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WEEKLY UPDATEMONDAY, JUNE 25, 2012 | ISSUE 29

BY STEVE LASH | CONTRIBUTING WRITER

A Maryland jury has awarded $20.9million – including $20 million for painand suffering – to the family of a 6-year-old boy who suffered permanent paralysisin his left arm when the obstetricianpulled on his head during delivery.

But the award to Tyler Arnett and hisparents, Athea and Franklin, was reducedto $1.5 million because of Maryland’sstatutory cap on non-economic damagesin medical malpractice cases. e cap was$650,000 at the time of Tyler’s injury inNovember 2005.

George S. Tolley III, the Arnetts’ attor-ney, characterized the cap as an unjustlimitation on what the jury deemed as ap-propriate compensation.

“It’s not just pain and suffering,” saidTolley of Dugan, Babij & Tolley LLC inTimonium, Md. Tyler has “an arm that issmaller, that is not functional in a normalway and that leaves him exposed to dis-parate treatment by his peers, not just inhis adolescence but as an adult trying tocompete for employment.”

e boy has sustained “so profound a lossfor such a long period of time,” Tolley

e Confrontation Clause does not baran expert from testifying at a criminaltrial that a DNA profile produced by anoutside laboratory matched the defen-dant’s state lab DNA profile, the U.S.Supreme Court has ruled in a fracturedopinion.

e case stemmed from a bench trial forrape, during which a forensic specialist tes-

tified that a DNA profile produced by anoutside laboratory matched a profile pro-duced by a state lab using blood obtainedfrom the defendant after he was arrestedon drug charges. e profile produced bythe outside laboratory was from a vaginalswab taken from a woman who was ab-ducted and raped earlier in the year.

BY PAT MURPHY | STAFF WRITER

e number of big-figure malpracticeclaims against law firms has increased, ac-cording to a new insurance industry survey.

“Claims severity has increased signifi-cantly in the last year,” said Eileen Garczyn-ski, author of Lawyers’ Professional LiabilityClaims Trends: 2012. Garczynski is a vicepresident for insurance broker Ames &

Gough, which released the new survey.e good news for lawyers from the

Ames & Gough study is that the actualfrequency of claims has leveled off. All butone of the insurers participating in thesurvey indicated that the number of newclaims filed in 2012 is flat compared tolast year. Last year’s Ames & Gough sur-vey reported a surge in the frequency ofmalpractice suits.

Of the six professional liability insurersthat participated in the 2012 study, five re-ported an increase in the number of claimswith a reserve (including loss and expenses)of more than $500,000. Two of the insurersestimated the increase in the number oflarge claims to be over 21 percent.

Four of the six insurers indicated thatthey had paid or had participated in paying

Large claims against law firms increase, study saysContinued on page 2Continued on page 3

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istockphoto.com

Md. jury awards$20.9 millionin med-mal case

Court: Expert testimony on DNA report admissible

NEWS

LAWYERS USA WEEKLY UPDATE | MONDAY, JUNE 25, 2012

added, noting the many years Tyler hope-fully has ahead of him.

Athea Franklin said her son “has diffi-culty doing everyday life things” like tyinghis shoes and washing his hands.

“He gets frustrated a lot when he can’tdo certain things,” she added. “e kidsmake fun of him, and he is really hurt bythat.”

e obstetrician’s lawyer said he will askJudge Toni E. Clarke for a new trial basedon what he characterized as the jury’s fail-ure to abide by the court’s instructions tocompensate the family for Tyler’s injuriesand not punish the doctor with an exces-sive damages award for pain and suffering.

“To put it mildly, we were very shockedat the $20 million verdict,” said attorneyDavid A. Roling. e amount “flooredeverybody in the courtroom.”

A $20 million award in noneconomicdamages is generally reserved for caseswhen a child has sustained severe and per-manent neurological damage, not paraly-sis that limits the youngster’s ability tocompete in physical activity and find em-ployment, said Roling, of Wharton,Levin, Ehrmantraut & Klein PA in An-napolis, Md.

e jury was “not utilizing the analyti-cal process that the court instructed [and]went into the punitive realm,” he added inpreviewing post-trial motions he plans tofile with the court. “We are going to haveto rely on the judge to look at this and ask,‘Did the defendant get a fair trial fromthis jury?’”

Standard of caree six-day trial amounted to a battle

of medical experts for the Arnetts and thedefendants: Subalaxmi Vinayakom, anobstetrician/gynecologist, and her med-ical practice.

Each side presented testimony fromtwo OB/GYN specialists and a pediatricneurologist as to whether Vinayakom’sdelivery of Tyler deviated from the med-ical standard of care.

According to the Arnetts’ lawsuit,Athea Arnett reported to WashingtonAdventist Hospital for induction of laboron Nov. 14, 2005. At about 5:10 the nextmorning, Vinayakom arrived to performthe delivery.

During the procedure, Tyler’s heademerged from the birth canal but a shoul-der got caught on the mother’s pelvicbone, a condition called shoulder dystocia.

Vinayakom pulled down “forcefully” on

Tyler’s head, according to the complaint.Tyler, who weighed in at 8 pounds, 6

ounces, was diagnosed with left obstetri-cal brachial plexus palsy, an injury to thenerves that extends from the neck to thefingers, according to the complaint, whichsaid the condition rendered the boy para-lyzed in his left arm.

e plaintiffs’ experts said the standard ofmedical care required Vinayakom to take amore gentle approach to achieve delivery.

e defense experts countered thatVinayakom’s actions were not as aggres-sive as the plaintiffs alleged and did notdeviate from the standard of care.

Roling, Vinayakom’s attorney, said thedoctor made sure Tyler’s shoulder was notimpacted before she proceeded with thedelivery. Roling noted his client had 24years’ experience delivering babies.

“She knew what to do,” Roling said.“Why would she pull on this boy’s head?”

After deliberating for about two hours,the six-member jury found the doctor andher practice liable and awarded the family$20,881,082.17 in damages. e awardincluded $582,999 in future medical ex-penses; $244,363 in lost earning capacity;and $53,720.17 in past medical expenses,as well as the $20 million for pain andsuffering.

e total award was reduced to$1,531,082.17, when the pain and suffer-ing award was cut to $650,000 under thestatutory cap.

A version of this article originally appearedin Lawyers USA’s sister publication, theMaryland Daily Record.

Continued from page 1

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Plaintiffs’ attorneys: GeorgeS. Tolley III and Bruce J. Babijof Dugan, Babij & Tolley LLC inTimonium, Md.

Defense attorneys: David A.Roling and Tiffany D. Randolphof Wharton Levin Ehrmantraut& Klein in Annapolis, Md.

The case: Arnett v.Vinayakom; June 12, 2012;Prince George’s County CircuitCourt; Judge Toni E. Clarke.

Md. jury awards $20.9 million in med-mal case


NEWS

a legal malpractice claim of $100 millionor more. Garczynski explained that the biglegal malpractice claims generally relate tocorporate and securities work, citing law-suits arising from the Ponzi scheme run bythe infamous Bernie Madoff.

“e sizes of the transactions are get-ting bigger, and the costs of defendingthem are getting bigger,” Garczynski said

However, the Ames & Gough studylisted the corporate and securities practicearea as only the second most frequentsource of malpractice claims. In line withthe historical trend, four of the six insurerspolled identified real estate as the practicearea continuing to see the largest numberof legal malpractice suits.

Because of the liability exposure, Gar-czynski agreed that small and midsizedfirms should be more wary of lawsuitsarising from their handling of a transac-tional case than, say, a personal injury case.

e report compiled information pro-vided by six of the leading writers of pro-fessional liability coverage in the U.S. einsurance companies that participated inthe survey include AXIS, Beazley, CNA,Fireman’s Fund, Hartford and Ironshore.Combined, those insurers handle 75 per-cent of the liability insurance market formid-sized (35 attorneys or more) to largelaw firms.

While small and mid-sized firms maynot have to fear $100 million malpracticesuits, Garczynski said that the studyshould serve as a wakeup call for thosefirms that tend to renew their policieswithout much thought.

“Law firms need to do a benchmarkingto make sure they have enough to pay notjust for a very large loss, but for the de-fense costs that go along with that,” Gar-czynski said. She explained that far toooften firms forget to factor in defensecosts when assessing their coverage needs.

“If you have a $100 million claim, you’llprobably have at least $500,000 in defensecosts,” she said.

e Ames & Gough study also showedthat conflict of interest is the number onereason that law firms get into trouble. Fiveof the six insurers cited conflict of interestas either the first or second most frequentcause of malpractice claims.

Garczynski explained that the conflict-of-interest problem has been exacerbatedby the mass movement of attorneys in thewake of the recession.

“With the economic downturn, therewere so many attorneys that jumped fromfirm to firm,” Garczynski said. “Any timethat happens, it creates a potential conflictof interest, so firms really need to makesure that they screen their lateral hiresproperly.”

e Ames & Gough survey can be ob-tained for free by e-mailing a request [email protected].

Large claims against law firms increase, study saysContinued from page 1

e defendant objected to the expert’stestimony, arguing that it violated theConfrontation Clause since the techni-cian who created the profile from the out-side lab was not present and available forcross-examination.

e judge overruled the objection andthe defendant was convicted and sen-tenced to life in prison.

Both the Illinois Appellate Court andthe Illinois Supreme Court affirmed theconviction. e Supreme Court grantedcertiorari and heard arguments in the casein December.

In a divided opinion, the Court af-firmed. A four-justice plurality, in anopinion authored by Justice Samuel A.Alito, Jr., held that “this form of experttestimony does not violate the Con-frontation Clause because that provisionhas no application to out-of-court state-

ments that are not offered to prove thetruth of the matter asserted.”

“When an expert testifies for the pros-ecution in a criminal case, the defendanthas the opportunity to cross-examine theexpert about any statements that are of-fered for their truth,” Alito wrote. “Out-of-court statements that are related by theexpert solely for the purpose of explainingthe assumptions on which that opinionrests are not offered for their truth andthus fall outside the scope of the Con-frontation Clause.”

Chief Justice John G. Roberts, Jr. andJustices Anthony M. Kennedy andStephen G. Breyer joined Alito’s pluralitydecision.

Justice Clarence omas wrote sepa-rately concurring in the judgment, butnoting that he reached this conclusion“solely because [the] statements lackedthe requisite ‘formality and solemnity’ to

be considered ‘testimonial’ for purposes ofthe Confrontation Clause,” and addingthat he “share[d] the dissent’s view of theplurality’s flawed analysis.”

Justice Elena Kagan wrote a dissent,joined by Justices Antonin G. Scalia, RuthBader Ginsburg and Sonia M. So-tomayor.

“In two decisions issued in the last threeyears, this Court held that if a prosecutorwants to introduce the results of forensictesting into evidence, he must afford thedefendant an opportunity to cross-exam-ine an analyst responsible for the test,”Kagan wrote. “Forensic evidence is reli-able only when properly produced, andthe Confrontation Clause prescribes aparticular method for determiningwhether that has happened.”U.S. Supreme Court. Williams v. Illinois,

No. 10-8505. June 18, 2012. Lawyers USANo. 993-3890.

Court: Expert testimony on DNA report admissible Continued from page 1

TOP OPINIONSLAWYERS USA WEEKLY UPDATE | MONDAY, JUNE 25, 2012

BANKRUPTCY‘Absolute priority’ survivedbankruptcy reform

e latest reform of the BankruptcyCode did not eliminate the long-standingrule protecting dissenting creditors whenthere’s a “cram down” under the Chapter11 plan of an individual debtor in posses-sion, the 4th Circuit has ruled in affirmingjudgment.

e so-called “absolute priority rule”predates the Bankruptcy Abuse Preven-tion and Consumer Protection Act of2005. As codified at 11 U.S.C.§1129(b)(2)(B)(ii), the rule generally pro-vides that, if a proposed Chapter 11 planallows the debtor to retain property, anydissenting creditors must be paid in fullin order for the plan to be “crammeddown.”

In this case, debtors have continued toown and operate their auto body shop asdebtors in possession. eir plan proposedthe refinancing of $3.5 million in businessdebt secured by their home, the keepingof their automobile under current termsof payment, and the payment of unse-cured debt at an estimated 1.7 cents onthe dollar.

Discover Bank, which held a relativelysmall unsecured claim, was the only cred-itor that voted to reject the plan.

e debtors sought to have their planconfirmed over Discover Bank’s dissent,contending that the absolute priority ruleno longer applied to individual debtors inpossession in the wake of BAPCPA.

But the court rejected the debtors’ con-tention that the Act impliedly repealedthe rule.

“e dramatic nature of such a depar-ture from longstanding pre-BAPCPAlaw, the ambiguous language of the

statutes, and the total lack of any indica-tion in the legislative history of such anintent, lead us to conclude that Congressintended to and did preserve the absolutepriority rule. Congress knows how toeliminate or partially abrogate the ab-solute priority rule; it has done so before,but did not do so again in BAPCPA,” thecourt said.

It noted that bankruptcy courts aresharply divided on this issue.U.S. Court of Appeals, 4th Circuit. In re

Maharaj, No. 11-1747. June 14, 2012.Lawyers USA No. 993-3897.

BUSINESSState Farm faces liability for dragging feet in settlement

State Farm may have engaged in badfaith by taking nearly three years to settlea third-party claim under one of its auto-mobile policies, the 6th Circuit has ruledin reversing a summary judgment.

In July 2003, the plaintiff suffered aspinal injury in a two-car crash that oc-curred when a vehicle driven by a StateFarm insured pulled into the path of hervehicle. Shortly after the accident, theplaintiff filed a third-party liability claimwith State Farm, seeking payment underthe other driver’s policy. e policy had a$50,000 liability limit.

State Farm initially resisted settlement,citing the fact that the plaintiff had suf-fered another back injury several years be-fore the accident. e insurer made aninitial $25,000 settlement offer at the endof October 2004, which the plaintiff re-fused. e plaintiff subsequently filed apersonal injury lawsuit against StateFarm’s insured.

State Farm settled the case for the pol-

icy limit in April 2006, after the plaintiffhad been deposed. e plaintiff acceptedthe settlement offer, but sued State Farmfor bad faith in violation of Kentucky in-surance law.

e 6th Circuit concluded that therewas sufficient evidence for the plaintiff toproceed with a claim for bad faith basedon the time it took for State Farm to set-tler her claim.

“e record … includes some evidenceof troubling claims-handling practices byState Farm both in this case and in gen-eral. ese include switching claims ad-justors four times without explanation,habitually making offers at the low end ofvaluation ranges, refusing to increase anoffer without documentation of addi-tional damages, failing to ask [the plain-tiff ] to submit to an independent medicalexamination, and failing to include factsin the claim file that would support a juryverdict in [the plaintiff ’s] favor. …

“Two of these practices – extending lowoffers and refusing to increase the valua-tion range – find support in the deposi-tion testimony of State Farm’s own claimsadjustors,” the court said.U.S. Court of Appeals, 6th Circuit. Phelps

v. State Farm, No. 10-6085. June 13, 2012.Lawyers USA No. 993-3883.

CIVIL PRACTICEComplaint needn’t specifycorporate ‘nerve center’

A plaintiff ’s complaint needn’t pleadthat a corporate party’s “nerve center” islocated in a particular place, the 9th Cir-cuit has ruled in reversing a dismissal.

e plaintiffs sued corporate defen-dants in federal court, asserting subjectmatter jurisdiction under 28 U.S.C.

You can link to the full text of the opinions digested on this page by going to www.lawyersusaonline.com and searching the Lawyers USA website.

Continued on page 6

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Last week, the U.S. Supreme Court issueddecisions in the following cases:

ADMINISTRATIVE LAWe Federal Communications Com-

mission cannot modify its enforcementpolicy against the use of fleeting exple-tives and momentary nudity withoutprior fair notice to broadcast companies.U.S. Supreme Court. FCC v. Fox, No.

10-1293. June 21, 2012. Lawyers USANo. 993-3903.

CONFRONTATION CLAUSEe Confrontation Clause does not

bar an expert from testifying at a crim-inal trial that a DNA profile producedby an outside laboratory matched thedefendant’s state lab DNA profile.

See “Court: Expert testimony onDNA report admissible” on page 1.U.S. Supreme Court. Williams v. Illi-

nois, No. 10-8505. June 18, 2012.Lawyers USA No. 993-3890.

CRIMINALA company convicted of violating fed-

eral environmental law was entitled tohave a jury decide the facts determiningthe amount of its fine.

See “Jury must decide factors forcriminal fine amount” on page 6.U.S. Supreme Court. Southern Union

Co. v. U.S., No. 11-94. June 21, 2012.Lawyers USA No. 993-3904.

EMPLOYMENT LAWPharmaceutical representatives who

pitch products to doctors are “outsidesalespeople” under the Fair Labor Stan-dards Act and therefore not entitled toovertime pay.

See “No overtime pay for pharma rep-resentatives under FLSA” on page 9. U.S. Supreme Court. Christopher v.

SmithKline Beecham Corp., No. 11-204.June 18, 2012. Lawyers USA No. 993-3891.

LABOR LAWe imposition of special union fees

on non-union employees without givingthose employees prior notice or an op-portunity to object violates the FirstAmendment.

See “Non-member union fees requireopt-in notice” on page 8.U.S. Supreme Court. Knox v. Service

Employees International Union, Local1000, No. 10-1121. June 21, 2012.Lawyers USA No. 993-3902.

SENTENCINGe Fair Sentencing Act of 2010,

which lowered the minimum sentencingrequirements for many crack cocaine-re-lated offenses, applies to all sentencesimposed after the statute’s enactment,even those for pre-enactment crimes.

See “Sentencing law applies to pre-enactment crimes” on page 6.U.S. Supreme Court. Dorsey v. U.S. and

Hill v. U.S., Nos. 11-5683 and 11-5721.June 21, 2012. Lawyers USA No. 993-3901.

TRIBAL LAWe United States waived its sover-

eign immunity in a suit challenging adecision by the Secretary of the Interiorto take land in trust for use as a gamingfacility.U.S. Supreme Court. Match-E-Be-

Nash-She-Wish Band of Pottawatomi In-dians v. Patchak, No. 11-246. June 18,2012. Lawyers USA No. 993-3888.

TRIBAL LAWe government is required to pay all

of the contract support costs incurred bya tribal contractor under the IndianSelf-Determination and Education As-sistance Act, even though Congress hasimposed a cap on the appropriationsavailable to pay such costs.U.S. Supreme Court. Salazar v. Ramah

Navajo Chapter, No. 11-151. June 18,2012. Lawyers USA No. 993-3889.

The Court granted certiorari in the following cases:

CRIMINALDoes the government bear the burden

of proving that a defendant did notwithdraw from a criminal conspiracyprior to the statute of limitations periodonce he produces evidence at trial thathe did withdraw?

See “Justices to decide government’sburden in conspiracy case” on page 7. Smith v. U.S., No. 11-8976. Certiorari

granted: June 18, 2012. Ruling below:651 F.3d 30 (D.C. Cir. 2011).


U.S. Supreme Court

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§1332(a)(2). e statute provides for ju-risdiction over actions between citizens ofa state and citizens or subjects of a foreignstate.

e district court dismissed the com-plaint because the plaintiffs failed to pro-vide factual support for their allegationsof diversity. According to the districtcourt, plaintiffs are subject to a height-ened pleading standard in the wake of theU.S. Supreme Court’s decision in HertzCorp. v. Friend, (130 S.Ct. 1181).

In Hertz, the Court held that a corpo-ration is a citizen of where its “nerve cen-ter” is located for purposes of federaldiversity jurisdiction. (See “Justices adopt‘nerve center’ test for diversity jurisdic-tion,” Lawyers USA, Feb. 23, 2010. Searchterms for Lawyers USA’s website: Hertzand nerve)

But the 9th Circuit concluded thatHertz did not impose a heightened plead-ing standard.

“Hertz provided a uniform test forcourts to apply when determining theprincipal place of business for federal di-versity jurisdiction purposes. It did notimpose a heightened pleading require-ment or dictate a precise manner forpleading subject matter jurisdiction. Weconclude that a complaint, like the one inthis case, that follows the general frame-work set forth in Form 7(a) [of the Fed-eral Rules of Civil Procedure] is sufficientto satisfy [Rule 8(a)(1)’s requirement thata complaint show the court’s jurisdiction];Hertz does not mandate more,” the courtsaid.U.S. Court of Appeals, 9th Circuit. Harris

v. Rand, No. 10-57012. June 13, 2012.Lawyers USA No. 993-3885.

CRIMINALJury must decide factorsfor criminal fine amount

A company convicted of violating fed-eral environmental law was entitled tohave a jury decide the facts determiningthe amount of its criminal fine, the U.S.Supreme Court has ruled 6-3.

e ruling reverses a 1st Circuit deci-sion holding that Apprendi v. New Jersey(530 U.S. 466) does not apply to the im-position of criminal fines.

e defendant in the case is a Texas-based energy company prosecuted for therelease of 140 pounds of mercury that hadbeen stored at a facility in Rhode Island.A jury found the defendant guilty of stor-ing hazardous waste without a permit inviolation of the federal Resource Conser-vation and Recovery Act. e trial judgeimposed a $6 million fine and a $12 mil-lion “community service obligation.”

e defendant argued that the fines vi-olated Apprendi, which generally requiresthat a jury decide “any fact” other than aprior conviction that increases a criminalpenalty beyond the statutory maximum.According to the defendant, the court-de-termined fines in this case violated itsSixth Amendment rights because they ex-ceeded the statutory maximum of$50,000 for a one-day violation. (See“Must a company’s criminal fine be im-posed by a jury?” Lawyers USA, March20, 2012. Search terms for Lawyers USA’swebsite: “Southern Union” and mercury)

e Court agreed that criminal fines aresubject to the Apprendi rule.

“[W]e see no principled basis underApprendi for treating criminal fines differ -ently [from other forms of punishment].Apprendi’s ‘core concern’ is to reserve tothe jury ‘the determination of facts that

warrant punishment for a specific statu-tory offense.’ at concern applieswhether the sentence is a criminal fine orimprisonment or death,” the Court said.

Justice Sonja Sotomayor wrote the ma-jority opinion. Justice Stephen G. Breyerwrote a dissent, joined by Justices AnthonyM. Kennedy and Samuel A. Alito Jr.U.S. Supreme Court. Southern Union Co.

v. U.S., No. 11-94. June 21, 2012. LawyersUSA No. 993-3904.

Sentencing law applies to pre-enactment crimes

e Fair Sentencing Act of 2010, whichlowered the minimum sentencing re-quirements for many crack cocaine-re-lated offenses, applies to all sentencesimposed after the statute’s enactment,even those for pre-enactment crimes, theU.S. Supreme Court has ruled.

e first of two consolidated cases be-fore the Court involved a defendant whopleaded guilty to possession of 5.5 gramsof crack. e charge was based on a crimecommitted two years before the law wasenacted, but the defendant was sentencedone month after the Act took effect.

e judge ruled that the Act didn’tapply to pre-enactment crimes.

e second case involved a defendantconvicted of possessing more than 50grams of crack and also sentenced afterthe Act was passed. e judge said the Actdidn’t apply because his offense took placebefore the law went into effect, and im-posed the 10-year statutory minimumsentence.

e judge noted that but for the statu-tory minimum he would have imposed asentence of less than five years.

Both defendants appealed and the 7thCircuit upheld both convictions. With acircuit split on the issue, the Supreme



Continued on page 7

Court took up the cases and heard oral ar-guments in April.

In a 5-4 ruling, the Court reversed,holding that the new lower minimumsentencing standards apply to all sen-tences imposed after the law was enactedregardless of the date the crime was com-mitted.

“We rest our conclusion primarily uponthe fact that a contrary determinationwould seriously undermine basic FederalSentencing Guidelines objectives such asuniformity and proportionality in sen-tencing,” Justice Stephen G. Breyer wrotefor the majority. “Indeed, seen from thatperspective, a contrary determinationwould (in respect to relevant groups ofdrug offenders) produce sentences lessuniform and more disproportionate thanif Congress had not enacted the Fair Sen-tencing Act at all.”

Justice Antonin G. Scalia wrote a dis-senting opinion that was joined by ChiefJustice John G. Roberts, Jr. and JusticesClarence omas and Samuel A. Alito, Jr.U.S. Supreme Court. Dorsey v. U.S. and

Hill v. U.S., Nos. 11-5683 and 11-5721.June 21, 2012. Lawyers USA No. 993-3901.

Weapons stop didn’tviolate Fourth Amendment

A police officer had reasonable suspi-cion to stop and frisk a pedestrian whenshe saw him adjust his pants in a mannerthat suggested he carried a concealedweapon, the Missouri Supreme Court hasruled in affirming the denial of a motionto suppress.

A police officer on patrol observed thedefendant standing on the street corner inthe vicinity of several recent armed rob-beries. As the officer drove by, she ob-served the defendant reach around his

back with one hand and adjust his pants.According to the officer, the defendant’smovements suggested that he was carry-ing a concealed weapon.

e officer proceeded to conduct an in-vestigative stop. When the defendant puthis hands up against a nearby wall pur-suant to the officer’s instructions, the de-fendant’s shirt came up and the officerobserved the butt of a gun. Police foundmarijuana in the defendant’s pocket dur-ing an ensuing search incident to arrest.

e defendant argued that the officerlacked reasonable suspicion to initiate astop and frisk.

But the court concluded that the Terrystop comported with the Fourth Amend-ment, explaining the officer “testified that[the defendant] made eye contact withher when she drove by him in a markedpolice car while she was routinely pa-trolling an area where there had been sev-eral recent armed robberies. [e officer]then saw [the defendant] make a furtivemovement that her experience and train-ing reasonably caused her to believe wasthe illegal concealment of a weapon.Based on the totality of these circum-stances, reviewed in the light most favor-able to the circuit court’s ruling, this courtdetermines there was sufficient evidenceto support the finding of the circuitcourt.” Missouri Supreme Court. State v. Nor-

folk, No. SC92252. June 12, 2012. LawyersUSA No. 993-3894.

Justices to decidegovernment’s burden in conspiracy case

e U.S. Supreme Court will decidewhether the governments bears the bur-den of proving that a defendant did notwithdraw from a criminal conspiracy

prior to the statute of limitations periodonce he produces evidence at trial that hedid withdraw.

e Court will review a D.C. Circuitdecision holding that the burden of per-suasion remains with the defendant.

e defendant and five other men wereindicted in 2000 on conspiracy charges re-lating to a violent drug distribution ringthat operated in Washington D.C. in thelate 1980s and 1990s.

At trial, the defendant contended thathe could not be convicted because hewithdrew from the conspiracy prior to theapplicable five-year limitations period.

In response to a jury question on thisissue, the district court instructed that“[o]nce the government has proven that adefendant was a member of a conspiracy,the burden is on the defendant to provewithdrawal from a conspiracy by a pre-ponderance of the evidence.”

e defendant argued that the instruc-tion misstated the law, claiming that evi-dence of withdrawal from a conspiracyprior to the statute of limitations periodnegates an element of the conspiracy. Ac-cording to the defendant, under these cir-cumstances due process imposes a burdenon the government to prove beyond a rea-sonable doubt that he did not withdraw.

But the D.C. Circuit observed that thecourt’s precedent requires a defendant toprove that he affirmatively withdrew froma conspiracy in order to get a lighter sentence.

e court concluded that the sentenc-ing rule also applied in this context.

“We are obliged to follow our prece-dent, and we thus hold that the districtcourt correctly instructed the jury that the defendant bore the burden of persua-sion to show that he withdrew from theconspiracy outside of the statute of

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limitations period,” the court said. Itnoted that the circuits are divided on this issue.

A decision is expected from theSupreme Court next term.Smith v. U.S., No. 11-8976. Certiorari

granted: June 18, 2012. Ruling below: 651F.3d 30 (D.C. Cir. 2011).

Sex offender must registerbased on juvenile record

A juvenile sex offense can be the basisfor imposing the federal sex offender reg-istration requirement on an adult, even ifthe earlier conviction predated the SexOffender Registration and NotificationAct, the 9th Circuit has ruled in reversingjudgment.

In 1994, when he was 14 years old, thedefendant pleaded guilty to a state childmolestation charge. In 2010, he was in-dicted for violating SORNA by failing toregister as a sex offender after travelinginterstate.

Because SORNA was enacted in 2006,the defendant argued that applying thefederal registration requirement to himbased on his 1994 juvenile conviction vi-olated the Ex Post Facto Clause of theU.S. Constitution.

But the court concluded that the ExPost Facto Clause was not implicated be-cause applying SORNA to the defendantbased on his state conviction as a juvenilesex offender is not punitive.

“[e defendant] correctly asserts thatSORNA is backward looking insofar as itlooks to a prior-in-time conviction as abasis for requiring registration. However,the courts of appeals have consistently re-jected [the defendant’s] contention thatthis renders

SORNA punitive,” the court said.

U.S. Court of Appeals, 9th Circuit. U.S.v. Elkins, No. 11-30135. June 14, 2012.Lawyers USA No. 993-3886.

Driver can sue over field sobriety tests

A driver wrongfully arrested for drunkdriving could sue police for detaining herfor field sobriety tests without reasonablesuspicion that she was intoxicated, the 6thCircuit has ruled in reversing a summaryjudgment.

e plaintiff was arrested for drivingunder the influence after submitting tofield sobriety tests during a stop for aminor traffic violation. e charges weredropped when a urine test showed thatthere were no drugs or alcohol in her system.

e plaintiff sued under §1983, allegingthat the arresting officer violated herFourth Amendment rights by detainingher for field sobriety tests without reason-able suspicion that she was impaired.

e officer argued that he had reason-able suspicion because the plaintiff ap-peared confused during the stop and heobserved that the pupils of her eyes wereconstricted.

But the court concluded that a juryissue was created by the results of the sub-sequent urine test.

“What matters here [is] that a subse-quent test for drugs and alcohol showedthat the driver was in fact sober,” the courtexplained. “at evidence alone is suffi-cient to cast doubt on the truthfulness of[the officer’s] testimony regarding [theplaintiff ’s] pupils.”

Similarly, the court concluded that ajury issue existed as to whether the plain-tiff ’s performance of the field sobrietytests in fact provided the officer withprobable cause to arrest. U.S. Court of Appeals, 6th Circuit. Green

v. Throckmorton, No. 10-4487. June 13,2012. Lawyers USA No. 993-3882.

EMPLOYMENTNon-member union feesrequire opt-in notice

e imposition of special union fees onnon-union employees without their priorapproval violates the First Amendment,the U.S. Supreme Court has ruled.

e case involves a fee charged to Cal-ifornia state employees. Under Californialaw, state law employment may be condi-tioned on a requirement to either join theunion or pay an “agency fee” for the por-tion of the union’s representation thatbenefits all employees.

But pursuant to the 1986 SupremeCourt ruling in Chicago Teachers Union v.Hudson (475 U.S. 292), the union mustsend out a notice to all members that ex-plains how the agency fee fund will beused and gives non-members the oppor-tunity to opt out of any “non-chargeable”expenditures, including expenditures forunion political activities.

In 2005, the union assessed a special feein addition to the annual agency fee to re-spond to anti-union petitions in the up-coming state election. e union sent aletter to employees informing them of thespecial fee and the fee was deducted fromtheir paychecks.

Non-union members sued the union,claiming the special assessment violatedtheir First, Fifth and Fourteenth Amend-ment rights.

e district court agreed, granting sum-mary judgment in favor of the employeesand ordering the union to provide a newHudson notice to non-members and re-fund the fees of all objecting members.


Continued on page 9


e court also awarded the employeesnominal damages of $1 apiece.

A divided 9th Circuit reversed, holdingthat the union satisfied the Hudson re-quirement with its notice to employeesbefore the fee was taken.

e Supreme Court granted certiorariand heard oral arguments in January.

In a 7-2 judgment, the Court reversed,holding that the union violated non-members’ First Amendment rights, withfive justices holding that the special feeassessment required an opt-in provisionfor non-members.

“To respect the limits of the FirstAmendment, the union should have sentout a new notice allowing non-membersto opt in to the special fee rather than re-quiring them to opt out,” wrote JusticeSamuel A. Alito, Jr. for a five-justice ma-jority. “Our cases have tolerated a substan-tial impingement on First Amendmentrights by allowing unions to impose anopt-out requirement at all. Even if thisburden can be justified during the collec-tion of regular dues on an annual basis,there is no way to justify the additionalburden of imposing yet another opt-outrequirement to collect special fees when-ever the union desires.”

Justice Sonia M. Sotomayor wrote aconcurring opinion, joined by JusticeRuth Bader Ginsburg, which stated thatan opt-out requirement would have beensufficient. Justice Stephen G. Breyer wrotea dissent which was joined by JusticeElena Kagan.U.S. Supreme Court. Knox v. Service

Employees International Union, Local1000, No. 10-1121. June 21, 2012.Lawyers USA No. 993-3902.

ERISA plans could offsetSocial Security benefits

Two long-term disability plans didn’tviolate ERISA when they both reducedan insured’s payments by the amount ofhis Social Security Disability Insurancebenefits, the 9th Circuit has ruled in af-firming judgment.

e plaintiff was insured under twolong-term disability plans administeredby Unum Life Insurance. After sufferinginjuries that prevented him from working,the plaintiff was awarded disability bene-fits under both Unum plans.

e plaintiff also applied for SSDI ben-efits. Several years after the Social Secu-rity Administration initially denied theplaintiff ’s claim, the agency awarded ben-efits and a retroactive payment of $25,000.When Unum learned of the award, itstarted to reduce his LTD paymentsunder both plans by the amount of hisSSDI. In addition, because the SSDIretroactive payment overlapped the cov-erage under its plans, Unum contended itwas entitled to $24,000 in overpayments.

e plaintiff sued under ERISA, alleg-ing that Unum abused its discretion by in-terpreting the plans to allow what hecharacterized as a “double offset” of hisSSDI benefits.

e court found no violation of ERISA,explaining that both plans “call for thepayment of different monthly benefits to[the plaintiff ], but both state that the‘payment may be reduced by deductiblesources of income and disability earnings.’In turn, the plans define ‘deductiblesources of income’ to include ‘[t]heamount that you, your spouse and yourchildren receive or are entitled to receiveas disability payments because of your dis-ability under … the United States SocialSecurity Act.’…

“erefore, [the plaintiff ’s] SSDI ben-

efit of $1730 is deductible under the plainlanguage of either plan. Neither of theplans contains any language that makes anexception for this deduction in a casewhere an employee is covered under twoseparate plans.”U.S. Court of Appeals, 9th Circuit. Ren-

fro v. Funky Door Long Term DisabilityPlan, No. 11-15301. June 18, 2012.Lawyers USA No. 993-3895.

No overtime pay for pharmarepresentatives under FLSA

Pharmaceutical representatives whopitch products to doctors are “outsidesalespeople” under the Fair Labor Stan-dards Act and therefore not entitled toovertime pay, the U.S. Supreme Court has ruled.

e case involved two pharmaceuticalcompany sales representatives who weretasked with pitching the company’s prod-ucts to doctors in exchange for a nonbind-ing commitment from the doctors toprescribe the products to patients. eywere prohibited from directly sellingproducts to doctors.

When the company classified the plain-tiffs as “outside salesmen,” making themineligible for overtime compensationunder the FLSA, the representatives sued,arguing that because they could not makedirect sales, they were employees entitledto overtime pay. e Labor Departmentsubmitted an amicus brief in the case sid-ing with the plaintiffs on their interpreta-tion of the FLSA and its regulations.

But a U.S. District Court granted thecompany’s motion for summary judg-ment, holding that the reps were “outsidesalesmen” and that the Labor Depart-ment’s interpretation of the law was “in-consistent with the statutory language”and therefore did not warrant deference.

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e 9th Circuit affirmed.e Supreme Court granted certiorari

and heard arguments in the case in April.In a 5-4 decision, the Court affirmed,

holding that the representatives were out-side salespeople exempt from FLSA rules,and that the DOL’s interpretation to thecontrary – an interpretation that waschanged only after the Supreme Courtgranted certiorari – was not controlling.

“In this case, there are strong reasonsfor withholding … deference,” JusticeSamuel A. Alito, Jr. wrote for the majority.“[e sales representatives] invoke theDOL’s interpretation of ambiguous regu-lations to impose potentially massive lia-bility on [the company] for conduct thatoccurred well before that interpretationwas announced. To defer to the agency’sinterpretation in this circumstance wouldseriously undermine the principle thatagencies should provide regulated partiesfair warning of the conduct [a regulation]prohibits or requires.”

Turning to the FLSA, the Court foundthat the statutory definition for the word“sale” was broad enough to include theplaintiff ’s activities.

“Obtaining a nonbinding commitmentfrom a physician to prescribe one of [thecompany’s] drugs … comfortably fallswithin” the text, Alito wrote.

Justice Stephen G. Breyer wrote a dis-sent in which Justices Ruth Bader Gins-burg, Sonia M. Sotomayor and ElenaKagan joined.U.S. Supreme Court. Christopher v.

SmithKline Beecham Corp., No. 11-204.June 18, 2012. Lawyers USA No. 993-3891.

PERSONAL INJURY & TORTSit-down restaurant has no‘mode of operation’ liability

A sit-down restaurant had no liabilityfor a slip and fall simply under the theorythat the way it operated its business cre-ated a substantial risk of harm to cus-tomers, the Nevada Supreme Court hasruled in reversing a $3.5 million judgment.

e “mode of operation” theory inpremises liability allows a plaintiff toavoid proving the defendant’s knowledgeof a particular hazardous condition if shecan prove that the nature of the defen-dant’s business tends to create a substan-tial risk of the type of harm the plaintiffsuffered.

In this case, the defendant operates asit-down Italian restaurant. e plaintiffis a customer who sued for negligence, al-leging that she slipped on an oily sub-stance on the floor as she walked to therestroom. e restaurant managers whoassisted the plaintiff testified that the floorwas clean and that the plaintiff fell with-out slipping.

A jury found the defendant 51 percentnegligent after being given a mode of op-eration instruction.

But the state supreme court concludedthat the theory does not apply outside thecontext of self-serve establishments.

“Because the mode of operation ap-proach is premised on the idea that busi-ness owners should be held responsiblefor the risks that their choice to have cus-tomers serve themselves creates, we con-clude that it does not extend to ‘sit-down’restaurants,” the court said.Nevada Supreme Court. FGA, Inc. v.

Giglio, No. 54187. June 14, 2012. LawyersUSA No. 993-3896.

Exposure rule doesn’t barspouse’s asbestos claim

e wife of an asbestos victim couldproceed with a claim for loss of consor-tium, even though her husband’s exposureto the defendant’s product occurred yearsbefore the marriage, the California Courtof Appeal has ruled in reversing a dis-missal.

e plaintiff was married in 2001. Herhusband was diagnosed with mesothe-lioma in 2010 and filed product liabilityclaims against various asbestos manufac-turers, including the defendant. e plain-tiff added a claim for loss of consortium.

e defendant argued that the plain-tiff ’s consortium claim was barred understate law because her husband’s exposureto asbestos occurred before the marriage,between 1958 and 1995.

But the court decided that the generalrule that the defendant’s wrongful con-duct must occur during the marriage didnot apply in this case.

“We hold that where an injury to aspouse that in turn causes injury to theplaintiff ’s right to consortium in the mar-ital relationship is not discovered or dis-coverable until after the couple‘s marriage,and the underlying cause of action thusaccrues during the marriage, the plaintiffhas a valid claim for loss of consortiumeven though the negligent conduct mayhave predated the marriage, the court said.

It noted a similar decision from anotherappellate court in the state. (See “Wife ofasbestos victim can sue for loss of consor-tium,” Lawyers USA, June 5, 2012. Searchterm for Lawyers USA’s website: Van-hooser)California Court of Appeal, 1st District.

Leonard v. John Crane, Inc., No. A133322.June 13, 2012. Lawyers USA No. 993-3887.




Vaccine Act award isn’treduced by SSDI benefits

A Vaccine Act award for a woman whosuffered nerve damage after taking a flushot should not be reduced by the amountof benefits she is eligible to receivethrough Social Security Disability Insur-ance, the Federal Circuit has ruled in af-firming judgment.

e plaintiff was a hairstylist beforebeing hospitalized in 2003 for Guillain-Barre syndrome, a disorder affecting theperipheral nervous system. Alleging thather disorder was caused by a flu shot shereceived, the plaintiff filed a claim forcompensation under the Vaccine Act.

e plaintiff was awarded $1.1 millionunder the Act, plus an annuity to coverfuture medical expenses. Of the lump sumawarded, $900,000 was to compensate theplaintiff for her lost earnings.

e government argued that the plain-tiff ’s award should have been reduced bythe $316,000 she was eligible to receivethrough Social Security Disability Insur-ance.

e Federal Circuit disagreed, firstholding that the SSDI benefits shouldnot be taken into account in calculat-ing the plaintiff ’s “actual or anticipatedloss of earnings” under §15(a)(3)(A) ofthe Act.

In addition, the court concluded that areduction was not called for under theAct’s offset provision, §300aa-15(g).

“Looking to the language of §15(g),Congress specifically enumerated thetypes of funding sources that would offsetcompensation awards. In relevant part,Congress included payments under a‘state compensation program’ or ‘any fed-eral or state health benefits program.’ IfCongress had wanted to include SSDI

benefits as an offset under §15(g), it couldhave done so,” the court said. U.S. Court of Appeals, Federal Circuit.

Heinzelman v. Secretary of Health andHuman Services, No. 2011-5127. June 13,2012. Lawyers USA No. 993-3884.

TAXATION & ESTATEPLANNINGJudge can’t order joint tax returns in divorce

A state judge did not have the authorityto order the parties in a divorce to filejoint income tax returns, the NebraskaSupreme Court has ruled.

e decision reverses a state appellateruling. (See “Divorced parties can be or-dered to file joint tax returns,” LawyersUSA, Oct. 7, 2011. Search term forLawyers USA’s website: Dalbey)

e parties were divorced in late 2010.Under the terms of their divorce decree,they were required to file joint tax returnsfor 2008 and 2009. (e parties had notyet filed returns for those years.)

e wife objected, arguing that trialjudges did not have the authority to makesuch orders.

e state supreme court agreed. It ex-plained that, because the U.S. Tax Courtis not bound by orders compelling partiesto sign a joint return, it “will look to thehusband and wife’s intent, and if one ofthem signed only because a state court or-dered him or her to do so, the return mayor may not be treated as a joint return. ismeans that a trial court can not know withcertainty whether its equitable division ofthe marital estate based on considerationof a joint tax return will be given effect byfederal authorities or courts.”

Accordingly, the court held that“[b]ecause a trial court can equitably ad-

just its division of the marital estate to ac-count for a spouse’s unreasonable refusalto file a joint return, resort to a coerciveremedy that carries potential liability isunnecessary.”

It noted that courts in other states aredivided on this issue.Nebraska Supreme Court. Bock v. Dalbey,

No. S-10-973. June 15, 2012. LawyersUSA No. 993-3892.

WORKERS’ COMPENSATIONComp award didn’t barwrongful death suit

A workers’ compensation award againstan insured employer did not bar a wrong-ful death lawsuit against an uninsuredemployer, the Missouri Supreme Courthas ruled in reversing judgment.

e plaintiff ’s husband was a passengerin a tractor-trailer that overturned. eman died in the wreck. e truck’s owneroperated under a contract with a trans-portation company. e transportationcompany carried workers’ compensationinsurance, but the truck owner did not.

e plaintiff filed claims for workers’compensation death benefits against boththe truck owner and the transportationcompany. e state’s workers’ compensa-tion agency determined that the trans-portation company was the statutoryemployer of the plaintiff ’s husband and or-dered the company to pay death benefits.

e plaintiff then attempted to pursuea wrongful death lawsuit against the truckowner.

e truck owner argued that the wrong-ful death action was barred because theplaintiff made an election of remedies whenshe obtained a workers’ compensation

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award against the transportation company.But the court concluded that the plain-

tiff ’s lawsuit could proceed because statelaw plainly allows employees and their de-pendents to elect to file a civil suit againstan uninsured employer such as the truckowner in this case.

“ere is no issue of an impermissibledouble recovery because any recovery by[the plaintiff ] in the civil action would besubject to [the transportation company’s]subrogation rights. …

“Finally, adopting [the truck owner’s]argument would require this court torewrite [state law] to permit [the owner]

to avoid the statutory requirement that hecarry workers’ compensation insurancewhile also evading financial responsibilityfor his employee’s injury. at is not thelaw,” the court said.Missouri Supreme Court. Lewis v.

Gilmore, No. SC91834. June 12, 2012.Lawyers USA No. 993-3893.


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