REPORT FROM COUNSEL

SPRING 2006 ISSUE

WHERE TO SUE? WEBSITES CAN AFFECT JURISDICTION

By Jeffrey L. Rehmeyer II

In a nation of 50 different systems of state courts and a highly interconnected national economy, the issue of when one state's courts can assert jurisdiction over a nonresident person or business has always been fertile ground for litigation. State legislatures have addressed the matter with laws that are the civil counterparts to the notion that criminals cannot escape the "long arm of the law." But "long-arm statutes," as they are known, do have their limits. Essentially, nonresidents can be sued in the courts of any state where they have had such contacts inside the state that it is reasonable to conclude that they have submitted themselves to the authority of the courts in that state. The principle is vague, but it has to be to cover the almost endless ways in which we conduct business.

In the business world, conventional arguments over the application of long-arm statutes have involved questions such as whether a party sought to be sued had an office or personal representative in the forum state, or whether a contract was signed by the parties in that state. Those issues still arise, but in the information age, courts increasingly have had to adapt the rules to business conducted over the Internet. Just because a company's website is accessible by customers in a given jurisdiction does not necessarily mean that the company can be sued there. The emerging rule of law is that the more that a customer can have online interactions with a business based elsewhere, the more likely it is that if things go wrong the business can be forced to play an "away game" in court.

Close, but No Cigar

Examples make the point better than statements of rules of law. A Vermont furniture store used a trucking company to deliver furniture to a customer in North Carolina. When the buyer was injured during unloading, he tried to sue the furniture company in a North Carolina court. In this case, the "long arm" was not long enough to reach the Vermont company. The furniture had been bought and paid for in Vermont. The only respect in which the store had any connection to North Carolina was that its website could be accessed there, like anywhere else. But it was a passive site, giving information about products, but not allowing purchases through the site.

When an Oklahoma resident bought a laptop computer from a Georgia company, then returned it for repairs, never to see the laptop again, he was unable to sue the company in Oklahoma. The customer had learned about the computer from the Georgia company's website, but he had ordered it by telephone and had not used the website to make the transaction.

Caught by the "Long Arm of the Law"

At the other end of the spectrum are cases in which businesses could be sued in the states where their customers lived because the businesses had a more substantial online "presence" in those states. A dog breeder in Pennsylvania could make a similar Maryland business defend a lawsuit in Pennsylvania because the Maryland business operated an interactive website and also used chat rooms to reach potential customers all over the country.

A California customer of a hotel run by a Nevada casino was able to haul the casino into a California court to defend allegations that it had imposed an energy surcharge on customers without notice. The plaintiff alleged that nothing in the casino's promotional activities, including its website, informed customers of the charge. It was important to the ruling that the casino used an interactive website where out-of-state customers could get quotes and book rooms. In addition, there was a close connection between the alleged wrong--the misleading promotions--and the casino's website that targeted millions of California residents.

The Warning

Be aware of implications of your business dealings. Before interacting with a website, you should take times to review the terms and conditions of it, so you aware of what they mean to you. For example, the Yahoo page has terms of services, which includes information about its privacy policy, warranties, limitations of liability, trademarks, etc. It further provides that your relationship with Yahoo shall be governed by the laws of the state of California and that you agree to the personal and exclusive jurisdiction of the courts located within the county of Santa Clara, California. Careful use of terms and conditions can also benefit a business with its own website, within which the State of legal jurisdiction and applicable law that is convenient can be imposed. If you have any questions regarding websites and jurisdiction, please contact the CGA Law Firm.

Jeffrey L. Rehmeyer II is Chair of the Intellectual Property and Technology practice at CGA. He counsels clients on a myriad of intellectual property matters such as this. Additionally, he conducts seminars and speaks on intellectual property to area businesses and organizations.

FIRM UPDATES

Events and Speaking Engagements

Lawrence V. Young will speak on current changes to the U.S. Bankruptcy Code at a seminar presented by the Pennsylvania Bar Institute in March. He is a course planner for PBI and also speaks at their Annual Bankruptcy Institute held in September.

Jeffrey L. Rehmeyer, Andrew M. Paxton and Richard Hansberry presented a legal training program at the York County Bar Association in February on intellectual property law. This program provided an overview of IP law including the basics of trademarks, copyrights, patents and licensing.

Anne E. Zerbe will present at a seminar entitled "Employment Law From A to Z in Pennsylvania" on March 29 in Lancaster, PA at the Holiday Inn Visitor's Center. This seminar is designed for human resource managers, payroll professionals, operations managers, controllers and senior level executives. Ms. Zerbe will focus her remarks on the legal issues surrounding payroll practices, wage and hour and leave policies.

Benjamin L. Pratt was appointed to the faculty of the Pennsylvania School Board Association's Institute for Collective Bargaining and Labor Relations. He will be presenting at a number of programs throughout the year on topics such as fundamentals of collective bargaining, uncovering issues in collective bargaining agreements and formulating strategies for successful negotiations. PSBA names Ben "one of the state's premier negotiators."

Honors, Awards and Appointments

Timothy J. Bupp has become a shareholder in CGA Law Firm. Tim has been with the firm since 1999. He has a B.S. from Penn State University and an MBA from York College. He completed his J.D. at Dickinson in 1992 and recently earned his LL.M. in Taxation from Temple University.

Gary M. Gilbert was appointed to a three year term on Valparaiso University's Business and Masters Program National Council.

Caryann M. Sculley was appointed to the Board of Directors for Dreamwrights Theater. She will serve as the Board Liaison to the Personnel Committee.

The York County Bar Assoc. honored CGA Law Firm with the Pro Bono Firm Award for 100% participation in their pro bono program. Also, Lawrence V. Young, Thomas D. O'Shea, Craig S. Sharnetzka, Timothy J. Bupp and Richard K. Konkel received special recognition for their pro bono efforts.

Thomas D. O'Shea was honored at the York Bar Association's Annual Awards Dinner for producing and directing the Bar Stools, a comedic musical performance not unlike a York County version of The Capitol Steps. The proceeds raised are donated to the York Bar Foundation, the charitable arm of the Bar Association and used to provide contributions to local charities, including pro bono legal services in the community.

CGA Professional Center was nominated for an award for interior renovation at the Associated Builders & Contractors Annual Excellence in Construction Awards. Our sincere thanks to Richard D. Poole LLC, not only for the nomination, but also for their professionalism and skill in creating a space that is both functional and beautiful.

Professional Development

Anne E. Zerbe will attend the National Employment Law Institute's ADA and FMLA Update in April. This seminar will focus on the latest agency and court developments concerning the interaction between ADA and FMLA as well as other leave laws.

Frank H. Countess, Jeffrey L. Rehmeyer, Craig S. Sharnetzka and Andrew M. Paxton attended the Pennsylvania Bar Association's Midyear Meeting in January. This meeting provides a valuable forum for attorneys, judges and other elected officials to discuss matters of importance to the statewide legal system and to interact with each other.

Margaret W. Driscoll and Christian J. Dabb are enrolled in the 2006 Leadership York Training program, a nine-month program designed to prepare leaders to make a positive impact on the York community through service on boards and in non-profit organizations.

Jon C. Countess and Frank H. Countess attended a seminar on Asset Protection Trusts presented by the York County Estate Planning Council.

For more information on attending upcoming programs or regarding any firm announcement, please contact Nikki A. Rovito, Director of Marketing at (717) 848-4900.

ADA PROTECTS EMPLOYEES WITH CANCER

By Caryann M. Sculley

Now 15 years old, the Americans with Disabilities Act ("ADA") protects qualified individuals with a disability from discrimination in employment settings. When you first think of individuals with disabilities, the millions of Americans who have some history of cancer may not immediately come to mind. But, as the Equal Employment Opportunity Commission ("EEOC") discusses in a recently published guide, a cancer victim may be entitled to the protection afforded by the ADA.

Cancer as a Disability

Cancer is a "disability" within the meaning of the ADA when the cancer itself or its effects substantially limit one or more of a person's major life activities. The limiting condition needs to be more than just temporary in nature. Just what constitutes a major life activity is difficult to succinctly describe, but an exhaustive list would be a long one. Interacting with others, sleeping, eating, and walking are but a few examples. As with other types of conditions, cancer may be treated as a disability if it does not, in fact, significantly affect a major life activity but an employer treats the individual as if it does. This reflects the ADA's goal of attacking discriminatory stereotypes and assumptions when they motivate an employer's decisionmaking.

Information Gathering

During the time period before any offer of employment has been made, an employer may not ask an applicant if he or she has (or has had) cancer, or about cancer-related treatments. The employer is only permitted to ask if an applicant can perform particular job requirements. If an applicant has volunteered the information that he or she has (or has had) cancer, the employer still may not question the applicant about the cancer or the applicant's prognosis, but the employer may ask questions about whether the applicant will need an accommodation in order to perform the functions of the job and, if so, what kind.

Once a job offer has been made, the employer may ask health-related questions as related to the duties of the job to be performed, and require a medical exam, as long as the employer treats all applicants for the same type of position in the same manner. The discovery that an applicant has (or has had) cancer cannot be used to withdraw a job offer if the applicant can perform safely all essential job functions, with or without reasonable accommodation. When an offer has been accepted by an applicant, the employer can ask questions about the employee's health or require a medical exam only when it has a legitimate reason to believe that the cancer may be affecting the employee's ability to perform the job, and do it safely. With a few exceptions, an employer must keep confidential any medical information learned about an applicant or employee, and retain the medical information in a file separate from the employee's personnel file.

Reasonable Accommodations

Within reason, the ADA requires employers to make adjustments or accommodations to enable qualified disabled people to enjoy equal employment opportunities. An employer is not required to subject itself to "undue hardship" (that is, significant expense or difficulty) in order to accommodate someone. Nor must an employer remove an essential function from a job, although it may choose to do so. As for cancer-related disabilities, some individuals may need, and are entitled to, reasonable accommodations because of the cancer itself, the effects of cancer medication and treatment, or both. A request is necessary to trigger the duty to make a reasonable accommodation, but disabled individuals need not use any "magic words" to request an accommodation and do not have to submit anything in writing to the employer. Other people may also seek accommodation for the disabled individual. Employers should begin the "interactive process" of determining if an accommodation is needed once employees provide sufficient information to let the employer know they are having difficulty performing their jobs because of a physical or mental impairment which may constitute a disability within the meaning of the ADA.

Courts at all levels, including the U.S. Supreme Court, are making it increasingly clear that the ADA requires highly individualized and fact-specific determinations. Whereas an employer might be able to defend a race discrimination claim on the grounds that the plaintiff was treated the same as his or her co-workers, this may not be a viable defense in a failure to accommodate case. The essence of the reasonable accommodation is that employers must make special adjustments to their policies for individuals with disabilities. Vigilance on the part of the employer with regard to the interactive process is essential. The guidance is available on the EEOC's website at www.eeoc.gov/facts/cancer.html.

SPECIAL NOTE

The ADA sets minimum standards of protection for employees, however, many state laws provide an even greater level of protection. If you have questions about whether or not an employee may qualify for protection under the ADA, you should consult with an employment law attorney to obtain the specific protection provided by that state's laws.

Caryann M. Sculley practices in the employment law, business law and municipal representation.

PROPERTY TRANSFERS AND MEDICAID ELIGIBILITY

By Timothy J. Bupp

An applicant for Medicaid may have eligibility for benefits delayed if he or she has recently transferred real property to an individual for less than the fair market value of the property. A penalty period is imposed if the transfer took place during a span of time known as the "look-back" period. This provision is meant to prevent duplicitous gaming of the Medicaid system, but, as a court recently noted, the provision does not justify viewing every property transfer with skepticism and disapproval merely because it precedes Medicaid eligibility.

In a recent case, a 67 year-old Alzheimer's patient applied for Medicaid assistance. The state Medicaid agency rejected the application because, the applicant had conveyed the home where she lived to her three children as a gift. The deed to the property was recorded shortly before she applied for Medicaid assistance. The court overturned the decision, favoring interpretation of the family's well-intentioned attempt to follow up promptly with recording the deed, rather than seeing it as part of a scheme to delay the transfer until it was apparent that the mother needed nursing home care and Medicaid assistance to pay for it.

As this issue goes to print, we await final passage of the 2005 Deficit Reduction Act, which, if signed by President Bush, will make significant changes in Medicaid. Most significantly, the look-back period for all transfers would be extended from three to five years. Ineligibility periods for such transfers would commence upon application for Medicaid, rather than at the time of the gift. Finally, the amount of exemptable equity in a personal residence will be capped. Look for future updates on the final changes to Medicaid in upcoming issues of this newsletter.

If you have any questions about this information, please do not hesitate to contact us at CGA.

Timothy J. Bupp practices in estate planning and administration. He also focuses on Elder Law issues. Tim has an LL.M. in taxation from Temple University. He was recently made a shareholder in the firm.

LANDLORD/TENANT

By Tina H. Ness

Insurer May Sue Renter for Fire Damage

Unless there is a contract or lease that provides otherwise, a tenant generally is liable to a landlord for negligently damaging the landlord's property, such as by accidentally starting a fire. But, depending on the language in the landlord's fire insurance policy, the tenant could end up defending himself against a powerful insurance company rather than the landlord.

Many insurance policies provide for subrogation, meaning that if the insurer pays a claim from the landlord for losses due to a negligently started fire, the rights of the landlord against the wrongdoer are transferred to the insurance company. In effect, the insurance company steps into the shoes of the landlord.

This scenario played out in two recent cases that were consolidated because of their similarity. In one case, a person renting a single-family home caused a fire by leaving a flammable item unattended on an electric stove. In the other case, an apartment tenant accidentally started a fire with candles left burning in the bedroom. In both instances, the insurers had subrogation clauses in the policies taken out by the landlords.

Without success, the tenants argued that they should be treated as co-insureds, and therefore they should not be subject to a lawsuit by the insurers. The court ruled that tenants may well have an insurable interest in the leased premises, but they are on their own in terms of liability, unless a contract provides otherwise. The court reasoned that allowing an insurance company to sue a tenant avoids a double recovery by the landlord (from the insurer and the tenant), and it prevents culpable tenants from evading responsibility for their conduct.

Tina H. Ness concentrates her practice in civil litigation.