APRIL 202 1 VOLUME 1 8 / NUMBER 2 TODAYSGENER ALCOUNSEL.COM
Mandatory Vaccine Hesitancy
Sex Trafficking Directors Beware—Wave of ESG Activism Coming Early Dismissal from Toxic Torts
$199 SUBSCRIPTION RATE PER YEAR ISSN: 2326-5000 ISSUU.COM/TODAYSGC
TAKE A CLOSER LOOK AT:
A FLEXIBLE PARTY-CENTERED APPROACH TO INTERNATIONAL DISPUTE RESOLUTION. At the center of every dispute are the organizations and people involved. Our mission is to assist parties in resolving their disputes faster, and more cost-efficiently. That’s why we developed a party-centered suite of resolution services backed by the American Arbitration Association® that minimizes the impact a dispute has on business. See all the reasons to choose the ICDR® at icdr.org.
GLOBAL EXPERTISE Matters. icdr.org
|
+1.212.484.4181
©2021 American Arbitration Association, Inc. All rights reserved.
contents
APRIL 2021 Volume 18 / Number 2
4 EDITOR’S DESK LABOR & EMPLOYMENT
8 COVID-19 AND WORK-RELATED PSYCHOLOGICAL INJURY
10
What is a “normal” reaction to a pandemic? By Bruce Leckart COMPLIANCE
10 OVERVIEW: OPERATING IN AN UNCERTAIN GLOBAL MARKETPLACE Best practices, from the FCPA to remote workplace issues. By Joe Valof
COLUMN WORKPLACE ISSUES
14 EMPLOYERS UNLIKELY TO MANDATE COVID VACCINATIONS Employees will return to a divided workplace. By Barry Hartstein FEATURES
12 WAVE OF SEX TRAFFICKING LAWSUITS IMPLICATES HOSPITALITY INDUSTRY
16 BEST PRACTICES IN MASS AND TOXIC TORTS
Hotels, motels and truck stops are being targeted. By Sabrina Atkins and Pamela Lee
18 2021 WILL BE A YEAR OF ESG ACTIVISM
Sometimes you should trust the plaintiffs’ counsel. By Ronald B. Lee and Moira H. Pietrowski
Dialogue with activists to maximize support at annual meetings. By William P. Fiske
APRIL 202 1 TODAYSGENERALCOUNSEL.COM
3
EDITOR’S DESK
W
ishful thinking is inevitable in a situation as dire as a pandemic, and in this country much of it has centered around “getting America back to work.” Anyone who
thought that project would be easy now that vaccinations are becoming widely available was daydreaming. In this issue of Today’s General Counsel, Barry Hartstein discusses a survey of employers that his firm conducted about mandating or incentivizing vaccinations. It shouldn’t be a surprise given the level of invective and misinformation around Covid, but an astounding three-fourths of employers singled out employees who refuse to be vaccinated as the main issue they will face. In other articles, William P. Fiske writes about increased investor scrutiny of environmental, social and governance issues, and Sabrina Atkins and Pamela Lee discuss a wave of lawsuits alleging that hotels, motels and truck stops are turning a blind eye to sex trafficking. On the issue of best practices in mass and toxic tort, Ronald B. Lee and Moira H. Pietrowski argue that collegiality and cooperation are often the best tactics for getting a dismissal from class actions that are by nature acrimonious.
Bob Nienhouse, Editor-In-Chief bnienhouse@TodaysGC.com
4
TODAYSGENERALCOUNSEL.COM APRIL 202 1
BACK TO CONTENTS
EDITOR-IN-CHIEF Robert Nienhouse
MANAGING EDITOR
EXECUTIVE EDITOR
SENIOR EDITOR
David Rubenstein
Bruce Rubenstein
Barbara Camm
CHIEF OPERATING OFFICER
CONTROLLER
Stephen Lincoln
Manuel Rosas
DIGITAL EDITOR
DATABASE MANAGER
Catherine Lindsey Nienhouse
Patricia McGuinness
ART DIRECTION & PHOTO ILLUSTRATION MPower Ideation, LLC
CONTRIBUTING EDITORS AND WRITERS Sabrina Atkins William P. Fiske Barry Hartstein Bruce Leckart Pamela Lee Ronald B. Lee Moira H. Pietrowski Joe Valof SUBSCRIPTION Subscription rate per year: $199 For subscription requests, email subscriptions@todaysgc.com
EDITORIAL ADVISORY BOARD Dennis Block
GREENBERG TRAURIG, LLP
Thomas Brunner
WILEY REIN
Peter Bulmer
JACKSON LEWIS
Mark A. Carter
DINSMORE & SHOHL
James Christie
BLAKE CASSELS & GRAYDON
Adam Cohen
FTI CONSULTING
Jeffery Cross
FREEBORN & PETERS
Thomas Frederick
WINSTON & STRAWN
REPRINTS For reprint requests, email Jill Kaletha jkaletha@mossbergco.com Foster Printing at Mossberg & Co
Jamie Gorelick
WILMERHALE
Robert Haig
Thurston Moore
Robert Heim
Robert Profusek
Joel Henning
Art Rosenbloom
Sheila Hollis
George Ruttinger
David Katz
Jonathan S. Sack
Steven Kittrell
Victor Schwartz
KELLEY DRYE & WARREN
DECHERT
JOEL HENNING & ASSOCIATES
DUANE MORRIS
WACHTELL, LIPTON, ROSEN & KATZ
MCGUIREWOODS
HUNTON & WILLIAMS
JONES DAY
CHARLES RIVER ASSOCIATES
CROWELL & MORING
MORVILLO, ABRAMOWITZ, GRAND, IASON & ANELLO, P.C.
SHOOK, HARDY & BACON
Nikiforos latrou
Jonathan Schiller
Timothy Malloy
Robert Zahler
WEIRFOULDS
MCANDREWS, HELD & MALLOY
Steven Molo
BOIES, SCHILLER & FLEXNER
PILLSBURY WINTHROP SHAW PITTMAN
MOLOLAMKEN
All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording, or any information or retrieval system, without the written permission of the publisher. Articles published in Today’s General Counsel are not to be construed as legal or professional advice, nor unless otherwise stated are they necessarily the views of a writer’s firm or its clients. Today’s General Counsel (ISSN 2326-5000) is published ten times per year by Nienhouse Group Inc., 30 S. Wacker Drive, Suite 2200, Chicago, Illinois 60606 Image source: iStockphoto | Copyright © 2021 Nienhouse Group Inc. Email submissions to editor@todaysgc.com or go to our website www.todaysgeneralcounsel.com for more information.
The resources you need to build a better compliance and ethics program Society of Corporate Compliance and Ethics (SCCE)® membership provides networking opportunities and educational resources to help you stay up to date on the latest in corporate compliance and ethics.
Compliance and Ethics Professional (CEP) Magazine®
CEP is a member-exclusive magazine available in print and online on SCCE’s content platform, COSMOS (a $325 value per year).
Free Web Conferences
Receive four (4) free member-exclusive SCCE web conferences each year (a $396 value per year).
Educational Publications and Conferences
Receive discounts on a variety of compliance publications and 45+ SCCE conferences, academies, and weekly web conferences throughout the year.
CCB Certification Discounts
SCCE members receive exclusive discounts on Compliance Certification Board (CCB)® exams. Demonstrate your expertise by getting certified with CCB: Certified Compliance & Ethics Professional (CCEP)®, and Certified Compliance & Ethics Professional–International (CCEP-I)®.
For more details and to join corporatecompliance.org/membership
Additional SCCE Resources
SCCE offers a wealth of additional resources to help grow the corporate compliance and ethics community. • COSMOS: Our digital content platform provides online access and powerful search functionality to easily access specific topics across SCCE & HCCA’s professional resources and publications. • SCCEnet: Network and share insights with over 10,000 compliance professionals on our complimentary social network. • COVID-19 Resources: SCCE has developed a variety of complimentary tools to help the compliance profession stay informed, manage risk, and maintain an effective compliance program. • SCCE Blog and Podcasts: The latest compliance news and updates featuring a variety of industry authors and speakers within the compliance and ethics community.
L ABOR & EMPLOYMENT
Covid-19 and Work-Related Psychological Injury By DR. BRUCE LECKART
V
ast numbers of people are getting anxious and depressed, and experiencing a variety of psychologically produced physical symptoms as a result of the Covid-19 pandemic. These symptoms can be caused by fear of illness to themselves, relatives and friends; by occupational events such as their employer closing its business; or events
8
TODAYSGENERALCOUNSEL.COM APRIL 202 1
unrelated to their occupation. In addition to serious illnesses and deaths, there are significant postinfection complications, some psychological, that we still do not understand. The list is astounding. In workers’ compensation, the most important considerations are whether the circumstances that cause the problem are workrelated and whether the condition
constitutes a mental health injury as defined by the Labor Code and/ or legal regulations in your jurisdiction. In some locales, if you get Covid-19 at work and become psychologically symptomatic, that psychological illness is legally not work-related. In other jurisdictions, psychopathology is only compensable if it was produced by physical symptoms of the BACK TO CONTENTS
coronavirus. In yet others, the specific cause is irrelevant as long as it is due to the work environment. Regardless of locale, the most important point can be the definition of a mental disorder. The Diagnostic and Statistical Manual of Mental Disorders is clear in stating that for a person to be considered to have a psychological disorder, his or her condition “must not be merely an expectable and culturally sanctioned
clinical judgment. For example, is it normal to become fearful, worried, or depressed or to have physical symptoms as a result of your experiences? Or are these abnormal reactions? The most crucial component in any workers comp litigation is a complete psychological examination in which the doctor has not simply provided a summary conclusion without substantial reasoning or the considerable
The most important consideration is whether the problems constitute a mental health injury as defined by the Labor Code and/or legal regulations in your jurisdiction. response to a particular event.” Accordingly, if a person’s symptoms are a normal, reasonable and understandable reaction to the environment, that is not a compensable psychiatric disorder. How is what is “normal, reasonable and understandable” defined? The answer is up to the doctor’s
objective data obtained during a comprehensive examination. The doctor must take a complete history of the patient’s symptoms, including information about their qualitative nature, frequency, intensity, duration, onset and course over time, and a complete history of what occurred.
The doctor should also give a battery of psychological tests including an instrument capable of determining claimant credibility, such as the Minnesota Multiphasic Personality Inventory, as well as observational data pertaining to the claimed symptoms. In addition, medical and/or non-medical records can back up the patient’s history. Then there must be a decision about the cause of those symptoms. Without this data, neither the attorneys nor the court can decide if there has been a psychiatric injury.
Bruce Leckart received his Ph.D. in psychology from Michigan State University and taught at Ohio University and San Diego State University for 30 years. He is a critic of the way psychological evaluations in workers’ compensation cases are often written. He has evaluated many claims in both personal injury and workers’ compensation cases and has critiqued numerous psychiatric reports for such cases. leckart@aol.com
For the latest legal news and business legal developments visit todaysgeneralcounsel.com and subscribe to our newsletters, digital magazine, webinars and library of legal resources.
Visit TODAYSGENERAL C OUNSEL.COM today! BACK TO CONTENTS
APRIL 202 1 TODAYSGENERALCOUNSEL.COM
9
COMPLIANCE
Overview: Operating in an Uncertain Global Marketplace By JOE VALOF
B
usinesses operating in today’s global marketplace face serious business and legal issues related to intellectual property ownership, the Foreign Corrupt Practices Act, bribery, data privacy, patent trolls and remote working. The world-wide pandemic has added to uncertainty in the marketplace. IP ownership: The lower courts
10
TODAYSGENERALCOUNSEL.COM APRIL 202 1
have heard some important legal issues, including whether software code can be copyrighted and when fair use applies. With regard to fair use, U.S. copyright law allows limited use of copyrighted materials for purposes of news reporting, research and criticism (to name just a few) without permission or payments to the copyright holder. Fair use determinations
are generally made by state courts. The problem, however, is that state judges have had difficulty determining what constitutes fair use, so there have been varying decisions. Judges in the Southern District of New York are considering some social media-related fair use issues, i.e., what it means to embed an Instagram post versus just displaying the picture BACK TO CONTENTS
used in the post. Hopefully, the Supreme Court will set some new guidelines for the courts. A critical artificial intelligence ownership issue is that many developers are using the same underlying AI technology to develop their products, so the question becomes “who owns what”? The Patent Office is currently reviewing the patent laws with the objective of updating them to recognize today’s technology. Also, under a recently implemented interim export regulation, developers may need a license to export certain AI software and/or related services referred to as “emerging technology” to a foreign country
State judges have had difficulty determining what constitutes fair use, so there have been varying decisions. or to a foreign national employee. Additionally, a presidential executive order was implemented in February 2019 setting forth rules and regulations governing the development and use of AI. Foreign Corrupt Practices Act (FCPA): The FCPA is a federal criminal statute related to making unlawful payments or giving things of value to a foreign official in return for getting business from that government. A violation could result in very severe financial penalties, as well as possible prison time. There are two settlement options offered by Department of Justice and the Security and Exchange Commission that companies can use to good advantage: BACK TO CONTENTS
a deferred prosecution agreement or a non-prosecution agreement. Management needs to fully understand the consequences of accepting either of these two agreements. Many other countries have implemented similar bribery laws, so a company can be hit from both ends. Data privacy: In 2018, the European Union implemented a complex General Data Protection Regulation (GDPR) which protects EU consumers’ data. U.S. companies that export EU consumers’ personal data must comply strictly via the EU-U.S. Privacy Shield. However, in July 2020, the European Court of Justice invalidated the Privacy Shield, claiming it was not strong enough to provide the protection required. The EU and U.S. Commerce Department are currently in talks to come up with stronger protection rules. In the meantime, U.S. companies will need to sign the old standard contractual clauses or have binding corporate rules in place. Companies doing business in California must comply with the California Consumer Privacy Act, which went into effect in 2020. This act contains a set of rules for protecting personal data. Many other states are in the process of implementing privacy legislation, so until the federal government implements a federal privacy law, companies will need to understand and comply with a host of differing privacy requirements. Including an arbitration clause in all applicable contracts could help mitigate the company’s financial and legal exposure. A privacy policy naming a privacy officer should be implemented. Patent trolls: Trolls buy patents from distressed and bankrupt companies with the intent of suing companies, claiming that they
are infringing on those patents. Many of their claims are baseless. Companies without the financial resources to defend themselves find it cheaper to pay. Various industry groups have formed non-profit consortiums to help ward off trolls. Joining one that fits your business model is easy. Remote working: The Covid crisis has caused many businesses to resort to remote work for their employees and contractors. If employees and contractors will be using their own devices to conduct company business, it is important to make sure that all parties understand and acknowledge that the company is the sole and exclusive owner of all confidential and proprietary business information residing on those devices. Therefore, a strong Bring Your Own Device policy should be implemented. Remote working may be the future, so this becomes critical. Engaging in best practices and being innovative will certainly help to mitigate a company’s financial and legal exposure.
Joe Valof, Esq. is founder of OnLine CounselSM, an alternative legal service provider. He advises high tech companies on their contract, licensing and corporate needs. He also founded the Association of Independent General Counsel. igcatty@earthlink.net
APRIL 202 1 TODAYSGENERALCOUNSEL.COM
11
COMPLIANCE
Wave of Sex Trafficking Lawsuits Implicates Hospitality Industry By SABRINA ATKINS AND PAMELA LEE
I
n 2019 and 2020, victims of alleged sex trafficking filed a flurry of lawsuits against hotel franchisors, franchisees, owners and operators that rocked the hospitality industry. Conceivably generated by the #MeToo movement and high-profile claims against Harvey Weinstein, Jeffrey Epstein and others, cases filed under the Trafficking Victims Protection Reauthorization Act (TVPRA) — primarily in federal court — have skyrocketed. According to the 2019 Federal Human Trafficking Report published by the Human Trafficking Institute, cases increased from just seven suits in 2018 to the initiation in 2019 of 43 lawsuits pending in more than 23 U.S. district courts.
12
TODAYSGENERALCOUNSEL.COM APRIL 202 1
At the heart of these lawsuits is the allegation that corporations — typically hotels, motels and truck stops, which may unknowingly provide a venue for trafficking crimes — have turned a blind eye to these criminal acts. While the TVPRA’s “perpetrator” subsections are typically reserved for criminal prosecution of the traffickers themselves, victims have brought civil suits against hotel defendants under the less stringent civil remedy subsection, 18 U.S.C. § 1595, taking advantage of the statute’s “knew or should have known” standard. The difficulty facing many businesses is that none of the cases alleging sex trafficking brought against hotel defendants have
concluded, whether by motion or trial, thereby creating a quandary of uncertainty. Quite simply, the jury is out on whether these claims will ultimately succeed. Nonetheless, the trends are clear. Cases are being filed swiftly, and we should assume they will increase.
TAKEAWAYS FROM PENDING CASES While the TVPRA is not a strict liability statute, it remains to be seen how far the federal judiciary will go in awarding relief to plaintiffs. The nature of human trafficking creates a dilemma for hotels and motels seeking to avoid exposure. While most federal courts have declined requests for early BACK TO CONTENTS
dismissal of hotel defendants, opinions issued by Judge Marbley of the Southern District of Ohio provide valuable guidance on sex trafficking prevention and the avoidance of potential liability. In many of the pending cases, plaintiffs do not plead that hotel defendants have direct knowledge of or directly associate themselves with traffickers, but rather that these defendants “knew or should have known” the traffickers were participating in a sex trafficking venture while on the premises. However, Judge Marbley noted in M.A. v. Wyndham Hotels & Resorts
None of the cases brought against hotel defendants have concluded, thereby creating a quandary of uncertainty. that plaintiffs must make a “showing of a continuous business relationship between the trafficker and the hotels, such that it would appear the trafficker and the hotels have established a pattern of conduct or could be said to have a tacit agreement.” Plaintiffs commonly claim they were trafficked at a particular hotel on numerous occasions, sometimes for weeks at a time. The allegation of a continuous business relationship involving multiple stays has seemed to satisfy most federal courts, thereby dissuading the granting of early dismissals. Although a hotel defendant may not be able to procure an early dismissal, whether due to federal pleading standards or the allegations raised by each plaintiff, implementing the appropriate BACK TO CONTENTS
policies and procedures to identify, prevent and combat sex trafficking can help insulate defendants from potential liability.
TELL-TALE SIGNS OF SEX TRAFFICKING Understanding what a sex trafficking venture looks like is key to implementing effective policies. Many signs are innocuous. A hotel employee is not likely to see a trafficker physically restrain or abuse a victim. The scenario is more nuanced. Victims and advocacy groups, however, have detailed the tell-tale signs, including the victim’s physical appearance, the accompanying individuals, and the control the victim has over herself, her money and her identification. Victims may show physical signs of abuse, like malnourishment, poor hygiene or fatigue. They may be scantily dressed and have little or no luggage. The trafficker may constantly monitor their movements, and they may be without money or identification, rendering any escape futile. Many victims do not personally interact with hotel staff or employees, which makes their identification even more difficult. Instead, they may use side or rear entrances to avoid detection. Victims often refuse room service and housekeeping but may make excessive requests for clean sheets and towels. When housekeeping is allowed access to a room, they may notice an unusually high number of contraceptive devices in the trash bin, along with multiple cell phones and computers in the room. Staff may also notice an inordinate amount of foot traffic to and from a room.
INSULATING YOUR BUSINESS Hotels and motels should provide training on sex trafficking to their
employees. This should include how to identify victims, buyers and traffickers, as well as a protocol for what employees should do if they suspect trafficking is occurring on the premises. Best practice would also include a written human trafficking policy detailing training, detection, prevention, response and reporting. Requiring guests to provide identification at check-in can thwart traffickers’ and buyers’ efforts to maintain anonymity. Limiting the duration of room rentals can assist in reducing allegations of weeks-long trafficking ventures — increasingly common claims in civil suits. Closely monitoring online reviews is also a smart preventative measure, as they may mention unwanted solicitations received by guests. Although civil sex trafficking cases will likely increase, implementing effective policies and procedures can assist in protecting and insulating your business, while also generally combating and preventing sex trafficking.
Sabrina Atkins is a litigation associate at Swift, Currie, McGhee & Hiers, LLP, practicing in the areas of appellate law, insurance coverage, commercial litigation, financial services litigation and sexual assault litigation. She is currently defending against numerous sex trafficking lawsuits. sabrina.atkins@swiftcurrie.com Pamela Lee is a partner at Swift, Currie, McGhee & Hiers, LLP, practicing in the firm’s litigation section. She devotes her practice to litigation, including tort liability litigation, insurance coverage disputes and defense of insurance bad faith matters. pamela.lee@swiftcurrie.com
APRIL 202 1 TODAYSGENERALCOUNSEL.COM
13
WORKPL ACE ISSUES
Employers Unlikely to Mandate Covid Vaccinations By BARRY HARTSTEIN
T
he availability of Covid -19 vaccines means hope that the end of the pandemic is in sight, but it also raises urgent legal and administrative questions for employers about mandating and/or incentivizing vaccinations, making necessary workplace accommodations, and continuing other Covid-related safety policies while maintaining a strong company culture.
14
TODAYSGENERALCOUNSEL.COM APRIL 202 1
To better understand employers’ perspectives on these issues, Littler conducted a survey that was completed by more than 1,800 in-house counsel, human resources professionals and C-suite executives. When asked about mandatory vaccinations, employers expressed hesitancy. Less than one percent of respondents have made vaccinations mandatory for all employees, and just six percent plan to do
this once vaccinations are readily available and/or the FDA grants full approval. Nearly half have already decided not to implement mandates. Unsurprisingly, 64 percent of employers reported being concerned about the potential legal liabilities if an employee experienced an adverse reaction to the vaccine. Fifty-seven percent questioned the effectiveness of BACK TO CONTENTS
a mandate, given the number of potential exemptions, including pregnant or lactating workers and employees with disabilities or religious beliefs that prevent them from getting vaccinated. Fortyseven percent cited administrative difficulties with implementing such a mandate, and that figure rose to 58 percent for in-house counsel respondents. The top two reasons had less to do with legal issues than employee relations. The main factor was resistance from employees who do not fall into a protected class but refuse to get the vaccination or generally oppose vaccinations (selected by 79 percent of respondents). Sixty-seven percent said the potential impact of a mandate on employee morale or company culture is a key concern. In the verbatim responses we collected as part of the survey, many employers are concerned that mandating vaccines would be seen as infringing upon their employees’ civil liberties. The fact that employers’ top two concerns with requiring vaccinations focus on the perspective of employees who oppose vaccination, as well as the potential impact on company culture, is a telling indication of the unprecedented environment in which employers are operating. In lieu of mandating vaccines, the survey data suggests a significant focus on encouraging employees to get the vaccine. In fact, only six percent plan not to do so. The vast majority, 87 percent, said they would share information with employees, including the benefits of vaccination and how to get vaccinated. Others plan to offer vaccine administration at their own facility, assuming they are authorized to increase convenience BACK TO CONTENTS
(37 percent); give employees paid time off to receive the vaccine and/or recover from its side effects (33 percent); and provide incentives to employees, such as cash awards or other monetary benefits (11 percent). As vaccines become widely available, employers expressed concern about a potential divide in their workplaces between those who have been vaccinated and those who have not. Most respondents (72 percent) report some level of concern over providing reasonable accommodations to those who cannot or refuse to get vaccinated. Some employers are worried about the unfairness of forcing vaccinated employees back into the office while workers who cannot or will not vaccinate continue working remotely. That may help explain why most employers responding to our survey appear to be decoupling remote work policies from vaccinations. Just seven percent said they would bring only vaccinated employees back into the workplace once vaccines are widely available, and only six percent said they would bring all employees back (and keep unvaccinated employees separate). In addition, 49 percent of employers are extending remote work at least into the summer, and 37 percent are allowing employees who wish to work on site the opportunity to do so on a voluntary basis. This may buy organizations some time to make decisions about vaccination policies and other return-to-work issues. It is also important for employers to remember that the vaccine isn’t a cure-all for Covid-19 workplace safety issues. In January, the Occupational Safety and Health
Administration released guidance recommending companies continue requiring mask use and other precautionary measures even after employees are vaccinated. Our data shows that employers appear to be following that guidance. Most will continue requiring or encouraging masks (81 percent), modifying workspaces to promote social distancing (66 percent), limiting contact in common areas (62 percent), increasing cleaning (56 percent), and conducting temperature checks or other symptom screenings (50 percent). Covid-19 vaccines will certainly be a significant factor as employers develop plans for re-opening workspaces. But the vaccine cannot fully define an organization’s plans in the coming months, and our data shows that employers are preparing well-rounded approaches to this complex issue. To download the full Littler COVID-19 Vaccine Employer Survey Report, visit: https://www. littler.com/vaccine-employersurvey.
Barry Hartstein is a shareholder at Littler Mendelson. He leads the firm’s COVID-19 Vaccination Working Group and serves as co-chair of Littler’s EEO & Diversity Practice Group. bhartstein@littler.com
APRIL 202 1 TODAYSGENERALCOUNSEL.COM
15
FEATURE
Best Practices in Mass and Toxic Torts By RONALD B. LEE AND MOIRA H. PIETROWSKI
I
n toxic and mass tort litigation, we repeatedly see plaintiffs naming defendants that have no connection to plaintiff’s alleged injuries. Individual defendants may feel that they are wrongly named and want a dismissal without payment. In many cases, that is exactly what needs to be done.
16
TODAYSGENERALCOUNSEL.COM APRIL 202 1
Inherent in any large litigation is an investment of company time and resources that is better spent doing business, not fighting legal battles. It seems simple, but the first decision is to fight or manage the litigation. This decision needs to be made by counsel, the company and its insurers. Collaboration is the new order
of the day, with counsel playing a pivotal role by defending and advising the client and working with the insurers to implement the strategy. When a client is sued in multiple states and cases involving a toxic tort, how can an attorney accomplish the client’s and the client’s insurers’ goals? In most of these cases, the defendants are a mix of those with exposure and others with no reason to be in the case. Best practices require addressing the plaintiff’s alleged exposure to your client’s products at the beginning of the case, before being buried with legal defense costs. Our firm recently experienced a situation in which a plaintiff’s attorney essentially chose to sue first and discover facts later. We had four different clients that were defendants in all or part of 38 cases brought in two states. In less than five months, one client was dismissed without payment from all of the cases. Within eight months, two clients were dismissed without payment from all but one case each. The fourth client was dismissed without payment from 26 cases. Five cases were settled for a nominal amount, with negotiations started on the remaining cases. All of this was accomplished in the middle of the pandemic. The overarching issue in every case involves doing what the client wants. There are some who will fight tooth-and-nail to avoid paying any settlement amount. In mass litigation, that is expensive but can be the correct avenue to prevent the next wave of litigation. BACK TO CONTENTS
However, best practices can be used to obtain dismissals when there is no exposure by plaintiff to your client’s products.
BEST PRACTICES Develop a relationship with the plaintiff’s attorneys, and be honest in order to gain the trust needed to obtain dismissals. Often in mass litigation, there is the tendency to treat the opposing side as an untrustworthy enemy that needs to be defeated. Sometimes that is true. Other times, it is critical to develop a relationship of trust. That can help when you try to educate opposing counsel about your client’s business and/or products, which can lead to opposing counsel understanding the basis
relationship allowed us to get dismissals in other cases. To obtain dismissals, build relationships and share relevant discoverable information early with the other side. Often, defendants remain in cases because they refuse to provide basic discoverable information. Gather the client’s documents early and understand your defenses immediately. You cannot obtain early dismissals unless you have the information you need from your client. Develop a relationship with the client so that they understand what is needed and why. Conduct a thorough analysis of the information in light of each plaintiff. Understand the sales information,
Best practices can be used to obtain dismissals when there is no exposure by plaintiff to your client’s products. for your client’s dismissal. Such actions are not only ethical and required but provide patterns of honesty and good faith dealing that will benefit your client in other mass tort cases with similar opposing counsel. Our firm had a situation in which a client did not want to search paper-archived sales records but wanted to use timelimited computerized records to support a dismissal. Our communications to opposing counsel were clear that the computerized records were limited to certain years. Discovery progressed, and plaintiff’s employer produced additional records. Our client then searched the paper-archived records and found information consistent with the plaintiff’s employer’s records. While the client remained in that case, our BACK TO CONTENTS
chemicals involved and the plaintiff’s alleged exposure. Prepare and provide affidavits to prove how accurate information was gathered. Depending on the situation, it makes sense to disclose what is discoverable early in the case to support the reasoning for your client’s early dismissal. Be relentless in your pursuit of information from your client and for dismissal from opposing counsel. Once you have shared information indicating that your client should be out of a case, pursue dismissal by phone calls and emails with opposing counsel. For cases with minimal product exposure, consider obtaining authority and negotiating a small payment. If the other side requests more discovery, suggest a dismissal with
an option to re-join if additional discovery supporting plaintiff’s position surfaces. Finally, there are times when a dispositive motion is needed to get the dismissal your client deserves. Early dispositive motions tend to be held in abeyance until discovery is completed. Sharing dispositive motions with opposing counsel prior to filing can help. Such actions provide opposing counsel an opportunity to address the issue internally without preparing a formal response. These best practices have worked for our firm in securing early dismissals in mass tort litigation. There are clients and situations that require a more aggressive approach, and many mass tort cases involve attorneys who will not agree to anything. Even in those situations, relationship building and honesty, picking your battles, and being relentless will serve you well.
Ronald B. Lee is a shareholder and the practice group manager of the Product Liability & Toxic Tort Group at Roetzel & Andress in Akron, Ohio. rlee@ralaw.com Moira H. Pietrowski is a shareholder in Roetzel & Andress, focusing on product liability, toxic tort, fire litigation and general negligence. mpietrowski@ralaw.com
APRIL 202 1 TODAYSGENERALCOUNSEL.COM
17
FEATURE
2021 Will Be a Year of ESG Activism By WILLIAM P. FISKE
M
any companies have faced increased investor scrutiny on environmental, social and governance (ESG) issues in the last few years, but investor activist campaigns related to ESG accountability are
18
TODAYSGENERALCOUNSEL.COM APRIL 202 1
still relatively uncommon. As an example of what may be coming, during 2020 the Children’s Investment Fund Foundation, a UKbased activist investor, called for action at three banks to end the financing of coal fuel projects.
Many large institutional investors continue to expect companies to quantify and report on how they meet investors’ enhanced ESG disclosure expectations. However, some activists believe additional disclosure provides a unique opBACK TO CONTENTS
portunity to challenge perceived weaknesses at companies and create greater long-term shareholder value. These two evolving dynamics, mounting pressure from traditional institutional investors together with new activist investor tactics, may combine to create the perfect storm for ESG activism in 2021. The year 2020 saw ESG-focused activist funds deploying new strategies. In June, Jeffrey Ubben, founder of ValueAct Capital Partners, relinquished his position at the firm and announced the
Investor pressure on the oil and gas sector to reduce greenhouse gas emissions is not new, but other investors may be more likely to support Engine No. 1’s concerns about environmental and social (E&S) accountability during the 2021 annual meeting season. The California State Teachers’ Retirement System has already come out publicly in support of Engine No. 1’s campaign, along with other investor groups that voiced similar concerns while supporting the board changes. Georgeson’s 2020 Annual Corporate Governance Report showed
Poor ESG disclosure may lead to votes against directors at companies that are perceived to be lagging. formation of Inclusive Capital Partners. The new fund’s premise is investment in companies that sustainable funds often avoid, such as oil and gas, chemicals, food processing and for-profit education. Ubben believes that disfavored companies offer the greatest potential to effect positive social and environmental change and become revalued up in the process. Another noteworthy development in ESG activism involves a proxy contest launched by Engine No. 1, whose strategy has involved targeting director seats. Shortly after forming in late 2020, it targeted a multinational oil and gas company, requesting that the company invest in more profitable drilling and clean energy activities to better position the company for long-term sustainable success. Further, in January 2021, Engine No. 1 formally nominated four independent directors with clean technology expertise for the company’s board. BACK TO CONTENTS
that overall investor support for E&S shareholder proposals has increased in recent years. Within the S&P 1500 index, 18 E&S-related proposals received majority support in 2020, up from eight in 2019. Five of these were environmentally focused proposals. This support is not surprising in the context of the top risks to the economy identified in the World Economic Forum’s recent annual report, which included extreme weather, climate action failure, natural disasters, biodiversity loss and human-made environmental disasters. Increased support for E&S shareholder proposals, coupled with growing pressure from institutional investors to see improved company E&S disclosure on issues such as climate change and human capital management, has put many companies in a vulnerable position heading into the proxy 2021 season. In 2021, poor ESG disclosure may lead to increased levels of support for shareholder proposals
demanding more accountability and transparency as well as votes against directors at companies that are perceived to be lagging. The outcome of the 2021 proxy season presents activist investors with an opportunity to further engage companies and institutional investors on E&S accountability during the post-season. In preparing for their 2021 annual meeting, we recommend that companies concentrate on understanding and addressing their perceived environmental and social vulnerabilities. If presented with a shareholder proposal, companies should review how similar proposals have fared historically at other firms, including how specific institutional investors voted in support or opposition. If negotiation with the proponent is possible, companies should consider the potential impact on their E&S strategy and goals. By understanding how ESG factors influence investors’ proxy voting decisions, companies may better understand their own vulnerabilities, providing a blueprint for enhancing ESG reporting and disclosures while maximizing support at annual general meetings.
William P. Fiske is the Head of M&A and Contested Situations for Georgeson, LLC. He and his team advise boards of directors and company executives on a range of issues including shareholder activism. bfiske@georgeson.com
APRIL 202 1 TODAYSGENERALCOUNSEL.COM
19
STAY CURRENT WITH OUR RESOURCE CENTER White Papers Webinars Product Guides Case Studies Industry Analysis And more!
Visit Today’s GC Resource Center
Click the Resources to tab to visit our library of free downloadable content provided by experts and vendors within the legal industry and stay current in a rapidly changing world.
TODAYSGCRESOURCES.COM @TodaysGC
Follow us
Like us
