• Washington college professor blames automaker for brain injury.
  • Company faces regulatory scrutiny over other safety issues.

Tesla Inc. was sued over a Maryland highway crash last year in which a Model 3’s airbags failed to deploy, leaving a college professor with brain damage.

Elon Musk, the company’s co-founder, has touted the Model 3 as the “safest car ever built” with the lowest risk of injury of any vehicle tested by government regulators. The lawyers who filed the suit said they believe it’s the first case targeting the electric-car maker’s airbags.

“Despite Tesla advertising the Model 3 as the safest car ever made, our lawsuit alleges there are fundamental problems with the safety features of the car,” said attorney Ted Leopold of Cohen Milstein Sellers & Toll, who represents the family that sued. “We look forward to reviewing Tesla’s design, development and testing of this car.”

. . .

Alleged defects in Tesla’s Autopilot system have been blamed in several lawsuits for deaths and injuries and the company has faced scrutiny of the technology by federal safety regulators. Separately, the National Highway Traffic Safety Administration is investigating premature failures of the large central touchscreen and the computer that powers it in Tesla’s Model S sedans.

The Model 3 belonging to the family of Kristian and Jason Edwards was struck by another vehicle in July, causing it slam into a guardrail on the I-95 interstate highway, according to the 27-page complaint. The case couldn’t immediately be verified in electronic records for California Superior Court in Oakland.

None of the car’s airbags deployed and Edwards, a public-health professor at George Washington University in Washington who was wearing her seat belt, suffered major head trauma and other injuries. Her son in the back also was hurt, according to the suit.

The complete article can be viewed here.

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.