Which Laws Apply to Broker-Dealers? Federal Laws? State Laws? Both? General Principles Leading to an Answer

TAMAR FRANKEL

BU Law emerita professor Tamar Frankel explains the law of preemption as it pertains to broker-dealers and their investor clients. She predicts, among other things, that either the clients will demand that broker-dealers adhere to a fiduciary duty, or else that states will impose that duty on them.

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Druding v. Care Alternatives

Court: US Court of Appeals for the Third Circuit

Docket: 18-3298

Opinion Date: March 4, 2020

Judge: Greenaway

Areas of Law: Government Contracts, Health Law, Public Benefits

Care Alternatives provides hospice care to New Jersey patients, employing “interdisciplinary teams” of registered nurses, chaplains, social workers, home health aides, and therapists working alongside independent physicians who serve as hospice medical directors. Former Alternatives employees filed suit under the False Claims Act, 31 U.S.C. 3729–3733 alleging that Alternatives admitted patients who were ineligible for hospice care and directed its employees to improperly alter those patients’ Medicare certifications to reflect eligibility. They retained an expert, who opined in his report that, based on the records of the 47 patients he examined, the patients were inappropriately certified for hospice care 35 percent of the time. Alternatives’ expert testified that a reasonable physician would have found all of those patients hospice-eligible. The district court determined that a mere difference of opinion between experts regarding the accuracy of the prognosis was insufficient to create a triable dispute of fact as to the element of falsity and required that the plaintiffs provide evidence of an objective falsehood. Upon finding they had not adduced such evidence, the court granted Alternatives summary judgment. The Third Circuit vacated, rejecting the objective falsehood requirement for FCA falsity. The plaintiffs’ expert testimony created a genuine dispute of material fact as to falsity.

Barrientos v. CoreCivic, Inc.

Court: US Court of Appeals for the Eleventh Circuit

Docket: 18-15081

Opinion Date: February 28, 2020

Judge: Hull

Areas of Law: Criminal Law, Government Contracts, Personal Injury

Plaintiffs, current and former alien detainees, filed a class action under the Trafficking Victims Protection Act (TVPA) and Georgia law, alleging that CoreCivic, a private contractor which owns and operates the Stewart Detention Center, coerces alien detainees to perform labor at the detention center by, inter alia, the use or threatened use of serious harm, criminal prosecution, solitary confinement, and the withholding of basic necessities. The Eleventh Circuit affirmed the district court's denial of CoreCivic's motion to dismiss the complaint and held that the TVPA applies to private for-profit contractors operating federal immigration detention facilities. Specifically, the court held that, under the plain language of the statute, the TVPA covers the conduct of private contractors operating federal immigration detention facilities; the TVPA does not bar private contractors from operating the sort of voluntary work programs generally authorized under federal law for aliens held in immigration detention facilities; but private contractors that operate such work programs are not categorically excluded from the TVPA and may be liable if they knowingly obtain or procure the labor or services of a program participant through the illegal coercive means explicitly listed in the TVPA.

McDonald v. Fidelity & Deposit Co. of Maryland

Court: Utah Supreme Court

Citation: 2020 UT 11

Opinion Date: February 28, 2020

Judge: Thomas R. Lee

Areas of Law: Construction Law, Government Contracts, Labor & Employment Law

The Supreme Court reversed the decision of the district court granting summary judgment in favor of Plaintiffs in this action seeking to recover delinquent contributions to various trust funds for construction on a state construction project, holding that the right of action under a payment bond statute extends to any amount due an employee, meaning any amount that is traceable specifically to an employee. One of the subcontractors hired to work on the project failed to make contributions to various trust funds for its employees' work on the project, as required by trust agreements and a collective bargaining agreement. The trusts (Plaintiffs) sought to recover the delinquent contributions from the public payment bond associated with the project by suing Defendant, the surety for the payment bond. The district court granted summary judgment for Plaintiffs. On appeal, the parties disputed whether Utah Code 63G-6-505(4) limits the right of action on a payment bond to amounts due to an employee or encompasses claims for any amounts due for an employee or on the employee's behalf. The Supreme Court reversed, holding that the right of action under the public payment bond statute contemplates recovery of any specific benefit that is due a person in the sense of being traceable to that person.