Supreme Court Ruling Delivers Victory for Students with Disabilities

In a unanimous decision, the U.S. Supreme Court paved a new route for students with disabilities to hold schools responsible—and now, recover damages—when a school fails to provide adequate educational accommodations. In Perez v. Sturgis Public Schools, the Court held that students with disabilities are not required to exhaust their administrative remedies under the Individuals with Disabilities Education Act (IDEA) when the plaintiff is also seeking monetary relief under the Americans with Disabilities Act (ADA) for prior discrimination or mistreatment by the school.

Miguel Luna Perez attended public school in Sturgis, Michigan from ages 9-20.  Speaking with reporters, Perez said that during his time in the Sturgis Public Schools, he received “some sign language,” but he wanted more. There was one other deaf student at his school. However, lacking resources and support, the two deaf students could not communicate with each other, much less the rest of the school. According to Perez, “nobody interpreted for me at Sturgis.”

Settling Perez’s IDEA claim, Sturgis schools agreed to send Perez to the Michigan School for the Deaf, where annual tuition exceeds $40,000, and pay for his post-secondary education so that Perez and his parents could learn sign language. The IDEA settlement resolved Perez’s needs moving forward but did nothing to address his prior mistreatment. To obtain compensation for past harm, lost income and damages for emotional distress, Perez sued under the ADA.

Both the ADA and the IDEA protect children with disabilities. Under the IDEA, students with disabilities can petition their school to enact reasonable, additional educational accommodations. But the IDEA does not permit recovery of money damages or remedy prior discrimination or mistreatment of a student with disabilities. Aside from the ADA, no such law provides relief to the nearly 7.5 million students with disabilities in the U.S. This was until Perez decided to challenge his school.

“The question [before the Court] is whether a plaintiff must exhaust administrative processes under IDEA that cannot supply what he seeks,” Justice Gorsuch wrote. “We answer in the negative.” Perez, who graduated from the Michigan School for the Deaf in 2020, said that he “learned so many new words and signs [and] learned construction.” Still, he said, “I wish I could have gone to college. I don’t have a job, but I want to have one. I want to make my own choices.”

Estate Planning is for Everyone

Who needs an estate plan? All people, including young adults, seniors, single people, and people with families, can benefit from an estate plan. While these groups may benefit differently from certain aspects of an estate plan, it is important that all people have a clear plan for their estate.

Estate plans typically include a testamentary instrument, such as a last will and testament, or a trust, and health and financial powers of attorney. What comprises a person’s estate plan can vary based on their specific needs and circumstances. Any estate plan should answer the following questions:

Who cares for you?

• Designating someone to serve as your financial and health power of attorney, and guardian and conservator, if necessary, ensures that someone of your own choosing makes decisions for you if you become incapacitated.  

Who cares for your children?

• Nominating a guardian, which is the protector of the person, and a conservator, which is the protector of financial resources, for your minor children or children with special needs assures that the courts know exactly who you choose to take care of your loved ones.

Who manages your estate once you have passed away?

• Nominating a personal representative or trustee to manage your affairs makes sure that someone you trust will manage your estate and follow your estate plan in accordance with your wishes.

Who receives your assets and how are those assets are received?

• Selecting the people or charities who will receive the gifts from your estate and determining whether those gifts are distributed right away or held for future distribution ensures specific life circumstances of each beneficiary of your estate are fully considered.

Most of these issues impact people regardless of age or wealth. Everyone must determine who will care for them and who will benefit from their assets once they have passed away. The goals of an estate plan are to reduce uncertainty, mitigate risks, and ensure the efficient transfer of assets to beneficiaries. Having a meaningful estate plan allows you to confidently answer the above questions and alleviate potential risks and uncertainties for your loved ones after your passing.

Mark Matulka assists people with estate planning and estate administration. Mark can be reached at (402) 397-2200 or matulka@eslaw.com.

Understanding Nebraska’s Medicaid Estate Recovery

An important part of estate planning is preparing for the recovery of any Medicaid assistance, especially if you or your spouse are over age 55 and have received any Medicaid benefits.   

Medicaid is a federal and state partnership that helps people with limited resources and income pay for health and long-term care costs. People over age 55 usually receive Medicaid funding for nursing facility services, home and community-based services, and related hospital and prescription drug services. 

There is a common misconception that once a person has exhausted their personal financial resources in paying for the cost of their health and long-term care, then Medicaid funding will continue paying for care at no cost to the person. While it is true that Medicaid will begin covering certain health expenses once a person meets asset and resource requirements, Medicaid funding is more of a loan, not a cost-free grant of funding. 

Because certain assets, such as a house, are disregarded when determining whether a person qualifies for Medicaid, federal and Nebraska law requires the Nebraska Department of Health and Human Services (DHHS) to recover any Medicaid expenses. The debt of Medicaid expenses arises during the recipient's lifetime; however, DHHS only seeks recovery after the recipient's death or the death of the recipient’s spouse. The outstanding debt is recovered from the former Medicaid recipient’s estate through a process known as Medicaid Estate Recovery. 

If a Medicaid recipient was 55 years of age or older, then their assets after death are subject to Medicaid Estate Recovery. Like with most rules, there are exceptions. First, DHHS cannot recover costs of Medicaid assistance provided to a recipient under the age of 55 unless the recipient permanently resided in a medical institution. Second, DHHS cannot recover costs if the deceased recipient is survived by a spouse, a child under 21, or a dependent regardless of age who is blind or permanently disabled. 

After a Medicaid recipient passes away, DHHS works with families, attorneys, and courts to recover funds for the Nebraska Medicaid Program.  In Nebraska, DHHS acts as a creditor with a claim against the assets or estate of a decedent; however, DHHS usually does not place liens on specific property for purposes of Medicaid Estate Recovery.  While a former Medicaid recipient’s assets and estate are subject to recovery, the recipient’s heirs may seek an exemption or reduction if recovery would create a hardship.  

Planning for Medicaid Estate Recovery is critical if you or your spouse are over the age of 55 and have received any Medicaid benefits.  If you have any questions about Medicaid Estate Recovery and how it may impact your estate plan, please reach out to any of the highly knowledgeable and experienced estate planning attorneys at Erickson | Sederstrom at (402) 397-2200.

Nebraska Contract and Judgment Interest Explained

In Becher v. Becher, a recent Nebraska Supreme Court opinion, the Court outlined the general rule for judgment interest and explained when courts may award judgment interest.  311 Neb. 1 (2022).  In sum, courts hearing equitable claims—which are claims seeking something other than money damages—may award or withhold interest as the court deems reasonable and just, except where a party is entitled to interest “as a matter of right.”  Id. at 16.  This raises the question: when is interest recoverable “as a matter of right,” and at what rate?   

Under Nebraska law, interest is generally recoverable “as a matter of right” in loan default and breach of contract claims. 

Loan default claims:  recoverable interest is usually outlined in the loan agreement.  A party may contract to borrow or loan money at any rate of interest not exceeding 16% per year.  Neb. Rev. Stat. § 45-101.03.  This limitation does not apply to loans to a corporation, partnership, LLC, or trust (or to a person or entity guaranteeing a loan to the same), or loans in excess of $25,000 payable to a single creditor.  A “fallback” interest rate of 6% per year applies where no interest rate is mentioned in the loan or contract.  § 45-102.

 Breach of contract claims: interest is divided into two categories: Pre-judgment interest and post-judgment interest.   

Pre-judgment interest accrues from the time a party breaches the contract until the date judgment is entered.  There are “three ways to recover pre-judgment interest, and none is preferred.”  Pre-judgment interest may be recovered on (a) liquidated claims, (b) unliquidated claims, and (c) liquidated or unliquidated breach of contract or quasi-contract claims.  Weyh v. Gottsch, 303 Neb. 280, 314 (2019). 

Liquidated claims—where there is no dispute as to the amount owed—interest is recoverable at the post-judgment interest rate set forth in § 45-103 (explained below).  § 45-103.02(2).  

Unliquidated claims—interest is recoverable if four conditions are met:  (1) a written offer must be made and mailed to defendant to allow judgment on the terms stated in the offer; (2) the offer must be made no less than ten (10) days prior to trial; (3) a copy of the offer and return receipt must be filed with the clerk of court where the action is pending; and (4) the offer is not accepted prior to trial or within thirty (30) days of the date the offer was made, whichever occurs first.  Neb. Rev. Stat. § 45-014.  When all four conditions are met, pre-judgment interest may be recovered at the post-judgment interest rate outlined in § 45-103 (explained below).  

Here’s the real kicker: Interest on liquidated or unliquidated breach of contract or quasi-contract claims is recoverable at a rate of 12% per year if the claim is (1) a claim on any instrument in writing (like a contract); (2) to settle an account from the date the balance is undisputed (when the breaching party agrees they owe the amount); (3) on unjust enrichment claims; or (4) on money owed and unreasonably withheld.  § 45-014. 

Post-judgment interest: Effective January 20, 2022, the statutory judgment interest rate in Nebraska is 2.223% per annum. As the name implies, post-judgment interest begins to accrue from the date judgment is entered and continues until the judgment amount, plus accrued interest, is paid in full. This rate is adjusted regularly by the Nebraska State Court Administrator to be “two percentage points above the bond investment yield” for 26-week United States Treasury Bills. § 45-103.

E|S Successful Before Nebraska Supreme Court In Construction Site Accident Case

In Porter v. Knife River, Inc., the Nebraska Supreme Court affirmed the district court for Thurston County’s grant of summary judgment to D.P. Sawyer, Inc., a traffic control and highway striping company. 310 Neb. 946 (2022).  Erickson | Sederstrom’s attorneys aided in the summary judgment and appeal process. 

In the case, the administrator of decedent’s estate sued D.P. Sawyer, along with several other construction contractors, alleging negligent maintenance of a construction site.  The administrator’s claim arose when an Omaha Tribal Police officer bypassed warning signals and road barricades along a highway closed for construction.  The officer then tragically collided with a large crane parked on the closed highway.  The administrator argued the contractors were liable for negligence because the crane was left on the highway without adequate illumination, barricades, or other traffic control, which allegedly caused decedent’s death. 

E|S attorneys argued defendants were entitled to summary judgment because the administrator failed to prove a prima facie case of negligence and that the decedent assumed the risk of harm involved when he bypassed the road barricades.  The Honorable John E. Samson, District Judge, agreed, granting summary judgment in favor of the defendants.  The administrator appealed.

The Nebraska Supreme Court affirmed the district court’s grant of summary judgment, determining that barricades placed at the termini of a closed highway need not absolutely prevent entrance to the construction area.  Highway contractors are not statutorily required to place additional signals at the termini of a closed highway notifying drivers that the highway utilizes dangerous machinery and may contain potential defects.  This is because warning signals and barricades at the termini thereof already give drivers notice that the highway is under construction and the condition of the highway itself shows that it is under various stages of completion. 

Accordingly, the Nebraska Supreme Court upheld the district court's order granting summary judgment because they offered evidence showing they exercised ordinary care under Nebraska law. 

Erickson | Sederstrom’s experienced litigation group has a long history of success in defending claims arising out of construction projects, vehicle accidents, and all types of injury accidents.  Ross M. Serena or E|S’s litigation attorneys can be reached at 402-397-2200.

Thanks to E|S law clerk Rob Toth for his assistance in preparing the above analysis!

Lingering Provisions of The CARES ACT That May Impact Iowa and Nebraska Landlords

In March of 2020 the Coronavirus Aid, Relief and Economic Securities Act (“CARES Act”) was signed into law. The moratorium thereunder originally had a sunset date of July 25, 2020. Congress chose not to extend this deadline, and when the CDC tried to do so by administrative order, the Supreme Court of the United States invalidated it. See Alabama Association of Realtors v. Department of Health and Human Services, 21A23 (Aug. 26, 2021). However, certain portions of the CARES Act did not include any such sunset dates and will continue to impact Nebraska and Iowa landlord until Congress legislatively puts an end to them.

Nebraska and Iowa Landlords should be advised that their normal pre-pandemic practices for recovery of unpaid rents and evictions based upon the same may now be affected by provisions of the CARES Act found in section 4024. If a tenant resides within any of the “covered property” defined under subsection 4024(2), then a landlord will need to provide a thirty (30) day notice before any writ of restitution can be executed and the tenant evicted. “[C]overed property” [under the CARES Act] means any property that—

(A) participates in—

(i) a covered housing program (as defined in section 41411(a) of the Violence Against Women Act of 1994 (34 U.S.C. 12 12491(a))); or

(ii) the rural housing voucher program under section 542 of the Housing Act of 1949 (42 U.S.C. 1490r); or

(B) has a—

(i) Federally backed mortgage loan; or

(ii) Federally backed multifamily mortgage loan.

See Public Law No. 116-136, § 4024(2). Even though it does not affect every landlord and tenant situation, this definition is broad enough to implicate a great number of them.

However, courts across Nebraska and Iowa have interpreted the application of these rules differently when “covered property” is implicated. Some allow for normal notices and cure periods for non-payment provided for by state statute (3 days in Iowa and 7 days in Nebraska; see Iowa Code Ann §562A.27; see also Neb.Rev.Stat. §76-1431), but then delay the issuance of a writ of restitution until thirty (30) days from the original notice, while others require actual service of a thirty (30) day notice for a landlord to avoid having to start the entire process over again. Therefore, it is important that Nebraska and Iowa Landlords obtain proper advice before instituting these actions in this current landscape in to avoid confusion, delay or added expense.

A “Verdict” is not a “Judgment" for Purposes of Nebraska's Post Judgment Interest Statute, and it is Error to Grant Post Judgment Interest Until Certifying the Final Judgment

The recent Nebraska Supreme Court case of VKGS v. Planet Bingo, et.al., 309 Neb. 950, ___ N.W.2d ___ (2021) addressed proper application of Nebraska’s post judgment interest statute and the propriety of bifurcating issues at trial.   

Planet Bingo, LLC, (Planet Bingo) owns an electronic gaming software called EPIC.  EPIC was developed in the late 1990’s by Planet Bingo’s wholly owned subsidiary, Melange Computer Services, Inc. (Melange).  VKGS, LLC, (VKGS) and Planet Bingo, competitors in the bingo hall gaming industry, sued each other for breach of contract.  Although they were competitors, Planet Bingo and VKGS maintained a contractual business relationship from approximately 2003 through 2012, which as of 2005 was protected by an extensive confidentiality provision drafted by VKGS.   

In 2011, Planet Bingo sued VKGS for breach of contract for VKGS’s misuse of Planet Bingo’s confidential information -- by taking confidential EPIC information to develop its own competing software program called OMNI. VKGS in turn alleged that Planet Bingo breached contractual obligations and tortiously interfered with business relations by using pricing information and disparagement to influence customers. Two separate jury trials ensued. 

A jury trial commenced in August 2018 on both parties’ claims.  About halfway through the trial VKGS attempted to offer a Canadian Patent application that contained some description of EPIC’s source code.  VKGS claimed that this public discourse of confidential information precluded Planet Bingo’s misuse of confidential information as a matter of law.   But VKGS did not have a certified copy of the patent application and failed to otherwise authenticate it at trial.  VKGS did not disclose the patent application as a trial exhibit.  The district court sustained Planet Bingo’s objections and did not receive the exhibit into evidence. 

Furthermore, the existence of the patent application raised issues about whether Planet Bingo could proceed with its case in chief.  Thus, VKGS moved to dismiss Planet Bingo’s misuse claim.  Because VKGS had not yet rested its case in chief, and because Planet Bingo had not yet presented evidence on its claims, the court instead bifurcated VKGS’s and Planet Bingo’s claims and proceeded on the VKGS claims only.  About a year later, in June 2019, Planet Bingo’s claims were tried to a separate jury.   

In the trial on VKGS’ claims, the jury found Planet Bingo liable for $558,405. In the second trial on Planet Bingo’s claims, the jury found VKGS liable for $2,990,000.  After the second trial, the court offset the verdicts and entered one judgment in Planet Bingo’s favor, but also awarded VKGS post judgment interest on its 2019 verdict while still offsetting VKGS’ award.   

VKGS appealed the court’s order bifurcating VKGS’ and Planet Bingo’s claims and also appealed the court’s decision to exclude the patent application from evidence in the first trial (the patent application was eventually received into evidence during the second trial of Planet Bingo’s claims).  Planet Bingo cross appealed claiming that the court erred in awarding VKGS post-judgment interest on its verdict because the “verdict” was not a judgment for purposes of the post-judgment intertest statute.  

As to the patent application, the Nebraska Supreme Court held that VKGS failed to authenticate the exhibit.  Also, in noting that authentication is a condition precedent to a document’s admission into evidence the court said  “Neb. Rev. Stat. § 27-901(1) (Reissue 2016) does not impose a high hurdle for authentication or identification of proffered evidence as a condition precedent to admissibility. ”  Instead, authentication “may be satisfied by testimony that a matter is what it is claimed to be, and proper authentication may also be attained by evidence of appearance, contents, substance, internal patterns, or other distinctive characteristics, taken in conjunction with circumstances, sufficient to support a finding that the matter in question is what it is claimed to be. ”  In fact, the Court noted that certified public records are self-authenticating under Neb. Rev. Stat. § 27-902(4) (Reissue 2016) but VKGS failed to even offer a certified copy of the application. 

As to the bifurcation issue, the Court held bifurcation of a trial may be appropriate where “separate proceedings will do justice, avoid prejudice, and further the convenience of the parties and the court.”   Additionally, the Court reaffirmed that trial courts have the inherent power over the general conduct of a trial and a decision to bifurcate will not be overturned absent an abuse of discretion.  The Court held that no abuse of discretion occurred because the unauthenticated patent application was not properly offered in VKGS’ case in chief because its contents were irrelevant to VKGS’ tortious interference claim.  Also, the potential effect of the application on Planet Bingo’s claims was a sufficient reason to bifurcate the trial. Thus, the Court dismissed VKGS’ appeal.  

As to post judgment interest, Court agreed with Planet Bingo that VKGS’ trial verdict was not a “judgment’ for purposes of post judgment interest and that the lower court erred in awarding VKGS post judgment interest.  Instead, the Court held that the two competing verdicts were required to be offset and interest could only accrue on the final judgement entered after the verdicts were offset.  Thus, the Court reversed the trial court’s award of post judgment interest on VKGS’ verdict and held “Final judgment in this case occurred after all of the parties’ claims were adjudicated and both jury verdicts were accepted by the district court. As post judgment interest accrues only on judgments, and [Neb. Rev. Stat.] § 25-1316 contemplates only one ‘judgment,’ the district court erred in awarding VKGS post judgment interest when interest had not begun to accrue on VKGS’ claim and Planet Bingo’s claim exceeded VKGS’ claim.”

Anticipated Changes for Landlords & Tenants Due to Covid-19

Considering the current state of affairs and the imminent expiration of Nebraska’s Temporary Residential Eviction Relief Executive Order, it is important for landlords and tenants to become informed of their duties and the potential for additional exposure to new claims on the horizon arising from circumstances surrounding COVID-19. This article is not meant to be an exhaustive discussion in that regard. Rather, I wish to provide an illustrative list of some of those duties and issues surrounding them which could be affected by the anticipated post-pandemic changes to the commercial real estate market.  

It is well founded in Nebraska law that landlords have a duty to mitigate damages following an abandonment, or any other breach of the lease which leads to a vacant unit in order to maximize their recovery of damages. See Hilliard v. Robertson, 253 Neb. 232, 570 N.W.2d 180 (1997). The satisfaction or not of this duty is fact dependent, but proof of the affirmative defense for breaching tenants does not currently require expert evidence, and even in cases where the landlord has erected marketing signage to relet the premises, Nebraska courts have held that such was insufficient to meet this common law duty. Id. In light of the expected shifts in the commercial real estate market due to the growth of implementing work-from-home strategies, and the eventual corrections likely to follow the sunset of governmental lending and grant programs, this duty and the issues tangential to it should be expected to be litigated frequently. Both landlords and tenants should pay close attention to that litigation as there are likely to be arguments which could alter the proof requirements as well as the duty itself in the coming months to account for a more volatile and shifting market space. 

Nebraska courts have also long held that commercial tenants have a duty to protect lawful entrants to the premises from foreseeable dangers in arrangement and use of his premises. Hansen v. First Westside Bank, 182 Neb. 664, 156 N.W.2d 790. Provided further, in some circumstances, liability for a patron’s injuries can even be extended to commercial landlords. See Reicheneker v. Seward, 203 Neb. 68, 277 N.W.2d 539 (1979). In particular, if a lease is not artfully crafted, or if a landlord fails to address issues that he is put on notice of by his tenant and which create an unreasonable risk of harm to patrons, then liability can be extended to the landlord as well as his tenant for injuries which occurred as a result of those issues. Id. But what does this mean regarding the potential for exposure to tenants and landlords with regard to claims based on contracting COVID-19?   

If landlords had no duty to protect their tenants or their tenant’s patrons, then they could save time and resources by demonstrating a hands-off management approach.  Alex J. Schnepf, A Covid-19 Heavyweight Bout Tenant Safety Versus Discrimination, 35 Prob. & Prop., 24, 25 (2021).  However, the absence of a duty to keep tenants safe is not a reality in many states because of the implied warranty of habitability.  Id.   

In Nebraska, the implied warranty of habitability creates a duty for landlords to maintain habitable conditions on their rental properties by ensuring the premises be safe for the health of the tenants.  For example, landlords must “do whatever is necessary, after written or actual notice, to put and keep the premises in a fit and habitable condition.”  Neb. Rev. Stat. Ann. § 76-1419 (West 2001).  The implied warranty of habitability and limited circumstances for the imputation of premises liability discussed above could theoretically create exposure for landlords who fail to reduce the spread of COVID-19 throughout their rental properties.  See Schnepf, Safety Versus Discrimination, supra; see also Reicheneker, Supra. 

It is foreseeable the assurances of the implied warranty of habitability and limited circumstances of imputation of premises liability may be extended to encompass protecting tenants and their patrons from spreading COVID-19 because the virus presents a direct threat to public health and safety.  It follows that an outbreak of the virus on rental properties could render a property uninhabitable and poses the real threat of substantial lawsuits amongst and against tenants and landlords alike.  What steps should landlords take to ensure the safety of their tenants and the habitability of their rental properties?   

Should landlords of commercial rental properties require their employees to receive vaccinations to mitigate the spread of COVID-19?  The Equal Employment Opportunity Commission states that employers may implicate vaccination policies as a qualification for employment.  The Occupational Safety and Health Administration suggests employers have the vaccine available to eligible employees, either at no or low cost, and supplemental information about the vaccines.  See ABA, COVID-19 Vaccines Prompt Different Questions for Employers and Employees (Feb. 20, 2021), available at https://www.americanbar.org/news/abanews/aba-news-archives/2021/02/covid-19-vaccines-prompt-different-questions-for-employers-and-e/. 

Who is exempt from an employee mandated vaccine?  Employers must engage in a process that considers reasonable accommodations for individuals with disability, those that are susceptible to the vaccine, or someone who has a religious objection.  If an employer is unable to make a reasonable accommodation to an employee, they should consider granting leave to the employee.  In doing so, employers should consider the following: Can the employee be granted a period of leave until the threat of COVID ceases?  Is the employee eligible for leave under the Family Medical Leave Act?  Does the employer have generally applicable workplace leave policies that could be used to allow the employee to take leave until the situation in the country changes?  Id.   

The impact of COVID-19 has created a less than favorable housing situation for tenants and landlords alike.  Nebraska’s Temporary Residential Eviction Relief Executive Order, acting as a moratorium on evictions, is set to expire on May 31, 2021.  Further, the Center for Disease Control’s eviction moratorium shall expire after June 30, 2021.  When these moratoriums lapse, an influx of evictions is likely because of COVID-19’s impact on employment, health, and the overall economy.  See Claire Corea, Tenants’ Right: The Law on Paper Versus the Law in Practice, 47 Rutgers L. Rec. 226, 254 (2020). Likewise, as the funds from governmental programs which have subsidized the market begin to run out, and as more companies continue to implement work-from-home strategies, it could reasonably be expected that the availability of replacement commercial tenants to fill those spaces would be less abundant than in recent years. Therefore, it is important for landlords and tenants alike to be aware of not only the market shifts, but also the changes in their duties and potential exposure to liability stemming from the resulting litigation.

Nebraska: A Second Amendment Sanctuary State

The Second Amendment of the Untied State’s Constitution reads, “A well regulated Militia, being necessary to the security of a free State, the right of the people to bear Arms, shall not be infringed.” According to the Pew Research Center, over 72 million Americans own a gun and approximately three-quarters of Americans consider their right to own a gun essential to their freedom.

Many gun owning Americans were concerned with President Biden’s April 07, 2021 announcement that his administration would not “wait for Congress” to draft new legislation regarding gun ownership. The Biden administration advised that it will order the Department of Justice to issue new proposed rules to stop the proliferation of guns assembled from kits, provide a clear definition for stabilizing devices used in target shooting pistols, and publish model “red flag” legislation for states.

In the wake of the presidential announcement, Nebraska Governor Pete Ricketts, issued a signed proclamation designating Nebraska as a “Second Amendment Sanctuary State.” That proclamation read:

WHEREAS, The Second Amendment to the U.S. Constitution Protects the right to keep and bear arms; and

WHEREAS, Article 1-1 of the Nebraska State Constitution guarantees “the right to keep and bear arms for security or defense of self, family, home, and others, and for lawful common defense, hunting, recreational use, and all other lawful purposes” and states that this right “shall not be denied or infringed by the state or any subdivision thereof;” and

WHEREAS, The State of Nebraska has protected the right of Nebraskans to open carry and conceal carry; and

WHEREAS, Nebraska will stand up against federal overreach and attempts to regulate gun ownership and use in the Good Life; and

WHEREAS, The White House and U.S. Congress have announced their intention to pursue measures that would infringe on the right to keep and bear arms; and

WHEREAS, A growing number of counties in Nebraska have declared themselves as “Second Amendment Sanctuary” counties; and

WHEREAS, Nebraska will continue to take any necessary step to defend our right to keep and bear arms.

NOW, THEREFORE, I Pete Ricketts, Governor of the State of Nebraska DO HERBY PROCLAIM the State of Nebraska is a

SECOND AMENDMENT SANCTUARY STATE

and I do hereby urge all citizens to take due note of the designation.

IN WITNESS WHEREOF, I have hereunto set my hand and cause the Great Seal of the State of Nebraska to be affixed this Thirteenth day of April, in the year of our Lord Two Thousand Twenty-One.

With so much attention on firearms and the importance of the Second Amendment to the United States Constitution, responsible gun owners and prospective gun owners need to be informed regarding their rights and the laws surrounding gun ownership and possession. There are currently an array of confusing and rapidly changing legal authorities affecting gun owners. For example, there are many hurdles that a hopeful gun owner must clear before becoming an actual gun owner such as background checks. Gun owners must also be familiar with the many laws setting forth restrictions on the ownership of both handguns and long guns, the laws related to when and how guns can be carried concealed, when and how guns can be carried in the open, and where guns are and are not permitted. Not being familiar with these laws can have severe consequences for gun owners. Those consequences can include criminal repercussions and loss of a gun owner’s right to own or possess a firearm in the future. Some prospective gun owners may have already lost their rights to own a gun and wish to regain that right through the proper channels but do not know how. And, finally, current gun owners may wish to protect the ownership of their firearms with devices known as “gun trusts” but do not know where to get started.

Many of these answers can be found in Nebraska Revised Statute Chapters 69 and Chapter 28. Those interested in purchasing a firearm, or having questions about firearm ownership or possession should not hesitate to review the legislative materials in these statutes or contact an attorney familiar with the subject. Erickson | Sederstrom has several attorneys with significant expertise regarding this area of the law.

The Acquired Immunity Doctrine – Will the Nebraska Supreme Court Take the Next Step and Adopt the Entire Doctrine?

The acquired immunity doctrine is an affirmative defense that may be available to state construction contractors that are sued by a third party for alleged construction plan design defects.  Here is the scenario: The Nebraska Department of Transportation (“Department”) contracts with a road contractor to remove and replace part of a state highway.  The Department designs the construction plans and requires the contractor to follow the plans as designed.  Part of the construction plans include a traffic control plan.  The traffic control plan complies with the Manual on Uniform Traffic Control Devices (“MUTCD”).  Traffic control is subcontracted to a traffic control manager.  The traffic control subcontractor has no discretion to deviate from the traffic control plan and must set up all traffic devices at the required locations as the Department orders. The subcontractor sets up the traffic devices as the traffic control plan requires.  

Subsequently, a third party is injured in the construction zone and alleges that additional or different traffic devices should have been used on the project.  The Department retains its sovereign immunity because: 1) the Department’s choice of devices was discretionary, and a matter of engineering judgment; and, 2) under Nebraska’s State Tort Claim Act, the Department retains its sovereign immunity for “Plans for Construction of or improvement to highways.” See Neb. Rev. Stat. §§ 81-8,219 (9) & (11) (Reissue 2014). Yet, the subcontractor is sued for the traffic plans’ alleged design defects even though the Department designed the plan and is immune from liability. Can the subcontractor raise the Department’s sovereign immunity as an affirmative defense?  The answer is “yes,” and the defense is called the “acquired immunity doctrine.”  

The acquired immunity doctrine “provides that a contractor who performs its work according to the terms of its contract with a governmental agency, and under the governmental agency’s direct supervision, is not liable for damages resulting from its performance.” Lopez v. Mendez, 432 F.3d 829, 833 (8th Cir. 2005) (citing Smith v. Rogers Group, Inc., 348 Ark. 241, 72 S.W.3d 450, 455 (2002)) (emphasis added). “Thus, if damages result from the contractor’s performance of a construction contract with the state, ‘and the damages result from something inherent in the design and specifications required by the public agency, the contractor is not liable unless he is negligent or guilty of a wrongful tort.’” Lopez, 432 F.3d at 833 (quoting Guerin Contractors, Inc. v. Reaves, 270 Ark. 710, 606 S.W.2d 143, 144 (1980)). “The purpose of the doctrine is to protect an ‘innocent contractor who has completely performed the work to the government’s plans and specifications.’” Lopez, (quoting Smith, 72 S.W.3d at 456).

The Nebraska Supreme Court has not yet adopted the acquired immunity doctrine.  But the Supreme Court has adopted the immunity’s fundamental concept. That is, the Supreme Court has said “where a construction contractor follows plans and specifications supplied by the owner which later prove to be defective or insufficient, [the contractor] is not responsible to the owner for loss or damage resulting therefrom as a consequence of the defectiveness or insufficiency of such plans and specifications.” Lindsay Mfg. Co. v. Universal Sur. Co., 246 Neb. 495, 506-07, 519 N.W.2d 530, 539-40 (1994); see also Langel Chevrolet-Cadillac, Inc. v. Midwest Bridge & Constr. Co., 213 Neb. 283, 287, 329 N.W.2d 97, 100-01 (1983) (citations omitted); Central Neb. Pub. Power & Irr. Dist. v. Tobin Quarries, Inc., 157 F.2d 482, 485-86 (8th Cir. 1946) (applying Nebraska law); State v. Commercial Cas. Ins. Co., 125 Neb. 43, 50, 248 N.W. 807, 808-09 (1933).

This is the acquired immunity doctrine. Furthermore, although the Nebraska’s State Tort Claims Act excludes independent contractors from the term “state agency,” “the acquired-immunity doctrine creates an exception to this rule.” See Neb. Rev. Stat. § 81-8,210(1); see also Lopez, 432 F.3d at 833. The reason for the exception “is to protect an ‘innocent contractor who has completely performed the work to the government’s plans and specifications.’” Lopez, 432 F.3d at 833 (quoting Smith, 72 S.W.3d at 456).  In fact, other jurisdictions with tort claims acts like Nebraska’s Act and that have the same “state agency” exclusion for contractors as Nebraska’s Act, still have adopted the acquired immunity doctrine to protect innocent contractors that follow the state’s construction plans. See id. at 833-34 (discussing the acquired immunity doctrine under Arkansas law); see also McLain v. State, 563 N.W.2d 600, 605 (Iowa 1997); Fraker v. C.W. Matthews Contracting Co., Inc., 272 Ga. App. 807, 614 S.E.2d 94 (2005); Garrett Freightlines v. Bannock Paving Co., 112 Idaho 722, 731, 735 P.2d 1033, 1042 (1987).

For example, the Iowa State Tort Claims Act also excludes independent contractors from the term “state agency.” I.C.A § 669.2(5). But the Iowa Supreme Court nevertheless adopted the acquired immunity doctrine to protect its independent contractors from liability. Specifically, in McLain v. State, supra, the plaintiffs sued the State of Iowa, its general contractors, and a subcontractor working in an interstate construction zone. The plaintiffs claimed that the construction zone was unreasonably dangerous because the traffic warning signs failed to warn motorists of traffic congestion. McLain, 563 N.W.2d at 601. The district court granted the general contractor and subcontractor summary judgment under the acquired immunity doctrine and in affirming summary judgment, the Iowa Supreme Court held:

The rule is well established that a contractor for the State is not liable to a third party for damages if the contractor complies with the State’s plans and specifications and is not negligent in performing its work . . . . In other words, in those situations the contractor shares the same immunity as the State.

* * *

Here, the evidence in the record reflects that [the general contractors and subcontractor] complied with all State plans and specifications and did not perform their work in a negligent manner. Throughout the project, the State controlled all decisions regarding the placement and installation of the traffic control devices. [The subcontractor] installed the warning signs as it contracted to, and on the day of the accident, the signs were in their proper locations and in complete working order.

Id. at 605 (citations omitted).

The Iowa court also noted that monitoring the effectiveness of the signs was “part of the decision-making process of whether to install additional signs,” which was a decision retained by the State and immunized by statute. Id. The Iowa Supreme Court then held that “[b]ecause [the general contractors and the subcontractor] complied with the State’s contract specifications, we conclude as a matter of law that they may share immunity with the State . . . .” Id.

            Here, like McLain, the subcontractor in our scenario followed the traffic control plan and the traffic plan complied with the MUTCD.  Also, the third-party’s claim that the traffic control plan should have included different or additional traffic devices is a claim against the Department because the Department designed the Traffic Plan —not the subcontractor. The Department, however, is immune from liability because: 1) the traffic plan’s design was a matter of engineering judgment; and, 2) the traffic plan was part of the Project’s “Plans for Construction” for a highway improvement. Neb. Rev. Stat. §§ 81-8,219 (9) & (11). Thus, the subcontractor is cloaked in the Department’s sovereign immunity because it “complied with all State plans and specifications and did not perform their work in a negligent manner. [And] [t]hroughout the project, the Department controlled all decisions regarding the placement and installation of the traffic control devices.” McLain, 563 N.W.2d at 605.

            Now, we need the right case to be taken to the Nebraska Supreme Court.  And remember, in Nebraska you can now file an interlocutory appeal on an order denying summary judgment based on the assertion of sovereign immunity.  Neb. Rev. Stat. § 25-1902.  

Post-Loss Assignments of Benefits: An Easier Way for Contractors to Get Paid

Contractors face an endless stretch of legal and business hurdles on a daily basis. They have to deal with weather, safety, personnel, material acquisition, permits, and needy homeowners. But, getting paid on residential construction work covered by a homeowner’s insurance policy should not be one of those hurdles because there is an easier way for contractors to get paid.

When a homeowner suffers a loss covered by their insurance policy, they have the right to assign their insurance benefits to the contractor making the repairs to their home. By doing this, the homeowner authorizes the insurance company to make the contractor a co-payee for that loss.

In most states, the law permits contractors to ask homeowners to assign their post-loss benefits to the contractor for the work they bid. This allows the contractor to receive payment directly from the homeowner’s insurance company. And, most importantly, helps the contractor avoid those dreaded situations where a homeowner receives their insurance payout but refuses to pay their contractor for its work.

Contractors, however, must beware of the many pitfalls that they can fall into with these post-loss assignments of benefit agreements. Failure to follow laws designed to protect insured homeowners can lead to a contractor’s entire contract becoming voided.

For example, a post-loss assignment of benefits has to be a written agreement. That agreement must contain certain language as set forth by statute, and the contractor has to place the homeowner’s insurance on notice of the assignment within a certain number of days depending on the jurisdiction.

Contractors also have to be careful not take certain forbidden actions on behalf of the homeowner. Some states like Iowa forbid a contractor from negotiating with a homeowner’s insurance company on the homeowner’s behalf. Other states strictly forbid a residential contractor from offering rebates on their deductible as an incentive for choosing their construction company for their job. Mistakes like these can cause a court to find the residential contractor’s entire agreement is void and unenforceable.

Finally, post-loss assignment of benefits under an insurance policy must include specific language depending on the jurisdiction that the contract is contemplated. For example, in Nebraska, a contractor must include the following language in all caps and in 14 pt. font for its assignment to be proper:

YOU ARE AGREEING TO ASSIGN CERTAIN RIGHTS YOU HAVE UNDER YOUR INSURANCE POLICY. WITH AN ASSIGNMENT, THE RESIDENTIAL CONTRACTOR SHALL BE ENTITLED TO PURSUE ANY RIGHTS OR REMEDIES THAT YOU, THE INSURED HOMEOWNER, HAVE UNDER YOUR INSURANCE POLICY. PLEASE READ AND UNDERSTAND THIS DOCUMENT BEFORE SIGNING.

THE INSURER MAY ONLY PAY FOR THE COST TO REPAIR OR REPLACE DAMAGED PROPERTY CAUSED BY A COVERED PERIL, SUBJECT TO THE TERMS OF THE POLICY.

IT IS A VIOLATION OF THE INSURANCE LAWS OF NEBRASKA TO REBATE ANY PORTION OF AN INSURANCE DEDUCTIBLE AS AN INDUCEMENT TO THE INSURED TO ACCEPT A RESIDENTIAL CONTRACTOR'S PROPOSAL TO REPAIR DAMAGED PROPERTY. REBATE OF A DEDUCTIBLE INCLUDES GRANTING ANY ALLOWANCE OR OFFERING ANY DISCOUNT AGAINST THE FEES TO BE CHARGED FOR WORK TO BE PERFORMED OR PAYING THE INSURED HOMEOWNER THE DEDUCTIBLE AMOUNT SET FORTH IN THE INSURANCE POLICY.

THE INSURED HOMEOWNER IS PERSONALLY RESPONSIBLE FOR PAYMENT OF THE DEDUCTIBLE. THE INSURANCE FRAUD ACT AND NEBRASKA CRIMINAL STATUTES PROHIBIT THE INSURED HOMEOWNER FROM ACCEPTING FROM A RESIDENTIAL CONTRACTOR A REBATE OF THE DEDUCTIBLE OR OTHERWISE ACCEPTING ANY ALLOWANCE OR DISCOUNT FROM THE RESIDENTIAL CONTRACTOR TO COVER THE COST OF THE DEDUCTIBLE. VIOLATIONS MAY BE PUNISHABLE BY CIVIL OR CRIMINAL PENALTIES.

The contractor must have the homeowner sign and date below this language as well. Then, after the  post-loss assignment of benefits is executed, a residential contractor in Nebraska must provide a copy of the assignment to the homeowner’s insurance company within five business days.

By taking advantage of post-loss assignments of rights under an insurance policy, contractors can keep revenue streams open cand collections moving. And often times, these simple assignments can help a contractor avoid the headache of executing liens as well. Residential contractors, however, should remember that contracts can be tricky. Assignments like the one described above need to be properly incorporated into the contractor’s underlying contract and those contracts need to meet all necessary formalities under the law to be binding. Therefore, contractors should never hesitate to reach out to a construction lawyer who is familiar with construction contracts and litigation when they have questions about their contracts.

SCOTUS Holds that Homosexual and Transgender Persons are Protected from Adverse Employment Actions Under Title VII

The United States Supreme Court has handed down a landmark case solidifying the rights of homosexual and transgender individuals within the workplace in Bostock v. Clayton Cty. The Court held that all three of the employers in the underlying cases violated Title VII of the Civil Rights Act of 1964 when each of the employers fired employees shortly after those employee revealed that he or she were either homosexual or transgender. Proceeding on the assumption that the term “sex” as it is used in Title VII refers only to the biological distinction between male and female, the Court turned its focus to analyzing what Title VII says about “sex.”

Title VII says it is “unlawful . . . for an employer to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex, or national origin.” 42 U. S. C. §2000e-2(a)(1) (emphasis added). The Court stated that, “[i]n Title VII, Congress adopted broad language making it illegal for an employer to rely on an employee’s sex when deciding to fire that employee.” As such, the Court determined that it is a necessary consequence of Title VII of the Civil Rights Act that an employer who fires an individual merely for being gay or transgender defies the law.

Nebraska Supreme Court Draws a Fine Line Between Federal and State Arbitration Laws in Home Sales

On any given day, millions of Americans are entering into contracts both big and small. Some of these contracts represent the terms and conditions for a major life decision for those people, while other contracts represent transactions that no one would give a second thought to. For example, as you are reading this article there is likely someone signing their name to a contract for a mortgage on the home they plan to raise their children in. Meanwhile someone somewhere else is agreeing to the terms and conditions of a mobile app designed to super impose animated animals over their face in a selfie. Regardless of the seriousness of the contract, people are more often than not agreeing to arbitration clauses that they never read.

Most people do not even realize that they are agreeing to arbitration clauses that will keep them out of the courthouse when they enter into these contracts. Even more people do not realize that arbitration is governed by one of two sets of laws in most cases, and parties who are not carefully drafting those clauses might find them unenforceable. Recently, in a nasty dispute between a property management company and a home buyer, the Nebraska Supreme Court in Garlock v. 3DS Properties, L.L.C., considered whether an arbitration clause found in the contract for the sale of a home was governed by Nebraska arbitration law or federal arbitration law.

In Garlock, the Garlocks purchased a home from 3DS Properties. The Garlocks later sued 3DS Properties for damages they alleged were caused by serious problems in the home which 3DS Properties did not disclose as required by law. The Garlocks brought this lawsuit in state court, and 3DS Properties sought to have it removed from state court and taken to arbitration. Both the Garlocks and 3DS Properties disagreed on where the Garlock’s claim should be considered. The dispute lasted several years until it eventually landed in the Nebraska Supreme Court. That dispute highlighted two important distinctions that should always be considered by anyone entering into a contract with an arbitration clause in Nebraska.

ATTENTION TO DETAIL REALLY MATTERS

Because the Garlocks wanted their case to be heard in state court rather than in an arbitration court, they argued that the arbitration clause in the contract between them and 3DS Properties was unenforceable under Nebraska’s Uniform Arbitration Act. The Garlocks based this argument on the fact that the contract between them and 3DS Properties contained a clause above the signature line that read:

THIS CONTRACT CONTAINS AN ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.

The Garlocks reasoned that because this notice was not underlined it was not enforceable under Nebraska’s Uniform Arbitration Act. The Nebraska Uniform Arbitration Act requires that all contracts with binding arbitration clauses include the above notice which must be capitalized and underlined in order to be enforceable. Because this notice was not underlined the Nebraska Supreme Court reasoned that, standing alone, the arbitration clause in the contract between the Garlocks and 3DS Properties was unenforceable on its face under Nebraska law.

This one minor detail was missed by 3DS Properties in the drafting of its real estate sale contract and highlights the importance of utilizing a qualified attorney in the contract review process. 3DS Properties was not without a strong counterargument, however.

ARBITRATION MATTERS ARE GOVERNED BY BOTH STATE & FEDERAL LAWS

3DS Properties badly wanted to have this dispute heard in arbitration court. To do this, 3DS Properties had to counter the Garlock’s argument that the arbitration clause was unenforceable because it failed to have an all capitalized and underlined notice. Rather than accepting Nebraska law as the governing choice of law, 3DS Properties argued that the arbitration clause governed by federal arbitration law and therefore did not have to include an underlined notice.

This argument was based on the Nebraska Supreme Court’s holding in Wilczewski v. Charter West National Bank where the Court held that federal arbitration laws applied to all contracts formed in interstate commerce under Title 9 of the United States Code. In cases where federal arbitration laws apply, contracts do not have to meet the requirements under Nebraska’s Uniform Arbitration Act. In Wilczewski, the sale of a home under foreclosure contained an arbitration clause which the buyers argued was unenforceable under Nebraska’s Uniform Arbitration Act. There, the Court reasoned that the arbitration clause did not have to comply with Nebraska’s Uniform Arbitration Act because the sale of homes in foreclosure are done by banks who are integral parts of the stream of interstate commerce.

3DS Properties tried to harness this reasoning in their dispute against the Garlocks. The Nebraska Supreme Court, however, disagreed when they determined that the simple sale of a home, rather than a foreclosure done by a bank, was purely an intrastate activity rather than an interstate activity. In other words, contracts governing the sale of real estate in Nebraska which do not involve parties from other states or lenders from other states is considered an intrastate activity and must conform to the requirements of the Nebraska Uniform Arbitration Act for arbitration to be binding.

IMPORTANT TAKEAWAYS FROM THE GARLOCK CASE

First, the details really do matter. Whether you are drafting a contract, or you are agreeing to a contract someone else has drafted it is important to fully understand all terms, conditions, and laws that govern those terms and conditions. In the case of Garlock, the parties could have avoided thousands of dollars in expenses, and years of litigation by simply underlining a single sentence in their sale contract. Moreover, the parties could have saved a great deal of trouble by having a qualified attorney review their sales contract prior to its execution.

Second, the context of a contract can completely change the arbitration laws it is governed by. If you are a party who prefers arbitration over traditional litigation, it is imperative that you understand the context in which your contract is being executed. In Garlock, the parties were selling a home in a simple real estate transaction and therefore the arbitration laws of Nebraska applied to the formation of their contract. However, had these parties been using an out of state lender, or selling the property in a foreclosure, the federal arbitration laws would have applied to the formation of their contract.

If you are in the middle of trying to sort out the contents of an important contract, please do not go it alone unless you fully understand the legal ramifications of what you are drafting or agreeing to. If you have questions about contracts, the clauses in those contracts, or arbitration and arbitration clauses make sure you get in touch with a qualified attorney before it becomes a mess you cannot get out of.

Nebraska Legislature Considers Property Tax Relief Procedure for Property Owners Whose Property has been Damaged by a Natural Disaster

Lawmakers heard LB512, introduced by Senator Lou Ann Linehan, on April 9. The bill contains alterations in state tax law that were requested by the state Department of Revenue. The bill allows for a property owner to petition his or her county assessor for a reassessment of property value if the property was damaged or destroyed by a natural disaster. Senator Steve Erdman introduced an amendment, adopted 41-0, which would require the county assessor to report all real property destroyed by a fire or other natural disaster to the county board of equalization. The county board would then adjust the value. Senator Curt Friesen supported the amendment and stated that the amendment would not have a significant effect on a political subdivision tax revenue. Property owners who suffered significant losses in this year’s flooding should consider consulting with counsel to determine their options to reduce property tax liability.

Does a Small Business Lose Protection under the Iowa Civil Rights Act When It Incorporates?

In a case of first impression, the Iowa Supreme Court recently determined that a corporation cannot qualify for the family-member exemption under the Iowa Civil Rights Act. The Iowa Civil Rights Act prevents discriminatory employment practices and does not apply to “any employer who regularly employs less than four individuals.” Individuals who are members of the employer’s family are not counted as employees under this section.

            In Cote v. Derby Insurance Agency, Inc., the plaintiff filed suit pursuant to the Iowa Civil Rights Act, alleging sexual harassment. The employer, a corporation employed less than four employees, excluding family members, during the relevant time. In December 2015, the employer filed a motion for summary judgment, alleging that the Iowa Civil Rights Act did not apply because the employer regularly employed fewer than four individuals, not counting family members. The district court denied this motion, and the case was appealed. The Iowa Court of Appeals determined that “employer” in the statute is limited to “individuals”, and that the district court correctly denied the employer’s motion for summary judgment.

            After further appeal, the Iowa Supreme Court noted that the Iowa Civil Rights Act defines “employer” to include “every other person employing employees within the state”. “Person” can be defined as a corporation, unless the context otherwise requires. The court stated that the legislature, broadly intending to protect family-owned small businesses, may have intended to exclude from the Iowa Civil Rights Act all businesses, incorporated or not, with fewer than four nonfamily-member employees. However, in analyzing the ordinary meaning of the statutory language, the court concluded that a corporate employer has no family members as employees. Thus, a corporate employer cannot qualify for the family-member exemption under the Iowa Civil Rights Act and may be held liable for discriminatory employment practices if it otherwise meets the statutory requirements.

            This opinion affects many family-owned businesses. Although the Iowa legislature may choose to change the language in the Iowa Civil Rights Act to clearly include corporations in the exemption, small businesses should consider the protections it may be losing by operating as a corporation.

Nebraska Supreme Court Clarifies Duty Analysis in Negligence Cases

           The Nebraska Supreme Court recently clarified the test for determining whether a party owes a duty of reasonable care to another, a threshold requirement for cases dealing with anything from car accidents to malpractice. To establish negligence in Nebraska, a plaintiff must show that the defendant owed a duty of reasonable care, that the defendant failed to act reasonably, and that the defendant’s failure to act reasonably caused the plaintiff damages. Whether someone owes a duty of reasonable care to another is a question of law for a judge, and a case could be dismissed if the plaintiff cannot establish a duty.  In 2010, the Nebraska Supreme Court adopted a new test to determine whether a duty of reasonable care exists, opining that a person owes a duty to another if the person engaged in conduct that created a risk of physical harm to another.

            In Bell v. Grow With Me Childcare & Preschool, parents of a child tragically killed by his nanny alleged that the nanny’s former employers were at least partially responsible for his death. They alleged that the daycares knew the nanny was a danger to children at the daycare, but that the daycares failed to report the nanny’s behavior to the Nebraska Department of Health and Human Services. The daycares alleged that their duty of reasonable care did not extend to the plaintiffs, as they had never used the daycares services or contacted the daycares prior to filing suit. The lower court refused to dismiss the suit based on failure to meet the duty requirement, finding that “the alleged conduct of not reporting suspected child abuse created a risk of physical harm”.

            After the case was appealed, the Nebraska Supreme Court determined that this analysis was made in error. The court noted that engaging in “conduct that created a risk of physical harm to another” must be an affirmative act rather than passive inaction. This is true because, barring narrow circumstances, if a defendant has not acted in a way to create a risk of harm to another, the defendant is not required to act in a specified manner. The court further explained that, to determine whether a person engaged in conduct that created a risk of harm to another, it is helpful to ask whether that same risk of harm would have been present to another if the defendant had been absent.

            In this case, the court determined that the lower court erred in its duty analysis for numerous reasons. First, the plaintiffs’ allegation that the daycares failed to act was not an affirmative action, but was merely passive inaction that does not create a risk of harm. Second, any actions by the daycare prior to the time that the plaintiffs hired the nanny did not increase the risk of harm already posed by the nanny herself.

            The Nebraska Supreme Court’s opinion in this case is the first where the court fully explored what actions trigger a requirement to help others under the framework adopted in 2010. By opining that an actor must affirmatively act in order to create a duty, the Nebraska Supreme Court placed a necessary constraint on negligence cases that is consistent with prior case law. By being able to better identify who owes a duty to whom, Nebraskans can have a better understanding about potential risks stemming from everyday actions.

Inverse Condemnation Claims/Political Subdivision Tort Claims Act

I.         THE COURT OF APPEALS PUTS A FINER POINT ON THE FORESEEABILITY ELEMENT FOR INVERSE CONDEMNATION CLAIMS.

The case is Essink v. City of Gretna, 25 Neb. App. 53, 901 N.W.2d 466 (2017).  In that case, the plaintiffs sued the City of Gretna for inverse condemnation action and negligence as a result of two sanitary sewer backups.  These were the only two backups Plaintiffs experienced.  The inverse condemnation claim was tried to a jury.  The Court allowed the jury to consider general theories of negligence that it was foreseeable that backups were likely to occur somewhere within the City of Gretna's sewer system.

            The initial question in an inverse condemnation case is not whether the actions of the governmental entity are the proximate cause of the plaintiffs' damages.  Instead, the initial question is whether the governmental entity's actions constitute the taking or damaging of property for public use.  That is, it must first be determined whether the taking or damaging was occasioned by the governmental entity's exercise of its power of eminent domain.  Essink v. City of Gretna, 25 Neb. App. 53, 901 N.W.2d 466-474; citing Henderson v. City of Columbus, 285 Neb. 482, 827 N.W.2d 486 (2013).  In order to meet the initial threshold that the property has been taken or damaged for public use, it must be shown that there was an invasion of property rights that was intended or was the foreseeable result of authorized governmental action.  Id.

            On appeal, the Court of Appeals reversed the jury verdict and ordered the case remanded with directions to enter a directed verdict in the City's favor.  The Court found that general theories of negligence cannot be used to support a claim for inverse condemnation.  Instead, plaintiffs must prove that the backups were: 1) both frequent or recurring; and, 2) that the City knew or could have foreseen that damage would occur to plaintiffs' specific property.  Because plaintiffs failed to present evidence of frequent or recurring backups and failed to prove that the City knew that damage would occur to their specific property as a result of the backup, the Court of Appeals concluded that a directed verdict should have been entered.

II.        THE COURT OF APPEALS AFFIRMS THAT THE NOTICE REQUIREMENT UNDER THE POLITICAL SUBDIVISION TORT CLAIMS ACT IS NOT A MERE TECHNICALITY. 

            Under the Political Subdivision Tort Claims Act, no suit shall be commenced against any employee of a political subdivision for money on account of damage to or loss of property caused by any negligent or wrongful act or omission of the employee while acting in the scope of his or her office or employment unless a claim has been submitted in writing to the governing body of the political subdivision within one year after such claim occurred.  Neb. Rev. Stat. § 13‑920(1).  All claims must be in writing and set forth the time and place of the occurrence giving rise to the claim and such other facts pertinent to the claim as are known to the claimant.  Neb. Rev. Stat. § 13-905.  A written claim to the political subdivision must demand the satisfaction of an obligation.  Jessen v. Malhotra, Essink at 478 citing Jessen v. Malhotra 266 Neb. 393, 665 N.W.2d 586 (2003). 

            In Essink, the plaintiffs submitted their cleaning bills to the City Clerk's office and argued these bills were sufficient to meet the notice requirements under the Act.  But the bills did not demand the satisfaction of an obligation.  Also, there were no documents submitted with the cleaning bills.  The bills only showed the date the work was performed, the location of the work, the reason for the work and the specific amount for such work.  The bills were addressed to the plaintiffs indicating they were responsible for payment of the bills.  And, the bills only indicated that they were the result of water damage in the plaintiffs' home - there was no allegation that the City caused the water damage, no reference to the sewer backups and no indication as to why the City would be responsible for the bills.  The only reference to the City was a statement in the bills that indicated Plaintiffs would submit them to the City for payment.  The Court of Appeals concluded that the content of the bills did not satisfy the notice requirements under the Act.  It therefor reversed the trial court's finding that the cleaning bills constituted a claim and overturned the judgment in plaintiffs' favor on their negligence claim.

Department of Labor Clarifies Test for Determining Whether an Intern is an Employee under the FLSA

On January 5, the United States Department of Labor clarified that, going forward, it will use the “primary beneficiary” test a number of federal appellate courts use to determine whether interns are considered employees under the Fair Labor Standards Act. This decision was announced after the United States Court of Appeals for the Ninth Circuit, in December, became the fourth appellate court to reject the Department of Labor’s prior six-part test for the same topic.

Under the Department of Labor’s prior six-part test, an intern was considered an employee unless all the following factors were met:

1.       The internship is similar to training which would be given in an educational environment;

2.       The internship experience is for the benefit of the intern;

3.       The intern does not displace regular employees;

4.       The employer provides that the training derives of no immediate advantage from the activities of the intern, and on occasion its operations may actually be impeded;

5.       The intern is not necessarily entitled to a job at the end of the internship;

6.       The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

However, the Ninth Circuit, along with the Second, Sixth, and Eleventh Circuits, expressly rejected this test.  Instead, the courts preferred the “primary beneficiary test”. Under this more flexible test, discussed by the Second Circuit in Glatt v. Fox Searchlight Pictures Inc., courts and employers would weigh and balance seven non-exhaustive factors. These factors are:

1.       The extent to which the intern and the employer clearly comprehend that there is no anticipation of compensation.

2.       The extent to which the internship provides training similar that would be given in an educational environment.

3.       The extent to which the internship is linked to the intern’s formal educational program by coursework of academic credit.

4.       The extent to which the internship accommodates the intern’s academic schedule.

5.       The extent to which the internship’s duration is limited to the time period when the intern is provided beneficial learning by the internship.

6.       The extent to which the intern’s work supplements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.

7.       The extent to which the intern and the employer understand that the internship is directed without entitlement to a paid job at the end of the internship.

Employers should take time to examine any internship positions to determine if an intern could possibly be considered an employee under the Fair Labor Standards Act.

EEOC Sues Employer for Gender Discrimination Related to Parental Leave Policy

Recently, the Equal Employment Opportunity Commission (“EEOC”) filed suit against cosmetic company Estee Lauder Companies, Inc. alleging the company discriminated against men by providing less parental leave benefits than women. Under federal law, men and women are allowed equal pay for equal work.

The EEOC alleges that the company’s leave policy allows for six weeks of leave for new mothers and “primary caregivers” and two weeks for “secondary caregivers”.  According to the suit, a male employee applied for primary caregiver status, but was denied. The employee was allegedly told that the “primary caregiver” designation only applied to surrogacy situations and would not apply to men avowing they would be the primary caregiver to their child. The EEOC argued that such a policy violates Title VII of the Civil Rights Act of 1964, which prohibits discrimination based on gender, and the Equal Pay Act of 1963, which prohibits discrimination based on gender when men and women work at the same company under comparable circumstances.

At this time, there does not appear to be an issue with the “primary caregiver” and “secondary caregiver” designation that many employers use when the policy is gender neutral. However, critics state that defining “primary caregiver” and “secondary caregiver” without utilizing gender stereotypes is easier said than done and could lead to gender discrimination when applied incorrectly.

With more companies allowing parental leave for both mothers and fathers, employers should review their policies to ensure that parental leave policies are not discriminatory. For example, an employer could provide the same benefits to mothers and fathers for the birth or adoption of a child, while allowing additional benefits tied directly to medical disability for pregnancy, childbirth, or similar circumstances. Such a policy may help avoid the issue of defining who is considered the “primary caregiver”, and it be more straight-forward for employees to apply in the workplace.

Can Data Breach Victims Sue in Federal Court Without Actually Suffering Identity Theft?

Recently, health insurer CareFirst Inc. filed a petition with the Supreme Court of the United States to resolve a disagreement among federal appellate courts on the issue of whether victims of data breaches may sue in federal court when they do not allege a present injury. This suit, on appeal from the United States Court of Appeals for the District of Columbia Circuit, will largely center on the idea of standing, a threshold requirement for any plaintiff hoping to sue in federal court. More specifically, CareFirst Inc. alleges the D.C. Circuit erred in reasoning that a plaintiff has standing to sue in federal court simply by virtue of the fact and nature of the data that was accessed by hackers. The data included names, birth dates, email addresses, and subscriber identification numbers.

Pursuant to the federal law, standing requires that a plaintiff suffer some sort of injury to sue. Future injuries may be actionable. However, courts will require that there be a substantial risk of injury. For data breach victims that have not seen evidence of identity theft or fraud, the main question is whether theft of private information as a result of a data breach creates a substantial risk of an identity theft to be actionable.

This August, the United States Court of Appeals for the Eighth Circuit, which hears cases from federal courts in Iowa and Nebraska, ruled in Alleruzzo v. SuperValu, Inc. that a district court properly dismissed many plaintiffs from a data breach action. In that case, hackers gained access to customers’ card information from a grocery store network. This included names, card numbers, expiration dates, card verification values codes, and personal identification numbers. Several customers filed suit under a variety of theories, but only alleged that one customer suffered a single fraudulent charge. Due to lack of injury, the case was dismissed by the district court.

On appeal, the plaintiffs argued that theft of their card information created a substantial risk that they will suffer identity theft in the future. The court initially noted that because card information does not contain social security numbers and birth dates, the information cannot plausibly be used to open new accounts, a form of identity theft most harmful to consumers. It also analyzed a 2007 Government Accountability Office report, which concluded that based on available information, most breaches have not resulted in detected incidents of identity theft. Since the plaintiffs presented no facts from which the court could conclude that plaintiffs suffered a substantial risk of future identity theft, they had no standing to sue in federal court.

The Eighth Circuit and the D.C. Circuit are not the only courts to consider the issue. Like the Eighth Circuit, the United States Court of Appeals for the Fourth Circuit, in Beck v. McDonald, concluded that the risk of identity theft was too hypothetical to allow plaintiffs to sue. Meanwhile, the United States Courts of Appeals for the Sixth and Seventh Circuit have stated, in Reijas v. Neiman Marcus and Galaria v. Nationwide Mutual, that data breach victims suffered an imminent risk of identity theft when the breach occurred.

While the Supreme Court has not yet agreed to hear CareFirst’s arguments, this is certainly an issue to keep watching. Should courts continue to state that data breach victims have standing to sue businesses by virtue of the fact that hackers gained access to the data, such litigation can be expected to rise as data breaches continue.