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PERSONAL INJURY: Comparing Compensatory Damages Awards to Evaluate Excessiveness of Punitive Damages Awards

The Lawletter Vol 39 No 6

Fred Shackelford, Senior Attorney, National Legal Research Group

     When a jury awards different amounts of compensatory damages to multiple plaintiffs in the same case but also awards each plaintiff the same amount of punitive damages, can a court compare the compensatory damages awards to determine whether a punitive damages award is excessive? That was the issue before the Virginia Supreme Court in the case of Coalson v. Canchola, 287 Va. 242, 754 S.E.2d 525 (2014). There, an intoxicated motorist (Canchola) caused an accident that injured another driver (Coalson) and the other driver's passenger (Stemke). In an action by both injured parties against Canchola, the jury awarded  compensatory damages of $5,600 to Coalson and $14,000 to Stemke, in addition to awarding $100,000 in punitive damages to each of them. The trial court remitted Coalson's punitive damages award, noting a "significant disparity" between the plaintiffs' compensatory damages awards but identical awards of punitive damages. On appeal, the Coalson court first determined that punitive damages were warranted based on Canchola's egregious conduct, as follows:

Canchola was driving while intoxicated and without a license, which had been revoked because of previous instances of driving while intoxicated. Despite having at least seven convictions for driving while intoxicated on his record, Canchola drove on several occasions on the day of the accident while drinking alcohol throughout the day. He ignored a police officer's warning not to drive and engaged in deception so that the officer would not discover he was driving, after which he drank even more and then attempted to drive again. After causing an accident that could have resulted in serious injuries, Canchola fled the scene and asked his girlfriend to lie about his involvement.

Id. at 250, 754 S.E.2d at 529.

     The court also determined that the ratio of Coalson's punitive damages to compensatory damages (1:17.86) was "high" but not unreasonably or strikingly out of proportion. Id. at 251, 754 S.E.2d at 529. The court further ruled that the ratio was not excessive for purposes of federal due process, even though under federal precedent the ratio between actual or potential harm and punitive damages should generally be within single digits.

     Addressing the central issue in the case, the Coalson court considered whether the jury properly awarded punitive damages in the same amount to plaintiffs whose compensatory damages differed, thereby applying different ratios to different plaintiffs based on the same conduct by the defendant. The court concluded that the jury acted properly, reasoning as
follows:

     We have not previously addressed whether it is proper to compare punitive damages
awards in evaluating excessiveness. However, in Allied Concrete Co. v. Lester, 285 Va. 295, 312, 736 S.E.2d 699, 708 (2013), this Court held that a trial court may not compare verdicts to evaluate the excessiveness of compensatory damages. Likewise, in John Crane, Inc. v. Jones, 274 Va. 581, 595, 650 S.E.2d 851, 858 (2007), the Court declined to compare verdicts in determining whether compensatory damages were excessive.

     We hold that the same rationale stated in John Crane, Inc. is true regarding comparing punitive damages awards: "[Comparing verdicts] is not probative of whether a verdict is excessive; rather that determination must be made based on the facts and circumstances of each case." Id. The circuit court's consideration of Coalson's and Stemke's relative ratios of compensatory damages to punitive damages as a basis for granting remittitur was error.

Id. at 249-50, 754 S.E.2d at 529.

      In dissent, Justice McClanahan asserted that the jury's verdict was either arbitrary or a result of partiality or prejudice. She explained:

     As compared to Stemke's punitive damage verdict, which was a little over 7 times
the compensatory damage verdict, the jury verdict for Coalson against the same defendant for the same conduct amounted to nearly 18 times the verdict. In other words, the jury punished Canchola more severely for the injuries sustained by Coalson than for the injuries sustained by Stemke arising from the same accident. If not arbitrary, the award was based on partiality toward Coalson or prejudice against Canchola.

Id. at 256, 754 S.E.2d at 532 (McClanahan, J., dissenting).

ESTATES: The Scope of the Probate Exception to Federal Jurisdiction

The Lawletter Vol 39 No 6

Matt McDavitt, Senior Attorney, National Legal Research Group

     It is well known that the jurisdiction conferred to the federal courts by the Judiciary Act of 1798 did not include authority over probate, as administration of decedent estates was reserved for the several states. Markham v. Allen, 326 U.S. 490 (1946). This jurisdictional exclusion of federal courts from probate matters has been deemed the "probate exception."  While traditionally the probate exception was interpreted broadly, thereby deterring federal courts from assuming jurisdiction over matters even tangentially related to probate of estates, the scope of the probate exception has narrowed in recent years such that federal courts now will entertain suits involving probate estates under certain circumstances.

     In 2006, the U.S. Supreme Court dramatically limited the scope of the probate exception, departing from prior jurisprudence and defining more precisely when federal courts may validly assume jurisdiction over disputes involving probate estates. The federal courts are not permitted to adjudicate issues involving (a) the administration of decedent estates, or (b) the disposition of property actually and presently in the in rem custody of the probate court, but issues outside these bounds are fair game for federal jurisdiction:

[T]he probate exception reserves to state probate courts the probate or annulment of a will and the administration of a decedent's estate; it also precludes federal courts from disposing of property that is in the custody of a state probate court. But it does not bar federal courts from adjudicating matters outside those confines and otherwise within federal jurisdiction.

Marshall v. Marshall, 547 U.S. 293, 296 (2006) (emphasis added). Courts after Marshall have acknowledged the now-narrowed scope of the probate exception:

It is clear after Marshall that unless a federal court is endeavoring to (1) probate or annul a will, (2) administer a decedent's estate, or (3) assume in rem jurisdiction over property that is in the custody of the probate court, the probate exception does not apply. Insofar as [prior case law] interpreted the probate exception as a jurisdictional bar to claims "interfering" with the probate, but not seeking to probate a will, administer an estate, or assume in rem jurisdiction over property in the custody of the probate court, that interpretation was overbroad and has been superseded by Marshall.

Three Keys Ltd. v. SR Util. Holding Co., 540 F.3d 220, 227 (3d Cir. 2008).

     Thus, federal courts may now assume jurisdiction over matters relating to probate estates so long as the matter being litigated does not implicate the above-listed subjects. For example, plaintiffs post-Marshall may now assert claims under federal law (after meeting the jurisdictional requirement of having either diversity of parties or the presence of a federal question) for intentional/tortious interference with inheritance so long as the plaintiff seeks in personam damages from the tortfeasor(s), and not the distribution of property in the actual control of the probate court.

CRIMINAL LAW: Warrantless Search of Cell Phones

The Lawletter Vol 39 No 6

Doug Plank, Senior Attorney, National Legal Research Group

     In what some commentators have described as the most important criminal law decision of its 2013-2014 Term, the U.S. Supreme Court ruled unanimously in Riley v. California, 134 S. Ct. 2473 (2014), that before police may search the contents of a cell phone seized after an arrest, they must first obtain a search warrant. In reaching this determination, which is a departure from the Court's general rule that a person's belongings may be searched without a warrant incident to an arrest of that person, the Court found that "[c]ell phones differ in both a quantitative and a qualitative sense from other objects that might be kept on an arrestee's person." Id. at 2489. In fact, the Court noted, many cell phones are actually minicomputers that also happen to have the capacity to be used as a telephone, and they could just as easily be called cameras, video players, Rolodexes, calendars, tape recorders, libraries, diaries, albums, televisions, maps, or newspapers. The Court found that because cell phones are both a repository of sensitive personal data, with immense storage capacity, and a portal to private records stored on remote servers, they simply could not fairly be said to be analogous to physical containers under the search-incident-to-arrest rule.

     The Court recognized that its decision will have an impact on the ability of law enforcement to combat crime, but it noted that some case-specific exceptions to the warrant requirement would still be applicable to the search of cell phones, such as the presence of exigent circumstances that would require an immediate search to prevent the imminent destruction of evidence or to locate an immediately dangerous instrumentality, such as explosives.

CONSTITUTIONAL LAW: Supreme Court Holds 2012 Recess Appointments to NLRB Invalid

The Lawletter Vol 39 No 6

John Buckley, Senior Attorney, National Legal Research Group

     On June 26, 2014, the Supreme Court held that the President lacked authority under the Constitution to fill three of the five seats on the National Labor Relations Board ("NLRB" or "Board") through "recess appointments" made on January 4, 2012, during a three-day break between two pro forma sessions of the Senate. NLRB v. Noel Canning, 134 S. Ct. 2550 (2014)
(Breyer, J., joined by Kennedy, Ginsburg, Sotomayor, and Kagan, JJ.; Scalia, J., concurring in the judgment, joined by Roberts, C.J., and Thomas and Alito, JJ.). The case turned on the precise definition of the term "recess" within the meaning of the Constitution's Recess Appointments Clause ("Clause"). Although the Court acknowledged that the term includes both inter- and intrasession recesses and can apply to vacancies that occur before a recess commences, the January 2012 appointments were nevertheless invalid. The Court explained that the three-day period was too short to constitute a "recess" within the meaning of the Clause, and the pro forma sessions could not be construed as recesses, thereby lengthening the period.  Because of the unconstitutionality of the appointment of the three Board members, the NLRB lacked a quorum when it rendered its decision in the case on appeal.

     The controversy arose after three seats on the Board became vacant between 2010 and 2012.  The President filled all three seats on January 4, 2012, during a three-day break between pro forma sessions of the Senate covering the period December 2, 2011 through January 23, 2012. The corporate employer, Noel Canning, received an adverse ruling from the NLRB after the three seats were filled. On appeal to the U.S. Court of Appeals for the District of Columbia Circuit ("D.C. Circuit"), the employer argued that a quorum of three members did not exist on the date the Board rendered the adverse decision.  A quorum was lacking because only one member voting for the decision had been confirmed by the Senate; the other two owed their positions on the Board to the challenged recess appointments.  (The Supreme Court had previously held in a 2010 decision, New Process Steel, L.P. v. NLRB, 560 U.S. 674 (2010), that the NLRB cannot act without a quorum of three members.)  The D.C. Circuit agreed with Noel Canning, holding that the challenged recess appointments were invalid under the Clause and, therefore, that the NLRB had indeed lacked a quorum when it rendered the ruling against the employer.  Noel Canning v. NLRB, 705 F.3d 490 (D.C. Cir. 2013).  The Supreme Court granted review.

     The Clause provides that "[t]he President shall have Power to fill up all Vacancies that may happen during the Recess of the Senate, by granting Commissions which shall expire at the End of their next Session."  U.S. Const. art. II, § 2, cl. 3. The D.C. Circuit had concluded that the phrase "the Recess" refers only to intersession recesses (i.e., breaks between formal sessions of the Senate).  The NLRB argued that "the Recess" also includes intrasession recesses (i.e., breaks in the midst of a formal session), noting that the U.S. Court of Appeals for the Eleventh Circuit had interpreted the language in this fashion. See Evans v. Stephens, 387 F.3d 1220 (11th Cir. 2004) (en banc).  Examining both the language of the Clause and historical practice, the Supreme Court determined that the phrase "the recess of the Senate" refers to both intersession recesses and intrasession recesses of substantial length. Specifically, a Senate recess of more than 3, but less than 10, days is presumptively too short to fall within the ambit of the Clause, but this presumption leaves open the possibility that some very unusual circumstance—such as a national catastrophe that renders the Senate unavailable but calls for an urgent response—could demand the exercise of the recess appointment power during a shorter break.

     The D.C. Circuit had also held that the vacancies on the Board did not "happen" during the recess of the Senate within the meaning of the Clause.  It was undisputed that the three vacancies had occurred on August 27, 2010, August 27, 2011, and January 3, 2012. The Supreme Court concluded, however, that the word "happen" in the Clause refers not only to vacancies that first come into existence during a recess, but also to vacancies that arise prior to a recess but continue to exist during the recess. This broader interpretation ensures that offices needing to be filled can actually be filled, whereas the narrower interpretation would prevent a President from making any recess appointment to fill a vacancy that arose before a recess, no matter who the official, how dire the need, how uncontroversial the appointment, and how late in the session the office fell vacant.

     Lastly, the D.C. Circuit had held that the Senate was not in recess during its pro forma sessions in December 2011 to January 2012. The Supreme Court agreed, declaring that for purposes of the Clause, the Senate is in session when it says it is, provided that under its own rules it retains the capacity to transact Senate business. In this case, the Senate had said it was in session, and its rules made clear that it retained the power to conduct business. The Court noted that the Senate could have conducted business simply by passing a unanimous consent agreement. Because the Senate was not in recess during its pro forma sessions, the challenged appointments to the NLRB had been made during a recess of only three days—a time period too short to constitute a "recess" within the meaning of the Clause. Therefore, the appointments of January 4, 2012 were invalid, and the Board lacked a quorum when it entered the ruling in the employer's case. The judgment of the D.C. Circuit was affirmed.

     Notably, the Court did not address the legality of the actions taken by the Board when its quorum was made up of members whose appointments were declared invalid, but the actions can be presumed to be invalid as well. Because a number of the actions were reconsidered after the Board gained a full complement of members whose appointments were properly ratified by the Senate, however, the impact of the Court's decision will not be as great as it would have been without the subsequent Senate ratification and Board reconsideration. As for other presumptively invalid Board decisions, the NLRB's Office of Public Affairs has reported that more than 100 legal challenges to the January 2012 recess-appointee Board were pending before the Court's decision. (For a list of pending cases, visit Master List of Pending January 2012 Recess Appointee Cases (May 16, 2014), available at http://op.bna.com/dlrcases.nsf/r?Open=kerl-9l5kel.) Many—if not all—of these cases will likely be returned to the NLRB for reconsideration.

CONTRACTS: Harsh Arbitration Provisions May Be Found to Be Unconscionable Under State Law

The Lawletter Vol 39 No 5

Charlene Hicks, Senior Attorney, National Legal Research Group

     In the last few years, the U.S. Supreme Court has issued controversial opinions that allow companies that use take-it-or-leave-it arbitration provisions in consumer contracts to require that unsatisfied consumers arbitrate all claims against the issuing companies on an individual,
rather than a class-wide, basis. See AT&T Mobility, LLC v. Concepcion, 131 S. Ct. 1740 (2011); Stolt Nielsen S.A. v. Animalfeeds Int'l Corp., 559 U.S. 662 (2010). Due to the high cost of arbitration, the practical effect of these decisions has been to discourage consumers from asserting any contractual dispute against the issuing companies and to thereby insulate large companies from liability for relatively minor small-dollar claims.

     Even so, some state courts have avoided the potentially far-reaching effects of Concepcion and Stolt Nielsen by analyzing the alleged unconscionability of an arbitration provision in a consumer contract under state law grounds. One particularly illuminating opinion is Gandee v. LDL Freedom Enterprises, Inc., 293 P.3d 1197 (Wash. 2013). In that case, the Washington Supreme Court ruled that a binding arbitration clause in a debt adjustment contract was unconscionable. The contract at issue required an indebted Washington consumer to travel to Orange County, California, to resolve her claim, shortened Washington's Consumer Protection Act statute of limitations from four years to 30 days, and required the consumer to pay the company's attorney's fees and costs if her claim was unsuccessful.

     In ruling that the arbitration clause in Freedom Enterprise Inc.'s ("Freedom") contract was substantively unconscionable, the Gandee court first found that the venue provision imposed prohibitive costs on the consumer. Next, the court determined that the "'loser pays' provision serves to benefit only Freedom and . . . effectively chills Gandee's ability to bring suit" under the state Consumer Protection Act. Id. at 1201. Third, the court concluded that the shortening of the state statute of limitations from four years to 30 days was substantively unconscionable.

     Finally, the court rejected Freedom's argument that the court's state law analysis was preempted by the U.S. Supreme Court's opinion in Concepcion. According to the Gandee court, Concepcion disallowed a California state court rule that invalidated an arbitration clause "that might be otherwise conscionable under California law." Id. at 1203. In contrast, the Gandee court's application of Washington's generally applicable unconscionability doctrine to the facts of the case before it was consistent with Concepcion and the Federal Arbitration Act. Thus, the Gandee court concluded: "Concepcion provides no basis for preempting our relevant case law nor does it require the enforcement of Freedom's arbitration clause." Id.

     Gandee limits the scope of Concepcion and the Federal Arbitration Act to arbitration provisions that are potentially conscionable under relevant state law. This suggests that where an arbitration agreement is so one-sided or overly harsh that it would be classified as unconscionable under state law grounds, a state court may feel free to invalidate the arbitration provision notwithstanding the Supreme Court's opinion in Concepcion. Although Concepcion may reflect the Supreme Court's recent trend of expanding the scope and general applicability of arbitration clauses, that opinion is not so far-reaching as to preempt traditional state law analysis of allegedly unconscionable contracts.

CRIMINAL LAW: Driving Under the Influence of a Proscribed Drug or "Its Metabolite"

The Lawletter Vol 39 No 5

Suzanne Bailey, Senior Attorney, National Legal Research Group

     Arizona is one of seven states that make it unlawful for a driver to be in actual physical  ontrol of a motor vehicle while there is a proscribed drug or "its metabolite" in the operator's body. Ariz. Rev. Stat. § 28-1381(A)(3). (The other six zero-tolerance jurisdictions are Delaware, Georgia, Indiana, Minnesota, Pennsylvania, and Utah. Joshua C. Snow, The Unconstitutional Prosecution of Controlled Substance Metabolites Under Utah Code § 41-6a-517, 2013 Utah L. Rev. OnLaw 195, 212 n.14 (2013).) In State ex rel. Montgomery v. Harris, 322 P.3d 160 (Ariz. 2014), the Supreme Court of Arizona was asked to determine whether the phrase "its metabolite" includes Carboxy-Tetrahydrocannabinol ("Carboxy-THC"), a nonimpairing metabolite of marijuana, which is a drug proscribed by statute. The court concluded that it does not.

     In Montgomery, the driver was stopped for speeding and making unsafe lane changes. After admitting to smoking some "weed" the night before, the driver voluntarily submitted to a blood test that revealed Carboxy-THC in his blood. He was charged with driving under the influence of a drug, in violation of section 28-1381(A)(1), and driving while a metabolite of a proscribed drug was in his body, in violation of section 28-1381(A)(3). The justice court dismissed the charge based on the presence of "its metabolite," and the State voluntarily dismissed the driving-under-the-influence charge. The superior court affirmed the justice court, but the court of appeals reversed, finding that the statute included the metabolite Carboxy-THC and that inclusion was not overbroad. State ex rel. Montgomery v. Harris ex rel. County of Maricopa, 301 P.3d 580 (Ariz. Ct. App. 2013). The state supreme court vacated the opinion of the court of appeals and affirmed the dismissal of the "its metabolite" charge, with one justice dissenting.

     The court found "its metabolite" to be ambiguous because it could mean all of a proscribed drug's metabolites, some of its metabolites, or only metabolites that cause impairment. The driver argued that the phrase referred to only Hydroxy-THC, the initial product of the metabolism of THC. The State insisted that the statute referred to all metabolites, including the nonimpairing Carboxy-THC, which was tested for. Significantly, the impairing Hydroxy-THC does not remain in the blood for very long and quickly converts to Carboxy-THC, which is why the State tests for Carboxy-THC but not for Hydroxy-THC. Carboxy-THC, on the other hand, can remain in the body for as many as 28 to 30 days after the ingestion of marijuana.

     Looking to the legislative history, which demonstrated an intent to prevent impaired driving, the court concluded that "its metabolite" is limited to metabolites capable of causing impairment. To hold otherwise could lead to the absurd result that a driver could be found guilty regardless of how long the metabolite remained in his or her body or whether it had an impairing effect. Furthermore, given that Arizona legalizes marijuana for medicinal purposes, the State's overinclusive reading could criminalize legitimate use after the impairing effects have worn off. Finally, a broad reading of "its metabolite" could allow the prosecution of an individual who drives after ingesting a legal substance that shares a nonimpairing metabolite with a proscribed substance.

     This decision in Montgomery hardly leaves Arizona without the ability to prosecute those driving under the influence of proscribed drugs. The prosecution may still establish criminal liability by evidence of impairment. Moreover, as the State admitted, it is possible to test for the impairing Hydroxy-THC, and the State may choose to do so. The decision merely serves to ensure that only those who are actually driving while impaired can be convicted.

CONSTITUTIONAL LAW: Refining "Clearly Established" Fourth Amendment Jurisprudence

The Lawletter Vol 39 No 5

Steve Friedman, Senior Attorney, National Legal Research Group

     A law enforcement officer is entitled to qualified immunity for his or her unconstitutional actions if "the right at issue was 'clearly established' at the time of defendant's alleged misconduct." Pearson v. Callahan, 555 U.S. 223, 232 (2009). "It is clearly established that citizens have a Fourth Amendment right to be free from unreasonable seizures accomplished by excessive force." Valladares v. Cordero, 552 F.3d 384, 388 (4th Cir. 2009).  But what is "unreasonable"?

     As summarized by a federal district court:

In assessing claims of excessive force under the Fourth Amendment, the court must apply a standard of "objective reasonableness." Graham v. Connor, 490 U.S. 386, 395, 109 S.Ct. 1865, 104 L.Ed.2d 443 (1989). Specifically, the court must determine "whether a reasonable officer in the same circumstances would have concluded that a threat existed justifying the particular use of force."  Elliott v. Leavitt, 99 F.3d 640, 642 (4th Cir. 1996) (citing Graham, 490 U.S. at 396-97, 109 S. Ct. 1865).  This fact‑intensive balancing test must be applied in light of the fact that "police officers are often forced to make split‑second judgments—in circumstances that are tense, uncertain, and rapidly evolving— about the amount of force that is necessary in a particular situation."  Graham, 490 U.S. at 397, 109 S. Ct. 1865.

Sloan v. Dulak, 868 F. Supp. 2d 535, 540 (W.D. Va. 2012).

     Due to the fact-sensitive nature of the analysis, the existence or absence of analogous case law is crucial. In a recent decision, the U.S. Supreme Court provided yet another ruling on a police shooting incident to help in that regard. See Plumhoff v. Rickard, 134 S. Ct. 2012 (2014).

     Around midnight on July 18, 2004, a West Memphis, Arkansas, police officer pulled over a vehicle driven by Rickard. As is relevant here, Rickard sped away and thus began a high-speed chase involving multiple police vehicles. Eventually, Rickard's car spun out into a parking lot and collided with one of the police cruisers. A couple of officers exited their cruisers, guns drawn, and ordered Rickard to exit his vehicle. Ignoring the officers' orders, Rickard continued his attempt to escape. Although one of the officers fired three shots into Rickard's vehicle, Rickard was nonetheless able to escape in his vehicle. However, other officers then fired a total of 12 shots toward Rickard's vehicle as it drove away. Shortly thereafter, Rickard crashed into a building and died from some combination of gunshot wounds and the collision.

     Rickard's daughter then brought a civil suit pursuant to 42 U.S.C. § 1983 against several of the police officers, alleging excessive force. The officers moved for summary judgment based on qualified immunity. The district court denied the officers' motion, holding that their conduct violated clearly established Fourth Amendment law. The officers appealed but the Sixth Circuit affirmed. The U.S. Supreme Court granted the officers' petition for writ of certiorari.

     The Plumhoff Court held first that it was not excessive for the police to use deadly force under the circumstances here. "[I]t is beyond serious dispute that Rickard's flight posed a grave public safety risk, and [thus] the police acted reasonably in using deadly force to end that risk." Id. at 2022.

     The Court held second that it was not excessive for the police to fire a total of 15 rounds at Rickard and his vehicle. "[D]uring the 10-second span when all the shots were fired, Rickard never abandoned his attempt to flee. Indeed, even after all the shots had been fired, he managed to drive away and to continue driving until he crashed." Id. The Court held third that, even if there was a constitutional violation, the officers were entitled to summary judgment based on qualified immunity. The Court's decision in Brosseau v. Haugen, 543 U.S. 194 (2004), illustrates that as of February 1999, when the events at issue in Brosseau occurred, "it was not clearly established that it was unconstitutional to shoot a fleeing driver to protect those whom his flight might endanger." Plumhoff, 134 S. Ct. at 2023.  However, the plaintiff here could not "meaningfully distinguish Brosseau," nor could she point to "a controlling case or a robust consensus of cases [decided between 1999 and 2004] that could be said to have clearly established the unconstitutionality of using lethal force to end a high-speed car chase." Id. at 2024 (internal quotation marks omitted).

     Therefore, the U.S. Supreme Court reversed the Sixth Circuit decision and remanded the matter for entry of summary judgment in favor of the officers.

CIVIL RIGHTS: Same-Sex Sexual Harassment

The Lawletter Vol 39 No 5

Dora Vivaz, Senior Attorney, National Legal Research Group

     There is a long line of cases discussing the principles that govern claims of sex discrimination in the form of sexual harassment, including, more recently, cases addressing same-gender harassment. In Oncale v. Sundowner Offshore Services, 523 U.S. 75 (1998), the Court explained that the critical issue in same-gender cases, as in all other sex discrimination cases, is whether "members of one sex are exposed to disadvantageous terms or conditions of employment to which members of the other sex are not exposed."  Id. at 80. Thus, the Court found that sexual harassment between members of the same gender is actionable if it amounts to discrimination because of sex. The Court noted that proposals for sexual activity by a homosexual harasser would allow the inference of discrimination because of sex, but explained that harassing conduct can also consist of conduct showing sex-specific hostility, rather than sexual desire.

     In a recent California case, the court addressed the issue of what evidentiary showing is needed under that state's law to support an inference that same-gender harassment constitutes discrimination on the basis of sex, noting that there was disagreement among the state's appellate courts. Lewis v. City of Benicia, 169 Cal. Rptr. 3d 794, 806 (Ct. App. 2014). While some courts had concluded that sexual comments designed to humiliate and challenge the plaintiff's gender identity would be sufficient without showing that the conduct had been motivated by sexual interest, at least one court had required a showing of genuine sexual interest. In Lewis, the court found it unnecessary to decide the question, because the evidence before it supported an inference that the harasser was, in fact, motivated by sexual interest.

     The court's decision not to determine the issue is particularly interesting, given that it took note of the fact that a recent legislative amendment specifically states that harassment because of sex "need not be motivated by sexual desire," id. at 803 n.8 (internal quotation marks omitted). The court, however, stated that it did not need to address the "effect of the amendment," id., because even if evidence of sexual desire were necessary, there were fact issues on that question. Perhaps more to the point, there did not appear to be any evidence in support of the alternative evidentiary route, that is, a showing of same-sex-specific hostility.

EVIDENCE: Evidence of Product or Design Defect Essential to Prevailing on Strict Products

The Lawletter Vol 39 No 5

Anne Hemenway, Senior Attorney, National Legal Research Group

     Consumer product defects can give rise to litigation as either a breach-of-warranty action or a strict products liability action. In determining whether a "defect" in the product exists, it is important to distinguish between these two claims. A strict products liability action is a tort claim, and a breach-of-warranty action is a contract claim. Litigants often confuse the evidence of a defect in these two contexts.

     In fact, evidence of a product or design "defect" is not required for a finding of unmerchantability in the context of a breach of implied warranty or breach of express warranty, although it is recognized that a product that is not "merchantable" or fit for a particular purpose is one that is defective. Hoffman v. Paper Converting Mach. Co., 694 F. Supp. 2d 359 (E.D. Pa. 2010) (citing Hittle v. Scripto-Tokai Corp., 166 F. Supp. 2d 142 (M.D. Pa. 2001)). To be merchantable, the goods sold must satisfy certain standards of quality and acceptability by the public but not necessarily be completely defect-free. Golden v. Den-Mat Corp., 276 P.3d 773 (Kan. Ct. App. 2012). The implied warranty of merchantability is intended to protect consumers and exists in all contracts for the sale of goods if the seller is a merchant. Paulk v. Thomasville Ford Lincoln Mercury, 732 S.E.2d 297 (Ga. Ct. App. 2012).

     Evidence of an actual product defect, however, is essential in order to prevail on a tort claim for strict product liability. Hoffman, 694 F. Supp. 2d 359 (citing Restatement (Third) of Torts: Products Liability § 2)); Wetzel v. Capital City Real Estate, LLC, 73 A.3d 1000 (D.C. 2013); Gresser v. Dow Chem. Co., 989 N.E.2d 339 (Ind. Ct. App. 2013).

FAMILY LAW: Children, Cars, and Equitable Distribution

The Lawletter Vol 39 No 4

Brett Turner, Senior Attorney, National Legal Research Group

     When a husband and wife get divorced, can the court equitably divide automobiles owned by the parties' children?

     This question arose in the Mississippi case of Terrell v. Terrell, 133 So. 3d 833 (Miss. Ct. App. 2013), cert. denied, 133 So. 3d 818 (Miss. 2014). The parties to that case were Robert and Mary. Robert and Mary had a daughter, Catherine. During the marriage, Robert purchased a car for Catherine, titling the car in Catherine's name. The trial court held that the car was marital property, apparently because it had been purchased with marital funds, and treated it as part of Mary's share of the marital estate.

     On appeal, the Mississippi Court of Appeals reversed:

     We agree that the vehicle should not have been deemed a part of the marital estate. While it was purchased during the course of the marriage, it is not marital property, nor is it separate property. Rather, it was a gift from Robert and Mary to Catherine, who was a third-party recipient. Catherine has retained physical custody of the vehicle and has been the legal title holder of the vehicle since it was purchased. It was not an asset of Robert or Mary either jointly or separately. Accordingly, we reverse and render this issue specifically for the elimination of Catherine's automobile from the marital estate.

Id. at 839 (& 17); see also In re Marriage of Sullins, 715 N.W.2d 242 (Iowa 2006) (error to treat car as marital property, where it had been purchased for daughter and titled in her name).

     The court reached the correct result. Definitions of "marital property" vary, but the term can generally be defined as property acquired by the parties during the marriage. Property owned by a third person falls outside this definition, because it was never acquired by a party to the marriage. A child of the marriage is just as much a third party as is any other nonspouse.

     It is worth noting that the car in Terrell was not separate property, either. Separate property is generally property acquired by a party before the marriage, property acquired by a party after the date of classification (where it is before the date of the property division hearing), and property acquired by a party during the marriage by various specific methods (e.g., gift or inheritance). The car in Terrell falls outside these definitions, again because it was not acquired by a party.

     In a divorce case, therefore, assets owned by nonparties are neither marital nor separate property. They fall into a third category, third-party property, which is not subject to division by the court. See generally 1 Brett R. Turner, Equitable Distribution of Property § 5:14 (3d ed. 2005).

     What seems to have misled the trial court in Terrell was that the car had been acquired with marital funds. But it is not uncommon for parties to a marriage to acquire property with marital funds, and then give that property away. This occurs every time the parties buy a nonparty a Christmas or birthday present. Property given away, with the consent of both spouses, is no longer marital. There is no suggestion in Terrell that either party objected to the gift of the car to Catherine.

     In specific cases, it is possible that a car used by a child might still be marital property. The key point in Terrell is that the car was titled in the name of the daughter. If the car had remained titled in the name of one of the parents, it might then have been marital property. E.g.Panettiere v. Panettiere, 945 S.W.2d 533 (Mo. Ct. App. 1997) (cars given to daughters were still property of parties, because parties had not filed documents required to change legal ownership of motor vehicles).

     Where transfer of title is complete, however, a car owned by one of the parties' children is generally not marital property in the parents' divorce case.

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