Professional Liability Magazine - December 2018

DECEMBER 2018

IN THIS ISSUE CO V E R S T O R Y P r ov i d e r s Co n f r o n t I n c r e a s e i n Lo n g -Te r m Ca r e Cl a i m s A co s t l y r i s e i n l i t i g a t i o n s p u r s p r o a c t i ve defense tactics SPOTLIGHT Fo o d F i g h t H ow t w o i co n i c A m e r i c a n brands ended up locking horns INSIGHT Th e # M eTo o M ove m e nt’s E f fec t on t h e E EO C INSIGHT H ow M u c h W e i g h t D o e s a n A m i c u s Cu r i a e B r i e f Ca r r y?

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DECEMBER 2018

EDITORS

CONTRIBUTORS

Jonathan S. Ziss

Caroline Berdzik cberdzik@goldbergsegalla.com

Management and Professional Liability Practice Group Chair

267.519.6820 jziss@goldbergsegalla.com

Jennifer H. Feldscher jfeldscher@goldbergsegalla.com

Peter J. Biging

Reshma Khanna rkhanna@goldbergsegalla.com

Management and Professional Liability Practice Group Vice Chair

646.292.8711 pbiging@goldbergsegalla.com Daniel L. Gold 786.814.4809 dgold@goldbergsegalla.com

Saleel V. Sabnis ssabnis@goldbergsegalla.com Jonathan Amar

PLM | DECEMBER 2018 INSIGHT 5 | How Much Weight Does an Amicus Curiae Brief Carry?

And how do you write one that people actually read?

SPOTLIGHT 6 | Eleventh Circuit Expands Scope of NewValue Defense New-Value Defense Expanded in Case of Grocer Against Creamery Q&A 8 | A Dispute Between American Icons Food Fight: How two iconic American brands ended up locking horns COVER STORY 10 | Providers Confront Increase in Long-Term Care Claims A costly rise in litigation spurs proactive defense tactics INSIGHT 12 | The #MeToo Movement’s Effect on the EEOC New data shows sexual-harassment lawsuits have risen by half CASE NOTES 14 | When is an Insurance Broker-Client Relationship “Special”?

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INSIGHT

How Much Weight Does An Amicus Curiae Brief Carry?

Photo: Carol M Highsmith | www.loc.gov/item/2015646021

Saleel V. Sabnis

• serve well when they draw attention to a specific issue in the case by synthesizing law from other jurisdictions or by exploring an applicable statutory framework in greater detail or presenting scientific/other factual evidence beyond a party’s reach.

Amicus curiae briefs (literally, “friend of the court” briefs) often bring relevant facts and other arguments to the appellate court’s attention that the parties directly involved in the appeal have not ad- • ideally offer a unique perspective or insight on legally obscure subject matter. For example, industry and professional organidressed. Such briefs can be very impactful, but a zations might have special expertise to share with the court on lingering doubt inevitably shadows those who file one: why a particular ruling might be untenable because it has uninOnce it enters the pipeline of the appellate court, are the argutended consequences. Along those lines, an amicus brief that ments raised in such submissions seriously considered? And will presents facts or data that is easily invalidated will undoubtedly adversely impact that argument and the party on the side of anyone even read the brief? that argument.

The data, as one would surmise, varies. (A more recent survey of U.S. Supreme Court clerks suggests a majority review such briefs.) • must make their purpose and relevance to the case apparent on the first page, with arguments that are succinct. If possible, Here are some things to remember when filing an amicus brief to an amicus brief should aim to reach its core arguments in far ensure that it will be taken seriously. fewer pages than the party submissions, because it has the liberty to focus on a specific interest.

AMICUS BRIEFS • are useful when they offer alternative legal grounds for decid- For an amicus brief to garner serious consideration, it must be ing the case or supplement the record with new facts or data transparent in that it presents the court with information not that merit judicial notice. The point of an amicus brief is that raised by the merit briefs and with implications that have broader it should constitute a stand-alone submission to the appellate importance beyond its impact on the parties. Keeping these considerations in mind can increase the chance that the amicus brief court rather than a “me-too” brief mirroring party arguments. will be seriously considered.  • have the most value when they can illuminate a highly technical area of law or a complex statutory/regulatory issue. www.goldbergsegalla.com

December 2018 | 5

SPOTLIGHT

Eleventh Circuit Expands Scope of New-Value Defense Kaye v. Blue Bell Creameries Inc. (In re BFW Liquidation LLC), 899 F.3d 1178 (11th Cir. Aug. 14, 2018), Daniel L. Gold In this case, the Eleventh Circuit expanded the definition of the new-value defense set forth in 11 U.S.C. § 547(c)(4)1 such that using the defense no longer requires that new value provided to a debtor “remain unpaid.” Often in Chapter 11 and Chapter 7 bankruptcy cases, trade creditors and vendors to a bankrupt company have found themselves the targets of preference lawsuits for receiving payments from an insolvent debtor company in the 90 days before the company declares bankruptcy.2 Such lawsuits, brought by trustees or other post-confirmation fiduciaries, have been understandable sources of consternation for vendors, who found themselves put on the defensive merely for being paid for goods or services provided to the debtor corporation. Now, after Kaye, a creditor providing new goods or services after receiving an initial payment from a bankruptcy company can defend a preference suit even if the debtor pays for the additional goods or services. Accordingly, preference defendants now have a stronger defense to preference suits, and the decision in Kaye should work to discourage many such suits from being filed.

1 2

3

The Eleventh Circuit’s holding in Kaye retreats from dicta3 in a prior Eleventh Circuit decision, Charisma Investment Co. NV v. Airport System Inc. (In re Jet Florida System Inc.), 841 F.2d 1082 (11th Cir. 1988). Jet Florida System seemingly held that the new-value defense could be invoked only if that new value, the additional goods or services provided to the debtor, “remained unpaid.” In holding that Blue Bell Creameries was liable to the liquidating trustee for the return of most of the payments received from the debtor in the 90 days before the bankruptcy was filed, the bankruptcy court relied on Jet Florida System in holding that Blue Bell could avail itself of the new-value defense only to the extent that any new goods provided to the debtor remained unpaid. Kaye, 899 F.3d at 1185. In an unusual procedural move, the parties agreed that an intermediate appeal to the district court would be wasteful and certified an appeal directly to the Eleventh Circuit, which accepted the petition. Id. Ruling that the previous requirement was dicta, the Eleventh Circuit remarked that it was free to give “fresh consideration” to the issue of whether new value must remain unpaid. Kaye, 899 F.3d at 1186. In reaching its ruling, the Eleventh Circuit examined the statutory language of Section 547(c)(4) and explained that it does

Section 547(c)(4) provides that the trustee may not avoid a transfer: “to or for the benefit of a creditor, to the extent that, after such transfer, such creditor gave new value to or for the benefit of the debtor.”

As defined in § 547(b), a preference occurs when an insolvent debtor transfers money to pay a creditor for a prior debt within 90 days before filing a bankruptcy petition. Kaye, 899 F.3d at 1182, n.1.

Debtors are presumed to be insolvent in the 90 days before filing for bankruptcy. Preference suits are supported by the policy that “avoiding” and recovering the amount of transfers made by a debtor in the 90 days before bankruptcy facilitates the equality of distribution to unsecured creditors.

“Dictum is a term that has been variously defined as a statement that neither constitutes the holding of a case nor arises from a part of the opinion that is necessary to the holding of the case.” Id. at 1186 (quoting Black v. United States, 373 F.3d 1140, 1144 (11th Cir. 2004) (citations omitted)).

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not include a requirement that new value provided by a creditor must remain unpaid and that the holding in Jet Florida System was not reached because the alleged new value in that case was paid but, instead, because no value had been received by the debtor after the creditor received the preferential payment. Kaye, 899 F.3d at 1187. Accordingly, the Eleventh Circuit looked to the plain language of the statute, which does not support the dicta from Jet Florida System. The Eleventh Circuit also looked to the policy which disfavored the trustee’s attempt to avoid the payments made to Blue Bell during the preference period.4

The Eleventh Circuit also rejected the trustee’s argument that an “otherwise unavoidable transfer” to the creditor on account of that new value referenced in 547(c)(4) could only protect new value in the form of fraudulent transfers from avoidance, and not mere preferences. The court rejected the argument as facially absurd: [i]f correct the Trustee’s argument effectively eviscerates the new value defense. Under his example, the creditor could take advantage of the defense only if the subsequent transfer by the debtor constituted a fraudulent transfer. But success in that endeavor would be a Pyrrhic victory because obviously the transfer would be avoided as fraudulent. In essence, the Trustee’s argument largely renders § 547(c)(4) an empty set; not a result one would reasonably think Congress to have intended when it drafted this language. Id. at 1198.

In reviewing the plain language of the statute, the Eleventh Circuit noted that an offset to a creditor’s preference liability requires only that “(1) any new value given by the creditor must not be secured by an otherwise unavoidable security interest, and (2) the debtor must not have made an otherwise unavoidable transfer to or for the benefit of the creditor on account of the new value given.” Id. at 1189 (citing 11 U.S.C. § 547(c)(4)). While the statutory formulations can be somewhat cumbersome to unpack, the Eleventh Circuit concluded that “so long as the transfer that pays Accordingly, the court reversed and vacated the bankruptcy for the new value is itself avoidable, that transfer is not a barrier to court’s judgment. If Jet Florida System’s requirement that new value must remain unpaid was ever the law in the Eleventh Cirassertion of 547(c)(4)’s subsequent-new-value defense.” Id. cuit, it is no longer. It is difficult to overstate the effect of this The Eleventh Circuit noted that its holding found “common change in precedent for creditors that continue to provide ground” with the Fourth, Fifth, Eighth, and Ninth Circuit courts of goods or services to troubled companies in their run-up to appeals but that the Seventh Circuit still follows the “remain un- bankruptcy. Vendors, professionals, suppliers, and all manner of paid” approach. Id. at 1189, n.9. As Judge Julie Carnes noted in the goods and service providers can continue doing business with opinion, it is arguable whether the Third Circuit, like the Seventh troubled companies without fear of payments received being Circuit, requires that new value remain unpaid for a creditor to avail clawed back as preferences — so long as they keep doing delivitself of 547(c)(4). In analyzing, N.Y.C. Shoes Inc. v. Bentley Interna- ering goods and services to the troubled company. This change tional Inc. (In re N.Y.C. Shoes Inc.), 880 F.2d 679, 680 (3d. Cir. 1989), the in preference jurisprudence will make keeping all of the funds court noted that the issue of whether § 547(c)(4) requires new val- received by a preference defendant in the 90 days before bankue to remain unpaid was not germane to the holding of that case. ruptcy a far easier endeavor. When in doubt, however, vendors dealing with troubled companies are always safest receiving In addition to applying the plain language of 547(c)(4), Judge cash-on-delivery (COD) for goods or services delivered, because Carnes found additional support for the court’s holding in the the “contemporaneous exchange” defense is recognized across legislative history, especially when compared to the predecessor all circuits.5 However, preference defendants can take heart that statute. When Congress enacted Section 547(c)(4) as part of the it may only be a matter of time until the Seventh Circuit no lon1978 amendments to the Bankruptcy Code, it replaced Section ger requires new value to remain unpaid.  60(c) of the Bankruptcy Act of 1898, which explicitly included the requirement that any offset in a creditor’s preference liability would apply only where new value remained unpaid. Kaye, 899 SEE RELATED ARTICLE, F.3d at 1190 (citing 11 U.S.C. § 96(c) 1976). The Bankruptcy Reform "A DISPUTE BETWEEN AMERICAN ICONS," → Act of 1978 excised the “new credit remaining unpaid” language ON NEXT PAGE and replaced it with the requirement that the debtor “not make an otherwise unavoidable transfer to or for the benefit” of a creditor who gave new value. The Eleventh Circuit, therefore, concluded that the change in the statutory language manifested an intent to change the meaning of the statute. Kaye, 899 F.3d at 1191.

The Eleventh Circuit also reasoned that policy considerations support the court’s holding. Specifically, Judge Carnes noted that “[r]equiring new value to ‘remain unpaid’ would hinder the policy objective of encouraging vendors to continue extending credit to financially troubled debtors, especially in situations ... in which the vendor and the debtor regularly engaged in relatively shortterm credit transactions.” Id. at 1193. Encouraging such extensions of credit will avoid the current incentive to stop delivering goods to a financially troubled company for fear that subsequent payments might be clawed back by a bankruptcy trustee. Id. 4 5

The preference payments at issue in Kaye totaled $563,869.37, which Blue Bell received for providing ice cream and related merchandise to Bruno’s Supermarkets during the 90 days before Bruno’s entered bankruptcy. Kaye, 899 F.3d at 1183. BFW Liquidation LLC is the post-confirmation entity for which Kaye serves as liquidating trustee.

Section 547(c)(1) provides that a trustee may not avoid a contemporaneous exchange for new value.

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December 2018 | 7

Q&A

A Dispute Between American Icons At the center of a dispute that, in August 2018, led to an expanded definition of the new-value defense in Chapter 11 bankruptcy cases is a company ordinarily associated with simple pleasures and childlike harmony, not complicated legal jargon or adversary proceedings.

Who is Kaye?

That company, the Blue Bell in Kaye v. Blue Bell, is a 111-year-old Texas creamery started in tiny Brenham, Texas, that claims on its website to make ice cream “the old-fashioned way, with the freshest and finest ingredients,” and offers a wide variety of flavors with playful names, such as Moo-ilennium Crunch, Cookie Two Step, and a vanilla-and-chocolate mix called The Great Divide.

What business was Kaye helping wind down in this case?

The Kaye in Kaye v. Blue Bell is William S. Kaye, trustee of BFW Liquidating Trust. Liquidating trusts help wind down businesses, including those in Chapter 11 bankruptcy.

The business Kaye was helping wind down this time was Bruno’s Supermarkets LLC, an 86-year-old grocery-store chain that once had more than 60 stores in Alabama and Florida. Bruno’s filed a voluntary Chapter 11 bankruptcy petition on February 5, 2009. Later that year, the bankruptcy court confirmed the grocer’s If life isn’t as uncomplicated as it seems on Blue Bell’s feel-good Fourth Amended Plan of Liquidation and William Kaye was apwebsite, there could be no more compelling proof than the dis- pointed as the liquidating trustee for Bruno’s bankruptcy estate. pute in which the creamery found itself embroiled until only What’s the story with Blue Bell and Bruno’s? recently, a legal dust-up that put the popular company in the unlikely and unaccustomed position of defending itself.

When it was founded, in 1907, Blue Bell manufactured both ice cream and butter, but in the mid-20th century the company In the following Q&A, we explain Kaye v. Blue Bell’s origins and stopped producing butter and focused on ice cream. It expandmain players and explore what the case was all about. ed to all of Texas and, eventually, much of the southern United States. Now the creamery’s ice cream is one of the top-selling brands in the country.

Blue Bell isn’t the only piece of Americana centrally involved in the Kay v. Blue Bell case. Bruno’s history is itself a feel-good tale of bootstrap American enterprise and steady growth, a story that includes one of America’s more storied and whimsical commercial names: Piggly Wiggly.

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Joseph S. Bruno founded his grocery chain in 1932 with an 800-square-foot grocery in downtown Birmingham, Alabama.

The company had 10 stores by 1959 and opened 29 more in 1970. In 1972, a year after becoming publicly traded, Bruno’s started Food World discount grocery stores and Consumer Foods, a chain of warehouse-style groceries that in 1983 changed to Food Fair. Then, in 1984, Bruno’s opened its first FoodMax stores. And, soon thereafter, the company acquired PWS Holding Construction and every one of its 58 Piggly Wiggly stores. The Piggly Wiggly chain, whose founder never divulged the origin of its name, was notable for having been the first true self-service grocery store. The acquisition of Piggly Wiggly was a feather in Bruno’s cap and signaled a grocery-store chain on the rise.

Why did Kaye take Blue Bell to court on behalf of Bruno’s?

But by the time Joseph S. Bruno died, in 1996, at the age of 83, his grocery empire was in decline and its long story approaching an end. In August 2008, Bruno’s “began suffering from liquidity problems,” according to the facts of the case.

Why was Blue Bell contesting Kaye’s claim?

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to sell to its customers in its efforts to remain financially afloat,” the suit states—it should not have to pay back the money it Like most disputes over money, this one received for those products. The bankruptwas over who owes whom what and why. cy court rejected that argument and Blue Kaye’s adversary proceeding against Blue Bell appealed.  Bell, brought in January 2011, sought to avoid as a preference the more than $560,000 that Bruno’s paid Blue Bell during the 90-day period leading up to the filing of the bankruptcy petition because the money was paid during a preference period and for a prior debt, Kaye claimed. Many trade creditors and vendors to a bankrupt company have found themselves the targets of preference lawsuits in Chapter 11 or Chapter 7 bankruptcy cases for receiving payments from an insolvent debtor company in the 90 days before the company declares bankruptcy.

Blue Bell contended that because its products by law provided new value to Bruno’s stores that conceivably might have helped the chain climb out of bankruptcy—“lots of ice cream products that the latter was able

December 2018 | 9

COVER STORY

Providers Confront Increase in Long-Term Care Claims Costly rise in litigation spurs proactive defense tactics Caroline Berdzik This article originally was published in CLM Magazine.

Claims against providers in the long-term care industry continue to rise, as does the cost of defending, settling, or litigating such claims.

The number of claims per 100 occupied beds rose from .71 in 2007 to 1.03 in 2017, according to a 2017 actuarial analysis conducted

by AON, a global professional-services firm that provides risk, retirement, and health consulting. During that same time, the average cost of defending, settling, or litigating such a case rose from $165,000 to $223,000, according to the analysis. The number and size of claims was expected to continue increasing in 2018.

At the same time, the types of claims pursued by litigants in this field remain fairly limited. A 2016 study by CNA, “Aging Services 2016 Claim Report — Using Evidence to Achieve Excellence: Engage, Lead, Succeed,” found that falls and pressure ulcer claims accounted for 42.7 percent and 18.6 percent of all claims, respectively, with improper care, failure to monitor, and resident abuse claims rounding out all but 13 percent of all claims. Similarly, AON’s actuarial analysis found that falls and pressure ulcer claims accounted for 49 percent and 28 percent of all specified claims in 2017, respectively, with assault/abuse/neglect and adverse outcome from a treatment/procedure claims rounding out all but 12 percent of all specified claims.

areas of arbitration agreements, payroll-based journal reporting, electronic health records, marketing collateral, the rise of acuity levels among assisted-living facility residents, and Centers for Medicare and Medicaid Services requirements to reduce the spread of Legionnaire’s disease in skilled nursing facilities.

ARBITRATION In general, it has been found that arbitration reduces costs in long-term care litigation. AON’s previously mentioned 2017 study found that the total cost for claims in which an arbitration agreement had been executed was 5 percent lower than for claims with no arbitration agreement in place. Furthermore, claims in which an arbitration agreement was in place tend to resolve, on average, three months before a claim in which no arbitration agreement was in place.

However, arbitration does not always result in the most cost-effective outcomes. According to AON’s study, claims in which an arbitration agreement is challenged have far higher average costs than claims in which no arbitration agreement is in place. In fact, the average expense for a claim in which an arbitration agreement is found to be invalid is $614,000, which is close to $400,000 higher than the cost for the average claim. Nevertheless, arbitration agreements are beneficial since they reduce the risk of runaway verdicts and generally foster earlier resolutions. It is imperative that providers that are relying on these agreements take steps to ensure that such agreements comply with the laws in their respective states and that the individuals signing the agreements have the capacity to do so. This is an area that the plaintiff’s bar and legislatures will continue to challenge.

Against this backdrop of consistent claims with gradually increasing costs, it is imperative for providers and their defense counsel to be cognizant of strategies that can rein in defense costs and settlement values by steering litigation toward a quick and favor- PAYROLL-BASED JOURNAL REPORTING In November 2017, CMS began posting on the Nursing Home able resolution by using proactive strategies to mitigate claims.

Compare website the number of hours worked by nursing staff We will discuss such strategies in the context of the developing at every facility, as submitted through the Payroll-Based Jour10 | PLM

nal, or PBJ, system. As of July 2018, CMS also has posted for each facility the number of hours worked by both nurse aides and physical therapists. Based on this PBJ data, CMS gives each facility a staffing rating on a five-star scale.

Litigants have begun to incorporate PBJ data into understaffing arguments. As with all understaffing arguments, however, defense counsel should assess whether the data actually supports the allegation of understaffing. Understaffing has become a boilerplate argument that often has littleto-no factual basis and makes for a good sound bite for plaintiffs.

Defense counsel should also be wary of the accuracy of the PBJ data, as the validation reports that providers receive when they upload the data means solely that the data has been submitted successfully, not that it is accurate or complete. Defense practitioners need to master the PBJ data and mine the information to combat some of the erroneous understaffing arguments being asserted.

ELECTRONIC HEALTH RECORDS An increasing number of providers are using electronic health records, or EHR. While this usually means more thorough and accurate documentation of residents’ medical conditions, it can pose its own challenges in the course of litigation. With more records comes the potential for more expansive and more invasive discovery, including discovery of information that may not be apparent at first blush.

Counsel representing providers with EHR should make themselves very familiar with the EHR system used by the client and its capabilities before receiving the initial discovery requests for these records. This not only should expedite the discovery process; it also will aid in the investigation of a claim. Counsel should also make sure that data-retention protocols are in place, as the deletion of EHR data and metadata could result in adverse inferences.

MARKETING MATERIALS A continued litigation trend is that plaintiffs are alleging violations of consumer fraud statutes and asserting claims of misrepresentation in lawsuits against long-term care providers. In July 2015, the Pennsylvania Attorney General filed a lawsuit against a national long-term care provider, Golden Gate National Senior Care LLC, alleging that it misrepresented the www.goldbergsegalla.com

quality of its services in chain-wide marketing materials. The trial court dismissed the lawsuit, finding that the alleged misrepresentations were mere “puffery.” The Pennsylvania attorney general’s appeal of this decision to the state’s supreme court is currently pending.

ous type of pneumonia that can be fatal.

According to CMS, 19 percent of all Legionnaires’ disease outbreaks are associated with long-term care facilities. The directive states that CMS expects all Medicare certified health care facilities to have water management policies and procedures in place to reduce the growth and spread of This lawsuit underscores the importance Legionella. of being familiar with a provider’s marketing materials (both print and online) and In light of CMS’ directive, providers must the law governing a provider’s right to mar- implement a water management policy ket its services. Plaintiffs can be expected that effectively inhibits the growth and to make false advertising claims when the spread of Legionella. Doing so is necesrepresentations in a provider’s marketing sary not only to comply with the CMS, but materials are inconsistent with the ser- also from a litigation standpoint, as more vices actually being provided. cases are being asserted in the long-term care setting against facilities that have an ACUITY CREEP IN ASSISTED-LIVING outbreak of Legionnaires’ disease. These FACILITIES cases can be complex medically and scienToday’s average resident in an assisted tifically and require solid expert guidance living facility (ALF) bears a resemblance to defend. to the average resident in a skilled nursing facility, or SNF, from several years ago. Despite the advanced age and co-morThe higher acuity levels in the less-defined bidities associated with long-term care regulatory environment in which ALFs op- residents and stringent government reguerate can result in high-stakes litigation. lations in the industry, claims are increasPlaintiffs often allege that an ALF could not ing in both number and severity across the provide the appropriate level of care to a board. This trend has led to some national resident, and that the ALF incorrectly mar- providers pulling out of the skilled-nursing market altogether or selling off significant keted its services. portions of their portfolios. In short, the To prevent such claims, it is critical for pro- market is trending toward smaller, more viders at the time of a resident’s admission regional players, which will undoubtedly to conduct a thorough assessment of the impact the litigation landscape and deresident’s physical and mental condition fense of these cases. and manage resident and family expectations. This initial assessment is necessary to These developments have also led to a determine whether a facility can realistically change in the carrier space, as some esmeet the needs of the resident. A residency tablished insurers have exited the market agreement should also clearly and unam- or reduced their market share while other biguously explain the services offered—and entrants continue to emerge. In short, it is not offered—by the assisted living facility. likely that premiums are going to continue Families of residents are much more likely to rise and deductibles will become more to file suit if they believe that the residency commonplace as the market hardens. Furagreement was misleading. Additionally, thermore, the plaintiff’s bar continues to dewhen a resident’s medical or cognitive sta- velop new strategies to increase recoveries. tus changes, providers must have candid discussions with families about whether the resident should be transferred to a facility that can provide a higher level of care if the care can no longer be provided in the assisted living setting.

CMS REQUIREMENTS ON LEGIONNAIRE’S DISEASE In June 2017, CMS published a directive with the intent to reduce the spread of Legionella in health care facilities. On July 6, 2018, this guidance was updated. Legionella is a waterborne bacterium that causes Legionnaires’ disease, a very seri-

In light of this trend, which is only expected to continue, it is imperative for providers, defense counsel, and insurance carriers to be aware of these emerging risks and strategies that can reduce litigation costs and deter litigation altogether.  Jonathan Amar, a former associate attorney with Goldberg Segalla LLP, contributed to this article.

December 2018 | 11

INSIGHT

The #MeToo Movement’s Effect on the EEOC Gomez v. Gen. Nutrition Corp., 323 F Supp 3d 1368 (S.D. Fla. 2018) Reshma Khanna

Not only has the EEOC played a role as a vigorous enforcer against harassment in the workplace, it is also making prevention and A year after the #MeToo movement began, the training a significant priority. In October 2017, the EEOC launched U.S. Equal Employment Opportunity Commission a training program called “Respectful Workplaces” that teaches (EEOC) has released staggering data reflecting the skills and promotes respect in the workplace. “Respectful Workpowerful impact of the movement. places” has since been used to train 9,800 employees and supervisors. Moreover, the EEOC has provided over 13,000 compliance The data, contained in an October 4, 2018, news trainings in the private public and federal sector work forces. release, demonstrates that the #MeToo effect stands strong and that harassment issues will remain at the forefront in 2019.

Additionally, the EEOC’s Select Task Force on Harassment that was initially put into place in June 2016 re-convened in June 2018 to hear from expert witnesses on #MeToo issues. In a press reSexual harassment lawsuits filed by the EEOC increased by lease dated June 11, 2018, the acting EEOC chair, Victoria Lipnic, discussed the successful meeting and stated that “the EEOC will over 50 percent from 2017 continue to lead the fight against workplace harassment and to The EEOC filed 66 harassment lawsuits, 41 of which included promote solutions to prevent it.” allegations of sexual harassment The EEOC itself revised its own internal policies and procedures Sexual harassment charges filed with the EEOC increased by on workplace harassment in November 2017. Future plans for 13.6 percent from 2017 the EEOC include new training for all EEOC investigators using The EEOC conciliated 498 charges alleging harassment, a 43 cognitive interviewing approach for harassment claims. They will percent increase from 2017 begin an outreach campaign encouraging reporting and plan to provide respectful workplaces training to all EEOC staff.

“Reasonable Cause” findings for harassment charges increased by 23.6 percent Notably, the above data does not include complaints filed sole-

Among the highlights of the preliminary data for fiscal year 2018: • • • • •

• Website traffic to the EEOC’s sexual harassment page more ly with state agencies or made internally to employers. Employers should be aware that they will likely see a higher volume of than doubled from the year prior sexual-harassment claims and that they should be prepared to • The EEOC recovered almost $70 million for victims of sexual handle the claims accordingly. This includes reviewing and upharassment through litigation and administrative enforcement dating internal procedures, conducting investigations, providing (up from $47.5 million in 2017) training, and ensuring that employee handbooks and policies are adequate for handling such complaints.

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CASE NOTES

When is an Insurance Broker-Client Relationship Special ?

Hefty v. Paul Seymour Insurance Agency, 163 A.D.3d 1376 (3rd Dep’t 2018) Jennifer H. Feldscher

coverage that was not provided in the policy.” American Bldg.

Supply Corp. v. Petrocelli Group, Inc., 19 N.Y.3d 730, 735 (2012).

In this case, the insureds, Kenneth Hefty, et al, sued Here, the appellate court held that, at best, the insureds exHefty’s insurance broker, Paul Seymour Insurance pressed a general interest in increasing coverage on the subject Agency, for breach of contract and negligence. property, which is insufficient as a matter of law.

The plaintiffs’ claims arise out of the broker’s alleged failure to procure higher coverage limits under the insureds’ homeowner’s insurance policy. The insureds had spent in excess of $200,000 on extensive renovations of the subject property.

They allege that their broker failed to increase the limit on their homeowner’s policy following the renovations.

With regard to whether a special relationship existed that may give rise to a duty to advise or direct an insured to procure additional coverage, the appellate court held that this could not be established on the facts of the case. The insureds had testified that they owned as many as 10 properties, and they would secure coverages for their properties as they saw fit, sometimes rejecting their broker’s advice and intentionally procuring insurance in The insureds testified at depositions that in conversations they an amount less than what their broker recommended. Although had informed their broker of the improvements to the property the broker handled nearly all of the insureds’ insurance needs for and requested that someone be sent there to reassess its value. over decade, that fact alone was insufficient to raise an issue of The insureds acknowledged, however, that at no point did they fact as to the existence of a special relationship. ever make a specific request for an increase in coverage.

This decision makes clear that, under New York law, the “specific Citing longstanding precedent, the appellate court held that, ab- request” from an insured must be explicit to constitute a specific sent a special relationship, “to set forth a case for negligence or request for coverage. The decision also makes clear that a special breach of contract against an insurance broker, a plaintiff must relationship will not likely exist where an insured regularly rejects establish that a specific request was made to the broker for the the advice of its broker, despite a longstanding relationship.

14 | PLM

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