Pennsylvania Litigation Blog

E-Discovery in Employment Litigation: It's Not Just for Plantiffs Anymore

David Freedman — Wed, 02 Dec 2009 13:18:20 -0500

In Seybert v. International Group, Inc., Jane Seybert filed suit in the United States District Court for the Eastern District of Pennsylvania claiming that her supervisor, Brett Marchand, subjected her to gender-based harassment. Seybert testified that during a work-sponsored dinner, attended by co-workers and other supervisors, Marchand stated loudly in reference to a chocolate fountain dessert, “I heard it’s really good if you go down deep, into the chocolate, with your berry,” which Seybert contended was a sexual metaphor.

As the matter proceeded to trial, International Group produced several emails that Seybert exchanged using her work email account during working hours. Many of these emails featured stories, jokes, cartoons and photographs employing sexual words, metaphors and double entendres. Seybert’s attorneys filed a motion to prevent International Group from using the emails at trial, citing a federal rule of evidence that limits the use of “sexual disposition” evidence.

The judge, however, rejected the argument, stating that “[b]y exchanging these emails with others during her . . . work hours, and using IGI computers, Mrs. Seybert may have been sanctioning the humor that the emails contained – a humor that may be found similar to the supposed humor underlying Mr. Marchand’s comment at the . . . dinner.” The court also noted that the emails did not comment directly on Seybert’s own sexual history or conduct, but mostly contained jokes and stories about generic topics or made-up characters, like Santa Claus.

The jury apparently found this evidence persuasive. On November 6, it entered judgment in favor of International Group.

Just like for plaintiffs, email evidence can sometimes provide important information for an employer defending an employment discrimination lawsuit. Employers can take advantage of some of these benefits—and limit some of the costs associated with E-Discovery in employment litigation—by adopting policies that require the long term retention of departing employees’ email accounts. Who knows? It might just be your “smoking gun” in the end.

Attorneys Fees for Collecting Judgement Against Owner

Jim Adams — Thu, 19 Nov 2009 10:57:52 -0500

Section 512 of the Contractors and Subcontractors Payment Act allows for an award of interest, penalties, and attorneys fees to a “substantially prevailing” party. When Owner did not pay him for construction work, Contractor sued Owner, won and obtained an award for the claim, plus interest, penalties and attorneys fees. Owner still didn’t pay. Contractor then filed execution proceedings and, eventually, did recover the amount of the award by attaching Owner’s bank accounts. Contractor then filed to also get interest and penalties from the time of the original award until Contractor eventually was paid, plus contractor’s attorneys fees incurred in the collection and execution process, as well as in the appeals to Superior Court. In a case of first impression, the Superior Court said, “Yup.” The trial court had denied the Contractor’s motion for interest, penalties and fees for the collection effort, but the Superior Court panel unanimously reversed. Zimmerman v. Harrisburg Fudd, PICS No. 09-1762 (Oct. 19, 2009).

The original amount owed by Owner was $10,108.70. After adding the first set of interest, penalties and attorneys fees, that number became $21,673.99. When the execution and appeals were considered, the total of the claim was almost four times the original debt – growing to $41,989.84. As explained by the Superior Court, the statute’s “underlying objective of making an unpaid contractor whole . . . can be gutted, when he is subjected to expensive litigation costs, including those incurred in the collection-of-fees phase.”

Trademark: Retain your Right to Sue

Joseph Falcon — Thu, 19 Nov 2009 10:52:33 -0500

Even if you are successful in federally registering your mark, misuse of your mark may result in losing your right to enforce the registration. The term misuse is relative and generally does not lead to a removal from the registry. Rather, your use may affect the ability to enforce rights granted by the registration.

The rights established from a federal registration can last indefinitely, as long as the owner continues active use of the mark on or in connection with the goods and/or services in the registration. Therefore, it is important that you actively use your registration.

Furthermore, when used, the trademark mark should be presented as an adjective. Any presentation of your trademark, as a noun or verb, should be avoided. In fact, use as a noun or verb is a common error that an owner uses the mark as a noun or a verb (i.e. correct use = “Drink YOUR MARK Cola”; incorrect use = “Drink YOUR MARK”). You should also avoid any presentation of the mark in plural or modified possessive form (i.e. incorrect use = “YOUR MARK’s Cola”).

A mark should be adequately distinguished in presentation, especially in regards to the surrounding text and symbols. For instance, your mark can be capitalized, underlined, italicized, placed in quotation marks, or even depicted in boldface type; each typography provides an emphasis on the mark, making it more distinguishable. Since trademarks are used to create distinct commercial impressions in regard to the offered goods and services, your trademark should be distinguishable.

Most importantly, your mark should be affixed to the goods and/or services for which the mark is registered. Meaning, if you received a registration of your mark in association with product X, then use of the mark with product Y is not protected under the registration. Rather, use of the mark with product Y only provides common law rights. It would be recommended to register the mark again, but now in association with a new class of goods and/or services. The mark can be placed on the parcel in which the goods are packaged. Tags or labels may be used as well, which are attached to the product, and provide greater identity of the mark.

It is important to know that certain actions must be taken to maintain your registration, especially if in any changes in use have occurred.

Trademark: Expand your Right to Sue through Registration

Joseph Falcon — Thu, 19 Nov 2009 10:37:08 -0500

The first person to use a trademark in connection with specific goods or services preserves a common law right to prevent any unauthorized use of that mark with similar goods or services. However, federally registering your mark with the United States Patent & Trademark Office provides more protection than established under common law. In fact, an unregistered mark may only protect use of your mark within a specific geographical area, while a federal registration provides exclusive right to use of that mark nationally.

If your mark lacks federal registration, the ability to enforce your rights through legal proceedings may therefore be limited. In fact, a registration not only provides constructive notice of the mark to infringers, but provides right to sue in federal court with a legal presumption as to ownership of the mark. Additionally, federally registering your mark provides more remedies available against infringing parties. For instance, the registrant may recover up to triple damages and attorney's fees for any willful violations.

The rights established from a federal registration can last indefinitely, as long as the owner continues active use of the mark on or in connection with the goods and/or services in the registration. Therefore, registering your trademark provides a bundle of exclusive rights that are otherwise not available through common law use of the mark.

New Regulations Clarify HITECH Breach Notification Rules

Kathy Kravitz — Wed, 04 Nov 2009 13:57:19 -0500

Interim Final Regulations published in the Federal Register on August 24, 2009 (74 Fed. Reg 42740) provide a framework for evaluating potential breaches of Protected Health Information (PHI) in order to determine if it is necessary to send a notification letter to the patient. While not all violations of the pre-existing HIPAA privacy regulations will result in a breach requiring notification under the new HITECH regulations, a violation of the privacy rule is a prerequisite to a breach requiring notification. Thus, determining whether or not a violation of the HIPAA regulations has occurred is the first step in evaluating a breach to determine if notification is necessary.

Threshold Finding of Harm Necessary. Under HITECH, a breach requiring notification is one which “compromises the security and privacy” of the PHI. The Department of Health and Human Services (DHHS) clarifies in the regulations that the occurrence of harm is implicit in this provision, and so a use or disclosure “which compromises the security and privacy of the PHI” is defined as one which “poses a significant risk of financial, reputational, or other harm to the individual.”

In the explanatory preamble to the regulations, DHHS identifies a number of factors to be considered in assessing the potential harm of a disclosure, including to whom the disclosure was made. It is suggested that there is less inherent risk of harm when an improper disclosure is made by one covered entity to another covered entity, as the recipient itself is bound by the same privacy obligations as the entity which disclosed the information. It is also noted that steps taken to mitigate against the potentially harmful effects of a disclosure may prevent it from being a “breach” requiring notification. For example, the covered entity may obtain satisfactory assurances that the information will not be further used or disclosed or will be destroyed.

Exceptions Clarified. HITECH excepts from the definition of “breach” inadvertent, good faith disclosures between employees acting within the scope of their employment, assuming no further disclosure occurs. The new regulations broaden the term “employees” to include all members of the “workforce,” as that term is defined in the Privacy Rule. This ensures that volunteers, trainees, and others who work at the covered entity but may not be employees, are covered under the exception.

The regulations also confirm that an inadvertent disclosure between or among individuals within the same “organized health care arrangement” (full definition at 45 CFR 160.103 Generally, a hospital and its medical staff are part of an organized health care arrangement, as are the different covered entities in a health system.) is not a breach requiring notification so long as the information is not further used or disclosed in a manner not permitted under the privacy rules.

DHHS Stands Firm on 60 Day Timeframe for Notification. HITECH mandates that when notification is required, it must not be “unreasonably delayed,” and must be given no more than sixty calendar days from discovery of the breach. Per the regulations, “discovery” occurs when the covered entity or any member of its workforce (other than the person committing the breach) knows or should know, in the exercise of reasonable diligence, of the breach. The regulations make it clear that the clock starts ticking right away upon such “discovery,” not after the entity has completed its investigation and/ or analysis. Indeed, it is suggested that even notice given on the 60th day might be deemed “unreasonably delayed” if the entity knew by day 10 that notification would be required. In light of this provision, covered entities may wish to revise all business associate contracts to require immediate notification of any breaches.

Contents of Notification. The required notification must include, “to the extent possible,” a description of (1) what occurred, including the date of the breach and the date it was discovered, if known; (2) the types of PHI involved; (3) suggested steps the individual should take to protect against potential harm; (4) what the covered entity is doing to investigate the breach, mitigate any potential harm and protect against future breaches; and (5) contact information, including a toll free number, email address, web site or postal address for the sender.

Summary of Analysis. Upon discovery” of a potential breach, a covered entity should promptly determine (1) If the occurrence constitutes an impermissible use or disclosure of PHI under the privacy rules; and if so (2) whether the impermissible use or disclosure presents a “significant risk of financial, reputational or other harm” to the individual; and if so (3) determine whether the incident falls under any of the exceptions to HITECH’s definition of breach and (4) determine whether anything can be done to mitigate against any potentially harmful effects of the use or disclosure, particularly if this will negate the need for notification under the regulations. Whatever the decision, a covered entity must keep documentation justifying its decision for six years.

Training/Policy Development Remain Key. All hospitals and other health care providers that are covered entities under HIPAA are encouraged to promptly review their HIPAA policies and procedures to determine where additions and modifications are needed to address breach notification. This important new regulation must also be rolled out to the workforce in a way that conveys a message of heightened scrutiny and the need for dedicated compliance.

Do You Own "Shop Right" to Your Employee's Invention?

Joseph Falcon — Mon, 12 Oct 2009 15:48:22 -0500

Employment agreements and assignment provisions may transfer patent rights to the employer. Even in the absence of an express agreement to assign from the employment contract will not preclude the employer as a matter of law from asserting a claim to the employee's invention. See Agawam Co. v. Jordan, 74 U.S. (7 Wall.) 583, 19 L.Ed. 177 (1868). Even in situations where the employee owns the invention, and a resulting patent, the employer may have a "shop right" to the invention, where the employer will have a license to use the invention without paying the employee any additional compensation as royalties. See, Aetna-Standard Engineering Co. v. Rowland, 343 Pa. Super. 64, 71, 493 A.2d 1375 (1985). As an implied license, shop rights allow the employer, and its employees, to use the patented invention. This is a limited right, restricted to a proximate use of the patented invention.

Several factors will be examined in order to determine if a “shop right” exists, including: (1) the extent the employer provided wages, materials, tools, and a work place; (2) the time used (on the clock or off) by the employee for the development of the invention; (3) the existence of contractual relationship (written or unwritten) between the employer and employee; and (4) the employees consent and acceptability that the employer use the invention. In general, the employer will retain a shop right when the employee devises the invention on the employer's time and at the latter's expense, using his materials and facilities, and allows him to use the invention without special compensation. See Dubilier Condenser, supra; Gill v. United States, 160 U.S. 426, 16 S.Ct. 322, 40 L.Ed. 480 (1896).

In order to clear any uncertainty of patent/invention ownership, employers should require employees to sign written patent assignment agreements.

Do You Own Your Employee's Invention?

Joseph Falcon — Tue, 06 Oct 2009 15:16:28 -0500

Owning a patent protected invention provides the right to exclude others from making, using or selling the invention throughout the United States for life of the patent. However, determining the ownership of those rights may be complicated. Generally, the inventor owns all rights to an invention. But, if the inventor is an employee, an employer may lay claim to the invention under certain circumstances. For instance, if an employee is hired to invent and the employer can demonstrate that this was clearly spelled out for the employee, the employer will be deemed the owner of any invention within the scope of the employee’s employment. In United States v. Dubilier Condenser Corp., 289 U.S. 178, 53 S.Ct. 554, 77 L.Ed. 1114 (1933), however, the Court stated that the mere existence of an employer-employee relationship does not of itself entitle the employer to an assignment of any inventions which the employee devises during the employment.

Environmental Hearing Board - Standard of Review

Chip Haws — Mon, 21 Sep 2009 15:54:58 -0500

The EHB recently issued a decision in TRRAAC v. DEP, et al, EHB Docket No 2008-315-L, addressing the EHB's de novo review of DEP actions. DEP approved a remedial investigation and cleanup plan for a site in Lancaster County. TRRAAC appealed the approval. TRRAAC noted in its pre-hearing memorandum that it intended to call a DEP inspector as a witness at the hearing. The DEP employee was not involved in the review of the action under appeal. Clean up at the site commenced and materials from the site were disposed of at a landfill. The DEP employee he was involved in inspections at the landfill.

DEP filed a motion in limine seeking to prohibit TRRAAC from calling the DEP landfill inspector. DEP argued that the inspector had no part in review of the remedial investigation and clean up plan, rather his involvement related to implementation of the clean up plan. Issues relating to the implementation of the clean up plan have no bearing on an appeal of DEP's review and approval of that plan.

The EHB held that all evidence up to the time of the hearing is potentially relevant. The EHB cited 35 P.S. Section 7514(c) for the proposition that a DEP action is not final as to the person taking the appeal, until the EHB decides that the action is final. DEP focused on the action under appeal itself, the clean up plan, as the issue and viewed the issues TRRAAC wanted to address as separate compliance issues. The EHB took the position that issues related to the approval might be borne out by subsequent evidence, not before the Department at the time it took action.

The EHB determined that its focus should properly be on the appealed action itself, rather that DEP conduct in completing its review. Details regarding the nature of DEP's review are not as important as whether the decision itself was correct, as such pointing out harmless errors in the review process, is unproductive. The EHB does not conduct a record review, rather it creates its own record.

The EHB distinguished its decision in this case from CRY v. DER, 639 A.2D 1265 (Pa. Cmwth. 1994). In CRY, the appellant appealed the issuance of a permit for a landfill. The appellant in CRY sought to introduce evidence relative to the fact that the liner was torn during its installation, in an effort to argue the permit should not have been issued. The EHB excluded the evidence. The Court determined that evidence relative to the tear in the liner was irrelevant, it had no bearing on whether the permit should have been issued.

The EHB provided an example of when evidence obtained after DEP acts, may be relevant to an appeal of that action. If DEP were to approve a dam permit, which approval gets appealed, the dam is later constructed and subsequently fails. Evidence relative to the cause of the failure may be relevant to the appeal of the permit for the dam. The later evidence may go to the propriety of the decision to issue the permit, rather than an unrelated compliance issue as was the case in CRY. Blanket prohibitions of evidence, based on the time the evidence came into existence, are improper.

The Comprehensive Plan; just a planning document?

Chip Haws — Fri, 11 Sep 2009 16:35:19 -0500

In Geryville Materials, Inc. v. DEP, Docket No. 152 MD 2009 DEP issued a letter to Geryville Materials indicating that it was going to suspend review of Geryville Material's permit application for a quarry. DEP suspended its review of the permit application based on a letter from the Lehigh Valley Planning Commission ("LVPC") that the proposed quarry was not consistent with the comprehensive plan. Quarry use is a permitted use as a special exception. Geryville Materials is pursuing a special exception. Geryville Materials filed an equity actions in the Commonwealth Court's original jurisdiction seeking an order that required DEP to continue to review its application. The Court in an unreported decision authored by Judge Pellegrini, denied DEP's preliminary objections. The Judge pointed out to DEP that the comprehensive plan is simply a planning document, it was not consistent with the zoning ordinance regarding the proposed use and that DEP misapplied its obligations under Act 67 and Act 68 by suspending its review of the permit application.

HIPAA-steria - The Sequel: First Up; Breach Notification

Kathy Kravitz — Tue, 08 Sep 2009 16:56:34 -0500

The new federal stimulus bill, American Recovery and Reinvestment Act of 2009 (ARRA), includes the Health Information Technology for Economic and Clinical Health (HITECH) Act, which contains, among other things, an expansion of HIPAA privacy law requirements for health care providers. The HIPAA provisions go into effect on a rolling schedule over the next several years, and further guidance for compliance will be forthcoming over that time period. Since much is still unknown, hospitals and other health care providers may wish to go about tackling the technical maze of new requirements (and avoiding HIPAA-steria) with an equally graduated, and systematic approach to enforcement. This Alert will focus on the breach notification provision, which is scheduled to go live in September of 2009.

General Rule. Under HITECH, any hospital or other covered entity which maintains protected health information (PHI) must notify the patient in the event of a breach of the data. Importantly, this provision only applies to data which is “unsecured;” if a breach of “secured” data occurs, no notification is required.

What is a Breach? A breach is the unauthorized access, use or disclosure of PHI which compromises the security or privacy of the information. There are, however, some important exceptions. For example, a disclosure may not be a breach requiring notification if you would not expect the person to whom the information was disclosed to remember it. This could cover a misdirected fax, depending upon the procedures followed. Also, if an employee acting in good faith, within the scope of his/her job duties, improperly accesses a record, as in the case of inadvertent or accidental access, this is not reportable so long as there is no further disclosure.

What makes data “secure?” Per DHHS’ April 27th guidance (74 Fed. Reg. 19006), electronic data is “secure” if encrypted as further specified in the HIPAA Security Rule and in guidelines promulgated by the National Institute of Standards and Technology and available at http://www.csrc.nist.gov/. The encryption method should use a process which transforms data into a form “in which there is a low probability of assigning meaning without the use of a confidential key or process.” As for hard copy records, per the guidance that hard copy PHI is only “secure” if destroyed in a manner which makes it unreadable.

Form/Timing of Notification. Notification must be made in writing, by mail or e-mail if that is the patient’s preference. The notification must be made within 60 days of discovery of the breach. If the breach involves disclosure of PHI of 500 or more people, notification also must be made to the media and to DHHS, and the incident will be posted on a DHHS public website.

Further Guidance to Come/Start Date. On August 24, 2009, DHHS published its final interim rules on breach notification (74 Fed. Reg. 42740). In its April guidance, DHHS asked for public comments, and the final interim rules are expected to address industry comments and concerns. These rules will then apply to breaches occurring 30 days after the publication of the rules, or no later than September 15, 2009.

Next Steps. Hospital and other health care providers should consult with their health care professional to flesh out a plan for HITECH compliance. Some things to consider in making your plan include:

• Review of Business Associate agreements to ensure that BA’s are required to give timely notice of breaches to allow for your compliance with HITECH’s 60 day deadline for notification.

• Review of most common breach circumstances and reportability; does every misdirected fax require a breach notification? This must be thoroughly analyzed and a policy created to supplement your existing HIPAA compliance program. Policies should be worded broadly enough to allow for analysis of each individual situation.

• Education. While staff may be aware of the need for privacy of PHI, these new requirements, along with HITECH’s substantially increased financial penalties, put a much greater emphasis on the importance of maintaining confidentiality on a day to day basis.

The Future. At the American Health Lawyers Annual Meeting in early July, a representative from the Office for Civil Rights (OCR) addressed the agency’s enforcement philosophy, saying, “I love the word reasonable,” when asked about the new HIPAA provisions. The commitment to this philosophy will be borne out in the coming months and years.

Settling Co-Defendants May Be Excluded From Verdict Sheets

Bob Dennison — Tue, 08 Sep 2009 16:23:59 -0500

Recently the Superior Court of Pennsylvania held that settling co-defendants may be excluded from verdict sheets where the evidence will not support a prima facie case of negligence against a settling co-defendant. In the matter Hyrcza v. West Penn Allegheny Health System, 2009 WL 1977500 (Pa.Super., July 1, 2009), Plaintiff brought a medical malpractice action on behalf of her decedent against numerous defendants on various theories of liability. Certain Defendants settled with Plaintiff prior to trial and were omitted from the verdict sheets. At trial a verdict was entered in favor of plaintiff and against the remaining defendants. On appeal, the remaining defendants argued the exclusion of the other settling defendants from the verdict sheets denied them a right to have liability apportioned against them. The Superior court affirmed the trial court ruling that the evidence did not support a prima facie case of negligence against the settling defendants, and therefore they were properly excluded.

Health Care Providers Knowingly Seeking Payment for Serious Adverse Events? Not in PA!

Megan Browne — Mon, 07 Sep 2009 09:11:04 -0500

As of August 9, 2009, health care providers (including hospitals, doctors, nurse midwives, CRNPs,

and others) in Pennsylvania are prohibited from “knowingly” seeking payment for certain

“preventable serious adverse events” or for any services needed to correct or treat the condition

created by the preventable serious adverse event when the event occurred under the provider’s

control. Likewise, private insurers and patients do not have to pay providers for such events.

Governor Rendell signed the Preventable Serious Adverse Events Act into law on June 10,

2009 (Act 1 of 2009). It is the first Pennsylvania law that addresses payment for preventable

serious adverse events, but it is not the first law of its kind that applies to Pennsylvania

health care providers. On January 14, 2008, the Department of Public Welfare (DPW)

issued a Medical Assistance (MA) Bulletin announcing that hospitals would no longer be

paid for certain “preventable serious adverse events,” the rationale being that they were not

“medically necessary services” to patients who receive MA benefits. (In fact, Act 1 of 2009

tracks key definitions used in the MA Bulletin.) The MA Bulletin followed federal regulation

providing that the Centers for Medicare and Medicaid Services would no longer pay for eight

“never events” suffered by Medicare recipients.

An event is non-reimbursable under Act 1 of 2009 if (1) it occurred in a health care facility;

(2) it was within the provider’s control so that the provider could have avoided it; (3) an error

or other system failure caused the event to occur anyway; (4) and the event caused the patient

to die, lose a body part, become disfigured, become disabled, lose a bodily function for more

than seven days, or lose a bodily function where such loss was still present when the patient

was discharged from a health care facility. (35 P.S. §449.2 (defining "preventable serious adverse event").)

What kinds of events does the Act cover? They are events included on a list created by

the National Quality Forum (NQF), a nonprofit organization established in 1999 that aims

to improve the quality of health care, or, for nursing facilities, in a bulletin to be published

pursuant to the Act (as described in the Bulletin mentioned above). The NQF’s list also is used as the initial point of analysis under the MA Program (as described in the Bulletin mentioned above). They include, for example, operating on the wrong body part or on the wrong patient, leaving a surgical sponge in the patient after surgery, discharging an infant to the wrong person, and death or serious disability associated with intravascular air embolism that occurred while receiving care at a health care facility.

If a provider discovers that payment was unknowingly sought for a covered event or

subsequent treatment, the provider must immediately notify the payor or patient (whoever

paid the bill) and refund the payment. The notification deadline is the later of (a) receipt of

payment, or (b) thirty days after the discovery was made. Similarly, a payor who discovers

that payment was sought in violation of the Act must immediately notify the provider that

payment may not be sought and will not be made (35 P.S. §449.93(b), (c)).

The Department of Health is responsible for investigating patient or payor complaints about

a health care facility (e.g. hospital) seeking improper payments (35 P.S. §449.95). The Department of State is responsible for investigating patient or payor complaints about a health care provider other than a facility (e.g. doctor) seeking improper payments (35 P.S. § 449.96).

As health care providers know, Medicare has a similar policy on non-payment for similar

events. Act 1 of 2009 specifies that the Medicare policy still applies to Medicare patients (35 P.S. § 449.97(f).)

Health care providers and payors can contract policies relating to serious preventable adverse

events as needed to implement the mandates of Act 1 of 2009. We have seen some private

insurers incorporating provisions into their contracts providing for the non-payment of costs

directly related to specified events.

Act 1 of 2009 raises many practical and legal implications, including:

• Prevention is important. Providers can use the list to take another look at their internal

policies and procedures to ensure that appropriate checks and balances are in place for

avoiding certain events.

• Sometimes problems occur despite having the best policies and despite compliance with those policies, so reporting becomes the issue. It is important for a provider to know

that a potential preventable serious adverse event has occurred. Policies need to address

how the appropriate report will be made to a designated individual or group within the

organization and who will undertake an investigation to determine if a covered event

occurred. In the meantime, payment must not be sought from payors or the patient.

(Doing so could have False Claims Act implications, which will be addressed in a

forthcoming Alert.)

• If a covered event is determined to have occurred, who was “in control” of the situation

such that that person or entity could have prevented the event and should not be paid for

related costs? Was the injury serious enough to be covered?

• Similarly, what are the costs that were attributable to the event and not to other aspects

of care?

• If there is a subsequent medical professional liability action relating to the preventable

serious adverse event, how does the non-payment (and prior investigation) impact the

lawsuit? Although Act 1 of 2009 states that information provided to a payor or provider

as to notification of improper payment or as to refund of an improper payment received

is not discoverable or admissible in such actions, the arguments will likely be made

that the occurrence of an event on the NSF list and covered under the Act establishes

negligence, and that any related investigation and the fact that payment was not sought

or received is discoverable and admissible.

Health care providers need to carefully review their operations and put into place policies and procedures to comply with Act 1 of 2009 and to prepare for its implications.

Inequitable Conduct: Plead with Specificity

Joseph Falcon — Fri, 04 Sep 2009 17:14:25 -0500

Commonly, a defendant during patent litigation will seek to declare a patent unenforceable using the doctrine of inequitable conduct, which stems from 37 CFR 1.56 (commonly referred to as Rule 56). Rule 56 details the duty of candor placed upon the inventors and any individual, substantially involved in the preparation or prosecution of the patent application. They must disclose to the Patent Office all information they are aware of that is material to patentability. Critikon Inc. v. Becton Dickinson Vascular Access, Inc., 120 F.3d 1253, 1256 (Fed. Cir. 1997). The party seeking to invalidate the patent, the moving party must demonstrate clear and convincing evidence that such conduct occurred, in the form of: (1) affirmative misrepresentations of a material fact; (2) failure to disclose material information; or (3) submission of false material information. Baxter Int’l v. McGaw, Inc., 149 F.3d 1321, 1327 (Fed. Cir. 1998). If the duty is found to be breached there is said to be “inequitable conduct” and the entire patent is unenforceable.

In a recent decision, Exergen Corp. v. Wal-Mart Stores, Inc., et al., Case Nos. 2006-1491, 2007-1180 (Fed. Cir. 2009), the ability to plead such a defense has become more burdensome. The Federal Circuit, in Exergen, decided that “a pleading that simply avers the substantive elements of inequitable conduct, without setting forth the particularized factual bases for the allegation, does not satisfy Rule 9(b).” (Slip Op. at 21). More particularly, the Federal Circuit held “that in pleading inequitable conduct cases, Rule 9(b) requires identification of the specific who, what, when, where, and how of the material misrepresentation or omission before the PTO,” (Slip Op. at 22) directing moving parties to motion a factual pleading rather than a notice pleading.

As such, the pleading must include sufficient factual allegations to permit a reasonable inference “that a specific individual (1) knew of the withheld information or of the falsity of the material misrepresentation, and (2) withheld or misrepresented this information with a specific intent to deceive the PTO.” (Slip Op. at 24-25). To comply with this new standard, the pleading must first name the specific individuals who are alleged to have committed inequitable conduct. The pleading should provide pincites to both the patent claim and a withheld reference, and establish that the allegedly material pincite is not to be found in the prior art of record. Finally, it is no longer permissible to allege merely that “on information and belief,” the information was withheld with intent to deceive. The pleading must include factual allegations that a specific person knew of the specific information in a withheld reference.

Third-party has Standing to Appeal DEP Order to Township

Chip Haws — Fri, 04 Sep 2009 17:00:09 -0500

Tilden Township and Frank Perano v. DEP et al EHB Docket No. 2009-066-L, DEP issued a letter to Perano, a mobile home park operator, that the NPDES permit for its waste water treatment plant would not be reissued. The Department then issued an Order directing the Township to revise its Official 537 Plan to provide sewer service to the Perano's mobile home park. Perano filed appeals of the letter he received and the Order issued to the Township. DEP argued in a motion to dismiss, that Perano had no standing to appeal the Order issued to the Township. The EHB found that Perano had standing to appeal and denied DEP's motion.

Chinese-Made Drywall: Another Litigation Risk?

Ron Pollock — Thu, 06 Aug 2009 17:46:34 -0500

Builders, developers, sub-contractors, shipping companies and suppliers, importers, distributors, architects and others may potentially be impacted if litigation in this area becomes prevalent in the Northeast, as the Gulf Coast is already seeing mass tort litigation forming. In particular, it is important to review insurance policies early to ascertain whether coverage is provided in the event of a claim. Further, we recommend checking your supply chain to identify drywall sources, handling and documentation and preserve any documents involved.

There has been a great deal of discussion recently with respect to property damage and personal injury claims arising from Chinese-made drywall, which is alleged to have contamination issues causing property and personal injury damages. While the science behind this remains murky, the problem may be particularly significant as statistics show that there are approximately 600 million pounds of Chinese-made drywall in at least 60,000 homes in the U.S.A. today. Commercial applications can also be involved.

According to an April 17th article in the Wall Street Journal, “Complaints about foul smelling Chinese-made drywall that first emerged in a few dozen homes in Florida in January have spread to hundreds of homes in several states.” As we saw with mold and synthetic stucco, the science surrounding Chinese-made drywall is still being developed. CNN reported in March that the drywall is alleged to have high levels of sulfur, and that the material emits sulfur-based gases that smell of rotten eggs and corrode piping and wiring, causing electronics and appliances to fail. At this point, the Gulf Coast has been in the forefront of these claims as high temperatures and humidity are purportedly primary triggers of problems resulting from the Chinese-made drywall. The United States Consumer Products Safety Commission has posted an internet alert on Chinese drywall, noting that it has received 1,174 reports from residents in 24 states who believe their health symptoms or the corrosion of certain metal components in their homes are related to the presence of drywall produced in China. Consumers largely report that their homes were built in 2006 to 2007. recommend checking your supply chain to identify drywall sources, handling and documentation and preserve any documents involved.

GARA Resists Another Challenge To Diminish Statute Of Repose

Bob Dennison — Thu, 06 Aug 2009 17:43:47 -0500

A unanimous en banc panel of the Pennsylvania Superior Court has held the issuance of Service Bulletins does not toll or restart the clock for calculating the statute of repose found in the federal General Aviation Revitalization Act of 1994. In Moyer v. Teledyne Continental Motors Inc., No. 1402 EDA 2007, 2009 WL 1929328 (Pa. Super. July 7, 2009). Appellants (Plaintiffs), relying on Caldwell v. Enstron Helicopter Corp., 230 F.3d 1155 (9^th Cir. 2005) that held flight manuals could be considered a new part or defective system sufficient to restart the clock, sought a similar ruling from the Court that would treat frequently issued Service Bulletins in the same manner as instruction manuals in an effort to circumvent the 18 year statute of repose.

The Superior Court, however, finding support in a 2009 Washington Court of Appeals matter captioned, Burton v. Twin Commander Aircraft, 148 Wash. App. 606 (Wash. Ct. App. Feb. 9, 2009) that held maintenance manuals are not to be considered a “part of an aircraft” extended the Burton ruling to Service Bulletins. The Moyer Court held Service Bulletins are distinguishable from instruction manuals, in part, because in the Caldwell case, it was the manual itself that was defective for failing to supply critical information to the operator, whereas in the Moyer case it was the aircraft part/component that was defective-not the Service Bulletin. The Court determined that a Service Bulletin is more analogous to a repair/maintenance manual used by mechanics for purposes of troubleshooting, repair and maintenance of an aircraft.

Rejecting Appellant’s assertions that Congress considered and intended to include the re-issuance of Service Bulletins to re-trigger the statute of repose, the Moyer Court held, instead, that frequency upon which Service Bulletins are issued would, to the contrary, frustrate and erode the intent of the Act if the issuance of Service Bulletins could be used to restart the clock.

OSHA Enforcement And Regulatory Changes Underway

Richard Hackman — Wed, 22 Jul 2009 14:16:17 -0500

Unlike the previous administration’s willingness to work with employers to resolve Occupational Safety and Health Administration (OSHA) complaints, under the Obama administration, OSHA intends to become more active in regulation promulgation and enforcement. Specifically, a pronouncement by President Obama’s new Secretary of Labor, Hilda Solis, encapsulates the new focus: “As I have said since my first day on the job, ... the U.S. Department of Labor is back in the enforcement business,” Solis said. “There will be no excuses for negligence.... And so long as I am the Secretary of Labor, the Department will go after anyone who negligently puts workers at risk.”

To that end, the new administration has earmarked significant additional funds for the enforcement of current OSHA regulations, the implementation of new OSHA regulations, and the hiring of additional investigators to increase enforcement. In June 2009, a House panel approved a $13.2 billion fiscal year 2010 appropriations package to fund the Department of Labor (DOL), which would represent an increase of $846 million from FY 2009 spending levels. This budget includes funding for OSHA at $554.6 million, which is a $41.6 million increase over FY 2009, yet $9 million lower than the President's request. In light of the above, OSHA has a number of initiatives going forward, including, but not limited to:

■ A special emphasis on oversight of construction projects funded by the recently enacted economic stimulus package, including safety issues involving fall protection, contractor liability and electrocution hazards. Stimulus-funded construction projects will be subject to random inspections, and OSHA inspectors would still have the authority to inspect construction sites if they observe any violations of OSHA rules.

■ Regulation of new “green” technologies involving solar and wind power.

■ A planned increase in the number of OSHA inspectors. Specifically, the fiscal year 2010 budget request was in part designed to fund the hiring of 130 new inspectors. OSHA intends to further supplement its inspectors with “partnerships with businesses and nongovernmental organizations.”

■ Addressing ergonomics “in some way, shape, or form.”

■ Reviewing OSHA’s penalty structure. Specifically, OSHA’s Acting Administrator, Jordan Barab, has remarked that “the average serious penalty is now below $1,000” and “that doesn’t provide much of a disincentive.”

■ Increasing the speed of the standard-setting process, which has been described by Barab as “way too slow.”

■ Significant revisions to the Voluntary Protection Program in light of a recent Government Accountability Office report that concluded that the agency failed to sufficiently oversee the program.

■ Making unannounced inspections of up to 4,500 of the “most dangerous workplaces” in the country. The inspections will be conducted under OSHA’s 2009 site-specific targeting program, which includes sites that had injury and illness rates considerably higher than the national average.

■ Continuing the enforcement of combustible dust standards. In June 2009, OSHA announced that it had issued a total of 667 citations against companies in several Southern states for alleged worker safety violations during inspections for unsafe hazardous dust conditions. The most frequently cited were for violations of housekeeping, hazard communication, personal protective equipment, and electrical standards, and the general duty clause. OSHA intends to begin regulatory action on combustible dust, with an advance notice of proposed rulemaking scheduled to be issued by August 2009.

■ Monitoring and supporting legislation in furtherance of OSHA’s goals. Specifically, the proposed “Protecting America’s Workers Act” (H.R. 2067) would give the agency the authority to press criminal charges against negligent employers. Further, the proposed “Nurse and Health Care Worker Protection Act” (H.R. 2381) would require OSHA to promulgate a standard mandating the use of mechanical lifts by health care workers when moving patients. This legislation would require health care facilities to develop safe patient handling and injury prevention plans, establish data systems to track injury trends, establish systems for reporting instances in which patient handling equipment is not used, train nurses on safe patient handling, allow nurses to refuse work, and require the Secretary of Labor to conduct audits.

Ultimately, as noted above, employers should be aware of, and expect, an increase in regulatory and enforcement action by OSHA. To that end, it is more important than ever to remain vigilant with respect to workplace safety issues. Establishing strict safety guidelines, increased training, the formation of safety committees and awards to safety-conscious employees are only a few ways employers can minimize workplace injuries, and hopefully avoid a knock on the door from OSHA.

Sewage Facilities - Private Request

Chip Haws — Tue, 21 Jul 2009 14:56:02 -0500

In the recent case Carroll Township v. DEP, EHB Docket No. 2008-173-L (issued July 16, 2009) the Environmental Hearing Board (“EHB”) sustained a DEP Order to the Township relative to DEP’s grant of a private request. The property owner owned an approved lot in Carroll Township. The lot was not suitable for on-lot disposal, which was what the Township’s 537 Plan called for. The lot did not have suitable soils and had steep slopes.

The property owner filed a planning module with the Township seeking to install a Small Flow Treatment Facility (“SFTF”) which would be designed to treat the effluent and discharge it to a stream located on the property. The Township denied the planning module, stating that the proposed SFTF was not in accordance with the 537 Plan or the Township’s goal of limiting the use of SFTF’s to previously developed properties.

The Board determined that the Department had the burden of proof as the appeal from Carroll Township was relative to an order from the Department, directing the Township to approve the SFTF. The parties had disputed who had the burden of proof as there was no clear case law on the matter. The Department justified the issuance of the order to the Township on its finding that it had a mandatory obligation to approve a private request if a resident could show that a municipality's 537 Plan was inadequate. The Board found that the standard for granting a private request is whether, in the Department’s sound discretion, the 537 Plan fails to adequately provide for the Township’s sewage facilities needs. Here the 537 Plan was inadequate to meet the property owner’s needs. There was no dispute that the lot was a valid existing lot, that the lot was not suitable for on-lot treatment and disposal and that there is nothing conceptually wrong with the use of SFTFs. Here the failure of the plan to address the lot owner’s needs trumps the Township’s stated goal of limiting the use of SFTFs to replacement systems.

IDEA reimbursement for private special-education

Whitney Krosse — Mon, 13 Jul 2009 10:58:36 -0500

Most parents of children with disabilities will regale you of stories of their on-going battle with their child’s school district in an attempting to secure the most meaningful and appropriate education to their children while at the same time keeping the child mainstreamed for social purposes. Most parents who face this battle quickly become versed in the alphabetical soup of special education lingo including FAPE - a free appropriate public education, which is guaranteed by IDEA - the Congressional Individuals with Disabilities Education Act. And of course the nature in which such an education is obtained under an IEP - Individualized Education Plan.

A recent United States Supreme Court has again brought IDEA to the forefront. In that the Supreme Court found in favor of a child with a disability in the June 22, 2009 decision Forest Grove School District v. T.A. (557 U.S. ___ (2009)). This dispute arose after the school district failed to establish an Individualized Education Plan (IEP) for a student with ADHD. As a result of the school district’s failure to act, the parents enrolled the child, at the advice of a private counselor, in a private school. The Court found that such action was appropriate as the school had failed to provide a FAPE as required by the IDEA. As a result, the school district was ordered to reimburse the child, who was substituted as a party when he reached the age of majority, for the expense incurred procuring the private school education.

This decision reinforces the authority the parents retain in seeking and procuring the most appropriate education for their child with disabilities, even if such a decision results in removing the child from public school. However, a decision to remove a child from a public school should not be treated lightly with an expectation that such reimbursement would be ordered by the court.

When is a Non-Modifiable Contract --- Modifiable?

Jim Adams — Fri, 10 Jul 2009 17:33:27 -0500

ADP supplied equipment and software to a client under a contract which was to last seven (7) years. The written agreement specified that it could not be modified “Except by a writing signed by both parties”. When the customer sought to terminate the contract and walk away from it early, ADP filed a lawsuit to collect for the full seven (7) years of the contract. The customer replied that ADP had orally agreed to modify the terms and shorten the length of the contract.

The agreement language clearly barred any modification of its terms that was not in writing. Therefore, the trial judge ruled for ADP. The Superior Court of Pennsylvania reversed. ADP v. Morrow Motors, Inc., 2009 Pa. Super. 52, 969 A 2d 1244 (March 23, 2009). In summary, the Superior Court ruled that even though an agreement says that it cannot be modified except in writing, that does not mean what it says. The contract still can be modified orally. The only difference is that, “An oral modification of a written contract must be proved by clear, precise, and convincing evidence.” Moreover, the Court pointed out that the same law applied in New Jersey. The client will have the opportunity to prove in court that ADP did orally agree to modify their contract --- despite the clear contract language barring an oral agreement.

How can this be explained? Perhaps, the lesson to be learned may be simply that courts do not like to allow parties to mislead each other in their relationships. Even where it appears that the clear language is on your side, you often need some element of fairness to support your position as well.