Stephen G. Tomlinson, P.C.

A nonprofit representing South Carolina's 271 incorporated municipalities can continue to pursue its claims that Geico failed to fully pay certain municipalities nearly $70 million in business license taxes and penalties, a South Carolina federal court ruled Wednesday, rejecting the company's position that the nonprofit lacks such tax collection authority. A federal judge on Wednesday denied Geico's bid to dismiss a $70 million tax collection suit brought by a nonprofit representing South Carolina's 271 incorporated municipalities. (Photo by Jaque Silva/NurPhoto via AP) Denying Geico's dismissal motion, U.S. District Judge Joseph F. Anderson Jr. noted that while South Carolina law does permit municipalities to delegate certain functions to third parties, Geico has specifically challenged whether the scope of such authority extends to the Municipal Association of South Carolina's insurance tax program. Given that each municipality's delegation of tax collection authority to MASC originates from underlying local revenue services contracts and corresponding municipal ordinances, Judge Anderson said "determining the validity of a local ordinance is a two-step process." Under the South Carolina Supreme Court's 2004 decision in Sunset Cay v. Folly Beach , that specifically means analyzing whether a local government has the power to enact a given ordinance and if the ordinance is consistent with South Carolina law, he said. "The 'home rule' amendments to the South Carolina Constitution grant broad powers to South Carolina municipalities," Judge Anderson wrote, referring to Section 17 in Article VIII stating that the "provisions of this constitution and all laws concerning local government shall be liberally construed in their favor." And under South Carolina statutes §5-7-60 and §5-7-300(E), municipalities are "empowered to contract by ordinance to assist in collecting property or business license taxes," he further found. While §5-7-300(E) refers only to a municipality's authority to delegate the collection of "property or business license taxes" to a third party like MASC, Judge Anderson said the collection of delinquent taxes and penalties is "fairly implied and not prohibited by this statute." "The general purpose of §5-7-300 is to empower municipalities to provide the procedure for collecting taxes and contract with other entities in fulfilling this function," he wrote. "A liberal construction of any such ordinances, as mandated by Article VIII, §17, further supports the authority of the participating municipalities to enact such ordinances." MASC sued six separate Geico units this past May, asserting two causes of action concerning unpaid taxes and penalties. Via local ordinances and local revenue service agreements, MASC said participating municipalities granted it the authority to collect their 2% tax on "gross premiums for all property and casualty policies." MASC said the ordinances also impose a 5% penalty on delinquent amounts for each month or portion of a month that the tax goes unpaid. Though MASC said the Geico units "report and pay on time," they specifically alleged the units failed for seven years to file "reconciliation reports" that "verif[y] the gross income amounts and allocations owed each participating municipality." "Without a reconciliation report, the amounts and allocations cannot be verified," MASC argues. All told, MASC says Geico failed to pay a total of $69.7 million from 2021 to 2024 in business license taxes and penalties owed. On Wednesday, Judge Anderson further rejected Geico's argument that MASC is "merely speculating that because defendants allegedly did not submit reconciliation reports, defendants underpaid their taxes." At the motion to dismiss stage, the court "must accept well-pleaded allegations as true, including the assertion that defendants have not paid the full amount owed," he wrote. Geico also claimed that South Carolina's three-year statute of limitations applies to bar a recovery for amounts allegedly owed in 2021. But Judge Anderson similarly ruled that the insurer can't yet prevail on those grounds because MASC argues that the deadline should be tolled because Geico repeatedly told the organization that it would submit the documents. "After discovery, the court may learn that the circumstances presented are insufficient to satisfy the strictures of equitable tolling; however, dismissal at this stage would be premature," Judge Anderson wrote. He said the same goes for Geico's related argument that MASC failed to exhaust administrative remedies before taking the insurer to court, in particular lodging a "notice of assessment" per state statute §6-1-410 for failure to pay a business license tax. The court "may learn that the correspondence alleged in the complaint was insufficient to satisfy plaintiff's requirements under S.C. Code §6-1-410," Judge Anderson said, but siding with Geico at the motion to dismiss stage would also be premature. Finally, the court denied Geico's invocation of the so-called Burford abstention under the U.S. Supreme Court's 1943 decision in Burford v. Sun Oil . Judge Anderson further pointed to the Fourth Circuit's 2007 decision in Martin v. Stewart , which said that under Burford, a federal court's abstention from a dispute is permitted when there are difficult questions of state law or retaining jurisdiction would "disrupt" state policy efforts. "This case does not present the type of extraordinary circumstances that would warrant abstention under Burford," Judge Anderson wrote. "While the interpretation of whether S.C. Code Ann. 5-7-300(E) permits MASC to collect delinquent taxes is one of first impression, it is not one that peculiarly calls for the exercise of judgment by state courts." Representatives of the parties did not immediately respond to a request for comment Wednesday. MASC is represented by Robert E. Tyson Jr. and Sarah C. Frierson of Robinson Gray Stepp & Laffitte LLC. Geico is represented by G.P. Diminich and Kathryn N. Tanner of Shumaker Loop & Kendrick LLP. The case is Municipal Association of South Carolina v. Government Employees Insurance Co. et al., case number 3:25-cv-03780, in the U.S. District Court for the District of South Carolina.

Nov 12

5 min

Siding with a firefighter in a dispute with his municipal employer, the Massachusetts Appeals Court late last week ruled that the city was required to provide a firefighter with 40 days of 24-hour shift pay after he missed over 40 days nonconsecutively for military leave. On Friday, the appellate court reversed the Middlesex County Superior Court's ruling that said the city of Melrose was only required to provide 20 days of 24-hour shift pay to firefighter Robert Driscoll for missing 40 nonconsecutive days for military service. During his time as a firefighter, Driscoll served as an officer for the U.S. Air Force and reached the rank of colonel in the Air National Guard, which required him to miss numerous shifts from 2019 to 2022 for military training and active duty. He filed suit after the city paid him for 20 24-hour shifts in a consecutive 40-day period for each federal fiscal year, rather than for the 40 shifts he claimed he was owed. The city argued that it was required to pay in full only for military service within "the first 40 consecutive calendar days of an annual tour of duty." However, the court concluded that the statute in dispute, Massachusetts General Laws chapter 33, Section 59 (a), provides that service members receive "payment for 40 days of service within a federal fiscal year, regardless of whether those 40 days are consecutive." "General laws c. 33, § 59 (a), requires participating government entities to pay the full salary of an employee performing certain military service for '40 days in any federal fiscal year,' and states that a day 'shall mean any 24-hour period regardless of calendar day.' Applying the plain meaning of these words, we conclude that the firefighter is entitled to pay for up to 40 24-hour shifts missed during his military service in each federal fiscal year, and not (as the city claims) up to 20 such shifts in a consecutive period of 40 days," said Associate Justice Joseph M. Ditkoff, who authored the opinion. Chief Justice Amy Lyn Blake and Associate Justice Robert A. Brennan also agreed. In Driscoll v. City of Melrose, Driscoll was employed by the city as a firefighter from 2002 until his retirement in 2022. According to the court, the agreement between the firefighters' union and the city provides that the 24-hour shifts firefighters work are split into two separate shifts, a 10-hour day shift, and then a 14-hour shift. For purposes of vacation or sick leave, these shifts were considered separate days, amounting to two total days for one 24-hour shift, the opinion said. From October 2019 to October 2020, Driscoll missed 42 24-hour shifts while on military leave. The next fiscal year began in October 2020, and that month, Driscoll missed one 24-hour shift and one 14-hour night shift for military training. He was deployed again in November 2020 for active military service until September 2021, and missed 70 24-hour shifts. The parties disputed how many missed 24-hour shifts Driscoll should be compensated for, with the city arguing that under Section 59 (a), it was only required to pay for military service within "the first 40 consecutive calendar days of an annual tour of duty" and that a 24-hour shift counts as two days of military leave. Middlesex County Judge James Budreau agreed with the city, concluding Driscoll was only entitled to compensation for the time he would have worked during a consecutive 40-day period. On Friday, the Massachusetts Appeals Court sided with Driscoll, which maintained that the statute applies to any 40 days within a federal fiscal year, and that any 24-hour period counts as only one day of service. According to the court, Section 59 (a) provides that service members are entitled to receive pay without loss of ordinary remuneration during their service, annual training, or drills and parades, "not exceeding 40 days in any federal fiscal year," with "day" meaning any 24-hour period regardless of calendar day. The court said that the city's interpretation required it to add the word "consecutive" to the statute, which is beyond the court's authority. "The plain and ordinary meaning of G. L. c. 33, § 59 (a), is that a public employee must be compensated for 40 days of military leave per federal fiscal year, whether or not they are consecutive," Ditkoff wrote. "The operative clause, 'during service in the uniformed services, annual training under section 60 or drills and parades under section 61, not exceeding 40 days in any federal fiscal year,' does not impose any requirement that those 40 days be consecutive, rather than merely in a single federal fiscal year." The court further noted that the statute includes National Guard members under reserve service by referencing annual training or "drills and parades," which under G. L. c. Section 61 requires members to "assemble for training at least 48 times in each year" for training. The court concluded that "it is apparent that the statute presupposes that a public employee in the National Guard would apply this recurring training obligation to the statute's 40-day limit throughout a calendar year." "We are pleased that the court agreed with us that it was a simple and straightforward interpretation of the statute," said Patrick N. Bryant, of Pyle Rome in Boston, who represented Driscoll. Stephen C. Pfaff, of Louison, Costello, Condon & Pfaff in Boston, represented the city and did not immediately respond to a request for comment.

Nov 26

4 min

Kirkland & Ellis advised Cushman & Wakefield (NYSE: CWK), a leading global real estate services firm, in the formation of a new asset services company with Vanke Service. Cushman & Wakefield is among the largest real estate services firms with 51,000 employees in approximately 400 offices and 70 countries. Vanke Service is a core subsidiary of China Vanke, a leading Chinese real estate development company. The new asset services company, with more than 20,000 employees, will have over 1,000 commercial property and facility management projects in more than 80 cities across Greater China. The Kirkland team was led by transactional partners Chuan Li and Shuting Qi and included transactional partners Pierre-Luc Arsenault, Tzi-Yang Seow, David Yun, Li-Chien Wong, Joey Chau, Stephen Tomlinson and Robert Hayward, intellectual property partner Min Wang, tax partners Lee Morlock and Devin Heckman, and litigation partner Cori Lable.

Jan 8

1 min

Kirkland & Ellis LLP counseled Dermody Properties LLC, a private equity real estate investment, development and operating company focused exclusively on the industrial property sector, on the closing of Dermody Properties Industrial Fund L.P. (DPIF). DPIF, launched in the fourth quarter of 2015, raised $442.4 million of equity capital and exceeded its target fundraising goal of $400 million. Investors in DPIF include public and corporate pension funds, insurance companies, and other institutional investors. The Kirkland team was led by investment funds partners Jennifer Wilson and Kelly Ryan and included investment funds partner Matt Cohen and associate Laura Stake; real estate partner Stephen Tomlinson; tax partners Bruce Gelman and Stephen Butler; and debt finance partner Jocelyn Hirsch and associate Bradley Laken. Kirkland & Ellis is a global leader in providing sophisticated advice to private investment fund sponsors and select institutional investors with respect to all major alternative investment strategies. In the past three years alone, Kirkland has advised nearly 300 private investment fund sponsors, raising more than 400 funds representing in excess of $315 billion of capital commitments.

Feb 15

1 min

Rivian Automotive Inc. investors asked a California federal judge Thursday to greenlight a $250 million settlement resolving their claims that the company underpriced its electric vehicles and misrepresented its profitability ahead of a blockbuster 2021 initial public offering, just one day before a summary judgment hearing. Rivian Automotive Inc. on Thursday said that resolving a lawsuit that alleges it misrepresented its profitability will enable it "to focus its resources on the launch of its mass market R2 vehicle in the first half of 2026." (Matthias Balk/picture-alliance/dpa/AP Images) In a motion for preliminary approval, the investors told the court that Rivian, its executives and board directors have agreed to pay $250 million in cash to settle the lawsuit, which claims Rivian miscalculated how much it actually cost to build its electric vehicles and knew before its November 2021 initial public offering that it would have to increase the vehicles' retail prices by nearly 20% to make up for the losses. Rivian announced price hikes in March 2022, and the investors say they were left holding the bag when Rivian's stock took a beating. The investors tell the court Thursday that the settlement "is an excellent result" for the pair of classes, which include investors who bought Rivian stock between Nov. 10, 2021, and March 10, 2022. "While plaintiffs and their counsel believe the classes' claims against defendants are meritorious and supported by substantial evidence developed during discovery, they also recognize the significant risks they faced, including that the court would grant, in whole or in part, defendants' summary judgment motion, or that a trial of the action could have precluded any recovery for the classes," the motion states. "The settlement amount represents a substantial percentage of the classes' potential recoverable damages as estimated by plaintiffs' damages expert," it adds. A hearing on the Rivian defendants' summary judgment bid was scheduled for Friday. In a statement Thursday, Rivian denied the allegations in the suit, noting that the settlement is not an admission of wrongdoing. But the company said resolving the litigation will enable it "to focus its resources on the launch of its mass market R2 vehicle in the first half of 2026." The company added it will pay the settlement, if approved, through a combination of directors' and officers' liability insurance, about $67 million, and cash, about $183 million. Rivian, which counts Amazon.com Inc. as its largest shareholder, in November 2021 priced an upsized $11.9 billion IPO, which was the largest IPO of 2021. The operative complaint contends that Rivian had been struggling with bringing its so-called bill of materials costs down for years before the IPO without success. The bill of materials refers to the total amount for parts and materials to build each vehicle. Rivian announced March 1, 2022, that it would raise the price of its R1T pickup truck from roughly $67,500 to approximately $79,500, and the price of its R1S SUV would be bumped up from roughly $70,000 to approximately $84,500. Rivian said at the time that the price hikes would apply to all future orders as well as existing preorders because of "inflationary pressure on the cost of supplier components and raw materials across the world." Rivian's stock price fell from $67.56 per share Feb. 28, 2022, to close at $53.56 per share March 2, 2022. Amid fierce customer backlash, Rivian promptly walked back the price increase for customers with preorders placed before March 1, 2022. The EV-maker said it would honor the original configured price for anyone with a Rivian preorder as of the March 1, 2022, pricing announcement. Within weeks, the company's stock price fell to $35.83 per share March 14, 2022, according to the suit. In the motion for preliminary approval of the settlement Thursday, the investors say that after the defendants moved for summary judgment in July, the parties reengaged with a mediator to try to reach a settlement. On Sept. 19, "following hard-fought, arm's-length negotiations," the parties agreed to the mediator's recommendation to resolve the dispute for $250 million, the motion states. The investors say the deal represents a "meaningful percentage" of the classes' damages, noting that their expert had estimated aggregate damages to range from about $1.87 billion to about $2.04 billion. "If defendants had one of more of the alleged corrective disclosures dismissed at summary judgment, or in proving that plaintiffs had not adequately disaggregated the price impact of any confounding information, damages would be reduced if not eliminated," the motion says. The settlement represents about 12.3% to 13.4% of the potential damages, according to the investors. Class counsel says it will seek no more than 24% of the settlement fund for legal fees, which they note is below the 25% benchmark in the Ninth Circuit. The investors are represented by Sharan Nirmul, Darren J. Check, Richard A. Russo Jr., David A. Bocian and Jennifer L. Joost of Kessler Topaz Meltzer & Check LLP, and Stephen G. Larson and Paul A. Rigali of Larson LLP. Rivian, its executives and board directors are represented by Boris Feldman, Doru Gavril, Eunice Leong and Rebecca Lockert of Freshfields LLP. The case is Charles Larry Crews Jr. v. Rivian Automotive Inc. et al., case number 2:22-cv-01524, in the U.S. District Court for the Central District of California.

Oct 23

4 min