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In a recent Corporate Counsel article, the authors describe a Federal Trade Commission ruling about the disclosure of connections between corporate advertisers and those who shill, directly or indirectly, the advertisers’ wares.

In this particular case, a media firm working for Hyundai Motor America had given certain bloggers gift certificates as an incentive to include links to Hyundai advertising videos in their blogs and/or to comment, in advance, on Hyundai’s 2011 Super Bowl advertisements. Some of the bloggers had not disclosed to their readers that the media firm had provided these (admittedly minimal) incentives for the bloggers to drop Hyundai’s name into their blogs.

Problem was, Section 5 of the Federal Trade Communications Act requires the disclosure of a material connection between an advertiser and an endorser, when such a relationship is not otherwise apparent from the communications containing the endorsement. See 15 U.S.C. §45. The FTC has explained this requirement in some detail in its aptly named “Guides Concerning the Use of Endorsements and Testimonials in Advertising,” found at 16 C.F.R. Part 255.

Fortunately for Hyundai, the FTC decided not to punish it for the conduct of the outside media firm, because (1) Hyundai had a robust corporate compliance program in place that barred such conduct, and (2) neither Hyundai nor the media firm had intended to deceive consumers. The authors then use this little tale to point up the need for corporate compliance programs, particularly in the areas of antitrust and consumer protection (noting, ominously, that federal criminal antitrust fines exceeded $1 biiiillllion dollars in 2011).

The article, and the FTC’s investigation, raise a couple of interesting issues. First, yes, I do believe that corporate compliance programs in the “Age of Compliance” serve multiple purposes, not the least of which is to meet the Government’s expectation that your clients have them. Indeed, I, myself, have written on this topic in the past. (FTC: Please note my full disclosure of the connection between Me The Blogger and Me The Author of the Article, in case that wasn’t otherwise obvious.) Having just attended an ABA conference that included an in-house counsel panel discussion on this topic, however, one might reasonably wonder just how much good such programs do. On the one hand, they may prevent shenanigans before said shenanigans occur. On the other, and as some in-house counsel noted at the conference, when was the last time you heard of the Government cutting a Fortune 500 company any slack in a criminal case, just because it had an expensive compliance program in place? Just sayin’.

Second, and I have to ask: Is this whole FTC thing just stupid? According to the article, the bloggers were commenting on, and including links to, Hyundai Super Bowl ads. Does that mean they were vouching for the quality and desirability of Hyundai vehicles? And even if they were, ask yourselves these questions: (1) Do you trust bloggers to give you the unbiased, unvarnished truth about anything? I mean, they’re bloggers, for goodness sake. (2) Do you buy products based on what someone says about the company’s advertisements? (3) Do you buy a car because one guy in the local paper writes a good review of it? (4) Is the FTC’s investigation patronizing? Is this the Nanny State run amok? Are we truly too stupid to decide for ourselves whether we like a commercial and want to buy the product? Or whether we should believe, and/or agree with, anything that Me The Blogger just wrote? Just sayin’.

Kurt Stitcher, a trial lawyer and former federal prosecutor, is a Partner in the Chicago office of Faegre Baker Daniels LLP. Kurt's practice encompasses white collar defense and investigations, product liability, and commercial/business litigation. He can be reached at kurt.stitcher@faegrebd.com or at 312-212-6526.

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Recently the Federal Communications Commission (FCC) took measures that may possibly eliminate all sports television blackouts — a move that would delight many fans but is up against the strong defense of leagues like the National Football League (NFL).

The NFL is the most notable league to experience a significant number of blackouts per year, with 2011 seeing 16 of them. The NFL’s blackout policy states that in order for a team’s home game to be televised in that team’s market, the game must be sold out 72 hours prior to kickoff.

The FCC is seeking public inquiry on eliminating its own blackout rules, which support league blackout policies. Specifically, the FCC’s blackout rule, which has been in place since 1970, is being targeted. In November, the Sports Fans Coalition, supported by other interest groups, filed a petition to end the FCC’s blackout rule, its executive director Brian Fredrick stating, “We’re asking the government to get out of the business of propping up sports blackouts.” The NFL, however, strongly supports the FCC’s blackout rule, as it is said to ensure a team’s “ability to sell all of its game tickets” and to “make televised games more attractive to viewers through the presence of sellout crowds.”

Fredrick believes that the NFL, along with other leagues, will argue that blackouts are financially necessary and should not be dispelled. In the petition filed in November, interest groups argued that the FCC’s blackout rule “supports anti-fan, anti-consumer behavior by professional sports leagues.” In addition, they believe that the leagues are the main reason this issue exists because, they argue, the leagues overcharge fans for tickets — the whole reason there are so many empty seats come game day in the first place.

Categories: Court of Appeals | Defense Practice | Federal Law | Federal Regulations | Sports Law

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The U.S. Supreme Court in Shute v. Carnival Cruise Lines, 499 U.S. 585 (1991) held the Shutes, who were injured on a Carnival Cruise ship in waters off Mexico, must file suit in Florida pursuant to the forum selection provision printed on the back of their ticket. The Shutes filed suit in their home state of Washington. The cruise ship departed from California. Shute is still one of the most far reaching holdings enforcing adhesion-like forum selection provisions. The Shutes also had a strong argument that they lacked notice of the forum selection/choice of law provisions.

In the recent running aground of the Italian Costa Concordia operated by Costa Crocier, which is controlled by Carnival, the ship departed near Rome. Approximately 120 United States citizens were on board and two may still be missing. With respect to notice of the forum selection and choice of law provisions, information is much easier to obtain now than it was when Shute was decided. For example, Carnival now posts its ticket contract online. Carnival’s contract includes a mandatory arbitration provision as well as a forum selection clause, limits on liability, and restricted statute of limitations periods. Costa Crocier also posts their ticket contract online. The Costa contract includes forum selection, arbitration and choice of law provisions at Section 2.

For claims involving personal injury or death, the Costa contract includes a forum selection clause for Broward County, Florida for cruises that depart from, visit or return to a U.S. port. In contrast, U.S. port related economic loss claims are subject to an arbitration provision. Under the Costa contract, any cruise that does not depart from, visit or return to a U.S. port, all claims must be filed in Genoa, Italy, and Italian law applies. The Costa contract also includes a jury waiver provision.

When a district court applies a forum selection provision, it usually does so via 28 U.S.C. § 1404, whereas a state court would dismiss the case. Italy is not a district to which a federal case can be transferred, so dismissal is likely remedy if court enforces forum selection provisions for U.S. citizen cases filed in their home state, or even in Florida. See e.g., Albemarle Corp. v. Astrazeneca U.K, Ltd., 628 F.3d 643, 651 (4th Cir. 2010) (applying English law / federal common law to enforce forum selection clause via dismissal). Albemarle also suggests that Costa Concordia related claims filed in the U.S. would still be analyzed under the four factor “unreasonableness” test set forth in M/S Bremen v. Zapata Off–Shore Co., 407 U.S. 1 (1972) (holding forum selection clause may be found unreasonable if “(1) [its] formation was induced by fraud or over-reaching; (2) the complaining party ‘will for all practical purposes be deprived of his day in court’ because of the grave inconvenience or un-fairness of the selected forum; (3) the fundamental unfairness of the chosen law may deprive the plaintiff of a remedy; or (4) [its] enforcement would contravene a strong public policy of the forum state.”).

Here, proponents of avoiding Costa Crocier’s forum selection clause and choice of Italian law may argue factors two, three and four. An analysis of Italian law related to factor three is beyond the scope of this blog post!

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The vanishing jury trial is perhaps one of the most important issues facing the civil justice system today. Civil trials have declined in federal courts from 12% in 1984 to less than 1% in 2010. Statistics from state courts, though more difficult to obtain, generally show the same trends. The issue has been widely studied, and while the fact of the vanishing trial is clear, the reasons for the decline are less obvious. Several theories have been advanced, ranging from a dramatic rise in case filings and underfunded court systems to the ever increasing cost of litigation and the success of alternative dispute resolution.

In 2010, DRI created the Jury Preservation Task Force (JPTF) to examine and inform the membership of issues impacting civil jury trials. The work of the JPTF is now underway. In 2011, the JPTF conducted multiple surveys concerning issues impacting civil jury trials. Survey respondents included State and Local Defense Organization (SLDO) leaders and participants in both the DRI Insurance and Corporate Counsel Roundtables. The JPTF is now in the process of examining the survey results along with the significant body of research available on the vanishing jury trial and the initiatives being proposed to address the problem.

The JPTF, in collaboration with DRI’s Trial Tactics Committee, will publish the results of its findings in a future edition of For the Defense. Then we will ask for your help. Stay tuned!

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Last week, the Wall Street Journal Law Blog wrote about a recent New York ethics opinion approving legal advertising on Groupon and other group coupon sites. These services allow consumers to pay one price up front for a service that is more valuable. A restaurant, for example, may offer a $50 meal for $25 that is paid immediately. An attorney, like this one, for example, may offer to provide a will for $99. New York wasn’t the first state to weigh in on the issue--South Carolina has, too--and it probably won’t be the last.

Both New York and South Carolina have approved groupon lawyer advertising per se despite claims that it constitutes the improper sharing of legal fees with a non-lawyer. However, and probably of more practical use to one considering running a groupon lawyer deal, the opinion of each state shows that it is essentially a path fraught with dangerous ethical pitfalls. For example, New York identified a laundry list of issues aside from fee-sharing that may be implicated in the typical scenario depending on the facts, including improper payment for referral, excessive fees, advertising violations, improper creation of the lawyer-client relationship, conflicts of interest, and improper scope of representation.

With these potential ethical pitfalls in mind, not to mention the questionable effectiveness and taste of such advertising, it is doubtful that legal service groupons will ever become too common.

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On January 16, 2012, attorneys filed a class action against Amazon.com relating to an online hacking attack that compromised the personal information of up to 24 million customers of its online shoe retailer, Zappos.com. Data Breach Legal Watch reported that less than 24 hours after the breach occurred, the plaintiffs’ bar had already filed a Complaint claiming that the attack resulted in the exposure of the following:

• Names;

• Addresses;

• Telephone Numbers;

• Email Addresses;

• Passwords (cryptographically scrambled); and

• The Last 4 Digits of Credit Card Numbers

The attack did not expose the social security numbers or complete credit card numbers of customers. Nonetheless, the Complaint claims that customers will be exposed to “phishing” attacks that are tailored to the compromised information, as well as anxiety, emotional distress and loss of privacy. Further, similar to the Sony data breach case, the Complaint seeks compensation for the costs of identity theft insurance and credit monitoring.

Data Breach Legal Watch notes that, aside from the Hannaford decision that the 1st Circuit recently published, courts have generally rejected fear of identity theft claims, requiring a showing of some actual harm to the individuals affected by the breach. This breach, however, did not expose complete credit card numbers like in Hannaford or several of the hacking attacks directed at Sony. It would seem that Zappos is unlikely to be on the hook for anything beyond being forced into providing identity protection and/or monitoring for its customers. However, the cumulative effect of these data breaches and the class actions that inevitably follow will likely be greater data security within internet industries.

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Over the past few years, we have all heard about and possibly participated in alternative fee agreements. According the legal analysts, these agreements are “here to stay” and in response DRI appointed an Alternative Fee and Billing Task Force which recently authored a comprehensive white paper on 10 of the most popular alternative fee agreements. This paper, now available on the DRI web site, exclusively for DRI members, details the most popular features of and potential ethical issues raised by each type of alternative fee agreements. The paper outlines the considerations that each party should consider before entering any type of arrangement.

Categories: Corporate America | Corporate Counsel | Law Practice Economics | Law Practice Management

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On January 23, 2012, the Supreme Court issued a unanimous opinion in the case of National Meat Association v. Harris, No. 10-224.

In its decision, the Court reversed the Ninth Circuit Court of Appeals, reasoning that the Federal Meat Inspection Act (“FMIA”), 21 U.S.C 601, et seq., expressly preempts inconsistent state law. This decision is the latest in a long line of Supreme Court opinions that have historically and consistently affirmed the preemptive effect of of the FMIA.

The FMIA governs the production and distribution of meat products in interstate commerce. The Act is enforced by the United States Department of Agriculture’s Food Safety Inspection Service (“FSIS”), and requires continuous, on-site inspection of all slaughter and processing establishments. The FSIS is required, among other things, to ensure that all meat products are: (1) produced under sanitary conditions; (2) not adulterated; and (3) properly labeled.

Under the FMIA, slaughter establishments are expressly permitted, under defined circumstances, to receive, hold and slaughter nonambulatory animals. After slaughter, but prior to being used for human food, the carcasses of such animals must first be inspected by a FSIS inspector.

The FMIA also contains an express preemption provision, 21 U.S.C. 678, which prohibits states from adopting any different or additional requirements than those imposed by the FMIA.

Despite the existence of a federal law governing the treatment of nonambulatory animals in slaughter establishments, and the existence of an express preemption provision within the FMIA, the state of California nevertheless amended its penal code in 2008 to prohibit slaughter facilities from receiving, holding or butchering nonambulatory animals. Because the federal standards under the FMIA and the new state law were inconsistent, the Nation Meat Association brought suit challenging the California law.

In an opinion authored by Justice Kagan, the Supreme Court confirmed that FMIA’s preemption clause “sweeps broadly,” and prohibits states from imposing any additional or different (even if non-conflicting) requirements concerning slaughterhouse facilities or operations. Because the State of California was attempting to govern in an area reserved exclusively for federal regulation, the Court held that the California law was preempted.

Thus, once again, the Supreme Court has made clear that the states are strictly prohibited from legislating in those areas already occupied by the FMIA.

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We often see cross-complaints filed amongst defendants in product liability cases asserting causes of action for contribution, equitable indemnity and declarative relief. They are rarely litigated and are almost never adjudicated.

In Jerry Bailey v. Safeway, Inc. (Case No. A131349 (CA Dist. 1 Ct. App., Sep. 15, 2011)), the California Court of Appeal explored the distinction between equitable indemnity and comparative equitable indemnity arising out of such a cross-complaint.

In 2006, Jerry Bailey suffered a severe eye injury while assembling a Cook's Champagne display at a Safeway store. Bailey sued Saint-Gobain containers, Inc. (Saint-Gobain) and Safeway for strict liability design defect under the consumer expectations theory. Bailey also sued Safeway for negligence. Bailey settled the case with Saint-Gobain for $1 million and an assignment of its equitable indemnity rights against Safeway.

The case then proceeded to trial against Safeway alone, under the strict product liability claim and negligence. The jury found Safeway liable under the strict product liability claim, awarding plaintiff $718,915.78. However, the jury found that Safeway "was not negligent or 'at fault'." Because the amount of the settlement exceeded the jury award, the court later entered judgment in favor of Safeway.

Bailey then filed a separate suit against Safeway based on the assigned equitable indemnity claim from Saint-Gobain. The trial court sustained Safeway’s demurrer without leave to amend, and an appeal followed. Id. at p. 14109.

Equitable Indemnity vs. Comparative Equitable Indemnity

"Although product liability defendants are jointly and severally liable to the plaintiff, their liability as among themselves is determined according to comparative equitable indemnity principles. [citation omitted]" Id. at p. 14110. "'The doctrine of comparative equitable indemnity is designed to do equity among defendants.' [citation omitted.]" Id.

By contrast, "[t]he purpose of equitable indemnification is to avoid the unfairness, under the theory of joint and several liability, of holding one defendant liable for the plaintiff's entire loss while allowing another potentially liable defendant to escape any financial responsibility for the loss." Id. "[E]quitable indemnification is an extension of comparative fault principles which allows parties to seek a division of loss between the wrongdoers in proportion to their relative culpability. [citation omitted]" Id. at p. 14111.

Here, Bailey argued, unsuccessfully, that the jury's determination that Safeway was 100% responsible allowed him to recover, on an equitable indemnity action, all or a portion of Saint-Gobain’s $1 million settlement based on its assignment to him.

The Court Would Not Allow Bailey to Stand in Saint-Gobain’s Shoes

Ultimately, the Court of Appeal invoked the doctrine of collateral estoppel to bar Bailey’s indemnity action. While cautioning that this decision should not be interpreted as precluding an equitable indemnity claim based on strict liability, the court focused on the fact that the jury exonerated Safeway by finding that it was not negligent. This imperative fact, thus, precluded Bailey as Saint-Gobain's assignee from prevailing on an equitable indemnity claim. To hold otherwise would have given rise to an unfair result where the designer and manufacturer of a defective product could recover against a retailer who’s only "sin" was to sell the defective product.

Categories: Court of Appeals | Product Liability

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Listen up, all you internet users (which is basically everybody but my mother, who still views the Internet as the work of the devil, and will quote from the book of Revelation in support of her theory). Three bills you need to be aware of, because they may change the way you view (or more correctly, the way you are allowed to view) the Internet. and from what I’m reading, there are some pretty darned big sites and companies that are ready to either “go dark” in protest (Wikipedia, for example, which is where I do most of my legal research) or lend a big supporting hand to the protests of the current bills being considered (Google is one – who can live a day without Googling something? I mean for cryin’ out loud the Company has made itself into a verb!!). Those bills are:

1. Stop Online Piracy Act (or “SOPA”).

2. Preventing Real Online Threats to Economic Creativity and Theft of Intellectual Property Act (PROTECT IP or PIPA, which is easier but less descriptive. I’ve never seen a bill with a name so long it requires not one but two abbreviations).

3. The Online Protection & ENforcement of Digital Trade Act (or “OPEN” Act – again- what is it with thinking up names for these acts? But I guess “OPAENDTA” doesn’t quite roll off the toungue).

Sounds simple enough, right? I mean, who doesn’t want to stop people from stealing stuff and using the Internet to get away with it? Uh, hold on--not so fast there, scooter. Here’s a quick overview, along with the pretty darned serious problems that exist. The main thought is that there is a serious problem (which there really is) regarding piracy on the Internet. As paraphrased from the OPEN site (http://keepthewebopen.com) the problem can be illustrated like this: downloading a movie from a foreign website is like buying a foreign product, but there really aren’t any trade laws equipped to deal with the online purchases from foreign sites.

The SOPA bill allows the Department of Justice and copyright holders to seek court orders against websites accused of enabling or facilitating copyright infringement. The court order could include barring online advertising networks and payment facilitators from doing business with the allegedly infringing website, barring search engines from linking to such sites, and requiring Internet service providers to block access to such sites. The bill would make unauthorized streaming of copyrighted content a crime, with a maximum penalty of five years in prison for ten such infringements within six months. The bill also gives immunity to Internet services that voluntarily take action against websites dedicated to infringement, while making liable for damages any copyright holder who knowingly misrepresents that a website is dedicated to infringement.

Proponents of SOPA say it protects the intellectual property market and corresponding industry, jobs and revenue, and is necessary to bolster enforcement of copyright laws, especially against foreign websites. Opponents say that it violates the First Amendment, is Internet censorship, and will threaten whistle-blowing and other free speech actions. A number of protest actions have been planned, including boycotts of companies that support the legislation, and major Internet companies “going dark” for a day (coinciding with hearing dates).

PIPA (or ‘PROTECT IP”, or whatever else you want to call it), appears to be SOPA’s twin, but in the Senate.

OPEN is, from what I can glean, a “bipartisan” bill written in response to the harsh criticism SOPA is receiving. (I always tend to squint my eyes when I see the word “bipartisan”).

Even the White House has entered the fray, with a post just a few days ago regarding the subject. Here’s a part of that post:

Any effort to combat online piracy must guard against the risk of online censorship of lawful activity and must not inhibit innovation by our dynamic businesses large and small.

And when the White House says “whoa”, you know there is likely a heckuva lot of pressure (political, economic, you name it) coming down against the proposed Act.

So who’s right? Well, everybody. Is there a lot of intellectual property piracy on the open internet seas? Absolutely. Does it need to be dealt with? No question. Do the SOPA and PIPA bills overreach and create more problems than they purport to solve? Yep. The bills do use the U.S. Court system to create a type of “internet police” as it pertains to copyrighted material. They also greatly increase the work flowing to litigators and litigation firms among other things, driving up (WAY up) the cost of doing business, which will most certainly hurt businesses generally and small businesses especially, because whether they are involved or not, others will be so involved, which will drive up the overall cost of products across the board as the increased cost is passed on to the consumer as much as possible. And how/why is it that the US Courts will be essentially graced with the responsibility of policing the Internet for the entire world?

Now that I’ve lit the fire and started the debate, feel free to discuss amongst yourselves (hey- it isn’t my job to give answers, just point out the questions).

Jeffrey Curran is Of Counsel with Gable Gotwals in Oklahoma City, OK

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Shilling for Dollars: How the FTC Wants to Save Us from Unscrupulous Bloggers (and Ourselves)

FCC Inching Closer to Ending NFL Blackouts

Capsized Costa Crocier Italian Cruise Ship - Forum Selection Issues

DRI to Examine the Vanishing Civil Trial

The ethics of legal service “groupons” – Accidents waiting to happen.

If the Shoe Fits (and the Data's been Breached) File a Law Suit!

Alternative Fee Arrangements - Here to Stay

Supreme Court Update - National Meat Association v Harris

Man Loses Eye from Exploding Champagne Bottle--Non-Negligent Retailer Protected from Equitable Indemnity Claim

A Modern-Day SOPA Opera: SOPA, OPEN, PIPA, oh my!

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