Dismissal of a case based on the statute of limitations may constitute a judgment on the merits entitled to preclusive effect.

In Newman v. Krintzman, the plaintiffs brought an action in New York state court after the defendant defaulted on certain promissory notes. Some of the notes were governed by New York law while one of them was controlled by Massachusetts law. The trial court dismissed the action, citing the New York six-year statute of limitations for contract actions. The plaintiffs continued to pursue the matter in Massachusetts federal court, seeking to recover on the note governed by Massachusetts law, arguing that the state's 20-year statute of limitations for actions involving "sealed instruments" should apply.

The First Circuit held that the dismissal in New York was a judgment on the merits and, therefore, principles of claim preclusion barred the plaintiffs from pursuing the same claims in Massachusetts federal court with the more generous statute of limitations (No. 12-1995, (1st Cir. July 24, 2013)). The First Circuit noted that New York law on this issue is unsettled. However, it examined the jurisprudence stemming from the New York Court of Appeals decision in Smith v. Russell Sage College, and concluded that limitations dismissals are on-the-merits rulings for claim preclusion purposes.

See Legal Update, First Circuit: NY Statute of Limitations Dismissal is a Judgment on the Merits, Claim Preclusive for more on this decision.

See New York Statute of Limitations Checklist for more on the statutes of limitations for various commercial claims in New York.

Practitioners in the Ninth Circuit should note that, even in the absence of any indication from the plaintiff that an action is removable, the defendant may remove the matter to federal court if its own investigation indicates removability. In Roth v. CHA Hollywood Medical Center, L.P., the Ninth Circuit ruled that a defendant who has not lost the right to remove by failing to timely file a notice of removal may still remove a case from state to federal court when, based on its own investigation, it discovers that a case is removable (No. 13-55771, (9th Cir. June 27, 2013)).

In this wage and hour class action, the district court remanded the suit to state court because the plaintiff had not indicated in its amended complaint that the matter was removable to federal district court, and the removal was based on information the defendant obtained itself. The Ninth Circuit reversed, concluding that the federal removal statutes, 28 U.S.C. § 1441 and 28 U.S.C. §§ 1446(b)(1) and (b)(3), when read together, permit a defendant to remove a case based on its own findings as long as neither 30-day deadline under the statutes has expired.

The Ninth Circuit noted that a plaintiff should not be able to prevent removal by withholding information showing removability and then objecting to removal when the defendant discovers the information on its own. The court's holding permits defendants in the Ninth Circuit to remove a case based on their own findings, as long as no document from which the defendant could otherwise ascertain diversity was filed by the plaintiff outside of the 30-day windows provided in 28 U.S.C. §§ 1446(b)(1) and (b)(3).

See Legal Update, Ninth Circuit: Removal Permitted When Defendant Discovers Removability for more on this decision.

See Practice Note, Removal: How to Remove a Case to Federal Court and Removal Checklist for more on removing a case to federal court.

To satisfy Federal Rule of Civil Procedure (FRCP) 23(b)'s predominance requirement for class members, courts may require that plaintiffs present expert testimony to establish a basis for relief. Without expert testimony, class certification may be denied.

In Guido v. L'Oreal, USA, Inc., the Central District of California granted in part and denied in part the plaintiffs' motion for class certification. The court found that the class, made up of consumers in California and New York, satisfied all of the requirements for class certification under FRCP 23(a), but failed the predominance requirement under FRCP 23(b) for the class members in California. It held that the damages calculation for the California class members required expert testimony to establish a basis for relief common to the class. (Nos. CV 11–1067 CAS ( JCx), CV 11–5465 CAS (JCx), (C.D. Cal. July 1, 2013).)

In its reasoning, the district court noted that the US Supreme Court's decision in Comcast Corp. v. Behrend held that a class could be certified under FRCP 23(b) only if there was evidence showing the existence of a class-wide method of awarding relief that is consistent with the plaintiffs' theory of liability. Because the California plaintiffs did not submit expert testimony on damages, they did not meet their burden under FRCP 23(b). In contrast, since the New York plaintiffs elected to receive statutory damages under New York law, expert testimony to determine damages was not necessary.

See Legal Update, C.D. Cal.: Market Value Damages Require Expert Testimony to Satisfy FRCP 23(b) Predominance Requirement for more on this decision.

See Practice Note, Product Liability Class Actions for more on FRCP 23 and other considerations for litigating product liability class actions.

The First Circuit's decision in Fryzel v. Mortgage Electronic Registration Systems, Inc. cautions that even in complex cases, plaintiffs and federal district courts must adhere to the content of the rules, not merely the labels they employ. Defendants, for their part, should promptly seek to remedy any procedural errors by moving the district court for rehearing or, if that does not work, appealing. Failure to do so may prevent them from obtaining full relief.

Fryzel involved nearly 700 actions seeking to prevent mortgage foreclosures or evictions in Rhode Island. The district court ordered a stay prohibiting the defendants from pursuing foreclosure proceedings and appointed a special master to mediate all of the claims. The First Circuit found that the relief offered by the district court's orders, while labeled a stay, was in practicality an injunction (719 F.3d 40 (1st Cir. 2013)).

The First Circuit held that the preliminary injunction was granted improperly because the plaintiffs and the district court failed to comply with FRCP 65, which requires that a party receive notice before it is made the subject of a preliminary injunction. Issuance of an injunction also requires the court to make certain findings on the merits of the case, the harm the plaintiff would suffer absent the injunction, the balance of hardships and the effect on the public interest.

The First Circuit recognized, however, that vacating the stay and mediation orders in 700 cases would have caused chaos and therefore left the challenged orders in effect pending an expeditious FRCP 65 hearing by the district court on remand.

See Legal Update, Preventing Preliminary Injunction Fiascos for more on this decision.

See Practice Note, Preliminary Injunctive Relief: Procedure for Obtaining Preliminary Injunctive Relief (Federal) and Standard for Preliminary Injunctive Relief by Circuit Chart for guidance on the process and standards for obtaining a preliminary injunction.

Courts should subject reverse payment settlements in pharmaceutical patent infringement suits to antitrust scrutiny by applying the rule of reason. The US Supreme Court's decision in FTC v. Actavis, Inc. settled a circuit split over whether reverse payment settlements are immune from antitrust attack.

A reverse payment settlement (also known as a pay-for-delay settlement) generally involves a payment from a branded drug manufacturer to a generic drug manufacturer to keep the generic drug manufacturer out of the marketplace for a certain period of time. In Actavis, the Supreme Court concluded that a reverse payment settlement is not immune from antitrust scrutiny simply because the anticompetitive effects fall within the scope of the patent (133 S.Ct. 2223 (2013)). The Supreme Court found that the Eleventh Circuit improperly dismissed the Federal Trade Commission's (FTC's) complaint challenging the reverse payment settlement, giving the FTC an opportunity to prove its antitrust claim under the rule of reason.

The Supreme Court stated that it is generally unnecessary for lower courts to determine the validity of the patent to decide whether a reverse payment settlement is anticompetitive and left much of the rule of reason analysis to be determined by the lower courts. This decision increases uncertainty for parties contemplating a reverse payment settlement, given the lack of a bright-line test for determining whether the settlement will violate antitrust laws.

See Legal Update, Supreme Court Issues Decision in Pay-for-Delay Case FTC v. Actavis for more on this decision.

Search Practice Note, Analyzing Restraints of Trade under the Rule of Reason for more on how courts apply the rule of reason.

Despite the recognized procompetitive benefits of most favored nation clauses (MFNs), a court may find that their use in certain situations gives rise to antitrust violations. In United States v. Apple, Inc., the Southern District of New York (SDNY) held that Apple Inc. committed a per se violation of Section 1 of the Sherman Act by conspiring with book publishers to raise e-book prices and eliminate price competition between e-book retailers, in part, by using MFNs to stabilize retail prices (No. 12-C2826, (S.D.N.Y. July 10, 2013)). For a detailed explanation of this decision, see Practice Note, Most Favored Nation Clauses: United States v. Apple, Inc., E-book Litigation.

Since the US Supreme Court's decision in AT&T Mobility LLC v. Concepcion, courts have increasingly declined to enforce state general contract law defenses that might otherwise invalidate arbitration agreements. Most recently, the Ninth Circuit found that the holding in Concepcion requires preemption under the Federal Arbitration Act (FAA) of any state general contract law defense that has a disproportionate impact on arbitration.

In Mortensen v. Bresnan Communications, LLC, an internet provider's subscriber agreement included a provision subjecting all claims to arbitration and a choice-of-law clause applying New York law to the agreement. Based on the agreement, the internet provider brought a motion to compel arbitration of a class action filed by its subscribers.

The lower court denied the motion on grounds that the agreement violated Montana's public policy against adhesive arbitration agreements that run contrary to a party's reasonable expectations. The Ninth Circuit reversed, reasoning that because Montana's public policy typically invalidated arbitration agreements, it was preempted by the FAA under Concepcion. It remanded the case to the district court to address the arbitration clause under New York law. (No. 11–35823, (9th Cir. July 15, 2013).)

Significantly, this decision expands the holding in Concepcion well beyond unconscionability to preempt any state rule that is adverse to arbitration.

See Legal Update, Ninth Circuit: State Law Contract Defenses that Disproportionately Impact Arbitration are Preempted by the FAA for more on this decision.

See Practice Note, Understanding the Federal Arbitration Act for more on the FAA.

In Oracle America, Inc. v. Myriad Group A.G., the Ninth Circuit held that incorporation of the United Nations Commission on International Trade Law (UNCITRAL) arbitration rules into a licensing agreement constitutes clear and unmistakable evidence that the parties intended to delegate questions of arbitrability to the arbitrator rather than the court. This is the case even if the arbitrability issue arises with respect to claims outside the scope of the arbitration clause. (No. 11–17186, (9th Cir. July 26, 2013).)

The license agreement at issue included a clause providing that disputes would be settled by arbitration in accordance with the UNCITRAL rules, but carved out certain intellectual property claims from its scope. When the plaintiff filed suit in the Northern District of California, the defendant moved to compel arbitration based on the arbitration clause.

In reversing the lower court's partial denial of the motion with respect to the plaintiff's intellectual property claims, the Ninth Circuit stated that the scope of an arbitration clause should not be conflated with who decides arbitrability. It noted that arbitrability is an issue for judicial determination unless the parties clearly and unmistakably provide otherwise. Because the UNCITRAL rules give the arbitral tribunal the authority to decide its own jurisdiction, the court held that the incorporation of those rules in the agreement was clear and unmistakable evidence that the parties intended to arbitrate arbitrability.

This holding follows the prevailing view and joins the decisions of the Second Circuit in Republic of Ecuador v. Chevron Corp. and the DC Circuit in Republic of Argentina v. BG Group PLC. Notably, the US Supreme Court granted certiorari to the DC Circuit decision on June 10, 2013.

See Legal Update, Ninth Circuit: UNCITRAL Rules are Clear Evidence that License Agreement Parties Intended Arbitrator to Decide Arbitrability for more on this decision.

See US Arbitration Toolkit for a collection of resources to assist counsel with US arbitration and drafting alternative dispute resolution clauses and agreements.

In a case of first impression, the Fifth Circuit held that a corporate entity can be vicariously liable for the kickback activities of its employees under the civil suit provision of the Anti-Kickback Act (AKA) (41 U.S.C. §§ 51-58).

Employees at Kellogg Brown & Root, Inc., a federal contractor, allegedly accepted meals, drinks and golf outings from subcontractors. After two private parties brought a qui tam suit for the alleged kickbacks, the US intervened and filed its own complaint under the AKA. In United States v. Kellogg Brown & Root, Inc., the Fifth Circuit found that:

(No. 12-40447, (5th Cir. July 19, 2013).)

Because the new standard may inspire more enforcement actions and qui tam suits, employers should ensure that employees are aware of, and assiduously follow, anti-bribery and anti-kickback laws.

See Practice Note, Criminal and Civil Liability for Corporations, Officers and Directors for more on a company's liability for the acts of its employees.

See Legal Update, Fifth Circuit: Employer Can Be Vicariously Liable For Employees Violating the Anti-Kickback Act for more on this decision.

A recent US Supreme Court decision on preemption will help to ensure consistency across the rules of the various ports in the US by preventing municipalities from enacting a patchwork of regulatory schemes that companies must comply with throughout their supply chains.

The Supreme Court's unanimous opinion in American Trucking Ass'ns, Inc. v. City of Los Angeles held that the concession agreement required as part of the Port of Los Angeles' Clean Truck Program is expressly preempted by the Federal Aviation Administration Authorization Act of 1994 (FAAAA), which preempts a wide range of state regulation of intrastate trucking (133 S.Ct. 2096 (2013)).

A national trade association for the trucking industry sought to enjoin several aspects of the agreement, claiming that:

The Supreme Court:

See Legal Update, Supreme Court: FAAAA Preempts Port of Los Angeles' Clean Truck Program Requirements for more on this decision.

See Practice Notes, Logistics: Federal Agencies Overview and Logistics: Transportation Service Providers Overview for more on transportation logistics in the commercial supply chain.

Board-adopted forum selection by-laws are enforceable for claims relating to the internal affairs of the company, according to a recent decision by the Delaware Court of Chancery. This will enable Delaware corporations to litigate certain shareholder claims with more predictability and efficiency.

In Boilermakers Local 154 Retirement Fund v. Chevron Corp., the Delaware Court of Chancery held that forum selection by-laws unilaterally adopted by the boards of directors of Chevron and FedEx were valid under Delaware law and contractually valid and enforceable (Nos. 7220–CS, 7238–CS, (Del. Ch. June 25, 2013)). The decision affirms the statements made in dicta in In re Revlon, Inc. Shareholders Litigation that boards of Delaware corporations can avoid the costs of multi-forum litigation by adopting forum selection by-laws that specify the exclusive venue for claims relating to the internal affairs of the company, including derivative suits and claims alleging fiduciary breaches.

The Chevron decision confirms that companies have the legal and contractual ability to avoid becoming subject to multi-forum litigation, in which the same issue is litigated in multiple forums or even in both state and federal courts. In the three years since Revlon, according to the court's opinion in Chevron, 250 publicly traded companies have adopted this type of forum selection provision. Following this decision, more public companies can be expected to adopt forum selection by-laws and withstand challenges to them brought by activist shareholders.

See Legal Update, Delaware Court of Chancery Upholds Boards' Unilaterally Adopted Forum Selection By-laws for more on this decision.

See Article, Designating Delaware: The Rise of Exclusive Forum Selection Provisions for more on the development of forum selection by-laws.

In Conestoga Wood Specialties Corp. v. Sebelius, the Third Circuit affirmed the district court's denial of a preliminary injunction and held that a for-profit, secular corporation and its owners could not challenge health care reform's contraceptives mandate because it could not engage in religious exercise under the Free Exercise Clause and the Religious Freedom Restoration Act (RFRA) (No. 13-1144, (3d Cir. July 26, 2013)).

The Third Circuit considered and rejected two legal theories under which the corporation might be viewed as exercising religion under the Free Exercise Clause:

The Third Circuit stated that a corporation has distinct rights and responsibilities apart from the owners themselves and that the contraceptives mandate does not require the owners to take any action that would violate their religious beliefs. It recognized, but expressly disagreed with, the recent Tenth Circuit decision in Hobby Lobby Stores, Inc. v. Sebelius, which held that for-profit, secular corporations can assert free exercise and RFRA claims in some circumstances.

Conestoga will likely not be the final word on the constitutional issues implicated by the contraceptives mandate. The mandate has resulted in numerous court decisions, and the issue is expected to reach the Supreme Court.

See Legal Update, Third Circuit Turns Back For-profit Corporation's Religious Challenge to Contraceptives Mandate for more on this decision.

See Practice Note, Coverage of Preventive Health Services under Health Care Reform for more on the contraceptives mandate and other health care reform requirements.

Entities other than the plan and plan administrator may be subject to liability in an ERISA claim for benefits. The insurer of an ERISA plan is a proper defendant in an action for benefits under ERISA Section 502(a)(1)(B), according to the Seventh Circuit.

In Larson v. United Healthcare Insurance Co., the Seventh Circuit stated that an ERISA claim for benefits must be brought against the party having an obligation to pay. Therefore, if the insurer decides eligibility and benefits questions and pays claims, it is a proper defendant. (No. 12-1256, (7th Cir. July 26, 2013).) This decision is consistent with the Ninth Circuit's en banc ruling in Cyr v. Reliance Standard Life Insurance Co., in which the Ninth Circuit overruled several of its own prior decisions to conclude that an insurer could be a proper defendant in a claim for benefits under the provision.

Other courts also appear to be adopting a more expansive view of which entities may be held liable under ERISA Section 502(a)(1)(B). For example, the Fifth Circuit concluded that a third-party administrator is a proper defendant if it exercised "actual control" over the claims administration process.

See Legal Update, Insurers Can Be Sued for Benefits under ERISA: Seventh Circuit for more on this decision.

See Practice Note, Title I of the Employee Retirement Income Security Act (ERISA): Overview for more on ERISA Section 502.

A recent Second Circuit decision continues the trend of the courts broadly interpreting the safe harbor of section 546(e) of the Bankruptcy Code to protect certain pre-bankruptcy financial contracts and payments from avoidance as preferences or constructive fraudulent transfers.

In In re Quebecor World (USA) Inc., the Second Circuit affirmed a broad interpretation of the 546(e) "securities contract" safe harbor, holding that a transfer made within 90 days of bankruptcy to purchase private placement notes issued by the debtor's affiliate was not avoidable as a preference (719 F.3d 94 (2d Cir. 2013)).

The Second Circuit concluded that:

While this decision is beneficial for financial institutions, it may also have the unintended effect of expanding their exposure to preference and fraudulent transfer liability. The Second Circuit's interpretation of the securities contract safe harbor is somewhat inconsistent with the mere conduit defense to "initial transferee" liability under section 550(a)(1) of the Bankruptcy Code. Its ruling that any transfer to a financial institution, even if it is a mere conduit, can be protected under the securities contract safe harbor begs the question why a financial institution acting as a mere conduit should not also be an initial transferee subject to preference and fraudulent transfer liability.

See Legal Update, In re Quebecor World (USA) Inc.: Second Circuit Broadly Applies Section 546(e) "Securities Contract" Safe Harbor for more on this decision.

See Practice Note, Preferential Transfers: Overview and Strategies for Lenders and Other Creditors for more on preferential transfers in bankruptcy.

The safe harbor found in section 546(g) of the Bankruptcy Code, which protects swap transactions from federal avoidance actions by bankruptcy trustees, impliedly preempts state law avoidance claims that creditors or their representatives may pursue after bankruptcy, says the SDNY.

In Whyte v. Barclays Bank PLC, the SDNY dismissed a complaint brought by a litigation trust organized pursuant to a Chapter 11 reorganization plan, seeking to avoid a swap transaction as a fraudulent transfer under state law. The court found that allowing a litigation trustee to avoid a swap transaction under state fraudulent transfer law would be an obstacle to the purpose and objections of Congress in enacting the section 546(g) safe harbor, which is to provide stability to counterparties of settled swap transactions and minimize volatility in the commodities and securities markets. (No. 12-5318, (S.D.N.Y. June 11, 2013).)

This decision is the first to reject an attempt to circumvent a section 546(g) safe harbor under principles of federal preemption. Courts have rejected similar attempts to circumvent the safe harbor of section 546(e), which protects margin payments and settlement payments made by or to (or for the benefit of) certain financial market participants.

See Legal Update, Whyte v. Barclays Bank: Court Rejects Attempt to Circumvent Section 546(g) Safe Harbor for Swap Transactions for more on this decision.

See Practice Note, Fraudulent Conveyances in Bankruptcy: Overview for more on fraudulent conveyance actions.

Although altered genetic material is patent eligible, naturally occurring genes and DNA segments, as products of nature, are not patent eligible merely because they have been isolated.

On June 13, 2013, the US Supreme Court issued a long-awaited opinion in Ass'n for Molecular Pathology v. Myriad Genetics, Inc. The Supreme Court unanimously held that, in line with its reasoning in earlier decisions, Myriad's composition patent claims drawn to:

(133 S. Ct. 2107.)

This decision breaks new ground in holding that the mere isolation of naturally occurring genes and genetic material is not enough to sustain a patent eligible composition of matter patent claim, even if incidental changes to these biological materials occur in the isolation process. The Supreme Court expressly recognized that this ruling is contrary to the US Patent and Trademark Office's existing practice and has the potential to invalidate a significant number of existing patents. However, it deemed this a matter better left to Congress.

See Legal Update, Supreme Court Rules in Myriad: Isolated Genes are Not Patent Eligible Unless Altered and Practice Note, In Dispute: Ass'n for Molecular Pathology v. Myriad Genetics for more on this decision.

See Practice Note, Patent-eligible Subject Matter for more on patent subject matter eligibility and practical guidance for drafting and litigating patents claiming life-sciences inventions.

Patent owners may find it more difficult to establish induced patent infringement. A recent Federal Circuit decision held that a good faith but erroneous belief of patent invalidity may negate the specific intent to encourage another's infringement, which is required for an induced infringement determination.

In Commil USA, LLC v. Cisco Systems, Inc., the Federal Circuit determined that the jury instruction given by the district court was improper because it allowed the jury to find inducement on the showing of mere negligence rather than actual knowledge or willful blindness, which is now required following the US Supreme Court's decision in Global-Tech Appliances, Inc. v. SEB SA. It ultimately set aside the jury verdict because the jury instruction could have changed the outcome. (No. 2012-1042, (Fed. Cir. June 25, 2013).)

This decision extends Federal Circuit precedent by clarifying that a good faith belief of invalidity, in addition to non-infringement, may negate the intent for induced infringement. It therefore provides defendants with additional means to defeat an induced infringement claim and increases the incentive to obtain opinions of counsel on either or both of those issues.

See Legal Update, Cisco Reroutes Federal Circuit's Induced Infringement Intent Instructions for more on this decision.

See Practice Note, Patent Infringement Claims and Defenses for more on infringement claims, claim construction and key defenses.

The Tenth Circuit's decision in 1-800 Contacts, Inc. v. Lens.com, Inc. sets a high bar for brand owners seeking to prove trademark infringement in competitor keyword advertising cases.

The Tenth Circuit held that Lens.com's purchase of advertising keywords incorporating the 1-800CONTACTS trademark was not direct trademark infringement where:

(Nos. 11–4114, 11–4204, 12–4022, (10th Cir. July 16, 2013).)

The court also held that Lens.com was not vicariously liable for trademark infringement based on its affiliates' publication of ads that featured variations of the 1-800CONTACTS mark, but reversed and remanded on the issue of contributory infringement citing evidence that Lens.com knew that at least one affiliate used the plaintiff's mark in the ads but did not make reasonable efforts to stop the practice.

While the legal standards may vary by circuit, this decision instructs that at least in the Tenth Circuit, in cases where competitor keyword advertising does not display the trademark owner's mark or otherwise suggest an affiliation between the parties, a trademark owner is unlikely to prevail absent evidence of high click-through rates, reliable and persuasive survey evidence or other compelling evidence of consumer confusion. For companies using affiliates or other third parties to purchase keyword ads, the ruling on contributory infringement shows a need to take reasonable steps to monitor and consider potential infringement by those parties.

See Legal Update, Lens.com Receives Mostly Clear Victory from Tenth Circuit's Keyword Advertising Decision Concerning 1-800CONTACTS for more on this decision.

See Practice Note, Trademark Infringement and Dilution Claims, Remedies and Defenses for more on trademark infringement claims.

According to a recent Fourth Circuit decision, an electronic agreement can satisfy the signed writing requirement for copyright transfers under Section 204 of the Copyright Act.

In Metropolitan Regional Information Systems, Inc. v. American Home Realty Network, Inc., the Fourth Circuit upheld a preliminary injunction for copyright infringement based on American Home Realty Network's unauthorized use of photographs in Metropolitan Regional Information Systems' (MRIS') real estate listings database. The court based its decision in part on its determination that subscribers' click-through assent to terms of use that included a copyright assignment provision effectively assigned their copyrights in uploaded photographs to MRIS. Noting a lack of clarity in the Copyright Act, the court found guidance in the Electronic Signatures in Global and National Commerce Act (E-Sign Act), reasoning that:

(Nos. 12–2102, 12–2432, (4th Cir. July 17, 2013).)

When seeking to transfer copyright interests or determine copyright ownership, companies should be mindful that, in the Fourth Circuit, copyright transfers may be effectuated through click-through agreements.

See Legal Update, Electronic Agreements Can Effect Copyright Transfers: Fourth Circuit for more on this decision.

See Practice Note, Copyright: Overview for more on US copyright law, including copyright transfers and the writing requirement.

An employee alleging Title VII retaliation must prove that his employer's retaliatory motive was the but-for cause of the negative employment action, instead of just a motivating factor under the lessened causation test. In University of Texas Southwestern Medical Center v. Nassar, the US Supreme Court clarified for lower courts that the motivating factor test typically applied in Title VII actions applies to only discrimination claims, not retaliation claims (133 S. Ct. 2517 (2013)).

Relying on the text of the anti-retaliation statute making it unlawful for an employer to retaliate against an employee "because of" certain criteria, the Supreme Court held that Title VII retaliation claims require proof that the desire to retaliate was the but-for cause of the challenged employment action. The Supreme Court found that plaintiff's arguments in favor of applying the motivating factor test rested on an interpretation that was inconsistent with the text and overall structure of the statutory scheme.

This ruling benefits employers because employees now face a stiffer burden of proof, making it harder for plaintiffs to prevail on Title VII retaliation claims. The Supreme Court stated that the old lessened causation test would likely have contributed to the filing of frivolous claims and made it more difficult to dismiss dubious claims at the summary judgment stage.

See Legal Update, Supreme Court: But-for Causation Test Applies to Employees Alleging Title VII Retaliation, Not the Lessened Causation Test for more on this decision.

See Practice Note, Retaliation for more on retaliation claims and defenses.

Employers now have a clearer and narrower definition of "supervisor" for purposes of vicarious liability harassment claims under Title VII. In Vance v. Ball State University, a divided bench for the US Supreme Court held that an employer may be held vicariously liable for the harassment of an employee only if the harassing employee meets the court's newly articulated definition of supervisor: an employee "empowered by the employer to take tangible employment actions against the victim" (133 S. Ct. 2434 (2013)).

The Supreme Court resolved a circuit split and affirmed the Seventh Circuit's judgment for the employer, Ball State University. The Supreme Court rejected a broader definition of supervisor that has been applied in some circuit courts and by the Equal Employment Opportunity Commission.

This holding is significant for employers because employers facing harassment claims are subject to distinct standards for liability depending on whether the alleged harasser is a co-worker or a supervisor. Whereas the standard for claims involving co-workers is negligence with respect to work conditions, the standard for claims involving a supervisor, to the extent the harassment involves a negative employment action, is strict liability absent an affirmative defense. A narrowed definition of supervisor means a potentially enhanced defense position for employers facing harassment claims.

See Legal Update, Supreme Court: Employer is Vicariously Liable for an Employee's Harassment under Title VII Only if Employee Was Empowered to Hire or Fire Victim for more on this decision.

See Practice Note, Harassment for more on workplace harassment claims and defenses.

To be eligible for whistleblower protection under the Dodd-Frank Act, an employee must report potential securities law violations to the SEC.

In Asadi v. G.E. Energy (USA), L.L.C., the Fifth Circuit affirmed a district court decision denying whistleblower protection under the Dodd-Frank Act to a former General Electric employee who did not report the perceived misconduct to the SEC and therefore did not meet the definition of whistleblower under the Dodd-Frank Act (No.12–20522, (5th Cir. July 17, 2013)).

Employees and employers should take note of the differences highlighted by the court between the anti-retaliation provisions of the Dodd-Frank Act and the Sarbanes-Oxley Act. Although the Sarbanes-Oxley Act provisions are generally less employee-friendly than the Dodd-Frank provisions, employees who report only internally and not to the SEC may still be protected from employer retaliation under the Sarbanes-Oxley Act.

See Legal Update, Dodd-Frank Whistleblower Provision Protects Only Those Who Report Misconduct to SEC: Fifth Circuit for more on this decision.

See Practice Note, Whistleblower Protections under Sarbanes-Oxley and the Dodd-Frank Act for more on whistleblower protections.

A DC Circuit decision imposes clear restrictions on the Department of Labor's (DOL's) ability to change its established interpretations outside of the rulemaking process under which employers would have an opportunity to comment.

In Mortgage Bankers Ass'n v. Harris, the DC Circuit vacated a 2010 DOL "Administrator's Interpretation" which stated that mortgage loan officers do not qualify as bona fide administrative employees exempt from the Fair Labor Standard Act's (FLSA's) overtime requirements and withdrew a 2006 DOL opinion letter finding the opposite (No. 12–5246, (D.C. Cir. July 2, 2013)). The court found that the DOL must comply with notice and comment requirements under the Administrative Procedures Act (APA) before it could significantly revise an earlier definitive interpretation.

The court held that a party challenging agency "flip-flopping" under the APA does not need to prove that it substantially relied on the agency's earlier interpretation to assert that the latter interpretation was invalid under the APA. The party needs to show only that the agency:

This decision should help employers anticipate and adjust for new DOL interpretations, as it should prevent the DOL from imposing new conflicting interpretations of statute and regulations unilaterally and without a notice and comment period. It also may be a victory for employees in the near term because most recent agency interpretations have imposed new restrictions or obligations on employers and granted broader rights to employees that now may not be summarily reversed or revised.

See Legal Update, DOL Could Not Change Definitive Overtime Exemption Interpretation Without Notice and Comment Rulemaking: DC Circuit for more on this decision.

See Practice Note, Wage and Hour Law: Overview for more on the FLSA's overtime requirements.