Sanctity in the Sanctuaries (?): Legal Implications of “Second Amendment Sanctuary” Resolutions in Kentucky

Blog Post | 108 KY. L. J. ONLINE | Jan. 21, 2020

Sanctity in the Sanctuaries (?): Legal Implications of “Second Amendment Sanctuary” Resolutions in Kentucky

Austin Sprinkles

 In the waning days of 2019 and the beginning of 2020, local governments across the Commonwealth of Kentucky began to pass resolutions calling themselves “Second Amendment Sanctuaries.”[1] These resolutions are in opposition to federal and state gun control legislation and are part of a larger nationwide movement.[2] In Kentucky, the movement is largely in response to the potential of a “Red Flag” law being proposed in the 2020 General Assembly.[3]

“Red Flag” laws, also known as Extreme Risk Protection Orders (“ERPO”), allow law enforcement officers (and family or household members in some states) to ask for a court order to temporarily remove an individual’s access to guns when they exhibit dangerous behavior or “red flags”.[4] Connecticut was the first state to enact such a law in 1999,[5]with 17 states having them as of January 2020.[6] These laws are often enacted in response to mass shootings, with the number having doubled since the mass school shooting in Parkland, Florida in 2018.[7] So far, these laws have survived Second Amendment challenges, however the laws passed since 2018 have been broader than initial “Red Flag” laws passed in Connecticut and Indiana. [8] The Kentucky General Assembly has yet to vote on a “Red Flag” law.[9] However in a November 2019 meeting of the Kentucky Interim Joint Judiciary Committee, State Sens. Paul Hornback, ( R-Shelbyville) and Morgan McGarvey, (D-Louisville) testified about such a bill, stating that they were close to finalizing a draft of the bill and filing it for the General Assembly session beginning in January, 2020.[10]

Across the nation, more than 400 municipalities have passed resolutions opposed to the enforcement of federal and state gun laws.[11] In some areas sheriffs and law enforcement officials have stated they will not enforce gun control statutes.[12] Many of these municipalities have declared themselves “Second Amendment sanctuaries”, borrowing the terminology from the recent “Sanctuary City” movement.[13] In addition to “Red Flag” laws, common targets of these resolutions include universal gun background checks and assault-style weapons bans.[14] The language used in Second Amendment sanctuary resolutions can vary, with some municipalities offering a general declaration in support of the Second Amendment and others stating specifically how they will withhold support for gun laws.[15]   

In Kentucky, the potential enactment of a “Red Flag” law has led to many counties adopting Second Amendment sanctuary resolutions.[16] As of January 8th, 2020, at least 14 counties have declared themselves Second Amendment Sanctuaries.[17] As of January 5th, 115 out of Kentucky’s 120 counties have enacted or are considering these resolutions.[18] At least one county, Marshall County, has proposed an ordinance prohibiting any “agent, department, employee, or official of Marshall County” from “[k]nowingly and willingly, participate in any way in the enforcement of any Unlawful Act . . . regarding personal firearms, firearm accessories, or ammunition.”[19]

Most of “Second Amendment Sanctuary” counties have enacted resolutions rather than ordinances. Under Kentucky state law, an ordinance is “an official action of a city legislative body, which is a regulation of a general and permanent nature and enforceable as a local law or is an appropriation of money.’”[20] While a resolution is “not statutorily defined but is distinguished from an ordinance as being “an act of a special or temporary character not prescribing a permanent rule of government, but merely declaratory of the will or opinion of a municipal corporation.”[21] Thus resolutions do not carry the full force of the law.[22] Additionally, section 65.870 of the Kentucky Revises Statutes states that “[n]o existing or future city, county, urban-county government, charter county, consolidated local government, unified local government, special district, local or regional public or quasi-public agency, board, commission, department, public corporation, or any person acting under the authority of any of these organizations may occupy any part of the field of regulation of the manufacture, sale, purchase, taxation, transfer, ownership, possession, carrying, storage, or transportation of firearms, ammunition, components of firearms, components of ammunition, firearms accessories, or combination thereof.”[23]

 If Kentucky were to pass a “Red Flag” law or any other type of gun control legislation, it is not likely that these “Second Amendment Sanctuary” resolutions would have any legal effect.[24] If Marshall County or any other jurisdiction within Kentucky were to pass an ordinance with the force of law, it would likely be in violation of  § 65.870.[25]Although there may not be much legal impact, there is surely to be political impact as the Kentucky General Assembly addresses and debates these issues in the 2020 legislative session.[26]

[1] Deni Camper, Gun Rights Advocates Push to Create '2nd Amendment Sanctuary Counties' in KY, WLKY (Jan. 7, 2020), https://www.wlky.com/article/gun-rights-advocates-push-to-create-2nd-amendment-sanctuary-counties-in-ky/30421467#.

[2] Id. 

[3] Id. 

[4] Tara Sklar, Elderly Gun Ownership and the Wave of State Red Flag Laws: An Unintended Consequence That Could Help Many, 27 Elder L.J. 35, 37 (2019).

[5] Grace Segers, What are "Red Flag" Laws, and Which States Have Implemented Them?, CBS News, (Aug. 9, 2019), https://www.cbsnews.com/news/what-are-red-flag-laws-and-which-states-have-implemented-them/.

[6] Sean Campbell & Alex Yablon, Red Flag Laws: Where the Bills Stand in Each State, Trace, (last updated Jan. 17, 2020, 4:05 PM),  https://www.thetrace.org/2018/03/red-flag-laws-pending-bills-tracker-nra/.

[7] Segers, supra, note 5. 

[8] Sklar, supra, note 4, at 39–40.  

[9] Joe Sonka, Kentucky Advocates Pitch ‘Red Flag’ Law to Remove Guns from Those Deemed a Threat, Louisville Courier Journal (Nov. 22, 2019), https://www.courier-journal.com/story/news/politics/ky-legislature/2019/11/22/proposed-red-flag-law-would-take-guns-kentuckians-deemed-threat/4269447002/.

[10] Id. 

[11] Jennifer Mascia, Second Amendment Sanctuaries, Explained, The Trace (Jan. 14, 2020), https://www.thetrace.org/2020/01/second-amendment-sanctuary-movement/.

[12] Id. 

[13] Id. 

[14] Id. 

[15] Id. 

[16] Will Wright, A Second Amendment Sanctuary Movement is Sweeping Through Kentucky. Here’s Why., Lexington Herald-Leader, (Jan. 3, 2020, 3:21 PM),  https://www.kentucky.com/news/state/kentucky/article238908618.html.

[17] Associated Press, ‘This Map Will Evolve Quickly’: Kentucky Counties Pass Resolutions Supporting Gun Rights, Louisville Courier Journal, (Jan. 7, 2020 12:31 PM), https://www.courier-journal.com/story/news/local/2020/01/07/kentucky-counties-passed-resolutions-declaring-local-governments-second-amendment-sanctuaries/2832055001/.

[18] Kentucky Second Amendment Sanctuary Counties Sweep Across the State, Gun Rights Watch, (Dec. 22, 2019 6:30 PM),https://gunrightswatch.com/news/2019/12/22/kentucky/kentucky-becomes-a-sea-of-orange-as-second-amendment-sanctuary-county-efforts-progress/.

[19] Marshall County, Ky. Proposed Ordinance 2019-15 (proposed Dec. 17, 2019); see also Dalton York, Marshall County Working to Have Kentucky’s First ‘Sanctuary County’ Ordinance for Guns, WKMS, (Dec. 17, 2019), https://www.wkms.org/post/marshall-county-working-have-kentucky-s-first-sanctuary-county-ordinance-guns - stream/0.

[20] Legislative Research Comm’n, Kentucky Municipal Statutory Law, Informational Bulletin No. 145, at 36 (quoting Ky. Rev. Stat. Ann. § 83A.010 (West 1992).)

[21] Id. at 36 (quoting 62 Corpus Juris Secundum. Sec. 411, Municipal Corporations. New York: The Amer. Law Book Co., 1949.).

[22] Wright, supra note 16.

[23] Ky. Rev. Stat. Ann. § 65.870 (West 2012).

[24] Wright, supra note 16.

[25] § 65.870.

[26] Wright, supra note 16.

The Dark Side of “Going Viral”: Can You Still Sue for Defamation

Blog Post | 108 KY. L. J. ONLINE | Jan. 16, 2020

The Dark Side of “Going Viral”: Can You Still Sue for Defamation?

Hannah Oates

The digital age, with the rise of the 15 minutes of fame concept, has complicated defamation law by making it more difficult to ascertain who qualifies as a public figure.[1] Consider Nick Sandmann. The junior at a Kentucky Catholic high school joined the long list of viral fame victims in January of 2019 after multiple large media outlets misconstrued a set of events that occurred in Washington D.C. painting the student as the instigator.[2]  Following the incident, Sandmann filed a defamation suit against CNN, NBC, and the Washington Post.[3] One commentator questions whether Sandmann could be considered a public figure.[4] What would this mean for the lawsuit? It would make it more difficult for Sandmann to succeed against the defendants. 

In a defamation suit, the plaintiff is typically required to prove fault of some sort, normally negligence. However, when the plaintiff is a public figure, the plaintiff must prove that the defendant acted with actual malice, a more difficult standard for the plaintiff to meet.[5]  The court has identified two types of public figures: all-purpose[6] and limited-purpose.[7] Are persons who experience their 15 minutes of fame – persons like Sandmann, subjects of popular memes, and social media “stars” – limited-purpose public figures, therefore, making it harder for them to prove their case in court? 

Part of the confusion in classifying public figures lies in the court split regarding whether one must voluntarily thrust oneself into the controversy. An Idaho court said that “public figure status does not hinge upon an individual’s preference in the matter . . . the Times privilege is not precluded because an individual does not voluntarily pursue public action.”[8]However, the Supreme Court a year prior held that voluntariness plays an important role in deciding whether one is a public figure. In that case, the Court held that a woman who married into a rich, high-profile family was not a public figure during the divorce proceedings.[9] Social media adds an interesting twist because while a person might voluntarily upload a video to Instagram or YouTube, most of the time they are not voluntarily seeking millions of views or likes. Consider a high school student who creates a silly TikTok clip with her friends after school. Chance makes the clip go viral, racking up millions of views. If the clip receives negative comments, should this high schooler be effectively insulated from receiving reprieve because she is deemed a public figure? 

The rationale behind the different standard for public figures further muddles the confusion in the digital age. Part of the reason for the different standard is that public figures have “greater access to the channels of effective communication” so they have “a more realistic opportunity to counteract false statements.”[10] Today, due to social media and the internet, private figures can have similar access to “channels of effective communication” in order to refute defamatory statements. The shift begs the question of whether the different treatment of public and private figures is necessary or effective anymore. 

 One scholar, noting the complications of voluntariness and the inapplicability of the rationale for the different standards, is advocating for a change in defamation public figure law that would elevate the obstacles faced in the digital age.[11]She suggests that the court should first ask “whether the disputed speech relates to an issue of general or public interest before compelling the disclosure of the identity of an alleged defamer.”[12] While this approach would help protect the innocent party of a viral video who had no intention of receiving such acclaim, like the example of the high school TikTok “star,” it likely would not protect Sandmann due to the political nature of the issue that occurred during the protests in the nation’s capital. 

Some defamation plaintiffs might find relief if their newfound fame is due to the media. While there are many ways that one can become a limited-purpose public figure, especially in the digital age where it seems the most unique behavior receives the most likes, one cannot become a public figure because of the media’s behavior. “When a sensational story by one news organization is picked up by many, the snowballing of media attention may transform an unknown individual into a virtual celebrity almost overnight. The possibility therefore exists that by relying on this snowballing of attention a media defendant might be able to bootstrap itself into first amendment protection. Such a sequence of events might concededly defeat public figure status in an appropriate case.” [13] If this exception was not in place, media outlets could take advantage of the public figure rule by continuing to post defamatory stories transforming the plaintiff into a public figure and, therefore, diminishing the plaintiff’s chances of success because actual malice must now be proven. Thus, even if plaintiffs, like Sandmann, are found to be limited-purpose public figures, their status as such might be declared null if the reason for their new fame is actually the entity defaming them.  

Like most areas of the law concerning the digital age, confusion exists. Even the clear defamation rules seem to make little practical sense due to the changing environment. As more cases like Sandmann’s cycle through the court system, perhaps the rules will become more clarified and applicable to the modern age. 

[1] L.V. Anderson, Can You Libel Someone on Twitter?, Slate (Nov. 26, 2012), https://slate.com/technology/2012/11/libel-on-twitter-you-can-be-sued-for-libel-for-what-you-write-on-facebook-and-other-social-media.html (“With the advent of Twitter celebrities and people with thousands of Facebook friends, the line between public and private figures—and therefore whether “actual malice” or negligence applies to a case—becomes increasingly blurry.”).

[2] Bill Chappell, Covington Catholic Teen Nick Sandmann Sues 'Washington Post' For $250 Million, National Public Radio (Feb. 20, 2019), https://www.npr.org/2019/02/20/696245435/covington-catholic-teen-nick-sandmann-sues-washington-post-for-250-million.

[3] Cameron Knight, CNN confirms a settlement has been reached with Covington Catholic student Nick Sandmann, USA Today (Jan. 7, 2020), https://www.usatoday.com/story/news/nation/2020/01/07/nick-sandmann-cnn-confirms-settlement-covington-catholic-student/2837478001/ (In February of 2020, Sandmann and CNN settled the defamation case for an undisclosed amount. It appears the suit remains ongoing against the other defendants).  

[4]  Max Londberg, Nick Sandmann of CovCath may face challenges in proving defamation, experts say, Cincinnati Enquirer (Feb. 11, 2019), https://www.cincinnati.com/story/news/2019/02/11/nick-sandmann-covcath-lacks-obvious-defamation-claim-experts-say/2757343002/.

[5] Gertz v. Robert Welch, 418 U.S. 323, 352 (1974).

[6] Id. (“Absent clear evidence of general fame or notoriety in the community, and pervasive involvement in the affairs of society, an individual should not be deemed a public personality for all aspects of his life”).

[7] Id. at 351 (“More commonly, an individual voluntarily injects himself or is drawn into a particular public controversy and thereby becomes a public figure for a limited range of issues.”). 

[8] Bandelin v. Pietsch, 563 P.2d 395, 398 (1977). 

[9] Time, Inc. v. Firestone, 424 U.S. 448, 454 (1976) (“Nor did respondent freely choose to publicize issues as to the propriety of her married life. She was compelled to go to court by the State in order to obtain legal release from the bonds of matrimony.”).

[10] Gertz, supra note 5, at 344.

[11] Katherine D. Gotelaere, Defamation or Discourse: Rethinking the Public Figure Doctrine on the Internet, 2 Case W. Res. J.L. Tech. & Internet 1, 3 (2011) (“The traditional public figure doctrine, as formulated through Supreme Court jurisprudence, is unable to meet the needs of the Internet.”).

[12] Id. at 4. 

[13] Marcone v. Penthouse Int'l Magazine for Men, 754 F.2d 1072, 1086 (3d Cir. 1985). 

Restorative Justice: Unique Challenges for Rural Communities

Blog Post | 108 KY. L. J. ONLINE | Jan. 14, 2020

Restorative Justice: Unique Challenges for Rural Communities

Seth Woods[1]

Over the past thirty years, a number of communities across North America have implemented restorative justice programs as an alternative supplement to their traditional criminal justice systems.[2] By viewing crime as a violation of individuals and personal relationships, restorative justice programs bring penitent offenders face-to-face with their victims and trained community supporters with the goal of resolving conflicts and reducing the likelihood of reoffending.[3] Recidivism success is one reason why these programs are so highly regarded: according to a long-term study in Longmont, Colorado, the town’s recidivism rate dropped in the past decade from over 32% to just 10% after first-time offenders were provided a restorative justice alternative.[4] Restorative justice programs have also been shown to be significantly more cost-effective than traditional judicial practices (in one study, saving over $1500/year per participant).[5] The programs tend to produce higher satisfaction rates among both victims and offenders.[6]

Despite the alluring results that can come from restorative justice, rural Kentucky has yet to see significant investment into it.[7] Only the state’s largest and fifth-largest cities[8] of Louisville[9] and Covington[10] have established related community justice programs; while in Lexington, the University of Kentucky[11] and Fayette County Public Schools[12]have incorporated restorative justice principles into their student conduct procedures.[13] Smaller communities such as Maysville have started the discussion [14] with moderate support, but have encountered setbacks that more urbanized cities did not.[15]

This is because the legal infrastructure in rural areas is different from more populous communities. For a restorative justice program to succeed, there must be intensive support from a number of community stakeholders—with each stakeholder facing their own unique obstacles. From the legal sector, for example, a judge must be willing to issue and abide by novel sentencing standards, a prosecutor must balance victims’ or others’ desire for retribution against the public interest in reducing recidivism, and a defense attorney must overcome the instinct to instruct their client not to admit guilt or speak to the victims.[16] In many restorative justice cases, the arresting police officer is included in part of the dialogue.[17] Significant support is needed from community partners as well: educators, religious leaders, and local organizers must each dedicate time and attention to offenders while they rehabilitate through the program.[18]

Rural restorative justice advocates face a dilemma when there is only one judge or attorney with the authority to approve such a program: it becomes an “all-or-nothing” situation that can fall apart after the first stakeholder opts out, because there are no alternatives available. Because both the risk and reward are so great, each stakeholder should be fully apprised of their role in the restorative process and make their commitment known before the program begins.

[1] University of Kentucky College of Law, J.D. expected 2021.

[2] Patricia Hughes & Mary Jane Mossman, Rethinking Access to Criminal Justice in Canada: A Critical Review of Needs, Responses, and Restorative Justice Initiatives 34 (2001), https://www.justice.gc.ca/eng/rp-pr/csj-sjc/jsp-sjp/rr03_2/rr03_2.pdf.

[3] U.S. Dep’t of Justice Office of Juvenile Justice and Delinquency Prevention, Effectiveness of Restorative Justice Programs (July 2017), https://www.ncjrs.gov/pdffiles1/ojjdp/grants/250995.pdf.

[4] Madeline St. Amour, Restorative Justice Program in Longmont Sees Success, Spotlights Community, Longmont Times-Call, Dec. 22, 2018, https://www.timescall.com/2018/12/22/restorative-justice-program-in-longmont-sees-success-spotlights-community/.

[5] Bryant Jackson-Green et al., Making Illinois Smart on Crime: First Steps to Reduce Spending, Ease Offender Re-Entry and Enhance Public Safety 12 (2015), https://files.illinoispolicy.org/wp-content/uploads/2015/08/CrimJustice_Report-1.pdf.

[6] Rebecca Beitsch, States Consider Restorative Justice as Alternative to Mass Incarceration, PBS Newshour (Jul. 20, 2016), https://www.pbs.org/newshour/nation/states-consider-restorative-justice-alternative-mass-incarceration.

[7] This is in comparison to the state’s Drug Court system, a specific type of restorative justice that has become very successful in Kentucky. Since the program’s inception in 1996, Drug Courts have been established in 113 of Kentucky’s 120 counties. Ky. Admin. Office of Courts, Kentucky Drug Court: Saving Costs, Saving Lives (2017), https://kycourts.gov/courtprograms/drugcourt/Documents/KYDrugCourtSitesMap.pdf.

[8] Ky. State Data Center, Total Population (2010-2018), Sorted by City Name (May 24, 2019), http://ksdc.louisville.edu/wp-content/uploads/2019/05/subcoest2018_alpha.xlsx.

[9] About Us, Restorative Justice Louisville, http://www.rjlou.org/about-us/ (last visited March 12, 2020).

[10] Community and Restorative Justice – Covington, https://www.facebook.com/CRJCovington/.

[11] Univ. of Ky. Office of Student Conduct, Restorative Justice, https://www.uky.edu/studentconduct/restorative-justice.

[12] Fayette Cty. Public Schools Dep’t of Equity, School Support & Community Engagement, Restorative Practices, https://www.fcps.net/restorative. 

[13] Community Restorative Justice Can Transform Outcomes, City of Maysville (Aug. 15, 2017), http://www.cityofmaysville.com/community-restorative-justice-can-transform-outcomes/.

[14] Public Input Sought on Community & Restorative Justice, City of Maysville (Oct. 31, 2017), http://www.cityofmaysville.com/public-input-sought-on-community-restorative-justice/.

[15] Interview with Lisa Dunbar, City Clerk, City of Maysville, Kentucky (Jan. 1, 2020).

[16] Id.

[17] Beitsch, supra note 6.

[18] Dunbar, supra note 15.

Recount: A Tale of Kentucky's Gubernatorial Election

Blog Post | 108 KY. L. J. ONLINE | January 10, 2020

Recount: A Tale of Kentucky's Gubernatorial Election

Zac Losey

As the election returns rolled in for Kentucky’s state constitutional offices on November 5, all eyes quickly turned to the results of the gubernatorial contest. By night’s end, with the unofficial votes almost fully tallied, the Democratic challenger Andy Beshear led Republican incumbent Matt Bevin by just 5082 votes[1]—a margin of just 0.36 percent. However, around 10:00pm when Bevin took the stage at the Galt House in Louisville, he somewhat surprisingly informed the audience that he would not be conceding due to unspecified “irregularities” and said that the result would be subject to “well-established” laws and procedures.[2] And while he has since conceded,[3] the world of Kentucky politics was in temporary upheaval when State Senate President Robert Stivers suggested that Bevin may invoke a provision of the state constitution[4] that would allow the state legislature to decide the winner of the election.[5]

That provision and the state laws passed under it essentially give the state legislature unfettered discretion to choose the winner of an election when a losing candidate contests the result, with no requirements that there be actual proof of any fraud, misconduct, or “irregularities.” These comments and the extremely small margin separating the two candidates led many to ask: what is the procedure for challenging and checking the results of a gubernatorial election?

In Kentucky, the most basic, and typically the first, step to ensure accurate vote totals is a recanvass. Most people are familiar with a recount, a procedure where ballots are hand checked for accuracy and authenticity, which is distinct from a recanvass, where vote totals are essentially just being double checked to make sure the math adds up. The procedures for a recanvass are laid out in state statutes, which give a statewide candidate one week after election day to make a written request for a recanvass to the Secretary of State.[6] If such a request is made, the recanvass must take place on the Thursday following the deadline to make the request.[7] During a recanvass, each political party and the media is permitted to have a representative present while each county board of elections double checks their vote tallies.[8] Once the vote totals are confirmed, they are sent to the State Board of Elections and thereafter considered the official returns for the election.[9] Recanvasses seldom change the outcome of an election, and often only yield “very modest revisions.”[10]

So, what if a candidate is still not happy with the results of an election after the recanvass? In many cases, the next step would be a recount, in which individual ballots are each counted again to ensure their integrity and accuracy. Many states permit candidates to request a recount if the vote margin is small enough, but in Kentucky there is no threshold—any candidate entitled to request a recount may do so regardless of how many votes they lost by.[11] To request a recount, the candidate must file a petition in Circuit Court within ten days of the election, and once certain procedural requirements are satisfied, the court will take possession of all the relevant “voting machines, ballots, boxes, and [] papers” and conduct the recount.[12]

However, in Kentucky, while most general election candidates can request a recount, candidates for governor, lieutenant governor, and the state legislature cannot.[13] For those candidates, the only recourse after a recanvass is an election contest. This is the procedure that left many uneasy after Kentucky’s gubernatorial contest. Not only does Kentucky’s election contest procedure allow the state legislature to choose the winner of an election regardless of who received the most votes—which understandably caused alarm, since the Kentucky legislature is controlled by a Republican supermajority and Republican state legislatures elsewhere have shown a brazen willingness to undermine rule of law[14]—but the state also has an unpleasant history with election contests. The last time a gubernatorial election was contested in the legislature, the governor was assassinated and the state nearly fell into a state of civil war.[15]

An election contest is authorized in section 90 of the Kentucky Constitution, which simply states that “[c]ontested elections for Governor and Lieutenant Governor shall be determined by both Houses of the General Assembly, according to such regulations as may be established by law.”[16] After the State Board of Elections has given final action to the results, state law gives candidates on a gubernatorial ticket thirty days to file a written notice of contest.[17] Once the contest has been initiated, the General Assembly selects eleven members to be on a board (three from the Senate and eight from the House of Representatives) by randomly drawing names of members from a box.[18] That board then gathers evidence, hears testimony, and makes findings.[19] After its investigation, the board’s decision is reported to a joint session of both chambers, where a final vote is taken to determine whether to accept the board’s recommendation.[20]

While certain procedural requirements are spelled out in state statute, the legislature appears to have broad discretion on whether to uphold or overturn the results of a gubernatorial election. The legislature is not required to justify their decision, and there is no requirement for sufficiency of evidence, no burden of proof on the candidate contesting the election, and no judicial review of the result of an election contest.[21] In the wake of this year’s election, many were fearful that Bevin would contest the election under spurious claims of voter fraud, which have become concerningly common across the country,[22] and the legislature would be free to declare him the winner—even if there were no legitimate grounds for doing so.

While ultimately the election was not contested and we appear to once again be headed toward a peaceful transition of power, this year’s election is a powerful reminder of the fragility of democracy and the power public officials can have over the public’s faith in elections. That power must be exercised responsibly, and officials should be careful not to undermine our electoral system with unfounded claims of voter fraud. And if they continue to do so, more responsible and patriotic public officials would do well to strengthen democratic safeguards—perhaps by requiring claims of “irregularities” and fraud to be proven by real, objective standards of evidence before permitting legislatures to thwart the will of the people and overturn an election.

[1] Veronica Rocha & Fernando Alfonso III, Election Day in Kentucky, Mississippi and Virginia, CNN Politics (last updated Nov. 6, 2019, 12:04pm), http://cnn.com/politics/live-news/2019-election-results-kentucky-mississippi-virginia/index.html. The final margin after the recanvass showed Beshear up 5136 votes over Bevin. Adam Levy & Kate Sullivan, Republican Matt Bevin Concedes Defeat in Kentucky Governor’s Race, CNN Politics (Nov. 14, 2019), https://www.cnn.com/2019/11/14/politics/kentucky-governor-recanvas-begins/index.html.

[2] Steve Brusk, Adam Levy, & Caroline Kelly, Bevin Campaign Formally Asks for a Recanvass in Kentucky, CNN Politics (last updated Nov. 6, 2019, 6:47pm), https://www.cnn.com/2019/11/06/politics/bevin-recanvass-kentucky/index.html.

[3] Steven Shepard, Matt Bevin Concedes Kentucky Governor’s Race, Politico (Nov. 14, 2019), https://www.politico.com/news/2019/11/14/matt-bevin-concedes-kentucky-governor-070975.

[4] Ky. Const. § 90 (Contest of election of Governor, Lieutenant Governor, or General Assembly member).

[5] Phillip M. Bailey & Joe Sonka, Beshear vs. Bevin: Kentucky Governor’s Race Could Be Decided by State Legislature, USA Today (Nov. 7, 2019), https://www.msn.com/en-us/news/elections-2020/beshear-vs-bevin-kentucky-governors-race-could-be-decided-by-state-legislature/ar-AAJXgkI.

[6] Ky. Rev. Stat. Ann § 117.305(1) (LexisNexis 2019).

[7] Id. (“[T]he county election board shall assemble at 9 a.m. on the Thursday following the filing deadline to request a recanvass”).

[8] Id.

[9] Id.

[10] Rick Pojas & Patrick J. Lyons, How Kentucky Will Decide Who Won the Governor’s Race, N.Y. Times (Nov. 7, 2019), https://www.nytimes.com/2019/11/07/us/kentucky-governor-election.html (quoting Professor Joshua A. Douglas, “In every instance, the vote totals change by a very small amount.”).

[11] Ky. Rev. Stat. Ann § 120.185(1) (LexisNexis 2019).

[12] Id.

[13] Id. (Providing that a recount is only available to candidates to which KRS 120.155 applies, which specifically states that it does not apply to candidates for governor, lieutenant governor, or member of the General Assembly). 

[14] See, e.g., Ari Melber, What Happens When Losers of Elections Won’t Relinquish Power?, The Washington Post (Dec. 6, 2018), https://www.washingtonpost.com/outlook/2018/12/06/what-it-means-democracy-if-losers-elections-dont-relinquish-power/ (describing actions taken by the Wisconsin’s republican state legislature to strip the governor of power after a democrat beat a republican incumbent).

[15] Ian Shapira, The Last Time Kentucky Fought Over a Gubernatorial Election, The Governor Got Killed, The Washington Post (Nov. 10, 2019) https://www.washingtonpost.com/history/2019/11/10/last-time-kentucky-fought-over-gubernatorial-election-governor-got-killed/.

[16] Ky. Const. § 90.

[17] Ky. Rev. Stat. Ann § 120.195(1)-(2) (LexisNexis 2019).

[18] Ky. Rev. Stat. Ann § 120.205(1) (LexisNexis 2019). 

[19] Ky. Rev. Stat. Ann § 120.185 (LexisNexis 2019).

[20] Ky. Rev. Stat. Ann § 120.185(5) (LexisNexis 2019).

[21] Taylor v. Beckham, 56 S.W. 17 (Ky. 1900) (holding that the General Assembly has exclusive power to pass on sufficiency of evidence, and that courts will not inquire on whether the ultimate decision of the Assembly is correct.).

[22] See, e.g., Chris Cillizza, Debunking Donald Trump’s Latest Voter Fraud Claim About New Hampshire, CNN Politics (Aug. 16, 2019) https://www.cnn.com/2019/08/16/politics/donald-trump-new-hampshire-vote-fraud/index.html; German Lopez, Trump’s Voter Fraud Commission, Explained, Vox (Jan. 3, 2018), https://www.vox.com/policy-and-politics/2017/6/30/15900478/trump-voter-fraud-suppression-commission.

To Defend or Not to Defend: Commercial General Liability (CGL) Insurers at the Center of Opioid Litigation

Blog Post | 108 KY. L. J. ONLINE | January 10, 2020

To Defend or Not to Defend: Commercial General Liability (CGL) Insurers at the Center of Opioid Litigation

Clay Thornton[1]

In light of the opioid epidemic, drug distributors are being brought into litigation. A question intriguing many insurers is to what extent do they have a duty to defend drug distributors in “pill mill” litigation? Underlying this issue is an inquiry as to whether the product was defective with respect to its intended use.[2]

Generally, like any other business entity, pharmaceutical drug distributors may hold commercial general liability [hereafter “CGL”] insurance, sometimes referred to as business liability policies.[3] CGL insurance provides coverage to business and commercial entities for specified categories of claims arising from injury to property and from liability for claims brought by a third party against the insured.[4]

While the federal court for the Western District of Kentucky has held that the insurance company has a duty to defend the pharmaceutical drug distributor,[5] several jurisdictions have held there is no duty to defend based upon prior gun manufacturing cases.[6]

Duty To Defend

In Cincinnati Insurance Co. v. Richie Enterprises, LLC, Richie Enterprises, LLC [hereafter “Richie”], a pharmaceutical drug distributor incorporated in Kentucky, was sued alongside twelve other drug distributors by the State of West Virginia, whose Attorney General alleged that they were supplying doctors and drugstores with drug quantities in excess of legitimate medical need.[7] Richie sought insurance defense from Cincinnati Insurance under its CGL policy; however, Richie refused to provide defense after concluding the claims brought by West Virginia were not covered by the CGL policy’s limits.[8] Cincinnati Insurance filed a declaratory judgment that there would be no duty to defend.[9]

Under Kentucky law, an insurer has a duty to defend when “there is any allegation which potentially, possibly or might come within the coverage of the policy”; or, restated in other words, the “insurance company must defend any suit in which the language of the complaint would bring it within the policy coverage regardless of the merit of the action.”[10]

Based upon the language of the CGL policy, the Western District of Kentucky had to determine whether the complaint alleged an: “occurrence”, “bodily injury” or “property damage”, and whether the possibility for coverage was removed by the policy’s exclusionary clause regarding intentional and criminal acts.[11] Similar to other CGL policies, the policy at hand provided the following definitions: “Occurrence” is "an accident, including continuous or repeated exposure to substantially the same general harmful conditions."[12] “Bodily injury” is "bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time."[13] “Property damage” is "[p]hysical injury to tangible property, including all resulting loss of use of that property."[14]

Occurrence

The Kentucky courts have defined “occurrence” to mean an “accident,” which inherently points to the doctrine of fortuity comprised of two central components, namely intent and control.[15] Regarding intent, Cincinnati Insurance contended West Virginia’s claim that Ritchie provided drugs in excess of medical necessity created a foreseeable result;[16] whereas, Ritchie argued the alleged claims sounded in negligence and, further, Ritchie was simply distributing in response to orders received from doctors and state-regulated pharmacies.[17] Regarding control, Cincinnati Insurance contended that the supplying of drugs to pharmacies was not an accidental result by Ritchie; whereas, Ritchie argued that the resulting drug epidemic was not foreseeable from their actions and was completely within the control of the pharmacists, physicians, and end-users of the prescription drugs.[18] Favoring Ritchie, the Western District held there was an occurrence.[19]

Bodily Injury or Property Damage

Cincinnati Insurance provided several substantive and persuasive arguments which indicated that the Attorney General’s Complaint sounded in economic damages, as opposed to “bodily injury” or “property damage”; however, the Western District of Kentucky favored a conclusion of bodily injury due to medical monitoring. [20]

Intentional and Criminal Act Exclusionary Provision

Cincinnati Insurance finally argued that the allegations of intentional and criminal conduct made their intentional and criminal act exclusionary provision applicable. In Thompson v. West American Ins. Co., the Kentucky Court of Appeals held that “allegations of the complaint cannot compel a defense if coverage does not exist”  and, further, that the “obligation to defend arises out of the insurance contract, not from the allegations of the complaint against the insured.”[21]

The Western District of Kentucky, however, held the conduct of distributing prescription drugs based upon orders placed by pharmacies is not, in and of itself, illegal and the violation of laws could be reasonably anticipated.[22] Thus, the Western District concluded that the insurer had a duty to defend.[23] This decision was bolstered by a similar holding from a district court in South Carolina regarding one of the other defendant-drug distributors.[24]

No Duty To Defend

Products-Completed Operations Exclusions & “Arising Out of” Considerations

In three federal court cases, the courts have concluded that a products exclusion provision operated to exclude coverage for claims against gun manufacturers for injuries allegedly caused by the guns the insureds had manufactured, and the insurers in opioid litigation have looked to these cases for support.[25] The issue is whether the damages “arise out of” the use of guns, and are thus excluded from coverage under the policies’ products-completed operations hazard exclusions.[26]

Black’s Law Dictionary defines “arise” to mean “[t]o spring up, originate, to come into being or notice.”[27] In Mass. Bay. Ins. Co. v. Bushmaster Firearms, Inc., the victims and family of victims of a shooting incident sued several gun manufacturers.[28] There, a Maine District Court held the damage that the product in question, namely firearms, created was within the products- completed operations hazard language and was thus excluded from coverage.[29] The Maine District Court looked to an earlier decision by the First Circuit regarding gun manufacturers in Brazas Sporting Arms v. American Empire Surplus, in which the insured argued that the exclusion was limited to defective products.[30]The First Circuit rejected the insured’s argument by stating:

The products-completed operations hazard includes in plain and unambiguous language “all ‘bodily injury’ and ‘property damage occurring away from premises you own or rent and arising out of ‘your product.’” Where, as here, the language of the exclusion provision is unambiguous, the text should be given its plain meaning. In this case, the plain meaning of the exclusion is that it applies to all product-related injuries.[31]

In Taurus, another gun manufacturer case, the insured again argued that the products-completed operations exclusion should be applied only to defective product.[32] The Taurus court’s review of case law across the nation revealed: First, most courts have not considered whether such provisions should only apply to defective products. Second, those that have are split on the issue of whether to construe “arising out of” language as restricted to only defective products or a broader interpretation. Third, the language of the policy is the most important factor for determining the duty to defend question.[33] The Taurus court ultimately held there was no coverage because the claims fell within exclusions for “‘bodily injury and property damage … arising out of your product.’”[34]

In opioid litigation citing these gun manufacturing cases, the court in The Travelers Property Casualty Co. of America v. Actavis, Inc. held the insurer had no duty to defend the insured-pharmaceutical companies.[35] Regarding an “occurrence,” or “accident,” the Court of Appeal of California held that the test is “whether an additional, unexpected, independent, and unforeseen happening produced the consequences.”[36] There, the court said the role of doctors in prescribing, or misprescribing, opioids is not an independent or unforeseen happening.[37] Regarding Products Exclusion language, the insurance policies in question provided: exclusion of coverage for bodily injury “arising out of” (Travelers Policies) or that “results from” (St. Paul Policies) “[a]ny goods or products…manufactured, sold, handled, distributed or disposed of by” the insured.[38] The Products Exclusions in the policies at question were unambiguous, stating: 

The declarations page states that the Travelers Policies have a general aggregate limit that applies to claims “[o]ther than Products-Completed Operations.” Because no classification of products claims is listed on the declarations page or a policy schedule, all products and operations are subject to the Products Exclusions.[39] A host of federal and state cases supported this decision in Actavis, Inc. that Products Exclusions bar coverage. [40]

Conclusion

The sample of court decisions provided exemplify how courts have reached different conclusions regarding insurer’s duty to defend in opioid litigation. The decisions have depended upon the construction of the insurance policy at hand,[41] differing state law interpretations of “occurrences” or “accidents” regarding intent,[42] and court interpretations of products-completed exclusionary clauses.

 With that recognition, depending on the jurisdiction in which an insurer finds themselves, the answer may still be unclear. However, if there is any consolation, the standing case law provides a litany of successful arguments for both insurers and insureds in future opioid litigation.

 [1] Staff Editor, Kentucky Law Journal, Volume 108; J.D. Candidate, University of Kentucky College of Law (2021); B.S., Accounting, B.S., Economics, Gatton College of Business and Economics, University of Kentucky (2018).

[2]Aetna Casualty & Surety Co. v. Richmond, 76 Cal. App. 3d 645 at 654 (Cal. Dist. Ct. App. 1977).

[3] Stephen Michael Sheppard, Commercial General Liability, The Wolters Kluwer Bouvier Law Dictionary Desk Edition.

[4] Id.

[5] Cincinnati Insurance Co. v. Richie Enterprises, LLC, 2014 U.S. Dist. LEXIS 27306 (W.D. Ky. 2014). See Liberty Mutual Fire Ins. Co. v. JM Smith Corp., 602 Fed. Appx. 115, 116 (4th Cir. 2015). The Fourth Circuit held that because the claims alleged in the West Virginia complaint create a possibility for coverage, the insurer was held to have a duty to defend the drug manufacturer.

[6] See The Travelers Property Casualty Co. of America v. Actavis, Inc., 16 Cal. App. 5th 1026. See also Taurus Holdings, Inc. v. United States Fid. & Guar. Co., 913 So. 2d 528; Brazas Sporting Arms v. American Empire Surplus (1st Cir. 2000) 220 F.3d 1; Beretta U.S.A. Corp. v. Fed. Ins. Co. (4th Cir. 2001) 17 Fed. Appx. 250; Massachusetts Bay Ins. Co. v. Bushmaster Firearms (D.Me. 2004) 324 F.Supp.2d 110. Products exclusion provision operated to exclude.

[7] Cincinnati Insurance Co. v. Richie Enterprises, LLC, 2014 U.S. Dist. LEXIS 27306 at *1-2 (W.D. Ky. 2014).

[8] Id. at *5.

[9] Id.

[10] Id. at *9. (citing James Graham Brown Found., Inc. v. St. Paul Fire & Marine Ins. Co., 814 S.W.2d 273, 279 (Ky. 1991)).

[11] Id. at *8.

[12] Id.

[13] Id. at *7-8.

[14] Id. at *8.

[15] Id. at *9-10. (citing Cincinnati Ins. Co. v. Motorist Mutual Ins. Co., 306 S.W.3d 69, 73-74 (Ky. 2010).

[16] Id. at *13-14.

[17] Id. at *11-13.

[18] Id. at *18-19.

[19] Id. at *19-20.

[20] Id. at *23-24. See Baughman v. U.S. Liab. Ins. Co., 662 F. Supp. 2d 386, 396 (D.N.J. 2009) ("The underlying plaintiffs have brought suit to procure, among other things, the costs of medical monitoring 'as damages' for the 'bodily injury' they allegedly suffered due to exposure to dangerous levels of mercury and so the underlying suit falls within the general coverage of the CGL policy.").

[21] Id. at *24-25. (quoting Thompson v. West American Ins. Co., 839 S.W.2d 579 (Ky. App. 1992)).

[22] Id. at *25.

[23] Id. at *15. (citing Liberty Mutual Fire Insurance Co. v. J M Smith Corp., 2013 U.S. Dist. LEXIS 136448. Affirmed in Liberty Mut. Fire Ins. Co. v. J M Smith Corp., 602 Fed. Appx. 115 (4th Cir. 2015)).

[24] Id.

[25] The Travelers Property Casualty Co. of America v. Actavis, Inc., 16 Cal. App. 5th 1026 (Cal. Dist. Ct. App. 2017). See Brazas Sporting Arms v. American Empire Surplus, 220 F.3d 1 (1st Cir. 2000); Beretta U.S.A. Corp. v. Fed. Ins. Co., 17 Fed. Appx. 250 (4th Cir. 2001); Massachusetts Bay Ins. Co. v. Bushmaster Firearms, 324 F.Supp.2d 110 (D.Me. 2004).

[26] Taurus Holdings, Inc. v. U.S. Fid. & Guar. Co., 913 So.2d 528, 530 (Fla. 2005).

[27] Taurus Holdings, Inc., 913 So.2d at 536 (citing Arise, Black's Law Dictionary (6th ed. 1990)).

[28] Massachusetts Bay Ins. Co. v. Bushmaster Firearms, 324 F.Supp.2d 110 (D.Me. 2004).

[29] Id. at 112.

[30] Id. at 113.

[31] Id. (quoting Brazas Sporting Arms v. American Empire Surplus, 220 F.3d 1, 6 (1st Cir. 2000)).

[32] Taurus Holdings, Inc., 913 So.2d at 537.

[33] Id.

[34] Id. at 530.

[35] The Travelers Property Casualty Co. of America, 16 Cal. App. 5th at 1026.

[36] Id. at 1042.

[37] Id.

[38] Id. at 1044.

[39] Id. at 1051-52.

[40] Id. at 1046-47. See Travelers Property Casualty Co. of America v. Anda, Inc., 658 Fed.Appx. 955 (11th Cir. 2016).

[41] See The Travelers Property Casualty Co. of America, 16 Cal. App. 5th at 1051-52.

[42] Id. at 1042-43.

Keeping Up With Copyright Infringement: Fast Fashion’s Modern Takeover

Blog Post | 108 KY. L. J. ONLINE | January 9, 2020

Keeping Up With Copyright Infringement: Fast Fashion’s Modern Takeover

Catherine Potter 

Copyright infringement is a pinnacle problem in the fashion industry, as fast fashion retailers “knock off” designs created by independent designers worn by social media stars. The crux of this problem lies in current United States copyright law which protects only original prints or graphics, not the actual designs carefully crafted by highly skilled fashion designers.

[1] These loopholes allow for fast fashion brands to profit, legally, on the designs of others, as clothing designs can be easily duplicated without permission of the original creator.[2]

Fast fashion company business models rely on the ability to copy trends, quickly produce them, and then bring them to market at a low price point.[3] The sector is “ridiculously profitable” and demands legal representation as such.[4] The industry remains successful because consumers rely on brands like Fashion Nova, Forever 21, Missguided, Asos, and others to recreate celebrity looks for cheaper prices.[5]

Different from music, art, literature, and other creative industries, fashion copyright law remains outdated.[6] Fashion was historically centered in Europe, with hubs in Paris and Milan.[7] During the 1980s and 90s, American designers emerged to the forefront.[8] Fashion designers in France and Italy remain protected by their country’s copyright laws, though American law has not developed to afford their designers the same protection.[9]

In 2004, Forever 21 was sued by multiple designers like Diane Von Furstenberg and Anna Sui, along with 47 other designers, for copying their clothing.[10] Forever 21’s defense was “ignorance” and that they could not monitor every buyer or vendor to the point of knowing how they came up with the repeat designs.[11] In 2012, Christian Louboutin sued Zara for copying their iconic red sole, selling the shoe for much less than the average $700 price per pair, with the court ruling that the trademarked red sole was too vague.[12]

 Today, social media has had a tremendous effect on consumer demand for fast fashion, as high profile celebrities and social media influencers such as Kim Kardashian, Kylie Jenner, Jennifer Lopez, and others post on their social media platforms in couture designs by Thierry Mugler, Versace, or Jean Paul Gaultier, days later to be copied by companies like Fashion Nova or Missguided, and the like.[13] Kim Kardashian filed suit recently against Missguided, a British Fast Fashion company, alleging that they used her likeness to sell cheaper versions of the designer clothing she wears.[14]Interestingly enough, Kardashian and the designers did not maintain infringement claims, but right of publicity violations.[15] Kardashian settled with Missguided and received $2.7 million dollars in damages from the company.[16]

John Galliano famously turned newspaper printed textiles into garments while at Christian Dior in the early 2000s.[17]Pretty Little Thing, another fast fashion company, recreated the garment using Galliano’s same name in the print.[18]Online sources believe that the use of the print alone will not give rise to an infringement claim, but rather falls under the copyright law doctrine of “idea-expression dichotomy” which provides legal protection over the expression of an idea, not the actual idea in and of itself.[19]

These knock offs are arguably what fuels part of the fashion industry, generating billions of dollars. The law protects this profitability but it is worth questioning whether if the outdated copyright laws were modernized that these high profile designers would be afforded more legal protection and ability to bring copyright infringement claims, perhaps mirroring the protections given to European designers. 

[1]Amy Lamare, How Fast Fashion Became a Multi-Trillion-Dollar Industry, Thinknum, 

 https://media.thinknum.com/articles/examining-fast-fashions-appeal-and-issues/ (last visited Jan. 9, 2020). 

[2] Chavie Lieber, Fashion brands steal design ideas all the time. And it’s completely legal., Vox (April 27, 2018), https://www.vox.com/2018/4/27/17281022/fashion-brands-knockoffs-copyright-stolen-designs-old-navy-zara-h-and-m.

[3] Id.

[4] Id.

[5] Maria Bobila, 11 Retailers to Know in a Post-Forever 21 World, Fashionista (Oct. 10, 2019), https://fashionista.com/2019/10/fast-fashion-stores-retailers-brands-like-forever-21.

[6] Chavie Lieber, Beyond Elle Woods: The Rise of Fashion Law, Racked (Jan. 15, 2015), https://www.racked.com/2015/1/15/7561277/fashion-law.

[7] Id.

 [8] Id.

 [9] Id.

[10] Amy Lamare, How Fast Fashion Became a Multi-Trillion-Dollar Industry, Thinknum, 

 https://media.thinknum.com/articles/examining-fast-fashions-appeal-and-issues/ (last visited Jan. 9, 2020). 

[11] Id.

[12] Id.

[13] Lisette Voytko, Versace Sues Fashion Nova For Knowing Off Famous Jennifer Lopez ‘Jungle’ Dress, Forbes (Nov. 27, 2019, 9:00 AM ), https://www.forbes.com/sites/lisettevoytko/2019/11/27/versace-sues-fashion-nova-for-knocking-off-famous-jennifer-lopez-jungle-dress/#6609f8b71d4c.

[14] Will Martin, Kim Kardashian won $2.7 million in a lawsuit accusing fast-fashion brand Missguided of ‘knocking off’ her clothes, Business Insider (July 4, 2019, 5:45 AM), https://www.businessinsider.com/kim-kardashian-missguided-lawsuit-awarded-damages-california-judge-2019-7; From Zara to Fashion Nova: Fast Fashion is Big Business & More Often Than Not, Perfectly Legal, The Fashion Law (Feb. 28, 2019), https://www.thefashionlaw.com/home/from-zara-and-hampm-to-missguided-and-fashion-nova-fast-fashion-is-big-business-and-more-often-than-not-perfectly-legal.

[15] From Zara to Fashion Nova: Fast Fashion is Big Business & More Often Than Not, Perfectly Legal, The Fashion Law (Feb. 28, 2019), https://www.thefashionlaw.com/home/from-zara-and-hampm-to-missguided-and-fashion-nova-fast-fashion-is-big-business-and-more-often-than-not-perfectly-legal.

[16] Greg Barradale, Missguided has to pay Kim K $2 million for ripping off her looks,The Tab, https://thetab.com/uk/2019/07/04/missguided-have-to-pay-kim-k-2-million-for-ripping-off-her-looks-109310 (last visited Jan. 8, 2019). 

 [17] John Galliano’s Newspaper Print is Getting the Fast Fashion Treatment 20 Years Later, The Fashion Law (Jan. 6, 2020),  https://www.thefashionlaw.com/home/john-gallianos-newspaper-print-is-getting-the-fast-fashion-treatment-20-years-later.

 [18] Id.

 [19] Id. 

NCAA Takes Small Step in Long Process Towards Allowing Student-Athletes to Profit from Name, Image and Likeness Rights

Blog Post | 108 KY. L. J. ONLINE | November 12, 2019

NCAA Takes Small Step in Long Process Towards Allowing Student-Athletes to Profit from Name, Image and Likeness Rights

Jameson Gay

 On Tuesday, the NCAA’s governing board unanimously voted to allow student athletes the “opportunity to benefit from the use of their name, image and likeness (NIL) in a manner consistent with the collegiate model.”[1] The board formed a working group in May to examine the NIL related issues presented in proposed state and federal legislation.[2] Based on the group’s recommendations, the board recognized that the NCAA “must embrace change.”[3] The vague, cautiously worded statement, however, makes clear that many hurdles remain before athletes are able to cash in on their NIL.[4]

As a result of increasing pressure at both the federal and state levels, the NCAA’s announcement indicated a seemingly abrupt departure from recent statements.[5] The working group’s co-chair initially indicated the group would “potentially propose rule modifications tethered to education” and would not “result in paying students as employees.”[6] Just last month, NCAA president Mark Emmert stated the NIL issue of California’s Fair Pay to Play Act was an “existential threat” to the collegiate model.[7] But with nine states proposing legislation similar to California’s, the NCAA found it necessary to address the NIL issue to prevent harm to “a national, uniform college athletics model.”[8]

The statement, however, merely indicates a favorable shift in NCAA policy towards allowing players to receive compensation for their NIL.[9] Instead of providing specifics, the NCAA stalled until April to allow more time to determine a response to legislative proposals.[10] The board included a vague framework of principles and guidelines that emphasized the new rules should “maintain the priorities of education” and “make clear the distinction between collegiate and professional opportunities.”[11]

Under this “new” framework it is not likely that the NCAA will permit athletes to be compensated in an unrestricted market as contemplated by some legislators.[12] More likely is a rule that aligns with the “tethered to education” requirement, established by Ninth Circuit precedent, to maintain a clear distinction between college and pro athletes.[13]A potential solution could be putting the compensation into a trust that can be accessed as a result of meeting specified academic benchmarks, such as meeting certain GPA, meeting yearly academic progress requirements, or graduating.[14] 

While the pressure from the states is obviously having an impact, it will likely take a victory in court or a bill passed by Congress to actually make a difference and force the NCAA’s hand.[15] Until then, the NCAA is prepared to challenge state laws that attempt to grant NIL rights beyond those articulated by their framework.[16] The NCAA will argue under NCAA v. Miller that the laws violate the Commerce Clause because they cannot operate as a national entity if states adopt conflicting laws.[17] As the NCAA struggles to maintain control of their precious ideal of “amateurism,” we have more questions than answers.

[1] Board of Governors Starts Process to Enhance Name, Image and Likeness Opportunities, NCAA (Oct. 29, 2019, 1:08PM), http://www.ncaa.org/about/resources/media-center/news/board-governors-starts-process-enhance-name-image-and-likeness-opportunities.

[2] Michael Brutlag Hosick, NCAA Working Group to Examine Name, Image and Likeness, NCAA (May 14, 2019, 2:40PM), http://www.ncaa.org/about/resources/media-center/news/ncaa-working-group-examine-name-image-and-likeness.

[3] Board of Governors Starts Process to Enhance Name, Image and Likeness Opportunities, NCAA (Oct. 29, 2019, 1:08PM), http://www.ncaa.org/about/resources/media-center/news/board-governors-starts-process-enhance-name-image-and-likeness-opportunities.

[4] Michael McCann, Key Questions, Takeaways from the NCAA’s NIL Announcement, Sports Illustrated (Oct. 29, 2019), https://www.si.com/college/2019/10/30/ncaa-name-image-likeness-announcement-takeaways-questions.

[5] John Taylor, NCAA Board of Governors Gives Unanimous Go-ahead for Athletes to Benefit Off Their Names, Image, Likeness, NBC Sports (Oct. 29, 2019, 2:15PM), https://collegefootballtalk.nbcsports.com/2019/10/29/ncaa-board-of-governors-gives-unanimous-go-ahead-for-athletes-to-profit-off-their-names-images-likenesses/.

[6] Michael Brutlag Hosick, NCAA Working Group to Examine Name, Image and Likeness, NCAA (May 14, 2019, 2:40PM), http://www.ncaa.org/about/resources/media-center/news/ncaa-working-group-examine-name-image-and-likeness.

[7] J. Brady McCollough, NCAA Says it Will Let Athletes Benefit From Name, Image And Likeness Use; A Plan is in the Works, LA Times (Oct. 29, 2019, 11:34AM), https://www.latimes.com/sports/story/2019-10-29/ncaa-athletes-nil-college-athletes-profit-name-image.

[8] Charlotte Carroll, Tracking NCAA Fair Play Legislation Across the Country, Sports Illustrated (Oct. 2, 2019), https://amp.si.com/college-football/2019/10/02/tracking-ncaa-fair-play-image-likeness-laws; Questions and Answers on Name, Image and Likeness, NCAA (Oct. 29, 2019), http://www.ncaa.org/questions-and-answers-name-image-and-likeness.

[9] Board of Governors Starts Process to Enhance Name, Image and Likeness Opportunities, NCAA (Oct. 29, 2019, 1:08PM), http://www.ncaa.org/about/resources/media-center/news/board-governors-starts-process-enhance-name-image-and-likeness-opportunities.

[10] Dennis Dodd, Inside the NCAA’s Move to Allow Athletes to Profit From Name Image and Likeness Rights, CBS Sports (Oct. 29, 2019), https://www.cbssports.com/college-football/news/inside-the-ncaas-move-to-allow-athletes-to-profit-from-name-image-and-likeness-rights/.

[11] Board of Governors Starts Process to Enhance Name, Image and Likeness Opportunities, NCAA (Oct. 29, 2019, 1:08PM), http://www.ncaa.org/about/resources/media-center/news/board-governors-starts-process-enhance-name-image-and-likeness-opportunities.

[12] Dan Murphy, NCAA Clears Way for Athletes to Profit from Names, Images and Likenesses, ESPN (Oct. 29, 2019, 1:50PM), https://www.espn.com/college-sports/story/_/id/27957981/ncaa-clears-way-athletes-profit-names-images-likenesses.

[13] Mit Winter, NCAA to Examine Allowing College Athletes to Receive Compensation for Use of Name, Image and Likeness, Kennyhertz PerryLaw (2019), https://kennyhertzperry.com/ncaa-to-examine-allowing-college-athletes-to-receive-compensation-for-use-of-name-image-and-likeness/.

[14] Id.

[15] Mike Decourcy, NCAA Won’t Budge on its NIL Timeline, despite Gov. Newsom’s Posturing, Sporting News (Oct. 1, 2019), https://www.sportingnews.com/us/ncaa-basketball/news/ncaa-wont-budge-on-its-nil-timeline-despite-gov-newsoms-posturing/go4899uxz0ua1u3fh28zfva8b.

[16] McCann, supra note 4.

[17] Id.

Not All Fun and Logic Games: The LSAT’s Attempt to Ensure Inclusivity through Reformation

Blog Post | 108 KY. L. J. ONLINE | November 12, 2019

Not All Fun and Logic Games: The LSAT’s Attempt to Ensure Inclusivity through Reformation

Paige Goins[1]

Nine years ago, law school hopeful Angelo Binno took the Law School Admissions Test (LSAT), making strides toward a career he had dreamed of since his days in middle school.[2] As he progressed through the exam, Binno inevitably reached the infamous logic games section of the test and realized his unavoidable defeat.[3] Because of the nature of the logic game questions, drawing and diagramming is usually a requirement for a successful score.[4] Binno is legally blind, making the diagramming, and consequently the logic games portion as a whole, exceedingly difficult, if not impossible.[5] Binno reportedly received a “very low” score on the admissions exam as a result of the section[6] and further claims he was denied entry to three law schools because of his poor performance.[7]

Binno filed suit after the Law School Admissions Council (LSAC) denied his accommodation request to waive the logic games portion of the exam, a refusal which Binno asserts violated the Americans with Disabilities Act (ADA).[8] The ADA defines “disability” as (1) a physical or mental impairment that substantially limits one or more major life activities of such individual; (2) a record of such an impairment; or (3) being regarded as having such an impairment.[9] Section 309 of the ADA’s Title III provides that any person who administers examinations related to applications of secondary/postsecondary education, professional, or trade purposes must do so in a place and manner that is accessible to persons with disabilities.[10] If accessibility is hindered, the examiner must offer alternative accessibility accommodations.[11] Section 503 of the ADA’s Title IV protects from interference with an individual’s enjoyment of any right the ADA protects.[12]

Binno argued because the LSAT required “spatial reasoning and visual diagramming for successful completion”, the admissions exam has a discriminatory effect on individuals with visual impairments, resulting in their poor performance.[13] This prevents those individuals from receiving admissions offers from accredited law schools, constituting a violation of Title III and IV of the ADA.[14]

Binno’s argument is not without merit. Legal blindness falls within the ADA’s definition of disability because it is a physical impairment that substantially limits Binno’s ability to see, which qualifies as a “major life activity” under the statute.[15] As to Section 309, LSAC has been administering a test that includes a lofty portion where success hinges upon hand-drawn, visual aids, impeding success for those with sight deficiencies.[16] LSAC had an option under the statute to continue operation with the embedded inaccessibility if they furnished an alternative accessible arrangement.[17] The Complaint states LSAC provided Binno with multiple accommodations such as a two-day examination period with breaks, 150% additional time per section, use of an Excel spreadsheet, screen-reading software, and a tactile system which one could argue were sufficient to shield LSAC from liability.[18] This argument is unpersuasive, however, as none of the provided accommodations were adequate remedies for Binno’s disability and therefore could not be reasonably presented as an alternative.[19] Finally, LSAC’s actions can be argued to violate Section 503 as administering the exam in such a manner interferes with Binno’s enjoyment of the right to take examinations without hinderance based upon his disability.[20]

Eight years after Binno filed suit, LSAC recently announced a settlement had been reached between the parties resulting in LSAC’s elimination of the logic games section, entirely.[21] LSAC maintains they will continue to test logical analytics in different ways that do not involve logic games and purports to include Binno and his co-plaintiff in the reformation process to ensure the new and improved examination’s inclusivity.[22]

[1] Staff Editor, Kentucky Law Journal, Volume 108; J.D. Candidate, The University of Kentucky College of Law (2021).

[2] Ryan Prior, A Lawsuit Argued the LSAT Discriminates Against the Blind. Now it’s Changing for Everyone, CNN (Oct. 10, 2019), https://www.cnn.com/2019/10/10/us/lsat-blind-people-trnd/index.html.

[3] Id.

[4] Staci Zaretsky, Major Changes Coming to the LSAT with Removal of Logic Games Section, Above the Law (Oct. 8, 2019), https://abovethelaw.com/2019/10/major-changes-coming-to-the-lsat-with-removal-of-logic-games-section/.

[5] Id.

[6] Stephanie Francis Ward, After Losing LSAT Lawsuit Against the ABA, Legally Blind Man Sues LSAC, ABA J. (May 18, 2017), http://www.abajournal.com/news/article/after_losing_lsat_lawsuit_against_the_aba_legally_blind_man_sues_lsac.

[7] Binno v. ABA, 826 F.3d 338, 341 (6th Cir. 2016).

[8] Nyman Turkish PC, Statement on the Amicable Resolution of Binno v. LSAC Lawsuit, Cision PR Newswire (Oct. 7, 2019), https://www.prnewswire.com/news-releases/statement-on-the-amicable-resolution-of-binno-v-lsac-lawsuit-300931402.html.

[9] Americans with Disabilities Act, 42 U.S.C. § 12102(1) (2019).

[10] Americans with Disabilities Act, 42 U.S.C. § 12189 (2019).

[11] Id.

[12] Americans with Disabilities Act, 42 U.S.C. § 12203(b) (2019).

[13] Binno, 826 F.3d at 341.

[14] Id.

[15] 42 U.S.C. § 12102(1) (2019).

[16] Zaretsky, supra note 4.

[17] 42 U.S.C. § 12189 (2019).

[18] Complaint at 14, Binno v. LSAC, No. 2:17-cv-11553-SFC-RSW (E.D. Mich. May 16, 2017).

[19] Ward, supra note 6.

[20] 42 U.S.C. § 12203(b) (2019).

[21] Prior, supra note 2.

[22] Nyman Turkish PC, supra note 8.

Hallelujah! We Have Waited 30 Years for Stark and AKS Reform. Sadly, it Still Is Not Enough.

Blog Post | 108 KY. L. J. ONLINE | November 12, 2019

Hallelujah! We Have Waited 30 Years for Stark and AKS Reform. Sadly, it Still Is Not Enough.

Brenton Hill

The Stark and Anti-Kickback (AKS) statutes started out with a simple desire, to prevent unnecessary spending on testing that could raise healthcare costs.1 Accordingly, Stark law prohibits a physician from referring to a certain entity for designated health services if he/she (or any immediate family member) has a financial relationship with that entity, unless an exception applies.2 Similarly, AKS, a criminal statute, prohibits “knowing and willful remuneration to induce referrals or generate business involving any item or service payable by Medicare, Medicaid or other federal healthcare program.”3While sound in their intent, these laws give increasing headaches for General Counsel offices in health systems who incessantly investigate any and every physician benefit that is received for free. In an effort to ease this burden, the Department of Health and Human Services (HHS) has offered proposed changes to Stark and AKS to clarify the archaic law and align it with value-based purchasing arrangements.4

While the breadth and depth of all Stark and AKS law are too much to explore in this post, the new changes that HHS and Centers for Medicare and Medicaid Services (CMS) have proposed are important to note. Moreover, since HHS is soliciting public discourse on the subject for the next 75 days I feel inclined to comment generally with my limited knowledge and perspective as a student.5 One of the most important proposed changes is the ability to better share data across the healthcare continuum because physicians could receive incentives to share this data with hospitals.6 For example, a specialty physician practice could share its “data analytic services with a primary care practice.”7 Also included in the possibly permissible conduct would be the ability for the hospital to potentially provide care coordinators, data analytic services, and remote monitoring to physicians to help better coordinate patient care.8 Even more timely, a hospital could donate cybersecurity software to each physician that refers patients to that hospital.9

Another important change to the Stark law is further clarification of what fair market value (FMV) means when compensating a physician.10 Since each physician is required to be paid within a certain range calculated with multiple variables, further clarification in the proposed changes could define the distinct categories of general application, equipment rentals, and office space rentals to help in the calculation of FMV.11 Physicians could even be allowed to receive up to $3,500 dollars per year in exchange for services or items.12 While these new changes to the Stark and AKS law seem to be improvements to outdated regulations, one still asks the question, why aren’t these purported “changes” already in place? Isn’t it obvious that different medical facilities should be able to share data to assist in well-rounded patient care? Why couldn’t a hospital provide patient centered initiatives to physicians for free from the inception of Stark and AKS? What if a physician has a legitimate reason for referring a patient to a clinic which he/she has some stake in?

Herein lies my greatest confusion with these laws, why is it that hospitals and physicians can’t use incentives like any other industry in the U.S.? One thought may be that there is an inherent distrust of physicians and administrators alike, which is why fraud and abuse laws are so strict. It could also be that there is over $1 trillion spent by the government on national healthcare expenditures, making it a very protected resource.13 Currently, over 50% of physicians reporting signs of burnout and the repercussions costing the healthcare system $4.6 billion dollars.14 Maybe we should ease up even more than these proposed regulations on the men and women that strive diligently to keep our population healthy and allow them to receive incentives for the great work they do without fear of breaking the law. I do not propose eradicating Stark and AKS, but I do think it could much more simplified to match the quality-based incentives that hospitals and physicians are currently being reimbursed for.

While the goal of these changes is to ultimately increase flexibility for hospitals and physicians, the Department of Justice (DOJ) has collected $2 billion dollars in fraud settlements per year for the last nine years.15 For example, a Detroit, Michigan hospital was fined $84 million dollars after it provided eight physicians with discounted office space much below FMV in exchange for patient referrals.16 What seemed like a mutually beneficial relationship for both parties and no mention of patient or community harm by the DOJ, turned out to be a major blow for an urban hospital system.17Instead of collecting large sums for mutually beneficial arrangements, we should ultimately limit the focus on fraud and abuse to reduction in population and patient welfare for which these health systems are responsible for.       

 _________________

1 Ayla Ellison, 15 Things to Know About Stark Law, Becker’s Hosp. Review (Feb. 18, 2017), https://www.beckershospitalreview.com/legal-regulatory-issues/15-things-to-know-about-stark-law-021717.html.

2 Physician Self-Referral (Stark) Law, Med. Grp. Mgmt. Ass’n https://www.mgma.com/advocacy/issues/federal-compliance/physician-self-referral-stark-law.

3 Id.

4 HHS Proposes Stark Law and Anti-Kickback Statute Reforms to Support Value-Based and Coordinated Care, U.S. Dep’t of Health and Human Services (Oct. 9, 2019) https://www.hhs.gov/about/news/2019/10/09/hhs-proposes-stark-law-anti-kickback-statute-reforms.html [hereinafter HHS Anti-Kickback Statute].

5 James Cannatti, Tony Maida & Daniel Melvin, HHS Proposes Substantial Changes to Stark Law and Anti-Kickback Statute Regulations, The Nat’l Law Review (Oct. 9, 2019), https://www.natlawreview.com/article/hhs-proposes-substantial-changes-to-stark-law-and-anti-kickback-statute-regulations.

6 Alex Kacik & Michael Brady, Stark, Anti-Kickback Rules Aren’t Only Obstacles to Volume-to Value Transition, Modern Healthcare (Oct. 11, 2019), https://www.modernhealthcare.com/policy/stark-anti-kickback-rules-arent-only-obstacles-volume-value-transition.

7 HHS Anti-Kickback Statute, supra note 4.

8 Id.

9 Cannatti, supra note 5.

10 CMS Makes Value the Centerpiece of Proposed Stark Rules, Health Law News Blog Hall Render (Oct. 10, 2019), https://www.hallrender.com/2019/10/10/cms-makes-value-the-centerpiece-of-proposed-stark-rules/.

11 Id.

12 Id.

13Nat’l Health Expenditure Fact Sheet, Centers for Medicare and Medicaid Services, https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/nhe-fact-sheet.html.

14 Pien Huang, What’s Doctor Burnout Costing America?, NPR (May 31, 2019) https://www.npr.org/sections/health-shots/2019/05/31/728334635/whats-doctor-burnout-costing-america.

15 Kacik, supra note 6.

16 John Commins, Michigan Hosp. to Pay $84.5M to Settle Stark Law, Kickback Claims, Health Leaders Media (Aug. 3, 2018),  https://www.healthleadersmedia.com/clinical-care/michigan-hospital-pay-845m-settle-stark-law-kickback-claims.

17 Detroit Area Hospital System to Pay $84.5 Million to Settle False Claims Act Allegations Arising from Improper Payments to Referring Physicians, United States Dep’t of Justice (Aug. 2, 2018), https://www.justice.gov/opa/pr/detroit-area-hospital-system-pay-845-million-settle-false-claims-act-allegations-arising.

Kaestner: Applying a Minimum Connections Test to State Taxation of Trusts

Blog Post | 108 KY. L. J. ONLINE | November 11, 2019

Kaestner: Applying a Minimum Connections Test to State Taxation of Trusts

J. Conner Niceley[1]

The rise in popularity of the revocable inter vivos trusts as a form of nonprobate succession has revolutionized the estate planning industry. The use of trusts provide a way by which individuals can maintain freedom of disposition but avoid the costs and complexities of the probate court.[2] Due to its popularity, a majority of states, as well as the federal government,[3] have passed legislation imposing taxes on trusts.[4] North Carolina is among these states, and its Department of Revenue has been the recent subject of Supreme Court review in North Carolina Dep’t of Revenue v. Kimberley Rice Kaestner 1992 Family Trust.[5] This decision affirmed the judgment of the state’s highest court that struck down a provision in North Carolina’s tax code imposing a tax on trusts based solely on a beneficiary’s residence in the state.[6]

Kaestner is the first iteration by the Supreme Court in several decades of a state’s limited power to tax trusts, but follows a growing number of state court cases that have rejected state trust taxation on constitutional grounds.[7] In Kaestner, writing for a unanimous court, Justice Sotomayor concluded that an examination of the facts relating to the trust in question did not reach the required minimum connection with the state to permit North Carolina’s Department of Revenue to impose such a tax on a trust beneficiary.[8] To better understand why the Court reached this conclusion, it is important first to evaluate the facts of Kaestner. 

The original trust that eventually prompted this litigation was formed nearly thirty years ago when Joseph Lee Rice, III, executed a trust governed by New York law for the benefit of his children, none of whom at the time lived in North Carolina.[9] It was not until Rice’s daughter, Kimberley Rice Kaestner, moved to the state and resided there with her children from 2005 until 2008, that this issue arose.[10] In the interim, the original trust was divided into three separate trusts, including the Kimberley Rice Kaestner 1992 Family Trust.[11] Because North Carolina taxes any trust income “for the benefit of” its residents, the state’s Department of Revenue assessed a tax on the accumulated proceeds of the trust from 2005 until 2008 while Kaestner’s children—the beneficiaries of the trust—were living in the state.[12] Even though there were no distributions made, the state imposed the tax merely because beneficiaries of the trust were North Carolina residents.[13] Nevertheless, the trustee paid the $1.3 million-plus bill before filing suit, in which it claimed that the imposition of a tax violated the Due Process Clause of the Fourteenth Amendment.[14]

The Court’s analysis of whether the imposed tax violated due process rights will make one happy that they paid attention in first-year civil procedure. To determine whether the imposition of the tax complies with due process, the Court identified that there must be some nexus—a minimum connection—between the state and entity or individual being taxed.[15] The sufficiency of the connection with the state seeking to impose the tax applies the minimum contacts test from International Shoe Co. v. Washington[16] that has more frequently been used in solving issues of  personal jurisdiction.[17] In addition, in order to comply with due process, the “income attributed to the State for tax purposes must be rationally related to ‘values connected with the taxing state.’”[18] The Court never addressed this second part of the analysis, though, because the tax fails under the first, minimum connections prong.[19]

Applying the minimum connections analysis in Kaestner revealed that the beneficiary’s connections with the state were insufficient for a number of reasons. Among them were the lack of distributions made to any beneficiary living in North Carolina during the taxable period, the inability of beneficiaries to possess trust income (because distribution was in the trustee’s “absolute discretion”), and the potential for the trust’s future termination.[20] The Supreme Court’s decision in Kaestner adds to an increasingly long list of state court judgments striking down taxes imposed on trust beneficiaries based on their residence in the state imposing the tax.[21] The trend in these cases, reaffirmed for the first time recently by Kaestner, is that residence alone in a state is not sufficient minimum connections to comply with due process and justify, constitutionally, the assessment of a tax on trust beneficiaries.[22]

So, what significance does Kaestner have on the future of state taxation of trusts? Because the nation’s highest court did not identify cases in which these taxes would pass muster of a due process analysis, we can expect to see continued efforts by states to push the limits of trust taxation. Moving forward, the important consideration is this: if a trust is being taxed merely because a beneficiary resides in the state, the tax is likely unconstitutional. 

[1] Staff Editor, Kentucky Law Journal, Vol. 108; J.D. Candidate, University of Kentucky College of Law (2021); B.A., Political Science, Eastern Kentucky University (2017). 

[2] John H. Langbein, Major Reforms of the Property Restatement and the Uniform Probate Code: Reformation, Harmless Error, and Nonprobate Transfers, 38 ACTEC L.J. 1, 10 (2012). 

[3] I.R.C. § 641 (2019). 

[4] Steve R. Akers, Bessemer Trust, Estate Planning: Current Developments and Hot Topics 135-36 (2014), https://www.bessemertrust.com/files/portal_orig/Advisor/Presentation/Print%20PDFs/2014%20Hot%20Topics%20and%20Current%20Developments_FINAL.pdf (As of December 2014, forty-three states and the District of Columbia imposed taxes on revocable trusts). 

[5] 139 S. Ct. 2213 (2019). 

[6] Id. at 2217.

[7] Steve R. Akers & Ronald D. Aucutt, Bessemer Trust, North Carolina Department of Revenue v. Kimberley Rice Kaestner 1992 Family Trust 6, 9 (2019), https://www.bessemertrust.com/sites/default/files/2019-07/Kaestner_Sup_Ct_Case_Summary_07_09_19.pdf. 

[8] 139 S. Ct. at 2223. 

[9] Id. at 2218. 

[10] Id. 

[11] Id. 

[12] Id. at 2219.

[13] Id. at 2218.

[14] Id. at 2219; U.S. Const. amend XIV.

[15] Kaestner, 139 S. Ct. at 2220 (citing Quill Corp. v. North Dakota ex rel. Heitkamp, 504 U.S. 298, 307 (1992). 

[16] 326 U.S. 310 (1945). 

[17] Kaestner, 139 S. Ct. at 2220. 

[18] Id. (quoting Quill, 504 U.S. at 306). 

[19] Id. at 2220 n.5. 

[20] Id. at 2223. 

[21] A comprehensive list of cases dealing with this issue can be found at Steve R. Akers, Bessemer Trust, Heckerling Musings 2012 and Other Current Developments 91-93, https://www.bessemertrust.com/files/portal_orig/Advisor/Presentation/Print%20PDFs/Heckerling%20Musings%202012_MASTER.pdf.

[22] Id.; Kaestner, 139 S. Ct. at 2221. 

You can Bet on It

Blog Post | 108 KY. L. J. ONLINE | Nov. 7, 2019

You Can Bet on It

Christian Farmer

Where there is competition and chance, those willing to wager will be watching. Many games of chance may be enjoyed today. However, there is one particular game that has not survived Federal legislation: online poker.

With the eruption of the internet, online poker soon followed, with the first real money game being played in 1998.[1] The industry quickly boomed, but the Federal government made other plans when they passed the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA).[2] While the Act was not a direct ban of online poker, it effectively rendered the game unplayable in the United States; it prohibited financial institutions from allowing wire transfers from their institutions to internet gambling sites.[3] However, online poker platforms continued to operate in the United States in direct defiance of the Act.[4] On April 15, 2011, the day deemed “Black Friday,” the industry was dealt a death blow when the Department of Justice indicted the three largest poker sites operating in the United States, causing these sites to leave the American market.[5] The industry crumbled and has since been unable to return to its former prominence in the gaming world.

Until 2018, sports betting had enjoyed a similar ban in the United States under the Professional and Amateur Sports Protection Act (PASPA).[6] The Supreme Court’s monumental decision in Murphy v. NCAA reversed the Congressional prohibition on sports betting, holding that PASPA is not consistent with the Constitution. [7] The Supreme Court ruled that PASPA included direct commands to the states in violation of the anti-commandeering doctrine.[8] As a result, state lawmakers are now able to decide if they would like to legalize sports betting within their borders.[9]

Does the defeat of PASPA provide any hope for online poker to return to its former prominence in America?

Possibly. The Poker Players Alliance (PPA), a large non-profit poker advocacy group, sees the ruling as an important mark of change regarding online gambling as a whole. Following the decision in Murphy, PPA President Rich Muny stated, “This is a great decision for consumers who for years have had no alternative to wager on sports other than the black market. It presents states with the perfect opportunity to establish sensible policies not only to regulate sports wagering, but also other forms of gaming, including internet poker.”[10] Muny’s comments point to a collective change in the minds of many lawmakers. 

Now that lawmakers are willing to pass legislation regulating sports betting, the future is brighter for legalization of other games. Lawmakers recognize the societal benefits of gambling include capturing tax revenue generated from its regulation. This revenue would otherwise be lost to the “black market” Muny referred to.[11] In fact, thirteen states have already implemented full­-scale sports betting and many more have active legislation working toward legalization.[12] For example, in Indiana’s first month of legalization, sports betting generated revenue of $8.6 million, which allowed the state to collect over $813,000 in taxes.[13] 

Even in a state as hostile to online poker as Kentucky, there is a great chance that legalization will come to the Bluegrass State in the near future. The current Governor, Andy Beshear, is advocating for online poker’s legalization in Kentucky.[14]

 The Governor also has the Kentucky legislature on his side. On the first day of the new lawmaking session in 2020, Representative Adam Koenig introduced HB 137 which purports to legalize sports betting, DFS, and online poker.[15]The bill stipulates that sports betting will be overseen by the Horse Racing Commission, while online poker will be overseen by the Kentucky Lottery Corporation.[16] The bill includes a 6.75% state tax attached to all online poker revenue.[17] Following the default rule in Nevada, players who would like to bet online will have to register in person with a licensed organization—likely one of the state’s racetracks.[18] Kentucky has multiple racetracks and brick-and-mortar locations where players will be able to register, including candidates such as Churchill Downs, Keeneland, Derby City Gaming, the Red Mile, and Turfway Park.

Ultimately, the grip of the UIGEA is still strong and online poker remains illegal and unregulated. As a result, American poker players have turned to offshore sites, which offer little in terms of player protection and security of funds.[19]However, with the defeat of sports betting’s ban, there is a greater possibility that online poker’s ban will be lifted as well. Legalizing online poker would present states with an influx of tax revenue as well as provide players better protection within their borders. Now is the time for lawmakers to work toward establishing sensible policies to regulate online poker in America. 

 [1] Eric Smith, Planet Poker Era, Poker History (Aug. 10, 2011, 5:15 PM), http://www.pokerhistory.eu/history/planet-poker-first-online-poker-room.

[2] 31 U.S.C. § 5363.

[3] Id.

[4] See Andrew M. Nevill, Folded Industry? Black Friday’s Effect on the Future of Online Poker in the United States, 2013 U. Ill. J.L. Tech. & Pol'y203, 204 (2013).

[5] Id.

[6] 28 U.S.C. § 3702; See John T. Holden, Prohibitive Failure: The Demise of the Ban on Sports Betting, 35 Ga. St. U.L. Rev. 329, 334­–37 (2019).

[7] Murphy v. NCAA, 138 S. Ct. 1461, 1484–85 (2018) (There is no U.S. Reporter source available yet for this recent decision).

[8] Id. at 1481.

[9] Supra note 7 at 1484.

[10] Jon Sofen, PPA Hopeful Supreme Court’s PASPA Ruling Will Elevate Online Poker’s Chances, Cardschat News (May 15, 2018), https://www.cardschat.com/news/ppa-hopeful-that-paspa-ruling-will-elevate-online-pokers-chances-63397.

[11] Id.

[12] Ryan Rodenberg, United States of Sports Betting, ESPN (Aug. 2, 2019), https://www.espn.com/chalk/story/_/id/19740480/the-united-states-sports-betting-where-all-50-states-stand-legalization.

[13] Andrew Clark, Indiana Sportsbooks Accepted $35.2M in Bets During First Month of Legal Sports Gambling, IndyStar (Oct. 11, 2019), https://www.indystar.com/story/sports/2019/10/11/indiana-sports-gambling-data-september-2019/3945010002/.

[14] Jennifer Newell, Online Poker Remains in Kentucky Gubernatorial Debates, Poker News (Oct. 17, 2019), www.legaluspokersites.com/news/online-poker-kentucky/19482.

[15] Alex Weldon, Kentucky Online Poker Bill Clears First Committee Hurdle with Ease, Online Poker Report (Jan. 22, 2020, 8:00 PM), www.onlinepokerreport.com/39654/kentucky-online-poker-bill-advances.

[16] Id.

[17] Id.

[18] Id.

[19] See BettingUS, https://www.bettingus.com/offshore-gambling/ (last visited Nov. 5, 2019).

California Shaking Up the Gig Economy: Should Uber and Lyft be Worried?

Blog Post | 108 KY. L. J. ONLINE | Oct. 1, 2019 

California Shaking Up the Gig Economy: Should Uber and Lyft be Worried?

Cameron F. Myers[1] 

On Wednesday, September 18, 2019, California Governor Gavin Newsom signed Assembly Bill 5 (AB-5) into law.[2]The purpose of AB-5 is to codify the 2018 California Supreme Court’s unanimous decision in Dynamex Operations West, Inc. v. Superior Court of Los Angeles[3] and clarify the decision’s application in state law.[4] Ultimately, California hopes to “ensure workers who are currently exploited by being misclassified as independent contractors instead of recognized as employees have the basic rights and protections they deserve under the law…”[5]

In Dynamex, the California Supreme Court established a presumption that a person who performs services for a hiring entity is an employee rather than an independent contractor for purposes of compliance with California wage orders.[6] In order to overcome this presumption, the hiring entity must pass what is commonly referred to as the “ABC” test.[7] The ABC test requires the hiring entity to show: “(A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact; (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed by the hiring entity.”[8]

 For ridesharing companies such as Uber and Lyft, whose business models hinge on classifying drivers as independent contractors,[9] failure to pass the ABC test would require a fundamental change in their way of doing business.[10] These companies would likely have to exert more control over drivers by telling them where to work, requiring a minimum number of hours per week, scheduling driver shifts, and preventing drivers from working for other rideshare companies.[11] According to Uber, this change would likely lead to drivers only being able to work at times and in areas where the demand for rides exceeds the number of drivers, thereby eliminating the accessibility of the company’s services “in areas of the state that need it most.” [12]

Uber claims that AB-5 does not automatically reclassify drivers from independent contractors to employees.[13]According to Uber’s Chief Legal Officer, Tony West, “arguably the highest bar [in passing the ABC Test] is that a company must prove that contractors are doing work ‘outside the usual course’ of its business.”[14] West argues that several previous rulings have found that drivers work is outside Uber’s usual course of business, which is “serving as a technology platform for several different types of digital marketplaces.”[15] Essentially, West argues that Uber’s usual course of business is providing an electronic app service to drivers, rather than providing rides to passengers.[16]

Regardless of the merits of that argument, it seems clear that Uber and Lyft would prefer not to take their chances with the ABC test.[17] In an effort to meet the California Legislature somewhere in the middle, the two companies have pledged a combined $60 million to a California ballot initiative which would allow drivers to remain independent contractors while also being entitled to certain benefits.[18] Among these benefits include guaranteed earnings above the local minimum wage, access to paid time off and paid sick leave, as well as a legally-protected right to negotiate over earnings.[19]

 [1] Staff Editor, Kentucky Law Journal, Volume 108; J.D. Candidate, University of Kentucky College of Law (2021); B.S., University of Kentucky (2018).

[2] Assembly Bill 5, 2019 Legis. Serv., Reg. Sess. (Cal. 2019).

[3] 4 Cal. 5th 903 (Cal. 2018).

[4] Assembly Bill 5, 2019 Legis. Serv., Reg. Sess. (Cal. 2019).               

 [5] Id.

 [6] Dynamex Operations W., Inc. v. Superior Court of Los Angeles, 4 Cal. 5th 903, 955 (Cal. 2018) (“The ABC test presumptively considers all workers to be employees…”).

[7] Id. at 916-17.

[8] Id.

[9] Moving work forward in California, Medium (Aug. 29, 2019), https://medium.com/uber-under-the-hood/moving-work-forward-in-california-7de60b6827b4.

 [10] Id.

[11] Id.

 [12] Id.

[13] Tony West, Update on AB5, Uber Newsroom (Sep. 11, 2019), https://www.uber.com/newsroom/ab5-update/.

 [14] Id.

 [15] Id.

[16] Brad Templeton, If Uber Drivers Become Employees, Can Uber Escape That? Plus How Employees Compete With Robocars, Forbes (Sep. 17, 2019), https://www.forbes.com/sites/bradtempleton/2019/09/17/if-uber-drivers-become-employees-can-uber-escape-that-plus-how-employees-compete-with-robocars/#72c7204253fb.

[17] See West, supra note 13.  

 [18] Moving work forward in California, Medium (Aug. 29, 2019), https://medium.com/uber-under-the-hood/moving-work-forward-in-california-7de60b6827b4.

[19] Id.

Proving a Point or Paving the Way: Will Taylor Swift Rerecording Her Masters Bring Needed Change to the Music Industry’s Unconscionable Contracting?

Blog Post | 108 KY. L. J. ONLINE | Sept. 26, 2019

Proving a Point or Paving the Way: Will Taylor Swift Rerecording Her Masters Bring Needed Change to the Music Industry’s Unconscionable Contracting? 

Ellen Ray[1]

 Taylor Swift has been a fierce advocate for artists’ rights to own their work in the music industry, but her latest move falls short of the necessary solution to unconscionability in record label contracting. In August, Swift announced she will be rerecording her first five albums in response to the sale of her master recordings by Big Machine Records to Ithaca Holdings in order “to regain artistic and financial control of her material.”[2]

 In standard recording contracts, like Swift’s contract with Big Machine, the record label profits by offering young artists the means to “finance, produce, and sell their creations,” [3] in exchange for the label’s retention of the master recording, the “physical embodiment of the performance”.[4] Because Swift is the primary songwriter on all her songs, she holds a copyright for the use both the lyrics and music, which is distinct from the label’s copyright for production rights.[5]

However, without ownership of the masters, a song cannot be produced and profited off in any meaningful way.[6] For this reason, legal scholars argue that the terms of a recording agreement are “unconscionable as a matter of law,” but due to a lack of litigation on the topic, courts have yet to arbitrate the matter.[7]

A contract is classified as unconscionable when the terms are so one-sided that it presents a lack of meaningful choice for one of the bargaining parties.[8] §208 of the Restatement (Second) of Contracts does not explicitly define unconscionability, but provides qualifications to assist judicial analysis subject to a sliding scale test.[9]

 When courts analyze a breach of contract under unconscionability, there must a procedural element, meaning the “bargaining terms” were unfair, and a substantive element, meaning the contract itself had “oppressive terms.”[10] If a court were to find the contract terms unconscionable, it would become voidable.[11]

 Utilizing precedent from similarly-situated music industry cases, like Graham v. Scissor-Tail Inc., would direct the court’s analysis on unconscionability based on the labels retention of the master recording. [12] In Graham, the dispute was between a concert promoter who was a member of a labor union, American Federation of Musicians, and a band, Scissor-Tail.[13] Under the sliding-scale test, the weight of the substantive unconscionability through violations of fundamental fairness and failure to protect the artist’s best interests was coupled with the finding of an adhesion contract, utilized as evidence of procedural unconscionability in the artists lack of “meaningful choice” or “alternative in contracting.”[14] In this sense, the requirements of procedural unconscionability have been broadened. This could counteract the viewpoint that the standard recording contract has become an accepted contract of adhesion, “ingrained into the notion of free contracting,” such that a claim of unconscionability would be against the public policy of the industry. [15]

Swift is well-positioned to fund a breach of contract claim based on unconscionability for a class of artists against their record label and force the issue past settlement proceedings to obtain an adjudication on the issue.[16] This would be a more productive alternative; allowing the courts to decide definitively whether recording contracts are unconscionable. The strength of legal precedent would have a ripple effect in the music industry. 

 [1] Staff Editor, Kentucky Law Journal, Volume 108; J.D. Candidate, The University of Kentucky College of Law (2021); B.A., Centre College (2018).

[2] Anastasia Tsioulcas, Look What They Made Her Do: Taylor Swift To Re-Record Her Catalog, NPR (Aug. 22, 2019), https://www.npr.org/2019/08/22/753393630/look-what-they-made-her-do-taylor-swift-to-re-record-her-catalog.

[3] Abdullahi Abdullahi, Termination Rights in Music: A Practical Framework for Resolving Ownership Conflicts in Sound Recordings, 2012 U. Ill. J.L. Tech. & Pol’y 457, 458 (2012).

[4] In re Antone’s Records, Inc., 445 B.R. 758, 779 (W.D. Tex. 2011). 

[5] Id.

[6] Joe Coscarelli, Taylor Swift Says She Will Rerecord Her Old Music. Here’s How., N.Y. Times (Aug. 22, 2019), https://www.nytimes.com/2019/08/22/arts/music/taylor-swift-rerecord-albums.html.

[7] Ian Brereton, Beginning of a New Age?: The Unconscionability of the “360-Degree” Deal, 27 Cardozo Arts & Ent. LJ 167, 168 (2009).

[8] Id. at 172. 

[9] Id.

[10] Abdullahi, supra note 3, at 471. 

[11] Id. at 479.

[12] Graham v. Scissor-Tail Inc., 623 P.2d 165 (Cal. 1981).

[13] Omar Anorga, Music Contracts Have Musicians Playing in the Key of Unconscionability, 24 Whittier L. Rev. 739, 747-48 (2003).

[14] Id. at 747-49.

[15] Brereton, supra note 6, at 173. 

[16] See Anorga, supra note 12, at 740. 

Turning the Tide: Big Pharma Willing to Settle

Blog Post | 108 KY. L. J. ONLINE | Sept. 19, 2019

 Turning the Tide: Big Pharma Willing to Settle

Allie McNamara

The opioid epidemic has claimed 47,600 lives in 2017 alone. In 2016 and 2017 more than 130 people every day died due to opioid use.[1] The hardest hit areas include: West Virginia, Ohio, Kentucky, Pennsylvania, and the District of Colombia.[2]

The crisis began in Maine and worked its way down the Appalachian Mountains, devastating parts of rural Appalachia. Purdue Pharma, the manufacturer of OxyContin, developed the drug in 1995.[3] After obtaining FDA approval, the drug hit the market in 1996. [4] Five years later officials began to inquire about how addictive the medication was, yet the company managed to convince the government that it was not more addictive than other drugs on the market. [5]However, in 2007, Purdue admitted it “deceptively marketed and promoted OxyContin as less addictive, less subject to abuse, and less likely to tolerance and withdrawal than other medications.”[6] Purdue hid this evidence. A unanimous decision by a three-judge panel in the Kentucky Court of Appeals on December 14, 2018 held that Purdue must produce records regarding marketing approaches and the level of addictiveness of OxyContin.[7] On August 26, 2019, the Kentucky Supreme Court denied to review this decision, clearing the way for these records to be obtained.[8]

The introduction of opioids greatly altered the healthcare system, creating the fifth vital sign. The fifth vital sign invites providers to ask patients “What is your pain level today?” during each office visit.[9] By custom, a pain level of 7 or more meant that the patient left the office with an opioid prescription.[10]

While public health and legislative efforts have begun to limit the amount of opioids distributed legally, there still exists many illegal efforts to provide pills to those most vulnerable through cash based pill mills. For example, one recent case involved the Tennessee Pain Clinic located outside of Chattanooga, TN.[11] This was no pain clinic, but rather, a front for a pill mill. Federal District Court Judge Wier sentenced a physician involved in the operation to twenty-one years.[12]Over half of this clinic’s customers were from Kentucky.[13] Individuals paid cash, as insurance was not accepted, and individuals transported these medications back into Kentucky to supply local drug dealers.[14] In total, this operation distributed 1.6 million Oxycodone pills to the region.[15] Black market operations such as this are the main driver of the opioid crisis as victims become increasingly desperate for a fix. The disaster has been exacerbated by many individuals who have turned to heroine in hopes of finding a cheaper way to get high.[16] Unfortunately, it is hard to know the exact ingredients of the illicit substances.[17] Many doses of heroine are laced with fentanyl, which is much more deadly than heroin.[18] To put it in perspective, it takes 0.25 milligrams of fentanyl to cause a fatal overdose because it is 50-100 times more potent than morphine.[19]

 It is no surprise that over 2,000 counties, cities, and Native American tribes have filed suit against pharmaceutical companies that make and produce opioids.[20] Suits have also targeted Prescription Benefit Managers (PBMs) and insurance companies in order to obtain the maximum relief for victims and their families.[21] These numerous suits have been consolidated into one scheduled for October 21, 2019 before Judge Polster in Federal District Court in Cleveland, Ohio.

 Judge Polster recently ruled against the drug industry on numerous pre-trial motions. These preliminary rulings have begun a chain reaction on the part of the drug manufactures who opt to settle with plaintiffs in order to be removed from the case and avoid the risk of a court ordered judgment. For example, Mallinckrodt, an Irish company, agreed to settle with two counties in Ohio for $30 million. A DEA report showed that a Mallinckrodt subsidiary, called SpecGX, was the single largest manufacturer of the more than 76 billion opioids distributed across the United States between 2006 and 2012.[22] Additionally, Purdue Pharma is also in settlement negotiations for their role in the opioid crisis. [23] As a part of an approximate $10 billion settlement, Purdue Pharma filed Chapter 11 bankruptcy on Sunday, September 15, 2019 and the Sackler Family (owners of Purdue) announced their intentions to give up the company which is a part of an approximate $10 billion settlement arrangement. [24]

This willingness to settle comes on the heels of an Oklahoma decision on August 26, 2019, where a judge ordered Johnson & Johnson (“J&J”) to pay $572 million for its role in the opioid crisis. The court found that J&J had “engaged in false, deceptive, and misleading marketing” which constituted a public nuisance for adding to the opioid epidemic. Damages were calculated by assessing the predicted dollar amount that would be needed each year to remedy this crisis. 

However, there is a scary realization that many of the victims of this crisis will never see a penny of that relief or future relief. Legal scholars equate opioid settlements to the Master Settlement Agreement with the tobacco industry.[25] That settlement is the result of the largest piece of civil litigation in American history, where the state Attorney Generals of forty-six states, the District of Columbia, and five U.S. territories settled with the five largest cigarette manufacturers regarding advertising, marketing, and promotion of cigarettes. The tobacco industry agreed to pay these states billions of dollars annually, yet today, while 16 million Americans suffer from a smoking related illness, less than 3% of the settlement received is spent on smoking cessation efforts, disease prevention, or providing healthcare for the victims.[26]

Is that the fate of the victims of the opioid crisis or will settlement funds be used to create needle exchanges and erect addiction treatment facilities to stop a generation of Americans from premature death?

[1] Opioid Crisis Fast Facts, Cable News Network (Aug. 28, 2019, 4:15 PM ET) https://www.cnn.com/2017/09/18/health/opioid-crisis-fast-facts/index.html.

[2] Drug Overdose Deaths, The Centers for Disease Control and Prevention, https://www.cdc.gov/drugoverdose/data/statedeaths.html.

[3] Timeline of Selected FDA Activities and Significant Events Addressing Opioid Misuse and Abuse, U.S. Food and Drug Administration, https://www.fda.gov/drugs/information-drug-class/timeline-selected-fda-activities-and-significant-events-addressing-opioid-misuse-and-abuse.

[4] Id.

[5] Id.

[6] United States v. Purdue Frederick Co., Inc. 495 F. Supp. 2d 569, 570 (W.D. Va. 2007). 

[7] Purdue Pharma L.P. v. Bos. Globe Life Scis. Media. LLC, No. 2016-CA-000710-MR (Ky. App. Dec. 14, 2018).

[8] Alia Paavola, Kentucky Supreme Court Clears Release of Secret Purdue OxyContin Files, Becker’s Hospital Review(Aug. 27, 2019) https://www.beckershospitalreview.com/pharmacy/kentucky-supreme-court-clears-release-of-secret-purdue-oxycontin-files.html.

[9] David W. Baker, The Joint Commission’s Pain Standards: Origins and Evolutions (May 5, 2017), https://www.jointcommission.org/assets/1/6/Pain_Std_History_Web_Version_05122017.pdf.

[10] Id.

[11] Bill Estep, ‘Front Writing Narcotics.’ Doctor Gets 21 Years in Prison for Running Pill Mill, Lexington Herald Leader (Aug. 9, 2019, 8:57 PM) https://www.kentucky.com/news/state/kentucky/article233700292.html.

[12] Id. 

[13] Id.

[14] Id.

[15] Id. 

[16] Heroin Use is Driven by its Low Cost and High Availability, National Institute on Drug Abuse, https://www.drugabuse.gov/publications/research-reports/relationship-between-prescription-drug-abuse-heroin-use/heroin-use-driven-by-its-low-cost-high-availability (last updated Jan. 2018). 

[17] Fentanyl and Other Synthetic Opioids Drug Overdose Deaths, National Institute on Drug Abuse,

 https://www.drugabuse.gov/related-topics/trends-statistics/infographics/fentanyl-other-synthetic-opioids-drug-overdose-deaths (last updated May 2018). 

[18] Id.

[19] Fentanyl, Centers for Disease Control and Prevetion, https://www.cdc.gov/drugoverdose/opioids/fentanyl.html(last updated May 31, 2019). 

[20] Lenny Bernstein, et al., Mallinckrodt Reaches Settlement with ‘Bellwether’ Counties in Mammoth Opioid Lawsuit, The Washington Post (Sept. 6, 2019) https://www.washingtonpost.com/health/mallinckrodt-reaches-settlement-with-bellwether-counties-in-mammoth-opioid-lawsuit/2019/09/06/1e8a19f8-d0d9-11e9-b29b-a528dc82154a_story.html.

[21] Karen Appold, Will PBMs Be the Next Target of Opioid Lawsuits?, Managed Healthcare Executive (Mar. 28, 2018) https://www.managedhealthcareexecutive.com/business-strategy/will-pbms-be-next-target-opioid-lawsuits.

[22] Scott Higham, 76 Billion Opioid Pills: Newly Released Federal Data Unmasks the Epidemic, The Washington Post(July 16, 2019) https://www.washingtonpost.com/investigations/76-billion-opioid-pills-newly-released-federal-data-unmasks-the-epidemic/2019/07/16/5f29fd62-a73e-11e9-86dd-d7f0e60391e9_story.html.

[23] Julia Jones, The Slacker Family Could Give Up Purdue Pharma, Sources Says, Cable News Network (Sept. 10, 2019, 9:30 PM ET) https://www.cnn.com/2019/09/10/us/sackler-family-could-give-up-ownership-of-purdue-pharma/index.html. 

[24] Elizabeth Joseph, Purdue Pharma Files for Bankruptcy as Part of a $10 Billion Agreement to Settle Opioid Lawsuits,Cable News Network (Sept. 16, 2019, 3:50 PM ET) https://www.cnn.com/2019/09/16/us/purdue-pharma-bankruptcy-filing/index.html.

[25] Kathleen Brady, Don’t Let the Opioid Settlement Fritter Away Funds like the Tobacco Settlement Did, STAT (Sept. 12, 2019) https://www.statnews.com/2019/09/12/opioid-settlement-tobacco-settlement/.

[26] Master Settlement Agreement, Public Health Law Center at Mitchell Hamline School of Law, https://www.publichealthlawcenter.org/topics/commercial-tobacco-control/tobacco-control-litigation/master-settlement-agreement.

“Finder’s Keepers” OR “Theft by Finding”

Blog Post | 108 KY. L. J. ONLINE | Sept. 17, 2019

“Finder’s Keepers” OR “Theft by Finding”

 Dalton Stanley

A Pennsylvania couple’s bank account grew from $1,000 to $121,000 overnight.[1] A bank teller had accidently deposited $120,000 into their account![2] Assumedly believing this was a turn of good fortune, they purchased a new car, “two four-wheelers, a camper,” race car components, and gave $15,000 to a friend needing the money.[3] After three weeks and a $107,000 shopping spree, the bank demanded the money be repaid.[4] The Williams told the bank they would consider a repayment plan, but, allegedly, did not return the bank’s calls.[5]

The Williams’ argument of “Finders Keepers, Losers Weepers” is not completely unfounded. Common law dictates that the “finder is entitled to the possession against [everyone] but the true owner.”[6] However, as case law has evolved, the finder has different rights depending on if the property was mislaid, lost, or abandoned.[7] In this case, the $120,000 can arguably be considered “lost” by the bank since the money was unintentionally parted with when the bank mistakenly put it in the Williams’ account.[8] Therefore, the Williams did have proper claim to the $120,000 as the finder, but the bank had the superior claim as the “true owner.” 

 Unsurprisingly, the bank demanded their money back – feeling little obligation to do otherwise according to the way the rule of “Finders Keepers” is defined by the law.[9] The Williams are now facing multiple charges including “theft of property by loss or mislaid.”[10] The corresponding charge under Kentucky Law would be “theft of property lost, mislaid, or delivered by mistake.”[11] For one to be found guilty for such a crime under Kentucky law, it must be proven that: 

(a) He comes into control of the property of another that he knows to have been lost, mislaid, or delivered under a mistake as to the nature or amount of the property or the identity of the recipient; and

(b) With intent to deprive the owner thereof, he fails to take reasonable measures to restore the property to a person entitled to have it.[12]

It is likely that the Williams will be deemed to have been in control of the $120,000 when it was deposited into their account, and they admitted that the money “was not theirs.”[13] If there is not a reason to expect such a large deposit, the circumstances may likely support finding that the Williams knew the money was intended to be deposited in another’s account, and that the money must have been “lost, mislaid, or delivered under a mistake.”[14] By spending the money themselves, it could be argued that the Williams may have implicitly intended to deprive the true owner of the funds, and they may not have taken reasonable measures to restore the property to its true owner.[15]

Despite what one in primary school may see as simply an application of “Finder’s Keepers, Losers Weepers” resulting in a favorable decision for the Williams, under Kentucky law, the Williams could potentially be found guilty of a class C felony.[16]

[1] John Beauge, Couple Who Spent $107,416 Mistakenly Placed in Their Bank Account Headed to Trial, Penn Live (Sept. 10, 2019), https://www.pennlive.com/news/2019/09/couple-who-spent-107416-mistakenly-placed-in-their-bank-account-headed-to-trial.html.

[2] Lisa Rowan, If the Bank Accidentally Deposits Money in Your Account, Don't Spend It, Lifehacker (Sept. 13, 2019), https://twocents.lifehacker.com/if-the-bank-accidentally-deposits-money-in-your-account-1838048864.

[3] Beauge, supra note 1.

[4] Rowan, supra note 1.

[5] Beauge, supra note 1.

[6] Foster v. Fidelity Safe Deposit Co., 174 S.W. 376, 378 (Mo. 1915).

[7] Joseph J. Simeone, “Finders Keepers, Losers Weepers”: The Law of Finding “Lost” Property in Missouri, 54 St. Louis U. L.J. 167, (2009).

[8] Id.; Rowan, supra note 1.

[9] Rowan, supra note 1.

[10] Id.

[11] Ky. Rev. Stat. Ann § 514.050 (West 2019).

[12] Id.

[13] Beauge, supra note 1.

[14] Id.; § 514.050

[15] Id.

[16] § 514.050

Taggart: an (Old) New Standard for Civil Contempt in Bankruptcy Court

Blog Post | 108 KY. L. J. ONLINE | Sept. 12, 2019

Taggart: an (Old) New Standard for Civil Contempt in Bankruptcy Court 

B. Gammon Fain[1] 

Earlier this summer, the Supreme Court of the United States handed down a ruling that could impact the way creditors interact with debtors after a bankruptcy discharge. In Taggart v. Lorenzen, the Court held that a creditor (or non-debtor, more generally) who violates a bankruptcy discharge can be held in civil contempt if there is “no fair ground of doubt” as to whether or not the creditor acted in violation of the discharge.[2] The case marks a debtor-friendly shift in how bankruptcy courts previously determined whether or not to hold discharge violators in contempt, and more broadly illustrates an application of non-bankruptcy jurisprudence to bankruptcy law.[3]

Taggart has a fairly complex factual background and procedural history. The case began in 2008 when Mr. Taggart was sued in Oregon state court by his business partners for an alleged violation of their LLC’s operating agreement.[4] While that litigation was ongoing, Mr. Taggart filed for Chapter 7 bankruptcy[5], which allows debtors to liquidate assets and pay creditors to obtain a bankruptcy discharge. In short, that discharge releases the debtor from all eligible debts accrued before the bankruptcy.[6] Mr. Taggart finished his bankruptcy and obtained a discharge of his debt before the state court trial began.[7]

Shortly thereafter, the Oregon trial court entered a judgment against Mr. Taggart, and the plaintiffs sought to collect attorney’s fees and court costs from him.[8] Monies owed from legal judgments are included in the debts eligible for discharge in a Chapter 7 bankruptcy,[9] and Ninth Circuit precedent holds that litigation expenses accrued after a discharge are still discharged if the litigation was filed prebankruptcy.[10]  Still, the plaintiffs argued that Mr. Taggart was liable for their accrued expenses under an exception from the same aforementioned Ninth Circuit case, which holds the debtor liable for litigation fees and costs if the debtor “returns to the fray[11],” or voluntarily continues to litigate disputed debt after a discharge.[12]

 The Oregon state trial court sided with the plaintiffs, holding that Mr. Taggart had “returned to the fray” and was thus liable for the plaintiff’s attorney’s fees.[13] Taggart then went to the federal Bankruptcy Court and filed a motion for the defendants to be held in contempt for violation of his bankruptcy discharge, and the Bankruptcy Court also sided with the defendants, holding that Taggart had indeed “returned to the fray.”[14] Taggart appealed that decision to the federal District Court, which sided with him, holding that he had not “returned to the fray” and remanding the case to Bankruptcy Court to decide on whether or not to hold the defendants in contempt for violating the discharge.[15]

The Bankruptcy Court then decided to hold the defendants in civil contempt, applying a strict liability standard on the basis that the defendants were aware of the discharge and intended the actions they took in violation of the discharge, regardless of whether or not they were aware of their (non)compliance with the discharge.[16] The defendants appealed, and the Bankruptcy Appellate Panel vacated the contempt holding.[17] On appeal by Taggart, the Ninth Circuit agreed with the appellate panel, holding that a creditor’s good faith belief that its actions are in compliance with the discharge is sufficient to preclude holding that creditor in contempt of court, even if that good faith belief is unreasonable.[18]

On cert from the Ninth Circuit, the Supreme Court heard oral arguments on the case in October 2017 and following a unanimous decision, released its opinion in June 2019.[19] The Court sided with Taggart, holding that a Bankruptcy Court is authorized to hold a non-debtor in civil contempt for violating a discharge “when there is no objectively reasonable basis for concluding that the creditor’s conduct might be lawful under the discharge order.”[20]

The Court’s reasoning is based in an interpretive principle originally coined by Justice Frankfurter: “When a statutory term is ‘obviously transplanted from another legal source,’ it ‘brings the old soil with it.’”[21] Because civil contempt is not a concept unique to the Bankruptcy Code, the “old soil” of previous jurisprudence on civil contempt in other settings also applies to bankruptcy proceedings, the Court explains.[22] In other words, “the bankruptcy statutes incorporate the traditional standards in equity practice for determining when a party may be held in civil contempt for violating an injunction.”[23] From there, the Court pulled the “fair ground of doubt” standard for civil contempt from a case decided in 1885,[24] which is an objective standard, but the Court noted that subjective intent may be considered as a factor in determining whether or not to hold a party in civil contempt.[25] All in all, the Court believes that the Taggart standard “strikes the ‘careful balance between the interests of creditors and debtors’ that the Bankruptcy Code often seeks to achieve.”[26]

The new standard is indeed balanced, but when compared to the approach taken by the Ninth Circuit, the Taggart holding is much friendlier to debtors, as creditors can no longer avoid being held in contempt of court by simply making a claim of good faith, regardless of how reasonable that claim may or may not be. The Court acknowledges this, noting that the Ninth Circuit’s standard could “lead creditors who stand on shaky legal ground to collect discharged debts, forcing debtors back into litigation . . . to protect the discharge that is was the very purpose of the bankruptcy proceeding to provide.”[27]

Despite Taggart’s debtor-friendly appearance, amicus briefs filed by the creditors’ bar were also critical of the Ninth Circuit standard,[28] and creditors appear to be reacting positively to the Taggart decision.[29] Nicole Strickler, an attorney for the National Creditors Bar Association (hereinafter NCBA) and author of the NCBA’s amicus brief to the Court, was quoted in Bloomberg Law acknowledging Taggart as positive for creditors “because it recognizes that reasonable minds may differ, and in such cases, creditors shouldn’t be punished.”[30] In other words, while giving debtors a powerful tool to use against predatory creditors who violate the Bankruptcy Code, Taggart also provides bright line guidance to creditors, thereby enabling law-abiding creditors and their attorneys to be more aware of what can and cannot land creditors in trouble with the courts.

 The case is also worth noting because it serves as an example of the “[rejection of] bankruptcy exceptionalism,” which is “the using of bankruptcy policy to resolve questions . . . relating to disputes in bankruptcy.”[31] In other words, a bankruptcy exceptionalist would advocate against the importing of general jurisprudence to a bankruptcy case, and Taggart does exactly that. Some legal scholars see bankruptcy exceptionalism as more of a problem than others,[32] but only time will tell whether or not Taggart is the beginning of a larger trend in bankruptcy jurisprudence. Legal scholars aside, it appears that for now, bankruptcy practitioners are willing to forego bankruptcy exceptionalism, as both the creditors’ and debtors’ bars are seeming to welcome the clarity provided by Taggart.[33] 

All in all, the Taggart decision handed down by the Supreme Court this summer provides useful and important guidance to bankruptcy lawyers and their clients, both on the creditor and debtor sides. As lower courts begin to apply and interpret the Taggart standard, a clearer picture should emerge of how the ruling will impact bankruptcy law practice, but most of the decision’s effects will be felt in the consumer bankruptcy arenas of Chapter 7 and Chapter 13, where most discharge disputes tend to arise.[34] For now, debtors should take note and keep watch of predacious creditors seeking to collect debt in violation of a bankruptcy discharge, as Taggart provides those debtors with a more assured remedy. On the flip side, creditors should be careful to know exactly what debt is and is not discharged at the end of a bankruptcy, as they could find themselves in quick trouble for seeking to collect a discharged debt under this new standard. 

[1] Staff Editor, Kentucky Law Journal, Vol. 108;  J.D. Candidate, University of Kentucky College of Law (2021); B.A. Political Science, University of Kentucky (2018); B.A. Integrated Strategic Communication, University of Kentucky (2018) 

[2] 139 S. Ct. 1795, 1799 (2019). 

[3] See Id. 

[4] See Sherwood Park Bus. Ctr. v. Taggart, 341 P.3d 96, 220-21 (Or. Ct. App. 2014).

[5] Taggart, 139 S. Ct. at 1799. 

[6] See 11 U.S.C. §§ 704(a)(1), 726 (2019). 

[7] Taggart, 139 S. Ct at 1800. 

[8] Id. 

[9] 11 U.S.C. § 524 (2019). 

[10] Taggart, 139 S. Ct at 1800 (citing in re Ybarra, 424 F.3d 1018 (9th Cir. 2005)). 

[11] Id. 

[12] In re Ybarra, 424 F.3d at 1023 (citing in re Fostvedt, 823 F.2d 305, 306 (9th Cir. 1987)); see also 4 Collier on Bankr. P. 524.02 (16th, 2019).

[13] Taggart, 139 S. Ct. at 1800. 

[14] Id. 

[15] Id. 

[16] See in re Taggart, 522 B.R. 627, 632 (Bankr. D. Or. 2014).  

[17] Taggart, 139 S. Ct. at 1800. 

[18] Lorenzen v. Taggart, 888 F.3d 438, 444 (9th Cir. 2018). 

[19] Taggart, 139 S. Ct. at 1795. 

[20] Id. at 1801 (emphasis added). 

[21] Id. (citing Hall v. Hall, 138 S. Ct. 1118 (2018) (quoting Felix Frankfurter, Some Reflections on the Reading of Statutes, 47 Columb. L. Rev. 527, 537 (1947)).

[22] Id. 

[23] Id. 

[24] Id. at 1801-02 (quoting California Artificial Stone Paving Co. v. Molitor, 113 U.S. 609, 618 (1885)). 

[25] Id. at 1802. 

[26] Id. at 1804 (citing Clark v. Rameker, 573 U.S. 122, 129 (2014)). 

[27] Id. at 1803. 

[28] Brief for the National Creditors Bar Association as Amicus Curiae In Support of Respondents, Taggart v. Lorenzen, 139 S. Ct. 1795 (2019) (No. 18-489) (“. . . the NCBA asks this Court to adopt the reasoning of the Bankruptcy Appellate Panel that found contempt sanctions were inappropriate because Respondents had a reasonable, objective, good faith basis for lacking knowledge of the applicability of the discharge . . . .”).

[29] See Diane Davis, Supreme Court Clarifies When Creditors Can Collect in Bankruptcy, Bloomberg L.: Bankruptcy L. (June 3, 2019), https://news.bloomberglaw.com/bankruptcy-law/supreme-court-clarifies-when-creditors-can-collect-in-bankruptcy.

[30] Id. 

[31] Bruce A. Markell, The Not-So-Terrible “Ts”: Tempnology and Taggart, 39 Bankr. L. Letter 7 (2019). 

[32] Compare Rafael I. Pardo & Kathryn A. Watts, The Structural Exceptionalism of Bankruptcy Administration, 60 UCLA L. Rev. 384 (2012) with Jonathan C. Lipson, Debt and Democracy: Towards a Constitutional Theory of Bankruptcy, 83 Notre Dame L. Rev. 605 (2008). 

[33] See supra notes 28-30. 

[34] Charles M. Tatelbaum and Kadeem G. Ricketts, Creditors Beware – Bankruptcy Courts Now May Hold Creditors in Contempt, Law.com: Daily Business Review (July 15, 2019), https://www.law.com/dailybusinessreview/2019/07/15/creditors-beware-bankruptcy-courts-now-may-hold-creditors-in-contempt/?slreturn=20190812181456.

Apple, Angry Birds, and Antitrust: The Direct Purchasing Requirement’s Survival

Blog Post | 108 KY. L. J. ONLINE | Sept. 5, 2019

Apple, Angry Birds, and Antitrust: The Direct Purchasing Requirement’s Survival

 Jacob Sherman[1]

In 2018, Google Play Store users downloaded 75.5 billion apps while App Store users downloaded 29.6 billion apps.[2]Google Play Store users may have downloaded twice as many apps as App Store users, but the App Store almost doubled Google Play Store’s revenue.[3] Last year, the Google Play Store made $24.8 billion in revenue while the App Store made $46.6 billion in revenue.[4]  The disparity in revenue, Killian Bell argues, is twofold.[5] First, it is easier to download and install pirated games on Android (the operating system that houses the Google Play Store), so many developers charge nothing for their apps.[6] Second, users of iOS (the operating system that houses the App Store) are more willing to pay for their downloads.[7] At least, some of them are. 

In 2011, four iPhone owners sued Apple Inc., the owner of the App Store, alleging the company unlawfully monopolized who could sell apps.[8] The plaintiffs argue that “they have ‘paid more for their iPhone apps than they would have paid in a competitive market.’” [9] Apple attempted to dismiss the case, arguing the plaintiffs did not have standing under Illinois Brick because they were not direct purchasers.[10]

Earlier this year, the Supreme Court held that the plaintiffs were direct purchasers.[11] Kavanaugh, writing for the five Justice majority, reasoned that the plaintiffs were direct purchasers because they bought apps directly from Apple.[12] To do so, Kavanaugh relied on the facts of Illinois Brick.[13]

 In Illinois Brick, the state of Illinois sued the Illinois Brick Company alleging the company fixed prices.[14] Illinois Brick was a brick manufacturer and distributor.[15] Primarily, Illinois Brick Company sold bricks to masonry contractors.[16]The masonry contractors would then submit bids to general contractors.[17] Finally, the general contractors would submit bids to Illinois.[18] The court held that Illinois could not bring an antitrust claim, only a direct purchaser could do so.[19]For Justice Kavanaugh, Illinois Brick created a simple rule. Direct purchasers have standing.[20]

Apple and the dissent argue that Illinois Brick’s reasoning prohibits consumers down the chain of consumption—to whom the overcharges are passed—from suing.[21] Apple maintains the defendants are downstream purchasers for two factual reasons.[22] First, independent developers set the app price, not Apple.[23] Second, Apple takes a 30% cut of the price.[24] These facts combined mean developers, in theory, could pass on the cost to consumers.[25]

The majority rejects Apple’s pass on argument for three reasons. [26] First, permitting another set of plaintiffs to sue makes antitrust enforcement easier.[27] Second, the difficulty in determining costs should not prohibit this plaintiff from suing.[28] Third, Illinois Brick did not bar different classes of injured parties from suing, it only barred indirect purchasers.[29] In other words, Apple cannot rid itself of a monopoly suit just by claiming it is potentially liable for a monopsony suit.[30] After rejecting Apple’s argument, the court held that the plaintiffs are direct purchasers.[31]

 While Illinois Brick was upheld, the direct purchasing requirement may be nearing its end.[32] Justice Gorsuch, and 30 states as amici, reasoned that Illinois Brick may not further antitrust policy.[33] However, before Illinois Brick is overturned, Gorsuch has a few questions.[34] Apple Inc. v. Pepper may clearly determine whether the plaintiffs are direct purchasers, but the future for online retailers and Illinois Brick is murky.[35]

 [1] Staff Editor, Kentucky Law Journal, Volume 108; J.D. Candidate, The University of Kentucky College of Law (2021).

[2] Killian Bell, App Store Made Almost Twice as Much as Google Play in 2018, Cult of Mac.com (January 18, 2019, 6:15 AM) https://www.cultofmac.com/601492/app-store-google-play-revenue-2018/.

[3] Id.

[4] Id. 

[5] Id.

[6] Id.

[7] Id.

[8] Apple Inc. v. Pepper, 139 S. Ct. 1514, 1519 (2019).

[9] Id.

[10] Id. 

[11] Id.

[12] Id. at 1520.

[13] See id. at 1521-22.

[14] Illinois Brick Co. v. Illinois, 431 U.S. 720, 726-27 (1977).

[15] Id. at 726. 

[16] Id.

[17] Id.

[18] Id.

[19] Pepper, 139 S. Ct. at 1521.

[20] Id. 

[21] Id. at 1525-26 (Gorsuch, J., dissenting).

[22] Id. at 1521-22 (majority opinion); Pepper, 139 S. Ct. at 1527-28 (Gorsuch, J., dissenting).

[23] Pepper, 139 S. Ct. at 1527-28 (Gorsuch, J., dissenting).

[24] Id.

[25] Id. at 1528. 

[26] Id. at 1524 (majority opinion). 

[27] Id. 

[28] Id.

[29] Id. at 1525.

[30] Id. 

[31] Id. 

[32] See id. at 1530-31 (Gorsuch, J., dissenting). 

[33] Faegre Baker Daniels, Future of Antitrust Class Actions Foreshadowed in Apple Inc. v. Pepper, JD Supra.com (May 24, 2019, 11:45 AM) https://www.jdsupra.com/legalnews/future-of-antitrust-class-actions-21288/.

[34] Id.

[35] Daniels, supra note 33.