Litigation Blog Washington Business Law Christina Haring-Larson

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This blog does not offer legal advice or form an attorney-client relationship. It is a collection of legal information that may or may not be relevant to a particular client, legal dispute or active case. Because the nature of the law is always changing, the cases and law cited in this blog may change over time. For further questions, please call (206) 632-4242 or email christina@eagleharborlaw.com

"LET THE BUYER BEWARE"

A recent decision by the Washington Court of Appeals in Douglas v. Visser, on February 25, 2013, held that a buyer of a home has a strict duty to make further inquiries of a seller and a buyer cannot recover when a buyer has constructive notice of a defect through an inspection report.

Although the buyer had an inspection done which revealed the presence of some rot, the buyer did not make further inquiry of the seller or show that a further inquiry would be “fruitless.” Thus, although the seller had actively concealed the extent of the rot prior to the sale, the buyer could not recover because the buyer was put on notice of the defect by the inspection report.

The take away for a buyer is that the buyer must follow-up with the seller if there is any potential defect to determine the extent of the problem.

UNITED STATES SUPREME COURT MAKES THE LEGAL STANDARD FOR DISCRIMINATION RETALIATION CLAIMS MORE DIFFICULT TO PROVE BY CHANGING TO A "BUT FOR" CAUSATION TEST

On June 24, 2013, the United States Supreme Court issued a landmark decision changing the legal standard of proof for discrimination retaliation claims. In University of Texas Southwestern Medical Center v. Nassar, 133 S.Ct. 2517 (2013), the majority decision concluded that Title VII retaliation claims must be proved according to traditional principles of but-for causation, not the lessened causation test for “motivating factor” set forth for status-based discrimination claims. The antiretaliation provision states, in relevant part: “It shall be an unlawful employment practice for an employer to discriminate against any of his employees ... because he has opposed any practice made an unlawful employment practice by this subchapter, or because he has made a charge, testified, assisted, or participated in any manner in an investigation, proceeding, or hearing under this subchapter.”

Going forward, for purposes of a discrimination retaliation claim alleging termination or constructive discharge in response to complaints of discriminatory conduct, the plaintiff must prove that such conduct was the “but for” cause of the termination or constructive discharge. The prior motivating factor test has been rejected for Title VII retaliation claims and will likely make it more difficult for employees to establish retaliation claims.

This change in the causation standard for federal law may also affect Washington state law based discrimination charges. Washington has adopted a statutory regime that provides broader protection than the protected classes for discrimination under federal law. The Washington Law Against Discrimination, RCW 49.60.180(1), prohibits refusing to hire someone based on “age, sex, marital status, sexual orientation, race, creed, color, national origin, honorably discharged veteran or military status, or the presence of any sensory, mental, or physical disability . . . . , unless based upon a bona fide occupational qualification.” In construing the state law against discrimination, Washington courts have sometimes looked for guidance from cases interpreting equivalent federal law under Title VII. Marquis v. City of Spokane, 130 Wn. 2d 97, 109, 922 P.2d 43, 50 (1996). However, where the express language of the Washington statute differs from that of Title VII, the Washington courts take that distinction into effect and may interpret Washington law differently than federal law. Id. In practice, it is not always clear whether the Washington courts will follow federal case law, such as Nassar, because the language of the statute is different in many respects.

Because the Nassar decision was based on a statutory interpretation of how Title VII’s federal discrimination and retaliation provisions are written, it is possible the outcome in Washington may be different under an interpretation of the Washington Law Against Discrimination. In any case, there is little doubt the issue will be percolating through the Washington courts as the impact of Nassar begins to have effect in ongoing pending cases.

Is Facebook Information Discoverable in Litigation?

Ever wonder if your information on Facebook can really be discovered by the other side in litigation? The answer is yes, provided the information is relevant to the case. See Patterson v. Turner Constr. Co., 88 A.D. 3d 617 (2011) (relevant postings were not shielded from discovery because plaintiff used service's privacy settings). An adverse inference instruction to the jury is also appropriate where someone deletes the Facebook account. Gatto v. United Air Lines (D. N.J. March 25, 2013). Although Washington courts have yet to weigh in, it seems likely they will follow suit.

Can an Employer Terminate an Employee for Use of Marijuana Where it is Legal in Washington?

The Colorado Court of Appeals recently found that there is no employment protection for medical marijuana users in the state since the drug remains barred by the federal government. Thus, even though Colorado (like Washington) has legalized recreational use of marijuana, the court held employers can lawfully terminate employees who test positive for the drug, even if the drug was used off duty. The Washington Supreme Court has previously held that use of marijuana is not protected under the medical marijuana statute. Thus, although Washington has not yet addressed this precise issue, it is likely that an employer can terminate an employee who uses marijuana where there is anti-substance abuse policy in effect.

Why is there a 21-Day Provision in a Severance or Settlement Agreement?

Many employees and employers ask why a 21 day period is provided for review of a severance or settlement agreement. Employees often want any monetary payment more quickly and employers are interested in putting employment disputes to a quick end to limit costs and attorney’s fees. Many employees and employers wonder why these provisions are there when other contracts do not have the same verbiage.

In reality, most severance or settlement agreements have a 21 day period for an employee to consider the agreement and then a 7 day period to revoke any such agreement. The reason is based on a federal law known as the Age Discrimination in Employment Act ("ADEA").

In 1990, Congress amended the ADEA by adding the Older Worker Benefit Protection Act (“OWBPA”). Employees over the age of 40 are protected by additional protections to guarantee that such an employee has an opportunity to make an informed choice whether or not to sign the agreement and to ensure that employees over 40 are not unduly pressured to sign these types of agreements. The law requires that such agreements contain a 21 day period to review the agreement and a 7 day period to revoke any consent to an agreement. If material changes to the final offer are made, the 21-day period starts over. The clause has become standard in many employment agreements, regardless of the age of the employee, to ensure a waiver or release of claims is effective.

Even if the above time frames are provided for, a waiver of age claims, like waivers of Title VII and other discrimination claims, will be invalid and unenforceable if an employer used fraud, undue influence, or other improper conduct to coerce the employee to sign it, or if it contains a material mistake, omission, or misstatement. These are largely questions driven by an individual’s facts surrounding the employment relationship.

WASHINGTON COURT OF APPEALS SETS FORTH THE INSURANCE COMPANY'S DUTY TO PAY DEFENSE COSTS WHILE A COVERAGE CASE IS UNDERWAY.

In a January 29, 2018 decision, the Washington Court of Appeals (Division I) clarified that an insurance company is responsible for all reasonable defense costs while an insurance company's claim of "no coverage" is in the process of being adjudicated. See National Surety Corporation v. Immunex Corp., 2018 WL 582450, Div. 1 (January 29, 2018) (unpublished decision).

National Surety insured Immunex under a policy spanning years of 1998 to 2002. When Immunex was sued for unlawful drug pricing claims, National Surety first denied coverage. Then, under a "reservation of rights" letter issued to Immunex, National Surety agreed to defend until a court could determine whether or not there was coverage. National Surety next filed a declaratory relief action in federal court arguing that Immunex's claims were not covered under the insurance policy and, therefore, that it had no duty to defend.

As a general rule, if an insurance company is uncertain of whether or not there is a duty to defend, the insurance company may decide to defend its insured with a "reservation of rights" letter and, simultaneously seek a declaratory judgment that it has no coverage and, thus, no duty to defend. By defending under a "reservation of rights" and seeking a declaratory judgment in a new coverage lawsuit, the insurance company may avoid breaching its duty to defend and incurring the potentially greater expense of defending itself from a claim of breach of contract claim brought by its insured for all costs incurred in litigation. But, where the insurance company seeks to take advantage of this procedure, the insurance company remains liable for defense fees and costs incurred while the coverage issue is being litigated.

In the Immunex case, the trial court denied Natural Surety's motion filed in the declaratory relief lawsuit that it should be completely relieved from paying any of Immunex's defense fees of over $15 million since it had issued a "reservation of rights" letter to its insured and also then filed a coverage lawsuit. Even though Immunex had provided its insurer with late notice of the claims, the Court of Appeals held Immunex may be entitled to recover some of its attorneys' fees that it had incurred while the coverage action was still pending. The Court of Appeals reiterated its prior holdings that an insurer's reservation of rights defense while simultaneously seeking a declaratory judgment of no coverage is a "means by which the insurer avoids breaching its duty to defend while seeking to avoid waiver and estoppel." However, the Court of Appeals added that "after obtaining a declaration of noncoverage, an insurer will not be obligated from that point forward." Thus, the Court of Appeals allowed Immunex to recover its defense costs incurred while the reservation of rights defense was asserted, but before the coverage determination had been issued by the federal court. The Court of Appeals remanded for the trial court to determine the reasonableness of the fees and costs sought by Immunex and cut its recoverable costs down from over $15 million dollars to just $670,000 because of Immunex's late tender of its claims to the insurance company.

This case serves as a good reminder to businesses. Businesses should timely tender a claim for coverage, even where coverage may be uncertain. Under some circumstances, a late tender may be excused if there is no prejudice to the insurance company. But, an insurance company cannot avoid payment of its insured's defense costs incurred while a coverage action is pending for adjudication.

Washington LLC Lacks Standing to Sue if Corporate Formalities Are Not Up to Date with Washington Secretary of State

Washington courts will not allow a company to sue if the company has failed to keep up to date on corporate formalities with the Washington Secretary of State. In Chadwick Farms Owners Association v. FHC, LLC, 166 Wn. 2d 178, 297 P. 3d 1251 (February 6, 2009), the Washington Supreme Court held a company that had been canceled by the Washington Secretary of State could not seek recovery from the court. The dissolved LLC had failed to seek reinstatement within the two-year winding up period provided by the LLC statute and, therefore, the ability of the LLC to sue ended upon cancellation of its certificate of formation. Subsequent cases have interpreted this decision to mean a canceled LLC could neither be sued nor maintain a lawsuit. See Sherron Associates Loan Fund V (Mars Hotel) v. Saucier, 157 Wash. App. 357, 237 P. 3d 338 (2010) (Dissolved, but not yet canceled, LLC could sue and be sued within the time limits of the statute).