The Lawletter Vol 43 No 8

Lee Dunham—Senior Attorney, National Legal Research Group

            Student debt is the second-largest source of U.S. household debt, at nearly $1.4 trillion. Federal Reserve Bank of New York, Quarterly Report on Household Debt and Credit (accessed on Nov. 10, 2018). It is projected that nearly 40% of student loan borrowers will default by 2023. Judith Scott-Clayton, The Looming Student Loan Default Crisis is Worse than we Thought (accessed on Nov. 10, 2018). Many attorneys have seen increased requests for student loan advice.

            Because students are often young and legally unsophisticated at the time they borrow, many understand little about their contracts, or have lost—or never obtained—copies of the essential documents. The first step in such circumstances is to have the client contact the servicer to request copies of the promissory note and related documents, payment history, name and address of the current lender, and documentation of any transfers.

The Lawletter Vol 43 No 7

Jeremy Taylor—Senior Attorney, National Legal Research Group

            In a decision dated September 5, 2018, the U.S. Court of Appeals for the Eleventh Circuit held that the due process rights of the defendant tobacco manufacturers were not violated by the district court’s application of collateral estoppel based on a jury’s findings in a previous class action against the defendants. See Searcy v. R.J. Reynolds Tobacco Co., 902 F.3d 1342 (11th Cir. 2018). Searcy was an action by the daughter of a cigarette smoker against tobacco companies for negligence, strict liability, concealment, and conspiracy to conceal arising from the death of her mother. The plaintiff alleged that her mother’s illnesses were caused by her addiction to cigarettes manufactured by the defendants. Following trial, the district court entered judgment in favor of the plaintiff for $1 million in compensatory damages and $1.67 million in punitive damages. 

The Lawletter Vol 43 No 7

Brad Pettit—Senior Attorney, National Legal Research Group

            "Rather than disposing of stock in a closely held business (by sale or corporate reorganization) at retirement the retiree may decide to transfer all or a portion of the stock by gifts to various family members." Streng & Davis, Tax Planning for Retirement ¶ 7.05[1] (Thomson Reuters Tax & Acct'g 2018).  Three important objectives can be achieved by making gifts of closely held business stock to family members:

It eliminates the stock's dividend income from the gross income and the estate of the retiree/donor

It removes the value of the stock from the retiree/donor's estate for federal estate tax purposes upon the retiree's death

It solidifies the interests of the family members receiving the stock as officers of the closely held corporation, enabling them access to corporate executive compensation arrangements and other benefits.

The Lawletter Vol 43 No 7

Suzanne Bailey—Senior Attorney, National Legal Research Group

            The Equal Pay Act ("EPA") provides as follows:

            No employer having employees subject to any provisions of this section shall discriminate, within any establishment in which such employees are employed, between employees on the basis of sex by paying wages to employees in such establishment at a rate less than the rate at which he pays wages to employees of the opposite sex in such establishment for equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions, except where such payment is made pursuant to . . . (iv) a differential based on any other factor other than sex[ .]

29 U.S.C. § 206(d)(1) (emphasis added). 

            The Ninth Circuit Court of Appeals has stated that "[t]he [EPA] stands for a principle as simple as it is just: men and women should receive equal pay for equal work regardless of sex." Rizo v. Yovino, 887 F.3d 453, 456 (9th Cir. 2018) (en banc), pet. for cert. filed (Aug. 30, 2018), pet. for cert. docketed (Sept. 4, 2018).  The Act "'creates a type of strict liability' for employers who pay men and women different wages for the same work: once a plaintiff demonstrates a wage disparity, she is not required to prove discriminatory intent." Id. at 459 (citation omitted). The employer can avoid liability, however, by establishing one of the four affirmative defenses enumerated in the Act. In Rizo, the Ninth Circuit considered, en banc, whether prior salary was "a differential based on any other factor other than sex" within the meaning of the EPA that would permit an employer to escape liability for paying disparate wages to a female employee.

The Lawletter Vol 43 No 7

Charlene Hicks—Senior Attorney, National Legal Research Group        

            To date, no consensus has been reached among courts throughout the United States on the question as to whether a creditor’s issuance of an IRS Form1099-C results in the extinguishment of the reported debt in favor of the debtor. Form 1099-C bears the title “Cancellation of Debt,” and, according to the IRS, a creditor should issue this form to the debtor for any year in which a debt is cancelled. Depending on the state in which the debtor resides, a creditor’s issuance of a Form 1099-C may have the effect of barring further collection efforts and of completely discharging the reported debt.

            The two divergent approaches taken by courts on this issue result in opposite outcomes. The majority approach is illustrated by the Fourth Circuit’s opinion in FDIC v. Cashion, 720 F.3d 169 (4th Cir. 2013). 

The Lawletter Vol 43 No 7

Anne B. Hemenway—Senior Attorney, National Legal Research Group

     Courts are reluctant to enforce prepetition automatic stay waivers, but will not rule out the possibility of enforcement. Often found as a clause in a forbearance agreement, a prepetition automatic stay waiver is therefore not per se unenforceable, notwithstanding the fact that its close relative, a prepetition waiver of a bankruptcy filing, is per se unenforceable. See In re Simpson, Case No. 17-10442, 2018 WL 1940378 (Bankr. D. Vt. Apr. 23, 2018). Generally, courts will hold that the debtor must carry the burden of proving that such contractual waiver should not be enforced. In re A. Hirsch Realty, LLC, 583 B.R. 583 (Bankr. D. Mass. 2018). 

The Lawletter Vol 43 No 6

Amy Gore—Senior Attorney, National Legal Research Group

            The area of presumed intent in the designation of life insurance policies has long been a source of dispute and litigation. When a state legislature enacts statutes that address an automatic revocation of insurance beneficiary status under particular circumstances, additional litigation is likely to result. Such was the case in Sveen v. Melin, 138 S. Ct. 1815, 1817 (2018). There, a couple were married in 1997 and the following year the named insured designated his wife as the primary beneficiary under his life insurance policy, and his two children from a prior marriage as contingent beneficiaries. The couple divorced in 2007, and the divorce decree never addressed the disposition of the life insurance policy or the rights of the contingent beneficiaries. Upon the named insured's death in 2011, both the wife and the two children made competing claims for the entire proceeds.

The Lawletter Vol 43 No 6

Jim Witt—Senior Attorney, National Legal Research Group

            In 1971, Charles Manson (“Manson”), the leader of the Manson Family cult, was convicted of first-degree murder and conspiracy to commit murder for the deaths of nine people in July and August 1969. He was originally sentenced to death, but his sentence was commuted to life with the possibility of parole after the suspension of the death penalty under both California and federal law (California's adoption in 1978 of a death penalty that qualified under federal guidelines and the sentence of life imprisonment with no possibility of parole could not be applied retroactively to Manson). After 46 years of incarceration, Manson died on November 19, 2017 of acute cardiac arrest, respiratory failure, and colon cancer. What has ensued, however, is an estate proceeding that has been complicated by a number of factors:

The Lawletter Vol 43 No 6

Nadine Roddy—Senior Attorney, National Legal Research Group
John Buckley—President, National Legal Research Group

            A federal district court sitting in Pennsylvania has held that an employer may proceed with its unfair competition suit asserting contract and tort claims against a former employee and the employee’s current employer. The employer adequately stated claims of common-law breach of fiduciary duty and unfair competition against the employee, and of aiding and abetting the same against the competitor. However, the employer’s claim of tortious interference with prospective contractual relationship against the employee would be dismissed because the complaint failed to allege a sufficient likelihood of a prospective contract. Neopart Transit, LLC v. CBM N.A., Inc., 314 F. Supp. 3d 628 (E.D. Pa. 2018).

            The plaintiff in the case, an American corporate distributor of parts for transit buses (“employer”), brought suit against a former employee and the employee’s current employer, a Canadian corporation (“competitor”), alleging that the employee stole confidential and proprietary information before resigning to go to work for the competitor, which then used the stolen information to compete with and harm the employer’s business in the United States.

The Lawletter Vol 43 No 6

Mark Rieber, Senior Attorney, National Legal Research Group

        Cell-site location information ("CSLI") is location information generated by cellular phone providers that indicates which cell tower a particular phone was communicating with when a communication was made. United States v. Curtis, No. 17-1833, 2018 WL 4042631, at *1 (7th Cir. Aug. 24, 2018). It is capable of pinpointing a phone's location within 50 meters. Id. Because cell phones are in constant communication with the nearest cell site—often affixed to a cell tower—they can collect CSLI as frequently as several times a minute. Id.

            In June 2018, in Carpenter v. United States, 138 S. Ct. 2206 (2018), the Supreme Court extended Fourth Amendment protection to CSLI and held that the government conducts a "search" when it accesses historical cell phone records that provide a comprehensive chronicle of the user's past movements. The Court concluded that the government must generally obtain a warrant supported by probable cause before acquiring such records and rejected application of the "third-party doctrine," even though the records at issue were held by a wireless carrier.