The Lawletter Vol. 41, No. 2

Steve Friedman, Senior Attorney, National Legal Research Group

     The federal Truth in Lending Act ("TILA"), 15 U.S.C. §§ 1601–1667f, was enacted to, among other things, "protect the consumer against inaccurate and unfair credit billing and credit card practices." Id. § 1601(a). Prior to 2009, TILA required that borrowers be informed if the servicer of their mortgage loan changed, but there was no such notice requirement if the owner of their mortgage loan changed. To impose the latter requirement, Congress enacted Public Law No. 111-22, 123 Stat. 1632 (2009).

     Specifically, the following new text was added to TILA: "[N]ot later than 30 days after the date on which a mortgage loan is sold or otherwise transferred or assigned to a third party, the creditor that is the new owner or assignee of the debt shall notify the borrower in writing of such transfer[.]" 15 U.S.C. § 1641(g)(1). Notably, if the new creditor does not comply, the borrower may bring suit to recover actual damages, a statutory penalty of up to $4,000 for individual claims ($1 million for a class action), plus costs and attorney's fees. See id. § 1640(a).

     In a recent case out of the U.S. Court of Appeals for the Ninth Circuit, the appellate court was presented with an issue of first impression: Is the new requirement in § 1641(g) retroactive? See Talaie v. Wells Fargo Bank, 808 F.3d 410 (9th Cir. 2015).

The Lawletter Vol. 41, No. 2

Fred Shackelford, Senior Attorney, National Legal Research Group

     The New Mexico Supreme Court has resolved an issue of first impression in that state: When a product causes personal injury and suit is filed for breach of warranty, what statute of limitations applies? In Badilla v. Wal-Mart Stores East, 2015-NMSC-029, 357 P.3d 936, the plaintiff bought a pair of work boots at a Wal-Mart store. More than three years after he was injured while wearing the boots, he filed a personal injury suit, alleging that the soles of the boots became unglued and caused him to trip on debris.

     In New Mexico, tort claims are generally subject to a three-year statute of limitations, N.M. Stat. Ann. § 37-1-8, while claims for breach of warranty under the Uniform Commercial Code ("U.C.C.") are generally subject to a four-year statute of limitations, id. § 55-2-725(1). The plaintiff based his claim on breaches of an express warranty and the implied warranties of merchantability and fitness for a particular purpose. The trial court and court of appeals ruled that the claims were time-barred under the three-year statute of limitations.

     On appeal, the Badilla court noted that courts in other states have reached different conclusions as to which statute of limitations should apply. The court outlined the two approaches taken by other courts, as follows:

The Lawletter Vol 41 No 1

Charlene Hicks, Senior Attorney, National Legal Research Group

     When a catastrophic accident causes one or more people to die, multiple legal questions inevitably arise. Among these is the issue as to whether and to what extent the deceased person's medical insurance company is entitled to recoup the costs it paid for the person's medical treatment prior to death from any wrongful death settlement or verdict eventually entered in favor of the decedent's estate and/or beneficiaries.

     Although the answer to this question depends on the law of each particular state, an examination of Administrative Committee of Dillard's, Inc. Group Health, Dental & Vision Plan v. Sarrough, No. 1:14-CV-01165, 2015 WL 3466568 (N.D. Ohio June 1, 2015), appeal dismissed, No. 15-3718 (6th Cir. Aug. 12, 2015), may be illuminating. There, Hanan Saah was injured in a February 2011 car accident in Ohio. Her employer, Dillard's, paid $260,000 of her medical expenses pursuant to a federal Employee Retirement Security Act of 1974 ("ERISA") health plan. Saah subsequently died in July 2011. Her estate was eventually awarded $300,000 in various wrongful death settlements. Dillard's then claimed a right to the settlement proceeds in order to recoup its $260,000 in medical costs.

     The district court determined that, as an initial matter, it was important to distinguish, and to allocate the amount of funds attributable to, the two different components of the settlement: Saah's survival claim versus the wrongful death claim. Dillard's, as the ERISA-approved health benefit plan, had a right to obtain reimbursement of medical expenses paid from net settlement proceeds allocable to the survival portion of the settlement. Under Ohio law, the survival action belongs to the decedent's estate and, therefore, was subject to subrogation.

The Lawletter Vol 41 No 1

Suzanne Bailey, Senior Attorney, National Legal Research Group

     The Foreign Sovereign Immunities Act, 28 U.S.C. §§ 1602–1611, shields foreign governments and their agencies from suit in U.S. courts unless the suit falls within an exception specifically enumerated in the Act. In a recent decision, OBB Personenverkehr AG v. Sachs, 136 S. Ct. 390, 392 (2015), a unanimous U.S. Supreme Court considered the commercial activity exception, 28 U.S.C. § 1605(a)(2), and concluded that the exception did not extend to the purchase of a Eurail pass in the United States.

     Carol Sachs, a California resident, purchased a Eurail pass over the Internet from a Massachusetts-based travel agent. Eurail passes allow holders unlimited passage for a set period of time on participating Eurail Group railways, including OBB Personenverkehr AG ("OBB"), the Austrian state-owned railway. As she was attempting to board an OBB train in Innsbruck, Austria, Ms. Sachs fell from the platform onto the tracks, where a moving train crushed her legs, requiring amputation of each leg above the knee. She brought suit for her injuries in the U.S. District Court for the Northern District of California on the grounds of (1) negligence, (2) strict liability for design defects in the train and platform, (3) strict liability for failure to warn of the design defects, (4) breach of an implied warranty of merchantability for providing a train and platform unsafe for their intended uses, and (5) breach of an implied warranty of fitness for providing a train and platform unfit for their intended uses.

The Lawletter Vol 41 No 1

Jeremy Taylor, Senior Attorney, National Legal Research Group

     The Supreme Court of South Carolina recently addressed the issue of who is a product "user" for purposes of holding the manufacturer liable for injuries under the theory of strict liability. See Lawing v. Univar, USA, Inc., No. 2013-002464, 2015 WL 7756860 (S.C. Dec. 2, 2015) (not yet released for publication). The plaintiff in Lawing was a maintenance mechanic in a factory that refined metals. The plaintiff was injured when some bags of sodium bromate, an oxidizer, caught fire when the plaintiff and other workers were using oxyacetylene torches near the bags. The plaintiff alleged that the manufacturer of the sodium bromate was strictly liable for failing to warn users of the dangers posed by the product. The manufacturer argued that it could not be held strictly liable to the plaintiff, because the plaintiff was not a "user" of the product.

     The South Carolina Supreme Court, as a matter of first impression, held that the plaintiff was a "user" of the product, even though he did not actually handle the bags of sodium bromate. The court noted that South Carolina's strict liability statute, S.C. Code Ann. § 15-73-10, has adopted the Official Comments to section 402A of the Restatement (Second) of Torts, from which the statute was derived. Official Comment l to section 402A provides that a "user" includes those who are utilizing a product for purposes of doing work upon it. The court rejected as overbroad the court of appeals' definition of a "user" as anyone who could foreseeably come into contact with the dangerous nature of a product, in that such a definition would allow a mere bystander to recover in strict liability, a proposition that the South Carolina Supreme Court had previously rejected. Rather, according to the court, the determination of who constitutes a user requires a case-by-case analysis.

The Lawletter Vol 41 No 1

Sandra Thomas, Senior Attorney, National Legal Research Group

     Resolving a question that is not expressly answered by the language of the Uniform Child Custody Jurisdiction And Enforcement Act ("UCCJEA"), the District of Columbia Court of Appeals in Upson v. Wallace, 3 A.3d 1148 (D.C. 2010), held that if a trial court had home-state jurisdiction to issue an initial custody determination under the UCCJEA at the time the action was filed, then the court could still exercise that jurisdiction even after all parties had left the state.

     In Upson, the child, Georgiana, was born in Virginia in May 2004. On March 2, 2005, the child's father, Wallace, filed for custody of Georgiana in Alexandria, Virginia. In April 2005, the child's mother, Upson, relocated with the child from Virginia to the District of Columbia.

The Lawletter Vol 40 No 12

Tim Snider, Senior Attorney, National Legal Research Group

     Setting aside the cases involving criminal misconduct by priests and others affiliated with certain Roman Catholic Church dioceses, the First Amendment precludes courts from interfering with the internal operations and activities of churches. Few principles are more firmly enshrined in our body of constitutional law than that government, including the courts, should not become entangled in the internal or doctrinal affairs of churches. To do so would offend the First Amendment's Free Exercise Clause. For over a century, the Supreme Court has directed that courts may not entangle themselves in the internal functions of churches. Watson v. Jones, 80 U.S. (13 Wall.) 679, 728-29 (1871).

     Churches are at liberty to make employment decisions that are arbitrary, even capricious, and those decisions are immune from judicial scrutiny. Young v. N. Ill. Conference of United Methodist Church, 21 F.3d 184, 187 (7th Cir. 1994). To permit courts to review decisions that are alleged to be arbitrary or unreasonable would be to allow courts to inquire into internal doctrinal matters, and the courts may not do that. There are circumstances where a court may inquire into an action taken by a church, but those circumstances are rare and typically involve, for example, the contractual obligations between the church and an unaffiliated third party, such as a contractor repairing the roof of the church building. Those decisions, however, implicate no doctrinal issues, unlike the employment of a pastor, which is intimately bound up with a church's doctrinal principles. Thus, civil courts, as a general proposition, are not a constitutionally permissible forum for a review of ecclesiastical disputes. Serb. E. Orthodox Diocese v.      Milivojevich, 426 U.S. 696, 710 (1976).

The Lawletter Vol 40 No 12

Brett Turner, Senior Attorney, National Legal Research Group

     One of the hardest issues in all of family law is grandparent visitation. In Troxel v. Granville, 530 U.S. 57 (2000), the U.S. Supreme Court struck down a Washington state statute allowing the court to award grandparent visitation based only upon the best interests of the child, finding that such a broad standard violates the liberty interest of the parents in having custody of their children.

     But Troxel did not decide what the proper standard for grandparent visitation is; it decided only what that standard is not. Case law since Troxel has disagreed substantially as to what grandparents must prove in order to be awarded visitation.

     No state has written more opinions in fewer cases on this issue than Alabama. In Ex parte E.R.G., 73 So. 3d 634 (Ala.2011), a nine-judge court wrote six separate opinions on the subject. The end result was that the court struck down Alabama Code section 30-3-4.1, which allowed the court to award grandparent visitation on a pure best-interests basis.

The Lawletter Vol 40 No 12

Dora Vivaz, Senior Attorney, National Legal Research Group

     In a recent case involving the Kansas University and City of Lawrence ticket-fixing scandal, wherein traffic tickets were allegedly dismissed in exchange for tickets to university athletic events, a city employee, an African-American, who had been terminated as a result of the investigation into the scandal, brought claims for race discrimination and the violation of his due process liberty interests. Monroe v. City of Lawrence, Kan., Case No. 13-2086-EFM, 2015 WL 5006081 (D. Kan. signed Aug. 20, 2015). The court engaged in the usual burden-shifting analysis on the race discrimination claim, concluding that although the employee had clearly shown that he had been treated differently from a similarly situated white employee, he had failed to raise a disputed question of fact on the issue of motive, because he had not shown that the City's reasons were pretextual.

     The court then went on to the interesting due process question raised by the employee's claim, that the "termination report" filed by the City violated his liberty interest by foreclosing employment opportunities in his field. The court concluded that the viability of the claim rested on whether the report constituted "publication." First the court noted that the City was required by statute to submit the report to the Kansas Commission of Peace Officers' Standards and Training. It then noted that although the statute purports to provide absolute immunity for reporting, the City had abandoned that argument in light of Supreme Court precedent stating that state law cannot immunize conduct that is wrongful under federal law. The question therefore came down to whether the report constituted publication, as required to make out a claim, or merely intragovernmental dissemination, which falls short of publication.

The Lawletter Vol 40 No 12

Jim Witt, Senior Attorney, National Legal Research Group

     Given the steep rise in college tuition costs over recent years, the Qualified Tuition Plans ("QTPs") authorized by § 529 of the Internal Revenue Code of 1986 have become increasingly popular. The following summary describes the basic rules governing QTPs, but, as becomes obvious, the restrictions on these plans are formidable, and the rules can vary from state to state.

     There are two basic types of QTPs, a "prepaid qualified tuition program" and a "qualified tuition program savings plan" (informally known as a "college savings plan"). Under a prepaid qualified tuition program, a person may purchase tuition credits or certificates on behalf of a designated beneficiary (the student) that cover future tuition charges and fees, and, in some cases, a room and board option may be purchased. There is generally a premium charged over the current price of tuition, intended to account for inflation. The benefit of this type of QTP is that it locks in tuition costs to the extent of the credits purchased. Many state-sponsored prepaid tuition programs are guaranteed by the state (this is not true for college savings plans). Most state-sponsored plans require either the owner or the beneficiary of the plan to be a resident of the state (college savings plans have no residency requirement). Prepaid tuition plans have a limited enrollment period (there is no limited enrollment period for college savings plans).