When the Labor Department quietly rolled out a new policy this week to limit when companies will be on the hook for double penalties in wage settlements, it said the move stemmed from an executive order directing agencies to remove “barriers to economic prosperity as America strives to defeat the economic effects of Covid-19.”

But that explanation obscures the extended history of a contentious action that had been discussed within the Trump administration since at least 2017, and that wage-hour practitioners say will transform the landscape of how the federal government negotiates settlements with employers accused of stiffing workers on pay.

The new directive, published deep inside a DOL webpage on Wednesday, culminates a concerted push by the business lobby to get the Trump administration to drop an Obama-era policy of seeking liquidated damages in pre-litigation wage settlements, which double the amount of back pay workers receive. The DOL’s Wage and Hour Division as of July 1 will seek regular back pay, and not liquidated damages, except in limited circumstances and with approval from two top agency officials.

. . .

Sign-off Required

The Wage and Hour Division’s online notice, which hasn’t been promoted by the department through a formal press release, directs field staff to stop applying liquidated damages as a default rule.

WHD Administrator Cheryl Stanton instructed local offices across the country that they’re prohibited from assessing double damages if employers meet any one of six conditions. That list includes situations in which there’s no clear evidence the employer acted willfully or in bad faith; the business has no history of violations; or if there’s a dispute over an unsettled area of law.

“It basically blows a complete hole in this policy,” said Michael Hancock, who was WHD assistant administrator during the Obama administration through 2015, where he oversaw the expanded use of double damages. “I would be hard pressed to name any employer that can’t cite at least one of these as a reason why they shouldn’t be subject to liquidated damages.”

The notice also said that if an agency investigator decides there’s enough evidence to proceed with pre-litigation liquidated damages, final approval must be obtained from the WHD administrator and the Solicitor of Labor.

The sign-off requirement is a “final kicker,” Hancock said, because it creates “such an administrative barrier that I can’t imagine anyone asks for the exception.” 

A Maryland woman who suffered traumatic brain injuries in a 2019 accident sued Tesla Inc. in California state court Wednesday alleging it manufactured an unsafe Model 3 vehicle with airbags that didn’t properly deploy.

Kristian Edwards and her husband, Jason Edwards, allege Tesla designed and manufactured an “unreasonably dangerous” Model 3 vehicle with defective airbag and occupant restraint systems, despite Tesla’s widely publicized claims that it “engineered the Model 3 to be the safest car ever built.”

The suit stems from a July 1, 2019, accident on I-95 in Maryland during which the driver of another vehicle failed to maintain her lane and hit the Edwardses’ Model 3 vehicle on the passenger side, causing it to crash into a guardrail before coming to rest on the median. The suit was filed in Alameda County Superior Court in California where Tesla’s headquarters is located.

. . .

The suit faults Tesla for overhyping the safety features on the Model 3 and setting a consumer expectation that was not met during the accident.

“The subject Model 3 did not perform as safely as an ordinary consumer would have expected it to perform when used or misused in an intended or reasonably foreseeable way, including, but not limited to, its airbags not deploying and/or its front passenger seat belt not properly restraining plaintiff Kristian Edwards,” the suit said.

Tesla has boasted that the Model 3 “achieves the lowest probability of injury of any vehicle ever tested by [the National Highway Traffic Safety Administration]” and that “NHTSA’s data shows that vehicle occupants are less likely to get seriously hurt in crashes when in a Model 3 than in any other car,” according to the complaint.

The company has also proclaimed that “the Model 3 has a shot at being the safest car ever tested” and that “Tesla is deeply committed to safety, which is why Tesla engineered the Model 3 to be the safest car ever built,” according to the suit.

The Edwardses contend the Model 3 had a number of defective or glitchy features, including faulty airbag sensors and supplemental restraint and passenger restraint systems.

They’ve asserted various claims for strict liability, design defect, failure to warn, negligence and loss of consortium.

“We believe that the vehicle is not crashworthy and it’s not safe and that’s evident by what happened in this accident,” the couple’s attorney Ted Leopold of Cohen Milstein Sellers & Toll PLLC told Law360 Thursday. “This is one of the first pure crashworthiness cases against Tesla, and we look forward to uncovering the design and manufacturing process of testing and safety analysis.”

The Edwardses are represented by Theodore J. Leopold, Leslie M. Kroeger, Adam J. Langino and Poorad Razavi of Cohen Milstein Sellers & Toll PLLC.

The complete article can be viewed here.

A Supreme Court decision this week upheld one of the Securities and Exchange Commission’s most powerful tools for clawing back money from fraudsters but set limits that provide some protections to financial advisers caught in the agency’s cross hairs.

In an 8-1 ruling Monday, the high court held that the SEC can obtain so-called disgorgement of ill-gotten gains in federal court as long the award does not exceed the wrongdoer’s net profit and is given to victims of the illegal scheme. The case involved a California couple, Charles Liu and Xin Wang, who misappropriated funds solicited to build a cancer center in California.

. . .

Disgorgement often is central to SEC enforcement actions. During the last fiscal year, the agency ordered $3.2 billion in disgorgement, the highest amount since fiscal 2015. The SEC levies penalties separately from disgorgement.

The Supreme Court decision allows the SEC to continue to seek disgorgement in federal court, where it wins about $1 billion annually, according to Bloomberg News. The SEC also can obtain disgorgement through administrative proceedings.

The disgorgement curbs will provide at least partial relief for financial advisers who are involved in cases where disgorgement is ordered.

. . .

In an earlier case, the Supreme Court ruled that disgorgement was a penalty for the purpose of imposing a five-year statute of limitations its use by the SEC. In this week’s decision, the court said disgorgement qualifies as equitable relief, similar to restitution to harmed investors.

The ruling could help firms defend themselves against disgorgement in revenue-sharing cases, where it’s sometimes difficult to determine how investors were harmed and how to return money to them, said James Lundy, a partner at Faegre Drinker Biddle & Reath.

“This decision says disgorgement should align more closely to restitution,” Lundy said. “There are arguments from this opinion that could be fashioned to push back on a claim by enforcement to pay revenue-sharing back to the government.”

But Laura Posner, a partner at Cohen Milstein Sellers & Toll, said it’s wrong to parse the Supreme Court decision as a loss for the SEC. After all, the court did not end disgorgement, and the SEC should be able to navigate the limitations placed on it.

“I don’t know how this case could be characterized as anything but a full-throated win for the SEC,” said Posner, former chief of the New Jersey Bureau of Securities. “The SEC returns to investors the overwhelming amount of money that it obtains through disgorgement.”

When disgorgement proceeds don’t go back to investors, they’re often used to finance investor protection and education programs.

“Most courts will find that is an equitable remedy and sufficient under [the Supreme Court’s] reasoning in Liu,” said Posner, referring to the case name, Liu v. Securities and Exchange Commission.

The Supreme Court ruling left to lower courts to decide whether disgorgement funds could be deposited with the Treasury Department.

The Supreme Court on Monday backed the Securities and Exchange Commission’s practice of seeking disgorgement of profits from companies involved in fraud and giving it to harmed investors.

Writing the 8-1 majority opinion, Associate Justice Sonia Sotomayor said the practice is legally permissible equitable relief, as opposed to a punitive action, as long as the SEC disgorges the net profits from the wrongdoing and awards it to victims.

“It’s an important decision for the markets” because it allows the SEC to continue seeking money for investors, said Laura H. Posner a partner at Cohen Milstein Sellers & Toll. Ms. Posner wrote an amicus brief for the North American Securities Administrators Association urging the Supreme Court to support the practice. “It is largely consistent with how regulators seek disgorgement in the first place. Had the SEC lost, it would have been very problematic for the markets,” Ms. Posner said in an interview.

The case, Charles C. Liu, et al. vs. Securities and Exchange Commission, now goes back to the 9th U.S. Circuit Court of Appeals in Pasadena, Calif., to decide other questions not addressed in the narrow Supreme Court ruling.

The case stems from the SEC’s civil lawsuit against an investment scheme that raised $27 million from Chinese investors in a visa investment program. A federal court agreed with the SEC and ordered the backers of the scheme to return, or disgorge, the money and pay a penalty of more than $8 million.

The scheme’s backers then petitioned the Supreme Court to decide whether disgorgement is the same as a penalty when used to discourage further fraud, and whether the SEC can then use it.

Technically speaking, the high court ruled 8-1 to vacate and remand the case for further proceedings. However, in its ruling, the Supreme Court clarified that, as a general matter, in a Securities and Exchange Commission (SEC) enforcement action, a “disgorgement award that does not exceed a wrongdoer’s net profits and is awarded for victims is equitable relief permissible under U.S. Code Section 78u(d)(5). ”

Justice Sonia Sotomayor filed the majority opinion, with only Justice Clarence Thomas breaking with the bench and filing a dissent.

. . .

Laura Posner, a partner at Cohen Milstein and also a former regulator who is highly active on SEC issues, actually has quite
different interpretation of the ruling, suggesting the SEC has basically been left with its full authority intact.

“This ruling could have been structured in a way that entirely robbed the SEC of its ability to secure disgorgement generally,” she tells PLANADVISER. “Thankfully, I don’t see this ruling as significantly limiting their authority at all in practical terms. It is clear to me, based on how they are remanding the case and the questions that they have left open, that the Supreme Court feels money spent in furtherance of outright fraud can be subject to disgorgement. The ruling simply instructs the lower courts to run an analysis of whether any funds have been spent for truly legitimate business purposes, and to use this analysis to help inform their disgorgement proposals.”

To clarify her position, Posner pointed out that the SEC in practice has drawn a distinction between cases where a business may have committed an inadvertent or partial fraud versus cases where fraud is at the heart of an operation or enterprise. She said the Liu case is an example of the latter, noting that evidence submitted at trial makes her believe that there were not any legitimate business purposes involved in this case.

“The SEC does not as a general matter attempt to force truly legitimate businesses to disgorge profits that were not related to an incidental case of fraud or noncompliance,” Posner said. “That is an entirely different matter than the type of major fraud cases like this one. The defendant/petitioners raised some $27.5 million with no business plan.”

In her view, moving forward, the SEC will simply have to do some additional analysis in these types of cases to tease out whether there have been monies spent towards legitimate business purposes. This information can then be used in the disgorgement process. Posner noted that this type of analysis is already a part of privately sponsored litigation, adding that it does not generally protect fraudsters from having to repay ill-gotten funds and profits.

The Supreme Court on Thursday rejected the Trump administration’s attempt to dismantle the program protecting undocumented immigrants brought to the country as children, a reprieve for nearly 650,000 recipients known as “dreamers.”

The 5 to 4 decision was written by Chief Justice John G. Roberts Jr. and joined by the court’s four liberals. It was the second, stunning defeat this week for the Trump administration, as the Supreme Court begins to unveil its decisions in marquee cases.

It will likely elevate the issue of immigration in the presidential campaign, although public opinion polls have shown sympathy for those who were brought here as children and have lived their lives in this country. Congress repeatedly has failed to pass comprehensive immigration reform.

. . .

The administration has tried for more than two years to “wind down” the Deferred Action for Childhood Arrivals (DACA) program, announced by President Barack Obama in 2012 to protect from deportation qualified young immigrants. Former Attorney General Jeff Sessions advised the new Trump administration to end it, saying it was illegal.

But, as lower courts had found, Roberts said the administration did not follow procedures required by law, and did not properly weigh how ending the program would affect those who had come to rely on its protections against deportation, and the ability to work legally.

“We do not decide whether DACA or its rescission are sound policies,” Roberts wrote.

He added: “We address only whether the [Department of Homeland Security] complied with the procedural requirement that it provide a reasoned explanation for its action. Here the agency failed to consider the conspicuous issues of whether to retain forbearance and what if anything to do about the hardship to DACA recipients. That dual failure raises doubts about whether the agency appreciated the scope of its discretion or exercised that discretion in a reasonable manner.”

He was joined by Justices Ruth Bader Ginsburg, Stephen G. Breyer, Sonia Sotomayor and Elena Kagan in the most important parts of the opinion.

. . .

Nearly 800,000 people over the years have participated in the program, which provides a chance for enrollees to work legally in the United States as long as they follow the rules and have a clean record.

More than 90 percent of DACA recipients are employed and 45 percent are in school, according to one government study. Advocates recently told the Supreme Court that nearly 30,000 work in the health-care industry, and their work was necessary to fighting the coronavirus pandemic.

While the program does not provide a direct path to citizenship, it provides a temporary status that shields them from deportation and allows them to work. The status lasts for two years and can be renewed.

Cohen Milstein represented the NAACP, the United Food & Commercial Workers and the American Federation of Teachers in National Association for the Advancement of Colored People, et al. v. Donald J. Trump, in his official capacity as President of the United States, et al. 

In another win at the U.S. Supreme Court, the justices on Thursday blocked the Trump administration from terminating the Deferred Action for Childhood Arrivals program, preserving protections for hundreds of thousands of young unauthorized immigrants and landing their attorneys at the New York Attorney General’s Office, California Attorney General’s Office, Jenner & Block LLP, Covington & Burling LLP,  Cohen Milstein Sellers & Toll PLLC  and Gibson Dunn & Crutcher LLP a spot on the lions list.

The state of Missouri is suing the company that made and marketed a guardrail that’s been at the center of a News4 Consumer investigation for years.

A number of people across the country have died or been severely injured after crashing into guardrail end pieces known as the X-LITE.

The Missouri Highways and Transportation Commission, which oversees the state’s Department of Transportation, filed a civil lawsuit against the Lindsay Corporation and other entities (Lindsay Entities) on June 9. The complaint lists several counts, including fraud and negligence.

WASHINGTON, D.C. — In recognition of their outstanding contribution to antitrust scholarship, the authors listed below have been selected as recipients of the 18th Annual Jerry S. Cohen Memorial Fund Writing Award:

  • Ailin Dong, Assistant Professor at the Antai College of Economics and Management, Shanghai Jiao Tong University;
  • Massimo Massa, Professor at INSEAD;
  • Alminas Žaldokas, Assistant Professor at the Hong Kong University of Science and Technology.

If circumstances allow, the Award will be presented at the 14th annual Private Antitrust Enforcement Conference of the American Antitrust Institute on November 10, 2020 at the National Press Club in Washington, D.C.

Ailin Dong, Massimo Massa, and Alminas Žaldokas will be honored for their article, “The Effects of Global Leniency Programs on Margins and Mergers,” 50 Rand J. of Econ. 883 (2019). The authors investigate how passage of national leniency programs has affected firms’ margins and merger activity. National leniency programs give amnesty to cartel conspirators that cooperate with antitrust authorities. The authors find that such programs reduce the gross margins of the affected firms, suggesting they are effective at reducing cartel activity. However, the authors also find that firms react to such programs by engaging in more mergers, and that some of those mergers may increase market power. Their empirical results imply that although leniency programs are generally effective, their benefits are offset to some extent by mergers that substitute for cartels. The authors thus advocate for stronger merger review.

The three winners will share a $10,800 prize and will each receive an inscribed original artwork created by Lori Milstein.

In addition, this year’s award selection committee has conferred six category awards, as follows:

This year’s award selection committee consisted of Zachary Caplan, Associate at Berger & Montague, P.C.; Warren Grimes, Professor of Law at Southwestern Law School; John Kirkwood, Professor of Law at Seattle University School of Law; Robert Lande, Professor of Law at the University of Baltimore School of Law; Christopher Leslie, Professor of Law at University of California, Irvine School of Law; Roger Noll, Professor Emeritus of Economics at Stanford University; and Daniel A. Small, Partner at Cohen Milstein Sellers & Toll PLLC.

About the Award:

The Jerry S. Cohen Memorial Fund Writing Award was created through a trust established in memory of Jerry S. Cohen, an outstanding trial lawyer and antitrust scholar. The award is administered by the law firm he founded, Cohen Milstein Sellers & Toll PLLC.

The award honors the best antitrust writing published during the prior year that is consistent with the values that animated Jerry S. Cohen’s professional life: a genuine concern for economic justice, the dispersal of economic power, effective limitations upon economic power, and the vigorous enforcement of the antitrust laws.

FOR IMMEDIATE RELEASE

Parents Demand Police and Prosecutor Reopen Inadequate Investigation as

Former Teacher Remains Free Despite Substantial Evidence

HOWARD COUNTY, MD – The families of five children between the ages of four and five have accused the Glen Mar Early Learning Center of the Glen Mar United Methodist Church, and the school’s former director, of enabling a predator to sexually abuse their children in 2019. The families are calling on the Howard County Police Department and Office of the State’s Attorney to reopen and thoroughly complete an investigation that, to date, has been superficial and highly incomplete, leaving the former teacher at large and free to work in other school environments.

The five children and their parents announced today a lawsuit implicating Miguel “Mike” Martinez, a former Glen Mar employee who previously worked at least one other day care center in Maryland and is believed to have work more recently in Delaware. As detailed in the 15-count complaint, two other families warned the school’s director, Lynda Celmer, about Martinez’s treatment of children in 2018. Despite assuring those families that she would alert law-enforcement authorities and suspend Martinez, Celmer failed to do either, allowing at least five additional children to be sexually abused. Both Martinez, known to the children as “Mr. Mike” and Celmer were subsequently terminated only when the Church’s Board of Directors became aware of the allegations in 2019.

Despite ample evidence, the Police Department and State’s Attorney Office for Howard County failed to charge Celmer for not reporting suspected child abuse in 2018 and withholding evidence about those abuse complaints during the first two months of authorities’ 2019 investigation. Similarly, Martinez has not been charged despite compelling evidence against him, including:

  • Detailed accounts from the families of at least seven children, all of whom described to their parents–and, in some instances, child welfare and law enforcement officials as well as mental health professionals–actions amounting to sexual abuse during naptime and identifying Martinez as their abuser;
  • Accounts from other Center staff members who witnesses Martinez touching children under their blankets during naptime; and
  • Security camera footage in which Martinez is seen touching multiple children, in some instances beneath their blankets, despite his denials to police of exactly that touching. (The footage was obtained despite the school’s dangerously inadequate surveillance system.)

The complaint, filed in the Circuit Court of Howard County, Maryland, carefully details an alarming degree of willful negligence by both the Early Learning Center itself and Lynda Celmer. The plaintiffs – the child victims, their mothers and fathers – filed the lawsuit anonymously and will ask the Circuit Court judge to allow them to proceed that way in order to protect the identity of the victims.

“I am incredibly frustrated that in a case involving young children, we as parents were treated as criminals, as though there was an ulterior motive, rather than simply being a voice for our children,” said the parents of one of the child victims. “Howard County Police Department’s mission states ‘Integrity, Pride, and Community.’ They have lost any and all integrity, showed zero pride in enforcing the law and lost all hope of bringing the community or my family any closure.”

Martinez is believed to have been removed from his position between late March and early April of 2019. However, parents were not notified by the school that their children could have been sexually abused or the potential risks stemming from Martinez’s employment until a month after his departure. The families have reason to believe that, subsequent to his stint at Glen Mar, Martinez worked with children in the area of Dagsboro, Delaware.

“The way that our concerns were handled by the Howard County Police Department is disheartening, to say the least. My child was molested and somehow, we were treated like we were the problem,” said another victim’s parent. “The police are supposed to serve and protect our communities and they have failed one of our most vulnerable populations, our children. Beyond the irreparable damage done to our family, our concerns lie with the families of other children who may not yet know of the potential their children were abused. Martinez worked with children for at least six years and is still able to work with children today. How many other times has he done this?”

The short- and long-term effects of prolonged sexual abuse of children on both the child victims and their parents are well-documented. In their developmental years, abused children are more likely to suffer from psychological disorders such as depression, anxiety and stress disorders; experience behavioral problems; suffer developmental delays, psychosomatic disorders, post-trauma symptoms such as engaging in premature sexualized and promiscuous behaviors, poor self-esteem or academic problems; develop substance abuse, eating or sleep disorders; and struggle with above-average peer relationship problems, among other harmful impacts. Learning that one’s child has been sexually abused is known in mental health medicine to inflict severe and long-lasting psychological distress, mental health disorders and other such harm on the child’s parents, potentially provoking such symptoms as: clinically-significant depression and/or anxiety, rage, agitation, irritability, humiliation, hypervigilance as to the child’s ongoing safety, fear, despondency, mistrust of others, damage to other relationships, distressing damage to the parent-child relationship and damage to religious faith.

“Our family is sickened and disappointed by the Howard County Police Department’s early and continued dismissal of clear statements made by several children over the past year regarding the sexual abuse suffered at the hands of Mr. Martinez,” said a third victim’s parent. “We have watched our child regress and struggle in ways that have been heartbreaking and terrifying; ways that professionals have advised us are consistent with the type of abuse our child described. The Department is aware of our child’s dramatic behavioral changes, as well as our child’s vivid, detailed statement regarding the abuse.  The Department’s failure to investigate, refusal to support the children and disrespectful dismissal of the parents of reporting children is disgusting and unforgivable.”

As detailed in the complaint, Martinez regularly being left alone with the children violated the church’s “Two Adult Rule” policy, which requires two adults in the room for every activity involving children. The violations of this policy make clear that the Center failed to properly implement or provide training for their administrators, staff, faculty and volunteers consistent with the applicable standard of care and in violation of law.

Among the counts brought against the Glen Mar Early Learning Center, the Glen Mar United Methodist Church and Lynda Celmer are several forms of negligence, including the retention of Martinez and failure to provide, maintain and operate a reasonably safe educational environment that prevented risk of sexual abuse. The families seek damages in order to help manage many of the repercussions frequently associated with abuse: costs of medical, psychological and psychiatric evaluation and care and medications; costs of vocational, rehabilitative, occupational and physical therapies; loss of earning capacity and future lost earnings; cost of transportation to and from health care providers; educational expenses; excess child care expenses; and the cost of parenting and family therapies, among many others.

The victims and their families are being represented in this case by the Sexual Abuse, Sex Trafficking and Domestic Violence practice group at Cohen Milstein Sellers & Toll. The group includes Takisha Richardson who prior to joining Cohen Milstein, was an Assistant State Attorney in Florida and Chief of the Special Victims Unit of the State’s Attorney’s office, where she directed the prosecution of crimes against children and the elderly and sexually motivated offenses.

About Cohen Milstein 

Cohen Milstein Sellers & Toll PLLC is a national leader in plaintiff-side class action litigation. As one of the premier law firms in the country handling major complex lawsuits, Cohen Milstein, with more than 90 attorneys, has offices in Washington, DC; Chicago, IL; New York, NY; Philadelphia, PA; Palm Beach Gardens, FL; and Raleigh, NC. For more information about the firm, please visit http://www.cohenmilstein.com or call (202) 408-4600.

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Media Contact: 

Dean Pearce/ 630-723-7490

cohenmilstein@berlinrosen.com