BSCR Firm News/Blogs Feed Aug 2019 00:00:00 -0800firmwise of Lost Wages Awards Under the FELA: the Illinois Appellate Court Applies Loos v. BNSF Aug 2019Illinois Law Blog<p>In <i>Munoz v. Norfolk Southern Railway Company</i>, 2018 IL App (1<sup>st</sup>) 171009 (<i>Munoz I</i>), Plaintiff Munoz sued his railroad employer under the FELA for an on-duty personal injury. A jury awarded Munoz a large sum attributed to past and future lost wages.&nbsp;After the verdict, the railroad moved for a setoff, claiming Munoz owed taxes on the lost wages award under the Railroad Retirement Tax Act (RRTA).&nbsp;Munoz argued that the award of lost wages should be treated the same as personal injury awards that are not subject to income taxes.&nbsp;</p> <p>The trial court denied the railroad&rsquo;s motion, relying on the Missouri Supreme Court&rsquo;s opinion in <i>Mickey v. BNSF Railway Co., </i>437 S.W. 2d 207 (Mo. banc 2014).&nbsp;In <i>Mickey</i>, the Missouri Supreme Court held that, like the exclusion for personal injury awards under Internal Revenue Code &sect; 104(a)(2), an FELA lost wages award does not constitute income.&nbsp;Therefore, lost wages do not qualify as taxable compensation under the RRTA.</p> <p>The railroad appealed, arguing that the plain language of the RRTA, when read in conjunction with the Railroad Retirement Act, supports a finding that an FELA lost wages award is compensation subject to withholding taxes.&nbsp;The Illinois Appellate Court disagreed and affirmed the trial court.&nbsp;The Appellate Court found that the RRTA defines &ldquo;compensation&rdquo; as money paid to an employee for &ldquo;services rendered&rdquo; and lost wages cannot be paid to an employee for &ldquo;services rendered&rdquo;.</p> <p>Shortly thereafter, the U.S. Supreme Court considered the same issue in <i>BNSF Railway Co. v. Loos</i>, 129 S. Ct. 893 (2019), and held that FELA lost wages awards are compensation subject to taxation.&nbsp;The Illinois Supreme Court then directed the Appellate Court to vacate its initial judgment in <i>Munoz I </i>and consider the effect of the <i>Loos</i> case.&nbsp;Upon reconsideration, the Appellate Court concluded that Munoz&rsquo;s lost wages award was taxable compensation under the RRTA.&nbsp;<i>Munoz v. Norfolk Southern Railway Company</i>, 2019 IL App (1<sup>st</sup>) 171009-B (<i>Munoz II</i>).</p> <p>The <i>Munoz II</i> &nbsp;Court observed that in <i>Loos</i> the Supreme Court looked to the Social Security Act (SSA) and the Federal Insurance Contributions Act (FICA) for guidance as to the meaning of &ldquo;compensation.&rdquo; &nbsp;The Supreme Court found that the RRTA&rsquo;s definition of compensation was &ldquo;materially indistinguishable&rdquo; from FICA&rsquo;s definition of &ldquo;wages&rdquo;, to include remuneration for &ldquo;any service, of whatever nature, performed . . . by an employee.&rdquo;</p> <p>Previous Supreme Court cases held that &ldquo;wages&rdquo; under the SSA and FICA included awards of backpay and severance payments. &nbsp;These cases held that such awards represented pay for active service, in addition to pay for periods of <i>absence </i>from active service. &nbsp;As a result, the Supreme Court held that &ldquo;compensation&rdquo; under the RRTA can encompass pay for periods of <i>absence </i>from active service, as long as the remuneration in question &ldquo;stems from the employer-employee relationship.&rdquo;</p> <p>The Supreme Court found that damages for lost wages awarded under the FELA &ldquo;fit comfortably&rdquo; within these parameters.&nbsp;Wage loss damages compensate an employee for time during which he or she is &ldquo;wrongfully separated&rdquo; from employment, and this is akin to an award of back pay.&nbsp;An award of back pay that compensates an employee for wrongful discharge constitutes wages under the SSA, even though the wages were awarded because of the employer&rsquo;s wrongdoing. &nbsp;Based on this reasoning, &ldquo;there should be no dispositive difference between a payment voluntarily made and one required by law.&rdquo;</p> <p>The <i>Munoz II</i> Court reiterated the distinction between personal injury damages that are not taxable under the Internal Revenue Code with FELA lost wage awards.&nbsp;Personal injury damages are excluded from &ldquo;gross income&rdquo; by the Code.&nbsp;And, &ldquo;gross income&rdquo; cannot be conflated with &ldquo;compensation&rdquo; under the RRTA, which Congress treated as discrete tax bases.</p> <p><b>CONCLUSION</b></p> <p>The Illinois Appellate Court is likely the first of many courts that will apply the <i>Loos</i> decision and find that an award of lost wages in an FELA case is subject to taxation.&nbsp;The resolution of the split on this issue will have practical ramifications in FELA litigation, including modification of jury instructions and, potentially, attempts to allocate settlement proceeds to sources other than lost wages.<br /> <br /> <br /> <em>* Kelly M. &ldquo;Koki&rdquo; Sabat&eacute;s, Summer Law Clerk, assisted in the research and drafting of this post. Sabat&eacute;s is a 3L student at the University of Missouri-Columbia.</em></p> Best Lawyers in America (2020 Edition) Recognizes Fourteen Baker Sterchi Lawyers Aug 2019Recognition<p>Fourteen Baker Sterchi Cowden &amp; Rice lawyers have been recognized in the 2020 edition of <i>The Best Lawyers in America&copy; </i>across numerous practice areas:&nbsp;</p> <p><b><u>Kansas City Metropolitan Area</u></b>&nbsp;</p> <p style="margin-left: 40px;"><strong>John W. Cowden</strong></p> <p style="margin-left: 80px;"><i>Aviation Law</i></p> <p style="margin-left: 80px;"><i>Bet-the-Company Litigation</i></p> <p style="margin-left: 80px;"><i>Commercial Litigation</i></p> <p style="margin-left: 80px;"><i>Mass Tort Litigation/Class Actions - Defendants</i></p> <p style="margin-left: 80px;"><i>Product Liability Litigation &ndash; Defendants</i>&nbsp;</p> <p style="margin-left: 40px;"><strong>James Scott Kreamer</strong></p> <p style="margin-left: 80px;"><i>Litigation &ndash; Construction</i>&nbsp;</p> <p style="margin-left: 40px;"><strong>Michael C. McMullen</strong></p> <p style="margin-left: 80px;"><i>Product Liability Litigation - Defendants</i>&nbsp;</p> <p style="margin-left: 40px;"><strong>Thomas E. Rice</strong></p> <p style="margin-left: 80px;"><i>Insurance Litigation<br /> <br /> Mass Tort Litigation/Class Actions - Defendants&nbsp;<br /> </i></p> <p style="margin-left: 80px;"><i> Product Liability Litigation - Defendants&nbsp;</i></p> <p style="margin-left: 40px;"><strong>James T. Seigfreid</strong></p> <p style="margin-left: 80px;"><i>Mass Tort Litigation / Class Actions &ndash; Defendants</i>&nbsp;</p> <p style="margin-left: 40px;"><strong>Thomas N. Sterchi</strong></p> <p style="margin-left: 80px;"><i>Commercial Litigation</i></p> <p style="margin-left: 80px;"><i>Mass Tort Litigation / Class Actions &ndash; Defendants</i></p> <p style="margin-left: 80px;"><i>Product Liability Litigation &ndash; Defendants</i></p> <p style="margin-left: 40px;"><strong>Kara Trouslot Stubbs</strong></p> <p style="margin-left: 80px;"><i>Product Liability Litigation &ndash; Defendants</i></p> <p><b><u>St. Louis Metropolitan Area</u></b>&nbsp;</p> <p style="margin-left: 40px;"><strong>Peter B. Hoffman</strong></p> <p style="margin-left: 80px;"><i>Personal Injury Litigation &ndash; Defendants</i></p> <p style="margin-left: 80px;"><i>Products Liability Litigation &ndash; Defendants</i></p> <p style="margin-left: 40px;"><strong>Michael B. Hunter</strong></p> <p style="margin-left: 80px;"><i>Commercial Litigation</i></p> <p style="margin-left: 80px;"><i>Personal Injury Litigation - Defendants</i>&nbsp;</p> <p style="margin-left: 40px;"><strong>John P. Lord</strong></p> <p style="margin-left: 80px;"><i>Railroad Law</i>&nbsp;</p> <p style="margin-left: 40px;"><strong>John F. Mahon, Jr.</strong></p> <p style="margin-left: 80px;"><i>Insurance Law</i></p> <p style="margin-left: 80px;"><i>Personal Injury Litigation - Defendants</i></p> <p style="margin-left: 80px;"><i>Product Liability Litigation - Defendants</i>&nbsp;</p> <p style="margin-left: 40px;"><strong>Steven P. Sanders</strong></p> <p style="margin-left: 80px;"><i>Commercial Litigation</i></p> <p style="margin-left: 80px;"><i>Personal Injury Litigation - Defendants</i></p> <p style="margin-left: 80px;"><i>Product Liability Litigation - Defendants</i>&nbsp;</p> <p style="margin-left: 40px;"><strong>Paul N. Venker</strong></p> <p style="margin-left: 80px;"><i>Litigation - Labor and Employment</i></p> <p style="margin-left: 80px;"><i>Medical Malpractice Law - Defendants</i></p> <p style="margin-left: 80px;"><i>Personal Injury Litigation - Defendants</i>&nbsp;</p> <p style="margin-left: 40px;"><strong>Theodore J. Williams, Jr.</strong></p> <p style="margin-left: 80px;"><i>Personal Injury Litigation - Defendants</i></p> <p style="margin-left: 80px;"><i>Railroad Law</i></p> <p>The annual&nbsp;<i>Best Lawyer</i>s&reg; rankings are based on an exhaustive peer-review evaluation. Included lawyers are recognized by geographic region and practice area(s), and inclusion is an indication that an attorney is well respected by his or her peers for professional success.&nbsp;</p> Sterchi Cowden & Rice Welcomes Haley Stevenson in KC Aug 2019Firm News<p>Baker Sterchi Cowden &amp; Rice welcomes Haley Stevenson to the firm&rsquo;s Kansas City office. Stevenson concentrates her practice in civil defense litigation with an emphasis in the areas of premises liability, products liability, and personal injury for the retail and trucking industries.</p> <p>Prior to joining Baker Sterchi, Stevenson was an associate at a Kansas City-area civil defense firm, and served as an Assistant Prosecuting Attorney in Jackson County, Missouri. She clerked for the Western District of Missouri Court of Appeals and for the Hon. James F. Kanatzar, Circuit Court of Jackson County, Missouri.</p> <p>Stevenson earned her undergraduate degree from Stephens College and her Juris Doctor from the University of Missouri &ndash; Columbia. While in law school, she served as an intern for a member of Congress in Washington, D.C., and the Department of Education Office for Civil Rights.&nbsp;</p> Obesity Qualify as a Disability Under the ADA? – The Courts are Divided Aug 2019Employment & Labor Law Blog<p>The Americans with Disabilities Act (&ldquo;ADA&rdquo;) prohibits employers from discriminating against a qualified individual on the basis of a disability. In 2008, Congress amended the ADA, to ensure that the ADA&rsquo;s definition of disability was construed broadly. The amendment added a &ldquo;regarded as&rdquo; disabled component, meaning that applicants and employees who cannot prove that they have an actual disability within the meaning of the ADA may still be able to show that their employer regarded them as having such a disability. This broader reading provides obese plaintiffs a greater opportunity for success in disability discrimination claims; however, this amendment has created differences in interpretation regarding the extent to which obesity is considered a disability under the ADA.<br /> <u><br /> The Seventh Circuit is the Fourth Federal Appeals Court to Hold That Obesity, Alone, is Not a Protected Disability Under the ADA<b>.</b></u>&nbsp;</p> <p>On June 12, 2019, the Seventh Circuit Court of Appeals joined the Second, Sixth, and Eighth Circuits <a href=";Path=Y2019/D06-12/C:17-3508:J:Flaum:aut:T:fnOp:N:2354448:S:0">holding</a> obesity must be the result of an underlying physiological disorder to qualify as a disability under the ADA in the case of<i> Richardson v. Chicago Transit Authority</i>. In&nbsp;<i>Richardson </i>the plaintiff, a bus driver who weighed over 400 pounds took medical leave due to hypertension and influenza. After he resolved the medical issues and was deemed fit to return to work, his employer required him to take an assessment because the bus seats were not designed to accommodate drivers over 400 pounds.&nbsp;The assessment determined that the plaintiff could not make hand-over-hand turns, he simultaneously used both of his feet on the gas and brake pedals, and he rested his leg near the door handle. His employer transferred him because of safety concerns regarding his operation of the equipment in question. He sued under the ADA, claiming that he should be &ldquo;regarded as&rdquo; disabled due to his obesity. The Seventh Circuit affirmed summary judgment for the employer. The court determined that under the ADA, the plaintiff must allege that he suffers from a medical impairment, and that obesity is a physical characteristic -- not an impairment -- and should not be regarded as an impairment. &nbsp;</p> <p>The Second, Sixth, Eighth, and now Seventh Circuit Courts are applying what they consider a &ldquo;natural reading&rdquo; of the EEOC&rsquo;s interpretative guidance. This reading concludes that physical characteristics, such as obesity, that are not the result of a physiological disorder do not qualify as a disability under the ADA. The opinion in <i>Richardson</i> suggests that if claims for obesity without an underlying physiological condition are allowed, interpretation of what could be &ldquo;regarded as&rdquo; a disability would become overly broad and open the court to results that are inconsistent with the ADA&rsquo;s text and purpose, including potential claims for weight-based claims from individuals with weight slightly outside of a normal range without any physiological basis as the cause, and making the &ldquo;regarded as&rdquo; amendment a catch-all for discrimination based on appearance, size, and more, none of which are disabilities the ADA was designed to protect. &nbsp;<br /> <u><br /> What Are Other Jurisdictions Saying?</u></p> <p>In the First Circuit case of <i>Cook v. State of R.I., Dept. of Mental Health, Retardation, &amp; Hosps., </i>the First Circuit held that obesity, by itself, should be protected without evidence of an underlying physiological disease or disorder.&nbsp;The Court took the position that the issue is a question of fact for a jury to decide.</p> <p>Likewise, although the Fifth Circuit has not directly ruled on this issue, a case arising in the U.S. District Court for the Eastern District of Louisiana, a federal trial court within the Fifth Circuit, <i>EEOC v. Res. for Human Dev., Inc.</i>, held that severe obesity can be a disability under the ADA, without evidence of an underlying physiological disorder.&nbsp;</p> <p>Lastly, a 2018 Ninth Circuit case, <i>Taylor v.</i><i> Burlington N.R.R. Holdings, Inc.</i>, arising under Washington&rsquo;s state anti-discrimination law, involved a plaintiff who was rejected for a job because he was considered outside of the company&rsquo;s weight standards for the position. The Court certified to the Washington Supreme Court for guidance the question of under which circumstances obesity qualified as an impairment under the state law. Interestingly, although not arising under the ADA, the EEOC filed a brief in the case, arguing that weight is not an impairment when it is within the &ldquo;normal&rdquo; range and lacks a physiological cause, but may be an impairment when it is either outside the &ldquo;normal&rdquo; range or occurs as the result of a physiological disorder.&nbsp;The Ninth Circuit acknowledges that whether obesity is to be &ldquo;regarded as&rdquo; a disability under the ADA remains an open question in that jurisdiction.&nbsp;The Washington Supreme Court responded this year that obesity is an impairment under the Washington law.<br /> <u><br /> Guidance for the Future</u></p> <p>The Second, Sixth, Seventh, and Eighth Circuits &ldquo;natural reading&rdquo; of the EEOC&rsquo;s interpretative guidance rejects the EEOC&rsquo;s stance that obesity should be &ldquo;regarded as&rdquo; a disability. The <i>Richardson </i>opinion makes clear that a court can reject a federal agency&rsquo;s interpretation when they feel that deference to the agency is inconsistent with the regulation. However, employers should proceed cautiously when taking adverse action against an employee due to obesity and should ensure compliance with the law in their particular jurisdiction. The scope of obesity as a disability is divided amongst circuits and remains a question of fact in others, and the ADA may still protect an employee if there is evidence that an underlying physiological condition causes the employees obesity.&nbsp;<br /> <br /> <br /> <em>* Jasmine Riddick, Summer Law Clerk, assisted in the research and drafting of this post. Riddick is a rising 2L student at Emory University in Atlanta, Georgia.&nbsp;</em></p> Joins Long, Strange Legal Trip of a Used Car Dealer's Legacy in Missouri Law Aug 2019Missouri Law Blog<p>In 2008, Chad Franklin became a party to several lawsuits related to the &ldquo;Drive for Life&rdquo; promotion at his used car dealership, Chad Franklin National Auto Sales North, LLC. A full explanation of the details of the &ldquo;Drive for Life&rdquo; promotion can be found within a previous BSCR blog post <a href=";an=33412&amp;stylesheet=blog&amp;p=5258">here</a>. At the time, Franklin was insured by Universal Underwriters Ins. Co. (&ldquo;Universal&rdquo;). &nbsp;Universal denied defense and coverage for the claims. &nbsp;Franklin filed suit for wrongful denial of coverage for the &ldquo;Drive for Life&rdquo; claims which were eventually settled in 2010 for $900,000.&nbsp;This $900,000 settlement would eventually trigger another round of litigation.&nbsp;</p> <p>Soon thereafter, Lewellen filed suit against Franklin alleging fraudulent misrepresentation and violations of the MMPA, resulting in a 2012 &nbsp;award of $25,000 in actual damages and $1 million in punitive damages against Chad individually for his fraudulent misrepresentation, and $25,000 in actual damages and $500,000 in punitive damages against Chad Franklin National Auto Sales North, LLC for a violation of the MMPA. Lewellen was also awarded attorneys&rsquo; fees totaling $82,810. In 2013, Lewellen sued Universal and Franklin, alleging that the $900,000 settlement between Universal and Franklin was fraudulent.&nbsp;&nbsp;The Clay County Circuit Court entered the following in that action, which were appealed to the Western District:&nbsp;</p> <ul> <li>Denial of insurance coverage on the Lewellen&rsquo;s claim that Franklin committed fraudulent misrepresentation in the sale of a vehicle;</li> <li>Awarding insurance coverage under Lewellen&rsquo;s policy with Universal for the actual and punitive damages on the Lewellen&rsquo;s MMPA claim against Franklin;</li> <li>Summary judgment in favor of Universal on Lewellen&rsquo;s claims that the settlement agreement was a civil conspiracy to commit a fraudulent transfer and violated the MMPA;</li> <li>Denial of Lewellen&rsquo;s claim for tortious interference with a business expectancy;</li> <li>Striking Franklin&rsquo;s pleadings after several alleged discovery violations and entering default judgment on Lewellen&rsquo;s fraudulent transfer and MMPA claims against him.</li> </ul> <p>After Franklin&rsquo;s pleadings were stricken, a jury awarded Lewellen $266,370in actual damages and $450,000 in punitive damages on each of her two claims. The court merged the actual damages on the two claims but granted the total amount of punitive damages and awarded Lewellen $189,060 in attorneys&rsquo; fees.</p> <p>1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>The Court of Appeals upheld the denial of insurance coverage for Lewellen&rsquo;s claim that Franklin committed fraudulent misrepresentation in the sale of a vehicle.</u></p> <p>Lewellen contended the court erred in denying insurance coverage for the damages awarded on her fraudulent misrepresentation claim against Franklin. The Western District appellate court disagreed, and found that the policy&rsquo;s exclusion of dishonest and fraudulent acts was valid, rejecting Lewellen&rsquo;s contention that the language was ambiguous. The court also held that the definition of &ldquo;occurrence&rdquo; in Franklin&rsquo;s Universal policy did not provide insurance coverage for damages on Lewellen&rsquo;s fraudulent misrepresentation claim.</p> <p>2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>The Court of Appeals reversed the finding of insurance coverage under Lewellen&rsquo;s policy with Universal for the actual and punitive damages on the Lewellen&rsquo;s MMPA claim against Franklin. </u></p> <p>Universal argued on appeal that the trial court erred in finding Franklin&rsquo;s policy covered Lewellen&rsquo;s MMPA claim, asserting that the fraud exception and the policy definition of &ldquo;occurrence&rdquo; noted above should preclude coverage. &nbsp;Lewellen argued that not only did Franklin&rsquo;s policy afford coverage to her MMPA claim, but the coverage of that claim triggered the concurrent proximate cause rule granting coverage to her extinguished fraudulent misrepresentation claim.</p> <p>The appellate court first turned to the policy definition of &ldquo;loss&rdquo; which was defined as &ldquo;all sums the INSURED legally must pay as DAMAGES because of INJURY to which this insurance applies caused by an OCCURRENCE.&rdquo;&nbsp;The court held that the conduct underlying Lewellen&rsquo;s fraudulent misrepresentation and MMPA claim was the same conduct.&nbsp;Because the Court had already determined that Franklin&rsquo;s actions were intentional and, therefore, not an &ldquo;occurrence&rdquo; under the policy, it found the same for the MMPA claims.&nbsp;The Court reversed summary judgment in Lewellen&rsquo;s favor and denied coverage for the MMPA claims.&nbsp;In reaching this decision, the Court found that the concurrent proximate cause rule did not apply to Lewellen&rsquo;s claims.</p> <p>3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>The Court of Appeals affirmed summary judgment in favor of Universal on Lewellen&rsquo;s claims that the settlement agreement was a civil conspiracy to commit a fraudulent transfer and violated the MMPA.</u></p> <p>Lewellen contended the trial court erred in granting Universal&rsquo;s motion for summary judgment on her claims that Universal&rsquo;s settlement agreement with Franklin amounted to a civil conspiracy to commit a fraudulent transfer with Franklin.&nbsp;In granting summary judgment in Universal&rsquo;s favor, the trial court noted that the &ldquo;[f]acts that may cause the bad faith settlement payments to Tiffany Franklin to appear suspicious (or even if arguably fraudulent) do not offset&rdquo; the common law requirement that without a lien, a mere general creditor does not have a sufficient right or interest in his debtor&rsquo;s property to give him standing to maintain a suit against a third person converting the debtor&rsquo;s property with the intent to defraud the debtor's creditors. Lewellen argued that the Missouri Uniform Fraudulent Transfer Act (&ldquo;UFTA&rdquo;) removed the common law rule that a lien was a condition precedent for standing to maintain a lawsuit against a third party.</p> <p>After a lengthy discussion of the language of the UFTA&nbsp;and analysis of opinions rendered in other jurisdictions on the issue, the Court adopted &nbsp;the majority viewpoint that absent a proper lien, a claim of civil conspiracy against a third party cannot be maintained under the UFTA.</p> <p>4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>The Court of Appeals affirmed denial of Lewellen&rsquo;s claim against Universal for tortious interference with a business expectancy. </u></p> <p>Lewellen argued that the circuit court erred in granting Universal&rsquo;s motion for summary judgment on her claim that Universal tortiously interfered with a business expectancy. The appellate court affirmed the trial court&rsquo;s finding that there was no authority for the proposition that a plaintiff in a lawsuit possesses &ldquo;a valid business expectancy&rdquo; in the future collection of a judgment either before or after a judgment is entered.&nbsp;</p> <p>5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>The Court of Appeals upheld the trial court&rsquo;s entry of default judgment against Franklin after several alleged discovery violations.</u></p> <p>Franklin claimed that striking his pleadings as a discovery sanction was inappropriate because Lewellen was not prejudiced by his failure to appear at his scheduled deposition, which the appellate court rejected. The Court of Appeals noted that even with threats of sanctions, Franklin still failed to make appearances and it was not until later that his counsel learned that he was in a rehabilitation center.&nbsp;Additionally, Franklin claimed that the circuit court abused its discretion by improperly considering and taking judicial notice of his discovery violations in other cases. The court of appeals found that the circuit court had not its discretion because the other cases were related, and even consolidated, with the current case at issue. Furthermore, the court reasoned that Franklin was an experienced businessman who was &ldquo;no stranger&rdquo; to the legal system, and who knew or should have known of the dire consequences of disappearing, without notice, during pretrial proceedings.</p> <p>6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>The Court of Appeals reversed the jury&rsquo;s award of punitive damages.</u></p> <p>Franklin argued that the trial court committed instructional error by providing a damage instruction and verdict director that removed the threshold finding of outrageousness for an award of punitive damages. &nbsp;The Court of Appeals agreed, holding that the modification of 10.01 removing the requirement that the jury find that Franklin&rsquo;s conduct was outrageous was &ldquo;unnecessary and improper&rdquo; and materially affected the merits and the outcome of the case. The appellate court also agreed with Franklin that the trial court erred in the exclusion of evidence as to the nature and structure of the settlement with Universal.&nbsp;&nbsp;The case was remanded for a new determination of punitive damages.<br /> <br /> <i><a href=" ">Lewellen v. Universal Underwriters Insurance Company et al</a></i>., WD81171.<br /> <br /> <em>* Kelly M. &ldquo;Koki&rdquo; Sabat&eacute;s, Summer Law Clerk, assisted in the research and drafting of this post.&nbsp;Sabat&eacute;s is a&nbsp;rising 3L student at the University of Missouri-Columbia.</em></p> That Missouri is Accepting Marijuana-related Business Licensure Applications, What is the Plan for the Other Green Stuff? Aug 2019Financial Services Law Blog<p>From now until August 17, 2019, Missouri entities may apply for a license to cultivate, dispense, manufacture, test, and transport marijuana, pursuant to last year&rsquo;s passage of Amendment 2, permitting marijuana use for serious medical conditions. A cloudy haze remains, however, over how financial institutions doing business with marijuana-related businesses (&ldquo;MRBs&rdquo;) will be governed.</p> <p>As most are aware, while cannabis is now legal in some form or fashion in more than 30 states as well as D.C., cannabis manufacture and use is still prohibited by federal law. Consequently, handling of proceeds from MRBs is considered money laundering, and financial institutions are required to submit Suspicious Activity Reports (&ldquo;SARs&rdquo;) with FinCEN when certain red flags are raised in relation to suspected cannabis business.</p> <p>The SAFE Banking Act of 2019, <a href="">H.R. 1595</a>, would provide a safe harbor for financial institutions handling MRB money while the legality of cannabis continues to be debated at the federal level. More specifically, the SAFE Banking Act would prevent federal regulators from interfering with relationships between financial institutions and MRBs in states where cannabis is legal, and it would allow MRBs to access traditional banking services without threat of seizure or prosecution. The bill, if passed, would not change the status of cannabis as a Schedule 1 controlled substance.</p> <p>In recent weeks, several Missouri credit unions and banks have joined together to urge passage of the SAFE Banking Act, in anticipation of this month&rsquo;s open application process. Unfortunately, there is not much confidence that it will be passed.</p> So, how much money are we talking about? Last year, cannabis reportedly generated over $8 billion. The revenues are expected to triple over the next 5 years. Even though Missouri&rsquo;s share will be a fraction of anticipated revenues, that&rsquo;s still going to be a whole lot of green. Now, Missouri financial institutions and prospective MRBs will remain in the sticky situation of figuring out what to do with all of it. Charepoo Receives Missouri Lawyers Media 2019 Diversity & Inclusion Recognition Jul 2019Recognition<p>Baker Sterchi Cowden &amp; Rice Member Martha Charepoo has received Missouri Lawyers Media 2019 Diversity &amp; Inclusion recognition. This is the second year Missouri Lawyers Media has recognized attorneys, firms and organizations for efforts to advance diversity, inclusion and the dignity of all people in Missouri&rsquo;s legal profession and in communities in which exceptional legal work impacts justice for all.</p> <p>Charepoo is the Chair of Baker Sterchi&rsquo;s Diversity &amp; Inclusion Committee, where she has been leading the firm&rsquo;s efforts to better align with American Bar Association Resolution 113 to promote diversity in the legal profession, as well as working to attract and retain diverse talent, and provide diversity related programming and activities for the firm&rsquo;s attorneys and staff.</p> <p>&ldquo;To me, diversity and inclusion is about feeling at home wherever you go. In the legal profession, it&rsquo;s about creating an environment in which diverse legal professionals feel free to pursue and flourish in a legal career and diverse clients feel they have equal access to legal services. This means doing what it takes individually and as an organization to support real change at the level of culture so that the vision of unity in diversity can be realized in the way we practice law and consume legal services.&rdquo; said Charepoo.</p> <p>Charepoo is also a current Fellow of the Legal Counsel on Legal Diversity (LCLD).&nbsp;&nbsp; Founded in 2009, LCLD is an organization of more than 300 Members who serve as either general counsel of major corporations or managing partners of the nation's leading law firms, united by their commitment to creating a truly diverse legal profession.&nbsp;</p> <p>Earlier this year Charepoo was promoted to Member status at the firm. Located in the firm&rsquo;s St. Louis office, she focuses her practice on complex commercial litigation, fraud and unfair trade practices, insurance coverage, subrogation, insurance bad faith litigation, product liability defense, and general liability.&nbsp;</p> <p>Missouri Lawyers Media 2019 Diversity &amp; Inclusion honorees will be recognized at an event at the Sheraton Westport Chalet in St. Louis, Missouri on August 9.&nbsp;</p> States Supreme Court Holds Counterclaim Defendants May Not Remove Diverse Lawsuits Jul 2019Product Liability Law Blog<p>In <i>Home Depot U.S.A., Inc. v. Jackson</i>, 139 S.Ct. 1743 (May 28, 2019), the U.S. Supreme Court affirmed in a 5-4 <a href="">decision</a> authored by Justice Thomas that neither the general removal provision (28 U.S.C. &sect;1441(a)) nor the removal provision in the Class Action Fairness Act of 2005 (28 U.S. C. &sect;1453(b)) permits a third-party counterclaim defendant to remove a class-action from state to federal court.</p> <p>Citibank filed a debt-collection action against George Jackson alleging he was liable for charges he incurred on a Home Depot credit card. In response, Jackson filed a counterclaim against Citibank and third-party class-action claims against Home Depot U.S.A. and Carolina Water Systems. Jackson alleged that Home Depot and Carolina Water induced homeowners to buy water treatment systems at inflated prices and engaged in unlawful referral sales and deceptive and unfair trade practices. Jackson also alleged that Citibank was jointly and severally liable for the conduct of Home Depot and Carolina Water and that his obligations under the sale were null and void. After Citibank dismissed its claims against Jackson, Home Depot removed the case to federal court under the Class Action Fairness Act (&ldquo;CAFA&rdquo;). Jackson moved to remand, arguing that precedent barred removal by a third-party/additional counter-defendant like Home Depot.</p> <p>The District Court remanded and the Fourth Circuit affirmed, relying on some almost-80 year old precedent that the general removal provision (&sect;1441(a)) did not allow Home Depot as a third-party defendant to remove the class-action claims; and concluding that CAFA&rsquo;s removal provision (&sect;1453(b)) likewise did not allow removal. The Supreme Court affirmed.</p> <p>The general removal statute, 28 U.S.C. &sect;1441(a), provides that &ldquo;any civil action&rdquo; over which a federal court would have original jurisdiction may be removed to federal court by &ldquo;the defendant or the defendants.&rdquo; Similarly, CAFA provides that a &ldquo;class action&rdquo; may be removed to federal court by &ldquo;any defendant without the consent of all defendants.&rdquo; 28 U.S.C. &sect;1453(b).</p> <p>Home Depot argued that because a third-party counterclaim defendant is a &ldquo;defendant&rdquo; to the claim against it, it may remove pursuant to &sect;1441(a). The Supreme Court disagreed based on the structure of the statute and precedent. When determining whether a district court has original jurisdiction over a civil action, it must evaluate whether that action could have been brought originally in federal court, either because it raises claims arising under federal law or because it falls within the court&rsquo;s diversity jurisdiction. The Court noted that the presence of a counterclaim is irrelevant to whether the district court has &ldquo;original jurisdiction&rdquo; over the civil action because the &ldquo;civil action&rdquo; of which the district court must have original jurisdiction is the action as defined by the plaintiff&rsquo;s complaint and the &ldquo;defendant&rdquo; to that action is the defendant to that complaint, not a party named in a counterclaim. Further, the Court noted that Congress did not intend for the phrase &ldquo;the defendant or the defendants&rdquo; in &sect;1441(a) to include third-party counterclaim defendants because the Federal Rules of Civil Procedure differentiate between third-party defendants, counterclaim defendants, and defendants. Additionally, in other removal provisions, Congress clearly extended the reach of the statute to include parties other than the original defendant (See &sect;1452(a) and &sect;&sect;1454(a) and (b)), whereas &sect;1441(a) does not so clearly extend its reach. Section 1441(a) limits removal to &ldquo;the defendant or the defendants&rdquo; in a civil action over which the district courts have original jurisdiction. Section 1441(a), therefore, does not permit removal by any counterclaim defendant, including parties brought into the suit for the first time by a counterclaim.</p> <p>Home Depot also argued that it could remove under &sect;1453(b) because of the different wording of that statute. It argued that although &sect;1441(a) permits removal only by &ldquo;the defendant or the defendants&rdquo; in a &ldquo;civil action,&rdquo; &sect;1453(b) permits removal by &ldquo;any defendant&rdquo; to a &ldquo;class action.&rdquo; The Court disagreed, holding that there was no indication that this language does anything more than alter the general rule that a civil action may not be removed on the basis of diversity jurisdiction &ldquo;if any of the &hellip; defendants is a citizen of the State in which such action is brought.&rdquo; The Court found that the two clauses in &sect;1453(b) that use the term &ldquo;any defendant&rdquo; simply clarify that certain limitations on removal do not limit removal under that section. The Court specifically found held that neither alters the limitation on who can remove, which suggests that Congress intended to leave that limit in place.</p> <p>The Court also referenced and reaffirmed its holding in <i>Shamrock Oil &amp; Gas Corp. v. Sheets,</i> 313 U.S. 100 (1941), which held that an original plaintiff may not remove a counterclaim against it. The Court found that this decades-old holding applies equally to third-party counterclaim defendants.</p> <p>Justice Alito wrote a lengthy dissenting opinion (joined by Justices Roberts, Gorsuch, and Kavanaugh), arguing that a &ldquo;defendant&rdquo; is a &lsquo;person sued in a civil proceeding&rsquo; and that the majority&rsquo;s decision leaves third-party defendants unprotected under &sect;1441 and CAFA. He thus asserted that the majority opinion reads an irrational distinction into the removal statutes.<br /> <br /> As noted by the dissent, this inability of a third-party defendant to remove raises concerns about out-of-state bias, the inability to take advantage of federal procedure rules, and the inability to use multidistrict litigation procedure.</p> a Long, Strange Trip It's Been: Illinois Supreme Court Upholds Decision That Res Judicata Does Not Apply to Involuntary Dismissal of Multiple Prior Complaints Spanning Ten Years Jul 2019Illinois Law Blog<p>Plaintiff Gerald Ward originally sued Decatur Memorial Hospital in 2009 alleging medical malpractice in the treatment of his brother who developed a post-surgery bed sore that became infected. Plaintiff alleged that his brother died from complications associated with a bacterial infection approximately one month after the Hospital discharged him.</p> <p>Plaintiff initially filed a nine-count complaint against the Hospital, Decatur Memorial Hospital Home Health Services, and unknown employees of the Hospital.&nbsp;The trial court granted the Hospital&rsquo;s Motion to Dismiss the majority of the counts but gave Plaintiff permission to refile.&nbsp;Plaintiff then filed first and second amended complaints.&nbsp;The court again dismissed both but with permission to refile.&nbsp;After plaintiff filed a third amended complaint, the Hospital filed responsive pleadings and the parties continued with discovery towards trial.&nbsp;</p> <p>In 2015, nearly four years later and only twenty days before the scheduled trial, the Hospital learned that the plaintiff intended to call a rebuttal expert not previously disclosed.&nbsp;The Hospital moved to bar the newly disclosed rebuttal expert, arguing that plaintiff had ample time during the six-year pendency of the case to obtain and properly disclose experts.&nbsp;Before the trial court ruled on the motion to bar, plaintiff moved for leave to file a fourth amended complaint to &ldquo;more correctly and succinctly describe the alleged negligence of defendant&rsquo;s nurses as a result of facts developed throughout discovery.&rdquo;</p> <p>Taking the motions together, the trial court granted the Hospital&rsquo;s motion to bar the proposed rebuttal expert witness and denied plaintiff&rsquo;s motion for leave to file a fourth amended complaint.&nbsp;The court cited the age of the case and noted that the allegations in the third amended complaint were substantially different from those in the proposed fourth amended complaint. &nbsp;Plaintiff then voluntarily dismissed the action.</p> <p>Four months later, plaintiff refiled the action and asserted nearly identical allegations as those set forth in the disallowed fourth amended complaint in the prior action.&nbsp;The Hospital moved to bar plaintiff from disclosing witnesses who had been barred in the previous case and to limit other witnesses to the opinions they gave in the initial action, arguing that plaintiff violated Illinois Supreme Court Rule 219(e) by using the dismissal and refiling to avoid having to comply with the previous court&rsquo;s order.&nbsp;The trial court partially granted the Hospital&rsquo;s motion and limited the opinions of witnesses to those provided in the prior case, but denied the Hospital&rsquo;s request to bar the rebuttal witnesses.&nbsp;</p> <p>The Hospital then moved for summary judgment on the basis of <i>res judicata</i>, arguing that the trial court had dismissed &ldquo;numerous counts of various iterations&rdquo; of plaintiff&rsquo;s complaint in the prior action and that he elected not to replead the counts.&nbsp;The Hospital asserted those dismissals constituted final adjudications on the merits as the complaints had been dismissed because of legal impediments, such that it was entitled to summary judgment on the basis of <i>res judicata</i>.&nbsp;</p> <p>Plaintiff opposed the motion, asserting that medical negligence was the sole cause of action in all the iterations of the complaint and no final judgment had been entered in the first action.&nbsp;The trial court ultimately granted the Hospital&rsquo;s motion for summary judgment based on <i>res judicata</i> after initially denying the motion.</p> <p>On appeal, the Fourth District Appellate Court reversed the trial court&rsquo;s grant of summary judgment.&nbsp;It concluded that &ldquo;by granting the plaintiff permission to file an amended complaint, the trial court vacated any suggestion of &lsquo;with prejudice&rsquo; in its dismissal of individual counts of the original complaint.&rdquo; &nbsp;The appellate court further observed that the trial court had permitted the plaintiff to amend &ldquo;over and over again, all the way to the third amended complaint&hellip;which remained pending and completely unadjudicated at the time of the voluntary dismissal.&rdquo;</p> <p>The Illinois Supreme Court <a href="">affirmed</a> the decision of the appellate court, concluding that <i>res judicata</i> was inapplicable and did not prohibit plaintiff&rsquo;s refiled lawsuit because there had not been a final judgment on the merits.&nbsp;Each previous dismissal had been dismissals without prejudice and with permission given to refile.&nbsp;As such, the dismissals were not final, did not terminate the litigation, and did not firmly establish the parties&rsquo; rights.&nbsp;</p> <p>Despite affirming the decision, the Court criticized the &ldquo;tortured history of litigation&rdquo; and lack of urgency on the part of the parties and the trial judge to resolve the matter in a timely or efficient manner.&nbsp;Additionally, while conceding that a plaintiff has the absolute right to refile a dismissed complaint, the Court cited the admission made by plaintiff&rsquo;s counsel on the record that he voluntarily dismissed the initial action because of his disagreement with the trial court&rsquo;s rulings.&nbsp;Noting that Rule 219(e) &ldquo;strikes the delicate balance between preserving a plaintiff&rsquo;s absolute right to refile, while discouraging noncompliance with the trial court&rsquo;s orders,&rdquo; the Court commented that while the Rule does not change the existing law as to a plaintiff&rsquo;s right to seek a voluntary dismissal, &ldquo;this paragraph does clearly dictate that when a case is refiled, the court shall consider the prior litigation in determining what discovery will be permitted, and what witnesses and evidence may be barred.&rdquo;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p> <p>Thus, while the Supreme Court reaffirmed a plaintiff&rsquo;s absolute right to refile a dismissed complaint, the Court&rsquo;s dictum regarding the applicability of Rule 219(e) offers hope to litigants defending refiled actions regarding the potential for limiting the scope of evidence in the face of demonstrated noncompliance with prior orders.</p> and Kunkel-Haskins Selected as 2019 Unsung Legal Heroes Jul 2019Recognition<p>Baker Sterchi Cowden &amp; Rice staff members Ruth (Sissy) Russell and Ruth Kunkel-Haskins have been selected as Missouri Lawyers Media 2019 Unsung&nbsp;Legal Hero&nbsp;Award honorees, an award honoring legal support professionals who have consistently gone above and beyond the call of duty in supporting attorney efforts.</p> <p>This is the fourth year Missouri Lawyers Media has recognized behind the scene employees in several categories: Accounting, Firm Administration, Information Technology, Legal Marketing, Legal Secretary, Office Manager, and Paralegal. Russell was selected in the paralegal category and Kunkel-Haskins in the legal secretary category.</p> <p>Russell has worked as a paralegal in Baker Sterchi&rsquo;s Kansas City office for more than 20 years.&nbsp;One of the attorneys she works with commented, &ldquo;Sissy cannot be ruffled; she is an oasis of stability.&nbsp;Words cannot express the appreciation we have for Sissy&rsquo;s diligence, loyalty, and thoughtful input.&nbsp;She continues to be the glue that holds our team together, day after day, case after case, crisis after crisis.&rdquo;&nbsp;</p> <p>Kunkel-Haskins is a legal secretary in the firm&rsquo;s St. Louis office.&nbsp;In late-1970, and again in early 2000, she was among the &ldquo;founding&rdquo; staff of two newly established St. Louis area law firms.&nbsp;One of the attorneys Kunkel-Haskins works with stated, &ldquo;Over the past 38 years, Ruth has not only provided exceptional administrative support, but has been extremely helpful in ensuring that our clients are well served.&nbsp;She has always been responsible, reliable and hard-working.&nbsp;I cannot conceive of having practiced law without her and her invaluable support.&nbsp;We really are a partnership.&rdquo;&nbsp;</p> <p>Russell and Kunkel-Haskins join prior Baker Sterchi Unsung Legal Hero honorees Karen Griggs (2016) and Mary Hoffman (2018), both recognized in in the Firm Administrator category. <i>Missouri Lawyers Weekly</i> will recognize 2019 winners in an upcoming special section of the publication.</p>