Thursday, May 7, 2015

Auto Insurers Again Seek Dismissal of In re Auto Body Shop Antitrust Litigation

By James M. Burns

In early March, the auto insurer defendants in the In re Auto Body Shop Antitrust Litigation renewed their motions seeking the dismissal of plaintiffs’ action, this time directed at plaintiffs’ Second Amended Complaint. The insurer defendants urged the Court to dismiss the action with prejudice, maintaining that, despite three attempts, the plaintiff auto body shops have still failed to include sufficient facts to make their claim of conspiracy plausible.

The action, commenced well over a year ago as A&E Auto Body v. 21st Century Centennial Insurance Co. and subsequently transformed into a multidistrict litigation proceeding (In re Auto Body Shop Antitrust Litigation, MDL 2557) after similar cases were filed in a multitude of states, centers upon a claim that many of the leading auto insurers in the country conspired to reduce rates for the repair of damaged vehicles and to steer insureds away from auto repair shops that refused to accept lower reimbursement rates for their services. The cases were consolidated before Judge Gregory Presnell (M.D. Fla.) in late 2014, and in early 2015 Judge Presnell dismissed plaintiffs’ First Amended Complaint, finding that the plaintiffs had failed to plead an antitrust conspiracy with the degree of specificity required under Bell Atlantic v. Twombly, 550 U.S. 544 (2007).

In February, plaintiffs filed their Second Amended Complaint, seeking to cure the deficiencies in the complaint identified in Judge Presnell’s prior rulings. In March, the defendants filed several new motions to dismiss the action. One group of defendants (including State Farm, Allstate, Progressive and 21st Century) maintained that the plaintiffs’ allegations still failed to include sufficient factual support to plead an actionable antitrust conspiracy, which they described as the “crucial question” in the case. Claiming that the plaintiffs’ allegations demonstrated nothing more than “parallel conduct” towards the plaintiffs, not agreement, these defendants renewed their request to have the action dismissed as to them. Another group of defendants (which includes Hartford, Nationwide and Zurich American) went a step further, arguing that the plaintiffs had failed to allege any material facts specifically about them, despite Judge Presnell’s express instruction in his prior dismissal order in January (without prejudice, on that occasion) that plaintiffs provide detailed allegations about each defendant’s involvement in the alleged conspiracy. Finally, one defendant (Old Republic) filed a separate motion not only seeking dismissal, but sanctions as well, based on the claim that the plaintiffs had been put on notice by the Court that particularized allegations as to each defendant’s alleged conduct was required, and that plaintiffs’ failure to include any additional factual support for their claims against Old Republic was sanctionable conduct.

In late March, the plaintiffs filed an “omnibus” response to all of the defendants’ motions, arguing that dismissal of the case at this juncture was not warranted. Asserting that “the Second Amended Complaint complies in every respect with the Court’s [January] Order,” the plaintiffs urged the Court to permit them to proceed into discovery. Specifically, the plaintiffs maintained that the parallel conduct alleged in the Second Amended Complaint constitutes “circumstantial evidence of conspiracy” and that the Supreme Court has never expressly held how many “plus factors” supporting a claim of conspiracy are required to satisfy a plaintiff’s pleading obligations. Plaintiffs contended, therefore, that they are not required to “set out specific facts establishing the time, place or persons involved in the conspiracy” nor are they required to allege an “express agreement.” Instead, they maintained, their allegations of parallel conduct, coupled with their allegations about the defendants’ collective market share, motive to conspire and opportunity to do so are more than sufficient to meet their pleading obligations.

In early April, the auto insurers filed reply briefs responding to the plaintiffs’ contentions. Perhaps most significantly, those defendants that had argued that the Second Amended Complaint still failed to contain any significant allegations about their specific conduct noted that the plaintiffs’ response had failed to refute that assertion in any meaningful way (“Rather than simply admit that they failed to allege anything against the moving defendants under the Sherman Act…plaintiffs point to allegations against the other defendants….” emphasis in original).

The entire set of motions are now before Judge Presnell for consideration, with the defendants urging the Court to take a “three strikes, you’re out” approach to the plaintiffs’ case. Whether Judge Presnell will adopt defendants’ baseball analogy and dismiss the case, with prejudice, as to all or some of the defendants remains to be seen. What is certain is that this matter will continue to be a significant focus of attention for the entire auto insurance industry over the coming months. Stay tuned.

Thursday, April 30, 2015

Amendments to the Michigan Nonprofit Corporations Act

By Grace K. Trueman

In January 2015, Governor Snyder signed Michigan Senate Bills 623, 624, and 929, which make significant revisions to the Michigan Nonprofit Corporation Act (MCL 450.2101 – 450.3192) (the “Act”). The purpose of these companion bills is to clarify and modernize the law governing nonprofit corporations that conduct activities in Michigan; indeed, the revisions constitute a major overhaul of the Act and provides increased flexibility for creating and governing nonprofit corporations. Among the numerous changes, the following major revisions may need to be addressed or incorporated into governing procedures or organizing documents:

1. Indemnification and Liability

The Amended Act revised and expanded upon provisions concerning the indemnification of a director, officer, employee, non-director volunteer, or agent, who is or is threatened to be made a party to a civil, administrative, or criminal suit or proceeding. In addition, a nonprofit may now amend its articles of incorporation to contain a provision limiting or even eliminating a director’s liability to the nonprofit corporation, its members, or its shareholders (except for intentional wrongdoing, such as an intentional criminal act or intentional infliction of harm to the corporation or shareholders).

Of particular importance, Section 209 provides that if an entity’s articles of incorporation contain a provision eliminating volunteer director or officer liability (filed before the effective date of the 2015 amendments), the existing provision automatically works to eliminate the liability of a director or volunteer officer under Section 209(1)(c).

2. Mergers

MCL 450.4705a of the Amended Act now allows one or more domestic nonprofit corporations and limited liability companies to merge. A surviving or new corporation may use the same corporate name as the merged or consolidated corporation. See MCL 450.2722. A nonprofit corporation organized for charitable purposes, however, is restricted from merging (as well as dissolving or converting) without the Attorney General’s consent. The Department of Licensing and Regulatory Affairs will not file a certificate of merger for a nonprofit organized for charitable purposes without a copy of the written consent from the Attorney General’s office, or an affidavit that the nonprofit corporation served the notice on the Attorney General and the Attorney General’s office failed to respond within 45 days after filing with the Department of Licensing and Regulatory Affairs.

3. Electronic Voting and Notifications

In an effort to keep pace with electronic forms of communication, the Amended Act allows for electronic voting on, and notice of, various corporate matters. Now, participation in meetings via electronic methods of communication is permitted by default, unless there is a provision in the nonprofit’s organizing documents that prohibit such voting methods. This opens the door for electronic voting or notifications through email, online surveys or other polling venues; but this also means that nonprofit corporations will need to address and prevent issues concerning identification of members or shareholders voting through electronic mediums.

4. Learned Profession

Nonprofit corporations operating in Michigan may provide “services in a learned profession” which includes services provided by a dentist, a physician, a doctor of divinity or other clergy, or an attorney. These revisions incorporate the Attorney General’s opinion that nonprofit hospitals and other nonprofits may provide medical services through employed physicians. In other words, the changes clarify from a statutory perspective the industry understanding that nonprofits may employ and enter into other arrangements with licensed or authorized professionals to provide services on behalf of the nonprofit corporation.

The Act also provides nonprofits with the option to limit access to information for shareholders and members. A nonprofit’s articles of incorporation or bylaws can specify that there is no right to inspect in certain instances, such as opening lists of donors would not be in the best interests of the corporation. Other revisions, such as permissibility of certain mergers and acquisitions, and restrictions on dissolving may be applicable to your nonprofit. Nonprofit corporations should consider reviewing and/or amending their respective governing procedures or organization documents to take these significant revisions to the Michigan Nonprofit Corporation Act into account.

Dickinson Wright is working with nonprofit corporations on a case-by-case basis to evaluate each client’s needs and/or compliance with the Amended Act. If you have any questions or concerns regarding how the Amended Act may affect your nonprofit corporation, please contact any attorneys in our Nonprofit Corporation team.

Thursday, April 23, 2015

USCIS Now Formally Requiring Amended Petitions When H-1B Worksite Changes

By Christian S. Allen

On April 9, 2015, the Administrative Appeals Office (AAO) of the U.S. Citizenship and Immigration Services (USCIS) issued a binding, precedential ruling that all U.S. employers must file an amended petition with the agency whenever an H-1B employee moves to a worksite location which was not specified on the underlying Labor Condition Application (LCA) attached to the original petition filing.

The AAO decision formally supports USCIS and DOL regulations and affirms a trend in policy which has been gaining momentum over the past several years. In 2003, an official at USCIS headquarters wrote a nonbinding letter in which he opined that an amended petition might not be required when an H-1B employee moves to a new worksite, provided that a new LCA was approved by the DOL and posted at the new worksite before the H-1B employee arrived there. Since that time, the USCIS has often allowed employers to follow this strategy when H-1B employees moved, without ever officially endorsing it. However, the legal authority for that strategy has always been suspect. More recently, the USCIS’ anti-fraud unit “site visits” have resulted in several instances of H-1B petitions being revoked, including the petition which is the subject of this AAO ruling. We have repeatedly warned employers that a failure to file an amended H-1B petition with the USCIS in these situations could be considered a violation of long-standing, formal USCIS and DOL regulations.

This decision by the AAO is effective immediately and could have a profound impact on employers in the information technology consulting and contract staffing industries, as well as other employers who are not able to anticipate all potential H-1B employee worksites at the time of their original petition filing. There are certain, limited exceptions to the amended petition requirement, including scenarios where the employee only moves a very short geographical distance, such that the existing LCA still covers the new worksite. However, the AAO was also careful to note that even nearby worksite changes could trigger a need for an amended petition, if the move includes other changes in employment. A common example of this could be a move to a new third-party, client/customer worksite, which would normally require the company to submit evidence to the USCIS to confirm its employer-employee relationship with the H-1B worker and its ongoing, exclusive control of his or her employment.

DW Immigration will be monitoring this development closely for our clients, and we will notify you of any significant updates, including if this policy is extended to other temporary work visa classifications, such as the L-1A or L-1B categories. In the meantime, it is now clear that amended petitions must be filed whenever an H-1B worker is moved to a location which triggers a requirement for a new LCA. As always, if you have any questions or concerns about this new ruling, please feel free to reach out to any of our Immigration Attorneys for advice, at any time.

Thursday, April 2, 2015

Amendments to Arizona’s Purchaser Dwelling Act Impact Residential Construction Claims

By Denise H. Troy

House Bill 2578, which amends the Purchaser Dwelling Act (“Act”), was signed into law by Governor Ducey on Monday, March 23, 2015. The Purchaser Dwelling Act sets forth a procedure for bringing claims for construction defects against the sellers of residential construction. The amended Act contains the following changes:

  • Gives the seller the right (but not the responsibility) to repair or replace alleged construction defects at the home. Previously, the seller could offer repair but the purchaser could reject the offer. The seller need not repair all conditions described in the purchaser’s notice to the seller. The seller may also offer monetary compensation in addition to or in lieu of repair. The purchaser is not required to accept a monetary offer.
  • The seller is required to make a good faith effort to begin any repairs within thirty-five (35) days of advising the purchaser of the intent to repair or within ten (10) days of the issuance of a permit necessary to make the repairs. The purchaser may ask the seller to have the repairs made by a third party to which both parties agree. The purchaser is not required to sign a release if repairs are made, but a release can be negotiated if a payment is made.
  • Defines the term “construction defect” to mean a material deficiency in the design or construction of home that violates construction codes, provides defective materials or equipment and/or fails to comply with workmanship standards. The amendment also defines “material deficiency” to only include deficiencies that “actually impair” the structural integrity, functionality or appearance of the home, or are reasonably like to do so in the foreseeable future.
  • Repeals A.R.S. § 12-1364, which allowed for an award of attorneys’ fees and expert costs to the prevailing party.
  • Precludes the filing of a lawsuit until the repairs are completed, unless the seller does not respond to the initial notice within the sixty days allowed.
  • If the claim is subject to arbitration, and the seller has agreed to make repairs, the purchaser may only make a demand for arbitration after the repair/replacement process has been completed.
  • Tolls the statute of repose and/or limitations until thirty (30) days after substantial completion of the repairs. Tolling also applies to other construction professionals who were involved in the original construction.
  • Requires a court to dismiss lawsuits filed by purchasers who do not comply with the Act. If the statute of repose or limitations expires while the dismissed lawsuit is pending, further claims are barred.
  • If the claims are raised by a homeowners’ association, the association must notify its members of the anticipated cost of litigation and the impact on home values prior to filing the lawsuit.

These amendments are very favorable to homebuilders, because they now have the ability to make necessary repairs; they can no longer be sued for minor issues; and, in many circumstances, are not at risk of an award of attorneys’ fees and costs that far exceed the value of the claim.

These amendments will become effective ninety-one (91) days after the legislature adjourns, which is expected to be in early April, making the effective date sometime in July 2015. The amendments are not retroactive.

We will be writing further on the anticipated impact of this new legislation.

Tuesday, March 3, 2015

Congress Begins With Renewed Efforts to Repeal Insurer’s Antitrust Exemption

By James M. Burns

Early into the 114th Congress, multiple bills have already been introduced that would repeal the insurance industry’s limited antitrust exemption granted by the McCarran-Ferguson Act (15 USC 1011 et seq.).

On January 6, Representative John Conyers (D-Mich.) introduced the “Health Insurance Industry Antitrust Enforcement Act of 2015,” (H.R. 99). The legislation would amend the McCarran-Ferguson Act, which currently provides the insurance industry with an exemption from the federal antitrust laws for conduct that is “the business of insurance,” is “subject to state regulation,” and does not constitute “an act of boycott, coercion or intimidation,” (15 USC 1013), by removing the exemption for health insurers and medical malpractice insurers. Notably, the bill would not eliminate the exemption with respect to other lines of insurance, and is similar to McCarran repeal bills that Representative Conyers has introduced in prior sessions of Congress. Representative Conyers has previously stated that his bill would “end the mistake Congress made in 1945 when it added an antitrust exemption for insurance companies.”

Subsequently, on January 22, Representative Paul Gosar (R-Ariz.), who was a practicing dentist for many years, introduced similar McCarran repeal legislation, entitled the “Competitive Health Insurance Reform Act of 2015” (H.R. 494). Representative Gosar’s bill would only eliminate the exemption as to health insurers. In introducing his legislation, Representative Gosar stated that “Since the passage of Obamacare, the health insurance market has expanded into one of the least transparent and most anti-competitive industries in the United States,” and that there is “no reason in law, policy or logic for the insurance industry to have a special exemption” from the antitrust laws.

Both H.R. 99 and H.R. 494 have been referred to the House Judiciary Committee for further action. Whether these bills will gain traction this Congress remains to be seen, but the fact that the bill has supporters on both sides of the aisle certainly increases the chances that the legislation will, at a minimum, be considered by the House Judiciary Committee (which failed to take up similar legislation in the 113th Congress).

Tuesday, February 17, 2015

Good News from Washington (for a change): Trademark Filings Just Got Cheaper

By John Blattner

The old joke is that the three least believable sentences in the English language are: “The check is in the mail,” “Of course I’ll respect you in the morning,” and “I’m from the government and I’m here to help you.”

But fair is fair, and I am happy to report that one arm of the government has done something very helpful indeed: the Trademark office has reduced the cost of filing trademark applications and renewals.

Once upon a time, all trademark filings were done on paper and via the U.S. Mail. That option is still available, but it’s expensive: you pay a $375 fee for each classification of goods and services in the application. Several years ago, the office introduced electronic filing. As an inducement to use the new approach, it lowered the fee to $325 for electronic applications. The strategy worked, and the vast majority of trademark applications are now filed electronically.

This month the Trademark Office introduced yet another option: the “RF” (“Reduced Fee”) application, which costs only $275. The catch is that you have to use electronic filing for all subsequent filings pertaining to the application. If at any point you revert to paper filing, you get hit with a $50 charge. But most sophisticated companies and law firms – like ours – typically do all their filing electronically anyway, so it’s not a big issue.

The Trademark Office has also reduced the fee for renewing a registration, from $500 to $400. Registrations are only renewed every ten years, so that’s not a huge saving in absolute terms. But when was the last time the government gave you a 20 percent discount on anything? (That’s what I thought.) I look forward to passing these savings along to clients going forward.

To read more articles from Brandmarking: Thoughts on the Creation, Protection, and Enforcement of Brand Identity, click here.

Tuesday, February 3, 2015

The Fight Against Counterfeit Products in Canada Just Got Easier

By Eric D. Lavers

Canada’s new Combating Counterfeit Products Act officially took effect on January 1, 2015. As part of the ongoing overhaul of Canada’s much neglected intellectual property regime, this new tool for content and brand proprietors in the fight against would-be counterfeiters should be viewed as a positive and welcome development.

At the heart of the new laws is a beefed up effort to control counterfeiting at the border. Going forward, border officials will be authorized (previously they weren’t) to voluntarily seize and detain suspected counterfeit goods without fear of repercussion. Simultaneously, the owners of Canadian copyright and trademark registrations will be able, under a “Request for Assistance” procedure, to direct the efforts of border officials by supplying them with advance information related to suspected counterfeiting of their goods.

Expanded definitions of copyright and trademark infringement will also give owners a wider array of options for enforcing their rights against others. Most significantly, in addition to the unauthorized sale, distribution or advertisement of goods or services protected by a registered trade-mark, it will also now be an infringement to manufacture, possess, import, or export protected goods for the purpose of sale or distribution. The same will hold true in certain circumstances for those activities undertaken with respect to labels and packaging for protected goods (as opposed to the goods themselves).

A final important change introduced by the Combating Counterfeit Products Act is the creation of new criminal offences of copyright and trademark infringement. These new criminal offences will cover acts of copyright and trademark infringement undertaken “knowingly” by a person – in other words, deliberately. The punishment for serious cases of criminal infringement will include a fine of up to $1 million and/or a 5 year jail sentence. Less serious offenses will carry a $25,000 fine and/or up to 6 months in prison.

If utilized effectively by brand and content owners, these new laws are sure to make a difference in the ongoing fight against counterfeiting.