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Tuesday, July 23, 2024 | Back issues
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Nvidia shareholder claims, overtime for ‘outside sales’ reps hit SCOTUS docket

The justices will decide cases involving Nvidia's cryptocurrency investments, overtime pay for outside salesmen, benefits for disadvantaged business owners and school telecommunications bills.

WASHINGTON (CN) — With only a few weeks left in its current term, the Supreme Court on Monday padded out its upcoming docket, adding business cases over issues as quotidian as overtime pay and as complex as securities fraud.

The justices agreed to hear an appeal from a Maryland-based international food seller, EMD Sales, which is fighting a lawsuit from three former sales representatives who claim the business owes them overtime wages under the Fair Labor Standards Act.

While the federal labor law doesn't guarantee overtime pay for most salespeople, it makes an exception for those who regularly work outside their employer's place of business, known as outside sales representatives.

The employees convinced two lower courts they were not exempt from overtime requirements, and EMD Sales implored the justices to review the case, noting that it was of national importance since these exemptions are one of the most frequently litigated issues in federal employment law. 

The Fifth, Sixth, Seventh, Ninth, 10th and 11th Circuits use a preponderance of evidence standard generally applied in civil cases — but the Fourth Circuit applied a clear and convincing evidence standard to EMD’s case. 

“The 1.1 million businesses across the Fourth Circuit should not lose cases they might win in the rest of the country,” Lisa Blatt, an attorney with Williams & Connolly, wrote in the company’s petition. 

While attempting to bridge that gap between the circuits in EMD Sales Inc. v. Faustino Carrera, the justices will also tackle wire fraud claims over a Pennsylvania bridge project. 

In the case underlying Stamatios Kousisis v. United States, the federal government says Alpha Painting & Construction Co., an industrial painting company, and its project manager Kousisis fraudulently participated in a program intended to remedy discrimination in business.

To receive federal funds for repairs on a Philadelphia bridge and train station, the Pennsylvania Department of Transportation agreed to hire companies that are predominantly owned and operated by individuals who are socially and economically disadvantaged. 

Alpha Painting won two contracts by committing to buy $6.4 million in paint supplies from Markias Inc., a New Jersey-based company that prequalified for the program. The government says the company and Kousisis didn’t follow through with this agreement, and instead used Markias only as a pass-through: The paint sellers who worked on the project sent invoices to Markias, which in turn issued its own invoices for a higher fee. 

Alpha and Kousisis were found guilty of wire fraud charges but fought their conviction on appeal. They said they did not defraud the government because they completed the construction projects and both the state and federal government received the full benefit of their agreement. 

The justices took up the case to decide whether sufficient evidence supported the wire fraud convictions. 

Fraud claims featured in another case on the court’s grant list. The court agreed to review pleading requirements for securities fraud class actions in Nvidia Corp v. E. Ohman J.

Investors in the chipmaker filed a securities fraud suit accusing Nvidia's CEO, Jensen Huang, of making public statements contrary to internal company reports regarding its involvement in the cryptocurrency industry. Nvidia claims investors had no information about the internal reports so they hired an expert witness to manufacture data. 

A federal judge dismissed the investors' claims, but the Ninth Circuit revived the case.

The appeals court ruling created an easy roadmap for the fishing expeditions that the Private Securities Litigation Reform Act was supposed to prevent, according to Cory Andrews, general counsel and vice president for litigation at Washington Legal Foundation.

“The Ninth Circuit’s opinion, if allowed to stand, would reopen the floodgates to the same litigation abuses that led Congress to enact the PSLRA’s heighted pleading standard in the first place,” Andrews said in a statement.

Finally, in taking up Wisconsin Bell v. U.S., the court agreed on Monday to hear a False Claims Act case from AT&T subsidiary Wisconsin Bell.

The federal government accused the company of overcharging schools and libraries for telecommunications services. During an audit of schools’ bills, relator Todd Heath claimed Wisconsin Bell did not charge schools the lowest rate for its services, so every reimbursement the company filed was a false claim. 

A federal judge said Heath did not have enough evidence to bring his claims, but the Seventh Circuit reversed that ruling. 

John Masslon, senior litigation counsel at Washington Legal Foundation, said allowing the appeals court ruling to stand encouraged parasitic suits and threatened the federal fisc. 

“The False Claims Act’s purpose is to prevent fraud against the United States, not to pad the pockets of relators and plaintiffs’ lawyers,” Masslon said in a statement. 

Follow @KelseyReichmann
Categories / Appeals, Business

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