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In making its determination, the Tenth Circuit focused on the statute's mandate that it apply “to any civil action commenced on or after the date of enactment. “While Office Depot argued that the removal of an action originally filed in state court is “commenced” in federal court on the date of removal, the class disagreed, stating that a class action can only be said to have “commenced” on the date of its initial filing in state court. Rejecting Office Depot's reading of the Act, the Tenth Circuit found that such an interpretation “would allow cases to be plucked from state court on the eve of trial,” and that the practice would be “disruptive to federal-state comity and the settled expectations of the litigants.” The court justified its understanding of the Act by noting that traditional rules of statutory construction and federal jurisdiction consider an action commenced when it is first brought in an appropriate court. This interpretation, the court noted, was further supported by the Act's legislative history. While upon its first introduction in the House, the statute's commencement provision was written to include a number of lawsuits then pending in state courts, the final version of the Act, as introduced in the Senate and in the final House bill, deliberately narrowed the Act's application. Further, the bill's two sponsors had explained that it was not intended to apply to currently pending class action suits. Thus, the Tenth Circuit found that by acknowledging both the policy concerns inherent in an alternative reading and the Act's language and legislative history, the term “commencement” as used in the Class Action Fairness Act could not be retroactively applied to a suit commenced in state court prior to its passage.

Eighth Circuit Refutes Employer Strict Liability Under FMLA Where Employee Termination Inevitable

The Eighth Circuit has determined that an employer should not be held strictly liable for interfering with an employee's right to leave under the Family and Medical Leave Act (the FMLA) where that employee would have been terminated for legitimate work-related reasons independent of his/her exercise of statutory rights. Throneberry v. McGehee Desha County Hosp., 2005 WL 820313 (8th Cir. Apr. 11).

A long-term employee of the defendant hospital, Throneberry, a registered nurse, suffered a deep depression and nervous breakdown after the death of her father and began missing work, taking and abusing prescription drugs, and neglecting her job responsibilities. These actions led the hospital administrator to suggest that she pursue a leave of absence, to which she responded by taking a month of paid medical leave under the FMLA. During her medical leave, Throneberry continued to show up at work and display inappropriate and offensive behaviors, which, on one occasion, resulted in the administrator feeling compelled to call Throneberry's family in order to remove her from the premises. Throneberry ultimately resigned, and her coworkers became privy to the extensiveness of her work-related infractions, including her failure to respond to important mail regarding state health department Medicaid updates and her improper billing of Medicaid services, which required the hospital to repay Medicaid approximately $40,000.

After holding in favor of Throneberry on her interference claim, the U.S. District Court for the Eastern District of Arkansas issued a verdict form requiring the jury to state whether she would have been terminated regardless of her exercise of FMLA rights, to which the jury responded in the affirmative. In finding that the jury instructions were correct and affirming the lower court's judgment, the Eighth Circuit held that the language of the FMLA does not protect employees on leave from lawful discharge if, had they not been on FMLA leave, their employers would have been authorized to terminate them. The court found that the statute is structured to provide qualified employees with rights to both leave and to restoration upon completion of leave, a protection that should not attach if the employee has no right to return to work. Citing the Department of Labor's interpretation of the FMLA, the court noted that employers are in fact lawfully permitted to interfere with employees' statutory rights if there is a layoff, if the employee is no longer physically able to perform essential job functions, or if the employee was specifically hired for a defined term or project. Furthermore, the Eighth Circuit found that this statutory interpretation recognizes employers' legitimate business needs in a way that a strict liability theory cannot. Therefore, the court concluded that this holding would ensure that an employee on FMLA leave was entitled to no greater rights than the employee would have had if he/she not taken such leave.

Third Circuit Finds Knowledge of Plan Amendment Appropriate Time for Cause of Action Accrual

The Third Circuit has found that a cause of action arising out of the amendment of an Employee Retirement Income Security Act (ERISA) plan does not accrue until plan participants become aware that the amendment has clearly repudiated some of their rights under the plan. Romero v. Allstate Corp., 2005 WL 851217 (3rd Cir. Apr. 14).

Up until 1991, Allstate Corporation (Allstate) had administered a pension plan that allowed those of its insurance agents with at least 20 years of continuous “credited service” the option to retire at age 55 and to receive a favorable early retirement benefit. Allstate then proceeded to amend this plan three times, in 1991, 1994 and 1996, first by discontinuing agents deemed “independent contractors” from eligibility for the early retirement benefit and then by stating that only “employees” could take advantage of this option. Along with making these changes, Allstate also took measures to persuade its agents to become independent contractors. A group of those employees who changed their employment status in response to their employer's tactics ultimately sued Allstate in the U.S. District Court for the Eastern District of Pennsylvania. Among their claims, these employee agents alleged that Allstate had violated ERISA's anti-cutback rule by amending the plan in 1991, 1994, and 1996 in order to make them ineligible for early retirement benefits.

The U.S. District Court for the Eastern District of Pennsylvania dismissed the employees' lawsuit as time-barred after finding that their ERISA claims had accrued on the date of each of the plan amendments. In reversing this holding, the Third Circuit determined that the date of a plan amendment cannot trigger the running of the statute of limitations under ERISA's anti-kickback rule if the affected plan participants are not aware of the change. In adopting the federal “discovery rule,” under which a claim accrues when a plaintiff discovers or reasonably should have discovered the injury on which a claim is based, the court noted that the effects of a plan amendment cannot be known to plan participants until some later event. Therefore, the court found that the opposite conclusion, that the accrual date should run from the time of amendment, would have the undesirable effect of requiring participants to “'become watchdogs over potential [p]lan errors or abuses.'”

Tenth Circuit Denies Retroactive Application of Class Action Fairness Act

The Tenth Circuit has held that the Class Action Fairness Act (the Act) does not apply to class action suits commenced in state court prior to the Act's enactment on Feb. 18, 2005. Pritchett v. Office Depot Inc., 2005 WL 827158 (10th Cir. Apr. 11).

The initial class action suit against Office Depot, alleging that assistant managers had been denied overtime compensation for hours regularly worked beyond 40 hours per week, was filed in state court in April 2003 and certified in June 2004. On the eve of trial, Office Depot attempted to remove the case to federal court by arguing that the Class Action Fairness Act gave the federal court system proper jurisdiction. Finding that the Act did not apply to cases filed in state court prior to its date of enactment, the judge for the U.S. District Court for the District of Colorado sent the case back to state court. The Tenth Circuit affirmed the lower court's judgment by finding that the language of the new law was inapplicable to cases “commenced” in state court prior to Feb. 18, 2005.

In making its determination, the Tenth Circuit focused on the statute's mandate that it apply “to any civil action commenced on or after the date of enactment. “While Office Depot argued that the removal of an action originally filed in state court is “commenced” in federal court on the date of removal, the class disagreed, stating that a class action can only be said to have “commenced” on the date of its initial filing in state court. Rejecting Office Depot's reading of the Act, the Tenth Circuit found that such an interpretation “would allow cases to be plucked from state court on the eve of trial,” and that the practice would be “disruptive to federal-state comity and the settled expectations of the litigants.” The court justified its understanding of the Act by noting that traditional rules of statutory construction and federal jurisdiction consider an action commenced when it is first brought in an appropriate court. This interpretation, the court noted, was further supported by the Act's legislative history. While upon its first introduction in the House, the statute's commencement provision was written to include a number of lawsuits then pending in state courts, the final version of the Act, as introduced in the Senate and in the final House bill, deliberately narrowed the Act's application. Further, the bill's two sponsors had explained that it was not intended to apply to currently pending class action suits. Thus, the Tenth Circuit found that by acknowledging both the policy concerns inherent in an alternative reading and the Act's language and legislative history, the term “commencement” as used in the Class Action Fairness Act could not be retroactively applied to a suit commenced in state court prior to its passage.

Eighth Circuit Refutes Employer Strict Liability Under FMLA Where Employee Termination Inevitable

The Eighth Circuit has determined that an employer should not be held strictly liable for interfering with an employee's right to leave under the Family and Medical Leave Act (the FMLA) where that employee would have been terminated for legitimate work-related reasons independent of his/her exercise of statutory rights. Throneberry v. McGehee Desha County Hosp., 2005 WL 820313 (8th Cir. Apr. 11).

A long-term employee of the defendant hospital, Throneberry, a registered nurse, suffered a deep depression and nervous breakdown after the death of her father and began missing work, taking and abusing prescription drugs, and neglecting her job responsibilities. These actions led the hospital administrator to suggest that she pursue a leave of absence, to which she responded by taking a month of paid medical leave under the FMLA. During her medical leave, Throneberry continued to show up at work and display inappropriate and offensive behaviors, which, on one occasion, resulted in the administrator feeling compelled to call Throneberry's family in order to remove her from the premises. Throneberry ultimately resigned, and her coworkers became privy to the extensiveness of her work-related infractions, including her failure to respond to important mail regarding state health department Medicaid updates and her improper billing of Medicaid services, which required the hospital to repay Medicaid approximately $40,000.

After holding in favor of Throneberry on her interference claim, the U.S. District Court for the Eastern District of Arkansas issued a verdict form requiring the jury to state whether she would have been terminated regardless of her exercise of FMLA rights, to which the jury responded in the affirmative. In finding that the jury instructions were correct and affirming the lower court's judgment, the Eighth Circuit held that the language of the FMLA does not protect employees on leave from lawful discharge if, had they not been on FMLA leave, their employers would have been authorized to terminate them. The court found that the statute is structured to provide qualified employees with rights to both leave and to restoration upon completion of leave, a protection that should not attach if the employee has no right to return to work. Citing the Department of Labor's interpretation of the FMLA, the court noted that employers are in fact lawfully permitted to interfere with employees' statutory rights if there is a layoff, if the employee is no longer physically able to perform essential job functions, or if the employee was specifically hired for a defined term or project. Furthermore, the Eighth Circuit found that this statutory interpretation recognizes employers' legitimate business needs in a way that a strict liability theory cannot. Therefore, the court concluded that this holding would ensure that an employee on FMLA leave was entitled to no greater rights than the employee would have had if he/she not taken such leave.

Third Circuit Finds Knowledge of Plan Amendment Appropriate Time for Cause of Action Accrual

The Third Circuit has found that a cause of action arising out of the amendment of an Employee Retirement Income Security Act (ERISA) plan does not accrue until plan participants become aware that the amendment has clearly repudiated some of their rights under the plan. Romero v. Allstate Corp., 2005 WL 851217 (3rd Cir. Apr. 14).

Up until 1991, Allstate Corporation (Allstate) had administered a pension plan that allowed those of its insurance agents with at least 20 years of continuous “credited service” the option to retire at age 55 and to receive a favorable early retirement benefit. Allstate then proceeded to amend this plan three times, in 1991, 1994 and 1996, first by discontinuing agents deemed “independent contractors” from eligibility for the early retirement benefit and then by stating that only “employees” could take advantage of this option. Along with making these changes, Allstate also took measures to persuade its agents to become independent contractors. A group of those employees who changed their employment status in response to their employer's tactics ultimately sued Allstate in the U.S. District Court for the Eastern District of Pennsylvania. Among their claims, these employee agents alleged that Allstate had violated ERISA's anti-cutback rule by amending the plan in 1991, 1994, and 1996 in order to make them ineligible for early retirement benefits.

The U.S. District Court for the Eastern District of Pennsylvania dismissed the employees' lawsuit as time-barred after finding that their ERISA claims had accrued on the date of each of the plan amendments. In reversing this holding, the Third Circuit determined that the date of a plan amendment cannot trigger the running of the statute of limitations under ERISA's anti-kickback rule if the affected plan participants are not aware of the change. In adopting the federal “discovery rule,” under which a claim accrues when a plaintiff discovers or reasonably should have discovered the injury on which a claim is based, the court noted that the effects of a plan amendment cannot be known to plan participants until some later event. Therefore, the court found that the opposite conclusion, that the accrual date should run from the time of amendment, would have the undesirable effect of requiring participants to “'become watchdogs over potential [p]lan errors or abuses.'”