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Table ofContents

The articles contained herein are for informational purposes only and are not intended to be the basis for decisions in specific situations nora substitute for legal counsel. Copyright © 2011 USLAW NETWORK, Inc. All rights reserved.

From the Chair’s Desk Page 1

FEATURES:

Personal Jurisdiction: A Casualty Of Global Commerce? Page 2

Navigating Discovery Abroad: How to Obtain Discovery of Witnesses and Materials Located Outside the United States Page 4

International Service of Process Page 6

Did the Supreme Court Kill Consumer Class-Actions? Page 9

Consumer Fraud Class Actions: Come Out Swinging or Keep Your Powder Dry? – Considerations When Responding to the Consumer Fraud Class Action Complaint Page 10

Compliance with Federal Safety Standards Does Not Bar State Tort Claims – Williamson & Pre-Emption Defense Page 12

Home Field Advantage…In the Cloud Enterprise Risk and Best Practices in the Cyber World Page 14

Swinging for the Fences: Becoming Litigation Spend Sabermetricians Page 16

Transactional Alcoholic Beverage Law – The Other Side of the Bar Page 18

A Medicare Q & A with Tom Thornton, National CMS Compliance Counsel Page 20

Beyond Paper: Keys for Effective eDiscovery Page 22

What the New ADAAA Regulations Mean for Businesses Page 24

Playing With Fire: Avoiding Ethical Pitfalls in “Burning Limits” Policies Page 26

Underwriting A Whole Different Risk: When the Excess Insurer Has A Duty To Defend Page 28

The FDCPA Minefield: Exposure for Debt Collecting Attorneys Under the Fair Debt Collection Practices Act 0

The Collateral Source Rule/Tax Code/Budget Deficit Nexus: Is it Time to Amend IRS Section 104(a)(2)? Page 32

Your Rapid Response Team and Discovery: How to Avoid Producing Your Investigative Team and File Page 34

A Refresher for Boards of Directors Page 36

DEPARTMENTS:

Successful Recent USLAW Law Firm Verdicts Page 38Firms on the Move Page 40Spotlight on Partners Page 44

About USLAW Page 42USLAW Membership Reference List Page 43

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CuttingEdge Directories.

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INTRODUCING AN-ALL-NEW WAY TOCommunicate with USLAW Membersand our Client FriendsThis Fall, USLAW launches the ultimate tool for communicating with your professional networkand sharing information instantly – right from your desktop, laptop, tablet, or mobile device.

Attorney-to-attorney and attorney-to-client networking are the most valuable benefits of your firm’sUSLAW membership. This brand new feature that will enable you to correspond like never before.

What is it? A new online community and private social network called USLAW Connect that givesyou the power to instantly share information, exchange documents, create topic-specific groups, reachout to colleagues prior to USLAW events and much more.

Our member directories will expand to provide you the much needed information to connect in-stantly with colleagues with common interests or the necessary skill set to immediately manage yourclients’ needs.

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U S L A W www.uslaw.org 1

F R O M T H E Chair’s Deskwww.uslaw.org

JILL ROBB ACKERMANBaird Holm LLP

Omaha, NE

MARK S. BARROWSweeny, Wingate & Barrow,

P.A.Columbia, SC

LEW R. C. BRICKERSmithAmundsen LLC

Chicago, IL

JOHN D. CROMIEConnell Foley LLP

Roseland, NJ

AMI C. DWYERFranklin & Prokopik, PC

Baltimore, MD

RICHARDS H. FORDWicker Smith O'Hara

McCoy & Ford P.A. Orlando, FL

NEIL A. GOLDBERGGoldberg Segalla LLP

Buffalo, NY

KEVIN J. GRAMLINGKlinedinst PCSanta Ana, CA

J. MICHAEL KUNSCHSweeney & Sheehan, P.C.

Philadelphia, PA

THOMAS L. OLIVER, IICarr Allison

Birmingham, AL

ROGER M. YAFFE EXECUTIVE [email protected]

(800) 231-9110 Ext 1

RICHARD P. MAGRATHGLOBAL DIRECTOR, STRATEGIC PARTNERSHIPS

[email protected](404) 409-6789

5905 NW 54th Circle • Coral Springs, FL 33067Phone/Fax (800) 231-9110

As we prepare to close out the ten-year opening chap-ter in our NETWORK’S young history...it is easy, per-haps even expected, for one to sit back and eye theorganization's accomplishments. But as successfulbusiness men and women, we know that few successes

sustain the test of time while in a state of non-motion. Snooze you losecomes to mind.

There will be no snoozing as we embark on our Next 10 years. There ismuch to be done to ensure that USLAW NETWORK continues to thriveand ensure that our member firm's clients receive the finest legal rep-resentation possible. Our successes are not fleeting, but rather compo-nents of a strong foundation for growth.

NEW FACES IN THE NEXT 10. Diversity is key to our future growthand should be a cornerstone within our NETWORK’S foundation. It isimperative to the organization's future success to position ourselves asan inclusive organization, comprised of individuals that mirror the di-versity of the communities in which we serve. From a purely economi-cal standpoint, diversity makes good business sense. But USLAWNETWORK’S ultimate goal for achieving diversity must primarily re-volve around the simple, but humanistic aspect that inclusion is right...and exclusion is wrong. Right vs. Wrong...that’s what we do.

Already guidelines and initiatives are being written to help shape thedirection our organization will travel towards achieving diversity.Unprecedented in its scope, these initiatives address diversity issues asthey relate to the individual firms, our practice groups, our member-ship, and our clients.

STRONGER TIES WITH CORPORATE COUNSEL. Perhaps some ofour “biggest fans” are the in-house corporate counsels of the world.More than any other market segment, they “get” what we do. They seeour value and understand our worth. Through new services and tar-geted educational events, USLAW NETWORK will focus on nurturingand growing these relationships between our membership and the in-house counsel community.

THE NETWORK WITH HEART. It has become more and more ap-parent our very real, and expected, obligation as global citizens to giveback to our communities. Our stepped-up efforts in supporting statechapters of Special Olympics has made “giving back” a very real part ofour NETWORK. The Next 10 will be different only in our goal to in-tensify these efforts.

We look forward to Our Next Ten and I'm proud to lead us in this nextchapter of USLAW NETWORK.

Sincerely,

Sheryl J. WillertIncoming Chair, USLAW NETWORK, Inc.

Editor/Publisher ROGER M. YAFFE

Art Director JEFF FREIBERT • COMPASS CREATIVE

USLAW NETWORK CORPORATE OFF ICERS

ROGER M. YAFFE, EXECUTIVE DIRECTORUSLAW NETWORK, Inc.

Coral Springs, FL

BOARD OF DIRECTORS

JOHN E. HALL, JR., CHAIRHall Booth Smith & Slover, P.C.

Atlanta, GA

SHERYL J. WILLERT, VICE CHAIRWilliams Kastner

Seattle, WA

EDWARD G. HOCHULI, SECRETARY-TREASURERJones Skelton & Hochuli, P.L.C.

Phoenix, AZ

BRADLEY A. WRIGHT, ASSISTANT TREASURERRoetzel & Andress, LPA

Cleveland, OH

C. ERIK GUSTAFSON, DIRECTOR AT LARGELeClairRyan

Alexandria, VA

JEFFREY L. O'HARA, INTERNATIONAL EXPANSION DIRECTORClyde & Co US LLP

Florham Park, NJ

RONNIE MUSGROVE, EMERGING MARKETS DIRECTORCopeland, Cook, Taylor & Bush, P.A.

Ridgeland, MS

MICHAEL R. SISTRUNK, IMMEDIATE PAST CHAIRMcCranie, Sistrunk, Anzelmo, Hardy,

McDaniel & Welch, PCNew Orleans, LA

MARK A. SOLHEIM, CHAIR EMERITUSLarson • King, LLP

St. Paul, MN


Assessing where jurisdiction lies, andunder what circumstances, is a consider-ation of primary importance to businessesand their insurers. For the past twenty-five years following the plurality decisionof the United States Supreme Court inAsahi Metal Industry Co. v. SuperiorCourt of California, 480 U.S. 102 (1986), itappeared that product manufacturerswere headed toward a rule by which theywere subject to jurisdiction wherever theirproducts were sold and/or used. Thisissue has been exacerbated by global ex-pansion of manufacturing and the dema-goguery against foreign-made goods. OnJune 27, 2011, the Supreme Court of theUnited States issued two decisions, in J.McIntyre Machinery, Ltd. v. Nicastro1 andGoodyear Dunlop Tires Operations, S.A.v. Brown,2 which offer much needed reliefto those concerned about the expansionof personal jurisdiction.

OVERVIEW OF PERSONAL JURISDICTIONCentral to the determination of personal jurisdic-

tion is the Due Process Clause of the FourteenthAmendment to the United States Constitution. InInternational Shoe Co. v. Washington, 326 U.S. 310(1945), the Supreme Court confirmed that pursuantto the Due Process Clause a state court may exercisepersonal jurisdiction over a non-resident defendantonly if there exists “minimum contacts” between thedefendant and the forum state. Id. at 316. These “min-imum contacts” must rise to a sufficient level so thatsubjecting the defendant to jurisdiction in the forumstate does not offend “traditional notions of fair playand substantial justice.” Id. As the Supreme Court lateraffirmed, affording foreign defendants fair warningthat a particular activity may subject them to the juris-diction of a particular sovereign permits those entitiesto structure their conduct “with some minimum as-surance as to where the conduct will and will not ren-der them liable to suit.” Burger King Corp. v. Rudzewicz,471 U.S. 462, 472 (1985).

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Jurisdiction over a nonresident is clas-sified as either specific or general. Specificjurisdiction exists where the lawsuit arisesout of, or is related to, the defendant’s con-tacts with the forum. General jurisdictionexists when the activities of a nonresident inthe forum state are substantial, continuousand systematic. Typically, specific jurisdic-tion is easier to assess and comprehend, andgeneral jurisdiction much more difficult toestablish.

THE ASAHI PROBLEMThe erosion of confidence in assessing

jurisdiction in the global marketplace datesto the decision in Asahi. The facts of thatcase seemed innocuous enough. A Japanesecomponent part manufacturer sold tirevalve assemblies (in Japan) to a Japanesetire manufacturer, which sold the tiresthroughout the world, including the UnitedStates. One such tire was alleged to havecaused a motorcycle accident in California.What remained when the case went to theSupreme Court was a third party action be-tween the tire manufacturer and the com-ponent part supplier.

Although the Supreme Court unani-mously agreed that there was no jurisdictionover the component part manufacturer inCalifornia, the Court could not agree on theproper test to assess jurisdiction. Deliveringthe opinion of the Court, Justice O’Connorwrote that “the placement of a product intothe stream of commerce, without more, isnot an act of the defendant purposely di-rected toward the forum state.” 480 U.S. at112. However, in his concurring opinion,Justice Brennan held that “as long as a par-ticipant in this process is aware that the finalproduct is being marketed in the forumstate, the possibility of a lawsuit there can-not come as a surprise.” Id. at 117.

Courts struggled to assess jurisdiction inthe uncertainty created by the plurality de-cision in Asahi, with some courts followingthe O’Connor “stream of commerce plus”test and others simply requiring the Brennan“stream of commerce only” test. This co-nundrum reached a crescendo in a pair ofstate court decisions from New Jersey andNorth Carolina which threatened exposingmanufacturers to unbridled jurisdiction.

NICASTRO V. J. MCINTYREMACHINERY

Nicastro involved a worker who was in-jured while using a recycling machine man-ufactured by a UK company in England.The machine was sold and shipped to an

unaffiliated exclusive distributor in Ohio,which sold it to the plaintiff’s New Jerseyemployer. Although the product could besold in any state, there was no evidence thatthe manufacturer targeted New Jersey. TheNew Jersey Supreme Court held that juris-diction exists over “a foreign manufacturerthat places a defective product into thestream of commerce through a distributionscheme that targets a national market,which included New Jersey.” Nicastro v.McIntyre Machinery America, Ltd., 201 N.J. 48,987 A.2d 575, 589 (2010). The Court af-firmed its intent to shape jurisdictional lawto reflect the “new reality” that in the globalmarketplace, trade knows few boundaries.Further, the Court advised that foreignmanufacturers would simply have to pro-cure insurance to cover this “new reality.”

The United States Supreme Courtflatly rejected the expansion of personal ju-risdiction portended by the New Jersey de-cision. More importantly, the majorityrejected the stream of commerce test enun-ciated in Asahi, which had elevated foresee-ability as the “touchtone of jurisdiction.”Instead, the Nicastro Court returned to theInternational Shoe understanding of personaljurisdiction, mandating that the principalinquiry “is whether the defendant’s activi-ties manifested an intention to submit tothe power of a sovereign.” 131 S.Ct. at 2788.Thus, it is the defendant’s action, not his ex-pectations, which empower a Court to sub-ject it to jurisdiction. Since the UKmanufacturer in Nicastro had not engagedin conduct purposely directed at New Jersey,there could be no jurisdiction over that en-tity in New Jersey.

Unfortunately, Justices Breyer andAlito did not believe Nicastro presented agood opportunity for the Court to fully ad-dress the implications of global commerceon the personal jurisdiction issue, and con-curred only in the result. The larger issueremains undecided.

BROWN V. GOODYEAR DUNLOPTIRES OPERATIONS, S.A.

Brown involved two minors from NorthCarolina who were killed in a bus accidentin France, which was allegedly caused by adefective tire manufactured by a Goodyearaffiliate in Turkey. Plaintiffs filed suit inNorth Carolina against Goodyear Tire andRubber Company and a number of its for-eign affiliates, including Goodyear Turkey.The affiliates each challenged personal ju-risdiction.

Since the incident did not occur in

North Carolina, the North Carolina Courtof Appeals had to assess whether there wasgeneral jurisdiction over the Goodyear af-filiates. Each of the affiliates is a whollyowned subsidiary of Goodyear Tire andRubber Company (which consented to ju-risdiction) and use the Goodyear distribu-tion system to sell tires. Although their tireswere primarily manufactured for foreignmarkets, some of their tires were distributedin North Carolina. Boldly going where nonehad gone before, the Court applied theAsahi “stream of commerce” to general ju-risdiction and held that the affiliated weresubject to suit in North Carolina.

Writing for a unanimous SupremeCourt, Justice Ginsberg rejected the notionthat a foreign corporation is subject to gen-eral jurisdiction merely because other enti-ties distribute, in the forum state, productsplaced into the stream of commerce by thedefendant. The decision reaffirmed that inorder to find general jurisdiction over anentity, there must be “continuous and sys-tematic general business contacts” betweenthe entity and the forum.

CONCLUSIONNicastro and Brown confirm that the

constitutional underpinnings of personaljurisdiction remain intact and have notfallen prey to the loud claims of the plain-tiff’s bar. Unfortunately, Nicastro, like Asahibefore it, is only a plurality decision.Although the Supreme Court has rejectedthe Asahi stream of commerce test, there isno conclusive determination of the effect ofglobal manufacturing and sales.

Litigating jurisdictional issues can beexpensive and tedious. Since this fight iswaged at the beginning of the lawsuit,recordkeeping is essential. Manufacturersneed to know where they do business, notonly with respect to manufacturing, mar-keting and sales, but also where their em-ployees travel. The more informationavailable to defense counsel and the Court,the easier the decision will be.

J. Michael Kunsch is apartner at Sweeney &Sheehan in Philadelphia,where his practice involvesthe defense of matters in-volving product liabilityand commercial litigation.He currently serves on the

USLAW Board of Directors and is the pastChair of the USLAW product liability practicegroup. He can be reached at [email protected]. 1 131 S.Ct. 2780 (2011).

2 131 S.Ct. 2486 (2011).


Today, there is an ever-present need toobtain discovery from people or organiza-tions who are involved in disputes withinthe United States, but located in foreign ju-risdictions. Lawsuits frequently arise wherethe need to obtain evidence from sourceslocated abroad is critical to a case. This ar-ticle will address the practical issues in-volved in obtaining discovery from peopleand organizations located abroad for pur-poses of proceedings in the United States.It will examine situations where the personfrom whom evidence is sought is subject tothe court’s jurisdiction, as well as how toproceed when a party is not subject to thecourt’s jurisdiction.

When discovery is being sought from aperson or organization who is a party to theaction and located abroad, and thus subjectto the court’s jurisdiction, the process iscomparable to obtaining discovery from aparty located within the United States. Stateand federal discovery rules apply and willgovern requests, production of documents,and the taking of depositions. Generally,Federal Rule of Civil Procedure 26 detailsgeneral discovery rules to be followed,

Federal Rule of Civil Procedure 30 describesthe procedure for taking depositions, andFederal Rule of Civil Procedure 34 governsproduction. State discovery rules and theFederal Rules of Civil Procedure allow acourt to order persons located outside ofthe United States to produce documentsand attend depositions in the United Statesso long as that person is subject to the per-sonal jurisdiction of the court. Additionally,a party can obtain discovery from certainnonparties located abroad. Federal Rule ofCivil Procedure 45 allows a party to sub-poena documents from a nonparty witnessand potentially subpoena a witness for dep-osition if that nonparty is located within theterritorial jurisdiction of the court or has aplace of business in the United States.

Alternatively, when seeking to obtainevidence from a person or organization lo-cated abroad that is not subject to thecourt’s jurisdiction, the process begins witha determination as to whether the othercountry has consented to be bound by theHague Convention of 18 March 1970 on theTaking of Evidence Abroad in Civil andCommercial Matters (“Convention”).1 The

Convention was created to help parties ob-tain evidence in both civil and common lawlegal systems, and most signatories to theConvention allow some form of discoverywhen dealing with cross-border disputes. Todetermine whether a country has consentedto be bound by the Convention, one shouldconsult the Hague Conference on PrivateInternational Law website.2 A country mustbe a party to the Convention in order to bebound by the Convention, as opposed tojust a member of the Hague Conference.3

If the discovery originates in a countrythat is not a party to the Convention, LettersRogatory will typically be used to obtain ev-idence instead of the Convention. LettersRogatory is one of the oldest discovery pro-cedures used to conduct discovery abroad.The process involves applying to the UnitedStates court where the action is pendingand requesting that that court send a formalrequest for assistance, or Letters Rogatory,directly to the foreign court. The LettersRogatory can also be requested throughdiplomatic channels. Once the foreigncourt or foreign authority receives the re-quest, it issues the Letters Rogatory under

Friedrich W. Seitz and Maria A. Starn Murchison & Cumming, LLP

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seal and conducts the discovery pursuant tothe specific request of the petitioning party.It is important to note that the foreign courtis under no legal obligation to issue LettersRogatory and, thus, should only be usedwhere discovery under the Convention can-not be obtained.

When the evidence sought is located ina country that is a party to the Convention,that country has agreed to be bound by theConvention and a legal obligation doesexist. These countries are consideredContracting States and have “consented tobe bound by the treaty, whether or not thetreaty has entered into force.”4 TheConvention provides a mechanism to ob-tain evidence located in these ContractingStates in both civil or commercial matters.Proceeding under the Convention is themost frequently used procedure, as it is lesstime consuming, less costly, and requiresless involvement of government and courtofficials.

Most Contracting States consider theConvention to be the exclusive mechanismto obtain evidence in other ContractingStates. The United States, however, is one ofthe minority countries that views theConvention as a permissive, alternativemeans to obtain evidence, rather than as anexclusive, mandatory procedure. In SocieteNationale Industrielle Aerospatiale v. UnitedStates District Court for the Southern District ofIowa,5 the Supreme Court found that theparties have the option of using theConvention to obtain discovery that is lo-cated abroad, but that foreign discovery canalso be taken using typical United States dis-covery procedures and the Federal Rules ofCivil Procedure.6

When evidence is to be obtained underthe Convention, it involves the submissionof a formal “Letter of Request,” which canthen be sent to a judicial authority or, moreinformally, sent to diplomatic officers, con-sular agents, and commissions who thengather evidence. Each process is discussedin chapter one and chapter two of theConvention, respectively.

A Letter of Request may be submittedin the state or federal court where the ac-

tion is pending. This domestic court thendirects the Letter of Request to the desig-nated Central Authority in the foreignContracting State where the documents orwitnesses are located. If the Letter ofRequest is approved, the Central Authoritywill send it to the appropriate judicial au-thority, who will then assist in obtaining an-swers to interrogatories, production ofdocuments, and other discovery requests.The Letter of Request can also be directedto a diplomatic officer, consular agent, orcommissioner, but only if there have beenno objections filed to chapter two of theConvention. This more informal process ofobtaining evidence through diplomatic of-ficers, consular agents, or commissioners issubject to the published reservations anddeclaration of the Contracting State.

The Letter of Request should be writ-ten in the language of the Contracting Stateto whom the request is being made, but thatContracting State should also accept aLetter of Request in English or French.7

However, the receiving Contracting Statemay still object and request that anotherlanguage be used. The Letter of Requestmust clearly and concisely identify variousitems in accordance with chapter one, in-cluding: (1) the nature of the proceedings,(2) the names and addresses of the per-son(s) to be examined, (3) the questions tobe put to that person, (4) the documents orother material to be inspected, (5) the formof oath to be used, (6) how the testimony isto be recorded, and (7) a specific request toask questions of the person(s) if so desired.8

One potential issue to be aware ofwhen drafting Letters of Request is that cer-tain countries request the right not to exe-cute Letters of Request issued for thepurpose of obtaining pretrial discovery. Ingeneral, a Letter of Request will be exe-cuted as requested, but Article 23 of theConvention allows Contracting States to de-clare that they will not execute Letters ofRequest “issued for the purpose of obtain-ing pretrial discovery of documents asknown in the Common Law countries.”9

Almost every signatory to the Convention,with the exception of Barbados, Israel, the

United States, the Czech Republic, and theSlovak Republic, has made a declaration inaccordance with Article 23 and indicatedthat it will not execute Letters of Requestaimed at acquiring pretrial discovery. Oneway to avoid this potential issue is to draftthe Letter of Request without using theterm pretrial discovery, and to emphasizethe fact that the evidence will be used fortrial purposes instead.

Once a Letter of Request has been ap-proved and executed, the authority towhom the request was made is expected toapply the same “measures of compulsion”as it would if the same request was made bya domestic party or authority in internalproceedings.10 Discovery will be sought tothe extent that internal law allows and thusthe foreign party requesting the evidence istreated the same as a domestic party.

While the Convention is not consid-ered a mandatory means of obtaining for-eign discovery in the Untied States, it isclear that it is a useful and efficient meansto do so. It is important to be aware of thescope of the Convention, as well as the dif-ferent reservations and designations of eachContracting State so as to be better pre-pared when seeking evidence from a par-ticular Contracting State. The HagueConference, or HCCH website11 is a usefulresource and provides relevant and insight-ful information, such as the list ofContracting States, full text of theConvention, and various handbooks and ex-amples of documents, such as Letters ofRequest. The Convention was designed as ameans to facilitate cross-border discoveryand should be utilized to the extent possi-ble when seeking discovery abroad.

Friedrich W. Seitz is aSenior Partner, Chair of theInternational Law practicegroup and Co-Chair of theBusiness Litigation andProduct Liability practicegroups of Murchison &Cumming, LLP. Mr. Seitz

regularly speaks and writes on internationallaw topics. He can be reached [email protected].

Maria A. Starn is a SeniorAssociate in the Los Angelesoffice of Murchison &Cumming, LLP where sheis a member of the AppellateLaw and Law & Motionpractice groups. Ms. Starncan be reached at

[email protected].

1 Hague Convention on the Taking of Evidence Abroad in Civil and Commercial Matters, Mar. 18, 1970,23 U.S.T. 2555, 847 U.N.T.S. 231.

2 See http://www.hcch.net/upload/overview20e.pdf.3 See http://www.hcch.net./index_en.php?act=states.listing.4 Vienna Convention on the Law of Treaties art. 2, May 23, 1969, 1155 U.N.T.S. 331.5 482 U.S. 522 (1987).6 Id. at 529, 533–34.7 Hague Convention on the Taking of Evidence Abroad in Civil and Commercial Matters, art. 4, Mar. 18,

1970, 23 U.S.T. 2555, 847 U.N.T.S. 231.8 Id. art. 3.9 Id. art. 23.10 Id. art. 10.11 See http://www.hcch.net/index_en.php.


It is increasingly common for US com-panies to do business with entities aroundthe globe. For many, international trade iscritical to remaining competitive in the USmarketplace.

But what if something goes wrong witha foreign product? What if a new line of of-fice chairs the company imported fromIndia collapses under its customers? What ifthe factory machine it purchased in Taiwaninjures a company employee on the job?

What if subsequent letters to the for-eign manufacturer demanding compensa-tion or indemnification go unanswered?

The answer is that the US companyfaces some tough choices, includingwhether to file a claim or – if the US com-pany is itself being sued – a cross-claim thatwill bring the foreign manufacturer into UScourt.

How is this done?Once a complaint is filed in the appro-

priate venue, the US plaintiff is required tonotify the foreign defendant that a lawsuitis pending against it. Until this service ofprocess takes place, the action cannot pro-ceed.

Domestically, this type of notice is a rel-atively straightforward matter: a processserver, constable or sheriff typically hand-de-livers the court papers to an officer of thedefendant corporation and swears out an af-fidavit of service.

Internationally, however, who may serveprocess and how service may be effected is acomplex matter, governed by multiple(often conflicting) sets of legal rules.

SERVICE IN INDIA, PURSUANT TO THE1965 HAGUE SERVICE CONVENTION

Take, for example, the case of a defen-dant located in India. In India, service isgoverned not just by US state or federalrules but also by terms of a judicial assis-tance treaty (the 1965 Hague Convention onthe Service Abroad of Judicial and ExtrajudicialDocuments in Civil or Commercial Matters or

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“Hague Convention”) and Indian law. UScourts have consistently held that, wherethe Hague Convention is in effect, applicationof that treaty’s provisions is mandatory andthat its channels supercede and abrogate in-consistent state and federal rules for service.In short, if your defendant is in a Hague sig-natory country, Hague rules exclusively dic-tate how service can be effected.

Hague Convention rules, in turn, deferto the laws of the destination state. Each sig-natory nation is asked to file formal decla-rations and reservations regardingpermissible methods of service in its terri-tory. In this regard, India declared that itobjected to direct service by diplomat (asprovided by Article 8), service by mail (asprovided by Article 10(a)) and service by ju-dicial officer (as provided by Article 10(b)).Thus, any attempt by a US attorney to serveby mail or agent in Indian territory – even ifprovided for under US domestic rules –would result in defective service under bothUS and Indian law.

How then must service be accom-plished? The “Requesting Authority” in theUnited States must file a formal HagueService Request with a designated “CentralAuthority” in India (as provided by Article5) – in this case, the Indian Ministry of Lawand Justice. The Indian Central Authoritythen vets the Service Request to ensurecompliance with the treaty and, in turn,refers the court papers to a competentlower court for service. There, a judge in-structs a court bailiff to effect service pur-suant to the laws of India.

Once the papers are served, the lowercourt returns its local proof to the IndianCentral Authority, which annexes it to aHague Certificate, or international proof ofservice, along with a duplicate copy of thepapers served, and sends the entire file backto the United States.

In India, service takes from four tonine months; it is virtually impossible to ex-pedite execution of a Hague Service Requestthrough the Indian court system. Sincemost state and federal rules provide thatservice must be effected within 30 to 120days, counsel for the plaintiff will need toshow diligence in attempting service to theUS court and apply for special extensions oftime.

There are sometimes other issues asso-ciated with service in India. Since India is acommon law country, the court bailiff gen-erally effects personal service, but occasion-ally service is effected by insertion in aletterbox, or by posting at an abandoned“registered office” for the defendant. Whilethis may constitute good service underIndian law, anything short of personal serv-ice is likely to be problematic from the point

of view of US law, since due process rightsunder the US Constitution dictate that serv-ice must be reasonably calculated to give thedefendant actual notice. Did the owner ofthe letterbox in which service was left re-ceive actual notice? A second attempt – andanother four to nine months – may beneeded to cure such service.

Likewise, language can add a wrinkle tothe process. India is home to several hun-dred languages. Because English is one of itsofficial languages, a translation of the courtpapers to be served is rarely required. At thesame time, under US notions of due process,plaintiffs have a duty to serve documentsupon defendants in a language that the re-cipient will be likely to understand. For ex-ample, if an Indian court bailiff elects toeffect sub-service of English language courtpapers upon a security guard who does notspeak English, has service been perfected?

SERVICE IN TAIWAN, PURSUANT TOLETTER ROGATORY

Not all foreign countries are signatoryto the Hague Convention. Service of processin Taiwan, for example, presents a com-pletely different set of issues.

In the absence of any treaty, service inTaiwan is governed by US rules andTaiwanese law. US rules must be met inorder to commence the action in US court.At the same time, Taiwan rules should bestrictly observed: Taiwan has indicated thatit will not enforce any ensuing US judgmentif service of the underlying action was noteffected through its courts. In other words,it is possible to arrange for service by privateagent in Taiwan pursuant to US rules only,but if the case is won, and a US money judg-ment is awarded, the judgment will be un-enforceable in Taiwan because the originalservice is deficient under Taiwanese law.The US company may well have litigated itscase for nothing.

How does a US company avoid thistype of issue? It must seek issuance of an in-ternational judicial assistance request, or let-ter rogatory, and transmit it throughdiplomatic channels.

A letter rogatory is a formal requestfrom a US court seeking judicial assistancefrom a foreign court. US attorneys draft theletter rogatory, and then apply to the UScourt for its issuance. In the letter rogatory,the US court asks a foreign court to arrangefor service on its behalf through a foreignjudicial officer on the basis of reciprocityand international comity. Once issued, theletter rogatory is transmitted to the US StateDepartment which sends it by diplomaticpouch (for a hefty transmission fee of$2,275) to the US embassy in-country, whichpresents it to the foreign government which

in turn, assigns it to one of its courts for ex-ecution. The entire letter rogatory, includ-ing the court papers, must be accompaniedby a certified translation in the language ofthe destination state. Once executed, theletter rogatory is returned to the USthrough the same chain of authorities.

To make matters more complex, theUnited States has no diplomatic relationswith Taiwan, does not recognize its existence,and maintains no embassy there. Indeed, UScourts are prohibited from sending lettersrogatory which refer to Taiwan as “theRepublic of China.” Instead, the US main-tains a “cultural center” (The AmericanInstitute in Taiwan), to handle its local affairs,including the transmission of letters rogatory.

Currently, it takes between five andseven months to perfect service in Taiwanby letter rogatory. Again, it is difficult to ex-pedite this process.

Because international service is expen-sive, time-consuming and fraught with un-expected problems, it behooves USplaintiffs to do their homework in advance.It is always best to effect service by the mostconservative means possible (generallythrough the foreign court system and its ju-dicial officers): to do it once, to do it prop-erly, and to give your attorneys the time theyneed to secure jurisdiction over the defen-dant. Accordingly, as a US company, youshould always consult with a qualified attor-ney and process server with international lit-igation experience to obtain the best adviceon how to proceed.

Cara LaForge is the man-ager of international litiga-tion support for LegalLanguage Services. Carahas more than 15 years’ ex-perience in the field and isa frequent lecturer on judi-cial assistance topics for the

ABA International Section, the NationalAssociation of Professional Process Servers andvarious CLE panels.

Phillip R. Anderson is a1997 graduate of theUniversity of KansasSchool of Law and cur-rently serves as in-housecounsel with LegalLanguage Services, special-izing in international serv-

ice of process and the taking of evidence abroad.Mr. Anderson also has extensive litigation ex-perience in products liability defense, commer-cial law, and family law matters.


A consumer walked into a cell phonestore to purchase a cell phone and a serviceplan. As part of this sale, the consumeragreed to the terms of a service contract.This contract, and like thousands of othersexecuted every day, contained an arbitra-tion clause. The purpose of the clause is torequire the resolution of any dispute be-tween the parties to the contract through ar-bitration. The arbitration clause containedin this particular contract, like many others,included language seeking to prevent con-sumers seeking to dispute a term of the con-tract from banding together to proceed ona class-action basis. If enforced, the impactof this clause is to require consumers to in-dividually pursue their own claims.

Until April, 2011 the enforcement ofclass-action waiver clauses varied dependingupon the jurisdiction. For instance, theThird, Fourth, Fifth, Seventh and EleventhCircuits had enforced class action waivers.The First and Ninth Circuits, in addition toAlabama, California, Illinois, New Mexico,Oregon, and Washington refused to en-force class-action waivers. The authors’home state of Nevada joined this list of ju-risdictions refusing to enforce class-actionwaivers in March, 2011. The result of thissplit created unequal and inconsistent en-forcement of contracts, frustrating attemptsto create a more predictable litigation envi-ronment.

The Supreme Court of the UnitedStates has now addressed the enforceabilityof the class-action waiver provisions. AT&TMobility LLC v. Concepcion, 131 S.Ct.1740 (2011) arose from a promotion inwhich the consumer alleged AT&T offereda “free” phone but then charged sales taxupon the sale of the phone. The consumerfiled suit in California and sought class-ac-tion status so as to expand the claim to in-clude other AT&T customers who mighthave been improperly charged sales tax.AT&T sought to enforce the arbitrationclause in the contract, requiring arbitration

and waiving the right to seek relief as a class.The lower courts refused to do so, relyingupon a California decision invalidating suchclauses in many instances. Discover Bank v.Superior Court, 113 P.3d 1100 (Cal. 2005).

In Concepcion the question concernedwhether the state rule invalidating class-ac-tion waiver clauses was preempted by theFederal Arbitration Act (“FAA”). TheSupreme Court noted the primary goal ofthe FAA is to enforce arbitration agree-ments to promote informal and more effi-cient resolution. Concepcion concludedCalifornia’s Discover Bank case conflictedwith the FAA because it impeded the goalof informal and efficient resolution.Therefore the FAA preempts Discover Bankand governed the contract between the con-sumer. The arbitration clause containingthe class-action waiver was enforceable.

Why does this matter? Litigating con-sumer class-action lawsuits is frequentlyhugely expensive and time consuming forcompanies. Efforts to restrain these costsand promote efficient, predictable resolu-tion of the claims constituting class-actionsare high on the priority list for many legaldepartments. Concepcion recognized this factas one reason to promote enforcement ofclass-action waivers. “First, the switch frombilateral to class arbitration sacrifices theprincipal advantage of arbitration – its in-formality – and makes the process slower,more costly, and more likely to generateprocedural morass than final judgment.”131 S.Ct. at 1751. The court also noted class-actions require procedural formality, greatlyincrease the risk to defendants due to thelack of several levels of appellate review, andthat arbitration is, at a fundamental level,not suited to class-action matters.

The impact of Concepcion appears to befar-reaching. First, there should now bemore uniformity for companies operatingin multiple states. Before this decision theenforcement of a class-action waiver clausevaried from state to state. To the extent

states once refused to honor such waivers,they may now be forced to enforce them.

Second, Concepcion provoked strong re-actions from both consumer and industryadvocacy groups. Consumer groups have ex-pressed concern the decision will forcemany to forego their claims due to even theminimal expenses of arbitrating smallclaims. Industry groups are rightly support-ive of the opinion, primarily for the reasonsstated by the majority opinion.

Many companies could be well-servedby well-crafted and thoughtful arbitrationclauses precluding class-action status,whether in retail sales contracts or other sit-uations. One perceived advantage to theAT&T clause was the manner in which it wasconstructed could be argued as far less draconian than some clauses that seek tovest all control over the arbitration with thecompany. By carefully drafting the arbitra-tion clause to comport with creating a fair,but efficient proceeding the clause is morelikely to be enforced. When combined witha class-action waiver the advantages grow asthe scope of each claim may be limited aswell as the exposure and potential liability.Clearly this comports with the Court’s goalpromoting the FAA’s intent of efficient andinformal resolution of claims.

DID THE SUPREME COURTKILL CONSUMER CLASS-ACTIONS?

James J. Jackson and Michael P. Lowry Thorndal Armstrong Delk Balkenbush & Eisinger

James J. Jackson is a share-holder in the Las Vegas of-fice of Thorndal ArmstrongDelk Balkenbush &Eisinger where he main-tains a governmental af-fairs and litigation practice.

Michael P. Lowry is an as-sociate in the same office asMr. Jackson and maintainsa civil litigation practice.

CONSUMERCLA

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CONSUMERFRAUD CLASS

ACTIONS

Matthew S. SchultzClyde & Co US LLP

COMEOUT

SWINGINGOR KEEP

YOURPOWDER

DRY?CONSIDERATIONS

WHEN RESPONDINGTO THE CONSUMER

FRAUD CLASSACTION

COMPLAINT

Many jurisdictions have enacted consumerprotection statutes that were intended, at leastoriginally, to protect consumers against sharpbusiness practices. However, today some wouldposit these enactments have been turned ontheir heads, and now are used more as a swordthan a shield by attorneys seeking to maximizefees rather than vindicate consumer rights.Often, a representative consumer acts as noth-ing more than a stalking horse for counsel pur-suing a claim that by itself would appear to be ofno worthwhile concern either because it isbased on a de minimus infraction or mere cus-tomer dissatisfaction. Nevertheless, such allega-tions are the makings of statewide or nationwideclass actions. Whatever one’s view concerningthe propriety of such suits, because of relativelyeasy state court procedural hurdles to achieveclass certification, these lawsuits have teeth andare of concern to all businesses that sell or mar-ket merchandise to the general public. Suchlawsuits raise two separate basic concerns forthe practitioner representing a commercial en-tity: (1) how to advise a commercial entity toavoid such suits, and (2) how to best respond tothe action if suit is filed. This article will addressthese two basic questions.

LITIGATION AVOIDANCEClients that sell or market merchandise of

any kind should be encouraged to familiarizethemselves with the consumer protectionstatute(s) that govern the particular jurisdictionin which they do business and ensure compli-ance where appropriate. Often, even where abusiness complies with applicable state admin-istrative codes and regulations, the consumerprotection statute may place additional obliga-tions upon a commercial entity with respect toselling or marketing goods to the general pub-lic. A commercial client who is unfamiliar withthe applicable statutory requirements is in dan-ger of running afoul of the statute, thereby invit-ing claims. Indeed, courts in certain states haveheld that even a de minimus violation of a con-sumer protection statute can form the basis fora consumer fraud action.

In other contexts, such as a franchisor/franchisee relationship, some companies havesought to include exculpatory waivers in theiragreements. However, exculpatory waivers areoften held invalid, especially where they seek totake away statutory rights conferred upon thegeneral public by a remedial statute, such asthose statutes designed to protect against con-sumer fraud. Such waivers are often struckdown as void against public policy – after all, aconsumer protection statute cannot accomplishits remedial goals if it can simply be avoided byagreement. A practitioner advising a commer-cial client in this context must be familiar withthe law regarding exculpatory waivers in the ap-

plicable jurisdiction to determine whether sucha waiver is enforceable.

Still, another option outside of an outrightwaiver is to relegate a consumer’s statutoryclaim to arbitration, by way of contractual arbi-tration clause. Generally speaking, agreementsto arbitrate do not violate public policy. On thecontrary, public policy favors arbitration. Thelanguage of the arbitration clause must clearlymandate the waiver of a jury trial concerningany and all claims, including those that arestatutory in nature, in favor of submitting anycontroversy to arbitration. In such instances,plaintiff’s statutory claims survive, but they willbe resolved in an arbitration forum, rather thana court of law. Arbitration clauses are desirablebecause submitting a dispute to an arbitratorrather than a jury generally allows for a morepredictable outcome and a smaller chance of alarge damage award.

A final option is to seek redress in the statelegislature. In jurisdictions that have particularlyconsumer friendly statutes that might be subjectto abuse, lobbying efforts to change the law arealways a viable option. Indeed, in New Jersey forexample, a bill was introduced in the state legis-lature (Assembly Bill No. A-3333) in October2010 that seeks to significantly amend the NewJersey Consumer Fraud Act (“NJCFA”). Seewww.njleg.state.nj.us/bills/BillView.asp. Thismeasure, if passed, will cap the amount of pre-vailing parties attorney’s fees available, make tre-ble damages a discretionary rather than amandatory remedy, and further limit the appli-cability of the NJCFA to transactions otherwisepermitted or regulated by any other state regu-latory body. If passed, this amendment wouldsignificantly curtail consumer fraud suits, in-cluding class actions. Thus, petitioning the leg-islature for a change to the law is also aneffective preventative measure.

RESPONDING TO THE CONSUMER FRAUDCLASS ACTION

Ultimately, despite whatever preventativemeasures are taken, a commercial entity maysomeday be faced with a consumer fraud classaction. It goes without saying that a well-rea-soned litigation strategy must be developed torespond to the suit. Some of this will obviouslybe determined by the merit of the lawsuit on itsface. If the cause of action set forth in the com-plaint is susceptible to a well-known and strongdefense, a motion to dismiss in lieu of an answermay be in order. If, on the other hand, the suitappears meritorious on its face it may provemore productive to interpose an answer andproceed through preliminary discovery. A com-mercial entity and its counsel can then deter-mine whether the suit can be attacked on othergrounds after more is learned about the factsgiving rise to the suit.CONSUMERCL

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A. REMOVAL TO FEDERAL COURTAn important initial consideration is

whether to remove the case to federal court.It is generally accepted that the Class ActionFairness Act of 2005, 28 U.S.C. 1332(d),(“CAFA”) has made it easier for defendantsto remove putative class actions to federalcourt. Business groups and tort reform sup-porters had lobbied for the legislation, ar-guing that it was needed to prevent classaction lawsuit abuse. The Act gives federalcourts jurisdiction over certain class actionsin which the amount in controversy exceeds$5 million, and in which any of the mem-bers of a class of plaintiffs is a citizen of astate different from any defendant, unlessat least two-thirds or more of the membersof all proposed plaintiff classes in the ag-gregate and the primary defendants are cit-izens of the state in which the action wasoriginally filed. The Act expands federal di-versity jurisdiction under 28 U.S.C. 1332and gives out-of-state defendants greaterability to remove matters out of more plain-tiff-friendly state venues.

This is an option that should be ex-plored with the client, assuming theamount in controversy requirement can besatisfied. Of note, it must be stressed that al-leging the amount in controversy require-ment of $5 million is satisfied for purposesof a removal petition is not an admission oracknowledgment that plaintiff’s suit hassuch a value nor that plaintiff’s suit is evenlegally viable. Removal is certainly a strategyto employ where plaintiff’s suit is vulnerableto dismissal on the pleadings because, gen-erally speaking, an Article III Judge is moreinclined to dismiss a suit on motion thanthe average state court judge. Usually, thedistrict court judge, who is appointed forlife, is less likely to be subject to local bias.Indeed, this is the underlying principle todiversity jurisdiction in the first place – toprotect out-of-state defendants from localprejudices.

B. THE MOTION TO DISMISS Federal Rule of Civil Procedure 23 governscertification of putative class actions. Eachstate has its own procedural rule(s) regard-ing certification but generally speakingthese rules mirror the federal model. Undersubsection (a) of this rule, one or moremembers of a class may sue or be sued onbehalf of all members only if: (1) the class isso numerous that joinder of all members isimpracticable; (2) there are questions of lawor fact common to the class; (3) the claimsor defenses of the representative parties aretypical of the claims or defenses of the class;and (4) the representative parties will fairlyand adequately protect the interests of the

class. These requirements are commonly re-ferred to as numerosity, commonality, typi-cality and adequacy of representation. Afterestablishing that the requirements of Rule23 (a) have been met, plaintiffs seeking tocertify a class most often look to satisfy oneof the elements enumerated in Rule 23 (b),which provides that:

The questions of law or fact com-mon to the members of the classpredominate over other questionsaffecting only individual members,and that a class action is superiorto other available methods for thefair and efficient adjudication ofthe controversy.

To predominate, common issues mustconstitute a significant part of individualclass members’ cases. However, where indi-vidual rather than common fact issues pre-dominate, this requirement cannot besatisfied.

1. Individual Fact Issues ConcerningReliance or Proximate Cause Predominate

Consumer fraud class actions are gen-erally considered vulnerable on this issue.Most fraud claims, even those codified bystatute, usually require proof of reliance.Reliance is an element of proof that de-pends on each individual plaintiff’s factualcircumstance as well as their credibility.Therefore, where reliance is an element, itcan be successfully argued that individualquestions of fact, rather than common ques-tions, predominate – such that a class actioncannot be maintained. In states that do notrequire plaintiff to establish reliance as partof statutory fraud claim, similar predomi-nance arguments can be made by attackingthe requisite element of causation.

2. Field PreemptionAnother argument available to defen-

dants is field preemption. Here, defendantseeks to infer a legislative intention to pre-empt a particular state’s consumer fraudstatute because the regulatory scheme es-tablished by another statute is so pervasiveas to “occupy the field” in that area of thelaw, so as to warrant an inference that thelegislature did not intend the consumerfraud statute to apply. This argument ismost often made where the other applica-ble statute contains a provision making itthe sole remedy for the harm claimed in thecomplaint. This is generally seen in the con-text of product liability suits that also allegeconsumer fraud statutory claims. Courts willoften conclude that the product liability actgoverns, and excludes any claims under theconsumer protection statute. In addition,

other areas of business may be so heavilyregulated by their respective enabling stat-ues that there is no room for the consumerprotection statute to govern. In this regard,one should look for a provision or regula-tion that directly conflicts with the con-sumer protection statute, as this will presentthe most compelling argument.

3. Failure to Plead Fraud with ParticularityAnother possible argument lies with

Fed. R. Civ. P. 9(b), which requires that ac-tions alleging fraud be pled with particular-ity. Statutory fraud claims, like theircommon law counterparts, must be so pled.Most states have a corollary to Fed. R. Civ. P.9(b), which requires that a complaint alleg-ing fraud be pled with specificity “in so faras practicable.” Any claim for statutoryfraud that does not plead all elements of thestatute backed up by specific facts is subjectto attack.

CONCLUSIONConsumer fraud class actions are a con-

cern for any commercial entity that sells ormarkets merchandise to the general public.Such suits may be warded off by knowledgeof the particular consumer protectionstatute in a given jurisdiction, the use of ex-culpatory waivers or arbitration clauseswhere possible and petitioning the state leg-islature for reform. If forced to litigate, a de-finitive and comprehensive defense strategyshould be developed and the lawsuit met ag-gressively, if warranted. Removal pursuantto CAFA should be considered.Predominance arguments, field preemp-tion or failure to plead fraud with particu-larity are all viable avenues of defense and,if the facts of the particular case are right,present strong arguments for dismissal. Ofcourse, the particular allegations containedin the complaint and the facts revealed byany investigation will best inform counsel’sstrategy when determining how to respondto the putative consumer fraud class action.

Matthew S. Schultz is aSenior Associate with theNew Jersey office of Clyde &Co US LLP, where he hasextensive experience in gen-eral liability, products lia-bility, professional liability,consumer fraud actions,

contract disputes and business litigation. Heregularly represents businesses and individualsat the trial and appellate levels, in both stateand federal court. Matthew also has significantexperience representing franchisors in a varietyof disputes.



COMPLIANCE WITH FEDERALSAFETY STANDARDS DOES NOT

BAR STATE TORT CLAIMSWILLIAMSON & PRE-EMPTION DEFENSE

Compliance with federal safety regulations no longer ensures that manufacturers are immune

from state tort claims. We may expect to see an increase of state tort suits in light of a

February 2011 United States Supreme Court decision that permits plaintiffs to sue an auto-

mobile manufacturer for state tort claims even though the manufacturer has complied with

federal safety standards. Williamson v. Mazda Motor of America, 131 S.Ct. 1131 (2011).



I. THE WILLIAMSON CASEIn 2002, the Williamson family was

struck head on by another vehicle while intheir 1993 Mazda minivan. ThanhWilliamson, sitting in a rear aisle seat andwearing a lap belt, died in the accident.Delbert and Alexa Williamson, who wore lap-and-shoulder belts, survived. The Williamsonfamily and Thanh Williamson’s estate subse-quently filed suit against Mazda, claimingthat Mazda should have installed lap-and-shoulder belts on rear aisle seats, and thatThanh died as a result of Mazda havingequipped her seat with a lap-only belt.

The Orange County Superior Courtsustained Mazda’s demurrer without leaveto amend as to the wrongful death claim.Following a stipulation to dismiss the re-maining personal injury claims, plaintiffsappealed. The California Court of Appealaffirmed, relying on Geier v. American HondaMotor Co., 529 U.S. 861 (2000), in which theUnited States Supreme Court held that a1984 version of Federal Motor VehicleSafety Standard No. 208 requiring installa-tion of passive restraint devices pre-empteda state tort action against an automobilemanufacturer for failure to install airbags.

In a unanimous decision, the UnitedStates Supreme Court reversed. The Courtheld that Federal Motor Vehicle SafetyStandard No. 208, which gives automobilemanufacturers the choice of installing ei-ther lap belts or lap-and-shoulder belts onrear inner seats, did not pre-empt state tortsuits claiming that manufacturers shouldhave installed lap-and-shoulder belts onrear inner seats.

The Court noted that in both Geier andthe instant case, federal regulations leavethe manufacturers with a choice. In Geier,manufacturers are assured to retain achoice installing any of several different pas-sive restraint devices. The federal regulationat issue in Williamson allows manufacturers achoice of two different kinds of seatbelts forrear inner seats.

The Court distinguished Geier on theground that in the airbag case, the choice isa significant regulatory objective, and thefederal regulators were concerned with con-sumer choice. Based on review of the fed-eral regulation’s history, Department ofTransportation (DOT)’s contemporaneousexplanation, and its interpretive views, theCourt found that providing manufacturerswith the seatbelt choice was, however, not asignificant objective of the federal regula-tion. Rather, the regulators encouraged theinstallation of shoulder-and-lap belts even ifthey were not required at the time. The factthat DOT thought that the requirementwould not be cost effective does not prove

that DOT sought to forbid common-law tortsuits, because DOT did not believe thatcosts would remain frozen, and many fed-eral safety requirements embody a cost-ef-fectiveness judgment. The Court thusrefused to infer pre-emptive intent from thecost-effectiveness judgment.

Under this ruling, where federal regu-lations give automobile manufacturers achoice of safety options, compliance withfederal safety standards alone does not au-tomatically immunize automobile manufac-turers from tort claims. Rather, the optionsunder the federal regulation is seen as asafety-minimum standard, which does notbar states from imposing stricter standards,and does not bar state tort suits.

II. THE IMPACT OF WILLIAMSON ONPREEMPTION DEFENSE

In the context of product liability liti-gation, the impact of Williamson on pre-emption defense is immediate, as can beseen in how courts rule on the issue ofwhether federal safety standard FMVSS 205(“Standard 205”) preempts state tort claims.

Prior to Williamson, several jurisdictionssuch as West Virginia Supreme Court andTennessee Court of Appeals found thatStandard 205, which allows multiple optionsof vehicle glass, preempted claims undertheir respective state laws.

Only days after the issuance ofWilliamson, the United States SupremeCourt vacated and remanded a SouthCarolina Supreme Court decision, whichheld that Standard 205 regarding glazingmaterials preempted South Carolina’s statelaw product liability claim. Priester v. FordMotor Co., 131 S.Ct. 1570 (2011).

Recently, an Arizona district court fol-lowed Williamson and ruled against auto-mobile manufacturer Daewoo Co. on the

preemption defense. Bernal v. Daewoo MotorAmerica, Inc., 2011 WL 2174890 (D.Ariz.2011). The issue in Bernal is whether a tortclaim under Arizona law for the use of tem-pered glass in side windows of automobilesis preempted by Standard 205, which per-mits the use of both laminated glass and itscost-effective version tempered glass. Failingto find preemption there could result in dif-ferent states separately finding each of thealternative materials in Standard 205 to beinsufficient, thereby eviscerating the federalregulation.

Relying on Williamson, the court foundthat where there was an implied conflict be-tween Arizona state law and the require-ments of Standard 205, Standard 205 mayonly be deemed to preempt state tort claimsif the history, the agency’s contemporane-ous explanation, and the agency’s currentviews of the standard indicated an addi-tional regulatory objective to which statetort claims would be an obstacle. In otherwords, the court interpreted federal regula-tion as a minimum-threshold material stan-dard absent clear and strong preemptionlanguage in the federal regulation.

III. CONCLUSIONIn light of Williamson and recent case

developments, we may expect to see an in-crease in state tort claims against automo-bile manufacturers who have complied withfederal regulations but chose to install lessexpensive, allegedly “unsafe” devices.Indeed, in state tort cases, automobile man-ufacturers are deprived of safety choicesguaranteed by federal regulations.

Joseph C. Balestrieri is ashareholder at Robinson &Wood, Inc. Mr. Balestrierihas tried a variety of casesin both California SuperiorCourt and United StatesDistrict Court. Mr.Balestrieri serves as a pro

tem settlement judge and as a court appointedarbitrator. He specializes in products liabilityand transportation liability, and chairs thefirm’s Transportation Litigation practice group.

Helen H. Chen is a litiga-tion associate at Robinson& Wood, Inc. Ms. Chenspecializes in complex in-surance coverage and badfaith litigation, commerciallitigation and professionalliability. She has authored

articles on insurance coverage in leading in-dustry publications.

The Court heldthat FederalMotor VehicleSafety StandardNo. 208, whichgives automobilemanufacturers the choice of installing either lap belts or lap-and-shoulder belts on rearinner seats, did not pre-emptstate tort suits claiming thatmanufacturers should haveinstalled lap-and-shoulder beltson rear inner seats.



It is often said that a rising tideraises all ships. Unfortunately italso sinks any that are not seawor-thy. Such is the case in today’s envi-ronment of constantly increasingand ever more valuable informa-tion. Organizations thrive off of thecurrent ease of data acquisition,storage, interpretation, and trans-mission-both locally and in theCloud. However, the sheer volumeof sensitive information many or-ganizations hold means that a sin-gle mismanagement, data-breach,or cyber-attack could spell disaster.

According to the 2010 U.S.Cost of a Data Breach study spon-sored by Symantec Corporationand presented by the PonemonInstitute, the average organiza-tional cost of a data breach was $7.2million, or $214 per compromisedrecord. Failure to comply with theByzantine and location-specificlegal requirements pertaining todata management can make thedamage even more costly throughshareholder lawsuits, reputationdamage and customer defection.As commerce conducted in theCloud expands, these risks and po-tential costs also continue to grow.

From a business perspective,unauthorized access to informa-tion, non-compliance with legal re-quirements, misuse of social mediaby stakeholders, or other issues asabove could compromise an orga-nization’s business strategy, reveal-ing trade secrets or essentialprocesses to competitors. A databreach may harm an organization’sreputation, impose costly notifica-tion requirements, or expose an or-ganization to shareholder suits,class action or major vendor claims.Loss of access or control could im-pact an organization’s ability to dobusiness or to deal with commonaccess and control requests, such aslitigation holds.

Bottom line, from a businessperspective, you can’t afford to getit wrong.

With no sign of this waxingtide of data risk abating, what is anorganization and Board ofDirectors to do?

The simple answer is to ad-dress data risk from an enterpriseperspective by bringing togetherthe key stakeholders (e.g., theChief Risk Officer or equivalent,Information, and legal officers) todevelop a plan.

But as the seasoned busi-nessperson knows, it’s all aboutwhat you do along the way that dis-tinguishes quality. And even moreimportant than the quality of theplan is how it is implemented. Amediocre plan executed thor-oughly will always defeat an excel-lent plan left uncompleted.

Unfortunately, many organiza-tions find themselves frozen in un-certainty. The remoteness and lossof control associated with Cloudcomputing and the complexity ofsecurely managing data across cy-berspace often engender a paralyz-ing sense of confusion inunprepared enterprises. With dan-ger facing them head on they standstill, afraid to make the wrongmove, only to become more gristfor the data risk mill.

Often the reason organiza-tions don’t act is the fear that bydoing so they may in fact makethemselves even more vulnerable,whether it be to attack by criminalsor to shareholder lawsuits. Suchfears are legitimate and need to beaddressed.

One of the best practices is towork with your attorney to analyzethe practical, technological, andlegal and implementation consid-erations pertaining to data riskmanagement. They can help deter-mine the best business solutions foryou. With your attorney as yourguide, providing their legal opin-ion, jurisdictional knowledge, andthe potential benefit of privilege,your enterprise is much more likelyto successfully navigate the datarisk waters.

The most valuable asset an at-torney can bring to the table istheir local legal and jurisdictionalknowledge. This is your “HomeField Advantage”. While the con-cept of Home Field Advantage mayseem like an oxymoron when dis-cussing issues in the Cloud, it is be-cause of the nature of the Clouditself that the local/jurisdictional is-sues become even more com-pelling.

Since the Cloud pools re-sources and infrastructure withouta “physical” location, it increasesthe risk of unauthorized data accesswithout specific definition as towhere the data resides. That meansprivacy, data security, and other is-sues can pop up anywhere at anytime and may be subject to a multi-

HOME FIELDADVANTAGE

…IN THECLOUD

Enterprise Riskand Best Practices in

the Cyber World

While the conceptof Home Field

Advantagemay seem like anoxymoron when

discussing issuesin the Cloud,

it is because of thenature of theCloud itself

that thelocal/jurisdictional

issues becomeeven more

compelling.

An Executive SummaryPrepared by Richard P. Magrath

From the Work Done by ManyUSLAW Attorneys

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tude of jurisdictions, regardless of wherethe data is physically stored. From the legalperspective, a variety of privacy and data se-curity laws may be implicated in the Cloud.In the United States, these laws are typicallybased on the type of information stored.

In many ways, the risks we address arecompounded by the facts that the cyberworld continually reinvents itself, with thepace of change accelerating every day. Theorganization will need to address and possi-bly revise information security policies andadopt protective measures to reflect theterms and restrictions on Cloud usage tak-ing into account the technological, practi-cal, and legal considerations. Werecommend a four-step process:

• LEGAL: Engaging appropriate outsidelegal counsel at the beginning of andthroughout the review, revision, and imple-mentation of a data risk management ap-proach is vital to the success of theoperation. Attorneys take on two key rolesin this regard - assessing compliance andproviding privilege.

Sensitive Data comes in dozens of vari-eties, each subject to its own particular reg-ulations that change depending on use andjurisdiction. Hence, an attorney can provide“Home field Advantage” through theirknowledge of the relevant, local legal con-cerns. Furthermore, sensitive data is in-creasingly passed to third-party providers,adding another dimension to the problem.The liability associated with a third-partydata breach may still fall on your organiza-tion depending on the terms of the contractand due diligence conducted. An attorneycan navigate this confusion, providing con-crete answers regarding compliance and li-ability. They can also examine providercontracts for terms regarding control ofdata, data access, monitoring, updates,remedies and indemnification. Provisionsfor conducting due diligence, monitoringservice levels, getting out of the relationshipand getting your data back also should beaddressed up front.

One risk associated with conductingdata risk assessments is that the written re-ports may provide a roadmap for an adver-sary, an advantage for a competitor or beproduced as evidence of negligence or will-ful disregard in a tort action. It is importantfor organizations to seek to protect such re-ports from unwanted discovery. The only re-alistic method to create such protection isto establish privilege through external legalcounsel. Outside counsel can then engageindependent data security experts to helpin the process while maintaining attorney-client privilege over the resulting reports.

• TECHNOLOGICAL: the organizationneeds to create a Written InformationSecurity Plan (“WISP”) to detail a high levelapproach to the following key areas:Identification, inventory, and destruction ofinformation, threat assessment, internal se-curity access and control, external securityaccess and control, employee training, sup-plier/3rd party servicer data risk manage-ment practices, security assessment andaudit, and data incident and breach re-sponse. The WISP will be the standardagainst which the company measures itsdata risk management capabilities goingforward. Therefore it should be developedusing the expertise of all relevant depart-ments as well as in conjunction with outsidecounsel. If needed, a third party organiza-tion can provide the needed expertise to de-velop an appropriate WISP. Next, thecompany must conduct a controls gap as-sessment to determine how current infor-mation security policies and technologiesconform to the WISP.

• PRACTICAL: the organization needsto address practical considerations and en-gage in a cost-benefit analysis to com-pare/contrast their data risk situation andtolerances against changes they are consid-ering. Upgrading technology, services, ortraining can be slow and expensive, but socan a data breach with a great deal of legalexposure. Determining your risk appetiteand making informed business decisionsbased on the best legal and technologicalinformation available helps make theprocess easier. Understanding how a poten-tial solution aligns with the strategic busi-ness plan and WISP is key. From a practicalperspective, at a minimum, the companyshould determine the scope of Cloud usage,implement disaster and business continuityplans, and arrange for backup of data witha party other than the Cloud provider.

• IMPLEMENTATION: If the organiza-tion determines it to be practical from acost/benefit perspective, it needs to trans-late the results of its attorney-guided datarisk management assessment into action-able steps to move towards the standards setout in the WISP. This can be accomplishedin ways such as increasing security in em-ployee/employment practices, generalprocesses, technology, 3rd party relation-ships, and sensitive data disposal.

CYBER BREACH AND EVENT RAPIDRESPONSE: Unfortunately, even the best-prepared organizations may be compro-mised. In such cases, the nature andtimeliness of the response will determine

the impact on the organization’s future rep-utation. Some best practices to build yourresponse plan around include internal rep-resentatives who would be responsible to:• Contact your attorney to establish priv-

ilege and brief them on the situation.Agree and coordinate with your attor-ney how to proceed going forward.

• Report the breach/event to yourbreach response vendor, if any.

• Report the breach/event to your in-surance agent, broker and company inaccordance with insurance policy re-quirements.

• Take immediate action to minimize theloss.

• Implement measures to protect fromfurther loss or damage.

• Implement means of capturing all ex-penses.

• Consult contractors for an initial esti-mate of the scope and cost to remediate.

• Define conditions and plans to resumeoperations.

• Identify temporary measures needed toresume operations and the associated ex-traordinary expenses that are incurred.

• Document to the extent possible andpracticable.

• Appoint one person to represent yourcompany in internal and external com-munications.

• Set up clear lines of communicationwith and ensure that all personnel un-derstand the functions of the externalparties involved.

Remember: A byte of prevention isworth more than an Exabyte of cure.

Like any good business decision, im-plementing these policies isn’t easy. Thetemptation to remain wishfully blind andunresponsive remains strong. But the tideof data risk advances unceasingly, surginglockstep with the increase of Cloud com-puting and cyber activity. Inaction will in-evitably result in a foundering future.However, by taking into account these bestpractices and working in concert with yourinternal team and external counsel, youstand a much better chance of sailing in asea of opportunity rather than scuttling dueto shoddy preparation.

For further information regardingEnterprise Risk and Best Practices in theCyber World, consult the white paper writ-ten jointly by RIMS, Identity Theft 911,AON, and USLAW available atwww.uslaw.org/cyberrisk.

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The drive towardbusiness efficiencies issomething that has longbeen standard in other serv-ice industries. Yet, the legal services industryhas been slow to adopt similar best practices.Because of factors like recessionary pres-sures, the legal services industry is finally see-ing meaningful trending in this area.

We can all see and feel the changes oc-curring in the business of legal services. Asthe landscape shifts, firms have an opportu-nity to share in the success of the business ofthe law as it evolves. In order to do this,firms can participate in developing mean-ingful metrics and seeking more creativeand better solutions for clients.

The billable hour has been dominatingthe discussion, and frankly, taking quite abeating. This billing methodology has beendebated at length against the movement to-ward alternative fee arrangements. It seemsas if every conference that I have attendedover the last couple of years has a roundtableor panel discussion dedicated to the topic.

HITTING TO ALL FIELDS – EXPANDING THE FOCUS

With the home stretch of the baseballseason upon us, I can’t help but frame thefocus on the billable hour in relation to myunrealistic hopes for my Los Angeles Dodgersbeing able to jump back into the race for apennant this year (it’s been a tough season).Attacking the billable hour is a bit like me say-ing that if the Dodgers change ownershipthey will start winning and game attendancewill go up. A change in ownership is a start,but the Dodgers need to add the right talentat multiple positions and improve the fan ex-perience to achieve these results.

A panel session at theUSLAW client conference in

April touched on this popular issue, but had arefreshingly broader focus. Instead of onlyconcentrating on how services are billed, thepanel expanded the discussion to include cut-ting-edge techniques for client partnering,legal services outsourcing and law firm man-agement. In a buyers’ market for legal serv-ices, law firms that offer creative solutions inmore areas than simply the way that they billservices stand to distinguish themselves as bet-ter partners.

So, why does the attention remain onthe debate between the billable hour andAFAs, when other creative options exist, likeshifting legal services work to outside com-panies? The discussion about billable hourversus AFAs is prevalent because the billablehour is a metric that is easily measured by lawfirm clients, absent other available metrics.

SCORING RUNS AND WINNING –WHO, WHAT AND WHY MATTERMORE THAN HOW

Sabermetrics, developed in the 1970s, isthe analysis of baseball through objective, em-pirical evidence. The introduction and use ofSabermetrics questioned historic measures ofbaseball skill like scouting players based onphysical tools and traditional statistics. For ex-ample, batting average is thought to be an im-portant statistic, but Sabermetricians arguethat it provides a relatively poor indicator forteam runs scored. Because scoring runs iswhat wins games, Sabermetricians put morestock in metrics that measure a player’s abil-ity to help his team score more runs than theopposing team.

Coming up with new ways and methodsto monitor and measure categories of legal

spend is not easy. Until recently, clients wereonly measuring the one metric they have: howthey are being billed. Changing billing struc-tures places the burden for finding cost effec-tive litigation service alternatives on law firms,as sourcing experts. However, as Ron Gruner,President of the Vallex Fund observed inDavid Galbenski’s book, Unbound: HowEntrepreneurship is Dramatically TransformingLegal Services Today, “…[I]nevitably the law-suit’s lead attorney, rather than a separatemanager, is managing the entire lawsuit. It’slike having the brain surgeon manage thenursing staff and stock the operatingroom…projects need two bosses, a creative ex-pert and a project manager.”

Identifying who is performing certaintasks, what those tasks are and the costs forthose tasks is becoming more important.Evaluating the who, what and why are tasksbetter suited for those with “the necessarybusiness and process skills to analyze…focusexclusively on process and efficiency anddefining what value is,” notes James Potter,General Counsel, Del Monte Foods inUnbound.

Outsourced litigation service providerslike Med Legal will benefit from these trends,but so can our clients. Med Legal is partner-ing with those that understand our valueproposition as an alternative resource to re-alize business efficiencies and better results,whether law firms, corporations or insurers.

DESIGNATED HITTERS – LEVERAGINGSPECIFIC TALENTS AND EXPERTISE

Unbound explores trends emerging inthe delivery of legal services against thebackdrop of interviews with various law firmleaders, legal entrepreneurs, and in-housecounsel for large clients of law firms.


SWINGINGFOR THEFENCES BECOMINGLITIGATION SPENDSABERMETRICIANS

Kyle A. Mason, J.D. Med Legal Consulting Source



Along with other outside litigation serv-ices providers, Med Legal is experiencingtremendous growth because insurance com-panies, corporations, government entitiesand law firms are beginning to realize thatour services represent areas of legal spendthat can be achieved with better results,faster and more cost efficiently. Med Legaldelivers better expertise than non-medicallyexperienced in-house personnel and at alower cost than highly paid experts. Thetools provided reduce redundancies, in-crease communication, provide a morethorough understanding of critical issues inmedical records and better identify oppor-tunities for mitigating damages in the areasof past medical billing and future care costs.

Legal process outsourcing (LPO) was a$400 million revenue industry in 2010 ac-cording to a June 2nd article in the New YorkTimes written by Heather Timmons. Still,this number represents only a fraction ofwhat is estimated to be a $200-billion-a-yearlegal market, Timmons wrote. The LPO in-dustry share of the legal market is predictedby The Datamonitor Group to grow to $2.4billion by 2012.

Outsourcing carries a negative conno-tation for some, because there is a percep-tion that it means “off-shoring” andrepresents a potential for losing controlover quality. But outsourcing is only a sub-set of other options (e.g. downsourcing andin-sourcing) for transferring work to othermodalities. Outsourcing does not necessar-ily mean “off-shoring.” In particular, in thearea of knowledge process outsourcing(KPO), where services are dependent onworkers with greater skill, it may be a betteridea to on-shore to prevent omitting criticaldetails that can sometimes be lost in trans-lation, like the language of medical records.

GENERAL MANAGERS – EVALUATINGYOUR MEASUREMENT METHODS

A study published in March 2011 thatwas commissioned by The Council onLitigation Management and conducted byRevere Advisory last year identified specificExternal Initiatives that are on the riseamong Litigation Managers and Executives.The study participants were 47 senior litiga-tion executives from a broad cross-sectionof the litigation industry. The group sur-veyed was diverse by organization type, legalspend, line of business and litigation type.

The findings of the study reveal that74% of study participants rated the qualityof their litigation metrics as “Fair,” “Poor”or “Very Poor.” While this is a representa-tion of the status quo, the study further in-dicated that these same individuals will bededicating more time to strengthening

these metrics. The efforts to better measureand quantify litigation spend represent asignificant trend toward more client con-trolled litigation spend.

The study makes it clear that litigationmanagement effectiveness has high-level at-tention and decision makers within organi-zations are pushing for metrics and analyticsthat allow for clearer measurement of ef-fectiveness and success. Specifically, thestudy identified five most penetrated exter-nal initiatives along with 10 emerging ex-ternal initiatives. The list of emerginginitiatives included services like E-Discovery,Copy Services and even (gasp) MedicalRecords Review!

The findings of the study reflect what Ihear more and more from clients about thetrend toward more client control. Our lawfirm clients are those that already under-stand the benefits of seeking better andmore cost effective solutions for theirclients. They have changed the conversationaway from how they are billing. Instead,they introduce alternative ways of doingbusiness that result in mutual benefit.Clients appreciate the effort to find betterways of doing business and having a clearerunderstanding of what they are getting fortheir dollar.

THERE’S NO “A-ROD” IN TEAM –ASSEMBLING THE RIGHT BLEND OFRESOURCES

Assembling teams with the perfectblend of specialized expertise in the mostcost effective way is what every ball club inMLB strives for (maybe not the Yankees!).Even in baseball, the evolution toward morespecialization didn’t occur overnight. In theearly days of the sport, the best all-aroundathletes dominated the sport and playedmultiple positions. Babe Ruth, one of thegreatest hitters of all-time, was also one ofthe game’s greatest pitchers.

Now, baseball teams are assembled withspecialized needs in mind: lead-off hitters,balanced lefty/righty lineups, closers, etc.Each position is sourced and paid accord-ingly. Occasionally, we see a Texas-sized dealfor a player like Alex Rodriguez, but it al-ways becomes clear that allocating toomuch spend to one superstar is not themost efficient way to produce wins. Theonly measurements that matter in trackinga team’s success are wins, losses and WorldSeries titles.

Until recently, the return on investmentfor utilizing outsourced litigation serviceshas revolved around anecdotal evidence andcase studies. For Med Legal, it’s because themetrics are lacking for who is reviewingmedical records for a client at their firms –

is it a generalist like paralegals and attorneys,a highly paid specialist like in-house medicalpersonnel or someone else?

Great attorneys are the All-Stars of liti-gation and compensating them appropri-ately is important. They are best suitedhitting in the clean-up spot in the lineup,hitting home runs by attacking high leveltasks that justify their billable hour rate. Thetrouble occurs when you are counting onthem to score from first on a double in thelate innings to tie or win a game. This task isbetter suited for a pinch runner, one thatspecializes in speed and happens to also notcarry the same price tag as your slugger. Ascorporate and insurance carrier clients drivethe momentum and efforts continue to de-velop better metrics around external initia-tives we know what they will reveal – MedLegal and other litigation services partners,like a pinch-runner in the late innings, canoffer a better level of specialized expertiseand for less – resulting in the only thing thatreally matters, better case outcomes.

THE DIVISION IS UP FOR GRABS –WHO WILL PUT TOGETHER A RUN?

Law firms currently have the opportu-nity to assist in creating these metrics, bring-ing solutions forward and sharing in theresulting profits from enhanced relation-ships with clients. But it may not be long be-fore they lose more and more of anopportunity to do so.

Firms and organizations like USLAWare distinguishing themselves as WorldSeries material by adopting new method-ologies and sourcing the best players at eachposition. Doing so ensures an inside trackto maintaining better relationships withclients and in return, prospects for prof-itability. Yet, focusing the conversation onthe billable hour versus alternative feearrangements ignores the most importanttask at hand – defining metrics and uncov-ering inefficiencies. The winners of this racewill be best poised to grab the lion share ofthe litigation spend – whether law firms oroutsourced companies.

Kyle Mason is Med Legal'sDirector of BusinessDevelopment and has expe-rience establishing andgrowing business relation-ships with well-known cor-porate brands in variousindustries. Kyle holds a J.D.

from George Washington University. MedLegal's medical record, bill analysis and futurecare cost evaluations reveal opportunities formitigation in BI liability cases.



TRANSACTIONALALCOHOLIC

BEVERAGE LAWFew attorneys are familiar with alco-

holic beverage law. The fundamental rulesgoverning the relationships between andamong the parties who produce, distribute,and sell alcoholic beverages are highly-nu-anced, and frequently counter-intuitive. Abasic understanding of these rules is im-portant, not only to alcoholic beverage com-panies, but also to suppliers of goods andservices, associations, charities, advertisers,promoters, event planners, insurers andothers. This article provides an overview ofthe regulatory environment in which alco-holic beverages are manufactured, distrib-uted, and sold in the United States. It alsoexplores one example of a prohibited rela-tionship, the “tied house,” and the most fun-damental and often litigated evidence ofthat relationship, a “thing of value” providedto or accepted by a retailer from a manu-facturer or distributor.

PROHIBITION“Modern” alcoholic beverage

laws arose after Prohibitionunder the 18th Amendment in1920 (“The Noble Experiment”)and the Repeal of Prohibitionunder the 21st Amendment in1932. (“The Failed Experiment”)1

While Prohibition was in ef-fect the three-tier market struc-ture (manufacturer todistributor to retailer) became

vertically integrated. Certain infamous“Families” of gangsters owned manufactur-ers and distributors, but also owned retailstores or forced other retailers to stock cer-tain products, kickback profits, and even setprices. Such relationships were referred to asa “tied house.”

REPEALFollowing the Repeal of Prohibition,

the Federal Alcohol Administration Act(“FAAA”) was passed in 1935. TheAmendment also permitted each state to

fashion its own alcoholic beverage controllaws and regulations regarding the trans-portation, importation, and possession of“intoxicating liquors.” Most Federal andState laws survive as they were initially prom-ulgated in response to the Repeal.

FEDERAL AND STATES’ LAWSREGARDING TRADE PRACTICES

Post-Prohibition Federal law governs li-censing, labeling, advertising, standards offill and identity, prohibition of unfair com-petition and unlawful practices, commercialbribery, and consignment sales. Federal law,however, does not preempt State regulationof such activities, and states are free to im-pose more stringent laws than the Federallaw (unless the State law conflicts directlywith applicable Federal law).

Federal law is enforced by the Tax andTrade Bureau (“TTB”) of the Departmentof the Treasury. (Federal law was formerlyenforced by the Bureau of Alcohol, Tobaccoand Firearms (“ATF”). State laws are en-forced by agents of the Alcoholic BeverageControl Agency in each individual State.

States’ laws allow, but do not require, theStates to be “Control States” - meaning thatonly “State Stores” may sell alcoholic bever-ages under a state government monopoly.The majority of States, however, are “OpenStates.” States or other governmental unitsof states, such as counties, may elect to be“dry” (no alcohol sales) when other coun-ties are “wet.” Most states are “wet.”

State laws regulate licensing, trans-portation, distribution, storage and TradePractices, including terms of purchase,costs, credit, returns, charitable events, do-nations of alcohol, hours of operation, de-livery, and sales and marketing. Thestandard purpose of these laws is usually “tomaintain an orderly market place,” “to keepretail independence free from risk,” and “todefine acceptable marketing practices.”This purpose is also described as an effortto avoid the “Tied House Evils.”

TRADE PRACTICE LAWS ANDINTERPRETATIONS; THE TIEDHOUSE;“THINGS OF VALUE”

Federal and virtually all States’ laws in-clude a broad prohibition of persons in thefirst and second tiers from providing to athird tier retailer any thing of value. Moststates’ laws state the prohibition in similarwords such as:

No licensee shall, directly or indirectly,put retail independence at risk or furnish,give or lend any money, premium, gift,free goods or other thing of value to anyretailer. It is also illegal for a retailer toask for or accept such items.

The critical difference between Federaland States’ laws is that Federal law includesa requirement that prohibited practices “in-duce” a retailer to carry products to the ex-clusion of others offering such products(the “Exclusionary Rule”), whereas manyStates’ laws regulate conduct toward retail-ers whether or not it results in an induce-ment or exclusion of others.

Al Capone

Meyer Lansky

THEOTHER

SIDEOF THE BAR

Susan M. Lowe Dillingham & Murphy, LLP



A vertically integrated structure, byownership or control of all three tiers iscalled a “Tied House.” Certain items andprograms are exempted from the “TiedHouse” rule, but only if those activities arespecifically permitted in the law. In somestates, marketing activities that are notspecifically exempted are considered illegal.In other states, any practice not prohibitedis presumed to be legal.

States’ laws differ regarding “tangible”things. For example, Illinois allows a manu-facturer or distributor to provide a “courtesywagon” or coil boxes and pumps, free ofcharge, one time per year, for a one day pe-riod, for picnics held by a retailer. Otherstates prohibit giving anything of value to aretailer. California specifically prohibits amanufacturer or distributor from givingglassware to a retailer. In the District ofColumbia, a manufacturer, but not a dis-tributor, may sell, give, rent or loan to a re-tailer “any service or article” costing themanufacturer not more than $500. InIndiana, cents-off coupons redeemable byretail licenses are prohibited. In Kentucky,they are permitted for both wine and spirits.

State laws also differ regarding “intan-gible” things. There is no precise definitionor quantification of “things of value” with re-spect to intangible things. Innumerablemodern developments in communication,and electronic applications, incapable ofimagination in 1932, are now being gov-erned by laws written in 1932. Today,whether a “thing of value” is prohibited whenit is provided to a retailer is a substantive de-termination made by the enforcementagency. Sometimes, the rationale for a de-termination appears counter-intuitive.

Recent examples illustrate “things ofvalue” prohibited by law pursuant to a Stateagency’s interpretation, including inCalifornia, Illinois or Florida:• Prohibition of Tiers I and II from provid-

ing to a retailer indemnity (other than forits own negligence) or naming a retaileras an additional insured.

• Famous chefs’ and celebrities’ who oper-ate restaurants prohibited from selling toretailers products labeled to include thename of the celebrity or the restaurant.

• Payment to or for retailers of more thana representative percent of a retailer’snetwork of electronic applications for or-dering, accounting, inventory, etc.

These are only a few of the “things ofvalue” prohibited simply because relevantagencies’ interpreted them as being “thingsof value.”

FOLLOW THE MONEYAs in many fields of law and life, the slo-

gan, “Follow the Money” is the direction.Despite many legal developments regardingintangible “things of value,” the most recentfederal enforcement action involved tangi-ble payments of cool, hard cash to a retailer.In May, 2011, the TTB proved that “whathappens in Vegas does not stay in Vegas”.

Six well-known companies in the upper tiersof the industry collectively paid nearly $2million in inducements with the purpose, inTTB’s words, “to obtain preferential prod-uct display and shelf space.” Payments weremade to a Harrah’s through its Harrah’sNationwide Beverage Program, which usedthat money to purchase luxury items, such

as sound systems, huge-screen televisions,furniture and electronics for placement inHarrah’s’ properties. The parties settled thecase (called an “offer in compromise”) byTTB accepting fines in payments by the sixcompanies of $1.9 million, the largest set ofoffers in compromise ever accepted by TTBfor trade practice violations. Each of the sixcompanies denied violating any laws or reg-ulations. Query: should not the companieshave known better? No matter the price ofthe settlement, the companies got a bargainand Harrah’s walked away from its bet-thecompany risks. But at what risk? It is diffi-cult to imagine the cost to Harrah’s and tothe six companies if their licenses to pur-chase and sell alcoholic beverages in LasVegas were revoked.

Litigation regarding the application ordesignation of prohibited “things of value,”through both administrative and state courtjurisdiction, is a subject for another day.

FINAL TIPThrough it all, industry members and

counsel must constantly have in mindwhether the product in issue is beer, wineor spirits. Among the hundreds of laws andregulations that one is presumed to know inthe Trade Practice field, there are differentlaws controlling the purchase and sale ofbeer, wine or spirits. For example, FederalLaws prohibiting unlawful practices, com-mercial bribery, and consignment sales donot apply to beer; most States’ TradePractice laws do. State laws vary in their def-initions of “de minimis” when specialtiesworth “de minimis” amounts may be fur-nished to retailers: such amounts vary from$.25 to $500.00.

Alcoholic beverage regulatory practiceis a demanding but fascinating practice.One thing is certain: the careful lawyershould wait until after providing advice toenjoy the client’s product!

Sell responsibly.

1 A good factual account of Prohibition is presented in an engaging new book, “Last Call” by Daniel Okrent (2010).

Susan M. Lowe is a part-ner at Dillingham &Murphy in the firm’sGeneral Business Groupand in the specialized prac-tice of alcoholic beveragelaw. She has served as in-house counsel to nationwide

companies including a retail grocery and theforemost distributor of alcoholic beverages.

The parties involved in bringing alcoholicbeverages to the marketplace are:

TIER IMANUFACTURER(Brewery, Winery, Distillery) aka“Supplier”

TIER IIWHOLESALER(Distributor) aka “Supplier”

TIER II IRETAILER(“on-sale” for bars, restaurants whereconsumption is allowed; “off-sale” forliquor stores, grocery stores, other retailestablishments where alcoholic bever-ages may be sold but not consumed onthe premises.



The below is an interview between Roger Yaffe,Executive Director of USLAW, and ThomasThornton, attorney with the Alabama USLAWMember firm Carr Allison. Thomas is the formerchair of USLAW's Retail Practice Group, andalso serves as National CMS CoordinatingCounsel for many of his clients regarding the ef-fect of Medicare laws on the liability industry.

QUESTION: Tom, what is the current timetable for the implementation of theMedicare Secondary Payer Act (MSP) andSection 111 as pertains to the liability in-dustry; and do you anticipate any furtherdelays with the reporting process?

ANSWER: The industry's obligations to en-sure Medicare's interests are protected in theliability context, where payments are beingmade to a Medicare beneficiary, have actu-ally been in effect since 1980 with the pas-sage of the MSP Act. However, for purposesof Section 111 reporting, all entities classi-fied as a responsible reporting entity (RRE)must be prepared to report all judgments,settlements, or payments to a Medicare ben-eficiary in excess of $5,000.00 during theirassigned reporting window in the first quar-ter of 2012. Also, the reporting requirementis retroactive for those cases in which a judg-ment, settlement or payment occurred witha Medicare beneficiary in excess of $5,000.00on or after October 1, 2011.

QUESTION: For our clients who are an RRE,other than having registered to submit re-ports pursuant to Section 111, when you say"prepared," what are you referring to?

ANSWER: I have always strongly encouragedmy clients to address and establish internalinitiatives and protocols to ensure that theyare prepared to address the contingent lia-bility under the MSP when handling liabilityclaims in general. Too many companies aresimply waiting for a situation to arise with aMedicare beneficiary and only then addresshow to respond and deal with Medicare intheir specific situations; or relying upontheir TPA or a vendor's recommendationsto address Medicare exposure. The prob-lem is, this may be too little, too late, andthe parties will find themselves in a bindwith potential adverse repercussions. Theother problem I see is that there is no onesingle "best practices" approach to handlingliability claims when considering potentialMSP concerns which can generically be ap-plied to the liability industry across theboard. The reason is that you will rarely findtwo companies whose claims, claim han-dling goals, or risk tolerance are identical.Every company or carrier who either has asubstantial volume of claims, or handles po-tentially catastrophic high exposure cases,should have a plan in place which is tailoredto them specifically based upon these gen-

eral concerns. I believe that by being proac-tive, as opposed to reactive, you will avoidunnecessary claim-handling expenses, los-ing a settlement, or opening yourself up tounnecessary exposure from Medicare.

QUESTION: Can you share with our readerssome general concerns they should be ad-dressing which they may not have consid-ered?

ANSWER: Three come to mind immediately.The first concerns situations wherein multi-ple parties are being identified within a re-lease and/or named in a lawsuit which isbeing defended by one firm. For each busi-ness classified as a Responsible ReportingEntity which is named on a release, or po-tentially included in a judgment, an obliga-tion arises for that entity to report thesettlement or judgment under Section 111,whether or not they contributed to, or wereeven aware of, it. Section 111 is clear thatevery party named on a release, whetherthey made an actual contribution to the set-tlement amount or not and where any pay-ment is for an amount above the applicablethreshold, must submit a Section 111 reportregarding that payment. Failure of a partyto do such can result in the $1,000.00-a-dayfine.

The second issue concerns situationswherein a business is resolving a case for

Thomas S. Thornton, III Carr Allison

N A T I O N A L C M S C O M P L I A N C E C O U N S E L

AMEDICARE

UPDATE

TomThornton



which there is no specific personal injuryclaimed, or even allowed under the statutegiving rise to the claim, but language is in-cluded in the release effectively or specifi-cally resolving an individual's potentialpersonal injury claim/addressing medicalexpenses. The utilization of "form" releasesincluding this general language can againtrigger Section 111 reporting obligationsfor an RRE, even where one was not in-tended. I see this more on the employmentside litigation though.

Finally, businesses need to ensure withthe implementation or acceptance of claimhandling protocols and procedures thatthey are addressing their contingent risks,and ensuring that those risks are acceptablewith their various carriers; especially thosecases approaching or exceeding their SIRor various policy limits. With your more cat-astrophic personal injury cases, the concernfor how parties will protect Medicare's ex-isting interest, and as well as the contingentand potential future interest, is an issue tobe determined prior to settlement negotia-tions with all impacted parties; not after thesettlement is reached.

QUESTION: Where is the industry now withregard to gift card programs and handlingnominal settlements?

ANSWER: In my capacity as National CMSCompliance Counsel for my clients, I mustadvise them that with any payment to aMedicare beneficiary, no matter how small,an obligation arises and potential exposureexists if Medicare's past and potentially fu-ture interest are not protected.

However, the client then must weighthe potential cost of ensuring thatMedicare's interest is protected in 100% ofthe cases dealing with a Medicare benefici-ary against their general claim handlinggoals and potential associated risk. It is pos-sible to ensure that one's interest is pro-tected in 100% of your liability cases, butthat would come at a potentially significantclaim handling cost, and I question whetherthis is realistic for any client. This decisionmust again be made on an individual clientbasis, from a risk assessment perspective. Ihave suggested that many of my clients in-volve their brokers to assist with this en-deavor, and have seen many have successwith a particular broker in the retail field atleast with AON. Particularly in the retail andhospitality field, the utilization of nominalsettlements and gift cards is an importanttool within the risk management field; andis one which does not have to be discarded.

QUESTION: What developments have youseen over the past eighteen (18) monthswhich were unexpected?

ANSWER: What has taken me by surprise isthe increased number of reported state andfederal court cases addressing the impact ofthe Medicare Secondary Payer Act on lia-bility cases. When the Medicare Set-Asideprocess in the workers' compensation in-dustry began in around 2001, there was lit-tle judicial push back from the workerscompensation industry. However, as thepassing of Section 111 has refocused the li-ability industry on Medicare concerns, par-ties are more willing to bring issues to theCourt's attention looking for assistance. Asan example, a recent Pennsylvania StateCourt entered an Order allowing aPlaintiff's attorney to take a legal fee basedupon his contingency fee arrangementthereby reducing the amount which hadbeen allocated by a jury toward future med-ical expenses (a pseudo MSA). This practiceis not followed in the workers compensationcontext. In addition, an Arizona federal dis-trict court judge entered an Order which ef-fectively caused a Medicare contractor torewrite its recovery demand letters, chang-ing its policy and approach to seeking re-covery of its conditional payment claims.The Order also suggests that the Plaintiff'sbar is "immune" from recovery efforts byMedicare should they and/or their clientsnot protect Medicare's interest as relates toexisting conditional payment claims after ajudgment or settlement.

However, we must remember the lim-ited authority which many of these decisionshave across the board based upon the juris-diction or court from which the Orders areentered. I do believe this phenomenon willcontinue and issues will eventually be ad-dressed by higher federal courts which carrygreater weight and potential impact on theindustry. This will eventually reshape howwe address MSP concerns.

QUESTION: Do you see any specific legislativechanges coming in the near future?

ANSWER: I am hopeful! The MedicareAdvocacy Recovery Coalition (MARC) in2011 introduced what is now named theSMART Act. Amendments were made to theAct compared to how it was originally in-troduced in 2010. There was recently a con-gressional hearing at which representativesof the MARC Coalition and Medicare testi-fied. During the hearing congressional rep-resentatives continuously questionedMedicare on their policies and procedures;

specifically as relates to their collection ef-forts with regard to nominal settlements. Aconditional payment recovery letter whichthey had issued demanding reimbursementof $1.76 was introduced as evidence. I be-lieve it was recognized that efforts to recoversuch amounts were an inefficient use ofMedicare's resources and time, as well asput an unnecessary burden upon the busi-ness and insurance industry. With this pub-lic hearing, and MARC's continuedlobbying efforts, I am optimistic that theSMART Act will be introduced, if not in2011 then in 2012. If passed, the SMARTAct would make the recovery system moretolerable as well as require Medicare to, inaddition to the reporting thresholds underSection 111, implement recovery thresholdsunder the Medicare Secondary Payer Act.

QUESTION: If you could change one aspectof the Medicare Secondary Payer processand system, what would that be?

ANSWER: I would create a permanentthreshold whereby neither party would berequired to either report under Section111, or be concerned with reimbursingMedicare's conditional payment claims forthose judgments, settlements, or paymentsbelow $5,000.00. This would substantiallydecrease the number of cases which arebeing reported to Medicare and for whichthey are initiating the recovery process, butwhich would have a minimum impact uponMedicare's total recovery efforts. This wouldbe a more efficient utilization of Medicare'sresources, as well as eliminate unnecessaryrisks and concerns with both Medicare ben-eficiaries and the business and insurance in-dustries.

Thomas S. Thornton, III isa shareholder with the firmof Carr Allison and prac-tices in its Birmingham,Alabama office. He is a for-mer chair of the USLAWNETWORK Retail PracticeGroup and is a Member of

the Medicare Advocacy Recovery Coalition. Heis also a member of the Defense ResearchInstitute and serves on the Strictly Retail andMSP Compliance committees. He has spoken ona wide range of topics from defending andclaim handling best practices with regard topremises liability, liquor liability, product lia-bility and general tort and workers compensa-tions claims. Mr. Thornton also serves asNational CMS Coordinating ComplianceCounsel for his national business and insur-ance clients.


22 U S L A W

In the past, factual evidenceappeared only on paper. Today,facts surrounding a matter arefound in cell phone text mes-sages and voicemail, iPads, on-board transportation computersin vehicles, time managementsystems, email, office docu-ments, corporate databases – thelist goes on and on.

This article explores twoareas where counsel can savethemselves from potentialheadaches with the court as wellas keep more money in theirclients’ pockets. The first has todo with preservation timing andthe second deals with a cost effi-cient review plan.

PRESERVATION TIMINGHow long can you wait to pre-

serve for eDiscovery? Not very long. You’dbe surprised how many times we hear someof these statements.

“What’s the harm in waiting to see if Ican make this go away.”

“They’ve threatened to sue but proba-bly won’t.”

“I’m not going to ask for theirs so theyprobably won’t ask for mine.”

“I’ve got this demand letter but I’m cer-tainly not going to agree to all theirpreservation requests, so I’m going todo nothing until we get some reason-able agreement.”

“I’d rather not impose on the clientright now if we don’t have to.”

“Let’s see if we can’t whittle it down be-fore we go bother IT and the businessclients.”

These are all practical day-to-day deci-sions yet they can come back to haunt us ifwe aren’t careful.

As the threshold basis for preserving ESI, aparty has a duty to preserve evidence whenit knows or should have known that litiga-tion was imminent. Recent court decisionsin several jurisdictions are making this pointvery clear.

In Haraburda v. Arcelor Mittal USA1 thecompany resisted any early preservation. Infact, after the EEOC complaint was filedand while the plaintiff was still employed,the plaintiff complained that emails werebeing deleted from her own email account.Her HR manager responded that “filesstored on company computers are companyproperty and can be assessed and/ordeleted as the company views appropriate.”Even after the civil suit was filed, counselcontended no duty to preserve until after aRule 26(f) discovery conference. The courtdisagreed and allowed plaintiff’s motion fora preservation order. The business scenariohere may be harsher than most, but this isan employment matter, the kind of case ofmost large companies contend with often.

Statistics in the Dukestudy2 show that “[i]n the 230cases in which sanctions wereawarded, the most common mis-conduct was failure to preserveESI, which was the sole basis forsanctions in ninety cases. It wasalso cited as one of the types ofmisconduct in forty-six cases in-volving multiple misconduct.”3

Why isn’t counsel “get-ting it” early enough? Part ofthe answer appears to be withcounsel awareness.

Changes and additions tothe FRCP Rule 26 (b) with re-spect to preservation were con-sidered in the May 2011 reportof the Civil Rules AdvisoryCommittee4. Among several sce-narios is one which enumerates

preservation triggers, under theperception that attorneys need more guid-ance. (1) Service of a pleading or other docu-

ment asserting a claim; or(2) Receipt of a notice of claim or other

communication – whether formal orinformal – indicating an intention toassert a claim; or

(3) Service of a subpoena or similar de-mand for information; or

(4) Retention of counsel, retention of anexpert witness or consultant, testing ofmaterials, discussion of possible com-promise of a claim or taking any otheraction in anticipation of litigation; or

(5) Receipt by the person of a notice or de-mand to preserve discoverable infor-mation; or

(6) The occurrence of an event that resultsin a duty to preserve informationunder a statute, regulation, contract, orknowledge of an event that calls forpreservation under the person’s ownretention program.

Tom Groom, Vice President D4 LLC

Beyond Paper:Keys forEffective

eDiscovery


(7) Any other [extraordinary] circum-stance that would make a reasonableperson aware of the need to preserveinformation.5

Do we really need this kind of list? Isthere anything here that the existing caselaw does not clearly cover? Emphatically, theSubcommittee has reached no conclusionon whether rule amendments would be aproductive way of dealing with preserva-tion/sanctions concerns, much less whatamendment proposals would be useful.6 Butclearly, the issue of early preservation isprevalent enough in the courts today to getthe committee revved up. Why else wouldthey have commissioned this report?

The Seventh Circuit Pilot Project goesabout it a little differently and seeks to in-centivize (and tactically penalize) partiesthat do not “get it” early and cooperatethroughout.

“The goal of the Principles is to provideincentives for the early and informal in-formation exchange on commonly en-countered issues relating to evidencepreservation and discovery, paper andelectronic, as required by Federal Ruleof Civil Procedure 26(f)(2). ThePrinciples provide guidance on how tostreamline the discovery process (e.g.,suggesting formats of electronic dis-covery which are generally not re-quired to be preserved, thus requiringa party to discuss the need for such for-mats early in the pretrial litigationprocess) and how to resolve disputesregarding electronic discovery.

“The Principles also contain novel ideas,such as the use of e-discovery liaisons, toassist parties in efficiently managing dis-covery, particularly discovery involvingcomplex electronically stored informa-tion. The Principles have generated atremendous amount of interest in thelegal community nationally.” 7

The Seventh Circuit Pilot ProjectPrinciples and the local rules that have de-veloped around them are considered a suc-cess by judges in those courts and bypractitioners who appear before them. ThePrinciples are attracting attention nationallyas a guideline for conduct in electronic dis-covery. If you practice within the Circuit,they are mandatory reading. If you practiceelsewhere, they are very much worth takingthe time to study.

MANAGING THE COSTS FOR REVIEWOK, so you have your data preserved

early only to realize the volume of ESI hasgrown much more than you anticipated.Fortunately there are answers in dealingwith large quantities of data, including so-phisticated technology and alternativestaffing models for attorney review. Each re-quires attention in supervision, projectmanagement, metrics, and quality control.

All of these gains are most critical tomanaging the size and cost of attorney re-view. Here, the stakes are highest when itcomes to the overall cost of litigation and towhether a party can afford to litigate or ne-gotiate on the merits.

A sane approach is that if you have agood plan, stick to it. If not, seek guidanceto develop a review protocol and start track-ing the effectiveness. It will save money andhelp get your job done better and faster.Think carefully not just about the technol-ogy, but about the workflow, supervision,quality control, training and documenta-tion. Here are some reminders:

Manage your records. In the absence ofa litigation hold, make sure you are gettingrid of data you don’t need. That includesdata from desktops, laptops, servers, mobiledevices, and especially backup tapes.

Have a litigation response plan. Thereis a return on investment here. Documentthe roles, procedures and workflow. If youquantify early what’s “in”, what’s “out” andwhy, you have the metrics to negotiate a de-fensible, cost-effective, favorable and “pro-portionate” scope of discovery.

Every phase needs experienced anddedicated project management.“Dedicated” means not to dilute or distractfrom workflow, supervision and quality con-trol. The best combination is good PM inthe firm, with the vendor and in-house co-ordinated and supervised by experiencedcounsel who has both the assignment andthe time to supervise.

Understand your technology. You canuse advanced search algorithms, conceptualbased search tools, predictive coding, or justplain old processing and search terms. Youdon’t need to be a linguist or a mathemati-cian, but make sure you understand howthey work for you. Can you explain how youare selecting what you choose to review anddefend what you choose not to review?

Understand your quality control. Ifyour quality control typically means, “firstyou review it, then I’ll review it”, you aremissing some fundamentals. You need test-ing and metrics. How good are your searchterms? How good is your first-pass review?Do you have metrics and testing to trap forerrors? Are your QC procedures docu-mented and approved by supervising attor-neys? Are they routinely enforced and notcompromised by a crashed schedule?

Dedicate time to training and supervi-sion. You can’t dip into a review for a dayand expect it to run on autopilot. No oneperson can supervise all aspects of a com-plex eDiscovery project. If the senior attor-ney is preoccupied with strategy, tactics,clients and opposing counsel, then anothersenior attorney must know intimately whatis going on with the review.

Don’t pander to the fear. Use the righttechnology and staffing models to buildyour programs and stick to them. Documentthe procedures, the workflow, and the qual-ity control measures to track your progress.The outcome is a discovery that is propor-tionate, defensible, and cost-effective.

1 2011 WL 2600756 (N.D.Ind. June 28, 2011)2 Sanctions For E-Discovery Violations: By The Numbers, Dan H. Willoughby, Jr., Rose Hunter Jones, Gregory

R. Antine. www.law.duke.edu Vol 60:789 (2010)3 Duke study at 803.4 Committee On Rules Of Practice And Procedure of the Judicial Conference of The United States, Report

of the Civil Rules Advisory Committee (May 2, 2011) http://www.uscourts.gov/uscourts/RulesAndPolicies/rules/Reports/CV05-2011.pdf There are other scenarios in the proposal that enumerate the du-ration of preservation. We encourage you to take a look, and to make your views known, since anychanges may affect how you advise your clients and what costs you should consider with respect to preser-vation.

5 Committee Report at 32.6 Committee Report at 28.7 http://www.discoverypilot.com/

Tom Groom is a recognizede-Discovery expert with morethan two decades of experi-ence in information tech-nology and 15 yearsfocused on litigation sup-port, document review, ande-discovery methodologies.

As the Vice President of Discovery Engineeringat D4, Tom advises both corporate and law firmclients on issues involving ESI, including de-fensible collection methodologies, optimized ESIprocessing and review workflows, and litigationcontingency and readiness planning. He estab-lishes project teams and solutions tailored tomeet the unique requirements of his clients.


The ADA Amendments Act of 2008(“ADAAA”) was enacted on September 25,2008, and become effective on January 1,2009. The law made a number of significantchanges to the definition of “disability.” Italso directed the U.S. Equal EmploymentOpportunity Commission (“EEOC”) topromulgate amended regulations reflectingthe ADAAA’s changes. In response to thisdirective, the EEOC issued its final regula-tions on March 24, 2011, and the regula-tions became effective on May 24, 2011.

What do the new regulations mean for busi-nesses covered under the ADAAA – that is,businesses with fifteen or more employees?The short answer is that many more indi-viduals are covered by the law and will beable to claim a disability. Highlights of thesenew regulations are set forth below.

Most employers are familiar with thedefinition of “disability” under the ADA.Congress did not change the definition ofthe first two prongs of coverage, the so-called “actual disability” and “record of”

prongs. Instead, Congress provided inter-pretive tools designed to expand coverageof who is “disabled” under the Act and shiftthe focus of the analysis to whether coveredemployers have complied with their obliga-tions and discrimination has occurred. Theregulations implement this goal.

Accordingly, the “actual disability”prong of the ADAAA still defines “disability”as “a physical or mental impairment thatsubstantially limits one or more major lifeactivities.” Similarly, the “record of” prong

WHATTHE

NEWADAAA

REGULATIONS MEAN FOR

BUSINESSESLori Rittman Clark Hinckley Allen & Snyder, LLP



is still defined as an individual with a recordof such an impairment. The changes lie inthe interpretation of the terms “substan-tially limits” and “major life activities.”

First, there are now nine rules of con-struction that apply in determining whethera “substantial limitation” exists. The rules ofconstruction direct that the term “substan-tially limits” should be construed broadlyand in favor of expansive coverage. The reg-ulations expressly state that the term is notmeant to be a demanding standard.

Three of the nine rules of constructionmerit detailed examination, because theylegislatively overrule Supreme Court casesthat held otherwise. First, the determina-tion of whether an impairment substantiallylimits a major life activity should be madewithout regard to the ameliorative effects ofmitigating measures. This means that if anindividual has a medical condition, such asEpilepsy, that is completely controlled bymedication, the determination of whetherthe individual is disabled must not take themediation into account. Other examples ofameliorative measures include medicalequipment, prosthetics and other types ofassistive technology. The one exception tothis rule is with respect to ordinary eye-glasses or contact lenses, which shall be con-sidered in determining whether anindividual is disabled.

While ameliorative or mitigating meas-ures are not to be considered when deter-mining if an individual is disabled, theregulations also make clear that the non-ameliorative side effects of a mitigatingmeasure may be taken into account to de-termine if a substantial limitation exists. Forexample, if the medication an individualtakes to control a medical condition has anegative side effect, this may be taken intoaccount in assessing whether the individualis substantially limited.

Second, an impairment that is episodicor in remission is a disability if it would sub-stantially limit a major life activity when ac-tive. This rule is particularly applicable tocertain mental impairments, such asDepression, which tend to be episodic andwhich were often determined not to be“substantially limiting” prior to the enact-ment of the ADAAA.

Third, and somewhat related to therule stated above, an impairment that istemporary – for example, one that will lastor is expected to last fewer than six months– can be substantially limiting.

On the other hand, a temporary orchronic impairment of a short duration,such as the flu or a broken bone, will not nor-mally be considered as limiting a major lifeactivity. Moreover, episodic conditions that

impose only minor limitations will also notnormally meet the definition of disability.

The regulations also provide for a “con-dition, manner or duration” framework forevaluating whether an individual is substan-tially limited. The interpretive Guidancemakes clear, however, that the “duration”analysis focuses on the time it may take theindividual to perform a major life activity orthe length of time the individual can per-form a major life activity, as compared tomost people in the general population. Theanalysis should not focus on whether the im-pairment itself is permanent or long term.

The ADAAA and the final regulationsalso expand the definition of “major life ac-tivities.” In particular, the regulations stipu-late that the term “major” shall not beinterpreted strictly to create a demandingstandard of disability. Whether an activity isa major life activity is not determined bywhether it is of “central importance to dailylife.” Examples of major life activities in-clude: caring for oneself, performing man-ual tasks, seeing, hearing, eating, sleeping,walking, standing, lifting, bending, speak-ing, breathing, learning, reading, concen-trating, thinking, communicating, working,sitting, reaching and interacting with others.

Further, “major bodily functions” hasbeen added to the definition of major lifeactivities. The operation of a major bodilyfunction also includes the operation of anindividual organ within a body system.

The “record of” prong of ADAAA cov-erage applies to individuals who were previ-ously substantially limited in a major lifeactivity, but are no longer so, as well as indi-viduals who have been misclassified as sub-stantially limited by either their health careproviders or employers. All of the interpre-tive rules set forth above apply to the“record of” prong as well as the “actual dis-ability” prong of the ADAAA.

In addition, once an individual has es-tablished coverage under either the “actualdisability” or “record of” prongs, which as setforth above is not a difficult task and shouldnot require extensive analysis, the focusshould shift to the “interactive process” ofdetermining whether a reasonable accom-modation is needed, and if so, what the rea-sonable accommodation consists of. (Notethat even under the “record of” prong, anindividual may be entitled, absent unduehardship, to a reasonable accommodation ifneeded and related to a past disability. Forexample, an employee with an impairmentthat previously limited, but not longer sub-stantially limits, a major life activity mayneed leave or a schedule change to permither to attend follow-up or “monitoring” ap-pointments with a health care provider.)

Another key change contained in theADAAA and captured in the implementingregulations relates to the third prong of cov-erage, the so-called “regarded as” prong.The standard for coverage under this pronghas been greatly relaxed and is now definedas an instance where an individual has beensubjected to an action prohibited by theADA as amended because of an actual orperceived impairment that is not both “tran-sitory and minor.”

When determining if an individual iscovered under this third prong of theADAAA, the terms “substantially limited”and “major life activity” are not relevant.Moreover, a reasonable accommodation isnot required for an individual who is cov-ered solely under the “regarded as” prong.The key issue for “regarded as” claims willbe whether the employer took an adverseemployment action against an individualbecause of the individual’s physical or men-tal impairment, keeping in mind that theimpairment need not be “substantially lim-iting,” it need only not be both “transitoryand minor.”

The major take-away of the final regu-lations is that many more individuals will beentitled to reasonable accommodations fortheir physical or mental conditions. To thatend, the revised and expanded definition of“disability” under the ADAAA and its im-plementing regulations should result in em-ployers engaging in the interactive processmore frequently and earlier on, by focusingless on whether an employee meets thestatutory definition of ‘disabled’ and moreon whether a reasonable accommodation isneeded and what the accommodationshould consist of.

A second important consideration isthat the ADAAA and the implementing reg-ulations apply to job applicants as well asemployees. As such, employers must be cog-nizant of the requirements of the Act bothduring the hiring process as well as duringthe course of the employment relationship.

Lori Rittman Clark is apartner in the Hartford,Connecticut office ofHinckley Allen & Snyder,LLP, where she focuses herpractice on employment law.Lori represents companiesof all sizes in courts and be-

fore administrative agencies on a variety of em-ployment-related claims, and also counselsemployers on compliance issues.



A homeowner installs a water purifica-tion system in his home. After severalmonths of use, the homeowner develops amysterious rash that he attributes to the newsystem. He retains counsel to sue the man-ufacturer, which notifies its liability insurerof the suit. The insurer sends the claim toits coverage counsel to opine as to whetherthere is a duty to defend the manufacturerin the suit. Coverage counsel says yes and is-sues a reservation of rights. The insurer ap-points counsel to defend the manufacturer.

So far the geometric relationshipamong insurer, defense counsel, and the in-sured sounds pretty typical for those prac-ticing in the fields of personal injury,insurance coverage, or insurance defense.Habitués of these practice areas are famil-

iar with the ethical obligations posed by theso-called tripartite relationship. Specifically,defense counsel, although paid and con-trolled by the insurer, owes duties of loyaltyand zealous representation to the insured.

This geometry, and the concomitant eth-ical obligations, may take on a different cast,however, where the manufacturer's liabilitypolicy is a “wasting” policy, also known as apolicy with “burning limits” or “defensewithin limits.”

The standard general liability policyprovides that the insurer has a duty to de-fend claims or suits against the insured,where such claim or suit is one to which theinsurance applies. The insurer also has theright to control the defense, at least wherethere is no conflict of interest with the in-

sured. In a provision typically entitled “sup-plementary payments,” such policy statesthat payment for the defense is in additionto the limits of liability set forth in the pol-icy declarations. There is also a contractualrequirement that the insured cooperatewith the insurer in the defense.

Generally, the insurer’s duty to defendlasts only until the applicable limit of liabil-ity is exhausted by the payment of loss.Where defense costs are in addition to thelimits of liability, this allows the insurer towithdraw the defense after paying its limit.

In recent years, liability insurance poli-cies have increasingly included costs of de-fense within the limits of liability. Thisfeature, once found primarily in profes-sional errors and omissions and directors

PLAYING WITH

Eric D. Suben Traub Lieberman Straus & Shrewsberry LLP

AVOIDING ETHICAL PITFALLS IN “BURNING LIMITS” POLICIES



and officers policies, is now finding its wayinto a more expansive range of liability cov-erages, particularly those written on a“claims made” basis. The “defense withinlimits” nature of a policy may be marked bythe absence of a “supplementary payments”provision as well as specific language thatexpenses are “part of and not in additionto” the limits of liability.

In some states, insurance regulatorshave restricted the use of “defense withinlimits” policies in a variety of ways. In NewYork, for instance, state regulation prohibits“defense within limits” in general liabilitypolicies except those issued to “large com-mercial insureds.” In such states, “defensewithin limits” is deemed a significant limi-tation on coverage not to be countenancedwhere the insured has limited leverage tonegotiate the terms of coverage.

Such regulations also contain stan-dards for communicating the “defensewithin limits” nature of the policy to the in-sured and third parties. In New York, the“defense within limits” feature must bestated conspicuously on both the applica-tion and the face of the policy.

Why all the fuss about a cost-payingprovision in a private contract? One con-sideration is protecting the rights of the in-jured claimant (the homeowner, in ourhypothetical). In many states, the injuredclaimant has direct rights against the policywhere such claimant becomes a judgmentcreditor of the insured. Such rights may becompromised or lost where a “defensewithin limits” policy is involved.

This possibility colors the ethical dilem-mas faced by attorneys and insurers whenthe costs of defense are within the limits ofliability. For instance, the insured’s primaryinterest may be in preserving the limits of li-ability so as to avoid excess exposure for anyeventual recovery by the injured claimant.By contrast, the insurer may view an aggres-sive defense as the best means to avoid orreduce loss payments. A number of courtshave observed that such a situation presentsan inherent conflict of interest between in-surer and insured, with defense counselcaught in the middle.

Moreover, the insurer’s contractualright to control the defense exists in tensionwith state ethical rules governing the con-duct of defense counsel. Rule 5.4 of theModel Rules of Professional Conduct specif-ically states that “a lawyer shall not permit aperson who…pays the lawyer to render legalservices for another to direct or regulate thelawyer’s professional judgment in renderingsuch legal services.” However, this is not nec-essarily realistic in the realm of insurance de-fense, as some states’ ethical rules recognize.

The tension may come to a head wherethe applicable limit of liability is exhaustedby defense costs. Courts and commentatorshave considered whether counsel providinga defense under a “defense within limits”policy may be estopped from withdrawingthe defense where the limit is used up in de-fending the claim. The linchpin of estoppelis prejudice to the insured, which in this sce-nario may arise from pursuit of an aggres-sive or costly defense strategy that depletesthe available limit, making it impossible tosettle the underlying claim within the avail-able limit.

A defense attorney in this situation mayfind herself in the unenviable position ofbeing unable to withdraw from the defensealthough there is no further coverage (i.e.,no money left in the policy) for the attor-ney’s services. It has been suggested that theattorney may insulate herself from this even-tuality by negotiating a fee agreement withthe insured, either at the outset of the caseor upon exhaustion of the policy limit. Thisentails ethical issues of its own.

Coverage counsel also has special obli-gations when acting for a “defense withinlimits” insurer. Traditionally, courts havetreated an insurer’s duty to defend and dutyto indemnify as two separate inquiries gov-erned by different standards. At least onecommentator has suggested that “defensewithin limits” collapses the dual inquiry intoone, and it may be inevitable that, in somecircumstances at least, assumption of the de-fense will be tantamount to an admission ofcoverage.

Insurers and their counsel should care-fully consider the increased possibility of“bad faith” claims where the insurer con-trols the defense under such policy, andshould make informed decisions about hav-ing independent rather than appointed de-fense counsel represent the insured.

In coverage correspondence issued byor on behalf of the insurer, the “defensewithin limits” nature of the policy should beclearly stated so there is no misunderstand-ing later. This should also be communicatedin any direct communications with plain-tiff’s counsel (for instance, in response to ademand that the insurer pay policy limits tosettle the claim). It has been suggested thatfailure accurately to communicate this as-pect of the policy may expose coveragecounsel to liability.

Primary insurers and counsel shouldalso consider the interests of excess insur-ers. In many jurisdictions, a defending pri-mary insurer owes a “good faith” obligationto excess insurers, whose coverage is trig-gered upon exhaustion of the primary pol-icy. A “defense within limits” insurer

controlling the defense of the insured mayrun afoul of this obligation where an ag-gressive defense strategy burns through thelimit, leaving only the excess insurance topay the claim. Questions about the defend-ing insurer’s handling of the claim may fuelthe “good faith” inquiry.

Plaintiff’s counsel, too, has special eth-ical considerations where the defendant’sdefense is within the limits of coverage.Once plaintiff’s counsel becomes aware ofthe nature of the defending policy, he mustcarefully weigh the litigation strategy. An ag-gressive attorney may find himself and hisclient caught short at the end of the day.

Pursuing an accelerated judgmentagainst the insured may not be an effectivepath to avert this eventuality. Although a de-fault judgment may appear to be a shortcutto direct recovery against a “burning limits”policy with limits largely intact, it has beenheld that the insurer’s costs of defendingthe direct action are properly chargedagainst the “wasting” policy limit.

Communication is the best tool for nav-igating these pitfalls. In our hypothetical,coverage counsel will prepare a reservationof rights that clearly advises the manufac-turer of the “wasting” nature of the policyand, if appropriate, of the manufacturer’sright to independent counsel. Insurer-ap-pointed defense counsel will provide re-ports and budgets to both the manufacturerand the insurer and will be responsive tofeedback from the manufacturer.

Defense counsel should respond to in-quiries about the manufacturer’s coveragewith information that accurately conveys thepolicy’s “burning” nature, so the home-owner’s counsel can evaluate the risks ofprotracted litigation. Defense counselshould also advise excess insurers earlywhere it appears the limit may be signifi-cantly eroded by the defense.

“Defense within limits” policies canhelp reduce the costs of various types of cov-erage. They best serve this purpose when allparties maintain awareness of their specialobligations where such coverage is in issue.

Eric D. Suben is a partnerin the law firm of TraubLieberman Straus &Shrewsberry LLP inHawthorne, New York. Hispractice focuses on insur-ance coverage and coveragelitigation, with particular

emphasis on coverage for products liability, en-vironmental liability, professional liability, andgeneral liability losses.



Your underlying general liability insur-ance policy will defend you in a suit, butyour excess policy will not, right? Contraryto common understanding, there are in-stances where an excess policy will be re-quired to provide a defense to the insured.Understanding how courts may interpretcertain language in your excess policy (orin your opponent’s policy) can be critical in-formation for your risk transfer database.

Oftentimes, a party will purchase sev-eral layers of insurance coverage, in order toprotect itself from both foreseeable and un-foreseeable liability. This coverage is thenstacked into layers of primary and excesscoverage. Once the insured is aware of aclaim and makes the proper notifications, its

primary, or underlying, layer of coverage re-sponds to the claim. From the underlying in-surer’s standpoint, control over the defensemakes sense, because it is that insurer’s pol-icy limits that are at risk in the first place.Thus, the underlying policy typically pro-vides that the underlying insurer has boththe right and duty to defend the insured.

Excess policies usually make no promiseto pay defense costs. These policies arereached less often and are relatively less ex-pensive to purchase in comparison to under-lying policies. Further, excess policies requirethe insured to maintain at least one layer ofprimary coverage that will pay before the ex-cess policy, and normally contain a scheduleof all the underlying policies that must pay

first. Likewise, excess policies may tell youthat they are excess; their “other insurance”clauses provide that when the insured has“other” insurance, that the excess policy is,naturally, excess over the other policies.

Accordingly, the general principle ob-served by the courts is that the underlyingpolicies have the duty to defend the in-sured, while the excess policies do not. Thisis true even where the underlying carrier isinsolvent or has denied coverage – the ex-cess carrier will not be forced to “dropdown” and provide the initial defense to theinsured. Indeed, the excess carrier did notbargain for such an obligation.Distinguished from a duty to defend, it isalso generally accepted that once the in-

William J. Mitchell Ahmuty, Demers & McManus

UNDERWRITING A WHOLE DIFFERENT RISK:

When The Excess InsurerHas A Duty To Defend



sured’s potential liability reaches the excesscarrier’s coverage, the excess carrier has theright to protect its interest by participatingin the defense.

However, as you can tell by the title ofthis article, there are circumstances whenthe underlying carrier refuses to defend orbecomes insolvent, and a duty to defendmay be imposed on the excess carrier. Attimes, certain excess policy language canmix with the law of particular jurisdictions,with the result that an excess carrier willfind itself faced with a duty to defend an in-sured, where that carrier probably never ex-pected to do so. Several of those scenariosare presented here, and they often fall intotwo general categories: first, where thecourt finds the excess policy language is am-biguous or overly broad, and second, wherethe excess policy incorporates just enoughof the language of the underlying policy forthe court to find a duty to defend.

USE OF AMBIGUOUS TERMS VIS-À-VIS OTHER INSURANCE

First and foremost, the drafter of an ex-cess policy must use clear language that statesthe excess carrier will not drop down and de-fend the insured. Otherwise, that old ambi-guity problem rears its ugly head: ambiguousterms are interpreted in favor of coverage.Some excess policies state that liability wouldattach only after the primary carriers “havepaid or have been held liable to pay.” Being“held liable to pay” can certainly be vieweddifferently than “have paid.” The lattermeans having actually paid, while the formerimposes only the legal requirement to pay.There are several instances where the pri-mary carrier had the legal obligation to paybut subsequently became insolvent, and theexcess carrier was required to drop down.

In several other cases, the word “recov-erable” caused similar problems. Where anexcess policy stated that it would pay “in ex-cess of…the amount recoverable under under-lying insurance,” insureds have soughtjudgment, maintaining that this languagewas ambiguous when nothing is recoverablefrom the underlying policy, and thus the ex-cess insurer was obligated to cover the lossbecause the “amount recoverable” from theinsolvent underlying insurer was zero. Thecourts have agreed, even in situations wherethe insured breached its duty to maintainunderlying insurance, because, as one courtwrote, “the term ‘amount recoverable’ canbe interpreted as a variable amount whichdepends on the actual amount recoverablefrom the primary insurer, not the fixed pol-icy limits.” For similar reasons, the word“collectible” also has been problematic forexcess carriers, and at least one court has

written that when an excess insurer uses theterm “collectible” or “recoverable” it is au-tomatically agreeing to drop down in theevent the primary coverage becomes uncol-lectible or unrecoverable.

Thus, it makes a good deal of sense,from an underwriting perspective, to avoidstating that your policy is excess over otheravailable, recoverable, collectible, or liablepolicies, assuming you want the policy to bea true excess policy. Conversely, from theperspective of the insured without a payingunderlying policy, or an additional excesscarrier on the same risk, the exposition ofsuch terms can be the basis for a drop-downargument, and thus a windfall.

NOTICE WHICH TERMS AREINCORPORATED BY REFERENCE INTOTHE EXCESS POLICY

It is common for an excess policy toadopt the terms and conditions of the un-derlying policy. In this manner, the excesscoverage provided follows the form of theunderlying coverage, and the exclusionsmay be incorporated as well. When a com-mercial insured transitions from job to job,and additional insureds are added and re-moved from the underlying policy, there isno need to modify the excess policy – addi-tional insureds are simply identified asthose additional insureds on the underlyingpolicy. This streamlines the coverage andpresumably removes any conflicts betweenprimary and excess policies.

That said, such incorporation by refer-ence can also become a trap for the excesscarrier. Some courts reason that once an ex-cess policy adopts the “warranties andterms” from the underlying policy, that theexcess policy is also adopting the duty to de-fend from the underlying policy.

In more than one jurisdiction, becausethe language of the excess policies read that“This contract is subject to the same war-ranties, terms, conditions, exclusions anddefinitions…as are contained in…the pol-icy/ies of the primary insurers,” the courtswill impose a defense duty onto the excesscarrier. Interpreting the policies very strictlyagainst the insurer, the courts note that thispolicy language “does not expressly declarewith certainty and clarity that there is no ob-ligation to defend.” Thus, an excess policythat is silent as to a duty to defend – as manyare – may have a duty to defend read intoit, even where the policy clearly states thatit is an excess policy. Note that this inter-pretation is not the controlling law in themajority of states, but can be an issue in sev-eral states. Of course, irrespective of the cur-rent precedent in your jurisdiction,depending on your posture in the case you

may be in a position where it is in your bestinterest to advance this argument.

WHAT WORDS SHOULD PLACE THEEXCESS POLICY WHERE IT ISSUPPOSED TO BE?

Obviously, from an underwriting per-spective, underwriters, risk managers, andanyone involved in the purchase or moni-toring of insurance should remove refer-ences in their excess policies that wouldrender coverage excess over coverage thatis “available,” “collectible,” “valid and col-lectible,” “recoverable,” or “held liable topay.” So what words could be used to putthe excess policy where it is supposed to be?

Rather than try to find just the right ad-jective for “underlying insurance,” focus ontriggering excess coverage only after the ex-haustion of a specified amount of underlyingcoverage, such as “this policy applies only inexcess of the $1 million underlying insur-ance and only after that $1 million in un-derlying coverage is exhausted.” Courtshave also found that an excess policy thatrequires exhaustion of the underlying pol-icy, “by reason of losses paid thereunder,”clearly demonstrates that the insured is li-able for lower levels of damage if no under-lying coverage was in force.

By the same token, even though the ex-cess policy may state it is “excess” over allother insurance (and only applies after suchinsurance is fully exhausted), the excess pol-icy should also state that it contains no de-fense duty.

CONCLUSIONIn sum, there is a general understand-

ing, by insurers, the public and judicial in-terpretation, that an excess policy has theright, but not the duty, to defend the in-sured. Nevertheless, there is certain wordingthat can make the excess policy susceptibleto a claim for defense costs. Avoiding thosewords, avoiding broad incorporation of theunderlying policy’s coverage, and by specif-ically stating that the excess policy does notcontain a duty to defend, you can help avoidthe unintended consequence of a duty todefend in an excess policy.

William J. Mitchell is anattorney with Ahmuty,Demers & McManus inNew York. His practice fo-cuses on insurance coveragelitigation, for both policyholders and insurers, andhe may be reached at

[email protected].



The economic downturn of the last sev-eral years has had far reaching implicationsfor attorneys practicing in consumer debtresulting in a drastic increase in litigationunder the Fair Debt Collection PracticesAct, 15 U.S.C. § 1692 et seq. (“FDCPA”),which regulates debt collection practicesacross the nation. In fact, federal litigationinvolving the FDCPA has almost tripledfrom 3,710 complaints filed nationally in2006 to 10,914 complaints filed in 2010. SeeFDCPA and Other Consumer LawsuitStatistics, available at https://www.webrecon.com. While it is not surprising that in-creasing consumer debt would lead to in-creased debt collection activity, a small butgrowing element of consumer’s attorneyshave targeted the FDCPA as a profitable andadvantageous source of litigation. Thistrend has not gone unnoticed by courts. SeeFederal Home Loan Mortgage Corp. v. Lamar,

503 F.3d 504, 514 (6th Cir. 2007)(criticizingthe “cottage industry” that has developedaround the FDCPA); Jacobson v. HealthcareFin. Servs, Inc., 434 F.Supp.2d 133, 138(E.D.N.Y. 2006)(same). This trend is all butcertain to increase given the holding of theUnited States Supreme Court in Jerman v.Carlisle, McNellie, Rini, Kramer & Urlich LPA,130 S. Ct. 1605 (2010), which curtailed thebona fide error defense, the primary de-fense available to debt collectors under theFDCPA.

The FDCPA is a broad consumer-pro-tection statute that is generally applied asstrict liability legislation. Allen v. LaSalleBank, 629 F.3d 364, 368 (3d Cir. 2011); seealso LeBlanc v. Unifund CCR Partners, 601F.3d 1185, 1190 (11th Cir. 2010); Donohue v.Quick Collect, Inc., 592 F.3d 1027, 1030 (9thCir. 2010); Ellis v. Solomon and Solomon, P.C.,591 F.3d 130, 135 (2d Cir. 2010); Ruth v.

Triumph P’ships, 577 F.3d 790, 805 (7th Cir.2009). In addition to enforcement throughthe Federal Trade Commission, the FDCPAalso contains a private attorney general pro-vision enabling private individuals and theirattorneys, armed with a generous fee shift-ing provision, to bring suit for violations ofthis broad, quasi-strict liability legislation. 15U.S.C. § 1692k. As to damages, the FDCPAallows for an individual recovery of $1,000per violation, court costs and reasonable at-torney’s fees as determined by the Court. 15U.S.C. § 1692k(a). More significantly, whereclass action relief is involved, the claimantmay recover the lesser of $500,000 or onepercent of the debt collector’s net worth inaddition to the per violation recovery andreasonable attorney’s fees.

Attorneys are encompassed within thedefinition of debt collectors for purposes ofthe FDCPA. When Congress enacted the

THE FDCPA MINEFIELDEXPOSURE FOR DEBT COLLECTING

ATTORNEYS UNDER THEFAIR DEBT COLLECTION PRACTICES ACT

Karen Painter Randall, Andrew C. Sayles and Meghan K. Musso Connell Foley, LLP



FDCPA in 1977, it provided that debt col-lectors may avoid liability by showing thattheir conduct was the result of a bona fideerror. This defense required evidence thatthe debt collector had measures in place toavoid the alleged violation of the FDCPAand that the unintentional violation oc-curred nevertheless.

Prior to April 2010, the bona fide errordefense was available in many jurisdictionsto both mistakes of fact and mistakes of law.However, the Supreme Court severely lim-ited this defense in Jerman v. Carlisle,McNellie, Rini, Kramer & Urlich LPA, un-equivocally holding that the bona fide errordefense was only applicable to mistakes offact, not mistakes of law. 130 S. Ct. at 1624.There, the defendant law firm sent a com-munication to a debtor that included noticelanguage required under section 1692g ofthe FDCPA. The debtor subsequently sued,alleging a violation of the FDCPA on thebasis that the notice improperly requiredthe debtor to dispute the debt in writing asopposed to orally. When the communica-tion was issued, there was no precedentialholding within the Sixth Circuit Court ofAppeals speaking to the issue, and therewere conflicting holdings from other circuitcourts. The District Court determined thata dispute need not be made in writing, butnevertheless granted summary judgment onbehalf of the law firm under the bona fideerror defense. The Sixth Circuit subse-quently affirmed the District Court’s deci-sion, holding that the law firm’s actions,although a mistake of law, constituted abona fide error defense. The debtor ap-pealed, and the Supreme Court issued a 7-2 opinion holding that the bona fide errordefense was not applicable to mistakes oflaw, even if the law was in a state of flux atthe time of the communication. Subsequentto the Supreme Court ruling in Jerman, mostfederal courts have applied the bona fideerror defense in a limited matter. SeeMcCollough v. Johnson, Rodenburg & Lauinger,LLC, 637 F.3d 939 (2011); compare Hare v.Hosto & Buchan, PLLC, 2011 U.S. Dist.LEXIS 33614 (S.D. Tex. Mar. 30, 2011)(finding Jerman holding was limited to themisinterpretations of the FDCPA, not mis-takes of state law).

Given the curtailment of the bona fideerror defense in Jerman, the drastic rise inclaims under the FDCPA and the corre-sponding “cottage industry” that has devel-oped, attorneys pursuing consumer-debtrelated claims must be extremely vigilantrelevant to their conduct to reduce the po-tential for exposure under the FDCPA.Although cliché, client selection plays an in-tegral role in this process. The FDCPA con-

tains numerous sections and subsections ad-dressing specific acts that constitute a viola-tion. A party acting to collect a debt is heldto a high standard and strict complianceunder the FDCPA is mandated. Against thisbackdrop, attorneys should be cautious inaccepting a debt collection matter if it is nota field in which they regularly practice. Thisis a two-fold warning from both a practicaland compliance perspective. Practicallyspeaking, a limited debt collection practicewill often carry little financial gain for an at-torney whereas the potential for liability andfee shifting would likely outweigh any nom-

inal benefit. Second, protections under thebona fide error defense regarding mistakesof fact still require that the debt collectormaintain a system of checks and balancesdesigned to prevent errors. An attorney whois not familiar with the pitfalls of debt col-lection practice will not likely be in a posi-tion to invest in or establish and maintain asafeguard system. These factors alone sug-gest that debt collection should not be afield of law to be occasionally dabbled in,but rather should be a primary focus of anattorney’s practice.

Second, debt collectors must be mind-ful of whom they are communicating with.Violations of the FDCPA are determined ac-cording to a hypothetical “least sophisti-cated consumer” or “unsophisticatedconsumer”. See Brown v. Card Service Center,464 F.3d 450, 453-454, 454 n. 2 (3d Cir.2006); Evory v. RJM Acquisitions LLC, 505F.3d 769, 774 (7th. Cir. 2007); Guerrero v.RJM Acquisitions, LLC, 499 F.3d 926, 934

(9th Cir. 2007); Clomon v. Jackson, 988 F.2d1314, 1318 (2d Cir. 1993); Peter v. GC Servs.L.P., 310 F.3d 344, 348, n. 1 (5th Cir. 2002).This standard is very forgiving and, in apractical application, requires only that aconsumer read a communication. Any po-tential confusion involving the communica-tion may subject a debt collector to liabilityunder the FDCPA. As such, communica-tions should follow the FDCPA mandates asclosely as possible and should neither em-bellish nor restrict the communication.Similarly, while jurisdiction-sensitive, someCourts have held that the FDCPA is eithernot applicable when a communication issent to a consumer’s attorney, or at the least,that such communications are assessed by ahigher, more scrutinizing standard. SeeEvory, 505 F.3d 769 (7th Cir. 2007); Guerrero,499 F.3d 926 (9th Cir. 2007); Dikeman v.Nat’l Educators, Inc., 81 F.3d 949 (10th Cir.1996). Alternatively, other circuits have heldthat no distinction should exist between aconsumer and his attorney. In those venues,the interposition of an attorney for a debtorallows an opportunistic consumer’s attorneyto create a minefield out of the FDCPA forunwitting debt collectors. See Allen v. LaSalleBank, 629 F.3d 364, 365 (3d Cir. 2011) (con-sumer’s attorney requested specific infor-mation from debt collector before filingclass action complaint).

Ultimately, debt collection efforts in-creasingly have a lower margin of error andrequire greater attention to detail in orderto reduce the potential for liability underthe FDCPA.

Karen Painter Randall, isa Partner at Connell Foley,LLP, ([email protected]) and a CertifiedCivil Trial Attorney. Sheserves as Co-Chair of theProfessional Liability andChair of the Director andOfficer Litigation PracticeGroups at Connell FoleyLLP. Randall is the formerChair of the USLAWProfessional LiabilityPractice Group.

Andrew C. Sayles andMeghan K. Musso are as-sociates with Connell Foley.For more information onConnell Foley, please visitwww.connellfoley.com orcall 973.535.0500.

...the Supreme Courtseverely limited this

defense...unequivocallyholding that the bona fide

error defense was onlyapplicable to mistakes of fact,

not mistakes of law.



The Collateral Source Rule is a com-mon law doctrine that developed more than150 years ago. The rule bars the admissibil-ity of evidence at trial to show that a plain-tiff’s losses have been paid by other sources,such as health insurance that benefits theplaintiff or workers’ compensation pay-ments. Forty-two states have amended theirlaws with respect to the Collateral SourceRule as of 2009.1 Modifications include re-ducing an award for medical bills by theamount of the bills that were paid by insur-ance as well as the standard approach of al-lowing a setoff in a third-party case forworkers’ compensation benefits paid to theplaintiff.

INTERNAL REVENUE CODEPROVISIONSInternal Revenue Code Section 104(a)(2)states as follows:

IRS § 104 Compensation for Injuries orSickness:

(a) In generalExcept in the case of amounts attributa-ble to (and not in excess of) deductionsallowed under section 213 (relating tomedical, etc., expenses) for any prior tax-able year, gross income does not in-clude—(1) amounts received under workmen’s

compensation acts as compensationfor personal injuries or sickness;

(2) the amount of any damages (otherthan punitive damages) received(whether by suit or agreement andwhether as lump sums or as periodicpayments) on account of personalphysical injuries or physical sickness;

The case law that has interpreted theboundaries of the provision has made itclear that 104(a)(2) protects the personalinjury plaintiff both with respect to medicalbills and lost income. Punitive damages areobviously excluded and are not non-taxable.The stated rationale for not taxing personalinjury awards that include reimbursementfor medical expenses or lost income is thenotion that the claimant has lost “human

Lawrence R. Smith and Daniel O’Reilley SmithAmundsen LLC

IS IT TIME TOAMEND

IRS SECTION104(a)(2)?

THECOLLATERALSOURCE RULE

TAX CODEBUDGET DEFICIT

NEXUS:



capital” and any award is not sufficient to re-store the individual to his or her pre-injurystatus.

Suffice it to say that the taxman has bil-lions of dollars at stake if Section 104 of theInternal Revenue Code is amended. Nottoo many people are draconian enough tosuggest that a plaintiff should be taxed onan award for pain and suffering or disability,but it is surprising that more attention hasnot been paid to the non-taxability ofawards for medical bills and lost income.

Health insurance policies may containa subrogation provision when recovery ismade on behalf of an innocent plaintifffrom a responsible third party. Medical liensare often discounted as part of the settle-ment process. Similarly, disability policiesmay have subrogation provisions includedwithin the terms of the agreement.Oftentimes, these “double recovery” pay-ments have not been reimbursed to an em-ployer, an employer’s insurer, an employee’sinsurer, or the government under Medicareor Medicaid provisions in the past. As we allknow now, MMSEA and SCHIP have madeit very clear that Medicare will no longerfoot the bill when it can rightfully be classi-fied as a “secondary payer.”

Consider the catastrophically injuredplaintiff who was never able to return towork after a non-work related injury.Hypothetically, this worker has lost five yearsof income between the date of loss and thedate of trial. In addition, economists predictanother ten years of lost income in the fu-ture. Of course, if that income had beenearned, it would have been subject to taxa-tion.

In the case of a jury award for past andfuture medical bills, there may be a sub-stantial difference between the amount ofthe medical bills placed on the “black-board” by the plaintiff’s attorney and theamount the medical providers acceptedfrom the health insurer to resolve the claimsfor outstanding medical bills. AssumeMedicare paid $.25 on the dollar on a$100,000 hospital bill. Medicare is entitledto a recovery of the amounts paid, but be-cause of the Collateral Source Rule, theplaintiff gets the benefit of a jury awarding$75,000 more than the amount it took tosettle or resolve the hospital bill. Should the$75,000 “windfall” be paid to the plaintiffwithout any taxation of the windfall?

Certainly, the proponents of the“human capital” approach do not want tosee any component of a jury award subjectto income tax. But, in these days, when the

federal government is tax starved and somestate governments are worse off than theirfederal government colleagues, it is surpris-ing that we have not seen significant chal-lenges to the non-taxability provision of IRSSection 104(a)(2).

Taxing awards for economic damagesare logically a much easier target than tax-ing awards for non-economic damages likepain and suffering and disability. If plaintiffswould have paid taxes on income had itbeen earned, it is hard to understand whysettlement proceeds or a jury award for lostincome are not taxable. Presumably, awardsfor non-economic damages are sufficient torestore the “human capital” component in apersonal injury case. Awards for future lostincome are subject to the same analysis.

No one is suggesting the awards foreconomic damages should be taxed on agross basis as opposed to a net basis. In fact,the suggestion is that only net awards or netsettlement proceeds after payment of attor-ney’s fees should be subject to income taxprovisions. Payments for pain and sufferingand disability should not be subject to tax,but benefits for past and future lost income,on a net basis, should be subject to incometax and payments for “excess” medical bills(amounts in excess of “fair payment” ac-cepted by medical providers) should betaxed.

If Medicare officials are intent on en-forcing the Secondary Payor Act, it is prob-able that a tax conscious federalgovernment, not to mention their under-funded state government colleagues couldsoon be seeking legislative changes to IRSSection 104(a)(2) that permit taxation ofnet economic damages such as lost incomeand medical bill amounts not subject to re-imbursement. This predictable tax policychange is consistent with the erosion of theCollateral Source Rule.

Philosophical reasons for the non-tax-ability of economic damages may well giveway to the needs of the taxman. If 104(a)(2)is amended, look for the collection of statesales tax on items shipped out of state to benext.

Lawrence R. Smith, afounding partner ofSmithAmundsen in Chicago,Illinois, focuses his practiceon risk management con-sulting, case monitoring,mediation, arbitration, andimplementing successful

trial strategies. Having tried over 120 jurycases, his experience covers many areas includ-ing product liability, transportation, aviation,employment, insurance services, and commer-cial litigation.

Upon graduation fromJohns Hopkins University,Dan O’Reilley joined theDefense Intelligence Agency.He spent five years workingas a counter-terrorism ana-lyst, which work includedtwo tours in Iraq. That ex-

perience led Dan to law school at IndianaUniversity where he writes for the Journal forGlobal Legal Studies and is a member of MootCourt. He is slated to graduate from IndianaUniversity Law School in May 2012. Duringthe Summer of 2011, Dan worked as a summerassociate at SmithAmundsen LLC.1 Bryce Benjet, A Review of State Law Modifying the Collateral Source Rule: Seeking Greater Fairness in Economic

Damages Awards, 76 DEF. COUNS. J. 210, 211 (2009).

If Medicare officials are intent

on enforcing the

Secondary Payor Act,

it is probable that a tax

conscious federal government,

not to mention their

underfunded state government

colleagues could soon be

seeking legislative changes

to IRS Section 104(a)(2)

that permit taxation

of net economic damages

such as lost income and

medical bill amounts

not subject to reimbursement.



Imagine a courtroom trial arising outof an intersection collision between a semi-trailer and a sedan. Whether the truckingcompany and its driver are at fault is hotlydisputed.

The plaintiff’s attorney presents to thejury “Exhibit A,” an incident report createdby the safety director of the trucking com-pany just hours after the accident. The re-port states, “This accident was preventablebecause the driver should have been payingbetter attention to the road.”

There is something wrong with this sce-nario. The trucking company’s own safetydirector very well may have created a “smok-ing gun.” Even if the trucking company hadrefused to disclose the incident report toopposing counsel, the court would have or-dered it to do so if the report was createdunder the company’s standard protocols forinvestigating accidents.

Yet, under certain circumstances, truck-ing companies can protect its investigativefile from disclosure, preventing the court-room scene described above. This article ex-plores the protection offered by the WorkProduct Doctrine for investigations con-ducted when litigation is reasonably ex-pected to arise out of the accident and thecompany initiates an investigation specifi-cally because of the prospect of suit beingfiled at some point in the future. Numerouscourts have protected the trucking com-pany’s investigative file, as well as testimonyof the persons who conduct the investiga-tion, when these circumstances are present.It is imperative that the trucking companyhave at least two separate protocols in placeprior to an accident to ensure that its inves-tigative file and investigators stay protectedunder the Work Product Doctrine.

THE WORK PRODUCT DOCTRINEDuring the discovery phase of a lawsuit,

the parties exchange information and docu-ments. A party can withhold information ordocuments that are protected by a privilege,even if they are requested by the opposingparty. One basis for withholding documentsis the Work Product Doctrine, which protectsmaterials collected or prepared in anticipa-tion of litigation. One of the primary func-tions of the Work Product Doctrine is toprevent a current or potential adversary inlitigation from gaining access to the fruits ofan attorney’s investigative and analytical ef-fort, and strategies for developing and pre-senting the client’s case. The Work ProductDoctrine permits attorneys and their team toinvestigate the facts of a case and prepare fortrial knowing that the file will not be dis-closed to the other side. The team is permit-ted to fully and candidly assess the situation.

The key to receiving protection underthe Work Product Doctrine is that the docu-ments were prepared in anticipation of liti-gation. For the majority of courts, so long asthe documents were prepared or obtained“because of” the prospect of litigation, thedocument is protected from discovery.1 Tomeet this standard, the document must becreated with the reasonable belief that liti-gation is a real possibility. Documents pre-pared in the ordinary course of business,including documents related to accident in-vestigations, are not protected. Documentsthat would have been prepared in substan-tially the same manner irrespective of antic-ipated litigation are not protected. Evenwhere litigation is imminent, there is nowork product immunity for documents pre-pared in the “ordinary course of business”rather than for litigation purposes.

This distinction – anticipated litigationversus ordinary course of business – lies atthe heart and soul of the Work ProductDoctrine. If a court is not convinced that

the document was specifically created withthe subjective and reasonable belief that alawsuit would be filed, the documents willnot be protected.

CREATE A SPECIAL PROCESS ORPROTOCOL FOR MORE SERIOUSACCIDENTS

In light of these principles, truckingcompanies should create specific investiga-tive protocols to follow when litigation is ex-pected. They must be separate and distinctfrom measures taken for all other accidentinvestigations. By policy, a special teamshould be established and directed by an at-torney to investigate the crash. The team caninclude an attorney, a private investigator,company employees and an accident recon-structionist to name a few. Following this spe-cial policy, the team undertakes aninvestigation of the accident with a specificfocus on gathering information and docu-mentation related to the defense of a futurelawsuit. A separate, “Anticipation ofLitigation File” is created to maintain the in-vestigative notes, witness statements, reportsfrom third-party experts, and other relatedmaterials.

Several courts have examined the spe-cial protocols created by transportationcompanies and have permitted the com-pany to withhold its entire team’s investiga-tive file from production to opposingcounsel based on the Work ProductDoctrine. An examination of these cases re-veals the key ingredients for an anticipated-litigation protocol to ensure its protectionfrom disclosure.

First, the protocol must specifically iden-tify the types of accidents that trigger the spe-cial protocols. Generally, only accidentsinvolving death or serious bodily injury, suchas a danger of paralysis or a severe head in-jury, should trigger the special measures.2

This is because litigation often ensues underthese circumstances, regardless of liability.

Certainly, if “special protocols” werefollowed for each and every trucking acci-dent or incident, the court would likely seethe investigation for what it really is: an in-vestigation performed in the ordinarycourse of business. The investigative filesthat courts have shown a willingness to pro-tect are for only a small subset of accidentsthat a trucking company investigates. Yet,these are the larger and more serious acci-dents, ones in which litigation is likely to,and often does, ensue. By invoking the spe-cial protocols for only the more serious ac-cidents, courts are more likely to protect theresulting investigative file.

Another key ingredient for protectionof the team’s investigative file is the involve-

Marshal M. Pitchford and Christopher E. CotterRoetzel & Andress, LPA

YOUR RAPID RESPONSE TEAM AND DISCOVERY

How to AvoidProducing Your

InvestigativeTeam and File



ment of outside counsel. Where outsidecounsel is retained within hours after an ac-cident to direct the investigation and pro-vide legal advice regarding the accident,courts will likely protect the team’s inves-tigative file.3 This is because trucking com-panies generally do not hire outside counselto participate in the investigation of a rou-tine accident. By hiring outside counsel todirect the team’s investigation, the companyacts in a way that is markedly different thanduring an ordinary-course-of-business inves-tigation.4 Moreover, it acts as a signal that alawsuit requiring defense by outside counselis expected at some point in the future.

Note that it is not enough that outsidecounsel be retained. Rather, outside counselmust direct all aspects of the investigation. Inone case, the company retained defensecounsel as soon as the seriousness of the ac-cident had became known. However, thecounsel did not direct the company’s claimsrepresentative to perform his accident in-vestigation and the representative per-formed the same investigation that itnormally performed for accidents. Thecourt ordered the company to produce toopposing counsel the investigative file pre-pared by the claims representative, findingthat it was not protected by the WorkProduct Doctrine.5

This is a cautionary tale that reinforcesthe lesson that the trucking company mustbe able to demonstrate that it took separateand distinct measures in investigating an ac-cident that it believed would eventually leadto a lawsuit. A trucking company seeking toprotect its investigation must ensure that itsoutside counsel is overseeing and coordi-nating all aspects of the investigation.Because the Work Product Doctrine protectsan attorney’s mental impressions and strate-gies, the work performed by the investigativeteam must be at the attorney’s behest.

There is an extraordinary advantage tohaving outside counsel direct the investiga-tion as well. When outside counsel hires thethird party experts and investigators, andthey report directly to outside counselrather than to the company, the entireteam’s investigative file will likely be pro-tected.6 With outside counsel at the helm,courts can plainly see that such an investi-gation is independent of any routine inves-tigation ordinarily conducted by thecompany and that a file is being assembledwith the expectation that a lawsuit will beforthcoming.

Another important element in protect-ing the investigative file is the assembly of aspecial investigative team. If an anticipated-

litigation investigation is carried out by thesame people that perform all other accidentinvestigations, the court may not considerthe investigation worthy of protection.However, if a different group of people car-ries out the different set of protocols, acourt is more likely to find that litigationwas anticipated. Again, the more distinctand separate the two protocols, the better.Commissioning a different team to performanticipation-of-litigation investigations issimply another way a trucking company canfurther distinguish these investigations fromroutine investigations so that the resultingfile may be protected from discovery to theopposing party.

PROTECTING THE INVESTIGATORSFROM TESTIFYING ABOUT THEINVESTIGATION

If the plaintiff learns of the legal inves-tigation and/or requests a copy of that fileduring the discovery phase of a lawsuit, heor she will probably also request the depo-sition of the persons on the team. The rea-soning is that, if the plaintiff cannot obtainthe investigative file, he or she hopes to atleast discuss the investigation with the peo-ple who conducted it. Some plaintiffs willargue that, because the Work ProductDoctrine only protects “documents and tan-gible things,” it does not protect depositiontestimony. This is inaccurate.

It is true that an investigator cannotwithhold the facts that he or she haslearned, the persons from whom he or shehas learned such facts, or the existence ornonexistence of documents, even thoughthe documents themselves may be pro-tected from discovery. However, the WorkProduct Doctrine does apply to testimonyconcerning the company’s strategies andlegal theories, as well as the subjective eval-uations of the investigator.7 If the companyanticipated litigation at the time it con-ducted the investigation, and the investiga-tion occurred because of anticipatedlitigation, the opposing party cannot deposeteam members and gain access to the fruitsof the investigative and analytical effort todefend the expected lawsuit.

When trucking companies prepare andimplement special protocols for serious acci-dents that are separate and distinct from in-vestigations of routine accidents, the entireteam will be protected. The company canwithhold the investigative file from discoveryto opposing counsel and can refuse to per-mit its investigators from testifying underoath regarding the investigation. The plain-tiff will have to find another “Exhibit A.”

1 See e.g. United States v. Adlman (Adlman II), 134 F.3d1194, 1202 (2d Cir. 1998); In re Grand JuryProceedings, 604 F.2d 798, 803 (3d Cir. 1979); Nat’lUnion Fire Ins. Co. of Pittsburgh v. Murray SheetMetal Co., 967 F.2d 980, 984 (4th Cir. 1992); U.S.v. Roxworthy, 457 F.3d 590, 593 (6th Cir. 2006);Binks Mfg. Co. v. Nat’l Presto Indus., Inc., 709 F.2d1109, 1119 (7th Cir. 1983); PepsiCo, Inc. v. Baird,Kurtz & Dobson LLP, 305 F.3d 813, 817 (8th Cir.2002); In re Grand Jury Subpoena (Mark Torf/TorfEnvironmental Management), 357 F.3d 900, 908(9th Cir.); In re Sealed Case, 146 F.3d 881, 884(D.C. Cir. 1998).

2 See Gruenbaum v. Werner Enterprises, Inc., 270 F.R.D.298, 305 (S.D. Ohio 2010) (“the Court finds thatWerner had a subjective fear of litigation becauseof, inter alia, the serious nature of this particularcollision, including decedent’ death and in-housecounsel’s invocation of the extraordinary CATLoss protocol.”); Lagace v. New England Cent.Railroad, 2007 WL 2889465 at *3 (D. Conn Sept.28., 2007) (court concludes that the defendantanticipated litigation immediately in this case inpart because the plaintiff was seriously injured).

3 Laney ex rel. Laney v. Schneider Nat. Carriers, Inc.,259 F.R.D. 562, 567 (N.D. Okla. 2009); Carnes v.Crete Carrier Corp., 244 F.R.D. 694, 698 (N.D. Ga.2007); Lagace, 2007 WL 2889465 at *3 (litigationwas anticipated in part because “counsel was re-tained immediately”).

4 Laney, 259 F.R.D. at 567 (“Schneider does not or-dinarily retain outside counsel to investigate col-lisions involving its trucks and drivers, andSchneider’s counsel in this matter has been re-tained only a few times in the last several years.”).

5 Skrovig v. BNSF Ry. Co., 2011 WL 2263789 at *4(D.S.D. Jun. 7, 2011); see also Fulmore v. Howell, 189N.C.App. 93, 102 (N.C.App. 2008) (where com-pany hired outside counsel in anticipation of lit-igation, but investigation had already beeninitiated by company safety director, the inves-tigative file not protected by the Work ProductDoctrine).

6 Laney, 259 F.R.D. at 567 (court protects the team’sinvestigative file in part because “Schneider didnot direct the investigation that is at issue hereand was not involved in that investigation”).

7 Gruenbaum, 270 F.R.D. at 305; Carnes, 244 F.R.D.at 699; Basinger v. Glacier Carriers, Inc., 107 F.R.D.771, 775 (M.D. Penn. Oct. 22, 1985).

Marshal Pitchford andChristopher Cotter are at-torneys with Roetzel &Andress, LPA in Akron,Ohio. In addition to coor-dinating emergency re-sponses on behalf of theirtransportation and logisticsclients, Mr. Pitchford andMr. Cotter focus their effortson transportation litiga-tion, including cargoclaims, personal injuryclaims, freight charges col-lection and transactions,government relations andcommercial litigation.



When serving on a board of directors,what guidelines should you keep in mind tomake sure you are serving effectively andfulfilling your fiduciary duties? You might besurprised to learn that regardless of whetheryou are a director of a publicly traded REIT,a privately held investment company, aFortune 500 corporation, or a nonprofit or-ganization, your fiduciary responsibilities tothe organization you serve are the same.The two primary fiduciary duties owed by di-rectors are commonly known as the “duty ofcare” and the “duty of loyalty.” The duty ofcare requires that a director discharge hisor her duties (1) in good faith, (2) with thecare that an ordinarily prudent person in alike position would exercise under similarcircumstances, and (3) in a manner the di-rector reasonably believes to be in the bestinterests of the organization. The duty ofloyalty requires that a director must, at alltimes, discharge his or her duties with theutmost loyalty to the entity he or she serves,and not for his or her personal benefit orthe benefit of others.

In practice, the duty of care relates tothe process a board of directors uses tomake decisions and how it exercises its su-pervisory and monitoring obligations. Inmaking decisions, directors are protected bythe “business judgment rule,” which hasbeen adopted in most states, includingColorado where I practice. Under the busi-ness judgment rule, directors are not liablefor the outcome of their decisions and ac-tions (or even their failure to act) so long asthey have complied with the standards ofcare, described above. To show that this is

the case, directors should make decisions ingood faith, with sufficient information andafter deliberating adequately about any is-sues of material importance to the entity.The minutes of a meeting should reflect thedeliberations conducted by the directors.In their supervisory and monitoring role, di-rectors should request, receive, and under-stand adequate information about issuesbeing considered by them; they should raiseappropriate questions, understand and con-sider risks involved; and, based on that in-formation, they should give input anddirection to management.

Of course, if a claim is made against aboard of directors for failing to comply withthese duties, the outcome will be highly factdependent, and the conduct of individualdirectors may be examined carefully. As youundertake your responsibilities as a director,here are some practical guidelines to helpyou fulfill your role:

ONE You should take the job of being adirector seriously – it is a job. If you don’thave adequate time to be well-informedabout the organization and the issues con-fronting it so that you can make good deci-sions, you should resign from the board.

TWO You should participate actively inboard meetings. You should raise questionsand analyze information and proposalscoming before you so that you understandthem. You should insist that you receivecomplete, thorough, and well-thought-outinformation from management.

THREE You should insist that the entityhire experts when appropriate. In Colorado,the law allows a director to rely on informa-tion, opinions, reports, or statements pre-pared or presented by experts whom adirector reasonably believes to be reliableand competent, including legal counsel,public accountants, and other experts.

FOUR Feel free to request a regular ex-ecutive session, in which only directors andinvited advisors or certain members of man-agement are present, perhaps at the end ofeach meeting. If there are items of particu-lar sensitivity to be discussed during a meet-ing, you should not hesitate to ask the boardto go into executive session; these sessionscan be conducted with specific members ofmanagement, so that items of particularsensitivity can be discussed openly andfrankly with them. Or, if appropriate, theboard can conduct an executive sessionwithout any members of management pres-ent, so that the directors can engage infrank discussion among themselves. If con-

cerns remain after an executive session, youshould ask that those concerns be directedto a board committee or to management forresolution and be placed on the agenda forsubsequent board meetings, until resolved.

FIVE The organization you serve shouldhave a conflict of interest policy that all di-rectors acknowledge every year. You shouldunderstand its terms and consider whetheryou can provide independent advice andmake decisions with the utmost loyalty tothe entity (remember, the appearance of aconflict can be as bad as an actual one). Youalso should routinely assess the ethics of de-cisions being made by the board. Even if acourse of action is legal, it may not be theright thing to do.

SIX Self-evaluations of how your boardis performing, both collectively and indi-vidually, should be routinely conducted.Was everyone well prepared for the meet-ing? Did members actively participate at agovernance level (remember, “managementmanages, a board governs”)? Were theagenda topics appropriate for a governingboard? Was discussion open and candid,and resolution reached when appropriate?Did management respond with completeand adequate information? These are onlyexamples. Each board itself can best decidethe criteria and methods it wants to estab-lish for evaluations and, based on those,how to measure its own effectiveness as aboard.

These guidelines should help you and yourfellow board members provide more effec-tive service to the organizations you serve,and help to limit your exposure to anyclaims that you have not properly dis-charged your fiduciary duties.

Bruce N. Warren is a partnerin RJ&L’s Colorado Springsoffice. He represents for-profitand non-profit business enti-ties in all facets of their oper-ations and contracts,including governance issues,and regularly attends board

of directors’, shareholders’, and officers’ meetings.He also represents both buyers and sellers of realproperties, including commercial and recreationalproperty, tenant-in-common structures, and de-velopment projects. He represents public and pri-vate companies in real estate and asset-basedsecured transactions, including life insurancecompanies, banks, and other lenders. Mr. Warrencan be reached at 719-386-3003 or by email [email protected].

Bruce N. WarrenRothgerber Johnson & Lyons LLP

A Refresherfor Boards

of Directors



Ten short years ago, a group of six charter memberfirms joined together in informal discussion aboutfounding a network of independent law firms thatwas unique from all the others. As managing part-ners of growing firms, we were looking for a way toelevate their service to existing clients and open thedoors to new ones. We knew that they could delivergreater value to these clients by helping them tapinto top notch counsel in unfamiliar jurisdictions.

From these discussions, USLAW NETWORK wasformed. Our first meeting was held in November2001 in Naples, Florida. Thirty USLAW member rep-resentatives convened in a small meeting room andcreated the foundation for USLAW’s future.

Today, USLAW NETWORK spans the entire UnitedStates, Latin America and through partnerships withboth Europe and Africa. Our reach is profound andthe value we deliver to clients significant.

USLAW exists to help clients of our member firmsaccess quality counsel, streamline the procurementof legal counsel, and create their own law firm net-works within ours to meet their unique geographicneeds.

In 2011, USLAW NETWORK is focused on the“Next 10.” While it is a year of celebration, we willnot rest on our laurels. Instead, we are committedto an even better “Next 10” with an emphasis onbuilding, maintaining, nurturing and growing rela-tionships both within the organization and with theclients our member firms represent.

We’ve achieved extraordinary success in a short pe-riod of time. But our NETWORK is only as strong asthe commitment of our members and loyal clients.Today, that commitment has never been stronger.

2001 - 2011CELEBRATINGOUR FIRST TEN

YEARS

LOOKINGAHEAD TO

OUR NEXT TENYEARS

2009 – 2

010

Michael R. Sistrunk

2008 – 2

009

Renée F. McElhaney

2007 – 2

008

Mark A

. Solheim

2005 – 2

007

Donald L. M

yles, Jr.

2003 – 2

005

Charles F. C

arr

2001 - 2

003

James J. O

’Hagan

PAST USLAWCHAIRS

and a sampling ofprevious conferencebrochure covers

l ighting the torch: fall2010

RUBENGONZALEZas Featured

Speaker

A BRIEF HISTORY


SuccessfulRecentUSLAW

Law FirmVerdicts

Bingham McHale LLP(Indianapolis, IN)Andy Gruber and Carolyn Hall of BinghamMcHale represented Kroger d/b/a IndianapolisBakery in a race discrimination matter before ajury in the Southern District of Indiana, JudgeTonya Walton Pratt presiding. Agreeing withKroger’s evidence that plaintiff’s employment wasnot terminated because of race, the jury returneda verdict in favor of Kroger. Mr. Gruber and Ms.Hall represent employers against all forms of em-ployment claims, including those for discrimina-tion and harassment.

Bingham McHale partner, Dan Fagan ob-tained jury verdicts in favor of physicians in twoseparate medical malpractice matters tried in2011. The first involved the death of a 71-year-oldman following prostate surgery. The plaintiffclaimed there was a lack of informed consent dueto the failure to advise the patient of his anesthe-sia risk classification and mortality data regardingthat classification. The Chairman of theAnesthesia Department at Indiana University dis-agreed with the plaintiff’s theory. The jury was outfor less than an hour before finding in favor of thephysician. The second case involved the death ofa 67-year-old man following gallbladder surgery.The allegation was that there was a delay in re-turning the patient to the OR once complicationsdeveloped. They alleged the delay was caused bythe physician leaving the facility to perform sur-gery at a surgery center some distance from thehospital. The defendant argued that a watchfulwaiting approach that included the giving of bloodproducts was reasonable. After a four- day jury trialand 3.5 hours of deliberation, the jury foundunanimously in favor of the physician.

Carr Allison(Mobile, AL)Carr Allison attorneys Craig Goolsby and FaithNixon of Carr Allison’s Mobile, Alabama office re-ceived a verdict that is tantamount to a defenseverdict in Mobile, Alabama Circuit Court in Aprilof 2011. The case arose out of the death of aworker at a construction site. Although the plain-tiff’s lawyers asked for $40 million in their closingargument, the jury’s actual verdict of $150,000 willbe offset to 0 because of pro tanto settlement pro-ceeds received from other defendants.

Goldberg Segalla LLP(Buffalo, NY)William J. Greagan and Bryan D. Richmond ofGoldberg Segalla successfully defended an apart-ment building owner in a case before the NewYork Appellate Division, 3rd Department. TheJune 9 ruling upheld a defense verdict in a leadpaint case where the plaintiff was diagnosed withattention deficit hyperactivity disorder, opposi-tional affiant disorder, a cognitive disorder andlearning disabilities which were alleged to havebeen the result of an elevated blood lead level atthe defendant’s apartment house. The court heldin Cunningham v. Anderson, 2011 NY Slip Op 4800,that the landlord’s liability for injuries related toa defective condition including lead paint cannotbe established without proof that the landlordhad actual or constructive notice of the condition

for sufficient period of time such that the condi-tion should have been corrected. The jury foundthat the defendant had such notice and was there-fore negligent—but the negligence was not a sub-stantial factor in causing the plaintiff’s injuries.The defendant’s experts opined that ADHD is acongenital condition and that there are no scien-tific studies proving that it is caused by lead ex-posure. They further opined that the plaintiff’sdisorders and disabilities were caused by otherfactors, mainly social and environmental circum-stances in his upbringing, which were supportedby scientific studies and articles showing a link be-tween socio-economic factors and psychologicaldevelopment. Proof of the plaintiff’s social andfamily factors was presented through school andmedical records as well as testimony from theplaintiff’s sister. The court also agreed that theplaintiff’s conduct when he was a preteen andteenager may have constituted a failure to miti-gate damages at a time when the plaintiff couldbe held legally responsible for his actions.

Huddleston Bolen LLP(Huntington, WV)Paul Loftus a partner at Huddleston Bolen, theUSLAW member firm from West Virginia, servedas co-counsel in a Federal Employers Liability Act(FELA) for a Class I railroad company in March2011. The defense team obtained a defense ver-dict in the action by an employee for allegedlower extremity cumulative trauma after eightdays of trial.

Klinedinst PC(San Diego, CA)With the help of Klinedinst attorneys GregHensrude and Dan Agle, Defendant TomCoverstone prevailed at trial in a breach of con-tract suit involving the sale of a patent portfolio.In Fleming v. Coverstone, a Boise, Idaho patentattorney named Hoyt A. Fleming, III claimed thatCoverstone had created a binding contract to pur-chase Fleming’s radar detector patent portfoliofor $1 million, based on an informal email ex-change with Coverstone. After a four day trial, thejury of eight men and women found unanimouslythat the email exchange was not a binding con-tract and, therefore, there was no breach whenCoverstone declined to purchase the patents aftercoming to the conclusion that they had little tono value.

Larson • King, LLP(St. Paul, MN)Employment attorney David Wilk obtained com-plete dismissal of claims under the Equal Pay Act,Title VII and the Minnesota Human Rights Actagainst a Fortune 500 client of Larson • King. Theplaintiff was a former head grocery buyer who al-leged that she was paid less than two male em-ployees who performed equal work. Judge PatrickSchiltz found that the two males who made moremoney than plaintiff were not proper compara-tors for two reasons. First, they did not work in thesame “establishment” as plaintiff because plaintifffailed to overcome the “ordinary and well settledrule” that physically distinct locations are differ-ent “establishments” for purposes of the EPA.



Second, plaintiff did not perform work equalto that of the two alleged comparators. TheCourt’s opinion can be found at 2011 WL1467579.

Lashly & Baer, P.C.(St. Louis, MO)Steve Beimdiek and Sarah Hugg, of Lashly &Baer, P.C. in St. Louis, Missouri, recently ob-tained defense verdicts in favor of HighwayTechnologies, Inc. in the Circuit Court ofBuchanan County, Missouri following sevendays of trial. In the case of Janet Peterson andLinda Lambright v. Progressive Contractors, Inc.and Highway Technologies Inc., the Plaintiffssought damages for the wrongful death oftheir mother, Virginia Winslow, and for per-sonal injuries to Janet Peterson. The casestemmed from a single vehicular accident in aconstruction zone on the Pony Express Bridgein St. Joseph, Missouri on September 23, 2007.

Murchison & Cumming, LLP(Los Angeles, CA)Michael D. McEvoy, Sr., Daniel G. Pezold andMaria A. Starn of Murchison & Cumming, LLPreceived a verdict in favor of their client, a sub-contractor, in a breach of contract case. Theclient was also found not negligent on a cross-complaint brought by the defendants allegingconstruction defects. The subcontractor filed acomplaint for a breach of contract and to fore-close on a mechanic’s lien to recover morethan $90,000 due and owing for the comple-tion of concrete and masonry work for theconstruction of a retail store. In the cross-com-plaint, the defendants alleged that the con-crete work was not performed in a good andworkmanlike manner, and sought to recovermore than $250,000 in repair costs, delay dam-ages and alleged future losses. M&C’s clientprevailed after a four-week jury trial, and wasawarded $92,000 plus ten percent interest forthe last two years of nonpayment. The sub-contractor was found zero percent at fault onthe cross-complaint.

Orgain, Bell & Tucker, LLP(Beaumont, TX)Jo Ben Whittenburg of Orgain, Bell & Tucker,LLP successfully defended a medical malprac-tice case filed against a nephrologist and a dial-ysis center. The family of a deceased patientalleged that the patient was forced to sit in herown waste while she received dialysis, and thatthe patient was not repositioned and did notreceive incontinent care during her 3-4 hourdialysis treatment that she received three daysper week at the dialysis center. The familyclaimed that the nephrologist and the dialysiscenter were negligent and that their negli-gence caused severe decubitus ulcers and thedeath of the patient. The dialysis center settledbefore trial and the case went to trial againstthe nephrologist only. The patient was a resi-dent of a nursing home who was transportedto a dialysis center three times per week. Theevidence showed that she returned from thedialysis center a number of times with soileddiapers, which the plaintiffs contendedshowed that she had been forced to sit in her

own waste while receiving dialysis treatment.The patient was hospitalized six times duringthe ten months that she received dialysis treat-ment and was treated for her end stage renaldisease, her co-morbid conditions and her se-vere bed sores before passing away with multisystem organ failure. Mr. Whittenburg was ableto demonstrate through the nurses and tech-nicians at the dialysis center, the medicalrecords and the expert witnesses that there wasno direct evidence that the patient ever hadan incontinent episode at the dialysis centerand that the nephrologist provided exemplarynephrology treatment to the patient through-out her dialysis treatment. After a seven daytrial, the jury deliberated for less than a day be-fore determining that the nephrologist wasnot negligent and completely exonerated himfrom all liability.

Quattlebaum, Grooms, Tull & Burrow PLLC(Little Rock, AR)Steve Quattlebaum and Mike Shannon ofQuattlebaum, Grooms, Tull & Burrow PLLC,successfully defended the Arkansas Game andFish Commission against claims that theagency structure violated the state constitu-tion. The suit, filed by a former commissionerof the Arkansas Game and Fish Commission,sought a declaratory judgment regarding theapplicability of a number of state statutes in-cluding the Arkansas AdministrativeProcedures Act and the Freedom ofInformation Act. After cross-motions for sum-mary judgment, the Court dismissed the plain-tiff’s suit for lack of standing.

Rothgerber Johnson & Lyons LLP(Denver, CO)Gregory B. Kanan, Kenneth F. Rossman, anda team of Rothgerber Johnson & Lyons LLPattorneys recently obtained a defense verdicton behalf of a large regional law firm, and aformer partner of the firm, following a two-week bench trial. Plaintiffs were clients, or en-tities related to clients, of the firm’s Moscowoffice in the 1990s. Plaintiffs claimed to havelost their Russian business following a raid bythe Russian tax police, and alleged the lawfirm failed to give them advice that would haveled them to avoid the circumstances giving riseto the tax police activities. After the Coloradocourts ruled that Russian law governed the dis-pute, Plaintiff pursued a claim for breach ofcontract (malpractice did not exist under theapplicable Russian law), and sought approxi-mately $190 million in damages. Following sev-eral years of discovery and depositions in theU.S., Russia, Austria and England, the case wastried in the Colorado District Court for theCity and County of Denver. The trial presentedunusual challenges, as it involved testimonyfrom Russian-speaking witnesses and exhibitsin four languages. In a 31-page decision, theCourt ruled for defendants on every elementof the claim.

SmithAmundsen, LLC(Chicago, IL)Mike Resis and Richard Valentino recentlywon an insurance coverage case for their clientin the Illinois Supreme Court. In Phoenix Ins.Co. v. Rosen, Docket No. 110679, the IllinoisSupreme Court held that the trial de novoclause in the underinsured motorist arbitra-tion provisions of an automobile insurancepolicy was valid and enforceable. The clause isbinding for underinsured motorist arbitrationawards of $20,000 or less, but allows either theinsurer or the insured to reject an award thatexceeds $20,000. The Supreme Court upheldthe insurer’s rejection of an underinsured mo-torist arbitration award of $382,500 in the in-sured’s favor, overruled four appellatedecisions which had held that the clause wasagainst Illinois public policy, and agreed withMichael and Richard that the clause was notcontrary to public policy or unconscionable.

Wicker Smith O’Hara McCoy & Ford P.A.(Tampa, FL)Tampa, FL USLAW member firm WickerSmith O’Hara McCoy & Ford P.A., recognizesMichael E. Reed and Erin Diaz for successfullyobtaining a defense verdict in a wrongfuldeath case tried in Tallahassee, Florida.Plaintiff sought wrongful death damages onbehalf of himself and his two children stem-ming from his wife’s death. The children werefour months and two years old at the time oftheir mother’s passing. Plaintiff alleged thatthe pharmacist of an international retail es-tablishment was negligent in simultaneouslyfilling three prescriptions causing death dueto Fentanyl toxicity. Plaintiff claimed that thepharmacist failed to use reasonable judgmentin filling a four month old prescription for a50 microgram Fentanyl patch, in conjunctionwith updated prescriptions for Darvocet andVioxx. Plaintiff focused upon the fact that theFentranyl patch was four months old, the pre-scription was originally written for post-opera-tive cesarean section pain which was no longerapplicable, the dose was too high for acutepain patients, and the decedent was opioidnaïve when the prescriptions were filled—allcontrary to the Fentanyl package insert andblack box warnings. The Florida county med-ical examiner who completed the post-mortem study testified that the decedent hada lethal amount of Fentanyl in her system,which in conjunction with the Darvocet,caused respiratory depression and toxicity.The defense argued that all three prescrip-tions were valid under Florida law and were ap-propriately written on their face. The defensealso presented evidence via its retained foren-sic pathologist that the decedent actually diedof sleep apnea, focusing upon the amount ofblood depicted in various recut slides of thelung more commonly seen in asphyxiation re-lated deaths. Plaintiff asked for $8 million inclosing, and the jury returned a unanimousdefense verdict.




Firmson theMove

Greenebaum Doll & McDonald PLLC(Louisville, KY) is pleased to announce thatMichael de León Hawthorne, a Member in thefirm’s Louisville office, has been electedPresident of the Attorneys for Family-HeldEnterprises (afhe). Mr. Hawthorne is also amember of the Board of Directors of afhe. Also,Margaret E. “Maggie” Keane will assume thepresidency of the Kentucky Bar Association(KBA) for a one-year term beginning Friday,July 1, 2011.

New Hampshire USLAW Firm Gallagher,Callahan & Gartrell, P.C. (Concord, NH)congratulates Shareholder-Director MarlaMatthews on being accepted into the NationalAcademy of Elder Law Attorneys. Marla repre-sents clients in matters of preservation andtransfer of wealth, gift and estate tax planning,special needs trust planning, estate and trust ad-ministration, and planning for public benefits.The Firm also congratulates Attorney ErikNewman on his recent election as a member ofthe New England Legislative Committee of theAmerican Resort Development Association. Erikfocuses his land use practice in the areas of con-dominium and timeshare law, real estate devel-opment and environmental law.

Goldberg Segalla LLP (Buffalo, NY) attor-neys Daniel W. Gerber, Sarah J. Delaney andPaul D. McCormick co-authored a chapter onthe emerging topic of mergers and acquisitionsinsurance for New Appleman on Insurance LawLibrary Edition, a seminal treatise on insurancelaw in the United States published byLexisNexis. M&A insurance encompasses sev-eral different types of highly specialized insur-ance policies that provide coverage for specificdifficulties or risks arising out of mergers, ac-quisitions, finance transactions or other busi-ness transactions.

West Virginia USLAW member firm,Huddleston Bolen LLP, launched a new blogtitled Transportation Law Today. The blog pro-vides current news and information for execu-tives, managers, and legal professionals in theinland maritime, rail, and trucking industries.A link to the blog is available at www.huddlestonbolen.com/blog. Transportation Law Today isauthored and managed by Paul Loftus, a partnerin the firm’s Huntington, West Virginia office.

Edmund G. Farrell, III, senior partner andAppellate Law practice group chair forMurchison & Cumming, LLP (Los Angeles,CA), was certified as a specialist in appellate lawby The State Bar of California Board of LegalSpecialization. Mr. Farrell is one of only 285California attorneys certified as an appellate spe-cialist. The extensive certification process includespassing a comprehensive written exam, demon-strating a high level of experience in the specialtyfield, fulfilling ongoing education requirementsand being evaluated by other attorneys and judgesfamiliar with the applicant’s work.

USLAW Minnesota member Larson • King(St. Paul, MN) is pleased to announce thatKevin DeVore has joined the firm as a partner tolead their White Collar Criminal Defense andInvestigations practice. Kevin is a Certified

Criminal Law Specialist and an experiencedcriminal litigator with over 125 jury and benchtrials to date. He focuses his practice on whitecollar criminal defense on behalf of individualsand corporations, and brings to bear his con-siderable experience with federal and state reg-ulatory and enforcement agencies involvingmatters arising from insurance, real estate andsecurities frauds, as well as health benefits andMedicaid frauds, embezzlement and moneylaundering.

Orgain Bell & Tucker, LLP (Beaumont, TX)attorney Gilbert I. “Buddy” Low has beenawarded the 2011 Jefferson County BarAssociation Professionalism Award, which issponsored by the Texas Center for Legal Ethicsand Professionalism. Buddy exemplifies thetraits of civility, professionalism and ethical be-havior and, with his over 50 years of experience,he demonstrates tremendous character in hisprofession and personal life. Buddy is a nation-ally recognized trial lawyer who currently han-dles major litigation involving a wide range ofissues, including personal injury, insurance cov-erage, antitrust, patents, trademarks, criminalRICO violations, pollution issues, class actions,contract disputes, and general business disputes.

Quattlebaum, Grooms, Tull & BurrowPLLC (Little Rock, AR), is pleased to be a par-ticipant in a recently announced partnership toprovide legal services to Arkansas Children’sHospital patients and their families at no charge.Known as a medical-legal partnership, or MLP,the pro bono corporate initiative is the first of itskind in the country. Under the partnership, legalassistance will be provided to patient families atclinics set up at Arkansas Children’s Hospital, aswell as during inpatient visits. The firm’s attor-neys have committed to volunteer their servicesfor this program. Endorsed by the American BarAssociation and the American MedicalAssociation among other leading health and laworganizations, medical-legal partnership is un-dergoing a rapid expansion in both rural andurban settings.

Roetzel & Andress, LPA (Cleveland, OH)has been recognized by clients on the 2011 “BTIClient Service A-Team” as an unparalleledleader in client service among law firms for itsability to deal with unexpected changes and forits outstanding value.

Timothy Liam Epstein, Chair ofSmithAmundsen LLC’s (Chicago, IL) SportsLaw Practice Group, has been been appointedto an honorary position with the FetzerInstitute, specifically as a member of the FetzerAdvisory Council on Sports, Physical Trainingand Exercise, and Embodied Spiritual Practices.The Fetzer Institute is a private, nonprofit op-erating foundation that engages with peopleand programs working to bring the power oflove and forgiveness to the center of individual,organizational and community life. The organ-ization creates and supports projects that serveas healing forces in a divided world, and thatspread knowledge about how individuals every-where can be more loving and forgiving in dailylife. Soccer star Mia Hamm will serve as chair ofTim’s respective advisory council.



USLAW NETWORK

In today’s global marketplace, legal

needs often transcend geographic

boundaries.Clients with complex legal

needs turn to USLAW NETWORK

member firms to represent them in the

courtroom and the boardroom, next

door, across the United States and

around the world.

When a complex legal matter emerges —whether it’s in a single jurisdiction or nation-wide — USLAW is there. We represent some ofthe country’s leading businesses in mattersranging from complex commercial litigation,employment law, products liability, and profes-sional malpractice defense.

USLAW NETWORK is an international or-ganization composed of over 65 independent,defense-based law firms with over 5,000 attor-neys covering the United States and LatinAmerica. Among the firms, there are over 150offices in 47 US states. An alliance with theTrans-European Law Firm Alliance (TELFA)gives us access to 25 European law firms andover 700 attorneys each representing its ownjurisdiction and a similar relationship withALN Limited enables USLAW to partner with10 firms in East and Central Africa.

USLAW NETWORK law firms:• Are fully vetted and subject to a rigorous re-

view process prior to admission; • Become part of the USLAW NETWORK by

invitation only;• Possess broad commercial legal

capabilities; • Have substantial litigation and trial

experience.Using a USLAW NETWORK firm provides

clients with national access to some of the besttrial lawyers in the country when needed forthe litigation and trial of complex, difficult is-sues and cases. These law firms are highlyskilled at early case evaluation and resolution,when possible, while providing cost effectiverepresentation.

The commitment of member firms is to pro-vide high quality legal representation to majorcorporations, captive insurance companies, in-surance carriers, and to both large and smallbusinesses across the United States.

USLAW NETWORK is founded on the re-lationship between its lawyers and their clientsthroughout the organization.

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USLAW NETWORKfirms and their memberattorneys include:

• Lawyers who have the highestprofessional and ethical stan-dards exemplified by the“AV” rating in Martindale-Hubbell

• Lawyers who are active mem-bers as well as presidents and

past-presidents of various in-dustry and trial organization,including:

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Working with USLAW NETWORK firms helps clients:• Streamline the law firm procurement process;• Access top-quality CLE and ongoing legal education oppor-

tunities through our Spring and Fall client conferences, re-gional meetings, and virtual programs.

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ALABAMA | BIRMINGHAMCarr Allison

Charles F. Carr........................................(251) [email protected]

ALASKA | ANCHORAGE Richmond & Quinn

Robert L. Richmond ..............................(907) [email protected]

ARIZONA | PHOENIXJones Skelton & Hochuli, P.L.C.

Donald L. Myles, Jr. ...............................(602) [email protected]

ARKANSAS | LITTLE ROCKQuattlebaum, Grooms, Tull & Burrow PLLC

John E. Tull, III .......................................(501) [email protected]

CALIFORNIA | LOS ANGELESMurchison & Cumming LLP

Friedrich W. Seitz ..................................(213) [email protected]

CALIFORNIA | SAN DIEGOKlinedinst PC

John D. Klinedinst.................................(619) [email protected]

CALIFORNIA | SAN FRANCISCODillingham & Murphy, LLP

Patrick J. Hagan .....................(415) 397-2700, ext. [email protected]

CALIFORNIA | SAN JOSERobinson & Wood, Inc.

Joseph C. Balestrieri..............................(408) [email protected]

CALIFORNIA | SANTA BARBARASnyder Law, LLP

Barry Clifford Snyder ............................(805) [email protected]

COLORADO | DENVERRothgerber Johnson & Lyons LLP

Ben M. Ochoa........................................(303) [email protected]

CONNECTICUT | HARTFORDHinckley, Allen & Snyder LLP

Noble F. Allen ........................................(860) [email protected]

FLORIDA | MIAMIWicker Smith O’Hara McCoy & Ford P.A.

Nicholas E. Christin ...............................(305) [email protected]

FLORIDA | TALLAHASSEECarr Allison

Christopher Barkas................................(850) [email protected]

GEORGIA | ATLANTAHall Booth Smith & Slover, P.C.

John E. Hall, Jr. ......................................(404) [email protected]

HAWAII | HONOLULUGoodsill Anderson Quinn & Stifel LLP

Thomas Benedict...................................(808) [email protected]

ILLINOIS | CHICAGOSmithAmundsen LLC

Lew R.C. Bricker ....................................(312) [email protected]

INDIANA | INDIANAPOLISBingham McHale LLP

James M. Hinshaw ................................(317) [email protected]

IOWA | CEDAR RAPIDSSimmons Perrine Moyer Bergman PLC

Kevin J. Visser........................................(319) [email protected]

KENTUCKY | LOUISVILLEGreenebaum Doll & McDonald PLLC

Mark S. Riddle .......................................(502) [email protected]

LOUISIANA | NEW ORLEANS McCranie, Sistrunk, Anzelmo, Hardy, McDaniel & Welch LLC

Michael R. Sistrunk ...............................(504) [email protected]

MAINE | PORTLANDRichardson, Whitman, Large & Badger

Wendell G. Large .................................(207) 774-7474 [email protected]

MARYLAND | BALTIMOREFranklin & Prokopik, PC

Albert B. Randall, Jr. .............................(410) [email protected]

MASSACHUSETTS | BOSTONAdler Pollock & Sheehan P.C.

John F.X. Lawler ....................................(617) [email protected]

MICHIGAN | DETROITClark Hill, PLC

Daniel Scully .........................................(313) 965-8468 [email protected]

MINNESOTA | ST. PAULLarson • King, LLP

Mark A. Solheim ...................................(651) [email protected]

MISSISSIPPI | GULFPORTCarr Allison

Douglas Bagwell ...................................(228) [email protected]

MISSISSIPPI | RIDGELANDCopeland, Cook, Taylor & Bush, P.A.

Greg Copeland .....................................(601) [email protected]

MISSOURI | KANSAS CITYBaty, Holm, Numrich & Otto, PC

Robert P. Numrich .................................(816) [email protected]

MISSOURI | ST. LOUISLashly & Baer, P.C.

Stephen L. Beimdiek.............................(314) [email protected]

MONTANA | GREAT FALLSDavis, Hatley, Haffeman & Tighe, P.C.

Maxon R. Davis......................................(406) [email protected]

NEBRASKA | OMAHABaird Holm LLP

Jill Robb Ackerman...............................(402) [email protected]

NEVADA | LAS VEGASThorndal Armstrong Delk Balkenbush & Eisinger

Brian K. Terry.........................................(702) [email protected]

NEW HAMPSHIRE | CONCORDGallagher, Callahan & Gartrell

R. Matthew Cairns ................................(603) [email protected]

NEW JERSEY | ROSELANDConnell Foley LLP

Kevin R. Gardner...................................(973) [email protected]

NEW JERSEY | FLORHAM PARKClyde & Co US LLP

Jeffrey L. O’Hara ...................................(973) [email protected]

NEW MEXICO | ALBUQUERQUEModrall Sperling

Timothy C. Holm ...................................(505) [email protected]

NEW YORK | ALBERTSONAhmuty, Demers & McManus

Michael Rabus .......................................(646) [email protected]

NEW YORK | BUFFALOGoldberg Segalla LLP

Neil A. Goldberg ...................................(716) [email protected]

NEW YORK | HAWTHORNETraub Lieberman Straus & Shrewsberry LLP

Stephen D. Straus ..................(914) 347-2600, ext. [email protected]

NORTH CAROLINA | RALEIGHPoyner Spruill LLP

Thomas K. Lindgren..............................(919) [email protected]

NORTH DAKOTA | DICKINSONEbeltoft . Sickler . Kolling . Grosz . Bouray . PLLC

Randall N. Sickler ..................................(701) [email protected]

OHIO | CLEVELANDRoetzel & Andress, LPA

Bradley A. Wright .................................(330) [email protected]

OKLAHOMA | OKLAHOMA CITYPierce Couch Hendrickson Baysinger & Green, L.L.P.

Gerald P. Green .....................................(405) [email protected]

OREGON | PORTLANDWilliams Kastner

Eric J. Neiman .......................................(503) 944-6943 [email protected]

PENNSYLVANIA | HARRISBURGThomas, Thomas & Hafer LLP

Todd B. Narvol.......................................(717) [email protected]

PENNSYLVANIA | PHILADELPHIASweeney & Sheehan, P.C.

Warren E. Voter ....................................(215) [email protected]

PENNSYLVANIA | PITTSBURGHPicadio Sneath Miller & Norton, P.C.

Henry M. Sneath ...................................(412) [email protected]

Pion, Johnston, Nerone, Girman, Clements & Smith, P.C.John T. Pion ...........................................(412) 281-2288

[email protected] ISLAND | PROVIDENCEAdler Pollock & Sheehan P.C.

Richard R. Beretta, Jr. ...........................(401) [email protected]

SOUTH CAROLINA | COLUMBIASweeny, Wingate & Barrow, P.A.

William O. Sweeny, III ...........................(803) [email protected]

Mark S. Barrow .....................................(803) [email protected]

SOUTH DAKOTA | PIERRERiter, Rogers, Wattier & Northrup, LLP

Robert C. Riter.......................................(605) [email protected]

TENNESSEE | MEMPHISMartin, Tate, Morrow & Marston, P.C.

Lee L. Piovarcy.......................................(901) [email protected]

TEXAS | BEAUMONTOrgain Bell & Tucker, LLP

Donean Surratt .....................................(409) [email protected]

TEXAS | DALLASFee, Smith, Sharp & Vitullo, L.L.P.

Michael P. Sharp....................................(972) [email protected]

TEXAS | HOUSTONJohnson Trent

Brian P. Johnson ....................................(713) [email protected]

TEXAS | SAN ANTONIOCox Smith Matthews Incorporated

Brett W. Schouest..................................(210) [email protected]

UTAH | SALT LAKE CITYStrong & Hanni, PC

Stanford P. Fitts .....................................(801) [email protected]

VIRGINIA | RICHMONDLeClairRyan

Charles G. Meyer, III ..............................(804) [email protected]

WASHINGTON | SEATTLEWilliams Kastner

Sheryl J. Willert .....................................(206) [email protected]

WEST VIRGINIA | HUNTINGTONHuddleston Bolen LLP

Richard J. Bolen.....................................(304) 691-8420rbolen@huddleston bolen.com

WISCONSIN | MILWAUKEESmithAmundsen, LLC

Patrick J. Lubenow................................(414) [email protected]

WYOMING | CASPERWilliams, Porter, Day and Neville PC

Scott E. Ortiz .........................................(307) [email protected]

I N T E R N A T I O N A LARGENTINA | BUENOS AIRESRattagan, Macchiavello, Arocena & Peña Robirosa Abogados SC

Juan Martin Arocena......................+(5411) [email protected]

CANADA | OTTAWAKelly Santini

Lawrence Kelly.......................(613) 238-6321, ext. [email protected]

CENTRAL AMERICA AND THE DOMINICAN REPUBLICCentral Law

Jesús Humberto Medina...................+(504) [email protected]

CHILE | SANTIAGOCarey & Allende Abogados

Luis Felipe Arze ......................................(562) [email protected]

MEXICO | MEXICO CITYBryan Gonzalez Vargas & Gonzalez Baz

Aureliano (Kir) M. Gonzalez-Baz....+52 (55) [email protected]

MEMBERSHIP


USLAW Premier Partners

Ringler AssociatesOFFICIAL STRUCTUREDSETTLEMENT PARTNER OF USLAW NETWORKwww.ringlerassociates.comJohn L. MachirSenior Vice President5311 Worthington DriveBethesda, MD 20816Phone: (301) [email protected]

With offices in over 75 major litigationcenters in the U.S. and U.K., RinglerAssociates is the nation's oldest & largeststructured settlement firm. Since 1975,the company's structured settlementspecialists have placed over 170,000 an-nuities totaling over $24 billion in claimsettlements for casualty carriers and self-insured corporations.

Since its establishment, RinglerAssociates has used a partnership ap-proach to build a team of highly-sea-soned professionals. Ringler settlementexperts average over 10 years of experi-ence in claims, insurance, law and nego-tiations; many are former senior claimsofficers and attorneys. As experts in allaspects of structured settlements involv-ing tort liability, representatives fromRingler Associates help settle casesfaster, save money on claims administra-tion costs, and reduce caseloads and pa-perwork. With access to all major lifeinsurance carriers offering the struc-tured settlement product, RinglerAssociates is always able to offer clientsthe lowest annuity rates from leadingcompanies. Structured settlement spe-cialists provide fast, accurate quotes, callwith updates on rate changes, securesubstandard life ratings where possible,and are available around-the-clock tomeet with clients and help review files.

Development of settlement annuityplans by the company's experts includesanalyses and life care plans which definethe needs and costs for the claimant'sentire future. On-site support is offeredduring all phases of settlement negotia-tions. Our specialists will assist in thehandling of closing documents and fol-low-up after cases are closed. In-houseseminars covering the structured settle-ment process are readily available.

Please refer to our website for furtherinformation and office contact details.While online, check out our top ratedlegal podcast series, RINGLER RADIO,with over 1,000,000 total listeners!

SEA, Ltd.OFFICIAL TECHNICALFORENSIC EXPERT PARTNER OF USLAW NETWORKwww.sealimited.comJ. Kenneth CorwinNational Account Executive7349 Worthington-Galena RoadColumbus, OH 43085Phone: (614) 888-4160Fax: (614) 885-8014Email: [email protected] Chris TorrensNational Account Executive3403 N. Sam Houston Parkway W.Suite 350Houston, TX 77086Phone: (800) 880-7324Email: [email protected]

SEA Limited is a multi-disciplined engi-neering and fire investigation companyspecializing in failure analysis. SEA Ltd.also conducts environmental and indus-trial hygiene analysis. They offer a com-plete investigative service, whichincludes mechanical engineering, elec-trical engineering, metallurgical engi-neering, civil engineering, fireinvestigation, environmental and workplace safety analysis, and a fullyequipped chemical testing laboratory.These disciplines interact to provide athorough and independent analysis thatwill support any subsequent litigation.SEA's full-time staff of investigators, en-gineers, and chemists are licensed/reg-istered professionals and arecourt-qualified experts in their respec-tive fields. With ten offices locatedthroughout the US, SEA Ltd. has pro-vided professional services to manufac-turers, attorneys and the insuranceindustry Nationally and Internationally.SEA has also developed specialized prac-tice groups in construction, marine,trucking, vehicle dynamics and qualitycontrol laboratory testing.

D4 LLCOFFICIAL E-DISCOVERY PARTNER OFUSLAW NETWORKwww.d4discovery.comTom GroomVice PresidentDiscovery Engineering8429 N. Silo RoadParker, CO 80138Phone: (303) [email protected] Holland, CEO222 Andrews StreetRochester, NY 14604Phone: (585) 385 [email protected]

D4 is a full range eDiscovery ServicesProvider supporting the legal industrysince 1997. From ESI planning, data col-lection, forensic examination & experttestimony, 26(f) and 30(b)6 preparationand consulting, early data assessment,ESI processing, hosted review, all theway through document production, D4brings its unique and cost effective ap-proach to all of its engagements. D4combines advanced technology with anexperienced staff to help customers ex-tract clarity and significance from whatotherwise could have been a deluge ofirrelevant data and excessive costs.There is a better way.

D4 is headquartered in Rochester, NewYork with full service locations locatedthroughout the United States.

Legal Language ServicesOFFICIAL TRANSLATION,INTERPRETATION AND INTERNATIONALLITIGATION SUPPORT PARTNER OFUSLAW NETWORKwww.legallanguage.comVictor HertzPresidentEmail: [email protected] AstefanousContract [email protected] John Street, Suite 300, NewYork, NY 10038Phone: (212) 766-4111Fax: (888) 754-8438

Since 1983, Legal Language Services,expert linguists working in 157 lan-guages and dialects, has been assistinglaw firms, corporations and insurancecompanies with professional translationand international litigation support.They provide certified translations of ev-identiary documents, statutes, com-plaints, judicial proceedings and otherlegal documents.

Their international litigation supportservices are offered in more than 90countries around the world. Such serv-ices include international service ofprocess, the compulsion of foreign evi-dence and skip tracing. Legal Languagealso provides interpreting, transcription,video depositions and the catalogingand summarization of discovery docu-ments in all languages.

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USLAW Support Partners

2011 USLAW Partners


Magna Legal Services, LLC OFFICIAL JURY CONSULTANT PARTNEROF USLAW NETWORKwww.magnals.comRobert AckermanPresidentEmail: [email protected] HutnickDirector of MarketingEmail: [email protected] Market Street, 8th FloorPhiladelphia, PA 19103Phone: (866) 624-6221Fax: (866) 579-0819

Who are the worst and best jurors foryour case? Is your trial story believable?What are the strengths of your case youcan emphasize, and the weaknesses thatyou can eliminate? These are only someof the questions that Magna LegalServices can help you answer.

Our consultants can assist in:• Focus Group Research • Mock Trial Research • Thematic Development Research • Perception Studies • Case Risk Assessment • Change of Venue Studies • Jury Selection Assistance • Witness Communication Training • Shadow Jury Studies

By conducting Jury Research, Magna as-sists you and your clients in identifyingthe best pathway to a favorable verdict.Let Magna Legal Services help you seeyour case through the jurors’ eyes. Callabout our exclusive cost-effective on-linefocus groups.

Med Legal Consulting SourceOFFICIAL MEDICAL RECORD ANALYSIS,MEDICAL BILL AUDIT, AND LIFE CAREPLANNER PARTNER OF USLAWNETWORKwww.medlegal-la.comNancy Fraser, RNChief Executive OfficerEmail: [email protected] Wilshire Blvd., Suite 260Los Angeles, CA 90017Phone: (213) 347-0203Fax: (213) 347-0209

Through expert interpretation of criti-cal information at the center of bodilyinjury liability cases, Med Legal consis-tently delivers case changing informa-tion to their clients. Attorneys, risk andlitigation managers and claims profes-sionals turn to Med Legal as a part of agreater innovative approach to mitigat-ing damages.

Since its foundation in 2000, MedLegal’s approach to medical recordanalysis, life care plans and medical billreviews has been grounded in the con-cept of building a strategic partnership.Med Legal has been working with litiga-tion and claims teams to build strongcases based on facts discovered in themedical records. By bridging the gap be-tween the medical and legal worlds,Med Legal improves cases from the startresulting in improved outcomes with amore limited investment of time andmoney.

Med Legal Consulting Source is head-quartered in Los Angeles. You can fol-low Med Legal on twitter@medlegalLA.

The Center for ForensicEconomic StudiesOFFICIAL ECONOMIC ANALYSISPARTNER OF USLAW NETWORKwww.cfes.comChad L. Staller, Esq., MBA, MAC,PresidentEmail: [email protected] Walnut Street, 8th FloorPhiladelphia, PA 19103Phone: (215) 546-5600Fax: (215) 732-8158

The Center for Forensic EconomicStudies is a leading provider of eco-nomic and statistical analysis and experttestimony. Center economists analyzedamages and liability issues in injuryand death matters, mass torts, commer-cial litigation, employment actions andinsurance-related issues. In addition, theCenter consults in non-litigation areassuch as labor-law compliance, businessvaluation, feasibility studies and wagenegotiation.

We assist with discovery, uncover keydata, critique opposing claims and pro-duce clear, credible reports and testi-mony. Since 1980, attorneys and theirclients have relied on our expertise inthousands of cases in jurisdictions acrossthe country.

Our main areas of concentration include:Personal Injury/Wrongful Death DamagesWhat economic damage did the tort vic-tim or the victim’s family members suffer?

Commercial Damages/BusinessInterruption ClaimsWhat did a business lose as the result ofa tort or breach of contract? Does abusiness-interruption claim overlook oroverstate elements of damages? Howlong can one reasonable project lostprofits for?

Economic Damages in Employment MattersWhat is the economic impact of an indi-vidual or group dismissal, layoff or otheremployment decision? Will the em-ployee have an on-going economic loss?What did the employee do to mitigatehis/her loss? What does economic datasuggest about a person’s ability to re-enter the labor force?

Employment DiscriminationWas a layoff or other employment actionbiased against a group or individual?

Business AppraisalsWhat is the economic value of a businessor professional practice?

US Legal Support, Inc OFFICIAL COURT REPORTING PARTNER OF USLAW NETWORKwww.uslegalsupport.comCharles F. SchugartPresident & CEO363 N. Sam Houston Pkwy. E., Suite 900Houston, TX 77060Ph: (832) 201-3834 Fax: (713) [email protected] CunninghamDivision President – IL200 West Jackson Boulevard, Suite 600Chicago, IL 60606Ph: (312) 236-8352 Fax: (312) [email protected] GiammancoDivision President – CA Reporting15250 Ventura Boulevard, Suite 410Sherman Oaks, CA 91403 Ph: (818) 995-0600 Fax: (818) [email protected] WatsonDiv. Pres. – TX Records & Reporting363 N. Sam Houston Pkwy. E., Suite 900Houston, TX 77060Ph: (832) 201-3872 Fax: (713) [email protected]

U.S. Legal Support has been providingservices to the legal community for morethan 20 years. With 42 offices across thenation and the combined years of expe-rience of our staff, U.S. Legal Supportcan provide nationwide coverage withlocal expertise. Utilizing U.S LegalSupport's Court Reporting services pro-vides access to over 1200+ superior courtreporters using state of the art technol-ogy including: Complete online officewith 24/7 access including online sched-uling and calendar access, the ability toview invoices online, transcript/exhibit/document repository, electronic deliv-ery, RealTime Reporting includingSummation & Livenote, daily and expe-dited delivery, Interactive PDF tran-scripts, Legal Videography, text/videosynchronization, condensed transcripts/ word indexes, conference rooms,video conferencing and Interpreters.

U.S. Legal Support is one of the mostexperienced firms in managing large,complex cases. The Power of ourCommitment differentiates us from ourcompetitors. We pride ourselves in ourability to create personal relationshipsand partnerships with firms by creatingcustom solutions tailored to their indi-vidual legal needs. We schedule and co-ordinate depositions, provide exhibitindexes and databases, schedule andmanage online reports of your discoveryprocess and monitor all stages of thebilling cycle. Let U.S. Legal Supportshow you the Power of ourCommitment today.

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USLAW MagazineUSLAW Magazine is a professional publication produced twice annually and designed to addresslegal and business issues facing commercial and corporate clients. Issued in Spring and Fall, re-cent topics have covered managing litigation in a tighter economy, changes in M&A strategies,sidestepping legal challenges during a workforce reduction, best practices in e-discovery poli-cies, and weighing the pros and cons of litigation versus mediation.

USLAW EduNetThe USLAW EduNet is our newest webinar program to help in-house counsel stay ahead ofchanging legal developments in the US and around the globe. Prepared by our USLAW practicegroups, webinars provide short summaries of legal happenings – recent court rulings, legislativechanges, and timely issues – affecting USLAW clients and their businesses.

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