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Discrimination Protections are Reduced After Missouri Signs Bill to Protect Businesses

Missouri is rolling back employment discrimination protections to protect businesses from frivolous lawsuits. At least, that’s the rationale Governor Eric Greitens would have everyone believe. The new law, SB 43, will go into effect beginning April 28 of next year. Previously, employees in Missouri only had to show that discrimination was one factor in their demotion or dismissal to bring a suit. Under the new law, employees must show that discrimination was “the motivating factor” or primary cause of their demotion or termination. Additionally, the bill would cap the amount of damages that an employee could receive and would restrict such suits to businesses. Employees would not be able to sue individuals, such as their supervisors, for discrimination. The bill applies the same restrictions to housing and public accommodations.

discrimination protectionsThe bill is extremely controversial in Missouri, in part because the sponsor of the bill, State Senator Gary Romine, owns a business that is being sued for alleged discrimination.  The employee in Romine’s case alleges that his supervisor calls him “nigger” and that there is a map in the back of the store circling a black neighborhood with the words “do not rent” underneath. Romine denies any wrongdoing in the case and insists that his bill was aimed at frivolous lawsuits without any consideration for the case pending against his company. Nevertheless, the NAACP and other critics accuse Romine of self-dealing while sponsoring and passing the bill.

The Downfall of Mixed-Motive Cases?

As promised, these restrictions will doom many employment discrimination suits. In an at-will employment position, an employer can fire a worker for any reason except for reasons that are prohibited by law. However, it’s rare today for employers to admit to terminating an employee purely for illegal reasons. Instead, the suits often involve cases where the employer dismisses an employee for a mix of legal and illegal reasons. For instance, if a woman is denied a promotion because her performance review says “she berates the staff” and that she “overcompensates for being a woman,” she might have an actionable suit based on the latter comment. However, the former comment would be a justifiable reason for the business to deny her a promotion.

Under federal law, an employer that has both legitimate reasons and illegitimate reasons will be liable for discrimination. If the employer can prove that it would have treated the employee the same without the illegitimate reasons though, reinstatement, back pay, and future pay will be denied to the employee. States have taken different positions on mixed motive discrimination. Many states have adopted the federal model. Other states permit the employee to prevail even he or she can show that an illegal reason exists, regardless of whether there were other legitimate reasons.

The Future of Missouri Businesses

Missouri has changed from a “no impressible motive whatsoever” position to a legal regime where discrimination must be the “dominating factor.” In other words, for Missouri employees to prevail now, it is not enough to show that the employer was discriminatory. If the employer might have had other reasons for dismissing or denying a promotion, the employee must show that discrimination was the most significant reason for loss of employment or promotion. Previously, the woman who sued for losing her promotion to comments that she “berates the staff” and that she “overcompensates for being a woman,” would have won because the second comment was proof of discrimination. Under the new Missouri law, it is not enough that the second comment exists. Instead, the second comment must be the #1 reason the woman lost her promotion.

Although this structure will undoubtedly force many employees out of the Missouri courthouse, the dominate motive structure is not an unusual one. Even states as liberal as California use the dominate motive instead of the mix motive framework to balance the fight between employers and employees. Instead, the most egregious aspect of SB 43 is that it caps damages. If a state forces a plaintiff to jump through hoops, like establishing dominate motive, it seems overly cruel to limit the damages that a plaintiff can obtain if the plaintiff wins. Employment lawsuits can be long and draining as they are. Missouri has doubled the time, expense, and difficulty for employees to collect a judgment, but it has reduced the amount of money that the employee gets even if the employee does everything correctly. It adds insult to injury if an employee can claim she was discriminated, but gets less for it.

Trademark Lawsuit for Juicy Fruit e-Cigarette

Juicy Fruit may not be the gum with the longest lasting flavor but, say what you will, their yellow packaging is immediately recognizable. The same is true of the green packaging on Doublemint, it’s just as easy to pick out in the checkout line in the grocery store. This is the product of around 100 years of marketing on the part of Wrigley Gum. Thus, when Chi-Town Vapors (a company dedicated to creating flavored e-cigarette fluid) decided to make e-cigarette flavors titled “Juicy Fruit” and “Doublemint” Wrigley decided to slap them with a lawsuit that Chi-Town is going to have a heck of a time wriggling out of.

Just last week, Wrigley brought a lawsuit alleging federal claims of trademark infringement, trademark dilution, and unfair competition, as well as an Illinois state law claim of deceptive trade practices, and a common law claim of unfair competition. Wrigley’s claims are strong in this case, mostly because of how Chi-Town Vapors has conducted their marketing and the nature of Chi-Town Vapor’s business. Especially strong are the claims of trademark infringement and trademark dilution. Chi-Town’s missteps are a good lesson for burgeoning businesses, especially when your product can-like Chi-Town’s-be especially vulnerable to dilution claims. In order to help keep your business’ safe, let’s take a look at this case, how it’s likely to shake out, and how trademark infringement and trademark dilution work.

trademark lawsuitChewing Over the Facts of the Case

Wrigley is an old company. A very old company. They’ve been selling Doublemint and Juicy Fruit gum for over a century. They’ve had a number of trademarks on “Juicy Fruit” and its associated logos for ages. Some registered as long ago as 1915, others issued a mere 60 years ago in 1953. It has similar trademark and trade dress (protection on the appearance of the packaging or building design consistently used by a company) on their Doublemint gum.

With all these age old registrations, you have to know it was a bad idea for Chi-Town Vapors to outright name the flavored e-cigarette liquid they sell “Juicy Fruit” and “Doublemint.” Chi-Town didn’t stop there, and their legal problems may not stop with Wrigley. They named flavors “Skittles,” “Hawaiian Punch”, “Kahlua,” “Mountain Dew,” “Red Bull,” and “Nutella.” All of these are registered marks and, no, Chi-Town didn’t get permission to use any of them. In a prime example of digging your own legal grave, Chi-Town Vapors’ marketing materials even included pictures of the products the flavors are based on or have their own name on incredibly close approximations of  the packaging of products such as Doublemint gum.

They must have caught wise to the fact that this wasn’t the best idea because, in January 2017, they took down these pictures and changed the names to things like “Joosy Froot;” still using the recognizable packaging of the candy as part of their marketing materials. Unfortunately for them, this is still extremely unlikely to be enough to get them off the hook.

Bursting Chi-Town’s Bubble: Trademark Infringement and Dilution

Trademark infringement mostly deals with the likelihood that the use of your registered trademark by another may confuse consumers as to the source or sponsorship of goods or services. For instance, if you have a trademark on Widget brand milk, and the guy across the street starts selling Widget brand almond milk, that would be a pretty clear-cut case of trademark infringement. This is especially true due to how close the other store is and how similar their product is.

Chi-Town used the exact name and packaging of both Juicy Fruit and Doublemint on a product designed to taste as identical to each respective gum as possible. There is serious potential that a customer would look at those flavors and think they were sponsored by Wrigley-thus why Chi-Town is in so much trouble.

However, as rough as the case may be for trademark infringement. Chi-Town Vapors has it worse when it comes to dilution. Dilution doesn’t need to show any confusion from consumers or even competition between the owner of the famous mark and the accused party’s product. Instead the owner simply needs to show blurring (that there is a likelihood of dilution in the consumer’s mind between the mark and their product) or tarnishment (a likelihood that association with the accused person’s use of the mark would damage the reputation of the owner’s mark). In order to receive this incredibly powerful protection, you need to be especially famous. However, with factors including how well known and how long the mark has been used as part of that analysis the 100-year-old and near universally recognizable Wrigley brands should qualify fairly easily.

It is the second half of dilution-tarnishment-which is the real trouble for an e-cigarette fluid distributor. Even in Wrigley’s complaint, it’s clear that they are leaning heavily on this argument to establish their dilution case. Not surprisingly, Wrigley has something to say about the practice of selling candy-flavored cigarettes. They point to studies out of the FDA, the Senate, and more which argue that flavoring e-cigarette materials like candy “harmfully targets children under 18 years of age.” To say that selling cigarettes to children has the potential to tarnish Wrigley’s brand is an understatement.

What Can You do to Avoid Chi-Town Vapor’s Sticky Situation?

As bad as the situation is for Chi-Town Vapors, and it does look bad, no case is a guaranteed slam-dunk. However, the best litigation strategy a company can take is to never face litigation at all. This isn’t always possible, but you can take steps in your branding to avoid Chi-Town Vapor’s situation.

First and foremost, don’t use famous brand names on your products without permission. This is obvious, but it bears repeating. If your business deals with something that might harm the reputation of a brand, liquor or tobacco for example, you have to be especially careful. This goes double when a famous brand targets children as customers. Another important step to take is to hire an attorney to do a trademark search for any logos or marketing slogans you want to use. This is generally fairly cheap and goes a long way towards avoiding a trademark infringement lawsuit. Your business is too important to risk a lawsuit or the expense of having to entirely change your branding after working to build it up-take the steps to make sure you don’t end up in Chi-Town Vapor’s situation.

Takata: Company Behind Airbag Crisis Files for Bankruptcy

Takata has literally been sued out of existence. The Japanese based company is filing for bankruptcy in Japan and the United States after a series of product liability suits left them $10 billion in debt. The 80 year old company was determined to be liable for faulty airbags. In one suit, Takata plead guilty to a criminal charge of wire fraud. A competitor, Key Safety Systems, purchased a few departments from Takata, but Takata retains most of its massive debt.

takataWhy is Takata Taking Such a Hard Hit?

Normally, product recalls are cause for concern for a supplier like Takata, but such recalls are not usually fatal. In 2008, Takata and Honda issued a recall of affected vehicles, ultimately totaling 42 million vehicles. Takata airbags would rupture, spraying shrapnel and metal bits at the occupants. In the United States, the airbags were allegedly the cause of 11 deaths and 100 injuries. The defective airbags and recall was bad for Honda and Takata, but survivable for such large companies.

Shortly after though, the New York Times published a story claiming that Honda and Takata knew about the defects since 2004. Instead of ceasing production of the airbags and informing federal regulators, as required, the automakers ordered their engineers to destroy the data showing the faulty airbags. The subsequent Congressional investigations, criminal charges, and civil suits lead to $125 billion in damages and legal fees. Takata settled or paid off most of it debts, but it is still $10 billion in the hole.

If the allegations are true, and Takata has pleaded guilty to some of them, the massive bills are certainly warranted. Companies cannot knowingly release a defective product into the market, cause 11 deaths and a hundred injuries, and expect to walk away without consequences. The penalty is severe though, as these suits and investigations will likely mean the end of Takata itself. Takata employees who were not involved in the design of the faulty airbags don’t deserve to lose their jobs, but unless the bankruptcy can preserve Takata itself, there may be subsequent layoffs.

Could Bankruptcy Save Takata?

With a company of Takata’s size, laying off hundreds of employees is a very real possibility. Fortunately, U.S. bankruptcy is not always the corporate death sentence it appears to be. Bankruptcy does not always mean that creditors will come in and take everything. There are different types of bankruptcy in the United States. These “Chapters” – named after a specific Chapter of the Bankruptcy Code, range from the typical liquidation usually associated with bankruptcy (Chapter 7), repayment plans (Chapter 13) and restructuring (Chapter 11). Takata has taken advantage of Chapter 11 and theoretically should be able to preserve some of its assets.

Chapter 11 bankruptcy is typically used by businesses looking to recover from the bitter taste of bankruptcy. As stated, Chapter 11 is about restructuring the business so that it becomes profitable again. This usually involves selling off parts of the company that are losing money and then refocusing the business on products and services that will allow the company to pay off its remaining debts. In exchange, creditors are expected to forgive and write-off some of the debt owed. Chapter 11 is meant to salvage a failing business, although some Chapter 11 filings can be converted into a Chapter 7, whereby the assets are sold off and the company is basically dead.

Takata has already begun restructuring its debts. The sale of key assets to Key Safety Systems is akin to chopping off an arm to save the rest of the body. Of course, the Takada family remains in control of the company. It might seem unusual that the people who crashed the business would be allowed to remain in control. Unlike Chapter 7 and Chapter 13 bankruptcy, where a neutral trustee is appointed by the bankruptcy court, in Chapter 11 the debtor is allowed to retain control of its finances. This might be appalling to the creditors and victims, but allowing a debtor to remain in control of the company is often the incentive that debtors need to file for a Chapter 11 bankruptcy. This might not feel just, but the expediency of repaying people is more important in the law.

Title VII Claim: Court Rules Intentional Segregation is Not Enough

The car repair chain AutoZone has been in legal trouble for transferring an African-American man from a store with primarily Latin-American clientele to one with primarily African-American clientele. To make things worse, the evidence showed that it was part of a concerted plan on the part of AutoZone to, over time, match the ethnicity of their store employees to the ethnicity of the majority of the clientele of a given store. The man who was to be transferred, one Kevin Stuckey, was fired after he refused the transfer.

If separating stores by race sounds like segregation to you, that’s because it’s basically the textbook definition of it. The Equal Employment Opportunity Commission (EEOC) certainly thought so, and brought a Title VII claim against AutoZone over their practice of intentional segregation. However, in a recent ruling, the EEOC was handed a shocker of a loss. Let’s take a look at the EEOC’s claim and why the court chose to rule the way they did.

Title VII Segregation Claims

The lawsuit brought by the EEOC made a claim under a less common source of liability for employers under Title VII– section 2000e(a)(2). Section 2000e(a)(2) makes it illegal for employers to “limit, segregate, or classify…employees or applicants … in any way that would deprive or tend to deprive [them] of employment opportunities or otherwise adversely affect [their] status as an employee [based on a protected characteristic such as gender or race].” This is a lower requirement than the usual Title VII claims alleging adverse employment action based on a protected characteristic. As we’ve discussed in the past, adverse employment action includes things such as firing, refusal to hire, demotions, refusing promotions or pay raises, and transfers to a generally less desirable position.  The EEOC’s claim, on the other hand, needed only to establish that AutoZone had acted in a way that tended to deprive Mr. Stuckey of an employment opportunity.

title viiThe first part of the EEOC’s claim was to simply prove that there had been segregation based on race. AutoZone obviously contested this, saying that Mr. Stuckey’s transfer was due to a combination of his inability to understand Spanish and failure to get along with the manager at his location.

The EEOC’s case, however, was quite strong. They produced evidence, and even testimony from the manager of Mr. Stuckey’s location, that AutoZone was engaged in intentional segregation based on majority clientele for a given store. AutoZone had an establish practice during the time of only hiring Latin-American employees for the location-regardless of their ability to speak Spanish.

The Court’s Ruling

Unfortunately for Mr. Stuckey and the EEOC, the court didn’t feel they needed to consider whether segregation took place–intentional or otherwise. They instead focused their ruling on whether or not Mr. Stuckey’s required transfer would have had a negative impact on his employment situation.

As mentioned before, segregation cases are fairly rare these days, so perhaps due to the lack of case law on the issue the court decided to examine the potential for negative impact on employment in a very similar manner to the higher standard of an adverse employment action. They focused on the fact that the transfer was a lateral one, no difference in duties, pay, or hours, in determining that Mr. Stuckey’s transfer would not tend to deprive him of an employment opportunity.

The EEOC argued that if the segregation element of Title VII does not cover intentional segregation, it’s a particular odd choice to have a separate rule for it. They further argued that the humiliation and embarrassment of being subjected to racial discrimination was by itself enough to give rise to a cause of action under Section 2000e(a)(2). They reasoned that it doesn’t make sense that the law allows intentional racial segregation of employees so long as the situations are equal–the very definition of separate but equal. Unfortunately, the court did not agree and ruled that without a situation that sufficiently damaged Mr. Stuckey to create a claim it did not need to bother considering whether AutoZone had actually segregated its employees.

What Does This Case Mean?

Unfortunately, this Seventh Circuit Court of Appeals ruling does mean what the EEOC feared in its arguments-employers seem to be able to legally intentionally segregate their employees so long as they don’t do so in a way that damages their economic situation. This seems almost too ridiculous to be the case. However, the next step of appeals from the Seventh Circuit Appeals Court would be up to the highest court in the land-the U.S. Supreme Court. The Supreme Court reviews only a very small portion of cases and, given its current conservative make-up, it is hard to predict the result of such an appeal. For now, this is the final word on this topic-regardless of if it seems to fly in the face of the law itself.

DAPL Protesters’ Victory Has a Long Way to Go

The battle of the Standing Rock Sioux to put an end to the Dakota Access Pipeline (DAPL) running through their lands and under a lake sacred to their people has been a long one and mostly without fruit. However, they recently got their first real victory–sort of.

The judge handling the case has officially ruled that the environmental survey done before starting the pipeline was insufficient. This is the first step necessary to shut down the pipeline completely. However, as substantial as this victory is, the ruling does not go as far as the Standing Rock Sioux would likely have hoped for. Let’s take a look at the ruling, and what it does and doesn’t do, to see why the judge ruled that the environmental survey was insufficient and why the victory is not all the Tribe hoped.

An Insufficient Study Under the National Environmental Policy Act

The Standing Rock Sioux have previously lost cases attempting to stop the DAPL on grounds that the DAPL destroyed sites sacred to them (this one was lost after the site in question was bulldozed over the weekend after the suit was filed) and that they were not consulted on the pipeline as required under a treaty between them and the U.S. Government. This time, however, the Sioux were targeting the insufficiency of the study made on the environmental impact of the pipeline. They argued that the study, the one expedited via an executive order from President Trump on the fifth day of his presidency, didn’t meet the requirements of the National Environmental Policy Act of 1970 (NEPA). This time, the judge in their case finally agreed with them.

DAPLNEPA requires agencies to put together an Environmental Impact Statement for major proposed federal actions along with either a Finding of No Significant Impact (FONSI) or a statement saying how they will mitigate negative impact on the environment called- lo and behold- a Mitigated FONSI. In order for these reports to meet the requirements of NEPA, the agency must have: “(1) accurately identified the relevant environmental concern, (2) taken a hard look at the problem in preparing its [FONSI or Environmental Assessment], (3) the ability to make a convincing case for its finding of no significant impact, and (4) shown that even if there is an impact of true significance, an EIS is unnecessary because changes or safeguards in the project sufficiently reduce the impact to a minimum. Out of these, the vaguely described “hard look” requirement is the one that made the difference. In order to have taken a hard look, an agency needs to look both the probability and the consequences of any given harm to the environment that has more than an extremely remote chance of happening.

In his whopping 91-page decision Judge James Boasberg highlighted two main reasons why the environmental study didn’t take the hard look required by NEPA. First, the U.S. Army Corp of Engineers did not consider how controversial the impact of the DAPL on the environment would be. Second, they did not look at the impact of the pipeline on the Sioux’s ability to hunt and fish on the land.

Controversial, in the context of NEPA, doesn’t mean quite what you’d imagine it to. Instead of implying that agencies should consider whether the public might consider the impact on the environment controversial, the requirement instead focuses on controversy as to the scientific method of the study–whether the means by which the study itself was done may be controversial. This was the case for the Corps’ study. Specifically, the study’s methodology was criticized for making a very general analysis of potential environmental impacts–often relying on studies which were either too general or outright erroneous when applied to the DAPL. By failing to consider whether their methods were improper, the study failed to meet the hard look requirements of the NEPA.

As to the ability to hunt and fish, the Corps’ study looked at the potential impact on the water around the DAPL but neglected to consider potential harm to animal and aquatic life. Even if the chances were remote, the Corps needed to at least consider the impact. By failing to do so they once again fell short of the hard look requirement.

The Loss in the Win

So we can see that the Sioux have got their win. The environmental study is officially insufficient under the NEPA. So why would they not be celebrating? The answer is that Judge Boasberg decided not to actually put a stop to the DAPL just yet.

Where the NEPA is violated the usual remedy is to put a halt to the project in violation until the agency brings itself into compliance by completing its study. This would normally mean that Judge Boasberg would withdraw the DAPL’s permits and easement and put a stop to its functions until a more thorough study was completed. However, citing the expense of stopping the pipeline, the judge instead has allowed for hearings on a potential remedy. After a hearing last week on June 21st, it’s looking like any potential action won’t be in the cards until at least August 28th when the final briefs are due.

This means no injunction for months, which in turn means that the enormous DAPL will continue shipping upwards of 520,000 barrels of crude oil a day across the land of the Standing Rock Sioux. A far from ideal situation for the Tribe. What’s more given the tone of the order (mentioning that Judge Boasberg had previously shot down the Tribe’s last two lawsuits) and the judge’s hesitance to put an actual injunction in place the Standing Rock Sioux have to be cautiously optimistic at best. The order is a win, but it’s far from a true victory.