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Uniting Plaintiff, Defense, Insurance, and Corporate Counsel to Advance the Civil Justice System
Summer 2015
Carbon nanotubes (CNTs) holdpromise for many beneficialapplications. However, there havebeen concerns and calls for amoratorium raised over “mountingevidence” that CNT may be the“new asbestos,”1 or at leastdeserving of “special toxicologicalattention” due to prior experienceswith asbestos.2 The shape and sizeof some agglomerated CNTs aresimilar to asbestos—the most“desirable.” And because CNTs forstructural utility are long andthin—characteristics thought toimpart increased potency to
asbestos fibers—discussions ofparallels between these twosubstances are natural. Thus, giventhe legacy of asbestos-relatedinjury and the thousands of caseslitigated each year, consideration ofpossible implications of the use ofCNTs in research and in consumerproducts is prudent.
First reported in 19913, CNTsepitomize the emerging field ofnanotechnology, defined by someas the “ability to measure, see,manipulate, and manufacturethings usually between 1 and100 nanometers.”4 CNTs are a typeof carbon-based engineerednanoparticle generally formed by
Uniting Plaintiff, Defense, Insurance, and Corporate Counsel toAdvance the Civil Justice System
Fall 2009
Toxic Torts and EnvironmentalLaw Committee
IN THIS ISSUECarbon Nanotubes: The Next Asbestos . . . . . . . . . . . . . . . . . . . . . . . 1
Editor’s Message . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Tatera v. FMC Corporation: When Is A Product No A Product? . . . 3
Mexico’s National Wastes Management Program. . . . . . . . . . . . . . . 4
Environmental Risk During Restructuring And Bankruptcy . . . . . 5
Upcoming TTEL Programs And Meetings . . . . . . . . . . . . . . . . . . . . 6
Limitations Of Toxicogenomic Studies To Assess Toxic ExposuresAnd Injury From Benzene . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Burlington Northern: The Requisite Intent For Arranger LiabilityUnder Cercla . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2009-2010 TIPS Calendar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Continued on page 18
CommitteeNewsCommitteeNews
CARBON NANOTUBES: THE NEXT ASBESTOS?Fionna Mowat, Exponent, [email protected] Tsuji, Exponent, [email protected]
1 Miller, G. 2008. Mounting evidence that carbonnanotubes may be the new asbestos. Friends of theEarth Australia. Available at http://nano.foe.org.au.2 The Royal Society and Royal Academy ofEngineering (RS/RAE). 2004. Nanoscience andnanotechnologies. Royal Society and Royal Associationof Engineers. London: The Royal Society. Available athttp://www.royalsoc.ac.uk/.3 Iijima, S. 1991. Helical microtubules of graphiticcarbon. Nature (London) 354:56–58.4 National Science and Technology Council (NSTC).2007. The National Nanotechnology Initiative. StrategicPlan. Washington DC: NSTC, Committee onTechnology, Subcommittee on Nanoscale Science,Engineering, and Technology. December. Available athttp://www.nano.gov/ NNI_Strategic_Plan_2004.pdf.
To our Members and Readers,
Welcome to the Summer Edition of the Corporate Counsel Newsletter 2015. This newsletter includes excellent articles on navigating ERISA’s safe harbor regulations, an insurer’s privilege as to investigative materials, and data privacy issues. We thank each of the authors of these articles and welcome all input, ideas, and work product for future newsletter articles.
Marcy’s Notes: This is my last newsletter as Chair of the Corporate Counsel Committee, and it is bittersweet, as I have really enjoyed working with all of you this year. The good news is that Bill Kruse is following
me as Chair of this wonderful committee and has a robust and exciting year planned for you. The committee is in excellent hands as we move into the next bar year.
Bill’s Notes: Our inaugural Mentorship Program was quite a success, and we will be starting the application process for 2015-2016 in the near future. We also have two or more CLEs for the coming bar year in the pipeline, being finalized and sent through for approval now.
Our next big event on the TIPS calendar is the Annual Meeting, July 30-August 2, 2015, at the Swissôtel in Chicago. Please check out the TIPS website for more information regarding the meeting logistics at:
http://www.americanbar.org/calendar/annual.html
And mark your calendars for our Fall Meeting at the Westin Kierland Resort in Scottsdale, Arizona, October 14-18, 2015.
WORDS FROM THE CHAIR
Corporate Counsel Committee
IN THIS ISSUE:Words From The Chair . . . . . . . . . . . . . . . . . 1Navigating the Shoals of ERISA: The “Safe Harbor” Regulations . . . . . . . . . . 4Are An Insurer’s Investigation Reports Protected As Privileged? . . . . . . . . . . . . . . . . 6Managing Data In An Era Of Transnational Uncertainty . . . . . . . . . . . . . . . . . . . . . . . . . . . 72015-2016 TIPS Calendar . . . . . . . . . . . . . . 13
Corporate Counsel Committee Newsletter Summer 2015
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Incoming ChairWilliam Eugene Kruse
Gallup Inc901 F St NW, Fl 4
Washington, DC 20004-1417(202) 715-3185
Outgoing ChairMarcy Hogan GreerAlexander Dubose et al
515 Congress Ave, Ste 2350Austin, TX 78701(512) 716-8310
Fax: (512) [email protected]
Chair-ElectDavid Becker
Freeborn & Peters LLP311 S Wacker Dr, Ste 3000
Chicago, IL 60606-6679(312) 360-6391
Fax: (312) [email protected]
Council RepresentativeJohn C McMeekin IIRawle & Henderson LLP1339 Chestnut St, Fl 16
Philadelphia, PA 19107-3597(215) 370-9626
Fax: (215) [email protected]
New Vice-ChairPamela Annette PalmerMorris Polich & Purdy LLP1055 W 7th St, Ste 2400
Los Angeles, CA 90017-2550(213) 891-9100
Fax: (213) [email protected]
Scope Liaison and Vice ChairChristine Spinella DavisManatt Phelps & Phillips LLP
1050 Connecticut Avenue NW, Suite 600Washington, DC 20036
(202) [email protected]
Vice-ChairsMonica Gibbs1106 S Bodine St
Philadelphia, PA 19147-5306(856) 968-2430
Zascha Blanco AbbottMarshall Dennehey Warner Coleman et Al
PO Box 347924Miami, FL 332347924
(305) 610-2843 [email protected]
Gabriel R AragonCohen Kennedy Dowd & Quigley PC
2425 E Camelback Rd, Ste 1100Phoenix, AZ 85016-9207
(602) 252-8400Fax: (602) 252-5339
Jeffrey Adam BrauerHahn Loeser & Parks LLP200 Public Sq, Ste 2800
Cleveland, OH 44114-2303(216) 274-2371
Fax: (216) [email protected]
Raana I Burney15600 Blue Star Ct
Odessa, FL 33556-1796(813) 532-4096
Rebecca Louise BushBorden Ladner Gervais LLP
40 King Street WestToronto, ON M5H 3Y4
(416) [email protected]
Mary Dohner SmithConstangy Brooks & Smith LLP
401 Commerce St, Ste 1010Nashville, TN 37219-2446
(615) 320-5200Fax: (615) 321-5891
Vallie Dugas1100 Poydras St, Ste 1700
New Orleans, LA 701631(504)5857500
Lacy L DurhamDeloitte Tax LLP
2200 Ross Ave, Ste 1600Dallas, TX 75201-6703
(214) 840-1926Fax: (214) 756-9714
Natalie T FurnissBricker & Eckler LLP
100 S 3rd StColumbus, OH 43215-4291
(614) 227-8918Fax: (614) 227-2390
Gary L GassmanCozen O’Connor
123 N Wacker Dr, Ste 1800Chicago, IL 60606-1770
(312) 474-7994Fax: (312) 474-7898
Sherra Van Brunt GilbertFanaff & Baldwin
11200 Richmond Ave, Suite 250Houston, TX 77082
M Gerard Gregoire35 Linden Rd
Lake Zurich, IL 60047-2234(847) 970-8010
Tracey Lee HaleyZurich North America
1502 Shannon PlCarrollton, TX 75006-1517
(972) 774-2233Fax: (800) 329-6105
Grace HansonHomesite Insurance Company
99 Bedford StBoston, MA 02111
(617) [email protected]
Kim D HogrefeChubb & Son Inc
15 Mountain View RdWarren, NJ 07059-6795
(908) 903-3085Fax: (908) 903-3030
We welcome your interest and encourage your involvement in the Corporate Counsel Committee. If you are interested, please feel free to join our monthly teleconferences with substantive presentations on the last Tuesday of each month at 4:00 EDT/3:00 CDT/2:00 MT/1:00 PDT. There are many ways to get involved in our group, whether you prefer speaking, writing, public service, networking, social outings, or all of the above. If you want to join the Corporate Counsel Committee, or if we can be of assistance in any other way, please let me know.
Marcy Hogan Greer William E. KruseAlexander Dubose Jefferson & Townsend LLP GALLUPOutgoing Chair, Corporate Counsel Committee Incoming Chair, Corporate Counsel Committee
Corporate Counsel Committee Newsletter Summer 2015
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Floyd Holloway JrState Farm Insurance
6 Hillman Drive, Suite 200Chadds Ford, PA 19317
(610) 361-4150Fax: (610) 361-4152
Keith HopkinsonWinstead PC
401 Congress Ave, Ste 2100Austin, TX 78701-3798
(512) 370-2896Fax: (512) 370-2850
Susan J JenningsLife Insurance Co of the Southwest
15455 Dallas Pkwy, Ste 800Addison, TX 75001-6496
(214) 638-9301Fax: (214) 638-9120
Kermit KendrickBurr & Forman LLP
420 20th St N, Ste 3400Birmingham, AL 35203-3284
(205) 458-5393Fax: (205) [email protected]
Beth M KramerLockheed Martin Corporation
6801 Rockledge DriveBethesda, MD 20817
(301) [email protected]
Michelle Anne LaffertyThe Hylant Group
6000 Freedom Square Dr, Ste 400Cleveland, OH 44131-2554
(216) [email protected]
Sheri Littlefield-MorenoCFA Institute
915 East High StreetCharlottesville, VA 22902
(518) 391-8098Fax: (434) 978-5997
Mengqian Liu3919 Temple City Blvd
Rosemead, CA [email protected]
Juanita B Luis175 County Road B2 E, Apt 201
Saint Paul, MN 55117-1513(651) 483-2583
Fax: (952) [email protected]
Samuel H Neece651 S Wells St, Apt 708Chicago, IL 60607-4547
(312) [email protected]
Julia A PhillipsPite Duncan LLP
9311 SE 36th St, Ste 100Mercer Island, WA 98040-3700
(206) 232-2752Fax: (206) 232-2655
Lisa Pittman1200 Miami DriveAustin, TX 78733(713) 632-1772
James M Proctor IIMcWane Inc
2900 Highway 280 S, Ste 250Birmingham, AL 35223-2469
(205) 414-3100Fax: (205) 414-3170
Lesley C ReynoldsNorton Rose Fulbright
799 9th St NW, Ste 1000Washington, DC 20001-4501
(202) 662-0247Fax: (202) 662-4643
April SavoyNationwide Insurance1 Nationwide Plz, Fl 35
Columbus, OH 43215-2239(614) 677-5164
Sarah Sederstrom8700 Jeffrey Ave N
Stillwater, MN 55082-9251(651) 272-6235
Hunter Tate902 Euclid Ave, Apt C
Mountain Brk, AL [email protected]
Alexander S. ValdesWinstead PC
401 Congress Ave, Ste 2100Austin, TX 78701(512) 370-2842
Thomas P WertRoetzel & Andress
PO Box 6507Orlando, FL 32802-6507
(407) 835-8548Fax: (407) 835-3596
Hypertext citation linking was created with Drafting Assistant from Thomson Reuters, a product that provides all the tools needed to draft and review – right within your word processor. Thomson Reuters Legal is a Premier Section Sponsor of the ABA Tort Trial & Insurance Practice Section, and this software usage is implemented in connection with the Section’s sponsorship and marketing agreements with Thom-son Reuters. Neither the ABA nor ABA Sections endorse non-ABA products or services. Check if you have access to Drafting Assistant by contacting your Thomson Reuters representative.
©2015 American Bar Association, Tort Trial & Insurance Practice Section, 321 North Clark Street, Chicago, Illinois 60654; (312) 988-5607. All rights reserved.
The opinions herein are the authors’ and do not necessarily represent the views or policies of the ABA, TIPS or the Corporate Counsel Committee. Articles should not be reproduced without written permission from the Copyrights & Contracts office ([email protected]).
Editorial Policy: This Newsletter publishes information of interest to members of the Corporate Counsel Committee of the Tort Trial & Insurance Practice Section of the American Bar Association — including reports, personal opinions, practice news, developing law and practice tips by the membership, as well as contributions of interest by nonmembers. Neither the ABA, the Section, the Committee, nor the Editors endorse the content or accuracy of any specific legal, personal, or other opinion, proposal or authority.
Copies may be requested by contacting the ABA at the address and telephone number listed above.
Corporate Counsel Committee Newsletter Summer 2015
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An employer sponsoring an employee benefit plan affording benefits such as group health care or disability insurance to its eligible employees likely is aware of the importance of knowing whether the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1101 et seq. (ERISA) governs its plan. ERISA imposes on covered plans a variety of disclosure, reporting and other requirements. At the same time, ERISA coverage changes the litigation landscape significantly when a plan’s decision (such as to deny benefits) is challenged. ERISA coverage generally means preemption of state law–based causes of action arising from plan decisions, while offering an important degree of deference to be given by courts to decisions made by the benefit plan and its plan administrator. Moreover, there is no right under ERISA to a jury trial, which may be an important factor in some cases.
What may be less well known is the manner in which plan sponsors may choose to decide if their plans fall under ERISA. Granted, by broadly defining “employee welfare benefit plan,” ERISA sweeps many arrangements into its regulatory embrace. Plan sponsors, however, should be aware that ERISA contains an exception from its regulatory structure for what otherwise would be covered plans. The exception is found in what is known as the “safe harbor” regulation. Depending on the employer’s goals – under ERISA coverage or not – using the safe harbor exception can play an important role in employee benefit planning.
Starting Point: ERISA Coverage of Employee Welfare Benefit Plans
ERISA defines an “employee welfare benefit plan” as:
[A]ny plan, fund or program which … is established or maintained by an employer or employee organization … to the extent such plan, fund or program was established or is maintained for the purpose of providing for its participants or their beneficiaries through the purchase of insurance … or otherwise, (A) medical, surgical or hospital care or benefits, or benefits in the event of sickness, accident,
disability, death or unemployment.… 29 U.S.C. § 1002 (1).
“[A] plan, fund or program under ERISA is established if, from the surrounding circumstances, a reasonable person could ascertain the intended benefits, class of beneficiaries, source of financing, and the procedures for receiving benefits.” Henglein v. Informal Plan for Plant Shutdown Benefits for Salaried Employees, 974 F.2d 391, 399 (3d Cir. 1992), quoting Donovan v. Dilingham, 688 F.2d 1367, 1373 (11th Cir. 1982). “[T]he purchase of a group policy or multiple policies covering a class of employees offers substantial evidence that a plan, fund or program has been established.” Id. at 1372-73.
Significantly, no formal written plan is required; indeed, an employer may have created an ERISA plan “even though affected employees had not known of the guidelines” for receiving benefits. Henglein, 974 F.2d at 400, citing Brown v. Ampco-Pittsburgh Corp., 876 F.2d 546 (6th Cir. 1989).
The “Safe Harbor” Exception
In contrast to the broad coverage principles cited above, the U.S. Department of Labor (DOL) has issued “safe harbor” regulations excluding certain group insurance plans from ERISA’s definition of “employee welfare benefit plan.”
Safe harbor applies when:
1) No contributions are made by an employer or employee organization
2) Participation [in] the program is completely voluntary for employees or members
3) The sole functions of the employer or employee organization with respect to the program are, without endorsing the program, to permit the insurer to publicize the program to employees or members, to collect premiums through payroll deductions or dues checkoff and to remit them to the insurer
4) The employer or employee organization receives no consideration in the form of
NAVIGATING THE SHOALS OF ERISA: THE “SAFE HARBOR” REGULATIONSBy: Kevin C. Donovan
Continued on page 10
Corporate Counsel Committee Newsletter Summer 2015
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The American Bar Association Tort Trial & Insurance Practice Section will kick off the 2015 bar year with it’s Section Fall Leadership Meeting, held October 14-18, 2015 at the Westin Kierland Resort & Spa in beautiful Scottsdale, Arizona. The meeting will feature a number of must-attend events including:
Complimentary CLE Program featuring Corporate Counsel Executives: Lessons Learned in the Trenches of Litigation Management
Important Business Meetings and Valuable Networking Events
Friday Afternoon Golf Tournament
Saturday Evening Dinner featuring Music, Dancing and “Glow-Putt” Mini-Golf
The Kirsten Christophe Memorial Award for Excellence in Trial and Insurance Law Presentation
The Opportunity to Enjoy the Stunning and Relaxing Surroundings of Scottsdale
ABA TIPS 2015 Fall Leadership Meeting October 14-18, 2015
The Westin Kierland Resort & Spa Scottsdale, AZ
Register Today! Register Today!
Corporate Counsel Committee Newsletter Summer 2015
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ARE AN INSURER’S INVESTIGATION REPORTS PROTECTED AS PRIVILEGED?By: A. Neil Hartzell
The notice of claim arrives, a group of home owners in Swell Town, USA, claim long-term health effects including skin cancer and reproductive issues from having ingested contaminated well water. The letter claims damages of over $50 million. There are two wells in town, both downgradient from XYZ Chemical Company, the town’s largest employer. XYZ used arsenic and selenium in its historic operations. You insure XYZ Chemical Company, which has a manufacturing plant in Swell Town. You call your best investigator, Ian Vestigator, who jumps on the case. Diligent, thorough and discreet, Mr. Vestigator discovers that the lead plaintiff and his wife have only lived in Swell Town for two years, have a family history of health problems and worked in a pesticide factory for over twenty years in another state, where the husband made a workers’ compensation claim for disability. It appears as though you have an excellent defense, at least as to the lead plaintiff and his wife. The claimants’ lawyer claims he has a “slam dunk” case and threatens you with a bad faith settlement practices claim unless a substantial payment is made and refuses to mediate. Litigation commences and you decide you will have to depose the plaintiff. Plaintiff then serves XYZ and its insurer with discovery, asking for all investigative reports and the insurer’s claim file concerning plaintiff’s claims. You think, well Mr. Vestigator’s report is protected, correct? Not so fast.
In Providence Piers LLC v. SMM New England, USDC RI, 12-532S (March 25, 2014), a U.S. magistrate judge held that certain reports and insurance company’s related investigative documents were not privileged and ordered them to be produced.1
The opinion stated that federal law makes it clear that a party asserting a work product protection bears the burden of showing it applies, citing Vicor Corp. v. Vigilant Ins. Co., 674 F.3d, 1, 17 (1st Cir. 2012). The burden requires the demonstration by specific and confident evidence that the documents were created in anticipation of litigation, citing Weber v. Paduano, No. 02-3392, 2003 WL 161340, at *4 (S.D.N.Y. Jan. 22, 2003). The court also stated that when documents are prepared for business reasons, the “prospect of litigation”
in connection with their subject matter is insufficient to pull them under the protective shadow of the work product umbrella, citing United States v. Textron Inc., 577 F.3d 21, 26, 29-31 (1st Cir. 2009) (certain work papers required by audit rules were prepared because of the “prospect of litigation” were not covered by the work product doctrine.)
The court reasoned that adjustment of insurance claims always involves the possibility of litigation, yet an insurance company’s ordinary business is investigating claims. Therefore, it is difficult to distinguish materials prepared in the ordinary course of business, which are not protected, from documents prepared in anticipation of litigation, which are usually protected.
The court stated that in the U.S. District Court in Rhode Island, whether an insurer’s investigation file is protected is a fact specific inquiry. Investigations into the causes and effects of an accident undertaken soon after the event itself are generally considered part of an insurance company’s ordinary work file, citing the Weber case, 2003 WL 161340, at *4, 7. Merely having an insurer involved with its counsel and its claim investigation does not transform the investigation into one undertaken and in anticipation of litigation, citing American Home Assurance Company v. United States, No. 09-CV-258, 2009 WL 3245445, at *3 (D.N.J. Oct. 7, 2009). The court went on to state that while courts generally find insurer authored documents more likely than attorney authored documents to have been prepared in the ordinary course of business, that was also not dispositive, citing QBE Insurance Corp. v. Interstate Fire and Safety Equipment Company Inc., 3:07CV1883, 2011 WL 692982 at *3 (D. Conn. Feb. 18, 2011). The court stated that a party resisting discovery in these circumstances must establish by objective evidence that the author of a document anticipated litigation when it was created, and would not have created a document in the same way had the prospect of litigation not existed.
Using those principles as the framework of its analysis, the court found that the evidence established that the reports were ordered by the non-attorney adjustors
Continued on page 12
1 As of this writing neither side has filed any objections to the Magistrate’s Memorandum and Order.
Corporate Counsel Committee Newsletter Summer 2015
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MANAGING DATA IN AN ERA OF TRANSNATIONAL UNCERTAINTYBy: Harry Gottfried
Privacy, privacy, and privacy: a siren call that no legal practitioner can ignore. Data management and information security practices are at the forefront of every company’s collective strategic consciousness as each business interacts, stores, manages, and shares information with and about customers, partners, suppliers, and internal personnel, in particular in the new era of “Big Data” hosted in the “Cloud.”
It is clear that the era of regularly using the Cloud to manage complex corporate transactions previously reserved to internally managed data centers and costly infrastructure has finally arrived. Witness the rise of the Workdays, NetSuites, and Salesforces’ of the Software-as-a-Services (SaaS) world. SAP’s recent cloud cooperation pact with IBM Corporation represents an important milestone in the emerging global phenomenon of moving critical corporate data and essential business functions to the Cloud. One can only imagine the stringent security terms included in the IBM-SAP agreement.1
Notwithstanding the transition the global corporate world is experiencing, one has to have been fast asleep or storing one’s head in the “Cloud” to have failed to note that the United States’ banking, health, and personal data are at constant risk. Target2, Home Depot3, JP Morgan4, and Community Health Systems5, have all recently suffered dramatic and significant data thefts and unlawful intrusions into their data storage and information management systems. It has been reported that Sony incurred $171 million dollars in settlement and remediation costs for its 20116 user account data breach, and recently agreed to a $15 million dollar settlement of U.S. based claims related to the theft of names, addresses, and possibly credit card data belonging to the 77 million stolen user accounts7. Data thieves are relentless, and
they do not differentiate between governmental and corporate targets8.
These data breaches involving many U.S. based companies have a truly global impact and a series of complex legal ramifications. These new issues confront the legal community in its daily representation of technology as well as “brick and mortar” clients alike.
In this article, I explore some of the recent legal decisions and technology trends that highlight the global inconsistency of the laws and practices governing data management and security. I also provide a case study of a Big Data client that describes how some transnational businesses are addressing customer concerns when expanding global operations in order to retain control over their information security systems and to protect critical data and information.
One of my Big Data clients recently asked my opinion about where and how to establish a data center presence outside of the U.S., as the company expands its global sales opportunities, particularly into the European marketplace. The conclusions and advice I provided made it clear there are no “silver bullets” or “slam dunk” easy ways to limit all apparent and known risks or potential liabilities when managing client data. The conclusion – we are still in a primitive and early stage of this truly “brave new world” of global data management practices.
With recent data and privacy related decisions in the U.S. and E.U. involving Google9 and Microsoft10, I was well aware of the vastly uncertain legal landscape that confronts any company (start-up and large entities alike) when trying to define a data management strategy on a multinational basis. The Google case involves an E.U. legal decision that grants citizens the “right to be forgotten” and enables
1 This deal involves SAP’s Hana Enterprise Cloud platform running on IBM Infrastructure-as-a-Service (IaaS) global capabilities. See: http://www.informationweek.com/cloud/software-as-a-service/sap-hana-platform-hits-ibm-cloud/d/d-id/13166112 http://krebsonsecurity.com/tag/target-data-breach/3 http://www.forbes.com/sites/maggiemcgrath/2014/09/08/home-depot-confirms-data-breach-investigating-transactions-from-april-onward/4 http://money.cnn.com/2014/10/02/technology/security/jpmorgan-hack/index.html5 http://money.cnn.com/2014/08/20/technology/security/hospitals-data/index.html6 http://www.darkreading.com/attacks-and-breaches/sony-data-breach-cleanup-to-cost-$171-million/d/d-id/10978987 http://www.polygon.com/2014/7/23/5931793/sony-2011-data-breach-class-action-lawsuit8 http://money.cnn.com/2014/10/01/technology/security/hackers-xbox-apache/index.html9 Dispute involves Spanish citizen’s “right to be forgotten” from Google search engine results based on a European right of privacy. See: Google Spain SL, Google Inc. v Agencia Española de Protección de Datos, Mario Costeja González (2014) is a decision by the Court of Justice of the European Union (CJEU). For the case decision, see: http://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:62012CJ0131, and http://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:62012CJ0131&from=EN10 See “IN THE MATTER OF A WARRANT TO SEARCH EMAIL ACCOUNT CONTROLLED AND MAINTAINED BY MICROSOFT”: 15 F.Supp.3d 466, in an opinion dated April 25, 2014 by James C. Francis Iv, United States Magistrate Judge (involving the question of whether a U.S. Government subpoena covers email communications controlled or maintained by a domestic corporation but whose physical location is outside of the U.S.) available at https://www.documentcloud.org/documents/1149373-in-re-matter-of warrant.html
Corporate Counsel Committee Newsletter Summer 2015
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individuals to petition Google to purge and expunge certain data and information stored in Google’s massive search engine database, regardless of where or how that data is stored. Not to be outdone, a U.S. court recently ruled in the Microsoft case that Microsoft had to produce electronic communications stored outside of the U.S. in connection with a domestic U.S. lawsuit, a finding that Microsoft apparently intends to appeal. Both decisions demonstrate the “extra-territorial” reach of current American and European jurisprudence, and presents a unique challenge to the legal practitioner that is providing information management and data security advice to transnational corporations.
Many legal advisors working with transnational clients have observed that a number of non-U.S. based potential customers and partners are reluctant to entrust their data to companies that exclusively host, store, manage, and secure information in U.S.-based data centers, hosted systems or with domestic data management partners (e.g. the “Snowden Effect”). My client and many other companies in a similar circumstance have firmly determined that there is a need for an “off-shore” data center option in order to ease customer concerns about the location of their data and to successfully grow and expand market potential. My client arrived at the same conclusion, despite the ability to claim that we maintain E.U. and Swiss “Safe Harbor” certification, and have developed world-class security protocols and protections.
Technology never stands still, and a number of U.S. based technology companies have recently gone on the offensive to address daily data management that impacts personal use of mobile and Internet applications. Apple recently announced it has added native encryption capabilities to its new operating system, and both Google and Yahoo are beefing up their own encryption and data protection systems since the Snowden revelations.
Getting back to the practical concerns of my Big Data client, after weighing many diverse factors, I advised my Big Data client to establish its European data center in the United Kingdom (using a managed hosting cloud that is scalable, flexible and accompanied by enhanced security features). In this case study, we already had an established commercial relationship with a well known and frequently used data hosting company headquartered in Texas, which has a U.K. based affiliate. The advantages of this approach included language commonality, the fact that the initial potential
sales market would be located in the U.K., and the key result that my Big Data client could finally represent in its customer and partner agreements that critical data, including any personal information entrusted to it, would be in a compliant hosted environment subject to the U.K.’s enabling legislation of the European Data Directive11. Of course, now only time will tell whether the structure we envision will satisfy our prospective German, French, and other European customers.
One cannot underestimate the current global angst that persists with respect to post-“Snowden” U.S. government data collection practices, and the alleged U.S. government influence upon, and access to, global data, email, and other electronic communications. Both, the U.S. in the Microsoft case, and the E.U. in the Google case, continue to joust and compete for pre-eminence with respect to data protection, privacy, and information management rules, applying broadly each of their own legal concepts and principles in an extra-territorial manner.
While my Big Data client will be able to represent it has established data management capabilities outside of the U.S. in compliance with E.U. law, which theoretically will now safely protect European-based data and information, apparently that same client cannot escape the subpoena power of U.S. courts for data located offshore (as demonstrated in the Microsoft case), nor can that client’s U.S. operations escape the consequences of the Google decision or the E.U. Data Directive12.
Both approaches drive the cost of business higher, and not until the U.S. and the E.U. decide that it is in their collective self-interest to harmonize their discordant practices and laws, will data driven companies have clear guidelines and rules to regulate their essential data management and information security practices.
Harry Gottfried, a Member of the State Bar of California since 1993, has served in an in-house capacity for many San Francisco-Bay Area/Silicon Valley technology companies, and presently advises an array of Big Data, Cloud-based start-ups. He has worked in varying legal capacities in Ireland, the Netherlands, and England, and started his legal career in 1992 advising clients in Brussels, Belgium entering the then-new European Union single market. He has also held in-house positions with Sega, NEC and Flextronics, managing global technology transactions. He additionally spent six years at Safeway Inc. negotiating internal procurement and technology agreements. You can contact Harry by way of his public LinkedIn page at: www.linkedin.com/pub/harry-gottfried/10/283/b38/ or at [email protected]. This article was previously published in the ABA TIPS International Committee Spring 2015 newsletter.
11 See European Data DIRECTIVE 95/46/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 24 October 1995, No L 281/31, and the U.K. Data Protection Act of 1998 (1998 Chapter 29).12 See also, http://blog.itsecurityexpert.co.uk/2014/04/time-to-start-preparing-for-new-eu-data.html for an interesting perspective on the potential for future European directive and legislative refinements that will further alter a company’s personal notice obligations and data management requirements.
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Join the Tort Trial & Insurance Practice Section for a Complimentary CLE Program featuring Corporate Counsel Executives
Thursday, October 15, 2015 3:30 PM – 5:00 PM
“Lessons Learned in the Trenches of Litigation Management”
Our experienced panel of in-house counsel and claims professionals will discuss trends, issues and approaches to the most difficult problems facing clients and lawyers alike in managing their litigation. Panelists include: Roy Alan Cohen, Esq. Jay Pricher, Senior Corporate Counsel Porzio, Bromberg & Newman, P.C. Best Western International Morristown, NJ Phoenix, AZ Douglas Betkowski, National Litigation Manager Craig Orraj, Head of Business Insurance Claims Mohave Transportation Insurance Company Farmers Insurance Group Phoenix, AZ Westlake Village, CA Leslie Leazer, Corporate Claims & Litigation Manager Knight Transportation Inc. Phoenix, AZ
Register Here Now! This program is co-sponsored by the TIPS Business Litigation Committee, Commercial Transportation Litigation Committee, Corporate Counsel Committee, Products Liability Committee, Staff Counsel Committee, and Toxic Tort and Environmental Law Committee. The ABA directly applies for and ordinarily receives CLE credit for ABA programs in AK, AL, AR, AZ, CA, CO, DE, GA, GU, HI, IA, IL, IN, KS, KY, LA, MN, MS, MO, MT, NH, NM, NV, NY, NC, ND, OH, OK, OR, PA, SC, TN, TX, UT, VT, VA, VI, WA, WI, and WV. These states sometimes do not approve a program for credit before the program occurs. This course is expected to qualify for one and a half (1.5) hours of Credit in 60-minute states, and 1.8 credit hours of Credit in 50-minute states. This transitional program is approved for both newly admitted and experienced attorneys in NY. Attorneys may be eligible to receive CLE credit through reciprocity or attorney sel f-submission in other states. For more information about CLE accreditation in your state, contact Donald Quarles at [email protected].
ABA TIPS 2015 Fall Leadership Meeting October 14-18, 2015 The Westin Kierland Resort & Spa Scottsdale, AZ
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cash or otherwise in connection with the program, other than reasonable compensation, excluding any profit, for administrative serviced actually rendered in connection with payroll deductions, or dues checkoff. 29 C.F.R § 2510.3-1(j) (emphasis supplied).
The burden of establishing that a plan comes within the safe harbor is on the party asserting that the exception applies; moreover, he or she must demonstrate that all four factors are met in order to pull the plan within the safe harbor. Morris v. Paul Revere Ins. Group, 986 F. Supp. 872, 878-79 (D.N.J. 1997); Menkes v. Prudential Ins. Co. of Am., 762 F.3d 285 (3d Cir. 2014).
Factors one, two and four are fairly straightforward. For example, whether the employer in any way contributes monetarily to the cost of the plan or profits by it should normally be easy to establish. E.g., McCann v. Unum Provident, 921 F. Supp. 2d 353 (D.N.J. 2013) (the fact that employees covered by the plan received a group discount by virtue of their status as employees satisfies the “contribution” prong of safe harbor). So, too, whether participation in the plan is voluntary should normally be evident. Factor number three of the safe harbor exception, however, introduces the vaguer concept of whether the employer has “endorsed” the plan. This addresses the principle of “employer neutrality” toward the plan.
When the safe harbor regulations were first proposed, the DOL in its explanatory comments stressed that for an employee benefit plan to fall within the safe harbor, the employer “… must not hold out the program as a benefit of employment …” 40 Fed. Reg. 24642, 24643 (No. 111) (June 9, 1975).
The DOL reiterated this principle in the final regulations by including therein the requirement that the employer not “endorse” the benefit program.
This requirement of employer neutrality is the key to the rationale for not treating such a program as an employee benefit, namely the absence of employer involvement. 40 Fed. Reg. 34526, 34527 (No. 159) (Aug. 15, 1975).
Thus, if an employer in any way “endorses” the program, then it cannot be said to have maintained the required “disconnect” from the benefit plan. “[P]lans are not subject to ERISA in cases where employers are disconnected from the program such that it is clear that the program represents a ‘third party’s offering’ to employees.” Ziesemer v. First Unum Life Ins. Co., 2006 U.S. Dist. LEXIS 59618, 2006 WL 2465622 (D.N.J. Aug. 23, 2006), citing and quoting Schneider v. UNUM Life Ins. Co. of America, 149 F. Supp. 2d 169, 177 (E.D. Pa. 2001) and Thompson v. American Home Assurance Co., 95 F.3d 429, 436 (6th Cir. 1996).
In Johnson v. Watts Regulator Co., 63 F.3d 1129 (1st Cir. 1995), the First Circuit articulated the appropriate test for satisfying the safe harbor “endorsement” prong as follows:
[A]n employer will be said to have endorsed a program within the purview of the … safe harbor regulation if, in light of all the surrounding facts and circumstances, an objectively reasonable employee would conclude on the basis of the employer’s actions that the employer had not merely facilitated the program’s availability but had exercised control over it or made it appear to be part and parcel of the company’s own benefit package. … Johnson, 63 F.3d at 1135 (emphasis supplied).
As shown by the first bolded phrase in the quote above, the test is objective and governed by the employer’s own actions. A party cannot satisfy its burden by claiming that it did not subjectively know that ERISA governed or by claiming ignorance of its employer’s actions with respect to the plan at issue. The question then becomes what facts should be considered in deciding if there has been an endorsement.
Endorsement Issues
“Endorsement” of a plan may take many forms. For example, an employer might expressly identify the plan as an offered benefit of employment in an employee handbook and/or present it as a benefit of employment during new-employee orientation.
Other forms of endorsement may be more subtle. The employer might place its name and company logo on plan documents describing the plan benefits. Ziesemer,
NAVIGATING THE SHOALS...Continued from page 4
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slip. op. at 24 (“The face of the Gildermann Plan shows that Gildermann, Inc. endorsed it. The plan itself is embossed with the words ‘Gildermann, Inc. Your Policy Number 460730 … Your Long-Term Disability Plan’”), citing Schneider, 149 F. Supp. 2d at 181 (finding endorsement where an employer allowed its logo to be printed on promotional material and made reference to the plan as its own).
As noted, the safe harbor regulations require the employer to keep the benefit plan at arm’s length. An employer that encourages its employees to enroll in the plan would most likely be found to have endorsed it (as well as having strayed from the hands-off approach required by the regulations). However, small differences in how the employer presents the plan make the difference in whether ERISA or its safe harbor applies. A comparison of two cases illustrates this point.
In Hansen v. Continental Ins. Co., 940 F.2d 971, 977 (5th Cir. 1991), endorsement was found where the employer provided its employees with a booklet on the plan that included the employer’s name, referred to the plan as “our plan,” and encouraged employees to “give [the accident insurance] program careful consideration” as it could be “a valuable supplement to your existing coverages.” Id. at 977.
By contrast, no endorsement was found where the employer distributed sales brochures that were prepared by the insurer and included within the text of the brochure a letter on company letterhead recommending enrollment in these words: “Your company makes available to you a program of Group Voluntary Accident Insurance that will provide protection for both occupational and non-occupational accidents. We believe this to be an attractive program available at substantially lower cost than similar coverage purchased
on an individual basis….” The employer (Watts Regulator) did add the caveat: “however, the decision is, of course, entirely an individual one.” Johnson, 63 F.3d at 1136-37, 1140. Viewing the record in its entirety, the Johnson court decided, perhaps surprisingly, that there was a difference between “recommending” enrolling into what the employer opined was a good plan and an actual “endorsement” within the meaning of safe harbor. Id. at 1136.
The Johnson court distinguished Hansen in two ways. First, it noted that in Hansen the corporate logo was embossed on the plan booklet, “making it appear that the employer vouched for the entire brochure (and for the plan).” By contrast, the Johnson court noted that “only Watts’s letter [typeset within the brochure] bore its imprimatur.” Id. at 1137. Second, the booklet at issue in Hansen described the policy as the company’s plan (“our plan”), while the letter from Watts, while typeset into the booklet, described the policy as a plan offered by another organization. Rejecting the argument that this was mere “semantics,” the Johnson court concluded that “in the difference between ‘our plan’ and ‘a plan’ lies the quintessential meaning of endorsement.” Id. at 1137, citing, e.g., Sorel v. CIGNA, 1994 WL 605726, at 2 (D.N.H. Nov. 1, 1994) (holding that a statement describing a policy as employer’s plan on the first page of a plan description indicates endorsement).
The foregoing shows how careful plan sponsors must be in presenting their benefit plans to their beneficiaries. They must plot their goal – ERISA or safe harbor – and navigate their course accordingly.
Kevin Donovan is a partner in Wilson Elser’s New Jersey office. He can be reached at 973.735.5760 and [email protected].
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immediately upon learning of the claim, and before counsel was engaged and that the insurer presented no evidence that demonstrated that these documents were not produced in the ordinary course of its business. The court also conducted an in camera review of the insurer’s investigation file documents, and certain reports from outside experts and concluded that they had the “look and feel” of standard insurance fare and contained no hint that they were prepared in anticipation of litigation as opposed to a claim of investigation. While the court found that certain other communications between the insurer and its insured were not protected because there had been a waiver, and that certain other documents were protected, what is critical to be aware of in this decision is that, at least in the District of Rhode Island (and a growing trend in some other states), unless a specific showing is made that documents were created in anticipation of litigation, they may not be protected.
This decision is somewhat troubling as one can argue that all claims have the potential to result in litigation, thus posing challenges on how to protect initial investigator reports that may contain critical (and sometimes harmful) information. The Court stated that a party resisting discovery based on claims of privilege cannot rely on conclusory statement of privilege but must make a particularized showing. While no method or mere label is a guarantee of protection, one possibility is to have an insurance company’s in-house counsel or outside counsel order the reports or label all reports -- as some companies do -- as prepared in anticipation of litigation and that will at least give an initial layer of protection. In addition, file notes could reflect that reports were ordered in anticipation of litigation, particularly after a demand letter is received or the adjuster reasonably believes a demand or claim will be forthcoming.
ARE AN INSURER’S...Continued from page 6
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2015-2016 TIPS CALENDAROctober 201514-18 TIPS Fall Leadership Meeting Westin Kierland Resort Contact: Felisha A. Stewart – 312/988-5672 Scottsdale, AZ22-23 2015 Aviation Litigation National Program Ritz Carlton Hotel Contact: Donald Quarles – 312/988-5708 Washington, DC
November 20154–6 2015 FSLC & FLA Fall Meeting Liaison Capitol Hill Contact: Donald Quarles – 312/988-5708 Washington, DC
January 201620-22 Fidelity & Surety Committee Midwinter Meeting Waldorf Astoria Contact: Felisha A. Stewart – 312/988-5672 Hotel, New York, NY
February 20163-9 ABA Midyear Meeting Manchester Grand Hyatt Contact: Felisha A. Stewart – 312/988-5672 San Diego, CA18-20 Insurance Coverage Litigation Midyear Mtg. Arizona Biltmore Contact: Ninah Moore – 312/988-5498 Phoenix, AZ
April 20166-9 Motor Vehicle Product Liability Program Arizona Biltmore Contact: Donald Quarles – 312/988-5708 Phoenix AZ8-9 Toxic Torts Midyear Meeting Arizona Biltmore Contact: Felisha A. Stewart – 312/988-5672 Phoenix, AZ
May 201611–15 TIPS Section Spring CLE Conference Intercontinental Buckhead Contact: Felisha A. Stewart – 312/988-5672 Atlanta, GA Speaker Contact: Donald Quarles – 312/988-5708
