Wake Forest Law Review
29Oct

Fourth Circuit Upholds Summary Judgment on Time Barred Claims with Insufficient Facts

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By Malorie Letcavage

On July 7, 2015, the Fourth Circuit issued its published opinion in the civil case Poindexter v. Mercedes-Benz Credit Corp. Ms. Virginia Poindexter appealed the district court grant of Mercedes-Benz Credit Corporation’s (“MBCC”) motion for summary judgment. That court held that all of Poindexter’s claims were time barred and she failed to demonstrate facts that would support all the elements of her claims. The Fourth Circuit agrred and affirmed the district court’s grant of summary judgment because her claims violated the statute of limitations and she did not point to facts that would sufficiently support the elements of her claims.

Lien on House to Help with Car Payments

In April 2001 Poindexter purchased an Audi from HBL Inc., who then assigned her repayment contract to MBCC. Poindexter then voluntarily participated in the Home Owner’s Choice Program, which allowed her to put a lien on her home by a deed of trust for her outstanding car payments. This structure made the interest she paid on the loan tax deductible. Poindexter signed a Servicing Disclosure Statement acknowledging the mortgage loan was covered by Real Estate Settlement Procedures Act (“RESPA”). Poindexter executed the deed of trust, which had a covenant that MBCC would release the lien when all payments were satisfied.

In 2004 Poindexter traded in her Audi to HBL for a Mercedes-Benz sedan, so she was released from further payments on the Audi. However, MBCC did not record a certificate of satisfaction that would release the deed of trust. Thus, when Poindexter went to refinance her mortgage, she found there was still a lien on her home. She wrote to MBCC and demanded it record a certificate of satisfaction, but MBCC did not do so in a timely fashion. Only after Poindexter filed a complaint did MBCC record a certificate of satisfaction. Poindexter alleged six causes of action:(1) breach of contract; (2) slander of title; (3) violation of RESPA; (4) violation of the Virginia Consumer Protection Act (“VCPA”); (5) violation of Virginia Code § 55- 66.3; and (6) declaratory judgment.

Summary Judgment Appropriate for Breach of Contract Claim

The statute of limitation begins to toll when the debt is satisfied. Since the debt was satisfied in 2004 when the car was traded and Poindexter did not file until 2013, her claim was time barred. Poindexter still argued that the court was equitably estopped from pleading the statute of limitations bars her claim. However, the Court found that Poindexter had not satisfied the elements of equitable estoppel because she did not establish facts that showed she did not have a “convenient and available means” of obtaining information about status of the lien on her home. There was also no evidence on the record whether there was a genuine issue of material fact as to whether MBCC tried to conceal anything or falsely misrepresent anything.

Poindexter also claimed that her previous dealings with MBCC made her believe MBCC had filed a certificate of satisfaction. However, she only cited that she traded in her Audi to support this claim. MBCC made no further statements about certificate of satisfaction. MBCC’s March letter was found to only have an accurate statement about the release of a security interest in her first vehicle and did not contain any security information about her Audi.

Also, Poindexter argued that the district court prematurely granted summary judgment because it did not rule on her motion for discovery. But Poindexter did not show how the information she requested would have created a genuine issue of material fact sufficient to overcome summary judgment. The Fourth Circuit found no error in the grant of summary judgment on the breach of contract claim.

Summary Judgment Appropriate for Slander of Title Claim

The Court found that MBCC did not publish false words with malice that disparaged Poindexter’s title to her property. There was no evidence in the record that showed MBCC had acted with malice or reckless disregard and Poindexter only pointed to the fact that MBCC didn’t file a certificate of satisfaction. However, the Court found this to just be an administrative oversight and showed nothing more than negligence. Therefore, Poindexter did not establish the elements for slander of title. The Court also found it was untimely because it was outside of the five year statute of limitations.

Summary Judgment Appropriate for RESPA Claim

A provision of RESPA states that a response to any “qualified written request” was necessary upon receipt. However, the Court did not find that Poindexter had sent a qualified written request that requested “information relating to the servicing of the loan.” First, her oral communications did not qualify as written requests. Second, the letter from Poindexter’s attorney to MBCC did not have a statement of the reasons or sufficient detail related to the servicing of the loan. That letter only referenced the details of another vehicle, which was not the Audi, for which the deed of trust was recorded so it did not properly identify the “account of the borrower” as RESPA requires.

The Court also found that Poindexter’s correspondence did not relate to the servicing of her loan. The Court followed the reasoning of Medrano v. Flagstar Bank, and held that Poindexter’s request related to the terms of the loan and mortgage and an obligation that arose after the loan was satisfied. Therefore, it did not relate to the receipt of making of loan payments and did not satisfy the elements of a RESPA claim.

Summary Judgment Appropriate for VCPA claim

The VCPA protects against deception or fraud in consumer actions but does not apply to mortgage lenders. The Court held that MBCC was a mortgage lender because after HBL transferred the vehicle loan to MBCC, Poindexter agreed to modify the car payment agreement and place a lien on her house. Thus, the vehicle loan was converted into a mortgage loan.

The Court further reasoned that both parties had a clear intent that the payment arrangement be a mortgage loan. Also, Poindexter reaped the benefits in tax deductions from it being classified as a mortgage loan so she could not avoid its consequences from such a classification.

Summary Judgment Appropriate for Va. Code § 55-66.3 Claim

This section states the requirements for the filing of a certificate of satisfaction as ninety days after the debt was paid and the consequences if the certificate is not filed. However, Poindexter’s claim was time barred. Her cause of action accrued on the ninety-first day after her obligations were satisfied in 2004. Since she did not enter a complaint until 2013, her claim was outside of the two-year time limit.

Summary Judgment Affirmed

The Fourth Circuit affirmed the district court’s granting of summary judgment for MBCC on each count. The Court held that these claims were either outside of the applicable statute of limitations or that Poindexter had failed to establish all the elements of her claims.

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30Sep

No Double Recovery: Fourth Circuit Rejects Employee’s Claim for Additional Compensation

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By Malorie Letcavage

On June 1, 2015, the Fourth Circuit released its published opinion in the civil case Huntington Ingalls Industries, Inc. v. Eason. The appellant, Huntington Ingalls Industries, Inc. (HI), appealed the Administrative Law Judge’s decision to grant further compensation for temporary partial disability to appellee, Ricky Eason, under the Longshore and Harbor Worker’s Compensation Act (LHWCA). The Court held that since Eason was already receiving compensation for a scheduled permanent partial disability injury, to allow him to recover additional compensation because of an injury flare up would be impermissible double recovery under the act. Also, the Court held that HI and Eason had misinterpreted Potomac Electric Power Co. v. Director, Office of Workers’ Compensation Programs (PEPCO). The Fourth Circuit remanded the case to the Benefits Review Board to give an order dismissing Eason’s claim for temporary partial disability compensation.

Eason Received Compensation for His Knee Injury

Ricky Eason was injured while working as a pipe fitter at Newport News Shipping and Dry Dock Company, which was later acquired by Huntingdon Ingalls Industries, Inc. Eason was diagnosed with a torn meniscus and had to undergo surgery. Eason was completely out of work from October 2, 2008 through June 18, 2009 and received temporary total disability benefits for this time. After returning to work full-time, Eason was given a 14% lower extremity permanent impairment rating, meaning he had reached maximum medical improvement. This meant that normal healing was no longer likely to occur, and this status determined his permanent partial disability compensation.

For the seven months after the 14% rating diagnosis, Eason received his scheduled injury permanent partial disability compensation in addition to his regular weekly salary. Scheduled compensation covers specified body part injuries and pays compensation for a fixed number of weeks at two-thirds of the employee’s average weekly wage.

Eason then went back to his doctor complaining of pain in both his knees. The doctor put Eason on light duty restrictions, and continued to recommend the restriction on two subsequent visits after Eason complained of knee pain. However, Eason continued to work full-time without any light duty restrictions. Eason then brought a claim for temporary total disability or temporary partial disability under the LHWCA. This act is a federal workers’ compensation system for employees injured, disabled, or killed in the course of covered maritime employment.

Journey Between Administrative Law Judges and Benefits Review Board

The first hearing was held before Administrative Law Judge Richard Malamphy. Judge Malamphy found that the evidence did not support Eason’s claim for temporary total disability, and his disability compensation was restricted to the amount required by the schedule. Judge Malamphy also held that Eason was not entitled to additional compensation for any temporary partial loss of wage-earning capacity for the same knee injury.

On appeal, the Benefits Review Board (BRB) vacated Judge Malamphy’s decision. It instead held that the permanent partial disability benefits did not determine whether a claimant could recover for permanent total, temporary total, or temporary partial disability. The BRB remanded the case to determine if Eason’s light duty work restrictions prevented him from his usual work. If so, it would be temporary total disability and he could recover additional compensation.

On remand, Judge Sarno found that Eason could not complete his usual work during the time his doctor ordered him to light duty restrictions. Judge Sarno found that Eason was temporarily partially disabled and entitled to compensation of $845.82 per week.

HI then appealed Judge Sarno’s decision to the BRB. The BRB affirmed Judge Sarno’s findings that Eason could not do his usual work in the time period in question. It also affirmed the award of compensation. HI filed its petition for review to the Fourth Circuit.

Double Recovery Is Not Allowed

The Court had to decide if Eason, who was already receiving benefits from a scheduled permanent partial disability, could receive additional compensation when his injury flared up and became a temporary partial disability.

In Eason’s case, he was already receiving benefits from a scheduled permanent partial disability. When that changed to a temporary partial disability because his injury flared up, there was no additional loss of wage-earning capacity. Scheduled compensation takes into account all lost wages under LHWCA, so Eason could not recover for the flare up because his injury was already being accounted for and compensated. To allow Eason to recover for the injury flare up would be “impermissible double recovery” because the scheduled compensation was calculated to cover any additional flare ups.

The Fourth Circuit held that the only way to receive additional compensation after a permanent partial disability was if the circumstances warranted a reclassification of that disability to a permanent total or temporary total. However, Eason’s injury did not qualify for reclassification to a permanent total or temporary total disability. His knee injury was permanent and partial and had been classified as such ever since his diagnosis.

The Court held that Eason’s argument for compensation under LHWCA for additional temporary partial disability was unpersuasive. Such a recovery would be double recovery for the same injury. Additionally, the purpose of scheduled compensation is to provide quick compensation for certain injuries and cover employer’s liability. To allow Eason to recover again would defeat the intent of scheduled compensation. The court also rejected HI’s interpretation of LHWCA-that Eason was barred from receiving temporary total disability compensation because he was receiving scheduled disability compensation. The court found this interpretation was inconsistent with prior case law, and it undermined the purpose of the act.

Lastly, the Court found that PEPCO was not determinative for either party. In PEPCO, the court held that LHWCA did not allow employees to choose between compensation of actual loss of wage earning or the compensation associated with permanent partial disability from a scheduled injury. The court in PEPCO noted that some cases of under or overcompensating were an inevitable part of the system.The Fourth Circuit distinguished PEPCO explaining that a scheduled injury does not preclude an award of total disability, nor does it permit double recovery.

Case Remanded to Benefits Review Board

The Court granted the petition for review and remanded the case to the BRB to enter an order dismissing Eason’s claim for temporary partial disability under LHWCA.

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29Sep

Claim Alleging Unconstitutional Redistricting for Wake County School Board Elections was Improperly Dismissed

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By Elizabeth DeFrance

On May 27, 2015, the Fourth Circuit issued a published opinion in the civil case Wright v. North Carolina. The Court considered whether the District Court for the Eastern District of North Carolina erred in ruling Senate President Pro Tem Philip Berger and General Assembly Speaker Thom Tillis could not be properly enjoined to a suit claiming the redrawing of Wake County Board of Education electoral districts violated the “one person, one vote” guarantees of the Fourteenth Amendment and the North Carolina Constitution. The Court also considered whether the district court erred in granting the defendants’ Federal Rules of Civil Procedure 12(b)(6) motion to dismiss when the plaintiffs’ complaint alleged “facts sounding in arbitrariness” without explicitly stating the element.

After Elections Resulted in a Democratic Majority on the Board of Education, the Republican-led General Assembly Passed a Bill to Redraw Electoral Districts

The Wake County Board of Education redrew electoral districts after the 2010 census, as required by the General Assembly. The resulting districts were geographically compact and had a maximum population deviation of 1.66%. The first election under the new plan resulted in a Democratic majority on the Board of Education. In spite of objections from the majority of the School Board, the Republican-led General Assembly passed Session Law 2013-110 (“Session Law”), redrawing the electoral districts. The changes resulted in seven less geographically compact districts and two “super districts.” One super district is an outer ring of rural areas and the other a central urban area. The maximum population deviation between the super districts is 9.8%. The Session Law also prohibits the Board of Education from making any changes to its election procedures until 2021.

Calla Wright along with twelve other individual Wake County citizens and two citizen associations brought a claim against the State of North Carolina and the Wake County Board of Elections alleging the redistricting violates the Fourteenth Amendment of the United States Constitution and the Equal Protection Clause of the North Carolina Constitution because the votes of Plaintiffs living in overpopulated districts weigh less than the votes of people living in underpopulated districts.

Defendants filed a 12(b)(6) motion to dismiss. Plaintiffs moved to amend to substitute Governor Pat McCrory, Senate President Pro Tem Philip Berger, and General Assembly Speaker Thom Tillis for the State of North Carolina. The district court granted Defendants’ motion to dismiss and denied Plaintiffs’ motion to amend.

State Officials May be Enjoined for the Use of State Power in Violation of the Constitution Only if they Have a Connection with Enforcement of the Act

The Court noted that although the Eleventh Amendment provides some immunity for state officials from private suits brought in federal court, an official may properly be enjoined if he has “some connection with the enforcement of an unconstitutional act.” The North Carolina Constitution does not provide the General Assembly with power to enforce laws, and both Berger and Tillis are members of the General Assembly. Thus, because neither Proposed Defendant has authority to enforce the redistricting plan, the Court held that they could not be properly enjoined and Plaintiffs’ motion to amend was properly denied. The Plaintiffs, in their reply brief to the Court, had conceded that McCrory was not a proper defendant.

To Survive Summary Judgment Where the Population Deviation is Below 10%, a Plaintiff Must Produce Evidence that the Apportionment was Arbitrary or Discriminatory

On the issue of whether summary judgment was properly granted for the defendants, the Court looked to the “one person, one vote” principle inherent in the Equal Protection Clause. When constructing districts, governments must “make an honest and good faith effort” to make the population in each as close to equal as is practicable. When a plaintiff brings a claim related to a redistricting plan with a population deviation below 10%, he has the burden to provide additional evidence showing the redistricting process had a “taint of arbitrariness or discrimination.”

Plaintiffs’ Factual Allegations “Sounding in Arbitrariness” Were Sufficient to Provide Defendants Fair Notice of Their Claims

The Court noted that Plaintiffs’ complaint alleged the redistricting discriminated between urban and rule voters because the rural districts were “unjustifiably underpopulated” and the urban districts were “overpopulated without justification.” The Plaintiffs also pointed out that the Board of Education was opposed to the Session Law, and that no African-American or Democratic members of the General Assembly voted for it. The Court reasoned that this suggested the law was “neither racially or otherwise neutral.”

The Court reasoned that although Plaintiffs did not expressly plead that the Session Law was arbitrary or discriminatory, their factual allegations sounded in arbitrariness and provided defendants fair notice of their claims.

The Court also rejected the district court’s justification for dismissal based on its view that plaintiffs had a political gerrymandering claim rather than a “one person, one vote” claim. The Court concluded that Plaintiffs clearly pled an equal protection claim.

Plaintiffs’ Federal Constitution and North Carolina Constitution Equal Protection Claims Were Improperly Dismissed

The Court held that because Plaintiffs’ complaint clearly pled facts supporting arbitrariness and discrimination, their Federal Constitution equal protection claim was improperly dismissed under 12(b)(6). For the same reasons, Plaintiffs’ North Carolina equal protection claim was also improperly dismissed. Additionally, because the Proposed Defendants did not have authority to enforce the Session Law, they could not be enjoined and Plaintiffs’ request to amend was properly denied. Accordingly, the case was affirmed in part, reversed in part, and remanded.

Circuit Judge Diana Gribbon Motz dissented. She reasoned that the Plaintiffs’ pleadings did not overcome the presumption of constitutionality for a redistricting plan with a maximum population deviation under 10% because the complaint did not use the words “arbitrariness” or “invidious discrimination” and failed to allege facts supporting such claims.

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24Sep

Fourth Circuit Holds that Reference to the NAACP as the “National Association for the Abortion of Colored People” Does Not Infringe Upon or Dilute Trademarks Held by the NAACP

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By George Kennedy

On May 19, 2015, the Fourth Circuit issued a published opinion in the civil case of Radiance Foundation v. NAACP. The court held that an online article describing the NAACP as the “National Association for the Abortion of Colored People” did not infringe upon or dilute trademarks held by the NAACP (the National Association for the Advancement of Colored People). In so holding, the Fourth Circuit vacated the decision of the district court and remanded the case for further proceedings.

Publication of the Article

In January 2013 the Radiance Foundation published an article entitled “NAACP: National Association for the Abortion of Colored People.” Appearing on the Radiance Foundation’s website, and several others, the article harshly criticized the NAACP’s position on abortion. The organizations that featured the article were non-profit, anti-abortion organizations which allowed site users to make donations.

Upon learning of the article’s publication, the NAACP sent Radiance a cease-and-desist letter on January 28, 2013. Radiance then brought a declaratory action seeking that the court find that Radiance had not infringed upon or diluted any of NAACP’s trademarks and that Radiance’s use of the marks was protected under the First Amendment.

The District Court Found for the NAACP

In a bench trial, the district court found for the NAACP and denied declaratory relief to Radiance. It held that Radiance had infringed upon the NAACP’s trademarks because it had used the marks in connection with goods and services and that the description of the NAACP as the “National Association for the Abortion of Colored People” was likely to create confusion among consumers. Furthermore, the district court held that the use of NAACP’s trademark created a likelihood of dilution of the trademarks owned by the NAACP by associating the NAACP and its marks with a pro-abortion position. Lastly, the district court held that Radiance’s use of the NAACP’s trademarks did not fall under any of the allowed exceptions of trademark dilution as set forth in the Lanham Act.

As a result, the district court issued a permanent injunction to Radiance, barring the organization from using the words “‘National Association for the Abortion of Colored People’ in a way that creates a likelihood of confusion or dilution.

The Fourth Circuit Vacated the Decision

In vacating the district court’s decision, the Fourth Circuit held that the district court erred in granting injunctive relief to the NAACP for two reasons. First, the Fourth Circuit held that the district court erred in finding that the NAACP had an actionable trademark infringement claim. Second, the Fourth Circuit held that the district court erred in finding that Radiance diluted the NAACP’s trademarks.

Radiance’s Article Did not Infringe Upon NAACP’s Trademarks

Trademark infringement is governed by the Lanham Act, 15 U.S.C. §§ 1114(1) and 1125(a). As the Fourth Circuit explained, these statutes exist to protect consumers from being confused by improperly used trademarks. However, trademark protection is limited by the Constitutional right to free speech, and as the Fourth Circuit noted, trademark laws may not “impinge the rights of critics and commentators.” For this reason, an actionable claim for trademark infringement requires more than just showing that a party other than the trademark holder used the trademark. Additionally, the trademark infringer must be shown to have used the trademark “in connection with” goods or services in a manner that is “likely to cause confusion.”

The Fourth Circuit held that Radiance did not use the NAACP’s trademarks “in connection” with goods or services, nor did they use the trademarks in a manner “likely to cause confusion.” While Radiance’s article did appear on websites which allowed users to make monetary donations, the Fourth Circuit held that there was not a clear enough connection with transactional activity for Radiance’s use of the NAACP’s trademarks to be considered “in connection” with goods or services. The Fourth Circuit reasoned it was not enough that the article merely appeared on a website in which monetary donations could be made. Instead, there needed to be a clear connection between the article itself and transactional activity for the “in connection” with goods and services requirement to be met.

Similarly, the Fourth Circuit also held that Radiance’s use of the NAACP’s trademarks was not likely to cause confusion. In its reasoning, the Fourth Circuit focused on the idea that trademark laws are not intended to protect the trademark holder from those who misunderstand its political views, and that it was unlikely that any readers of the article would have been confused about an affiliation between Radiance Foundation and the NAACP. As the Fourth Circuit argued, the article authored by Radiance was a scathing critique of the NAACP; it would not follow that the NAACP would author such an article.

Radiance’s Article Did Not Dilute the NAACP’s Trademarks

Lastly, the Fourth Circuit held that NAACP did not have an actionable dilution claim against Radiance. The law of dilution, 15 U.S.C. § 1125(c)(3), protects the integrity of the trademark by protecting the trademark’s reputation. While the Fourth Circuit conceded that the NAACP had established a prima facie case for dilution against Radiance, the Fourth Circuit held that Radiance’s use of the NAACP’s trademark was permissible under the “fair use” exception and the “non-commercial use” exception. The fair use exception allows a trademark to be used by someone other than the trademark holder to comment or criticize the trademark holder or its services. The Fourth Circuit held that Radiance used the trademark “NAACP” in conjunction with the “National Association for the Abortion of Colored People” as a way to criticize the NAACP and the policies for which it stands. Additionally, the Fourth Circuit held that the non-commercial use exception was satisfied because Radiance’s purpose in writing the article was not commercial gain, but to strongly criticize the policies and political positions of the NAACP. Therefore, the Fourth Circuit held that there existed no basis for either a trademark infringement claim or trademark dilution claim against Radiance. Accordingly, the Fourth Circuit held that the district court erred in granting injunctive relief to NAACP on the basis of trademark infringement and trademark dilution.

The Fourth Circuit Vacated and Remanded for Further Proceedings

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17Sep

Fourth Circuit Narrowly Construes FRSA’s Election of Remedies Provision

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By Elissa Hachmeister

Today, in a published opinion in the civil case of Lee v. Norfolk Southern Railway Co., the Fourth Circuit established that the “Election of Remedies” provision of the Federal Railroad Safety Act (FRSA) is to be narrowly applied to bar duplicative claims brought under statutes aimed at preventing retaliation for workplace health and safety whistleblowing.

Lee’s Suspension and Subsequent Lawsuits

Charles Lee works as a carman for Northern Southern Railway Company (NS), where his responsibilities include inspecting railcars to identify potential defects. According to Lee, NS’s management capped the number of railcars that Lee could tag for repair. Lee refused to comply with the quotas because he believed federal law required him to identify and tag all defective railcars.

Lee, an African-American, further alleged that NS denied African-American carmen the training and advancement opportunities provided to white carmen. Lee described racial harassment by co-workers, who allegedly threatened his children, called him racial slurs, and hung a noose in his locker.

In July 2011, Lee was suspended for six months without pay. NS claimed it suspended Lee for drinking on the job in violation of company policy. Lee claimed that the suspension was really motivated by racial and retaliatory animus. He alleged that his white supervisor drank beer on duty and was never disciplined.

Lee filed two lawsuits against NS. In the first, Lee claimed racial discrimination in violation of 42 U.S.C. § 1981. The district court granted summary judgment for NS.

In the second lawsuit, Lee claimed retaliation in violation of the whistleblower protection provision of FRSA. Lee did not bring this claim in his first lawsuit because he was required to exhaust his administrative remedies first. The district court held that the second lawsuit was barred by FRSA’s Election of Remedies provision, which forbids an employee from “seek[ing] protection under both this section and another provision of law for the same allegedly unlawful act of the railroad carrier.” 49 U.S.C. § 20109(f).

FRSA’s Election of Remedies Provision Does Not Require a Choice Between FRSA and Federal Antidiscrimination Laws

While the district court had focused on whether Lee’s first lawsuit under § 1981 was an attempt to seek protection under “another provision of law,” the Fourth Circuit clarified that the issue was whether the two lawsuits, which both challenge the same suspension, concerned “the same allegedly unlawful act.” A question of statutory interpretation is reviewed de novo.

The court first looked at the plain language of the Election of Remedies provision and concluded that that the phrase “the same unlawful act” ordinarily means that the act is unlawful for the same reasons. The court explained that the “same act” may be implicated in more than one claim yet is “allegedly unlawful” for fundamentally different reasons depending on the claim. The provision is not triggered by merely the “same act” but by “the same allegedly unlawful act.”

Looking beyond the meaning of the words, the court reasoned that accepted grammatical rules also support its interpretation of the phrase. There is no comma between “same” and “allegedly unlawful act,” suggesting that “same” modifies the entire phrase and “unlawful act” should be read as a unit. If “same” and “allegedly unlawful” both independently modify “act,” then the adjectives should be separated by a comma per several widely respected style guides.

While the court found the provision unambiguous—that is, capable of only one reasonable interpretation—it noted that the result would have been the same even if it had found the provision ambiguous: the legislative history and context of the statute showed that the Election of Remedies provision was “only intended to bar railroad employees from seeking duplicative relief under overlapping anti-retaliation or whistleblower statutes that provide protections similar to the protections in FRSA.” Thus, the Election of Remedies provision would apply to potential claims under the Occupational Health and Safety Act (OSH Act) and various state versions of the OSH Act since those statutes, like FRSA, are aimed at preventing retaliation for engaging in protected whistleblowing activities regarding safety and health in the workplace.

The court also pointed to a 2007 amendment to FRSA that states that nothing in the FRSA’s retaliation provision is to “diminish” other rights of employees under “any” law. 49 U.S.C. § 20109(h). Quoting approvingly from a Sixth Circuit opinion, the Fourth Circuit explained that the Election of Remedies provision, if construed as NS suggested, would dilute an employee’s rights since“[r]estricting an employee to only one of the numerous arrows in his quiver obviously reduces the number of options available to him.” Norfolk S. Ry. Co. v. Perez (6th Cir. 2015).

FRSA’s Election of Remedies Provision Does Not Bar Lee’s Suit

Although both of Lee’s lawsuits challenge the same “act”— his suspension by NS—the Fourth Circuit agreed with Lee that a suspension on the basis of race is not “the same allegedly unlawful act” as a suspension in retaliation for railway safety whistleblowing. The court explained that a suspension in itself is not unlawful. An “unlawful act” must have a basis in the law. Since Lee’s claims were based in different laws they did not concern the “same allegedly unlawful act.”

The court emphasized that the laws implicated here, § 1981 and FRSA, have different aims and give rise to distinct causes of action with different elements and burdens of proof. FRSA seeks to prevent retaliation for engaging in protected whistleblowing activities regarding railway safety while § 1981 aims to halt racial discrimination. FRSA’s Election of Remedies provision therefore does not apply to bar Lee’s second lawsuit.

The Fourth Circuit Vacated and Remanded for Further Proceedings

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16Sep

Fourth Circuit Affirms Summary Judgment on the Basis of Qualified Immunity

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By Malorie Letcavage

Overview

In a published opinion of a civil case issued on April 28, 2015, the Fourth Circuit affirmed the lower court’s decision to grant summary judgment on the basis of qualified immunity in the case of Raub v. Campbell. The appellant, Brandon Raub, argued that his Fourth Amendment right to be free from unreasonable seizures, and his First Amendment right to free speech were violated by the appellee, Michael Campbell. Raub also sought injunctive relief even if his constitutional claims failed. In reviewing the district court’s grant of summary judgment, the Fourth Circuit used a de novo standard. The Fourth Circuit upheld the district court’s grant of summary judgment on the basis of qualified immunity because it found that Raub’s Fourth Amendment rights were not violated, he had not pled sufficient facts for a First Amendment claim and there was no abuse of discretion in the district court’s dismissal of his injunctive claim for relief.

Factual Background

In the summer of 2012, two Marine veterans that had served with Brandon Raub contacted the FBI about Raub’s Facebook posts. Raub posted threatening messages and employed extremist language in numerous posts. The FBI and local law enforcement visited Raub to question him about his Facebook activity. The agents reported that Raub’s behavior was unusual because during the interview he was preoccupied, could not maintain eye contact and displayed extreme mood swings.

The agents contacted Michael Campbell, a certified mental health “prescreener” affiliated with the local emergency services. Campbell recommended Raub be detained for evaluation, at which point the officers took Raub to the local jail. Campbell interviewed Raub and noted the same behavior the officers had described; Raub was distracted, and had trouble answering questions. Campbell concluded Raub might be paranoid and delusional.

Campbell petitioned and was granted a temporary detention from the magistrate because Raub was displaying signs of psychosis. Four days into the temporary detention, the court ordered that Raub be admitted to the hospital for thirty days. However, a few days later Raub was released because the court found that the petition had insufficient factual allegations. Raub then filed suit under 42 U.S.C. §1983 against Campbell. The district court granted Campbell’s motion for summary judgment due to qualified immunity and denied Raub’s request for injunctive relief.

42 U.S.C. 1983

This statute provides an avenue to pursue a civil action for a deprivation of constitutional rights. It lays out that any person acting under the color of state law (which, as in this case, can include a mental health professional associated with emergency services) who subjects anyone to a “deprivation of any rights, privileges, or immunities secured by the Constitution and laws” will be liable to the party injured.

Appellant’s Fourth Amendment Rights Were Not Violated

The court explained that qualified immunity analysis has two prongs: 1. Whether the plaintiff has established the violation of a constitutional right and 2. Whether that right was clearly established at the time of the alleged violation.

The court decided to start its evaluation with the second prong and held that Campbell’s conduct was not proscribed by clearly established law. The court noted that a seizure requires probable cause but there is a lack of clarity in the law concerning seizures for psychological evaluations. The court then went on to cite the major cases in the Fourth Circuit which all held that that seizures for psychological evaluation were upheld when the person was a threat to himself or others. The court held that due to the totality of the factors, including the content of Raub’s Facebook posts, the initial observations by the officers and Campbell’s observations of Raub, Campbell did not violate Raub’s Fourth Amendment rights because his petition to detain was reasonable based on existing precedent.

Appellant Failed to Allege Sufficient Facts for a First Amendment Claim

            Though Raub contended that Campbell only recommended detention based on Raub’s “unorthodox political statements,” the court found that Campbell had numerous other reasons for recommending detention. The court cited the content of the Facebook posts, Raub’s behavior during the interview, and the increasingly threatening nature of his posts. Even if the political statements were part of the decision, the court found Campbell had plenty of other reasons for Raub to be detained. Thus the court held that Raub did not sufficiently allege facts for a First Amendment violation and Campbell was entitled to qualified immunity.

Appellant’s Claim for Injunctive Relief Was Properly Rejected 

            The court reviewed the denial of injunctive relief for abuse of discretion, and it found none. Under §1983 when a plaintiff is seeking injunctive relief, he needs to demonstrate a real or immediate threat that he will be wronged again in a similar way. However, Raub only alleged that his political beliefs would subject him to seizures and retaliation in the future. The court found that this claim was too speculative and did not reach the level needed to grant equitable relief.

Conclusion

The court did not find that Raub’s Fourth Amendment rights were violated nor did it find that he had alleged sufficient facts for a First Amendment claim. It also found no abuse of discretion in the dismissal of the claim for injunctive relief. Therefore, the court affirmed the lower court’s grant of summary judgment.

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10Sep

What Is the Appropriate Procedure for Seeking Judicial Review of an Arbitration Award Entered Under the Multiemployer Pension Plan Amendments Act?

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By George Kennedy

On April 21, 2015, the Fourth Circuit issued a published opinion in the civil case of Freight Drivers and Helpers Local Union No. 557 Pension Fund v. Penske Logistics LLC in which it held that commencing an action by filing a complaint is the proper procedure for seeking judicial review of an arbitration award under the Multiemployer Pension Plan Amendments Act (“MPPAA”), reversing the judgment of the District of Maryland. Additionally, the Court held that the amended complaint filed by Freight Drivers and Helpers Local Union No. 557 Pension Fund (“Pension Fund”) was timely because it related back to the original complaint.

Facts Leading up to the Dispute and Arbitration Proceedings

In 2004, Penske Logistics LLC (“Penske”) transferred ownership of its subsidiary, Leaseway Motorcar Transport Company, to a third party. After transferring control, Penske ceased making contributions to the Pension Fund. The Pension Fund responded by assessing withdrawal liability against Penske. Penske refused to pay the withdrawal liability, and soon thereafter, Penske and the Pension Fund submitted their dispute for arbitration.

The parties entered into arbitration proceedings and in July 13, 2012, the arbitrator dismissed the Pension Fund’s claims. The arbitrator decided that Penske was not liable for the withdrawal liability assessed against it because Penske was exempt as “‘a trucking industry fund as that term is described in [29 U.S.C. § 1383(d)].”

The Pension Fund Seeks Judicial Review

Following the arbitrator’s order against it, the Pension Fund sought judicial review of the order by filing a complaint in the District of Maryland on August 9, 2012. Subsequently, Penske filed a motion to dismiss the Pension Fund’s complaint. The District Court granted Penske’s motion, but granted leave for the Pension Fund to amend the complaint within 21 days of the filing of its original complaint.

The Pension Fund filed an amended complaint within 21 days. Again, Penske filed a motion to dismiss the complaint, and again, the District of Maryland granted the motion. In so holding, the District of Maryland argued that the proper mechanism for reviewing an arbitration award under the MPPAA is the filing of a motion under the provisions of the Federal Arbitration Act. As such, the District of Maryland treated the Pension Fund’s amended complaint as a motion, and held that it was deficient for two reasons. First, the Court held that it was untimely because motions cannot relate back pursuant to Federal Rule of Civil Procedure 15. Second, the Court held that it was lacking an attached memorandum stating the authority and reasoning in support as required for motions under Local Rule 105.

The Filing of a Complaint is the Appropriate Procedure

The Fourth Circuit first took up the issue of which procedure is correct for seeking review of an arbitration award under the MPPAA. It held, contrary to the District of Maryland, that the proper procedure is the filing of a complaint, and not the filing of a motion. In so holding, the Fourth Circuit appealed to: (1) the plain meaning of Sections 1401 and 1451 of the MPPAA, (2) the language of related provisions of the MPPAA, (3) the Rules of Civil Procedure, and (4) the legislative intent surrounding the enactment of the MPPAA.

The Fourth Circuit considered, and ultimately dismissed, Penske’s counterargument that Section 1401(b)(3) of the MPPAA is controlling in this case and mandates that judicial review be sought by filing a motion and not by filing a complaint. The Fourth Circuit explained that Section 1401(b)(3) applies only to arbitration proceedings and not to the process of seeking judicial review. Instead, the Fourth Circuit argued that Section 1401(b)(2) of the MPPAA controls judicial review of arbitration awards, and that it states that judicial review is to be sought by filing a complaint, and not a motion.

The Pension Fund’s Amended Complaint is Timely Because it Relates Back

After establishing that the filing of a complaint is the appropriate method for seeking review of an arbitration order under the MPPAA, the Fourth Circuit then ruled on whether the Pension Fund’s amended complaint was timely. The Fourth Circuit held that the amended complaint was timely because it related back to the original complaint pursuant to Federal Rule of Civil Procedure 15. The Court reasoned that since the amended complaint asserted claims arising out of the same conduct underlying the claims of the original complaint, the requirements for relation back under Rule 15 were satisfied. The Court quickly dismissed Penske’s argument to the contrary, holding that it was “hyper-technical, carrying no equitable or pragmatic weight.”

Judgment Reversed and Remanded

Accordingly, the Fourth Circuit reversed the judgment of the District of Maryland, remanding the case for further proceedings.

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20Mar

No Qualified Immunity for Officers in Their Use of Excessive Force

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By Joshua P. Bussen

On March 18, 2015, in a published opinion of the civil case Smith v. Ray, the Fourth Circuit affirmed the district court’s denial of summary judgement to two police officers who were accused of using of excessive force.  The circuit court found no error in the Eastern District of Virginia’s decision to deny the police officers qualified immunity.

The Use of Excessive Force

On September 21, 2006, a uniformed Virginia police officer was looking for a missing juvenile.  The officer heard that the juvenile might be at a house in Virginia Beach, VA.  When the officer arrived at the house and knocked on the door, the plaintiff Amanda Smith answered.  The officer and Amanda spoke for a little while before she turned to go back inside.  As she opened the door the officer slammed it shut and grabbed Amanda by her arm.  The officer then slammed her to the ground and pressed his knee into her back—resting his full weight on her.  The officer also punched her several times in the ribs and yanked on her ponytail.  Throughout the entire incident, Amanda never resisted.  She did, however, receive multiple visible bruises, a broken rib, shoulder pains, as well as other emotional injuries.

Assault, Battery, and Qualified Immunity

Amanda, the plaintiff, sued the officers for state law assault and battery.  The officers asserted that they were immune from the suit under the qualified immunity doctrine.  Qualified immunity bars suits against officers unless (1) the facts, taken in the light most favorable to the plaintiff, show that the officer violated a federal right, and (2) the right was clearly established at the time the violation occurred, such that a reasonable person would have known his conduct was unconstitutional.

Was the Force Required?

The Fourth Circuit stated that “when a plaintiff has alleged that an officer employed excessive force in making an arrest, the federal right is the Fourth Amendment right against unreasonable seizures.” In determining if the right was “clearly established,” it articulated that evaluating the reasonableness of an officer’s actions under Fourth Circuit precedent requires a balancing of the individual’s rights against the countervailing governmental interest—a “totality of the circumstances” evaluation.  In this case, the Fourth Circuit found that the officer grabbed Amanda with no provocation and threw her to the ground despite the fact that he only, at the most, suspected her of aiding in the delinquency of a minor—a misdemeanor.  The circuit judges also found that nothing in the record suggested that Amanda resisted arrest or presented any threat to the officers.

The District Court’s Decision Is Affirmed

The Fourth Circuit found that the officer had acted in a completely unreasonable manner in his use of force against Amanda Smith on September 21, 2006.  He threw her to the ground with no provocation or present risk of harm, and continued to treat her violently despite her passive reaction.  Therefore, the circuit court held that the district court was correct to deny the officers’ motion for summary judgement under the qualified immunity doctrine.

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5Mar

Prospective Request for Attorneys’ Fees Did Not Violate Fair Debt Collection Practices Act

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By Rolf Garcia-Gallont

In an opinion published today, the Fourth Circuit affirmed the district court’s decision in the civil case of Elyazidi v. SunTrust Bank, dismissing all claims brought by the appellant and original plaintiff, Mounia Elyazidi.

Facts and Procedural Posture

Elyazidi overdrew her SunTrust checking account when, despite having only a few hundred dollars in the account, she cut herself a check for nearly $10,000 and cashed it at a SunTrust branch.

When Elyazidi had opened her account with SunTrust, she had signed an agreement that included a provision addressing the account holder’s overdraft liability as follows:

You are liable for all amounts charged to your Account, whether by offset, overdraft, lien or fees. If we take court action or commence an arbitration proceeding against you to collect such amounts, . . . you will also be liable for court or arbitration costs, other charges or fees, and attorney’s fees up to 25 percent, or an amount as permitted by law, of the amount owed to us.

After its own attempts to collect the money proved unsuccessful, SunTrust hired a Maryland law firm, Mitchell Rubenstein & Associates (“MR&A”), to bring a debt collection suit. Because Elyazidi is a Virginia resident, MR&A filed suit on SunTrust’s behalf in Virginia state court. MR&A used a “warrant in debt,” a standardized pleading form that the Virginia courts make available to creditors. The attorneys filled in the blanks to indicate that Elyazidi owed $9,490.82, plus 6 percent interest; $58 in costs; and $2,372.71 in attorneys’ fees. The $2,372.71 in attorneys’ fees represented exactly 25% of the amount Elyazidi owed. MR&A and SunTrust both submitted affidavits along with the pleading, estimating the legal work that would be required to justify this amount. The Virginia state court entered judgment for the full amount demanded by the plaintiff.

After losing her collection suit in Virginia, Elyazidi filed a complaint against SunTrust and MR&A in Maryland state court. Four of her claims — two under Maryland state law, and two under the federal Fair Debt Collection Practices Act (FDCPA) — challenged SunTrust’s and MR&A’s efforts to recover attorneys’s fees in the Virginia suit. Another claim was brought under the FDCPA to recover for MR&A’s disclosure of Elyazidi’s social security number in an unredacted exhibit produced during the Virginia proceedings.

SunTrust and MR&A removed the case to the United States District Court for the District of Maryland, where they were granted a motion to dismiss all claims for failure to state a claim. Elyazidi appealed.

FDCPA CLAIMS

Appellees’ Prayer for Attorneys’ Fees Cannot, as a Matter of Law, Be a False, Deceptive, or Misleading Representation Under the FDCPA

Pursuant to 15 U.S.C. § 1692e, a debt collector may not “use any false, deceptive, or misleading representation or means in connection with the collection of any debt.” It is unlawful to make a “false representation of (A) the character, amount, or legal status of any debt; or (B) any services rendered or compensation which may be lawfully received by any debt collector for the collection of a debt.” To violate the statute, a representation must be material, in the sense that it would affect a naive, unsophisticated consumer’s decisionmaking.

The Fourth Circuit found that MR&A’s representations in the Virginia pleading form were not misleading, because the attorneys sought no more than was allowed in the agreement between Elyazidi and SunTrust, indicated via affidavit that the figure was an estimate, and provided an explanation for the amount of work that would generate that amount of fees. Under these circumstances, not even the most unsophisticated consumer would have misunderstood the nature of MR&A’s request.

The Agreement between Elyazidi and SunTrust Expressly Authorized SunTrust to Seek Attorney’s Fees

Section 1692f(1) of the FDCPA condemns the use of “unfair or unconscionable means to collect or attempt to collect any debt,” and provides a non-exhaustive list of proscribed conduct, including “[t]he collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law.”

Again, because SunTrust sought nothing more than to enforce their valid contractual rights, the Fourth Circuit affirmed dismissal of this claim for failure to state a claim for relief.

Accidental Disclosure of Elyazidi’s Social Security Number During Litigation Was Not an Unfair or Unconscionable Means of Debt Collection Under FDCPA

Section 1692f lists several examples of unfair or unconscionable debt collection practices. The common denominator of these prohibited practices is that they involve harassing or pressuring the debtor to pay her debt. Elyazidi argued that MR&A had intentionally disclosed her social security number as a means to “extort payment” from her.

The Fourth Circuit again affirmed dismissal of her claim, considering that there was no evidence of a scheme to extort payment, and the fact that the failure to redact the documents that contained the social security number had been quickly remedied.

MARYLAND STATE CLAIMS

The Maryland Consumer Debt Collection Act (“MCDCA”) and Maryland Consumer Protection Act (“MCPA”) Did Not Apply to Appelles’ Conduct, Which Took Place Outside of Maryland

The federal district court exercised supplemental jurisdiction over Elyazidi’s Maryland state claims, and dismissed them on the grounds that neither the MCDCA nor the MCPA applies to conduct occurring “entirely” in Virginia.

In Maryland, regulatory statutes are “generally construed as not having extra-territorial effect unless a contrary legislative intent is expressly stated.” Regardless of the fact that MR&A was a Maryland firm, the entirety of the conduct that gave rise to Elyazidi’s claims took place in Virginia. For this reason, the Fourth Circuit affirmed the district court’s dismissal of both Maryland state claims.

The District Court’s Decision to Dismiss All Counts for Failure to State a Claim is Affirmed

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2Mar

How Many Experts to Prove Causation? Five Fail in Medical Device Products Liability Case

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By Elissa Hachmeister

Today, March 2, 2015, in the civil case Lewis v. Johnson & Johnson, the Fourth Circuit affirmed in an unpublished opinion the District Court for the Southern District of West Virginia’s decisions granting summary judgment for the defendant on Lewis’ failure-to-warn claim and directing a verdict for the defendant on Lewis’ design defect claim.

Lewis’ Products Liability Suit

Carolyn Lewis, a Texas resident, alleged injuries resulting from tension-free vaginal tape (TVT) manufactured by a subsidiary of Johnson & Johnson. The defendant moved for summary judgment, and the district court granted summary judgment as to Lewis’ failure-to-warn claim. At trial, Lewis presented testimony from five expert witnesses as well as current and former employees of the TVT manufacturer. Nonetheless, the district court directed a verdict for the defendant on the remaining design defect claim at the conclusion of Lewis’ case.

Summary Judgment on Failure-to-Warn Claim

A district court’s grant of summary judgment is reviewed de novo. The grant will be affirmed if there is no genuine dispute as to a material fact and the moving party is entitled to judgment as a matter of law. The evidence is viewed in the light most favorable to the non-moving party.

Under Texas law, the applicable law in this diversity case, a failure-to-warn claim requires proof of two elements: (1) that the product warning was inadequate, and (2) that the inadequate warning “was a producing cause of the plaintiff’s condition or injury.” Porterfield v. Ethicon, Inc., 183 F.3d 464, 468 (5th Cir. 1999).

In order to establish the “producing cause” element, the plaintiff must show that a different warning would have changed her physician’s decision to prescribe the device. (A device manufacturer’s duty to warn of risks extends only to physicians prescribing the device and does not reach patients who ultimately receive the device.) Absent such proof, the inadequate warning cannot be said to have caused the patient’s injuries.

Prescribing Doctor’s Failure to Rely on Inadequate Warning Defeats Causation

The doctor who recommended and implanted Lewis’ TVT did not rely on the warning or instructions for use in making her decision to prescribe the device. The doctor could not recall whether or not she even possessed the patient brochure containing the warning at the time of Lewis’ surgery. She had last read the TVT’s instructions for use during her surgery fellowship in 2002, seven years before prescribing the device to Lewis. When asked whether she had relied on these documents in prescribing the TVT, the doctor admitted she did not. Instead, she relied on her own experience and her examination of the patient. Because the doctor did not rely on the allegedly inadequate warning in prescribing the device, the warning cannot be the cause of  Lewis’ injuries. The Fourth Circuit affirmed the district court’s grant of summary judgment, agreeing that Lewis did not offer sufficient evidence to create a dispute as to material fact regarding whether a different warning would have changed her doctor’s decision to prescribe the TVT.

Judgment as a Matter of Law on the Design Defect Claim

The grant of a motion for a directed verdict is reviewed de novo. A directed verdict is appropriate where, without weighing the evidence or considering the credibility of the witnesses, there is just one verdict that reasonable jurors could reach. Plaintiff can avoid a directed verdict by presenting sufficient evidence to establish a prima facie case.

Under Texas law, a design defect claim requires the plaintiff to show “that (1) the product was defectively designed so as to render it unreasonably dangerous; (2) a safer alternative design existed; and (3) the defect was a producing cause of the injury for which the plaintiff seeks recovery.” Timpte Indus., Inc. v. Gish, 286 S.W.3d 306, 311 (Tex. 2009). The district court directed a verdict for the defendant based on the final element.

Expert Testimony Needed to Prove Causation in Cases Involving Complex Medical Issues

Expert testimony is necessary to establish causation when an issue involves matters beyond a lay juror’s general experience and common understanding. Cases involving medical diagnoses and complex medical devices will normally require expert testimony. Indeed, the Fourth Circuit characterizes the issues in this case as “complex and technical medical issues beyond common knowledge and experience,” and therefore agrees with the district court’s assessment that Texas law required Lewis to present expert testimony on the causation element.

Experts Failed to Establish Causal Connection Between TVT Defect and Lewis’ Injuries

Although Lewis presented five expert witnesses, the Fourth Circuit concluded that no testimony was sufficient to show causation. One expert testified that the TVT caused Lewis’s pain, but did not testify that a particular defect caused her pain. Another expert did point to a specific property of the TVT, explaining how it might cause pain, but the testimony established only that the device could cause injuries, not that it did in this specific case. (The expert had not examined or treated Lewis.) A third expert’s testimony failed for the same reason: identifying a characteristic of the TVT and connecting it to chronic pain generally does not suffice to establish a causal link between a defect in Lewis’ TVT and Lewis’ pain. And a fourth expert testified to degradation of the TVT in Lewis, but failed to connect it to her pain.

Finally, the fifth expert did offer the right opinion—but the district court excluded it because the expert was unqualified. Rulings on the admissibility of expert testimony are reviewed under a deferential abuse of discretion standard, and the Fourth Circuit concluded that the district court did not abuse its discretion in excluding the opinion. Absent expert testimony that a defect in the TVT caused Lewis’ injuries, the district court properly directed a verdict for the defendant.

Court of Appeals for the Fourth Circuit Affirmed

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4Feb

Tort Claim Against Spam E-Mail Senders Barred By Consent Doctrine

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By Patrick Southern

Today, in Beyond Systems, Inc. v. Kraft Foods, Inc., the Fourth Circuit held in a published decision that the established tort doctrine of volenti non fit injuria (“to a willing person it is not a wrong”) applies to internet service providers (an “ISP”) who set “spam traps” solely for the purpose of raising claims against those who send certain types of spam e-mails. The appellate court affirmed the decision of the District of Maryland in this civil case.

Defendants Argue The Claim Is Barred

Defendant Kraft Foods argued successfully at the District Court level that the claims of plaintiff Beyond Systems and third-party plaintiff Hypertouch were barred because the plaintiffs’ actions before the filing of the action constituted consent. The plaintiffs appealed this issue in the hopes of receiving a new trial, since the District of Maryland never so much as reached the question of damages in this tort action.

Plaintiffs Have a History of Claims Under Anti-Spam Statutes

Spam e-mail became an issue in the 1990s and 2000s, and 35 states responded by 2004 in passing legislation providing for a private right of action for ISPs for violations of provisions related to the sending of spam.

The plaintiff in this case, Beyond Systems, is a Maryland-based corporation which used certain tactics referred to as “spam traps.” In the code of various web sites, it hid e-mail addresses in a way that could not be seen by the typical end user, but instead were only visible to “spam crawlers” (programs which are used by spammers to look for e-mail addresses and subscribe them to e-mail lists). Beyond Systems did nothing to filter or block spam e-mails on the accounts in question, and actually increased its storage capacity to archive these e-mails and retain them for use in litigation.

The third-party plaintiff, Hypertouch, is a California-based corporation owned by the brother of the owner of Beyond Systems. It had engaged in similar tactics and sued Kraft Foods in 2005 over certain e-mails. The claim resulted in a settlement, which provided in part that Hypertouch agreed to cooperate with Kraft in identifying future e-mails that may violate California law. Such lawsuits were big business for both companies, accounting for 90 percent of Beyond Systems’ income in recent years.

In 2008, Beyond Systems sued Kraft and another company, Connexus, in the District of Maryland, bringing both Maryland and California state law claims. Many of the e-mails in question were the same ones that formed the basis for the Hypertouch suit in 2005. Partial summary judgment was granted on e-mails that had been part of the Hypertouch suit, e-mails in which Hypertouch did not notify Kraft of the violations in accordance with the settlement agreement, and (because of the applicable statute of limitations) e-mails which were sent more than one year before the suit.

The District Court bifurcated the trial into a “liability” proceeding and a “damages” proceeding. There were two phases to the liability proceeding: in the first, the court had to determine if Beyond Systems met the Maryland state law standard for being classified as an ISP; in the second, it then had to determine if it was a “bona fide” ISP. The jury found that Beyond Systems met the state law standard, but said because of its litigation activities and relationship to Hypertouch, it was not a “bona fide” ISP. It held that Beyond Systems had invited its own injury and was thus barred from recovery.

The Tactics Utilized by Plaintiffs Constituted Consent

While the cause of action in this case is derived from state statutes, it is rooted deeply in the tort law tradition. Thus, common law rules are applicable in such cases. The Fourth Circuit held, accordingly, that the common law principle that one cannot recover damages flowing from conduct he consents to barred Beyond Systems from any recovery in this case. The appellate court agreed with the trial court that the actions of Beyond Systems constituted consent.

 Claims Based on State Statutes Viewed Through The Lens of Tort Law

The Maryland and California laws at issue in this case exist only as a result of an exception to the federal law which precluded many such statutes, the CAN-SPAM Act (15 U.S.C. § 7701(a(11) et seq.). The federal law allowed certain state laws to continue in operation so long as they were aimed at prohibiting “falsity or deception” in such spam e-mails. Both the Maryland and California laws fall into that category, but since they are primarily concerned with falsity and deception, the Fourth Circuit indicated they fall “into the vein of tort.”

It is a general maxim of tort law that “no wrong is done to one who consents.” In other words, one who consents to conduct of another cannot recover in an action of tort for the conduct or for harm resulting from it. Maryland and California courts have recognized that “[t]hose who, with full knowledge, assent to the invasion of their interests may not complain.”

The Fourth Circuit held that in this case, there was “overwhelming” evidence that Beyond Systems consented to the harm it claims it suffered. It created fake e-mail addresses solely to gather spam, embedded those e-mail addresses in web sites in a way in which they could only be discovered by “spam crawler” programs, and even increased storage capacity to hold more spam e-mails.

But the distinction here is admittedly a thin one. In a footnote, the court made clear it is not barring all claims from a plaintiff ISP whose legitimate business is impacted by deceptive spam and gathers e-mails to have evidence for a suit. The case here turned on the nature of Beyond Systems as a company (its substantial revenue stream from claims related to spam e-mail), and the court said that this plaintiff “gratuitously created circumstances which would support a legal claim and acted with the chief aim of collecting a damage award.”

The Judgment of the District of Maryland Is Affirmed

The Fourth Circuit agreed with the District Court that Beyond Systems had consented to receive the spam e-mails in question in this case, and thus it was barred from any potential recovery.

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18Jan

Are Even Torturers Immune from Suit? How Attorney General Opinions Shield Government Employees from Civil Litigation and Criminal Prosecution

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By: Daniel L. Pines

This article is only available in PDF format. Click here for the full PDF version of this article.

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