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Legal Report January 2010


NEGLIGENCE. A California court ruled that a company can be held responsible for a crash that occurred after a tow truck was stolen from its parking lot.

The same day that convicted gang member Raymond Bermudez was released from prison on parole, he became intoxicated. Using an unlocked gate, Bermudez then entered an automotive service center in Huntington Park owned by Maurice J. Sopp & Son after the shop was closed to the public. He stole a tow truck, which was also unlocked and had the keys in the ignition.

Bermudez drove the tow truck out of the service center and struck several vehicles along an adjacent street. After driving about a mile, Bermudez drove through a bus stop, killing three people and injuring several others. Those injured in the incident, along with family members of the deceased, sued Sopp for negligence and wrongful death.

The company requested summary judgment—a hearing based on the facts of a case without a trial—claiming that under state law, a company is not liable for damage caused by the theft of an unlocked vehicle.

The plaintiffs appealed the decision, arguing that because a tow truck is a powerful vehicle that requires special skills to operate, it is more dangerous than a normal vehicle. Thus, the tow truck represented a “special circumstance” under California law, and the company was required to take extra care in securing it. The plaintiffs further argued that the company failed to implement adequate security measures to keep the tow truck from being stolen, despite the fact that the service center was located in an area with a high rate of vehicle theft.

A California appeals court ruled that the tow truck did represent a “special circumstance” and that the service center owed a duty of care to protect the truck. Whether the company met its duty was an issue for a jury, ruled the court. The court also said that the high vehicle theft rate was an issue. The fact that the truck was accessible to thieves, with the keys in the ignition, in a position that permitted Bermudez to drive out of an unlocked gate all contributed to the ruling.

In the written opinion of the case, the court noted that the ruling was aimed at preventing such incidents in the future. “Although as to Sopp (unlike Bermudez) the element of moral blame may be lacking, there clearly is a strong public policy of preventing future harm of the type that occurred here. Requiring Sopp to lock its gate or to remove keys from commercial vehicles does not constitute an onerous burden on a business owner.” (Carrera v. Maurice J. Sopp & Son, California Court of Appeal, No. B204911, 2009)

WHISTLEBLOWERS. In its first decision on federal whistleblower protections, a federal appeals court has ruled that two employees who were fired after reporting that their employer may have committed fraud may pursue their lawsuit. The case is important because it lays out the requirements that plaintiffs must meet to pursue a retaliation case under the whistleblower provision of the Sarbanes-Oxley Act of 2002.

Plaintiffs Shawn and Lena Van Asdale were hired by the Nevada company International Game Technology (IGT) to serve as in-house attorneys. The Van Asdales claim that they were fired because they reported potential shareholder fraud committed by IGT during a merger with another company, Anchor Gaming.

The Van Asdales sued IGT, claiming that they were discharged in retaliation for reporting the fraud. Sarbanes-Oxley prohibits a publicly traded company from discriminating against employees who report what they reasonably believe to be mail, wire, or bank fraud. The law also covers violations of federal laws against defrauding shareholders.

The court ruled that the Van Asdales had established a basis for a whistleblowing suit and allowed the case to proceed to trial. While the court did not offer a ruling on whether the fraud occurred, the court did set out the requirements plaintiffs must meet to pursue a whistleblowing claim under Sarbanes-Oxley.

According to the court, the employee must have engaged in protected activity; the employer must have known or suspected that the employee had engaged in protected activity; the employee must have suffered an adverse employment action; and there must be evidence that the protected activity was connected to the adverse employment action. (Van Asdale v. International Game Technology, U.S. Court of Appeals for the Ninth Circuit, No. 07-16597, 2009)


DRUG TESTING. The U.S. Department of Transportation (DOT) has announced that it will not relax its drug testing policies despite state laws allowing the use of medical marijuana. The DOT issued guidelines on the matter after the Justice Department publicly noted that it will not pursue federal prosecutions for medical marijuana use.

The DOT guidelines state that transportation employees who must undergo drug testing may not cite medical marijuana use as a valid medical explanation for a positive test. In the guidelines, the DOT notes that it “remains unacceptable for any safety-sensitive employee subject to drug testing under the DOT’s drug testing regulations to use marijuana.”


CHEMICAL FACILITIES. A bill (H.R. 2868) intended to increase security at chemical facilities has been approved by the House of Representatives. To proceed, the bill must be approved by the Senate. The Senate has not announced whether it will consider the measure.

According to statements made by lawmakers who introduced the bill, H.R. 2868 would make the Chemical Facility Anti-Terrorism Standards Act of 2006 permanent. (The law will expire in October.) H.R. 2868 would extend existing law and maintain current Department of Homeland Security (DHS) regulations on the subject by establishing standards and procedures for security vulnerability assessments and site security plans.

H.R. 2868 differs from existing law in urging facility owners to adopt inherently safer technologies. The measure would not allow DHS to mandate the use of such technologies. Instead, before DHS could require such changes, it would first have to notify Congress of the ramifications of making the switch. Such changes would be prohibited in cases where using inherently safer technologies would require the facility to cut production or fire employees.

In a statement of support for the bill, Chairman for the House Energy and Commerce Committee’s Subcommittee on Energy and the Environment Rep. Ed Markey (D-MA), noted that “by requiring the highest risk facilities to switch to safer chemicals or processes when it is economically and technologically possible to do so, this legislation will make our communities less vulnerable.”

CRUISE SHIP SECURITY. A bill (S. 588) that would enhance security aboard cruise ships has been approved by the Senate Commerce, Science, and Transportation Committee. The Senate has announced that it will consider the measure.

The bill would require that each stateroom be equipped with security latches and electronic keys that can provide times and dates of entries. Ships would also be required to install and maintain a video surveillance system and provide information from that surveillance to law enforcement upon request. Cruise ship owners would be required to establish and enforce policies on crewmember access to passenger rooms.

S. 588 would also require that ships maintain rape kits and ensure that medical staff members are trained to administer such kits and treat assault victims. Security personnel and crewmembers would be trained to detect and preserve evidence from any crime that occurs on board the ship.

Ship owners would be required to track incidents of rape and other crimes and keep a log of those crimes. The log would be available to the FBI, the U.S. Coast Guard, and any law enforcement officer investigating a crime. If a serious crime—homicide, suspicious death, missing persons, kidnapping, or assault—occurred on board, ship operators would be required to report the incident to the nearest FBI field office immediately.

DATA SECURITY. A bill (H.R. 2221) that would set out requirements for ensuring that data security has been approved by the House Energy and Commerce Committee. The full House of Representatives has not announced whether it will bring the bill to the floor for a vote.

The bill would require that the Federal Trade Commission (FTC) issue regulations on data security policies and procedures for companies that conduct interstate commerce using personal information of individuals.

Companies would be required to notify the FTC and affected individuals when information security breaches occurred. Additional requirements would be established for breaches by contractors who maintained or processed electronic data containing personal information, breaches involving telecommunications and computer services, and breaches of health information.

The bill would make it illegal for information brokers to conduct any type of pretexting—obtaining or disclosing personal information by false pretenses. If enacted, the law would preempt all state information security laws. (Currently, federal law makes pretexting illegal when it is used to obtain financial records. State laws on the matter vary.)

Under the bill, information brokers would be required to submit their security policies to the FTC after a security breach or upon request by the FTC. The measure also requires that the FTC conduct an audit of security practices after an information broker experiences a data breach.

The measure would require that information brokers establish procedures for verifying the accuracy of information that identifies individuals and provide individuals with a means of reviewing their information and having mistakes corrected.



SECURITY OFFICERS. A new law (formerly S.B. 741) in California regulates proprietary security officers. Under the bill, proprietary officers are required to register with the same state agency that was already charged with regulating contract officers. Proprietary officers must also undergo a background check and be issued a license. Officers must complete initial training and undergo an annual review by the state to maintain their licenses.


BACKGROUND SCREENING. A new Minnesota law (formerly H.B. 882) would protect employers in civil lawsuits where the plaintiff is seeking damages arising from the actions of employees. To be protected from liability, one of three conditions must exist, according to the law: The employee did not pose a greater risk in his employment than he would as a general member of the public; the criminal record of the employee had been sealed; the employee had been pardoned or the arrest or charge did not result in criminal conviction.

This column should not be construed as legal or legislative advice.