The Investors’ Control of Their Investment Advisers. Who Has the Final Word?

TAMAR FRANKEL

BU Law emerita professor Tamar Frankel discusses an emerging issue affecting financial advisers—when a client may exercise control over the actions of the adviser. Frankel relates the story of an investment adviser that did not follow the client’s orders to cease certain investments, at a cost of almost $5 million to the client. As Frankel explains, the Securities and Exchange Commission (SEC) got involved, resulting in the investment adviser’s settlement for a significant payment to the client and other conditions.

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Lutes v. United Trailers, Inc.

Docket: 19-1579

Opinion Date: February 13, 2020

Judge: Per Curiam

Areas of Law: Labor & Employment Law

Phillips injured his ribs while playing with his grandchildren. For two weeks, he called his employer, United, to report he would miss work. Phillips stopped calling in and did not appear for work on three consecutive days so United fired him. He sued, alleging United failed to properly notify him of his rights under the Family Medical Leave Act (FMLA), 29 U.S.C. 2617, and that he was fired in retaliation for attempting to exercise his right to seek FMLA leave. The Seventh Circuit affirmed the rejection of the retaliation claim but remanded Phillips’s interference claim. A reasonable jury could find that Phillips’s injury constituted a serious health condition. If United failed to train its personnel to recognize FMLA-qualifying leave, that may factor into deciding whether Phillips provided sufficient notice of his need for leave. A jury must decide the factual question of whether the nature and amount of information he conveyed put United on notice and required United to notify Phillips whether the leave would be designated as FMLA leave. His wife attested had Phillips known United offered FMLA leave, he would have taken it. Other than that, the record does not reflect whether Phillips would have acted differently had United provided the requisite information Even if Phillips engaged in a protected activity and United took adverse employment action against him, Phillips failed to establish any causal connection between his alleged attempt to seek FMLA relief and his discharge.

Jacobsen v. Commissioner of Internal Revenue

Docket: 18-3371

Opinion Date: February 13, 2020

Judge: ROVNER

Areas of Law: Tax Law

Jacobsen’s former wife, Lemmens, embezzled $400,000 from her employer, income that was not reported on the couple’s jointly filed income taxes. After Lemmens was convicted, the IRS audited the couple’s joint tax returns for 2010 and 2011 and proposed total net adjustments attributable to omitted embezzlement income of over $300,000, with corresponding deficiencies and accuracy-related penalties of over $150,000. Jacobsen sought relief under the tax code’s “innocent spouse” provision, 26 U.S.C. 6015(b), and equitable relief provision, section 6015(f). The Tax Court granted Jacobsen innocent spouse relief for 2010 but denied all relief for 2011. The Seventh Circuit affirmed. Jacobsen acknowledged that with the exception of his knowledge for 2011, the Tax Court correctly assessed the positive, negative, or neutral impact of each of the seven factors listed in Revenue Procedure 2013-34 and acknowledged that he had “reason to know” of the embezzlement income by the time he filed their 2011 tax return. He argued that the Tax Court erred when it concluded that he had actual knowledge of the unreported income for 2011. While the Tax Court could have easily decided that Jacobsen was entitled to equitable relief, nothing in the record indicates the Tax Court misapprehended the weight to be accorded Jacobsen’s knowledge or treated it as a decisive factor barring relief.