This case, like other recent rulings of the Supreme Court, has an unusual procedural history, which will limit its applicability to future cases. However, it does provide an important reminder for all parties of the great compromise arbitration represents.

Sutter, a pediatrician, entered into a contract with Oxford, a health insurance company, to provide medical care to members of Oxford’s network and Oxford agreed to pay for those services at prescribed rates. Several years later, Sutter filed suit against Oxford in New Jersey Superior Court on behalf of himself and a proposed class of other New Jersey physicians under contract with Oxford, alleging that Oxford had failed to make full and prompt payments to the doctors, in violation of their agreements and various state laws.

Oxford moved to compel arbitration of Sutter’s claims, relying on an arbitration provision in their contract. The state court granted Oxford’s motion, thus referring the suit to arbitration.

In what must be a regrettable decision on the part of Oxford, the parties agreed that the arbitrator should decide whether their contract authorized class arbitration and the arbitrator determined that it did.

As Justice Alito explained in his concurrence, the arbitrator improperly inferred an implicit agreement to authorize class-action arbitration from the fact of the parties’ agreement to arbitrate and that it is far from clear that absent class members will be bound by the arbitrator’s ultimate resolution of the dispute.

After all, it is well-established that arbitration is a matter of consent, not coercion, and the absent members of the plaintiff class have not submitted themselves to this arbitrator in any way.

Class arbitrations that are vulnerable to such collateral attack allow absent class members to unfairly claim the benefit from a favorable judgment without subjecting themselves to the binding effect of an unfavorable one. However, because Oxford consented to the arbitrator’s authority by conceding that he should decide in the first instance whether the contract authorizes class arbitration, this argument was not available to it.

It is unlikely that other defendants will make the same mistake in light of this ruling, which will limit its impact going forward.

The greater lesson is in the arbitrator’s erroneous analysis of the parties’ contract. Justice Kagan, who wrote for the majority, explained that the potential for such mistakes are the price of agreeing to arbitration. Where an arbitrator’s decision concerns the construction of a contract, it holds, however good, bad or ugly.

In summary, Justice Kagan put it bluntly: “Oxford chose arbitration, and it must now live with that choice.”

In this rare instance, the misfortune of an arbitrator’s grave error fell on a defendant with the wherewithal to appeal the decision to the highest court in our nation, albeit unsuccessfully. More often, however, the misfortune will fall upon plaintiffs who are inexperienced with the arbitration process and whose individual damages do not warrant appeal.

Abbey Spanier, LLP, located in New York City, is a well-recognized national class action and complex litigation law firm.

Memorial Day was officially proclaimed on May 5, 1868 by General John Logan, national commander of the Grand Army of the Republic and was first observed on May 30, 1868, when flowers were placed on the graves of Union and Confederate soldiers at Arlington National Cemetery. The first state to officially recognize the holiday was New York in 1873.

Memorial Day often marks the start of the summer vacation season and Labor Day its end.  But did you know that on Memorial Day the flag is raised briskly to the top of the staff and then solemnly lowered to the half-staff position, where it remains only until noon. It is then raised to full-staff for the remainder of the day.  The half-staff position remembers the men and women who gave their lives in service of their country. At noon their memory is raised by the living, who resolve not to let their sacrifice be in vain, but to rise up in their stead and continue the fight for liberty and justice for all.

To help remind Americans of the true meaning of Memorial Day, the “National Moment of Remembrance” resolution was passed in 2000 and signed by President Clinton which asks that at 3 p.m. local time, for all Americans “To voluntarily and informally observe in their own way a Moment of remembrance and respect, pausing from whatever they are doing for a moment of silence or listening to ‘Taps.’”

Last year we posted several blog posts that covered the wave of class action lawsuits relating to the United States Treasury’s Home Affordable Modification Program (“HAMP”), including the Fletcher litigation against IndyMac Mortgage Servicers, FSB (a division of OneWest Bank, FSB) where Abbey Spanier is lead counsel.  See some of our posts located here, here and here.

HAMP was created by the federal government to combat the national foreclosure crisis. The program was specifically designed to allow eligible homeowners who are about to default on their mortgages to save their homes by modifying the terms of their loans. Despite the government’s noble intentions, HAMP has been criticized and viewed by many people as unsuccessful. One of the many problems with the HAMP was that mortgage service providers often unjustifiably denied requests for permanent modifications by losing paperwork, including documents showing borrowers financial hardship.

A few weeks ago, the Federal Housing Finance Agency (“FHFA”) announced that Fannie Mae and Freddie Mac will offer a new, simplified loan modification initiative to minimize losses and to help troubled borrowers avoid foreclosure and stay in their homes. Under the new initiative, many borrowers who are at least 90 days delinquent will be sent an offer that includes a Trial Period Plan specifying the dollar amount of their new mortgage payment based upon a fixed interest rate, extending the payment terms to 40 years, and providing principal forbearance for certain underwater borrowers.  Only those borrowers with loans more than 12 months old with a mark-to market loan-to-value ratio greater than 80 percent and who have not had two or more previous loan modifications will be solicited for participation in the program.

A key component of the new procedure is that borrowers will not be required to document their hardship or financial situations to receive a permanent modification. Under the program, after the borrower makes on-time payments during the three month trial period and meets necessary criteria, the borrower will receive a permanent mortgage modification. In a press release dated March 27, 2013, the FHFA explained that, “[t]he new Streamlined Modification Initiative eliminates the administrative barriers associated with document collection and evaluation. Eligible borrowers must demonstrate a willingness and ability to pay by making three on-time trial payments, after which the mortgage will be permanently modified.”

The new streamlined loan modification program is only available to those homeowners with loans owned or guaranteed by Fannie Mae or Freddie Mac.  The program will commence on July 1, 2013 and will expire on August 1, 2015.  If you have questions about the new initiative, you can find some helpful answers provided by the FHFA here.

Abbey Spanier, LLP, located in New York City, is a well-recognized national class action and complex litigation law firm.

Sunday, 28 April 2013 10:18By Lynn Parramore, AlterNet | Report

Healthcare Corp. filed a $7,500 offer of judgment (in addition to reasonable attorneys’ fees, costs, and expenses to be determined by the court) along with its answer to the complaint.  Healthcare Corp. stipulated that if the plaintiff did not accept the offer within 10 days after service, it would be deemed withdrawn.  The district court ruled on a motion to dismiss for lack of subject matter jurisdiction that the Rule 68 offer of judgment mooted plaintiff’s lawsuit and dismissed the case.  The Third Circuit reversed, ruling “that calculated attempts by some defendants to ‘pick off’ named plaintiffs with strategic Rule 68 offers before certification could short circuit the process, and, thereby, frustrate the goals of collective actions.”

The U.S. Supreme Court reversed the Third Circuit’s decision and began its analysis by noting that “[w]hile the Courts of Appeals disagree whether an unaccepted offer that fully satisfies a plaintiff’s claims is sufficient to render the claim moot, we do not reach this question, or resolve the split, because that issue is not properly before us.  The Third Circuit clearly held in this case that respondent’s individual claim was moot.”  The Supreme Court also noted that the plaintiff waived the mootness issue because she did not raise this argument in her petition for certiorari.  Therefore, the Supreme Court assumed that the Rule 68 offer mooted the plaintiff’s individual claim.  The Supreme Court concluded that the case was properly dismissed for lack of subject matter jurisdiction because the plaintiff had “no personal interest in representing putative, unnamed claimants, nor any other continuing interest that would preserve her suit from mootness.”

Abbey Spanier, LLP, located in New York City, is a well-recognized national class action and complex litigation law firm.

The New Jersey District Court action alleges that, after more than twenty-five years as a member of the company’s sales force, Quest terminated Ms. Seibert based on her age in violation of the New Jersey Law Against Discrimination (“LAD”). Ms. Seibert also claims that her termination was part of larger pattern and practice of unjustifiable terminations based on poor performance designed to deny Quest’s older employees severance benefits
in violation of Section 510 of the Employee Retirement Income Security Act (“ERISA”).

With respect to the Section 510 claim, which plaintiff is pressing on behalf of a class of more than 100 other similarly situated former Quest employees, the company argued that Ms. Seibert “has simply no evidence to prove that interference with her eligibility for severance benefits. was a motivating factor in the decision to terminate her employment.”

The Court disagreed. Relying on the Third Circuit decision in Eichorn v.AT&T Corp., 248 F.3d 131 (3d Cir. 2001), the Court was persuaded that, at the time Ms. Seibert was terminated for cause, Quest was concerned about its financial condition and was motivated to reduce or eliminate severance costs. The evidence supporting the Court’s findings is compelling.

For example, after Quest lost revenue sources in and around 2007, its Chief Financial Officer said on an earnings calls that “a significant piece” of its planned cost reductions was going to come “from reduced people costs.”  However, a reduction of “people costs” through a reduction in force (“RIF”) would have made many of the terminated employees eligible for severance benefits under Quest’s benefits plan. A former Human Resources director testified that Quest did not use a RIF, “[b]ecause there were other ways that would be better for the business,” and that terminating an employee for poor performance is less expensive than doing so through a RIF.

To avoid using a RIF, John Nosenzo, then-Vice President of Sales and Marketing for Ms. Seibert’s organization, planned to “consolidate some open positions” and then “not fill[] some positions as they became open (either forced or unforced turnover).” According to the testimony of a long-time District Sales Manager at Quest, Mr. Nosenzo introduced an evaluation system that “ignored the realities of the marketplace to value only the achievement of sales quotas, even though those numbers became unrealistic to reach” and
was designed “to create as much pressure on the manager as possible to give as many representatives as possible who did not meet their attainment numbers, for whatever reason, an unsatisfactory rating.” Employees receiving an unsatisfactory rating were placed on performance improvement plans (“PIPs”), which were “a figurative death sentence to the [sales] representative, used to create an appearance of fairness.”

In Ms. Seibert’s case, her immediate supervisor testified that she could “[p]robably not” have met her total sales attainment goals, that the loss of many accounts in her territory “were probably uncontrollable” and that “[i]t was probably unlikely” that she could have met the sales quota he had established in her PIP.

Based on these and other facts in the record, the Court denied Quest’s motion for summary judgment, concluding that a factfinder could find that Mr. Nosenzo’s evaluation system “consciously provided management with a tool to push some employees into ‘voluntarily’ leaving the company” and “could operate as cover for a reduction in the number of employees that would otherwise trigger benefits like severance.”

The Court also rejected Quest’s motion for summary judgment on Ms. Seibert’s age discrimination claim. Plaintiff adduced testimony revealing that executives in Quest’s sales organization stated that the company “should be hiring these young and talented people from Pharma” and that the “people from Pharma were younger and more educated and therefore would be a big advantage over the representatives they replace.” In fact, Quest’s then-Chief Executive Officer, Surya Mohapatra, stated during an 2010 investor conference call that the company was actively “hiring some young people who are coming from other industries” and that, in order to address the downturn in the economy at that time, Quest needed “to have a very engaging sales organization.”

Abbey Spanier, LLP, located in New York City, is a well-recognized national class action and complex litigation law firm with more than a decade of experience litigating employment class actions.

The reversal is good for employees and requires the courts to consider adverse employment actions by employers within the context of the employee’s individual circumstances, rather than some common minimum threshold that may not reflect the economic reality for higher-paid professionals.

The plaintiff in Scott entered into an employment agreement with his former employer. Under the terms of the agreement, the plaintiff would hold the position of “SVP Global Accounts & Business Development” at a starting salary [of] $220,000 per year.” Although plaintiff’s employment was at-will, meaning either he or his employer could terminate the employment relationship at any time and for any reason not expressly prohibited by law, if plaintiff was terminated for any reason other than “cause,” he would be entitled to severance benefits. Conversely, if plaintiff resigned or was terminated for cause, he would have to return a $15,000 signing bonus he received at the time of hire.

Despite the terms of the employment agreement, plaintiff’s employer reduced his salary to $150,000 during the first year of his employment. Soon afterwards, plaintiff notified his employer that he deemed himself constructively discharged and sought severance benefits.

The parties disagreed about whether plaintiff resigned (and, thus, owed his employer the $15,000 signing bonus) or was terminated without cause (and, thus, was owed severance benefits).

The district court ruled that plaintiff’s reduction in salary by $70,000 did not constitute constructive discharge as a matter of law because “the reduced amount compare[d] favorably to the earnings of other accomplished persons in the national workforce.”

The consequence of the the district court’s line of reasoning is to raise arbitrarily the burden of demonstrating constructive discharge for professionals receiving above-average pay.

The Second Circuit disagreed with the district court’s narrow view of the law, ruling that it should also have considered plaintiff’s reduction in pay in terms of the percentage of the reduction and in terms of the parties’ reasonable expectations.

Plaintiff’s reduced salary of $150,000 undoubtedly compares favorably to the earnings of other similarly accomplished professionals, as noted by the district court. However, the Second Circuit’s ruling sensibly requires the lower courts to consider reductions of pay in the circumstances of plaintiff’s case.

Here, the Second Circuit found that sufficient questions of fact on the disputed issue of whether plaintiff was constructively discharged or resigned did exist due to the percentage by which his salary was reduced and the terms of the employment agreement, as well as other factors, including changes to plaintiff’s title and responsibilities and evidence the plaintiff’s employer repeatedly told him that he had the option to resign.

Abbey Spanier, LLP, located in New York City, is a well-recognized national class action and complex litigation law firm with more than a decade of experience litigating employment class actions.

The home care workforce is divided into two groups: (1) home attendants, also known as “personal care aides” and (2) home health aides.  Home attendants are required by state law to have 40 hours of entry-level training and 6 hours of in-service training annually.  Home health aides are required by federal and state law to have 75 hours of entry-level training and 12 hours of in-service training annually.  These two groups of workers have historically received different rates of pay resulting in home attendants receiving a minimum of $10 per hour while home health aides received an average wage of $8 per hour.  This resulted in a wage inversion meaning the more highly trained aides were earning less per hour than the home attendants.  The Wage Parity Act was designed to address this inversion.

Under the Wage Parity Act, employers are required to pay home care aides a minimum wage of $9.00 per hour starting on March 1, 2012 and hourly pay will increase to $10 per hour on March 1, 2014.  Employers must also either provide individual health insurance or pay an additional supplemental benefit.  Have you benefited from the Wage Parity Act?  Tell us your story here.

Abbey Spanier, LLP, located in New York City, is a well-recognized national class action and complex litigation law firm.

Specifically, the plaintiffs alleged that their employer deducted 4.762% of their wages to cover the employer’s operating expenses, and deducted an additional $50 “computer charge.”

The defendants attempted to convince the judge that individual issues would predominate at trial—thus defeating class certification—because each salesperson could have “impliedly agreed” to a different compensation arrangement.  The court rejected this argument, however, and noted that the defendants paid each salesperson according to a standard schedule set by the defendants.

A Brief Background on Unlawful Deductions

Under the New York Labor Law, an employer may only take certain, limited deductions from an employee’s paycheck.  Those deductions are listed in Section 193 and, as a general matter, consist of deductions that are for the benefit of the employee.  These deductions include contributions to pension plans, union dues, money to pay for discounted travel costs (for instance, Transitchek), gym membership dues, or 401(k) contributions.

An employer may not deduct expenses for the purpose of minimizing the employer’s risk.  For instance, one court held that an employer’s $3,000 deduction from an employee’s wages due to a customer’s failure to pay the employer was a violation of the law.  Similarly, a bakery cannot deduct the cost of stale good from its employee’s paycheck.

New York is not the only state that prohibits certain types of deductions from workers’ pay.  Keep an eye on this blog; in upcoming weeks we’ll write about the wage deduction laws in other states.