Wednesday, July 28, 2010 Atlanta

Wednesday, July 28, 2010 Atlanta Program 1:30 p.m. 5:00 p.m. Lunch 5:00 p.m. 7:00 p.m. Embassy Suites ATL Perimeter Center 1030 Crown Pointe Pkwy Atlanta, Georgia 30338 TRANSPORTATION SEMINAR Topics of Discussion Include: MCS-90 Issues CSA 2010 Bifurcation in Trucking Cases Electronic Logs: The Future is Here Handling of Catastrophic Cases Technology in the Industry Driver Distractions John Boy vs. Learned Hand: Sizing Up Your Case Based on the Plaintiff s Lawyer Wage and Hour Litigation Extended to the Transportation Industry Extraterritorial Jurisdiction in the Trucking Industry Special Litigation Practice Presentations: Panel Update on Medicare Update on E-Discovery Jury Selection and Trials in the age of Social Networking Sites The Crown s Right of Recovery of Healthcare Costs in Alberta

Transportation Seminar The Harmonie Group July 28, 2010 (ALL RIGHTS RESERVED) MCS-90 Financial Responsibility and Update (Shreve)... 1 Attachment Endorsement for The Motor Carrier Act of 1980... 17 CSA 2010 (Fox)... 19 Bifurcation of Civil Trials in Trucking Cases (Griffin)... 26 Electronic Logs: The Future Is Here (Morse)... 34 Attachment Recent Regulations Concerning Electronic On-Board Recorders... 35 Handling and Defending the Catastrophic Loss (Harris)... 48 The Positives and Negatives of Transportation Technology (Abbarno)... 51 Make-Up, Burgers, Now Texting Oh My! A Renewed Attention to Inattentive Driving (Nygren)... 75 John Boy vs. Learned Hand: Sizing Up Your Case Based on the Plaintiff s Lawyer (Spratlin)... 78 Attachments Exhibit 1... 83 Exhibit 2... 120 Trucking Companies to California Supreme Court: Give Us a Break (Greene)... 129 Extraterritorial Jurisdiction in the Trucking Industry (Dixon)... 135 Panel Discussion: Medicare Secondary Payer Statute (Dixon & Voke)... 139 Operation: Preserve ESI (Tari)... 140 Social Media and Law Practice (Spitz)... 157 The Crown s Right of Recovery of Healthcare Costs in Alberta... 163 Resources: The Harmonie Group & CLC: 24 Hour Hotline... 169 Harmonie s Transportation Accident Investigation Checklist... 170

MCS-90 Financial Responsibility and Update Mark Shreve Garan Lucow Miller, P.C. I. What is MCS-90? A. The MCS-90 is an endorsement on a trucking company s liability insurance policy, required by the Federal Motor Carrier Safety Regulations, which serves as a surety for safety of the public. Even if the trucking company is not entitled to liability coverage due to some exception or exclusion in the insurance policy, an injured member of the public may recover under the MCS-90 endorsement and the insurance company may then seek reimbursement from the trucking company. See, e.g., Canal Ins. Co. v. Carolina Cas. Ins. Co., 59 F.3d 281, 283 (1 st Cir. 1995); John Deere Ins. Co. v. Truckin U.S.A., 122 F.3d 270, 274 (5 th Cir. 1997). B. The purpose of the Federal Motor Carrier Act ( F.M.C.A. ), and the regulations issued under the Act, especially the MCS-90, was to stem the unregulated use of vehicles in interstate commerce, which threatened public safety. Integral Insurance Company v. Lawrence Fulbright Trucking, 930 F.2d 258 (2 nd Cir. 1991). C. One of the significant aims of federal rules regulating motor carriers is to eliminate the attendant difficulties of allocating of financial responsibility for damage and injuries to members of the public. Transamerican Freight Lines v. Brada Miller Freight Systems, Inc., 423 U.S. 28, 37, 96 S.Ct. 229, 46 L.Ed.2d 169 (1975). Accordingly, the MCS-90 has been construed and applied to protect members of the public injured by interstate motor carriers from uncompensated losses by mandating coverage where there would otherwise be no coverage. American Alternailve Ins. Co. v. Sentry Select ins. Co., 176 F.Supp.2d 550 (E.D.Va., 2001). D. A motor carrier of property has a duty under federal law to guaranty its financial responsibility for injuries to the public. To protect the public from uninsured interstate motor carriers, federal law imposes an $11,000 penalty on motor carriers who fail to include the MCS-90 endorsement in their insurance policies. 49 C.F.R. 378.17. Further, anyone who aids or abets a motor carrier in procuring a policy without a MCS-90 is subject to civil and criminal penalties. 49 C.F.R. 390.13, 35, 37. E. Purchasing insurance coverage under an MCS-90 endorsement is one way for a carrier to fulfill this duty. Harco National Insurance Company v. Bobac Trucking et al, 1995 WL 482330 at 4 (N.D.Ca. 1995); Barbarula cxr Estate of He v. Canal Ins. Co., 353 F.Supp.2d 246 (D.Conn. 2004). The MCS-90 is not insurance coverage per se; it operates as a suretyship for the benefit of the public and is appended to a motor carrier s liability policy. See, e.g., Canal Ins. Co. v. Carolina Cas. Ins. Co., 59 F.3d 281, 283 (1 st Cir. 1995); John Deere Ins. Co. v. Truckin U.S.A., 122 F.3d 270, 274 (5 th Cir. 1997). The MCS-90 endorsement guarantees payment of minimum amounts, as set forth in the regulation to an injured member of the public. 49 C.F.R. 387.7, 387.9. A MCS-90 endorsement is intended to eliminate the possibility of denial of coverage by requiring the insured to pay any final judgment recovered against the insured for negligence in the operation, maintenance or use of a motor vehicle, subject to federal financial responsibility requirements, even though the accident vehicle is not listed in 1

the policy or some other policy defense may preclude coverage. F. The MCS-90 does not create in the insurer a duty to defend, but only a duty to the public to pay any judgment against the motor carrier resulting from the negligence in operation, maintenance or use of motor vehicles, even if they are not specifically listed on the policy. See, e.g., Canal Ins. Co. v. First Gen. ins. Co., 889 F.2d 604, 614 (5 th Cir. 1989); Industrial Indem. Co. v. Truax Trucklines, Inc., 45 F.3d 986, 991 (5 th Cir. 1995); National Am. Ins. Co. v. Century State Carriers, Inc., 785 F.Supp. 793, 795 (N.D. IN. 1992). G. The MCS-90 endorsement only applies where: 1) the underlying insurance policy to which the endorsement is attached does not provide coverage for the motor carrier s accident, and 2) the motor carrier s insurance coverage is either not sufficient to satisfy the federally prescribed minimum levels of financial responsibility or is nonexistent. Carolina Casualty Ins. Co. v. Yeats, 584 F.3d 868 (10 th Cir. 2009) [Emphasis supplied.] H. MCS-90 is applicable to interstate motor carriers, and not intrastate motor carriers. As to intrastate motor carriers, state law will apply. Canal Ins. Co. v. J. Perchak Trucking, Inc., 2009 WL 959596 (M.D. PA.), Thompson v. Harco National Ins. Co., 120 S.W.3d 511 (2003). II. United States federal laws and safety regulations require motor carriers to guarantee their financial responsibility to the public. A. The Motor Carrier Act requires proof of financial responsibility by one of three methods: 1. Endorsement(s) for motor carrier policies of insurance for public liability under 29 and 30 of the Motor Carrier Act of 1980. (Form MCS-90) issued by an insurer(s); 2. A motor carrier surety bond for public liability under 30 of the Motor Carrier Act of 1980 (Form MCS-82) issued by a surety; or 3. A written decision, order, or authorization of the Federal Motor Carrier Safety Administration authorizing a motor carrier to self-insure under 387.309, provided the motor carrier maintains a satisfactory safety rating as determined by the Federal Motor Carrier Safety Administration. B. The United States strictly regulates insurance policy for interstate motor carriers and has numerous requirements to secure safety on our roadways. First, minimum insurance requirements are specified by United States Federal Motor Carrier Safety Regulations (F.M.C.S.R.). These minimum requirements vary based upon a number of variables, e.g. weight of vehicle and cargo being hauled. 1. Minimum Levels of Liability 1 $ 750,000 Vehicles over 10,000 lbs; Non-hazardous freight carriers $1,000,000 Including gasoline and oil. $5,000,000 Including liquified petroleum gas in excess of 3,500 gal. 2 1 See 49 C.F.R. 387, Minimum Levels of Financial Responsibility for Motor Carriers. 2 Under Michigan law, pursuant to the Michigan Court s interpretation of the Michigan No Fault Act, property 2

C. A trucker with United States Department of Transportation authority for interstate hauling must have the mandatory required limits of insurance coverage, as well as a MCS-90 endorsement, attached to the policy. 49 C.F.R. 387.15. The mandatory insurance and MCS-90 endorsement are BOTH required for a trucker to obtain interstate hauling authority. 49 U.S.C. '13906; 49 C.F.R. 387.7, 387.9. D. The MCS-90 endorsement is not insurance. However, it obligates an insurer to pay an injured party, regardless of any potential coverage defenses. An insurer who is so obligated may then recover its payment from its insured. See: Powers v. Meyers, 101 Ohio App 3d 504 (1995), Lv. app. den., 73 Ohio St. 3d 1413 (1995). The intent behind the MCS-90 requirement is to fill coverage gaps and assure that the motor carrier complies with the financial responsibility requirements of the Federal Motor Carrier Safety Act. The MCS-90 applies on a per accident basis, not a per personal claimant basis, Carolina Casualty Ins. Co. v Karpov, 559 F.3d 621 (7 th Cir. 2009). E. The MCS-90 endorsement must be attached to a trucker=s liability policy issued to a motor carrier, for the purpose of providing notice to the general public that all criteria of the financial security requirements have been met. F. For motor carriers subject to federal regulation, insurers must cause insurance policies to be endorsed for public liability. The most common form of such endorsement is the MCS-90, which amends the insurance policy to fill coverage gaps and to ensure compliance with the Motor Carrier Act and FMCSR. It remains in effect continuously, until replaced or cancelled according to special cancellation requirements independent of the policy s cancellation requirements. It is considered public information, and registered motor carriers must keep it available to the public for inspection. 49 C.F.R. 387.7(e); 49 C.F.R. 387.29; 49 C.F.R. 387.7(b)(1); 49 C.F.R. 387.3i(b)(i). While the F.M.C.S.A. has exclusive jurisdiction over interstate motor carriers and is the primary repository for financial responsibility filings, the carriers file proof of insurance in their base registration state, which upon approval, issues a registration receipt that authorizes operation in all jurisdictions under a federal permit. 49 C.F.R. 1023 and 1162. Canadian and Mexican trucking companies operating in the U.S. must also comply. 49 C.F.R. 350(a)(8), G. The MCS-90 covering the owner of a tractor or trailer also covers permissive users, including vicarious logo liability, so that the judgment need not be against the named insured. See, e.g., John Deere Ins. Co. v. Nueva, 229 F.3d 853, 856 (9 th Cir. 2000); Integral Ins. Co. v. Lawrence Fu Trucking, 930 F.2d 258 (2 nd Cir. 1991); Reliance Nat l Ins. Co. v. Lewis, 2001 U.S. Dist Lexis 12901 (Aug. 24, 2001); Lynch v. Yob, 768 N.E.2d 1158 (Ohio 2002); Pierre v. Providence Washington Ins. Co., 730 N.Y.S. 2d 550 (N.Y. App. Div. 2001); But see, Tamara 13. Goorevitz, et al, Coverage Expansion in Tractor Trailer Insurance?, 47:2 For The Defense 40 (Feb. 2005). Even though the vehicle is not listed or covered on the insurance policy, if the company named on the policy is operating the vehicle by placard or by its interstate licensing there is MCS-90 coverage. H. The MCS-90 overrides policy exclusions that would otherwise defeat coverage, including non-cooperation and notice clauses, Campbell v. Bartlett, 975 F.2d 1569, 1580-81 (10 th Cir. 1992), and presumably including exclusions for intentional acts, protection insurance is limited to $1,000,000, despite the higher requirements under the Motor Carrier Act. See M.C.L.A. 500.3121. 3

intoxication, etc. Richard M. Mosher, Liability Endorsements and Financial Responsibility, 47:2 For The Defense 45, 49 (Feb. 2005). However, exclusions for intentional acts are likely to preclude MCS-90 coverage for the reason that the MCS- 90 endorsement language states, resulting from negligence. I. However, MCS-90 endorsement will not be incorporated into a policy of insurance as a matter of law. Waters v. Miller, 564 F.3d 1355 (11 th Cir. 2009). In a recent important decision, the 11 th Circuit held that there was nothing to indicate to the insurer that the insured was operating their tractor trailer interstate. The matter arose when a Progressive Insurance Company policy expired by its own terms. The District Court found that Progressive had not notified the federal agencies as to the cancellation of the policy. The 11 th Circuit concluded that the injured claimant did not present sufficient evidence to support the conclusion that Progressive knew or should have known that the prior insured was operating the tractor/trailer in interstate commerce. Therefore, the Court would not rewrite the insurance policy to include the MCS-90 endorsement. However, as the 11 th Circuit noted some Courts have incorporated the endorsement into the policies as a matter of law. Prestige Cas. Co. v. Mich. Mut. Ins. Co., 99 F.3d 1340, 1348; Travelers Ins. Co. v. Tranp. Ins. Co., 787 F.2d 1133, 1139 (7 th Cir. 1986); Hagans v. Glen Falls Ins. Co., 465 F.2d 1249, 1252 (10 th Cir. 1972). It is important to note that if there is evidence that the insurer knew it was insuring an interstate motor carrier, the cases indicate the Courts may well incorporate the MCS-90 endorsement as a matter of law. See Howard v. Quality Express, Inc., 128 N.N. 79, 989 P.2d 896, 900 (1999). Also, note the civil and criminal penalties under 49 C.F.R. 390.13, 35, 37. III. MCS-90 Payment Obligations. A. The MCS-90 endorsement language is dictated by federal statute. (A copy of a typical MCS-90 is attached as Appendix A). The language of this endorsement creates an obligation to pay on the part of the insurer when: 1. A final judgment is recovered against the insured for public liability; 2. Resulting from negligence in the operation, maintenance or use of motor vehicles subject to this section; 3. For bodily injury to or death of any person a. other than: i. injured=s employees while engaged in the course of their employment; ii. or property transported by the insured B. Generally when the conditions are met, the insurer is obligated to pay damages, within its limits of liability, regardless of any conditions, provisions or limitations contained in the policy. The MCS-90 endorsement also provides that all terms, conditions, and limitations in the policy remain in full force and effect. 1. Unless notice of cancellation is sent to the federal motor carrier safety administration, the mcs-90 continues to require coverage by the insurer, even if insured was provided with notice of cancellation. If the MCS-90 is not cancelled with the Federal Motor Carrier Safety Administration, the public 4

continues to assume and operate as if the motor carrier is F.M.C.S.A. compliant - and the insurer remains liable. Notice to the Interstate Commerce Commission is only effective 30 days after receipt. Practice Point: If the insured stops paying premiums, proper cancellation notice should also include notice to the F.M.C.S.A.. Keep in mind that if the policy expires pursuant to its normal terms, notice still must be given to F.M.C.S.A., therefore, if notice is given on the last date of the policy, exposure remains for an additional 30 days. Also, it is recommended that cancellation notices to the F.M.C.S.A. be sent by certified mail to prove that they received it. 2. The MCS-90 provides coverage even where there is only vicarious liability. The principle argument is that the plain meaning of the language employed in the MCS-90 endorsement is that the insurer must indemnify even where the insured or one of its agents is not actively negligence. We agree. We therefore hold that when a judgment is entered against the owner of a motor vehicle insured under the MCS-90 endorsement, the insurer is obligated to indemnify, even when the judgment is based on a theory of vicarious liability. Integral Ins. Co. v. Lawrence Fulbright Trucking, Inc., 930 F.2d (1991). 3. Certain exceptions to MCS-90 coverage have developed. a. In Armstrong v. United States Fire Ins. Co., 606 F. Supp. 2d 794 (E.D. Tenn. 2009), the Court held that the insurer of a trailer s lessor had no duty to defend or indemnify the truck s lessee in a tort action, by virtue of the policy s federally mandated MCS-90 endorsement. The policy had an exclusion that stated that the lessees of the vehicles (in this case the trailer) were not insured under the policy. The policy, however, did contain a MCS-90 endorsement. The Court found that the lessee would be deemed a permissive user of the vehicle (the trailer). However, the owner of the trailer was never sued in any of the litigation arising from the accident. As a result the Court concluded after an extensive analysis that the term in the MCS-90 endorsement referencing the insured is the motor carrier named in the policy of insurance. Since the named insured was the lessor, the statute requires that there be insurance to pay for each final judgment against the lessor, however, the lessor was not a defendant in the action, and therefore, the Court concluded that the lessor s MCS-90 endorsement would not apply to the driver or the lessee of the trailer. (Note that this decision involved a claim filed prior to the applicability of the Graves Amendment dealing with the limitation of liability as to lessors.) b. Directly on point as to the issue of the application of the Graves Amendment as it applies to tractor and trailer lessors is the case of 5

Canal Ins. Co. v. Kwik Cargo, Inc. Trucking, 2009 WL 1086524(D. Minn.). In that case, suit was brought against Kwik Cargo which was operating a tractor leased from Clear Lake. Kwik Cargo was not listed on the policy of insurance issued by Canal Insurance. The Canal insurance policy did contain an MCS-90 endorsement. Canal sought summary judgment that Clear Lake was also liable for all amounts paid by Canal bringing a claim against Kwik Cargo and Clear Lake demanding reimbursement under the MCS-90 portion of the policy. Canal Insurance prevailed on its claim against Kwik Cargo pursuant to the terms of the MCS-90. However, as to the lessor, Clear Lake, the Court concluded that any attempt to impose vicarious liability for the actions of Kwik Cargo would be precluded by the Graves Amendment. Therefore, Canal Insurance was not paying and entitled to reimbursement from Clear Lake. c. In Sentry Select Ins. v. Thompson, 665 S. Supp.2d 561 (E.D. V.A. 2009) the Court held that Sentry Insurance as the insurer of the trailer that was involved in the accident was not obligated to pay under the MCS-90 endorsement to the Sentry policy for two reasons. First, the Sentry policy did not list either the tractor nor the trailer in any way as of the date of the accident. The claimant attempted to argue that the Sentry policy should be amended so the trailer would be a covered auto under the policy. The Court concluded that there needed to be a judgment against the insured named in the policy for there to be an MCS-90 obligation. Since there was no judgment against a named insured, Sentry was not required to make payment under its policy. Secondly, the underlying settlement paid by Canal Insurance Company exceeded the $750,000 MCS-90 minimums, there was appropriate MCS-90 coverage, and the Sentry MCS-90 endorsement could not be stacked to provide additional coverage. d. In Canal Ins. Co. v. P.S. Transport, Inc., 2010 WL 817290 (N.D. Miss.) The Court held that there was no MCS-90 coverage when the tractor was not pulling a trailer or otherwise carrying cargo, as the driver was returning home after performing his duties as a driver for the motor carrier. The Court reasoned that the driver was first not engaged as a for hire motor carrier pursuant to 49 C.F.R. 387 at the time of the accident, as he was not being paid by anyone at the time of the accident. Second, the driver was not transporting property, as he was not hauling cargo when it happened, and the driver was not engaged in interstate commerce at the time of the accident. The Court relied on Brunson v. Canal Ins. Co., 602 F. Supp.2d 711 (D.S. C. 2007) in support of its position. The Court discussed the public policy considerations and how it would apply to a MCS-90 endorsement, however, concluded that the regulations explicitly state that it is only applicable to for hire motor carriers operating motor vehicles transporting property 49 C.F.R. 387.3(a), and therefore, concluded that Canal Insurance did not have to pay any judgment 6

recovered against the insured with respect to the accident. (Canal had also issued bobtail coverage in the amount of $100,000, but the claimants wanted to make a claim against the motor carrier policy MCS-90 coverage of $750,000.) 4. MCS-90 provides the paying insurance company with the right of reimbursement from its insured, for any payments it has made that would not otherwise be its obligation due to applicable exclusions. While this generally this can be an uncollectible right, as noted, supra, various insurance carriers have tried to expand this opportunity for recovery. 5. The Courts continue to hold that there is no MCS-90 coverage when the accident occurs outside the United States. Lincoln General Ins. Co. v. Morquecho, 501 F.3d 436 (5 th Cir. 2007); Canal Indemnity v. Galindo, 2009 WL 2921863 (C.A. 5 (Tex)) (Sept. 14, 2009). The Galindo Court held that, even though the accident occurred only a mile into Mexico and the vehicle had a MCS-90 endorsement, there is no MCS-90 coverage. C. Priority of coverage between the carrier issuing the MSC-90 endorsement and other insurance policies is determined by the excess and other insurance clauses of the respective policies. See, e.g., Empire Fire & Marine Ins. Co. v. J. Transport, Inc., 880 F.2d 1291, 1295 (11 th Cir. 1989).; Carolina Cas. Ins. Co. v. Underwriters Ins. Co., 569 F.2d 304 (5 th Cir. 1978). If an insurer pays a claim under the MCS-90 endorsement that it would not otherwise have been required to pay under the terms of the insurance policy, it has a right of reimbursement against the insured motor carrier for the claim paid, but not for costs of defending the underlying claim against the motor carrier. See, e.g., Harco Nat. Ins. Co. v. Babac Trucking, Inc., 107 F.3d 733 (9 th Cir. 1997); T.H.E. Ins. Co. v. Larsen Intermodal Services, 242 F.3d 667 (5 th Cir. 2001). However, in Canal Ins. Co. v Kwik Cargo, Inc. Trucking, 2009 WL 1086524 (D. Minn.) the Court held that Canal was entitled to seek its reasonable costs and attorney fees incurred in the settlement of the underlying lawsuit and could pursue reimbursement for those costs against its insured, who did not list the vehicle on the policy. The Court concluded that Canal would not have incurred these costs and fees but for its MCS-90 endorsement obligations. IV. Intra-State Application of the MCS-90. A. Courts are in conflict as to whether the MCS-90 applies when the motor carrier s particular trip was not subject to federal jurisdiction at the time of the accident, e.g., an intrastate shipment. Royal Indemnity Co. v. Jacobsen, 863 F. Supp. 1537, 1542 (D. Utah 1994)(MCS-90 applied to intrastate trip hauling exempt commodities); contra, General Security Ins. Co. v. Barrentine, 829 So.2d 980, 983 (Fla. 1 st Dist. 2002) (not applicable to intrastate trip); Branson v. MGA Ins. Co., Inc., 673 So. 2d 89, 92 (Fla. 5 th Dist 1996); Standard Ins. Co. v. McKissack, 153 S.W.2d 997 (Tex. Civ. App. 1941). B. However, the MCS-90 endorsement specifically provides that the coverage applies whether such negligence occurs on any route or territory to be served by the insured or elsewhere, so it is arguable for a Court to hold that the endorsement 7

applies whether or not federal regulations actually require it at the time of the accident. Fawley Motor Lines v. Cavalier Poultry Corp., 235 F.2d 416, 418 (4 th Cir, 1956). The MCS-90 endorsement limit applies on a per-accident rather than per-person basis. Hamm v. Canal Ins. Co., 10 F. Supp. 2d 539 (M.D.N.C. 1998). C. Whether or not the MCS-90 endorsement applies in Intrastate Commerce continues often to depend on the particular Court. In Thompson v. Harco National Ins. Co., 120 S.W.3d 511 (2003) the Court found that at the time of the accident the truck was engaged in intrastate commerce even though the trip had started from Wisconsin, went to Missouri, and then to Dallas, Texas. A load was acquired in Dallas and was to be delivered to Roma, Texas when the accident occurred. The Court concluded that this particular trip was in intrastate commerce, and therefore, the MCS-90 endorsement did not apply. D. Practice Point: In evaluating whether you want interstate or intrastate commerce to apply, an analysis must be made of the entire accident. Keep in mind that, in arguing that the accident occurred during an intrastate shipment, a motor carrier could create substantial issues concerning cargo loss liability by removing the limitations and protections provided by the Carmack Amendment and thereby rendering state law applicable. V. The Insurer and the Injured Member of the Public. A. There is one basic rule of thumb on this issue. The member of the public always wins. This is, after all, the reason that the regulations were promulgated in the first place. B. Typical of the cases is Adams v. Royal Indemnity Co., 99 F.3d 964 (10 th Cir. 1996). It demonstrates the lengths to which Courts will go to find coverage, yet at the same time also shows that those lengths do have some limits. Adams was injured in an accident with Hofer. He obtained a $1 million default judgment against Hofer and sought to recover that judgment from Royal. Royal had issued two policies, one to Geiger and one to Thomas. Each policy contained a MCS-90 endorsement. Thomas was a partner in the partnership that owned the trailer. The partnership leased the trailer to Geiger, who lent it to Hofer. The judgment was only against Hofer. The issue, therefore, was whether Hofer was covered under either of the separate policies issued by Royal to Thomas and Geiger. The Court first determined that, absent the endorsement, Hofer would not have been covered by either policy. He did not qualify as an insured, because the trailer was not listed as a covered auto under either policy, and neither policy had been issued to him (Geiger had purchased Specifically Described Autos coverage only). 8

The Court then considered the effect of the MCS-90 endorsement. Royal argued that the MCS-90 endorsement only applied, by its own terms, to the insured, and that it did not, therefore, apply to Hofer, since he was not an insured. Interpreting the language of the endorsement which provides that no condition, provision, stipulation, or limitation... shall relieve the company from liability or from the payment of any final judgment, the Court stated that this language negates any limiting clauses in the policy. The definition of insured limited it to permissive users of covered autos driving vehicles owned, hired, or borrowed by the named insured. By negating the covered autos part of the provision, since this was a limiting clause, the Court rewrote the provision to read: Anyone else... while using with your permission an auto you own, hire, or borrow. As to the Geiger policy, Hofer was using a trailer that Geiger had hired with his permission. The MCS-90 endorsement therefore required Royal to pay the judgment. The result was different as to the Royal policy issued to Thomas. Thomas did not own the vehicle; the partnership did. Thomas did not give permission to Hofer, Geiger did. Thus, even the MCS-90 endorsement was insufficient to require Thomas insurer to pay the judgment. C. Just as the regulations exclude employees of the trucking company, so too does the endorsement exclude employees from seeking recovery under the endorsement. Specifically, the endorsement provides: Such insurance as is afforded, for public liability, does not apply to injury or death of the insured s employees while engaged in the course of their employment, or property transported by the insured, designated as cargo. Employees of the insured are not members of the public. 1. In the recent case of OOIDA Risk Retention Group v. Williams, 579 F.3d 469 (5 th Cir. 2009), the Court held that a deceased trucking company proprietor who allowed another individual to operate the vehicle was precluded coverage. The operator was deemed to be a statutory employee of the decedent, and therefore, 49 C.F.R. 390.5, precluded coverage under the MCS-90 endorsement for a claim by the proprietor s estate against the driver in an attempt to collect under the MCS-90 endorsement. D. One of the recent and leading cases in the Federal system is Carolina Casualty Ins. Co. v. Yeats, 584 F.3d 868 (10 th Cir. 2009). The 10 th Circuit s prior case of Empire Fire & Marine v Guarantee National Ins. Co., 868 F.2d 357 (10 th Cir. 1989) had created substantial confusion among the Circuit Courts. Carolina Casualty argued that this case was incorrectly decided, and proceeded to again approach the 10 th Circuit on the issue of allowing the MCS-90 endorsement to modify the underlying insurance policies by allowing recovery from a policy that otherwise does not provide liability coverage and allowing primary liability recovery from a policy that provides only excess coverage. A number of the other Circuits that dealt with this issue declined to read the MCS-90 endorsement as modifying the underlying insurance policy. Kline v Gulf Ins. Co., 466 F.3d 450 (6 th Cir. 2006). Carolina lost initially before the 10 th Circuit, but appealed for an en banc review. As a result, the en banc panel reversed the prior law and concluded that the MCS-90 only applies where the underlying insurance policy to which the endorsement attached does not provide coverage and where the motor carrier accident and the motor carrier s insurance coverage is either 9

not sufficient to satisfy the federally prescribed minimum level of financial responsibility or is non-existent. The Court held: Under the reasoning, a MCS-90 insurer s duty to pay a judgment arises not from any insurance obligation, but from the endorsement s language guaranteeing a source of recovery in the event the motor carrier negligently injures a member of the public on the highways.... The MCS-90 should not render the endorsement insurer s primary or co-primary as a matter of law where the underlying policy provides otherwise.... It follows that when the protection of the injured members of public is not at stake, the MCS-90 and the relevant federal regulations do not address for the purpose of dispute between the insured and the insurer.... In sum, the MCS-90 endorsement creates an obligation entirely separate from other obligations created by the policy to which it is attached. The MCS-90 defines the insurer s public financial responsibility obligation, while the underlying policy defines the insurer s insurance liability obligation. It would make no sense to jump to the insurer s MCS-90 endorsement obligation, if the underlying insurance policy already provides coverage for the accident. (emphasis supplied) Thus, the Court concluded that the triggering circumstances for the MCS-90 would be when either there is no other insurance policy available to satisfy the judgment against the motor carrier or the motor carrier s insurance coverage is insufficient to meet the federally mandated minimum level. As a result, the 10 th Circuit has now joined all other Circuits (except the 2 nd Circuit). 1. In Zurick America Ins. v. Grand Avenue Transport, 2010 WL 682530 (N.D. Calf.) the Court relied upon Yeats to distinguish the prior 9 th Circuit decision of John Deere v. Nueva, 229 F.3d 853 (9 th Cir. 2000) in concluding, Once the federally-mandated minimums have been satisfied, however, the endorsement does not apply. (emphasis supplied). Thus, where the insurer of the tractor had paid $1,000,000, the insurer of the trailer was not required to pay another $750,000 because the federally mandated minimums of the MCS-90 had been satisfied. Notation: The foregoing cases are important in that they preclude the attempt to acquire additional coverage from the trailer or other possible excess insurance carriers that may also contain the MCS-90 endorsement once the initial (arguably primary insurance carrier) has provided coverage sufficient to meet the MCS-90 endorsement obligations. VI. The Insurer and Insured. A. If the insurer pays pursuant to the endorsement where it would not otherwise have had to pay, it is entitled to recover those payments from the insured. The endorsement states this expressly and the Courts usually uphold this provision. 10

1. A demonstrative example is Harco National Ins. Co. v. Bobac Trucking, 107 F.3d 733 (9 th Cir. 1996). Harco paid $225,000 on behalf of Bobac as part of the settlement of the underlying tort case and then sought reimbursement from Bobac. It was undisputed that, but for the MCS-90 endorsement, there would have been no coverage under the policy. Bobac argued, however, that the failure of Harco to defend the underlying case was a breach of the policy, relieving it of its obligation to reimburse Harco. The Court rejected this argument. The Court noted that the purpose of MCS-90 was to protect the public, not to give a windfall to the insured. Once the member of the public had been paid, the purpose of the endorsement had been satisfied, The endorsement did not affect the rights of the insurer and the insured as between each other. Moreover, the Court noted, MCS-90 is not really an insurance policy, rather a financial responsibility method. Thus, the endorsement did not create a duty to defend, meaning that Harco s failure to defend could not be considered a breach of Harco s obligations. Harco was entitled to reimbursement. VII. VIII. Between Insurers. A. Cases often involve fights over who is primary and who is excess. It is often contended that the MCS-90 endorsement alters in some way the outcome of the usual battle over other insurance clauses. B. There are several variations on other insurance clauses, typically resulting in debates over escape clauses, excess clauses, or co-primary clauses. In construing the impact of any of these clauses in conjunction with MCS-90, there are three lines of cases. One holds that MCS-90 in essence trumps all other provisions, making the policy with the endorsement the sole primary coverage. This line is in the clear minority. The second and third lines of cases reject the logic of the first line because the purpose of the endorsement is served once the member of the public is paid, and it has no effect among parties that the Regulations were not intended to protect. The difference between the second and third lines of cases, however, is that the second line still requires the endorsement-containing policy to be a co-primary policy, refusing to give effect to any excess or escape language in the policy. Such language is considered by these cases to be limiting language which is negated by MCS- 90. The third line, by contrast, gives the endorsement no effect whatsoever once the member of the public has been protected. In this line, excess or escape clauses will be interpreted in the same manner that they would be interpreted in any other kind of policy. See Carolina Casualty Ins. v. Yeats, supra. A good discussion of the three lines of cases can be found in Prestige Casualty Co. v. Michigan Mutual Ins. Co. 99 F.3d 1340 (6 th Cir. 1996). Unlike the other kinds of disputes, there is no rule of thumb for resolution of inter-insurer disputes. Since each jurisdiction has reached a different result, the law of the particular jurisdiction must be consulted in each case. Keep in mind that choice of law rules might be critical in resolving these disputes. Duty to Defend and Obligations Relating to Default Judgments. 11

A. The MCS-90 endorsement does not create a duty to defend the insured, but only creates a duty for the insurer to pay judgments against motor carriers by the public, resulting from negligence in the operation, maintenance or use of motor vehicles. Even if the insured is not cooperating with the defense, the insurer is going to be liable anyway. The only recourse is to seek reimbursement from the insured. Therefore, why would the insurer want to give up control of the defense? 1. Example: Powers v. Meyers, 101 Ohio App. 3d 504 (1995). In this case, the driver was carrying five members of his family, in direct violation of written and oral instructions from his employer, when he drove off the road and over an embankment. The driver and three members of the family were killed and two were seriously injured. An Occupant-Hazard Endorsement@ excluded bodily-injury liability coverage for passengers injured or killed in a covered vehicle. However, the Court held that the MCS-90 endorsement: 1. Imposed an obligation on the insurer to pay the final judgment; 2. Conferred on the plaintiffs (as judgment-creditors) a right to proceed directly against the insurer to satisfy that judgment; and 3. Imposed an obligation upon the insured motor-carrier to reimburse the insurer for payment the insurer would not have otherwise been obligated to make under the provisions of the policy. 2. Example: McClurg v. Deaton, 380 S.C. 563, 671 S.E.2d 87 Plaintiff instituted this action for injuries received as a passenger in a car involved in a motor vehicle accident with a truck owned by New Prime and driven by its driver, Deaton. Zurich became involved and engaged in negotiations with the Plaintiff s counsel. Unbeknownst to Zurich and New Prime, Plaintiff s counsel filed a Summons and Complaint naming only the driver Deaton as a defendant. Plaintiff acquired service of process on Deaton and took a default judgment for $800,000.00. Upon learning of the default judgment, Zurich stepped in to try and get the judgment set aside by having New Prime appear. If argued that it had an interest in the judgment pursuant to the MCS-90 Endorsement and that the non-cooperation/late notice defense, which might have been available due to Deaton s failure to notify New Prime of the lawsuit, could be completely eliminated thereby leaving New Prime vulnerable to being responsible for the entire judgment. Zurich would have the right pursuant to the MCS-90 to the language stating that: The insured agrees to reimburse the company for any payment made by the company on account of any accident, claim or suit involving breach of the terms of the policy, and for any payment that the company would not have been obligated to make under the provisions of the 12

policy except for the agreement contained in this endorsement. After extensive analysis, the Court allowed New Prime to intervene to attack the default judgment against the driver, but concluded that the default judgment against the driver was valid and enforceable. Thus, the plaintiff by this somewhat underhanded action could proceed forward and collect against Zurich pursuant to the MCS-90 language which states: It is further understood and agreed that, upon failure of the company (insurer) to pay for any final judgment recovered against the insured is provided herein, the judgment creditor may maintain an action in any Court of competent jurisdiction against the company to compel such payment. While the insurer may have had a claim back against New Prime, if New Prime was uncollectible, it was stuck paying it all. Practice Concerns. The recent trend is for plaintiff s counsel to focus litigation on the driver or possibly the company where they can obtain a default judgment. This is motivated by the fact that even if the case is defensible and there is possibly no negligence on the part of the driver and/or trucking company, by obtaining the default judgment and precluding the opportunity to defend, the plaintiff can collect the $750,000 MCS-90 minimum coverage. In many cases, the drivers are no longer employed by the trucking company and therefore may not be willing to assist in the defense of the litigation. In these situations, drivers who are generally uncollectible, may simply throw away the summons and complaint and allow the case to proceed to default judgment. Therefore, it is extremely important that when an accident happens that has any potential for a significant injury, appropriate investigation be done and the driver be contacted and advised that if he hears anything from an attorney representing a claimant that he immediately advised the insurance carrier. This also applies with regard to the trucking company. 3. Example: Hawthorne v. Ingram Trucking/Hawthorne v. Lincoln General Insurance Company (U.S. District Court for the Eastern District of Michigan Southern Division). Plaintiff began negotiations with Lincoln. Without notifying Lincoln, he filed suit and served the trucking company, Ingram. Ingram was going out of business, and ignored the summons and complaint. A default judgment was entered for nearly $1,000,000. Plaintiff counsel sat on the judgment for a 13

substantial period of time and then attempted to garnish Lincoln. Available defenses were raised so Plaintiff eventually brought a direct action pursuant to the MCS-90. The defense was raised that, even though there may be a default judgment in this case, there were significant issues as to the lack of negligence of the truck driver as well as the nature and extent of the plaintiff s injuries. The defense proceeded based upon the language that: In consideration of the premium stated in the policy to which this endorsement is attached, the insurer (company) agrees to pay, within the limits of liability described herein, any final judgment recovered against the insured for public liability resulting from the negligence in the operation, maintenance or use of motor vehicles subject to the financial responsibility requirements of Section 29 and 30 the Motor Carrier Act of 1980. The defense argued that, for plaintiff to obtain a judgment in this case against the trucking company which only had derivative liability, plaintiff still had to establish negligence on behalf of the driver before plaintiff could collect against Lincoln based upon the MCS-90 direct action. Despite the Michigan Law that the default judgment against the trucking company did not establish any negligence but was based solely on derivative liability, the Court still concluded that the default judgment constituted an adjudication on the merits. Therefore, the insurer stepped into the shoes of the trucking company pursuant to the MCS-90 to fulfill all final judgments recovered against Ingram for negligence. As a result, the defendant (insurer) was barred from litigating the underlying,unadjudicated negligence issue. Note: The Magistrate Judge had decided this issue to the contrary, finding that the insurer could challenge the default judgment based on the negligence language of the MCS-90 and try the negligence and damage issues before there could be collection against the insurance carrier. The Federal District Court dismissed the leading case on this issue, Green v. Royal Indemnity Co., 1994 W.L. 267749 (S.D.N.Y. June 15, 1994) claiming that Michigan Law concerning default judgments differed from New York Law claiming that New York Law provides that a default judgment is only prima facie evidence of negligence while Michigan Law represents an adjudication on the merits. 4. Example: Green v. Royal Indemnity Co., 1994 W.L. 267749 (S.D.N.Y. June 15, 1994). Green was killed when the rear wheels broke loose from a trailer and struck the windshield of his van. Plaintiff obtained a default judgment against the truck rental company, which failed to appear, and entered into a consent judgment with Transport in which Transport stipulated to its liability in exchange for a promise not to seek additional sanctions and pursue certain personal assets. The judgment was for $1,000,000. Thereafter, plaintiff commenced an action against Royal under the MCS-90 it had issued for the Transport company. Royal raised the issue that it is a surety in regard to the 14

MCS-90 and therefore not charged with the defense of the action and not bound by the judgment. The Court found that it was not bound by the New York judgment as a surety but nonetheless had a contractual obligation to pay the judgment. Citing the MCS-90 endorsement, the Court found that the insurer could not subject the final judgment against the insured to collateral attack as a plaintiff would be forced to try her lawsuit twice. However, the Court found there to be a triable issue as to whether the plaintiff s injuries resulted from the negligent use or operation of the trailer (which Royal insured) under the MCS-90 endorsement. Accordingly, the Court found the endorsement does not require Royal to pay all final judgments against the insured but only those resulting from negligence. For Royal to be liable under the endorsement, therefore, there must be a showing that Green s death resulted from negligence in the operation, maintenance or use of the trailer. Here, there had been no showing that Green s death resulted from such negligence, because the issue of negligence was never adjudicated on the merits rather, New York judgment serves as prima facie evidence but not conclusive evidence that transport acted negligently. Thus, the Court concluded that, despite the default judgment and consent judgment, since there had been no trial on the merits regarding negligence, the motion for summary judgment against Royal was denied. The matter remanded for a trial on the negligence issue, subject to a finding that the default judgment served as prima facie but not conclusive evidence of negligence. The Court also concluded that, even without the presumptive evidence of the consent judgment, the burden on the plaintiff at trial would be to establish merely that someone, not necessarily Transport, was causally negligent with regard to the trailer. Thus, a default judgment in this case did not result in an automatic collection against the insurer under the MCS- 90 doctrine. 5. Example: Pierre v. Providence Washington Ins. Co., 730 N.Y.S. 2 nd 550; 784 N.E. 2 nd 52 (2002). Lack of Notice to the Insurer is not a defense to an MCS-90 Judgment. One of the leading cases is that of Pierre v. Providence Washington Ins. Co., 99 N.Y.S. 2 nd, 784 N.E. 2 nd 52 (2002). Plaintiff was injured when his vehicle was struck by a tractor trailer driven by Harris and employed by the trucking company Conquest and pulling a trailer owned by Blue Hen. Blue Hen had purchased an insurance policy from Providence. Plaintiff sued Harris and Conquest and obtained a default judgment against them. Plaintiff then learned that Blue Hen owned the trailer and that Providence had issued a policy to Blue Hen. Plaintiff forwarded the judgment to Providence demanding payment. Providence disclaimed coverage on the grounds that the insured breached notice conditions of the policy in failing to timely inform Providence of the accident. The Court concluded that the motor carrier who purchased insurance as a so called named insured need not 15

have been negligent; all that was required is that the accident resulted from negligence and that a judgment was entered implicating the endorsement. The Court concluded that the MCS-90 is consistent with public policy underpinnings of the endorsement; shifting the risk of loss in motor vehicle accidents involving tractor trailers operating in interstate commerce by guaranteeing that an injured party will be compensated even if a condition in the liability policy would otherwise provide the insurance carrier with a valid defense. Therefore, the Court rejected Providence s contention that the MCS-90 endorsement should not be treated as part of the underlying trucker s policy but should be viewed as imposing conditions distinct from those contained in the policy. This was a four to three decision in favor of the plaintiff where the three judge dissent was troubled with no one ever informed the carrier of the accident until after the entry of the judgment. The dissent commented that the language of the form is not to be understood as an expression of intent of Congress, but as another term in the policy. The risk for which the insurer issues the policy is redefined by the form the insurer did not draft. They concluded that the majority s view of the MCS-90 eviscerates the policy and creates absolute liability against the insurer for anyone injured by the vehicle operating under the motor carrier s registration who obtains a judgment against only the operator. The Court concluded that it substitutes its view of good policy for the express provisions chosen by Congress. It concluded that, had Congress intended such a result, it could have easily accomplished this by requiring the provisions of the MCS-90 to apply to a judgment not just against the insured, but against any insured as defined in the liability policy. IX. Conclusion and Comment. The MCS-90 and the decisions dealing with it create almost absolute liability in favor of the injured claimant. It is similar to uninsured motorist coverage, but with the difference that, once there is a default judgment, there is automatic collectability up to the lesser of the limits of the MCS-90 endorsement, or the amount of the judgment. The Courts are adopting the public policy goals that they interpret were behind the MCS-90, commenting that the primary purpose of the MCS-90 endorsement is to ensure that injured members of the public can collect a judgment from negligent authorized interstate carriers up to the MCS-90 limits contained in the endorsement. John Deere Ins. Co. v. Nueva, 229 F.3d 853, 857 (9 th Cir. 2000); Harco National s Ins. Co. v. Boback Trucking, Inc., 107 F.3d 733, 736 (9 th Cir 1997) (referencing Canal Ins. Co. v. First Gen. Ins. Co., 889 F.2d 604, 611 (5 th Cir 1989) the purpose of the MCS-90 is to protect the public, not create a windfall for the insured. Mark Shreve Garan Lucow Miller, P.C. 1111 West Long Lake Road, Suite 300 Troy, MI 48098 P: (248) 641-7600 E: mshreve@garanlucow.com 16

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CSA 2010 Frank M. Fox, Esq. The Cavanagh Law Firm According to The Federal Motor Carrier Safety Administration (FMCSA) CSA 2010 re-engineers the existing enforcement and compliance business process to provide a better view into how well large commercial motor vehicle (CMV) carriers and drivers are complying with safety rules, and to intervene earlier with those who are not. When the program is fully rolled out by the end of 2010, FMCSA will have a new enforcement and compliance Operational Model that it believes will utilize its resources, and those of its state enforcement partners, more efficiently and effectively. The Objectives are to increase contact with carriers and drivers; improve performance measurements for identifying high-risk motor carrier and driver behaviors; and correct high-risk behaviors before they become chronic and habitual. The new CSA 2010 operational model has three major components: Measurement - CSA 2010 measures safety performance in new ways, using inspection and crash results to identify carriers whose behaviors could reasonably lead to crashes. Evaluation - CSA 2010 helps FMCSA and its State partners to correct high risk behavior by contacting more carriers and drivers, with interventions tailored to the specific safety problem, as well as a new safety fitness determination methodology. (In process) Intervention - CSA 2010 covers the full spectrum of safety issues from how data is collected, evaluated, and shared to how enforcement officials can intervene most effectively and efficiently to improve safety on our roads. Measurement - Within the Comprehensive Safety Analysis (CSA 2010) Operational Model, the Safety Measurement System (SMS) quantifies the on-road safety performance of carriers and drivers to identify candidates for interventions, to determine the specific safety problems exhibited by a carrier or driver, and to monitor whether safety problems are improving or worsening. SMS replaces SafeStat in the new operational model. The carrier SMS uses a motor carrier s data from roadside inspections, including all safety-based violations, State-reported crashes, and the Federal motor carrier census to quantify performance in the following Behavior Analysis Safety Improvement Categories (BASICs). CSA 2010 BASICs (7 Categories): Unsafe Driving Operation of commercial motor vehicles (CMVs) by drivers in a dangerous or careless manner. Example Violations: Speeding, reckless driving, improper lane change, and inattention. (FMCSR Parts 392 and 397) Fatigued Driving (Hours-of-Service) Operation of CMVs by drivers who are ill, fatigued, or in non-compliance with the Hours-of-Service (HOS) regulations. This BASIC includes violations of regulations pertaining to logbooks as they relate to HOS requirements 19

and the management of CMV driver fatigue. Example Violations: HOS, logbook, and operating a CMV while ill or fatigued. (FMCSR Parts 392 and 395) Driver Fitness Operation of CMVs by drivers who are unfit to operate a CMV due to lack of training, experience, or medical qualifications. Example Violations: Failure to have a valid and appropriate commercial driver s license and being medically unqualified to operate a CMV. (FMCSR Parts 383 and 391) Controlled Substances/Alcohol Operation of CMVs by drivers who are impaired due to alcohol, illegal drugs, and misuse of prescription or over-the-counter medications. Example Violations: Use or possession of controlled substances/alcohol. (FMCSR Parts 382 and 392) Vehicle Maintenance Failure to properly maintain a CMV. Example Violations: Brakes, lights, and other mechanical defects, and failure to make required repairs. (FMCSR Parts 393 and 396) Cargo-Related Failure to properly prevent shifting loads, spilled or dropped cargo, overloading, and unsafe handling of hazardous materials on a CMV. Example Violations: Improper load securement, cargo retention, size and weight, and hazardous material handling. (FMCSR Parts 392, 393, 397 and HM Violations) Crash Indicator Histories or patterns of high crash involvement, including frequency and severity. It is based on information from State-reported crashes. A carrier s measurement for each BASIC depends on: The number of adverse safety events (violations related to that BASIC or crashes) The severity of violations or crashes When the adverse safety events occurred (more recent events are weighted more heavily). After a measurement is determined, the carrier is then placed in a peer group (e.g., other carriers with similar numbers of inspections). Percentiles from 0 to 100 are then determined by comparing the BASIC measurements of the carrier to the measurements of other carriers in the peer group. 100 indicates the worst performance. Data limited to: Commercial Motor Vehicles Violations in Personal Vehicles do NOT count for consequences of serious violations as defined in FMCSR Data must be tied to inspections OOS as a result of a crash does NOT count Violations must be written as FMCSR violations, not state codes 49 CFR 392.2 a problem! 20

"Point System" All violations will be assigned points Not the same as points on an MVR Violations weighted by time and severity Points are then converted to percentages FMCSA will not limit total number of points per driver or company Points will follow drivers for 36 months Points will follow carriers for 24 months - Driver points do not transfer to future employers, but stay with carrier under which violation occurred How the math works... Time weights (multipliers) - 0-6 months old = 3-6-12 months old = 2-12-24 months old = 1 Out of Service - Add 2 points to severity weight prior to multiplying Violation Severity Weights - Range from a low of 1 to a high of 10 Example 1: Current Level 1 Inspection Violations found: - Brake out of Adjustment - Overweight / Overaxle - False Log put OOS for 10 hours Time Weight = 3 OOS Weight = +2 Severity Weights Brake = 4 Overweight = 7 False Log = 7 Brake Violation 3x4 = 12 Maint. Overweight Violation 3x7=21 Cargo HOS Violation/OOS 3x(7+2)=27 HOS - The "30 Point Limit" applies to each "Bucket" during an inspection Example 2: Importance of Time 3 Months Old - Overweight 21 points - No CDL 9 points 8 Months Old - Unsafe loading of explosives 4 points - Improper load securement 20 points 13 Months Old - Crash with Fatality 2 points More Math Points in each category are converted into percentages based on two Peer Groups: Number of power units 21

For Unsafe Driving / Drug & Alcohol / Crashes Number of Inspections For Maintenance / Driver Fitness / HOS / Cargo Percentages change based on action of peers, as well as company Moving target! Evaluation (In Process) - Safety evaluation is the process of determining how to address carriers with poor safety performance. SMS is intended to allow FMCSA to more effectively evaluate safety performance using new measures for: 1. identifying which carriers require what type of intervention using a policy-driven process called intervention selection, and 2. determining which carriers should be proposed "unfit" to operate, using a regulatory process called Safety Fitness Determination (SFD). (An Unfit Suspension will prohibit a carrier from operating, based on the conclusion of a SFD. The details of Unfit Suspension will be described in the SFD Rulemaking.) FMCSA is developing a Safety Fitness Determination (SFD) methodology, subject to ongoing rulemaking, to replace the current system, which is solely dependent on the onsite compliance review results. The SFD will expand the use of on-road performance as calculated in the SMS and include results of all investigations. It will also allow FMCSA to determine safety fitness on a larger segment of the industry. Intervention - FMCSA and State partners will use measurement results to identify carriers for CSA 2010 interventions. These interventions will offer an expanded suite of tools ranging from warning letters to comprehensive on-site investigations that supplement the labor-intensive compliance review to better address the specific safety problems identified. CSA 2010 investigators are to be equipped to systematically evaluate why safety problems are occurring, to recommend remedies, to encourage corrective action(s), and, where corrective action is inadequate, to invoke strong penalties. Interventions are to provide carriers with the information necessary to correct problems and to change unsafe behavior early on. Interventions under CSA 2010 can be broken into 3 basic categories, which are described, in detail below: early contact, investigation, and follow-on. Early Contact Warning Letter - Correspondence sent to a carrier's place of business that specifically identifies deficient BASIC(s) and outlines possible consequences of continued safety problems. The warning letter provides instructions for accessing carrier safety data and measurement as well as a point of contact. Carrier Access to Safety Data and Measurement - Carriers have access to their measurement results (BASICs scores), as well as the inspection reports and violations that went into those results. With this information, carriers can chart a course of self-improvement. Carriers can also monitor this data for accuracy and challenge it as necessary through FMCSA s DataQs system: https://dataqs.fmcsa.dot.gov/login.asp. 22

Targeted Roadside Inspection - CSA 2010 provides roadside inspectors with data that identifies a carrier s specific safety problems, by BASIC, based on the new measurement system. Targeted roadside inspections occur at permanent and temporary roadside inspection locations where connectivity to the SMS information is available. As Commercial Vehicle Information Systems and Networks (CVISN) technologies evolve they will be incorporated into the roadside inspections. Investigation Off-site Investigation - A carrier is required to submit documents to FMCSA or a State partner. These documents are used to evaluate the safety problems identified through the SMS and to determine their root causes. Types of documents requested may include third party documents such as toll receipts, border crossing records, or drug testing records. The goal is to identify issues responsible for poor safety performance. If the carrier does not submit requested documents they may be subject to an on-site investigation or to subpoena records (see below). On-site Focused Investigation - The purpose of this intervention is to evaluate the safety problems identified through the SMS and their root causes. An on-site focused investigation may be selected when deficiencies in two or less BASICs exist. "Focused" on-site investigations target specific problem areas (for example, maintenance records), while "comprehensive" on-site investigations address all aspects of the carrier s operation. On-site Comprehensive Investigation - This intervention is similar to a CR and takes place at the carrier s place of business. It is used when the carrier exhibits broad and complex safety problems through continually deficient BASICs, worsening multiple BASICs (three or more), or a fatal crash or complaint. Follow-on Cooperative Safety Plan (CSP) - Implemented by the carrier, this safety improvement plan is voluntary. The carrier and FMCSA collaboratively create a plan, based on a standard template, to address the underlying problems resulting from the carrier's substandard safety performance. Notice of Violation (NOV) - The NOV is a formal notice of safety deficiencies that requires a response from the carrier. It is used when the regulatory violations discovered are severe enough to warrant formal action but not a civil penalty (fine). It is also used in cases where the violation is immediately correctable and the level of, or desire for, cooperation is high. To avoid further intervention, including fines, the carrier must provide evidence of corrective action or initiate a successful challenge to the violation. Notice of Claim (NOC) - An NOC is issued in cases where the regulatory violations are severe enough to warrant assessment and issuance of civil penalties. Settlement Agreement - A Settlement Agreement is a contract negotiated with the carrier to enact remedies that address the root cause of a safety problem, defer or reduce penalties, or terminate enforcement proceedings. CSA 2010 mandates proactive and progressive interventions for carriers and drivers that have been identified with safety deficiencies. CSA 2010 interventions are unique tools designed to communicate, investigate, and correct carrier safety performance problems before crashes occur. The interventions increase in severity and degree of interaction based on the risk posed by the carrier. FMCSA and its state partners will use CSA 2010 interventions to maintain a strong 23

enforcement presence by more effectively targeting motor carrier safety deficiencies soon after those problems are identified. These intervention tools are meant to enable investigators to systematically evaluate why safety problems are occurring, to recommend remedies, to encourage corrective action(s), and, where corrective action is inadequate, to invoke strong penalties. Next Steps All carriers have access as of April 12, 2010 Full access in August, 2010 Public will have access to BASIC scores beginning November 30, 2010 Warning letters mailed nationwide 12/10 Enforcement training will begin early 2011 Additional states will be added mid-2011 No interventions until states are officially in Future Action Safety Fitness Determination must go through Federal Rulemaking May see Notice of Proposed Rulemaking by June 2010 If so, may have Final Rule by end of 2011. Why care? Carriers stuck between 2 systems satisfactory no longer means the same as it did under old system. Rumors Driver information becomes public FMCSA will publish a driver "black list", putting 175,000-250,000 drivers out of work Drivers will be ranked and/or rated Driver scores will automatically convert to "marginal" or "unfit" status Pre-Employment Screening Program Not part of CSA 2010 program "Voluntary" Program Utilizes same data sources Allows carriers to see 3 years roadside activity / 5 years crash for drivers prior to hiring - Must have driver sign a specific waiver Pre-enrollment began 3/10 Current plan is supported to be active mid-july Legal Concerns Increased Liability - Negligent hiring and/or retention - Pre-Employment Screening voluntary or mandatory? 24

- Liability if carrier is "Unfit" or "At Fault" - Discovery issues with dual rating systems Other Issues - Independent contractor issues If holding drivers to a higher standard, will that change employee / individual contractor status? Advice Educate, - Management, drivers, 3 rd parties Get a COMPASS account Update MCS-150 Clean / Challenge Incorrect Data "Map" Transition More Advice Update Company Policies - Add CSA "points" to disciplinary/incentive program? - Have drivers sign-off on changes - Update contracts Frank M. Fox, Esq. The Cavanagh Law Firm 1850 N. Central Avenue, Suite 2400 Phoenix, Arizona 85004 P: (602) 322-4013 E: fmfox@cavanaghlaw.com 25

In Search of a Fair Shake: Bifurcation of Civil Trials in Trucking Cases Written by: F. Marshall Wall and Dexter Chip Campbell III Presented by: Rob Griffin Cranfill Sumner & Harzog LLP You are defending a trucking company and a driver sued as the result of a traffic accident. Settlement negotiations have broken down. High-low agreements have been rejected. Your case is heading to trial. As is often the case when defending trucking companies, the accident was severe, and the plaintiff suffered serious injuries. While there is no significant dispute about causation or damages, liability is very questionable. Without a doubt, the plaintiff s injuries and the way that they changed the plaintiff s life will illicit tremendous sympathy from a jury, and his or her attorney will seek significant compensatory damages. Since a traditional negligence jury trial consists of one trial in which a jury considers both negligence and damages, a judge may well allow the plaintiff s attorney to discuss the plaintiff s catastrophic injuries in great detail during voir dire and opening statements and while presenting evidence, leading to the coda his or her closing argument. Your client is concerned that the damages evidence will evoke enough sympathy that the issue of liability will not receive a fair hearing. In fact, the courts have recognized this concern, articulated, for instance, by the United States District Court for the District of New Jersey, which wrote that sympathetic jurors might be inclined to award Plaintiff some money regardless of fault, if they were aware of the magnitude of the injuries incurred and the damages sought. Miller v. New Jersey Transit Authority Rail Operations, 160 F.R.D. 37, 41 (D.N.J. 1995). So what can you do to prevent sympathy for the plaintiff from overwhelming strong arguments on negligence and to make sure that your client gets a fair trial? How can you help your client reduce its exposure and best predict the outcome of a very dangerous case? The Federal Rules of Civil Procedure and their state counterparts, as well as courts across the country, have provided a possible solution bifurcation. Splitting the liability and damages issues into two phases, determining liability first, and then, if necessary, determining damages separately, can give defendants a fair chance to present liability defenses without facing a jury that is not mostly focused on a badly injured plaintiff. Bifurcation may offer your best chance to reduce or even eliminate jury prejudice when a plaintiff suffers a catastrophic injury or death, which will likely improperly influence a jury if the jury considers liability and damages together. You must determine whether to seek bifurcation on a case-by-case basis. In an appropriate case, bifurcation has many positives, but it certainly also offers risks that you must assess fully and discuss with your client. For example, if a jury finds for a plaintiff on liability in the first phase of a trial and 26

then moves on to damages, that jury may be less inclined to reduce an award for questionable liability because it has already decided and forgotten that issue. This article will examine some telling case law on bifurcation, to you with an understanding of what courts consider in deciding whether to bifurcate a case and help you decide whether bifurcation is a desirable option for you and your clients. Some of the cases discussed below dealt with lawsuits against trucking companies; others did not. They are heavily weighted toward personal injury lawsuits involving catastrophic injuries or death. These cases generally, though not universally, have allowed bifurcation. Further, when courts have permitted bifurcation, these courts opinions often have set out some of the most common objections made by the plaintiffs bar, which will give you an idea of the objections that you will likely face. The Basis for Bifurcation: Fed. R. Civ. P. 42(b) Rule 42(b) of the Federal Rules of Civil Procedure gives judges discretion to order separate trials of issues or claims: (1) for reasons of convenience; (2) when conducive to expediting a case or to promote judicial economy; or (3) to avoid prejudice. Since bifurcation is discretionary, a court of appeals will overrule a decision to bifurcate only if the trial judge abused that discretion. See Mosley v. General Motors Corp., 497 F.2d. 1330 (8th Cir. 1974). Some courts have required that [o]nly one of these criteria need be met to justify bifurcation. Saxion v. Titan-C-Manufacturing, Inc., 86 F.3d 553, 556 (6th Cir. 1996). Others seem to require that the party seeking bifurcation demonstrate that it will suffer prejudice if a court does not grant separate trials. See Marshall v. Overhead Door Corp., 131 F.R.D. 94 (E.D. Pa. 1990). Any party can move for bifurcation, or the court may order it sua sponte. See Saxion, 86 F.3d at 556. Federal courts have universally recognized that a trial judge has the right within his or her discretion to apply Rule 42(b) to bifurcate personal injury actions into separate phases to determine liability and damage issues. Moss v. Associated Transport, Inc., 344 F.2d 23 (6th Cir. 1965). The party seeking bifurcation has the burden of showing that bifurcation is proper in light of the general principle that a single trial tends to lessen the delay, expense, and inconvenience to all parties. Lowe v. Philadelphia Newspapers, Inc., 594 F. Supp. 123, 125 (E.D. Pa. 1984). The Severity of a Plaintiff s Injuries as a Factor in Bifurcation The case Moss v. Associated Transport, Inc., involved four consolidated actions for conflicting claims of death and injury and an unusual twist on bifurcation. 344 F.2d 23 (6th Cir. 1965). Moss was permanently injured when he was riding as a passenger in a tractor-trailer truck that collided with another tractor-trailer truck owned by the defendant, Associated Transport, and operated by its employee. The driver of the Associated Transport truck and his passenger were both killed. The widows of the driver and passenger in the Associated Transport truck sued the driver and the owner of the truck in which Moss was riding at the time of the accident for wrongful death. Moss sued the driver and owner of the Associated Transport truck. The lawsuits were consolidated and, over the objection of Moss, the trial court directed that the jury should first determine the issue of liability and then, second, damages, if necessary. The jury found in the liability phase of the trial that Moss driver was negligent and exonerated the driver of the Associated Transport vehicle. As such, Moss claims were dismissed, and the widows prevailed at trial. On appeal, Moss argued, among other things, that separating the issues had prejudiced him, because he could not show the severity of his injuries and was denied a weapon with which to combat the 27

natural sympathy that a jury would feel for the two plaintiff widows who had, in effect, been made Moss opponents by the consolidation. Id. at 26. Moss argued that the jury knew what the widows had lost during the liability phase of the bifurcated trial, but had no idea of the extent and severity of his injuries, since he could not introduce that evidence. In affirming the trial court s decision to consolidate and bifurcate, the Sixth Circuit stated: There are not a few who question the wisdom of employing Rule 42(b) to divide personal injury damage actions into separate trials of the liability and damages issues, whether submitted seriatim to the same jury or to different juries. Some look upon the practice as but another procedural gimmick designed to assist current judicial efforts to mass produce dispositions of pending cases, but which merely multiplies the burden of litigation. They feel that the occasional good it produces is greatly outweighed by the danger of unfairness being visited upon litigants who from right motives prefer to try their suits in traditional fashion. However, whatever academic disagreement there may be on that point, it seems now to be established that under Rule 42(b) a trial judge had right within his discretion to do what was done here. Id. at 25 (internal citations omitted). Another Sixth Circuit case, Helminski v. Ayerst Laboratories, held that bifurcation was appropriate when evidence pertinent to the issues of liability and damages was wholly unrelated and evidence relevant to damages could have a prejudicial impact on a jury s liability determination. 766 F.2d. 208 (6th Cir. 1985). The plaintiff in Helminski was a severely disabled child whose parents sued, claiming that his in utero exposure to a medication manufactured by the defendant caused those disabilities. The case is notable for another reason, however. In it, the Sixth Circuit discussed whether a trial court could exclude the litigant from attending the liability phase of a bifurcated trial if it determined that the plaintiff s presence would substantially prevent or impair a jury from performing its duties. While the Sixth Circuit found that the trial court should not have barred the plaintiff from the liability phase of the trial, it also determined that this was a harmless error, since his condition rendered him unable to assist meaningfully with the prosecution of the case, and the circuit court affirmed the defense verdict. In Zofcin v. Dean, the plaintiff was injured and his wife and two children were killed in an auto accident. 144 F.R.D. 203 (S.D.N.Y. 1992). The defendant stipulated to causation and moved to bifurcate. The trial court granted the defendant s motion to split the liability and damages phases of the trial. Over the plaintiff s objections, the court found bifurcation proper, since the plaintiff intended to offer detailed evidence of extreme pain and suffering, including burning flesh and screams of pain. Id. at 205. This posed a substantial risk of impairing the jury s objectivity on the liability issue. Id. The Zofcin facts were horrific a father and husband who suffered injuries himself and, more importantly, who witnessed the deaths of his family in the same accident. It presents a classic example of a situation in which a jury would likely become overwhelmed by damages evidence without bifurcation. Other Considerations in Deciding Whether to Bifurcate In McKellar v. Clark Equipment Company v. Lime Products Corporation, the plaintiff was left quadriplegic and incurred significant economic damages as the result of an accident. 101 F.R.D. 93 (D. Me. 1984). The severity of the damages was not in question, but liability was hotly contested. The defendant sought to separately try the issue of liability from the damages issues on the bases of 28

avoiding prejudice and judicial economy. The plaintiff opposed the motion, arguing that bifurcation was unnecessary to avoid prejudice and unlikely to result in time savings. In granting the defendant s motion to bifurcate, the court considered several factors, including: Whether a separation of the issues for trial will serve to expedite the disposition of the action and to conserve trial time and other judicial resources, whether such separation will be likely to avoid prejudice to any party at trial that may occur in the absence of separation of the issues, and whether the issues to be separated are essentially independent of each other for evidentiary purposes so that there will be no need to duplicate the presentation of significant areas of the evidence in the separated proceedings. Id. at 94. The court determined that bifurcating the trial would obviate likely prejudice to the defendant on the determination of the liability issues, will conserve judicial resources, and will occasion no prejudice to Plaintiff in the orderly and effective presentation of his case. Id. at 94. The court further stated that the plaintiff s physical injuries and lengthy treatment could adversely and improperly affect a jury s fair, impartial and objective consideration of the liability issues. Id. at 95. Regarding judicial economy, the court noted that since the main dispute was liability, a plaintiff s victory on that issue against one or both of the defendants was likely to greatly facilitate a voluntary settlement by the losing party. Id. at 95. While not recognized as a circumstance permitting bifurcation under Rule 42(b), the McKellar court s comment about the likelihood of settlement if the defense lost the liability phase of the case probably reflects reality. When a defendant pins its hopes on a liability defense that proves unsuccessful, it often chooses to settle a case rather than go forward with a trial on damages that will almost certainly end badly. New York s federal courts have consistently recognized several additional factors that a court should consider when determining whether bifurcation is proper, including (1) whether the issues are significantly different from one another; (2) whether the issues are to be tried before a jury or to the court; (3) whether the posture of discovery on the issues favors a single trial or bifurcation; (4) whether the documentary and testimonial evidence on the issues overlap; and (5) whether the party opposing bifurcation will be prejudiced if it is granted. Dallas v. Goldberg, 143 F. Supp. 2d 312, 315 (S.D.N.Y. 2001). The Dallas court noted that bifurcation remains the exception rather than the rule, however, and denied the defendants request. Id. Promoting Judicial Economy: A Strong Argument for the Defense Betts v. General Motors Corp., is a wrongful death and personal injury case resulting from a motor vehicle accident. 689 P.2d 795 (1984). The case involved a high-speed, head-on collision between a 1974 Ford pick-up truck and a 1973 Chevrolet Monte Carlo that was towing a 1972 Chevrolet Vega with a rented U-Haul trailer hitch and tow bar. The accident was caused by the Ford pick-up driver s negligence. He lost control of his vehicle when he apparently fell asleep. Five members of the plaintiffs family were passengers in the Monte Carlo. A fire broke out after the collision, and, except one five-year-old child, the plaintiffs family died. The driver of the Ford pick-up was also killed. 29

The plaintiffs sued General Motors for faulty product design and manufacturing and for negligence in installing the fuel tank in a place where the plaintiffs claimed that it would likely rupture in a collision and cause a gasoline fire. General Motors moved to bifurcate the liability and damages issues so that a jury first could determine liability, if any, of General Motors, U-Haul and the Kansas Turnpike Authority. The trial court allowed a bifurcated trial, and the jury decided that General Motors was not liable. The plaintiffs argued on appeal that the trial court had abused its discretion in ordering bifurcation. The Kansas Supreme Court found no error, noting that the trial court pointed out the advantages of a bifurcated trial that it would help the jury comprehend the issues, economize the court s time, and reduce the parties trial expenses. The supreme court affirmed the trial court s bifurcation order, which found that the additional expenses of time and resources might be unnecessary if determination of the fault issues made the damages issues moot or enhanced the prospects of settlement. Id. at 802. In Marshall v. Williams, the North Carolina Court of Appeals approved an order initiated by the trial judge to bifurcate a personal injury action. 574 S.E.2d 1 (2002). The case involved a collision between a truck and a boy on his bicycle. The trial was bifurcated to consider all issues related to negligence before proceeding with a trial on the damages. Arguing against bifurcation, the plaintiff s attorney took the position that the jury needed to see the entire picture of the accident and that to prove negligence the plaintiff would have to prove that the boy s damages were proximately caused by the negligence of defendant. In response, the defendant stipulated that the boy s injuries were the direct result of the accident. The court bifurcated the trial for the purpose of judicial economy, for the ease of understandability and presentation to the jury, and... after lengthy consideration of the best presentation of this matter. Id. at 4. At trial, the court granted a directed verdict in favor of defendant on the issue of negligence. The North Carolina Court of Appeals upheld the trial court s decision to bifurcate, noting that a trial judge s discretion in separating trials is extremely broad. Even Simple Cases Can Be Bifurcated Sometimes plaintiffs oppose bifurcation, as in Hunter v. McDaniel Construction Company, by arguing that their case is the result of a simple vehicular collision, and, as such, does not meet bifurcation criteria. 623 S.W.2d. 196, 198 (1981). The Arkansas Supreme Court has disagreed. It held that bifurcation of liability and damages in a personal injury action was common in federal and state courts and did not infringe on the constitutional right to a jury trial. Id. The court also noted that the primary concern is efficient judicial administration, rather than the wishes of the parties, as long as no party suffers prejudice by bifurcation. Id. at 198. Trucking cases may seem simple to courts, and plaintiffs attorneys may try to depict them that way. The truth is often different, however. For example, trucking cases often involve the Federal Motor Carrier Safety Regulations, for instance, whether a carrier violated them and, if so, whether that violation was a proximate cause of an accident. Expecting jurors to parse evidence of regulatory violations when determining liability and then asking those same jurors to ignore that evidence when deciding compensatory damages is optimistic at best. Educating a court about the complexity of your case can be crucial when trying to win a bifurcated trial. 30

Stipulating to Other Issues to Win Bifurcation Sometimes, you might need to stipulate some issues to win bifurcation. One case that illustrates this strategy is Fisher v. Northland Insurance Company, which involved a fatal trucking accident and in which the Court of Civil Appeals of Oklahoma upheld bifurcation of liability and damages. 23 P.3d 296 (2000). The plaintiff, the personal representative of her granddaughter s estate, sued a trucking company and its insurance carrier. Granting a motion by the defense, the trial court bifurcated the issues of liability and damages and further bifurcated the plaintiff s claims against the insurer until the jury decided the liability question. The jury found in favor of the trucking company. The plaintiff argued that evidence of her relationship with her granddaughter was necessary to prove that she was an appropriate personal representative. The defendants stipulated that the plaintiff had the legal ability to bring the suit, dispensing with the plaintiff s arguments. The plaintiff could not show that bifurcation was prejudicial to her, and the appeals court affirmed the trial court s decision. Fisher is also a classic example of a trucking case bifurcation. It involved the death of a child, questionable liability, and coverage issues. The court wisely chose to try liability first, and second, have the jury decide damages and coverage, if needed. After hearing the negligence case, the jury found for the defense, and the jury did not need to sort through coverage and damages evidence to conclude the case. Bifurcation as Court Practice Requires Informed Discretion Courts must generally adhere to particular principles when granting bifurcation, as illustrated in Lis v. Robert Packer Hospital, in which a four-month-old child was taken to the emergency room with breathing difficulties after possibly aspirating food. 579 F. 2d 819 (3d Cir. 1978). On arrival at the hospital, a doctor s examination revealed extremely high blood sugar levels, and the baby was diagnosed with diabetes. Next, the baby received 15 insulin injections. Shortly after receiving the injections, the baby experienced serious seizures, which lead to severe brain damage, mental retardation. At the time, the emergency room examining doctor thought that the child would also experience blindness. The doctor s diagnosis and treatment was later proven erroneous, and the family sued the hospital and the physician. The case was tried in the Middle District of Pennsylvania. The trial court, as was its usual practice, ordered the case to go to the jury first on the issue of negligence. Id. at 823. Over the plaintiffs objection, the trial court stated: I bifurcated it because we bifurcate all negligence cases, and I think everybody is more fairly treated that way. Id. During the bifurcated trial, the defense argued that the baby s seizures were not the result of the insulin injections, but of a preexisting congenital brain disorder. The jury found the treating physician negligent, but found no proximate cause. The plaintiffs appealed, and the Third Circuit held that it was improper for the lower court to adopt a general practice of bifurcating all negligence trials. The court stated that: A general policy of a district judge bifurcating all negligence cases offends the philosophy that a decision must be made by a trial judge only as a result of an informed exercise of discretion on the merits of each case. Id. at 824. The Third Circuit upheld the trial court s decision to allow bifurcation in this case, however, noting that the plaintiffs did not show that bifurcation prejudiced them. The Third Circuit noted, however, that it would not necessarily require a showing of prejudice in future cases to overrule a trial court s 31

decision to bifurcate if the trial court failed to demonstrate that it had exercised informed discretion. Id. at 825. This opinion illustrates that although discretionary, a trial judge must consider the merits of each individual case when granting or denying bifurcation. Courts Can Initiate Bifurcation A court can initiate bifurcation. Further, even if both parties oppose bifurcation, a court can find that it is appropriate given the circumstances of a particular case. For example, in Hosie v. Chicago & N.W. Ry. Co., the trial court initiated and ordered bifurcation on the issues of liability and damages one day before the trial, over the objection of both the plaintiff and the defendant. 282 F.2d 639 (7th Cir. 1960). The defendant prevailed on the issue of liability at trial, and the plaintiff appealed, arguing that bifurcation deprived him of his constitutional right to a trial by jury. In affirming the trial court s decision to bifurcate and rejecting the plaintiff s constitutional argument, the Seventh Circuit held that the procedural rules in place when the Bill of Rights was adopted were not set in stone and, just as with rules on the form of pleadings, they could be changed. In support of bifurcation, the court stated: Many of the federal district courts of this country are laboring under the heavy burden of crowded trial dockets. The Northern District of Illinois is no exception. The judges of that court should be commended for their search for methods and means to expedite the disposition of cases upon their calendars. There is no doubt that in numerous cases, the severing of the issue of liability from the issue of damages will result in the shortening of the time of trial. The instant case is a good example. Without such severance, hours or even a day or two might have been consumed on the issue of damages. Id. at 643. Bifurcation initiated by a court, however, is the exception, rather than the rule, and the best practice is to request bifurcation rather than hope that a court will decide to split a trial. Damages as an Essential Liability Element With all this said, achieving bifurcation creates challenges when damages are an essential element of a liability claim, as exemplified by Miller v. Fairchild Industries, Inc., in which two employees sued their employer, alleging that they were discharged from their jobs in retaliation for filing discrimination charges with the Equal Employment Opportunity Commission. 885 F.2d. 498 (9th Cir. 1989). Among other claims, the plaintiffs sought redress for intentional infliction of emotional distress. The Ninth Circuit held that the facts supporting the intentional infliction of emotional distress claim were so intertwined with liability that bifurcation was improper. Id. at 511. Specifically, the Ninth Circuit noted that a finding of liability for intentional infliction of emotional distress required that the fact finder determine that a plaintiff in fact had suffered emotional distress. As such, the court determined that separating the issues would create confusion and uncertainty for the jury, rendering separation inappropriate. Beware the Demand for a Jury Trial At least one court has relied, in part, on a defendant s demand for a jury trial in denying a motion to bifurcate in a trucking accident case. Fetz v. E&L Truck Rental, 670 F. Supp. 261 (S.D. Ind. 1987). In this case, as a result of the accident the plaintiff sustained brain damage that left her in a permanent vegetative state. Noting that bifurcation typically only shortened trials if the defense won on liability, the trial court found that the trucking company had not demonstrated that its 32

probability of prevailing in a separate trial of liability is sufficiently substantial to warrant ordering a bifurcated trial in this case based on judicial economy Id. at 266. The court next discussed the defendant s concern about prejudice, should a jury hear the full case. After writing that the defendant s sudden lack of faith in the jury system must be viewed with skepticism given that the defendants themselves demanded a jury trial in this case, the court denied the request to bifurcate. While an uncommon basis for denying a motion to bifurcate, the Fetz court s logic would require the defense to decide whether prejudice is likely when you file an initial pleading and when you decide whether to request a jury trial. Conclusion Lest you believe after reading the cases discussed above that courts frequently grant bifurcation, remember that there is essentially a presumption against it. While not dealing specifically with bifurcation under Rule 42(b), the United States Supreme Court in Miller v. Am. Bonding Co., wrote that the general practice is to try all the issues in a case at one time; and it is only in exceptional instances where there are special and persuasive reasons for departing from this practice that distinct causes of action asserted in the same case may be made the subject of separate trials. 257 U.S. 304, 308 (1921). In defending your client, a motion to bifurcate a trial can offer an important tool. Separating consideration of issues at trials may give your client some predictability and save time and money in certain circumstances. While you should decide to move to bifurcate on a case-by-case basis, generally serious personal injury lawsuits resulting from trucking accidents lend themselves to bifurcation as much as any other. When you and your client believe that bifurcation would prove useful, consider a bifurcation motion from the start of a case and use discovery to develop arguments to support it. Bifurcation may be an uncommon remedy, but it could help alleviate your clients concerns about facing a jury in a catastrophic trucking accident case. F. Marshall Wall is a partner and Dexter Chip Campbell III an associate in the Raleigh, North Carolina, office of Cranfill Sumner & Hartzog LLP. Members of DRI s Trucking Law Committee, both are also members of the firm s trucking and transportation section who defend commercial motor vehicle accidents and other disputes involving trucking companies. Marshall Wall Dexter Chip Campbell III Cranfill Sumner & Hartzog LLP Cranfill Sumner & Hartzog LLP 5420 Wade Park Boulevard, Suite 300 5420 Wade Park Boulevard, Suite 300 Raleigh, NC 27607 Raleigh, NC 27607 P: (919) 828-5100 P: (919) 828-5100 Rob Griffin Cranfill Sumner & Hartzog LLP 5420 Wade Park Boulevard, Suite 300 Raleigh, NC 27607 P: (919) 863-8723 E: rhg@cshlaw.com 33

Electronic Logs: The Future Is Here Andrew Morse Snow, Christensen & Martineau I. Companies of All Sizes Moving to Electronic Log: a. Werner Transportation one of the first. i. Done to avoid unacceptable HOS violation rate. ii. Done via agreement with FMCSA. b. Other major carriers have followed. i. CR England. ii. Schneider National. iii. Central Refrigerated Service, Inc. c. FMCSA regulations recognize and encourage electronic logs. 49 CFR 395.16. (Applicable code sections, attached.) II. III. IV. Advantages: a. Saves drivers time. b. Saves company money in reduced log audit costs. c. Saves company money in lower FMCSA fines and out of duty delays. d. More efficient fleet management, as HOS availability is in real time. Disadvantages: Not fool-proof, as advertised. a. Drivers can manually change duty status from on-duty-not-driving to sleeper berth, when they are actually on-duty-not-driving. b. Not easy for police to check, leading to misleadingly low out of service rates. FMCSA Now May Require Electronic Logs for HOS Offenders: a. As of June 4, 2010 under 49 CFR 385.801, the FMCSA may require electronic logs as a remedy for HOS violations. b. FMCSA will issue proposed unfitness determination if carrier fails to comply. 385.813. c. After 45 days of noncompliance, the proposed determination becomes final, and carriers hauling hazardous material will lose its authority to operate. 385.819. d. All others have 60 days to comply without losing authority. V. Electronic Discovery: a. Electronic log data for six months prior to incident must be retained. b. In-house information technology witness must know system. Andrew M. Morse Snow, Christensen & Martineau 10 Exchange Place PO Box 45000 Salt Lake City, UT 84145 P: (801) 521-9000 E: amm@scmlaw.com 34

Recent Regulations concerning Electronic On-Board Recorders 49 C.F.R. 385.801 - Purpose and scope. (a) This subpart establishes procedures for FMCSA's issuance of notices of remedial directives and proposed determinations of unfitness. (b) This subpart establishes the circumstances under which FMCSA will direct motor carriers (including owner-operators leased to motor carriers, regardless of whether the owner-operator has separate operating authority under part 365), in accordance with 385.1(a), to install electronic onboard recorders (EOBRs) in their commercial motor vehicles as a remedy for threshold rate violations, as defined by 385.803, of the part 395 hours-of-service regulations listed in Appendix C to this part. (c) This subpart establishes the procedures by which motor carriers may challenge FMCSA's issuance of proposed determinations of unfitness and remedial directives. (d) The provisions of this subpart apply to all motor carriers subject to the requirements of part 395 of this chapter. 49 C.F.R. 385.803 - Definitions and acronyms. (a) The definitions in subpart A of this part and part 390 of this chapter apply to this subpart, except where otherwise specifically noted. (b) As used in this subpart, the following terms have the meaning specified: Appendix C regulation means any of the regulations listed in Appendix C to Part 385 of this chapter. Appendix C violation means a violation of any of the regulations listed in Appendix C to part 385 of this chapter. Electronic on-board recording device (EOBR) means an electronic device that is capable of recording a driver's duty hours of service and duty status accurately and automatically and that meets the requirements of 395.16 of this chapter. Final determination for purposes of part 385, subpart J means: (1) An adjudication under this subpart upholding a notice of remedial directive and proposed unfitness determination; (2) The expiration of the period for filing a request for administrative review of remedial directive and proposed unfitness determination under this subpart; or 35

(3) The entry of a settlement agreement stipulating that the carrier is subject to mandatory EOBR installation, use, and maintenance requirements. Motor carrier includes owner-operators leased to carriers subject to a remedial directive, regardless of whether the owner-operator has separate operating authority under part 365 of this chapter. Proposed determination of unfitness or proposed unfitness determination means a determination by FMCSA that a motor carrier will not meet the safety fitness standard under 385.5 on a specified future date unless the carrier takes the actions necessary to comply with the terms of a remedial directive issued under this subpart. Remedial directive means a mandatory instruction from FMCSA to take one or more specified action(s) as a condition of demonstrating safety fitness under 49 U.S.C. 31144(b). Threshold rate violation for the purposes of this subpart means a violation rate for any Appendix C regulation equal to or greater than 10 percent of the number of records reviewed. 49 C.F.R. 385.807 - Notice and issuance of remedial directive. (a) Following the close of the compliance review described in 385.805(a), FMCSA will issue the motor carrier a written notice of remedial directive and proposed determination of unfitness. FMCSA will issue the notice and proposed determination as soon as practicable, but not later than 30 days after the close of the review. (b) The remedial directive will state that the motor carrier is required to install and maintain EOBRs compliant with 395.16 of this chapter in all of the motor carrier's CMVs and to use the EOBRS to record its drivers' hours of service pursuant to 395.16. The motor carrier shall provide proof of the installation to FMCSA in accordance with 385.811 within the following time periods: (1) Motor carriers transporting hazardous materials in quantities requiring placarding, and motor carriers transporting passengers in a CMV, must install EOBRs and provide proof of the installation by the 45th day after the date of the notice of remedial directive. (2) All other motor carriers must install EOBRs and provide proof of installation by the 60th day after the date of FMCSA's notice of remedial directive. If FMCSA determines the motor carrier is making a good-faith effort to comply with the terms of the remedial directive, FMCSA may allow the motor carrier to operate for up to 60 additional days. (3) A motor carrier may challenge the notice of remedial directive and proposed determination of unfitness in accordance with 385.817. 49 C.F.R. 385.811 - Proof of compliance with remedial directive. (a) Motor carriers subject to a remedial directive to install EOBRs under this section must provide proof of EOBR installation by one of the following: 36

(1) Submitting all of the carrier's CMVs for visual and functional inspection by FMCSA or qualified State enforcement personnel. (2) Transmitting to the FMCSA service center for the geographic area where the carrier maintains its principal place of business all of the following documentation: (i) Receipts for all necessary EOBR purchases. (ii) Receipts for the installation work. (iii) Digital or other photographic evidence depicting the installed devices in the carrier's CMVs. (iv) Documentation of the EOBR serial number for the specific device corresponding to each CMV in which the device has been installed. (3) If no receipt is submitted for an installed device or the installation work in accordance with paragraph (a)(2) of this section, the carrier must submit a written statement explaining who installed the devices, how many devices were installed, the manufacturer and model numbers of the devices installed, and the vehicle identification numbers of the CMVs in which the devices were installed. (b) Visual and functional EOBR inspections may be performed at any FMCSA roadside inspection station or at the roadside inspection or weigh station facility of any State that receives Motor Carrier Safety Assistance Program funds under 49 U.S.C. 31102 and that provides such inspection services. The carrier may also request such inspections be performed at its principal place of business. (c) Motor carriers issued remedial directives pursuant to this section must install in all of their CMVs EOBRs meeting the standards set forth in 49 CFR 395.16. Such motor carriers must maintain and use the EOBRs to verify compliance with part 395 for a period of 2 years following the issuance of the remedial directive. In addition to any other requirements imposed by the FMCSRs, during the period of time the carrier is subject to a remedial directive the carrier must maintain all records and reports generated by the EOBRs and, upon demand, produce those records to FMCSA personnel. (d) Malfunctioning devices. Motor carriers subject to remedial directives shall maintain EOBRs installed in their CMVs in good working order. Such carriers must cause any malfunctioning EOBR to be repaired or replaced within 14 days from the date the carrier becomes aware of the malfunction. During this repair or replacement period, carriers subject to a remedial directive under this part must prepare a paper record of duty status pursuant to 395.8 of this chapter as a temporary replacement for the non-functioning EOBR unit. All other provisions of the remedial directive will continue to apply during the repair and replacement period. Failure to comply with the terms of this paragraph may subject the affected CMV and/or driver to an out-of-service order pursuant to 396.9(c) and 395.13 of this chapter, respectively. Repeated violations of this paragraph may subject the motor carrier to the provisions of 385.819. 49 C.F.R. 385.813 - Issuance and conditional rescission of proposed unfitness determination. 37

(a) Simultaneously with the notice of remedial directive, FMCSA will issue a proposed unfitness determination. The proposed unfitness determination will explain that, if the motor carrier fails to comply with the terms of the remedial directive, the carrier will be unfit under the fitness standard in 385.5, prohibited from engaging in interstate operations and intrastate operations affecting interstate commerce, and, in the case of a carrier registered under 49 U.S.C. 13902, have its registration revoked. (b) FMCSA will conditionally rescind the proposed determination of unfitness upon the motor carrier's submission of sufficient proof of EOBR installation in accordance with 385.811. (c) During the period the remedial directive is in effect, FMCSA may reinstate the proposed unfitness determination and immediately prohibit the motor carrier from operating in interstate commerce and intrastate operations affecting interstate commerce if the motor carrier violates the provisions of the remedial directive. 49 C.F.R. 385.819 - Effect of failure to comply with remedial directive. (a) A motor carrier that fails or refuses to comply with the terms of a remedial directive issued under this subpart, including a failure or refusal to provide proof of EOBR installation in accordance with 385.811, does not meet the safety fitness standard set forth in 385.5(b). With respect to such carriers, the proposed determination of unfitness issued in accordance with 385.813 becomes final, and the motor carrier is prohibited from operating, as follows: (1) Motor carriers transporting hazardous materials in quantities requiring placarding and motor carriers transporting passengers in a CMV are prohibited from operating CMVs in interstate commerce and in operations that affect interstate commerce beginning on the 46th day after the date of FMCSA's notice of remedial directive and proposed unfitness determination. A motor carrier subject to the registration requirements of 49 U.S.C. 13901 will have its registration revoked on the 46th day after the date of FMCSA's notice of remedial directive and proposed unfitness determination. (2) All other motor carriers are prohibited from operating a CMV in interstate commerce and in operations that affect interstate commerce beginning on the 61st day after the date of FMCSA's notice of remedial directive and proposed unfitness determination. A motor carrier subject to the registration requirements of 49 U.S.C. 13901 will have its registration revoked on the 61st day after the date of FMCSA's notice of remedial directive and proposed unfitness determination. If FMCSA determines the motor carrier is making a good-faith effort to satisfy the terms of the remedial directive, FMCSA may allow the motor carrier to operate for up to 60 additional days. (b) If a proposed unfitness determination becomes a final determination, FMCSA will issue an order prohibiting the motor carrier from operating in interstate commerce. If the motor carrier is required to register under 49 U.S.C. 13901, FMCSA will revoke the motor carrier's registration on the dates specified in 385.819(a)(1) and (a)(2). (c) If FMCSA has prohibited a motor carrier from operating in interstate commerce under paragraph (a) of this section and, if applicable, revoked the carrier's registration, and the motor carrier subsequently complies with the terms and conditions of the remedial directive and provides 38

proof of EOBR installation under 385.811, the carrier may request FMCSA to lift the prohibition on operations at any time after the prohibition becomes effective. The request should be submitted in writing in accordance with 385.817(c). (d) A Federal Agency must not use for CMV transportation a motor carrier that FMCSA has determined is unfit. (e) Penalties. If a proposed unfitness determination becomes a final determination, FMCSA will issue an order prohibiting the motor carrier from operating in interstate commerce and any intrastate operations that affect interstate commerce and, if applicable, revoking its registration. Any motor carrier that operates a CMV in violation of this section will be subject to the penalty provisions listed in 49 U.S.C. 521(b). 49 C.F.R. 395.2 - Definitions. <For compliance date(s) of amendment(s) to section, see 75 FR 17208.> As used in this part, the following words and terms are construed to mean: Adverse driving conditions means snow, sleet, fog, other adverse weather conditions, a highway covered with snow or ice, or unusual road and traffic conditions, none of which were apparent on the basis of information known to the person dispatching the run at the time it was begun. Agricultural commodity means any agricultural commodity, nonprocessed food, feed, fiber, or livestock (including livestock as defined in sec. 602 of the Emergency Livestock Feed Assistance Act of 1988 [7 U.S.C. 1471] and insects). Automatic on-board recording device means an electric, electronic, electromechanical, or mechanical device capable of recording driver's duty status information accurately and automatically as required by 395.15. The device must be integrally synchronized with specific operations of the commercial motor vehicle in which it is installed. At a minimum, the device must record engine use, road speed, miles driven, the date, and time of day. 49 C.F.R. 395.11 - Supporting documents for drivers using EOBRs. <Text of section added by 75 FR 17245, effective June 4, 2010.> <For compliance date(s) of amendment(s) to section, see 75 FR 17208.> (a) Motor carriers maintaining date, time and location data produced by a 395.16 compliant EOBR need only maintain additional supporting documents (e.g., driver payroll records, fuel receipts) that provide the ability to verify on-duty not driving activities and off-duty status according to the requirements of 395.8(k). 39

(b) This section does not apply to motor carriers and owner-operators that have been issued a remedial directive to install, use, and maintain EOBRs. 49 C.F.R. 395.16 - Electronic on-board recording devices. <Text of section added by 75 FR 17245, effective June 4, 2010.> (a) Applicability and authority to use. This section applies to electronic on-board recording devices (EOBRs) used to record the driver's hours of service as specified by part 395. Motor carriers subject to a remedial directive to install, use and maintain EOBRs, issued in accordance with 49 CFR part 385, subpart J, must comply with this section. (1) A motor carrier may require a driver to use an EOBR to record the driver's hours of service in lieu of complying with the requirements of 395.8 of this part. For commercial motor vehicles manufactured after June 4, 2012, any electronic device installed in a CMV by a manufacturer or motor carrier to record hours of service must meet the requirements of this section. (2) Every driver required by a motor carrier to use an EOBR shall use such device to record the driver's hours of service. (b) Information to be recorded. An EOBR must record the following information: (1) Name of driver and any co-driver(s), and corresponding driver identification information (such as a user ID and password). However, the name of the driver and any co-driver is not required to be transmitted as part of the downloaded file during a roadside inspection. (2) Duty status. (3) Date and time. (4) Location of CMV. (5) Distance traveled. (6) Name and USDOT Number of motor carrier. (7) 24 hour period starting time (e.g., midnight, 9 a.m., noon, 3 p.m.). (8) The multiday basis (7 or 8 days) used by the motor carrier to compute cumulative duty hours and driving time. (9) Hours in each duty status for the 24 hour period, and total hours. (10) Truck or tractor and trailer number. (11) Shipping document number(s), or name of shipper and commodity. 40

(c) Duty status categories. An EOBR must use the following duty statuses: (1) Off duty or OFF. (2) Sleeper berth or SB, to be used only if sleeper berth is used. (3) Driving or D. (4) On-duty not driving or ON. (d) Duty status defaults. (1) An EOBR must automatically record driving time. If the CMV is being used as a personal conveyance, the driver must affirmatively enter an annotation before the CMV begins to move. (2) When the CMV is stationary for 5 minutes or more, the EOBR must default to on-duty not driving, and the driver must enter the proper duty status. (3) An EOBR must record the results of power-on self-tests and diagnostic error codes. (e) Date and time. (1) The date and time must be recorded on the EOBR output record as specified under paragraph (i) of this section at each change of duty status, and at intervals of no greater than 60 minutes when the CMV is in motion. The date and time must be displayed on the EOBR's visual output device. (2) The date and time must be obtained, transmitted, and recorded in such a way that it cannot be altered by a motor carrier, driver, or third party. (3) The driver's duty status record must be prepared, maintained, and submitted using the time standard in effect at the driver's home terminal, for a 24 hour period beginning with the time specified by the motor carrier for that driver's home terminal. (4) The time must be coordinated to UTC and the absolute deviation shall not exceed 10 minutes at any time. (f) Location. (1) Information used to determine the location of the CMV must be derived from a source not subject to alteration by the motor carrier or driver. (2) The location description for the duty status change, and for intervening intervals while the CMV is in motion, must be sufficiently precise to enable Federal, State, and local enforcement personnel to quickly determine the vehicle's geographic location on a standard map or road atlas. The term sufficiently precise, for purposes of this paragraph means the nearest city, town or village. 41

(3) When the CMV is in motion, location and time must be recorded at intervals no greater than 60 minutes. This recorded information must be capable of being made available in an output file format as specified in Appendix A to this part, but does not need to be displayed on the EOBR's visual output device. (4) For each change of duty status (e.g., the place and time of reporting for work, starting to drive, on-duty not driving, and where released from work), the name of the nearest city, town, or village, with State abbreviation, must be recorded. (5) The EOBR must record location names using codes derived from satellite or terrestrial sources, or a combination of these. The location codes must correspond, at a minimum, to ANSI INCITS 446 2008, American National Standard for Information Technology--Identifying Attributes for Named Physical and Cultural Geographic Features (Except Roads and Highways) of the United States, Its Territories, Outlying Areas, and Freely Associated Areas and the Waters of the Same to the Limit of the Twelve Mile Statutory Zone (10/28/2008), where GNIS Feature Class = Populated Place (incorporated by reference, see 395.18). (For further information, see also the Geographic Names Information System (GNIS) at http://geonames.usgs.gov/domestic/index.html). (g) Distance traveled. (1) Distance traveled must use units of miles or kilometers driving during each on-duty driving period and total for each 24 hour period for each driver operating the CMV. (2) If the EOBR records units of distance in kilometers, it must provide a means to display the equivalent distance in miles. (3) Distance traveled information obtained from a source internal to the CMV must be accurate to the distance traveled as measured by the CMV's odometer. (h) Review of information by driver. (1) The EOBR must allow for the driver's review of each day's record before the driver submits the record to the motor carrier. (2) The driver must review the information contained in the EOBR record and affirmatively note the review before submitting the record to the motor carrier. (3) The driver may annotate only non-driving-status periods and the use of a CMV as a personal conveyance as described in paragraph (d)(1) of this section. The driver must electronically confirm his or her intention to make any annotations. The annotation must not overwrite the original record. (4) If the driver makes a written entry on a hardcopy output of an EOBR relating to his or her duty status, the entries must be legible and in the driver's own handwriting. (i) Information reporting requirements. 42

(1) An EOBR must make it possible for authorized Federal, State, or local officials to immediately check the status of a driver's hours of service. (2) An EOBR must produce, upon demand, a driver's hours-of-service record in either electronic or printed form. It must also produce a digital file in the format described in Appendix A to this part. The record must show the time and sequence of duty status changes including the driver's starting time at the beginning of each day. As an alternative, the EOBR must be able to provide a driver's hours-of-service record as described in paragraph (i)(6) of this section. (3) This information may be used in conjunction with handwritten or printed records of duty status for the previous 7 days. (4) Hours-of-service information must be made accessible to authorized Federal, State, or local safety assurance officials for their review without requiring the official to enter in or upon the CMV. The output record must conform to the file format specified in Appendix A to this part. (5) The driver must have in his or her possession records of duty status for the previous 7 consecutive days available for inspection while on duty. These records must consist of information stored in and retrievable from the EOBR, handwritten records, records available from motor carriers' support systems, other printed records, or any combination of these. Electronic records must be capable of one-way transfer through wired and wireless methods to portable computers used by roadside safety assurance officials and must provide files in the format specified in Appendix A to this part. Wired communication information interchange methods must comply with the Universal Serial Bus Specification (Revision 2.0) incorporated by reference, see 395.18) and additional specifications in Appendix A, paragraph 2.2 to this part. Wireless communication information interchange methods must comply with the requirements of the 802.11g 2003 standard as defined in the 802.11 2007 base standard IEEE Standard for Information Technology-- Telecommunications and information exchange between systems--local and metropolitan area networks--specific requirements: Part 11: Wireless LAN Medium Access Control (MAC) and Physical Layer (PHY) Specifications (IEEE Std. 802.11 2007) (incorporated by reference, see 395.18), or CMRS. (6) Support systems used in conjunction with EOBRs at a driver's home terminal or the motor carrier's principal place of business must be capable of providing authorized Federal, State, or local officials with summaries of an individual driver's hours of service records, including the information specified in 395.8(d). The support systems must also provide information concerning on-board system sensor failures and identification of amended and edited data. Support systems must provide a file in the format specified in Appendix A to this part. The system must also be able to produce a copy of files on portable storage media (CD RW, USB 2.0 drive) upon request of authorized safety assurance officials. The support system may be maintained by a third-party service provider on behalf of the motor carrier. (j) Driver identification. For the driver to log into the EOBR, the EOBR must require the driver to enter information (such as a user ID and password) that identifies the driver or to provide other information (such as smart cards, biometrics) that identifies the driver. (k) Availability of records of duty status. 43

(1) An EOBR must be capable of producing duty status records for the current day and the previous 7 days from either the information stored in and retrievable from the EOBR or motor carrier support system records, or any combination of these. (2) If an EOBR fails, the driver must do the following: (i) Note the failure of the EOBR and inform the motor carrier within 2 days. (ii) Reconstruct the record of duty status for the current day and the previous 7 days, less any days for which the driver has records. (iii) Continue to prepare a handwritten record of all subsequent duty status until the device is again operational. (iv) A brief (less than 5 minute) loss of connectivity between the EOBR and a location-tracking system or the motor carriers' support system is not considered an EOBR failure for the purpose of this section. (l) On-board information. Each commercial motor vehicle must have onboard the commercial motor vehicle an information packet containing the following items: (1) An instruction sheet describing how data may be stored and retrieved from the EOBR. (2) A supply of blank driver's records of duty status graph-grids sufficient to record the driver's duty status and other related information for the duration of the current trip. (m) Submission of driver's record of duty status. (1) The driver must submit electronically, to the employing motor carrier, each record of the driver's duty status. (2) For motor carriers not subject to the remedies provisions of part 385 subpart J of this chapter, each record must be submitted within 13 days of its completion. (3) For motor carriers subject to the remedies provisions of part 385 subpart J of this chapter, each record must be submitted within 3 days of its completion. (4) The driver must review and verify that all entries are accurate prior to submission to the employing motor carrier. (5) The submission of the record of duty status certifies that all entries made by the driver are true and correct. (n) EOBR display requirements. An EOBR must have the capability of displaying all of the following information: (1) The driver's name and EOBR login ID number on all EOBR records associated with that driver, including records in which the driver serves as a co-driver. 44

(2) The driver's total hours of driving during each driving period and the current duty day. (3) The total hours on duty for the current duty day. (4) Total miles or kilometers of driving during each driving period and the current duty day. (5) Total hours on duty and driving time for the prior 7 consecutive-day period, including the current duty day. (6) Total hours on duty and driving time for the prior 8 consecutive-day period, including the current duty day. (7) The sequence of duty status for each day, and the time of day and location for each change of duty status, for each driver using the device. (8) EOBR serial number or other identification, and identification number(s) of vehicle(s) operated that day. (9) Remarks, including fueling, waypoints, loading and unloading times, unusual situations, or violations. (10) Driver's override of an automated duty status change to driving if using the vehicle for personal conveyance or for yard movement. (11) The EOBR may record other data as the motor carrier deems appropriate, including the date and time of crossing a State line for purposes of fuel-tax reporting. (o) Performance of recorders. A motor carrier that uses an EOBR for recording a driver's records of duty status instead of the handwritten record must ensure the EOBR meets the following requirements: (1) The EOBR must permit the driver to enter information into the EOBR only when the commercial motor vehicle is at rest. (2) The EOBR and associated support systems must not permit alteration or erasure of the original information collected concerning the driver's hours of service, or alteration of the source data streams used to provide that information. (3) The EOBR must be able to perform a power-on self-test, as well as a self-test at any point upon request of an authorized safety assurance official. The EOBR must provide an audible and visible signal as to its functional status. It must record the outcome of the self-test and its functional status as a diagnostic event record in conformance with Appendix A to this part. (4) The EOBR must provide an audible and visible signal to the driver at least 30 minutes in advance of reaching the driving time limit and the on-duty limit for the 24 hour period. 45

(5) The EOBR must be able to track total weekly on-duty and driving hours over a 7- or 8 day consecutive period. The EOBR must be able to warn a driver at least 30 minutes in advance of reaching the weekly duty-/driving-hour limitation. (6) The EOBR must warn the driver via an audible and visible signal that the device has ceased to function. Ceasing to function for the purpose of this paragraph does not include brief losses of communications signals during such time as, but not limited to, when the vehicle is traveling through a tunnel. (7) The EOBR must record a code corresponding to the reason it has ceased to function and the date and time of that event. (8) The audible signal must be capable of being heard and discerned by the driver when seated in the normal driving position, whether the CMV is in motion or parked with the engine operating. The visual signal must be visible to the driver when the driver is seated in the normal driving position. (9) The EOBR must be capable of recording separately each driver's duty status when there is a multiple-driver operation. (10) The EOBR device/system must identify sensor failures and edited and annotated data when downloaded or reproduced in printed form. (11) The EOBR device/system must identify annotations made to all records, the date and time the annotations were made, and the identity of the person making them. (12) If a driver or any other person annotates a record in an EOBR or an EOBR support system, the annotation must not overwrite the original contents of the record. (p) Motor Carrier Requirements. (1) The motor carrier must not alter or erase, or permit or require alteration or erasure of, the original information collected concerning the driver's hours of service, the source data streams used to provide that information, or information contained in its EOBR support systems that use the original information and source data streams. (2) The motor carrier must ensure the EOBR is calibrated, maintained, and recalibrated in accordance with the manufacturer's specifications; the motor carrier must retain records of these activities. (3) The motor carrier's drivers and other personnel reviewing and using EOBRs and the information derived from them must be adequately trained regarding the proper operation of the device. (4) The motor carrier must maintain a second copy (back-up copy) of the electronic hours-of-service files, by month, on a physical device different from that on which the original data are stored. (5) The motor carrier must review the EOBR records of its drivers for compliance with part 395. 46

(6) If the motor carrier receives or discovers information concerning the failure of an EOBR, the carrier must document the failure in the hours-of-service record for that driver. (q) Manufacturer's self-certification. (1) The EOBR and EOBR support systems must be certified by the manufacturer as evidence that they have been sufficiently tested to meet the requirements of 395.16 and Appendix A to this part under the conditions in which they would be used. (2) The exterior faceplate of the EOBR must be marked by the manufacturer with the text USDOT EOBR as evidence that the device has been tested and certified as meeting the performance requirements of 395.16 and Appendix A to this part. 47

Handling and Defending the Catastrophic Loss Keith Harris, Esq. Braff, Harris & Sukoneck Claims involving serious injury present unique challenges. Emotion and human sympathy drive outcomes even in cases where liability is uncertain and for that reason an effective plan must be crafted to manage and defend the claims. Incrementally, even the most serious claims can be addressed and mitigated. In circumstances of a large loss, if a claim cannot be entirely defeated it can be managed and contained by scrutinizing every issue independently and exhaustively. Claimants almost universally prefer to dwell on the "big picture". The most effective response is concentration on the details. Frequently, the cornerstone of successful defense of a catastrophic claim is laid prior to the claim and at the time of loss, well in advance of litigation or claims. Preparation for the Catastrophic Loss Certain operations involve inherent risks which have the potential to create losses of significant magnitude. Transportation operations have that potential. Companies engaged in shipping and transport can mitigate potentially catastrophic losses in advance of such claims arising. Certain issues are self evident: -Hiring; -Training; -Documents; -Record retention; -Emphasizing safety in all areas; -DOT compliance; -Progressive discipline and counseling; -Good corporate citizenship; Certain less obvious pre-litigation techniques: -Employee training regarding conduct at the time of the loss; -Preparation of accident related forms created by counsel and to which privilege may attach; - Local counsel in areas of operation for presence at scene; -Lead/coordinating defense counsel responsible for handling of catastrophic claims; -Pre-selection of corporate designee as witness and training for that role; -Major accident response team; The Catastrophic Loss Occurs Once a loss occurs, those individuals acting as part of a major accident response team should take steps to capture events accurately. Such investigation and related activities should properly be directed by counsel so that privilege attaches to the work. Proposed action immediately post accident would include: - Immediately retain and dispatch local counsel to scene; -Hire investigator and photographer/videographer for scene work; 48

-Retain accident reconstruction expert to attend scene and investigate; -Identify and safeguard all relevant documents, including licensing, training, and other personnel records, logs, equipment, maintenance and repair records, onboard electronic data, route information, cargo information, etc. ---Research roadway accident history; -Contact and communicate with responding police and other agencies; -Manage and control dealings between outside agencies and company representatives; Following accident of a catastrophic nature, tension often develops between the transportation company and the operator involved in the accident. For that reason, a sworn and recorded statement by the operator taken by counsel can be valuable. Such an exercise when events are related helps prevent loss of memory or altered recollection or information. Preserving the memory of employees who may have trained, supervised, or worked with the involved operator is also appropriate. In jurisdiction where the law allows opposing counsel to communicate with employees who are not part of the "litigation control group", this is even more important. Likewise, such employees should be counseled regarding contact with opposing counsel. As potential issues become clear, expert attention should be considered, even in advance of a claim. Hiring the best qualified and most effective experts assists in the defense of a claim. Equally valuable is casting a wide net and "tainting" experts who might otherwise be hired by a plaintiff. In cases with a potentially large value, the cost of putting numerous experts on retainer, even if only to ensure they cannot be hired by a claimant, is worthy of consideration. Notice intended to prevent potential spoliation is appropriate post accident. Especially in matters involving passenger cars, once a vehicle is deemed a loss it is frequently disposed of quickly. For purposes of appropriate investigation this should be avoided. Consideration should be giving to determine if adverse vehicles can be purchased. Black box data should be downloaded post accident. Such a download should only be performed if there is assurance downloading does not corrupt data or create spoliation issues. Immediate consideration should be given to handling of employees involved in a major accident or loss. Change in position, pay scale, or even employment can create issues which need to be evaluated from various perspectives. Altruistic claims handling has received attention as a possible approach. This humane tactic can have pitfalls. The Catastrophic Loss in Litigation Once the matter is in suit, it is critical that the case be prepared for trial and the plaintiff understand that the defense is prepared to have a jury decide a reasonable value for the case if the plaintiff will negotiate and act in good faith. Removal to federal court should always be considered. Any opportunity to take the choice of venue from the plaintiff should be exploited. 49

Pre-suit hiring experts to prevent adverse counsel from doing so is effective. Once suit is filed, the best experts available are required. In cases with large value, effective and qualified experts save more, if they are talented, then they cost. Depositions should be videotaped. Prior claims and prior discovery served on behalf of the defendant should be reviewed to ensure consistency. Prior deposition testimony of witness and defense experts also have to be consistent with positions taken in other matters. Life expectancy experts, not actuarial tables, should be considered. Addressing the issue of the claim of the defendant is seeking to deny the plaintiff the "best" medical care available. Every aspect of every claim must be investigated. Resolution Consideration of motions for summary judgment. Advantages and disadvantages. Mediation and ADR Settlement agreements should include non-liability provisions, confidentiality and other protective terms. Offers should be preconditioned on acceptance of such terms. Trial as leverage for settlement. Keith Harris, Esq. Braff, Harris & Sukoneck 570 West Mt. Pleasant Avenue Livingston, NJ 07039 P: (973) 994-6677 E: kharris@bhs-law.com Brian C. Harris Braff, Harris & Sukoneck 570 West Mt. Pleasant Avenue Livingston, NJ 07039 P: (973) 994-6677 E: bcharris@bhs-law.com 50

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Make-Up, Burgers, Now Texting -- Oh My!!!! A Renewed Attention to Inattentive Driving Presented by: Chris Nygren Milodragovich, Dale, Steinbrenner & Nygren, P.C. Prepared by: Bob D. James Best and Sharp The issue of driver distractions is certainly nothing new. As long as there have been vehicles on the road there have existed distractions which, often by design, will cause a driver to divert his/her attention from the roadway. For decades debates have been waged over the dangers of driver distractions, from those distractions outside of the vehicle, such as roadside advertising, to the multiple distractions found within the vehicle itself, such has changing radio stations, tobacco use, eating while driving, and applying make-up. However, the rapid increase in the development and use of hand held electronic devices, has caused an equally rapid increase in the demand for regulations to control, or all together eliminate, the use of these devices by drivers In November of 2009, U.S. Secretary of Transportation, Ray LaHood, stated his position on the matter as follows: My position on this epidemic is clear: We must put an end to distracted driving. It is costing us lives and inflicting injuries.it s wrong and I want to see it reduced. Effective December 30, 2009, President Barack Obama signed an executive order (Executive Order No. 13513) directing all federal employees not to engage in text messaging while driving government-owned vehicles or with government-owned equipment. Specifically the executive order states Text messaging causes drivers to take their eyes off the road and at least one hand off the wheel, endangering both [the driver of the government vehicle] and others On January 20, 2010, the United States Department of Transportation announced that it was, effective immediately, prohibiting truck and bus drivers from sending text messages on hand-held devices while operating commercial vehicles. The prohibition applies to drivers of interstate trucks and buses weighing over 10,000 pounds. Those found to be texting while driving commercial vehicles will be subject to civil or criminal penalties up to $2,750.00. In March of 2010 the Department of Transportation unveiled a proposal that would elevate texting while driving a commercial truck or bus to its most serious category of offenses. If the proposal is approved, three violations in a three-year period would result in a 120-day suspension. This is the same penalty currently imposed on commercial truck drivers who have been cited for violations of state or federal laws in connection with three fatality wrecks during the same time period. In the event the state and federal government can t get your attention, perhaps you will tune an ear to Ms. Oprah Winfrey. This paper is being penned on April 30, 2010, which coincides with the first ever No Phone Zone day. A day of national recognition, created by Oprah Winfrey, to promote awareness of the dangers associated with driver distractions. Also supporting Oprah s No Phone Zone Day are: the U.S. Department of Transportation (DOT), National Highway Traffic Safety Administration (NHTSA), The Governors Highway Safety Association (GHSA), National 75

Organizations for Youth Safety (NOYS), FocusDriven, SADD (Students Against Destructive Decisions) and RADD the Entertainment Industry s Voice for Road Safety. Currently, there are twenty-four (24) states, plus the District of Columbia and Guam, which have passed laws banning all drivers from text messaging while driving. An additional eight (8) states have banned text messaging by novice drivers. However, cell phone usage has not received the same amount of legislative criticism. There is currently no state that has banned all cell phone use by all drivers (hand held and hands free combined) Twenty-four (24) states and the District of Columbia have banned all cell use by novice drivers, but only six (6) states, D.C. and the Virgin Islands, prohibit all handheld cell phone use while driving. While some states have had bans in place for many years (Arkansas 19 years), a large number of the banning states have only recently enacted legislation. Indeed, six (6) of the state laws banning texting are so new that they will not go into effect until the summer of 2010. So why the sudden push for legislation? Some would attribute this surge of attention to a new federal administration, headed by a new President, who, based on his own awareness, or perhaps persuaded by key political supports, like Ms. Winfrey, has chosen to elevate driver distraction to a level of top priority. Others, would point to an increase in scientific data which has placed a spot light on the real dangers associated with the increase in usage of hand held devices. According to a study by the National Highway Traffic Safety Administration (NHSTA), in 2008 there were 5,870 fatality accidents in the United States and 515,000 injury related accidents. In 16% of the fatality accidents some form of driver distraction was indentified on the crash report. In 22% of the injury accidents some form of driver distraction was identified on the crash report. In 2006 a study, generally known as the 100 car study, was released and has become the seminal naturalist study on this topic. For one year, with the assistance of multiple on board cameras, computers, and sensors, the 100 car study monitored 241 drivers for more than 2,000,000 combined miles. Through this study data was gathered on more than 9,000 events (69 crashes, 751 near crashes, and 8,295 incidents in which crash avoidance responses were necessary). The study revealed that in more than 80 percent of all recorded crashes and in more than 60 percent of all near crashes, the driver s attention had been distracted, to something other than the roadway, during the six second period leading up to the event. When discussing driver distractions in the context of commercial vehicles, the seminal study is the 2009 study Driver Distraction in Commercial Vehicle Operations, R.L., et al., Federal Motor Carrier Safety Administration, USDOT, Report No. FMCSA-RRR-09-042 (the CVO study). The CVO study utilized information obtained from nearly 200 commercial drivers who operated their trucks for nearly three million miles. The study accumulated and analyzed 60 thousand hours of data and developed a data base that included 4,452 safety critical events (21 crashes, 197 near crashes, 3,019 crash relevant conflicts, and 1,215 unintentional lane deviations). The results of the study indicate that in 81.5 percent of the safety critical events driver distraction was a potential contributing factor because the distraction occurred within the six seconds leading up to the event. Of particular interest were the findings and discussion regarding what types of activities have the greatest likelihood to increase the chance for a safety critical event. The study found that activities such as text messaging, use of a dispatching device, writing, using a calculator, reaching for an object, dialing a cell phone, or reading, had the greatest potential for increasing the chances of a safety critical 76

event. Surprisingly, activities such as talking or listening on a handheld cell phone, eating, and use of chewing tobacco, did not have any significant increase in the chance for a safety critical event. One finding generated by the CVO study may prove to be the single most significant piece of data to support the recent increase in state and federal legislation to prevent text messaging while driving. The CVO research concluded that drivers who send and receive text messages take their eyes off the road for an average of 4.6 seconds out of every 6 seconds while texting. At 55 miles per hour, this means the driver is traveling the length of a football field, including the end zones, without looking at the roadway. Other highly distracting tasks, include: reading a book or newspaper (eyes off roadway for 4.4 seconds); driver interacting with technology, such as calculator (eyes off roadway 4.4 seconds) or dispatch device (4.1 seconds); writing (eyes off roadway for 4.2 seconds); looking at a map (eyes off roadway for 3.9 seconds); cell phone dialing (eyes off roadway for 3.0 seconds); and reaching of an object (eyes off the roadway for 2.9 seconds). The researchers conducting the CVO study provided the transportation industry with a frame work from which organizational policy and procedure might be crafted. The following recommendations were included in the study: 1. Fleet Safety Managers should educate their drivers on the importance of being attentive and not engaging in distracting tasks or behaviors. 2. Fleet Safety Managers should develop policies to eliminate or minimize the use of in-vehicle devices while driving and educate drivers on the dangers of these devices. 3. Drivers should not be allowed to text, manually dial cell phones, or read, write, look at maps or use dispatching devices while driving. 4. Drivers should NOT be prohibited from talking on cell phones or CB radios. While the above recommendations should not be seen as creating an industry standard, the breach of which could constitute legal liability, the transportation industry must be mindful of these recommendations as they are very likely to become the bench mark from which public opinion will judge industry performance. Chris T. Nygren Milodragovich, Dale, Steinbrenner & Nygren, P.C. PO Box 4947 620 High Park Way Missoula, MT 59806-4947 P: (406) 728-1455 E: nygren@bigskylawyers.com Bob James Best & Sharp Williams Center Tower 1 One West Third Street, Suite 900 Tulsa, OK 74103 P: (918) 582-1234 E: bjames@bestsharp.com 77

John Boy vs. Learned Hand: Sizing Up Your Case Based on the Plaintiff s Lawyer Art Spratlin Butler, Snow, O'Mara, Stevens & Cannada, PLLC I. Introduction In our firm, we sometimes send around internal e-mails among our partners with a subject line entitled John Boy Method of Research. We know this means one of our lawyers is either too busy (or too lazy!) to hit the books or to get on Westlaw to do his own research. The e-mail usually begins apologetically with [P]ardon my John Boy method of research, but has anyone recently looked into the Mississippi law on.... In response, one of my partners might reply, [I] m no Learned Hand, 1 but I think the law is... Oftentimes, Plaintiffs lawyers in a trucking case take this same John Boy approach, and treat a serious trucking case like a simple car wreck. On the other hand, there are some Learned Hands out there - excellent Plaintiffs attorneys who know the Federal Motor Carrier Safety Regulations (FMCSR) like the back of their hand - who can make life very difficult for defense counsel (and particularly for unsuspecting safety directors). The Learned Hands are organized, and have the support (and form documents) of their local Trial Lawyers Associations, and more recently, national associations like The Association of Plaintiff Interstate Trucking Lawyers of America ( APITLA ). 2 If you have not looked at the APITLA website, you would be well served to do so. These Learned Hands of the Plaintiffs bar make litigation very expensive for the insurance company and/or the trucking company. Regardless of the facts, these lawyers will assume and will handle each trucking case as if it involves: fatigue and violations of the FMCSR s hours of service regulations; destruction of evidence by the defense; false log books and multiple log books; pressure put on the driver by the trucking company to meet an unreasonable delivery schedule; false driver qualification files and false employment history; a driver with sleep apnea (or other sleep disorder); and punitive damages. Responding to and defending these claims requires an enormous amount of time from defense counsel, claim handlers, and from the trucking company. In order to prevent misunderstandings, soured relationships, and billing disputes down the road, defense counsel and their insurance and trucking company clients need to learn how to identify and distinguish the John Boy s from the Learned Hand s early on, in order to have a clear understanding 1 Learned Hand (January 27, 1872 August 18, 1961) was a famed American Court of Appeals judge for the Second Circuit and a judicial philosopher. He possessed a gift for the English language, and his writings are admired as legal literature. His decisions set lasting standards for craftsmanship and clarity. Hand is generally considered to be one of the most influential American judges never to have served on the Supreme Court of the United States. Han has been quoted more often than any other lower court judge by legal scholars and by the U.S. Supreme Court. 2 APITLA, the Association of Plaintiff Interstate Trucking Lawyers of America, uses the slogan Putting the Brakes on Unsafe Trucking Companies. APITLA is a national association of committed lawyers who have joined together to help eliminate unsafe and illegal interstate trucking practices. Through our combined efforts in learning, litigation and legislation, we are working today to make America s highways a safer place tomorrow for our families, our clients, and all Americans. www.apitlamerica.com 78

of the what is to come in the course of the litigation particularly as to the time commitment and expense involved. II. Your First Clue the Complaint You can usually get a good idea of the type of Plaintiff lawyer you are dealing with based on the Complaint. We have all seen the simple one-page trucking Complaint, but we have also had to deal with the dreaded 50-paragraph, detailed Complaint, citing the FMCSR s and case law. The simple, John Boy Complaint usually signals a Plaintiff s lawyer that does not specialize in Trucking/Transportation cases, and may do very little personal injury litigation at all. Many solo practitioners are also doing business, real estate, family/domestic, civil rights and other types of law, practicing in both the circuit and chancery courts, and simply do not keep up with the latest theories, regulations and technology applicable in a Trucking case. In these cases you can expect to engage in little discovery, and to have an early mediation, with a relatively fair and reasonable settlement. Consequently, you will incur minimal legal fees and expenses, and your client will heap praise upon you and tell everyone in their office that you are a legal genius. In contrast, the Learned Hand Complaint takes the first shot across the bow and should be a wake-up call to defense counsel that this case will be different. Counsel should immediately discuss this with the claim representative and the trucking company, and prepare them for what is about to happen. It will not be pretty, and it will not be cheap. These Learned Hands of the Trucking litigation world are diligent, smart, focused, and are full of statistics. They may only take on the highest exposure trucking cases, and may limit the number of cases they take in order to assure they have time to apply daily pressure on each case. They are students of the FMCSR s and your state s Commercial Driver s manual, and anything else that can be used to cross-examine your driver and safety director, and/or to seek punitive damages. You can expect these cases to involve scorched earth discovery, brutal depositions of the safety director and your driver, voluminous motions to produce company records and historical data, and a trial that is no longer focused on the accident in question, but on whether you are a bad company worthy of a punitive damage award. Consequently, your client will incur exorbitant fees and expenses in a short time period, will barely speak to you, and will tell everyone in their office what an awful attorney you are. III. Fact Investigation and Discovery The John Boys of the Trucking world will typically send you a form set of discovery, usually around 15 Interrogatories and 10-12 Requests for Production the same exact set of discovery they sent out two years ago on a car wreck case. They will not ask for your driver s qualification file, employment history or medical files, log books, or your company s accident files or other internal records. They will probably only ask to depose your driver, and not bother to depose a company representative or your safety director. They do not know what an ECM is, thus they do not inquire, and they are unfamiliar with Qualcomm and other modern tracking devices. If you have some damaging information, John Boy will likely never ask for it, or stumble across it, unless you have to produce it voluntarily. The case will be tried like a simple car wreck, and the FMCSR s will never come up. The Learned Hands start out with a seven page spoliation set-up letter, otherwise known as an evidence preservation letter, warning the trucking company of the grave dangers ahead if they do 79

not immediately preserve and retain a voluminous laundry list of documents and things - most of which is in no way related to the subject vehicle, the driver, or the trip. (See Exhibit A). These letters are typically overly broad and unduly burdensome, and seek information that is in no way related to the accident at issue. However, it puts the burden on the trucking company to at least gather and hold these materials in case a judge does later rule them relevant and subject to production. Otherwise, you will be subject to a spoliation claim based on Plaintiff s set-up letter. This is particularly frustrating if the documents would have been insignificant and/or even supported the defense. Next, the Learned Hands will hit you with the maximum of 30 Interrogatories, each with a multitude of detailed sub-parts, based on a variety of technicalities under the FMCSR s. They will also typically serve 75 or so Requests for Production, and a few hundred Requests for Admission, again with detailed references to the FMCSR s and case law. (See Exhibit B). Needless to say, responding to (and objecting to) this kind of discovery is going to be very time consuming to defense counsel and to trucking company personnel, and consequently, very expensive. Insurance companies not used to this kind of discovery will undoubtedly balk at your bills when they see how long you spent responding to discovery, and your trucking company representatives will tire quickly of your repeated calls and requests for assistance in responding. This type of discovery usually results in some expensive motions to compel or for protective orders, and related briefing, and a couple of hearings. Further, many of the Learned Hands have their own in-house investigators who can mysteriously come up with more background material on your driver than you can imagine old speeding (or other) tickets from many years past in the most remote of jurisdictions, missed child support payments, etc. - and sworn statements from persons who allegedly witnessed the accident that you were not aware of (and do not believe), among other things. (See Exhibit C). Much of this type of information is irrelevant to the accident, but Plaintiffs will fight to get it in at trial (and hold it over your head at mediation), and in some venues will be successful. Depositions with these lawyers can be a nightmare. They typically know the FMCSR s better than your driver or your safety director. They will also use your local Commercial Driver s License manual and the trucking company s driving manual and/or driver training manual to fill in any gaps in the FMCSR s, and to cause more confusion on the record. Even a good driver and a good safety director can come away looking foolish after one of these depositions. (See Exhibit D, sample Plaintiff s outline of a corporate safety director). These Plaintiffs will engage in expensive motion practice to establish negligence per se for violation of the FMCSR s, and then use this type of evidence to rebut your motion for summary judgment as to punitive damages. The Learned Hands will all the while continue to press fatigue issues and negligent entrustment type claims. These are expensive battles to fight. While a driver may be over his hours, Plaintiff must still show causation, and the defense will expend many hours arguing that the fatigue theory is inadmissible. Although the majority rule favors the defense as to negligent entrustment claims (when vicarious liability is admitted), the Learned Hands will press this issue to the bitter end, in order to preserve their major theme of the case - that you are a bad company, you hire and retain bad drivers, and you both are guilty of prior bad acts - as opposed to determining who ran the stop light, and whether or not the Plaintiff was actually injured. 80

IV. Settlement Strategies John Boy is happy to get to a mediation after deposing your driver (maybe) and getting some basic responses to his car wreck type discovery. After letting you subpoena all his clients medical records and employment records, and letting you explain to the mediator how much the Plaintiff s medical claims and lost wage claims will be, John Boy is content to hang around the mediation and wait for an offer of three times the meds, plus lost wages, to settle and wrap things up (so long as you can handle any Medicare issues for him). Learned Hand sets out on a course to create a conflict of interest between the insured trucking company and the insurance company, by making a settlement demand just inside policy limits, requiring separate counsel to advise the insured and insurer on settlement. He will portray the driver as a bad actor and seek to create conflicts between the trucking company and driver. He will then push for an early mediation, where he brings a high tech power point emphasizing each FMCSR you have violated, including each specific brake on your truck that is out of specification, and each tire that has insufficient tread depth (even though these issues may have absolutely nothing to do with the accident itself), each log book violation, a fatigue theory of some sort, case law (often from other jurisdictions) to support his negligent entrustment claims, and a flow chart showing his foolproof method of getting to the jury on punitive damages. He then uses the opportunity to personally warn the trucking company representative how he better settle immediately or risk losing his entire business and livelihood to an excess verdict and punitive damages (and/or be hit with a personal judgment if a small company), while warning the insurance company representative that they will be liable for an excess verdict if they unreasonably refuse to pay the settlement demand just inside policy limits. V. Another Type to Beware - the Michael Vick Another type of Plaintiff s lawyer to watch out for, that is certainly going to cause problems and create huge and unnecessary fees and expenses, is the Michael Vick. In football, the busted play is sometimes the most effective. A quarterback like Michael Vick is the master of the busted play, so I refer to him in relation to a Plaintiff s lawyer who lives and dies by the busted play in litigation. This type of lawyer is a master of avoiding the issues on the table, and insists on taking the litigation down a series of unrelated rabbit trails in order to avoid the unfavorable facts. This lawyer will have you briefing all sorts of unrelated issues, will accuse you of unethical conduct and lying to the Court, and will engage in an ongoing email or letter writing barrage of side issues. Dealing with these lawyers is a tar baby, often leaving you with few options to extricate yourself from all the turmoil and the high-stakes drama. Unfortunately, dealing with the Michael Vicks can approach the expense and disruption of your client s daily routine much akin to dealing with the Learned Hands. VI. Conclusion Sometimes we get lulled into thinking that all trucking cases are alike for the most part. This is hardly the case these days. With the help of local Trial Lawyers Associations and groups like APITLA, even some of the John Boys can get ahold of discovery forms and seminar materials that can help elevate their game to the Learned Hand level. The massive paper discovery, detailed FMCSR-based depositions, focus on fatigue, negligent entrustment, and punitive damages, and the ever-present spoliation set-up can drive expenses through the roof, and ruin a good attorney-client relationship if the Learned Hand is not identified on the front end of the litigation. Defense counsel 81

and claim representatives are wise to recognize and assess these cases quickly, and to advise their trucking company clients of the prolonged battles (and corresponding expenses) ahead. Arthur D. Spratlin, Jr. Butler, Snow, O Mara, Stevens & Cannada, PLLC PO Box 6010 Ridgeland, MS 39158-6010 P: (601) 985-4568 E: art.spratlin@butlersnow.com 82

~ LLC o~ss. ALS I.SED IN TES..'AL UCED IN LOIANA JACKSON. Mississippi 39216 November 12, 2008 TEL-lHONE. (601 FA (601_ AILING ADDRESS: o ~~~D, L. --~!! Re: Our Client:. Dear SirlMad: Date of Loss: 03/27/08.~:.." l.l~~~ b.e~vised tht! am the lega repreentative of as a result ofsenous ìiijties.thafheí'~ived on Marh 27, 2008. On that date, the Plaitiff was travelignortøunc; öiï't~~5 wnêá-i1lë trådòitflèi owned by rai1on aiddrlveìí b~ ~ccidentreport..,. :~trckplaintifts vehicle. l'e Mississippi Highway Patrl was called to the scene and prepared an... As par of my investigation' of ths incident, I nee varous documents. As used below, the fol1owig ter shal have the. followig meags: "Collsion" or "Incident' sha.refer to the incident between Tranporttion. drven by and a vehicle drven by 2008 in Holmes County, Mississippi. '.' a trck owned b~ on March 27,.. "Item." As used herein, the word ''item'' refer to any and al documents, report, letters, treatises,....books, arcles, witness stements reuced to wrtig, witness sttements on tape recrdig, wrtings of any tye, photogrhs, videotapes, Compute files even if not reuced to wrtig, x -rays, medcal rep9rts, medical records, medca tes, meaements, drwigs, slides, plan, or other tangible '.: ~j matenalsóf any kid or nat.. " "'::'~'.~ :.:: -."'.~.".;...",:.'.' ; '- '. "...."..,..,...,..,...:,'.c"':':.',...c'.,.:..........:,.': '..'..,:.,"..',. :.",".,...;.::...,.,,::.)'V. '''otor VéhicIe" shal have the sare défition tht"mótor vehicle" has Ì1 the fedér mototêàrei; ~ãfétyi~~li~~ :::~"!._:.:.. '...:'..,......:..",...: ";~U';'\,.~. ;..'.:- Exhibit A 83

--, t. ITrarton N()vember 12, 2008 Page 2 l, ~ha refer to_rarton, the owner of. collsion. the sem-trtor trler atthe tie of the ''Employee'' shá refer to the drver of the lrrarttion sem-trtor trler. ''Trailer'' sha refer to the trler unt beg puied by the Employee at the tie of the incident "Truck" sha refer incident. to the sem-trtor trk beig drven by the Empioyee at the tie of the The document requests are often indexed to varous provisions of the Feder Motor Carer :Regulations to aid you in identifyg the appropriate documents. I would,lie copies of the fòllowig: 1. All documents reui in quag Employee as a commercial motor carer drver for Tennessee puruat to the Feder Motor Carer Safety Reguations, to include but not limtedtq; (FCSR Sec. 391.11)' A. Emplòyee's applicaon for emloyment with-- include the twelve items of information. FMCSR Sec. 391.21. B. Al resnses of Sta agencies to~ -, inquies concerg Employee's prior drvig recrd. FMCSR Sec. 391.23. C. All resnses of prevous employer to_ inquies concerg Employee;s pas emloyment. FMCSR Sec. 391.23. D. Copies of any and al anua reviews of Employee's drvig recrd. FMCSR Sec. 391.25. E. Employee's list of violatons of motor vehicle trc laws and ordices (Requied anuay). FMCSR Sec. 391.27. F. Employee's road tes (or equivalent). FMCSR Sec. 391.31. G. Employee's wrtt examon (or equivalent). FMCSR Sec. 391.35. H. Employee's physical examtion (long form). FMCSR Sec. 391.41, 43. i. Employee's commeral motor vehicle opertor's licee. FMCSR Sec. 391.11(b)(7). 84

.. raorton ". November 12, 2008 "., Page 3 2. 3. A complete copy of Emloyee's qucaon and peronnel fie. FMCSR Sec. 391.51. Copies of all Employee's rerd of duty statu (day logs) for the penod of March 27, 2007, thugh Marh 27,2008. FMCSR Sec 395.8. tie begig 4. Copies of all Employe's tie rerd (tie car) for the penod of 27,2007, thugh Marh 27,2008. FMCSR Sec. 395.8. tie begig March 5. If ther was a trk tahogrh on the Tnik drven by Employee at the tie of the incident that could record Employe's spee aid!ttstopst the tahogrphdisks'fortheperodoftie begimng March 27, 2oo7~ thugh Marh 27, 2008... 6. Copies of all Employee's pay rerd or ficial settement documents for the perod of time begig Marh 27, 2007, thugh Marh 27, 2008. 7. Copies of al_company diath re for Employee for the period begig Marh 27, 2007, thugh Mah 27, 2008.,of tie,.",.8. '.'9. Any aidal Item which refl~spath proceures. Copies' of shipping docuients (bill of lag, manests, etc.) for al frght cared by Employee for the peod of tie begig Marh 27,2007, thugh Marh 27,.2008.. 10. Copies of all company trp rert reui of Employee for the penod of tie begig March 27, 2007, thugh Mah 27, 2008. 11. Copies of documents relatg to vehicle fuel purhaed or secur by Employee for the date records of the incident on Marh 27,2008, and one month prior to the incident (to include drven tie and dates, etc. for oompleted by Employee which indicae routes taen mieage fuel ta purses)...,12.. 13. ',,14. Copies of au road and bridge toll repts, al sce weight receipts, and trer wash-out receipts associat with :gmployee's drvi for the penod of tie 2007, though Marh 27, 2008. begig Marh 27; Wn~en intions frm_o Employee perttg hi to log meal stops and other routie stops as "off duty~csr Sec. 395.8. Any correspondence or Itei relatg to Employee's abilty (ìncludig leter of to drive a motor vehicle safely, warg, rerd of discipli actions, etc.) FMCSRSec. 391.51 (b )(5). 85

, '-Tranorton, November 12, 2008 Page 4 15. Copy of the rerd of Emloye' s trk drvig trg to include cuculum coverg safe opertig pratices, i.e., vi seah, sp mangement, space mangement, night opertions, ha pertion an emergency maneuver. FMCSR Sec. 391.51.,,16. A copy of ever Item asiated with or which touches upon, or which is par 0_ safety program for its trk drver th was in effect at the tie of the incident and for thee year preedg the Incident, includig documentaon of Employee's safety meetigs, subjects cover to include trg aids used e.g., videotaes, etc. as well as attendace record of Employee. 17. Copies of all Employee's incident and/or acident rerts reorted to_ any state entity, any feder entity, and, any offcer or employee of the Feder Highway Admtrtion. (fo include subject Incident and al previous incidents and/or accidents). FMCSR Sec. 394.9 i 8. Copies of all state, muncipal, and company incident and/or accident reprts or otherincideiit and/or accident rerds concerg al incidents in which Employee has been involved in to include the Incident and company al prvious acidents and/or incidents. Stae and muncipal statutes; recrd; FMCSR Sec. 390.30; FMCSR Sec, 391.51(b)(5). 19. Copies of all Ite relat to the trp durg which the Incident ocured and not otherwse described in ths document, includig, but not lited to, documents related to meals, 'lodgig, fuel, tols, and such other rert as wer mae to_ " " 20. Copies of al documents or Ite which reflect Employee's inection of for the penod of tie begig on Marh 27, 2007, thugh March 27, 2008. his Motor Vehicle, 21. Copies of all Ite related to any drvig tht employee did on the five days pnor to the Incident and on the dae of the Incident not othere described abve, inc1udg, but not madet~ lited to, documents related to mea, lodgig, fuel, tools, and such other report as were ': :22. Copies of al road inections for both Employee and Truck and Traer conducted by agents of the Feder Highway Admston, (Form MR-63, EmployeeVehicle Compliance Check). FMCSR Sec. 395-13; FMCSR Sec. 396.9,.. ".,.'. 23. Copies of al road inection rert for both Employee and the Truck and Traler conducted by state or muncipal law enorcent agencies. FMCSR Sec. 390.30; State and Muncipal statutes. 86

, ', November 12, 2008 " -rraorton Page 5,,'24. Copies of al Tnick and Traer inecon, reai and matence rerds for the dae of Incident and one yea pnor to the Incident Ths includes recrds coverig and requi sysatic inectig, reaig, and maitag of suject vehicles, as well as rerds to indicae the na and due dae of the the varous inection and maitece operons to be perormed. Al,al prour, form, check list, etc. used in imlementig the company's inection, repai and Jiaiteceprogr in use at the tie of 396.3 the Incident. FMCSR Sec; 25. Copies of Employee's day wrtten Tnick and Traler inpecon report for date of the Incident and thre month pror to the incident. (Completion of days work report). Ths includes company cerfication th aiy defects of deficiencies have bee corrected FMCSR Sec. 396.11., 26. If a leased Truck or Traler is involved a copy of leae agreement beteen_and lessor. '27. Al Item related to, or logs related to, 01: rertooncerg Employee's telephonic or rado and communcation with _ Jconcergthe detls of any trp taen by Employe frm the penod of March 27, 2008. ' the trp involve di ths lawsuit tie begig March 27,2007, though,, 28. All photogrhs of the scene of the Incident includg photogrhs of the Tnick, the Traler, the Plaiti, and any other photogrhs taen which in any way relate to ths action. ' '29. Any and al bills of reai or esates of reai on thetnick or Traer for daages caused by the Incident. 30. Any company rues, reguations, or policies which wer applicable to Employee's driving on the date of the Incident.,. 31. _saety maua and or coany rues for the yea 200-200. I wil be hapy to pay any cost asiat with copyig these documents. If you will not,,,'voluntaly provide these maa1 and Ite, sute will be fied to secur them. You are hereby speifca notied of our nee for these material and our request that., they be preserved. Any destrction ør other loss of these material wi be considered a the requested documents or items. Take spoliation of material evidence Do not destroy any of,,,'steps to safeguard the requeste documents and items._is advied that the incident in ". question resulted in serious andpei.anent injuries tð- 87

,.,.,,.,_raporton November 12, 2008, '",Page 6 I look forwar to your prompt rens. L cc: 88

,).. ~ f../ ln THE CIRCUIT COURT OF CLAIBORNE COUNTY, MISSISSIPPI PLAINTIFF vs. CML ACTION NO :. DEFENDANTS PLAINTIFF'S FIRST REOUEST FOR ADMISSION OF FACTS TO DEFENDANT. ~ - COMES NOW the Plaintiff pursuant to Mississippi, Rule of Civil Procedure and hereby requests the Defendant,., to admit the trth of the following facts within the time allowed by the' Mississippi Rule of' Civil Proced ure., ' (A) These discovery requests a.e continuing in character so as to require you to fie supplementary answers if before trial. you obtain additional or different information' (B) If aft~r conducting a reasonable investigation you cannot answer or, respond, you should so state and..nswer to the extent that you can, stating what information you do have, what information you cannot provide and stating the efforts to locate and obtain the unknown information. ' (CÕ)rFY. DEFINITIONS For the purposes of this Discovery and as used hereín, unless otherwise specified, the followi~g words, shall have, and be construed with reference to, the' following meanings and definitions:,reference to a natural person shall mean to (1) "Identify" when' used in state his or her full name and current or last known residence address, current employer, and current business address; when used with respect to a do,cument (as hereìnafter defined) "identify" ' means to state tle date, subject or substance, documents (e.g., letter, telegram, memorandum, author, all recipients, type of computer printout, sound reproduction, chart, etc.), its present location, and the identity of each of its current custodians, and shall include documents (a) with respect to which a privi~ege is, or may be, claimed and (b) d?ci ~ch have beendestroyed,.lost, misplaced or damaged.. ill'i:u, 1;.._ :!tjco'1 fie. MAY 3 ni001 b~~f,, Exhibit 8 89 Mrs~~ i;~ BV~D.C.

1 -. 8. Actmit or deny that the Federal Motor Carrier Safety Regulations apply to the operation of Defendant 9. Admit or deny tj:át the Federal Motor Carrier Safety Regulations apply to the operation of Defendant _ on the dáte of the incident made the basis of this lawsuit. 10. Admit or' deny that the Federal Motor Carrier Safety Regulations apply to the conduct of the driver of the commercial vehicle on the date of the incident made the basis of this lawsuit. 1 i. Admit or deny that the state in which the incident made the basis of this lawsuit occurred has adopted the Federal Motor Carrier Safety Regulations to govern the intrastate shipment of commerce. 12. Admit or deny that Federal Motor Carrier Safety Regulation 392.2 states that "eveiy commercial motor vehicle must be operated ih accordanc~ with the laws, ordinances, and regulaùons of the jurisdiction in which it is being operated." 13., Admit or deny thät you operate your commercial motor vehicle(s) in accordance with the laws, ordinances'- and reguations of thejurisqiction in which it is being operated. 14. Admit or deny that the driver involved in the incident made the basis employment with you' this lawsuit operated your commercial motor vehicle during, in accordance with the laws, ordinances, and regulations of the jurisdiction in which it was being operated.. 15., Admit or deny that Federal Motor Carrier Safety Regulation 390.3(e) states that commercial carriers and drivers are required tó be knowledgeable of and comply with the Federal Motor Carrier Safety Regulations. 16. Admit or deny that Defendant Federal Motor Ca-rrier Safety Regulations. is knowledgeable of the 17. Admit or deny that Defendant complies with the Federal. ' Motor Carrier Safety Regulations in the course of its business as a commercial carner. 18. Admit or deny that Defendant the Federal Motor Carrier Safety Regulations. is knowledgeable of 90

i 9. Admit or deny that Defendant complies with the Federal Motor Carier Safety Regulations in the course of his/her business 'as à. commercial vehicle driver.. : 20. Admit or deny that commercial carriers must instruct their drivers regarding compliance with the Federal Motor Carrier Safety Regulations. '2 i. Admit or deny that commercial carriers must require their drivers to comply with the Federal Motor Carrier Safety Regulations. 22. Admit or deny that you instruct your drivers regarding compliance with tl1e Federal Motor Carrier aafety Regulations. 23. Admit or deny that yqu require your drivers to comply with the Federal Motor Carrier Safety Regulations. 24. Actmit or deny that Federal Motor,Carrier Safety Regulation 390. i 1 states that "whenever. ',' a duty is prescribed for a driver or a, prohibition i.s im'posed upon th~ driver, it shall be the duty of the motor carrier to require observance of such duty or prohibition." 25. Admit or deny that whenever a duty is prescribed for a driver or a prohibition is imposed upon the driver, it shall be the duty of the motor carrier to require observance of such duty or prohibition. " 26. Admit or deny that whenever a duty is prescribe,d for your driver or a proa.ibttion is imposed upon your driver, it is your duty to require observance of such duty or, prohibition. 027. Admit or deny that the Federal Motor Carrier Safety Regulations. require that a motor carrier have adequate safety management controls in place. 28. Admit or deny that Federal Motor Carrier Safety Regulation 385.3 states that "safety management controls means the systems, policies programs,, practices, and procedures used by a motor carrier to ensure compliance with applicable safety and hazadous materials regulations, which ensure the safe movement of products and passengers through the transportation system, and to reduce the risk of highway accidents and hazardous materials incidents resultig in fatalities, injuries, and property damage." 29. Admit or deny that a commercial carrier must have proper safety management controls in place to ensure compliance with the applicable safety highway accidents resulting in fatalities, regulations in order to reduce the risk of 91

injuries, and property damage. 30. Admit or deny that the Federal Motor Carrier Safety Regulations require safety i:anagement controls in place which function'effectively to ensure compliance with applicable safety requirements to reduce the risk-associated with: a..commercial driver's license standard violations (Part 383), b. Inadequate levels of financial responsibi1tty (Part 387), c. The use of unqualified drivers (Part 391),,d. Improper use,and driving of motor vehicl~s (Part 392)" e..unsafe vehicles operating on the highways (Part 393), f. Failure to maintain accident registers and copies of accident reports (Part 390), go The use of fatigued drivers (Part 395), h. Inadequatè inspection, repair, and maintenance of vehicles (Part 396), i. 'Transportation of hazardous materials, driving and parking rule violations (Part 397). J. Violation of hazardous materials regulations' (Parts i 70 through i 77), and k. Motor vehicle accidents and hazardous materials incidents. 31. Admit or deny that, you did have adequate safety management controls in place on the date of the'incident made ttie basis of this lawsujt. 32. Admit or deny that you did have adequate safety management controls in place at the time that the driver involved' in the incident made the., basis of this lawsuit was hìred. ' 33; Admit or deny that you did have adequate safety management controls in place at all times during your employment of the driver involved in the incident made the basis of this lawsuit.,34. Admit or deny that Federal Motor Carrier Safety Regulation 391.23 requires a commercial carrie'r to investigate the background of all drivers applying for employment. 35. Admit or deny that Federal Motor Carier Safety Regulation 39 i.23 requires the background investigation to include an inquiry into the driver's driving record during the preceding 3 years to the appropriate agency of every State in which the driver held a motor vehicle operator's license or permit during those 3 years.. 36. Admit or deny that Federal Motor Carrier Safety Regulation 39 1.23 requires the background investigation to include an inquiry into, the driver's. employment re.cord during the preceding 3 years. 37. Admit Or deny that you conduct background investigations that comply with Federal Motor'Carrier Safety Regulation 391.23., 38. Admit or deny that you conducted a background investigation of the 92

driver involved in the incident made the basis of this lawsuit that complied with Federal Motor Carrier Safety Regulation 391.23. ' 39. Admit or deny that the purpose of the background investigation required by Federal Motor Carrier Safety Regulation 391.23 is to determine whether the driver is a safe driver. 40. Admit or deny that the purpose of the background investigation' required by Federal Motor Carrier Safety Regulation 391.23 is to determine whether the driver is a qualified driver as defined by Federal Motor Carrier Safety Regulation 391.11. ' 41. Admit or deny that your background investigation of the driver involved in the incident made the basis of this law~uit showed that the driver was a safe driver. 42. Admit or deny that your b~ckground investigation of the driver this lawsuit showed that the driver was involved in the incident made the basis of a qualified driver. 43. Admit or deny that Federal Motor Carrier Safety Regulation 39 i. i i provides that to be qualified to operate a commercial motor vehicle, the driver 'must meet the following i 1 separate criteria:. a'. Be at least 21 years old. b. Be able tq suffciently read and speak the English language. c. By reason of experience' and/ or training, be able to safely operate the vehicle. d. By reason of experiet1ceand/ or tráining, be able to determine whether the cargo has been properly loaded. e. Be familar with methods and procedures for securing cargo. f. Is physically, qualified to drive a commercial motor vehicle. g. Has a currently valid commercial motor vehicle operator's license issued only by one state or jurisdiction. h. Has prepared and furnished the motor carrier that employs him or her with the list of violations or the certificate as required by section 392.27. i. Is not disqualified to drive a commercial motor vehicle under the rules in section 391. 15. J. Has successfully completed a driver's road test, and has been issued a certificate of driver's road test in accordance with section 391.13, or has presented an.operator's license or a. certificate of road test which the tiotor carrier that employs him/her has accepted as.equivalent to a road test in acèordance with section 391.33. k. Has completed and furnished the mator carrier with an application for employment under section 391.21. 44. Admit or deny that Federal Motor Carrier Safety Regulation, 383.1 i 0 ) 93

states that "all drivers of commercial motor vehicles shall have knowledge and skils necessary to, operate a commercial motor vehicle safely." 45. Admit or deny that Federal Motor Carrier Safety Regulations 383.1 1 1 and 383. 1 13 set fqrth the knowledge and skills necessary for the safe operation of a commercial motor'vehicle. 46. Admit or deny that drivers of commercial motor vehicles shall have knowledge and skils necessar to operate a commercial motor vehicle safely. 47. Admit or deny that your drivers have knowledge and skils necessary to optrate a commercial motor vehicle saf~ly. 48. Admit or deny that the driver involved in the incident made the basis of this lawsuit had,the knowledge necessar to operate a commercial motor vehicle' safely at all times during your employment of the driver. 49. Admit or deny that the driver involved in the incident made the basis of this lawsuit had the knowledge necessar to operate a commercial motor vehicle safely at all times during your employment of the driver., 50.., Admit or deny that a driver is riot qualified to operate a commercial vehicle under the Federal Motor Carrier Safety Regulatiòns if that driver does not have the knowledge and skils set forth in sections 383.111 and 383.113. 51. Admit or deny that a driver is not qualified to operate a commercial vehicle for Defendant if that driver does not have the knowledge and i. skils set forth in sections 383.111 and 383.113. 52. Admit or deny that Federal Motor Carrier Safety Regulation 391.41, states that "a person shall not drive a commercial motòr vehicle unless hel she is physically qualified to do so." 53. Admit or deny that a driver is not allowed to drive for you unless the driver is physically qualified. 54. Admit or deny that a commercial carrier must allow only qualified drivers to drive. 55. Admit or deny that a commercial carrier must not allow unqualified drivers to drive.,56. Admit or deny that Federal Motor Carrier Safety Regulation 391.25 states that "each motor carrier shall, at least. once every 12 months, make an inquiry into the driving record of' eacb driver itemploys, covering at least the preceding 12 months, to the appropriate agency of every State in which the driver held a commercial motor vehicle operator's license or permit during the time period." ' 57. Admit or deny that you should, at least once every 12 months, make period. ' 58. AØmit or deny that Federal Motor Carrier Safety Regulation 39 i.2s an inquiry,into the driving record of each driver you employ, covering at least the preceding 12 months, to the appropriate agency of every State in which the driver held a commercial motor vehicle operator's license or permit during the time states that "each motor carrier shall, at least once every 12 months~ review the 94

-_._--_.._--------------- driving record of each driver it employs to determine whether that driver meets, minimum requirements for safe driving or is disqualified to drive a commercial motor vehicle.". 59. Admit or deny that you, at least once every 12 months, review the driving record of each driver you employ to determine whether that driver meets minimum requirements for safe driving or is disqualifed to drive a commercial,motor vehicle. 60: Admit or deny that Federal Motor Carrier Safety Regulation 391.25 states that "the motor carrier must consider the driver's accident record and any evidence that the driver has violated laws governing the operation of motor vehicles, and must give great weight to violations, such as speeding, reckless, driving,' and operating while under the influence of alcohol or drugs, that indicate that the driver has exhibited a disregard for the safety of the public." 61. Admit or deny that you consider. the driver's accident record and any, evidence that the driver has violated laws governing tht operation of motor vehicles, and give great weight to violations, such as speeding, reckless driving, and óperating while under the influence of alcohol or drugs, that indicate that the driv~r has exhibited a disregard for the safety of the public. 62. Admit or deny that Federal Motor Carrier Safety Regulation 391.25 requires' a written record, including the date and the name of the person who reviewed the driving record, to be placed in the driver's quailficati6n fie. 63. Admit or deny that you conducted an annual review of the driver involved in the incident made the basis of this lawsuit in compliance with Federal Motor Carrier Safety Regulation 391.25. 64. Admit or,qeny that Federal Motor Carrier Safety Regulation 383.51 directs that a driver is disqualifed from driving for the specified duration if the driver is convicted of any of the following while operating a commercial motor vehicle: a. Driving while his/her alcohol concentration is 0.04% or more, or driving under the inflt:ence of alcohol as prescribed by state law, or refusing to undergo testi,ng. ' b. Operating under the influence of a controlled substance. c. Leaving the scene of an accident involving a commercial motor vehicle. d. Committing a felony involving a commercial motor vehicle. e. Using a'commercial motor vehicle to'commita felony involving manufacturing, distributing, or dispensing a drug. 65., Admit or deny that the driver involved in the incident made the basis of this lawsuit was disqualified from driving during his employment with you because he was convicted of one or more of the offenses listed in the previous request. ", ' 66. Admit or deny that Federal Motor Carrier Safety Regulation 383.5 i driving for the specified duration for mandates that a driver is disqualified from 95

committing a serous traffc violation and that a serious traffic violation is defined by Federal Motor Carrier Safety Regulation 38~.5 to include:. a. Excessive speeding, which is 15 mph or more above the posted speed limit; b. Reckless,driving; c. ' Improper lane changes; d. Following too closely; and e.,a traffc violat,ion arising in connection with a fatal traffic accident. 67. Admit or deny that the driver involved in the incident made the basis of this lawsuit was disqualified from driving during his employment with you because he committed one of the offenses listed in the previous request. 68. Admit or deny that Federal Motor Carrier Safety Regulation 383.51 mandates that a driver is disqualified from driving for the specified duration for violating out-or-service orders.. 69. Admit or deny that the driver involved in the incident made the basis of this lawsuit was disqualified from driving during liis employment with you because he violated an out-of-service order. ' 70.. Admit or deny that Federal Motor Carrier Safety Regulation 383.5 i mandates that a driver is disqualified from driving for specified railroad-highway, grade crossings violations.. 71. Admit or deny that the driver involved in the incident made the basis of this lawsuit was disqualified from driving during his employment with you because he violated the specified railroad-highway grade crossings offenses listed in Federal Motor Carrier Safety Regulation 383.51. 72. Admit or deny that a commercial driver who is disqualified shall not drive a commercial motor vehicle. ' 73. Admit or deny that a commercial carrier shall not require or permit a: driver who is disqualified to drive a commercial motor vehicle. 74. Admit or deny that you require drivers that are disqualified to drive a commercial motor vehicle..... 75. Admit or deny that you permit drivers that are disqualified to drive a commercial mòtor vehicle. 76. Admit or deny that Federal Motor Carrier Safety Regulation 383.51 states that "no motor carrier shall schedule a run nor permit nor require the operation or any commercial motor vehicle between points' in such period of time as would necessitate the commercial motor vehicle being operated at speeds greater than those prescribed by the jurisdictions in or through which the commercial motor vehicle is being operated." 77. Admit or deny that you should not schedule a run nor permit nor require the operation of any commercial niotor vehicle bet~een points in,such',period of time as'would necessitate the commercial motor vehicle being operated at speeds greater than those prescribed by the jurisdictions in or t~rough which 96

the commercial motor vehicle is being operated. ' '78. Admit or deny that Federal Motor Carrier Safety Regulation 390.13 manda.tes that a motor carrier should. not aid, abet, encourage, or require its employees to violate any of the Federal Motor Carrier Safety Regulations. ' 79. Admit or deny that'you should not aid, abet, encourage, or require your employees to violate any of the,federal, Motor Carrier Safety Regulations. 80. Admit or deny that Section 395 of the Federal Motor Carrier Safety Regulations sets the limitation on the time that a driver can be in the service of a commercial carrier. 81.' Admit or deny that you require compliance by your drivers with the hours of service limitation set forth in Section 395 of the Federal Motor Carrier Safety Regulations. 82. Admit or deny that compliance by your drivers with the hours of service limitation set forth in Section 395 of the Federal Motor Carrier Safety Regulations is mandatory. 83. Admit or deny that a driver is disqualified if the driver is operating outside of the specific hour of service limitations set forth in Section 395 of the Federal Motor Carrier Safety Regulations. 84.' Admit or deny that you allow your drivers to operate outside of the specific hour of service limitations set forth in Section 395 of the Federal Motor Carrier Sarety Regulations. ', 85. Admit or deny that one of the purposes of the hours of service.regulations found in Section 395 of the Federal Motor Carrier Safety Regulations is to keep fatigued drivers off the highway., 86.. Admit or deny that Federal Motor Carrier Safety Regulation 3~5.8 states that "each motor carrier shall i:atntain records' of duty status and all' supporting doquments for each driver it employs for a period of six months from the date of receipt." 87. Admit or deny that you maitain records of duty status for each driver you employ for a period of six months from the date of receipt. 88. Admit or deny that the Federal Motor Carrier Safety Regulations define the term "supporting documents" a~ "the records of the motor vehicle carrier which rerrain maintained in the ordinary course of business and -used by II ' _ the motor carier to verify the information recorded on the driver's record of duty status. of 89. receipt. Adn:it or deny that you maintain, all supporting.doçuilents for duty status records for each driver you employ for a period of six months from the date 90. Admit or deny that a commercial carrier shquld review a driver's records of duty status to insure that the driver was in con:pliance with the hours of service,regulations found in Section 395 of the Federal Motor Carrier Safety Regulations. 9 i. Admit or deny that a commercial carrier should review all supporting 97

documents for a driver's records of duty status tò insure that the. driver was in compliance with the hours of service regulations found in Section 395 of the Federal Motor Carrier Safety Regulations. 92. Admit or deny that you reviewed the records of duty status for the driver involved in the incident made the basis of this lawsuit during the driver's employment with you in order to insure that the driver was in compliance with the hours of service regulations found in Section 395 of the Federal Motor Carrier Safety Regulations: 93. Admit or deny that you reviewed the supporting documents for the records of duty status for the driver involved in the incident made the basis of this lawsuit during tlie driver's employment with you in order to insure.that the driver was Ìn compliance with the hours of service regulatiòns found in Section 395 of the Federal Motor Carrier Safety Regulations. ' 94. Admit or deny that the records of duty status for the driver involved in the incident made the basis of this lawsuit during the driver's employment with you show violations of the hours of service regulations found in Section 395 of the Federal Motor Carrie~ Safety Regulations. 95. Admit or deny thatthe driver involved in the incident made the basis of this lawsuit was never admonished during the' driver's employment with you about any violations of the hours of service regulations found in Section 395 of the Federal Motor Ci:rrier Safety Regulations. ' 96. Admit or deny that Federal Motor Carrier Safety Regulation 395.8 states that a commercial çlriver has an obligation to stop driving when his "ability or alertness is so impaired, or so likely to become impaired, thròugh fatigue,. ilness, or a.y other cause, as to make it unsafe for him/her to begin or continue' to operate the commercial motor vehicle." 97.. Admit or deny that Federal Motor Carrier Safety Regulation 395.8 mandates that a commercial carrier is prohibited from requiring or allowing the driver to operate when the drivers "abilty or alertness is so impaired, or so likely. to become impaired, through fatigue, ilness, or any other cause, 'as to make it unsafe for him/h~r to begin or continue to operate the commercial motor vehicle." 98. Admit,or deny that you require drivers to operate when their abilty or alertness is só impaired, or so likely to become impaired, through fatigue, ilness,,~ or any other cause, as to make it unsafe for him/her to begin or co,ntinue to operate the commercial motor vehicle. 99. Admit or deny that you permit drivers to operate when their abilty or alertness is so impaired, or so likely, to become impaired, through fatigue, ilness, òr any other cause, 'as to make it unsafe for him/her to begin or continue to operate the commercial motor vehicle. 100. Admit or deny that the accident'made the basis of this lawsuit was, "DOT Recordable or Reportable" as d~fined by the Federal Motor Carrier Safety Regulations. i 0 i. Admit, or deny that an alcohol test was conducted on the driver 98

involved in the incident made the basis of this lawsuit after the accident.,102. Admit or deny that the alcohol test conducted on the driver involved in the incident made the basis of this lawsuit after the accident detected the' presence of alcohol. 103. Admit or deny that a controlled substance test was conducted on the driver involved in the incident made the basis of this lawsuit after.the accident. 104. Admit or deny that the controlled substance test conducted on the driver involved in the incident made the basis of this lawsuit after the accident detectèd the presence of a controlled'substance., 105. Admit or deny that a pre-employment alcohol test, as defined by the Federal Motor, Carrier Safety Regulations, was conducted on the driver involved in the incident made the basis of this lawsuit. ' 106. Admit or deny that the pre-employment alcohol test, as defined by the Federal Motor Carrier Safety Regulations, conducted on the driver involved in the incident made the basis of this lawsuit detected the presence of alcohol. 107. Admit or deny that a, pre-employment controlled substance test, as defined by the Federal Motor Carrier Safety Reguiations, was conducted on the ddver involved in the incident made the basis of this lawsuit. 108. Admit or deny that the pre-employment controlled substance test, as defined by the Federal Motar Carrier Safety Regulations, conducted on the driver involved in the incident made the basis of this lawsuit detected the presence of a controlled substance., ' i 09. Adi:it or'deny that a random alcohol test, as defined by the Federal Motor Carrier Safety Regulations, was conducted on the driver involved in the incident made the basis of this lawsuit durig his employment with you. i 10. Admit or deny that the random alcohol te,st, as defined by the Federal Motor Carrier Safety Regulations, conducted on the driver involved in the incident made the basis of this lawsuit detected the presence of alcohol.. ~ 11 i. Admit or deny that a random controlled substance test, as defined by the Federal Motor Carrier Safety Regulations, was conducted on the driver involved in the incident made'the basis of this lawsuit:during his employment with you. 112. Admit or deny that the random controlled substance test, as defined by the Federal Motor Carrier Safety Regulations, conducted on the driver involved in the incident made the basis of this lawsuit detected the presence of a controlled substance.. 113. Admit or deny that a reasonable suspicion alcohol test, as defined by the Federal Motor Carrier Safety Regulations, was conducted O'n the driver involved in the incident made the basis of this lawsuit during his employment with you. 114. Admit or deny that the reasonable suspicion alcohol test, as defined by the Federal Motor Carrier Safety Regulations, conduèted on the driver involved in the incident made the basis of this lawsuit detected the presence of alcohol. 99

" ", i 15. Admit or deny that a reasonable suspjcion controlled substance test, as defined by the Federal Motor Carrier Safety Regulations, was conducted on the driver involved in the incident made the basis of this lawsuit during his employment with you. 116. Admit or deny that the reasonable suspicion controlled substance test, as defined by the Federal Motor Carrier Safety Regulations, conducted on the driver involved in the incident'made the basis of this lawsuit detected the presence of a controlled substance. - 117. Admit or deny that you kept an Accident Register, as defined by the Federal Motor Carrier Safety Regulations, that includes on it the incident made the basis of this lawsuit. 118. Admit or deny that you were required by the Federal Motor Carrier Safety Regulations to- review the incident made the basis of this lawsuit in order to your driver. determine whether the accident was preventable on the part of 119. Admit or deny that you did review the' inciden t made the basis of this lawsuit in order to determine whether the accident was preventable on the part of your driver., ' this 120. Admit or deny that your review of the incident made the basis of lawsuit-concluded that the accident was non-prev~ntable on the- part of your - 121. Admit or deny that the incident made the basis of this lawsuit was non-preventable on the part of your driver. Mississippi - (601) _ Telephone (601) ~ - Facsimile PLEASE SERVE WITH SUMMONS AND COMPLAINT 100

IN TH CIRCUI COURT OF HOLMS COUN, MISSISSIPPI PLAIF v. CIV ACTION NO._ DEFENDANTS and v. TH PARTY PLAITIFS THI PARTY DEFENDANTS PLAITIFF'S TODEFENDAN._ FIRST SET OF REQUEST FOR PRODUCTION PROPOUNED -- l- COMES NOW Plaitiff, by and though his attrneys, and requests that -. produce with fort-five (45) days of servce hereof, at the offces, Mississippi 39216, or some other of mutuly ageeable plac, the followi documents for inpetion and/or copying: 1. The applicaton for employment with submitted or completed by 2. The Certficate of Driver' s Road Test completed by the person or persons who tested the State of puruat to 49 C.F.R. Section 391.31 and/or the laws of Mississippi and/or the laws of the Sta of Arka. RA.N))M ~A5ES- C;'Nû"'tl~+l? døwm~ait) 101

44. A ceed copy of any liabilty inurce policies, includ, but not lited to, any excess or umbrella policies coven or the trtor and/or traier opera by.-nmach 27,2008 and for the load or loads being cared on that date. 45. Al Compliance Reviews or Safety Reviews of. (as or the tractor and/or trler operated by whch was in effect on March 27, 2008. 8 102

by from Febni 27, 2008 to Mach 27,2008. saety progrs, drver stdads and drver education. '.'s mauas coverig trck saet, maitenace, fleet 61. Any and all documents associate with or generated as a result of any inpections peormed pursuat to 49 C.F.R. Section 396.17 on the vehicle operated by _ J on March 27, 2008. 62. All Risk Management Gudelies provided to. by r any other ince caer. 9 103

63. Al wrtt reue mae by. and/or I l to or any other ince caer for any Risk Maement Guidelies or Risk Management Plan. on beha of 64. All Risk Manement Plan pre by or for 65. All videos us for tr ot1 or any other drvers employed by or 66. Any audits or reviews peormed by. or by any other person or entity of any Dnver's Daiy or Multi-Daiy Log Books, expenss and/or Bils of Ladig for 67. The sudden decleraton rert forthe trtor and triler opera by as descnbed in the Complait. 68. All informaton obtaed from the Electronic Control Module for the tractor and trailer operated by L as descrbe in the Complait. 69. All exit rert of audits peormed by the Bureau of Motor Carer Safety or by any other state or federa agencies for 70. Al fuel and/or fleet card recipts for fuel obtaed by Febru 27,2008 to Marh 27,2008..' ", from 71. Pleae produce the followi: A. The persnnel fie of B. The quacaon fie of c. The personnel file of as it exist on March 27, 2008; D. The quacaon fie of as it existed on March 27,2008; 10 i. 104 I

E. Any other fie kept on F. Any payll and beefit rerd for G. Al cacelled checks of any kid paid to for March 27, 2008; H. Al logs 0_ for Mach 27,2008; I. Any and al rerd of heath ince clai, disailty claims, sickness or doctors' excuses fo for March 27,2008; J. Any work, trps, trvel, trck drvig and/or trck work of any ty of_ - whether was drver or co-dver, or assistt, or whatever capacity, for Marh 27, 2008. With regard to ths reuest pleae produce the followig manas for al suh work, trps, trvel, trck drving or assisting: 1. pickup inons; 2. route ma; 3. diatch recrd; 4. trp rerdssheets; 5. toll rerds; 6. bil oflad; 7. fright recrds; 8. any other shipping documents; 9. bilg rerds for load hauled; 10. load shee or rerds of any and al records of any payments made or reived or trfer or distbuted regadig payments, profits, saares, expnss, commssions, trp lea; 1 1. fuel ta reipts or trp sheets; 12. trp tickets; 11 105

13. settement stteents; 14. bilg to any shppe; 15. payment to any shippe; 16. bil to any other persn or corpration; 17. payments reived from any other person or corpration; 18. expenses of any ty of Hilton L. Dixson; 19. gas reciptsful recipts; 20. cret cad reipt; 21. telephone credt charges; 22. trp records; 23. tie recrds; 24. weight records; 25. scale rerds; 26. brokerae payments or commssions paid or received; and, 27. bilgs to and payments received frm any other person or corpraon. K. Any and al telephone records and bils of the Defendat for March 27,2008; L. Any and all cret cad bils and recipts of the Defendat for Marh 27, 2008, includi but not lite to Comcheck and Comdata; M. Any and all fuel rerds, tickets, reipts, sumes of the Defendant for Marh 27,2008; N. Any and al toll receipts of for Mach 27, 2008; O. Any and al settement sheets of the Defendat for March 27,2007 thug Mah 27, 2008; 12 106 I

P. Defendat ful ta trp sheets for March 27, 2007 thug March 27, 2008; Q. Al ICCIDOT autonty for ths trtor from Marh 27,2006 to Mach 27, 2008; R. Al USDOT Safety Fitness Ras of the Defendat for March 27, 2008; S. Copies of al USDOT Safet Compliance Audits of 27, 2008; the Defendant for March T. Al fuel ta report of the Defendat for March 27,2008; U. All stte saety auts of the Defendat for March 27,2008; V. ICCIDOT authonzons for Defendat in effect on March 27,2008; W.. ICC registered pet or authorition fo the Defendat in effect on March 27,2008; X. All federa acident reprt fied by the Defendat for March 27,2008; Y. Al DOT inpetion report for the Defendat for March 27, 2008; Z. All long form DOT physicas of AA. Any and al Seven Day Pnor Foim for for March 27, 2008; BB. All DOT and Sta intions of 27,2008; the trctor involved in-tle crash for March CC. Motor Caer Safety Ra of the Defendat for Mach 27,2008; DD. Al fies of the Defendat for March 27,2007, though March 27,2008 by DOT, stte, and/or feder authority; and, EE. Any conditiona ra of 27,2008. the Defendats by DOT, ste or federa for March 72. Produce all rerd for Marh 27, 2008, of any tye which documents any drving or trvel in a trck by and the dates and ties and locations of al places traveled to and from by 13 107

~. AATTORNEYS AT LAw Writer's e-mall. February 20, 2007 p-q -- FFR 2 2 2001 FYI to Via Facsimile (601) 985-4500 & U. S. Mail Arhur D. Spratlin Jr. Jody E. Owens, II Butler, Snow, O'Mara, Stevens & Canada Post Offce Box 22567 Jackson. Mississippi 39225-2567 RE: Dear Ar and Jody: the following list of Puruat to our agreeent to mediate this case prior to the filing of a lawsuit, I am forwarding' moving violations that we have identified for Mr._ Offense Date 1. 05/07/99 2. 06/25/99 3. 06/25/99 4. 07/18/99 5. 1 2/04/99 6. 12/03/99 7. 11/15/00 8. 01130/01 9. OS/21/01 10. 10/26/01 1 1. 10/26/01 12. 05/19/02 13. 11/03/03 14. 06/22/04 15. 09/01/04 16. 01/04/05 17. 02124/05 18..01/09/06 19. 09/21/06 Conviction Date 06/16/99 10/09/00 10/09/99 10/21/99 02/1 5/00 04/21/2000 12/07/2000 02/09/01 06/28/01 09/16/02 09/16/02 OS/21/02 02/05/04 11/15/04 06/17/05 01/21/2005 3/31/2005 07/20/06 Offense DWLS DWLS Speeding Speeding Speeding Overweight Truck Overweight Truck Speeding Speeding DWLS Speeing DWLS DWLS ImplNo Tag ImplDef Equipment Drive W Nision Obscu & Fail Place Prop Tire Improper Duty Status No Proof of Insurance ExplNo D.L.& Spiling Load 108 Exhibit C

Pleae pas th letel on to yo çlieø ad thei ine caer. I look forwar to heag from you in the ver nea fu 109

AïTORNEVS AT LAW Writer's e-mai: May 23, 2007 Via Facsimile (601) 985-4500 & U. S. Mail Jody E. Owen, II Butler, Snow, O'Mara, Steven & Canada Post Office Box 22567 Jackson. Mississippi 39225-2567 RB: Dear Jody: I am wrting ths in response to your letter that I received yesterday. I disagree with your assessment of what laws are applicable to ths cae, as well as what safety reguations an exempt caer must comply with in Mississippi. I. Applicable Laws The vehicle and drver were ilegal under thee laws: (1) Feder Motor Carer Safety Reguations (FMCSR); (2) state regulations govenng the operation of commercial vehicles; and (3) state laws regulating the operation of any vehicle. A. FMCSR COIlenial vehicles engaged in i.terstte commerce are govered by the FMCSR. The reguations create a unform stadard of conduct to promote safe trvel on intertate highways. Wallace v. Ener, 521 F.2d. 215 (511 Cir. 1975); Stong v. Freeman Truck Line, 456 So. 2d. 698 (Miss. 1984). Evidence of violations of safety statutes has bee held to constitute negligence per se or evidence of neglgence. Classic Coach, Inc. v. Johnson, 823 So. 2d 517 (Miss. 2002); Thoma v. McDonald, 667 So. 2d 594 (Miss. 1995); Hasson v. Hale, 555 So. 2d 1014 (Miss. 1990); Harmon v. Grande Tire Co., 821 F.2d 252 (5th Cir. 1987),' Bullock v. Fairburn. 353 So. 2d 759 (Miss- 1977); Powers v. Malley, 302 So.2d 262 (Miss.1974); Planters Wholesale Grocery v. Kincade, 210 Miss. 712, 50 So. 2d 578 (1951). Intetae comierce is defied by FMCSR 390.5: "Intertate commerce mea trade, trffc, or trsprttion in the United States:(I) betwee a place in a state and a place outside of such state (includig a place outside the United States); (2) between two places in a stte though another state or place outside the United States; or (3) between two places in a state 110

as par of trade, traffc, or trsporttion origiating or teninatig outside ofthe state or United States." Goo tranported in the stream of intertate commerce presere their charcter as intertate commerce from the beging of their shipment until they are finaly delivered to the purchaser. Southern Pac. T.E.R.M Co. v. ice, 219 u.s. 498,31 S.O. 279,55 L.Ed.310 (1922) ('~e teinal company is par and parcel of the system engaged in the trsporttion of comm.erce"); Wallng v. Jacksonvíle Paper Co., 317 V_So 564,63 S.Ct. 332, 87 L.Ed. 460 (1943) (The goos reta thei charcter as interstate coinerce until they are fially delivered to the customer.); Merchants Fast Motor Lines, Inc. v. ice, 528 F.2d 1042 (SIb Cir. 1976) (Carer is engaged in "interstate comierce" when transporting goos either originatig in trit from beyond stte or ultimately bound for destitions beyond state, even though route of parcuar caer is wholly withn one state.); Central Freight Lines v. ICC, 899 F.2d 413 (5th eir. 1990). The deternig factor is whether the logs being haresed were in fufillment of ordei or contracts for the delivery to a cutomer outside of Mississippi. If the delìver was in fufilment of such order or contracts, then the goo are intertate commerce even where the trp origiates and ends withn the borders of Mississippi. At ths time, I do not know whether ths is the ca. Ths, however, is an issue that I intend to fuly explore if necessar. There is no exemption from compliance with the FMCSR for log hauler engaged in. intertate commerce. (60 FR 47421-01). The exemption that you referenced in your letter has no application, is prepted by the FMCSR and has bee deterined to be unenforceable. applies to (60 FR 47421-01). Even were there an applicable exemption, that exemption only compliance with the ecodomic reguation, i.e., the inum fiancial resnsibilty. FMCSR 390.5 defies an exempt motor carer as: "engaged in transportation exempt from ecnomic reguation by FMCSA under 49 D.S.C. 13506, "Exempt motor caers" are suject to the safety reguations set fort in FMSCR." A commercial caer trportg an exempt conuodity is stl subject to recvin ticket for: (1) being out-of-servce due to a mechanica problem; (2) beig out-of-seice due to a drver problem; (3) beig over weight, etc. It is simply ilogica to argue that becuse you are exempt, you do not have to comply with saety regulations designed to protec the lives of the motorig public. The intent of the exemption is to help industres, such as the log industr, by reucig the fiancial obligations. B. State Coøiercial Vehcle Laws In Mississippi, the FMCSR apply even when a commercial vehcle is being opted intrtate becuse Mississippi has adopted by reference the FMCSR. Mississippi has adopted to apply to the opeation of commercial vehicles intrtate the following FMCSR 390 (Gener), 391 (Qualifications of Drver), 392 (Drivig of Commercial MotorVelúcle), 393 (pars and Accsories Necessar for Safe Operation), 395 (Hour of Servce), 396 (Inpection, Repair, and Maiteance). We will offer as witnesses to ths issue several employee from the Mississippi Division of the FMCSA. the Mississippi Deparent of Traporttion, and the Mississippi Pulic Serce Commssion. Additionay, Mississippi parcipates in the Feder Motor Carer Safety Assistance Program which provides money to States in order to reuce comm.ercial vehicle wrecks. In ordefto get the grt money~ there is a requiement of the "adoption and unform enforcent of safety rues, reguations, and stadards compatible with 111

the Feder Motor Carer Safety Reguations FMCSRs... for both intertate and intrastate motor caer and drvers..." Mississippi Commercial Drver's Licee Law 63-1-74 states: the FMCSA. As you "The purose of ths arcle is to implement the Federal Commercial Motor Velúcle Safety Act of 1986(49 D.S.C.S. Appx. Section 2701 et seq.):' which is admstered by know, the Missíssippi Tranorttion Commssion supeses and ints safe opeation of commercial vehicles in Mississippi: "In accrdance therewith, the commssion shall promulgate as its own and enforce the rues, reguations, requients and classifications of the Unite States Deparent of Trarttion or any successor federa agency thereof charged with the regulation of commercial motor vehicle saety." Miss. Code 77-7-16 (1). Therefore. the FMCSR that I reference in our meetig and in ths letter apply, even when a commercial vehicle is engaged in purely intrastate com.merce. I recogne that logs are an exempt commodity under Miss. Code 77-7-16. Ths exemption, however, does not relieve a commercial caer from complyig with safety statutes. The exemption only applies to compliance wìth the ecnomic reguation, i.e., the mium fiancial resonsibilty. Again, an exempt motor caer is one engaged in trsportation exempt from economic regulatin by the federal goverent and is still subject to the safety regulations. As I stated previously, a commercial caer trsprtg an exempt conuodty is still subject to recivíg a ticket for: (1) being out-of-serce due to a mechanca probleni; (2) beig out-ofserce due to a driver problem; (3) being ovèr weight, etc. It is incorrect to argue that becuse you are exempt, you do not have to comply with safety reguation designed to protect the lives of the motorig public. I feel confdent tht I will win ths arguent durng litigation. c. State Vehicle Laws AB you mow, Mississippi has vehícle codes and cae law regulating the operation of any vehicle. These laws apply to commercial drver and their vehicles. There is no exe.ption from compliance with these laws for log hauler. II. megal Vehicle Your clients' vehicle was ilega at the tie of the wreck. We maita that tls was a the wreck becuse there is substatial evidence tht Mr~p1ied his dit cause of br.akrior to the collsion in suffcient tie to have come to a compl~ri~r to impactig the ehicle if the tractor and triler had been equipped with properly operatig The COD tions that we found are as follows: Tractoi' Defect: brakes. 1. RFD brake position out of adjustment, 2-5/16" pushrod travel. 2. LRD brae posiqon out of adjustment, 2-1116" pusbr travel. 3. RR brake position out of adjustment, 2-118" pusbrod trvel. 4. All dns have bell-mouth condition. LFS, RFS-3/16", LFD, RFD - 1/8". LRD, RR - 1/4". 112

5. LFD, RFD position brae shoes not makg ful contact with drms when brakes are applied. 6. LR, RRD brae position have oil seals leag. Brake shoes and drws oil satuated.. 7. RFD slack adjuster contacting axle housing when braes are applied. 8. LFD outside tie 0/32" tread. 9. RFD inide tire 0/32" tread. 10. LRD outside tie 2/321' tread. 11. LRD inside tie 0/32" tread. 12. RR outside tie 1/32" tread. Trailer Defects Al of 1. LF brae position out of adjus1ient, 2-114" pushrod travel. 2. RF brake position out of adjustment, 2-5/16" pushrod trvel. 3. LR brake position out of adjusent, 2-7/16" pushrod trvel. 4. RR brake position out of adjustment, 2-1/2" pushrod travel. s. All automatc adjuster have bee removed and replaced with manual adjuster tbat.!lenotmatchinginlengt. LF-6", RF-6-1I2", LR-6-112", RR-6". 6. All dru have bell-mouth condition. LF-l/8", RF-3/16", LR-3/16", RR-3/16". 7. RF, RR bråe positions have on seal leakig. Brake shoes and drums oil satated. 8. ABS system not operating properly due to exciter rig on LR wheel position covered with dir and oil mixed. 9. Main servce ai supply line fot trler brakes cut causing massive ai leak when braes are applied. 10. LFI trer tire tread depth 0/32". these conditions were in violation of A. FMCSR both state and federal law. Commeral caers must systematcaly inpect. repai, and xnaitain their vebìcles. 396.3. All vehicle par and accsories shall be in safe and proper operating condition at all ties. 396.3. Furter, a commercial vehicle shall not be operated in such a condition as to likely cause an accdent or a breakdown. 396.7. When a conuercial vehicle is discovered to be in an unafe condition while being operated on the highway, it may be contiued in option only to the neaest place where repai ca safely be effeced and only if it is less hazardous to the public than to pet the vehicle to remain on the highway. 396.7+ If a velùcle is found to be in such a condition. authorized personnel ofthe Fedral Motor serce Carer Safety Admstrtion shal declare the vehicle "out of serce." 396.9. An out of vehicle caot be opted unti all repai require by the "Qut of serce notice" have bee satisfactorily coinpleted. 396.9. 113

1. Brakes. All commercial vehicles must have brakes adequate to control the movement of, and to stop and hold, the vehicle or combination of vehicles. 393.40 All brakes with which a motor vehicle is equipped must at au ties be capable of operatig. 393.48. Every commercial motor vehicle shall be equippe with braes actig on all wheels. 393.42. Your client was in violation of these provisions based on the defects- that existed at the tie of the wreck. 2. Brake Tubing!ose. Brake tubing and brae hose mus: (1) be intalled in a maner that ines proper contiued fuctioning of the tubin or hose; (2) be suitably secured agait chag, kig, or other mechancal damage; (3) be intalled in high a maner tempetues. that prevents it from contacting the vehicle's exhaus system or any other source of 393.45. Your client was in violation of tie of the wreck. these provisions based on the defects that existed at the 3. Brake TubîngIose Connections. All coimections for ai, vacuum or hydraulic brag systems shal: (1) be adequate in material and constrction to insure proper contiued fuctioning; (2) be designed, constcted, and installed so as to insue, when properly connected an attchm.ent free ofleaks, constrctions, or other defects; and (3) have suitale provision in ever detchable connection to aford reaonable these provisions assurce agait bas accidenta on the defecæ disconnection. 393.46. Your chent was in violation of that existed at the tie of the wreck. 4. Brake Ling. Brae lings must be so constrcted and intalled as not to be subject to excesive fading and grbbing and must be adequate in thckness, meas of attchment, and physica charactestics to provide for these safe provisions and reliable based stopping on the of defects the motor that vehìcle. 393.47. Your client was in violation of existed at the tie of the wreck. s. Reservoir. Commercial vehicles using ai or vacuum for bra: (1) shall be equippe with a reseroir suffcient to ensure a ful serice brae application with the engie stopped; (2) shal have such reseoir so safeguded by a check valve or equivalent device that in the event of falure or leakage in its connection to the source of compressed air or vacuum the ai or vacuum supply in the reeroir shall not be depleted by the lea or faiure. 393.50. Your client was in violation of these provisions based on th defects that existed at the tie of the wreck. 6. Ties. FMCSR 393.75 govers ties used on commercial vehicles. Commercial vehicles caot be opeted on any tire tht (1) has body ply or belt materal exposed tboligh the tread or sidewall, (2) has any trd or sidewall separtion, (3) is flat or has an audible lea or (4) has a cut to the extent that the ply or belt materal is exposed. Additionaly, cornercîal operators must adhere to the followi if applicable: (1) The front ties on a bus, trck, or trck trctor must have a trea depth of at leat 4/32 inch; (2) All other tires must have a mimum tread depth of 2/32 inch; (3) On buses, regroved, reped, or retreaded ties are prohibited on the front wheels; (4) On bucks and ttck tractoi:s, no regrooved tires shal be used on front wheels havig a load cag capacity equal to or greater than that of 8.25-20 8 ply-ratig tires; and (5) All ties must be in conformance with the tire load ratings spcified in 114

571.119, and marked on the sidewall of the tire, except when the vehcle is operating under ters of a spcial pert issued by the state and is being operated at a reduce spee; (6) No vehicle shal be operated on a tie which has a cold inflation pressure these less provisions than that based specified on the for defects the load that bei caed. 393.75. Your client was in violation of existed at the tie of the wrck. B. State Commercial Vehicle Laws Again, Mississippi adopted FMCSR 396 Inpection, Maitenance and Repair. For the same reaons listed abve, your clients' vehicle was ilegal. C. State Vehicle Laws In addition to the obligations set fort in the FMCSR, commercial caer and their drver have the respnsibilty of complying with numerous state vehicle sttutes they and are laws. drving. ~4It Generaly, these statutes apply to all driver, regardless oftbe ty of is unawf for the owner, or any other person, employing or otherise directing the driver of any vehicle to require or knowingly to penit the operation of such vehicle upon a highway in any maner contr to law." Miss Coe An. 63-9-9. Mississippi cour have held that violations of safety sttutes constituted negligence per se Or evidence of negligence. Classic Coach, Inc. v_ Johnson, 823 So. 2d 517 (Miss. 2002); Thomas v. McDonald, 667 So. 2d 594 (Miss. 1995); Hasson v. Hale, 555 So. 2d 1014 (Miss. 1990); Hannon v. Grande Tire Co., 821 F.2d 252 (5th Cir. 1987); Bullockv. Fairburn, 353 So. 2d 759 (Mss. 1977); Powers v. Malley, 302 So. 2d 262 (Miss.1974); Planters Wholesale Grocery v. Kincade, 210 Miss. 712, 50 So. 2d 578 (1951). "When the sttute is violated the injured par is entitled to an intrction that the par violating tht negligence prximately caused or contrbuted to the injur, is guilty of negligence, and if then the injured par is entitled to recover." Bryant v. Alpha Entertainment Corp., 508 So. 2d 1094 (Miss 1987). 1. Violation of Brake Statutes Your client violated the Mississippi Brae Statutes. As a general requirement, it is unlawfu in Mississippi to "drve or move on any lughway any motor vehicle, and trailer, semtrler or pole trer, or any combintion thereof, unless the equipment upon any every said vehicle is in good working order... and said vehicle is in su safe mechanca condition as not to endager the dnver or other occpant or any pern upon the highway." Miss. Code Ann. 63-13-3. Mississippi statutes make it unawf to operte a vehicle with improperly maitaed braes that are not in goo working order. The applicale statutes ar Miss. Code Ann. 63-13-3,63-7-51 and 63-7-5363-7-27. Section 63-13-3 madates that: No peon shall dnve or move on any lughway any motor vehicle, trailer, semtrailer or pole traler, or any combíntion thereof, uness the equipment upon any and every said vehicle is in good worki order and adjustment as reuired in this chapter, and said vehicle is in such safe mechancal condition as not to endanger the driver or other occupant or any peron upon the highway. 115

Section 63-7 -51 requies that: (1) Ever motor vehicle, other than. a motorcycle, when opeted upon a highway shall be equippe with brakes adequate to control the movement of and to stop and hold such vehicle, including two separate mea of applyig the braes, each of which mea shall be effective to apply the brakes to at leat two wheels. If these two separte mea of applyig the brakes are connected in any way, they shall be so constrcted that failure of anyone par of the opetig mechansm shall not leave the motor vehicle without biaes on at leat two wheels. *** (3) Ever triler cag over one ton, when opeated upon a highway, shall be equippe with braes adequate to control the movement thereof and the to towing stop and motor to hold such vehicle, and so designed to be applied by the drver of vehicle from its cab; sad brakes shall be so designed and connected that in cae of the towed vehicle, the brakes shall be automatically an accdenta breaaway of applied. (4) Ever new motor vehicle, excet a motorcycle, hereaer sold in ths state and operated upon the highways, and ever new trler, excet a trer of less than 2,00 pounds gross towed by an two axes of automobile, hereafter sold in ths state and opeted upn the highways, shah be equippe with serce braes upon all wheels of ever such vehicle. Secon 63-7-53 diects tht: (1) The serce braes upon any motor vehicle OT combination of vehicles shall be adequate to stop such vehicle or vehicles when trveling twenty øúles per hour with a distace of th feet when upn dr ashat or concrete pavement surac free frm loose materal where the grde doe not e;icee one per cet. (2) Under the above condition the han brae shal be adequate to stop such vehicle or vehicles with a distace of fift-five feet and sad hand brake shal be adequate to hold such vehicle or vehicles stationar on any grde upon which operted. (3) Under the above conditions, the serce brakes upn a motor vehicle equipped with two-wheel braes only, and when pemtted under section 63-7-51, shal be' adequate to stop the velúcle withn a distace of fort feet and the hand brae adequate to stop the vebicle withi a distace of fift-five feet. (4) Al brakg distace spified in this secon shall apply to all vehicles mentioned wheter such vehicles ar not loaded or are loaded to the maximum capacity petted under law. 116

(5) All braes shall be maintaed in good workig order and shall be so adjusted as to operte as equaly as practcable with rest to the wheels on opposite sides of the vehicle. Evidence of a commercial caer's or drver's violation of the brake sttute creates a prima facia cae that the driver must rebut. The fact that the braes are defective is material in deterg queston of neglgence where the drver knew or should have known of the defect. Phillps v. Delta Motor Lines, Inc., 235 Miss. 1,108 So. the 2d dnvets 409.(Mss. 1959). ''Te mere failure of negligence. Failure of braes to fucton properly is not conclusive of brakes to opete makes only a pnma facie cae whìch the drver may defend by showig prope inpection and a sudden faiure without warg." Id. See Bullock v. Sim Ramsey, Jr. Trucking Co_, 207 So. 2d 628 (Mss. i 968); Robinson v. ß. UMP.. 894 F.2d 7 S8 (5th eir. 1990) (applyìg Mississippi law)). Your client will be unable to show proper inspction and a sudden faiure without warg. 2. Tires Tires are a vital par of a commercial vehicle. Generlly, it is unlawfu to "drve or move on any mghway any motor vehicle, trer, semtrler or pole trler, or any combination thereof, unless the equipment upon any and ever said vehicle is in good workig order and adjusent as reuired in this chapter, and said vehicle is in such safe mechancal condition as not to endanger the drver or other occpant or any peron upon the highway." Miss. Code Ann. 63-13-3. Defective ties cause wrecks. Miss. Code Ann. 63-7-67 requies that: Every solid rober tie on a vehicle shall have rubber on its the entire entire traction perpher. surace at leat one (1) inch thck above the edge of the flange of No pen shall opete or move on any highway any motor vehicle, trailer, or semitrailer havig any met tie in contact with the roadway. Your client was in violation of the wreck. these provisions based on the defects that existed at the tie of in. megal Drivel" Your driver was ilega for numerous reasons. As you know, Mr~id not have a vald Commeral Drver's License on the day of the wreck. FMCSR ~uies that a dnver "must have a curently valid Conuercial Dnver's License to operate a Commercial Vehicle. Miss. Code 63-1-77: states that a drver: "canot dnve a Commercial Vehicle on highways of state uness person holds a vald Commercial Drver's License." "caot drve a Co:mercial Vehicle on mghways of state while drving privilege is susded revoked or cacelled." 117

Commercial Driver's Licee was ~'disqualified" at the tie of the wreck. FMCSR 391.15 maitains that a caer must not allow a disqualfied driver to drve, nor shall a disquaified drver allow themelves to drve. Miss. Code 63-1-83 states that if a driver is found to be operatig a Commercial Vehicle without a valid Commercial Drver's Licee or without license or endorsement, that drver is "disqualified" from drvig for 1 yea and for proper ty of 3 yeas if violation occed while trsprtg hazardous materals. On September 21, 2006, Mr.-las found to be haulg hazardous materials whie lícense sunded, without a Hazrsement whie workig for_ The fact that ~as an ilegal drver will be admtted into evidence, not to show that he was neglgent on the day of the wreck, but to prove the indepdent act of negligence on the par of and to detere their porton of responsibilty for the wreck. Pleae underd that these claims have absolutely nothg to do with vicaous liabilty. You, therefore, wil not be able to keep ths evidence from being considere by the jur by admttg agency. ~ a dagerous company and uses dangerous drivers. The following are the movig offenes that I have found to date for Mr. - 1. 05/07/99 2-06/25/99 3. 06/25/99 4. 07/18/99 5. 12104/99 6. 12/03/99 7. 11/15/00 8. 01/30/01 9. OS/21/01 10. 10/26/01 i 1. 10/26/01 12. 05/19/02 13. 11/03/03 14. 06/22/04 15. 09/01/04 16. 01/04/05 17. 02/24/05 18. 01109/06 19. 09/21/06 DWL DWLS Speeing Speing Speedg Overweìght Overeight Speng Speedg DWLS Speedin DWLS DWLS ImplNo Tag DefEquipment Drve W Nision obsc1,ed & Failure to Place Prop Tire hnpror Duty Statu No Prof In. Exp/No D.L.& Spilin Load 118

Commercial Camer have a fudaental duty to ru their copany safely. -uled to do ths. Mr.~ drving bistory~ including the ilegal natue of~, wil come into evidence to prove the independent acts of negligence on the par ot-and to detene what porton of compartive fault is attbutable to their acts. IV. punitive Damages puntive damages will be awarded in ths cae. It is generly held that wilful and wanton conduct is the intentiona doing of an act or the intentional failure to do an act with reckless disregard for the consequence and under circumstace and conditions tht a reasonable peson would know or have reasn to know that such conduct would, in a high degree of probabilty, result in har to another. Trico Coffe Co. v. Clemons, 151 So. 175, 176 (Mss. 1933). Drving a large comnercial vehicle with dagerously defecve brakes results in death and injur. Any reaonable sane pern knows this fact. A jur will award a substatial amount in the form of punitive daages. The curent Supreme Cour Justices in Mississippi wil not throwaway thei poliical caee by siding on the side of a dagerus trckig company. Barg an astronomical punitive damage award, the verdict will not be remitted. braes is a horrd problem in the trckig industr. Too many Improper maintenance of people are dyig and being injured as a result of the trckig industr's misconduct. These catastrophes are often a direct result of a commercial caer's sytemwide failure to implement safety management controls neeed to maitai vehicle and promote the safe operation of a commercial vehicle. It is a bad time to be a trckig company defendat because commercial trc accdents each yea.~ii be vehicles ar involved in an alarg number of punshed if ths cae gets to a jur. v. Conclusion The inan caer should sette ths ca for the policy limts of 1 Milion Dollar and, thereby, not subject their insued to an excess verdict. If do not hesitate to contact me. I look forward to heag frm you before the end of you nee to discuss this fuer, pleae the day. cc: 119

DEPOSITION OUTLINE DEPOSITION OF 30 (b)(6) - SAFETY MANAGER Name: This is going to be the deposition of, designated by the Defendant 0 testify on behalf of the Defendants regarding matters known or reasonably available and those listed in Plaintiffs 30(b)(6) notice and also as the person who is designated as that person most knowledgeable about safety issues related or pertaining to the operation of a commercial vehicle at the time of the incident made the basis of this lawsuit. Ask him if that is correct. You are in charge of safety deparment? Are you in charge of the training deparment? Instructions Are you in charge of any other departents? Request for production: (establish that he has not provided) I have requested numerous documents, have you reviewed these documents any documents not contained that are responsive to my request - Go through specifically regarding documents that would be responsive In the 30(b)(6) notice, I have requested numerous documents, have you reviewed these documents? Can you think of any documents that are not contained in these produced documents that are responsive to my request? Go through all the requested documents and ask specifically if he can think of any documents that were not produced that would be responsive to the request. Depo Prep: Review of following to refresh your recollection:. records, manuals, accident reports discussed with anyone conducted your own investigation view your personnel file at_ documents contained in documents produced in response to our deposition notice documents not contained in documents produced in response to our deposition notice statements read any depositions read investigative or accident reports ~~p~ ever seen any statements l45e lf~i 120 Exhibit D I

National awards through these associations Jourals (authoritative, reliable information) Served on advisory council (in advisory capacity) to any federal agency in connection with legislation affecting the motor carer industry Paricular committee? If so, what did you do for that committee? FMCSR State the purose of Any kind of certification as safety director If yes, by whom. If no, can you get such certification Have you ever taken any course for certification? Other credentials that qualify you to be a safety director Have a Federal DOT # Authorized ever read the Federal Motor Carier Safety Regulations. Do you understand them the Federal Motor Carier Safety regulations. 1. create uniform standardsfor operation of commercial vehicles 2. (Answer: Section 383.1 - to help reduce and prevent truck accidents, fatalities and injuries Do you agree that they are for promoting safety Safer drivers Safer roads Protection of road users Driver and Company Responsibilty - Do you agree that: 1. both commercial drivers and the commercial carriers share the obligations, responsibilties and duties created by the FMCSR. 2. All commercial carriers and drivers are required to be knowledgeable of and comply with FMCSR 390.3(e). 3. Commercial carriers have a duty to their drivers to instruct them regarding, and require, compliance with the FMCSR. 4. the FMCSR provide that "whenever... a duty is prescribed for a driver or a prohibition is imposed upon the driver, it shall be the duty of the motor carrier to require observance of such duty or prohibition." 390.11. 5. The FMCSR mandate that: " no person shall aid, abet, encourage, or require a motor carrier or its employees to violate the rules of this chapter." 390.13. Companies Responsibilities - Safety Management Controls Do you agree that: 1. Commercial carriers have a duty to operate their company safely. 'lb \ 121 ~

2. A commercial carers has a responsibility to have proper safety management controls, i.e., systems, policy programs, practices, and procedures, to ensure compliance the FMCSR in order to advance the safety of the transporttion system, and to reduce accidents resulting in fatalities, injuries, and property damage. 385.3. Do you understad that: 1. The Federal Motor Carer Safety Administration conducts inspections of commercial carers to determine the safety fitness of motor carers, assign safety ratings, and direct commercial carrers to tae remedial action when required. 385.1 2. There are four safety ratings that a commercial carrer can have: (1) Satisfactory; (2) Conditional; (3) Unsatisfactory; and (4) Unrated. A. A satisfactory safety rating means that a motor carrer has adequate safety management controls. B. A conditional safety rating means a motor carier does not have adequate the FMCSR. safety management controls in place which could lead to violations of C. An unsatisfactory safety rating means a motor carier does not have the adequate safety management controls in place which has resulted in violations of FMCSR. D. An unrated commercial carier is one that has not been assigned a safety rating by the FHW A. Do you agree that: 1. A conditional or unsatisfactory rating is substandard. 2. A substandard rating means that the commercial carier is not meeting its responsibilities of having proper safety management controls in place to insure compliance with the FMCSR. Companies Responsibilties - Responsibilities During Application Process driver and the carier. the driver. Do you agree that: 1. The application process is the beginning of the relationship between the 2. The application process is the genesis of the carier's decision to employ 3. A failure in the application process, can lead to an unsafe drver being released onto the motoring public. 4. FMCSR 391.21 requires that a driver must not drive a commercial vehicle unless without completing and signing an employment application. State Understanding of what should be on an application: 1. Name and address of carrier; 2. Applicant's name, address, date of birth, and social securty number; 3. Applicant's address( es) for three years preceding date of application; 4. Date of application; 5. Issuing state, number and expiration of applicant's operators license; 6. Natue and extent of applicant's experience operating motor vehicles; s-/'3 \ 122 ')-

7. List of all motor vehicle accidents in which applicant was involved in during three years; 8. List of all violations of motor vehicle laws and ordinances of which applicant was convicted or forfeited bond or collateral during the last three years; 9. A statement detailng facts and circumstaces of any revocation, or suspension of any license, permit or privileges to operate a motor vehicle issued the applicant, or a statement that no such denial, revocation or suspension has occurred; 10. A list of the names and addresses of applicant's employers during the last three years, including dates of employment. If the applicant operated a commercial vehicle that has a GVWR 26,001 pounds or more, is designated to cary more than 15 people, or is any size used to cary hazardous materials, he must also list employers for which he operated a commercial motor vehicle during the seven years preceding the three years mentioned above; and 11. The certification statement that the information supplied is correct in the applicant's signature line and a date line. Do you agree that: 1. The information provided in the application provides starting point for commercial carriers investigation of a potential driver. 2. FMCSR 391.23 mandates that a commercial carier is required to investigate the applicant's background. A. The applicant's driving record during the preceding three years to the appropriate agency of every state in which the driver held a license. 1. A copy of the response by each state agency must be retained in the driver's qualification fie. C. The investigation of the driver's employment record must be made within 30 days of the date his/her employment begins. 1. The investigation may consist of personal interviews, telephone interviews, letters, or any other method of obtaining information that the carier deems appropriate. 2. Each commercial carier must make a written record with respect to each past employer who was contacted. 3. The record must include the past employer's name and address, the date he/she was contacted, and his/her comments with respect to the driver. 4. The record is kept as a part of the driver's qualification file. 391.23. 3. A failed application process and inadequate investigation can lead to a commercial carer hiring an unqualified driver. Companies Responsibilties - Responsibilty for Driver Qualification Do you agree that: 1. A commercial motor carier has a duty to use only qualified and competent drivers. ~/31 123 ~

2. This duty begins when the dnver is first employed and continues throughout the dnver's employment. 3. A commercial carier is obligated to ensure that the dnver is initially qualified, remains qualified and is never disqualified to operate a commercial vehicle. 4. Since a non-qualified driver should not be operating a commercial vehicle, establishing that the dnver was not qualified is proof that the commercial carers failed in their duty to operate their company safely. Initial Qualifcation of Drivers Do you agree that: 1. Before a carrier allows an individual to drive, it has an affrmative duty to determine if the individual is "qualified." 2. FMCSR 391.11 provides that to be initially qualified to operate a commercial motor vehicle, the driver must meet the following 11 separate criteria: 1. Be at least 21 years old. language. 2. Be able to sufficiently read and speak the English 3. By reason of experience and/or training, be able to safely operate the vehicle. 4. By reason of experience and/or training, be able to determine whether the cargo has been properly loaded. 5. Be familiar with methods and procedures for securing cargo. 6. Is physically qualified to drive a commercial motor vehicle. 7. Has a currently valid commercial motor vehicles operator's license issued only by one state or jursdiction. 8. Has prepared and fuished the motor carier that employs him or her with the list of violations or the certificate as required by section 392.27. 9. Is not disqualified to drive a commercial motor vehicle under the rules in section 391.15. 10. Has successfully completed a driver's road test, and has been issued a certificate of driver's road test in accordance with section 391.13, or has presented an operator's license or a certificate of road test which the motor carrer that employs him/er has accepted as equivalent to a road test in accordance with section 391.33. 11. Have completed and furnished the motor carier with an application for employment under section 391.21. 3. If a dnver fails to meet one of these critena, the commercial carer must not allow him to operate their commercial vehicle. 4. In order to document dnver qualifications, a commercial carer must retain for each dnver employed a separate driver qualification file. 5. The dnver qualification fie must include each of the following documents: 1. Application for employment ( 391.21),?/31 124 ì

2. Motor vehicle records from states for new hires ( 391.23), 3. Previous employer information ( 391.23), 4. Road test form and certificate ( 391.31), or license or certificate accepted in lieu of road test ( 391.33), 5. Medical exam certificate, original or a copy ( 391.43), 6. Any letter granting a waiver of a physical disqualification, 7. Anual motor vehicle record from states for current drivers ( 391.25(a)) 8. Anual review or driving record ( 391.25(c)), and 9. A list of violations ( 391.27). 6. The driver's qualification file is to be kept for the duration of the driver's employment and for three years thereafter. Requirement of Experience and/or Training to Safely Operate Do you agree that: 1. A commercial carier has to ensure that the drivers that they employ have the experience and/or training to operate a commercial vehicle safely in accordance: a. the FMCSR b. State laws governing the operation of Commercial Vehicles c. State Rules of the Road d. CDL Manuals from the state that issued the drivers CDL. Doe_eet these minimum requirements? Does ire drivers that do not meet these requirements? - Why - Unqualified Not Qualified Not Properly Experienced Not Properly Skilled Careless, Irresponsible, reckless Driving Skills Not Suitable to be Professional Driver Knowledge and Skills Requirement Do you agree that: 1. All drivers of commercial motor vehicles shall have knowledge and skils necessary to operate a commercial motor vehicle safely. 383.110. 2. Commercial carers are responsible for ensuring that the drvers have the requisite knowledge and skills. 3. A driver that does not possess the required knowledge and skill canot possibly possess the experience and/or training to operate a commercial vehicle safely. Knowledge 4. Knowledge requirements in FMCSR 383.111 and 383.113. Examples are: 125 if1f i

x - hazardous material endorsement Road Test Certificate Must successfully pass road test and be issued a certificate of completion. 391.31 Describe all ofthe aspects of the road test - 391.31(c)(1-8) Does Transport of America accept or hire drivers who do not have this certificate? 391.33 Was Mr. l-ssued a certificate of driver's road test? -Application The Complete 10 year work history is not given Did talk to -lbout this Were they were contacted (No). -lired What Date ~rientation program Driver Orientation and Training Policy? Decision to hire List all ot-'s minimum requirements for a qualified driver. How much driving experience does ~f America require its applicants? One Year Describe Mr._s driving experience. Who is the final decision-making authority re whether driver hired? Driver Qualification File What is required to be in the driver qualification. 391.21(b-ll) Application 391.21 Written record of past employer investigation. 391.23 Certificate of Road Test. 391.31(e) or a copy oflicense and certificate. 391.33 Response of State Agency to Anual Driver Record Inquiry. 391.25(a) Does anyone audit the driver for qualification fies? 021-037 - Introduce 022 - Show that it is incomplete If so, who for_? When would audit have been conducted Employment Rate How many applications received in 2001 for driving jobs? In 2001, how many drivers were tured down for job applications? 2;ir~ I 126 Zi

Of Estimate Files kept anywhere Data kept anywhere (Purose) the drivers that you turn away, which hiring criteria highest that they failed to meet? - How are those applicants notified Training at_: Receive following training Deparment of Transportation rules and regulations _ rules and regulations Night Driving Log preparation administering first aid safe vehicle control (ex. shifting, the basic shifting rules and terms, as well as shifting patterns and procedures; common transmission 383.11 (c )(3); visual search - the importance of proper visual search, and the proper visual search methods 383.11(c)(5); speed management - the importance of understanding the safe effects of speed 383.11(c)(7); space management - the procedures and techniques for controllng the space around the vehicle 383.11(c)(8); hazard perceptions - the basic information on hazard perception includes recognition of hazards 383.11(c)(11); skid control and recovery - information on the cause of major types of skids as well as procedures for recovering from skids 383.11(c)(13); basic vehicle operation skills safe driving skil: proper visual search methods, speed control for traffic conditions 383.1l3(b) - ~ intersection approaches Training at s Defensive Driving Policy Training after being hired Describe Fleet manager assigned. Driver Manger Safety Departments Role in Training Safety deparment involved? Do you personally participate in testing or training of your drivers? Does the driver training deparment report to the safety deparment? Did you design any of the tests that were given in the training of drvers? Testing On the information on which trained Who administered those tests? Written Driving 2J/3/ 127 7 ~

,., assigned a training supervisor Files kept anywhere Data kept anywhere (Purpose) -l0licy - Trip inspections reporting accidents post-accident procedures notification to the safety director contacting the terminal manager policies that say that a driver who is involved in a wreck where a motorist is kiled, can drive his tractor away from the accident scene and continue on his trip? No motor carier shall permit a driver from operating a truck while the driver's ability or alertness is impaired for any cause so as to make it unsafe for him to continue his trip. 392.3 psychological evaluations drug tests drivers required to fie reports with any deparment or agent of_ communication at scene psychological testing for your drivers regarding approaching an intersection on a stale green light. Safety Meeting (Driver Meeting) Mandatory drivers sign showing attendance other records of attendants drivers paid Regularly scheduled or impromptu What would prompt such meetings? High accident rate High injur rate High rate of DOT inspêction violations High rate of moving violations subjects discussed approaching an intersection on a stale green light. Proper Intersection Procedure Safety Memos (Newsletters) Frequency (Regular or specific subjects General Skils What is the stopping distace ofthe trck at 55 mph? How do the FMCSR apply to you? Explain the hours of service requirement? What are FMCSR following distaces What is a safe distance to follow at 55mph? Explain what keeping a proper lookout means? ~(31 128 il(

Trucking Companies To California Supreme Court: Give Us A Break Raymond A. Greene, III Burnham Brown It is not surprising that California courts are providing the backdrop for large plaintiff employment verdicts and the advancement of pandemic class action litigation over untimely or missed meal breaks. What is somewhat surprising, however, is that the California Supreme Court is poised to give employers some relief in ruling on the single most important unresolved issue in California employment law today. Employers in virtually every industry in the state await a conclusive finding concerning California Labor Code 512 s requirement that employers provide a 30 minute meal period for employees that work more than 5 hours in a day. The key issue involves whether provide means employers must force employees to take meal periods or merely make meal periods available. The stakes are very high for employers since the determination of class certification in meal period cases also turns on the definition of provide. In fact, the first certified meal period case that has been tried in California (Savaglio v. Wal-Mart stores, Inc.) resulted in a jury award exceeding $172 million to 116,000 plaintiff employees. There, the Court instructed the jury that provide meant that Wal-Mart not only had to to offer the opportunity of a meal period for employees, but also had to ensure the employees took the period. Cicairos v. Summit Logistics, Inc.: Truck Drivers Apply the Breaks Large retailers are not the only companies watching the California Supreme Court closely. The transportation industry is in lock step, especially after the Third Appellate District in California addressed the meaning of provide in Cicairos v. Summit Logistics, Inc. (2005) 133 CA4th 949. 1 There, a trucking company used an activity based compensation system in determining plaintiff s wages. Specifically, the company utilized a computerized onboard system called XATA to record various factors such as speed, starts and stops, and time. Plaintiff truck drivers were required to input factors manually into the onboard computer system so that activities could be accurately monitored. A driver could communicate that a certain trip took longer than expected by inputting one of the reasons for delay (e.g., road construction). In the absence of the inputting of one of these designated reasons for delay, a trip that lasted longer than expected resulted in the driver not being paid for extra time. The Court reasoned that since the defendant did not schedule meal periods or include rest break activity codes into the computer system, management pressured drivers to skip lunch and make more than one daily trip. The Cicairos court reversed the trial court s granting of summary judgment for the defendant noting that the defendant had the ability to regulate their drivers activity to a certain extent through the XATA computer system. Given this ability, the defendant s obligation to provide the plaintiffs with 1 In Cicairos, the Court of Appeal reversed a trial court s granting of a motion for summary judgment finding that the motor carrier exemption set forth in wage order number 9 of the Industrial Welfare Commission (IWC) applied to overtime claims but not to meal periods, rest breaks and itemized wage statements. The First Appellate District had ruled previously that wage order number 9 provided that California overtime regulations did not apply to employees whose hours of service are regulated by the United States Department of Transportation. Collins v. Overnite Transportation (2003) 105 Cal.App.4th 171. 129

an adequate meal period was not satisfied by assuming meal periods were taken. Rather, the employer has an affirmative obligation to ensure that workers are actually relieved of all duty. Federal Courts Distinguish Cicairos While the Cicairos ruling was unfortunate in that it now required employers to ensure their drivers took a meal break, federal courts have expressed their own view on the meaning of provide. Recent federal court decisions have interpreted the statutory language as mandating employers to only provide the opportunity for the employee to take a meal break. One such decision is White v. Starbucks, 497 F.Supp.2d 1080 (N.D. Cal. 2007). There, the plaintiff was a store manager who testified at deposition that he did not recall ever missing a meal when he worked at one store location. Any meals that he missed at another store location were the result of his own personal decision to skip those meals. Further, there was no evidence that store managers pressured employees to skip breaks. This situation was distinguishable from the allegations in Cicairos where the defendant knew that employees were driving while eating and did not take steps to remedy the problem. The Court felt it was inappropriate to require an employer with no reason to suspect employees were missing breaks to find a way to force employees to take breaks or pay an employee an additional hour of time when he or she voluntarily chose to skip a break. The Court reasoned that employees could manipulate the process and manufacture claims by skipping breaks or taking breaks of fewer than 30 minutes entitling them to compensation of one hour of pay for each violation. The Court felt that this could not have been the intent of the California legislature to create perverse and incoherent incentives. Another federal court distinguished the Cicairos ruling in a transportation-related case, Moreno v. Guerrero Mexican Food Products, CV05-7737 DSF (C.D. Oct. 11, 2007) 2. There, the United States District Court for the Central District of California ruled that California s meal period laws obligated employers to notify employees that they are free to take a 30 minute break. However, the same laws did not create an obligation to ensure that employees take advantage of those made available to them. The plaintiff drivers in Moreno argued that California Labor Code Sections 226.7 and 512 along with the applicable IWC Wage Order for the transportation industry required the defendant to ensure that they took meal breaks even on the road. The Court disagreed, ruling that the language in the IWC Wage orders did not impose a duty to enforce meal periods. Rather, the language set forth an obligation to provide a meal break, not to ensure that employees ceased working during that time. The Moreno decision is important in that it noted that ensuring a meal break would not be practical in many industries. The Court stated that an undue burden would be placed on employers whose employees are numerous or do not remain in contact with the employer during the day. Despite this partially helpful ruling, the Court denied defendant s motion for summary judgment on the meal period claim. The Court ruled that the employer s informal and verbal advisement of the meal break right to its employee drivers was insufficient to establish the company had adequately authorized employees to take their meal periods. And even after the defendant formally notified drivers after February 2006 that they were entitled to take meal breaks and mandated that the drivers record such breaks on their hand-held computers, the Court found that some drivers had routes that were not flexible enough to allow meal breaks. While denying defendant s motion for summary judgment, it also held that the case was not appropriate to be tried as a class action. 2 Moreno is not a published decision. 130

The California federal courts continued to distinguish Cicairos in Brown v. Federal Express Corp., 249 FRD 580 (C.D. Cal. 2008). In Brown, the Central District refused to grant certification of a meal break class since individual issues predominated based on the fact that employers must only provide meal breaks and not require that they be taken. In reviewing the applicable wage orders and Labor Code Sections 512 and 226.7, the Court found nothing in said laws to support the position that California employers are required to ensure employees take meal breaks. Indeed, it is the employer s obligation to ensure that its employees are free from its control for thirty minutes, not to ensure that the employees do any particular thing during that time. (In making this statement, the Brown court looked for guidance from the California Supreme Court s view on meal breaks in the landmark case entitled Murphy v. Kenneth Code Prods., Inc., (2007) 40 Cal.4th 1094.) The decision in Murphy ultimately found that an employee forced to forego his or her meal period loses a benefit to which the law entitled him or her. Thus, the additional one hour of pay constituted compensation, not a penalty. The Brown court found that requiring enforcement of meal breaks would be too burdensome on employers, especially when the employees do not remain in constant contact with the employer. The court continued and stated that it does not believe the California Supreme Court would adopt the enforcement rule advocated by employees. The Brown court was not persuaded by the employee s interpretation of the decision in Cicairos. The Brown court believed Cicairos did not require employers to ensure employees took their meal breaks, rather Cicairos stands for the proposition that employers must make meal breaks available and relieve them of duty. Based on the Brown court s interpretation of the standard regarding meal breaks, it refused to certify a meal break class because a showing that Federal Express policies deprived employees of their breaks would require substantial individualized fact finding. The Federal Express drivers had different driving styles, different driving conditions, different routes, worked in different facilities across California, and had different managers, which the court would be forced to analyze in determining the reason an employee forewent a meal break. The highly individualized factual inquiries just described predominate over the few legal and factual issues shared by the proposed class. The court would, in essence, be forced to hold over 5,000 mini-trials in order to determine the reason behind the missed meal break. Brinker and Brinkley Set the Stage for the Supreme Court California s Fourth Appellate District weighed in on the break requirement in an unpublished ruling in Brinker Restaurant Corp. v. Superior Court, Cal. Ct. App. Oct. 12, 2007. The Court of Appeal reversed a trial court class certification order finding that the order was based on the false premise that the employer had a duty to ensure that its hourly employees meal periods were provided to them. It should be noted that in Brinker, the defendant restaurant corporation operates 137 restaurants throughout California. The company s meal policy states that employees are entitled to take a 30 minute meal period, during which they must clock out when they work a shift exceeding 5 hours. In addition, the company rest period policy allows employees who work more than 3.5 hours during a shift to be eligible for a 10 minute break for each 4 hours that they work. Employees who violate the policy were subject to disciplinary action including termination. The trial court granted the plaintiff s motion for certification of rest period, meal period and off-the-clock sub-classes. The Court of Appeal issued a Writ vacating the trial court s order holding that it abused its discretion in 131

granting a class certification. The Court provided insight on the meal break and other issues in its ruling: 1. Failure to ensure meal breaks. The Court vacated the trial court certification and remanded the matter to decide the issue as to what provide means. Nonetheless, the language of the Court s decision suggested that California Supreme Court would require only that an employer offer real breaks rather than require employers to actively ensure workers were indeed taking the breaks. It went on to say that individual issues would predominate since inquiries would be required at trial to determine whether each alleged instance of a missed or shortened meal period was the result of the employee s personal choice or a manager s coercion. Therefore, class certification would not apply. 2. Rolling 5 Hour Meal Periods. The Court reasoned that Labor Code 512 does not contemplate a rolling 5 hour meal period because an employer would never reach the question of whether an employee had worked the 10 hours necessary to trigger the second meal. The trial court was in error in determining that California has a rolling 5 hour meal period requirement. Here, plaintiffs contended that there would be a violation if an employee worked any overtime at all without receiving a second meal period. By ruling that California does not have rolling 5 hour meal period requirement, it appears that employers will not face the contention that there is a per se violation of the meal period requirement anytime an employee works more than 5 hours after taking his or her first meal break. 3. Rest Break Claims. The Court simply held here that a determination on a classwide basis as to whether or not members of the class missed rest breaks as a result of supervisor s coercion or employee s uncoerced choice was not possible. Again, individual questions would predominate here. 4. Certification of Off the Clock Claims. The Court of Appeal ruled that the trial court had not properly examined the elements that needed to be established for the plaintiff to prevail on the off the clock claim. Given plaintiff s allegations that defendant managers shaved time off employee records, the trial court should have examined the elements of the claim before certifying them for class treatment. Another case that will frame the meal period issue before the Supreme Court is Brinkley v. Public Storage, Inc., (2008) 167 Cal.App.4th 1278. There, the plaintiff accused his former employer of failing to ensure that employees were provided appropriate meal and rest breaks and providing incorrect paystubs. Defendant had instituted a policy that required all employees to take a 30 minute meal break if they were working a shift over 5 hours and to sign in and out for the breaks. The Court of Appeal upheld the trial court s partial granting of defendant s motion for summary judgment. The Court found that defendant produced substantial evidence that the employer provided meal periods to the plaintiff and other period sub-class members. Specifically, the defendant company showed that: 1. Defendant had a written policy providing for meal periods; 2. Plaintiff was aware of the policy; 3. Defendant disciplined employees for not taking meal periods; and 132

4. Defendant warned employees (including the plaintiff) at a meeting that they were required to take lunch and rest breaks. Since the defendant met its burden with respect to the meal period claim, the burden shifted back to the plaintiff. Plaintiff claimed that he and other non-exempt employees missed meal breaks at times. However, the plaintiff did not produce admissible evidence that he or other employees were denied an opportunity to take the meal period. Plaintiff belatedly tried to argue that employees were not allowed to leave the premises or lock the office during meal periods. Therefore, they were effectively on duty and entitled to one hour of wages per meal. The Court dismissed this argument as being waived since it was not in the appellate brief or separate statement opposing the motion for summary adjudication. In sum, the Court of Appeal felt that California law does not require the employer to ensure that employees take rest periods. An employer need only make rest periods available. Defendant was able to shift the burden back to the plaintiff by demonstrating that the company had a written policy permitting employees to take rest periods in substantial compliance with the wage order, and that the defendant advised the plaintiff and other employees at a meeting that they were required to take these periods. Plaintiff failed to meet its burden. Due to the conclusory nature of its allegations, plaintiff s claim that he could not take a rest break was insufficient to raise a triable issue of material fact. Based on the guidance provided by the federal courts, it appears that the California Supreme Court is poised to uphold Brinker Restaurant and Brinkley, at least in part. It is anticipated that the Supreme Court will require employers to only make meal periods available rather than ensure they were taken. That being said, employers will still face liability for violations of the Labor Code where plaintiffs can demonstrate the company impeded, discouraged or dissuaded employees from taking rest periods or meal breaks. The net impact of the Supreme Court upholding Brinker and/or Brinkley creates a difficult burden of proof standard for plaintiffs. It is likely that the plaintiffs will have to prove not only that they did not receive their meal periods but also why they did not receive them. This standard of proof will make it extremely difficult for plaintiffs to demonstrate liability against a company that has a meal break policy but subtly discourages employees from taking rest or meal periods. Despite the anticipation of an employer-friendly resolution of the Brinkley and/or Brinker cases in the Supreme Court, it would behoove employers to develop meal break procedures with goals that include defeating class certification. Employers can protect themselves from the pandemic meal break litigation with the following simple steps: 1. Implement and distribute written policies that comply with California meal and rest break requirements; 2. Document management attempts to remind employees that meal and rest breaks must be taken; 3. Institute a policy of disciplinary actions, including termination, of employees who fail to take meal and rest periods. 133

4. Keep accurate time records to reflect at least that meal and rest periods were available to employees. The American Trucking Association Gets Involved How concerned is the transportation industry with the resolution of the meal break issue by the California Supreme Court? The interest of the transportation industry in the nature and scope of the Supreme Court decision in Brinker is illustrated by the Amici Curiae brief filed by the American Trucking Associations, Inc. on August 17, 2009. ATA is, of course, the association of motor carriers, state trucking association and national trucking conferences created to promote and protect the interests of the trucking industry. Representing over 30,000 companies and almost every type of motor carrier operation in the United States, the ATA is an effective advocate for the trucking industry s interests before state and federal courts. The ATA relies on the aforementioned case law and the language of Labor Code 226.7 and 512 in asserting that employers only need to make a meal period available pursuant to the law. The ATA goes on to claim that the mandatory meal periods would be impossible to enforce for motor carrier operators. The association contends that monitoring employee compliance with the meal break requirements would be difficult, while enforcing these same requirements would be virtually impossible. The ATA notes that the Federal Motor Carrier Safety Administration had considered a mandatory rest break while amending hours of service regulations for interstate motor carriers in 2005. The FMCSA concluded that it would be difficult to enforce their personnel to verify meal and rest breaks, and that to do so would significantly interfere with the operational flexibility that motor carriers and drivers need to manage schedules. The ATA goes on to argue in its brief that mandatory meal periods at specified times would often cause carriers to choose between violating the requirements and putting their drivers in potentially unsafe situations. In addition, drivers would be placed in difficult situations by strict timing regulations. For example, traffic may make a driver s planned break at a certain location impossible. In order to meet the inflexible timing requirements suggested by the plaintiff in Brinker and take a meal break, the driver may be forced to pull off to the side of the road, a potentially dangerous situation. The driver would face the choice of violating California Vehicle Code 21718(a) by making a prohibited roadside stop or violating the break time requirements. In sum, it appears the transportation industry views the Brinker and Brinkley cases as a vehicle to avoid the strict and onerous interpretation of the meal period requirements set forth in Cicairos. Although oral arguments have not yet been scheduled before the Supreme Court, the transportation industry and many other employers should anticipate guidance on the meal break issue later this year. Ray Greene Burnham Brown 1901 Harrison Street, 11th Floor PO Box 119 Oakland, CA 94604 P: (510) 835-6721 E: rgreene@burnhambrown.com 134

Extraterritorial Jurisdiction In the Trucking Industry Edward K. Dixon, Esq. Rebecca Yanos, Law Clerk Zimmer Kunz, PLLC States began to pass Workers Compensation laws beginning in the early part of the 20 th century. By the 1950s, each state had passed its own, individualized body of law creating its system of workers compensation. As a result, a mixture of different laws, benefits, eligibility and compensation varied from state to state. Thus, many challenges have resulted for industries which span multiple states like trucking and heavy construction as a result of the individualized formation of many different workers compensation systems. One of these issues has been extraterritorial jurisdiction with regards to workers compensation benefits for employees working outside of the state s jurisdiction where he or she is employed or resides. The following is a brief outline highlighting the various requirements for extraterritorial jurisdiction within Arizona, Illinois, Wisconsin, Texas, Georgia, Florida, California, and Ohio. Pennsylvania: If an employee, while working outside the territorial limits of Pennsylvania, suffers an injury on account of which he, or in the event of his death, his dependents, would have been entitled to the benefits provided by this act had such injury occurred within this State, such employee, or in the event of his death resulting from such injury, his dependents, shall be entitled to the benefits provided by this act, provided that at the time of such injury: (1) His employment is principally localized in Pennsylvania, or (2) He is working under a contract of hire made in Pennsylvania in employment not principally localized in any state, or (3) He is working under a contract of hire made in Pennsylvania in employment principally localized in another state whose workmen's compensation law is not applicable to his employer, or (4) He is working under a contract of hire made in Pennsylvania for employment outside the United States and Canada. See 77 P.S. 411.2. Arizona: If an employee who has been hired or is regularly employed in this state receives a personal injury by accident arising out of and in the course of such employment, he shall be entitled to compensation according to the law of this state even though the injury was received without the state. If an employee who has been hired without this state is injured while engaged in his employer's business, and is entitled to compensation for the injury under the law of the state where he was hired, he may enforce against his employer his rights in this state if they are such that they can reasonably be determined and dealt with by the commission and the courts in this state. 135

To receive benefits under state's workers' compensation laws, 23-901 et seq., for injury occurring outside of state claimant must have been hired in state or must be regularly employed in state. For example, where truck driver was hired in Arizona and regularly worked out of Arizona on his driving assignments for Texas employer, and where driver was injured in accident in Texas which occurred during course of his employment, it was proper to award workmen's compensation coverage under Arizona law even though injury was received in Texas. Texas. Jordan v. Industrial Commission (App. Div.1 1977) 117 Ariz. 215, 571 P.2d 712 See Arizona Statute: A.R.S. 23-904. Illinois: Employee whose employment is outside of the State of Illinois where the contract of hire is made within the State of Illinois have the same rights and power to contract, receive payments and give quittances as employees within the state. Employee, whose employment results in injuries within the State of Illinois where the contract of hire is made outside of the State of Illinois have the same rights and power to contract, receive payments and give quittances as employees within the state. Employee whose employment is principally localized within the State of Illinois, regardless of the place of the accident or the place where the contract of hire was made, and including aliens, and minors who, for the purpose of this Act are considered the same and have the same power to contract, receive payments and give quittances. Wisconsin: No information regarding extraterritorial jurisdiction for worker s compensation benefits is provided within the Wisconsin Worker s Compensation statute, located at W.S.A. 102 et. seq. Texas: An employee who is injured while working in another jurisdiction or the employee's legal beneficiary is entitled to all rights and remedies under this subtitle if: (1) The injury would be compensable if it had occurred in this state; and (2) The employee has significant contacts with this state or the employment is principally located in this state. An employee has significant contacts with this state if the employee was hired or recruited in this state and the employee: (1) Was injured not later than one year after the date of hire; or (2) Has worked in this state for at least 10 working days during the 12 months preceding the date of injury. See V.T.C.A., Labor Code 406.0. Georgia: In the event an accident occurs while the employee is employed elsewhere than within George, which accident would entitle him or his dependents to compensation if it had occurred in this state, the employee or his dependents shall be entitled to compensation if (1) the contract of employment was made in this state and (2) if the employer's place of business or the residence of the employee is in this state unless the contract of employment was expressly for service exclusively outside of this state. 136

If an employee shall receive compensation or damages under the laws of another state, nothing contained in this Code section shall be construed so as to permit a total compensation for the same injury greater than is provided for in this chapter. Any employer from another state engaged in the construction industry within Georgia with a workers' compensation insurance policy issued under the laws of such other state so as to cover that employer's employees while in this state shall be in compliance with subsection (a) of this Code section if: (1) Such other state recognizes the extraterritorial provisions of Code Section 34-9-242; and; (2) Such other state recognizes and gives effect within such state to workers' compensation policies issued to employers of this state. See O.C.G.A. 34-9-242 and O.C.G.A. 34-9-121(b)(1). Florida: If an employee is injured in an accident while employed elsewhere than in Florida, which would entitle the employee or his or her dependents to compensation if it had happened in this state, the employee or his or her dependents are entitled to compensation if the contract of employment was made (1) in this state, or (2) the employment was principally localized in this state. However, if an employee receives compensation or damages under the laws of any other state, the total compensation for the injury may not be greater than is provided in this chapter. See FL 440.09(d). California: An employee who has been hired/regularly employed in the state of California who receives a personal injury by accident arising out of and in the course of such employment outside of this state, he, or his dependents, in the case of his death, are entitled to compensation according to the law of this state. Any employee who has been hired outside of this state and his employer shall be exempted from the provisions of this division while such employee is temporarily within this state doing work for his employer if such employer has furnished workmen's compensation insurance coverage under the workmen's compensation insurance or similar laws of a state other than California, so as to cover such employee's employment while in this state; provided, the extraterritorial provisions of this division are recognized in such other state and provided employers and employees who are covered in this state are likewise exempted from the application of the workmen's compensation insurance or similar laws of such other state. The benefits under the Workmen's Compensation Insurance Act or similar laws of another state, or other remedies under such act or such laws, shall be the exclusive remedy against such employer for any injury received while working in California. A certificate from the duly authorized officer of the appeals board or similar department of another state certifying that the employer of such other state is insured therein and has provided extraterritorial coverage insuring his employees while working within this state shall be prima facie evidence that such employer carries such workmen's compensation insurance. See California Labor Code 3600.5. Ohio: Whenever, with respect to an employee of an employer who is subject to and has complied with this chapter, there is possibility of conflict with respect to the application of workers' compensation laws because the contract of employment is entered into and all or some 137

portion of the work is or is to be performed in a state or states other than Ohio, the employer and the employee may agree to be bound by the laws of this state or by the laws of some other state in which all or some portion of the work of the employee is to be performed. The agreement shall be in writing and shall be filed with the bureau of workers' compensation within ten days after it is executed and shall remain in force until terminated or modified by agreement of the parties similarly filed. If the agreement is to be bound by the laws of this state and the employer has complied with this chapter, then the employee is entitled to compensation and benefits regardless of where the injury occurs or the disease is contracted. If the agreement is to be bound by the laws of another state and the employer has complied with the laws of that state, the rights of the employee and the employee's dependents under the laws of that state are the exclusive remedy against the employer on account of injury, disease, or death in the course of and arising out of the employee's employment without regard to the place where the injury was sustained or the disease contracted. As for an employee who is a resident of another state, insured under another state s laws performing work within Ohio, the employee and the employee's dependents are not entitled to receive compensation or benefits under this chapter, on account of injury, disease, or death arising out of or in the course of employment while temporarily within this state, and the rights of the employee and the employee's dependents under the laws of the other state are the exclusive remedy against the employer on account of the injury, disease, or death. See O.R.C. 4123.292 and O.R.C. 4123.54. Of course, every state s judiciary interprets these statutes in their own unique way creating a legal tapestry which creates headaches for employers crossing state lines. Our presentation will not necessarily clean the muddied waters but will hopefully help demystify the necessary processes of analysis. Edward K. Dixon Zimmer Kunz, PLLC 3300 US Steel Tower Pittsburgh, PA 15219-2702 P: (412) 281-8000 E: dixon@zklaw.com 138

Panel Discussion: Medicare Secondary Payer Statute Panel Members: Edward K. Dixon: Zimmer Kunz, PLLC Pittsburgh, PA Brian Voke: Campbell Campbell Edwards & Conroy Professional Corporation Boston, MA Topics May Include: Responsibility of Defendants under the Secondary Payer Act Workers Compensation Payments and Settlements Medicare, Private Health and No-Fault payments Notice requirements Lien and Subrogation Rights Dealing with CMS Complete Medicare information can be found in The Harmonie Group Member Firms Synopsis of the Medicare Secondary Payer Statute. This document is available for download at www.harmonie.org/resources OR you may request a CD version by contacting Tim Violet at the address below. Tim Violet, Esq. Executive Director THE HARMONIE GROUP 634 Woodbury Street St. Paul, MN 55107 Office: (651) 222-3000 Cell: (612) 875-7744 Fax: (651) 222-3508 Email: tviolet@harmonie.org 139

Operation: Preserve ESI An Update on E-Discovery Case Law Regarding ESI Preservation and Litigation Holds Guidelines from the Zubulake, Pension Committee, and Rimkus Decisions Presented by: Cynthia Tari Hermes Sargent Bates, L.L.P. Prepared by: Dwayne J. Hermes, Esq. Co-Authors: Natalie Butler and Christian Dennie Hermes Sargent Bates, L.L.P. TABLE OF CONTENTS I. Introduction A. Zubulake Opinions B. Pension Committee C. Rimkus II. Litigation Holds Practical Guidelines A. Litigation Holds Checklist 1. Form Written 2. Who Recipients of the Written Litigation Hold 3. Process Implementation, Monitoring, and Revising 4. Cost Hindrances Seeking Protection for Costs of Producing ESI III. Failure to Preserve ESI Consequences A. Burden of Proof B. Practical Tips Checklist for Litigation Holds C. Texas Law and the Practical Application of ESI IV. Conclusion Appendix A - Chart of Preservation Failures and Possible Sanctions Appendix B - Document Retention Policies and Litigation Holds: A Summary Checklist I. Introduction The evolution and development of e-discovery have been convoluted partially based on rapidly changing technologies and based on the need for lawyers, judges, and businesses to determine how electronically-stored information (ESI) needs to be preserved and then later produced during the throes of litigation. Many lawyers remain concerned about the procedures and policies, in effect an Operation Preserve ESI, that need to be launched when litigation is reasonably anticipated. Pension Committee, 2010 WL 184312 at *4 (S.D.N.Y. Jan. 15, 2010). As explained by Judge Scheindlin, once a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a litigation hold to ensure the preservation of relevant documents. Id. at *4, quoting Zubulake v. UBS Warburg, LLC, 220 F.R.D. 212, 218 (S.D.N.Y. 2003) (Zubulake IV). Questions remain about knowing how, when, and to whom these directives regarding preserving ESI must be given. Two of the main concerns addressed in case law and commentary are the process and timing of issuing a litigation hold letter to key players directing them to preserve ESI once litigation is 140

reasonably anticipated. The Southern District of New York judges, in particular Judge Shira Scheindlin, have taken leading roles in analyzing this process. On January 15, 2010, Judge Scheindlin issued her highly-anticipated Pension Committee decision, which builds on the ESI preservation steps she established in 2003 in her Zubulake opinions. Shortly after the Pension Committee decision, Judge Lee Rosenthal, from the Southern District of Texas, issued a lengthy, 139-paged opinion, addressing willful destruction of ESI and appropriate sanctions for such behavior. Rimkus Consulting Group, Inc. v. Cammarata, 2010 WL 645253 at *1 (S.D. Tex. Feb. 19, 2010). The Zubulake, Pension Committee, and Rimkus decisions provide guidelines for issuing litigation holds and provide an analysis of when ESI preservation failures should trigger sanctions. The timeline of e-discovery law had two main milestones up until 2010: 1) the Zubulake opinions and 2) the 2006 amendments to the Federal Rules of Civil Procedure. As many are aware, in 2003, Judge Shira Scheindlin of the Southern District of New York authored the famous Zubulake opinions. These opinions were the first opinions to examine in depth the impact of e-discovery, the need for litigation holds and document retention policies, and the sanctions available for counsel who fail to issue litigation holds which may permit the company to negligently, grossly negligently, or willfully destroy relevant electronically stored information (ESI). 1 In 2006, the Federal Rules of Civil Procedure were amended to incorporate the term electronically stored information and provide some guidelines on the types of ESI that may be available for production in litigation. Electronically stored information is broadly defined under the Rules and encompasses every single piece of information maintained by the company stored in any medium. 2 Parties may now refer to electronically stored information in responses to interrogatories and opt to produce data in electronic form. 3 The procedures for pretrial conferences and initial conferences were also revised to require parties to discuss provisions for the disclosure and discovery of electronically stored information in pretrial conferences and initial scheduling conferences. 4 Parties are also now required to discuss potential privilege claims, including possible agreements to govern the inadvertent disclosure of privileged documents or electronically stored information. 5 To help better understand the importance of these amendments and the development of the case law thus far, these cases will be explored in detail below. A. Zubulake Opinions The Zubulake opinions arose from an employee gender discrimination case. UBS s conduct resulted in an adverse inference charge to the jury instructing the jury that the deleted emails would have negatively affected its case. The main issues in these opinions centered on retrieving deleted emails relevant to the plaintiff s case, who should bear the costs of retrieving the deleted emails from UBS s backup tapes, and whether sanctions should be imposed on UBS for not taking efforts to preserve those deleted emails. 1 Zubulake v. UBS Warburg LLC, 217 F.R.D. 209 (S.D.N.Y. 2003) (Zubulake I); Zubulake v. UBS Warburg LLC, 230 F.R.D. 290 (Zubulake II); Zubulake v. UBS Warburg LLC, 216 F.R.D. 280 (S.D.N.Y. 2003) (Zubulake III); Zubulake v. UBS Warburg LLC (Zubulake IV); Zubulake v. UBS Warburg LLC, 229 F.R.D. 422 (S.D.N.Y 2004) (Zubulake V). 2 See FED. R. CIV. P. 34 (a). 3 FED. R. CIV. P. 33 (d); 34. 4 FED. R. CIV. P. 16 (a) (5); 26 (f) (3). 5 FED. R. CIV. P. 16 (a) (6) ; 26 (f) (4). 141

In Zubulake I, the court found that UBS should bear the costs of restoring the backup tapes containing the deleted emails. Zubulake v UBS Warburg, LLC, 217 F.R.D. 209 (S.D.N.Y. 2003). In Zublake II (not connected with the email production dispute), the court denied the Plaintiff s request to report certain information contained in a deposition to the NYSE. Zubulake v. UBS Warburg, LLC, 230 F.R.D. 290, 293 (S.D.N.Y. 2003). In Zubulake III, the court applied a seven-factor cost allocation test and found that UBS still had to restore the backup tapes containing the deleted emails, produce the emails, and pay 75% of the collection and production costs. Zubulake v. UBS Warburg LLC, 216 F.R.D. 280, 284 (S.D.N.Y. 2003). Zubulake IV addressed the plaintiff s requests for sanctions against UBS. Zubulake v.ubs Warburg LLC, 220 F.R.D. 212, 217 (S.D.N.Y 2003). The court had to determine what data were accessible versus inaccessible and determined that accessible data were data contained on backup tapes actively used for information retrieval. Id. at 217-218. Inaccessible data were data stored on disaster recovery backup tapes. Id. at 217. Parties had a duty to preserve accessible data, but not inaccessible data (except potentially the inaccessible data for key players to the litigation). Id. at 217-218. Zubulake V addressed a litigant s duties to preserve and produce ESI. It was in this final opinion that Judge Scheindlin determined that an adverse inference charge should be issued against UBS regarding the deleted emails. Zubulake v.ubs Warburg LLC, 229 F.R.D. 422, 424 (S.D.N.Y. 2004). Judge Scheindlin explained that lawyers have a duty to issue carefully worded litigation holds to key players of the company when litigation is reasonably anticipated and should monitor these litigation holds after they are issued. Id. In the Pension case, as outlined below, Judge Scheindlin revisited in more detail the process of issuing and monitoring a litigation hold letter and when sanctions may be imposed for not properly or timely issuing a litigation hold letter. B. Pension Committee In Pension Committee v. Banc of America, 2010 WL 184312 at *3 (S.D.N.Y. Jan. 15, 2010), Judge Scheindlin emphasized that the courts have a right to expect that litigants and counsel will take the necessary steps to ensure that relevant records are preserved when litigation is reasonably anticipated, and that such records are collected, reviewed, and produced to the opposing party. Id. at *1. This case involved a suit by investors to recover losses stemming from liquidation of two hedge funds in which they held shares. Id. at *1. During the discovery process, the defendants claimed that there were substantial gaps in the plaintiffs document production. Id. The Court ultimately found that the defendants demonstrated that the plaintiffs had destroyed or failed to preserve relevant evidence, including numerous emails, and instructed that an adverse inference jury instruction be issued regarding the lost emails. Id. at *23. Judge Scheindlin made it clear in the Southern District of New York, failure to issue a written litigation hold constitutes gross negligence. Id. at *3 (emphasis added). This finding may differ in other jurisdictions but, to be on the safe side, counsel at a minimum should issue a written litigation hold when litigation is reasonably anticipated. In the Pension decision, the court made several key holdings including: 6 1. the failure to issue a written litigation hold is gross negligence; 6 DRI Webcast presentation outline. 142

2. the failure to preserve email or backup tapes of key players after a duty has attached is gross negligence or willfulness if no active data are available; and 3. the failure to evaluate the accuracy and validity of search terms is negligence. Judge Scheindlin organized her opinion into three main sections. The court (1) discussed how to define negligence, gross negligence, and willfulness in the discovery context and what conduct falls into these categories; (2) reviewed the law on sanctions for spoliation of discovery; and (3) applied the governing law to the thirteen plaintiffs discovery misconduct. 2010 WL 184312 at *2 (S.D.N.Y. Jan. 15, 2010). Judge Scheindlin explained that in the discovery context and the e-discovery context in particular, the first step is the preservation of evidence which commences with the issuance of a written litigation hold. Judge Scheindlin recognized that every case is different, and established a continuum range of negligent grossly negligent willful failure to preserve ESI. Id. at *2. The severity of the sanctions imposed depends on the degree of culpability for the behavior. Judge Scheindlin set the baseline for negligence as the failure to preserve electronic records. Judge Scheindlin indicated that it is safe to assume, and the court will assume, that if counsel fails to timely issue a written litigation hold, then relevant documents will be lost or destroyed. Id. at *2. As noted earlier, Judge Scheindlin considers failure to issue a written litigation hold gross negligence because that failure is likely to result in the destruction of relevant information. Id. at *3. The second step in the discovery process is collection and review of the evidence. Id. at *3. In Pension Committee, Judge Scheindlin emphasized that litigants have the duty to preserve electronic communications and records of former employees that are in the company s possession, custody, or control. Judge Scheindlin also noted that a potentially higher burden may rest on plaintiffs to issue written litigation holds faster because plaintiffs are in a better position to anticipate litigation far sooner than the defendants. C. Rimkus On February 19, 2010, approximately one month after Judge Scheindlin issued her Pension Committee decision, Judge Lee Rosenthal of the Southern District of Texas issued Rimkus Consulting Group, Inc. v. Cammarata, 2010 WL 645253 at *1 (S.D. Tex. Feb. 19, 2010), a lengthy, 139-paged opinion addressing willful destruction of ESI and the appropriate sanctions for such destruction. This case arose from two parallel lawsuits regarding the validity of a non-compete agreement. In this case, a former employee of Rimkus Consulting left Rimkus and opened his own consulting firm. Several other Rimkus employees left with him to join his new consulting firm in Louisiana called U.S. Forensic. At Rimkus, this former employee (as well as the other former employees) had signed a non-compete agreement. In the fall of 2006, he filed a declaratory action in a Louisiana court to declare the non-compete agreement invalid. Near the same time, Rimkus filed suit in Texas against this former employee to enforce the non-compete agreement. In this case, Judge Rosenthal addressed the issue of sanctions against the defendants (the former employees) for destroying emails. Rosenthal found that the former employees deliberately destroyed emails even after they knew that litigation was coming. Id. at *1. Based on the evidence, Judge Rosenthal found that the former employees actions were done in bad faith which warranted the severe sanction of an adverse inference instruction. Id. The Judge determined that he would inform the jury that if it finds that the defendants intentionally deleted evidence to prevent its use in 143

anticipated or pending litigation, the jury may, but is not required to, infer that the lost evidence would have been unfavorable to the defendants. Id. The court also awarded attorneys fees and costs to the plaintiffs that were reasonably incurred in identifying and revealing the spoliation and in litigating the consequences. Id. at 3. In determining whether sanctions were warranted, the court considered both the spoliating party s culpability and the level of prejudice to the party seeking discovery. Judge Rosenthal agreed with Judge Scheindlin s methodology of analyzing culpability and prejudice on a continuum. Rosenthal recognized that a party s culpability can range from inadvertent destruction to intentional destruction to prevent the use of documents in litigation, while prejudice to the other party can range from no impact to preventing the party from defending itself or proving its claims. Id. at *6. In analyzing whether destruction of emails was intentional or not, a judge must look to see if the Federal Rules of Civil Procedure 37(e) safe harbor applies. The safe harbor rule of 37(e) involves the routine good-faith operation of an electronic information system that may result in the loss of some of the information. Id. at *5. Judge Rosenthal emphasized that deletions, alterations, or losses of electronic evidence cannot be spoliation unless there is a duty to preserve that information, a culpable breach of that duty, and resulting prejudice. Id. at *5. Judge Rosenthal differed from Judge Scheindlin and found that the sanction of an adverse inference jury instruction is only warranted if the destruction of electronic evidence has been done in bad faith or intentionally. Id. at *6. Judge Scheindlin, in contrast, found that emails or other electronic evidence lost through gross negligence warranted an adverse inference jury instruction. Id. at *6, referencing Pension Committee, 2010 WL 194312 at *10-11. Ii. Litigation Holds - Practical Guidelines A. Litigation Holds Checklist As previously discussed, a litigation hold is an affirmative act by an organization to prevent the destruction of documents, including ESI and paper, relevant to a lawsuit. 7 John Jablonski, a New York practitioner, and the co-author of the book Seven Steps for Legal Holds of ESI and Other Documents, suggests that attorneys use the following outline as a guide for analyzing litigation holds: 8 1. Identify trigger events 2. Analyze preservation duty is a legal hold required? 3. Define the scope of the legal hold 4. Implement the legal hold 5. Enforce and Examine the Effectiveness of the legal hold 6. Modify the legal hold (if necessary) 7. Monitor and remove the legal hold 8. When Defining a trigger event 7 Jabolonski, John J. Electronic Discovery: Case Studies in Executing Effective and Practical Discovery Holds and Data Preservation Strategies for Products in a Global Environment, presented at the DRI Products Conference, April 2010, Las Vegas, Nevada, at 700. 8 As referenced in Jabolonski, John J. Electronic Discovery: Case Studies in Executing Effective and Practical Discovery Holds and Data Preservation Strategies for Products in a Global Environment, presented at the DRI Products Conference, April 2010, Las Vegas, Nevada, at 701. 144

As emphasized by Judge Scheindlin and the Sedona Conference, a written litigation hold letter should be sent when litigation is reasonably anticipated. Judge Scheindlin in Pension Committee explained that the litigation trigger for a plaintiff may occur sooner than for a defendant, because a plaintiff often knows best when the loss occurred that forms the basis for a cause of action. Pension Committee, 2010 WL 184312 at *9-10. In fact, Judge Scheindlin found that the Plaintiff s delay in issuing a written litigation hold until 2007, when they had anticipated litigation since 2003, constituted gross negligence. Id. at *10. A study in 2007 commissioned by ARMA International Education Foundation ( AIEF ), authored by John J. Isaza, Esq., formulated a list of events that would most likely trigger a duty to preserve ESI for anticipated litigation. This trigger event list includes: 9 1. creation of a list of potential opponents before filing a lawsuit; 2. date notice is provided to an insurance carrier; 3. date claims are filed with administrative agencies; 4. dates of substantive conversations with supervisors and others about a potential lawsuit; 5. letter requesting explanation for non-hiring; 6. circulation of internal document hold memoranda; and 7. severity of injuries combined with the totality of circumstances. The Committee also discussed possible trigger events including 1) pre-litigation correspondence, 2) the date of retention of counsel and/or experts, 3) partial settlement of claims, and 4) imminent lawsuit apparent with other red flags. Once a trigger event has occurred, the duty to preserve ESI has attached, and a party from that point on must issue the litigation hold and suspend its routine document and retention/destruction policy. Zubulake, 220 F.R.D. at 218. 1. Form Written It was very important to Judge Scheindlin for counsel to issue written litigation holds. Judge Scheindlin suggests that emails alone are not enough, and that letters should be sent to the key players and other personnel in key departments (the recipient list is discussed further below). Counsel should also have a meeting with key players in person and invite IT personnel to this meeting to discuss the scope of the litigation hold and the procedures that will be used to implement the litigation hold. Judge Scheindlin also emphasized the importance of making the litigation hold letters very specific and avoiding general form letters. The employees need to be clear about their obligations. For example, in Pension Committee, Judge Scheindlin found that emails, memoranda, and emails from counsel to plaintiffs requesting documents and emails necessary to draft the complaint did not meet the standard of a litigation hold. These emails and memoranda did not direct employees to preserve all relevant records both paper and electronic nor does it create a mechanism for collecting the preserved records so that they can be searched by someone other than the employee. Pension Committee, 2010 WL 184312 at *8 (S.D.N.Y. 2003) (emphasis in original). 9 As referenced in Jabolonski, John J. Electronic Discovery: Case Studies in Executing Effective and Practical Discovery Holds and Data Preservation Strategies for Products in a Global Environment, presented at the DRI Products Conference, April 2010, Las Vegas, Nevada, at 701. 145

Judge Scheindlin thus recognized the need for counsel to monitor the process of collecting the data. Additionally, Judge Scheindlin explained that the written litigation hold must explicitly instruct the employees to not destroy records (which the communications from counsel to plaintiffs failed to do in Pension Committee). Id. To be effective in drafting the litigation hold and collecting the relevant electronic materials, counsel must be familiar with the type of document retention system its client or corporation uses. Judge Scheindlin in Zubulake emphasized that counsel must become fully familiar with [the] client s document retention policies, as well as [the] client s data retention architecture. Zubulake v. UBS Warburg, LLC, 229 F.R.D. 422, 432 (S.D.N.Y. 2004) (Zubulake V). 2. Who Recipients of the Written Litigation Hold Judge Scheindlin explained that the litigation hold letter should be sent at a minimum to key players of the organization with knowledge relevant to the litigation, but counsel needs to analyze whether the data from other non-key or lower-level employees may also need to be included within the scope of the litigation hold. Counsel needs to analyze the potential or actual causes of action and which individuals or departments may have the most knowledge related to the plaintiff s litigation and issue the written litigation hold to the entire department if necessary. Another factor that counsel needs to keep in mind is determining whether certain key employees or employees within the key department have left, and take steps to notify the IT department of the company to preserve the emails and deleted emails of those former employees. Counsel also needs to be made aware if any key employees or employees from the key departments are about to leave the company, to ensure that all relevant data or materials from the individual s home computer or laptops or removable data cards are retrieved from those employees before they leave the company. It goes without saying that counsel for a corporation must issue the litigation hold letter to the IT department or personnel of the corporation and must work with IT staff to implement and monitor litigation holds. The IT department will have superior knowledge of how the company s computer systems are operated and what steps need to be taken to preserve data. 3. Process Implementation, Monitoring, and Revising Judge Scheindlin suggested that it is not enough for counsel to just issue the litigation hold and then later wait until discovery responses are due to check on the ESI preservation efforts. Attorneys need to be constantly monitoring the implementation of the litigation hold and revise the terms of the hold as necessary as the litigation develops. If a lawsuit is filed, or new parties are added, or new causes of action alleged, counsel may need to re-assess the terms of the litigation hold and expand or change the scope of the hold. 4. Cost Hindrances Seeking Protection for Costs of Producing ESI If ESI discovery will impose an undue burden or expense on the responding party, the court can engage in a cost-shifting analysis to determine whether the requesting party should share some of the costs in production. Zubulake, 217 F.R.D. 209, 318 (S.D.N.Y. 2003). A burden is undue when it outweighs its likely benefit, taking into account the needs of the case, the amount in controversy, the parties resources, the importance of the issues at stake in the litigation, and the importance of the proposed discovery in resolving the issues. Id., quoting Fed. R. Civ. P. 26(c). The court should consider a cost-shifting analysis only when electronic data is relatively inaccessible, such as in backup tapes. 217 F.R.D. at 324. The court then can require the 146

responding party to [r]estore and produce responsive documents from a small sample of the requested backup tapes to more accurately determine the costs of producing the data. Id. Lastly, the court can consider the seven (7) cost-shifting facts developed by the Zubulake court: 1) the extent to which the request is specifically tailored to discover relevant information, 2) the availability of such information from other sources, 3) the total cost of production, compared to the amount in controversy, 4) the total cost of production, compared to the resources available to each party, 5) the relative ability of each party to control costs and its incentive to do so, 6) the importance of the issues at stake in the litigation, and 7) the relative benefits to the parties of obtaining the information. Id. at 322. Iii. Failure To Preserve ESI - Consequences A. Burden of Proof The Zubulake, Pension Committee, and Rimkus decisions discussed the continuum of sanctions depending on the culpability of the spoliating party. As explained by these courts, the sanctions can range from further discovery, cost-shifting, fines, adverse inference jury instructions, preclusion of claims, and entry of default judgment or dismissal. See Pension Committee, 2010 WL 184312 at *3 (S.D.N.Y. Jan. 15, 2010). Judge Scheindlin provided that a party requesting sanctions against an opposing party for failing to preserve ESI must demonstrate that the missing ESI is relevant and that the party has been prejudiced by the failure to produce the ESI. Id. at *5. In addition the requesting party must prove that the spoliating party: 1) had control over the evidence and an obligation to preserve it at the time of the destruction or loss; 2) acted with a culpable state of mind upon destroying or losing the evidence; and 3) the missing evidence is relevant to the party s claim or defense. Id. at *5. While the Second Circuit (due to Judge Scheindlin) is more likely to impose more serious sanctions such as adverse inference jury instructions on the basis of gross negligence, other circuits, including the Fifth Circuit, require a finding of bad faith or intentional destruction of ESI and prejudice to the requesting party before an adverse inference jury instruction will be given. See Rimkus, 2010 WL 645253, at *6, *31; contra Pension Committee, 2010 WL 184312, at *10-11. It is important to check the law of your circuit to determine at what level of culpability the court will impose a more serious sanction such as an adverse inference jury charge. The burden is still on the requesting party to prove that information has been lost or destroyed, and that the information is relevant, and that the requesting party is prejudiced because of lack of production of the information. Rimkus, 2010 WL 645253, at *5. The requesting party will need to obtain extrinsic evidence of the content of at least some of the deleted information from other documents, deposition testimony, or circumstantial evidence to show the relevance of the information and the prejudice from the loss of the information. Rimkus, 2010 WL 645253, at *8. If the information can be found elsewhere, or through third-parties, then the level of prejudice will likely be low. If the information can be retrieved from no other sources, then the level of prejudice will likely be high. In addition to sanctions, the court will often also award attorneys fees to the requesting party to cover their efforts to prove the spoliation. Id. at *39. See Appendix A, attached to this paper for a Chart of Preservation Failures and Possible Sanctions. B. Practical Tips Checklist for Litigation Holds 10 10 As suggested (with modifications in the DRI s Electronic Discovery Committee Webcast Presentation entitled Are Written Litigation Holds Required to Avoid Sanctions in Federal Court? presented on April 14, 2010 by John Jablonski and Jim Lehman. See also Appendix B to this paper for additional guidelines. 147

1. Written Form Required 2. Clearly articulated preservation instructions develop scope and road map 3. Timely issuance of written litigation hold when litigation is reasonably anticipated 4. Suspend automatic deletion 5. Preserve backup media when it is the only source 6. Supervision by counsel 7. Priority on key players start with key players and expand the list if and when necessary 8. Affirmative custodian responses make sure they understand their responsibilities 9. Conduct key custodian interviews 10. Modify scope to match your court papers you need to match your litigation hold list with your witness lists/lists of people with knowledge of relevant facts 11. Review and issue routine hold reminders 12. Consider a defensible collection process that you are prepared to defend in court 13. Preserve ESI of departing employees don t routinely wipe hard drives of departing employees 14. Training/Auditing 15. Release litigation holds once case is over 16. Refine your process once case is over C. Texas Law and the Practical Application of ESI Like many states, Texas law provides for the discovery of ESI following the adoption of the new Federal Rules of Civil Procedure. However, Texas provides its own twists and nuances to the analysis of production of ESI. In Rule 192.3(b) of the Texas Rules of Civil Procedure, the Texas Rules provide for the discovery of documents, which are defined to include ESI that is relevant to the subject matter of the proceeding. Tex. R. Civ. P. 192.3(b). Rule 196.4 addresses the production of documents and specifically applies to the production of data or information that exists in electronic or magnetic form. Id. at 196.4. Rule 196.4, however, provides a more stringent application required to obtain specific ESI than those provided in the federal court opinions addressed herein. Rule 196.3 states, [t]o obtain discovery of data or information that exists in electronic or magnetic form, the requesting party must specifically request production of electronic or magnetic data and specify the form in which the requesting party wants it produced. Id. (emphasis added). In the seminal case In re Weekley Homes, L.P., the Court addressed circumstances pertaining to the request for production of deleted emails. In re Weekley Homes, L.P., 295 S.W.3d 309 (Tex. 2009). In this case, the lower court allowed a party s expert to search the computers of the builder s employees for deleted emails. Id. at 311-13. The Texas Supreme Court held that the lower court abused its discretion by permitting experts to search the builder s employees computers for deleted emails because there was no indication that experts were familiar with the particularities of the employees hard drives, or that they were qualified to search the hard drives, and the proposed methodology for searching the hard drives was not reasonably likely to yield the information sought. Id. at 319-22. Specifically, the Court indicated a trial court may order production of information that is not reasonably available only if the requesting party shows good cause. Id. at 316. In addition, the Court stated to show good cause, the trial court must consider whether the burden or expense of the 148

discovery outweighs its likely benefit considering the needs of the case, amount in controversy, the party s resources, importance of issues at stake, and importance of discovery to resolve issues. Id. at 316-22. In order for an opposing party to gain direct access to the hard drives of the other party s computers to search for data, the requesting party must show 1) the responding party has somehow defaulted in its obligation to search its records and produce the requested data; and 2) the responding party s search has been inadequate and that a search of the opponent s [electronic storage device] could recover deleted relevant materials. Id. at 317. [M]ere skepticism and bare allegations are insufficient to show the responding party failed to adequately search for relevant information. Id. at 318. In sum, the Texas Supreme Court articulated the proper procedure for requesting ESI in accordance with Rule 196.4 as follows: 1. The party seeking to discover electronic information must make a specific request for that information and specify the form of production. 2. The responding party must then produce any ESI that is responsive to the request and reasonably available to the responding party in its ordinary course of business. 3. If the responding party cannot through reasonable efforts retrieve the data or information requested or produce it in the form requested, the responding party must object on those grounds. 4. The parties should make reasonable efforts to resolve the dispute without court intervention. 5. If the parties are unable to resolve the dispute, either party may request a hearing on the objection at which time the responding party must demonstrate that the requested information is not reasonably available because of undue burden or cost. 6. If the trial court determines the requested information is not reasonably available, the court may nevertheless order production upon a showing by the requesting party that the benefits of production outweigh the burdens imposed subject to discovery limitations outlined in Rule 192.4. 7. If the benefits are shown to outweigh the burdens of production and the trial court orders production of information that is not reasonably available, sensitive information should be protected and the least intrusive means should be employed. The requesting party must also pay the reasonable expenses of any extraordinary steps required to retrieve and produce the information. 8. When determining the means by which the sources should be searched and information produced, direct access to another party s devices containing ESI is discouraged, and courts should be extremely cautious to guard against undue intrusion. Id. at 322. The Court also instructed counsel for parties involved in litigation to share relevant information discussing how ESI is stored, the types of systems used to store ESI, and storage methodologies so agreements may be reached regarding protocols or to aid trial courts in drafting discovery orders that are not unduly intrusive or overly burdensome. Id. at 321. Borrowing from the Federal Rules of Civil Procedure, the Texas Supreme Court stated it is of critical importance to learn relevant systems for storing ESI early in the litigation to avoid complicated preservation issues in the latter portion of the litigation. Id. at 322. 149

Sharing the types of storage systems housing ESI and the methodology for doing so is imperative when producing voluminous ESI. Take, for example, a case involving the construction of a sports arena that required a municipality to condemn land in order to obtain the grounds to construct the facility and the subsequent documents and information derived from the construction of a sports arena. Clearly, a multitude of emails, plans, and other ESI required to bring the construction of a sports arena to conclusion will be created and stored over a period of years. In these matters, millions of emails are created, stored, and deleted, which may also include millions of attachments that may pertain to traffic plans, construction plans, zoning ordinances, community meetings, and a multitude of other matters. In sum, coordinating the production of this volume of ESI can be a nightmare. In order to comply with Federal Rules of Civil Procedure or state rules, it is necessary to quickly meet with the client to determine where this information is stored, how that information can be obtained, and whether the information is easily transferrable. Commonly, this requires an information technology ( IT ) professional who will provide information that is far superior to the knowledge of an average attorney. Thus, coordinating with a third-party vendor may be imperative to quickly and accurately transmit information for production to a requesting party. However, the task of producing several million emails, reviewing these emails, and removing any privileged or irrelevant emails can take weeks, if not months, of attorney time. Therefore, it is oftentimes necessary to attempt to come to an agreement with the requesting party as to necessary search terms to reduce the ESI produced. Taking the example of the construction of a sports arena, the parties could agree on search terms like sports arena, team name, arena name, team owner s name, and stadium construction and also tailor these key search terms to a relevant time period. An agreement is imperative in an effort to provide documents without the possibility of inadvertently withholding relevant documents. Without an agreement as to the search terms, a responding party would be forced to spend every waking minute tolling through millions of emails. Once an agreement is reached, several different types of software will allow a responding party to upload the documents and review the same for privilege or relevancy. Once the relevant documents are reviewed, they can quickly be submitted to the requesting party for review via the same system. These agreements can save time for counsel for both parties and also show the Court that the parties are attempting to work through voluminous discovery requests. IV. CONCLUSION The ESI failure to preserve/sanctions cases of Zubulake, Pension Committee, and Rimkus teach counsel of the crucial importance of knowing when the trigger date for preservation of ESI occurred; in other words, when litigation was reasonably anticipated. Once this date is determined, counsel must send a detailed written litigation hold letter to key players outlining in detail the data that needs to be preserved and placing a halt on the routine deletion or destruction of data that the client may have in place. Counsel should meet with the client s IT personnel and learn how the client s computer and email systems operate in order to better compose the litigation hold letter and provide more specific guidelines to the key players and IT personnel about preserving hard and electronic forms of data relevant to the lawsuit. Counsel needs to be aware of preserving electronic data from former employees and protecting data of employees planning to leave the company during the pendency of litigation. Counsel must monitor the data preservation and collection efforts to ensure all appropriate data are preserved. 150

All of these steps need to be documented in order to protect the client in case a Motion to Compel or Motion for Sanctions is filed against the client. Counsel need to be proactive about preserving data in anticipation of litigation and during the pendency of litigation. Additionally, counsel should work with opposing counsel to find reasonable solutions for reviewing and producing relevant electronic data such as agreeing to have a third-party vendor host the ESI for both parties and agreeing upon the appropriate search terms for the data. These vendors can provide a place for each counsel to review electronic documents efficiently and then allow the counsel to produce data quickly to the other party once the data have been reviewed for privileges. If counsel takes the appropriate steps to preserve and collect the relevant electronic data, then counsel will be taking the necessary precautions to protect the client from possible sanctions in the future. The goal at the end of a case is to have confidence that counsel took every effort to preserve, collect, produce, and analyze the client s ESI so that the counsel can affirmatively say Mission: Accomplished to their Operation: Preserve ESI. 151

Appendix A Chart of Preservation Failures and Possible Sanctions Failure Culpability Sanctions Possible Factors To Issue Written Gross Negligence see Range from further Litigation Hold after the Pension Committee, discovery, cost-shifting, duty to preserve has attached and destruction 2010 WL 184312 at *3, *7 (S.D.N.Y. Jan. of relevant evidence 15, 2010) results To Timely Issue Written Litigation Hold To identify key players and ensure that their electronic and paper records are preserved To preserve backup tapes after the duty to preserve has attached when they are the sole source of relevant information or when they relate to key players, if the relevant information maintained by those players is not obtainable from readily accessible sources To Monitor Litigation Hold Could constitute Gross Negligence Constitutes Gross Negligence or willfulness (See Pension, 2010 WL 184312 at *3, *7 (S.D.N.Y. Jan. 15, 2010) Constitutes Gross Negligence or willfulness (See Pension, 2010 WL 184312 at *7 (S.D.N.Y. Jan. 15, 2010) Could constitute Gross Negligence fines, adverse inference jury instructions, and preclusion to entry of default judgment or dismissal. See Pension Committee, 2010 WL 184312 at *3 (S.D.N.Y. Jan. 15, 2010) Range from further discovery, cost-shifting, fines, adverse inference jury instructions, and preclusion to entry of default judgment or dismissal. See Pension Committee, 2010 WL 184312 at *3 (S.D.N.Y. Jan. 15, 2010) Range from further discovery, cost-shifting, fines, adverse inference jury instructions, and preclusion to entry of default judgment or dismissal. See Pension Committee, 2010 WL 184312 at *3 (S.D.N.Y. Jan. 15, 2010) Range from further discovery, cost-shifting, fines, adverse inference jury instructions, and preclusion to entry of default judgment or dismissal. See Pension Committee, 2010 WL 184312 at *3 (S.D.N.Y. Jan. 15, 2010) Range from further discovery, cost-shifting, fines, adverse inference jury instructions, and preclusion Level of Culpability on the part of the producing party and the Level of Prejudice to the requesting party Level of Culpability on the part of the producing party and the Level of Prejudice to the requesting party Level of Culpability on the part of the producing party and the Level of Prejudice to the requesting party Level of Culpability on the part of the producing party and the Level of Prejudice to the requesting party Level of Culpability on the part of the producing party and the Level of Prejudice to the requesting party 152

To preserve former employee records under the company s possession, custody or control To Produce Relevant ESI Could constitute Gross Negligence Range from Negligence to Gross Negligence to willfulness to entry of default judgment or dismissal. See Pension Committee, 2010 WL 184312 at *3 (S.D.N.Y. Jan. 15, 2010) Range from further discovery, cost-shifting, fines, adverse inference jury instructions, and preclusion to entry of default judgment or dismissal. See Pension Committee, 2010 WL 184312 at *3 (S.D.N.Y. Jan. 15, 2010) In 2 nd Circuit, gross negligence can result in adverse inference jury instruction. See Pension Committee, 2010 WL 184312, at *10-11. In 5 th Circuit, bad faith plus prejudice to the requesting party is required for adverse inference jury instruction. See Rimkus, 2010 WL 645253, at *6, *31. Level of Culpability on the part of the producing party and the Level of Prejudice to the requesting party Level of Culpability on the part of the producing party and the Level of Prejudice to the requesting party 153

Appendix B Document Retention Policies & Litigation Holds: A Summary Checklist A Guideline for Document Retention Policies Does a program exist to preserve ESI when litigation is reasonably anticipated? 1. Should immediately enact a program if one does not exist. i. If program has been established, it should be reviewed with corporate compliance department, in-house counsel and/or risk managers, IT departments, and outside counsel. Schedule an annual follow-up meeting to review policy and implement necessary revisions. 1. Consider an e-discovery / document retention task force. Should be comprised of these specific departments. 2. Companies should consider designating an IT or in-house representative as the company s representative on all issues. This person should have authority to speak on the company s behalf, and should be vested with knowledge of all e-discovery and document retention programs and protocols. This person should be willing to testify and/or sign affidavits on the company s behalf on these issues. 2. Considerations in establishment of document retention policy and/or review of current policy: 11 i. Consult the Sedona Guidelines when drafting or revising document retention policies. 12 ii. Policy must be based on sound business considerations. 1. Industry 2. Company s history 3. Are certain aspects of the company prone to litigation? 4. Are certain products or services prone to litigation? 5. Are certain locations more prone to litigation or regulatory violations than others? This could give rise to an increased retention time, even if no threat of litigation appears imminent. iii. Types of documents and data both paper and electronic 1. Location of documents. What types of documents are found at corporate headquarters, each plant location, office, and other locations? 2. What is current method of storing documents, either electronic or paper? 3. How long are documents currently preserved? Why? The policy must articulate the rationale for storage periods, such as industry regulations, increased instances of litigation for certain items, and any other pertinent reasons. 11 For a good overview of document retention considerations and practices following the enactment of the e-discovery amendments to the Federal Rules of Civil Procedure, see J. Mark Coulson, The Wild, the Innocent and the E-Discovery Shuffle, In- House Defense Quarterly, Winter 2007. 12 The Sedona Guidelines: Best Practices & Commentary for Managing Information and Records in the Electronic Age, Guideline 5, The Sedona Conference Working Group Series, September 2005 available at http://www.thesedonaconference.org. 154

4. Data may be different things to different companies. E-mails, voicemails, metadata, GPS data, and other electronically stored information must be retained. iv. Commentary recognizes destruction of documents may be acceptable when documents or data lose their business purpose. The establishment of a document retention policy based upon business considerations greatly increases the reasonableness of document destruction. The business purpose must be specifically articulated in the policy. It is critical to enact a reasonable policy. 13 1. What is the effective date of the policy? 2. What should be done (or can be done) with the documents / data prior to the establishment of this policy? 3. The document retention policy must also discuss litigation hold procedures, and ensure procedures are in place to stop the destruction of documents or data when the litigation hold becomes necessary. v. Consider a separate procedure for e-mails, including centralizing storage and limiting personal or home use of e-mail to ensure all e-mails may be stored according to corporate policy. vi. Specifically define the length of time required to store each type of documents. Consider an overall policy to articulate the basis for retention and destruction, with a separate exhibit thereto detailing specific categories of documents and retention periods for each. 3. How is the policy articulated and disseminated? i. Could be a discoverable document. ii. Should be clearly stated with defined categories, but written broadly to permit reasonable interpretation in the future. iii. Employ safeguards to ensure policy is followed to underscore credibility. iv. Should the policy simply be placed along with other corporate documents, or should each employee sign an acknowledgement and understanding of the policy? v. Consider establishing a help line and/or an internal website to address specific questions from employees. Litigation Hold Procedures a. Litigation Hold Letters 14 i. Does a policy exist? If so, it should be reviewed with corporate compliance department, in-house and/or risk management, IT department, and outside counsel. ii. Relevant considerations for the implementation of a litigation hold letter policy (or for reviewing current policies): 13 The Sedona Guidelines: Best Practices & Commentary for Managing Information and Records in the Electronic Age, Guideline 4, The Sedona Conference Working Group Series, September 2005 available at http://www.thesedonaconference.org. 14 For an excellent overview of considerations involved in litigation hold letters and a sample form, see Mark S. Sidoti and Renee L. Monteyne, The Effective Internal Litigation Hold Letter, In-House Defense Quarterly, Winter 2007. Several of the suggestions for litigation hold letters and policies discussed herein are adapted from this article. 155

iii. Dwayne J. Hermes, Esq. Co-Authors: Natalie Butler and Christian Dennie Hermes Sargent Bates, L.L.P. 901 Main Street, Suite 5200 Dallas, Texas 75202 P: (214) 749.6000 E: dwayne.hermes@hsblaw.com 1. Should not be a mere form letter. 2. Could be a discoverable document. 3. Should be sent by high-level executives and cc: other executive offices and CEO. 4. Define corporate audience. Not necessarily required to be sent to all employees, perhaps only those department(s) or plant(s) implicated in possible litigation. Should err on the side of inclusion and broad dissemination. 5. Should be concise and direct. Should not exceed more than a few paragraphs, and should be easy to understand. Should not provide a detailed explanation of the litigation. Avoid mentioning specific trigger date for litigation or the reasonable anticipation thereof (could be an admission). Instead, state an obligation to preserve all presently existing material. 6. Stress the importance of the matter to the company. 7. Critical to define the documents and data to be preserved. Should note that not all documents are paper- many are now electronic. 8. Must be written to include all electronic data, such as e-mails, voicemails, backup tapes, and metadata. Consider appropriate storage and safeguards for special issues such as GPS data and blackberries. 9. Reiterate the importance of preserving all paper and electronic data and that serious consequences could result if such documents are destroyed. 10. Should state that the company and its safety and corporate compliance department and/or outside counsel will be following up on the process. Should also provide the name and number of contact persons (in the IT department and/or safety and corporate compliance department) to answer questions. 11. Should the letter be sent only to specific persons / offices, or globally? This is often determined on a case by case basis. 12. How should the document be sent? (i.e., e-mail, hard copy, posting in offices). The company must prove not only the existence of litigation hold procedures, but the proper implementation of those procedures. The obligation to impose a hold arises when litigation is reasonably anticipated. This date could arise well before the initiation of litigation and therefore requires proactive monitoring and action from safety and corporate compliance department and outside counsel. Cynthia Tari Hermes Sargent Bates, L.L.P. Bank of America Plaza 901 Main Street, Suite 5200 Dallas, TX 75202 P: (214) 749-6000 E: cynthia.tari@hsblaw.com 156

Social Media and Law Practice Alice Spitz and Geoffrey McDonald Molod, Spitz & DeSantis, P.C. 1) Introduction What Is Social Media? Social media began as the means of communication and networking for individuals through the use of the internet and smartphones. When the use of social media became widespread, businesses also began participating. It is now so ubiquitous that a new use of language has been created. Friend has now become a verb, and tweet does not refer to birds. Popular and free networking sites include Myspace, Facebook, Linked In, and Twitter. Social media is distinct from industrial media, such as newspapers, television and film, in that it is more accessible for those interested in publishing information to the outside world at no cost. The information that one puts on a social networking website can be updated and revised almost instantaneously and is much easier than creating and editing one s own website. Social media networking creates and fosters relationships among people who share similar interests. The social network websites allow each user to post a profile about him or herself as well as to provide ways for users to interact with each other through email and instant messaging. The Advisory Committee on Judicial Ethics has defined social networks as follows: Social networks, as they are commonly known, are Internet-based meeting places where users with similar interests and backgrounds can communicate with each other. Users create their own personal website a profile page - with information about themselves that is available for other users to see. Users can establish connections with other users allowing increased access to each other s profile, including, in many cases, the ability to contact any connections the other user has and to comment on material posted on each other s pages. 1 On social networking websites, users upload photographs, provide information about themselves in their profiles, and become friends with other users, after one user accepts another s friendship request. Users can generally control the level of access that others have to their profiles, who can contact them, and who can add comments to their pages. Of all the social networking services, Twitter is the most unique, with people generally twittering their information or messages through their smartphones rather than through the Twitter webpage interface, allowing users to broadcast where they are and what they are doing in real time, even without access to a computer. Twitter has been described as a giant dinner party. There are tons of conversations going on and you can easily join one, or you can start a new one. If you start a new one, others can easily join in. This social media may not be conducive to your average garrulous attorney, however, because Twitter limits each message s length to 140 characters. When a person posts a message on Twitter or tweets a message, it is available to that person s followers (those users who have subscribed to their Twitter account to ensure they don t miss any of their favorite twitterer s tweets), and is also available to the whole world through, inter alia, searches conducted for words which may appear in the tweets. Twitter results can now easily be included in regular Google search results. 157

Businesses jumped onto the social networking bandwagon as a way to interact with consumers, and to keep their product branding and reputations intact. Some businesses now have entire departments devoted only to seeing what their customers are tweeting and blogging about their products or stores, and to quickly respond before any complaints go viral. Businesses also affirmatively use social media to advertise and increase their customer base. Some restaurants, for example, offer free meals to the first person to re-tweet one of their tweets. Lawyers are also now being encouraged to get on Twitter and start producing tweets. Whereas the last generation s focus was to be sure attorneys had their own websites, today s attorneys also post links to and tweet about helpful legal articles, court decisions, and other information in order to gain and retain followers, and eventually clients. Once that s done, it s possible to track those users who are forwarding tweets, communicate with them and find out what interests them to follow up. Separate email addresses facilitate people sending their comments about your tweets and enabling a dialogue, which could ultimately lead to new business. 2 We also advise attorneys that you cannot know what people are saying about you, your clients, and your witnesses if you don't know what is on social media. Consequently, we advise attorneys to set up google alerts for themselves, for their law firm, for their clients, witnesses, etc. 2) Exercise Caution with Social Networking Sites Privacy There are many concerns about privacy on social networking sites because users disclose personal information such as street addresses, phone numbers, personal likes and dislikes, and other information that may be visible to more than one s friends, depending on the networking site s security and the user s selection of various and often complicated settings. Also, since there is no identification required to set up many of these accounts, impersonation and even identity theft are concerns. It is important to be familiar with the current privacy setting options of any social media utilized. 3 Facebook, for example, which currently boasts more than 400 million users, is notorious for violating their users privacy expectations in new and unforeseen ways. 4 For example, Facebook privacy settings are currently being examined by Congress, since they require complicated opt out processes, rather than a simplified opt in mechanism to assure privacy. 5 Possible Impropriety of Attorney and Judge Social Media Friendships Judges have been advised to use caution when joining social networking sites. 6 It is clearly possible that the public may come away with the wrong impression if a judge has friended one attorney in a dispute and the other attorney is not listed among the judge s friends on a social networking site. 7 The Rules of Judicial Conduct caution against not only actual impropriety, but the appearance of impropriety as well. The Advisory Committee on Judicial Ethics in 2009 recognized that there was nothing inherently wrong with judges joining social networking sites but there is always danger of the wrong impression being left with the public when the judge starts friending litigants and attorneys. The Florida Supreme Court ruled, in an advisory opinion, that it is improper for a judge to become Facebook friends with lawyers that appear in the judge s court, so as to avoid the impression that certain lawyers have special influence with the judge. However, the court found no problem with 158

judges friending (on Facebook) other lawyers who did not appear before them. 8 A North Carolina case in which a judge became a Facebook friend of one of the litigants and then proceeded to post comments about the case on Facebook resulted in the judge s order being vacated and a new trial being held with a different judge. 9 In addition to improper ex parte communications with an attorney representing a party before the judge, it was also found that the judge had used Google to gather information about one of the litigants and thus allowed himself to be influenced by independent internet research, also impermissible. Beware Addiction You must also exercise caution in not letting social media overtake your life. Last week, researchers at the University of Maryland reported that college students who swore off social media showed signs of withdrawal similar to those of drug addicts going cold turkey. 10 3) Social Media And Its Impact On Civil/Criminal Litigation Jurors Use of Social Media At Trial The concerns about juror use of the internet to communicate and retrieve information from outside the trial record are real. New York and a number of other states have already included admonitions in their jury instructions specifically prohibiting conducting internet research or communicating with anyone about the case, including by means of social networking sites. In New York, PJI 1:11, we now find the following: Please do not discuss this case either among yourselves or with anyone else during the course of the trial. Do not do any independent research on any topic you might hear about in the testimony or see in the exhibits, whether by consulting others, reading books or magazines or conducting an internet search of any kind. All electronic devices including any cell phones, Blackberries, iphones, laptops or any other personal electronic devices must be turned off while you are in the courtroom and while you are deliberating after I have given you the law applicable to this case. [In the event that the court requires the jurors to relinquish their devices, the charge should be modified to reflect the court's practice] It is important to remember that you may not use any internet services, such as Google, Facebook, Twitter or any others to individually or collectively research topics concerning the trial, which includes the law, information about any of the issues in contention, the parties, the lawyers or the court. After you have rendered your verdict and have been discharged, you will be free to do any research you choose, or to share your experiences, either directly, or through your favorite electronic means. It is certainly anticipated that all states will be amending their jury instructions, if they have not already done so. In Indiana, judges have proposed new model jury instructions, cautioning jurors not to consult the internet to obtain information about cases on which they are to deliberate. Moreover, the jurors are 159

instructed not to communicate with anyone about the case on your cell phone, through e-mail, Blackberry, iphone, text messaging, or on Twitter, through any blog or website, through any internet chat room, or by way of any other social networking websites, including Facebook, My Space, LinkedIn and YouTube. 11 A federal drug trial was interrupted when it was discovered that jurors were doing online research about the case including reviewing evidence that the court had specifically excluded. A mistrial was declared. 12 A juror in England was found to have posted the details of the child abduction/sexual assault case in which she was deliberating for her Facebook friends and decided that she would conduct a poll because she was unsure how to vote. When this was discovered she was dismissed from the jury. 13 Service of Process Australia was the first country to permit service of process through social networking sites. 14 Courts in Canada, New Zealand, and England have also allowed service by social networking sites. No U.S. court has allowed this kind of service yet, however, the future may hold service by Facebook as a valid practice. In the countries that allow this kind of service, it is used as a last resort when it appears as the most likely method to provide actual notice. Social Media as Evidence in Criminal/Civil Litigation In many kinds of cases, evidence from social networking sites is already being used in the courtroom. Admissions and other evidence found on social networking sites have led to criminal convictions and the denial of child custody. 15 Civil litigation is no exception to this trend as social networking sites offer a veritable treasure trove of valuable and potentially discoverable information. As many individuals use these sites to provide a running commentary on their lives, the information can be particularly interesting and valuable to defense attorneys whose adversaries claim that their clients have suffered a diminution in the enjoyment of life, when the plaintiffs own social media profiles have information to the contrary. 16 On the other hand, defendant corporations also need to beware of information which could negatively effect their position in litigation. Corporations need to be aware of, and concerned about, the fact that hundreds of employees may be providing sensitive information about the company on dozens of social networking sites. These statements could be disastrous to the corporation if, for example, privileged information is disclosed. This possibility must be dealt with in any sound litigation strategy. Presently, there are no set rules as to the discoverability of information obtained from social networking sites. May a lawyer friend an adverse represented party to gain some valuable personal information to be used against them in the course of litigation? As is well known, a lawyer may not contact another party to a lawsuit directly if that party is represented by counsel. 17 Also, when dealing with a person who is not represented by counsel, a lawyer may not state or imply that he or she is disinterested and, if the un-represented person misunderstands the lawyer s role, the lawyer must make reasonable efforts to correct the misunderstanding. 18 What is clear from the 160

foregoing is that a lawyer may not friend a represented party on Facebook to gain access to the possibly quite relevant information that may be found there. 19 However, with the limited privacy settings on sites such as Facebook, a considerable amount of information is already in the public domain and is available to attorneys without violating any ethical considerations. Conclusion It s not too soon to say that social media has revolutionized the way people interact, and it is certainly having an impact on the world of business in general, and the practice of law in particular. There are a number of concerns, however, with respect to the use of social media in combination with the practice of law. As indicated, privacy issues arise from posting personal information on social networking sites. Judges need to be particularly careful about their interactions with lawyers who appear before them and these interactions now include friendships on social networking sites. These sites, at once, offer attorneys the opportunity to network, to find new clients, and to learn important information about their adversaries. However, attorneys need to be careful not to breach their ethical responsibilities as acquiring publicly accessible information may cross an impermissible line when the attorney affirmatively attempts to friend an adversary in order to gain access to private information. There is nonetheless a tremendous amount of data freely and ethically available. This increase in the quantity of information available to defense counsel must also improve the quality of the defense as well. As we have seen, some of the information posted on these sites is discoverable for use at trial. Moreover, information that is not admissible at trial is, nevertheless, available to jurors from social networking and other internet sites that they access from their smartphones, even if technically prohibited by the court s rules. The use of these sites is expanding exponentially and as defense counsel, we must stay ahead of the curve to provide the best defense available to our clients. Alice Spitz Geoffrey McDonald Molod Spitz & DeSantis, P.C. 104 West 40th Street New York, NY 10018-3617 Phone: (212) 869-3200 Email: aspitz@molodspitz.com 1 Advisory Committee on Judicial Ethics Opinion 08-176 2 Jordan Furlong, Make the most of Twitter, Trial, January 2010 3 See, for example, Getting Control of Your Facebook Privacy Settings from the Wall Street Journal on 4/26/10 at http://tinyurl.com/37yb98p and The New Facebook Privacy Settings: A How-To from the New York Times on 12/11/09 at http://tinyurl.com/yeunr4v. 161

4 "Social networking sites are a Wild West of the Internet; users need ability to control private information and fully understand how it's being used," the lawmakers wrote. Senators press Facebook, The Washington Post, 4/27/10, at http://tinyurl.com/2ebs4hk. 5 Ibid. 6 Ken Strutin, Pitfalls of Social Networking for Judges and Attorneys New York Law Journal, March 16, 2010, p. 5 7 Ibid. 8 Ibid. 9 Ibid. 10 New York Times, 4/26/10, Encouraging the Text Generation to Rediscover Its Voice. 11 Proposed Model Jury Instructions: The Use of Electronic Technology to Conduct Research on or Communicate about a Case, Prepared by the Judicial Conference Committee on Court Administration and Case Management, December 2009. 12 John G. Browning, When All That Twitters In Not Told, Texas Bar Journal, March 2010, p. 217 13 Ibid. 14 John G. Browning, Served Without Ever Leaving the Computer, Texas Bar Journal, March 2010, p. 181 15 Kendall Kelly Hayden, How Social Media is Changing the Law, Texas Bar Journal, March 2010 16 Joshua B. Fleming and Vanessa A. Davis Myspace Invasion: The Discoverability of Social Networking Sites, Indiana Civil Litigation Review, p. 165 17 See ABA Model Rules of Professional Conduct 4.2 18 See ABA Model Rules of Professional Conduct 4.3 19 Joshua B. Fleming and Vanessa A. Davis Myspace Invasion: The Discoverability of Social Networking Sites, Indiana Civil Litigation Review, p.182 162

The Crown s Right of Recovery of Healthcare Costs in Alberta Ryan Ewasiuk Brownlee LLP Introduction The primary purpose of this paper is to discuss the Alberta government s right to recover healthcare costs from wrongdoers. In addition, it will compare and contrast the Alberta government s right of recovery, with that of the government of Ontario. Right of Recovery in Alberta In Alberta, the Crown maintains an independent right of recovery against a wrongdoer, in respect of insured health services provided to an injured person. The Crown s right of recovery is governed by the Part 5 of the Hospitals Act, R.S.A. 2000, c. H-12 (the Act ), which came into force on August 1, 1996. Part 5 of the Act replaced section 58, which had formerly allowed the Crown the right of recovery on a subrogated basis. The 1996 amendments also significantly expanded the Crown s scope of recovery. Prior to August 1, 1996, the Crown s right of recovery was limited to hospitalization services provided to an injured person. Since 1996, the Crown is in a position to recover the cost of insured services, for both past and future care. Within this context, the following costs are now recoverable: Hospital impatient and outpatient services; Air ambulance services; Services provided under the Alberta Health Care Insurance Act; Services provided under the Aids to Daily Living and Extended Health Benefits Regulation; Drug costs; Mental health costs; Services provided under the Co-ordinated Home Care Program Regulation; The amount the Crown pays for out of province health care costs; and Any good or service proscribed to be a health service by the regulations. 1 The Crown s right of recovery encompasses all injuries caused by wrongdoers, but for most motor vehicle-related injuries. Within this context, the Crown does not have an independent right of recovery against a wrongdoer who causes an injury in the course of operating a motor vehicle, provided that wrongdoer is insured under a motor vehicle liability policy. A motor vehicle liability policy is defined under the Insurance Act, R.S.A. 2000, c. I-3, and includes any policy of insurance that is issued or renewed in Alberta, or that is deemed to be issued and renewed in Alberta. 2 Accordingly, the Crown maintains an independent right of recovery within a motor vehicle context, in respect of injuries caused by (1) uninsured wrongdoers, and (2) wrongdoers insured by out-of-province motor vehicle policies. The reason why the Crown does not maintain a right of 1 Crown s Right of Recovery (Ministerial) Regulation, A.R. 160/98, s. 4. 2 Insurance Act, R.S.A. 2000, c. I-3, s. 1. 163

recovery against a wrongdoer insured under an Alberta motor vehicle liability policy is because Alberta insurer s pay an annual aggregate assessment. The assessment is set by the Minister of Health and Wellness (the Minister ), and is based on the Minister s annual estimate of the Crown s cost of health services incurred due to the actions of wrongdoers in the course of their use and operation of motor vehicles. Duty to Report Potential Claims The Crown s independent right of recovery is protected by certain reporting duties imposed on injured parties, as well as insurers. For one, an injured party who thereafter consults a lawyer, or has a third party consult a lawyer on their behalf, must as soon as possible inform the Director of Third Party Liability (the Director ) of Alberta Health and Wellness ( Alberta Health ) of the incident, and provide other information proscribed by the Right of Recovery (Ministerial) Regulation, A.R. 160/96 (the Regulation ). 3 With respect to insurers, section 75 of the Act states that an insurer who is notified of circumstances in which the Crown s right of recovery may arise shall, as soon as possible, notify the Director of those circumstances and provide the Director with the information proscribed by the Regulations. 4 Section 5(1) of the Regulation in turn provides that an insurer who is notified of circumstances in which the Crown s right of recovery may arise as a result of a wrongful act or omission of its insured shall provide certain information to the Director. Section 5(1) then goes on to detail specific information that a wrongdoer s insurer must provide the director, including the wrongdoer s contact information, insurance policy, and details of the incident that resulted in the injury. 5 Taken together, it is unclear whether the duty to report applies to both the insurer of the injured party, and the insurer of the wrongdoer, or merely to the insurer of the wrongdoer. A plain reading of section 75 of the Act suggests the former, whereas section 5(1) of the Regulation indicates the latter. Unfortunately, there has been no judicial consideration to-date of these seemingly contradictory provisions. Nevertheless, it would seem, based on recognized principles of statutory interpretation, that the duty to report extends to both insurers. Within this context, whenever a statutory provision conflicts with a regulatory provision, it is necessary to read the regulatory provision in harmony with the statutory provision. In the event that this is not possible, then the regulatory provision is of no force and effect, to the extent that it conflicts with the statutory provision. While a regulatory provision may add to the scope of a statutory provision, so long as that addition is consistent with the meaning and purpose of the statutory provision, a regulatory provision may not in any way change the meaning and purpose of a regulatory provision. In short, it is not possible to amend a statute by way of regulation. With these principles in mind, it seems that section 5(1) of the Regulation can be reconciled with section 75 of the Act to the extent that it provides specific direction, in respect of the information that a wrongdoer s insurer must disclose to the Director. The scope of that duty, as proscribed by the Regulation, cannot be said to negate from the duty of the injured party s insurer to report to the Director, upon learning of a potential claim of the Crown. Such an interpretation would be inconsistent with the plain language contained in section 75, and would have the effect of amending 3 Hospitals Act, R.S.A. 2000, c. H-12, s. 72. 4 Ibid., s. 75. 5 Right of Recovery (Ministerial) Regulation, A.R. 160/96, s. 5. 164

a statutory provision by way of regulation, something that is strictly prohibited pursuant to the principles of statutory interpretation. Unfortunately, neither the Act nor the Regulation provides any direction to the injured party s insurer regarding the nature and scope of the information to be provided to the Director. Nevertheless, it would seem that an injured party s insurer would at the very least be required to provide the Director with information sufficient for the Director to evaluate the basis of any potential claim. Investigation Once the Director is informed by either the injured party or an insurer that the Crown might have a claim of recovery, the Director thereafter commences an investigation to determine whether the Crown does in fact have an independent claim. If an independent claim does exist, then the Director must evaluate whether the resources necessary to effect recovery are worth expending, based on the amount to be recovered, and the probability of enforcing recovery against the wrongdoer. In order to aid the Director in its investigation, the Act empowers the Director to request information from injured party that is relevant and material to the Crown s ability to seek recovery. 6 Moreover, the Act stipulates that the injured party has a duty to cooperate with the Director. 7 The Act further provides that the Director may request from any person information pertaining to health services provided to the injured party. 8 Whereas section 1 of the Insurance Act defines an insurer as any person who undertakes or effects a contract of insurance, it follows that the duty to provide the Director with health services information extends to insurers. Penalties The Hospitals Act imposes penalties on parties that fail to provide information for which they are duty-bound to provide to the Director. An injured party, insurer, wrongdoer, or any other person that fails to provide required information to the Director is guilty of an offence, and is liable to a fine of not more than $10,000.00. 9 Further, an injured party may be liable to indemnify the Crown in respect of the cost of health services provided to the injured party, when the injured party fails to comply with their duty to cooperate with the Director, and where the Crown is unable to recover the cost of health services provided. 10 Commencing an Action, Judgment and/or Settlement If the Director concludes that there are sufficient grounds to seek recovery, and that it is desirable to do so, then the Director may order that an independent action be commenced against the wrongdoer. The Regulation provides that any injured party with a duty to report must provide the Director with their lawyer s name and contact information, as well as any pleadings filed against the wrongdoer. 11 Consequently, it follows that the Director will usually be in communication with the injured party s 6 Hospitals Act, R.S.A. 2000, c. H-12, s. 73. 7 Ibid., s. 74. 8 Ibid., s. 76. 9 Ibid., s. 80. 10 Ibid., s. 70. 11 Right of Recovery (Ministerial) Regulation, A.R. 160/96, s. 4. 165

lawyer, prior to any action being commenced on the injured party s behalf. Accordingly, in most instances the Director will coordinate with the injured party s lawyer, as to the steps to be taken, in respect of any action to be commenced. Usually, the Crown is named as a party at the time that the injured party commences an action. Moreover, the Director will often elect to have the injured party s lawyer act on behalf of the Crown. Nevertheless, the Crown maintains the right to retain independent counsel. Any injured party with a duty to report must inform the Director of any settlement agreements, or judgments. 12 Moreover, the wrongdoer likewise owes certain duties to the Director upon the obtainment of a judgment, or upon the reaching of a settlement agreement. For one, a wrongdoer must inform the Director of any structured settlement as soon as possible. 13 Moreover, an insured wrongdoer must provide the Director with the particulars of the wrongdoer s insurance policy, upon the obtainment of a judgment, or upon the reaching of a settlement agreement. 14 It is unclear why the Act distinguishes between the reporting duties of a wrongdoer who enters into a structured settlement with the injured party from the reporting duties of a wrongdoer upon the obtainment of a judgment, or upon the reaching of a lump sum settlement. In the case of the former, the wrongdoer is obliged to inform the Director of the structured settlement, regardless of whether the wrongdoer is insured, or not. In the case of the latter, the wrongdoer is obliged to inform the Director of a settlement, or judgment, only if the wrongdoer is insured. Whatever the reason, the aforesaid provisions are of limited practical use to safeguard the Crown s right of recovery. Indeed, it seems that there are only two scenarios where the Crown would gain added protection in respect of its right of recovery. The first scenario arises when (1) an injured person fails to seek legal counsel, but takes some step against the wrongdoer; (2) the insured wrongdoer fails to report the incident to their insurer; and (3) judgment is entered against the insured wrongdoer, absent the insured wrongdoer consulting their insurer; or (4) the insured wrongdoer enters into a lump sum settlement with the injured party, absent the insured wrongdoer consulting their insurer. The second scenario might arise when an injured person does not seek legal counsel, and an uninsured wrongdoer enters into a structured settlement agreement with the injured party. Both of the aforementioned scenarios would likely protect the Crown s right of recovery, in respect of a distinctly limited number of potential claims. In the vast majority of instances, the injured party will retain, or at the very least consult legal counsel, thereby triggering that party s duty to report. Further, or in the alternative, an insurer will be involved for one or both of the parties, thereby imposing a similar duty. Whereas the Crown s claim of recovery is based on its right to commence an independent against the wrongdoer, it follows that the Crown s right of recovery is not directly affected as a consequence of any decision rendered by an injured party vis-à-vis the wrongdoer. For example, that an injured party decides against commencing an action against the wrongdoer would not preclude the Crown from commencing its own action against the wrongdoer. Similarly, any decision of the injured party to enter into a settlement agreement with the wrongdoer does not prejudice, in any manner, the Crown s right to seek full recovery of its costs from wrongdoer. It should be noted, however, that 12 Ibid., s. 4. 13 Hospitals Act, R.S.A. 2000, c. H-12, s. 77. 14 Ibid., s. 78. 166

the Crown s right of recovery might be impaired when an injured party decides against commencing an action, to the extent that the Crown might not learn of its right of recovery. Nevertheless, the Act safeguards the Crown, by extending the limitation period six months beyond that of the injured party. 15 Comparison of the Right of Recovery in Alberta and Ontario The most important distinction between the Crown s right of recovery in Alberta, and Ontario, is that the Ontario Crown maintains the right to seek recovery on a subrogated basis. 16 Although, the Ontario Crown, like the Alberta Crown, maintains the right to commence an independent action against a wrongdoer, the primary method of cost recovery in Ontario is on the basis of subrogation. Indeed, the Ontario Health Insurance Act, R.S.O. 1990, c. H.6 (the OHIA ) mandates that an injured party must include the Crown s claim of recovery in any action commenced against a wrongdoer, unless otherwise informed by the General Manager of the Ontario Health Insurance Plan (the General Manager ). In practical terms, the Ontario Crown s right to commence an independent action is an added safeguard to its right of recovery. This added safeguard might be utilized in the event that the injured party commences an action against the wrongdoer, without making a claim on behalf of the Crown. Moreover, the commencement of an independent action might be necessary where the injured party decides against commencing an action against the wrongdoer. Many of the distinctions between the Alberta and Ontario Crown s right of recovery are the consequence of differences between subrogated and independent claims. Perhaps the most significant of these distinctions is the Ontario requirement that an injured party obtain the approval of the General Manager before effecting a settlement with the wrongdoer. Such approval is logical within the context of a subrogated action, insofar as any settlement reached will directly affect the Crown s right of recovery as a subrogated party. By contrast, in Alberta, any settlement reached between the injured party and wrongdoer does not affect the Crown s right of recovery insofar as the Crown s right of recovery is entirely independent from that of the injured party. In general, it can be said that the Alberta Hospitals Act and the regulations therein are more encompassing than the OHIA and its regulations, at least in respect of the duties imposed on injured parties, insurers, and wrongdoers. For one, an injured party in Alberta has a duty to report any potential Crown claim of recovery, upon their or their agent consulting with legal counsel. As such, even if an injured party decides against retaining legal counsel, or decides against commencing an action at all, that the injured party consulted with legal counsel is sufficient to trigger the injured party s duty to report any potential claim to the Director. In Ontario, there is no requirement on the part of the injured party to report any potential Crown claim to the General Manager. Instead, such a duty arises only upon the commencement of an action by the injured party, and only extends to the lawyer of the injured party. Moreover, in Alberta, an insurer is obliged to report any potential Crown claim to the Director, upon it learning of the potential claim. In Ontario, there is no corresponding duty on insurers. Instead, the wrongdoer s insurer need only inform the General Manager of negotiations for settlement. Until such time as negotiations for settlement commence, there is no duty on the part of any insurer to report to the General Manager. Further, in Ontario, unlike Alberta, there is no reporting duty imposed directly on a wrongdoer. 15 Hospitals Act, R.S.A. 2000, c. H-12, s. 67. 16 Health Insurance Act, R.S.O. 1990, c. H.6, s. 30. 167

Despite these and other differences, there are several similarities in respect of the Alberta and Ontario Crown s right of recovery. For example, the Ontario Crown s right of recovery does not encompass injuries sustained in the course of the wrongdoer operating a motor vehicle where that wrongdoer is insured by a motor vehicle policy. Moreover, the Ontario Crown, like the Alberta Crown, has the right to seek recovery in respect of past and future care. Conclusion Although the means of recovering healthcare costs in Alberta and Ontario against wrongdoers are different, the overriding objective is the same. That legislative regimes are in place in both provinces demonstrates that injuries caused by the negligence or willful acts of wrongdoers places significant burdens on the cost of healthcare delivery. As such, the legislative frameworks in both Alberta and Ontario seek to provide the necessary flexibility in order that the Crown might maximize its recovery of those costs from wrongdoers. Ryan Ewasiuk Brownlee LLP 2200 Commerce Place 10155-102 St Edmonton, AB Canada P: (780) 497-4800 E: rewasiuk@brownleelaw.com 168

(USA) Canadian Litigation Counsel Davies Arnold Cooper (C (Canada) (Mexico) 24 HOUR EMERGENCY/ACCIDENT RESPONSE North America 877 247 365 9 TOLL FREE 24 HOURS A DAY / 7 DAYS A WEEK 365 DAYS A YEAR 911 FOR EMERGENCIES 1 877 247 365 9 T hrough its network of independent defense law firms, The Harmonie Group, CLC and DAC are uniquely situated to provide access to the legal services necessary for you to manage the complex issues arising in major emergency and accident situations. Firms have provided contact information for attorneys that can offer assistance 24/7, 365 days a year. The Harmonie Group member firms can assist companies in several ways: Accident site response Extend the attorney client privilege to investigation matters where possible On-site investigation management and control Recommend and arrange ancillary services such as adjusting, Evidence preservation photography, videotape services, criminal defense, evidence Assist with accident statements gathering and forensics, reconstructionists, and more The 24-Hour Emergency/Accident Response Directory169 can be accessed online at www.harmonie.org/directory.

Transportation Accident Investigation Checklist of Steps to Consider The Harmonie Group has asked its member firms, and their respective transportation practice attorneys, to assist in putting together this TRANSPORTATION ACCIDENT INVESTIGATION CHECKLIST OF STEPS TO CONSIDER. This checklist is provided to illustrate possible action items you may wish to review in the course of investigating and handling your particular accident, case, or event. As all states vary, and since each individual accident is different, there is no correct or complete list of investigation steps that will be appropriate for all situations. However, these specific steps are matters you should consider as possibly being necessary or required in your particular situation after carefully weighing the facts, and the legal issues, and after consulting with an experienced attorney. As always, the Harmonie member firm attorneys are prepared to discuss with you the individual items listed to determine if there is applicability to your specific case. In certain cases, other steps may be required depending on the circumstances. The Harmonie Group does not practice law, and this summary checklist should not be construed as a recommendation or a list of required steps in any particular case. It is provided as an illustration of possible matters that only you, with competent legal advice and consideration of the variables involved, can determine are necessary in your specific case. ACCIDENT RESPONSE CHECKLIST I. FIRM TRUCKING ATTORNEYS WITH CONTACT INFORMATION a. Assemble and complete a listing of all firm attorneys that will be involved in your case including office phone numbers, cell numbers, and home numbers b. Assemble and complete a listing of all attorneys from your company that will be involved and exchange lists with the firm involved. II. ACCIDENT RECONSTRUCTIONIST WITH CONTACT INFORMATION a. Assemble and complete a listing of one or more accident reconstructionists that may be used including office phone numbers, cell numbers, and home numbers. If you do not have one, your Harmonie firm may be able to suggest one. III. CRIMINAL DEFENSE ATTORNEY WITH CONTACT INFORMATION a. Assemble and complete a listing of one or more criminal attorneys that may be required in the case including office phone numbers, cell numbers, and home numbers. If you do not have one, your Harmonie firm may be able to suggest one. IV. PHOTOGRAPHERS a. Assemble and complete a listing of photographers that will be involved in the case including office phone numbers, cell numbers, and home numbers. If you do not have one, your Harmonie firm may be able to suggest one. b. Consider the need of the following: i. Aerial photography ii. Video photography iii. Still photography V. ADJUSTER/CLAIMS REPRESENTATIVE a. Do you have a preference on the use of an adjuster? If you do not have one, your Harmonie firm may be able to suggest one. b. Assemble and complete a listing of the adjuster that will be involved in the case including office phone numbers, cell numbers, and home numbers, and exchange with your Harmonie firm. VI. CHAIN OF COMMAND a. Establish and communicate a chain of command regarding the investigation. VII. CONTROL OF INVESTIGATION AND POSSIBLE ACTION STEPS-DETERMINE WHO WILL CONDUCT EACH STEP CONSIDER THE ATTORNEY CLIENT PRIVILEGE AND HOW IT MAY APPLY. a. Identify and interview all witnesses b. Identify and interview all police on the scene and available accident reports c. Identify and interview all emergency medical personnel at scene and available reports d. Interview, control and protect driver e. Interview, control and protect all ECM/black box/computers f. Photograph and/or control debris field g. Photograph and/or control roadway surface h. Photograph and control vehicles i. I.D. and control all driver records, including logs, fuel receipts, toll receipts, trip envelopes and other travel documents j. Photograph all vehicles and accident scene k. Aerial photograph of scene l. Drug and Alcohol Testing i. Mandatory requirements ii. Client policy iii. Manage process 170

VIII. IX. m. Identify all involved towing, storage and/or repair facilities n. Make plans with the client to secure cargo if necessary o. Ascertain if there are any environmental or hazardous materials issues/spills i. Governmental notifications ii. Containment, remediation and clean up MEDIA RESPONSE ISSUES a. Communicate company policy on media relations to all involved. Provide contact information to all involved on your public relations professional for referral and comment to the press. b. Identify all media representatives at scene (consider who will do this) ON SCENE RESPONSE EQUIPMENT AND SUPPLIES FOR RESPONDERS TO THE SCENE-IDENTIFY WHO WILL BE RESPONSIBLE a. Draft witness forms b. Disposable camera c. Dictaphone d. Business cards e. Coveralls, boots, hard hat & gloves f. Small umbrella g. Evidence log h. Reflective safety vest i. Tape measure (100' or longer is preferable) X. TRAINING a. Review and provide checklist to all company professionals involved. Consider, add, delete as you determine appropriate. b. Consider which law firm in the area will be utilized. Stress importance of availability and response of attorneys. Harmonie s list of firms and the 24-Hour Emergency Response directory can be found at www.harmonie.org. c. Consider notifying your law firm to research rights and obligations of driver with respect to police questions and interviews. Consider notifying your law firm to research other laws that may be applicable in the event of an accident within each respective jurisdiction. The Harmonie Group provides a 24-hour emergency/accident response directory of transportation attorneys on its firm directory page at www.harmonie.org. The firms in the group may have relationships and be able to make suggestions on accident reconstructionists, adjusters, protographers, criminal defense attorneys, lab testing facilities and many more resources. The Harmonie Group also provides access to legal services across Canada through its affiliation with The Canadian Litigation Counsel. For CLC firms located throughout Canada, visit www.clcnow.com or call 1-866-252-5515. For more information on The Harmonie Group, go to www.harmonie.org or contact: Tim Violet, Esq. Executive Director THE HARMONIE GROUP 634 Woodbury Street St. Paul, MN 55107 Office: 651-222-3000 Cell: 612-875-7744 Fax: 651-222-3508 Email: tviolet@harmonie.org The Harmonie Group provides NATIONAL ACCESS TO EXCELLENCE. The defense firms in our network handle complex and difficult high-stakes litigation for corporations, third party administrators and insurance companies. The process of looking for counsel can be time-consuming, uncertain and difficult. Harmonie is a by invitation only network where the firms are subjected to a rigorous review process to meet our standards, ethics and values before they are invited to join. The Harmonie Group is pleased to provide on-line access to our NATIONAL DIRECTORY on our web site at www.harmonie.org. THE GENERAL PHONE NUMBERS OF THE HARMONIE GROUP MEMBER FIRMS ARE BELOW. THE HARMONIE GROUP PROVIDES A 24-HOUR EMERGENCY/ACCIDENT RESPONSE DIRECTORY OF TRANSPORTATION ATTORNEYS ON ITS FIRM DIRECTORY PAGE AT WWW.HARMONIE.ORG. ALABAMA NORMAN, WOOD, KENDRICK & TURNER (205) 328-6643 ALASKA DELISIO MORAN GERAGHTY & ZOBEL, P.C. (907) 279-9574 ARIZONA THE CAVANAGH LAW FIRM, P.A. (602) 322-4122 ARKANSAS BARBER, MCCASKILL, JONES & HALE, P.A. (501) 372-6175 CALIFORNIA BURNHAM BROWN (San Francisco/Oakland) (510) 444-6800 MANNING, MARDER, KASS, ELLROD & RAMIREZ, LLP (Los Angeles) (213) 624-6900 SPILE, SIEGAL, LEFF & GOOR, LLP (Los Angeles) (818) 784-6899 COLORADO COOPER & CLOUGH PC (303) 607-0077 CONNECTICUT RYAN, RYAN, JOHNSON & DELUCA, LLP (203) 357-9200 DELAWARE SMITH, KATZENSTEIN & FURLOW, LLP (302) 652-8400 DISTRICT OF COLUMBIA Please see the listings for MD and VA. FLORIDA BUNNELL,WOULFE, KIRSCHBAUM, KELLER, MCINTYRE, GREGOIRE & KLEIN, P.A. (Miami) (954) 761-8600 FISHER, RUSHMER, WERRENRATH, DICKSON, TALLEY & DUNLAP, P.A. (Orlando) (407) 843-2111 GUILDAY, TUCKER, SCHWARTZ & SIMPSON, P.A. (Tallahassee) (850) 224-7091 GEORGIA DREW, ECKL & FARNHAM, LLP (404) 885-1400 HAWAII YAMAMURA & SHIMAZU (808) 523-6969 IDAHO HALL, FARLEY, OBERRECHT & BLANTON, P.A. (208) 395-8500 ILLINOIS RABBITT, PITZER & SNODGRASS, P.C. (Southern Illinois) (314) 421-5545 SANCHEZ DANIELS & HOFFMAN LLP (Chicago) (312) 641-1555 INDIANA LOCKE REYNOLDS LLP (317) 237-3800 IOWA AHLERS & COONEY, P.C. (515) 243-7611 KANSAS WALLACE, SAUNDERS, AUSTIN, BROWN & ENOCHS, CHARTERED (913) 888-1000 KENTUCKY STITES & HARBISON, PLLC (502) 587-3400 LOUISIANA COOK, YANCEY, KING & GALLOWAY, APLC (Shreveport) (318) 221-6277 SUTTERFIELD & WEBB, L.L.C. (New Orleans) (504) 598-2715 MAINE CAMPBELL CAMPBELL EDWARDS & CONROY PROFESSIONAL CORPORATION (207) 780-1190 SULLOWAY & HOLLIS PLLC (410) 539-2800 MARYLAND HODES, PESSIN & KATZ, P.A. (410) 938-8800 WRIGHT, CONSTABLE & SKEEN, L.L.P. (410) 659-1300 MASSACHUSETTS CAMPBELL CAMPBELL EDWARDS & CONROY PROFESSIONAL CORPORATION (617) 241-3000 MICHIGAN GARAN LUCOW MILLER P.C. (248) 641-7600 MINNESOTA MEAGHER & GEER, P.L.L.P. (612) 338-0661 MISSISSIPPI BUTLER, SNOW, O'MARA, STEVENS & CANNADA, PLLC (601) 948-5711 MISSOURI RABBITT, PITZER & SNODGRASS, P.C. (St. Louis) (314) 421-5545 WALLACE, SAUNDERS, AUSTIN, BROWN & ENOCHS, CHARTERED (Kansas City) (913) 888-1000 MONTANA MILODRAGOVICH, DALE, STEINBRENNER & NYGREN, P.C. (406) 728-1455 NEBRASKA ERICKSON & SEDERSTROM, P.C. (402) 397-2200 NEVADA RAWLINGS, OLSON, CANNON, GORMLEY & DESRUISSEAUX, P.C. (702) 384-4012 NEW HAMPSHIRE SULLOWAY & HOLLIS, PLLC (603) 224-2341 NEW JERSEY BRAFF, HARRIS & SUKONECK (973) 994-6677 MARGOLIS EDELSTEIN (Westmont) (856) 858-7200 NEW MEXICO RODEY, DICKASON, SLOAN, AKIN & ROBB, P.A. (505) 765-5900 NEW YORK ABRAMS, GORELICK, FRIEDMAN & JACOBSON, P.C. (NYC) (212) 422-1200 HURWITZ & FINE, P.C. (Buffalo) (716) 849-8900 MOLOD SPITZ & DeSANTIS, P.C. (NYC) (212) 869-3200 PAUL FRANK + COLLINS P.C. (Upstate NE NY) (802) 658-2311 NORTH CAROLINA CRANFILL, SUMNER & HARTZOG LLP (Raleigh) (919) 828-5100 NORTH DAKOTA MEAGHER & GEER, P.L.L.P. (612) 347-9196 OHIO REMINGER & REMINGER COMPANY, L.P.A. (216) 687-1311 OKLAHOMA BEST & SHARP (918) 582-1234 OREGON MARTIN, BISCHOFF (503) 224-3113 PENNSYLVANIA FINE, WYATT & CAREY, P.C. (Scranton) (570) 343-1197 MARGOLIS EDELSTEIN (Philadelphia) (215) 922-1100 171 ZIMMER KUNZ, PLLC (Pittsburgh) (412) 281-8000 RHODE ISLAND CAMPBELL CAMPBELL EDWARDS & CONROY PROFESSIONAL CORPORATION (401) 421-5123 SOUTH CAROLINA RICHARDSON, PLOWDEN, CARPENTER & ROBINSON, P.A. (803) 771-4400 SOUTH DAKOTA GUNDERSON, PALMER, GOODSELL & NELSON, LLP (605) 342-1078 TENNESSEE BAKER, DONELSON, BEARMAN, CALDWELL & BERKOWITZ, PC (901) 577-2256 TEXAS BROWN SIMS, P.C. (Houston) (713) 629-1580 HERMES SARGENT BATES, L.L.P. (Dallas) (214) 749-6000 UTAH SNOW, CHRISTENSEN & MARTINEAU (801) 322-9183 VERMONT PAUL FRANK + COLLINS P.C. (802) 658-2311 VIRGINIA HARMAN, CLAYTOR, CORRIGAN & WELLMAN, P.C. (804) 747-5200 WASHINGTON BETTS, PATTERSON & MINES, P.S. (206) 292-9988 WEST VIRGINIA ZIMMER KUNZ, PLLC (804) 292-8531 WISCONSIN PETERSON, JOHNSON & MURRAY, S.C. (414) 278-8800 WYOMING HIRST APPLEGATE, P.C. (307) 632-0541