Jenner & Block

Spotlight Newsletter Resource Center

Jenner & Block is excited to introduce “The Spotlight,” an electronic monthly newsletter from the Litigation Department Chair, Craig C. Martin, designed to highlight recent cases and legislative developments from across the United States.  Additionally, The Spotlight recaps the high impact Litigation Department news, upcoming events and publications of interest.

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Topics Covered

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  • Arbitration Clause In Law Firm Engagement Letter Did Not Support Class Arbitration.
    By: Howard S. Suskin

    An arbitration clause in a law firm’s engagement letter was found not to support the client’s attempt to pursue its breach of privacy claim as a class action.  Shore v. Johnson & Bell, No. 16-CV-4363 (N.D. Ill. Feb. 22, 2017).  The court found that the arbitration clause did not explicitly or implicitly agree to the use of class arbitration.  The court noted that the engagement letter made clear that the agreement is between the law firm and a particular client or clients.  The court found unpersuasive the client’s argument that the use of form client engagement letters means that the law firm and other absent parties contracted and intended to engage in class arbitration.

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  • Chancery Court Rules Former Stockholder Lacks Standing In Books And Records Suit.
    By: David P. Saunders

    In a case of first impression in Delaware, the Chancery Court dismissed a former shareholder’s books and records complaint for lack of standing.  Weingarten v. Monster Worldwide, Inc., C.A. No. 12931-VCG (Del. Ch. Feb. 27, 2017).  In Weingarten, the plaintiff shareholder held shares of Monster on August 8, 2016, when Monster entered into a merger agreement with a third party.  The merger included a tender offer for all of Monster’s outstanding shares.  On October 19, 2016, plaintiff’s counsel sent a Section 220 books and records demand to Monster in order “to determine whether it is appropriate to pursue litigation against all or some members of the Board for alleged wrongdoing in connection with the Merger.”  On October 26, 2016, Monster rejected the demand, but expressed a willingness to negotiate “a narrowly tailored production.”  On that same day, plaintiff’s counsel sent another letter expressing his expectation “that the company will refrain from asserting any argument that Mr. Weingarten lost standing to inspect documents because the merger closed before he filed his complaint.”  Monster did not respond until October 28, 2016, saying that it would not waive any defense.  Before any production of documents, on November 1, 2016, the merger closed and plaintiff’s Monster shares were cancelled.  Monster then wrote to plaintiff’s counsel and said that the demand for books and records was “moot” because the plaintiff no longer held any shares.  The plaintiff ultimately filed his lawsuit on November 22, 2016, and defendants moved to dismiss because, among other reasons, the plaintiff lacked standing.

    The Chancery Court agreed with defendants, and rejected the application of an equitable estoppel defense based on Monster’s October 26, 2006 letter.  In interpreting Delaware’s books and records statute, the court concluded that the “plain language” of that statute has a two-pronged requirement for standing:  first, a current shareholder must make a formal demand, and second, at the time suit is filed, the demanding party must be a shareholder.  Because the plaintiff in Weingarten no longer held shares, he lacked standing to pursue his complaint.  This case creates an important precedent for any company that receives a books and records demand shortly before a cash tender merger is set to close.

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Class Actions

  • Court Awards Class Counsel Fees of $167 Million in VW Class Action.
    By: Michael T. Brody

    The class action alleging consumer fraud and other claims against Volkswagen due to its use of software designed to cheat emission tests and deceive regulators resulted in the establishment of a funding pool of more than $10 billion.  Class counsel indicated at the time of settlement approval that they would not seek more than $324 million in fees.  Ultimately, counsel sought less – they submitted a fee application for $167 million, plus $8 million in costs.  On March 17, 2017, the district court granted the petition.  In re Volkswagen “Clean Diesel” Mktg., Sales Practices, and Prod. Liab. Litig., MDL No. 2672 (N.D. Cal. Mar. 3, 2017).  After reviewing Ninth Circuit law, which permits a benchmark for attorneys’ fees in common fund actions of 25%, the district court addressed the result obtained (the awarded fee was less than 2%), which was notable in light of the short duration of the case, the litigation risk, the benefit of non-monetary relief, reactions from class and objectors, and other factors.  The court also applied a lodestar crosscheck and calculated a lodestar of $63.5 million, with a multiplier of 2.63.  Based on all of these factors, the court found the request reasonable and approved the request in its entirety.

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Complex Commercial Litigation

By: Matthew J. Thomas

  • Supreme Court:  Credit-Card Surcharge Law Regulates Free Speech.
    New York General Business Law § 518 provides that no seller may impose a “surcharge” on a customer who elects to pay with a credit card in lieu of payment by cash or check.  In Expressions Hair Design v. Schneiderman,No. 15-1391 (U.S. Mar. 29, 2017), a group of New York businesses filed suit, arguing that the law violates the First Amendment.  The district court ruled in favor of plaintiffs, but the Second Circuit reversed, holding that the law regulates pricing conduct, not speech, and thus did not violate the First Amendment.  The U.S. Supreme Court vacated and remanded, holding that the law did, in fact, regulate free speech.  Giving deference to the lower court’s interpretation of the statute, the Court determined that the law prohibited only “surcharges” for credit-card purchases, and did not preclude discounts or other types of differentiated prices for cash purchases.  Thus, the law merely prevented merchants from publishing a single sticker price, and then charging a customer an additional amount for paying with a credit-card.  The Court reasoned that § 518, therefore, was not a typical price regulation, in that it did not mandate the total amount merchants are allowed to collect from a cash or credit card payer; rather, it only regulates how sellers may communicate their prices by prohibiting sellers from posting a base (cash) price and an additional credit-card surcharge expressed as either a percentage or dollars-and-cents amount.  Because, at bottom, the law regulates how sellers must communicate their prices, the Court concluded that § 518 regulates speech, and remanded the matter for a determination of whether the law can survive First Amendment scrutiny.

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  • High Court:  Laches Not a Defense to Patent Claim Within Limitations Period.
    In SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC, No. 15-927 (U.S. Mar. 21, 2017), the U.S. Supreme Court held that laches cannot be asserted as a defense against a damages claim that falls within the Patent Act’s six-year limitations period.  In this case, the district court held that, although plaintiff’s patent infringement claim was within the Act’s six-year limitations period, 35 U.S.C. § 286, it was nonetheless barred by the doctrine of laches.  The Federal Circuit affirmed, holding that because § 286 of the Patent Act begins with the phrase “[e]xcept as otherwise provided by law,” it codified laches as a defense to all patent infringement claims, including claims for damages suffered within the six-year limitations period.  But the Supreme Court vacated, holding that even assuming the preamble to § 286 incorporated a laches defense of some dimension, it does not follow that this defense may be invoked to bar a claim for damages incurred within the limitations period set out in § 286.  To hold otherwise would mean that Congress chose to include in the Patent Act both a statute of limitations and a laches provision applicable to a damages claim – something that “would be exceedingly unusual, if not unprecedented.”  The Court concluded that the reasoning from its prior decision in Patrella v. Metro-Goldwyn-Mayer, Inc., 134 S. Ct. 1962 (2014) – holding that laches was unavailable as a defense to claims falling within the Copyright Act’s three-year limitations period – was equally applicable here:  laches is a gap-filling doctrine, and where there is a statute of limitations, there is no gap to fill.  Thus, the general rule remains that laches cannot be invoked to bar a claim for damages incurred within a limitations period specified by Congress.

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  • Third Circuit Allows Mixed-Motive Retaliation Claim Under FMLA.
    In Egan v. Delaware River Port Authority, No. 16-1471 (3d Cir. Mar. 21, 2017), plaintiff sued his employer alleging, among other things, retaliation in violation of the Family and Medical Leave Act (FMLA).  At trial, plaintiff requested that the jury be instructed on a “mixed-motive” theory of retaliation; the district court denied the request, ruling that a mixed-motive instruction was not available in the FMLA context and, in any event, plaintiff had failed to proffer any direct evidence of retaliation.  On appeal, the Third Circuit reversed.  Although the FMLA does not specifically provide for retaliation claims, the court looked to the Department of Labor’s (DOL) regulation stating that the FMLA prohibits an employer from retaliating against an employee for having exercised FMLA rights, and that “employers cannot use the taking of FMLA leave as a negative factor in employment actions.”  29 C.F.R. § 825.220(c).  Applying the Chevron test, the court concluded that the DOL’s regulation is a reasonable interpretation of the FMLA.  The court further held that, consistent with this regulation, an employee does not need to prove that invoking FMLA rights was the sole or even the most important factor upon which the employer acted, so long as it was “a negative factor” in the adverse employment action.  Thus, an employee may bring an FMLA retaliation claim under a mixed-motive theory.  In addition, direct evidence is not required under a mixed-motive theory of liability; an employee need only proffer evidence – direct or circumstantial – from which a reasonable jury could conclude that the employee’s use of FMLA leave was a negative factor in the employment decision at issue.

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Electronic Discovery

By: Daniel J. Weiss

  • Form Objections to ESI Requests for Production Violate FRCP 26 & 34.
    In Fischer v. Forrest, 14 Civ. 1304 (PAE) (AJP), 14 Civ. 1307 (PAE) (AJP) (S.D.N.Y. Feb. 28, 2017), Magistrate Judge Andrew J. Peck issued a strongly-worded decision criticizing a party’s “form” objections to requests to produce documents, including electronically stored information.  First, Judge Peck disapproved of the use of general objections because they fail to state objections with specificity, as required under Rule 34(b)(2)(B), or to indicate whether any responsive materials were being withheld on the basis of the objections, as required under Rule 34(b)(2)(C).  Judge Peck opined:  “General objections should rarely be used after December 1, 2015[.]”  Second, Judge Peck held that objections made “to the extent [requests] call for the disclosure of information that is not . . . likely to lead to the discovery of relevant, admissible evidence” no longer conform to Rule 26(b)(1).  Rule 26(b)(1) was amended December 1, 2015, to limit discovery to material “relevant to any party’s claim or defense” and no longer includes information “likely to lead” to evidence.  Third, Judge Peck called objections that the requests were “overly broad and unduly burdensome”  “meaningless boilerplate.”  Fourth, Judge Peck disapproved of the responding party’s failure to indicate any timeline for its productions.  Judge Peck ordered the responding party to revise its responses.  In conclusion, Judge Peck ordered: “From now on in cases before this Court, any discovery response that does not comply with Rule 34’s requirement to state objections with specificity (and to clearly indicate whether responsive material is being withheld on the basis of objection) will be deemed a waiver of all objections (except as to privilege)” (emphasis added).

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  • Electronic Drop Box with Public URL No More Secure than “Bench in the Public Square.”
    In Harleysville Insurance Co. v. Holding Funeral Home, Inc., No. 1:15cv00057 (W.D. Va. Feb. 9, 2017), an insurance declaratory judgment action, the plaintiff insurance company used the file-sharing site “Box” to share ESI with the third-party National Insurance Crime Bureau (“NICB”).  Critically, the plaintiff failed to use a password to protect its Box site, leaving its ESI accessible to “any person who had access to the internet . . . simply by typing in the URL address in a web browser.”  When defendant subpoenaed NICB, an email containing the Box URL address was produced.  Defendant subsequently used the Box URL address to access the site and download all of plaintiff’s stored ESI without notifying the plaintiff.  When defendant then produced plaintiff’s own ESI in discovery, plaintiff moved to disqualify defense counsel for having accessed plaintiff’s ESI, which included material covered by the attorney-client privilege and the work product doctrine.  The court, applying Virginia privilege law, found that plaintiff had not used reasonable precautions to prevent disclosure when it used the Box site without password protection.  Because “its actions were the cyber world equivalent of leaving its claims file on a bench in the public square and telling its counsel where [to] find it,” the plaintiff had waived any attorney-client privilege.  Applying federal law, the court further held that that Federal Rule of Evidence 502 did not protect the ESI as work product because plaintiff’s disclosures were not inadvertent nor were plaintiff’s precautions reasonable.  Accordingly, the court denied plaintiff’s disqualification motion.  However, the court also sanctioned the defendant, taxing plaintiff’s costs for bringing the motion, because defendant had not revealed plaintiff’s disclosure nor sought a court determination on the waiver issues, despite clear confidentiality legends on the NICB email containing the Box URL address.

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  • Court Orders Google to Comply with Warrant to Produce User ESI Stored in Ireland.
    In In re Search Warrant No. 16-960-M-01 to Google, Misc. No. 16-960-M-01 (E.D. Pa. Feb. 3, 2017), a Pennsylvania-based U.S. magistrate judge ordered Google to comply with two FBI search warrants, issued pursuant to Section 2703 of the Stored Communications Act (SCA), to produce emails stored on servers in Ireland. The court’s decision runs contrary to an earlier ruling of the U.S. Court of Appeals for the Second Circuit, which held that Microsoft was not required to produce emails stored in Ireland.  See Matter of Warrant to Search a Certain E-Mail Account Controlled & Maintained by Microsoft Corp., 829 F.3d 197 (2d Cir. 2016).  The court reasoned that “the conduct relevant to the SCA’s focus will occur in the United States” because the invasion of privacy will not occur until “the FBI reviews the copies of the requested data in Pennsylvania.”  By contrast, “[e]lectronically transferring data from a server in a foreign country to Google’s data center in California does not amount to a ‘seizure’ [under Fourth Amendment principles] because there is no meaningful interference with the account holder’s possessory interest in the user data.”  Accordingly, the court held that compelling production of the emails “involve[d] a permissible domestic application of the SCA, even if other conduct (the electronic transfer of data) occurs abroad.”

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  • “Unusually Deplorable” Conduct in Theft/Destruction of ESI Garners $7 Million Sanctions.
    In Shawe v. Elting, No. 487, 2016 (Del. Feb. 13, 2017), the Delaware Supreme Court affirmed a sanctions award of over $7 million against the appellant/plaintiff for theft of the appellee/defendant’s ESI and destruction of his own, conduct the Court of Chancery and the Delaware Supreme Court both called “unusually deplorable.”  Among other acts, plaintiff had broken into defendant’s office with a computer forensics expert to image defendant’s hard drive; used remote access to defendant’s computer at least 44 times on 29 different occasions to access 19,000 emails, including 12,000 privileged communications between defendant and her lawyer; destroyed his own cell phone under the pretense that the phone had been dropped in a cup of soda and found in a drawer with rat droppings; deleted nearly 19,000 files from his laptop; and lied in discovery, at trial, and in post-trial briefings, leading the court to make false factual findings.  The Chancery Court sanctioned plaintiff 100% of defendant’s fees and expenses in bringing the sanctions motion plus 33% of the fees defendant incurred in litigating the merits of the underlying suit – a total of $7,103,755.  The Delaware Supreme Court affirmed:  plaintiff had deleted files from his laptop “in the face of two litigation hold notices, one of which he issued, and an expedited discovery order that permitted [defendant] to conduct forensic discovery of [plaintiff’s] laptop.”  The court found that the fact that most of the deleted files were recovered due to the laptop’s volume shadow copy system “[did] not negate [plaintiff’s] illicit intent.”  The court further held that the Chancery Court had not failed to afford criminal due process or abused its discretion in “impos[ing] a civil sanction against the plaintiff for his repeated lies under oath.”

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Investigations, Compliance and Defense

By: Erin R. Schrantz

  • DOJ Signals Possible Extension of FCPA Pilot Program.
    The DOJ is evaluating whether to extend its FCPA Pilot Program, originally scheduled to end on April 5th of this year.  In remarks to the American Bar Association National Institute on White Collar Crime, Acting Assistant Attorney General Kenneth Blanco said that as the initial, one-year period of the Pilot Program comes to a close, DOJ will be “evaluating the utility and efficacy” of the program in determining “whether to extend it.”  Until DOJ reaches a final decision, however, “the program will continue in full force.”  Blanco highlighted the Pilot Program’s goal of providing more transparency and consistency for corporate resolutions, including “clear metrics for what constitutes voluntary self-disclosure, full cooperation and full remediation.”  Fraud Section Chief Andrew Weissmann launched the Pilot Program in April 2016.  At the time, DOJ said the program aimed to promote accountability by motivating companies “to voluntarily self-disclose FCPA-related misconduct, fully cooperate with the Fraud Section, and, where appropriate, remediate flaws in their controls and compliance programs.”  The program provided motivation for self-reporting by making companies and individuals choosing to voluntarily self-report eligible for far greater credit that those who elected not to self-report.  Self-reporting credits could include a reduction of up to fifty percent below the low end of the applicable fine range according to U.S. sentencing guidelines, as well as possibilities of pursuing remediation without the appointment of a monitor and even declination of prosecution.

    In the program’s one year so far, DOJ has issued five declinations for self-reporting entities.  All five of those entities adhered to the self-reporting criteria of the program, namely: (1) voluntary self-disclosure; (2) full cooperation in FCPA matters, and (3) timely and appropriate remediation.

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  • Criminal Investigation of ING for Alleged Involvement in VimpelCom Corruption Scandal.
    Dutch prosecutors announced their investigation of Netherlands-based bank ING for its alleged involvement in money laundering and corruption in Uzbekistan, according to a disclosure made by the bank to the Securities Exchange Commission on March 20, 2017.  According to the Dutch prosecutors, the subject of the investigation includes “unusual payments by VimpelCom to the company of an Uzbek government official."  ING’s disclosure to the SEC acknowledged the criminal investigations into ING for “various requirements related to the on-boarding of clients, money laundering and corrupt practices.”  U.S. authorities have served information requests to ING, and ING has indicated its cooperation in responding to those requests.  Documents filed in the U.S. District Court for the Southern District of New York early last year reveal that the Uzbek official at the center of the investigation is the late President, Islam Karimov.  U.S. prosecutors claimed that of the $800 million paid in bribes, $184 million originated from ING.  In February 2016, VimpelCom paid $795 million to settle the charges, and admitted paying more than $114 million in bribes to a government official in Uzbekistan through a shell company between 2006 and 2012.

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Privilege Issues

By: David M. Greenwald

  • Assertion of Privilege Cannot Create an Adverse Inference.
    In United States ex rel. Barko v. Halliburton Co., Case No: 05-cv-1276-RCL (D.D.C. Mar. 14, 2017), the district court held that a party’s proper assertion of the attorney-client privilege cannot result in an adverse inference against that party.  This qui tam case had twice been before the D.C. Circuit Court of Appeals, which overturned the district court’s rulings that: (a) an internal investigation conducted pursuant to a company’s Code of Business Conduct or in accordance with government regulations is not privileged even if conducted at the direction of counsel (KBR I); and (b) that KBR had waived privilege because its in-house attorney reviewed internal investigation documents in preparation for his deposition (KBR II).  In KBR I, the appellate court held that the investigation conducted by KBR was protected just as the investigation at issue in U.S. v. Upjohn was within the privilege.  So long as a significant purpose of an investigation is legal, the fact that it also serves business interests does not preclude a party from asserting attorney-client privilege.  In March 2017, the district court granted KBR’s motion for summary judgment.  In response to KBR’s MSJ, relator Barko argued, among other things, that the court should apply an adverse interest against KBR for refusing to produce its investigation findings.  The court rejected Barko’s argument and held that no adverse interest can result from a valid assertion of attorney-client privilege.  The court explained that allowing such an inference would undermine the privilege, discouraging persons from seeking legal advice, or discouraging lawyers from giving honest opinions.  “Such a penalty for invocation of the privilege would have seriously harmful consequences.”

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  • Deposition Testimony Regarding Strategy Resulted in Broad Subject Matter Waiver.
    In Sprint Communications. Co., L.P. v. Comcast Cable Communications, LLC, No. 11-2684-JWL (D. Kan. Feb. 23, 2017), a patent infringement matter, the court considered the proper scope of waiver where defendant Comcast waived privilege during discovery.  In a related matter pending between the parties in another jurisdiction, the court ruled that if Comcast intended to present trial testimony regarding its patent acquisition policy, it must do so through a non-lawyer who must first sit for a deposition and produce all documents related to such a policy.  Although Comcast had previously asserted privilege over this issue, Comcast responded to the court’s ruling by producing previously withheld documents and allowing its Vice President of Strategic Intellectual Property to testify about the company’s strategy to acquire high quality, litigation-grade patents that it could assert defensively.  The new documents indicated that Comcast had applied this strategy in anticipation of litigation that could be brought against Comcast by Sprint and others.  Sprint argued that this waiver required full disclosure of documents discussing Comcast’s defensive acquisition strategy and the timing of Comcast’s anticipation of litigation against Sprint.  The court agreed, holding that fairness requires broad disclosure to prevent a selective and potentially misleading presentation of evidence.

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  • Lawyer Holding Inactive License Cannot Form Attorney-Client Relationship.
    In John Ernst Lucken Revocable Trust v. Heritage Bankshares Group, Inc., No. 16-CV-4005-MWB (N.D. Iowa Feb. 15, 2017), defendants sought to depose Peterson, who had provided plaintiffs with advice on several of plaintiffs’ projects over many years, but who had not held an active attorney’s license for more than ten years, with the exception of one short period.  The court noted that no direct case law existed in the Eighth Circuit on this point.  The court found that the general rule in other courts is that an attorney-client privilege cannot attach where the communications are not made with a member of the bar, except where the person asserting the privilege had a reasonable but mistaken belief that the person to whom they were communicating was in fact a licensed attorney.  Here, Peterson had been actively licensed in Colorado, and changed his status to “inactive” when he moved to Florida to advise plaintiffs.  The court noted that the state of Colorado, where Peterson held his only license to practice law, would not consider him eligible to practice under inactive status.  The court also found that plaintiffs failed to demonstrate that they had a reasonable belief that Peterson was licensed to practice law, and that the evidence presented by Peterson indicated that plaintiffs knew that Peterson had gone on “inactive” status and that he would not likely renew his previous “active” status.  Defendants, therefore, were free to depose Peterson as a non-lawyer occurrence witness.

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Professional Responsibility and Ethical Developments

By: Gregory M. Boyle and John R. Storino

  • Former Exec Alleges Wrongful Termination After Complaining About Evidence Destruction.
    On February 8, 2017, a former Vice President of Claims at Chubb Corp. filed a whistleblower lawsuit in New Jersey state court alleging that he was fired after he raised concerns with an in-house lawyer and a manager that the company was destroying documents subject to a legal hold in ongoing insurance litigation.  See Complaint, Guerriero v. Chubb (N.J. Sup. Ct. Feb. 8, 2017).  Guerriero alleges that he was copied on a 2013 email from an IT employee stating that he had removed from the company’s server all calls relating to an ongoing litigation matter, which was subject to a legal hold.  In January 2014, Chubb’s in-house counsel allegedly approved of destruction of tapes related to the claim.  When Guerriero was being prepared for deposition in that legal matter, counsel advised him not to volunteer information about the tapes, which Guerriero felt was a “strong-arm tactic” to keep him quiet about evidence destruction.  The issue did not come up in the deposition.  Several months later, Guerriero complained to Chubb’s employment lawyer that he was upset about the evidence destruction, and the lawyer said he was investigating.  In 2015, Guerriero refused to sign Chubb’s annual compliance code of conduct, which contained a statement that Chubb complied with legal holds and did not condone improper destruction of documents.  Later that year, Chubb’s reinsurers refused to pay the settlement of the legal matter involving evidence destruction, and Guerriero again complained to the manager in charge of the settlement.  Guerriero alleges that same manager filed a frivolous grievance against him a month later.  Two months later, Chubb merged with another company, and three months after that Guerriero was fired.  Guerriero alleges his termination was not consistent with his performance in the position.

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  • Ninth Circuit Widens Circuit Split on Breadth of Anti-Retaliation Whistleblower Provisions.
    On March 8, 2017, the Ninth Circuit issued a 2-1 decision holding that Dodd-Frank’s anti-retaliation employment protections apply to whistleblowers who report alleged wrongdoing to agencies or persons other than the SEC.  Somers v. Digital Realty Trust, Inc., No. 15-17352 (9th Cir. Mar. 8, 2017).  The decision adds to the circuit split on that question: the Fifth Circuit held in 2013 that whistleblowers must report to the SEC for the anti-retaliation provisions to apply, while the Second Circuit held in 2015 that because the anti-retaliation provisions are ambiguous, courts must defer to the SEC’s guidance which, in effect, extends protections to all those who report suspected violations, whether internally or to the SEC.  The circuit split is set to widen further, as the Third Circuit currently has before it a whistleblower case raising the same question.  In Somers, the majority held that the district court correctly denied Digital Realty’s motion to dismiss a lawsuit by one of its former Vice Presidents, who alleges he was fired in retaliation for complaining to senior management that his supervisor eliminated internal controls required by Sarbanes-Oxley.  The dissenting judge agreed with the Fifth Circuit’s interpretation limiting anti-retaliation protections to those who complain to the SEC.

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  • Supreme Court Denies Cert. Petition Seeking Whistleblower Status for Reporting to FBI.
    On March 20, 2017, the U.S. Supreme Court denied the cert petition of a former banker at Morgan Stanley, John Verble, who asked the Court to find he is entitled to be classified as a whistleblower for reporting insider trading allegations to the FBI.  See Verble v. Morgan Stanley Smith Barney, LLC, 137 S. Ct. 1348 (Mar. 20, 2017).  The trial court held that Verble could not file a retaliatory firing suit under Dodd Frank, finding that he was not a whistleblower because he did not report his allegations to the SEC before he was fired.  The Sixth Circuit upheld the lower court decision, but found that it did not need to interpret Dodd Frank because Verble’s allegations of his work with the FBI were too vague to state a claim for relief. As discussed above, there is currently a circuit split as to whether Dodd-Frank’s whistleblower protections for retaliatory firings apply to reporting of allegations of impropriety to organizations other than the SEC.

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  • Jury Returns Verdict for San Francisco City Attorney Fired After Internal Whistleblowing.
    On March 17, 2017, a state court jury returned a $2 million verdict against the City and County of San Francisco for firing a former city trial attorney, Joanne Hoeper, in violation of the California Whistleblower Act and False Claims Act.  See Jury Verdict, Hoeper v. Herrera, No. CGC-15-543553 (Sup. Ct. Cal. Mar. 17, 2017).  Hoeper conducted a probe into an alleged $10 million scheme to file fraudulent claims for damage to private sewer lines by trees owned by the City of San Francisco, and alleged that she was fired after presenting the results of that probe to the City Attorney.  The City claimed that Hoeper’s supposed “whistleblowing” activities were a wild goose chase that did not result in any evidence of wrongdoing, and that Hoeper was fired for overall lackluster job performance. The verdict consisted of approximately $700,000 in lost earnings and $1.3 million in emotional distress.

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