Litigants hoping to avail themselves of the doctrine of equitable tolling must satisfy two separate and distinct elements of proof, in light of a recent US Supreme Court decision.

In Menominee Indian Tribe of Wisconsin v. United States, the plaintiff entered into several contracts with the federal government providing that the plaintiff would take control of certain federally funded programs and the government would pay certain costs associated with these programs. The plaintiff brought an administrative proceeding alleging that the government breached these contracts, and the administrative officer denied some of the claims as barred by the six-year statute of limitations in the Contract Disputes Act.

The plaintiff challenged the denials in federal district court, arguing that the statute of limitations should be tolled for the period during which another putative class action involving similar claims, Cherokee Nation of Oklahoma v. United States, was pending. The district court ultimately concluded that equitable tolling was not warranted and the DC Circuit affirmed, holding that equitable tolling requires extraordinary circumstances beyond a party’s control. Notably, the Federal Circuit had previously granted equitable tolling under similar circumstances in Arctic Slope Native Ass’n, Ltd. v. Sebelius.

The Supreme Court affirmed the DC Circuit’s decision. Applying the test the Supreme Court set out in Holland v. Florida, the Supreme Court held that equitable tolling requires a party to satisfy two distinct elements:

In Menominee, the plaintiff failed to satisfy the second element because its mistaken reliance on the putative Cherokee Nation class action in failing to timely commence administrative proceedings was not an obstacle beyond its control. (136 S. Ct. 750 (2016).)

See Legal Update, Equitable Tolling Requires Extraordinary Circumstances Beyond Litigant’s Control: Supreme Court for more on this decision.

See Practice Note, Responsive Pleadings: Answering the Complaint for more on asserting an affirmative defense based on a statute of limitations.

Real estate investment trusts (REITs) assume the citizenship of their members, which include shareholders, for purposes of federal diversity jurisdiction.

Americold Realty Trust v. ConAgra Foods, Inc. involved a lawsuit filed in Kansas state court by a group of corporations against Americold Realty Trust. Americold removed the action to federal district court, which accepted jurisdiction and resolved the dispute in Americold’s favor. On appeal, the Tenth Circuit questioned whether jurisdiction was appropriate, and concluded that because Americold was a REIT, its citizenship depended on that of its shareholders. Because there was no record of the shareholders’ citizenship, the Tenth Circuit held that diversity jurisdiction was not proved and remanded the case.

The Supreme Court affirmed, resolving confusion among the US Courts of Appeals regarding the citizenship of unincorporated entities. In its reasoning, the Supreme Court reiterated the rule that unincorporated entities assume the citizenship of their members and, applying Maryland law, construed the term members to include Americold’s shareholders. The Supreme Court rejected Americold’s argument that a trust possesses the citizenship of its trustees alone.

Further, the Supreme Court distinguished an unincorporated entity from a corporation, which is considered a citizen of its state of incorporation and the state where it has its principal place of business (28 U.S.C. § 1332(c)), explaining that “Congress never expanded this grant of citizenship to include artificial entities other than corporations, such as joint-stock companies or limited partnerships.” ( (U.S. Mar. 7, 2016).)

While the Supreme Court did not directly address the citizenship of limited liability companies, the most common type of unincorporated entity, the decision implies that their citizenship should be determined in the same way as a REIT.

See Legal Update, REITs Assume the Citizenship of Their Members: US Supreme Court for more on this decision.

See Practice Note, Commencing a Federal Lawsuit: Initial Considerations for more on determining citizenship for purposes of diversity jurisdiction.

A complaint in a settled case is a judicial document subject to a presumption of public access under the First Amendment and common law, according to the Second Circuit.

In Bernstein v. Bernstein Litowitz Berger & Grossmann LLP, an attorney filed a complaint under seal against his former law firm, alleging that the firm forced him to resign after he blew the whistle on the firm’s unethical conduct. The attorney claimed that during the law firm’s representation of the lead plaintiff in a securities class action, the firm assigned its litigation to unqualified local counsel as part of a political kickback scheme with the Mississippi Attorney General’s Office. The parties settled before the complaint was set to be automatically unsealed and jointly moved the court to close the file without unsealing it.

The Second Circuit affirmed the district court’s denial of the parties’ request to continue the sealing order, holding that pleadings, even in settled cases, are judicial records subject to a presumption of public access and that a court must make specific, rigorous findings before sealing these documents. Because the complaint alleged the involvement of a public entity in a kickback scheme, the privacy interest in keeping the complaint sealed was insufficient to rebut the presumption. The Second Circuit reasoned, among other things, that:

( (2d Cir. Feb. 24, 2016).)

See Legal Update, Complaint in Settled Case Subject to Presumption of Public Access: Second Circuit for more on this decision.

See Practice Note, Filing Documents Under Seal in Federal Court for more on seeking an order to file documents under seal in federal district court.

The announcement of an SEC investigation, if coupled with a subsequent corrective disclosure by the defendant, can form sufficient facts to plead loss causation in a private securities fraud action, according to a Ninth Circuit decision. The holding affirmatively answers the question left open in an earlier Ninth Circuit case, Loos v. Immersion Corp.

Lloyd v. CVB Financial Corp. involved a securities fraud class action in which the plaintiff alleged that a creditor, CVB Financial Corp., made misrepresentations in its SEC filings about one of its borrower’s (Garrett’s) ability to repay its loans. CVB’s stock price dropped by 22% after it disclosed its receipt of a subpoena from the SEC, with analysts commenting on the possible relationship between the subpoena and the Garrett loans. One month later, CVB announced that it was writing off $34 million in loans to Garrett, which had a minimal effect on CVB’s stock price.

The Ninth Circuit vacated the district court’s dismissal of the case for failure to plead loss causation, concluding that while the holding in Loos made clear that the announcement of a government investigation alone cannot meet the loss causation requirement, the plaintiff in the present case alleged much more. Although CVB’s stock price dropped significantly after its announcement about the SEC subpoena, the market hardly reacted to its disclosure about Garrett, confirming that investors understood the announcement about the subpoena as at least a partial disclosure of the inaccuracy of the statements made in its SEC filings.

The court determined that the plaintiff sufficiently pled loss causation, noting that any other rule would allow a defendant to escape liability by first announcing a government investigation and then waiting until the market reacted before revealing that its prior representations under investigation were false. (811 F.3d 1200 (9th Cir. 2016).)

See Legal Update, Announcement of Investigation Plus Subsequent Corrective Disclosure Sufficient for Pleading Loss Causation: Ninth Circuit for more on this decision.

See Practice Note, Securities Litigation: Pleading and Proving Loss Causation for more on loss causation.

To serve its goal of ending cartel behavior, the Department of Justice (DOJ) is focusing on individual accountability for antitrust violations, and expects more individual prosecutions in the future, as announced in a memorandum by US Deputy Attorney General Sally Quillian Yates (Yates Memo). The Yates Memo, which represents official DOJ policy, outlines specific steps for the DOJ to increase individual accountability, including that corporations must provide all relevant information about individuals involved in corporate misconduct to be eligible for any cooperation credit.

In remarks at the Yale Global Antitrust Enforcement Conference, Deputy Assistant Attorney General Brent Snyder reiterated the DOJ’s commitment to individual accountability, and discussed changes to be made in light of the Yates Memo. Specifically, he noted that new internal procedures will ensure that potentially culpable individuals, including senior executives, are identified early in cartel investigations. Snyder also noted that the DOJ’s prosecution of individuals for antitrust violations has outpaced its prosecution of companies over the past five years, during which the DOJ:

Although the DOJ negotiates plea agreements with corporate offenders, culpable employees are not protected by those plea agreements, which reserve the DOJ’s rights to prosecute culpable employees.

See Legal Update, Deputy Assistant AG Brent Snyder Delivers Remarks on Individual Accountability for Antitrust Violations for more on the DOJ’s approach to individual accountability for antitrust violations.

See Article, Expert Q&A on the DOJ’s Yates Memo for more on the Yates Memo and tips for counsel representing a company or individual under investigation by the DOJ.

In a highly anticipated decision, the Delaware Court of Chancery established a new standard for the approval of disclosure-only settlements of public merger strike lawsuits. Although the decision was foreshadowed by recent rulings challenging the historical approval of disclosure-only settlements, it provides a clearer (and precedential) presentation of the standards that the court will use going forward.

The court in In re Trulia, Inc. Stockholder Litigation held that supplemental disclosures must be “plainly material” to justify court approval of a disclosure-only settlement of a strike lawsuit. These lawsuits, which typically allege that the board of directors of an acquisition target breached its fiduciary duties by agreeing to sell the company for an unfair price, occasionally reveal genuine wrongdoing. However, a strike lawsuit more commonly results in a quick settlement under which the defendant directors add some disclosures to the proxy statement in return for a broad release of all known and unknown claims in any way related to the transaction and payment of plaintiffs’ attorneys’ fees.

The Trulia decision calls for settling defendants to provide supplemental disclosures addressing any plainly material misstatements or omissions in the proxy statement. In exchange, plaintiffs can provide a narrowly tailored release encompassing only disclosure claims and fiduciary duty claims that concern the sale process. The court warned that it would be increasingly vigilant when scrutinizing these settlements. (129 A.3d 884 (Del. Ch. 2016).)

In a recent application of that principle, the court approved a settlement in which a narrowly tailored release was exchanged for disclosures of management’s free cash flow projections and waivers of the target company’s standstill agreements with potential bidders (In re BTU Int’l, Inc. Stockholders Litig., (Del. Ch. Feb. 18, 2016)).

See Legal Update, Delaware Court of Chancery Issues Definitive Ruling on Disclosure-Only Settlement Approvals for more on this decision.

State statutes that require regulated entities, including health insurers and self-funded health plans, to report information related to health care claims and services for inclusion in a state health care database are preempted by the Employee Retirement Income Security Act of 1974 (ERISA), according to the Supreme Court.

In Gobeille v. Liberty Mutual Insurance Co., the Supreme Court concluded that a Vermont law that required health insurers and self-funded health plans, as well as other regulated entities, to report information related to health care claims and services for inclusion in a state health care database was inconsistent with ERISA’s goal of providing a single uniform national scheme for administering ERISA plans, and was therefore preempted. According to the Supreme Court, preemption was necessary to prevent plans from having to comply with differing reporting requirements in other states. (The Supreme Court noted that nearly 20 states had or were implementing databases similar to Vermont’s.)

In its decision, the majority declined to decide whether the Affordable Care Act’s (ACA’s) reporting requirements, which are incorporated into ERISA, would preempt the Vermont law, instead basing its ruling on ERISA’s pre-ACA reporting, disclosure, and recordkeeping rules. Noting the ACA’s “anti-preemption provision,” under which the ACA does not supersede state laws unless they prevent the ACA’s applicability, the Supreme Court suggested that the new ACA reporting obligations might be prevented from preempting state reporting regimes. (136 S. Ct. 936 (2016).)

See Legal Update, Supreme Court Holds That ERISA Preempts State Health Care Reporting Law for more on this decision.

See Practice Note, ACA Information Reporting: Forms 1095-C and 1094-C (Overview) for more on the ACA’s new health coverage information reporting requirements.

A recent decision by the US Bankruptcy Court for the Southern District of New York (SDNY) demonstrates the extraterritorial reach of certain avoidance actions when determining which assets belong to the bankruptcy estate. This decision splits from other SDNY decisions holding that the Bankruptcy Code’s avoidance provisions cannot be used to recover property transferred outside of the US.

In In re Lyondell Chemical Co., Basell, a Luxembourg entity, purchased Lyondell, a Delaware company, in a leveraged buyout (LBO). The LBO resulted in the formation of a new company. As part of the LBO, Lyondell took on $21 billion in secured debt, $12.5 billion of which was paid out to shareholders, including to Basell’s parent company. Just over a year later, Lyondell became insolvent.

The trustee brought an avoidance action under sections 548 and 550 of the Bankruptcy Code to recover a $100 million transfer from Basell to its parent company as a fraudulent conveyance. The court held that the avoidance power under section 548 could be given extraterritorial application to avoid a transfer from a foreign entity to its foreign parent. In doing so, the court found that:

(543 B.R. 127 (S.D.N.Y. 2016).)

See Legal Update, In re Lyondell: Section 548 Avoidance Power Can Reach Foreign Transfers for more on this decision.

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

In an unprecedented move, the Supreme Court stayed the implementation of the Environmental Protection Agency’s (EPA’s) Clean Power Plan before litigation over the legality of the rule had concluded. Oral arguments over the legality of the rule have been expedited and will be heard in the DC Circuit starting June 2, 2016. In light of the stay, the September 2016 deadline for states to submit an implementation plan or request an extension, is on hold. However, it remains unclear how the implementation schedule will be impacted if the challenges to the Clean Power Plan are unsuccessful and the stay is lifted.

The Clean Power Plan, published as a final rule in the Federal Register in October 2015, is the first federal regulation to set carbon emissions limits for existing power plants and is a significant component of President Obama’s Climate Change Action Plan. More than 15 separate lawsuits were filed following the October 2015 publication of the final rule, which were consolidated in the DC Circuit. West Virginia and a coalition of 24 states challenging the rule moved to stay the implementation of the rule until after the litigation had concluded. The DC Circuit denied the motion to stay, and set an expedited schedule for oral arguments to begin on June 2, 2016.

The Supreme Court’s February 9, 2016 order granting the stay application was issued following a 5-4 vote by the Justices, only days before Justice Scalia’s death. The order noted that implementation of the Clean Power Plan will be stayed pending the outcome of the current DC Circuit litigation and any subsequent review by the Supreme Court. (W. Virginia v. E.P.A., 136 S. Ct. 1000 (2016).)

See Legal Update, US Supreme Court Stays EPA Clean Power Plan for more on this decision.

In an en banc decision, the Federal Circuit affirmed previous precedent on the doctrine of patent exhaustion by ruling that the sale of patented articles subject to a resale restriction does not give the articles’ buyer or downstream buyers resale authority. Similarly, the court reaffirmed that foreign sales of patented articles do not implicitly allow buyers to import the articles for later sale and use in the US.

In Lexmark International, Inc. v. Impression Products, Inc., Lexmark alleged patent infringement based on Impression’s refilling of Lexmark-manufactured cartridges for resale, where the cartridges were subject to express no-resale provisions.

The Federal Circuit held that a patentee that authorizes the sale of a patented article abroad does not implicitly authorize the article’s buyer to import the article for sale and use in the US, and specifically ruled that:

( (Fed. Cir. Feb. 12, 2016).)

See Legal Update, No Patent Exhaustion from Resale Restriction, Sale Abroad: Fed. Cir. for more on this decision.

See Practice Note, Patent License Agreements for information on resale and use restrictions.

A recent Ninth Circuit decision affirms the First Amendment rights of the filmmakers and writers involved with the 2009 motion picture, The Hurt Locker. The decision attempts to balance First Amendment rights and the individual right of publicity.

The plaintiff in Sarver v. Chartier was an Army Sergeant who handled improvised explosive devices (IEDs) during the Iraq war. His story was depicted in Playboy magazine and The Hurt Locker. Sarver alleged, among other things, that the film’s producer, director, and several others related to the film and magazine article had misappropriated his likeness and right of publicity.

Citing the public concern in the use of IEDs during the Iraq War, the defendants filed a motion to strike the complaint under California’s Anti-SLAPP (Strategic Lawsuits Against Public Participation) statute, which the district court granted. The Ninth Circuit affirmed, finding that:

( (9th Cir. Feb. 17, 2016).)

See Legal Update, “The Hurt Locker” Subject Has No Right of Publicity Claim Against Movie Makers: Ninth Circuit for more on this decision.

See Right of Publicity Laws: State Q&A Tool to compare state-specific definitions of the right of publicity, the scope of protection, what aspects of identity are protected, defenses, remedies, and more.

For the first time, the Federal Circuit has recognized an independent patent-agent privilege over a client’s communications with non-attorney patent agents, where the communications are reasonably necessary and incident to patent preparation and prosecution. The decision settles a longstanding split among district courts on the issue.

After noting that Federal Rule of Evidence 501 authorizes courts to define new privileges, the Federal Circuit in In re Queen’s University at Kingston reasoned that recognizing an independent privilege was appropriate because:

The Federal Circuit limited the scope of the privilege to only those communications that facilitate, and are reasonably necessary and incident to, the patent agent’s preparation, prosecution, or defense of patent applications before the USPTO. ( (Fed. Cir. Mar. 7, 2016).)

See Legal Update, Communications with Non-Attorney Patent Agents May Be Privileged: Fed. Cir. for more on this decision.

See Practice Note, Patent Litigation: Attorney-Client Privilege and Work Product Doctrine Considerations for information on the attorney-client privilege and work product doctrine in patent litigation.

The Fifth Circuit held, as a matter of first impression for the circuit, that an independent contractor may bring an employment discrimination suit under Section 504 of the Rehabilitation Act of 1973. Following this decision, employers in the Fifth Circuit can no longer rely on an independent contractor’s lack of employee status when confronted with an employment discrimination allegation.

In Flynn v. Distinctive Home Care, Inc., the plaintiff (Flynn) was a pediatrician who had an independent contractor agreement with Distinctive Healthcare Staffing, Inc. to provide pediatric services at Lackland Air Force Base. At around the time that Flynn was diagnosed with Autism Spectrum Disorder-Mild, the officer overseeing her contract raised concerns about her performance and recommended her removal from service. When notified of the concerns, Flynn disclosed her medical condition. However, Flynn was ultimately terminated following further complaints, and she sued Distinctive for disability discrimination under the Rehabilitation Act.

The Fifth Circuit disagreed with the district court’s determination that Flynn could not sue Distinctive under the Rehabilitation Act because she was an independent contractor rather than an employee. In its reasoning, the Fifth Circuit compared the statute’s language to that of Title I of the Americans with Disabilities Act (ADA), and concluded that the Rehabilitation Act does not incorporate the ADA’s requirement that a plaintiff be classified as the defendant’s employee. The Fifth Circuit’s decision is consistent with decisions from the Ninth and Tenth Circuits. (812 F.3d 422 (2016).)

See Legal Update, Independent Contractor May Bring Discrimination Claim Under Rehabilitation Act: Fifth Circuit for more on this decision.

See Practice Note, Disability Discrimination Under the ADA for more on the prohibition of disability discrimination in employment.

The Department of Labor (DOL) was permitted to apply the Fair Labor Standards Act’s (FLSA’s) tip pooling restrictions to employers that do not rely on an employee’s tips to satisfy any part of their hourly minimum wage obligations (that is, employers that do not take a tip credit), according to a recent Ninth Circuit decision. The case upholds a 2011 DOL rule that two district courts held invalid.

In Oregon Restaurant & Lodging Ass’n v. Perez, the Ninth Circuit considered two cases involving employers that did not take tip credits and required their employees to participate in tip pools. Under Section 203(m) of the FLSA, an employer that takes a tip credit must allow its employees to retain all tips they receive, unless the employees participate in a valid tip pool comprised of customarily tipped employees.

The tip pools at issue in Oregon Restaurant required customarily tipped employees to share tips with non-customarily tipped employees. The district court in each case ruled in the employer’s favor, relying on the Ninth Circuit’s 2010 decision in Cumbie v. Woody Woo, which determined that the Section 203(m) tip pooling restriction did not apply to employers that do not take tip credits because the statute is silent on the issue. The Ninth Circuit reversed and concluded that:

Accordingly, the Ninth Circuit upheld the 2011 DOL rule and remanded the cases. ( (9th Cir. Feb. 23, 2016).)

See Legal Update, Cumbie No Bar to DOL Extending Tip Pool Restrictions to Employers That Do Not Take a Tip Credit: Ninth Circuit for more on this decision.

See Practice Note, Tipped Employees Under the FLSA for more on the treatment of tips under the FLSA.

A recent Sixth Circuit decision held that residential loan underwriters were administrative employees exempt from the FLSA’s overtime pay provisions. This holding creates a circuit split with the Second Circuit.

In Lutz v. Huntington Bancshares, Inc., the Sixth Circuit focused on the FLSA’s requirements that to fall within the administrative employees exemption, employees must:

The Sixth Circuit distinguished the case from the Second Circuit’s decision in Davis v. J.P. Morgan Chase & Co., which held that loan underwriters were production employees eligible for overtime because their duties concerned the employer’s principal production activity of producing loans. Unlike the underwriters in Davis, who were trained to apply the bank’s credit policy only “as they found it,” the underwriters in Lutz exercised significant discretion. Further, the court explained that the focus in the Sixth Circuit is on whether an employee helps run or service a business, rather than whether his duties merely touch on a production activity. ( (6th Cir. Mar. 2, 2016).)

See Legal Update, Sixth Circuit Holds Mortgage Underwriters Are Exempt Administrative Employees Under the FLSA for more on this decision.

See Standard Document, Questionnaire to Determine Exempt Status Under the FLSA for a sample questionnaire to help determine an employee’s status as exempt or nonexempt under the FLSA, with explanatory notes and drafting tips.

The Florida Supreme Court recently amended the Florida Rules of Civil Procedure and released new forms for use in residential mortgage foreclosure actions to expedite the foreclosure process. Real estate foreclosure counsel practicing in Florida should be aware of the amendments and ensure that their forms are updated.

The court’s order coincides with certain rule amendments adopted by the state legislature that require mortgage foreclosure complaints to specifically plead:

The rule amendments clarify that the mortgage or lien being foreclosed must be secured by a promissory note. Also, the rule changes reinforce the need for adequate protection if the note is lost, destroyed, or stolen. (In re Amends. to the Fla. Rules of Civ. Proc., (Fla. Jan. 14, 2016).)

See Legal Update, Florida Supreme Court Amends Foreclosure Forms for more on this decision and the new forms.

See Real Estate Finance: State Q&A Tool to compare state-specific laws on commercial real estate finance, including priority, mechanics’ liens, mortgage recording taxes, usury, title insurance, and more.