WINTER 2020
BRING-YOUR-DOG-TO-WORK DAY Welcoming emotional-support and service animals to your dealership PAGE 12
ALSO INSIDE ‘Exhibit A’ Against Themselves; Doctors Can’t Sue Those Who Report Them in Bad Faith, Court Says; Attorney Advertising.
Uncharted Territories: A Timeline of Women Pioneers
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PLM | WINTER 2020
Contents CASE NOTE A quarterly magazine on emerging developments, decisions, and defenses in professional-negligence law and claims management
EDITORS
Management and Professional Liability Co-Chairs
Jonathan S. Ziss 267.519.6820 jziss@goldbergsegalla.com
Peter J. Biging 646.292.8711 pbiging@goldbergsegalla.com
TEAM LEAD Colleen M. Murphy cmurphy@goldbergsegalla.com
CONTRIBUTORS Sharon Angelino sangelino@goldbergsegalla.com Jonathan L. Berkowitz jlberkowitz@goldbergsegalla.com Meghan M. Brown mbrown@goldbergsegalla.com Andrew P. Carroll acarroll@goldbergsegalla.com Jennifer H. Feldscher jfeldscher@goldbergsegalla.com Seth L. Laver slaver@goldbergsegalla.com Joanne J. Romero jromero@goldbergsegalla.com Rachel Zucker rzucker@goldbergsegalla.com
MANAGING EDITOR Robert L. Kaiser
COPY EDITOR Nicolette Clark
4 | Doctors Can’t Sue Those Who Report Them in Bad Faith, Court Says 5 | Dispute over Postnuptial Agreement Dismissed for Lack of Attorney-Client Relationship 6 | Court Reiterates Liability Limitation for Law Firms Holding Money in Trust Accounts INSIGHT 8 | ‘Exhibit A’ Against Themselves 10 | PROFESSIONAL LIABILITY MATTERS A sampling from Goldberg Segalla social media and the web COVER STORY 12 | Bring-Your-Dog-to-Work Day SPOTLIGHT 16 | Investors Narrowly Escape Complete Dismissal In Prominent #MeToo Securities Case SPECIAL INSERT 19 | Q&A ʻAmazingly Gutsy’
Marveling at the courage of trailblazing professional women
20 | TIMELINE Uncharted Territories
A timeline of professional women’s accomplishments
TOP 5 22 | Don’t Blink. You’ll Miss the Parade. Weird St. Patrick’s Day traditions and trivia
CROSSOVER 23 | Details, Details
ART DIRECTOR Jeremy Dolph
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Winter 2020 | 3
CASE NOTE Haar v. Nationwide Mutual Fire Insurance Co., No. 18-128 (2d. Cir. 2019)
Doctors Can’t Sue Those Who Report Them in Bad Faith, Court Says New York’s Public Health Law does not create a private right of action for bad-faith or malicious reporting of suspected medical misconduct, according to ruling. BY SHARON ANGELINO AND MEGHAN M. BROWN New York State’s highest court recently clarified that the Public Health Law provision on reporting of medical misconduct was enacted to protect the complainants and not the physicians or other targets of the complaints. As a result, doctors cannot use the law to sue people who report them in bad faith to the state’s Office of Professional Medical Conduct (OMPC). The U.S. Court of Appeals for the Second Circuit certified the following question to the New York State Court of Appeals: “Does New York Public Health Law § 230(11)(b) create a private right of action for bad-faith and malicious reporting to the Office of Professional Medical Conduct?” In November, the Court of Appeals answered in the negative in its 6-0 opinion in Haar v. Nationwide Mutual Fire Insurance Co. The court held that there was no indication that the legislature intended to create a private right of action in this section of the statute and that existing common-law remedies were sufficient to protect the targets of complaints from bad-faith or malicious reports of misconduct. The decision arose from a lawsuit by Robert D. Haar, an orthopedic surgeon, against the insurer Nationwide. Haar treated four patients injured in automobile accidents and insured by Nationwide. Nationwide denied each of the claims and filed complaints with the OPMC alleging insurance fraud by Haar. After an investigation, the OPMC declined to impose any discipline on the doctor. Dr. Haar then sued Nationwide, alleging defamation and that its complaints to the OPMC lacked a good faith basis in violation of Public Health Law § 230(11)(b). The action was removed to federal court, and a federal judge in Manhattan dismissed both causes of action in the complaint. On appeal, because of a split in New York State law over whether Public Health Law § 230(11)(b) implies a private right of action, the Second Circuit turned to the Court of Appeals for an answer. Section 230 of the New York Public Health Law governs the proceedings of the state board for medical misconduct. Subsection 11 addresses the reporting of professional misconduct. Aside from certain enumerated mandated reporters, any other person, such as Nationwide, may report “any information . . . which rea4 | PLM
sonably appears to show that a licensee is guilty of professional misconduct” as that term is defined in the Education Law. Further, “[a]ny person, organization, institution, insurance company, osteopathic or medical society who reports or provides information to the board in good faith, and without malice shall not be subject to an action for civil damages or other relief as the result of such report.” It was undisputed that this statute did not expressly create a cause of action against a complainant who allegedly files a report in bad faith or maliciously. The court rejected the plaintiff’s efforts to imply a private right of action by negative implication; that the “good faith” language in the statute makes bad-faith reporting actionable. In considering the legislative intent, the court explained that this statutory provision was enacted to protect the public from medical misconduct by encouraging reporting and to alleviate fear of litigation from entities encouraged to report misconduct. It was not added to protect physicians accused of misconduct. Thus, Haar was not the intended beneficiary of this provision. That alone was enough to conclude that there is no implied right of action under Public Health Law § 230(11)(b). Going further, however, the court noted that the legislature’s goal was to increase reporting, which would be undermined if a private right of action was found that would increase the possibility of litigation for those reporting suspected misconduct and a private right of action would discourage mandatory reporting and impede the effectiveness of the statute, inconsistent with the legislative scheme. Based on the negative answer to the certified question, the Second Circuit concluded that Haar’s claim was properly dismissed. The decision should provide a level of protection to SIU units that are charged with investigating and reporting suspected fraud. Sharon Angelino focuses her practice on complex insurance coverage, professional liability, commercial litigation, and general corporate law. A leader of the GIS New York Team, Sharon has more than 20 years of insurance coverage experience in both first-party and third-party claims. Meghan M. Brown focuses her practice on general liability and appellate advocacy, including matters involving personal injury, construction, and professional liability. She routinely represents medical professionals and health care facilities in professional liability claims.
CASE NOTE Seaman v. Schulte Roth & Zabel LLP, New York Appellate Division, First Department, October 17, 2019
Dispute over Postnuptial Agreement Dismissed for Lack of Attorney-Client Relationship BY JENNIFER H. FELDSCHER By late 2014, the marriage was over. Jordan Seaman and Rebecca Colin were living apart—Seaman in Westchester County, Colin and their children in a rental home in Greenwich, Connecticut—and they were beginning to formalize their separation. What happened next became the basis for a legal-malpractice lawsuit by Seaman against the New York City-based law firm Schulte Roth & Zabel—a case that would reaffirm, in an appellate court ruling, the importance and enforceability of nonrepresentation clauses when seeking to limit legal-malpractice exposure for services performed by counsel outside an attorneyclient relationship. Around March 3, 2015, Seaman executed a two-page agreement prepared by defendants. In Seaman v. Schulte Roth & Zabel LLP, Seaman alleged that a partner in that firm, Susan Frunzi, agreed to represent him and Colin in drafting the agreement. The agreement provided that Seaman would pay $3.5 million toward a new home for Colin and assume responsibility for paying half of the expenses associated with the home as long as Colin owned it. Seaman blamed the defendants for failing to advise him that his obligations under such an agreement would not cease if he and Colin divorced, despite his specific request that their prenuptial agreement remain intact. Schulte Roth & Zabel argued that they did not represent Seaman or Colin in connection with the preparation of the March 2015 agreement. Rather, the firm maintained, it acted as mere goldbergsegalla.com
scrivener of the agreement and not as counsel to either party. Schulte Roth & Zabel disclaimed the existence of any attorney-client relationship repeatedly in writing and argued that each party to the agreement had been informed of its right to obtain independent counsel. Both also had time to review the agreement before signing it, the defendants maintained. Seaman tried to argue that an attorney-client relationship existed despite the presence of a non-representation clause. In essence, he argued that actions, not words, should determine whether an attorney-client relationship existed. He argued that an attorney-client relationship existed in this instance because the attorney had drafted a legal document, had provided advice, and had sent a bill for legal services for his “personal representation.” The New York Appellate Division, First Department, disagreed with Seaman. The court held that “[al]though defendants were required to use the ordinary degree of skill required of the legal community in drafting a postnuptial agreement, there [was] no claim that the agreement was ineffective due to a technical error or that Frunzi failed to accurately memorialize the terms of the parties’ agreement.” The appellate court affirmed a lower court’s dismissal of the complaint. Jennifer H. Feldscher is a partner at Goldberg Segalla. She has more than 15 years of complex commercial litigation experience encompassing a wide range of matters and issues.
Winter 2020 | 5
CASE NOTE Moshe Meisels v. Fox Rothschild, LLP, Docket No. A-20/21-081534, (N.J. App. Div. Jan. 9, 2020)
Court Reiterates Liability Limitation for Law Firms Holding Money in Trust Accounts BY ANDREW P. CARROLL Law firms regularly hold funds in their trust accounts on behalf of clients for a variety of reasons, and when the amounts are large, this can result in significant repercussions. During the recent Malaysia Development Berhad (1MDB) scandal in 2015, the opacity of attorneys’ obligations with respect to those funds was brought into the spotlight on a massive scale. In the 1MDB scandal, Malaysia’s then-Prime Minister Najib Razak was accused of channeling more than $700 million from the Malaysia Development Berhad, a government-run strategic development company, to his personal bank accounts. What duties do law firms actually owe when holding money in their trust accounts? In a recent New Jersey Appellate Division case, the court reiterated the limitation of liability absent specific instructions or any escrow relationship with third parties. Moshe Meisels v. Fox Rothschild involved a real-estate transaction in which the firm itself appeared to have no involvement. Instead, a client of the firm agreed to sell property in New Jersey and the buyer wired $2.4 million to the firm’s trust account. The wire transfer was made by a company called RightMatch Ltd. and contained just a single byline—one stating that it was “for and on behalf of Cambridge Mercantile Corp.” and to the attention of Moshe Meisels. The plaintiff, Meisels, conceded that he had no contact with the law firm. Meisels argued that the transaction was never consummated, and yet the firm still transferred the funds to its client, Eliyahu Weinstein. It filed a lawsuit setting forth numerous counts, but only Meisels’ claims of conversion and breach of fiduciary duty remained on appeal. Meisels argued that under the Rules of Professional Conduct, the law firm was tasked with safekeeping the funds and wrongly converted them by sending the $2.4 million to Weinstein without finalizing the deal. The law firm responded that it had no knowledge Meisels even existed, let alone that it was acting as his fiduciary, and that no demand was made that would substantiate a conversion claim. The Appellate Division agreed with the law firm, acknowledging the role of attorneys while limiting their liability for trust account funds. The Appellate Division began by noting that “as officers of 6 | PLM
the courts, attorneys are reposed with special status.” However, the duty to safeguard property is not limitless. In the present case, the law firm received a wire transfer that had no limiting instructions or other directions. It was not aware of Meisels’ involvement in the transfer, nor did he make any demand for the repayment of funds. Considering the heightened level of relationship attendant to a fiduciary duty, the Appellate Division could find no reason to hold that the law firm could owe such a duty to someone it did not even know existed. The court also held that a demand and refusal was a prerequisite to conversion unless facts suggest an exception to this general rule should be applied. Citing nineteenth-century law, the Appellate Division ruled that there was no conflict with the true owner’s rights when, as far as the law firm knew, it was acting in accordance with all parties’ wishes. Had there been a demand, the law firm could at least have had the opportunity to investigate and potentially seek judicial intervention. However, the Appellate Division ruled there is no independent duty of attorneys “to inquire into the origins and possible third-party interests of every source of funds that flows into a trust account for purposes of closing on a transaction.” The Appellate Division’s ruling in Meisels v. Fox Rothschild is a reaffirmation of the limited, but opaque nature of lawyer trust accounts that is necessary from a practical perspective. As the court noted, there are a variety of reasons why a law firm should not be treated like a bank and tasked with investigating wire transfers that come into its trust account. However, in the 1MDB scandal it was widely reported that this is an area ripe for abuse. Clients could abuse a law firm trust account to conceal the source of funds in a transaction, essentially using the procedure to circumvent banking laws. While this may be of concern to regulators, it is certainly not a function that should be served by law firms. Therefore, the Meisels’ decision should be viewed as a win for attorneys who could potentially be targeted with increased duties when recent high profile cases suggest a revisit to monitoring transfers in firm trust accounts. Andrew P. Carroll focuses on handling matters related to professional liability, insurance coverage, real property litigation, and product liability for a variety of companies, professionals, and nonprofits.
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Winter 2020 | 7
INSIGHT
‘Exhibit A’ against Themselves That’s what agents create when they write to insurers trying to coax them to cover disputed claims This article first appeared on the website agentsofamerica.org.
BY COLLEEN M. MURPHY AND RACHEL ZUCKER As experienced insurance-agent and -broker E&O attorneys, we frequently defend agencies or brokerages after the principals have tried their best to neutralize a potential E&O claim. All too often an agency principal, producer, or claims person will write what we call an “unfortunate letter”—a letter, email, or text trying to convince an insurer to cover a disputed claim of an insured customer. We understand that as owners of dynamic businesses, agency principals are accustomed to troubleshooting a variety of problems that land on their desks every day. However, when it comes to resolving a potential E&O claim, such self-help might prove harmful to the agency, including its business relationships with its customer, and may even trigger the loss of the agency’s E&O coverage. Agency principals may have been encouraged to write such letters to insurers because in the past they have been successful. The insurer has been persuaded, the insured’s claim covered, and an E&O claim avoided with the agency’s business relationships intact. However, these appeals to the insurer, when written by the agent, have become decreasingly effective. This is particularly true in the present market. In addition to this practical concern as to whether the letter will work, the agency principal must bear in mind that there are several legal consequences that flow from writing such unfortunate letters. First, the agency principal almost always copies the letter to the insured. If the insurer does not cover the claim, the insured may turn the unfortunate letter over to their attorney who will use it as a basis for drafting an E&O complaint. Even if the agent does not copy the insured on the letter, the letter will still become part of the insured’s claims file and is discoverable in an E&O lawsuit. In many instances, an insurer will pay the claim and then seek indemnification from the agency. Sometimes these unfortunate letters can even fuel such a claims stance by an insurer which was already ambivalent about covering the claim. The problem with unfortunate letters is they are often written defensively and in haste without the benefit of a thorough investigation. Rather than marshal the relevant evidence of the insurance transaction and make pointed insurance coverage and/or binding authority arguments likely to persuade the insurer, these letters are often defensive and attempt to justify agency errors and/or request outright an agency accommodation. For example: “Although the CSR did not request the endorsement, our intent as your agent was to provide…,” or “as a Premier agent with a substantial premium volume we request an agency accommodation.” Also: “Although we made some mistakes, so did your underwriter.” 8 | PLM
Such letters also commit the agency principal prematurely to a version of events, without the benefit of a thorough investigation that might bring to light a version more favorable to the agency. These letters become fodder for cross-examination and are often used as “Exhibit A” against the agency in an E&O lawsuit. Now the agency and its E&O attorney are unnecessarily forced into a defensive position. A variant of self-help (particularly subject to boomeranging) occurs when the agent mounts an effort to have the insurance policy reformed after a claim to provide the “missing” or otherwise lacking/insufficient coverage. E&O carriers beware. Do not allow the insurance agents or their personal counsel to do this unilaterally and without the claims representative’s input, particularly if such counsel is not an experienced insurance-agent and -broker E&O attorney. Those of us who are know that reformation is a major fork in the road to be taken only if there is a very good chance of success. Why? In a premature or unsuccessful bid to garner reformation, the insurance agent necessarily makes certain admissions that it intended the insured to have certain coverages. In so doing, the agent may be giving up certain defenses resulting in the agent and its E&O carrier in effect buying the claim if the reformation attempt fails. In a recent high-dollar E&O case, prior to our involvement, the agent had its personal insurance coverage attorney write a letter to the commercial lines property and casualty insurer in an effort to get coverage after the fact for certain storm-damaged items (of a fairly modest value). Lamentably, in an effort to impute the agent’s intent to the property and casualty carrier in support of reformation of the commercial property and casualty policy, this attorney wrote a sweeping request for reformation letter to the carrier, claiming that the agent intended “everything on the property to be covered.” To make matters worse, the insurance agent was copied on and approved the letter. The property and casualty insurer denied the reformation request (see side bar box as to the limits of reformation). Then came the boomerang: The insured reported to the agent that it found another item of storm damage, in the high seven-figure range, for a type of property for which insurance is not often, but can be, purchased. The insured had not previously reported the damage, and the property and casualty insurer had closed the claim early due to the lack of coverage and, thus, was unaware of this item of damage. Clearly, the agent, who had been out to the property to meet with the commercial insured before the loss, had not so intended that there be insurance coverage under the policy for this other item of property (in actuality, this large item of property had never been discussed at all by either the agent or the insured before the storm). The agent’s personal insurance coverage attorney had unwittingly written this unfortunate and unsuccessful letter which risked becoming “Exhibit A” against the agent in an E&O claim. Compounding the issue, the attorney had
not provided the letter to the E&O carrier for approval ahead of time. The smart strategy, rather than writing a letter yourself, is to promptly report the potential claim to your E&O carrier which can retain E&O counsel and/or insurance coverage counsel experienced in agency issues, to conduct an investigation and, if warranted, author an effective “advocacy letter” on the agency’s behalf to the appropriate insurers. A strategic letter authored by an experienced E&O attorney also has a much better chance of swaying the insurer. In addition, the attorney can assist the agency in preparing itself at the earliest possible moment to defend an E&O law-
suit if the insurer refuses to pay the insured’s claim. Since the insured is often an existing customer of the agency, the agency may also have legal questions for the E&O attorney as to how to proceed in handling the account, day to day.
Although it might be hard to admit that it’s time to report a potential claim to the E&O carrier and secure help from an E&O attorney, in the case of unfortunate letters, the old adage holds true, “he who represents himself has a fool for a client.”
It also must be stressed that writing an unfortunate letter might run afoul of the terms of the agency’s E&O policy which normally obligates the agency to provide notice to the E&O insurer when the agency becomes aware of an act, error, or omission that may give rise to a claim. Agents who write these types of letters often are aware of circumstances that may give rise to an E&O claim. Moreover, if the unfortunate letter contains an admission, it might also jeopardize the agency’s coverage.
Colleen M. Murphy is a partner at Goldberg Segalla and the leader of the firm’s insurance agents and brokers practice within its Management and Professional Liability practice group. Rachel Zucker, an associate attorney, focuses her practice on counseling and defending clients in a wide variety of insurance matters.
REFORMATION OF AN INSURANCE POLICY Reformation is a proper remedy where the parties have reached a definite and explicit agreement, but, whether by mutual or common mistake, or a mistake on one side and fraud or inequitable conduct on the other, the written contract fails to express the agreement. In which case the policy will be corrected to make it conform to their real intent, and the parties will be placed as they would have stood if the mistake had not occurred.
that, for purposes of reformation, there was no difference between a mistake by the insurer and a mistake by its agent.
In the context of E&O insurance policy-reformation cases involving insurance agents who act as agents of the insurer (as opposed to brokers, who act as agents for the insured), the knowledge and intent of the agent may be imputed to the insurer such that a “mutual mistake” between the agent and the insured will also be deemed a “mutual mistake” between the insurer and insured. Courts will consider whether the agent was acting within his or her scope of authority and within the scope of the subject matter entrusted to him/her by the principal (the insurer).
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Challenges when arguing agent’s knowledge or intent should be imputed to the insurer
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The agent for the insurer must have acted within the scope of his or her authority. If the agent is found to be outside of his or her authority, intent is not imputed to the insurer, and there is no “mutual mistake” between the insurer and the insured.
For example, the New York Appellate Division, Fourth Department, in Callea v. Hartford Ins. Co. of Connecticut, 15 A.D.3d 973 (2005) looked for proof of an “express or implied agency agreement” as proof of authority given to the agent by the insurer, such that a mistake by the agency’s employee could be attributed to the insurer. In another example, in Simmons v. Insurance Company of North America, 17 P.3d 56 (Alaska 2001), the court held that an agency agreement between an agency and an insurer gave the agency binding authority. Thus, when the agency made a mistake in the listing of insureds on an automobile policy, the court held
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In contrast, in Estvold Oilfield Services, Inc. v. Hanover Insurance Company, 2018 WL 4101504 (D.N.D. 2018), the court found the intermediary was acting as the insured’s broker—without actual or apparent authority for the insurer—and held that the broker’s knowledge was not imputed to the insurer for reformation. Even if the agent is acting with binding authority, intent cannot be imputed if the principal is the victim of fraud perpetrated by the agent or if the agent and insured colluded against insurer.
For example, the New York Court of Appeals in Center v. Hampton Affiliates, Inc., 66 N.Y.2d 782 (1985) held that knowledge is not imputed if the agent is engaged in a scheme to defraud his principal, either for his own benefit or that of a third person. For another example, the Appellate Court of Connecticut, in Carson v. Allianz Life Ins. Co. of N. America, 184 Conn.App. 318 (2018), held that an insurance agent’s alleged acts of fraudulent concealment could not be imputed to the life insurer, where the insurer had no knowledge of any purported fraud by the agent, and the insurer itself had not engaged in any fraudulent concealment.
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Intent of the parties is subjective, bringing the ccredibility of the agent into play― the trier of fact may not believe an agent’s assertion of intent.
For example, the New York Court of Appeals in Zion v. Kurtz, 50 N.Y.2d 92, 105 (1980) held that conclusory allegations of mutual mistake are insufficient.
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Mutual mistake must be supported by clear and convincing evidence, and the mistake of fact must have existed at the time the contract was executed. In cases where the agent’s mistake was imputed, documentary evidence generally supports the mutual mistake.
For example, in Great American Ins. Co. v. Zelik, 2020 WL 85102, (S. D. N. Y. Jan. 6, 2020) the insurer sought reformation of an umbrella policy to remove six properties as insured locations, arguing the parties held a mutually mistaken belief the properties had underlying CGL insurance. However, the court held there was no “mutual” mistake, as there was no clear and convincing evidence establishing that the insured or the insured’s agent believed the properties were covered by CGL policies. For another example, in Harleysville Worchester Ins. Co. v. Diamondhead Property Owners Ass’n, Inc., 2013 WL 392478 (W.D.Ark. Jan. 31. 2013), the insurer issued a commercial policy to its insured that did not contain an exclusion for ‘law enforcement coverage.’ The insurer sought reformation of the policy, arguing that both parties had actually intended the policy to in fact contain that exclusion, and the failure to include the exclusion was an inadvertent mistake. The court held the insurer showed a mutual mistake by clear and convincing evidence, as the insurer submitted sworn affidavits from two representatives of the insured’s broker that expressly stated it was not the insured’s intention to purchase law enforcement coverage.
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The court can look at the “history of negotiations” or prior dealings to demonstrate that there was an understanding regarding desired coverage.
For example, in Artmar, Inc. v. United Fire & Cas. Co., 34 Wis.2d 181 (1967), the insured’s premises contained a house and a detached outbuilding, and the outbuilding was destroyed by a fire. The insurer argued the outbuilding was not a covered location, and the insured argued the failure to include the outbuilding as a covered location was a “mutual mistake.” The court held issues of fact precluded summary judgment on the issue of “mutual mistake,” because the insurance agent had previously issued a policy that covered the outbuildings, and because the same agent drafted an earlier policy providing such coverage, the agent knew the insured wanted coverage on the outbuilding.
Winter 2020 | 9
FROM THE BLOG
Professional Liability Matters
According to the American Tort Reform Foundation, these were America’s top 10 “Judicial Hellholes” in 2019: 1. Philadelphia Court of Common Pleas 2. California 3. New York City 4. Louisiana 5. St. Louis 6. Georgia 7. Cook, Madison, and St. Clair Counties in Illinois 8. Oklahoma 9. Minnesota Supreme Court/ Twin Cities 10. New Jersey Legislature
Malpractice Policy: The Devil’s in the Details Forum Shopping? How About Philadelphia? BY SETH L. LAVER
America's birthplace is a destination for history, arts, culture, and—personal injury cases. Once again, Philadelphia has been named America’s number one “judicial hellhole” by the American Tort Reform Foundation. The 2019 ranking is based on Philadelphia’s outrageous verdicts, the amount spent on lawsuit advertisements, the percentage of outof-state plaintiffs, and courts’ loosely applying venue rules. Some highlights from 2019: • A major pharmaceutical company hit with an $8 billion verdict • A blood-thinner settlement for $775 million • An estimated $45 million spent on lawsuit advertisements read more at professionalliabilitymatters.com
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BY SETH L. LAVER
At its simplest and most basic level, a professional malpractice policy for an attorney serves to insure against claims of malpractice. The devil is in the details, of course. In a recent decision, the Second Circuit affirmed a ruling denying coverage to an attorney involved in a dispute over collection of his legal fee. The decision provides an interesting coverage lesson as well as a lesson about the sensitive nature of seeking to collect on a disputed fee. read more at professionalliabilitymatters.com
U.S. Chamber of Commerce’s “Top 10 Most Ridiculous Lawsuits” of 2019
500 MILLION IN DAMAGES
$
1. Woman Sues Blistex Over Lip Balm Packaging (Belleville, IL) 2. Trial Lawyers’ Expert Witness Falls Apart on the Stand (San Francisco, CA)
Who’s to Blame for the Ponzi Scheme? BY SETH L. LAVER
Nine law firms face $500 million in damages arising from the alleged aiding and abetting of a large securities scam. The scam was perpetrated by a now defunct, relatively well-publicized real estate investment firm that operated a Ponzi scheme targeting the retirement benefits of the elderly. The man responsible for the scheme pled guilty to a 25-year sentence in late 2019. Now, through its bankruptcy
trustee, the Investment Firm is reportedly suing its attorneys and claiming that they knowingly assisted in the fraud. According to the trustee, the law firms helped to conceal the scam and to mislead investors. The trustee has targeted offering documents, which were “false and misleading”, as well as opinion letters drafted by the defendant law firms. read more at professionalliabilitymatters.com
3. Trial Lawyers Have a Cow Over Vegan Butter Labeling (Brooklyn, NY) 4. Woman Sues New York City Over “Scary” Poster Promoting Dexter (New York, NY) 5. California Coffee House Sued Over Warning Labels (Pasadena, CA) 6. Customer Sues Friendly’s Ice Cream Over Vanilla Ingredients (Brooklyn, NY) 7. NBA Player’s Lawyers Tried to Game the System (New Orleans, LA)
Hip Protectors: Risk-Management Tool
8. Gamer Sues Fortnite Over Dance Competition Entry (Los Angeles, CA)
BY JONATHAN L. BERKOWITZ AND SETH L. LAVER
9. Dog Owner Gets Sued for Online Review (DeLand, FL)
Hip fractures are one of the mostcommon orthopedic injuries sustained by plaintiffs in long-term and elder care cases arising from falls. Long-term care (LTC) facilities must endeavor to reduce fall-induced hip fractures through carebased interventions to optimize patient care, limit litigation, and decrease stress upon the health care system. The Journal of the American Medical Directors Association recently published a study, entitled “Effectiveness of Hip
Protectors to Reduce Risk for Hip Fracture from Falls in Long-Term Care,” which addresses the hip protector as an intervention to decrease hip fracture risk. The study concluded that LTC residents could anticipate a threefold decrease of the risk of sustaining a hip fracture if they wore a hip protector at the time of a fall.
10. Man Sues Godiva over Labeling (Washington, DC)
read more at professionalliabilitymatters.com
Also on Professional Liability Matters blog:
• Coverage Denied for Attorney Seeking Fee
• Missed Deadlines, No Communication Equals Disbarment
• When Does an Occurrence Occur? Malicious Prosecution and Coverage professionalliabilitymatters.com
Seth L. Laver, a partner in Goldberg Segalla’s Philadelphia office, focuses on matters of professional liability, representing attorneys, accountants, and other professionals.
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Jonathan L. Berkowitz focuses on representing nursing homes, assisted living facilities, home health care agencies, and substance-abuse rehabilitation providers, among many others.
Winter 2020 | 11
COVER
‘Bring-Your-Dog-to-Work Day’ Welcoming emotional-support and service animals to your dealership BY JOANNE J. ROMERO This article first appeared in the February 2020 issue of Fixed Ops magazine.
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enerally, the world has become increasingly pet-friendly in recent years, with more and more businesses such as restaurants and stores welcoming customers with their furry friends. In fact, some car dealership owners, aware that many pet owners will take their dog on a test drive or bring them along when getting their cars serviced, have designed pet-friendly dealerships. A few dealerships with the requisite acreage have even gone so far as to build dog parks for the exclusive use of their customers. Other more modest examples of the pet-friendly dealership include dealerships that provide a dog bed, animal treats, and/or water for their customers’ pets. At least one car dealership extends a welcome, not only to its customers’ pets, but also its employees’ pets, making every day a “bring-your-dog-to-work day.” Of course, on the other end of the spectrum are more traditional dealerships that have never even considered the idea of making their dealerships “pet-friendly.” The use of service animals and emotional support animals has become more widespread in recent years as well. However, whether you are among the more vanguard pet-friendly dealerships, or the more traditional “no pets” allowed dealerships, everyone must be sensitive to accommodations which must be made for service animals and/ or emotional support animals and be mindful that these animals are not pets. Service animals are trained to perform tasks for disabled individuals, while emotional support animals, although not as specifically trained, provide emotional comfort to individuals who need it.
Technical background as to the legal requirements along with some best practices for accommodating customers with service animals and employees who require service animals or emotional support animals: THE ADA REGULATES THE USE OF SERVICE ANIMALS AND SUPPORT ANIMALS IN A DEALERSHIP Required accommodations for service animals and emotional support animals in public places, including the workplace, are governed by federal, state, and local laws. At the federal level, the Americans with Disabilities Act (ADA), 42 U.S.C. § 12101 et seq., is the law that governs the necessary accommodations to be made for service animals and emotional support animals in a car dealership. The ADA is divided into three titles, of which two apply to dealerships: Title I, which prohibits disability discrimination in employment; and Title III, which prohibits disability discrimination in places of public accommodation. ACCOMMODATING YOUR CUSTOMERS We will start with Title III, which governs the accommodations that must be made for car dealership customers with service animals. The term service animal under Title III of the ADA is defined as “any dog that is individually trained to do work or perform tasks for the benefit of an individual with a disability, including a physical, sensory, psychiatric, intellectual, or other mental disability.” The ADA guidelines as revised in 2010 also include miniature horses within the definition of service animals. The work or task a service animal has been trained to provide must “directly relate to the person’s disability.” Examples of service animals and specific tasks they are trained to perform include: • Seeing-eye dog which assists or guides blind persons • Hearing or signal dog which alerts a hard of hearing person to a sound • Psychiatric service dog who can sense when a person with PTSD is about to have an anxiety attack and can take specific action to help avoid the attack or lessen the impact • A SSigDOG trained to respond on behalf of an autistic child playing out-doors who does not otherwise respond to his name when the parents want to call the child home • A seizure response dog that barks to alert caregivers of a person with epilepsy having a seizure, or that can activate a special alarm
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Interestingly, emotional support animals are carved out of the definition of service animal because they are not trained to perform a specific job or task related to a person’s disability. Given that emotional support animals do not qualify as service animals under Title III of the ADA, car dealerships are not required to permit customers with emotional support pets into their stores. Accordingly, you may not necessarily have to welcome into your showroom the famous emotional support peacock that one airline had to contend with. However, you should be aware of any local civil rights laws which may have broader requirements than the ADA and which may require public accommodations to permit emotional support animals or animals beyond dogs and miniature horses.
owners were very friendly and understanding. This anecdote may raise the eyebrows of some dealership owners concerned about their leather interior showroom cars. But, they shouldn’t be too concerned. The ADA does impose some specific requirements of service animals and their handlers, including that:
If you are hesitant about permitting customers to bring animals they claim are service animals onto the premises, and wish to verify that an animal is indeed a service animal, be aware that the ADA permits only two questions if the animal’s service is not obvious:
• But even when there is a legitimate reason to ask that a service animal be removed, car dealership staff must be sure to offer the person with the disability the opportunity to obtain goods or services without the service animal’s presence
Based on the foregoing requirements, you can politely request that a service animal be excluded or removed from the premises if: • The handler does not effectively control the animal and the animal is running away from the handler, jumping on other customers, or repeatedly barking without provocation • The service animal is clearly not house-broken (as was the case of the adorable puppy in the liquor store)
• Is the dog or miniature horse a service animal required because of a disability?
• The service animal be housebroken―entities are not required to provide care, supervision, or cleaning after the animal
• What work or task has the animal been trained to perform?
• The service animal’s handler keep the service animal under control, and that the service animal be harnessed, leashed, or tethered, unless devices interfere with animal’s work or the disability prevents use of the devices (under those circumstances, voice, signal or other effective control can be used)
All other inquiries are prohibited, so do not ask: • About the person’s disability • For medical documentation • For a special identification card or other proof that the animal has been certified, trained or licensed as a service animal • For a demonstration of task WHERE MUST SERVICE ANIMALS BE ALLOWED? Generally, you must allow service animals to accompany people with disabilities in all areas of the facility where the public is normally allowed to go. People with disabilities who use service animals cannot be isolated from other patrons, treated less favorably than other patrons, or charged fees that are not charged to other patrons without animals. So, if a business requires a deposit or fee to be paid by patrons with pets, it must waive the charge for service animals. One dealership owner raised concerns about what to do if other customers are allergic to the service animal. The answer is that an accommodation must be provided to both parties (the dealership cannot deny access or refuse service because of allergies or fear of dogs). For example, each party can be assigned to different locations within the same room. However, the particular dealership in question has only one small waiting room – what to do then? In that case, let’s think outside the box. Perhaps just move some chairs to an area in the showroom. Or possibly have the party with allergies wait in some-one’s office and offer them a coffee for any inconvenience. This same dealership owner shared a funny anecdote about his wife, who was thrilled to have found a pet-friendly liquor store where her beloved puppy could accompany her while she did some spirited shopping. The first time in the store, her puppy proceeded to pee on some wine bottles that were conveniently located on a bottom shelf for this purpose. Fortunately, the store 14 | PLM
The Service Animal should be vaccinated in accordance with local animal control or public health requirements Based on the foregoing requirements, you can politely request that a service animal be excluded or removed from the premises if: • The handler does not effectively control the animal and the animal is running away from the handler, jumping on other customers, or repeatedly barking without provocation • The service animal is clearly not house-broken (as was the case of the adorable puppy in the liquor store) But even when there is a legitimate reason to ask that a service animal be removed, car dealership staff must be sure to offer the person with the disability the opportunity to obtain goods or services without the service animal’s presence. REASONABLE ACCOMMODATIONS FOR YOUR EMPLOYEES Under Title I of the ADA, employers must provide reasonable accommodation to employees with disabilities unless the accommodation would pose an undue hardship to the employer. The ADA defines “disability” as “a physical or mental impairment that substantially limits one or more major life activities ... a record of such an impairment; or being regarded as having such an impairment[.]” Under Title I, a reasonable accommodation “may include making existing facilities used by employees readily accessible to and usable by individuals with disabilities; and job restructuring, part-time or modified work schedules, reassignment to a vacant position, acquisition or modification of equipment or devices, appropriate adjustment or modifications of examinations, training materials or policies, the provision of qualified readers or interpreters, and other similar accommodations for individuals with disabilities.”
Requests to bring a service animal or an emotional support animal must be processed like any other request for a reasonable accommodation and you must engage in the interactive process to determine if allowing the animal is a reasonable accommodation that is required to assist the disabled employee or applicant to perform an essential job function, and if so whether the reasonable accommodation will impose an undue hardship. Although service animals are not addressed in Title I and the Equal Employment Opportunity Commission (EEOC) does not have a specific regulation on service animals, permitting a service animal or an emotional support animal to accompany a disabled individual to work is generally considered to be a reasonable accommodation, which in this context is essentially a modification to a policy with a prohibition on bringing animals to work (if you are the car dealership where every day is “bring your pet to work day,” then you must be sure to extend the same privileges to disabled individuals with service animals without having to undergo the reasonable accommodation process). Because Title I does not define service animals, there is no limitation on what may qualify as a service animal. Thus, unlike places of public accommodation, employers are not permitted to limit service animals to dogs or miniature horses. And, while not automatically required to permit them at work, you must consider service animals of any species as well as emotional support animals of any species as a reasonable accommodation for employees with disabilities unless doing so would cause you as the employer to suffer an undue hardship. In addition to simply allowing the employee with the disability to bring the animal to work, common reasonable accommodations for disabled employees who use service animals or emotional support animals include: • Permitting the employee leave to participate in individualized service animal training • Providing the employee with a private/enclosed workspace • Designating an area where the employee can attend to the service animal’s basic needs, such as eating or bodily functions and allowing the employee to take periodic breaks to care for the service animal’s basic needs • Providing a designated area that the service animal can occupy until the employee’s shift ends (if the employee only requires the service animal to travel to and from work) If the employee’s disability is not obvious, you are permitted to ask for reasonable documentation that an accommodation is needed. You may also request documentation or demonstration that the service animal is trained, is housebroken and will behave appropriately and not disrupt the workplace. However, you may not insist that such documentation come from a medical professional and should accept documentation from other sources, including service animal trainers. This is particularly true when considering re-quests for emotional support animals, in which case documentation from psychologists, social workers, and treating clinicians, among others, is deemed acceptable. If the use of a service animal is the accommodation that an employee requests and prefers, you should NOT ask employees requesting permission to use a service animal to use a substitute accommodation, unless the service animal would pose an undue hardship. goldbergsegalla.com
Similar to how you might address customer concerns about allergies, there are many potential ways for you to address these concerns among coworkers, including: • Allowing the employees to work in different areas of the building or in private offices or to travel on different paths in the building • Flexible scheduling so that the employees do not work at the same time • Using portable air purifiers or adding HEPA filters to the existing ventilation system • Regularly cleaning the work area, including carpets and window treatments • Asking the disabled employee to use dander-care products regularly when cleaning the service animal • Asking the disable employee if he/ she can use alternative support during times when both employees must attend the same meeting • Creating a plan so that the employees do not use common areas such as break rooms at the same hour • Arranging alternatives to in-person communication, such as teleworking • Allowing allergic coworkers to take periodic rest breaks if needed to take medication • Similar arrangements can be made for addressing animal phobias It is a good idea to ask the employee what his/her expectations are for how others should interact with the service animal or emotional support animal, but the following are generally accepted guidelines: • Address the person, not the animal • Treat the employee handler with respect • Don’t ask the employee handler about his/her disability • Don’t ask personal questions about the service animal or emotional support animal such as name, breed, or tasks it can perform or ask for a demonstration • Remember that the service animals are providing a service and are not pets, so do not distract the animal, play with the animal, or try to pet or feed the animal It is good to always keep in mind that service animals and emotional support animals add value to the employment setting as they promote the effective job performance of disabled employees. Joanne J. Romero, a partner in Goldberg Segalla’s Manhattan office, concentrates her practice on representing employers in employment discrimination and harassment cases in state and federal courts, as well as before administrative agencies such as the Equal Employment Opportunity Commission, New York State Division of Human Rights, and New York City Commission on Human Rights.
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SPOTLIGHT
Investors Narrowly Escape Complete Dismissal in Prominent #MeToo Securities Case BY COLLEEN M. MURPHY AND JONATHAN S. ZISS On February 13, 2019, lead plaintiff Construction Pension Trust for Southern California filed suit in the U.S. District Court for the Southern District of New York. The nature of the suit was a putative securities class action on behalf of all purchasers of CBS Class A and Class B common stock between September 26, 2016, and December 4, 2018, against CBS, certain of its senior executives, and certain current and former members of CBS’s Board of Directors, asserting violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10(b-5) promulgated thereunder. Section 10(b) of the Securities and Exchange Act makes it unlawful to “use or employ, in connection with the sale of any security … any manipulative or deceptive devise or contrivance of such rules and regulations as the Commissions may prescribe.” 15 U.S.C. §78j(b). Implementing Rule 10b-5 prohibits the making of “ … any untrue statement of a material fact” and further makes unlawful to “omit to state a material fact necessary in order to make the statement made, in light of the circumstances under which they are made, not misleading.” The amended complaint described the nature of the action as follows: This case concerns defendants’ failure to disclose that CBS was beset by a company-wide pattern and practice of sexual harassment, creating a ‘culture of fear’ and hostile work environment that exposed the company to significant reputational risk, and the potential loss of key executives, including, most notably, CEO, President and Chairman of the Board, Defendant Leslie Moonves. The amended complaint is underpinned by a New Yorker article by Ronan Farrow unearthing alleged sexual harassment and misconduct concerning Leslie Moonves and CBS, as well as subsequent articles published in the New York Times.
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On January 15, 2020, U. S. District Judge Valerie Caproni granted in part and denied in part motions the defendants had made to dismiss the amended complaint for failing to state a cause of action under Federal Rules of Civil Procedure 12(b)(6). Constr. Laborers Pension Tr. for S. California v CBS Corp., 18-CV-7796 (VEC), 2020 WL 248729 [SDNY Jan. 15, 2020]. The court succinctly stated in its order concerning the background of the case that: The facts in the case center on Moonves’ allegedly unique value to the company and on accusations of sexual misconduct made against Moonves and other non-Defendant executives at CBS that were reported by the New Yorker and other news organizations. The court recited key allegations of the amended complaint, including that Moonves’ leadership was instrumental to CBS and that the events which unfolded caused Moonves and CBS to face a #MeToo reckoning. This included a draft 59-page report leaked from CBS’ independent investigation of Moonves that was published by the New York Times. The court noted that: After reviewing the findings of the investigations, which included interviews with approximately 350 people, CBS’s Board decided to terminate Moonves for cause due to his willful misfeasance. The draft report found that Moonves’ behavior “arguably constitutes willful misfeasance and violation of the company’s sexual harassment policy” and “the company’s historical policies, practices, and structures have not reflected a high institutional priority on preventing harassment and retaliation.” Also included in the court’s order is a recitation of defendants’ public statements alleged in the amended complaint, including CBS’s proxy statements from 2016–18 which incorporated CBS’s “Business Conduct Statement” (BCS). The court noted that the proxies provided that the purpose of the BCS was to address “[t]he company’s commitment to providing … a bias-free harassment-free workplace environment.” The BCS provided that “CBS has a ‘zero tolerance’ policy for sexual harassment.” The court also noted a statement that Moonves made to an audience at Variety Magazine’s Innovative Summit that the #MeToo movement was “a watershed movement” and that “it’s important that
a company’s culture will not allow for this. … There’s a lot we’re learning, there’s a lot we didn’t know.” The court’s order sets forth the amended complaint’s allegations regarding CBS’s stock fluctuation and trading activities by executives. Specifically: Following the July 27, 2018, publication of sexual assault allegations involving Moonves, CBS Class A and Class B stock prices fell about 6 percent from $57.85 to $54.27 per share and $57.53 to $54.01 per share respectively. And, “…by the next trading day, the stock prices had each fallen about 10 percent total.” While the stock prices recovered slightly, they dropped again once the New York Times article appeared concerning the leak of the CBS draft investigation report. Finally, the court took note of the amended complaint’s allegations that before the sexual harassment allegations became public, Moonves and CBS’s executives collectively sold 3.4 million shares of CBS stock. In the analysis of the subject motions, Judge Caproni treated three broad categories1 of misleading statements alleged in the Amended Complaint: 1. The BCS, ethics code, and various related statements 2. Disclosures about the importance to CBS of key personnel and Moonves, in particular 3. Management statements to news media made by Moonves, CBS President David Rhodes, and CBS News With respect to the first category, the court found that the BCS, ethics code, and related statements were neither material nor false and misleading, reasoning that only in rare circumstances have courts allowed statements in a code of conduct to survive a motion to dismiss: “…corporate codes of conduct tend to be general statements about reputation, integrity, and compliance with ethical norms [that] are inactionable puffery, as opposed to being statements of facts and, therefore, generally incapable of forming the basis for a Section 10(b) claim (citing Singh v. Cigna Corp. 918 f.3d 57 (2d Cir. 2019)).” In reviewing the statements in the BCS, the court concluded that they did not invite reasonable reliance as they were “…far too general and inspirational.” For example, “CBS believes in an environment that is free from workplace bullying.” “CBS has a zero tolerance policy for sexual harassment,” and “[w]e will take reports of violation or suspected violation of these policies very seriously.” In concluding that these and other statements were mere puffery, the court articulated that “These statements were not made to reassure investors that no CBS executive, or its CEO specifically, was susceptible to being the target of accusations of sexual harassment.” The court pointed out that the amended complaint had not alleged that the alleged misconduct was so pervasive “… that CBS, in fact, held none of its asserted aspirations.” Interestingly, the court determined that two sets of statements in the BCS came close to being statements of fact, but concluded that “…no reasonable investor would rely on these statements as assurance that CBS had no high level executive who was vulnerable to a #MeToo moment.” Those statements concern allegations in the complaint that “CBS represented that it will take all steps and remedial action to stop sexual harassment and protect the workplace environment,” and second, that CBS represented that there “are several different methods for making an anonymous report” and “That CBS will promptly and thoroughly investigate
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allegations of sexual harassment and those who report sexual harassment will not be retaliated against.” In a further finding that the above statements could not survive beyond the pleading state, the court reasoned that they “…do not guarantee compliance or make any commitment to take concrete steps to address sexual harassment complaints.” As to CBS’s description of its BCS and ethics code in the proxy, Judge Caproni found that the amended complaint did not allege that the statements “…were made to reassure investors or suggest that allegations of sexual misconduct would not damage the company.” Here, the court also found the amended complaint lacking in any allegations that “…the company highlighted its BCS in the wake of revelations about workplace sexual harassment to reassure investors that CBS would not be rocked by similar allegations against its executives.” The court opined that “…no reasonable investor would have relied on the BCS statements to reassure him or herself that the company was immune to losing key executives due to allegations of sexual misconduct.” The amended complaint was further found to be deficient in that even if the alleged statements were material, the amended complaint did not allege them to be false. To the contrary, the amended complaint contained allegations reflective that CBS acted in accordance with the BCS, including allegations that CBS producer “[Brad] Kern was ousted after a third investigation.” On the issue of falsity, Judge Caproni distinguished In re Signet Jewelers Ltd. Sec. Litig., No 16-cv-6728, 2018 WL 6167889, at *17 (S.D.N.Y. Nov. 26, 2018), on which plaintiffs heavily relied. In Signet, the plaintiff alleged that the company “took no action at all in the face of blatant and pervasive violations…” Similarly, the court found that the complaint did not allege that statements in the ethics code or in the proxy statement were false or misleading. Turning to the key personnel and critical risk disclosures, the court found them not to be misleading. As alleged in the complaint, the “key personnel disclosure” (made in 10K annual reports and 10Q quarterly reports), stated that “Company’s business depends upon the continued efforts, abilities, and expertise of its chief executive officer and other key employees.” The court’s opinion, which included an analysis of the law against half-truths with respect to risk disclosures, concluded that “The Amended Complaint does not allege that Defendants knew that the risk of Moonves’ termination for sexual harassment had ‘already materialized’ at the time the company made the risk disclosures,” relying upon well-established precedent that “[a]n earlier statement is not somehow made misleading simply because it failed to foretell a … problem which later materialized.” Panther Partners Inc. v. Ikanos Comm’s Inc., 538 F. Supp. 2d 662, 672 (S.D.N.Y. 2008). Finally, with respect to the risk disclosures, they were not misleading as they “stated simply that Moonves was important to CBS and had “nothing to do with Moonves’ alleged misconduct.” Turning to CBS President David Rhodes and CBS News’ statements to news media after Charlie Rose was terminated from CBS, the court held they were “…mere generic puffery” and that such statements did “…not state or imply that Moonves, or any other executive, had not engaged in misconduct or would not be swept up in the #MeToo movement.” Importantly, the amended complaint did not allege that the statements were false and misleading. While the complaint also alleges that “…On May 3, 2018, Rhodes also denied that he or CBS News had prior knowledge of Rose’s sexual misconduct,” the amended complaint did not allege that statement to be false or misleading.
Caproni found that plaintiffs abandoned their claims as to statements falling into three other categories.
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The court then examined Moonves’ statement on November 29, 2017, at an industry event hosted by Variety that “[#MeToo] is a watershed movement. It’s important that a company’s culture will not allow for this and that’s the thing that’s far-reaching. There’s a lot we’re learning. There’s a lot we didn’t know.” Significantly, Judge Caproni held that “The Amended Complaint, read in light most favorable to plaintiffs, adequately—though barely—alleges that this was a misleading statement of material facts.” Thus, the court held that the amended complaint adequately alleged that Moonves’ statement was “misleading.” Specifically, “Although it is very close, it is barely plausible that a reasonable investor would construe his statement as implicitly representing that he was just learning of problems with workplace harassment at CBS.” The court further found that “…the misleading aspect of Moonves’ statement is also adequately pled to be material.” The court opined that in response to Moonves’ statement made at an industry summit, “[a] reasonable investor could have understood Moonves’ statement to mean that he did not have exposure to sexual misconduct allegations, thus providing reassurance that Moonves, the one executive that the company and analysts viewed as crucial to CBS’ continued success, would not be compromised by the #MeToo movement. … Thus, a reasonable investor could rely upon his statement as reflecting Moonves’ own—and thus CBS’—lack of high-level exposure to the #MeToo movement.” Concerning the element of scienter (a mental state embracing intent to deceive, manipulate, or defraud2) necessary to support a Section 10(b) claim, the court opined that the amended complaint sufficiently plead scienter as to Moonves and CBS. The scienter allegation in the amended complaint consists of allegations that defendants: 1. Disregarded open and pervasive sexual harassment at the company, including Moonves’ problematic post 2. Sold stock during the putative class period 3. With respect to Moonves only, engaged in sexual harassment Plaintiff’s amended complaint asserted that individual defendants concealed the sexual harassment issues at CBS in order to sell their shares before problems were discovered. The court referenced that Moonves and CBS then-COO, now-CEO Joseph Ianniello (with one exception) “…made all of their alleged trades pursuant to public, periodic, and pre-set 10(b5-1) trading plans” and found “these sorts of trades do not give rise to a strong inference of scienter.” In Re Lululemon, Sec. Litig. 14 F. Supp. 3d, 553, 585 (S.D.N.Y. 2014) aff’d 604 F App’x 62 , (2dCir 2015). Taking judicial notice of the trading plans, the court found that they “… were adopted months before the New Yorker article about Harvey Weinstein, and trading values followed a consistent pattern from early 2017 through early 2018.” The court thought significant that “…the Amended Complaint does not allege that the trading plans were altered or adopted after the New Yorker article was published.” What’s more, the court found the amended complaint was “…sorely deficient in alleging that any trades … were suspicious.” Concerning the plaintiff’s theory of conscious misbehavior or recklessness, the court held that the allegations of the amended complaint fell short as to all defendants except Moonves, relying upon precedent holding “absent concrete allegations as to Defendants’ knowledge the [Amended Complaint] cannot generate
2 Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551, U.S. 308, 319 (2007) (quotations omitted).
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a strong inference of scienter.” In Re Arantuna Therapeutics Inc., Sec. Litig. 315 F. Supp. 3d, 737, 745 (S.D.N.Y. 2018). The court determined that the fact of an emergency board meeting called and then cancelled in 2018 regarding the public airing of allegations against Moonves “serious enough to suspend him” was insufficient to support a strong inference of scienter. Other individual defendants who, the complaint alleged, upon learning of rumors, urged an internal investigation of Moonves, and/ or retained a law firm to investigate Moonves (the investigation concluded there was “…nothing to worry about”) also had such allegations dismissed for lacking sufficiency with respect to the element of scienter. The court cited precedent that such allegations “…suggest a prudent cause of action that weakens rather than strengthens an inference of scienter.” Slayton v. Am. Express Co., 604 F. 3d 758, 771 (2d Cir. 2010) (quotation omitted). Judge Caproni did find that “the Amended Complaint did adequately—though again barely—allege that Moonves was consciously reckless when he made his statement at the Variety Innovative Summit.” Specifically, the court found that “the Amended Complaint, including extensive and specific allegations that Moonves sexually harassed and assaulted employees and non-employees, precisely the sort of behavior that #MeToo reporting was ferreting out and precisely the conduct that his Variety statement impliedly distanced himself from.” The allegations of the amended complaint, which on a motion to dismiss the court had to accept as true, sufficiently set forth that “Moonves knew of his own prior misconduct and knew that it left him in a precarious position in a post #MeToo world; nonetheless, he impliedly disclaimed knowledge and sought to portray his position by stating to the Variety audience, ‘There’s a lot we’re learning. There’s a lot we didn’t know.’” In addition to finding that the amended complaint adequately pleaded a strong inference of scienter with respect to Moonves, Judge Caproni also determined that Moonves’ alleged state of mind was attributable to CBS, and that the plaintiff’s amended complaint sufficiently pleaded corporate scienter. Concerning the element of loss causation, CBS contested that it was pleaded. Judge Caproni disagreed, opining, “Although the court has to wonder whether plaintiffs will be able to prove it, they have adequately plead loss causation. CBS’ stock declined immediately after each of the alleged corrective disclosures (the July 27 New Yorker article and the December New York Times article), evincing (at least for purposes of deciding a motion to dismiss) the new information in the disclosures caused the decline.” The court concluded that the amended complaint states a Section 20(a) claim against CBS (a Section 20(a) establishes a secondary liability for controlling persons). Lastly, the court denied the plaintiff’s motion for leave to amend the complaint without prejudice.
TAKEAWAY: While securities violations launched against corporations, directors, and officers stemming from sexual harassment may be viable, would-be plaintiffs can expect their pleadings to be subjected to the scrutiny and exacting analysis of the pleading requirements for each element of the causes of action.
Q&A
‘Amazingly Gutsy’ Marveling at the courage of trailblazing professional women. There are reasons why digging into the stories of pioneering professional women comes naturally to Goldberg Segalla partner Colleen Murphy, the architect of the timeline on the following pages.
a lesson on anatomy claiming it would be immodest to hold the class in her presence. Thankfully, such blatant outdated thinking is largely in the past.
First, Colleen enjoys a good investigation, whether it’s cracking one of her legal cases or finding an innovative way to help her son overcome his autism.
Q. Do you have an opinion as to the challenges that remain today for women?
Second, her grandmother, Dorothy F. Murphy, was the only woman in her law school class in 1951 at the University at Buffalo. At the time, she had five children, ranging in age from five to 16. And, finally, as an experienced attorney and the leader of Goldberg Segalla’s insurance agents and brokers practice within its Management and Professional Liability group, Colleen, who put herself through college and law school, is a woman whose story would not be out of step with the spirit of this timeline. Over the past 25 years, she has successfully represented hundreds of agents and brokers in complex matters. Still, Colleen was amazed as she set about compiling a basic chronology of milestones. She found these women’s stories so compelling and relevant to today’s challenges that she dug deeper and deeper— and the project grew well beyond a list of perfunctory facts. In the following Q&A, Colleen talks about getting to know these professional women. Q. What did you learn from this piece? A. All of the professional women I researched were passionate about what they were doing which allowed them to persevere to reach their goals. While clearly nothing was handed to them and, in fact, many people blocked them, there were those that helped them along the way. Not only did help come from other women, but male colleagues, mentors, and family members gave them a boost up as well. Q. What surprised you? A. Some of the prevailing attitudes that the women confronted at the time were absurd. For example, in the 1800s women’s brains were determined by authorities to be categorically deficient, preventing women from performing the tasks required of an accountant, and similarly women were deemed to not have the requisite constitution to handle the stressors of CPA work! Elizabeth Blackwell’s medical school professors expressed that it was an inconvenience to teach her, and one even tried to stop her from attending goldbergsegalla.com
A. I personally believe that one of the greatened challenges we face today is recognizing and overcoming our implicit biases. If we can do that, many other pieces will fall into place and I’m not alone in thinking that. In New York, for example, the Continuing Legal Education Board issued a new category of required CLE credit pertaining to diversity, inclusion, and the elimination of bias, based not only on gender, but also race, ethnicity, national origin, sexual orientation, gender identity, religion, age, or disability. In addition, professional women (and, for that matter, any professionals) are not immune from #MeToo harassment, which must be eradicated at all levels. Q. What inspired you during your research? A. I was inspired by how amazingly gutsy these trailblazing women were or are. But also, how so many of them gave back to their communities―from the first Native American female doctor, Susan LaFlesche, who turned down lucrative offers to return to her Omaha reservation to practice medicine, to the present day example of Beth Elaine Mooney’s contributions serving on the Board of the Cleveland Clinic Foundation, to name but a few. Q. Can you tell me a little about the Goldberg Segalla Women’s Initiative? A. Happy to―it’s an internal effort designed to empower female attorneys and administrators at Goldberg Segalla with professional development, mentoring, and networking opportunities, and to create lasting positive change for women in the firm and beyond. Q. Any parting thoughts? A. Yes, you may have noticed that the majority of the authors in this edition of PLM, for which I served as the editor, are women. To some extent that is just the way it turned out for this particular issue. However, it’s also reflective of our firm where we not only have a formal women’s initiative, but a culture which stresses teamwork. I can count on my team, including a group of dedicated women, to support me, in my effort to produce a quality edition―further busting the myth that women do not help other women to advance. Winter 2020 | 19
Uncharted Territories
On the eve of Women’s History Month, a timeline of the pioneering accomplishments of professional women. BY COLLEEN M. MURPHY
Susan LaFlesche becomes first Native American female doctor
Elizabeth Blackwell becomes first woman to receive a medical degree
Christine Ross becomes America’s first female CPA
LaFlesche enrolls in the Women’s Medical College of Pennsylvania at a time when even white women face severe discrimination. The college was the second medical institution in the world established to train women to earn an M.D. Upon graduating, she returns to the Omaha reservation where she grew up to serve as the only doctor for 1,244 patients spread across 1,350 square miles.
Because she is a woman, Ross—a native of Nova Scotia, Canada—has to wait more than six months to get her scores after taking New York’s inaugural CPA exam. During the delay, the New York Board of regents evaluates whether to award her certificate despite her having the second- or third-highest score in her group. Finally, the board issues Ross Certificate Number 143.
Louise Bethune becomes America’s first female architect with her own firm
On the question of whether Geneva Medical College should accept Bristol, England, native Elizabeth Blackwell as a student, the men vote yes—as a joke. Never before has a woman received a medical degree from Geneva—or anywhere else. Blackwell is undaunted, however. She proceeds to graduate and goes on to set up a medical clinic for the poor in New York City.
Bethune apprentices with a prestigious architectural firm in Buffalo and then goes on to make her mark as an architect. Her work includes Buffalo’s Hotel Lafayette. The redbrick French Renaissance-style building opens its doors in June 1904 and is hailed as one of America’s finest hotels. Fun fact: Bethune also has the distinction of being the first woman in Buffalo to buy a bicycle.
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Lucy Hobbs Taylor becomes first woman to graduate from dental school
Maggie L. Walker becomes first woman to charter a bank and first woman bank president
After repeatedly being denied admission to dental school because she’s a woman, Taylor takes an apprenticeship, opens her own practice, and then, after moving her practice to Iowa, finally is admitted— at Ohio College of Dentistry. In partnership with her husband, a Civil War veteran to whom she taught dentistry, Taylor establishes, in Kansas, one of the more successful practices of its time.
If society will not admit of woman's free development, then society must be remodeled. Elizabeth Blackwell
Colleen M. Murphy is the leader of the firm’s insurance agents and brokers practice within its Management and Professional Liability group. 20 | PLM
Walker, whose mother is a former slave, grows up in Richmond, Virginia, during the Jim Crow-laws era. She founds a bank, becoming the first woman in America to do so. She starts a newspaper. She is a humanitarian and a teacher, working to create opportunities in her community. In 2017, Richmond celebrates Walker with a larger-than-life bronze statute honoring her achievements.
Arabella Mansfield becomes America’s first female lawyer Rather than going to law school, Mansfield studies for two years in her brother-in-law’s office. Then she passes the bar exam in Iowa after successfully challenging that state’s men-only statute, paving the way for women and minorities to practice law. Mansfield becomes an English professor at Iowa Wesleyan College and, later, dean of the school of art and music at De Paul University.
Women’s History Month, which recognizes women’s contributions to society and history, is observed in March in Australia, the United Kingdom, and the United States, and in October in Canada. Many successful professionals in a wide range of fields are now women, but that was not always the case. Here is a timeline of firsts for professional women, offered to inspire us all as we take on today’s challenges and prepare to celebrate the successes of tomorrow. Kuma Elizabeth Ohi becomes first Japanese-American female lawyer
Johanna Lucht becomes NASA’s first female deaf engineer involved in a live mission
Born in Chicago, she overcomes detainment after the bombing of Pearl Harbor―Arthur Goldberg, an attorney who employs her as a legal secretary and will go on to become an Associate Justice of the U.S. Supreme Court, helps her win her release—and she goes on to attend John Marshall Law School and practice law. Later her name changes to K. Elizabeth Owen.
Lucht moves when she is a child to Alaska to enroll in programs for the deaf. She becomes interested in science, technology, engineering, and mathematics. She ignores three email offers from NASA for an internship before finally accepting.
Serena Auñón-Chancellor becomes first Hispanic female doctor to become an astronaut
Muriel F. “Mickie” Siebert becomes first woman with a seat on the New York Stock Exchange
Initially hired by NASA to help with medical operations for the International Space Station, Chancellor is later chosen to be an astronaut and has her first mission in 2012, piloting a DeepWorker 2000 Submersible for an exploration mission off Key Largo, Florida. She also has a degree in engineering.
In Siebert’s time, women are allowed only on the floor of the exchange, but Siebert gets a seat and advocates for other women in finance, donating millions of dollars to businesses helping women get started in the field. In 1977, Siebert is appointed as the first female Superintendent of Banking for New York State. “Do not be afraid to go into uncharted territories,” she says.
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Mary T. Washington becomes one of America’s the first black female CPAs
Katharine Graham becomes first female CEO of a Fortune 500 company
Beth Elaine Mooney becomes first woman to be CEO of a top-20 U.S. bank
In 1963, after her husband committed suicide, Graham became president of The Washington Post. She supported the newspaper’s investigation of the Watergate scandal and she received a Pulitzer Prize for her autobiography, Personal History. “What I essentially did,” she says. “was to put one foot in front of the other, shut my eyes and step off the ledge. The surprise was I landed on my feet.”
The bank is KeyCorp, in Cleveland, Ohio. Mooney’s success follows a period of unemployment. In 1979, she walks unannounced into Republic Bank in Dallas and spends three hours persuading the training manager to hire her. “I just nicely and basically refused to leave until he offered me a job,” she says.
Washington begins her career after high school, in the 1920s, at Binga State Bank, one of the nation’s largest black-owned banks. She spends her career training other CPAs. Her partner, Hiram Pittman, whom she hired as a newly minted CPA, describes their firm as an Underground Railroad for black accountants, who come from across the United States to gain experience there.
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Haley Moss is the first openly autistic female lawyer admitted to the Florida Bar Sandra Day O’Connor becomes first female U.S. Supreme Court Justice Even after graduating third in her class from Stanford Law School in 1952 and serving on the Stanford Law Review, O’Connor has trouble getting a job as a lawyer because she is a woman. “I never thought for a moment that I’d have trouble getting a job. But I couldn’t get an interview,” she says. She serves on the Supreme Court until 2006. In 2009, President Obama awards her the Presidential Medal of Freedom.
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At age three, Haley is diagnosed with autism, is non-verbal, and attends special-education classes. Later, she takes mainstream classes. She defies doctors’ predictions that she will never live on her own or have a full-time job. She authors three books, including one about growing up as a female with highfunctioning autism, titled What Every Autistic Girl Wishes Her Parents Knew.
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TOP 5
Don’t Blink. You’ll Miss the Parade. Weird St. Patrick’s Day traditions and trivia How much do you know about St. Patrick’s Day? You probably know people drink green beer and get so hungover they turn themselves green. You might even know Chicago dyes its river green, McDonald’s sells Shamrock Shakes, and you’re supposed to wear green or else. But there probably are some things about St. Patrick’s Day you don’t know, either because they’re too obscure or too bizarre. No worries; that’s where we come in. Just as Valentine’s Day has some weird traditions and trivia—in Norway and Denmark there is a tradition dating back to the 18th century where people send their admirers a “gaekkebrev” or a “joking letter” —so, too, does St. Patrick’s Day. Here are a few:
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Did you know St. Patrick’s name wasn’t Patrick? Seriously. It was Maewyn Succat. Our hero apparently didn’t care much for that, though. Whether friends in middle school teased him with unfortunate sound-alike derivatives or he simply was displeased because M-A-E-W-Y-N S-U-C-C-A-T was too long to tattoo on his knuckles isn’t altogether clear, but eventually the man who would be St. Patrick chose to be called Patricius. He also is said to have answered occasionally to Magonus, Succetus, or Cothirthiacus. Anything, it would seem, except for Maewyn. Or Bob. There’s no record of St. Patrick ever being called Bob.
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In San Francisco on St. Patrick's Day, it is said, the city has been known to hold snake races.
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St. Patrick's Day is bigger in the United States than in Ireland, but nowhere is it as big as in Montserrat in the Caribbean, where the St. Patrick's festivities go on for a week. Montserrat is the only nation in the world other than Ireland that considers St. Patrick's Day a national holiday, according to irishcentral.com.
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In Enterprise, Alabama, a city of 25,600 in the southeastern part of the state, they have held a party for one person every St. Patrick's Day since 1993. A different person of Irish descent holds the Irish flag high above his or her head, carries a pot o' gold, and recites limericks while walking past the local courthouse and around the Boll Weevil Monument.
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You’ve attended St. Patrick’s Day parades. It’s the thing to do when you’ve nothing better to do. After all, everyone loves a parade! At least until they don’t! Let’s face it: Some parades go on for too long and become, well, boring. After the Mustang convertible jammed with a local band playing “Danny Boy,” the floats can rapidly lose their appeal. Nobody wants to see a meat-pie sculpture in a Radio Flyer. Well, in Hot Springs, Arkansas, they’ve come up with the perfect solution: one of the world’s shortest St. Patrick’s Day parades. It traverses only 98 feet—which is the length of that town’s Bridge Street, named by Ripley’s as the shortest street in the world. How long is 98 feet? Consider: a. The world’s longest bus is 98 feet. b. A regulation basketball court from baseline to baseline is 94 feet. c. A major league pitching mound is 60 feet, six inches from home plate. All of which is to say 98 feet isn’t long at all for a parade, even one traveling much more slowly than Aroldis Chapman’s fastball.
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Details, Details Judge dismisses claim of injured worker who can’t keep his story straight He injured his knee saving the bread. That’s what he alleged in his worker’s compensation claim. But when the bakery-warehouse employee testified about the accident, it wasn’t his knee that he described getting hurt. “I was pushing out a dolly—a stack of bread, actually—out to the [truck] trailer and the front of the dolly must have gotten caught on the lip of the trailer,” the worker said at a hearing. “The [bread] stack started sliding off the dolly, and as I tried to grab it the tail end of the dolly hit my shin.” “How did you injure your knee,” Goldberg Segalla associate Bola Awujoola asked during cross-examination, “if you got hit in the shin?” Soon thereafter, the defense decided to make its closing statement, Bola says, “while waiving the right to cross-examine the treating doctor, waiving the right to obtain an [independent medical examination], and waiving the right to call our witnesses.”
How did you injure your knee if you got hit in the shin? “The crux of our argument was that there is no nexus between the claim and the diagnosis,” he says. “We argued that the claimant’s mechanism of injury was to his left shin while his claim was for the left knee and left quad.” Bola, a member of Goldberg Segalla’s Workers’ Compensation group, also called the judge’s attention to the man’s four conflicting accounts of how he was injured. The only detail that remained the same was the number of trays of bread on the dolly: 17. Agreeing with Bola’s assessment of the case, the judge dismissed the claim—a decision upheld on appeal.
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