January 2018

In Santiago[1] v. Rich Products Corp., et al.[2], the Massachusetts Appeals Court held that a finding of spoliation requires both: (1) the negligent and intentional loss or destruction of evidence; and (2) the awareness of the spoliator at the time the evidence is lost or destroyed of the potential for the evidence to help resolve the dispute. The Santiago Court’s strict interpretation of the doctrine of spoliation follows the trend of Massachusetts litigation, shifting focus from the first element, the spoliator’s conduct to the second element, its mental state. The opinion also accentuates the fact that non-compliance with a document retention policy does not equate to per se spoliation.

The underlying dispute arose in 2006, when the plaintiff, Kelvin Santiago, then a 7-year-old first grader at Lowell public schools, experienced traumatic brain damage after choking on meatballs that were served to him during school lunch. The plaintiffs (Kelvin Santiago and his parents) sued the city of Lowell and the entity that produced and sold the meatballs, Rich Products, asserting negligence, breach of the implied warranty of merchantability, and Chapter 93A consumer protection claims, amongst others. Id. at 2. By way of background, in 2004, as part of the Federal government’s initiative to provide healthy lunches to students through the National School Lunch Program, Rich Products began providing and producing meatballs that met the healthy-lunch specification guidelines. To comply with standards promulgated by the United States Department of Agriculture, Rich Products used Profam 974, a soy protein isolate, to achieve the requisite “two ounces of protein per student [per lunch].” Santiago, No. 16-P-504 at 3. The plaintiffs’ counsel argued that the inclusion of Profam 974 rendered the product unreasonably dangerous, because the soy protein produced a meatball whose texture made it a choking hazard. Id. at 6

Upon enduring substantial discovery and motion hearings, in 2014, the Superior Court awarded the city of Lowell summary judgment, and a jury found that Rich Products was not responsible, on the basis that its negligence was not a “substantial contributing factor to the plaintiffs’ injuries.” Id. at 2-3. On appeal, the plaintiffs argued that the trial court erred by, among other things, denying the plaintiffs’ request for an adverse-inference instruction regarding Rich Products’ alleged spoliation of evidence. Id. On December 28, 2017, the Appeals Court “conclude[d] that the trial judge did not abuse his discretion in declining to give a spoliation instruction because the plaintiffs failed to establish the necessary factual predicate that Rich Products lost or destroyed the missing evidence when it knew or should have known of a potential lawsuit.” Id. (emphasis added).

Spoliation is the destruction of evidence, negligently or intentionally, when the litigant is aware or should be reasonably aware that the evidence is relevant to a potential action, whether or not the action has officially commenced. Id. at 7 (citing Mass. G. Evid. § 1102 (2017)). “The doctrine does not extend to a fault-free destruction or
Continue Reading

On December 22, 2017 President Trump signed into law the Tax Cuts and Jobs Act (officially Public Law no. 115-97, named “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018”). Recognized generally for changes to the individual income tax brackets, the corporate tax cuts, and the estate tax modification, a separate section, 13307, likely will have a significant impact on sexual harassment settlements.

Senator Bob Menendez (D- NJ) proposed the Weinstein tax exclusion (above) in direct response to the #MeToo movement after the sexual harassment revelations about Harvey Weinstein. The provision was added to the Tax Cuts and Jobs Act to restrict tax deductibility of sexual harassment settlements associated with nondisclosure agreements. Such agreements were reported in connection with Harvey Weinstein, Fox News, and other high profile cases.

Section 13307 modified the IRS Tax Code section 162 to eliminate the ability of businesses and defendants (and possibly plaintiffs) to deduct the costs associated with settlements of sexual harassment claims that are subject to nondisclosure agreements, including legal fees related to the settlements. Because most settlements related to sexual harassment have included confidentiality or nondisclosure language, the impact of this legislation will be significant for all parties involved, and will be reflected in advice from legal counsel. The provision applies to any payments made on or after December 22, 2017 and is not retroactive, except to the extent it affects payments left to be paid after December 22, 2017 on any prior settlement agreement.

The statutory language does not provide definitions for the terms “sexual harassment” or “sexual abuse.” The statutory language also does not clarify the meaning of “related to” for the purposes of settlement or legal fees. This ambiguity leaves several important open questions:

• An employment dispute that does not involve claims of sexual harassment but results in a nondisclosure agreement that includes broad releases may be problematic. If the scope of the releases includes sexual harassment claims, can that settlement be deducted by the business?

• What if a plaintiff has multiple claims, including but not limited to retaliation, gender discrimination, and a sexual harassment claim; what portions of a settlement payment will be deductible? Could effective contract drafting allocate most of the settlement consideration to the non-sexual harassment claims and thereby affect deductibility?

• In settling multiple claims, should counsel draft two separate agreements, one dealing only with the sexual harassment claim and the other agreement with all remaining claims, and allocating the larger portion of the settlement consideration to the nonsexual harassment claim, which is deductible?

• Does the statute exclude all legal fees associated with the claim from deduction, or just the portion of fees associated with the negotiation of the settlement and the drafting and execution of a settlement agreement?

Until more clarity is provided by administrative rules, legislative changes, or court opinions, lawyers will have an important role advising clients how to modify previous boilerplate nondisclosure settlement
Continue Reading

In a recent decision, the Massachusetts Supreme Judicial Court (SJC) clarified the scope of personal liability for investors and board members under the Commonwealth’s Wage Act, as codified at G.L. c. 149, §§148-150.  The SJC held that investors and board members could not be held personally liable solely by virtue of their investment activity or acts performed in their official capacity as board members.  While the case involved a nuanced set of facts aptly described as “unusual and removed from the core concerns of the Wage Act,” its holding is nonetheless significant, and provides guidance for personal liability under the Wage Act for individuals other than a company’s president or treasurer.

In Segal v. Genitrix, LLC, 478 Mass. 551 (2017), H. Fisk Johnson and Stephen Rose, two former board members of Genitrix, LLC, sought direct appellate review of an adverse jury verdict that found them personally liable for failing to pay wages owed to the company’s former president and CEO, Andrew Segal.  Johnson, Rose, and Segal founded the biotech company, originally a Maryland LLC, in 1997.  Johnson briefly served as a board member during Genitrix’s opening year, but continued to invest in the company until its dissolution in 2007.  Johnson designated Rose as his appointee to the board and advised Segal that Rose was to be his contact for any financial matters.

As a condition to Johnson’s initial investment, he required Segal to execute an employment agreement with Genitrix.  The agreement stipulated that Segal would receive a fixed salary in consideration for his service as the company’s president and CEO, including managing the day-to-day financial and administrative affairs of the company.  Segal, the company’s sole officer, supervised the laboratory, managed all human resource functions, including payroll, and was the only individual authorized to issue wage checks.

The company began to experience financial difficulties in 2006, which led to Segal’s recommendation that the company lay off its at-will employees in order to meet payroll obligations.  In turn, the two defendants invested additional money in the company; however, they earmarked the investment for specific purposes such as funding payroll and replacing lab equipment.  The company’s financial condition worsened in 2007, and Segal unilaterally decided to stop taking his salary.  By mid-2007, the company was unable to make payroll and its board voted to lay off the other remaining employee.  The defendants made a final investment to pay off that employee’s remaining salary obligations and then shuttered the company’s doors.

The company ultimately filed a petition for judicial dissolution.  During those proceedings, Segal filed an array of claims against the company, and also attempted unsuccessfully to block the dissolution of Genitrix, a Delaware LLC.  See Fisk Ventures, LLC v. Segal, et al., C.A. No. 3017-CC (Del. Ch. Jan. 13, 2009).However, Segal did not assert a claim under the Massachusetts Wage Act.  Notably, Segal continued in his role as president while the dissolution proceedings were ongoing, despite continuing to decline a salary.  Segal’s belief that he eventually would get paid for the work
Continue Reading

On August 30, 2016, a Miami-Dade jury awarded Richard Batchelor and his wife more than $21 million after finding that his mesothelioma arose, in part, from asbestos exposure during overhaul work at a Florida Power & Light Co. (FP+L) power plant. On December 27, 2017, the Third District Court of Appeal erased the verdict against defendant Bechtel Corporation (Bechtel), finding that the jury should never have considered claims against that defendant because of plaintiffs’ insufficient evidence.  The appellate court also found reversible error in an adverse inference instruction, and concluded that Bechtel’s efforts to locate discoverable information were reasonable under the circumstances.

Between 1974 and 1980, Richard Batchelor worked for FP&L as an electrical technician at two power plants including the Turkey Point power plants. At that time, Turkey Point was a sprawling and complex facility – occupying over three thousand acres and containing 12 nuclear-fueled units and two oil and natural gas fueled units – and provided power for all of South Florida. On any given day, four hundred FP&L employees and numerous contractors worked at Turkey Point. Mr. Batchelor was responsible for repairing and maintaining gauges and equipment at the site, including four of the nuclear and gas units. Insulation, an indeterminate amount of which contained asbestos, covered the various pipes, wires, and equipment at the plant. Mr. Batchelor never removed insulation from any equipment and never worked on equipment while the insulation was being removed. Instead, insulation removal was performed by independent contractors who specialized in insulation removal, and other FP&L workers. Mr. Batchelor did work in the vicinity of other workers removing insulation, but it is unclear how close Mr. Batchelor worked to those removing asbestos, how often this occurred, or the duration of the occurrences. When asked by his attorney if the dust he breathed in was from insulation, Mr. Batchelor responded, “It could be from anywhere. It’s just dust.”

One of the contractors retained to provide ongoing maintenance services of the equipment on site was defendant Bechtel. The contracts provided that FP&L would issue work orders at its discretion to Bechtel, which would do the work requested on a cost-plus basis. FP&L decided whether FP&L or Bechtel would provide needed supplies, equipment, and ancillary services. During the relevant time period, Bechtel provided 1,050,070 man hours of services at Turkey Point.

FP&L periodically shut down the units for repair and maintenance. During these shutdowns, FP&L had Bechtel perform major overhauls on the units. FP&L also had another contractor, Foster Wheeler, perform maintenance on the unit’s giant boilers, which were lined with insulation. Although other contractors were present most of the time, Bechtel received work instructions only from FP&L.

In 2015, Mr. Batchelor was diagnosed with terminal mesothelioma caused by asbestos exposure. On January 2, 2016, he filed suit against twenty-six defendants, including Bechtel Corporation, for negligently causing his mesothelioma. Mr. Batchelor’s medical causation expert never examined Mr. Batchelor and never visited Turkey Point. He based his opinion solely on a review of Mr. Batchelor’s deposition
Continue Reading

A group of companies that advertised job opportunities through Facebook’s ad-serving platform discriminated against older members of the applicant pool, claims a proposed class action filed in the U.S. District Court for the Northern District of California. This filing suggests potential liability for any employer that posts jobs via ads that target recipients based on demographic metadata.

 

As Facebook’s roughly two-billion active users view, like, and share content, they give Facebook concrete information about their preferences and behaviors. Facebook’s ad platform leverages this data by allowing advertisers to reach the users most likely to find their ads relevant. Because Facebook also collects information on its users’ demographic factors, such as  age, race, and gender, critics note a potential for discriminatory ad targeting. In a December 20th filing, a proposed class of older job-seekers on Facebook argued that this discriminatory potential came to fruition when a group of employers (including Amazon, Cox, and T-Mobile) used an age filtering feature for their job postings to target younger cohorts and screen out older ones in violation of the Age Discrimination Employment Act (ADEA).

Largely in response to concerns about the opacity of Facebook’s ad-targeting, Facebook offers a feature on each ad that allows users to determine “Why am I seeing this ad?” Based on job postings like the one above, class members claim they were screened off from job postings that reached younger Facebook users. Since this filing, Facebook, which was not named a defendant, commented in response to this suit that its ads could be part of a broader media campaign by hiring employers, and that targeting is a permissible part of a diversified hiring strategy. Facebook further noted that its ads are no different from TV and magazine ads, which inherently reach different demographics by virtue of their viewer and subscriber bases.

Several important implications from this filing:

  • Targeting may not equal discrimination, but it can get you sued.

The defendant employers likely share Facebook’s view—that targeting is not per se discrimination. Whether or not this argument prevails, this filing shows that applicants scrutinize potential discrimination in posting criteria as well as in the hiring decision. The plaintiffs argue that Facebook ads are so ubiquitous and pervasive that being screened off from those ads is to be effectively eliminated from the pool. Courts will have to decide whether or not targeting gives rise to ADEA liability, but before the question can be settled, employers accused of targeting will be dragged into expensive, broad-ranging suits like this one if their postings facially preference a certain age.

  • This is bigger than Facebook postings.

Facebook is not the only platform with targeted ads. A 12/20/17 ProPublica and New York Times report highlighting potentially discriminatory employment ads found that Google’s AdSense and LinkedIn ads had the same age-filtering capability (LinkedIn since eliminated this function). Going forward, postings through these and other, smaller ad-serving platforms can expect the same scrutiny by potential plaintiffs and their lawyers. The proposed class
Continue Reading