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Legal Report July 2011


HOSTILE WORK ENVIRONMENT. A federal appeals court has ruled that an employee may not sue his employer for creating a hostile work environment because the employer took immediate action to correct the problem and the employee failed to report subsequent incidents.

Arthur Ray Wilson, an African American, was employed by Moulison North Corporation, an electric utility contractor in Maine. On May 22, 2006, Wilson was assigned to work at the Portland Jetport with three other people, all white males. Almost immediately, Wilson’s coworkers subjected him to racial slurs. Though Wilson asked them to stop, the taunts continued.

On June 5, Wilson contacted the company’s owner, Ken Moulison, as specified in the company’s antiharassment policy. Moulison returned the call the same day, and Wilson recounted what had been happening at the job site. Moulison then contacted the supervisor on the site, who confirmed Wilson’s story.

The next day, Moulison visited the job site and confronted the harassers. The men did not deny that they had taunted Wilson. Moulison made it clear that their conduct was unacceptable and told them that any further harassment, no matter how minor, would result in immediate termination. Moulison then spoke with Wilson alone. Moulison directed Wilson to contact him about any further problems. Wilson agreed to do so.

Despite Moulison’s warnings, the harassment continued. In addition to the verbal slurs, the men contaminated Wilson’s water bottle, yelled and swore at him, and refused to help him with job assignments. During this time, Moulison often visited the job site and was frequently alone with Wilson. But Wilson never made an additional complaint.

In September, Wilson injured his back and was placed on disability leave. He did not return to work, but he did file a lawsuit against the company, claiming a hostile work environment. Wilson claimed that the company’s response to his first complaint was insufficient and that the job supervisor should have acted on the subsequent harassment. The company requested summary judgment—a hearing based on the facts of a case without a trial. The U.S. District Court for the District of Maine granted the summary judgment. Wilson appealed.

The U.S. Court of Appeals for the First Circuit upheld the lower court’s decision, ruling that the company acted appropriately in addressing the initial complaint of harassment and that it cannot be held liable for subsequent incidents because Wilson did not alert the company.

The court ruled that Moulison’s response to Wilson’s initial complaint was swift and appropriate. Moulison looked into the complaint immediately and reprimanded the perpetrators in strong terms. Wilson need not approve of the discipline for it to be appropriate, ruled the court. In the written opinion of the case, the court noted that “the imposition of employee discipline is not a rote exercise, and an employer must be accorded some flexibility in selecting sanctions.”

Wilson’s second claim, that his supervisor should have known about and put a stop to the subsequent incidents of harassment is misplaced, according to the court, because Wilson was the one who had a duty to report the harassment to Moulison. Because Moulison directed Wilson to bring any incidents to his attention immediately, Wilson’s failure to do so jeopardized any case he might have. The court noted: “This omission occurred despite the fact that Moulison reinforced the policy by explicitly instructing the plaintiff to speak directly to him. Under these circumstances, the plaintiff’s failure to put the defendant on notice of the renewed harassment is fatal to his claim of employer liability.” (Wilson v. Moulison North Corporation, U.S. Court of Appeals for the First Circuit, No. 10-1387, 2011)

FRAUD. A federal appeals court has upheld the fraud conviction of former Enron executive Jeffrey Skilling. The court heard Skilling’s appeal after the U.S. Supreme Court narrowed the “honest services” provision of the federal fraud statute last November.

Prosecutors had originally convicted Skilling under a portion of the mail-fraud statute that makes it illegal to deprive someone of “honest services.” The honest services law was meant to tackle fraud cases in which no party suffered a loss. The idea behind the law was that certain actions, such as a government official colluding to give a contract to a favored constituent, for example, are still illegal even if the government receives fair terms on that service. However, the law does not set out exactly what sort of actions are illegal under the honest services theory.

Starting in the 1940s, appellate courts applied the honest services doctrine to bribery of public officials. However, over time, the courts began to apply the concept more broadly, extending it to private industry as well. Usually, the theory was used in cases where a person accepted bribes or kickbacks but the company did not suffer from those actions. But the doctrine has also applied to other types of fraud.

Skilling was convicted for wire fraud under the honest services theory for conspiring to defraud Enron’s shareholders by misrepresenting the company’s financial health. However, Skilling could not be charged for this crime under another statute because he never solicited or accepted payment from a third party in exchange for making these misrepresentations. The government argued that Skilling’s actions were illegal because he deprived the company and its shareholders of honest services.

In appealing his conviction under the honest services theory, Skilling argued that he could not be convicted under the statute because it did not clearly state that his actions were illegal. The U.S. Supreme Court agreed with Skilling; because most cases under the honest services doctrine involved bribes and kickbacks, the Court determined that the law applies only to bribes and kickbacks. Thus Skilling’s conviction on that count must be thrown out, ruled the Court. This did not invalidate the government’s entire case against Skilling, however. The Court ruled that the conviction, including counts of fraud and conspiracy could be reexamined by a lower court.

The U.S. Court of Appeals for the Fifth Circuit upheld the conviction, ruling that even if the convictions related to the honest services provision were thrown out, sufficient evidence remained to prove that Skilling had conspired with others to manipulate Enron’s earnings and conceal its losses. (U.S. v. Skilling, U.S. Court of Appeals for the Fifth Circuit, No. 06-20885, 2011)

DOMESTIC SPYING. A federal appeals court has ruled that the plaintiffs challenging the constitutionality of the government’s domestic spying law do have standing to pursue their case. The plaintiffs, including Amnesty International as well as journalists, international aid groups, labor organizations, and attorneys, argued that the amendments to the Foreign Intelligence Surveillance Act (FISA) violate the U.S. Constitution. The appellate court overturned a lower court’s decision—that the plaintiffs had no grounds to sue because they had no evidence that they had been harmed by the law.

The case involves the FISA amendments, which allow the federal government to conduct surveillance without a warrant if they believe that at least one party involved is a “suspected al Qaeda affiliate.” The plaintiffs argued that, as international aid organizations or groups that do significant work overseas, they are likely to be targets of the government’s warrantless surveillance program. As such, they argued, they have been forced to take “costly and burdensome measures to protect the confidentiality of certain communications.”

The government argued that the plaintiffs’ case should not be allowed to proceed because they could not prove that the FISA amendments would cause them future injury. The court disagreed. In the written opinion of the case, the court noted: “The government overstates the standard for determining when a present injury linked to a contingent future injury can support standing. The plaintiffs have demonstrated that they suffered present injuries in fact—concrete economic and professional harms—that are fairly traceable to the [FISA amendments] and redressable by a favorable judgment. The plaintiffs need not show that they have been or certainly will be monitored.”

The facts of the case must now be heard by a lower court to determine whether the FISA amendments are unconstitutional. (Amnesty International v. Clapper, U.S. Court of Appeals for the Second Circuit, No. 09-4112-cv, 2011)


FOOD SAFETY. A bill (S. 216) introduced by Sen. Patrick Leahy (D-VT) that would enhance penalties for contaminating food supplies has been approved by the Senate. It is now pending in the House Energy and Commerce Committee.

The bill would make the crime of intentionally adulterating or misbranding food, drugs, tobacco products, or cosmetics a felony, punishable by up to 10 years in prison. Those who knowingly introduce such products into the food supply would face the same penalty.

In his introductory remarks, Leahy noted that such activities are already illegal but they are misdemeanors and rarely result in jail time. He also noted that fines and recalls have become so frequent that they are considered “merely the cost of doing business.”

EMERGENCY PREPAREDNESS. A bill (S. 191) introduced by Sen. Joseph Lieberman (I-CT) that would examine how amateur radio operators could aid first responders in an emergency has been approved by the Senate Homeland Security and Governmental Affairs Committee. The Senate must now consider the bill.

Under S. 191, the Department of Homeland Security (DHS) would study how amateur radio operators provided information to first responders during disasters such as Hurricane Katrina, the relief effort after 9-11, and the response to the Oklahoma City bombing. If the report finds that such efforts were successful, DHS will determine how to organize operators to enhance their role in disaster response.

BACKGROUND CHECKS. A bill (H.R. 1331) introduced by Rep. Blaine Luetkemeyer (R-MO) would allow employers in the security and alarm monitoring business access to federal databases to conduct background checks on employees. Because state background screening requirements vary, employers would be able to conduct a federal criminal background check to ensure that employees have not been convicted of a felony within the previous 10 years. After completing a successful check, the employee would be given a federal ID card good for one year that could be used in any state. Under the bill, an employee would be allowed to dispute the findings and correct false information.


WEAPONS. Tennessee Governor Bill Haslam signed a bill (S.B. 519) into law that will clarify the state’s handgun laws. The state already allows employers to permit handguns in the workplace. The new law specifies that the decision to permit handguns in the workplace does not create an unsafe workplace.

CRIME. A new bill (H. 16) introduced in Vermont would amend the state’s criminal code to make it a crime to knowingly and intentionally post false and defamatory information to an Internet Web site. The bill would also amend the definition of Internet harassment to include posting on a Web site as a form of electronic communication.

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