Home Sellers On the Hook for Failing to Disclose Defects

This week the Nebraska Court of Appeals affirmed a trial court’s decision to award damages, costs, and attorney fees to the purchasers due to the sellers’ failure to disclose defects in a Seller Property Condition Disclosure Statement. Hutchison v. Kula, 27 Neb. App. 96 (2019). Nebraska law requires sellers of real property to complete the disclosure statement, which lists aspects and defects of a property where the sellers mark “yes,” “no,” “working,” “not working,” etc. The purchasers sued due to problems with the purchase of the property including water intrusion, a leaking window, a defective refrigerator fan and garage door keypad, and a dead tree. On the disclosure statement, the sellers, after owning the property for 7 years, marked the box for “working” by the refrigerator, garage door keypad, and the sump pump. They admitted some water had intruded into the basement during the “heavy rains” of “2014” due to “a neighbor’s failed sump pump,” but indicated they added a drain system. They marked “no” for questions about “diseased or dead trees,” leaking or windows with broken seals, and “flooding, drainage, or grading problems.”

After moving in, the purchasers found long-term water damage to the basement, mold under the carpet, and a non-functioning drain tile system. And that the water intrusion of 2014 was not caused by the neighbor, but happened whenever it rained. Repairs and remedial actions were estimated at $16,774. A mechanical engineer providing investigative engineering services for insurance claim cases, including property losses due to water infiltration, testified to the long-term existence of the basement water intrusion problems, and the lack of accuracy of the statements by the sellers in the disclosure statement. The sellers testified they were truthful to their knowledge.

To prove a claim related to a disclosure statement, a buyer has to “…prove either that the seller failed to provide a disclosure statement or that the statement contained knowingly false disclosures by the seller.” Bohm v. DMA Partnership, 8 Neb. App. 1069, 1078-79 (2000). A seller is not liable for “any error, inaccuracy, or omission of any information in a disclosure statement if the error, inaccuracy, or omission was not within the personal knowledge of the seller.” Neb. Rev. Stat. § 76-2,120(8). Proving actual knowledge is difficult, however the trial court found the evidence “established that there was a steady stream of leaking along the entire top of one of the basement windows,” the leaking and other problems happened shortly after occupancy by the purchasers, and the expert testimony supported the purchasers’ claims.

The successful buyers were entitled to attorney fees. “If a conveyance of real property is not made in compliance with this section, the purchaser shall have a cause of action against the seller and may recover the actual damages, court costs, and reasonable attorney’s fees.” Neb. Rev. Stat. § 76-2,120(12). Here, they sought an additional $11,670.25, on appeal. The court affirmed the trial court’s award of $10,000 in attorney fees saying what constitutes “reasonable attorney fees remained discretionary to the district court” and they found no abuse of discretion in the award.  The lesson? Fully disclose ALL knowledge on disclosure statements. If you’re dealing with a real estate dispute and need help resolving it, please give us a call.

Proposed Changes to Federal Overtime Rules

On March 7, 2019, the U.S. Department of Labor issued a Notice of Proposed Rulemaking (NPRM) that “would make more than a million more American workers eligible for overtime.” Interested individuals and companies have 60 days to comment on the proposed regulation once it is published in the Federal Register.

Key provisions of the NPRM include:

  • Increases the minimum salary required for an employee to qualify for exemption from the currently-enforced level of $455 to $679 per week (equivalent to $35,308 per year).
  • Increases the total annual compensation requirement for “highly compensated employees” (HCE) from the currently-enforced level of $100,000 to $147,414 per year.
  • A commitment to periodic review to update the salary threshold. An update would continue to require notice-and-comment rulemaking.
  • Allowing employers to use nondiscretionary bonuses and incentive payments (including commissions) that are paid annually or more frequently to satisfy up to 10 percent of the standard salary level.
  • No changes overtime protections for:
    • Police Officers
    • Fire Fighters
    • Paramedics
    • Nurses
    • Laborers including: non-management production-line employees
    • Non-management employees in maintenance, construction and similar occupations such as carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operating engineers, longshoremen, and construction workers
  • No changes to the job duties test.
  • No automatic adjustments to the salary threshold.

More information is available through the DOL website: https://www.dol.gov/whd/overtime2019/

Defense Verdict for Railroad in FELA Case

Following a three-day trial, a jury in the District Court for Box Butte County, Nebraska, returned a verdict in favor of the railroad, represented by Tyler Spahn and Andrew Weeks, on an employee’s claim under the Federal Employers’ Liability Act. Plaintiff claimed he injured his knee when he fell in snowy conditions while walking from his work location to his vehicle in the parking lot. After the incident, he underwent a knee replacement and then returned to work for the railroad.

Plaintiff claimed the railroad failed to take proper measures for winter weather conditions and to address other alleged safety hazards with the route he chose to the parking lot. The evidence showed, however, that plaintiff had an indoor alternative route, which was free from winter weather conditions, and that the alleged hazards he complained of did not play a role in his accident. Medical evidence presented by the railroad also established that he had a pre-existing history of knee complaints going back decades and was told by his doctors that he was a candidate for a knee replacement years before the accident. The railroad demonstrated that he chose the route he took over the indoor alternative solely for convenience and that he did not consider the weather conditions or his pre-existing knee issues.

Ultimately, the jury returned a unanimous verdict in favor of the railroad, finding that the plaintiff did not meet his burden of proof.

Moeller v. Burlington Northern & Santa Fe Corp., Case No. CI 17-13 (Neb. Dist. Ct. Jan. 17, 2019).

District Court Finds No Negligence in FELA Case

The Lancaster County District Court of Nebraska granted summary judgment in favor of the railroad and dismissed a former employee’s negligence claims under the Federal Employers’ Liability Act (“FELA”), 45 U.S.C. § 51. Plaintiff, a former track laborer with several years of experience, fractured his foot while swinging a sledgehammer to remove a metal clip from a rail where the crew was replacing railroad ties. He took a full swing, used his foot as a brake for the hammer, and pinched his foot between the sledgehammer and a clip behind his foot. He claimed the injury caused him to develop complex regional pain syndrome (“CRPS”), and that he was now completely and totally disabled from the injury. Generally, his claims centered on inadequate training, supervision, pre-job surveys, and job briefings. He generally admitted, however, that he had extensive experience using a sledgehammer to remove metal clips from rails—almost a daily occurrence—and it was a “no brainer” task. He was aware of his surroundings and all the aspects of the working environment were readily apparent to him, such as the track conditions, location of the clips, and his footing.

The district court held there was no genuine issue of material fact and dismissed the case. The court rejected the plaintiff’s theory of liability that the railroad should have provided additional instruction, supervision, warning, or training for the specific configuration of the track and clips on the day of the incident, despite plaintiff’s extensive experience removing clips:  “FELA Law does not place a duty on employers to provide specific training on each and every task their employees may have to perform let alone every conceivable circumstance in which their employees may need to perform them.”

Lanham v. BNSF Railway Co., Case No. 17-106 (Neb. Dist. Ct. Jan. 4, 2019)

Locomotive Inspection Act Does Not Preempt Railroad Claims

The U.S. Court of Appeals for the Eighth Circuit held that the railroad’s claims against a manufacturer for a defective locomotive seat was not preempted by the Locomotive Inspection Act (“LIA”), 49 U.S.C. § 20701. After settling a personal injury claim with its employee who claimed the backrest of his locomotive seat was broken, the railroad initiated claims against the seat manufacturer to recover the amount of the settlement, expenses, and attorney fees. The railroad asserted multiple claims including breach of contract, product liability, strict liability, equitable subrogation, indemnity and contribution. The legal issue on appeal was whether the LIA preempted the railroad’s “products-liability claims based on federally-imposed standards of care.” The Court held it did not. The Court also held that the railroad’s breach of contract claim was not preempted by federal law. The case was remanded for further proceedings to the U.S. District Court of Nebraska.

BNSF Railway Company v. Seats, Incorporated, 900 F.3d 545 (8th Cir. 2018).

Dismissal of FELA Claim Upheld on Appeal

The U.S. Court of Appeals for the Eighth Circuit summarily affirmed the dismissal of the plaintiff’s Federal Employers’ Liability Act claim by the U.S. District Court for the Southern District of Iowa.  Read the decision of the Eighth Circuit.  Read the decision of the District Court.

Lahart v. BNSF Railway Company, Case No. 4:15-CV-464, 2017 WL 4021132 (S.D. Iowa), affirmed on appeal (8th Cir. November 30, 2018).

Judgment as a Matter of Law for Railroad Following Close of Plaintiff’s FELA Case

BNSF was granted judgment as a matter of law in a FELA jury trial upon the close of the plaintiff’s case, following three days of testimony in the U.S. District Court for Nebraska before the Hon. John Gerrard. BNSF had previously obtained summary judgment on the plaintiff’s FRSA, § 20109, discrimination claim. For his FELA claim, the plaintiff claimed he was injured when pulling a piece of paper containing coal dumped from the bottom of a coal car in BNSF’s Alliance, Nebraska, mechanical facility and argued that BNSF should have adopted alternative procedures of having all coal dumped outside. The Court entered judgment as a matter of law primarily due to the plaintiff’s admissions on cross-examination. The plaintiff admitted he did not perceive the task was unsafe and that his argument for dumping the coal outside did not arise from a safety concern, but rather from a labor complaint that he should not be required to do the work. The plaintiff failed to present any evidence that the task of cleaning up the coal exposed him to an unreasonable risk of injury. He attempted to rely on the existence of an alternative method to establish negligence, but the Court recognized that he must first make a showing that the method at issue was unsafe.

For his FRSA claim, the plaintiff argued that his termination for dishonesty in his injury report was retaliatory. The Court granted summary judgment, because there was no evidence of any retaliatory intent by the decision-makers in assessing discipline to establish a contributing factor under the FRSA. To explain his dishonesty, the plaintiff claimed that a supervisor influenced the way he reported his injury and made him report it dishonestly. However, the Court recognized that the critical issue was not whether this actually occurred, but whether there was any indication of pretext that the decision-makers had believed the plaintiff’s allegations. Because it was clear the decision-makers did not, the plaintiff failed to show any retaliatory intent and a contributing factor.

Logsdon v. BNSF Railway Company, Case No. 8:15-CV-232 (D. Neb. Aug. 30, 2017).

Eighth Circuit Affirms Summary Judgment in Favor of Railroad

The U.S. Court of Appeals for the Eighth Circuit affirmed summary judgment in favor of the railroad on the plaintiffs’ claims under the Federal Railroad Safety Act (“FRSA”), 49 U.S.C. § 20109. The three plaintiffs claimed the railroad retaliated against them for engaging in protected activities under the FRSA. The U.S. District Court for the Southern District of Iowa granted summary judgment in favor of the railroad on the plaintiffs’ claims, finding the plaintiffs failed to exhaust administrative remedies, did not engage in a protected activity under the FRSA and any alleged protected activity was not a contributing factor to their claimed adverse actions.

The case arises out of an incident where the plaintiffs’ coworker was injured during a crew change. Following the incident, all of the employees involved were disciplined for rule violations. The plaintiffs alleged they were disciplined and suffered other adverse actions for reporting various work conditions after the incident occurred.

In its recent decision, the Eighth Circuit held the District Court correctly found the plaintiffs failed to exhaust administration remedies and that the non-exhausted claims were properly dismissed on the merits. The Court rejected the plaintiffs’ argument they did not have to exhaust administrative remedies under the FRSA. The plaintiffs’ claims of adverse actions related to increased testing and taking positions that paid less were not raised in their OSHA Complaint and were not allegations that flowed naturally from the Complaint. Regarding the plaintiffs’ protected activities, the Court found the plaintiffs failed to exhaust claims related to their statements to the railroad’s claims department.

On the merits of the plaintiffs’ remaining claims, the Court found the plaintiffs’ handwritten statements regarding the work conditions to the trainmaster were not reports of a violation of any federal law, rule or regulation under Section 20109(a)(1) because they failed to state that the railroad knew about the conditions or that they failed to remedy a known condition. While these statements were reports of hazardous safety conditions under Section 20109(b)(1)(A), the plaintiffs explicitly abandoned any claims under that section of the FRSA. The statements made at the investigation hearing for discipline were not a contributing factor to any alleged adverse action. First, these statements were given after the railroad initiated the investigation. Second, there is no evidence connecting these statements to plaintiff’s discipline or dismissal. The Court also rejected the plaintiffs’ arguments they did not actually violate the rules and that their protected activity and adverse actions were “inextricable intertwined.” See Heim v. BNSF Railway Company, 849 F.3d 723, 727 (8th Cir. 2017). Summary judgment in favor of the railroad was proper.

Foster et al. v. BNSF Railway Company, 866 F.3d 962 (8th Cir. 2017).

Summary Judgment on FELA Claim and No Damages for Discrimination

The U.S. District Court for the Southern District of Iowa granted the railroad summary judgment on the plaintiff’s Federal Employers’ Liability Act claim. He had claimed a shoulder and back injury after operating a switch near Ottumwa, Iowa. The railroad denied the switch was defective and moved to dismiss the claim as not reasonably foreseeable. In granting summary judgment for the railroad, the Court noted that neither the railroad nor plaintiff found any issues with the switch before he operated it. The evidence showed the railroad properly conducted regular inspections of the switch without any finding of defects. The plaintiff operated the switch as second time after he claimed he was injured, and while he mentioned the switch needed some oil, he did not report the switch as defective or ask that it be taken out of service.

The plaintiff’s remaining discrimination claim under the Federal Railroad Safety Act went to jury trial. The plaintiff argued that his termination for violating the railroad’s rules was discrimination for reporting his alleged injury from operating the switch. The railroad presented evidence that plaintiff was terminated based upon his conduct after reporting the alleged injury and when he was confronted with a serious rules violation. The plaintiff was afforded an investigation hearing according to his union’s collective bargaining agreement with the railroad. An independent decisionmaker at the railroad reviewed the investigation transcript and made the decision to dismiss plaintiff based on the railroad’s discipline policy. The decision was reviewed by the railroad’s labor relations department to ensure consistent application of the discipline policy. After three days of trial, the jury found plaintiff has suffered no emotional distress and awarded plaintiff no damages.

Lahart v. BNSF Railway Company, Case No. 4:15-CV-464, 2017 WL 4021132 (S.D. Iowa May 30, 2017) (appeal pending).

Eighth Circuit Affirms Dismissal in Retaliation Case

The U.S. Court of Appeals for the Eighth Circuit affirmed the entry of summary judgment in favor of the railroad on the employee’s claim under the Federal Railroad Safety Act (“FRSA”), 49 U.S.C. § 20109. The employee, who was disciplined for a violation of the railroad’s safety rules, claimed he was disciplined because he reported a work-related injury, a protected activity under the FRSA. The U.S. District Court for Nebraska held that the railroad did not retaliate against the employee because no evidence suggested his injury report was a contributing factor to his discipline.

In reliance on Kuduk v. BNSF Railway Company, 768 F.3d 786 (8th Cir. 2014), the Heim court reaffirmed that to establish a prima facie case of FRSA retaliation, the employee must show the railroad intentionally retaliated against the employee for engaging in a protected activity. The employee argued the injury report and his discipline were “inextricably intertwined” since the railroad would not have learned about the rule violation absent his report of personal injury. The court rejected this argument finding the employee “must demonstrate more than a mere factual connection between his injury report and his discipline to establish a prima facie case under the contributing-factor standard.” While the employee was not required to conclusively demonstrate a retaliatory motive, he was required to show the discipline was at least partly based on intentional retaliation.

The Court rejected the employee’s argument that circumstantial evidence was sufficient to show intentional retaliation. The evidence showed he was encouraged to report his injury, and the proximity between the injury report and discipline, without more, was insufficient to make a retaliation claim. The employee’s claim that he was treated differently because he sustained an injury failed to show a retaliatory motive because there was no evidence that the railroad was aware of other employees engaging in the same misconduct as the employee. The existence of the railroad’s compensation program was also insufficient to support the employee’s claim. Because the employee failed to offer specific evidence of an improper retaliatory motive by the railroad, summary judgment in favor of the railroad was proper.

On October 2, 2017, the U.S. Supreme Court denied plaintiff’s petition of a writ of certiorari upholding the Eighth Circuit’s decision.

Heim v. BNSF Railway Company, 849 F.3d 723 (8th Cir. 2017)., cert. denied (2017).