Archive for March, 2009

Laurie Chadwick, mother of an eleven-year-old son and six-year-old triplets, was denied a promotion by Wellpoint, Inc.  In denying the promotion, Chadwick’s supervisor explained as follows:

It was nothing you did or didn’t do. It was just that you’re going to school (one class per semester), you have the kids, and you just have a lot of your plate right now.

Chadwick filed a suit under Title VII of the Civil Rights Act, but the trial court granted summary judgment to Wellpoint, Inc., because there had been no specific discussion of Chadwick’s gender.  The First Circuit reversed the decision, noting that such a requirement would make it extremely hard to prove a sex discrimination case.  For a full account of this story, click here.


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Downtown Lawyer has been included in Blawg Review #205, which is structured around Gustav Holst’s The Planets.  A big thanks to Declarations and Exclusions and Blawg Review.

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Roach v. Stouffer, No. 08-1429.

The State of Missouri allows drivers to obtain specialty license plates that contain a specific message or symbol from a sponsoring organization instead of the state moniker of “Show Me State.”  Under Mo. Rev. Stat. 301.3150, a private organization can apply for a specialty license plate for its organization.  Applications are reviewed by the Joint Committee on Transportation Oversight (“Joint Committee”).  Based on Mo. Rev. Stat. 21.795(6), the Joint Committee cannot approve of any application if it receives a signed petition from five house members or two senators.

When Kevin Roach, founder, president, and chairman of Choose Life of Missouri, Inc., applied for a “Choose Life” specialty license plate, he complied with all of the requirements, but two pro-choice senators submitted a letter opposing the specialty license plates.  Accordingly, the Joint Committee denied the application.  Roach filed suit against the state, arguing that the specialty license plate scheme violated his right to free speech, due process, and equal protection under the United States Constitution and right to free speech under the Missouri Constitution.  The trial court struck down Mo. Rev. Stat. 21.795(6) as unconstitutionally overbroad and ordered issuance of the “Choose Life” specialty plates.

On appeal, the Eighth Circuit Court of Appeals noted that it must first determine whether specialty license plates constituted government or private speech.  After reviewing decisions from multiple circuits, the court followed the majority of circuits in holding that specialty license plates are private speech.  The court noted that, under the circumstances, a reasonable person would understand that the vehicle owner took the initiate to purchase the license with his or her message.  The court held that specialty license plate program was unconstitutional because it allowed for viewpoint discrimination.

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After news of the AIG bonuses was released, the Obama administration requested additional oversight of AIG, which has several different branches including insurance, and other companies that have received federal bailout money.  During his recent press meeting, President Obama noted that regulations from the 1940s were outdated and needed to be reformed.  The debate over whether insurance companies should be regulated by the states or the federal government is not new.  However, with the outrage over the bailout in general and AIG’s actions specifically, the Obama administration and those in favor of federal regulation may now have the political capital to achieve the goal of federal regulation of insurance companies.

Background of State Regulation

Under general principles of constitutional law, any authority not specifically granted to the federal government in the United States Constitution is reserved to the states.  In 1868, the Supreme Court followed this principle in Paul v. Virginia by favoring state regulation of insurance companies.  In 1945, Congress also adhered to this principle by passing legislation that stated the states would have control over insurance regulation.  Even with this history, advocates of federal regulation have always existed.

Recent Debate

After the federal government committed $85 million to bailout AIG because “it was too big to fail,” John Sununu, a Republican senator from New Hampshire, Tim Johnson, a Democratic senator from South Dakota, Melissa Bean, a Democratic congresswoman from Illinois, and Ed Royce, a Republican congressman from California, wrote an opinion that was published in the Wall Street Journal on September 23, 2008.  In the opinion, the legislators argued that the AIG bailout was necessary because of the lack of comprehensive, federal oversight of insurance companies.  AIG and other insurance companies like it, they argued, have immense assets and cover multiple countries.  Because of their size, these insurance companies cannot be adequately regulated by one state, with jurisdiction only to its state borders. 

In response, state regulators spoke out against federal regulation at their annual meeting.  The state regulators argued that state regulation has done an excellent job of regulating insurance, but that AIG’s problems related to its financial holdings, which are federally regulated.  The state regulators noted that the U.S. Office of Thrift Supervision regulates the AIG holding company that needed financial assistance, while AIG’s 71 insurance units are regulated by the states.  They argued that the insurance units, by contrast, were the healthiest parts of AIG, which allowed the Federal Reserve to approve the $85 million bailout.

State Investigations into AIG Bonuses

Many were upset by the lack of a federal response to the AIG bonuses, but, in truth, the federal government had little authority to question AIG’s actions.  Congress ordered hearings.

On the state level, attorneys general of Arizona, Connecticut, Delaware, Illinois, Kentucky, Louisiana, Maine, Michigan, Mississippi, Montana, Nebraska, New Jersey, New Mexico, New York, Ohio, Oklahoma, Oregon, Pennsylvania, Texas, Washington, and West Virginia have launched investigations into AIG’s expenditures and bonuses.  Each of these states have demanded names and documents related to the bonuses.  Because the bonuses related to AIG’s financial holding company, it is unclear what authority these states have to compel AIG to comply with their requests.  AIG has countered that the employees are entitled to the bonuses under state contract law.  Many employees are voluntarily returning the bonuses based on the public’s response.


These issues are complicated, as is everything related to the bailouts and the recession.  Even with little understanding of the intricate details, many individuals are outraged over taxpayer dollars being given to the same employees who caused the company to experience financial difficulties.  Whether these circumstances will allow advocates of federal insurance regulation to succeed in their goal remains to be seen.

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Sentis Group, Inc. v. Shell Oil Co., Nos. 07-2308/2573/3162.

Plaintiffs in this case operated Shell gas stations and convenience stores under contracts that required Shell to reimburse plaintiffs for some of the costs of maintaining retail gas operations.  The case turned on how those costs were calculated.  Plaintiffs claimed that Shell misrepresented how those calculations would be made.

The parties engaged in extremely contentious discovery.  The parties disputed (1) whether several persons were plaintiffs’ employees or consultants, (2) whether certain documents were protected by attorney-client privilege or if the privilege had been waived by providing those documents to an expert, (3) whether plaintiffs produced all of the conversations with Shell employees they had secretly recorded, and (4) whether plaintiffs had concealed financial information and e-mails.  Shell filed a motion for sanctions based on plaintiffs’ conduct during discovery.  Based on plaintiffs’ refusal to produce information in discovery, the trial court stated:

. . . I kept telling you to produce stuff, expert stuff.  You ducked.  You wove.  You did everything to keep from producing them.  You go to the Eighth Circuit.  They tell you to produce them, and you still goddamn don’t produce them.  Now what the hell do you not understand? . . . That’s it.  I’m done.  I’m granting the defendant’s motion to dismiss this case for systematic abuse of the discovery process. . . .

After this hearing, plaintiffs submitted a motion for recusal, which the trial court denied.

On appeal, the Eighth Circuit Court of Appeals reverse the trial court on the recusal issue, vacated the trial court’s order of dismissal, and remanded the case for reassignment and reconsideration of the motion for sanctions.  The court stated that “neither party behaved in a manner consistent with the spirit of cooperation, openness, and candor owed to fellow litigants and the court and called for in modern discovery.”  The court then noted that the trial court had directed profanities to plaintiffs over fifteen times during the course of the litigation and that a reasonable man would harbor doubts about the judge’s impartiality in this situation.

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Patrick Crosby, a 58-year-old student, was detained by campus police for viewing MySpace profiles on the library computer.  The officer referred to MySpace as a kid’s site and stated it was inappropriate for Crosby to be visiting the site.  Crosby brought suit against the school, arguing that the school’s conduct violated state law prohibiting school from disciplining students for conduct protected by the First Amendment.  The trial court agreed.  On appeal, however, the California appellate court affirmed the decision, but refused to hold the school policy unconstitutional.  For a full account of this story, click here.

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Advance America Servicing of Arkansas, Inc. v. McGinnis, No. 08-992.

Plaintiff sought to bring a class action against defendants for charging usurious interest and violating the Deceptive Trace Practices Act.  Plaintiff suffered from schizophrenia, which she was unable to afford to treat, as well as anxiety and depression, for which she took prescription medication.  At the certification hearing, defendants challenged that plaintiff was incapable of adequately representing the proposed class because of these conditions.  The trial court disagreed and granted class certification.

On appeal, the Arkansas Supreme Court stated that persons with limited intellects or mental handicaps could serve as class representatives.  The court noted the lack of any medical testimony in the record that plaintiff was unable to participate in the prosecution of the case.  Accordingly, the court affirmed the trial court’s class certification.

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