for assessing a plaintiff's responsibility for determining if they have a case when the initial information available to them is more general in nature and thus further inquiry is necessary before a plaintiff can sufficiently determine that they have a claim and should pursue it.

By contrast, inquiry notice is less flexible because, through its focus on when the duty arose in a plaintiff to exercise reasonable diligence to uncover the basis for their claims, it starts the clock running at the earliest opportunity with less regard to the nature of the information available to the plaintiff.  Under this standard, if plaintiffs cannot demonstrate the requisite notice, then they are held to have constructive notice of all facts that could have been learned.  Although the two standards share some similarities, the difference is critical as inquiry notice serves to put a plaintiff on notice at the earliest opportunity possible.  Thus its application often results in more claims being held to be stale and untimely.  Stated differently, the discovery rule starts the clock from the point in time when the facts would lead a reasonably diligent plaintiff to investigate further, whereas inquiry notice starts the clock running when the plaintiff should have already discovered facts constituting the violation.

The Third Circuit's opinion also provides guidance as to how and when the particularity of the information about an investment in the public sphere can either begin the clock to run immediately on a plaintiff's claim, or when it merely requires plaintiffs to conduct further inquiry before the clock can begin to run out on their claims.  Thus, general information about the failures of a category or class of investments may give a plaintiff an extended period of time in which to discover the facts of the misrepresentations about a specific investment.  By contrast, if the investors' claims arise from a specific investment and there are news reports about that specific investment, its failures, misrepresentations, etc., then the time period between when plaintiffs ought to begin their investigation and when they ought to discover the operative facts from which their claims arise is much smaller.  Keep in mind, however, that the Court also clarified that the discovery rule can be tolled by reassurances given to investors that everything is fine with their investment if an investor of ordinary intelligence would reasonably rely on such reassurances to allay their concerns.

Advisors, broker-dealers, and investment firms need not wait until they are sued to put these lessons to good use as part of any defense.  The decision's clarifications can be used proactively to avoid litigation.  Investors look to and rely upon their advisors to give them honest, unvarnished, and objective advice and information about their investments.  Providing honest, objective information to investors puts the investors on notice earlier to investigate any claim that they might have and thus, from a risk management perspective, it is far wiser to provide investors with as specific information as possible on their investments than to provide subjective reassurances that can toll the ruling of the statute of limitations and thus expand the time investors have to file a claim.

Have Employees Working From Home?

Beware! As an employer, do you allow employees to work from home?  If so, you need to consider a number of issues before making this a reality.

Tips For Mitigating Claims For At-Home Worksites

Beth A. Slagle, Esquire
bas@muslaw.com

Telecommuting has many advantages for employers and employees. It reduces overhead costs for employers while giving employees the flexibility to structure their work days in a way that suits their schedule and family status. But at-home worksites are not without their disadvantages. Liability for off-site work premises claims can present a number of challenges for any discerning employer. Workers compensation laws as well as potential liability for third party claims create exposure for employers that they do not encounter in a typical office setting. 

Precautionary steps to lessen the chance of employee claims:

1. Create a Telecommuting Policy: Establishing clear ground rules for telecommuting employees is critical. The policy, preferably in written format, should outline the employer’s expectations for the employee during regularly scheduled work hours.
2. Office Area and Ergonomics: Employer and employee should agree what area in the employee’s home will be the designated office area. Confining the work area to a specific site in the home will mitigate against claims for damages or bodily injury that occur in other areas of the house. Additionally, an employer should verify that the work site is ergonomically correct. 
3. Site Check: Employers can be held liable for providing a safe work environment for employees, regardless of where that office is located. Thus, an employer is wise to do regular site checks, when appropriate, to determine if there are known and/or apparent hazards that should be removed or eliminated.
4. Fixed Hours: An employer and employee should agree on regular and fixed working hours as well as rest breaks. If there are no established fixed hours, an employee could arguably claim that an injury occurring at ANY time during the day is a workers compensation claim.
5. Job Description: The employee’s job description should be detailed so that there is no discrepancy as to what activity is part of the employee’s job and what is not. 

When an employee works from home, workers compensation boards and courts typically consider that the hazards encountered at home are also hazards of his or her employment. As such, eliminating much of the risk that goes along with at-home work sites is possible if a few basic steps are followed. A carefully designed telecommuting policy goes a long way towards mitigating those claims.

Wage and Hour Issues Involving Employees Working From Home

Elaina Smiley, Esquire
es@muslaw.com

Another issue employers must address for telecommuting employees is properly paying employees for all time worked.   Employers must accurately assess whether employees are exempt from the overtime requirements of the Fair Labor Standards Act.  Employers have the burden to keep accurate records and to properly pay non-exempt employees for all time worked, including time an employee spends working from home. 

There are several steps employers should take to mitigate the risk for non-exempt employees working from home:

1. Time Reporting Policy: Implement policies on time reporting to ensure that employees are being paid for all time worked, including time worked from home.  Have employees sign time sheets, and establish set procedures for employees to report any problems with pay and then promptly address such issues.
2. Policies and Training:  Have a policy that no one has authority to ask employees to report fewer hours than actually worked or to report more hours than worked.  Train supervisors to report to human resources when they suspect someone is working off the clock. Establish disciplinary procedures for employees who fail to report all time worked.  
3. Approval for Overtime: Establish procedures governing overtime hours such as employees are not permitted to work more than 40 hours per week without prior approval from their supervisor.  
4. Breaks:  Set rules regarding normal work hours and breaks and when employees are expected to be working at home.  Employers are required to pay for break times which are less than 30 minutes long.  
5. Attendance Policy: Establish an attendance policy and call-off procedure such as how and when employees must call off work.  Require a medical certification for certain medical related absences.  Set procedures, such as shutting off computer access, to ensure that when non-exempt employees are off work due to an illness or leave that they are not working from home.

Six Steps Necessary To Protect Your Intellectual Property

Brian J. Sommer, Esquire
bjs@muslaw.com

Through proper planning, companies can mitigate the risk of losing control over their copyrights, patents, and trade secrets.

1. Provide Clear Guidelines:   Define the circumstances in which an employee can work from home, what facilities/equipment they can or cannot use, and if using their own home computers - the how, when, and why to log into the office system.
2. Require an Intellectual Property Agreement:  Have key employees execute intellectual property ownership/assignment agreements to confirm company ownership.
3. Avoid Disclosure of Trade Secrets: This plan should include: (a) creating an inventory of what information the company wants to keep secret and confidential; (b) developing a matrix classifying who gets access to which secrets and how much access the employee gets; (c) determining which trade secrets can be digitalized and which are to remain in hard copy never to leave the office; (d) developing a written trade secret policy to be included in any agreements; (e) getting employees to sign non-disclosure agreements; and (f) designating a corporate security officer to oversee compliance.
4. Create a Plan for Departing Employees:  Cut off computer access before terminating an employee and create a record during the exit interview of a departing employee’s adherence to company policy that includes a signed statement that the employee has abided by the company's trade secret policies, has not retained trade secret information, has not and will not take any trade secret information with them.
5. Legal Fee Provisions:  Shift the burden to pay the company’s attorneys fees and costs in connection with any lawsuit for violations of the company’s trade secret policies onto the employee.
6. Liquidated Damages:  Damages from the theft of trade secrets are often hard to calculate.  Thus, as another way to discourage theft, companies should consider including liquidated damage provisions in its employment agreements  which establish fixed damages as a reasonable royalty for use of trade secrets.

The Affordable Care Act: A Look at the PPACA's Employer Shared Responsibility Payment Rules

ACBA Labor & Employment CLE | ACBA - Continuing Legal Education

February 4, 2014    Tuesday    12:00pm - 1:00pm

The Patient Protection and Affordable Care Act is a large and complex law enacting sweeping changes in the way health care will be provided in America.  The provisions of the PPACA are expansive as are its implementing regulations.  As it relates to employers, the PPACA contains various new requirements, in particular the Employer Shared Responsibility Payment provisions (the “Pay or Play” rules).  This program will focus on the comprehensive regulations regarding the Shared Responsibility payment provisions.  Practitioners representing employers will want to familiarize themselves with these provisions before they take effect in 2015.

SPEAKERS:

Jason Mettley, Esq.

Meyer Unkovic & Scott LLP

David E. Mitchell, Esq.

Campbell Durrant Beatty Palombo & Miller, P.C.

MODERATOR:

Julie A. Aquino, Esq.

Campbell Durrant Beatty Palombo & Miller, P.C.

Location: 

Conference Center Auditorium
920 City-County Bldg
414 Grant Street
Pittsburgh, PA 15219
Phone: 412-402-6704

Credit Hours 1.00   (1 hour of Substantive Credit)

Please click here for  more information or to register.

Business Workshop: Changes to the Commercial Code

 

Robert E. Dauer, Jr., Esquire
red@muslaw.com

Pennsylvania recently became the 27th state to adopt specific changes to Article 9 of the Uniform Commercial Code.

Article 9 governs transactions in which a debtor uses personal property -- anything other than real estate -- as collateral.

The article sets forth the rules regarding all aspects of secured loan transactions, including formation, documentation and foreclosure.

The American Law Institute and the Uniform Law Commission developed and approved the amendments to Article 9 in 2010, and the Pennsylvania Legislature enacted them as law earlier this year.

The amendments went into effect July 1.

The changes to Article 9 are modest.

The most important one involves clarification of the requirement that the name of an individual debtor on a financing statement be correct. If the debtor's name is wrong, the financing statement is ineffective and the secured party will lose its interest in the collateral to other secured creditors, buyers or the trustee in a bankruptcy.

The old Article 9 required that a financing statement contain the debtor's "individual name."

But what is an individual name?

An individual's driver's license, passport and birth certificate may all show different names.

Moreover, an individual may be known by her nickname or middle name.

Under the revised rule, a financing statement correctly states an individual debtor's name only if it contains the debtor's name as shown on the Pennsylvania driver's license or, if he or she does not have a driver's license, the identification card issued by the Pennsylvania Department of Transportation.

If a debtor has neither form of identification, the financing statement will be valid if it indicates the debtor's individual name or surname and first personal name.

While it seems like a small change, this clarification eliminates ambiguity and will protect many creditors from losing their interest in the collateral securing their loan.

For more information on this topic, please contact Robert E. Dauer, Jr. at red@muslaw.com.

This article originally appeared in the Pittsburgh Post-Gazette's Business Workshop section. Business Workshop is a weekly feature from local experts offering tidbits on matters affecting business. Read more: http://www.post-gazette.com/businessnews/2013/09/30/Business-workshop-Changes-to-the-Commercial-Code/stories/201309300007#ixzz2llRBMAVX

If Obesity is a Disease, Is It Also a Disability?

Beth A. Slagle, Esquire
bas@muslaw.com

Is obesity a disease, or merely a condition resulting from an unhealthy lifestyle?

The debate has raged for decades. Now the American Medical Association (AMA) finally put the question to rest in June when it voted in favor of Resolution 420, officially declaring obesity to be a disease, whether the cause is a physiological disorder or an unhealthy lifestyle choice. The AMA compared obesity to lung cancer, which is unquestionably considered a disease, whether the cause is harmful behavior like smoking or another factor.

While the resolution was intended to increase medical and community support for obese patients, it may have unintended consequences for employers. With the official classification of obesity as a disease, it may be easier for overweight employees to claim protection under the Americans with Disabilities Act Amendments Act (ADAAA).

Please click here to read the full article from Western Pennsylvania Healthcare News.

Default under the Operative Oil and Gas Lease?

Frank Kosir, Jr.
fk@muslaw.com

Caldwell v. Kriebel Resources Co., LLC, et al; 2013 PA Super 188, 2013 Pa. Super. LEXIS 1642 (2013)

This matter addressed the issue of whether a gas exploration company’s failure to extract gas from the Marcellus Shale formation while extraction of shallow gas took place constituted a default under the operative oil and gas lease.  On January 19, 2001, Terry L. Caldwell and Carol A. Caldwell (“Caldwells”) and Kriebel Resources (“Kriebel”) entered into agreement (“Agreement”) whereby the Caldwells leased “all oil, gas, surface and Drilling Rights ... owned or claimed by landowners” in a 105-acre parcel of real property (“Property”)  situated in Clearfield County, Pennsylvania.  The Agreement provided for an initial 2-year term commencing on April 1, 2001, which term would be extended if oil or gas were being produced.   Pursuant to the Agreement, Kriebel commenced shallow gas drilling on the Property, drilling which has consistently produced gas in paying quantities, thereby extending the term of the Agreement.  However, concerned that the gas reserves under the Property were not being fully utilized, the Caldwells commenced an action in the Clearfield County Court of Common Pleas seeking to terminate the Agreement on the basis of Kreibel’s failure to commence drilling activities in the Marcellus Shale formation.  The Defendants filed Preliminary Objection in the nature of a demurrer, which the trial court sustained, concluding that Kriebel had no obligation under the Agreement to commence exploration of the Marcellus Shale formation.

On appeal, our Superior Court affirmed.  In issuing its ruling, the court noted that the Caldwells were essentially asking the court to create an implied duty on the part of an oil and gas lessee to develop different strata.  However, a review of the Agreement found that it included language providing that no inference or covenant would be implied as to either of the parties.  Therefore, as the parties’ respective duties were plainly set forth in the Agreement, and the Agreement did not require Kriebel to develop different levels of strata, the court could not impose such a duty upon Kriebel or its assigns.  Furthermore, since there was no dispute that the shallow gas wells were producing revenue, Kriebel had satisfied its obligations under the Agreement and the Caldwells were not entitled to terminate the contract.