Human Genes Cannot be Patented, Says the U.S. Supreme Court

Last week, a unanimous U.S. Supreme Court held that human genes are not eligible for patenting and that patent claims to isolate genes from DNA are invalid.

WHY IS THIS A BIG DEAL?  Because it prevents any one company from monopolizing testing for a particular gene mutation once they have discovered the gene, which is exactly what the defendant in Association for Molecular Pathology, et al. v. Myriad Genetics, Inc., et altried to do. The Court’s decision allows for a healthy competition between companies offering testing for genetic diseases. It also allows patients to obtain a second opinion regarding any genetic test results.  If Myriad had prevailed, it would have been the only owner of the two genes it tried to patent and it would have paved the way for other companies to monopolize other genes that they had identified.  The Supreme Court’s decision, therefore, is a great victory for all the people affected by hereditary conditions that require genetic testing.

In this case, the defendant, Myriad, discovered the precise location and sequence of two genes related to breast and ovarian cancer – BRCA1 and BRCA2.  Using this discovery, it developed a battery of tests for detecting mutations in these genes in a particular patient and assessing the patient’s cancer risk.  Myriad then filed several patent applications, which, if valid, would allow it to have an exclusive right to (1) isolate the BRCA1 and BRCA2 genes and (2) test them for mutations.  Other laboratories offering genetic testing either had to abstain from testing for BRCA1 and BRCA2 because of Myriad’s patents or received cease and desist letters threatening litigation if they did not stop the testing of these two genes.   The above lawsuit was filed seeking a declaration that Myriad’s patents were invalid under 35 U.S.C. §101.   After percolating through the courts, the case ended up before the U.S. Supreme Court.

Section 101 of the U.S Patent Act provides: “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.”  The U.S. Supreme Court has previously made it clear in Mayo Collaborative Services v. Medical Laboratories, et al., that “[l]aws of nature, natural phenomena, and abstract ideas are not patentable.”

Myriad admitted that it did not create or alter any genetic information encoded in BRCA1 and BRCA2. Nor did it create or alter the genetic structure of DNA.  It’s sole contribution was uncovering the precise location and genetic sequence of the BRCA1 and BRCA2.  The U.S. Supreme Court concluded that unaltered human DNA was a product of nature and could not be patented by Myriad.  Moreover, the genes and the information they encoded are not patent eligible under §101 simply because they have been isolated from the surrounding genetic material.

The Court, however, clarified, that DNA that has been scientifically altered or modified and that is not naturally occurring can be patented.  Specifically, Myriad’s patents for cDNA – a string of DNA where nucleotides that do not code for amino acids have been removed by a lab technician – were patent eligible because they were not a “product of nature.”   The Court’s decision does not affect the companies’ ability to seek patents for methods of use of isolated DNA, manipulation of DNA or testing for gene mutations, and ends up striking the important balance between “creating incentives that lead to creation, invention and discovery” and “impeding the flow of information that might permit or spur invention.”

For more information, contact Leiza Dolghih.

Firing a Mother for Breast Feeding is, Indeed, Sexual Discrimination

Seems like a no-brainer, right? Well, a Texas District Court judge did not think so, so the Fifth Circuit Court of Appeals had to step in and set him straight in Equal Employment Opportunity Commission v. Houston Funding II, Ltd

Back in February 2012, a Texas federal judge held that a woman who claimed that she was fired for seeking to use a breast pump at work had no viable claim under Title VII‘s prohibition against discrimination based upon pregnancy, childbirth or a related medical condition. He dismissed her claims on summary judgment stating that “lactation is not pregnancy, childbirth, or a related medical condition,”  therefore, “firing someone because of lactation or breast-pumping is not discrimination.”  Needless to say, the opinion caused an uproar and resulted in the Equal Employment Opportunity Commission (“EEOC”) filing an appeal with the Fifth Circuit.

The EEOC explained that “lactation discrimination” violates Title VII of the Civil Rights Act of 1964 (“Title VII”) as amended by the Pregnancy Discrimination Act (“PDA”) because lactation is a medical condition related to pregnancy.  Furthermore, the disparate treatment on the basis of breastfeeding, an inherently female function, constitutes “the essence of sex discrimination” under Title VII.  As stated in the EEOC’s appellate brief, “[l]actation is a female-specific function.  Thus, firing a female worker because she is lactating (i.e., producing and/or expressing breast milk) imposes a burden on that female worker that a comparable male employee simply could never suffer. That is the essence of sex discrimination.”

The Fifth Circuit agreed with the EEOC and explained that a dismissal of a female employee motivated by the fact that she is lactating “clearly imposes upon women a burden that male employees need not – indeed, could not – suffer.”  The Court held that “lactation is a related medication condition to pregnancy for purposes of the PDA,” and thus, cannot be used as a reason to fire or discriminate against an employee.

Additional Protections for Breastfeeding Mothers in Workplace 

The Patient Protection and Affordable Care Act (“Affordable Care Act”), which amended Section 7 of the Fair Labor Standards Act (“FLSA”), requires employers to provide reasonable break time for employees to express breast milk for nursing children for one year after a child’s birth.  The Act also requires employers “to provide a place, other than a bathroom, that is shielded from view and free from intrusion from coworkers and the public, which can be used by employees to express breast milk.”  More details about this requirements can be found at the Department of Labor website here.

Texas does not have a similar statute.  However, Texas Health Code §165.002 (1995) authorizes a woman to breastfeed her child in any location, which would include a work place, and Texas Health Code §165.003 et seq. provide for the use of a “mother-friendly” designation for businesses who have policies supporting worksite breastfeeding. (HB 340)  The law provides for a worksite breastfeeding demonstration project and requires the Department of Health to develop recommendations supporting worksite breastfeeding (HB 359), which can be found at

Finally, the EEOC provides its Caregiver Best Practices Guidance (2011) for employers, in which it explains what employers can do above and beyond what is required by federal law in order to avoid discrimination claims and create a productive work environment.

BOTTOM LINE:  In the day and age when women make up 46.9% of the total labor force, and 51.5% of management, professional, and related positions, and when 55.8% of all mothers with children under the age of 1 are in the labor force, employers can no longer afford to ignore pregnancy-related issues in the workplace and need to familiarize themselves with the relevant law or face unpleasant consequences.  

For more information, contact Leiza Dolghih.

An Arbitration Agreement Found Unconscionable Without Translation

It is no secret that many Texas businesses employ Spanish-speaking employees.  It is also no secret that many businesses in Texas require their employees to sign arbitration agreements, in which employees agree to arbitrate any disputes with their employers.  What happens when an employee who only speaks Spanish is asked to sign an arbitration agreement in English?  The Eighth Court of Appeals of Texas ruled that such agreement, when not explained to the employee, is unconscionable.

In Delfingen US-Texas, L.P. v. Guadalupe ValenzuelaGuadalupe Valenzuela was hired to work for Delfingen in El Paso, Texas.  Following a company orientation that was conducted entirely in Spanish, Valenzuela signed a number of documents that were written in English including a “Dispute Resolution and Arbitration Policy and Agreement.”  The agreement included a clause that required all disputes related to Valenzuela’s employment be submitted to binding arbitration.

After Valenzuela was terminated, she filed a lawsuit against Delfingen for wrongful termination.  Delfingen then filed a motion to compel arbitration based on the agreement Valenzuela signed during the orientation.  Valenzuela argued against arbitration by stating the agreement was “procedurally unconscionable” and said she was rushed to sign the agreement despite that it was written in English.  She also alleged that the agreement was not fully explained to her.  Delfingen challenged Valenzuela’s assertions and argued that her inability to read English did not invalidate the agreement.  Following an evidentiary hearing, the district court found that Delfingen did not explain the agreement to Valenzuela and denied Delfingen’s motion to compel arbitration.  The company then filed an interlocutory appeal.

On appeal, Valenzuela argued that the agreement was procedurally unconscionable because: (1) she was unable to read English and Delfingen failed to provide a Spanish translation or explain the agreement to her in Spanish; and (2) Delfingen affirmatively misrepresented the nature of the arbitration agreement.  Because of the district court’s finding that Delfingen had not explained the agreement to Valenzuela at the orientation and because of Delfingen’s stipulation that Valenzuela spoke no English, the Court of Appeals found that the arbitration agreement was procedurally unconscionable.

In contrast, in a case involving a similar issue and decided by another Court of Appeals, the court found that an arbitration agreement was enforceable when a Spanish version of the agreement was provided to employees by their employer.  See Superbug Operating Co., Inc. v. Sanchez (First Court of Appeals, 2013).

THE MORAL OF THE STORY?  If you have Spanish-speaking employees, make sure that the translated versions of any agreements that they sign are available to them, to thwart any arguments of procedural unconscionability.

For more information, contact Leiza Dolghih.

Freedom of Speech v. Defamation: The Texas Citizens Participation Act

In 2011, the Texas legislature passed the Texas Citizens Participation Act (TCPA), meant to curtail the Strategic Lawsuits Against Public Participation (SLAPP) often filed by businesses or other moneyed interests in retaliation for negative comments or complaints made by regular citizens.  The goal of SLAPP lawsuits is not necessarily to win, but to force the defendants to withdraw their statements and to silence them under the threat of costly litigation.

The TCPA protects Texans’ right to free speech by allowing defendants sued for defamation, business disparagement, or other speech-related torts to quickly dismiss lawsuits before the costly discovery begins and automatically recover legal fees if they succeed. By passing the TCPA, Texas joined 27 other states that have similar statutes.

Last week, the First Court of Appeals applied the TCPA to dismiss a lawsuit brought by an assisted living facility against a newspaper that published a number of articles discussing regulatory compliance problems and government investigations into the facility.  Newspaper Holdings, Inc. et al.  v. Crazy Hotel Assisted Living, Ltd., et al.provides a great example of when and how the TCPA applies.  See also Better Business Bureau of Metropolitan Dallas, Inc. v. Ward and Better Business Bureau of Metropolitan Dallas, Inc. v. BH DFW, Inc. discussing how negative ratings of businesses are protected by the TCPA.

In this case, the defendant newspaper published a number of articles about problems encountered at Crazy Hotel assisted living facility and the ensuing government investigations of such problems. Crazy Hotel filed a lawsuit for defamation, business disparagement and tortious interference against the newspaper and its source.  The defendants filed a motion to dismiss the lawsuit, invoking their free speech rights under the TCPA.   The trial court denied the motion to dismiss, but the First Court of Appeals reversed and remanded the case for dismissal.

The Court of Appeals explained that the purpose of the TCPA is to “encourage and safeguard the constitutional rights of persons to petition, speak freely, associate freely, and otherwise participate in government to the maximum extent permitted by law and, at the same time, protect the rights of persons to file meritorious lawsuits for demonstrable injury” and the TCPA was to be construed liberally to effectuate its purpose and intent fully.  §§27.002, 011(b).

Motion to Dismiss Standard under the TCPA

In order to dismiss the lawsuit under the TCPA,  the court must find that (1) the defendant has established by preponderance of evidence that the legal action is based on, related to, or is in response to the defendant’s exercise of the right of free speech, the right to petition, or the right of association; AND (2) the plaintiff has failed to show by clear and specific evidence a prima facie case for each essential element of its cause of action(s).  TCPA §27.005(b), (c).

The TCPA defines “the exercise of the right of free speech” as “a communication made in connection with a matter of public concern,” which includes, among other things, issues related to “health and safety,” and “environmental, economic, or community well-being.” TCPA §27.001(7) (A), (B).  Here, because the newspaper articles that gave grounds to the lawsuit related directly to Crazy Hotel’s obligations to fulfill the licensing requirements and standards applicable to the assisted living facilities under the Texas Health & Safety Code, the Court of Appeals found that they related to a matter of public concern.

The Court of Appeals also found that Crazy Hotel failed to introduce clear and specific evidence that any of the statements made in the newspaper articles were false or that the newspaper was negligent in making such statements, thus failing to show prima facie evidence in support of its claims.

Commercial Speech Exemption from the TCPA

Crazy Hotel argued that the TCPA did not apply to the statement made by the newspaper because it was a commercial and not non-profit organization and because the statements constituted commercial speech not protected by the TCPA.  TCPA §27.001(b).  The Court of Appeals, however, found that because the articles did not “arise out of the sale of lease” of newspapers, the commercial speech exemption did not apply, and to interpret the statute otherwise would defeat the purpose of the TCPA.


If you are facing a defamation, business disparagement, or tortious interference lawsuit, or if you are considering filing one,  make sure  you consider how the TCPA will affect the claims.  As a general rule, any statements regarding matters of public concern are likely to be protected under the TCPA.  On the other hand, statements made in connection with the sale or lease of goods, services, or an insurance product or a commercial transaction intended for potential buyers or customers are not protected.  A claim that the TCPA applies will necessarily lead to compliance with strict procedural requirements set out by the statute.

For more information, contact Leiza Dolghih.

The Supreme Court Renders an Important Pro-Employer Decision

In the past two weeks, both the United States Supreme Court and the Fifth Circuit Court of Appeals have rendered decisions that will add roadblocks to certain employee lawsuits.  Last week, the Supreme Court decided Genesis Healthcare v. Symczykwhich I have previously identified as a case to watch in 2013 (here).

In Genesis Healthcare v. Symczyk, the Court held that when an employee brings a collective action under the Fair Labor Standards Act (FLSA) against an employer, and the employer makes an offer of judgment to the employee under Federal Rule of Civil Procedure 68 prior to class certification, if such offer fully settles the employee’s individual claim, the collective action becomes moot as well.

In this case, Symczyk, a nurse, brought a collective action on behalf of herself and “other employees similarly situated” and alleged that the medical center violated the FLSA by automatically deducting 30 minutes of time worked per shift for meal breaks for certain employees, even when the employees performed compensable work during those breaks.  When Genesis Healthcare answered the complaint, they simultaneously served upon Symczyk an offer of judgment under Rule 68.

The District Court found that this offer of $7,500 provided Symczyk a complete relief on her individual damages claim, and, since no other individuals had joined her lawsuit, the case was rendered moot.  The Third Circuit Court of Appeals reversed the District Court and held that while the individual claim had become moot, the collective action had not.  The Court explained that allowing defendant employers to “pick off ” named plaintiffs with strategic Rule 68 offers before class certification, would frustrate the goals of collective action under the FLSA.

The Supreme Court, however, reversed the Third Circuit Court of Appeals and found that where a judgment offer under Rule 68 completely satisfies the named employee’s individual claim, and the class has not yet been certified, both the individual claim and the collective actions are rendered moot.


Now, anytime an employee brings a collective action under the FLSA against an employer, all the employer has to do to get the collective action dismissed, is to make a Rule 68 judgment offer prior to the class certification, and the collective action will be mooted, if the district court finds that the amount of the judgment offer fully satisfies such employee’s individual claim.  Note, however, that the federal circuit courts are split about the question the Supreme Court did not decide: whether an unaccepted offer of judgment moots the named plaintiff’s FLSA claim (and thus the collective claim). The four dissenting members of the Court said “no.”  The Rule 68 offer strategy will work only in those judicial circuits that find an unaccepted offer of judgment to moot the claim.

The Court’s decision makes it more difficult for employees to bring the FLSA collective actions because they are now forced – prior to class certification – to either identify a sufficient number of class members or claim a sufficiently large amount of damages so that the employer is not willing to make a Rule 68 offer or the employer’s offer is not large enough to satisfy all the individual claims.

The Court specifically pointed out that the judgment offers under Rule 68 might not work in class actions governed by Federal Rule of Civil Procedure 23.  Thus, employees might want to try to bring lawsuits that allege both a collective action under FLSA as well as Rule 23 class actions, or bring only state-law claims as class actions.

It will be interesting to see if, as a result of this decision, the Congress attempts to amend the FLSA to close the loophole created by Rule 68 offers that many employers are now sure to use to dismiss collective actions brought under the FLSA.

For more information, contact Leiza Dolghih.

Your Dog Might Be Worth Less Than Your IPhone

In a long-awaited decision in Strickland v. Medlen, the Texas Supreme Court ruled that pet owners can be compensated only for their animal’s market worth – not their sentimental value – even when a pet’s death is caused by somebody’s negligence. So, for those owners who have adopted no-breed mutts, such market value might be less than the cost of a new cellphone.

The facts of Strickland, much publicized in the media, were such:  the Medlens’ dog, Avery, escaped from their backyard and was picked up by animal control.  The Medlens went to the animal shelter to retrieve Avery, but did not have enough money to pay the fees. They were told to return a week later and a “hold for owner” tag was placed on Avery’s cage. Several days after the tag was placed, Carla Strickland, a shelter employee, put Avery on the list of dogs to be euthanized and he was put down. When the Medlens returned for their dog, they learned of his unfortunate fate. The Medlens then sued Strickland for negligence, claiming damages to compensate them for the unique sentimental or intrinsic value that Avery had.

Texas has long recognized that dogs are considered personal property. Typically, you cannot recover emotional damages for destruction of personal property – only the market value.  However, where personal property is one-of-a-kind or irreplaceable and carries with it a sentimental value (e.g., old family photographs or heirlooms that  have little market value), the damages for the destruction of such property might take into consideration the “feelings of the owner.”  The Medlens argued that this body of law allowed them to recover sentimental value associated with their dog.  The trial court rejected their argument, but was reversed by the Second District Court of Appeals. Strickland appealed.

On appeal to the Texas Supreme Court, the Texas Veterinary Medical Association, submitted an amicus curiae brief to the Court arguing that “awarding sentimental damages for the death of an animal may ultimately harm pets by driving up the basics costs of pet ownership placing it out of reach for some.”  Additionally, Texas Municipal LeagueTexas City Attorneys Association, and City of Arlington submitted a joint amici curiae brief arguing that recognizing sentimental value damages arising out of pets’ deaths would elevate the duties of parties who deal (voluntarily and involuntarily) with other people’s pets, and the associated costs will be passed on to taxpayers and pet owners.  American Kennel Club, Cat Fanciers’ Association, Animal Health Institute, American Veterinary Medical Association, National Animal Interest Alliance, American Pet Products Association, and Pet Industry Joint Advisory Council also filed a joint amici curiae brief arguing against allowing emotion-based damages for pet deaths because of the impact it would have on the costs associated with pet care.  Even Texas Civil Justice League, a non-profit association of Texas businesses, health care providers, and professional and trade associations, chimed in with its own amicus brief reiterating the same arguments.

After considering the Medlens’ and Strickland’s arguments, as well as the amici curiae briefs, the Texas Supreme Court reversed the Court of Appeals and held that non-economic damages rooted solely in an owner’s subjective feelings about the dog were NOT allowed under Texas law.

The Court noted that while “losing man’s best friend is undoubtfully sorrowful,” dog owners cannot recover emotion-based damages for their loss even when their companions are negligently killed.

WHAT DOES THIS MEAN for DOG OWNERS:  If your beloved Buddy runs away from the dog daycare and gets run over by a car because an employee forgot to lock the door, or your vet prescribes Buddy a wrong medication that causes his death or he botches Buddy’s surgery, or (insert a multitude of negligent pet care scenarios, including the one in Strickland), all you can recover as the pet owner is the market value of your dog.

If it’s a pure-bread and you have a receipt for his/her purchase, you can probably recover the purchase cost.  If it’s a trained dog that provides certain services, you can probably recover the value of such services.  However, if it’s “just” a family mutt, with no recognized pedigree or special skills valued in the market, you might be getting next to nothing in damages from a pet care provider, even if s/he were found negligent.

WHAT DOES IT MEAN for PET CARE FACILITIES.  The law remains at status quo. Nothing will change until Texas passes a statute akin to the wrongful death statute that allows people to recover emotional damages for deaths of their immediate relatives.  Given the amount of amici curiae briefs filed in this case and the lobby interests of the pet care industry, a passage of such statute in the near future is highly unlikely.

For more information, contact Leiza Dolghih.

Can You Fire or Get Fired for Statements on Facebook, etc.? (Social Media – Part II)

In the last couple of years, many employers have been adding Social Media policies to their Employee Manuals, often prohibiting employees from discussing all company matters publicly or from disparaging managers, co-workers, or the business itself online.  A violation of these policies has often been cited as a firing offense.  The question is how enforceable are these policies and how far can an employer go in regulating what its employees are saying about the business or the working conditions on sites such as Facebook or Twitter?

Thankfully, several opinions and memorandums issued by the National Labor Relations Board (The Board) provide some very useful guidance.  Here’s a quick summary of do’s and don’t of social media for both employers and employees:

1.  Discussions of working conditions, wages, or benefits are protected.  Under Section 7 of the National Labor Relations Act, all employees (not only the ones unionized)  have the right to “engage in … concerted activities for the purpose of collective bargaining or mutual aid or protection.” The Board considers that any social media policy that discourages workers from exercising their right to communicate with one another with the aim of improving wages, benefits or working conditions, are likely to be in violation of Section 7.

For example, in Hispanics United of Buffalo Inc. and Carlos Ortiz, 03-CA-027872, several employees posted angry comments criticizing one of the other employee’s statements that they were not doing their work.  All five were fired.  The Board ordered their reinstatement and held that the employees were united by common cause, and engaged in a concerted activity for the “purpose of mutual aid or protection” as allowed by Section 7.”

2.  Personal venting or rants are NOT protected. The Board has previously found that an employer can fire an employee for offensive and inappropriate Twitter postings that do not involve protected concerted activity.  See The Board’s Advice Memorandum to Arizona Daily Star, 28-CA-23267.  In this case, a police reporter kept making distasteful comments about Tucson’s homicide rates, criticized another department at his newspaper, and called other media people “stupid” – all from his Twitter account linked to Arizona Daily Star.  The Board found that the employee’s “conduct was not protected and concerted: it did not relate to the terms and conditions of his employment or seek to involve other employees in issues related to employment.”  Thus, the newspaper was within its rights to fire him.

3.   Disclosure of confidential information or trade secrets is NOT protected.  An employer can prohibit employees from disclosing company’s trade secrets in social media.   However, employees still retain the right to discuss their wages, workplace conditions, or employees’ or company performance under Section 7. See Point 1 above.

4. Prohibition of colorful language, expletives, distasteful remarks (also known as “Courtesy Clause”) is unlawful.  The Board has held that courtesy clauses violate the National Labor Relations Act because they may be construed to restrict employees’ rights to publicly criticize their employer.  See Karl Knauz BMW, Knauz Auto Group, 13-CA-046452.  Therefore, while, an employer might find some of its employees’ comments distasteful or rude, as long as such comments are part of a concerted activity, they are lawful and cannot be used as grounds for termination.

5.  Employee opinions are protected even if factually wrong.  The Board’s view is that as long as the purpose of a social media discussion is to come to a collective understanding or action, employees should be able to express their opinions, even if their statements are not entirely factually correct.

6.  Harassing, violent, abusive, or malicious statements are NOT protected.  Employers always retain the right to prohibit sexual harassment, workplace violence and threats of violence, and abusive or malicious activity, and should include such clause in their social media.  However, the clause should be narrowly drafted so that it does not discourage or “chill” the protected activity.

BOTTOM LINE for Employers:

1.   Have a written social media policy. Some examples can be found here.

2.  Make sure the policy is narrowly drafted and does not prohibit or discourage the employees’ right to discuss their work conditions, wages, and benefits or engage in other concerted activities.  Use the memorandums issued by The Board as your guide.

BOTTOM LINE for Employees:

Keep in mind that Texas is an at-will state of employment, which means that an employer can fire an employee at any time, for any reason (except an illegal one). Posts that are not related to the place of employment or work duties, are not protected under Section 7 and can be used by an employer as a lawful cause to fire an employee.

For my previous post regarding Social Media, click here.

For more information, contact Leiza Dolghih.

Facebook – It’s not Just for Fun Anymore (Social Media – Part I)

During 2012, the country has been abuzz with dozens of statutes and cases dealing with social media (Facebook, Twitter, Linked-In., etc.) A new body of law is emerging, and unless you’ve kept close tabs on it, it can be very confusing, especially, considering that different states and different jurisdictions treat some of the same issues quite differently.

I expect that we’ll see an exponential increase in cases dealing with social media in 2013, which is why I would like to dedicate the next several posts to discussing where Texas currently stands on social media legal issues, in comparison to other jurisdictions.

As far as legislation is concerned, Texas is currently trying to catch up with some other states that have already passed statutes dealing with social media.

Senate Bill 118 – A Proposed Amendment to the Labor Code 

Last January, Texas senator Juan Hinojosa (D-Corpus Christi – McAllen) introduced a bill that would make it unlawful for employers to require or request that an employee or applicant for employment “disclose a user name, password, or other means for accessing a personal account or the employee or applicant …”

If Texas passes Senate Bill 118, it would join four other states – California (A.B. 1844), Illinois (H.B. 3782), Maryland (H.B. 964/S.B. 433), and Michigan (H.B. 5523) – that have already enacted similar legislation last year.

Additionally, California (S.B. 1349), Delaware (H.B. 309), Michigan (H.B. 5523), and New Jersey (A.B. 2879) have prohibited higher education institutions from requiring their students to give up their passwords.

Several other states have introduced similar bills in 2012 and 2013, but have not yet passed them: Massachusetts (H.D. 4323), Minnesota (H.F. 2963), Missouri (H.B. 2060), New York (A.B. 9654), Ohio (S.B. 351), Oregon (H.B. 2654), Pennsylvania (H.B. 2332), South Carolina (H.B. 5105), and Washington (S.B. 6637).

Finally, in February, several house representatives in U.S. Congress reintroduced the bill (H.R. 537) titled “Social Networking Online Protection Act” (SNOPA), which would prohibit employers and higher education institutions from requiring their employees and students’ social media passwords.

2.   HB 1989 – A Proposed Amendment to the Texas Civil Practice & Remedies Code

This month, Texas state representative Jeff Leach (R-Plano) proposed a bill that would allow sheriffs, process servers and other legal entities the right to serve legal papers over social media accounts, including Facebook.  As currently drafted, the bill would become effective on September 1, 2013.

If Texas House Bill 1989 is enacted, it would make the Lone Star State the first in the United States to allow for service of process via social media as an alternative means of service.  The courts in other jurisdictions have already found such service to be valid in certain circumstances.  For example, the Southern District Court of New York in Federal Trade Commission v. PCCARE247, Inc., found that service via Facebook was acceptable as long as the serving party could establish that the Facebook account indeed belonged to the person/entity being served.  Outside the United States, Australia, Canada,  New Zealand, and United Kingdom have all allowed service via Facebook or Twitter.   Texas could be next.

UPDATE (July 2013):  The Legislative Session ended on May 27, 2013.  HB 318/SB 118 was passed by the House, but then died.  HB 1989 was not passed by either chamber.

For more information, contact Leiza Dolghih.

Quick Recap of 2013 Tax Changes

Several key tax provisions took effect on January 1, 2013, as part of the American Taxpayer Relief Act of 2012:

Tax Rate Increases

  • Top long term capital gains and qualifying dividends tax rate increased from 15% to 20% – or 23.8% if you include the new 3.8% Medicare tax on investment income (this is a 59% increase).
  • The estate and gift tax exclusion was retained at $5+ million (indexed for inflation), but the top estate and gift tax rate was increased from 35% to 40%.

New Medicare Surtax 

  • Earned income (wages & self-employed income) in excess of $200,000 (for single people) and $250,000 (for married couple) will be subject to 0.9% Medicare tax.
  • Investment income of taxpayers whose Adjusted Gross Income is over $250,000 (for joint filers) will be subject to the new 3.8% Medicare surtax.
  • Taxable gains on residences (gains over $250,000 for individuals and $500,000 for joint filers) will also be subject to 3.8% Medicare surtax.
  • Employer’s part of the Medicare tax remains unchanged.


  • The Section 179 expense deduction for 2013 is $500,000 and additional 50%  first-year bonus depreciation.  These deductions, however, are scheduled to be greatly reduced in 2014.
  • The gift tax exclusion per person increased to $14,000.

For more information, see KPMG’s website here or contact Leiza Dolghih.

The U.S. Supreme Court Renders A Pro-Business Class Action Ruling

Today, the U.S. Supreme Court rendered a decision that should make any business owner facing a class action breath a little easier.   The Court’s decision in Standard Fire Insurance Co. v. Knowlesmakes it easier for defendants to move class actions from state courts to federal courts, which are generally known to be less favorable to plaintiffs and which provide less of a home-court advantage to plaintiffs’ lawyers when it comes to recovery of attorneys’ fees associated with class actions.

Under the Class Action Fairness Act (CAFA), any class action with aggregated damages over $5 million dollars, can be brought in federal court.  To avoid being in federal court, plaintiffs often allege that they are seeking damages of less than $5 million.   Following the usual practice, the named plaintiff in Knowles submitted an affidavit stipulating that the class members were not going to seek at any time during the case damages exceeding $5 million.  The plaintiff then argued that the federal court had no jurisdiction over the case because of the stipulation, even though absent the stipulation the damages would have exceeded the threshold amount.

The U.S. Supreme Court held that such stipulation was not enough to defeat the transfer of the case from the state to federal court and that the federal court had to assess for itself whether the damages exceeded the CAFA threshold.  The Court reasoned that the stipulation did not guarantee that the damages would stay below $5 million because the named plaintiff could not legally bind prospective class members to a certain amount in controversy before the class was certified.

Sure, the Court clarified that a stipulation that is binding on all class members can be sufficient to avoid a transfer to federal court.  However, from a practical stand point, this means that a plaintiffs’ attorney would have to certify the class first, then file a stipulation, and then transfer the case back to the state court, which at that point – months or even years after filing the case in federal court – might be impossible or impractical to do, or simply not worth it.

For more information, contact Leiza Dolghih.