Supreme Court Rules ERISA Fee Claimants Only Need Achieve Some Degree of Success And Need Not Be "Prevailing Parties" To Obtain Attorneys' Fees

In an emphatic 9-0 decision, the United States Supreme Court ruled that an ERISA fee claimant under 29 U.S.C. 1132(g)(1) need only obtain some degree of success as opposed to being a "prevailing party" under the court's Buckhannon precedent.  See Hardt v. Reliance Standard Life Insurance Co.,   http://www.supremecourt.gov/opinions/09pdf/09-448.pdf. 

In Hardt, Reliance denied Ms. Hardt's request for Long Term Disability ("LTD") benefits.  Ms. Hardt filed a claim under ERISA, alleging that Reliance wrongfully denied her benefits.  At the summary judgment stage, the District Court concluded that Reliance had failed to review all of the necessary medical evidence and, therefore, the benefits denial was not based on substantial evidence.  The District Court, however, did not issue a ruling.  Rather, the court remanded the case for Reliance to reconsider all of the medical evidence and act on Ms. Hardt's application for LTD.  Ultimately, Reliance awarded Ms. Hardt LTD.  Hardt then filed an application for attorneys' fees pursuant to 1132(g)(1).  The District Court awarded Hardt fees.

Reliance then appealed the fee award, arguing that Ms. Hardt was not a "prevailing party" under the United States Supreme Court precedent of Buckhannon in that there was (1) no enforceable judgment on the merits, or (2) no court ordered consent decree.  The Appeals Court agreed and vacated the award of attorneys' fees.

The United States Supreme Court in Hardt unanimously rejected the Appeals Court analysis and found that the award of attorneys' fees was appropriate.  Specifically, and significantly, the Court ruled that ERISA has two different fee shifting provisions.  The first, not at issue, 1132(g)(2), governing actions to recover delinquent employer contributions to multi-employer plans provides that fees be awarded only to prevailing parties.  Quite differently, 1132(g)(1), the provision at issue, only requires that the court use its discretion to determine whether either party is entitled to attorneys' fees.  The Court went on to rule that under Ruckelshaus v. Sierra Club, 463 U.S. 680, 694 (1983), the proper standard for fee shifting provisions providing discretion to the court is whether the fee claimant obtained "some degree of success."  The Court then ruled that Ms. Hardt had obtained more than some degree of success and was entitled to attorneys' fees under 1132(g)(1). 

This critical new ruling by the High Court should make ERISA claims much more enticing to plaintiffs' counsel as a plaintiff who effects change, as opposed to obtaining a judgment, may now be entitled to an award of attorneys' fees under ERISA.

Jury returns $250 Million Punitive Damages Verdict in Gender Class Action Against Novartis

A federal Jury in Manhattan handed down a $250 million punitive damages verdict against drug maker Novartis. http://www.bloomberg.com/apps/news?pid=20601100&sid=aIFrBtReIhKs.  This, just two days after the jury returned a verdict in favor of the 5,600 member class of female employees on all three counts of gender discrimination.  The class alleged, and the jury found, that Novartis discriminated against female employees in the terms and conditions of their employment, including disparate pay and promotional opportunities.  The staggering punitive damages award s believed to represent 3% of Novartis' 2009 net income.

DOL Issues Guidance On Internship Programs And Compliance With The FLSA

In April, the Department of Labor issued a Fact Sheet: Internship Programs Under The Fair Labor Standards Act.  http://www.dol.gov/whd/regs/compliance/whdfs71.pdf.  The Fact sheet provides guidance to assist in determining whether an intern for a "for-profit" private sector employer must be provided with minimum wage and overtime pay under the FLSA.  The DOL has identified six factors that must be considered when determining whether an internship or training program is legitimate and, therefore, interns need not be compensated:

1.  The internship, even though it includes actual operations of the facilities of the employer, is similar to training which would be given in an educational environment;

2.  The internship is for the benefit of the intern;

3.  The intern does not displace regular workers and is closely supervised by existing staff;

4.  The employer derives no immediate advantage from the activities of the intern and may, in fact, be impeded by the presence of the intern;

5.  The intern is not entitled to a job at the end of the internship; and

6.  There is an understanding that the intern is not entitled to wages for the time at the internship.

Common illegitimate "internships" involve unpaid positions where the "intern" is engaging in the operations of the business.  Where a student is asked to file, perform clerical work, or assist customers, the intern is providing productive work for the benefit of the employer and should be compensated.  Conversely, where the intern is shadowing rank-and-file employees and learning as opposed to working, that individual will likely be considered a legitimate intern, who need not be paid minimum wage or overtime.

Dukes v. Wal-Mart -- Ninth Circuit Approves Largest Gender Class Action in U.S. History

On Monday, the long running Dukes v. Wal-Mart gender class action, first filed in 2001, was approved as a class action by a 6-5 vote of the en banc Ninth Circuit Court of Appeals in California.  As a result, Wal-Mart now faces the potential for an over one million member gender class action challenging Wal-Mart's pay and promotion practices.  The certified class involves female Wal-Mart employees employed in any of Wal-Mart's domestic retail operations since December 26, 1998.  The en banc decision was the third finding that certification was proper and followed the District Court's 2004 and three judge panel's 2007 findings that class certification of the potential 1.6 million member class was proper.  Pay disparity, promotional discrimination, and gender inequity in all terms and conditions of employment will now be pressed by lead counsel on behalf of the largest gender discrimination class in United States history.

Court Dismisses Brokers' Complaint Alleging That Citigroup Promissory Notes Are Unconscionable

In a stern opinion, District Judge Lewis Kaplan rejected all of the arguments asserted by six former Citi brokers and dismissed their complaint seeking to unwind their promissory note obligations to Citi. See Banus v. Citigroup Global Markets, Inc., 2010 U.S. Dist. LEXIS 40072 (S.D.N.Y. Apr. 23, 2010). The decision is significant in that it challenged Citi's promissory note/up front compensation program on a global basis as unconscionable and against public policy. The Court rejected those contentions. Moreover, the Court ruled that whether or not the underlying arbitrations should be stayed in favor of a putative class action litigation, based on FINRA Rule 13204, rested in the capacious discretion of the arbitration panel. The Court ruled it was not error by one arbitration panel to deny a stay in favor of the putative class action challenging the enforceability of the Citi up front compensation program. The long and short of this decision may well be that challenging the legitimacy of an up front compensation program -- on a global basis -- may not succeed given that the brokers have the opportunity to review the documents, consult with a lawyer, consider alternative options, and take and spend the money. However, and most significantly, individual challenges to up front compensation claims still remain viable. Individual claims, such as (i) whether a broker was fraudulently induced to join a firm, (ii) whether a broker was provided with that which she was promised, (iii) whether a broker was treated and compensated in the manner contemplated, and (iv) whether the broker was subject to a material alteration of employment still remain legitimate ways to challenge up front compensation claims asserted by financial institutions.

Societe Generale Trader Arrested for Misappropriating Trade Secrets

Yesterday, April 19, 2010, a former Societe Generale Group quantitative analyst was arrested in New York for allegedly misappropriating the company's proprietary computer code related to its high frequency trading system. The arrest provides several valuable lessons for employees. First and foremost, the misuse and/or misappropriation of a company's proprietary information is against company policy and may lead to civil litigation, BUT IT IS ALSO criminal and may lead to prison time. Second, proprietary trading systems are incredibly valuable to financial services companies and will be guarded and aggresively protected. While the FBI was involved in this matter, the escalation was probably based on the fact it involved the company's very profitable trading system. The FBI may not have been summoned and involved had the misappropriation involved an individual employee's client list. The long and short of this situation is that whether or not there are restrictive covenants, company policies, or written agreements, it is simply unlawful and criminal to take a former employer's property. It cannot and should never be done and the consequences of such action are much graver than being a civil defendant in an employment dispute.

New Jersey Supreme Court Protects Employee's Privileged E-Mail Communications on Company Computer

The New Jersey Supreme Court recently handed down a significant decision addressing whether a company e-Mail policy can trump the attorney-client privilege between an employee and her personal attorney hired to sue the company for employment discrimination. See Stengart v. Loving Care Agency Inc., A-16-09. The court ruled the company could not and ruled the employee was entitled to invoke the privilege with respect to e-Mails she authored and received from a company computer via a personal password protected e-Mail account. The Court provided:

"even a more clearly written company manual -- that is, a policy that banned all personal computer use and provided unambiguous notice that an employer could retrieve and read an employee's attorney-client communications, if accessed on a personal, password-protected e-mail account using the company's computer system -- would not be enforceable."

The Court went further. The Court ruled that the company's attorneys violated ethics rules by not returning the e-Mails without reviewing them. New Jersey's high court has remanded the case to the trial court to determine whether disqualification of the company's law firm is required given its review of the privileged e-mails.