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Weekly Appellate Report #23

By Brian Cardile | Oct. 7, 2016

Appellate Practice

Oct. 7, 2016

Weekly Appellate Report #23

Kiran Seldon (Seyfarth Shaw) chats on-call rest breaks after CASC arguments in Augustus v. ABM; John Cannon (Stradling) considers the 9th's SEC v. Jensen and expansion of CEO/CFO liability after financial restatements


This week's show regards two significant cases with outsize implications, one a class action employment suit set to further refine just what California employers can require of employees during rest breaks; the other a federal securities law ruling that broadens company executive liability in the wake of financial restatements, but leaves some significant ambiguities within that doctrine.

First, Kiran Seldon, of Seyfarth Shaw, will visit to discuss Augustus v. ABM Security Services, a case which heard oral arguments before the California Supreme Court last week. There, a class of security guards filed suit against ABM, claiming the company's policy requiring employees to be on-call, and able to discharge work responsibilities if needed, during rest periods violated state labor codes. The plaintiffs contend that state law requires employers to relinquish all control over employees during these breaks, which includes the power to summon them back to work. A trial court sided with the class and awarded $90 million in damages. The Second Appellate District reversed that ruling, finding on-call breaks permissible. As the case could significantly expand employer liability in these contexts, it has drawn a number of amicus filings from both sides of the argument, one authored by Ms. Seldon, who will describe why, in her view, the Second District ruling should stand.
Then, John Cannon, of Stradling, will visit to analyze a recent Ninth Circuit securities ruling, in SEC v. Jensen, which included two important holdings making company executives more vulnerable to disgorgement of certain income, even where those executives didn't necessary engage in any wrongdoing or recklessness. One holding relates to Section 304 of the Sarbanes-Oxley Act, and instructs that, in the wake of financial restatements, executives may be subject to disgorgement whether or not their personal misconduct gave rise to those restatements. The other holding reads an independent cause of action into a rule of the Securities Exchange Act that requires executives to sign submitted financial documents. The Ninth Circuit held that a claim may be brought against executives, not just when they fail to sign such documents, but when they sign documents that contain some false information. Important, as Mr. Cannon will describe, the appellate panel neglected to discuss the sort of knowledge requirement necessary in suits under either the Securities Exchange Act rule or Section 304, making the opinion suggestive of an unforgiving, strict liability sort of rule. Mr. Cannon will discuss what that means for company executives and how this doctrine may develop further.
Don't forget CLE credit is available for podcast listeners. Find a link to a short true/false test below. <!-- Weekly Appellate Report Podcast -->


Brian Cardile

Rulings Editor, Podcast Host, 9th U.S. Circuit Court of Appeals reporter

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