Litigation

 

Nebraska Supreme Court Upholds PSC Approval of Keystone XL Route

On August 23, the Nebraska Supreme Court issued its long-awaited opinion in the Keystone XL pipeline route approval case that was argued before the court in fall, 2018. Issued as In Re Application No. OP-0003 and cited as 303 Neb. 872, the opinion stems from a suit brought by landowners and advocacy organizations in opposition to the Nebraska Public Service Commission's decision in November of 2017 to approve the Mainline Alternative Route (MAR) for the Keystone XL Pipeline.

In a 59-page, unanimous decision, authored by Justice Funke, the Court stated:

"In summary, the PSC is an elected body created by the Nebraska Constitution to serve the public interest... the legislature determined that '[t]he construction of major oil pipelines in Nebraska is in the public interest...' The Legislature designated the PSC as the agency responsible for determining which pipeline route is in the public interest. After months of careful consideration, the PSC determined that the evidence showed that the MAR (Mainline Alternative Route) is in the public interest. Upon de novo review, we find there is sufficient evidence to support the PSC's determination that the MAR is in the public interest. The assignments of error are without merit."

While those who argued in favor of the project welcomed the news, those who have long opposed the project, like Bold Nebraska founder and current Chair of of the Nebraska Democratic Party, Jane Kleeb, issued comments stating the Legislature, or a new President in 2020 could seek to undo the opinion issued by the Supreme Court.

U.S. Supreme Court Takes Broad View of Qualified Immunity for Police Officers

       The United States Supreme Court recently held that a police officer who shot a woman holding a knife outside her home was entitled to qualified immunity because his actions did not violate clearly established statutory or constitutional rights that a reasonable person would have known. Kisela v. Hughes, 584 U.S. ___, 138 S. Ct. 1148 (2018).

       In May 2010, Andrew Kisela and other officers responded to a 911 call that a woman carrying a knife was acting erratically. Officers spotted Sharon Chadwick in the driveway of a nearby house. Then, Amy Hughes, matching the 911 description of the woman acting erratically, emerged from the house carrying a large knife. Hughes stopped near Chadwick, at which time the officers drew their guns. After officers told Hughes to drop the knife twice, Kisela shot Hughes four times. Less than one minute passed from the time the officers first saw Chadwick to when Kisela shot Hughes.

       Hughes sued Kisela under 42 U.S.C. § 1983, alleging Kisela used excessive force in violation of the Fourth Amendment, which the Court did not decide. Instead, it held Kisela was entitled to qualified immunity, even if a Fourth Amendment violation did occur.

       The Court explained that, “although existing case law does not have to be directly on point…existing precedent must have placed the statutory or constitutional question at issue beyond debate” to deny a police officer qualified immunity. Excessive force, particularly, “is an area of the law in which the result depends very much on the facts of each case, and thus police officers are entitled to qualified immunity unless existing precedent squarely governs the specific facts at issue.” Thus, an officer does not violate a clearly established right unless “the right’s contours were sufficiently definite that any reasonable official in the defendant’s shoes would have understood that he was violating it.”  The Court held the facts in Kisela were “far from an obvious case in which any competent officer would have known that shooting Hughes to protect Chadwick would violate the Fourth Amendment.”

       This decision is in line with other recent Supreme Court decision on excessive use of force by police officers.  Claimants asserting excessive use of force claims against police officers must overcome strong deference in favor of the police officers in order to prevail on their claims.

Tortious interference among set of valuable tools for employers to protect their information from misuse by former employees

Recently, the Eighth Circuit Court of Appeals reviewed an appeal out of the District of Nebraska. The multiple claims against former employees, including a claim for tortious interference with business relationships, a claim not often considered by employees and employers, but which can make a wide array of damages available to a plaintiff. The claim often arises alongside claims that former employees have taken trade secrets or used confidential information to solicit clients or other employees. Read on to learn more!

Factual Background

            Bryce Wells (“Wells”) was the president and shareholder of West Plains Company. Wells sold West Plains Company to West Plains, L.L.C. (West Plains), in February 2012. West Plains operated a freight brokerage operation called CT Freight. When Wells sold West Plains Company, the employee defendants and Jodi May (“May”) all continued to work for West Plains in the same positions they held prior to the sale. The employee defendants signed the West Plains Employee Handbook, “which prohibited employees from engaging in conflicts of interest and disclosing confidential information to a competitor.”

            In October of 2012, Wells began forming Retzlaff Grain Company, a freight brokerage company. Retzlaff Grain Company did business as RFG Logistics. Wells recruited four of the employee defendants who “signed confidentiality and consulting agreements with Wells.” Wells provided them each with $5,000 as a consulting fee.

            These four employee defendants worked with Wells in creating RFG Logistics and recruited the remaining employee defendants to join RFG Logistics by the end of January, 2012. The employee defendants then submitted their resignations from CT Freight.

Procedural History

            In February 2012, West Plains brought suit, alleging “(1) misappropriation of trade secrets against all defendants; (2) tortious interference with business relationships against all defendants; (3) tortious interference with employment relationships against Wells and RFG Logistics; (4) breach of the duty of loyalty against the employee defendants; (5) civil conspiracy against all defendants; and (6) a violation of the Computer Fraud and Abuse Act . . . against [one of the employee defendants].”

            The district court granted a temporary restraining order against the defendants “prohibiting them from contacting and providing freight brokerage services for the customer and carriers of CT Freight” until the court ordered and to return all documents taken from West Plains. The temporary restraining order was extended to April 5, 2013. The district court ruled in favor of the defendants regarding the claims for tortious interference with employment relationships and the claim under the Computer Fraud and Abuse Act.

            At trial, the jury found in favor of West Plains on the tortious interference with business relationships claim as to all defendants except for three. The jury also found a breach of the duty of loyalty by all employee defendants. Finally, the jury found that all defendants, except May, entered into a civil conspiracy. According to these findings, the jury awarded West Plains $1,513,000 in damages and required forfeiture of compensation of all employee defendants. The defendants appealed.

Tortious interference with business relationships

            In order to prove tortious interference with a business relationship in Nebraska, the following must be shown: 1) “the existence of a valid business relationship or expectancy”, 2) that the person interfering had knowledge of the business relationship or expectancy, 3) “an unjustified intentional act” by the interferer, 4) a showing that the interference caused the harm, and 5) damage to the party whose business relationship or expectancy was interfered with. The defendants alleged that that their conduct did not amount to unjustified interference and that West Plains did not prove their conduct caused that damages sustained by West Plains after the temporary injunction expired.

Acts of Unjust Interference

            Often the key question in a tortious interference claim is whether the acts that interfered were justified and proper. In this case, the Eighth Circuit Court of Appeals determined that “a jury could find Wells unjustly interfered with West Plains’ business relationship by knowingly paying, recruiting, and seizing CT Freight’s workforce, infrastructure, and customer relationships.”

            The court reasoned that Wells knew that by recruiting freight brokers away from CT Freight that he could essentially own CT Freight without having to pay for it. Although Wells instructed the employee defendants not to take any customers from CT Freight, he recruited the leaders of CT Freight and began a plan “that effectively would remove CT Freight’s business to RFG Logistics.” The group resignation resulted in an inability by CT Freight to “broker large quantities of freight.”

            The court also found that “the employee defendants took it upon themselves to take CT Freight’s customer lists, documents, and confidential information.” There were messages between some of the employee defendants discussing how to send the customer information to their personal emails. During the process of their departure, the defendants took steps to not “disrupt their business with their existing customers, whom they admittedly planned to bring with them the moment they left CT Freight.” The court held that “[w]hile there was nothing unjust about the employee defendants’ choice to leave at-will employment with West Plains, there was evidence the employee defendants knew and understood their group resignation would decimate CT Freight.”

Damages after April 5, 2013

            The defendants argued that there was not enough evidence to prove that the defendants’ resignations caused the losses suffered by CT Freight. The Eight Circuit determined that “[the defendant’s] concerted action . . . resulted in tortious interference that caused damage to West Plains.”

            West Plains went from a profit of over $800,000 in 2012 to a net loss of $150,000. West Plains tried to preserve the business by recruiting employees but could not find employees for the business. The court reasoned that even though West Plains did hire new employees, these employees did not have sufficient experience or a customer base in the industry. The Eighth Circuit concluded that “the evidence was sufficient to show the defendants’ actions caused a loss of profits to West Plains, and that loss continued after the expiration of the temporary injunction.”

Breach of Duty of Loyalty

            The Eight Circuit determined that the employee defendants breached their duty of loyalty, as well. The employee defendants, while employed by West Plains, “intended to hinder CT Freight’s business” by giving CT Freight information to Wells and resigning together in order to make sure customers followed. The employee defendants signed an agreement prohibiting them from partaking in conflicts of interests and distributing company information. Seven of the employee defendants signed the confidentiality and consulting agreements with Wells, violating their employment agreement with West Plains. Also, four of the employee defendants received the compensation from the consultation with Wells.

            The employee defendants also argued that the forfeiture of their pay was excessive. The Eighth Circuit determined that there was “adequate support for each award” based on the extent of involvement with RFG Logistics.

Civil Conspiracy

            A civil conspiracy can arise when two or more people accomplish, by concerted action, an unlawful object. A finding that the defendants committed unjustified interference with West Plains’ business or breached their duty of loyalty “would support the conspiracy claim.” The Eighth Circuit determined that “[t]here was abundant evidence showing the defendants entered into an agreement tortuously to interfere with West Plains’ business or to breach their duty of loyalty.”

Mitigation

            The defendants argued that West Plains did not show that it mitigated its damages upon the resignation of the employee defendants. The Eighth Circuit determined that West Plains immediately transferred employees from another division to CT Freight and contacted its customers that left with the employee defendants in an attempt to retain their business. CT Freight even expanded its business into other sectors of the industry. This all satisfied its duty to mitigate damages.

West Plains, L.L.C. v. Retzlaff Grain Co., 870 F.2d 774 (8th Cir. Aug. 30, 2017).

 

Takeaway for employers

            If you suspect former employees are appropriating your confidential information to consult with your clients or employees or may be planning to appropriate your information to form a competing venture, it is best to get your attorney involved right away. You may have rights to assert through a cease and desist letter, and could ultimately be vindicated in a court of law.

Department of Labor Clarifies Test for Determining Whether an Intern is an Employee under the FLSA

On January 5, the United States Department of Labor clarified that, going forward, it will use the “primary beneficiary” test a number of federal appellate courts use to determine whether interns are considered employees under the Fair Labor Standards Act. This decision was announced after the United States Court of Appeals for the Ninth Circuit, in December, became the fourth appellate court to reject the Department of Labor’s prior six-part test for the same topic.

Under the Department of Labor’s prior six-part test, an intern was considered an employee unless all the following factors were met:

1.       The internship is similar to training which would be given in an educational environment;

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

3.       The intern does not displace regular employees;

4.       The employer provides that the training derives of no immediate advantage from the activities of the intern, and on occasion its operations may actually be impeded;

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

6.       The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

However, the Ninth Circuit, along with the Second, Sixth, and Eleventh Circuits, expressly rejected this test.  Instead, the courts preferred the “primary beneficiary test”. Under this more flexible test, discussed by the Second Circuit in Glatt v. Fox Searchlight Pictures Inc., courts and employers would weigh and balance seven non-exhaustive factors. These factors are:

1.       The extent to which the intern and the employer clearly comprehend that there is no anticipation of compensation.

2.       The extent to which the internship provides training similar that would be given in an educational environment.

3.       The extent to which the internship is linked to the intern’s formal educational program by coursework of academic credit.

4.       The extent to which the internship accommodates the intern’s academic schedule.

5.       The extent to which the internship’s duration is limited to the time period when the intern is provided beneficial learning by the internship.

6.       The extent to which the intern’s work supplements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.

7.       The extent to which the intern and the employer understand that the internship is directed without entitlement to a paid job at the end of the internship.

Employers should take time to examine any internship positions to determine if an intern could possibly be considered an employee under the Fair Labor Standards Act.

EEOC Sues Employer for Gender Discrimination Related to Parental Leave Policy

Recently, the Equal Employment Opportunity Commission (“EEOC”) filed suit against cosmetic company Estee Lauder Companies, Inc. alleging the company discriminated against men by providing less parental leave benefits than women. Under federal law, men and women are allowed equal pay for equal work.

The EEOC alleges that the company’s leave policy allows for six weeks of leave for new mothers and “primary caregivers” and two weeks for “secondary caregivers”.  According to the suit, a male employee applied for primary caregiver status, but was denied. The employee was allegedly told that the “primary caregiver” designation only applied to surrogacy situations and would not apply to men avowing they would be the primary caregiver to their child. The EEOC argued that such a policy violates Title VII of the Civil Rights Act of 1964, which prohibits discrimination based on gender, and the Equal Pay Act of 1963, which prohibits discrimination based on gender when men and women work at the same company under comparable circumstances.

At this time, there does not appear to be an issue with the “primary caregiver” and “secondary caregiver” designation that many employers use when the policy is gender neutral. However, critics state that defining “primary caregiver” and “secondary caregiver” without utilizing gender stereotypes is easier said than done and could lead to gender discrimination when applied incorrectly.

With more companies allowing parental leave for both mothers and fathers, employers should review their policies to ensure that parental leave policies are not discriminatory. For example, an employer could provide the same benefits to mothers and fathers for the birth or adoption of a child, while allowing additional benefits tied directly to medical disability for pregnancy, childbirth, or similar circumstances. Such a policy may help avoid the issue of defining who is considered the “primary caregiver”, and it be more straight-forward for employees to apply in the workplace.

ERISA: A Plan Sponsor’s liability for an underfunded plan.

The 8th Circuit recently held that a defined benefit pension plan participant’s claim against a Plan Sponsor cannot move forward if an underfunded plan becomes overfunded during the course of litigation.  In Thole v. US Bank, National Association, et el, No. 16-1928 (October 12, 2017),  the 8th Circuit held that a defined benefit pension plan participant who alleges a breach of fiduciary duty and prohibited transaction claims under ERISA is unable to assert their claims if the plan subsequently becomes overfunded, even if the overfunding occurs after litigation has been filed.  

In Thole, the Plaintiffs were retirees of U.S. Bank and participants in the U.S. Bank Pension Plan (“the Plan”).  U.S. Bancorp was the Plan’s sponsor, while U.S. Bank was the Plan’s trustee.  Pursuant to the Plan document, the Compensation Committee and Investment Committee had authority to manage the Plan’s assets. The Compensation Committee was composed of U.S. Bancorp directors and officers.  The Compensation Committee designated a subsidiary of U.S. Bank as the Investment Manager with full discretionary investment authority over the Plan’s assets.

Plaintiffs brought an action against U.S. Bank, N.A., U.S. Bancorp, and multiple U.S. Bancorp directors challenging the defendants’ management of the Plan.  The Plaintiffs alleged that the defendants violated the Employee Retirement Income Security Act of 1974 (ERISA) by breaching their fiduciary obligations and causing the Plan to engage in prohibited transactions.  The Plaintiffs asserted that the ERISA violations caused significant losses to the Plan’s assets in 2008 and resulted in the Plan being underfunded.  Plaintiffs challenged the management of the Plan from September 30, 2007 to December 31, 2010. 

Plaintiffs alleged that the Investment Manager had invested the entire portfolio in equities managed by the Investment Manager.   Plaintiffs further alleged that because defendants put all the Plan’s assets in a single higher-risk asset class, the Plan suffered a loss of $1.1 billion.  The status of the Plan as underfunded at the commencement of litigation was not in dispute.  

Following the commencement of litigation U.S. Bank made voluntary contributions to the Plan in the amount of $311 million dollars.  These additional voluntary contributions resulted in the Plan becoming overfunded, with more money in the plan than was needed to meet its obligations. Defendants moved to dismiss the case asserting that Plaintiffs could no longer prove they had suffered any financial loss. The District Court dismissed the action, concluding that because the Plan was now overfunded, the Plaintiffs lacked a concrete interest in any monetary relief that the court might award to the Plan if the plaintiffs prevailed on the merits. On Appeal the 8th Circuit Court of Appeals affirmed the District Court’s decision.

In addition to the monetary relief sought by Plaintiffs, the Court also determined that the Plaintiffs’ injunctive relief claim against the Investment Manager could not move forward.  While ERISA provides that a plan participant or beneficiary may bring a civil action to enjoin any act that violates any provision of the Act or terms of the plan the Court held that plaintiffs must make a showing of actual or imminent injury to the Plan itself, and because the Plaintiffs could not show injury as the plan was overfunded injunctive relief was not appropriate. 

The Court’s holding allows a Plan sponsor to make additional contributions to a Plan even after litigation has commenced, increasing the burden on a Plaintiff to prove injury in such an action. 

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. 

Davis v. State: State is not required to plead and prove an exception to the State Tort Claims Act, and an exception to the State’s immunity may be raised for the first time on appeal or sua sponte.

On October 6, 2017, in the case of Davis v. State, the Nebraska Supreme Court concluded that its prior cases holding that the State of Nebraska (the “State”) must plead and prove an exception to the State’s immunity from suit under the State Tort Claims Act (the “STCA”) were clearly erroneous. Davis v. State, 297 Neb. 955, 979 (2017).  As a result, the Court overruled its prior cases “to the extent they can be read to hold that a state attorney waives an immunity defense under [the Act] by failing to raise it in a pleading or to a trial court.”  Davis, 297 Neb. at 979.1

Instead, the Court held “that an exception to the State’s waiver of immunity under the STCA is an issue that the State may raise for the first time on appeal and that a court may consider sua sponte [(i.e., on its own motion)]”.  Id.  The Court’s rationale for its holding was that “when a plaintiff’s complaint shows on its face that a claim is barred by one of the exceptions [to the STCA], the State’s inherent immunity from suit is a jurisdictional issue that an appellate court cannot ignore.”  Id.  While not specifically stated, the Court’s holding in Davis will also apply to claims under Nebraska’s Political Subdivisions Tort Claims Act (the “PSTCA”).  See id.

The effect of the Court’s holding in Davis is that a plaintiff bringing a tort claim against the State or against a political subdivision will have to meet somewhat of a heightened pleading standard.  In addition to having to comply with the procedural requirements of the STCA or the PSTCA, plaintiff’s will also have to ensure that their complaint does not show, on its face, that the claim is barred by one of the exceptions to the State’s or political subdivision’s waiver of immunity.  If it is, the trial court, or even an appellate court, has the inherent power to determine whether the plaintiff’s allegations show that the tort claim is facially barred by an exception to the STCA or the PSTCA.  See id. at 980.

The Davis holding also relaxes the pleading standard for the State and political subdivisions.  As indicated above, because the Court considers the exceptions to the State’s and political subdivision’s waiver of immunity under the STCA and PSTCA as jurisdictional issues (i.e., whether the court has the power to hear the case), the failure to raise an exception in a responsive pleading or at trial does not operate as a waiver of the defense, and may be raised by either the State, political subdivision, or the court for the first time on appeal.

1 The cases that were overruled were Maresh v. State, 241 Neb. 496, 489 N.W.2d 298 (1992); Hall v. County of Lancaster, 287 Neb. 969, 846 N.W.2d 107 (2014); Doe v. Board of Regents, 280 Neb. 492, 788 N.W.2d 264 (2010); Reimers-Hild v. State, 274 Neb. 438, 741 N.W.2d 155 (2007); Lawry v. County of Sarpy, 254 Neb. 193, 575 N.W.2d 605 (1998); Sherrod v. State, 251 Neb. 355, 557 N.W.2d 634 (1997); and D.M. v. State, 23 Neb. App. 17, 867 N.W.2d 622 (2015).

Bankruptcy Creditors Given Leeway to File Proofs of Claim Based Upon Stale Debts

In Midland Funding, LLC v. Johnson, 581 U.S. ___, 137 S.Ct. 1407, 197 L.Ed.2d 790 (2017), the United States Supreme Court held that creditors in Chapter 13 bankruptcy cases do not violate the Fair Debt Collection Practices Act if the creditor files a proof of claim based upon a stale debt in the bankruptcy case.  In other words, even if the statute of limitations set forth by state law has expired as to the creditor’s claim against the debtor, it is not a violation of federal law for the creditor to file a proof of claim in the bankruptcy case.  Once the proof of claim has been filed, the burden is on the debtor, through counsel, to identify the stale nature of the claim and object to the claim.  The Chapter 13 bankruptcy trustee may also object.  If no objection is made, the claim is likely to be allowed in the bankruptcy case.

Midland Funding has led to additional questions, including whether the same rule applies in Chapter 7 bankruptcy cases as well or is limited to Chapter 13.  Although Midland Funding was focused on Chapter 13, we believe the holding regarding stale debts would apply to Chapter 7 consumer bankruptcy cases.  Based on Midland Funding, creditors will in some cases be able to recover at least part of a debt that could not be pursued outside the bankruptcy court forum.  Creditors are now significantly more likely to file such claims in bankruptcy cases. 

Erickson | Sederstrom recommends that creditors planning to file a proof of claim that would be time-barred under state law first consult with counsel to ensure they do not violate the Fair Debt Collection Practices Act.

May an Insurer Depreciate the Cost of Labor in Determining the Actual Cash Value of a Covered Loss?

Recently, the United States District Court for the District of Nebraska certified this question to the Nebraska Supreme Court: “May an insurer, in determining the ‘actual cash value’ of a covered loss, depreciate the cost of labor when the terms ‘actual cash value’ and ‘depreciation’ are not defined in the policy and the policy does not explicitly state that labor costs will be depreciated?”. Today, the Nebraska Supreme Court found in the affirmative. 

Henn v. American Family Mut. Ins. Co. involves a current dispute over the interpretation of a homeowners’ insurance policy. At the crux of the dispute was whether labor costs can be depreciated in determining the actual cash value (replacement cost minus depreciation) of a covered damage under the policy. In its analysis, the Nebraska Supreme Court noted that Nebraska law has always generally allowed for depreciation in defining “actual cash value”. Despite the plaintiff’s argument that depreciating labor is illogical because labor does not depreciate, the court noted that such an argument is in contravention of the court’s prior reasoning that actual cash value must not equal the amount required to complete the repairs. Actual cash value is meant only to start repairs. 

The court also stated that Nebraska courts may still consider material and labor when determining actual cash value. This approach ensures that the insured does “not pay for a hybrid policy of actual cash value for roofing materials and replacement costs for labor” as the property is comprised of both materials and labor. Therefore, an insurer may depreciate labor in determining the actual cash value of a covered loss when not stated otherwise in the policy. 
 

E|S assists client in obtaining a $1.59 million dollar judgment in a breach of contract action in the United States District Court for the Western District of Missouri, St. Joseph Division.

Erickson | Sederstrom’s Richard J. Gilloon and Nicholas F. Sullivan, together with Kevin D. Weakley and Leilani R. Leighton from the Kansas law firm Wallace Saunders Austin Brown & Enochs, obtained a $1.59 million dollar judgment for their client, Hassanin Aly, against Hanzada for Import and Export Company, Ltd. (“Hanzada”).

In Nebraska, Lenders Have Five Years to Pursue Deficiency Lawsuits after Judicial Foreclosures

In First National Bank of Omaha v. Scott L. Davey and Deborah Davey, the Nebraska Supreme Court held that a creditor has five years to pursue a deficiency action in situations where a piece of real estate has been foreclosed through judicial proceedings.

Nebraska law provides that, when real estate lending is secured by a deed of trust, the deed of trust can be foreclosed either through a non-judicial trustee sale of the property or a judicial foreclosure proceeding.  If the foreclosure, through either process, does not generate enough proceeds to pay off the underlying loan, the lender will be entitled to pursue the defaulted party for the remaining unpaid balance (the “deficiency”).  The Nebraska Deed of Trust Act, however, states that any legal action to secure a deficiency judgment must be brought within three months after “any sale of property under a trust deed…”

In Davey, a deed of trust had been foreclosed through use of judicial foreclosure proceedings which culminated with a sheriff’s sale of the property.  A deficiency resulted, but the lender did not file a deficiency lawsuit within the three month time frame.  The Douglas County District Court held that the lender filed its deficiency action too late and the action was dismissed.  The Nebraska Supreme Court reversed that decision, finding that the general five year statute of limitations for written contract matters applied instead.  The Court found that, notwithstanding the statutory language, applying the shorter three month time frame to filing of deficiency actions after a judicial foreclosure sale could produce absurd results in some cases and that it was more appropriate, given the overall statutory intent, to apply the five year limit instead.  Accordingly, lenders using the judicial foreclosure process have a considerable length of time to determine whether they wish to seek a deficiency judgment when the foreclosure did not produce enough funds to pay off the underlying loan.  
Davey reflects that, in Nebraska, despite the expedient procedure for foreclosure provided in the Deed of Trust Act, many situations can exist in which judicial foreclosure is more appropriate.  While the judicial process will take much longer, it is appropriate for use in situations in which competing liens need to be resolved, and can also be appropriate when the lender will need more time to evaluate its options.  

Erickson|Sederstrom attorneys are available to aggressively pursue both judicial and non-judicial foreclosure actions and any resulting deficiency suits.  Erickson|Sederstrom attorneys also provide a wide variety of additional real estate litigation services, including quiet title actions and landlord/tenant dispute litigation.

 

Differences Between Application of General Negligence and Professional Negligence Statutes of Limitation Clarified

In Churchill v. Columbus Community Hospital, Inc., the Nebraska Supreme Court attempted to provide clarification, in the context of services provided by a physical therapist, about how to determine when the two year professional negligence statute of limitation applies and when the four year general negligence statute of limitation applies.
In Churchill, a patient participating in aquatic therapy was injured after she slipped on a puddle of water while descending steps to leave a pool area located within a physical therapy clinic. The clinic’s policy was not to assist patients leaving the pool unless an initial evaluation indicated the patient had trouble walking. Churchill’s evaluation did not reveal any such trouble. On November 1, 2011, one day before the four year anniversary of her fall, Churchill filed an action in Platte County District Court against the clinic’s owner, claiming negligence in failing to clean the floor and failing to warn of the water hazard. The district court granted summary judgment in favor of the defendant, determining that the action was one for professional negligence, which Nebraska Revised Statute §25-222 states must be filed within two years after the act or omission occurred.
Churchill appealed the grant of summary judgment against her on the grounds that her claim was for premises liability, which is subject to a four year statute of limitation under Neb. Rev. Stat. §25-207. Addressing an issue it had not previously specifically determined, the Court concluded that physical therapists are considered professionals, taking into account that physical therapists are licensed by the state, are required to have a college degree, are subject to professional disciplinary authority, and are required to maintain certain educational requirements. The Court then stated that the alleged negligent act, directing Churchill to leave the pool without assistance, occurred within the scope of a professional relationship between patient and therapist. The Court reasoned that performing aquatic exercises was part of Churchill’s therapy, and her therapist evaluated her ability to walk. When the therapist directed Churchill to leave the pool without assistance, he was providing professional services. Thus, Churchill’s action was not allowed to proceed, as it was governed by the two year statute of limitation for professional negligence. 
Churchill thus clarified the analysis by which Nebraska courts evaluate whether a claim must be filed within two years as professional negligence, or within four years as required for other causes of action. The act or omission alleged must be essential and an integral part of the professional service rendered. Also, the profession addressed must exhibit factors similar to the factors set forth in Churchill.   This rule of law has been upheld in subsequent cases.
Churchill gives plaintiffs an incentive to file suit early if they have any question as to whether their claim is subject to the professional negligence statute of limitation.  Those defending against claims may argue for a broader application of the definition of “professional negligence”, as Churchill may broaden that definition in some situations.

 

Jury Confusion: What Happens When the Jury Makes a Mistake?

The Iowa Court of Appeals recently affirmed a district court’s denial of a motion for new trial based on juror misconduct. In Resetich v. State Farm, the Leanna Resetich was involved in a car accident in which she sustained injuries. Her and her husband eventually sued State Farm for underinsured motorist coverage and loss of consortium. The jury returned a verdict for $48,000, and assessed Ms. Resetich’s fault at 45%. Consequently, the judge reduced the plaintiff’s judgment to $26,500. 

The plaintiffs then filed a motion for a new trial alleging, among other things, juror misconduct. In support of the assertions, they produced a juror’s sworn statement attesting that the jurors had already considered Ms. Resetich’s fault in calculating the $48,000 verdict, an action prohibited by the jury instructions. The district court refused to admit the affidavit and denied the motion for new trial. Plaintiffs appealed. 

On appeal, the court noted that I.C.A. § 5.606(b) prohibits the use of juror testimony unless it refers to extraneous prejudicial information or outside influences that improperly affected jurors. In order to protect the sanctity of the juror room, any thoughts, emotions, or internal matters are not admissible. The court reasoned that jurors’ understanding or lack thereof represented the internal workings of the jury, which was barred by the evidence statute. Thus, the district court properly excluded the juror’s affidavit and denied the motion for new trial on the grounds of juror misconduct.

For any litigant, this result is upsetting. I.C.A. §5.606(b) is a statute used in different forms across the country to protect jurors. To avoid a confused jury, it is important to have an attorney that fights for clearly worded jury instructions and protects an appellate record in case unfair instructions are sent to the jury room. 

If you are considering suit or facing a complaint, attorneys at Erickson | Sederstrom may be able to assist you on a variety of legal topics. Attorney MaKenna Dopheide may be reached at (402) 397-2200.

Nebraska Strikes Employer’s Strategy to Keep Workers’ Compensation Plaintiffs from Dismissing Cases

Nebraska’s highest court recently ruled that employers in workers’ compensation cases cannot hold a counterclaim to keep a plaintiff from dismissing their case voluntarily. In Interiano-Lopez v. Tyson Fresh Meats, the plaintiff filed a case in Nebraska’s workers compensation court asking the court to determine his employer’s liability as to an alleged injury in October 2013. Tyson, the plaintiff’s employer, answered with a counterclaim asking that the court also determine its liability. Eventually, the plaintiff requested that the court dismiss the case without prejudice so that he could file the same case in the Iowa workers’ compensation system. (At the time, the plaintiff lived in Iowa, while the Tyson plant was located in Nebraska) The judge dismissed the plaintiff’s case, but Tyson’s counterclaim continued. Before Iowa could adjudicate the plaintiff’s claim, the Nebraska court ruled in favor of Tyson with regard to the October 2013 injury.

On appeal to the Nebraska Supreme Court, the court noted the alleged conflict in workers’ compensation statutes. Neb. Rev. Stat. § 48-177 allows a plaintiff to dismiss a case with the ability to refile if the case has not been submitted to the judge or if both parties agree. Meanwhile, Neb. Rev. Stat. § 48-173 allows both parties in interest to petition the Nebraska workers’ compensation court to resolve a dispute about an employee’s workers’ compensation benefits. While the court did not consider Tyson’s counterclaim to be a “petition” under Neb. Rev. Stat. § 48-173, it also noted that to allow counterclaims would interfere with plaintiffs’ right to dismiss a case under Neb. Rev. Stat. § 48-177. It stated, “[w]e will not construe an employer’s right to file a petition under § 48-173 in a manner which negates a plaintiff’s right to dismiss a case under § 48-177”.

This case represents a blow to a defense strategy to keep plaintiffs from increasing employer costs. In this case, the court noted that the plaintiff sought to refile in Iowa because the benefits and law were more favorable to him. The employer’s strategy sought to protect itself from last minute dismissals to save money and costs. After this opinion, plaintiffs will be allowed to dismiss a case voluntarily without regard to an employer’s right to file a petition.