Commercial Litigation

Syracuse University's men's basketball program has been in the news lately, not because of its basketball prowess but because of its legal tribulations. While accusations of child molestation and defamation topped the headlines for other universities, SU basketball's relatively quieter drug-testing scandal raises important questions because of its broad implications across college athletics.

The SU story highlights the way student athletes across the country submit themselves to a dizzying array of drug-testing procedures in exchange for the privilege of representing their universities and colleges on the courts, rinks, and fields of play — and the maelstrom of legal issues and ambiguities this practice raises.

On Friday, August 24, a nine member jury entered a verdict in favor of Apple and awarded almost $1.05 billion in damages.  Apple filed suit against one of its largest competitors, Samsung Electronics, in April 2011, and alleged that Samsung’s Galaxy line of smartphones and tablets infringed seven of Apple’s patents covering the iPhone and iPod products.  In turn, Samsung countersued alleging that Apple infringed Samsung’s patents covering various wireless software components of its products.  After more than a year of highly contentious litigation and following a trial that began at the end of July and lasted the better part of August, the jury deliberated for less than three days before delivering the verdict in favor of Apple. 

The tough economic conditions in our country have had a significant impact on most businesses, but the impact felt by franchise systems has been particularly acute. The continued slow pace of economic growth has placed, and continues to place, additional pressures on franchisees, particularly food and retail franchisees operating in industries with tight profit margins.

Certain aspects of federal court jurisdiction and venue have troubled courts and practitioners alike. Congress sought to alleviate lawyer consternation and judicial disagreement by recently passing the Federal Courts Jurisdiction and Venue Clarification Act of 2011 (JVCA), PL 112-63, 125 Stat. 758 (Dec. 7, 2011).

Applicable to all actions commenced on or after January 7, 2012, the JVCA makes its biggest splash in the law concerning removal of diversity actions to federal court, but also addresses some longstanding issues with the law governing venue.

On February 1, 2012, Honda CRV Hybrid owner Heather Peters won a Los Angeles County small claims court case against American Honda Motor Co., Inc. ("Honda"). The award of close to $10,000 received a tremendous amount of attention in the media and blogosphere because Peters won significantly more money than she would have earned had she remained a member of an existing consumer class action.

This has led many to suggest that businesses should fear an influx of small claims lawsuits and more aggressive class action attorneys trying to protect their turf. This article addresses the realities of the Peters case, the unique circumstances that lead to the verdict and its effect on people and companies that do business in California.

An emerging issue for attorneys involved in complex litigation is whether parens patriae lawsuits brought by a state attorney general can be construed as mass actions or class actions subject to federal diversity jurisdiction under the Class Action Fairness Act of 2005 ("CAFA").

The parens patriae doctrine, rooted in English common law, grants states standing to sue in order to protect the interests of their citizens.  Initially quite limited, the doctrine has been expanded over the last half-century to permit state attorneys general to bring suit anytime they can establish a "quasi-sovereign" interest, such as an interest in the physical and economic health and well-being of its residents.  SeeAlfred L. Snapp& Sons v. Puerto Rico ex rel. Barez, 458 U.S. 592, 593 (1982).  Indeed, many states have enacted laws expressly authorizing its state's attorney general to bring parens patriae suits, especially in the context of antitrust and consumer protection violations.

I frequently assist clients in drafting and negotiating non-compete clauses as part of larger agreements for the sale of business, employment, and lease of property.   One question that sometimes arises is: when do non-compete clauses in these contexts raise antitrust concerns?  The answer to this question, typically, is that they do not.

The purpose of the Sherman Act ("Act") is to guard against unreasonable restraints of trade.  Key to establishing a claim under the Act is the establishment of an "antitrust injury."  See, e.g., Cole v. Champion Enterprises, Inc., 496 F. Supp. 2d 613, 634 (M.D.N.C. 2007).  To establish an antitrust injury, a plaintiff must prove more than mere individual injury, rather an injury to competition.  See id.  This is because "antitrust laws were enacted for the protection of competition, not competitors."  Id. 

One of the most common provisions found in both commercial and consumer insurance policies is colloquially referred to as the "Cooperation Clause." This clause takes on several different forms. One common version reads as follows: 

The Insured agrees to provide the Insurer with all information, assistance and cooperation that the Insurer may reasonably request, and further agrees that it will do nothing which in any way increases the Insurer's exposure under this Policy or in any way prejudices the Insurer's potential or actual rights of recovery. 

The Cooperation Clause is highly relevant to both the coverage the insurer is required to provide and the rights between the insurer, the insured and defense counsel. 

As commercial litigators, undoubtedly we all have experienced a scenario like this: you get a call or an email from a client saying that the company has just been served with a new complaint arising out of a business contract that went awry. On the surface, you assume the parties' rights and remedies will be confined by whatever is provided in the contract. Upon reviewing the complaint, you observe that Count I is for breach of contract, but the complaint goes on with Counts II through X alleging every imaginable tort, from basic negligence to tortious interference with contract to tortious interference with a business advantage and several others in between. Of course the reason for including a wide range of tort claims on top of the breach of contract claim is to open the door to potentially richer measures of damages and remedies available in tort, or at least to raise the specter of that relief to gain tactical leverage for settlement purposes.

The economic loss rule (“ELR”) has enjoyed a tumultuous existence in Arizona case law.  The recent Flagstaff Affordable Housing decision, although it has garnished much attention, does little to change that.  The Flagstaff decision formally adopted the ELR in the context of construction defect claims involving contractors and design professionals, put a premium on privity, and held that “a plaintiff who contracts for construction cannot recover in tort for purely economic loss, unless the contract otherwise provides.”  223 Ariz. 320, 326-327, 223 P.2d 664, 670-671 (Ariz. 2010).  The Flagstaff court cautioned against a “broad brush” application of this holding, however, reiterating that “our adoption of the economic loss doctrine in construction defect cases reflects our assessment of the relevant policy concerns in that context; it does not suggest that the doctrine should be applied . . . in other circumstances.”  Id.  The holding, which appeared to have only limited utility, has already been expansively applied outside the construction defect context, and even in cases involving allegations of personal injury.

On April 15, 2011, the British Columbia Court of Appeal released two decisions which, if upheld, will have a major impact on antitrust class actions in Canada. The Court of Appeal reversed certification in two antitrust class actions, Pro-Sys Consultants Ltd. v. Microsoft Corp. (2011 BCCA 186) ("Microsoft") and Sun-Rype Products Ltd. v. Archer Daniels Midland Co. (2011 BCCA 187) ("Sun-Rype"), ruling that indirect purchasers of allegedly price-fixed products "have no cause of action recognized in law." These decisions represent a dramatic departure from the recent trend in Canada towards certification of classes comprising direct and indirect purchasers. 

On April 27, 2011, the Supreme Court of the United States released its decision in AT&T Mobility LLC v. Concepcion. The Court ruled that the Federal Arbitration Act prohibited operation of a state law invalidating arbitration clauses in consumer contracts of adhesion. The Court specifically addressed a California rule that declared unenforceable a waiver of access to class proceedings clause in a consumer contract of adhesion. DRI filed an amicus brief with the Court in support of the successful petitioner, AT&T, to enforce the arbitration clause in issue.

A month before the ruling in Concepcion, the Supreme Court of Canada considered the very same issue and came to the opposite result. Its decision in Seidel v. Telus Communications Inc., 2011 SCC 15, released March 18, 2011, provides an interesting comparator to Concepcion.