SCOTUS-Today

Our colleague Stuart Gerson of Epstein Becker Green has a new post on SCOTUS Today that will be of interest to our readers: Court’s Unanimous Opinion in Federal Tort Claims Act Case Provides Useful Guidance on Claim/Issue Preclusion.

The following is an excerpt:

The Court rendered a unanimous opinion (per Thomas, J., with Sotomayor, J., concurring) in the case of Brownback v. King. The Respondent, King, suffered personal injury in a confrontation with Brownback and Allen, two members of a federal task force, and brought suit against them and others under the Federal Tort Claims Act (FTCA), a statute waiving federal sovereign immunity under certain limitations, and allowing a plaintiff to bring some state-law tort suits against the federal government. 28 U. S. C. §2674. The FTCA includes a provision, called the “judgment bar,” that prohibits “any action by the [plaintiff], by reason of the same subject matter, against the employee of the government whose act or omission gave rise to the claim” if a court enters “[t]he judgment in an action under section 1346(b).” §2676.

King also brought individual actions against the federal officers under the authority of Bivens v. Six Unknown Fed. Narcotics Agents, 403 U. S. 388. The District Court in Brownback dismissed the FTCA claims, holding that that the officers had qualified immunity and that the plaintiff had failed to state a valid claim under Fed. R. Civ. P. 12. The Bivens claim also was dismissed but only the FTCA holding was appealed. The Sixth Circuit held that the dismissal below did not trigger the judgment bar to block King’s Bivens claims. However, noting that the District Court’s order was a judgment on the merits of the FTCA claims that can trigger the judgment bar, the Supreme Court reversed the Sixth Circuit and held that, similar to common-law claim preclusion, the judgment bar requires a final judgment on the merits, and that is precisely what the lower court rendered. The District Court’s dismissal of the FTCA claims hinged on a “quintessential merits decision” concerning whether the complaint was based on facts that established all the elements of an FTCA claim. And while a Rule 12(b)(6) holding generally does not deprive a court of subject-matter jurisdiction, the case is otherwise in the unique context of the FTCA.

Click here to read the full post and more on SCOTUS Today.

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Our colleagues Stuart Gerson and Daniel Fundakowski of Epstein Becker Green have a new post on SCOTUS Today that will be of interest to our readers: “Court Declines Resolving Circuit Split on What Constitutes a ‘False’ Claim, but Will Consider Legality of Trump Abortion Gag Rule.”

The following is an excerpt:

While this blog usually is confined to the analysis of the published opinions of the Supreme Court, several of this morning’s orders are worthy of discussion because of their importance to health care lawyers and policy experts. Guest editor Dan Fundakowski joins me in today’s unpacking of the Court’s rulings.

First, in Cochran v. Mayor and City Council of Baltimore; Oregon v. Cochran; and American Medical Association v. Cochran, the Court granted cert. to review a regulation promulgated by the Trump Department of Health and Human Services that would bar doctors who receive federal funds for family planning services from referring patients to abortion providers. The Ninth Circuit has upheld the regulation, but the Fourth has held it unlawful and enjoined its effectuation on a nationwide basis. The ramifications of this dispute for Medicaid providers and others are obvious, and it will be a point of interest as the Biden administration moves ahead in ways substantially different from its predecessor. It could, for example, moot the cases by repealing the regulation.

Health care litigators have, for some time, urged the Court to decide whether, under the False Claims Act (“FCA”), “falsity” must be based on objectively verifiable facts. In other words, for example, does a conflict of opinion between experts negate a finding of falsity with respect to a decision as to medical necessity or coding of a health care procedure? There has been increasing division among the Circuit Courts of Appeals on this subject, and to the chagrin of practitioners, that division is going to be unresolved for some time, as the Supreme Court has denied cert. in two qui tam FCA cases that we have been closely monitoring: United States ex rel. Druding v. Care Alternatives, 952 F.3d 89 (3rd Cir. 2020) and United States ex rel. Winter v. Gardens Regional Hospital & Medical Center, Inc., 953 F.3d 1108 (9th Cir. 2020). While the FCA requires that claims be “false or fraudulent” in order to give rise to liability, the statute does not define those terms, and this has proved a major issue in dispute in the context of claims related to clinical judgments.

Click here to read the full post and more on SCOTUS Today.

Advances in artificial intelligence (“AI”) continue to present exciting opportunities to transform decision-making and targeted marketing within the world of consumer products. While AI has been touted for its capabilities in creating fairer, more inclusive systems, including with respect to lending and creditworthiness, AI models can also embed human and societal biases in a way that can result in unintended, and potentially unlawful, downstream effects.

Mostly when we talk about bias, we focus on accidental bias. What about intentional bias? The following hypothetical illustrates the problem as it relates to the marketing of consumer products.

In targeted advertising, an algorithm learns all sorts of things about a person through social media and other online sources, and then targets ads to that person based on the data collected. Let’s say that the algorithm targets ads to African Americans. By “intentional” we don’t mean to suggest that the software developer has racist or otherwise nefarious objectives relating to African Americans. Rather we mean that the developer simply intends to make use of whatever information is out there to target ads to that particular population (even if that data is specifically race or data that correlates with race, such as ZIP Code). This raises a number of interesting questions.

Setting aside certain situations involving bona fide occupational qualifications (for those familiar with employment law), would this be okay legally? What if the product is certain hair care products or a particular genre of music? What about rent-to-own furniture based on data that suggest that African Americans are greater than average consumers of such furniture? Taking this scenario a step further, what if it is well documented that rent-to-own arrangements are a significant contributing factor to poverty among African Americans?

Bias can also be introduced into the data through the way in which the data are collected or selected for use. What if the data, collected from predominately African American ZIP Codes, suggest that African Americans typically are willing to pay higher rental rates, and so the advertisements directed to African Americans include those higher rates? Could the companies promoting these advertisements based on those statistical correlations be subject to liability for predatory or discriminatory lending practices? Do we still need human judgment to make sure that AI supported decision making is fair?

These are among the questions that we’ll explore in our upcoming panel on targeting advertising and we invite you to join us.

To learn more about the legal risks of and solutions to bias in AI, please join us at Epstein Becker Green’s virtual briefing on Bias in Artificial Intelligence: Legal Risks and Solutions on March 23 from 1:00 – 4:00 p.m. (ET). To register, please click here.

SCOTUS-Today

Our colleague Stuart Gerson of Epstein Becker Green has a new post on SCOTUS Today that will be of interest to our readers: Biden DOJ No Longer Argues That the ACA Is Unconstitutional

The following is an excerpt:

While the Supreme Court is in recess this week, and public attention is drawn to the trial of Donald Trump in the Senate, there is one event at the Court that is worthy of attention, particularly by those who counsel clients in the health care space. In a letter to the Court, the Biden Department of Justice (“DOJ”) has reversed the position that the previous administration had taken in the cases of California v. Texas and Texas v. California, where the government had filed a brief in support of the total invalidation of the Affordable Care Act (“ACA”).

The instant matter derives from congressional passage of the Tax Cuts and Jobs Act of 2017, which, among other things, eliminated the ACA’s so-called “individual mandate,” which created a tax penalty for Americans who elected to remain without health insurance. It was that provision which the Chief Justice relied upon in joining the Court’s liberals to form a majority upholding the ACA in National Federation of Independent Business v. Sebelius, 567 U.S. 519 (2012). With the penalty first having been zeroed out and then eliminated altogether, Texas and several other states argued that there now was no basis to uphold the ACA itself, and that it must be declared unconstitutional in all regards as an improper exercise of Congress’s taxation powers. The complaining states largely prevailed in lower court decisions, and the Supreme Court granted cert. to the Fifth Circuit to resolve the question. The Trump administration’s DOJ filed a brief on behalf of federal respondents supporting the position of Texas that the whole ACA should be declared unconstitutional.

Click here to read the full post and more on SCOTUS Today.

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In July, we reported (here) on a Third Circuit decision that held an out-of-network provider’s direct claims against an insurer for breach of contract and promissory estoppel were not pre-empted by ERISA. That opinion was a significant win for healthcare providers. Recently, there has been another important win for out-of-network providers—this time from the Ninth Circuit.

In Beverly Oaks Physicians Surgical Ctr., LLC v. Blue Cross & Blue Shield of Illinois, 983 F.3d 435, 442 (9th Cir. 2020), an out-of-network surgical center sued Blue Cross for improperly refusing to pay—or dramatically underpaying—charges for seventeen procedures performed for fourteen patients.

The surgical center in Beverly Oaks followed the typical procedures for out-of-network care. Prior to each procedure, it obtained an assignment from the patients. It also called Blue Cross to confirm that Blue Cross would cover the procedures. Following the procedures, it submitted claim forms to Blue Cross totaling $1.4 million. Of these, Blue Cross paid only $130,000, less than one tenth what was owed.

In the subsequent suit, Blue Cross asserted—for the first time—that the surgical center could not recover any payment due to a non-assignment provision contained in each of the patients’ plans. The District Court agreed, and dismissed the surgical center’s suit for failure to state a claim.

However, the Ninth Circuit reversed the dismissal, finding that the surgical center had alleged facts sufficient to suggest that Blue Cross waived the anti-assignment provision by failing to assert it sooner, and that Blue Cross was estopped from asserting the provision because it promised to pay the claims in pre-surgery phone calls.

For lawyers, this case is another small indication that courts across the country are waking up to the difficulties faced by out-of-network health care providers arising from insurers’ use (and abuse) of boilerplate anti-assignment provisions in health plans. For out-of-network providers, this case highlights the importance of following good pre-procedure protocols, and pinning down the terms of payment before agreeing to provide services.

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The recently issued 2021 Report on FINRA’s Examination and Risk Monitoring Program (the “Report”) replaces, and combines, two previously published FINRA reports – The Report on Examination Findings and Observations as well as the Risk Monitoring and Examination Program Priorities Letter. The Report addresses key regulatory topics in four categories: (1) Firm Operations; (2) Communications and Sales Practices; (3) Market Integrity; and (4) Financial Management. In particular, FINRA identified the following issues that impact many member firms.

Regulation Best Interest (Reg BI) and Form CRS

FINRA noted that in 2021 it intends to expand the scope of its review and testing in this area to engage in a more comprehensive review of firm processes, practices and conduct. FINRA provided a list of considerations its staff will use when examining a firm for compliance with Reg BI and Form CRS, and firms should make sure they have addressed those considerations and FINRA’s prior guidance in this area. FINRA also noted that it was in the “early stages” of review for compliance with these new obligations and thus the report does not contain exam findings or effective practices related to Reg BI and Form CRS. FINRA anticipates issuing a separate report after more examinations have been conducted. Firms should monitor FINRA’s further guidance in this issue.

Cybersecurity

For years, FINRA has focused on cybersecurity due to firms’ increasing reliance on technology. In the Report, FINRA noted that it has observed an increase in cybersecurity or technology incidents at firms, including data breaches. Further, as COVID-19 has triggered an increase in remote work and virtual client interactions, FINRA is encouraging firms to review its prior guidance on cybersecurity as well as the considerations, observations, effective practices outlined in the Report. FINRA also noted that it remains concerned about increased risks for firms that do not implement practices for addressing phishing emails or requiring multi-factor authentication for accessing non-public information. Accordingly, firms should review their cybersecurity program against FINRA’s guidance to ensure that they have adopted best practices and engaged in sufficient testing of their cybersecurity program.

Communications with the Public

FINRA noted that it is “increasingly focused” on communications about new products and how firms address risks relating to new digital communication channels.” In particular, FINRA noted that it is focused on the risks associated with app-based platforms with interactive or “game-like” features that are intended to influence customers. As more millennials become customers, firms may look to such apps to attract customers and firms should be mindful of FINRA’s guidance in this area. FINRA also stated that it will maintain its traditional focus on communications regarding complex products and communications with seniors and vulnerable investors.

Variable Annuities

FINRA noted that in 2020 it had engaged in an informal review of firms’ procedures for buyouts of variable annuities and disclosures to customers after an insurer with significant variable annuities exited the market. That review found that firms did not have sufficient supervision around buyouts, did not have sufficient supervision over exchanges of annuities, had an inadequate review of source of funds for new annuities and did not provide sufficient training to its registered representatives on the sale of annuities. Firms should consider the findings of this review as well as the other issues raised in the Report in connection with their sale of variable annuities.

The Report also highlighted best execution and consolidated audit trail as areas of focus.

In addition to these areas of specific concern, the Report also outlines examination priorities regarding several other issues, including anti-money laundering, outside business activities, books and records, regulatory events reporting, fixed income mark-up disclosure, private placements, large trader reporting, market access, vendor display rule, net capital, liquidity management, credit risk management, segregation of assets.

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Our colleague Stuart Gerson of Epstein Becker Green has a new post on SCOTUS Today that will be of interest to our readers: Court Favors Judicial Review in Railroad Benefits Case, Remands Two Cases Concerning Nazi-Era Looted Property.

The following is an excerpt:

The Supreme Court decided three cases Wednesday, two of them related. None of them could be characterized as a blockbuster ruling or even a matter of broad national interest. One of them, however, will garner much inside-baseball commentary because the 5-4 majority that decided it included the Chief Justice and Justice Kavanaugh, along with the three so-called “liberal” Justices (Sotomayor, who wrote the opinion; Breyer; and Kagan), with Justice Thomas writing a dissent, joined by Justices Alito, Gorsuch, and Barrett. The case is Salinas v. Railroad Retirement Board, and the issue was whether, under the Railroad Retirement Act of 1974, 50 Stat. 307, as restated and amended, 45 U. S. C. §§ 231 et seq., the decision of the Board refusing to reopen a denial of benefits to Mr. Salinas was subject to judicial review.

The Court began with a textual analysis that demonstrated that the phrase “any final decision” is broad, and it reflects Congress’ intent to define the scope of review “expansively,” and hence reversed and remanded the case to the Fifth Circuit for further proceedings. The dissenters opined that the majority might have been correct with respect to the provision that they analyzed, but it was the wrong provision to apply. According to several commentators, there is little surprise in Justice Kavanaugh’s being in the majority because he held in favor of judicial review in a similar case when he was on the DC Circuit. Chief Justice Roberts apparently agreed with him. In the end, besides its value to Mr. Salinas, the case demonstrates once again that the Justices do not necessarily fit the rigid liberal or conservative molds that much of the popular press would put them in, and there is a majority that would favor judicial review if a statute might be interpreted to provide it.

Click here to read the full post and more on SCOTUS Today.

SCOTUS-Today

Our colleague Stuart Gerson of Epstein Becker Green has a new post on SCOTUS Today that will be of interest to our readers: Court Refuses to Take Another Look at Case Questioning Whether Judge or Arbitrator Should Decide Scope of Arbitration Agreement

The following is an excerpt:

The overall quiet at the Court on Monday was only lightly interrupted with its per curiam decision in Henry Schein, Inc. v. Archer & White Sales, Inc., dismissing the petition for certiorari to the Fifth Circuit as improvidently granted. I mention it because the dismissal leaves open the questions that remained when a unanimous Court held on January 8, 2019, in the first iteration of the Schein case, that “a court may not decide an arbitrability question that the parties have delegated to an arbitrator.”

The underlying case was an antitrust matter against Schein, a dental equipment distributor, that sought both monetary damages and injunctive relief. Schein sought to compel arbitration, and the parties’ arbitration agreement provided that “[a]ny dispute arising under or related to this Agreement (except for actions seeking injunctive relief … shall be resolved by binding arbitration … .” The core question was, “Did that provision apply to the case at hand, and had Archer agreed that the initial question of arbitrability itself was for the arbitrator or a court to decide?” The Fifth Circuit held that Schein’s motion to compel arbitration was invalid, thus holding that the threshold question could be decided by a court. The Supreme Court unanimously reversed, as noted above. However, while resolving the underlying legal issue, the Court did not provide any more guidance on what an arbitration agreement should look like other than that it should provide “clear and unmistakable evidence” of the parties’ intent.

Click here to read the full post and more on SCOTUS Today.

SCOTUS-Today

Our colleague Stuart Gerson of Epstein Becker Green has a new post on SCOTUS Today that will be of interest to our readers: Unanimous Court Applies “Plain Meaning” Approach in Bankruptcy Decision

The following is an excerpt:

Bankruptcy is not usually a subject that I would cover in this blog, but I write about the Supreme Court’s unanimous decision today in City of Chicago v. Fulton for two reasons. The first is obvious in that, in these uncertain times, there is an unfortunate number of companies that are contemplating reorganization and others that, as a result, are taking steps to secure property that might affect the ultimate estate. Those who practice in the field should download a copy of the opinion and study its details.

The second reason pertains more to us lawyers who practice before the Court or who otherwise predict or determine its decisions and trends. The Fulton case involves the issue of whether a creditor, in this case the City of Chicago, violates the automatic stay provision of the U.S. Bankruptcy Code (“Code”) when it refused to return various impounded vehicles that had been owned by four debtors who were subject to Chapter 13 of the Code. Reversing lower court rulings, a unanimous Court (Sotomayor, J., concurring, and Barrett, J., not participating), held that the mere retention of estate property after the filing of a bankruptcy petition does not violate 11 U.S.C. § 362(a)(3), which operates as a “stay” of “any act” to “exercise control” over the property of the estate. While Justice Sotomayor concurred because she questioned whether other provisions of the Code might apply in future cases, even she agreed that, as used in §362(a)(3), the phrase “exercise control over” does not cover a creditor’s passive retention of property lawfully seized before bankruptcy and does not require the creditor to return the property upon the filing of a bankruptcy petition.

Click here to read the full post and more on SCOTUS Today.

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Our colleagues Janene Marasciullo and David J. Clark of Epstein Becker Green have a new post on the Trade Secrets and Employee Mobility blog that will be of interest to our readers: “Less Than a Month After DOJ Brings Its First Wage-Fixing Indictment, DOJ Brings Its First “No-Poach” Indictment.”

The following is an excerpt:

In the past month, the U.S. Department of Justice (DOJ) has made good on its 2016 threat, contained in its Antitrust Guidance for Human Resource Professionals (“Antitrust Guidance”) to bring criminal charges against people or corporations who enter into naked wage-fixing agreements or naked no-poach agreements. First, as reported here, on December 9, 2020, DOJ obtained an indictment against the president of a staffing company who allegedly violated Section 1 of the Sherman Act by conspiring with competitors to “fix wages” paid to physical therapists (PT) and physical therapist assistants (PTA). Although not mentioned in the indictment, a related Federal Trade Commission (FTC) complaint alleged that the defendant agreed with competing staffing companies to lower wages after a client unilaterally lowered the rates paid to the defendant for PT and PTA services. On January 7, 2021, DOJ announced a second indictment, which alleged that two corporations operating outpatient medical care facilities violated Section 1 of the Sherman Act by reaching “naked no poach agreements” with two competitors, pursuant to which they agreed not to solicit each other’s “senior-level employees.”

Both indictments allege that the employers entered into purportedly “naked” wage-fixing and no-poach agreements, which are illegal per se, and thus are “deemed illegal without any inquiry into [their] competitive effects.” If the courts allow DOJ to proceed on the illegal per se theory, this will significantly lighten the government’s burden of proof because it assumes the anticompetitive and unlawful character of the agreement. In civil enforcement cases and statements of interest, DOJ has consistently argued that no-poach and wage-fixing agreements are illegal per se. Although DOJ has obtained several consent decrees which indicate that such agreements are illegal per se, civil cases generally resolve through settlement, and as the 2019 decision in In re Railway Ind. Employee No-Poach Litigation (W.D. Pa No. 18-798) recognizes, the law on this issue remains unsettled. Thus, these criminal cases may provide a vehicle for setting standards to determine when wage-fixing and no-poach agreements are “naked” and whether such agreements are illegal per se or subject to the rule of reason analysis.

Click here to read the full post on the Trade Secrets & Employee Mobility blog.