News from around the industry highlighting firm achivements and current events

The Washington Supreme Court Applies Strict Liability Standard to Medical Product Manufacturer’s Duty to Warn Hospitals

February 9, 2017

By Greg Johnson

In Taylor v. Intuitive Surgical Inc. (Feb 9, 2017) the Washington Supreme Court held that the Washington Product Lability Act imposes a statutory duty on manufacturers of medical products to warn hospitals of the products’ dangers when they purchase them. Manufacturers’ duty to warn purchasing hospitals is not excused by warning the doctors who use the devices because hospitals need to know the dangers of the products they purchase, which cannot be accomplished simply by the manufacturers’  warnings to the doctors who use the products. A copy of the Washington Supreme Court’s opinion can be found here: http://www.courts.wa.gov/opinions/?fa=opinions.disp&filename=922101MAJ

 


RECENT SUPREME COURT DECISION IMPACTS LENDERS’ CONTRACTUAL RIGHT TO ENTER AND TO SECURE HOMES IN DEFAULT

February 9, 2017

By: Tricia D. Usab

 

On July 7, 2016, the Washington Supreme Court handed down a decision in Jordan v. Nationstar Mortgage, 185 Wn.2d 876 (2016), that directly impacts a lender’s ability to exercise standard provisions found in many mortgages and deeds of trust recorded throughout the state of Washington.  Many mortgages and deeds of trust contain provisions that allow a lender to enter into a borrower’s real property for the purpose of securing it after an event of default, but prior to a foreclosure.  The provisions usually allow the lender to change the locks, winterize structures, or take other steps necessary to protect the value of the real property.

 

In Jordan v. Nationstar Mortgage, the Court held that provisions in a deed of trust or mortgage that allow a lender to enter into real property and change the locks, prior to a foreclosure are an exertion of physical control by the lender, and that such physical control exercised by the lender amounts to possession of the real property.  The court examined various definitions of the word “possession” and determined that possession is an exertion of control over property.  In Washington, an act of possession of real property by a lender prior to a foreclosure is prohibited by law.  RCW 7.28.230, states “a mortgage of any interest in real property shall not be deemed a conveyance so as to enable the owner of the mortgage to recover possession of the real property, without a foreclosure and sale according to law.”  In other words, a lender or mortgagee has a right to place a lien on the real property and to foreclose upon that lien, but the lender does not have a right to possess the property prior to the foreclosure.  Accordingly, the court held that provisions in a deed of trust or mortgage that allow a lender to enter into a property for the purpose of changing the locks to secure it, prior to a foreclosure are prohibited by Washington law, as an act of possession by the mortgagee prior to a foreclosure.

 

The Court reasoned that a lender changing locks on a borrower’s real property is similar to a landlord changing locks on a tenant’s real property, and in Washington, the act of a landlord changing the locks on a tenant is deemed an exertion of control over the real property and an unlawful eviction against the tenant.  The Court applied this rule to lenders and borrowers, even though the lender in the case thought the real property was abandoned and the borrower was provided with a telephone number to obtain access to the property.

 

After this decision, it difficult to know what a lender may do prior to a foreclosure sale, in order to protect or secure the real property pledged to the lender as collateral following an event of default under the loan.  Clearly a lender may not enter into the real property to change the locks, even if the lender believes that the real property is abandoned and the lender provides a means of contact to the borrower for future access.  Moving forward what acts will constitute an exertion of control by the lender under Washington law?  Is winterizing without changing the locks an exertion of control over the real property?  What about transferring payment of the electricity bill to the lender, in order to ensure that payment and services are continued in the winter months to avoid pipes from freezing?

 

According to the Spokesman Review, Washington appears to be the first state in the nation to invalidate these types of provisions, so we are venturing into new territory.  The Spokesman Review article may be found by following the link below:

 

http://www.spokesman.com/stories/2016/jul/17/washington-state-invalidates-common-mortgage-provi/


NEW DEVELOPMENT REGARDING FCRA THAT AFFECTS ALL BUSINESSES

February 3, 2017

On January 20, 2017, the Ninth Circuit Court of Appeals issued a ruling in a case that has broad effect, potentially impacting your organization.

 

In the case of Syed v. M-I, LLC, Case No. 14-17186 (2017), the Court ruled that a prospective employer violates the Fair Credit Reporting Act when it procures a job applicant’s consumer report after including a liability waiver in the same document as the statutorily mandated disclosure.  The Ninth Circuit Court of Appeals is the very first Court in the nation to rule on this particular issue.  The Court also found that given the statute’s requirement that the disclosure document consist solely of the disclosure, a prospective employer’s violation is “willful” when the employer includes terms in addition to the disclosure, such as the liability waiver, before procuring a consumer report or causing one to be procured.

 

If your organization utilizes consumer reports when making business decisions, including hiring of employees, you should review your written disclosure statements issued to prospective employees to ensure that they comply with the Ninth Circuit’s ruling.


RECENT SUPREME COURT DECISION IMPACTS DEVELOPMENT OF LAND WITH PERMIT-EXEMPT WELLS

February 1, 2017

By: Tricia D. Usab

On October 6, 2016, the Washington Supreme Court handed down a decision in Whatcom County v. Hirst, 186 Wash. 2d 648 (2016),  that directly impacts the development of land with permit-exempt wells in counties such as Spokane, that are subject to the Growth Management Act.  The Growth Management Act is legislation that reinforces conservation goals, discourages sprawling low-density development patterns, and encourages future growth in urban areas.  Permit-exempt wells allow a withdrawal of groundwater for domestic use in an amount not exceeding five thousand gallons per day without any water permit requirement, provided that the groundwater withdrawals do not infringe upon any senior water rights.  The Court held that the Growth Management Act places an independent duty on counties within Washington to ensure that groundwater appropriations will not infringe upon any senior water rights, including minimum stream flows prior to allowing land development.  The result is that counties can no longer rely upon the contention that water is presumptively available for permit-exempt wells provided that the county’s comprehensive plan is consistent with certain rules issued by the Department of Ecology.  Prior to this ruling, counties regularly allowed owners of land with permit-exempt wells to obtain building permits without the applicant providing any evidence that water is legally available, or actually available on the land.  Counties only confirmed that the well did not fall within one of the boundary areas identified by the Department of Ecology, as an area where water for development does not exist.

 

The Court stated in its analysis that the trend in the law is to retain sufficient water in streams and lakes in order to sustain wildlife, recreational, and navigational opportunities.  The Court noted that the Growth Management Act shifted some of the obligation to protect local environments to local governments, instead of solely relying upon the Department of Ecology.  The Court’s decision relied upon Washington’s precedent of protecting minimum instream flow rights, which are the minimum streams necessary for fish and other wildlife.  The Court reasoned that since the adoption of the Department of Ecology rules in 1985, the understanding and methods of determining hydraulic continuity and the effect of groundwater withdrawals on surface water have changed.  The Court noted that when the minimum instream flow rules were adopted, the Department of Ecology did not believe that withdrawals from deep contained aquifers impacted stream flows, but now it is well recognized that groundwater withdrawals can have a significant impact on surface water flows.   Additionally, the rules issued by the Department of Ecology that Whatcom County and other counties have followed allow a permit-exempt well to appropriate water from an otherwise closed basin,  unless the basin is closed to all future appropriations.  Accordingly, in addition to holding that counties must consider the effect on senior water rights before approving building or subdivision permits, the Court held that if there is a conflict between the Growth Management Act and the Department of Ecology rules, the Growth Management Act controls.

 

Currently there are no systems in place for counties to analyze a well’s effect on senior water rights, since prior to this ruling, counties relied upon the Department of Ecology’s rules specific to each water basin.  Justice Stephens, in her dissenting opinion, stated the practical result of this holding is to stop counties from granting building permits that rely on permit-exempt wells.  Justice Stephens stated that the majority’s holding misinterpreted the phrase adequate water supply in the building code,  to mean legal availability, not just actual presence of water.  Justice Stephens reasoned that the Department of Ecology was tasked with developing and implementing the comprehensive state water resource program and water resource inventory areas, which Whatcom County and other counties across the state have relied upon prior to this decision.  Justice Stephens opined that the building codes implemented by local governments should be aligned with the water resource areas, allowing counties to integrate the Department of Ecology’s water determinations into their comprehensive plans and rely upon them when reviewing building permit applications.  According to Justice Stephens, the majority’s opinion assigns applicants who are otherwise exempt from obtaining a water permit, to obtain hydrogeological studies to determine complex effects on surface water from the use of a given well, that are difficult, if not impossible, to measure.

 

It is hard to know what a permit-exempt landowner will need to produce to obtain a building permit from a county governed by the Growth Management Act moving forward, but this case makes one point very clear, water is being classified as a limited commodity, and there is a trend toward increasing regulation that all users will be forced to navigate.  In the wake of this decision, Spokane County has adopted an emergency county ordinance prohibiting any well to be drilled within 500 feet of an existing well.  According to the Spokesman Review, Spokane County officials believe this ordinance complies with the controversial decision, but prevents a moratorium on building and reduces the burden of proof placed on an applicant with a permit exempt well.  I will continue to monitor this issue for further developments and for more information on Spokane’s emergency ordinance, please follow the link below:

 

http://www.spokesman.com/stories/2016/nov/02/spokane-county-adopts-interim-emergency-ordinance-/