The document summarizes recent changes to Delaware's corporation and LLC laws, including amendments that allow for incorporators or directors not yet in those roles to take certain actions. It also discusses a recent case, Jancik v. Redbox, where the court rejected a plaintiff's claim that a company violated the ADA by not providing closed captioning on enough of its DVD rentals. The court found that while the ADA requires equal access to public accommodations, it does not require businesses to alter the content of the goods they provide.
2014-10-14 -- Corporate Counselor Article re Jancik v Redbox Autmoated Retail
1. By Sandra Feldman
This edition of the Quarterly
State Compliance Review looks
at some legislation of interest to
corporate lawyers that went into
effect between Aug. 1 and Oct. 1,
including amendments to Dela-
ware’s corporation and LLC laws.
It also looks at some recent cases
of interest, including decisions
from the Delaware and Nevada
Supreme courts on a corpora-
tion’s attorney-client privilege.
IN THE STATE
LEGISLATURES
DE Amends Its
Corporation and
LLC Laws
House Bill 329 amended the
General Corporation Law. The
amendments went into effect on
Aug. 1 and include:
Secs. 103 and 108 were amend-
ed to state that if an incorporator
is unavailable to sign a document
or take actions to organize the
corporation, a person for whom
or upon whose behalf the in-
corporator was acting may sign
or take the action. Sec. 141 was
amended to allow a person, not
yet a director, to consent to an ac-
tion that will be effective for up
to 60 days in the future, and have
the consent be deemed effective
as long as the person is a director
on the future effective date. Sec.
228 makes a similar amendment
regarding consents by stockhold-
ers and other persons.
By Robert A. Naeve
Title III of the Americans with Disabilities Act, 42 U.S.C. §§ 12181-12189
(ADA or Title III) prohibits retailers and other businesses that transact
business with the public from “discriminating” against individuals with
disabilities. The statute is broadly worded to prohibit a wide range of discrimina-
tory practices, and has been the subject of literally thousands of individual and
class action lawsuits seeking to change how the business community deals with
individuals with disabilities. Congress enacted the ADA “to remedy widespread
discrimination against disabled individuals.” PGA Tour, Inc. v. Martin, 532 U.S.
661, 674 (2001). The salutary effect of the ADA cannot be understated. However,
many business owners and operators might, at the same time, rightly ask whether
there are any limits to the Act’s reach. Jancik v. Redbox Automated Retail, LLC,
2014 U.S. Dist. LEXIS 67223 (May 14, 2014) explores one such limit — the so-
called “special products exception.”
Overview of Title III of the ADA
We begin with first principles. As is relevant here, Title III prohibits discrimina-
tion by public accommodations generally, by providing that “[n]o individual shall
be discriminated against on the basis of disability in the full and equal enjoyment
of the goods, services, facilities, privileges, advantages, or accommodations of
any place of public accommodation by any person who owns, leases (or leases
to), or operates a place of public accommodation.” 42 U.S.C. § 12182(a). The term
“public accommodation” is defined to include most retail and service establish-
ments and other businesses that are open or provide services to the public. 42
U.S.C. § 12182(7)(A)-(L).
Congress also enacted “rules of construction” to provide guidance in inter-
preting this catch-all rule. Among other things, Title III prohibits discrimina-
tion in the provision of goods, services and facilities in general, and to provide
unequal goods, services and facilities to individuals with disabilities in particular.
In This Issue
Jancikv.Redbox....... 1
QuarterlyState
ComplianceReview... 1
Extraterritoriality
AndWhistleblowers... 3
Complianceandthe
Workforce............... 5
DressCodes............ 7
UKFraud................. 9
PERIODICALS
Volume 29, Number 7 • October 2014
Corporate
Counselor®
The
continued on page 8
continued on page 2
Quarterly State
Compliance
Review
Jancik v. Redbox Automated Retail
The Scope of the ADA’s Special Products Exception
3. October 2014 The Corporate Counselor ❖ www.ljnonline.com/ljn_corpcounselor 3
By R. Scott Oswald and
Tom Harrington
Though whistleblower protec-
tion statutes take many forms, the
frameworks for determining liability
are really quite similar. Generally
speaking, an employee must first
demonstrate that he or she engaged
in protected conduct under an act.
Next, the employee may be required
to prove that the employer actually
knew about the employee’s pro-
tected conduct. Third, the employer
must take some sort of adverse per-
sonnel action against the employee.
Finally, the employee must demon-
strate that his or her protected con-
duct was causally related to the ad-
verse employment action.
In-house counsel for multina-
tional corporations and counsel for
foreign plaintiffs often must deal
with an even more preliminary is-
sue than any of those cited above.
Specifically, can overseas whistle-
blowers avail themselves of United
States whistleblower protection
laws? If so, under what circumstanc-
es? How can corporations protect
themselves against claims of retali-
ation from company whistleblowers
located outside the United States?
An answer one way or the other
may render meaningless arguments
about, for example, whether an em-
ployee’s conduct should be deemed
protected or the appropriate causa-
tion standard to be applied. Indeed,
understanding the extraterritoriality
issues in international whistleblow-
er cases is absolutely critical inso-
far as it may provide an avenue for
defense counsel to seek a dismissal
early in litigation.
Morrison v. National
Australian Bank, Ltd.
In 2010, the Supreme Court de-
cided the case of Morrison v. Na-
tional Australia Bank. 130 S. Ct.
2869 (2010). Relying heavily upon a
presumption against extraterritorial
application, the Court established a
two-part test to determine whether
extraterritorial application is appro-
priate.
Setting the Stage
The Morrison case involved a
lawsuit by shareholders in Australia
against National Australian Bank,
Ltd. (National), Australia’s largest
bank at the time of the suit. Morri-
son, 130 S. Ct. at 2875. In 1998, Na-
tional purchased HomeSide Lending,
Inc. (HomeSide), a mortgage servic-
ing company in Florida. Id. Over the
next several years, National, through
its annual reports and public state-
ments from company officers, dis-
cussed the success of HomeSide’s
business. Id. In mid-2001, however,
National announced a more than $2
billion dollar write-down in the val-
ue of HomeSide’s assets. Id. at 2876.
Shareholders, upset about the write-
down, accused National of intention-
ally manipulating HomeSide’s finan-
cial models to make the company’s
assets to appear more valuable than
they actually were. Id. The share-
holders, again residents and citizens
of Australia, filed a complaint in the
Southern District of New York, alleg-
ing violations of §§ 10(b) and 20(a)
of the Securities and Exchange Act of
1934 and SEC Rule 10b-5. Id.
The district court dismissed the
complaint for lack of jurisdiction,
finding that the acts in the United
States were, “at most, a link in the
chain of an alleged overall securi-
ties fraud scheme that culminated
abroad.” In re National Australia
Bank Securities Litigation, No. 03
Civ. 6537(BSJ), 2006 WL 3844465, *8
(S.D.N.Y., Oct.25, 2006). The Court
of Appeals for the Second Circuit af-
firmed the dismissal. 547 F.3d 167,
175 (2d Cir. 2008).
SCOTUS Establishes
A Two-Part Inquiry
Justice Antonin Scalia began the
majority opinion by noting the “long-
standing principle of American law
‘that legislation of Congress, unless a
contrary intent appears, is meant to
apply only within the territorial ju-
risdiction of the United States.’” Id.
at 2877 (quoting EEOC v. Arabian
American Oil Co., 449 U.S. 244, 248
(1991)). He went on to state that,“un-
less there is the affirmative intention
of the Congress clearly expressed to
give a statute extraterritorial effect,
we must presume it is primarily con-
cerned with domestic conditions.” Id.
Scalia criticized the Second Circuit’s
“effects” and “conduct” tests, finding
that its framework disregarded the
presumption against extraterritorial-
ity and that the tests became overly
cumbersome in their application. Id.
at 288-80.
The Court went on to discuss
what has essentially become a two-
part inquiry. First, the relevant stat-
ute should be examined for “a clear
statement of extraterritorial effect.”
Id. at 2883. Noting that a statute need
not explicitly state, “this law applies
abroad,” the Court endorsed look-
ing to “whatever sources of statu-
tory meaning one consults to give
‘the most faithful reading’ of the
text.” Id. Such a framework, in the
Court’s view, was more faithful to the
presumption that federal law is not
meant to have extraterritorial effect.
In a paragraph that could be writ-
ten by no one but Justice Scalia, the
Court acknowledged the fact that, in
most cases, some contact with the
United States is inevitable:
For it is a rare case of prohib-
ited extraterritorial application
that lacks all contact with the
territory of the United States.
But the presumption against ex-
traterritorial application would
be a craven watchdog indeed if
it retreated to its kennel when-
ever some domestic activity is
involved in the case. The con-
currence seems to imagine just
such a timid sentinel, but our
cases are to the contrary.
Id. at 2884. (internal citations
omitted).
The Court went on to discuss
“the focus” of the Exchange Act as
regulating transactions in securities
listed on domestic exchanges. Ulti-
mately, it concluded that under “the
continued on page 4
Extraterritoriality
And Whistleblower
Retaliation
Crossing the Line
Tom Harrington and R. Scott
Oswald are principals of The Em-
ployment Law Group, P.C., a law
firm that represents employees who
have experienced retaliation by
their employers for whistleblowing
activity.
4. 4 The Corporate Counselor ❖ www.ljnonline.com/ljn_corpcounselor October 2014
transactional test we have adopted
— whether the purchase or sale is
made in the United States, or in-
volves a security listed on a domes-
tic exchange,” the statute did not al-
low for extraterritorial application.
Id. (emphasis added).
Fallout from Morrison
In the ARB
The next major decision in extra-
territoriality application for whis-
tleblowers came from the Admin-
istrative Review Board (ARB) in
Villanueva v. Core Laboratories NV,
2009 ARB CASE NO. 09-108, 2011
WL 6981989 (Dec. 22, 2011). William
Villanueva is a Colombian national
who, during the relevant period,
was living and working in Bogota.
Id. at *2. The company’s ownership
structure is a bit complex. Villan-
ueva worked for Saybolt Columbia,
a Colombian company that is 95%
owned by Saybolt Latin America
B.V., a Netherlands company, and 5%
owned by a Colombian national. Say-
bolt Latin America is, in turn, owned
by Saybolt International B.V., also a
Netherlands company. Saybolt Inter-
national is a wholly owned subsid-
iary of defendant Core Laboratories,
a United States company. Id.
In a complaint under Section 806
of the Sarbanes Oxley Act (SOX),
Villanueva alleged that Core Labora-
tories “orchestrated a ‘transfer price
fixing scheme’” whereby Core Labo-
ratories Sales, an offshore subsid-
iary of defendant Core Laboratories,
received a percentage of Saybolt Co-
lombia’s generated revenues even
though Core Laboratories Sales pro-
vided no services on the contract.
Villanueva alleged that this scheme
led to an under-reporting of taxable
revenue to the Colombian govern-
ment. Id. Skeptical of the scheme,
Villanueva, Saybolt Colombia’s Gen-
eral Manager, reported his concerns
to various individuals both within
and external to Core Labs. Ultimate-
ly, he refused to sign the tax returns
that were due to the Colombian
government. Id.
Villanueva claimed that, as a re-
sult of his disclosures, Core Labs
retaliated against him by failing to
provide him a pay raise and then
terminating his employment. He as-
serted that the Core Laboratories’
Regional Manager and Saybolt Latin
America’s President, both located in
Houston, TX, were the individuals
responsible for the decision.
Villanueva required the ARB to
decide whether Section 806 of SOX
was to be given extraterritorial ap-
plication. Turning the Morrison test
around, the ARB first sought to de-
termine Congress’s focus when
enacting SOX, and found it to be
“prevent[ing] and uncover[ing] finan-
cial fraud, criminal conduct in corpo-
rate activity, and violations of secu-
rities and financial reporting laws.”
Id. at 10-1. The ARB found that “the
alleged fraud … involved Colombian
laws with no stated violation or im-
pact on U.S. securities or financial
disclosure laws” and that, as a result,
Villanueva’s complaint did not fall
within the statute’s focus. Id. at 11.
To prevail, Villanueva would need
to demonstrate that § 806 “included
extraterritorial laws within its defini-
tion of protected activity.” Id.
The ARB then looked to the plain
text of § 806 and found no clear in-
dication that it embraced commu-
nications about foreign securities
and tax law as protected activity.
Id. at 11. It next compared § 806’s
language with that of other statutes
already dealt with by federal courts
in the determining extraterritoriality
application. The ARB noted that in
many other statutes that contained
even stronger indications of extra-
territoriality intent, the presumption
against extraterritoriality could not
be overcome. Id. at 11-12. Finally,
the ARB noted that the Dodd-Frank
act expressly extended coverage
of some aspects of SOX to foreign
transactions but remained silent as
to the extraterritoriality of § 806’s
anti-retaliation provision. Id. at 12.
In sum, Villanueva provides sev-
eral key takeaways for practitioners.
To begin, the second step of Morri-
son (but the first in Villanueva) re-
quires looking at the “primary focus”
of the statute in general and then
the “additional focus” of the anti-
retaliation provision. Then, the ARB
will look to the “labor elements” to
determine whether the statute’s ter-
ritorial scope implicates the subject
matter of the complaint (in Villan-
ueva, the ARB noted that the labor
elements were so obviously extra-
territorial such that extensive treat-
ment was not necessary).
Moreover, the ARB’s decision
seems to advocate for more of a
case-by-case assessment of the facts
and labor factors as opposed to
bright-line tests. It noted the follow-
ing could be factors in determining
whether a complainant’s claim would
require extraterritorial application
(at least under SOX): location of the
protected activity, location of the job,
location of the retaliatory act, and
the nationality of the laws allegedly
violated for which the complainant
has been fired for reporting. Id. at
FN 22. The ARB also noted that the
fraudulently activity being reported
was “the driving force of the case,”
was “solely extraterritorial,” and
therefore “[took] the events outside
Section 806’s scope.” Id. Again, this
factor-based approach and acknowl-
edgement that, depending upon the
circumstances of the case, some fac-
tors may be more important than
others steps away from the bright
lines of Morrison.
Conclusion
Extraterritorial application in
whistleblower cases requires a
unique inquiry into the statute at is-
sue and the facts of a given case.
After reviewing the explicit text of
the governing statute and confirm-
ing that there is no language stat-
ing that “this law applies abroad,”
counsel must be prepared to take
a deep dive into the “focus” of the
law’s anti-retaliation provisions and,
under Villanueva, the broader pur-
pose of the law, itself.
From a factual perspective, it be-
hooves defense counsel to demon-
strate the extent to which the facts
of the case are removed from the
United States and, at least in ad-
ministrative proceedings within the
Department of Labor (DOL), frame
the dispute as being “driven” by
some factor that occurred abroad.
Conversely, plaintiff’s counsel could
(and certainly should) try to put
Justice Scalia’s “craven watchdog”
back in its kennel. In a best-case sce-
nario, the plaintiff will want to argue
Extraterritoriality
continued from page 3
continued on page 8
5. October 2014 The Corporate Counselor ❖ www.ljnonline.com/ljn_corpcounselor 5
By Daniel de Juan
A strong workplace compliance
and ethics program offers many
benefits for any organization. Such
a program defines expectations for
employee conduct, creates a safer
workplace, improves employee re-
tention, addresses risk in order to
protect the company, and — per-
haps most important — establishes
a culture of compliance.
But there is a world of difference
between creating a compliance and
ethics program and effectively imple-
menting one so that employees actu-
ally engage with it and adhere to it. A
scan of the business news headlines
reveals no shortage of malfeasance
that breaches regulatory and ethical
standards. For example, violations of
the U.S. Foreign Corrupt Practices
Act (FCPA) create headlines based
on the large sums companies pay in
fines and disgorgements. FCPA viola-
tions alone accounted for $4.63 bil-
lion in settlement payments between
2007 and 2013 from enforcement ac-
tions by the U.S. Department of Jus-
tice (DOJ) and Securities Exchange
Commission (SEC). See Koehler,
Mike, A Foreign Corrupt Practices
Act Narrative. Mich. State Int. Law
Rev. 22.3 (2014): 961-1094. The FCPA
is but one of the numerous laws and
regulations that corporations are
subject to and against which cor-
porate infractions are reported on a
seemingly weekly basis.
While the Ethics Resource Center,
in its 2013 National Business Ethics
Survey, reported that the percent-
age of employees who said that they
have “observed misconduct on the
job” dropped to the lowest in the
survey’s history: 41%, or two out of
every five workers, this is still a sig-
nificant number. And more than one
of every three of these individuals
did not report the observed miscon-
duct. Perhaps the most encouraging
findings to support the impact that
compliance and ethics programs can
have are: In companies judged to
have a “strong” ethics cultures, only
one in five workers said they saw
misconduct, while in companies with
the weakest ethics cultures, close to
nine in 10 employees observed mis-
conduct. See National Business Eth-
ics Survey of the U.S. Workforce. Eth-
ics Resource Center (ERC), 2014.
With these things in mind, how can
you be more successful in compelling
employees at all levels of your orga-
nization to get on board with your
workplace compliance and ethics
standards? This challenge becomes
more complicated when you con-
sider that you have employees from
different age groups and generations,
as well as diverse cultures. Both of
these factors can have an impact on
the way that different employees con-
sume and retain information.
This article outlines two key tac-
tics for effectively executing and
nurturing a strong workplace com-
pliance and ethics strategy. The first
is fostering employee engagement.
The second involves deploying the
right technology tools to drive and
support this.
Compliance and Ethics:
The Inconvenient Truth
Granted, many organizations al-
ready have embraced strong work-
place compliance and ethics ideals.
These days, most companies not
only have a code of conduct, but also
some level of associated compliance
and ethics programs in place. How-
ever, the inconvenient truth is that
many programs that are considered
effective or look great on paper may
not always compel employees to
comply and act ethically.
Seemingly endless vulnerabilities
and risks related to unethical or
non-compliant employee or third-
party activities can threaten today’s
global businesses. Whether they are
due to carelessness, lack of aware-
ness or understanding, or willful
disregard, employee and third-party
actions that violate internal or exter-
nal policies and rules can have seri-
ous implications for the business. It
is critical that employees and third
parties understand and internalize
their compliance obligations. Failure
to adhere to company standards of
customer service, for example, can
lead to customer dissatisfaction, and
in extreme cases, loss of customers,
negative publicity, or even legal ac-
tion. Violations of industry and gov-
ernmental rules and regulations can
lead to fines as noted earlier, poten-
tial criminal prosecution, damage to
reputation and brand, diminished
shareholder confidence, and other
serious repercussions.
Needless to say, there is no short-
age of these externally-imposed
rules and regulations, including
those under the FCPA, the Consum-
er Financial Protection Bureau, the
Environmental Protection Agency
(EPA), HIPAA, and more. With regu-
lators becoming more vigilant and
aggressive than ever, it behooves
companies to ensure that their em-
ployees understand the importance
of compliance.
But there is good news. A robust
compliance and ethics program can
provide real strategic benefits, not
the least of which is that regulators
suggest that such a program can be
employed as a viable defense for
one-off violations.
The Status Quo
Is Not Good Enough
Michael Rasmussen, founder of
GRC 20/20 Research and recog-
nized authority on all things related
to governance, risk, and compliance
(GRC) management, asserts that in
order to be effective, companies
need to move away from a “check-
the-box” mentality for compliance
and ethics. Instead, they need to
find ways to truly connect with em-
ployees and show that compliance
and ethics are an integral part of
day-to-day operations of the busi-
ness. See Rasmussen, Michael, Em-
ployee Engagement in the Context
of GRC: Bringing GRC to the Coal-
Face. The GRC Pundit Blog, GRC
20/20 Research, 29 Oct. 2013.
Why haven’t traditional programs
been effective enough? Rasmussen
suggests that this is because compa-
nies have neglected how front-line
employees experience these pro-
grams. The programs are too often
continued on page 6
Compliance,
Ethics and the
Multi-generational
Workforce
Daniel de Juan is director of prod-
uct management for Datacert’s,
Passport GRC.
6. 6 The Corporate Counselor ❖ www.ljnonline.com/ljn_corpcounselor October 2014
highly disorganized and lack coordi-
nated communications. Rather than
being engaged, employees tend to
be confused and alienated, and view
required compliance-related tasks as
a waste of valuable time. In many
companies, for example, there is no
single source for policies or related
training materials and surveys. Em-
ployees may receive compliance-re-
lated communications from multiple
departments in the organization. In
such an environment, how are em-
ployees to know, for example, which
policies are the most current, where
to find a specific policy that they are
looking for, or whether the policy-
related notices and task requests that
they receive truly apply to them?
How to Enable
Engagement
How can organizations better fos-
ter employee engagement in their
compliance and ethics programs?
As has been widely recognized,
this starts with the tone at the top. Se-
nior leaders must make compliance
and ethics important components
of who they are, how they operate,
and how they treat employees, busi-
ness partners, and customers. Tone
at the top is vital for empowering a
culture of compliance and enabling
the compliance function to act with
enterprise-wide authority.
To support this culture, employ-
ees need to be made aware of their
compliance and ethics responsibili-
ties as part of their overall job to
make both themselves and the orga-
nization successful. This idea can be
woven into performance goals and
evaluations to help make compli-
ance and ethics more personal and
meaningful to employees.
Companies should also create
opportunities and offer technology
tools that encourage employees to
actively interact and participate with
compliance and ethics programs.
For example, employees need to go
beyond simply reading policies, but
must also understand them, be able
to provide feedback, and know how
to ask questions about policies to
trusted sources.
In talking about employee en-
gagement, Rasmussen emphasizes
the importance of the user experi-
ence with the tools that support
ethics and compliance programs.
He cites four elements as key for
systems to engage employees: 1) In-
tuitive interface design; 2) Socializa-
tion and collaboration; 3) Gamifica-
tion; and 4) Mobility.
As companies seek to more ef-
fectively engage employees in their
ethics and compliance programs,
they must also consider the chang-
ing workplace demographics. More
Americans are retiring later in life.
Today 18% of U.S. workers are over
age 65, according to the U.S. Bu-
reau of Labor Statistics. This means
that many companies have to con-
sider designing compliance and eth-
ics programs to reach four different
generations of employees, often la-
beled as Traditionalists, Baby Boom-
ers, Gen-X, and Gen-Y or Millenni-
als. The latter, in particular, pose new
challenges for ethics and compliance
leaders who are seeking to educate,
motivate — and engage — workers.
As “digital natives,” they are very
tech-savvy and socially networked.
They want work to be involving and
meaningful, and are accustomed to
sharing information through a va-
riety of social media technologies.
The compliance and ethics pro-
grams that companies implement
— and the technology solutions
that they deploy to support them —
must take all of this into account.
Innovative GRC
Technology at
The table
To successfully support and en-
able employee engagement, it’s im-
portant to use technology tools that
effectively deliver compliance and
ethics content and that reflect the
new reality of a socially connected
workforce. So what should you look
for when choosing this technology?
First, technology tools should min-
imize complexity and be straight-
forward and intuitive to use (with
minimal training required) and
graphically interesting. For example,
a secure portal for compliance and
ethics can serve as a central reposi-
tory where employees and third par-
ties can read and attest to applicable
company policies and respond to
policy surveys. Look for a portal that
provides a clear, personalized inter-
face and user experience. It should
enable employees to locate specific
policies, access helpful resources,
submit policy-related comments and
questions, and access information on
their progress.
Next, seek out tools that embed
opportunities for social interactions
and collaboration among users, and
that include gamification elements.
For example, some portals have so-
cial features similar to those users
are accustomed to in the apps and
programs they use outside work.
Some of these features include on-
line profiles; opportunities to par-
ticipate in fun and competitive ac-
tivities (competing for prizes for the
most required policy attestations
completed on the team); and inter-
action with the content and a com-
munity of users. These features can
further personalize the user experi-
ence and stimulate involvement and
engagement.
Third, ensure that the tools pro-
vide mechanisms for effectively com-
municating with employees and third
parties about changing policies and
requirements. Some systems offer
automated management of your au-
diences for different policies (which
is particularly critical over time as
people move into, out of, or around
different parts of the organization)
and can integrate with other systems
(such as HR) to facilitate this. They
can also provide capabilities for au-
tomatically notifying audiences when
policies are published or updated.
Many people access work content
and activities via smartphones and
tablets. It is important for technol-
ogy tools to facilitate these users
by enabling mobile access to poli-
cies and allowing them to respond
to required attestations, training,
and questionnaires. This can further
support employee engagement.
Beyond the facilities for delivery
and interaction with content, it is
important that a technology solu-
tion provide capabilities that support
both documentation and evaluation
of ethics and compliance program
efforts. For example, as employees
GRC Challenges
continued from page 5
continued on page 8
7. October 2014 The Corporate Counselor ❖ www.ljnonline.com/ljn_corpcounselor 7
By Jen L. Cornell
While employers always need to
keep in mind differing obligations
under state and federal anti-discrim-
ination statutes, the potential pitfalls
for employers with regard to trans-
gender employees are enormous.
Courts have expressly held that Title
VII and the Equal Protection Clause
does not cover discrimination on the
basis of sexual orientation. See, e.g.,
Simonton v. Runyon, 232 F.3d 33, 36
(2d Cir. 2000). However, most courts
that have considered the question of
transgender — or gender non-con-
forming individuals, regardless of
how they self-identify — have held
that the gender-stereotyping theory
of Price Waterhouse v. Hopkins, 490
U.S. 228 (1989), extends Title VII
protections to those individuals.
The extension of Title VII protec-
tion to transgender or gender non-
conforming individuals has been
addressed by a number of courts,
which employers should note. See,
e.g., Glenn v. Brumby, 663 F.3d
1312, 1313-14 (11th Cir. 2011) (ac-
cepting a claim bought by a trans-
gender plaintiff who was fired be-
cause her supervisor believed that
her gender transition would be
“inappropriate” and “disruptive”
and would make fellow employees
“uncomfortable”); Smith v. City of
Salem, 378 F.3d 566 (6th Cir. 2004)
(accepting a claim by a transgender
woman who was told she was not
masculine enough and was subject-
ed to psychological testing and sus-
pension); Schwenk v. Hartford, 204
F.3d 1187 (9th Cir. 2000) (accepting
a claim under the Equal Protection
Clause that a prison guard assaulted
a transgender prisoner based on
assumptions about gender); Rosa
v. Park West Bank & Trust Co., 214
F.3d 213 (1st Cir. 2000) (accepting a
claim from a bank patron who was
refused service because his gender
presentation did not match his iden-
tification); Schroer v. Billington, 577
F. Supp. 2d 293, 300, 305 (D.D.C.
2008) (accepting a claim brought by
a transgender plaintiff whose super-
visor recoiled when shown a picture
of what the employee would look
like after transitioning).
Jurisprudence and
Dress Codes
At odds with this line of cases is
a line of jurisprudence holding that
Title VII does not prohibit gendered
dress or grooming codes. In these
cases, courts have typically held that
as long as the burden of the dress
codes is equal for both men and
women, the dress code does not
violate Title VII. See, e.g., Jespersen
v. Harrah’s Operating Co., Inc., 444
F.3d 1104, 1109-10 (9th Cir. 2006);
Knott v. Mo. Pac. Ry. Co., 527 F.2d
1249 (8th Cir. 1975); Willingham v.
Macon Tel. Pub. Co., 507 F.2d 1084,
1088 (5th Cir. 1975). As a result, em-
ployers may have been advised that
they can maintain gendered dress
codes, or grooming standards, with-
out fear of violating federal anti-dis-
crimination laws.
While the case has not yet been
heard, the growing consensus that
federal anti-discrimination laws pro-
tect transgender employees is on a
collision course with jurisprudence
permitting gendered dress codes.
Take, for example, an employer with
different standards for men and wom-
en regarding hair length. How would
the employer determine which stan-
dard applied to a transgender em-
ployee? Would the transgender em-
ployee have a claim of discrimination
if the employer enforced the hair
length provision based on the gen-
der it believed applied, even if the
employee disagreed? Furthermore,
would a non-transgender employee
who had been disciplined for violat-
ing the hair length standard have a
claim if transgender employees were
allowed to choose which standard
applied to them? Could a court find
the mere existence of different gen-
dered standards contributed to a pat-
tern and practice of discrimination or
a hostile work environment, even if
rarely enforced?
All of these questions remain un-
answered, since a court has yet to
hear such claims. Given the evolv-
ing understanding that Title VII
protects transgender employees,
coupled with the increased pres-
ence of openly transgender employ-
ees in the workplace, it is inevitable
that an employer with a gendered
dress code will soon be facing one
of these claims, or one similar.
Gender Stereotypes
Indeed, even if an employer be-
lieves it has no transgender employ-
ees, many of the cases that have led
to the protection of transgender em-
ployees under Title VII were brought
by individuals who did not identify
as transgender, but simply defied ste-
reotypical gender expectations. Ann
Hopkins, the employee at the heart
of the Supreme Court case that first
articulated the “sex stereotyping”
theory of Title VII protection, for ex-
ample, did not identify as transgen-
der, but her supervisors commented
that she should “walk more feminine-
ly, talk more femininely, dress more
femininely, wear make-up, have her
hair styled, and wear jewelry.” Price
Waterhouse, 490 U.S. at 235.
To avoid being the named de-
fendant in the case that reconciles
these two tracks of jurisprudence,
the safer course for an employer is
to draft a dress code or grooming
standard that is equally applied to
all employees, regardless of their
gender expression. It is reasonable
for an employer to require that em-
ployees dress “professionally” and to
give specific examples of what pro-
fessional dress means in the setting
of that workforce, such as suits, no
jeans, or other examples that are not
different for either gender. It is also
reasonable for an employer to expect
that employees keep their hair “neat
and clean” or even place restrictions
on overly ostentatious hair colors.
Cf. Burchette v. Abercrombie & Fitch
Stores, Inc., 2010 WL 1948322, at
*(S.D.N.Y. May 10, 2010) (upholding
a grooming standard that instructed
both male and female employees to
wear their hair in a “clean, natural,
classic hairstyle” in a race discrimina-
tion claim brought by an employee
with dyed hair).
These policies should be linked
to a legitimate business needs. For
example, restrictions on certain hair
continued on page 8
Gendered Dress
Codes
Jen L. Cornell is an attorney with
Nilan Johnson Lewis in Minneapo-
lis. She can be reached at jcornell@
nilanjohnson.com or 612-305-7717.
8. 8 The Corporate Counselor ❖ www.ljnonline.com/ljn_corpcounselor October 2014
styles are more likely to be upheld
if there is a connection between the
restriction and the employees’ duties,
such as for safety reasons. Addition-
ally, the dress code should be tai-
lored for different positions if neces-
sary. An employer can demonstrate
more readily a business need for a
customer-facing employee to adhere
to certain dress standards than for an
employee who is in an office and not
acting as the face of the company.
Conclusion
Again, as long as these dress codes
are gender neutral, both on their face
and in their application, they are
likely to withstand challenges under
federal anti-discrimination law. While
these policies should be reviewed
with a different eye to ensure that
a claim of religious discrimination
does not follow — by an employee
who wears a religious headdress, for
example — gender-neutral policies
that are linked to legitimate business
needs will protect employers from
become the test case for two lines
of jurisprudence that will, at some
point, need to be reconciled.
Transgender Dress
continued from page 7
that all of the requisite elements of
the protected conduct and retaliatory
actions occurred within the United
States and that extraterritorial ap-
plication of the statute is not an is-
sue. In other words, the goal is to
demonstrate that the plaintiff’s case
merely requires an application of a
U.S. whistleblower statute to retalia-
tory acts committed within the U.S.
Perhaps most importantly, once
these extraterritorial issues are de-
cided, all of the parties will either
get to go on about their business or
get back to arguing about protected
conduct, causation standards, and
everything else with which we are
all much more comfortable debat-
ing.
Extraterritoriality
continued from page 4
Sec. 218 was amended to provide
that stockholder voting trust agree-
ments and amendments thereto may
be delivered to either the corpora-
tion’s registered office or a prin-
cipal place of business. Sec. 242
was amended to allow the board
of directors to enact certain minor
housekeeping amendments with-
out stockholder approval. And Sec.
251(h), which was enacted last year
to eliminate the need for stock-
holder approval of the back end of
a two-step transaction involving a
front-end tender or exchange, was
amended to expand, clarify, and
confirm application of the provi-
sion.
House Bill 327, effective Aug. 1,
enacted various amendments to the
Delaware Limited Liability Company
Act, including the following:
Sec. 18-104 was amended to re-
quire an LLC to provide its commu-
nications contact with the name and
address of a natural person with
access to the record identifying the
LLC’s members and managers. Secs.
18-302 and 18-404 were amended to
allow a person, not then a member
or manager, to consent to any mat-
ter that will be effective in the future
and have the consent be deemed
effective as long as the person is a
member or manager on the future
date. Sec. 18-305 was amended to
confirm that a member may inspect
LLC books and records by an at-
torney or other agent, to require
the demand to be accompanied by
proof of the agent’s authorization,
and to require an LLC to maintain a
record identifying the name and ad-
dress of each member and manager.
And Sec. 18-806 was amended to
provide additional means by which
an LLC may revoke a dissolution.
Amendments to the
Business Entity Laws
Of Other States
In Connecticut, House Bill 5597,
effective Oct. 1, authorized new or
existing business corporations to
become benefit corporations. In
Louisiana, House Bill 841, effective
Aug. 1, amended the LLC law pro-
visions regarding the definition of
“person,” proxy voting by members
and managers, and voting trusts.
Quarterly Review
continued from page 1
Sandra Feldman is a publications
and research attorney for CT Corpo-
ration and a member of this news-
letter’s Board of Editors.
continued on page 10
—❖—
—❖—
and third parties use a portal to read
policies, complete surveys and attes-
tations, submit questions, etc. some
systems allow information on these
activities to be collected, analyzed,
and reported. Data of this type offers
compliance professionals a valuable
barometer of the level of employee
engagement and can help gauge
program effectiveness and inform fu-
ture program improvements. Docu-
mentation of program activities also
permits companies to build an audit
trail, demonstrate program success,
and defend compliance efforts.
Final Thoughts
With the best intentions, many
companies have developed compli-
ance and ethics programs that, on
the surface, appear to be effective
in protecting the organization and
supporting its standards and obli-
gations. However, compliance inci-
dents are still occurring, unethical
behavior is still a serious problem,
and fines for regulatory violations
are higher than ever. To improve the
success of ethics and compliance
programs requires heightened focus
on effectively engaging front-line
employees. In order to foster this
engagement, companies can look to
innovative technology solutions to
help employees participate actively
in compliance and ethics and un-
derstand their role in ensuring the
integrity of the organization.
GRC Challenges
continued from page 6
—❖—
9. October 2014 The Corporate Counselor ❖ www.ljnonline.com/ljn_corpcounselor 9
By André Bywater and
Jonathan Armstrong
In the UK, the Serious Fraud Office
(SFO) acts as an independent govern-
mental authority tasked with investi-
gating and prosecuting the most seri-
ous or complex fraud and domestic
and overseas corruption. As readers
might be aware, a few years ago the
UK introduced a new legal regime to
tackle corruption under the UK Brib-
ery Act 2010, with some describing it
as the toughest anti-corruption legis-
lation in the world.
David Green, CB QC, the Director
of the SFO, recently published his
annual report (2013-2014), which
gives the opportunity to reflect on
the recent past and look to the fu-
ture concerning the SFO’s activities,
notably as regards corruption en-
forcement.
The Annual Report
In the areas of both fraud and cor-
ruption, the SFO ran a total of eight
prosecutions of 18 defendants last
year, with a conviction rate of 85%.
It is relevant to note, however, that
the numbers are quite small — 11
defendants were convicted, of whom
four pleaded guilty with seven be-
ing found guilty by a jury. The SFO
also opened 12 investigations last
year, and charged 35 defendants. Al-
though from a U.S. perspective this
might be considered to be minor,
given the scale and complexity of
the SFO’s work, it actually is a mod-
est success, and it should be borne
in mind that the SFO essentially only
tackles serious and complex cases.
As for the outlook for the future,
the Director states that the SFO is
“undertaking fewer but much larger
and more complex investigations”
and that the SFO has “expanded [its]
analytical and intelligence capabil-
ity, and currently [has] significant
pre-investigation projects in devel-
opment.”
Deferred Prosecution
Agreements
What will be of particular inter-
est to watch as a development is the
use of Deferred Prosecution Agree-
ments (DPAs) that came into opera-
tion earlier this year with the SFO’s
enforcement of the UK Bribery Act
2010. There have as yet been no
public announcements of a DPA go-
ing through the system. DPAs are a
tool for the SFO (and other govern-
ment crime authorities) to try and
reach a form of plea bargain with
corporate offenders and thereby
shortcut trials, time and cost. This
process is similar to the U.S. plea-
bargaining system, but it has major
differences, most notably the over-
sight role of a judge who has to ap-
prove any proposed deal (in open
court). It will probably take some
time for DPAs to bed down and so
only time will tell whether DPAs are
judged a success or not.
The SFO also appears to have had
some regulatory woes of its own
on a different front — including a
data loss (in 2012), which led to an
investigation resulting in a 98% re-
covery of material. The incident was
reported to the Information Com-
missioner’s Office (ICO), which is
the main UK data protection/pri-
vacy regulator, as personal data had
apparently been inadvertently sent
to a third-party. The report states
that the ICO undertook a site visit
at the end of May 2014 and that the
SFO have had a further 10 instances
of data-handling issues, although no
more details were given. Data losses
are an all-too-frequent occurrence
these days, to which even top regu-
latory authorities are not immune.
Since the SFO’s report was pub-
lished, other significant additional
activity has included the following:
• The settlement of the SFO’s
long-running civil actions with
the Tchenguiz brothers;
• The sentencing of former Alba
CEO Bruce Hall for conspiracy to
corrupt, in relation to contracts
for the supply of goods and ser-
vices to a Bahraini Aluminium
company. He was sentenced
to 16 months in prison and or-
dered to pay a confiscation or-
der of GBP 3,070,106 (about
$5.175 million) or face serving
an additional prison term of 10
years (on top of significant sums
of compensation he also paid to
his former company where the
corruption occurred, and a high
contribution to prosecution costs
that he has also paid);
• The laying of criminal charges
against a UK subsidiary of Al-
stom after a tip-off from the Of-
fice of the Attorney General in
Switzerland concerning large
transport projects in India, Po-
land and Tunisia; and,
• The sentencing of four men con-
nected with Innospec in con-
nection with their involvement
in a bribery scheme in Indone-
sia and Iraq. Mr. Green said of
the prosecutions, “This success-
ful conclusion to a long-running
investigation demonstrates the
SFO's ability and determination
to bring corporate criminals to
justice.” The SFO also secured
a guilty plea from the company
with fines being imposed in the
UK and the U.S. after co-opera-
tion between the SFO and au-
thorities in the U.S., Indonesia,
Switzerland and Singapore.
Conclusion
It is clear from both the report
and the activity of the last few
weeks that those who think the
Bribery Act 2010 is dead have spo-
ken too soon. The SFO is right to
focus its resources on the most
complicated cases, and, the Crown
Prosecution Service, which is the
principal prosecuting authority (in
England and Wales) responsible
for conducting most prosecutions
of alleged criminal offences, has
also used bribery legislation to
bring less complex cases to court.
Complex cases take longer to
reach court, especially given the
need for cooperation with foreign
continued on page 12
UK Serious Fraud
Office Annual
Report
Recent Cases Show Progress
André Bywater and Jonathan
Armstrong, a member of this
newsletter’s Board of Editors, are
commercial lawyers with Cordery
Compliance in London, where they
focus on regulatory compliance,
processes and investigations. Reach
them at Jonathan.Armstrong@
CorderyCompliance.com and
Andre.Bywater@CorderyCompliance.
com, respectively.
10. 10 The Corporate Counselor ❖ www.ljnonline.com/ljn_corpcounselor October 2014
In Maryland, House Bill 916, ef-
fective Oct. 1, amended provisions
of the corporation law governing,
among other things, a corpora-
tion’s power to renounce business
opportunities, qualifications for di-
rector nominees, actions without a
meeting, voting for directors, spe-
cial meetings, proxies, voting agree-
ments, mergers and share exchang-
es, dissenters rights and REITs.
In Minnesota, House Bill 2190, ef-
fective Aug. 1, authorized a prefiling
review of business entity documents
by the Secretary of State and amend-
ed provisions of the corporation and
LLC laws dealing with conversions
and domestications, amendments by
voting groups, delegation of powers,
and contents of merger documents.
In New York, Senate Bill 7762, effec-
tive Aug.11, authorized certain cor-
porations with both charitable and
business purposes to elect to be a
non-charitable corporation.
In New Hampshire, House Bill
1283, effective Sept. 9, amended
the Voluntary Corporations & As-
sociations code regarding domestic
reinstatement. And in North Caro-
lina, Senate Bill 853, effective Oct.
1, amended the Business Corpora-
tion Law to establish a procedure
for mergers to effect a holding com-
pany reorganization.
IN THE STATE
COURTS
DE Recognizes
Garner Exception to
Attorney-Client
Privilege
In Wal-Mart Stores, Inc. v. Indi-
ana Electrical Workers Pension Trust
Fund IBEW, No. 614, 2013, Delaware
Supreme Court, decided July 23,
2014, a stockholder brought an ac-
tion under Sec. 220 of the General
Corporation Law to inspect corpo-
rate books and records. The stock-
holder’s purpose was to investigate
possible breaches of fiduciary duty in
connection with the board’s investi-
gation of an alleged bribery scandal,
and to determine whether making a
pre-suit demand on the board would
be futile. The corporation declined
to provide certain documents, invok-
ing attorney-client privilege and the
work-product doctrine.
In determining whether to en-
force the corporation’s attorney-
client privilege, the Chancery Court
applied the Garner doctrine — an
exception that allows a stockholder
to invade a corporation’s attorney-
client privilege to prove a breach of
fiduciary duty upon a showing of
good cause. The court found that
under Garner, the stockholder was
entitled to the documents sought.
The corporation appealed.
The Delaware Supreme Court af-
firmed, and in so doing, stated for the
first time that Delaware recognizes
the Garner exception for both plena-
ry stockholder proceedings and Sec.
220 actions. However, the court went
on to state that in a Sec. 220 proceed-
ing, the court must first determine that
the records sought are necessary and
essential to the stockholder’s proper
purpose. Then the stockholder must
show good cause before the court can
apply Garner and order production
of the documents.
In this case, the Delaware Supreme
Court agreed with the Chancery
Court’s findings that the requested
documents were necessary and es-
sential to the stockholder’s purpose
and that the stockholder demonstrat-
ed good cause. Among other factors
that demonstrated good cause were
that a colorable claim existed, the
information was not available from
non-privileged sources, this was not
a fishing expedition, no trade secrets
were involved, and the stockholder, a
pension fund, was a legitimate stock-
holder.
NV: A Corporation’s
Management Is Sole
Holder of Its
Attorney-Client Privilege
In Las Vegas Sands Corp. v. Eighth
Judicial District Court of the State of
Nevada, No. 63444, Nevada Supreme
Court, decided Aug. 7, 2014, a for-
mer CEO filed a suit against his for-
mer corporate employer for breach
of employment contract. Before his
termination, the CEO took certain
corporate documents. The corpora-
tion asserted that the documents
may be subject to its attorney-client
privilege. The trial court ordered the
CEO to give the documents to an
independent vendor for review. The
CEO moved to have the vendor re-
turn the documents. The trial court
granted the motion, finding that the
CEO, as a former executive who was
in possession and control of the doc-
uments now and when he was the
CEO, was in a class of persons al-
lowed to use the documents to pros-
ecute his claims. The corporation
petitioned for a writ of prohibition,
asking the Nevada Supreme Court to
vacate the trial court’s order.
The Nevada Supreme Court
granted the writ, holding that Ne-
vada does not recognize the “class
of persons” exception to attorney-
client privilege applied by the trial
court. The court reviewed precedent
from other courts, and noted that
the modern trend is to hold that the
attorney-client privilege belongs to
the corporation and not to former
directors or officers. Furthermore,
recognizing the “class of persons” ex-
ception would have a chilling effect
on candid communications between
corporate management and counsel,
which is inconsistent with the pur-
poses of the attorney-client privilege.
CA Appellate Court
Rules on Damages
For Market Manipulation
In Pricaspian Development Corpo-
ration v. Ficeto, B239435, California
Court of Appeals, Second District,
decided Aug. 21, 2014, the plaintiff
invested $12 million in three hedge
funds. The defendants were alleged
to have engaged in a fraudulent
scheme in which the funds were
devalued by trading performed in
microcaps. The plaintiff lost nearly
$7 million of its investment, and
brought an action for fraud. The jury
found for the plaintiff and awarded
it $1.2 million in damages. The trial
court granted the defendant’s mo-
tion for JNOV on the basis that the
evidence did not establish that the
plaintiff suffered any damages due
to their wrongdoing. The plaintiff
appealed.
continued on page 12
Quarterly Review
continued from page 8
The publisher of this newsletter is not engaged in rendering
legal, accounting, financial, investment advisory or other
professional services, and this publication is not meant to
constitute legal, accounting, financial, investment advisory
or other professional advice. If legal, financial, investment
advisory or other professional assistance is required, the
services of a competent professional person should be sought.
11. October 2014 The Corporate Counselor ❖ www.ljnonline.com/ljn_corpcounselor 11
impose so enormous a burden
on the retail sector of the econ-
omy and so vast a supervisory
responsibility on the federal
courts, we think it would have
made its intention clearer and
would at least have imposed
some standards. It is hardly a
feasible judicial function to de-
cide whether shoe stores should
sell single shoes to one-legged
persons and if so at what price,
or how many Braille books the
Borders or Barnes and Noble
bookstore chains should stock
in each of their stores.
Id. at *10-11 (quoting Doe v. Mu-
tual of Omaha Ins. Co., 179 F.3d
557, 560 (7th Cir. 1999)). Hence, the
court held that “Title III does not
apply to the goods in a retailer’s in-
ventory,” id. at *12.
But that did not end the district
court’s inquiry. The court went on
to explain that a Department of Jus-
tice (DOJ) regulation, which gener-
ally recognizes the special goods
exception, 28 C.F.R. § 36.307(a), also
obligates public accommodations to
“order accessible or special goods
at the request of an individual with
disabilities, if, in the normal course
of its operation, it makes special
orders on request for unstocked
goods, and if the accessible or spe-
cial goods can be obtained from a
supplier with whom the public ac-
commodation customarily does
business.” 28 C.F. R. § 36.307(b). The
court explained that:
For example, a clothing store
would be required to order
specially-sized clothing at the
request of an individual with a
disability, if it customarily makes
special orders for clothing that
it does not keep in stock, and
if the clothing can be obtained
from one of the store’s custom-
ary suppliers. This does not
mean that defendants can be li-
able under this prong of the reg-
ulation if they participate in any
kind of special ordering. Rather,
the Department of Justice in-
tended for § 36.307(b) to require
special orders only of those par-
ticular types of goods for which
a place of public accommoda-
tion normally makes special or-
ders. For example, a book and
recording store would not have
to specially order Braille books
if, in the normal course of its
business, it only specially orders
recordings and not books.
Id. at *14-15 (citations and quota-
tions omitted).
Applying this regulation to Mr.
Jancik’s case, the district court held
that it could not “deny the ADA claim
wholesale,” because it remained to
be determined whether and to what
extent “Redbox Retail normally takes
special orders for DVDs and whether
such goods can be obtained from its
suppliers … .” Id. at *15.
Comments
Jancik is an interesting decision
in a number of respects. First and
foremost, it properly applies the
special goods exception by recog-
nizing that the ADA’s broad and
salutary mandates typically will not
require retailers to provide “acces-
sible or special goods that are de-
signed for, or facilitate use by, indi-
viduals with disabilities.” As the DOJ
has recognized in the commentary
accompanying its original Title III
regulations in 1991, the goal of the
Act is to ensure accessibility to the
goods offered by a public accommo-
dation, not to alter the nature or mix
of goods that the public accommo-
dation has typically provided. See
56 Fed. Reg. 35,544, 35,571 (1991).
In this regard, Jancik’s holding is
in accord with a number of federal
circuit court decisions, e.g., Arizona
ex rel. Goddard v. Harkins Amuse-
ment, 603 F. 3d 666, 673 (9th Cir.
2010); Doe, 179 F.3d at 560; McNeil
v. Time Ins. Co., 205 F.3d 179, 187
(5th Cir. 2000); Weyer v. Twentieth
Century Fox Film Corp., 198 F.3d
1104, 1114 (9th Cir. 2000).
Second, Jancik recognizes that
the special goods exception does
not excuse public accommodations
from complying with Title III’s gen-
eral and specific prohibitions. As
noted above, public accommoda-
tions can violate the Act by provid-
ing goods, services and facilities
that are not equal to that afforded
to other individuals. This rule finds
special application in the context of
the special goods exception, at least
to the extent that a retailer or other
public accommodation accepts spe-
cial orders, and accessible or special
goods can be obtained from their
traditional suppliers.
Third, Jancik does not fully ex-
plore the relationship between the
special goods exception and the
obligation to provide auxiliary aids
and services. The duty to provide
auxiliary aids is grounded in the
general obligation of public ac-
commodations to “effectively com-
municate” with disabled customers,
clients, patients and participants, as
well as with their companions. 28
C.F.R. § 36.303(c). Hence, covered
public accommodations must pro-
vide auxiliary aids and services so
that individuals with disabilities are
not “excluded, denied services, seg-
regated or otherwise treated differ-
ently than other individuals” unless
doing so would “fundamentally alter
the nature of the good, service, facil-
ity, privilege, advantage, or accom-
modation being offered, or would
result in an undue burden.” 42
U.S.C. § 12182(b)(2)(A)(iii). The Act
defines “auxiliary aids and services”
to include “qualified interpreters or
other effective methods of making
aurally delivered materials available
to individuals with hearing impair-
ments;” “qualified readers, taped
texts, or other effective methods of
making visually delivered materials
available to individuals with visual
impairments;” “acquisition or modi-
fication of equipment or devices”;
and “other similar services and ac-
tions.” 42 U.S.C. § 12103(1)(A)-(D).
How does the auxiliary aids and
services standard apply, for ex-
ample, to the written instructions
printed on the packaging of prod-
ucts sold in a grocery store? An in-
dividual who is blind might argue
that the store must provide an aux-
iliary aid by providing the instruc-
tions in Braille or in audio format,
reasoning that he or she could not
fully enjoy the packaged prod-
uct unless the instructions are “ac-
cessible.” Providing an individual
with vision impairments a package
without Braille instructions, so the
continued on page 12
Jancik and the ADA
continued from page 2
12. 12 The Corporate Counselor ❖ www.ljnonline.com/ljn_corpcounselor October 2014
The California Court of Appeals af-
firmed. The court noted that where
a plaintiff alleges it suffered dam-
ages due to the defendant’s manipu-
lation of a stock price, the plaintiff
is entitled to damages measured by
the difference in value between the
price paid for the stock and its value
at the time of purchase. Here, the
plaintiff did not provide evidence of
the actual value of the hedge funds.
Thus there was no evidence that
the shares were not worth the $12
million paid. In addition, a suit for
fraud that devalued the hedge funds
had to be brought derivatively, and
not by the plaintiff directly.
law enforcement agencies. It is
likely that the next few months
will see more activity as announce-
ments are made in some of the
SFO’s ongoing investigations.
To order this newsletter, call:
1-877-256-2472
On the Web at:
www.ljnonline.com
argument goes, is equivalent to
providing an individual without a
vision impairment a package with
a blank label. The grocery store, on
the other hand, might invoke the
special goods exception and argue
that it is not required to alter or
change the contents of the packages
it sells.
Jancik provides some guidance
on this important question by em-
phasizing the distinction “between
access to a good and the good it-
self.” 2014 U.S. Dist. LEXIS 67223 at
*10. Under Jancik, the auxiliary aids
standard should not require a public
accommodation to modify the con-
tent of the goods it sells. Instead, the
auxiliary aids standard might only
require that public accommodations
effectively communicate existing
content so that it can be perceived
by individuals with disabilities.
At least one federal appellate
court has adopted this approach.
In Arizona ex rel. Goddard v. Har-
kins Amusement Enters., 603 F.3d
666 (9th Cir. 2010), the Ninth Circuit
was asked to determine whether Ti-
tle III required the Harkins theater
chain to provide closed captioning
for movies displayed in its theaters.
Harkins argued that Title III only re-
quired it to provide equal access to
its theaters, and relied on the special
goods exception to argue that Title
III did not require it to modify its
services so that deaf patrons could
more fully enjoy displayed movies.
The Ninth Circuit rejected Harkins’
argument by noting that the Title III
obligation to provide auxiliary aids
and services “limits [the] general
rule that public accommodations do
not have to provide different servic-
es for the disabled.” Id. at 671-72.
The panel went on to explain that,
“[b]y its very definition, an auxiliary
aid or service is an additional and
different service that establishments
must offer the disabled.”
That being said, the distinction
Jancik recognizes between the spe-
cial goods exception and the auxil-
iary aids standard is difficult to ap-
ply in practice, and may fray badly
at the edges. For example, it is one
thing to suggest that a grocery store
clerk might assist a customer with a
vision disability by reading out loud
the written instructions on the pack-
aging of a product in which the cus-
tomer is interested. That may very
well be an effective auxiliary aid
designed to “make visually deliv-
ered materials available to individu-
als with visual impairments.” How-
ever, it is much less certain that the
grocery store would have the same
obligation to provide auxiliary aids
once the customer leaves the store.
Conclusion
The district court’s opinion in Jan-
cik is not the last word on the rela-
tionship between the special goods
exception and Title III’s auxiliary
aids and services standard. Indeed,
Jancik is on appeal to the Ninth Cir-
cuit. Nonetheless, the district court’s
opinion reminds retailers and other
public accommodations that Title III
applies not only to facilities, but to
their sales practices and other deal-
ings with the public.
Jancik and the ADA
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UK Compliance
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Quarterly Review
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