Matt Rusch Triumphs - Griffith v. LG Chem et al: Summary Judgment Affirmed on Appeal

Congratulations to partner Matt Rusch regarding a recent Nebraska Supreme Court victory, Griffith v. LG Chem et al.  The Court affirmed the Lancaster County District Court’s grant of summary judgment in favor of Erickson Sederstrom clients.  The case involved a conflict of law issues between Nebraska and Pennsylvania regarding the application of the states’ conflicting statutes of limitation. 

Background: 

The case centered around John Griffith's injuries sustained while replacing electronic cigarette batteries at his home in Pennsylvania.  He had purchased the batteries at a truck stop in Nebraska.  LG Chem and LGCAI were alleged to be the manufacturers of the batteries.  The Griffiths filed suit against LG Chem, LGCAI, Shoemaker’s, and E-Titan, alleging negligence, product liability, breach of warranty, and loss of consortium. E|S represented Shoemaker’s and E-Titan, while LG Chem and LGCAI were represented by other counsel.  Key issues included conflicting statutes of limitations from Pennsylvania and Nebraska and a challenge to personal jurisdiction over LGCAI.  The case was filed in Nebraska more than 2 years after Mr. Griffith received his injuries.  Shoemaker’s and E-Titan sought summary judgment, contending that Griffith’s claims were time-barred under Pennsylvania's 2-year limitation period. The Griffiths argued that Nebraska’s 4-year statute of limitations applied. The district court determined that an actual conflict existed between the two states' laws and that the 2-year Pennsylvania statute of limitations applied, resulting in dismissal of all claims against Shoemaker’s and E-Titan.  The district court also dismissed LG Chem and LGCAI from the case, citing a lack of personal jurisdiction.

The Griffiths appealed, challenging the summary judgment in favor of Shoemaker’s and E-Titan and the dismissal of LG Chem and LGCAI. The assignments of error focused on applying the Pennsylvania statute of limitations and the court's lack of personal jurisdiction over LGCAI.

Analysis and Conclusion:

The Nebraska Supreme Court affirmed the district court’s grant of summary judgment for Shoemaker’s and E-Titan and dismissal of the other defendants. 

The appellate court concurred with the district court's findings, emphasizing that Griffith’s negligence claims were based on Pennsylvania law, justifying application of its statute of limitations. The court also upheld the dismissal of LGCAI, stating that the Griffith failed to establish sufficient contact between LGCAI and Nebraska.

Griffith v. LG Chem, 315 Neb. 892

Nebraska Supreme Court's Ruling on Insurance Policy Limitation Periods: Key Takeaways.

On October 6, 2023, the Nebraska Supreme Court issued an opinion further supporting freedom to contract and held that a choice of law provision in an insurance policy controlled resulting in the application of a two-year contract limitation period.

Teresa Rose of Carter Lake, Iowa, was injured when the vehicle she was driving was struck by an under-insured motorist on February 3, 2018. The car Rose was driving belonged to her boyfriend, Christopher Stark, a Nebraska resident. Rose was insured under her sister’s American Family auto policy at the time of the accident. Following the accident, Rose settled with the at-fault motorist’s insurer and Stark’s insurer. Rose then attempted to claim underinsured benefits under the American Family Policy but was denied.

Rose attempted to sue American Family following the denial of benefits; however, the insurance contract stated, “any suit against [American Family] will be barred unless commenced within two years from the date of the accident.” In addition to the two-year limitation, the Policy contained a choice of law provision that stated any disputes would be governed by the laws of the state shown in the declaration of residence, which in this case, was Carter Lake, Iowa.

The district court for Douglas County determined that Iowa courts have expressed a strong public policy in favor of freedom to contract, including enforcing an underinsured motorist policy that contained a two-year limitation on actions, and thus, determined Rose’s claim time-barred. Rose appealed.

The Supreme Court analyzed the district court’s finding, stating that Rose’s claim, although based on the car accident which is a tort, actually arose out of the insurance policy, which is a contract. Because of this, contract law was applied, along with it the public policy encouraging freedom to contract which supports adherence to the black-letter terms of the policy. As the Policy terms stated, Iowa law was to be applied, and as Iowa law has historically supported a two-year limitation period for an uninsured motorist claim, that is the rule of law that the Nebraska court applied. Further, although Nebraska law has a five-year statute of limitations for contracts, Nebraska’s limitation was not found to prohibit contractual limitation periods arising from policies issued in other states, just those policies issued in Nebraska. Ultimately, the Nebraska Supreme Court affirmed the order of the district court.

Rose v. American Family Insurance Co. provides important insight not only into how far one’s freedom to contract extends but also what to keep in mind when working with insurance policies that may reach over state lines.

See Rose v. American Family Ins. Co., 315 Neb. 302 (2023).

Piercing the Corporate Veil - Can you collect from the individuals that own the company that owes you money?

If you obtain a judgment against a company, you can collect that judgment from the company's owners under certain circumstances. This is a legal concept called piercing the corporate veil. It comes up with corporations, LLCs, and other types of limited liability companies (businesses formed to protect owners from liability for business debts). However, it is the exception to the general rule that owners of a limited liability business are not liable for the business’s debts. Specific facts must be proven to pierce the corporate veil. The Nebraska Supreme Court recently reviewed these in the case of 407 N 117 Street, LLC v. Harper et al.

A Nebraska court may pierce the corporate veil to hold owners liable “only where the corporation has been used to commit fraud, violate a legal duty, or perpetrate a dishonest or unjust act in contravention of the rights of another.” 407 N 117 Street, 314 Neb. 843, 849 (2023)(citation omitted). Often, fraud is alleged as the grounds for piercing. Nebraska courts will consider the following factors to determine whether to disregard the corporate entity based on fraud:

1. Was there grossly inadequate capitalization of the company?

2. Was the company insolvent at the time the debt was incurred?

3. Did a shareholder/owner divert company funds or assets for their own use or other improper use?

4. Was the company a mere façade for the personal dealings of the shareholder/owner, and were company operations conducted by the shareholder disregarding the corporate entity?

Because this is the exception to the general rule of limited liability, the party seeking to collect against the shareholders/owners must prove these facts. While possible, it can be challenging to establish absent clear, strong evidence of the above, as the recent case described here shows. The court entered summary judgment in favor of the individual owners and did not pierce the corporate veil. The result in cases like this can be that the creditor does not recover any of its judgment at all, where a company has little or no assets remaining to collect. Early strategies in litigation and collection efforts can be developed in many cases to ensure against this kind of result. On the other hand, legal advice from an experienced attorney in this field can help business owners be sure they will not become subject to claims to pierce the corporate veil of their business and hold them individually liable for company obligations.

Students for Fair Admissions, Inc. v. President and Fellows of Harvard College

On June 29, 2023, the Supreme Court of the United State issued an opinion holding that the admissions programs at Harvard College and the University of North Carolina (“UNC”) violated the Equal Protection Clause of the Fourteenth Amendment. This decision highlights the appropriate criteria under the Equal Protection Clause that higher education institutions may evaluate when considering a candidate’s admission. 

Harvard College and UNC are two of the oldest and most elite institutions of higher learning in the United States. Every year tens of thousands of students go through the application process with only few being admitted. Both ivies have an extensive and selective application process, where committees meet, and rank applicants based on a number of categories. The Court stated that in the Harvard admissions process, “race is a determinative tip for “a significant percentage” of all admitted African American and Hispanic applicants.” The Court also stated that UNC offers students a “plus” based on their race, which in some cases may have a significant effect on the individual’s admission.  

Founded in 2014, Students for Fair Admissions (“SFFA”) is a nonprofit organization whose purpose is “to defend human and civil rights secured by law, including the right of individuals to equal protection under the law.” In 2014, SFFA filed suits against Harvard College and UNC arguing that their admissions tactics violated both Title VI and the Equal Protection Clause. However, the lower courts concluded that both Harvard’s and UNC’s admission programs comported with precedent and were permissible under the Equal Protection Clause as the Fourteenth Amendment prohibits States from denying to any person within its jurisdiction the equal protection of the laws.  

Under the Equal Protection Clause of the Fourteenth Amendment, equality of treatment before the law for all persons without regard to race is required. In the Courts analysis of Harvard and UNCs admission process, strict scrutiny was applied. This means that for the admission tactics to be Constitutional they must serve a compelling interest and the tactics must be necessary and narrowly tailored to those achieving those interests. Prior to this case, courts followed the Grutter v. Bollinger standard when addressing admission criteria, in which the court upheld the University of Michigan law School’s consideration of race “as one factor among many, in an effort to assemble a student body that is diverse in ways broader than race.”   

Here, a vote of 6-2 reversed the Court of Appeals for the First Circuit and the District Court for the Middle District of North Carolina judgments, ruling the use of affirmative action in college admissions violates the Constitution’s Equal Protection Clause. Chief Justice John Roberts delivered the opinion for this case clarifying and refining the Court findings in prior decisions. Roberts stated that the Court only allowed universities to use race-based admissions programs “within the confines of narrow restriction.”  

Roberts’ dissatisfaction with Harvard’s and UNC’s admission process starts with the vague goals the institutions state will be achieved by it. The Court could not measure whether “training future leaders in the public and private sector” and “promoting the robust exchange of ideas” were compelling interests that would be accurately achieved by an admission process that gives higher acceptance to minority races.  

The majority also stated that Harvard and UNC admission programs did not have a “logical end point,” which was the original idea when the Court issued the opinion in Grutter. In fact, UNC suggested that it might soon use race to a greater extent than it currently does in the admission process. Without a logical end point the Court was unable to say that the admission process used by these institutions was necessary and narrowly tailored to the already vague goals.  

Although this decision limited the weight higher education institutions can place on race during the admission process, Roberts stated that applicants are still able to explain how their race influenced their character in a way that would have concrete effect on the university.  

Additional insights provided by ES Law clerk, Emily Todd.

Legally Entitled to Recover? The case of Geerdes v. West Bend Mutual Insurance Company

The case Geerdes v. West Bend Mutual Insurance Company was decided by the United States Court of Appeals for the Eighth Circuit on June 20, 2023. The decision helps interpret the phrase "legally entitled to recover" under Iowa insurance law. In 2018, Iowa residents Gregg Geerdes and Mary Murphy (“Plaintiffs”) purchased home and automobile insurance from West Bend. The policy covered Plaintiffs as well as their son. The following year, Plaintiff’s son tragically died from injuries he sustained while a passenger on a charter bus that crashed in British Columbia, Canada. The charter bus’s insurance paid all the no-fault motorist insurance benefits that it was legally obligated to pay under the policy. Plaintiffs did not sue the bus company as personal jurisdiction for any such action would be in British Columbia. Plaintiffs did however sue West Bend seeking uninsured/underinsured benefits and additional umbrella coverage they believed they were entitled to under their policy. The West Bend Policy states policyholders are entitled to uninsured/underinsured coverage for payment of compensatory damages for bodily injury caused by an accident that an insured is “legally entitled to recover from the owner or operator.” However, Iowa case law states the benefits plaintiffs are entitled to recover from uninsured/underinsured umbrella policies are limited to the amount they would be able to recover in a tort action against the tortfeasor where the accident occurred or in the tortfeasors’ home state. Applying this law, the District Court dismissed the case via summary judgment because Plaintiffs are not “legally entitled to recover” under British Columbia law as it does not permit recovery of non-economic damages.

On appeal, Plaintiffs contended that Iowa law requires the court to interpret the phrase “legally entitled to recover” liberally, not literally. Plaintiffs introduced cases where Iowa courts have found plaintiffs were “legally entitled to recover” damages from the tortfeasor even when they may not have been able to in the tortfeasor’s home state or in the state the injury occurred. The Eighth Circuit explained that these circumstances occurred when plaintiffs were being precluded from recovery based on procedural law, not substantive law.

British Columbia’s substantive law does not permit recovery for non-economic damages. Thus, the Eighth Circuit Court affirmed the District Court's judgment, concluding that Plaintiffs were not “legally entitled to recover” and therefore the policy did not award coverage.

The Eighth Circuit’s opinion should catch the eye of Iowa insurers when it comes to how “legally entitled to recover” is interpreted and applied.

Erickson|Sederstrom Law Clerk Emily Todd assisted with drafting this article and her help is greatly appreciated.

Supreme Court Ruling Delivers Victory for Students with Disabilities

In a unanimous decision, the U.S. Supreme Court paved a new route for students with disabilities to hold schools responsible—and now, recover damages—when a school fails to provide adequate educational accommodations. In Perez v. Sturgis Public Schools, the Court held that students with disabilities are not required to exhaust their administrative remedies under the Individuals with Disabilities Education Act (IDEA) when the plaintiff is also seeking monetary relief under the Americans with Disabilities Act (ADA) for prior discrimination or mistreatment by the school.

Miguel Luna Perez attended public school in Sturgis, Michigan from ages 9-20.  Speaking with reporters, Perez said that during his time in the Sturgis Public Schools, he received “some sign language,” but he wanted more. There was one other deaf student at his school. However, lacking resources and support, the two deaf students could not communicate with each other, much less the rest of the school. According to Perez, “nobody interpreted for me at Sturgis.”

Settling Perez’s IDEA claim, Sturgis schools agreed to send Perez to the Michigan School for the Deaf, where annual tuition exceeds $40,000, and pay for his post-secondary education so that Perez and his parents could learn sign language. The IDEA settlement resolved Perez’s needs moving forward but did nothing to address his prior mistreatment. To obtain compensation for past harm, lost income and damages for emotional distress, Perez sued under the ADA.

Both the ADA and the IDEA protect children with disabilities. Under the IDEA, students with disabilities can petition their school to enact reasonable, additional educational accommodations. But the IDEA does not permit recovery of money damages or remedy prior discrimination or mistreatment of a student with disabilities. Aside from the ADA, no such law provides relief to the nearly 7.5 million students with disabilities in the U.S. This was until Perez decided to challenge his school.

“The question [before the Court] is whether a plaintiff must exhaust administrative processes under IDEA that cannot supply what he seeks,” Justice Gorsuch wrote. “We answer in the negative.” Perez, who graduated from the Michigan School for the Deaf in 2020, said that he “learned so many new words and signs [and] learned construction.” Still, he said, “I wish I could have gone to college. I don’t have a job, but I want to have one. I want to make my own choices.”

A Win for Homeowners: Nebraska Legislature Ends “Home Equity Theft”

Geraldine Tyler, a 94-year-old widow and homeowner in Minnesota, successfully challenged the Constitutionality of a Minnesota law that permitted her county government to seize the entire value of her property because of a much smaller outstanding property tax debt. The United States Supreme Court held that the state law practice violated the Takings Clause of the Fifth Amendment of the United States Constitution, which prohibits the government from taking private property for public use without paying just compensation to the owner.

Mrs. Tyler owed $2,300 in property tax and $13,000 in interest and penalties. Acting under Minnesota’s forfeiture procedures, the County seized her home, sold it, and kept the entire $40,000 from the sale. This sale amount more than doubled Mrs. Tyler’s debt on the property but the County returned nothing to the homeowner in consideration of the equity she had built up in the home. On May 25, 2023, the Supreme Court unanimously ruled that the State “may not extinguish a property interest that it recognizes everywhere else to avoid paying just compensation when it is the one doing the taking.” Tyler v. Hennepin Cnty., 215 L. Ed. 2d 564, 575, 2023 U.S. LEXIS 2201, *19, 143 S. Ct. 1369, 29 Fla. L. Weekly Fed. S 851.

The Tyler case has important implications beyond Minnesota. More than ten other states, including Nebraska until recently, have some form of property forfeiture law similar to Minnesota’s that has been characterized as “home equity theft.” Illinois, Minnesota, and New York have led the nation in the number of these property takings. Now on notice of the unconstitutionality of these forfeiture laws, states must change these laws to comply with the Supreme Court ruling.

During the 2023 legislative session, as part of a $6.4 billion tax relief package, the Nebraska Legislature passed LB 727, which abolished “home equity theft” in Nebraska. The bill requires property tax foreclosures to go through judicial proceedings that protect the owner’s equity.

As property values rise, so have incentives for government entities to seize properties due to tax debts. For those affected by this issue in Nebraska, the Tyler case and Nebraska’s new tax bill set forth strong protections for Nebraska homeowners. Individuals who have lost property under the former Nebraska approach that was invalidated by Tyler should consider speaking with an attorney regarding any potential recourse.

Erickson|Sederstrom Law Clerk Elise Siffring assisted with drafting this article and her help is greatly appreciated.

ES Recognized For 2022 Courtroom Victories by Harmonie Group

Our experienced trial attorneys have a history of success where it really counts - the courtroom. Read about some of our top cases of 2022, as recognized by The Harmonie Group.

37 MOTOR VEHICLE ACCIDENT INVOLVING SCHOOL VAN AND UNBELTED PASSENGERS 

Matt Reilly, Counsel

School Not Liable for Passenger’s Failure to Wear an Available Seatbelt Defense represented a school district in a claim by a high school student who was injured as a passenger in an automobile collision involving a school van during a summer activity. There was no dispute that the school van driver was not at fault for the accident, as another driver crossed the centerline on the highway and was impossible to avoid. The passenger—himself, a licensed driver aware of the rules of the road—sued the school, claiming that the van driver failed to ensure that the passenger secured his own seatbelt. Plaintiffs refused to consider any settlement offers below policy limits. After almost ten years of litigation—including a two-week trial, two directed verdicts in favor of the school district, and two different appeals— ruled in favor of the school district, holding that Nebraska statutes do not provide a passenger with a negligence claim against a driver when the sole basis of the claim is a failure to ensure the usage of a seatbelt.

■ RESULT: Defense Verdict Upheld on Appeal.

TRIP AND FALL IN A PUBLIC PARK 

Matt Reilly, Counsel

Political Subdivision Immune in Fall in Public Park Defense represented a sanitary improvement district against a claim by two parents that their son was injured when he stepped into a hole on the grounds of the playground within the district’s boundaries. Defense asserted immunity on behalf of the district against the significant damage claims in reliance upon statutes that provide that a political subdivision cannot be sued for claims arising out of “recreational activities.” The lower court ruled in favor of the district on the asserted grounds and dismissed the parents’ claims against the district. 

■ RESULT: Summary Judgment Granted.

LLC DISSOLUTION 

Bonnie Boryca, Counsel

Business Partner Accusing of Withdrawing From LLC A bifurcated jury trial was held on the issue of whether one of four business partners in a real estate development LLC had withdrawn as a member of the LLC. If it had, then any liability and value of its percentage ownership of the LLC was capped as of the date of withdrawal. All business partners testified, as well as non-party witnesses. The jury returned a unanimous verdict in favor of the business partner accused of withdrawing, finding that there was no withdrawal or dissociation. 

■ RESULT: Jury Verdict and Court Ruling That Partner Had Not Withdrawn From LLC.

GAS EXPLOSION, INSURANCE SUBROGATION ACTION 

Matt Reilly, Counsel

Gas Explosion in Historic Downtown Building Counsel represented a subrogation carrier with a $2.6MM claim arising out of a fire in Omaha’s downtown Old Market area. The fire occurred when an underground gas line was struck in the course of a contractor performing directional boring work. The one remaining defendant at trial was the gas utility operator, Metropolitan Utilities District (MUD). MUD denied all liability and claimed that it properly marked its buried gas line. After a 2-week trial, the court ruled in favor of the subrogated carrier and found that MUD was 50% at fault (the remaining 50% was assigned to a settled party.) 

■ RESULT: Subrogation Win $2.6MM.

Is an Order to Mediate a Final Order? Nebraska Supreme Court Re-Visits Final Orders Yet Again

In June of 2022, the Nebraska Supreme Court found it was without jurisdiction over an appeal because a district court’s order for mediation and further determination is not considered a final judgment. Tegra Corp. v. Boeshart, 311 Neb. 783 (2022). The decision stemmed from a dispute over what authority a committee has under Neb. Rev. Stat. § 21-168, which governs special litigation committees for corporations, and whether that authority was analyzed with regard to Neb. Rev. Stat. § 25-1902, which defines a final order.

 Patrick Boeshart is the president and sole manager of Lite-Form Technologies, LLC, based in Sioux City, Nebraska. Tegra, 311 Neb. 783 at 787.  His wife, Sandra, is the office manager and bookkeeper. Id. Boeshart Management Company is an Iowa LLC owned by Patrick and Sandra. Id.  Pat Boeshart Construction is an Iowa LLC that is wholly owned by Patrick. Id. Tegra Corporation is an Iowa corporation in Sioux City, Iowa, and is a minority shareholder of Lite-Form. Id.

            Tegra, individually and on-behalf of Lite-Form, filed a complaint against the Boeshart’s alleging breach of fiduciary duty, misappropriation and waste of corporate assets, unjust enrichment, and conversion. Id at 788. Based on Tegra’s claims and pursuant to Neb. Rev. Stat. § 21-168, the manager-defendants appointed Cody Carse to the special litigation committee for the corporation. Tegra, 311 Neb. 783 at 788. Carse determined that it was in Lite-Form’s best interests to settle. A term of settlement included disclosing certain issues to the LLC members and conducting a majority vote on how the issues should be resolved. Id at 792.

            When the District Court reviewed the committee’s report, it found the committee acted with enough disinterested independence and good faith, but that its recommendations went beyond the authority of a committee under Neb. Rev. Stat. § 21-168. Tegra, 311 Neb. 783 at 794. The District Court ordered the parties to attempt mediation and report back. Id. Tegra appealed the order and the defendants cross-appealed. Id.

            The Supreme Court selected this case to address the scope of final judgments under Neb. Rev. Stat. § 25-1911 and how they apply to the Court’s jurisdiction. First, the Court determined that to be appealable, the order in question must satisfy the requirements of Neb. Rev. Stat. § 25-1902 and when applicable, Neb. Rev. Stat. § 25-1315(1).  Id at 796. Under § 25-1315, an express determination by the court about lack of reason for delay in making a final judgment must exist which would be “fatal to [the Court’s] jurisdiction over the appeal.” Id at 798. The Court found there was no express determination here. Further, the Court found the order was not final under § 25-1902. Id.

            To determine if the order to mediate was final under § 25-1902, the Court analyzed whether a derivative action is a “special proceeding” that “affected a substantial right.” Id. A special proceeding includes every special statutory remedy that is not in itself an action. While the plea may be connected with an action through application of the proceeding, it is not the integral part of an action.  Id at 799. Prior to Tegra, the Court had not addressed if a derivative action was a special proceeding. The Court stated they “will no longer reason that a proceeding is special by the sole virtue of being governed by statutes outside of chapter 25.” Id at 802.

            Ultimately, the Court concluded derivative actions are not special proceedings, but an equitable proceeding a member asserts on behalf of the LLC. Id at 802. While a derivative action requires the extra steps of making a demand of other members to enforce the right and requires the complaint to state a demand or state the action is futile, the derivative action is an action nonetheless. Id. The derivative action is a proceeding in a court by which one party prosecutes another for enforcement. It is still possible that orders under § 21-168 are made during a special proceeding, but this is because a special proceeding may be “connected with” an action; not because it, in itself, is an action. Id at 803. Whether a special proceeding is connected with an action or is an action depends on whether the proceedings under § 21-168 are an integral part of the main derivative action or just one of the many steps taken to commence the action. Id.

            The four options available to a committee under § 21-168 are: (1) the action continue under the control of the minority-member plaintiff who brought it, (2) the action continue under the control of the committee, (3) the action be settled on terms approved by the committee, and (4) the action be dismissed. Id at 806. After analyzing the four options, the Court determined any proceedings under § 21-168 are just a step in the underlying derivative action and not itself an action. Therefore, orders made pursuant to § 21-168 are not made during a special proceeding. Id at 807.

The Court also held an order under § 21-168 does not impact a substantial right. Id. A substantial right is “an essential legal right...[that is] affected if an order affects the subject matter of the litigation, such as by diminishing a claim or defense that was available to an appellant before the order from which an appeal is taken.” Id at 807. Determining whether an order is substantial depends on if it affects, with finality, the rights of the parties in the subject matter. Id at 810. The Court held that enforcing special litigation committee determinations lead to final judgments, but their effect as independent orders is limited in duration and any delay in their enforcement does not affect any substantial right. Id. 

Both parties in this suit attempted to argue the Court’s order of mediation exceeded its authority, but the Supreme Court found it did not affect a substantial right because any alternative dispute resolution is voluntarily entered into. Id at 811.

Ultimately, the Court found the order of the lower court was not a final order because there was not a “special proceeding” that “affected a substantial right.” This means reviewing courts’ rulings issued about a corporate committee decision under § 21-168 are not part of special proceedings for purposes of the final order doctrine. Id at 812.

The Nebraska Supreme Court continues to clarify and update its stance on final orders for purposes of appeals. Erickson | Sederstrom’s litigation attorneys are well-versed in this law and happy to review any appeal issues for clients in the region as lead counsel, for out-of-state attorneys as local counsel, or for Nebraska attorneys needing expert appellate co-counsel for their clients’ matters.

** This article was researched and primarily written by E|S law clerk Amelia Rens. Amelia is starting her third year at Creighton University School of Law and will join E|S as an associate attorney in the fall of 2023 after becoming licensed. We look forward to it! **

Can Criminal Intent Be Proven By Expert Opinion?

What is the difference between “possession” of drugs and “possession with intent to deliver” drugs?  In Nebraska, it’s having one ounce of cocaine and “expert testimony” that one ounce is too much for personal use. Expert opinion of possession with intent to deliver can make a difference in punishment. Mere possession of cocaine in Nebraska is a Class IV felony, punishable by up to two years in prison and a $10,000 fine.  Possession with intent to deliver carries a minimum penalty of three years imprisonment.

On April 1, 2022, the Nebraska Supreme Court affirmed the conviction of a western Nebraska attorney of one count of possession of a controlled substance, cocaine, with intent to distribute. Defendant was the Box Butte County Public Defender at the time of the offense, January 7, 2020. The court sentenced Defendant to the mandatory minimum sentence of three years imprisonment.

There was no evidence he had ever delivered or attempted to deliver a controlled substance to anyone in Scotts Bluff or anywhere else, according to his defense attorney at the time of sentencing. (Alliance Times-Herald, March 31, 2021).   However, the charge of “possession with intent” does not require proof of delivery, but simply proof of intent. In this case proof of intent was largely based on circumstantial evidence including “expert testimony” by a Scotts Bluff police department investigator.

The Nebraska Supreme Court made it clear that “evidence of the quantity of a controlled substance possessed, combined with expert testimony that such quantity indicates an intent to deliver, can be sufficient for a jury to infer an intent to deliver.” State vs. Worthman, 311 Neb. 284, at 291 (2022). The lesson for potential defendants is this:  There need not be proof that any amount of cocaine (and many other drugs) was ever distributed, delivered or sold. Circumstantial evidence that “a lot of cocaine” was possessed, “expert testimony” that such amount was more than enough for one user, can convict a defendant of possession with intent to deliver.

Nebraska Supreme Court Clarifies Political Subdivision Appellate Rights

Under Nebraska law, political subdivisions may not be sued without an express grant of power because they maintain sovereign immunity. The Nebraska Political Subdivisions Tort Claims Act (“PSTCA”) provides a limited waiver of sovereign immunity with respect to some types of tort claims against political subdivisions. Neb. Rev. Stat. § 13-901 et seq. One of the newest features of the PSTCA is that political subdivisions enjoy an immediate right to appeal when a request for immunity is denied by a trial court on summary judgment. The Nebraska Supreme Court was recently presented with an issue of first impression as to the limitations of that right to immediate appeal.  

In Clark v. Sargent Irrigation Dist., 311 Neb. 123 (2022), the Nebraska Supreme Court analyzed whether a district court’s denial of a political subdivision’s pretrial motion was a final order under Neb. Rev. Stat. § 25-1902(1)(d). In Clark, an irrigation district employee prepared a mixture of herbicides and sprayed the mix on several trees along a canal, which damaged the crops of nearby landowners. The landowners filed suit in the District Court for Custer County, alleging that the district’s employee was negligent in preparing the herbicide. The irrigation district moved the district court for summary judgment, arguing that the employee’s actions of preparing the herbicide fell within the discretionary function exemption of the PSTCA. The exemption states that the performance or nonperformance of a discretionary function cannot be the basis of tort liability of the political subdivision under the PSTCA.

The district court denied the irrigation district’s motion, reasoning that the discretionary function exemption does not apply when a statute, regulation, or policy specifically describes a course of action. The irrigation district sought an interlocutory appeal on the district court’s Order denying its motion for summary judgment.

The Nebraska Supreme Court concluded that it had appellate jurisdiction to review the irrigation district’s assignment of error under § 25-1902(1)(d) because the motion at issue was based on the assertion of the district’s sovereign immunity, the denial of which does constitute an appealable order. Clark v. Sargent Irrigation Dist. stands for the proposition that a district court’s denial of a political subdivision’s motion for summary judgment asserting the PSTCA’s discretionary function exemption was a final appealable order under § 25-1902(1)(d).

E|S attorneys have vast experience and a deep understanding of the Nebraska Political Subdivision Torts Claim Act. Matt Reilly and E|S litigators can be reached at 402-397-2200. 

Back to the Basics - No retaliation claim if no protected activity

Retaliation claims are among the most numerous types of employee claims processed through the Equal Employment Opportunity Commission and state EEO agencies. Central to these claims are whether an employee engaged in protected activity and how the employer responded to it. A recent Eighth Circuit case involving Nebraska law on retaliation is exemplary. 

In Walker v. First Care Mgmt. Grp., LLC, the United States Court of Appeals for the Eighth Circuit held that employees’ conduct in response to a facility resident’s abuse upon another facility resident did not constitute protected conduct to support a retaliation claim under Nebraska law.  27 F.4th 600 (8th Cir. 2022). 

Two caregivers employed by a retirement community witnessed a resident sexually assaulting other residents several times.  Per company policy, employees had to report resident abuse immediately, by reporting any incident to a supervisor, completing an incident report, and making a note in the resident’s chart.  The two employees claimed they reported observing the abuse, but on at least one occasion, they waited to make their report until day after the incident. 

The Nebraska Department of Health and Human Services (“DHHS”) responded to an anonymous complaint about the resident’s abuse and made an unannounced site visit of the facility.  Shortly after, a retirement community manager claimed she was unaware of the abuse that led DHHS to the facility.  Several employees stated the manager must have been aware of the abuse because the employees reported such abuse.  Upon completion of the visit and a staff meeting, the two caregiver employees were terminated. 

The employees filed suit alleging, among other claims, unlawful retaliation after engaging in a protected activity.  The retirement community moved in the District Court for summary judgment, which was granted, resulting in a judgment against the employees and dismissing their claims.  The employees appealed. 

On appeal, the Eighth Circuit considered whether the lower court erred in granting the retirement community’s motion for summary judgment.  Under Nebraska law, an employer may not discriminate against an employee who opposed or refused to carry out any unlawful action of the employer.  Neb. Rev. Stat. § 48-1114(1)(c).  In other words, employees claiming retaliation must demonstrate that they opposed an unlawful practice of their employer. 

The two employees alleged engaging in the following activities: the report made to DHHS, internal complaints to supervisors about the abuse, and confronting a manager about her alleged ignorance of their report of abuse.  However, none of these acts were found to have opposed unlawful activity of the retirement community. Nor did they amount to acts of refusing to carry out an unlawful action. Thus, there was no protected activity on which to base a retaliation claim.  Accordingly, the Eighth Circuit upheld the summary judgment because the employees’ conduct in response to the abuse of the facility resident did not constitute protected conduct under Nebraska law. 

Obviously, the facts of the case suggest egregious acts of abuse. However, a retaliation claim is closely focused on the activities of employees and the response of the employer. Any time an issue arises, employers are cautioned to involve their attorneys at an early stage to avoid or minimize potential claims of retaliation and to appropriately respond to abuse, to complaints, or to protected activity of employees.

Thanks to Rob Toth, current law clerk and joining E|S as an associate attorney in the fall of 2022, for assistance in preparing this article.

Bonnie Boryca and E|S employment attorneys can be reached at 402-397-2200.

Law or equity – whether a jury decides the claim in light of the equitable ‘clean up’ doctrine

In Schmid v. Simmons, the Nebraska Supreme Court held that the common law “clean up” doctrine is still good law, discussed when a party is entitled to a jury trial on civil disputes, and clarified how a litigants may waive the right to jury trial on legal claims.  311 Neb. 48 (2022).   

The Nebraska Constitution guarantees the right to trial by jury. However, on civil matters, which are generally disputes about money or other non-criminal matters, the state Constitution allows the Legislature to modify this right to allow juries less than 12 to decide matters in courts inferior to the District Courts, and, in such cases, the decision may be rendered by five-sixths majority of the jury.  Neb. Const. art. I, § 6.

 Litigants still have a right to seek a jury trial on legal claims—those involving disputes over specific real or personal property and money damages—but not on equitable claims, which may be tried “to the bench” without a jury.  Whether a claim is legal or equitable rests upon the “main object” of the claim, which is shown by the issue the lawsuit seeks to resolve.  

 Under the “clean up” doctrine, a court may determine equitable issues and then “clean up” other legal issues in the case, even where a defendant asserts a legal claim as a defense or counterclaim.  The purpose of this doctrine is to preserve judicial efficiency by allowing the same court to hear and determine all disputed issues in a single lawsuit. 

Applied to the facts, the Court found proper the district court’s decision to resolve plaintiff’s equitable claims (quiet title, declaratory judgment, LLC accounting, and judicial dissolution) and then “clean up” defendant’s amended counterclaims seeking damages for breach of contract, a legal claim.  Because the District Court retained jurisdiction to quiet title and determine rights of LLC members, and because the parties agreed the matter before the court was equitable, the District Court correctly applied the “clean up” to resolve any remaining legal claims all equitable claims were decided.  

The Court further clarified the manner in which parties may waive the right to trial by jury on a breach of contract action, or with the court’s agreement in other actions, finding that waiver could be accomplished in three ways: (1) by consent of a party where the other party fails to appear, (2) by written consent delivered to the clerk of court, or (3) by oral consent in open court on the record.  Neb. Rev. Stat. § 25-1126.

 E|S attorneys are experts in civil trials, whether to a jury or to a judge, whether in equity or common law. Bonnie Boryca and E|S litigators can be reached at 402-397-2200. 

Thanks to E|S law clerk Ross Serena for contributing to the above article.

E|S Attorney Pat Guinan Does it Again.

Congrats to our attorney Patrick Guinan on another appeal win, this time in front of the United States Court of Appeals for the Eighth Circuit. The court upheld the lower court’s entry of summary judgment completely in favor of certain defendants, including one represented by Erickson & Sedestrom. The opinion can be found here: https://www.ca8.uscourts.gov/todays-opinions (Pals v. Weekly et al).

Nebraska: A Second Amendment Sanctuary State

The Second Amendment of the Untied State’s Constitution reads, “A well regulated Militia, being necessary to the security of a free State, the right of the people to bear Arms, shall not be infringed.” According to the Pew Research Center, over 72 million Americans own a gun and approximately three-quarters of Americans consider their right to own a gun essential to their freedom.

Many gun owning Americans were concerned with President Biden’s April 07, 2021 announcement that his administration would not “wait for Congress” to draft new legislation regarding gun ownership. The Biden administration advised that it will order the Department of Justice to issue new proposed rules to stop the proliferation of guns assembled from kits, provide a clear definition for stabilizing devices used in target shooting pistols, and publish model “red flag” legislation for states.

In the wake of the presidential announcement, Nebraska Governor Pete Ricketts, issued a signed proclamation designating Nebraska as a “Second Amendment Sanctuary State.” That proclamation read:

WHEREAS, The Second Amendment to the U.S. Constitution Protects the right to keep and bear arms; and

WHEREAS, Article 1-1 of the Nebraska State Constitution guarantees “the right to keep and bear arms for security or defense of self, family, home, and others, and for lawful common defense, hunting, recreational use, and all other lawful purposes” and states that this right “shall not be denied or infringed by the state or any subdivision thereof;” and

WHEREAS, The State of Nebraska has protected the right of Nebraskans to open carry and conceal carry; and

WHEREAS, Nebraska will stand up against federal overreach and attempts to regulate gun ownership and use in the Good Life; and

WHEREAS, The White House and U.S. Congress have announced their intention to pursue measures that would infringe on the right to keep and bear arms; and

WHEREAS, A growing number of counties in Nebraska have declared themselves as “Second Amendment Sanctuary” counties; and

WHEREAS, Nebraska will continue to take any necessary step to defend our right to keep and bear arms.

NOW, THEREFORE, I Pete Ricketts, Governor of the State of Nebraska DO HERBY PROCLAIM the State of Nebraska is a

SECOND AMENDMENT SANCTUARY STATE

and I do hereby urge all citizens to take due note of the designation.

IN WITNESS WHEREOF, I have hereunto set my hand and cause the Great Seal of the State of Nebraska to be affixed this Thirteenth day of April, in the year of our Lord Two Thousand Twenty-One.

With so much attention on firearms and the importance of the Second Amendment to the United States Constitution, responsible gun owners and prospective gun owners need to be informed regarding their rights and the laws surrounding gun ownership and possession. There are currently an array of confusing and rapidly changing legal authorities affecting gun owners. For example, there are many hurdles that a hopeful gun owner must clear before becoming an actual gun owner such as background checks. Gun owners must also be familiar with the many laws setting forth restrictions on the ownership of both handguns and long guns, the laws related to when and how guns can be carried concealed, when and how guns can be carried in the open, and where guns are and are not permitted. Not being familiar with these laws can have severe consequences for gun owners. Those consequences can include criminal repercussions and loss of a gun owner’s right to own or possess a firearm in the future. Some prospective gun owners may have already lost their rights to own a gun and wish to regain that right through the proper channels but do not know how. And, finally, current gun owners may wish to protect the ownership of their firearms with devices known as “gun trusts” but do not know where to get started.

Many of these answers can be found in Nebraska Revised Statute Chapters 69 and Chapter 28. Those interested in purchasing a firearm, or having questions about firearm ownership or possession should not hesitate to review the legislative materials in these statutes or contact an attorney familiar with the subject. Erickson | Sederstrom has several attorneys with significant expertise regarding this area of the law.

Arbitration - Preparing for the Important Preliminary Hearing

A guiding principle for an Arbitrator is to hear all the evidence that may be relevant and material in order to understand and determine the dispute. A well-organized preliminary hearing is critical to fulfill that principle.

Because an arbitration demand is not usually a very detailed account, often only a limited amount of information is exchanged in the early stages of arbitration. The parties and their attorneys may have had little or no contact with each other since the dispute arose, except to choose the arbitrator.

It surprises me that many attorneys do not realize that they are to participate in a preliminary hearing. As noted, the preliminary hearing is a critical step in the arbitration process. I've also found that the large number of attorneys are not prepared for the preliminary hearing.

These are my suggestions to improve the quality of their arbitration advocacy and put them on the right path to obtain the benefits of arbitration.

1. Often the Claimant files a general demand, i.e. Respondent breached the contract and owes $50,000. That does not tell the Arbitrator much about the case. If possible, the attorneys should indicate all theories of recovery and relief sought and the calculation of damages. This allows the Arbitrator to determine whether the case is complex or simple. Also a more detailed Complaint, Answer or Crossclaim narrows the issues for the Arbitrator.

2. Attorneys should realize that they have an important part in the proceedings. They should discuss scheduling dates on which the clients and witnesses (both fact and expert) will be available. Before the preliminary hearing, the attorneys should confer to discuss:

• Available dates for the evidentiary hearing.

• The scope of document discovery.

• The dates for exchanging documents.

• Deadlines for Exhibit Lists.

• Deadlines for Witness Lists.

• Dates for exchanging their expert's reports.

• Whether either party plans to file any prehearing motions, and if so, the dates for filing and replying to them.

• How much time each side will need for direct and cross-examination at the evidentiary hearing.

• Whether the parties want a court reporter?

3. The Attorneys should at the preliminary hearing inform the Arbitrator what type of award they want. Failure to tell the Arbitrator the form of the award could result in an award that fails to address every claim or counterclaim. Attorneys should be aware that the more detailed an award, the more cost to the client. Obviously, the Arbitrator charges for the time taken to draft the award.

Title Defect Renders Collateral Useless; Bank Unable to Cover Losses from Loan Default

A recent Nebraska Supreme Court decision illustrates why individuals should always seek advice of counsel before entering into a financial agreement. In Foundation One v. Svoboda, the Nebraska Supreme Court affirmed a lower court’s ruling that a Bank could not recover vehicles pledged as collateral to secure a loan because a gap in title indicated the Borrower did not own the vehicles. 303 Neb. 624, ___ N.W.2d ___ (2019).

Foundation One loaned $200,000 to Jason Svoboda upon Svoboda pledging two Mack trucks as collateral to secure the loan. In order to maintain the priority of its claim to the vehicles the Bank paid $85,141.40 to remove several preexisting liens on the truck titles. When the Svoboda defaulted on the loan, the Bank repossessed both trucks, eventually selling one for $95,000. Before the Bank could sell the second truck, however, the legal owner intervened in the case.

The trial to determine the legal owner of the trucks brought some startling facts to light. Prior to obtaining the loan, and unbeknownst to the Bank, Svoboda had engaged in a scheme to fraudulently transfer title from the legal owner, Lehr, Inc., back to Svoboda, to use the trucks as collateral for his loan. This scheme left a gap in the trucks’ chain of title. Lehr, Inc. presented evidence at trial showing that the trucks were, at all relevant times, the legal property of Lehr, Inc., and not Svoboda.

The jury verdict ordered the Bank to return the truck remaining in its possession, and to pay an additional $95,000 to Lehr (the amount the Bank received for the sale of the other truck). The jury verdict left the Bank with the full $200,000 amount of the loan, less any payments made before the Borrower’s default. Reviewing the case on appeal, the Nebraska Supreme Court commented that the Bank is required to show a clear chain of title from any previous owners of the trucks to the Borrower, and from the Borrower to the Bank. Id. at 633, ___ N.W.2d at ___. Ultimately, the Bank could not claim an interest in either truck because “the evidence, on its face, . . . showed a break in the chain of ownership between Lehr and [the Borrower] and did not show clear title in [the Bank].” Id.

If the Bank had conducted a more thorough investigation regarding the vehicles offered by Svoboda, it would have avoided the loss in question.

Can Data Breach Victims Sue in Federal Court Without Actually Suffering Identity Theft?

Recently, health insurer CareFirst Inc. filed a petition with the Supreme Court of the United States to resolve a disagreement among federal appellate courts on the issue of whether victims of data breaches may sue in federal court when they do not allege a present injury. This suit, on appeal from the United States Court of Appeals for the District of Columbia Circuit, will largely center on the idea of standing, a threshold requirement for any plaintiff hoping to sue in federal court. More specifically, CareFirst Inc. alleges the D.C. Circuit erred in reasoning that a plaintiff has standing to sue in federal court simply by virtue of the fact and nature of the data that was accessed by hackers. The data included names, birth dates, email addresses, and subscriber identification numbers.

Pursuant to the federal law, standing requires that a plaintiff suffer some sort of injury to sue. Future injuries may be actionable. However, courts will require that there be a substantial risk of injury. For data breach victims that have not seen evidence of identity theft or fraud, the main question is whether theft of private information as a result of a data breach creates a substantial risk of an identity theft to be actionable.

This August, the United States Court of Appeals for the Eighth Circuit, which hears cases from federal courts in Iowa and Nebraska, ruled in Alleruzzo v. SuperValu, Inc. that a district court properly dismissed many plaintiffs from a data breach action. In that case, hackers gained access to customers’ card information from a grocery store network. This included names, card numbers, expiration dates, card verification values codes, and personal identification numbers. Several customers filed suit under a variety of theories, but only alleged that one customer suffered a single fraudulent charge. Due to lack of injury, the case was dismissed by the district court.

On appeal, the plaintiffs argued that theft of their card information created a substantial risk that they will suffer identity theft in the future. The court initially noted that because card information does not contain social security numbers and birth dates, the information cannot plausibly be used to open new accounts, a form of identity theft most harmful to consumers. It also analyzed a 2007 Government Accountability Office report, which concluded that based on available information, most breaches have not resulted in detected incidents of identity theft. Since the plaintiffs presented no facts from which the court could conclude that plaintiffs suffered a substantial risk of future identity theft, they had no standing to sue in federal court.

The Eighth Circuit and the D.C. Circuit are not the only courts to consider the issue. Like the Eighth Circuit, the United States Court of Appeals for the Fourth Circuit, in Beck v. McDonald, concluded that the risk of identity theft was too hypothetical to allow plaintiffs to sue. Meanwhile, the United States Courts of Appeals for the Sixth and Seventh Circuit have stated, in Reijas v. Neiman Marcus and Galaria v. Nationwide Mutual, that data breach victims suffered an imminent risk of identity theft when the breach occurred.

While the Supreme Court has not yet agreed to hear CareFirst’s arguments, this is certainly an issue to keep watching. Should courts continue to state that data breach victims have standing to sue businesses by virtue of the fact that hackers gained access to the data, such litigation can be expected to rise as data breaches continue.