The Lawletter, Vol 35 No 11, July 29, 2011

John Stone, Senior Attorney, National Legal Research Group

The unusual legal term "cat's paw" apparently originated in Shager v. Upjohn Co., 913 F.2d 398 (7th Cir. 1990).  "Cat's paw" describes a theory of the liability of an employer for a discriminatory action that stems from the prohibited bias of a subordinate employee who set up but did not actually take the action complained of.  In reversing a summary judgment for the employer in this age discrimination case, the court described the theory, as to which there were material factual issues to be decided, as follows:

Lehnst [a supervisor] did not fire Shager [plaintiff]; the Career Path Committee did.  If it did so for reasons untainted by any prejudice of Lehnst's against older workers, the causal link between that prejudice and Shager's discharge is severed, and Shager cannot maintain this suit even if Asgrow [employer] is fully liable for Lehnst's wrongdoing. . . .  But if Shager's evidence is believed, as in the present posture of the case it must be, the committee's decision to fire him was tainted by Lehnst's prejudice.  Lehnst not only set up Shager to fail by assigning him an unpromising territory but influenced the committee's deliberations by portraying Shager's performance to the committee in the worst possible light.  Lehnst's influence may well have been decisive.  The committee's deliberations on the question whether to fire Shager were brief, perhaps perfunctory; no member who was deposed could remember having considered the issue.  A committee of this sort, even if it is not just a liability shield invented by lawyers, is apt to defer to the judgment of the man on the spot.  Lehnst was the district manager; he presented plausible evidence that one of his sales representatives should be discharged; the committee was not conversant with the possible age animus that may have motivated Lehnst's recommendation.  If it acted as the conduit of Lehnst's prejudiceChis cat's‑pawCthe innocence of its members would not spare the company from liability.  For it would then be a case where Lehnst, acting within (even if at the same time abusing) his authority as district manager to evaluate and make recommendations concerning his subordinates, had procured Shager's discharge because of his age.  Lehnst would have violated the statute, and his violation would be imputed to Asgrow.

Id. at 405 (emphasis added) (citation omitted); see also EEOC v. BCI Coca‑Cola Bottling Co. of L.A., 450 F.3d 476, 484 (10th Cir. 2006) ("The 'cat's paw' doctrine derives its name from a fable . . .  in which a monkey convinces an unwitting cat to pull chestnuts from a hot fire. As the cat scoops the chestnuts from the fire one by one, burning his paw in the process, the monkey eagerly gobbles them up, leaving none left for the cat.  Today the term 'cat's‑paw' refers to one used by another to accomplish his purposes.  In the employment discrimination context, 'cat's paw' refers to a situation in which a biased subordinate, who lacks decisionmaking power, uses the formal decisionmaker as a dupe in a deliberate scheme to trigger a discriminatory employment action." (citations omitted) (internal quotation marks omitted)).

The Lawletter Vol 35 No 11, July 29, 2011

Scott Meacham, Senior Attorney, National Legal Research Group

It is well known that an express grant of permission will defeat a claim for adverse possession.  If a junkyard owner, for example, gets permission to store old tires on a neighboring property, then his use of that property will not ripen into full title no matter how long it continues.

But when no one gives clear permission, should permission be presumed?  Or should an apparently adverse use be presumed to constitute a trespass instead?  These are the questions the Washington Court of Appeals addressed recently in the case of McMilian v. King County, No. 64868-3-I, 2011 WL 1631853 (Wash. Ct. App. May 2, 2011).

The background of McMilian lies outside the context of an adverse possession dispute.  Rather, the case involved a zoning controversy and the possibility that a grandfathered nonconforming use could exist on land that the nonconforming user did not own.

Prior to 1958, the owner of the northernmost of a pair of adjoining parcels had begun operating a wrecking yard on his property.  Although the County amended its zoning ordinance in 1958 to prohibit such uses in a residential zone, the wrecking yard on the northern parcel remained a valid nonconforming use.

The northern owner did not limit his industry to his own land, however.  Over a period of several decades, he stored wrecked cars, junk auto parts, and tires on the southern parcel.  The northern owner apparently did not seek permission to do this, and the southern owner never granted anyone express permission to use his land.  It is easy to see why the county hearing examiner would see this as a case of trespass.

In 2002, the plaintiff purchased both the northern and southern parcels.  He continued the wrecking yard operation, and in 2005 he cleared the remainder of the southern parcel and began storing vehicles there.  The County cited him in 2007 for code violations on the southern parcel, including the operation of a wrecking business in a residential zone.

On administrative appeal, the hearing examiner determined that the prior owner of the northern parcel had neither obtained permission nor asserted an adverse possession claim and that he must therefore have been a trespasser.  Since a trespasser could not establish a valid nonconforming use, the junkyard on the southern parcel would be prohibited.  The county superior court reversed, and the County appealed.

July 19, 2011

Steve Friedman, Senior Attorney, National Legal Research Group

In recent years, dubious mortgage practices and lax lending standards contributed to a housing bubble that eventually burst and thrust the economy into the worst economic downturn since the Great Depression; as a result, there have been a record number of foreclosures.  Despite the time-sensitive nature of foreclosure proceedings and related litigation, foreclosing parties need to be careful about checking the land records and verifying that all interested parties have notice of the foreclosure proceedings.

The doctrine of merger provides that "[w]henever a greater and a less estate coincide and meet in one and the same person, without any intermediate estate, the less is immediately merged in the greater, and thus annihilated."  31 C.J.S. Estates § 153 (Westlaw database updated June 2011).  Applying the merger doctrine to the mortgage context, when the mortgagee acquires legal title to the subject property by way of foreclosure, the mortgage lien merges with the legal title, and the lien is extinguished as a matter of law.  See Citizens State Bank of New Castle v. Countrywide Home Loans, No. 76S03-1009-CV-515, 2011 WL 2566451, at *2 (Ind. June 29, 2011); Am. Family Mut. Ins. v. Welton, 926 F. Supp. 811, 816-17 (S.D. Ind. 1996).

The Lawletter Vol 35 No 10, July 8, 2011

Brad Pettit, Senior Attorney, National Legal Research Group

The Internal Revenue Code states that "[e]xcept as otherwise provided . . . , any amount paid or distributed out of an individual retirement plan shall be included in gross income by the payee or distributee."  26 U.S.C. § 408(d)(1).  Section 408 of the Code goes on to say that a taxpayer does not have to include in his or her gross income the amount distributed or paid from his or her individual retirement plan if

(i)         the entire amount received . . . is paid into an individual retirement account or individual retirement annuity . . . for the benefit of such individual not later than the 60th day after the day on which he receives the payment or distribution; or

(ii)        the entire amount received . . . is paid into an eligible retirement plan for the benefit of such individual not later than the 60th day after the date on which the payment or distribution is received[.]

Id. § 408(d)(3)(A).  The same rules apply with respect to distributions from a qualified "employees' trust."  Id. § 402(c).

The Code provides for discretionary hardship relief from the 60-day limitations period on a tax-free rollover of a distribution from a qualified retirement plan or trust.  The 60-day limitations period on making a tax-free rollover from an individual retirement plan can be waived by the Secretary of the Treasury "where the failure to waive such requirement would be against equity or good conscience, including casualty, disaster, or other events beyond the reasonable control of the individual subject to such requirement."  Id. §§ 402(c)(3)(B), 408(d)(3)(I).  In determining whether to grant a waiver of noncompliance with the 60-day time period for a tax-free rollover, the Internal Revenue Service ("IRS") will consider all relevant facts and circumstances, including

(1) errors committed by a financial institution . . . ;  (2) inability to complete a rollover due to death, disability, hospitalization, incarceration, restrictions imposed by a foreign country or postal error; (3) the use of the amount distributed (for example, in the case of payment by check, whether the check was cashed); and (4) the time elapsed since the distribution occurred.

Rev. Proc. 2003‑16 sec. 3.02, 2003‑4 I.R.B. 359, 2003‑1 C.B. 359.

The Lawletter Vol 35, No 10, July 8, 2011

Paul Ferrer, Senior Attorney, National Legal Research Group

Discussed in a prior issue of The Lawletter, see Paul Ferrer, Enforceability of Arbitration Clause Prohibiting Classwide Arbitration, 35 Lawletter No. 2 (Jan. 21, 2011), the case of Scott v. Cingular Wireless, 161 P.3d 1000 (Wash. 2007) (en banc), is indicative of the growing trend among state courts to strike down as unconscionable class action waivers in otherwise enforceable arbitration agreements in cases where there are a large number of potentially affected consumers, each of whom has only a small claim.  In Scott, for example, the plaintiffs alleged that Cingular had overcharged its individual customers between $1 and $45 per month by unlawfully adding roaming and other hidden charges to their cellular telephone plans.  In finding the class action waivers in the plaintiffs' arbitration agreements to be unenforceable, the court reasoned that "class actions are a critical piece of the enforcement of consumer protection law," because "[w]ithout class actions, many meritorious claims would never be brought":  It simply would not be cost-effective for individual consumers to proceed on such small claims.  Id. at 1006.  This reasoning was echoed in Discover Bank v. Superior Court, 113 P.3d 1100 (Cal. 2005), in which the California Supreme Court similarly held that under such circumstances, class action waivers in arbitration agreements are unconscionable and, thus, unenforceable:

The Lawletter Vol 35 No 9, June 17, 2011

Suzanne Bailey, Senior Attorney, National Legal Research Group

May an employee voluntarily leave work due to emotional distress arising out of a family crisis and still be eligible for unemployment compensation?  In Pennsylvania, a claimant qualifies for benefits if s/he demonstrates that the cause for voluntarily leaving employment is "of a necessitous and compelling nature."  43 Pa. Stat. Ann. § 802(b).  To meet that burden of proof, the claimant must establish that (1) circumstances existed that produced real and substantial pressure to terminate employment; (2) like circumstances would compel a reasonable person to act in the same manner; (3) s/he acted with ordinary common sense; and (4) s/he made a reasonable effort to preserve the employment.  In the recent case of Fiedler v. Unempl. Comp. Bd. of Review, No. 1984 C.D. 2010, 2011 WL 1486078 (Pa. Commw. Ct. Apr. 18, 2011), the Commonwealth Court of Pennsylvania applied this standard to the case of a worker who left his out-of-state job and returned home to Pennsylvania to reunite with his family to cope with the tragic loss of his adult son.  The court found that the claimant had met the burden of proof and was entitled to benefits.