U.S. Supreme Court Adopts “Nerve Center” Diversity Jurisdiction Test

April 1st, 2010

In Hertz Corp. v. Friend, 2010 U.S. LEXIS 1897 (Feb. 23, 2010), the United States Supreme Court finally resolved a split among the circuits on how to analyze where a corporation’s “principal place of business” is for purposes of diversity jurisdiction. The Court reversed a Ninth Circuit holding that Hertz Corporation was a citizen of California because of the amount of business it did in California compared to other states, including New Jersey, where Hertz claimed was its principal place of business. For example, Hertz operated 273 of its 1,606 car rental locations in California, 3.8 million of its 21 million annual rental transactions took place in California, and approximately 2,300 of its 11,230 full-time employees were located in California. Still, the Supreme Court rejected the Ninth Circuit’s “business activities” test and instead adopted the corporate “nerve center” standard used by numerous other Circuits. The Sixth Circuit, however, applied a “total activities” test, whereby a court had to consider a variety of factors, such as the location of the corporation’s nerve center, its administrative offices, its production facilities, and its employees. Gafford v. General Elec. Co., 997 F.2d 150, 163 (6th Cir. 1993). The U.S. Supreme Court concluded that since the headquarters, most of the executives, and the vast majority of the decision-making took place in New Jersey, that was Hertz’s principal place of business. In a unanimous decision the Supreme Court added much needed clarity on how to define a corporation’s so-called “nerve center”—which is now defined as the “the place where the corporation’s high-level officers direct, control, and coordinate the corporation’s activities.”


October 19th, 2009

Several Michigan State Representatives have taken steps to enact legislation to hold insurance companies “accountable” for perceived misdeeds.  State Representatives Vicki Barnett, Mike Simpson, Lisa Brown and Jon Switalski have proposed a bill providing for $1 million fines for insurance companies that “repeatedly deny and delay legitimate claims” and to charge “corporate leaders” who foster or encourage wrongful denial of claims with felony convictions.  For further information regarding their position, please see their website at www.stopinsurancedenial.com.

These legislators have taken the position that insurance companies benefit by “postponing and rejecting legitimate claims.”  They assert that insurance companies have a “set of tactics” that they use to delay or deny legitimate claims and make “gigantic profits.”

An extreme example involving an obviously sympathetic injured child has been used to justify the legislation.  Kecia Milliner, the mother of the injured 5-year old, appeared with representatives Barnett, Simpson and Switalski at a press conference on July 13, 2009, to illustrate and support the charges against insurance companies. In fairness, however, it is worth making the following observations:

  1. The child will have medical coverage for the rest of her life for all expenses incurred for reasonably necessary medical treatment and accommodations for the child’s care, recovery and rehabilitation.  Although it was suggested that Michigan is out of step with 46 states that have “protective” legislation, Michigan is the only state that requires insurance companies to pay lifetime benefits with no limit on the amounts paid.
  2. Michigan already has a statute that requires that insurance companies must pay a benefit or the child’s doctor’s bills within 30 days after it receives reasonable proof of the charge and relation to the accident.  An overdue payment requires the insurance carrier to pay a 12% per annum penalty.
  3. If Ms. Milliner retains to an attorney to pursue her claims, existing legislation requires that the attorney’s fee shall be charged against the insurance company in addition to any benefits recovered, including penalty interest, if the court finds that the insurer unreasonably refused to pay the claim or unreasonably delayed in making proper payment.  Despite this provision, the proponents of this legislation state “there is nothing to protect consumers from a wrongful denial.”

It is one thing to promote proposed legislation, encourage dialogue, and debate the need for specific legislation.  It is quite another to suggest that insurance companies are all out to cheat their policyholders.  Although it is fashionable to criticize the insurance industry, our firm’s experience has consistently been that claims are handled fairly, efficiently and expeditiously.  To suggest there is some type of corporate culture to defraud is wrong.

Should Your Company Hire National Trial Counsel?

October 19th, 2009

As product liability lawsuits continue to cut into slim margins of profit in recession based sales, many companies are looking for a solution.   Repeated lawsuits, even those without merit, are frequently rewarded by settlements that encourage rather than discourage further litigation.  Counsel for injured plaintiffs are well connected, effectively allowing them to spread news of settlements and judgments against particular companies, encourage other lawsuits, and share strengths and weaknesses of any case.  Defending these lawsuits, even frivolous ones, drain important resources, requiring efforts in responding to discovery, ensuring consistency across lawsuits, and mandating repeated training of defense attorneys who are frequently unfamiliar with the both the products and the industry.

In an effort to avoid the pitfalls that result from product liability lawsuits, there is a growing trend throughout the United States for companies to hire national trial counsel to represent all product liability suits, regardless of jurisdictions.  Aided by the allowance of case specific admissions allowing out of state counsel to defend product liability suits in each state, these companies have reaped the benefits of a consistent and orchestrated defense provided by attorneys experienced and specialized in a given field.  By hiring attorneys to handle all such litigation, these companies foster a long standing and mutually beneficial relationship aimed at not only discouraging future lawsuits, but also in reducing costs.

The companies selecting national counsel have quickly learned the benefits of such a relationship.  Not only do such programs provide a place to turn when legal questions arise, but they also provide company management with the peace of mind governed by trust that arises only through long term relationships.  These programs additionally help to alleviate drains on company resources since the need for repeated training is reduced or eliminated.  The programs also provide great benefits in the defense of cases.  Knowledgeable attorneys handling claims from the onset, provide manufacturers significant advantages in early stages of litigation because the defense counsel know the products and issue and can cut off many avenues of recovery.  In addition, the relationship ensures consistent responses to discovery nationwide, preventing sanctions from well connected plaintiff counsel who claim that the manufacturers have provided different answers to discovery in different jurisdictions.

National counsel can also discourage future claims.  Plaintiffs’ counsel are less likely to file suits against counsel when they understand that they will face experienced trial counsel who will not hesitate to try the case, will reduce recovery, and will require heavy investment by the counsel themselves.  Lower settlements and judgments, which usually coincide with national representation, also reduces the incentive to file or pursue claims.

Although some wonder at the costs, experience shows that long terms costs actually decrease.  Experienced counsel generally spend less time in learning the product and industry, and less time in the promulgation of discovery materials.  Experienced attorneys usually help to reduce drains on company resources, freeing time for more beneficial activities such as product development and sales.  Experienced attorneys may also help to lower values of cases, and reduce overall settlement and judgment figures.

Although these programs were once used only by the largest companies, they are no longer limited to large, multi-national corporations.  Smaller companies have found avenues for using the programs.  These companies, which frequently rely upon insurance companies for protection, are usually able to negotiate claims control, or obtain self insured retentions that provide the ability to choose counsel.  In some cases, insurance premiums are actually reduced due to the existence of a reliable and coordinated defense.   Further, attorneys are generally agreeable to tailoring programs to meet the specific needs of any given company.

As the information becomes more readily available through the continued growth of computerized, internet and wireless based growth in the legal profession, the use of national counsel programs may be the right solution for any company.


September 29th, 2009

In Bonkowski v Allstate Ins Co, 281 Mich App 154 (2008), the Michigan Court of Appeals held that evidence of what a healthcare agency would charge to provide similar care was not relevant to the issue of a reasonable charge for in-home care provided by a family member in a suit for attendant care expenses under the Michigan No-Fault Act.  The Court of Appeals based its ruling on testimony from plaintiff’s expert during cross-examination that the person actually providing the care for the agency would receive less than the agency rate, because the agency rate included a profit margin for the agency, and overhead costs such as workers’ compensation insurance, professional liability insurance, malpractice insurance, health insurance, disability insurance,  secretarial staff, rent, legal fees, accounting costs, and office supplies, many of which the family member providing the care to the plaintiff in the Bonkowski case did not receive.   While the Court of Appeals acknowledged that a fact-finder may consider the compensation paid to licensed or unlicensed healthcare “professionals” who provide similar services, the Court held that actual charges assessed by healthcare agencies in the business of providing such services would not be relevant and provide the finder of fact no assistance in determining reasonable compensation for the actual provider’s services.  Instead, according to the Court of Appeals, the focus should be on the compensation provided to the person providing the services, not the charge assessed by an agency that hires healthcare professionals to provide such services.  281 Mich App 165.  Unfortunately for the insurer in Bonkowski, the Court of Appeals held that the issue had not been properly preserved by its trial counsel.

In the wake of Bonkowski, the hourly wage paid to home health workers, as based on data from the Bureau of Labor Statistics, or similar indices, may be found to be admissible in evidence as illustrative of a reasonable charge for services provided in the home by family members or friends.  Borderland issues remain, however, including the employer’s cost of compensation of such individuals, which might include fringe benefits for an employee, workers’ compensation insurance, and other overhead which the court in Bonkowski found not to be relevant.

There remain other issues which may be instructive on the reasonable nature of charges for in-home care provided by family members, such as the family member’s other duties in the home performed while allegedly dedicated to the care of the patient, the issue of compensating a family member while he or she sleeps, and the issue of whether benefits are properly payable for time not dedicated to providing care to the injured party.

Alternative views of the evidence, including compensation at a set rate on a weekly or monthly basis, or the compensation paid in the marketplace to live-in care workers for activities such as personal assistance, medication reminders, meal preparation and companionship, may prove more realistic than an hourly charge, depending on the facts of the case.  Due to the  fact-intensive nature of these cases, assistance of counsel experienced in these issues is warranted, even in the claims stage.

Plaintiffs’ Bar Anticipates Possible Kreiner Change

September 16th, 2009

In a case which could possibly result in a reversal and/or modification of the Kreiner v. Fisher, 471 Mich 109 (204) case, the Michigan Supreme Court has now accepted for hearing the case McCormick vs. Carrier, Docket No. 136,738 COA 275888.  The Supreme Court’s Order was posted on the plaintiff’s bar website before it was posted by the Court.


In McCormick, a General Motors auto worker suffered a broken ankle when a coworker backed a truck over it.  The auto worker sustained two surgeries and continued to suffer some degree of ankle pain.  However, after the plaintiff returned to work, he drove his truck, continued to fish and golf and cared for himself without assistance.

At deposition, the plaintiff admitted that his life was “painful, but normal”.  Summary disposition was granted by Judith Fullerton in the Genesee Circuit Court, LC No. 06-083549-NI.  In a split, non published decision by the Court of Appeals, an Order was entered on March 25, 2008, affirming the lower court’s dismissal.  Of the panel, Whitbeck, P.J., Jansen, and Davis, J.J., Judge Davis dissented.  In his dissenting opinion Judge Davis stated his two reasons why the case should not have been disposed of by Motion for Summary Disposition.  First, he stated that the entire (emphasis added) “trajectory” of the plaintiff’s life must be considered.  He suggested that with the plaintiff’s medical condition, the plaintiff faced at least the possibility of future problems.

Second, Judge Davis opined that there was also evidence that the plaintiff’s life was not “normal”, based upon the findings of two doctors and plaintiff’s employer (after the plaintiff returned to work, his work duties were altered).

Ultimately, the initial application to the Supreme Court was denied through an Order dated October 22, 2008, with multiple Amicus briefing.

The Supreme Court’s calendar with regard to this matter is speculative at this time.  We would expect that this case will increase appellate filing by plaintiffs whose cases were dismissed upon Summary Disposition.

Sometimes Filing a Notice of Non-Party Fault Is a Faulty Choice

September 16th, 2009

Recently we defended a contractor in a personal injury lawsuit.  The plaintiff was at a local mall.  Our client had done some repair work in a common area, and had replaced the concrete floor after fixing a water main leak.  Another contractor was going to install terrazzo tile on top of the concrete.  A rubber-backed mat was placed over the transition area on the floor between the existing terrazzo tile and the concrete.  The plaintiff claimed that she slipped and fell because the mat was not taped to the floor.

Counsel for the manager of the mall filed a notice of non-party fault, identifying the entity hired to keep the common areas of the mall clean and the contractor.

That strategy may have appeared to be appropriate, however, it was a faulty decision in this instance.  The entity hired to keep the mall clean established that the rubber-backed mat was in fact owned by the defendant mall manager, and that the manager directed the clean up company as to the use of its mats.  Further, the agreement between the mall manager and the contractor specifically provided that the contractor would not provide mats.

After the notice of non-party was filed, the plaintiff amended her complaint, adding the contractor and the clean up company.  Discovery established that if liability existed, it was entirely the responsibility of the mall manager.  The court granted summary disposition for both the contractor and the clean up company.

The bottom line is that a knee-jerk reaction to attempt to pass liability on to other entities is not always the wisest course of action.


September 15th, 2009

Retaliation charges are the single most prolific type of charge over recent years as demonstrated by EEOC statistics.  From 1992 through 2008 the number of retaliation claims (all statutes) has nearly tripled from 11,096 in 1992 to 32,690 in 2008.  Over the same time period retaliation claims as a percentage of total claims more than doubled from 15% of the total claims filed to over 34% in 2008.  See U.S. Equal Employment Opportunity Commission Charge Statistics:  FY 1997 through FY 2008, http://www.eeoc.gov/stats/charges.html; Charge Statistics:  FY 1992 through FY 1996, http://www.eeoc.gov/stats/charges-a.html.  This disturbing trend may be difficult to explain entirely; however, two recent cases  illuminate how the claimants’ ability to establish a prima facie case is becoming increasingly facilitated.

In Crawford vs. Metropolitan Government of Nashville and Davidson County, Tennessee, 129 S.Ct. 846, 2009, the Supreme Court effectively expanded the class of individuals able to state a claim of retaliation in the Sixth Circuit from those who actually initiate a complaint of discriminatory conduct to include those individuals who simply identify discriminatory behavior while responding to an employer’s inquiry.

In 2001, Vickie Crawford, a long-time employee, provided a statement during her employer’s internal investigation as to alleged sexual harassment by Metropolitan’s employee relations director Hughes.  She was asked whether she had ever witnessed “inappropriate behavior” on the part of Hughes and told the investigator that he had, in fact, harassed her as well as other employees.  Metropolitan’s attorney concluded that there was, in fact, inappropriate and unprofessional behavior but not to the extent of Crawford’s allegations and no disciplinary action was taken.  In about a year subsequent to the involvement with the investigation Vickie Crawford was accused of embezzlement and drug use and was later suspended and ultimately terminated.  She filed a charge of discrimination with the EEOC alleging retaliation in June of 2003 and initiated the litigation upon receiving her right to sue.

Crawford’s claim was under Title VII of the Civil Rights Act of 1964 and claimed that Metropolitan was retaliating for her report of Hughes’ behavior in violation of 42 USC §2000 e-3(a) which makes it unlawful “for an employer to discriminate against any . . . employe[e]” who (1 “has opposed any practice made unlawful employment practice by this sub chapter) (opposition clause), or (2 “has made a charge, testified, assisted or participated in any manner in an investigation, proceeding, or hearing under this sub-chapter”) (participation clause).  The District Court dismissed her case summarily and the Sixth Circuit affirmed holding that the opposition clause demanded “active, consistent activities in opposition” and Crawford had not initiated any complaint prior to the investigation and the participation clause did not cover the internal investigation because it was not conducted pursuant to an EEOC charge but, rather, an internal complaint of another employee.

The Supreme Court reversed and remanded the case concluding that the word “opposed” goes beyond “active, consistent” behavior in the ordinary discourse, and may be used to speak of someone who has taken no action at all to advance a position beyond disclosing it.  The Court recognized that initiating or instigating a complaint are commonly understood to exemplify opposition but they do not set the limits of “opposing” activity.  Thus, a person can be afforded retaliation protection by responding to someone else’s questions during the course of an inquiry just as surely as by provoking discussion or filing her own complaint.

In Hamilton vs. General Electric Co. 556 F3d 428 (6th Cir. 2009) the temporal proximity of less than three (3) months between the employee’s filing of an EEOC complaint and his termination combined with his allegations that the employer “increased” scrutiny of his work after the EEOC complaint was filed established the causal nexus required for a prima facie case of retaliation.

Hamilton, a long-time employee of General Electric, had a history of heated confrontation with his plant managers and supervisors regarding absences, medical restrictions and work assignments that eventually led to his earlier termination.  With his union’s intervention he was re-instated upon signing a Last Chance Agreement which reinstated his job for his agreement that he would comply with all of GE’s rules and that if he violated any he would be subject to immediate termination.  He worked under the terms of the agreement for nearly a year before a dispute arose between him and his supervisor that led to his second termination.  He was again reinstated upon his union’s intervention but given a 30-day suspension.  During the period of his suspension he filed an age discrimination charge against GE with the EEOC.  Following filing the charge, he resumed working and alleged that his supervisors greatly intensified their scrutiny of his work and harassed him more than ever before.  Hamilton’s relationship with his employer during the months he was back at work was strained.  Some three (3) months after filing his charges an incident occurred the facts of which were hotly contested which led to Hamilton’s termination giving rise to the litigation.

In reversing the District Court’s summary judgment, the Sixth Circuit found “the fact that scrutiny allegedly increased is critical”.  It concluded that the temporal context (3 months following filing of the charges) coupled with the allegations of increased scrutiny and charges that GE was merely waiting for him to make a mistake to cover up their true intention not only constituted a prima facie showing of retaliation but also satisfied the very definition of pretext.  The Court seemingly overlooked or disregarded the fact that Hamilton had been terminated on multiple occasions in the year leading up to the filing of his EEOC charges, that he was subject to scrutiny as a result of the Last Chance Agreement and legitimate business reasons advanced by GE and rested entirely upon his allegations of increased scrutiny to reach their conclusion.

It is difficult to imagine how employers can protect themselves from potential retaliation claims.  Certainly they must become increasingly cautious in conducting investigations or disciplining troublesome employees prior to taking any adverse action.  Even assuming this extra burden employers may be unable to protect themselves fully from the ever increasing ease with which claimants can establish a prima facie case.


August 18th, 2009

It is not uncommon for attorneys involved in an injury or property damage claim to attend inspections with retained experts.  Such an inspection presents an opportunity for the attorney to gain knowledge of the “science” involved and to gain foundational knowledge as to the occurrence and potential causes.

It is important for the attorney to take this opportunity, usually one on one with a Ph.D., to ask sufficient questions so that the attorney can then explain the expert’s findings, opinions, observations and theories concerning causation to lay people who may later comprise a jury that will hear the case.

One of the most difficult tasks in litigation is explaining complex issues, facts and circumstances to a jury which, collectively, has had no experience in the area involved.

For instance, an expert inspection was recently undertaken of catalyst tubes that had been installed in a refinery’s hydrogen furnace.  Newly installed piping failed at the welds which resulted in a claim of defective workmanship.  The amount claimed for both repair costs and loss capacity was in the eight figures.

The attorney participating in the inspection took it upon himself to seek an explanation as to how the furnace operated, the purpose of the catalyst tubes, the reaction of the catalyst tubes to heating and cooling of the furnace and the forces placed on the newly welded piping during the heating and cooling process.

It was learned, through the course of the inspection, that the catalyst tubes attached to a header system which recirculated heated air and channeled hydrogen fuel.  The header system was suspended by counterweights.  As the catalyst tubes were heated they increased in length raising the header system by some 4 to 6 feet.  During the course of this expansion, the counterweights would lower and keep the suspended system in balance.

Upon inspection it was found that the counterweights were out of repair and immobilized and thus did not counterbalance the catalyst tubes as the tubes expanded.  The result was the placement of a bending force on the newly installed piping at the point of the failed welds.

This theory and explanation as advanced by the expert during the course of the inspection formed the foundation for discovery throughout the pendency of the lawsuit.  By “getting his hands dirty” and by asking questions (some of which were rather basic) the attorney was able to gain a sophisticated understanding of the operation and design of hydrogen furnaces for power plants and the specific causation dynamics related to the claimed failure.

Good advice to any attorney attending an inspection with an expert is to come back “knowing what the expert knows” and being able to explain “what happened” to the rest of us who have no scientific or engineering background.

Junk Science Checklist: Seven Factors Courts Must Consider in Michigan

August 18th, 2009

In Michigan, trial courts are required to consider seven factors in assessing the admissibility of expert testimony:

1. Whether the opinion and its basis have been subjected to scientific testing and replication.

2. Whether the opinion and its basis have been subjected to peer review publication.

3. The existence and maintenance of generally accepted standards governing the application and interpretation of a methodology or technique and whether the opinion and its basis are consistent with those standards.

4. The known or potential error rate of the opinion and its basis.

5. The degree to which the opinion and its basis are generally accepted within the relevant expert community.

6. Whether the basis for the opinion is reliable and whether experts in that field would rely on the same basis to reach the type of opinion being proffered.

7. Whether the opinion or methodology is relied upon by experts outside of the context of litigation.

MCL 600.2955(1). See also MRE 702.

Contractual Indemnity Revisited

August 18th, 2009

This April, the Michigan Supreme Court reconfirmed several principles of law in the area of contractual indemnity.  In the case of Zahn –vs- Kroger Co of Michigan, 483 Mich 34 (2009), Plaintiff was an employee of a carpentry subcontractor on a construction job renovating a grocery store.  He was injured when he fell from an allegedly unsafe scaffold while hanging drywall, and sued the general contractor, which filed a 3rd Party Complaint for indemnity against the subcontractor/employer.

The general contractor settled with the Plaintiff, and proceeded with a non-jury trial on the 3rd party claim.  The trial judge found the employer 80% at fault and the general contractor 20% at fault, and ordered the employer to indemnify the general for 80% of the settlement amount, pursuant to the subcontract requiring indemnity for

“all claims for bodily injury and property damage that may arise from the performance of the Subcontract work to the extent of the negligence attributed to such acts or omissions by Subcontractor, or anyone employed or contracted by Subcontractor for whose acts any of them may be liable”.

The Court of Appeals and the Supreme Court affirmed.

The employer argued that under the law of several liability, the injured employee’s claim against the general had been limited to the apportioned fault of the general, and had not included any liability of the employer.  Accordingly, to require the employer to indemnify the general at all, would constitute indemnity of the general for its own fault, and violate MCL §600.2956, which provides for several liability, not joint liability.

The Supreme Court disagreed, holding that the language of MCL 600.2956 limits its applicability to “an action based on tort or another legal theory seeking damages for personal injury, property damage, or wrongful death”, and does not apply to, or otherwise limit, a claim for contractual indemnity.

The Supreme Court specifically rejected an argument that the contractual indemnity clause was obsolete, unintended language, contained in an antiquated form contract, drafted before the abolition of joint liability.  The Supreme Court declared:

“We cannot assume that the parties in this case, given their equal bargaining power, agreed to a clause that has no meaning or that we should ignore it because the language was part of a form contract.”

Interestingly, the concept of apportioned indemnity was first recognized in Michigan in MSI Construction Managers, Inc –vs- Corvo Iron Works, Inc, 208 Mich App 340 (1995), in which Harvey Kruse successfully argued that the “to the extent” language, contained in a form contract, constituted a change from previous versions of the same form contract, and signified an intent to provide indemnification based on apportionment of fault between the general contractor and the subcontractor.

These cases show the importance of key language in all contracts, construction or otherwise, and the ability to analyze those contracts and argue for the correct interpretation.  Harvey Kruse has the experience and capability to protect our clients’ interests in these areas.