Featured Articles
 

Commercial Litigation


Mentoring Committee: What to do When you Receive a New File

You walk into the office on Monday morning to find a copy of a complaint and some other documents on your chair.  On top is a yellow post-it note from a partner, asking you to see her about working on a new case.  What can you do to set yourself up for success on this new matter?

Every new matter needs a plan of attack, and that plan of attack has to begin as soon as you receive the assignment.  To give yourself the best chance of success in satisfying your partner and getting the best result for your client, you should always develop and follow a plan that looks at the end game, even while the game is just beginning.

 view more
Sports and Entertainment Law SLG: Snyder’s Last Stand

The Washington Redskins, the Cleveland Indians, the Chicago Blackhawks, and the Kansas City Chiefs play different sports in different cities, but collectively, they share many things. Each team is beloved in their respective city by fans, young and old. Each team has a rich history and tradition. And each team is the proud owner of a trademark that could be construed as disparaging toward Native Americans, playing on stereotypical notions or imagery to sell merchandise to the public at large. A lot has been said and written lately about the Redskins nickname, in particular. Everyone seems to have an opinion about it. President Barack Obama has even weighed in on the subject, recently saying that he believes that Redskins owner Daniel Snyder should "think about changing" the team's nickname. However, appeals to Snyder's heartstrings seems to have fallen on deaf ears; he's defiantly stated that he will "never" change the name of his beloved team. He may not have to — the courts may do it for him. A new appeal to the Trademark Trial and Appeals Board (TTAB) by six young Native American plaintiffs may finally spell the end of the Redskins mark, once and for all. More on this in a second. First, a little history.

 view more
The Continuing Saga of Class Action Fairness Act Jurisdiction, and Why You Miss Out if You Miss the Business Litigation Seminar

It goes without saying that DRI seminars are a wonderful way to network and learn about developing legal issues.   Readers of theBusiness Suit probably are aware that the Commercial Litigation seminar in particular has been an extremely productive event to attend.  The event promises to be even more valuable now that there is a seminar focused specifically on business litigation.

If you did not attend this year's Commercial Litigation seminar (and where were you?), you missed an important illustration of just how valuable attendance at DRI seminars can be.  Participants in the Class Action SLG break out session learned about two issues involving the Class Action Fairness Act of 2005, Pub. L. 109-2 ("CAFA") that are continuing to attract attention from the nation's highest courts.  

 view more
Class Action SLG: Whirlpool and Sears: The Impact of Products Liability Class Actions on the Reinforced Commonality and Predominance Requirements of Rule 23

Front-loading washing machines have revolutionized the age-old chore of laundry because of their increased capacity and efficiency.  Why, then, are the front-loading washing machines the subject of countless proposed class actions all across the country?  As the manufacturers of those washing machines have repeatedly tried to say: what does not smell right is that the certified classes include numerous consumers who have not experienced any problems with the washers and have suffered no actual damages.  According to the Sixth and Seventh Circuit Courts of Appeal, however, whether those washing machines are defective is a sufficient common question that predominates over individual issues to support class certification under Rule 23(b)(3).  Glazer v. Whirlpool Corp., 722 F.3d 838, 852 (6th Cir. 2013); Butler v. Sears, Roebuck & Co., 727 F.3d 796, 801 (7th Cir. 2013).

 view more
More Relief for Business: U.S. Supreme Court Continues to Restrict Far-Reaching Claims Over the past few years, U.S. Supreme Court decisions have limited the ability of class action plaintiffs to assert the sort of far-reaching claims that often force businesses to settle rather than fully defend. AT&T v. Concepcion upheld class action waivers in arbitration agreements. Wal-Mart v. Dukes adopted a narrow interpretation of the “commonality” requirement in Federal Rule of Civil Procedure 23(a). 

 view more
Settlement Negotiation in High Stakes Litigation Involving Publicly Traded Companies (and Potentially Others) We have all participated in numerous settlement negotiations for all kinds of clients dealing with all types of claims. However, when representing a publicly traded company subject to the dictates of the Sarbanes-Oxley Act of 2002, also known as the Public Company Accounting Reform and Investor Protection Act (in the Senate) and the Corporate and Auditing Accountability and Responsibility Act (in the House of Representatives), and commonly called either Sarbanes-Oxley, Sarbox or SOX, there are many additional considerations regarding potential settlement. Enacted in 2002, SOX set new or enhanced standards for all U.S. public company boards of directors, management and public accounting firms. Incorporate that with the requirements of Generally Accepted Accounting Principles (GAAP) which applies to all public companies, and you have added a lot of complexity to the arena of settlement. GAAP is a codification of the process Certified Public Accounting firms and public companies use to prepare and present their business income, expenses, assets and liabilities on their financial statements.

 view more
Another Domino? The Conundrum of Antitrust Policy vs. Patent Rights

Are we on the brink of another domino falling in the battle to protect patent rights? It might seem so, considering a recent Third Circuit Court of Appeals' ruling that appears to elevate commercial antitrust law above the interests of patent holders.

On July 16, 2012, in the K-Dur case, the Third Circuit Court of Appeals ruled that a "finder of fact must treat any payment from a [pharmaceutical] patent holder to a generic patent challenger who agrees to delay entry into the market, as prima facie evidence of an unreasonable restraint of trade." In re K-Dur Antitrust Litig., No. 10-2077, 2012 WL 2877662, at *16 (3d Cir. July 16, 2012). The opinion was the latest salvo in the heated debate between the Federal Trade Commission (FTC) and pharmaceutical companies regarding so-called "reverse payments." Not only did the opinion reverse a long string of circuit court opinions upholding such payments as a proper exercise of patent rights, it supported the FTC's view that such payments are inherently anti-competitive. 

 view more
The Most Important Thing Your Clients Need to Know About Copyright Law

As an IP attorney with a transactional and litigation practice, I am often in the position of advising clients with respect to protection of their copyrightable works. I have found that a majority of new clients do not understand who owns works created by independent contractors they've hired. Specifically, clients do not know that if they hire an independent contractor to create copyrightable works for them, in the absence of a written agreement vesting ownership of the works in the client, the independent contractor – and not the client – owns the copyright to the works.

 view more
Merely a Clue Or a Bright Line Test? Updates on Removal Standards Under the Class Action Fairness Act

After Congress enacted the Class Action Fairness Act, 28 U.S.C. §§ 1332(d), 1453, and 1711-15 in 2005 ("CAFA"), defendants gained the ability to remove class action cases beyond the general 30 days from the filing of the complaint. Courts have invoked varying standards for when defendants must identify that a case falls within CAFA jurisdiction, thus triggering a 30-day window to remove. By way of reminder, a case is removable under CAFA where (1) diversity jurisdiction exists, (2) the putative class of plaintiffs is 100 or more, and (3) the amount in controversy is $5,000,000.00 or more. 28 U.S.C. § 1332 (d). The general 1-year rule for invoking diversity jurisdiction does not apply under CAFA. 

 view more
An Unwelcome “Gift” That Keeps on Giving: Why Settling a DOJ Antitrust Investigation Rarely Puts an End to a Corporation’s Antitrust Problems

In September 2010, the DOJ Antitrust Division filed an antitrust action against Adobe Systems, Apple, Google, Intel, Pixar, and Intuit, alleging that they entered into, and actively enforced, agreements between them prohibiting "cold calling" one another's employees with competing job offers.  United States v. Adobe Systems Inc., et al., Case No. 1:10-CV-1629 (D.D.C. 2010).  The DOJ contended that the agreements restricted employee job movement, restraining their advancement and prospects for higher compensation.  Shortly after announcing the investigation, the DOJ also announced that the defendants had agreed to resolve the matter by entering into a stipulated judgment in which the defendants agreed to terminate any such agreements that may have been in place.

 view more
Is That Non-Compete Valid? Can a Non-Compete Agreement Be Enforced? Not surprisingly, the enforceability of non-compete agreements is determined by each state’s laws. And each state balances a variety of public policy concerns in determining whether non-compete agreements are enforceable and, if so, the extent to which the agreements are enforceable. Two of the most obvious public policy concerns are the opposition to restraint of trade, as compared to the need for freedom of contract. Additionally, a company may have a legitimate purpose for asking new or current employees to enter into non-compete agreements. Nevertheless, those agreements must be crafted carefully, and in light of the applicable state laws, because they are generally considered are a restraint of trade and disfavored by law. This extremely surface-only review of a few states’ attitudes towards non-compete agreements is simply intended to make attorneys aware of potential pitfalls. view more
Not for the Bashful: Student Athletes, Drug Testing … and Judicial Doctrine

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.

 view more
Put Up Your Dukes: Evidentiary Battles in Class Certification In Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), the US Supreme Court touched on nearly every facet of class action litigation. Although the Court's legal analysis has had a significant impact, its examination of the quality and quantity of evidence submitted by both parties has immediately affected the way that complex cases are litigated.  view more
What You Need to Know About Pending Legislation and Recent Updates Relating to Consumer Privacy Laws Today, businesses are well aware that privacy is an important concern for consumers. However, there has been very little guidance in the law as to how consumer information should be uniformly treated. Historically, the Federal Trade Commission (FTC) took a very conservative view of the issue and urged businesses to always obtain express permission from consumers prior to collecting and using data. As a result, many companies established privacy policies that lay out what information will be collected and how it will be used.  view more
Supreme Court Unanimously Upholds Secured Lenders’ Rights to Credit Bid in Chapter 11 Plans The ability of secured creditors to credit bid in sales conducted under bankruptcy plans of reorganization is an important right that protects them against low bids from rival purchasers. A secured creditor is typically permitted to offset, or bid, its secured allowed claim against the purchase price in a sale of collateral conducted under section 363(b) of the United States Bankruptcy Code. view more
Will Corporate America Say “We’re Not in Kansas Anymore” After the Kansas Supreme Court’s Antitrust Decision in O’Brien v. Leegin? In 2007, the Supreme Court overturned almost one hundred years of settled antitrust precedent by declaring that resale price maintenance ("RPM"), the practice by which a manufacturer attempts to dictate the resale price of its products, was no longer per se unlawful under the federal antitrust laws. Leegin Creative Leather Products v. PSKS Inc., 551 U.S. 877 (2007). Instead, RPM would be assessed under the "rule of reason," which, unlike the per se test that declares such conduct unlawful in all circumstances, requires the Court to weigh the pro-competitive justifications for the agreement against its anticompetitive effects in determining the legality of the conduct. In short, a balancing test similar to that used in assessing most other antitrust issues (other than horizontal price fixing and market allocation agreements) would apply to RPM agreements, opening the door -- or so it seemed -- for some manufacturers to exert greater control over retailer pricing. view more
Pay Close Attention to Financial Reporting About Litigation The Financial Accounting Standards Board ("FASB") has issued several proposals that would require companies to include expanded disclosures about potential losses from litigation and other contingencies. These proposals were in response to concerns raised by investors and other users of financial statements that the existing rules do not provide adequate and timely information to assist them in assessing the likelihood, timing, and magnitude of potential losses. The original proposal was issued in June 2008, but was criticized by preparers of financial statements as costly and requiring judgments that are more predictive and speculative in nature rather than factual. In response to the criticism, the FASB continued its study of disclosure requirements, which culminated in a July 2010 revised proposal that contained less additional disclosure requirements. This proposal was originally was to have been effective for calendar year end companies in 2010, but the implementation was delayed and is being reconsidered by the FASB. view more
<i>Apple v. Samsung</i> - What Happened - What's Next?

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. 

 view more
The Blurring of the Line Between Contract and Restitution Remedies: Section 39 of the Restatement (Third) of the Law of Restitution and Unjust Enrichment Most lawyers learned in their first year contracts course in law school that the remedies for breach of contract generally are designed to place the non-breaching party in the same position it would have been in if the breach had not occurred. See, e.g., Magnusson Agency v. Public Entity Nat. Company-Midwest, 560 N.W.2d 20, 27 (Iowa 1997); Donovan v. Bachstadt, 453 A.2d 160, 165 (N.J. 1982); Goodstein Constr. Corp. v. City of New York, 604 N.E.2d 1356, 1360 (N.Y. 1992). That measure of damages usually is known as expectation damages. According to the Restatement of Contracts, "Contract damages are ordinarily based on the injured party's expectation interest and are intended to give him the benefit of his bargain by awarding him a sum of money that will, to the extent possible, put him in as good a position as he would have been in had the contract been performed." Restatement (Second) of Contracts § 347 cmt. a. view more
Off to the Races: Litigating in the Fast-Paced International Trade Commission The International Trade Commission ("ITC") is an increasingly popular forum for patent and trademark litigation, with a record number of 70 unfair competition cases filed in 2011 alone. There are currently 73 cases pending in the ITC, and the statutory vehicle for this growing litigation is 19 U.S.C. § 1337, which prohibits "unfair methods of competition and unfair acts in the importation of articles. view more
Is <i>Dukes</i> a Hazard to State Court Class Certification? A Survey of State Court Decisions Applying <i>Wal-Mart Stores, Inc. v. Dukes</i> Members of DRI and readers of the Business Suit are likely familiar with the Supreme Court decision in Wal-Mart Stores, Inc. v. Dukes, __ U.S. __, 131 S. Ct. 2541 (2011) ("Wal-Mart"). Since Wal-Mart was released in June, 2011, it has revolutionized federal class action practice, as reflected in hundreds of citations to the decision by federal courts. Wal-Mart also generated enormous interest in the academic and legal communities, and the decision has been discussed in countless articles, client alerts and CLE presentations view more
Getting in the Game: 2011 Report Shows Ups, Downs in Pro Sports Diversity Each year, proponents of diversity and inclusion in the professional world look to the Racial and Gender Report Cards (RGRC) issued by the Institute for Diversity and Ethics in Sport for an indication of where progress is being made — and where work needs to be done — in the high-profile and high-profit domains of pro and college sports.  view more
Tough Economic Times Increase The Potential For Franchisor Tort Liability Claims

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.

 view more
Federal Courts Jurisdiction and Venue Clarification Act of 2011

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.

Among other things, the JVCA revises the "separate and independent" claims provision, codifies the "rule of unanimity," adds a bad faith exception to the one-year limit on removal, clarifies the process for determining the amount in controversy, and allows venue in any district if all parties consent. view more
Should Businesses Fear the Honda Small Claims Court Verdict?

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.

 view more
Are Parens Patriae Suits Subject to Federal Jurisdiction under CAFA?

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.

 view more
Jury Attitudes And Advocacy Techniques In Sports-Product Litigation Jurors like sporting goods companies.  Yet, companies in the sporting-goods business are not immune to large plaintiffs' verdicts.  In 2010 and early 2011, American juries returned fifteen product-liability verdicts of $25 million or more, which is more than twice the number of similar verdicts issued in 2009.  In many disputes involving sporting goods and/or recreational-vehicles, including the cases described below, the plaintiffs are engaged in activities having an obvious risk of injury, and, in some cases, the plaintiffs exhibited clear negligence.  Regardless, juries were willing to award substantial damages against manufacturers for injuries received in the regular course of participating in these activities.  Years of experience and recent nationwide research by litigation-consulting firm Persuasion Strategies have revealed common factors (1) that favor sporting-goods manufacturers in the courtroom and (2) that can turn a jury against such manufacturers.   This article highlights those topics and provides strategy recommendations and juror-selection criteria that may aid defense counsel in sporting-goods cases.  view more
Increasing Use of the Computer Fraud and Abuse Act in Business Disputes Increasingly in business disputes, often involving departing employees with proprietary information, businesses are adding Computer Fraud and Abuse Act ("CFAA") claims to their list of claims asserted because CFAA provides a vehicle for getting such suits into federal court without satisfying diversity jurisdiction requirements.  But, there is a split among the circuits as to the applicability of CFAA in business disputes.  view more
Keep Talking, but Know the Law: Ongoing Considerations Regarding Communications with Potential Class Members Defendants involved in class-action litigation may obtain valuable information by reaching out to potential class members. Legal and ethical considerations applicable to contact with potential class members were discussed in detail in To Talk, or Not to Talk . . . That Is the Question: Communications with Potential Class MembersSee generally Alan Rupe, Tim Congrove & David Northrip, To Talk, or Not to Talk . . . That Is the Question: Communications with Potential Class Members, The Business Suit, July 3, 2008, at 1 [hereinafter To Talk, or Not to Talk].   view more
When Does a Non-Compete Agreement Raise Antitrust Concerns?

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

 view more
Secured Party Maintains Interest in Manufactured Home After Tax Sale of Land In today's troubled economy, many debtors are unable to meet their financial obligations to secured creditors under installment contracts. Likewise, the same financially distressed debtors are in many instances unable to pay taxes imposed upon their real property by state and municipal governments, ultimately leading to a tax sale of the debtor's property.  When a manufactured home has been affixed to the debtor's property to be sold, disputes frequently arise between the purchaser of the property and the secured party regarding their respective interests in the manufactured home.  These disputes typically involve the same issue:  who owns the manufactured home after the tax sale?  view more
Whither False Patent Marking Litigation? False patent marking litigation has seen dramatic swings over the past few years in the number of cases filed.  Before recent changes occurred, anyone in the U.S. could bring a case against a patent holder, and any awarded damages were split between the plaintiff and the U.S. government.  After the Forest Group case, where the Federal Circuit determined that fines for false marking should be on a "per article" basis, with courts determining the appropriate fine, (maximum of $500 per article), there was a dramatic spike in the number of cases.  590 F.3d 1295 (Fed. Cir. 2009).  view more
Insurers Are Generally Within Their Discretion to Settle With Claimants on a A defendant may face potential liability by multiple claimants stemming from either a single lawsuit involving multiple plaintiffs or more than one lawsuit brought by different plaintiffs.  Under either circumstance, a settlement payment by the defendant's insurance carrier to one or more of the plaintiffs reduces and may exhaust the policy funds available to satisfy judgments or settlements that may be obtained by the remaining plaintiffs.  Nevertheless, most courts recognize the general right of the insurer to settle claims on a "first come, first served" basis, even if settling with one or more plaintiffs may be to the detriment of the remaining plaintiffs.   view more
Whither False Patent Marking Litigation? False patent marking litigation has seen dramatic swings over the past few years in the number of cases filed.  Before recent changes occurred, anyone in the U.S. could bring a case against a patent holder, and any awarded damages were split between the plaintiff and the U.S. government.  After the Forest Group case, where the Federal Circuit determined that fines for false marking should be on a "per article" basis, with courts determining the appropriate fine, (maximum of $500 per article), there was a dramatic spike in the number of cases.  590 F.3d 1295 (Fed. Cir. 2009).  view more
A Matter of Opinion: Courts Require Section 11 and 12 Claims Based on Allegedly False or Misleading Opinions to Satisfy Rule 9(b) In the wake of the economic downturn and mortgage crisis, courts around the country have seen numerous suits brought against issuers and sellers of securities based on allegedly false or misleading statements regarding the defendant’s financial health.  See, e.g., Fait v. Regions Fin’l Corp., 712 F. Supp. 2d 117 (S.D.N.Y. 2010), aff’d, No. 10-2311-cv, 2011 U.S. App. LEXIS 17515 (2d Cir. Aug. 23, 2011); Rubke v. Capitol Bancorp Ltd, 551 F.3d 1156 (9th Cir. 2009); In re Washington Mutual, Inc. Sec. Litig., 259 F.R.D. 490 (W.D. Wash. 2009).  Several of these cases have been brought against issuers of securities – as well as underwriters and accountants – under Sections 11 and 12(a)(2) of the Securities Act of 1933, 15 U.S.C. § 77k(a) and  § 77l(a)(2).  These sections, which have “roughly parallel elements,” provide a cause of action for false and misleading registration statements (Section 11) and prospectuses (Section 12) disseminated in connection with the issuance of securities.  See Fait, 712 F. Supp. 2d at 120.  view more
The Consumer Finance Protection Bureau: There’s a New Cop in Town A creation of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. Law 111-203 ("Dodd-Frank Act"), the Consumer Financial Protection Bureau ("CFPB") is charged with regulating consumer lending activities of financial institutions and, in partnership with state attorneys general, enforcing numerous federal consumer protection laws.  For commercial litigators involved in the defense of financial institutions in federal and state consumer protection lawsuits and attorney general investigations, the ongoing development and actions of the CFPB are important concerns.  This article discusses the structure and logistics of the CFPB's regulatory and enforcement mechanisms, what the CFPB has been doing since its creation, and what financial institutions and their attorneys can anticipate from the agency moving forward. view more
Information Security: Evolving “Reasonable” Security Standards 2011 has been the year of cyber attacks and renewed public discussion of information security assessments: assessment of vulnerabilities, assessment of threats, assessment of successful cyber attacks. The breach of EMC Corp.'s RSA SecurID sophisticated two-factor authentication token, the attack on Booz Allen Hamilton's military e-mail account and log-in credentials and other breaches by Anonymous/AntiSec hackers, Sony and its PlayStation service member database and account information attack, Lockheed Martin and the attack on its VPN access system, among others, follow the Stuxnet worm events, reported attacks on unnamed energy companies, and continuing attacks on various US Government agencies. The absence of publicized cyber attacks on other enterprises should not lead to the conclusion that other industries or organizations and their networks are of little or no interest to information thieves or manipulators. On the contrary, businesses in general, including professional services and small or more specialized targets, are moving into the cyber attackers' cross-hairs.  view more
Corporate Statements – Knowledge and Intent Substantial potential corporate liability arises out of the statements employees make on a corporation's behalf. A wide array of crimes and torts are based on allegedly false corporate statements – fraud, false statements and securities actions, among others. The defense to most of these actions is that the company lacked knowledge that the statement was false and/or did not intend to deceive anyone. To successfully assert such a defense, you must have a clear understanding of what constitutes corporate knowledge and intent. This is an area of law, however, which seems to have become increasingly muddled over the years, with distinct splits between jurisdictions. Therefore, it is critical to understand the approach your jurisdiction takes. The general trends in this regard are addressed below.  view more
The Practical Impact of an Insurance Policy’s “Cooperation Clause” on an Insured and Its Insurance Carrier

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. 

 view more
The Independent Tort Doctrine: Avoiding Tort Liability for Breach of Contract

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.

 view more
Recent Arizona Court of Appeals Case Expands Economic Loss Rule

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.

 view more
The Death of Indirect Purchaser Claims in Canada?

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. 

 view more
Concepcion v. Seidel: Supreme Courts in the US and Canada Come to Different Conclusions on Enforceability of Consumer Arbitration Clauses

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

 view more
The BCS and the Less Restrictive Means Prong: Legality Might Depend on the Circuit The National Collegiate Athletic Association (NCAA) governs 22 different sports at various levels and holds championship tournaments for every sport at every level except the Football Bowl Subdivision ("FBS"- formerly known as I-A). In FBS, the post-season is controlled by dozens of privately owned bowl games that pay schools lucrative appearance fees. In virtually every collegiate team sport, the national champion is determined by playing a NCAA sanctioned post-season tournament. In the case of football, a series of human and computer polls, which judge the teams' performance on the field, decide the national champion. This unique bowl system has often produced split national champions based on differing polls, and conference affiliations and contractual obligations have often prevented the best teams from competing against one another on the field.  view more
Cracking the Whip: FINRA Enforcement Action and Rule Changes Involving Private Placement in Outside Business Activities Recently, Regulation D offerings through private placements ("Reg D Offerings") sold by broker/dealers and registered representatives have been the subject of increased scrutiny by state, SEC and FINRA regulators. Given the number of Reg D Offerings that have failed in the past three years and the number of investors that lost money as a result, FINRA's enforcement division has made it clear that broker/dealers involved in the sale of Reg D Offerings already are – or will become – top targets for FINRA's enforcement agency. James Shorris, executive vice president of FINRA's enforcement division, stated in Investment News on February 2, 2011, that because of the losses investors have experienced in recent years, monitoring Reg D Offerings will be a "major, major initiative" for FINRA in 2011. Therefore, it is important that broker/dealers and registered representatives who have engaged in the sale of Reg D Offerings in prior years are aware of some of the details of these enforcement actions, and likewise be aware of the red flags that may cause future Reg D Offerings to come under scrutiny by state, SEC and FINRA regulators. view more
Expanding Civil Liability Under RICO: The Second Circuit's Surprising Answer To The Supreme Court's 2006 <i>Anza</i> Opinion On June 28, 2011, a divided panel of the Second Circuit published the latest opinion in the long-running dispute between New York steel supply companies.  The majority opinion allows the RICO claims of Ideal Steel Supply Corp. to proceed against National Steel Supply, Inc. and its principals under 18 U.S.C. §§ 1962(a) and 1964(c).  By easing the proximate cause requirement for a private claim under § 1962(a), the Second Circuit creates a dangerous precedent inviting more frivolous RICO claims, particularly when a disgruntled business wants to impede its competitor’s activities.  Hopefully, the dispute will make its second appearance before United States Supreme Court.  In Anza v. Ideal Steel Supply Corp., 547 U.S. 451 (2006), the Court held that the plaintiff did not adequately allege proximate cause when pursuing a RICO claim under § 1962(c).  At that time, however, the Court did not address the viability of a claim under § 1962(a).  Not surprisingly, the plaintiff seized on that opening and focused its attention on the § 1962(a) claim on remand.  view more
Home Is Where the Nerves Are: What to Know About a Subsidiary’s Principal Place of Business When Diversity Jurisdiction Is at Stake It goes without saying that it is vitally important to place your client in the most advantageous position at the outset of a lawsuit. For a defense attorney, the conventional wisdom is that federal court is often the best forum to defend a complex lawsuit against a corporate client. However, a defense attorney is well-advised to consider challenging federal court jurisdiction in appropriate cases. Diversity jurisdiction, of course, is a common and familiar gateway into the federal court system. However, in Hertz Corp. v. Friend, 130 S. Ct. 1181 (2010), the United States Supreme Court altered the landscape by establishing the "nerve center" test to determine a corporation's principal place of business. Although this test clarifies the often-confusing standards previously used by various courts across the country, a defense attorney needs to understand the impact this case has on its corporate client, especially a corporation with either a geographically decentralized management structure or a subsidiary that is closely controlled by an out-of-state corporate parent. This article discusses the latter type of corporate relationship and considers the tactical options for an attorney who either represents such a corporation or is defending against the claims brought by that corporation.  view more
Automatic Stays: Not So Automatic in Appeals of Arbitration Clauses Arbitration clauses are, for better or for worse, commonplace in various agreements entered into by businesses. When an adverse party ignores the arbitration clause and brings suit, the proponent of the clause often finds itself in the position of seeking to have a federal district court enforce the arbitration clause, stay the matter, and compel arbitration. view more
WARNING! Is Your Client Violating U.S. Export Laws? If your client has customers, facilities or offices outside of the United States, then you must be familiar with the U.S. export laws, specifically the Expert Administration Regulations (EAR). In fact, you should be familiar with the EAR even if your client's primary business is not selling goods or services outside of the United States. If its employees have regular contact with persons or companies outside of the United States, they could be exporting items in violation of U.S. law. view more

DRI Resources