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Current Updates and Legal Developments - Fall 2017

September 28, 2017 (9 min read)


By: Bender’s Labor & Employment Bulletin, Volume 17, Issue 7

RECENTLY, THREE OF THE U.S. CIRCUIT COURTS OF APPEAL addressed the issue of whether discrimination on account of an individual’s sexual orientation is precluded by Title VII of the Civil Rights Act of 1964 (42 U.S.C. § 1981).

In the first case, Evans v. Georgia Regional Hospital, 850 F.3d 1248 (11th Cir. 2017), the Eleventh Circuit held that it was not. A petition for en banc review is pending.

In the second case, Anonymous v. Omnicom Grp., Inc., 852 F.3d 195 (2d Cir. 2017), a Second Circuit panel agreed, but only because it was constrained by circuit precedent. The concurring opinion in the Second Circuit case argued strongly that the issue should be revisited en banc and the circuit precedent overturned.

In the third case, Hively v. Ivy Tech Community College of Indiana, 853 F.3d 339 (7th Cir. 2017), the Seventh Circuit, sitting en banc, became the first federal appellate court to hold that Title VII prohibits discrimination on the basis of sexual orientation. In doing so, the en banc Hively court, in large part, adopted the theories advanced in the concurring opinion of the Second Circuit’s decision in Omnicrom.

In a fourth case, the Second Circuit also decided it would review the issue en banc, agreeing to review a panel decision in Zarda v. Altitude Express, 855 F.3d 76 (2d Cir. 2017), in which the panel rejected the argument that sexual orientation discrimination is prohibited under Title VII. As with the decision in Omnicrom, the panel in Zarda relied upon earlier circuit precedent as precluding review of the issue. Oral argument in Zarda is set for September 26, 2017.

To find this article in Lexis Practice Advisor, follow this research path:

Research Path: Labor & Employment > Discrimination and Retaliation > EEO Laws and Protections > Articles > Title VII


By: Lexis Practice Advisor Journal Staff

THE DEPARTMENT OF LABOR (DOL) HAS ABANDONED its defense of new standards established by the Obama administration for employee classification under the Fair Labor Standards Act (FLSA), telling the Fifth Circuit U.S. Court of Appeals that it intends to begin its own rulemaking process on the issue.

Implementation of the new standards, which increased the salary threshold under the FLSA for classifying workers as exempt whitecollar employees, was enjoined by U.S. Judge Amos Mazzant III of the Eastern of District of Texas on November 22, 2016, after 21 states and various business groups filed suit. Nevada v. U.S. Department of Labor, 218 F. Supp. 3d 520 (E.D. Texas 2016).

The standards, which were set to go into effect on December 1, would have increased the threshold for exempt employees from $455 per week or $23,660 annually to $921 per week or $47,892 annually, effectively extending overtime pay to an estimated 4.2 million Americans. The new standard also provided for automatic update of the threshold every three years, beginning January 1, 2020.

The DOL appealed, and the Fifth Circuit agreed to an expedited review. The DOL and the challengers filed briefs with the Fifth Circuit before President Donald J. Trump was sworn in, with the DOL’s reply brief due on January 31, after the new administration took office. The appeals court granted the DOL’s request for additional time to file its reply brief.

In that brief, filed on June 30, the DOL did not reiterate its earlier argument that the Fifth Circuit should reinstate the new rules but asked the appeals court to reverse the Texas court’s holding that the department lacked the authority to establish a salary test.

“[T]he Department requests that this Court reverse the judgment of the district court because it was premised on an erroneous legal conclusion, and reaffirm the Department’s statutory authority to establish a salary level test,” the DOL said. “The Department requests that this Court not address the validity of the specific salary level set by the 2016 final rule ($913 per week), which the Department intends to revisit through rulemaking.”

To find this article in Lexis Practice Advisor, follow this research path:

Labor & Employment > Wage and Hour > FLSA Requirements and Exemptions > Articles > Overtime Requirements


Courtesy of Pratt’s Bank Law & Regulatory Report, Volume 51, No. 7

THE FEDERAL FINANCIAL INSTITUTIONS EXAMINATION Council (FFIEC) released an update to its Cybersecurity Assessment Tool. The update to the assessment tool addresses changes to the FFIEC IT Examination Handbook.

The FFIEC said the updated assessment tool, which was developed to help financial institution management determine the institution’s risk profile, inherent risks, and cybersecurity preparedness, will also provide additional response options, allowing financial institution management to include supplementary or complementary behaviors, practices, and processes that represent current practices of the institution in supporting its cybersecurity activity assessment.

The FFIEC noted that the assessment tool provides “a repeatable and measurable process that financial institution management may use to measure cybersecurity preparedness over time.”

“Use of the tool is voluntary, and financial institution management may choose to use the Assessment or another framework, or another risk assessment process to identify inherent risk and cybersecurity preparedness,” the FFIEC added. “Management of financial institutions and management of third-party service providers are primarily responsible for assessing and mitigating their entities’ cybersecurity risk.”

To find this article in Lexis Practice Advisor, follow this research path:

RESEARCH PATH: Finance > Financial Services Regulation > Financial Institution Activities > Articles > Other Regulatory Issues


THE U.S. SUPREME COURT HAS AGREED TO TAKE ON THE question of whether a provision of the America Invents Act (AIA) that created pretrial proceedings to address challenges to existing patents violates Article III of the U.S. Constitution.

The justices granted a petition by Oil States Energy Services LLC for review of a decision by the U.S. Court of Appeals for the Federal Circuit affirming a ruling by the U.S. Patent and Trademarks Appeal Board (PTAB) that invalidated several claims of its hydraulic fracturing patent.

That decision came in an infringement action filed by Oil States against Greene’s Energy Group LLC, one of its competitors. Greene’s responded to the suit with an allegation that the Oil State patent is invalid. The PTAB reviewed the patent, under procedures set forth in Section 6 of the AIA, and found several claims invalid. The Federal Circuit affirmed. Oil States Energy Servs., LLC v. Greene’s Energy Grp., LLC, 639 Fed. Appx. 639 (2016 U.S App. 8870).

In seeking review, Oil States argued that the review process established in the AIA violates the Constitution by allowing a government panel to extinguish private property rights. “Suits to invalidate patents must be tried before a jury in an Article III forum, not in an agency proceeding,” Oil States argued. Further, Oil States contended, even if the review process is constitutional, its application violates the rights of patent holders to take advantage of the patent amendment process, and the high court should clarify the standard to be used by the PTAB in reviewing patents.

Opposing review, Greene’s argued that it is “settled case law” that patents are “mere ‘public rights’” susceptible to review by a nonArticle III tribunal. Greene’s also dismissed Oil States’ argument on the amendment process, arguing that it was not presented to the Federal Circuit and that clarification of the standard of the review is not necessary.

The high court granted limited review to the constitutional issue. Oral arguments will be heard after the justices return from their summer recess in October.

To find this article in Lexis Practice Advisor, follow this research path:

RESEARCH PATH: Intellectual Property & Technology > Patents > PTAB Proceedings > Articles


Courtesy of Pratt’s Bank Law & Regulatory Report, Volume 51, No. 7

THE U.S. SUPREME COURT UNANIMOUSLY HELD THAT A company may collect debts that it purchased for its own account without triggering the Fair Debt Collection Practices Act (FDCPA) requirements applicable to “debt collectors,” a term that includes anyone who “regularly collects or attempts to collect . . . debts owed or due . . . another.” Henson v. Santander Consumer USA Inc., 198 L.Ed. 177 (2d Cir. 2017).

The complaint alleged that CitiFinancial Auto loaned money to four consumers seeking to buy cars, that the consumers defaulted on those loans, and that consumer finance firm Santander Consumer USA Inc. then purchased the defaulted loans from CitiFinancial and sought to collect in ways that violated the FDCPA. The U.S. District Court for the District of Maryland and the Fourth Circuit U.S. Court of Appeals both held that Santander did not qualify as a debt collector because it did not regularly seek to collect debts “owed . . . another” but sought instead only to collect debts that it purchased and owned.

The Supreme Court affirmed those decisions in Justice Neil Gorsuch’s first opinion as a member of the Court.

In response to the argument that Congress did not know in 1977 that the business of purchasing defaulted debt would blossom as it has, Justice Gorsuch wrote, “All this seems to us quite a lot of speculation. And while it is of course our job to apply faithfully the law Congress has written, it is never our job to rewrite a constitutionally valid statutory text under the banner of speculation about what Congress might have done had it faced a question that, on everyone’s account, it never faced.”

To find this article in Lexis Practice Advisor, follow this research path:

RESEARCH PATH: Finance > Financial Services Regulation > Financial Institution Activities > Articles > Other Regulatory Issues


Courtesy of Pratt’s Bank Law & Regulatory Report, Volume 51, No. 7

THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC) is adopting the Supervisory Guidance on Model Risk Management previously issued by the Board of Governors of the Federal Reserve System (SR 11-7) and the Office of the Comptroller of the Currency (OCC Bulletin 2011-12).

The guidance addresses supervisory expectations for model risk management, including model development, implementation, and use; model validation; and governance, policies, and controls.

The FDIC noted that it does not expect the guidance will pertain to FDIC-supervised institutions with under $1 billion in total assets unless the institution’s model use is significant, complex, or poses elevated risk to the institution.

The FDIC also observed that some FDIC-supervised institutions have increased their reliance on models for various functions, such as credit management, operational risk, valuation, and stress testing. The FDIC highlighted that:

  • Model risk management should be commensurate with each institution’s risk exposure, as well as the complexity and extent of its model use.

  • An effective model risk management framework should include disciplined and knowledgeable development that is well documented and conceptually sound, controls to ensure proper implementation, processes to ensure correct and appropriate use, effective validation processes, and strong governance, policies, and controls.

  • Use of vendor and other third-party models should be incorporated into the model risk management framework.

To find this article in Lexis Practice Advisor, follow this research path:

RESEARCH PATH: Finance > Financial Services Regulation > Financial Institution Activities > Articles > Other Regulatory Issues