Business Litigation Alert

Business Litigation Alert

Practical Perspectives on Litigation Developments & Trends

Bill to Expand Data Breach Notification Requirements Passes New Jersey Assembly

Posted in Data Privacy & Security, General Litigation

On December 15, 2014, the New Jersey Assembly voted 75-to-0 to advance a bill that would expand the existing data breach notification requirements for companies doing business in the state. The bill, A3146, would broaden the type of information that, if compromised, would trigger a company’s obligation to notify customers of the breach. The proposal now heads to the Senate, where a similar bill, S2188, has been pending in the Commerce Committee since June.

If enacted, the bill would expand the definition of “personal information” to include a customer’s “user name or email address, in combination with any password or security question and answer that would permit access to an online account.” The current definition already includes a customer’s (1) Social Security number; (2) driver’s license or State identification card number; and (3) account, debit, or credit card number, in conjunction with any required access code or password that would permit access to an individual’s financial account. Under the current law, if data falling into any one of these three categories is illegally accessed, along with an individual’s first name or initial and last name, the company must disclosure the breach to the customers affected.

With this proposed update, New Jersey lawmakers are recognizing that individuals are increasingly using online accounts to store sensitive and potentially valuable data. If hackers obtain the credentials to access such accounts, that data may be stolen and used to the detriment of the account holders. As the spate of recent corporate data breaches has shown, businesses of all sizes are increasingly being targeted by more sophisticated hackers and the risk of a data breach is growing everyday. Therefore, in addition to protecting against such security breaches before they occur, it is imperative that companies doing business in New Jersey are aware of the steps that should be taken following a data breach, including complying with all applicable data breach notification laws.

Michael C. Landis is an Associate in the Gibbons Business & Commercial Litigation Department.

Pennsylvania Supreme Court Holds the UTPCPA’s “Ascertainable Loss” Requirement Cannot Be Manufactured by Voluntarily Hiring Counsel and Incurring Litigation Costs

Posted in Class Action Defense

In Grimes v. Enterprise Leasing Co. of Phila., LLC, the Pennsylvania Supreme Court held that the retention of counsel to institute suit alone does not constitute “ascertainable loss” under the state’s consumer protection statute.

The plaintiff in Grimes had rented a car from an Enterprise branch in Philadelphia and apparently declined to purchase Collision Damage Waiver or Loss Damage Waiver coverage. Consequently, the plaintiff was responsible for the cost of repairs for any vehicle damage incurred during the rental period and administrative, loss-of-use, and diminishment-in-value fees. The rental contract also contained a power-of-attorney clause that empowered Enterprise to request payment directly from plaintiff’s insurance carrier or credit card issuer. After the plaintiff returned the car to Enterprise, she was informed that she was responsible for a scratch on the car, and later received an invoice for the repair costs and other administrative fees noted in the contract.

Plaintiff sued Enterprise under Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (“UTPCPL”), claiming the fees in the contract were unconscionable with no reasonable relationship to the costs of repairing the damage to the vehicle, and as such constituted deceptive acts and misrepresentations. The complaint alleged generally that Enterprise had demanded payment and that she had suffered damages, but she admitted in response to a counterclaim that she had not paid the disputed sum.
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Streamlined Judicial Process Signals Good News for Business Litigation

Posted in General Litigation

On November 13, 2014, the New Jersey Supreme Court approved implementation of the Complex Business Litigation Program for the handling of complex business, commercial, and construction cases. The Program, based on the report and recommendations of the Supreme Court Working Group on Business Litigation chaired by Bergen Vicinage Assignment Judge Peter E. Doyne, will begin on January 1, 2015 for those complex cases filed on or after that date that fulfill certain eligibility criteria. The details of the Program include:

  • Threshold Damages Amount. The amount in controversy must be at least $200,000 for inclusion in the Program unless the court determines in a particular situation that a case with a lesser amount in controversy is appropriate for inclusion.
  • Self-Designation as Complex Business Litigation. The attorneys or parties will designate a matter as complex business litigation by indicating on the Civil Case Information Statement that the matter is either case type 508 (complex commercial cases involving unusually complicated business matters) or case type 513 (complex construction cases involving unusually complicated factual or legal issues). A more detailed definition of the cases that fit within these case types can be found here.
  • Other Suitable Actions. Actions to establish a constructive trust or impose an equitable lien to satisfy damages are also cognizable in the Complex Business Litigation Program, as are cases primarily seeking legal relief in which ancillary injunctive relief is sought.
  • Excluded Actions. The Program does not include matters that are handled by General Equity or matters primarily involving consumers, labor organizations, personal injury, or condemnation, or cases in which the government is a party.
  • Jury and Non-Jury Matters. The Program encompasses both jury and non-jury matters.
  • Opt-in/Opt-out. Parties may file a motion with the Complex Business Litigation Program Judge for inclusion in the Program where the amount in controversy is less than $200,000. Parties may also move for removal from the Program on the grounds that the action does not meet the eligibility criteria.
  • Review of Cases in Program. The Assignment Judge or his/her designee may initially conduct a review of the case to determine if it is appropriate for the Program. The Program Judge may also review actions presumptively assigned to the Program to determine if the case is appropriate for inclusion. If after review a judge determines that the complex nature of the action or the threshold damages claim amount is not established, the case may be removed from the Program. Cases removed from the Program will be reassigned to the appropriate track for case management.
  • Complementary Dispute Resolution.  Cases in the Program are not part of the court’s mandatory civil mediation and arbitration programs.  However, the Complex Business Litigation Program Judge in each vicinage, as part of case management, should encourage the parties to engage in mediation.
  • Opinions.  Each Complex Business Litigation Judge will be expected to issue a minimum of two written opinions per year in order to develop a body of case law on issues relating to business litigation.  These opinions will be posted on

The Program will also feature the designation of Complex Business Litigation Judges in each vicinage, with those designated judges receiving extensive specialized training in all areas relating to business litigation (including, but not limited to, Uniform Commercial Code, securities, anti-racketeering, and business valuation). These judges will also receive additional training in effective case and management, e-discovery, and other relevant topics. A list of the designated Complex Business Litigation Judges can be found in the Court’s November 13, 2014 order and a Notice to the Bar accompanying the Court’s November 13, 2014 order authorizing the Program. 

Approval and implementation of the Program is good for the business community who will likely benefit from a streamlined judicial process for complex cases falling within the eligibility requirements of the Program. By creating a program specific to complex business, commercial, and construction cases, New Jersey joins other states around the country that have similar divisions/programs (including California, Maine, Maryland, New York, and Pennsylvania).

Jonathan D. Klein is an Associate in the Gibbons Business & Commercial Litigation Department.

Third Circuit Holds Truth in Consumer Contract Notice and Warranty Act Claim May Not Be Based Upon Omission of Price Information

Posted in Class Action Defense

In Watkins v. DineEquity, Inc., the Third Circuit recently considered whether the District Court properly dismissed a putative class action brought against Applebee’s and International House of Pancakes, in which Plaintiff claimed that Defendants violated the New Jersey Truth in Consumer Contract Notice and Warranty Act (“TCCNWA”) by failing to disclose beverage prices on their menus. In affirming the District Court’s dismissal, a divided Third Circuit panel ruled that the “TCCNWA encompasses only illegal provisions in writings covered by the statute, and does not make actionable omissions, including the omission of beverage prices from a restaurant menu.”

The TCCNWA prohibits a seller from displaying a “written . . . notice or sign . . . which includes any provision that violates any clearly established legal right of a consumer or responsibility of a seller . . . as established by law.” Plaintiff asserted that Defendants’ omission of drink prices from their menus constituted a violation of the New Jersey Consumer Fraud Act (“CFA”), and that such a violation was a predicate for a claim under the TCCNWA, despite the fact it stemmed from an omission, rather than an inclusion, of information. The District Court rejected this argument, concluding that “[b]ecause omitting certain prices from restaurant menus does not pose the same risk of misleading a consumer into failing to enforce her legal rights as an affirmative misrepresentation,” the TCCWNA was not applicable to a price omission. Following the dismissal of Plaintiff’s complaint and amended complaint, and the denial of Plaintiff’s motion for reconsideration, Plaintiff appealed to the Third Circuit.

The Third Circuit found, as a matter of first impression, that a plain reading of the TCCNWA, which provides for a statutory penalty in instances in which a Defendant displays a sign that “includes any provision that violates any clearly established legal right of a consumer or responsibility of a seller[,]” indicates that the Legislature intended the TCCNWA to penalize only the inclusion of illegal provisions and not omissions.
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“Safe and Effective,” Without More, Does Not Warrant Unqualified Safety and Efficacy

Posted in Class Action Defense, General Litigation

The Third Circuit in In re: Avandia Marketing Sales Practices & Products Liability Litigation recently refused to revive a putative class action accusing GlaxoSmithKline PLC (“GSK”) of violating an express warranty allegedly contained on the label of its diabetes drug, Avandia, which declared the drug “safe and effective.” In so doing, the Court reaffirmed the narrow scope of a breach-of-express-warranty claim under New Jersey law and the requirements necessary to sustain such a claim.

Richard V. D’Apuzzo filed a class action complaint against GSK for economic, but not physical, harm alleging that he would have paid less for a safer, more effective drug had GSK not expressly warranted Avandia to be safe and effective in treating his condition. The United States District Court for the Eastern District of Pennsylvania (where approximately 4,900 Avandia-related lawsuits have been centralized under Multidistrict Litigation No. 1871 granted GSK’s Rule 12(b)(6) motion to dismiss the entire complaint with prejudice.

On appeal, D’Apuzzo alleged that GSK “expressly warranted on its labels and packaging . . . that Avandia would provide assist[ance] ‘in the management of type 2 diabetes mellitus’ in safe and efficacious matter.” The label in question stated “[t]he 8 mg daily dose has been shown to be safe and effective in clinical studies,” which the Third Circuit determined was a representation only that a particular dose of Avandia had been shown to be safe and effective in such studies and not a claim that Avandia will be safe and effective in every case for every consumer. Because GSK disclosed Avandia’s contraindications, risk factors, and possible side effects on the drug’s label, the Court concluded that the “safe and effective” statement cannot be read as an unqualified guarantee that Avandia would be safe and effective for all consumers.
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Opinion Holds That Non-Monetary Reverse Payments Trigger Actavis Antitrust Scrutiny, Creating Split Within D.N.J.

Posted in Antitrust

An opinion issued on October 6, 2014, by Judge Sheridan of the United States District Court for the District of New Jersey further muddied the legal waters as to what type of “reverse payments” made by makers of brand-name pharmaceuticals to their generic competitors to settle patent litigation are subject to antitrust scrutiny under the Supreme Court’s decision in FTC v. Actavis. Judge Sheridan held that Actavis applies to non-monetary payments, such as a promise by the brand-name manufacturer in exchange for which the generic agrees to delay entry. Importantly, however, a non-monetary payment must be capable of being reliably converted to a monetary value so that it can be evaluated against the Actavis factors. Judge Sheridan’s holding runs counter to Judge Walls’s decision earlier this year in In re Lamictal Direct Purchaser Antitrust Litigation, which limited Actavis to reverse payments involving an exchange of cash and was the subject of a prior blog post.

In In re Effexor XR Antitrust Litigation, a class of direct purchasers alleged that defendant Wyeth made a reverse payment to defendant Teva to induce Teva to delay launching its generic version of Effexor by two years. This reverse payment was essentially an agreement not to compete, the plaintiffs alleged, as Wyeth promised Teva that it would not market its own generic version of Effexor during Teva’s 180-day exclusive sales period (which Teva had earned by being the first to seek FDA approval of such a generic) in exchange for Teva’s delay. The plaintiffs estimated that Wyeth’s promise was worth $500 million to Teva, based on the fact that Teva would face no price competition during its 180-day exclusivity period.
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NJ Businesses Should Reassess Arbitration Waiver Provisions in Consumer Contracts

Posted in General Litigation

Companies that do business in New Jersey should carefully review arbitration provisions in their contracts after a unanimous decision by the New Jersey Supreme Court that marks a departure from recent federal opinions. In Atalese v. U.S. Legal Services Group, the Court held that “[t]he absence of any language” in an arbitration provision that a consumer is waiving his or her “statutory right to seek relief in a court of law renders the provision unenforceable.”

In Atalese, the plaintiff contracted with defendant U.S. Legal Services Group, L.P (USLSG) for debt-adjustment services. When Atalese brought claims against USLSG for violations of the Consumer Fraud Act and the Truth-in-Consumer Contract, Warranty and Notice Act, USLSG moved to compel arbitration. The arbitration clause in question appeared on the ninth page of the twenty-three page contract, and stated “[i]n the event of any claim or dispute between Client and the USLSG . . . the claim or dispute shall be submitted to binding arbitration upon the request of either party upon the service of that request on the other party. . . .” The trial court granted USLSG’s motion to compel arbitration and dismissed the complaint without prejudice, finding that the arbitration clause was “minimally, barely . . . sufficient.” The Appellate Division affirmed, on the grounds that the clause “clearly and unambiguously states that . . . any dispute relating to the underlying agreement shall be submitted to arbitration and the resolution of that forum shall be binding and final.”
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Service of Discovery Also Subject to New Deadline in Delaware Federal Court

Posted in Legislation Updates

We previously posted on the new deadline of 6:00 p.m. Eastern Time for all filings other than initial pleadings in the U.S. District Court for the District of Delaware. On October 15, 2014, Chief Judge Leonard Stark of the District of Delaware issued a letter addressing certain questions about the new rule. Chief Judge Stark reiterated that filings and service must be completed by 6:00 p.m. Eastern Time, and further indicated that this rule applies to all filing and service deadlines — including service of discovery materials — in every case in the District of Delaware, other than initial pleadings or those cases in Bankruptcy Court.

Chief Judge Stark explained clearly that “the 6:00 p.m. deadline applies to the exchange among parties of discovery requests and discovery responses, and it applies even if such requests or responses are made by hand delivery.” The rule cannot be altered by both parties’ consent in specific cases, but rather only by judicial relaxation of the rule, a “discretion [that] will be exercised rarely (most likely during trial).” A judge’s discretion to relax the deadline is even further limited to only the deadline for a “particular paper.” The Chief Judge noted that the local chapter of the Federal Bar Association was forming a new committee “to explore work-life balance issues” and suggested that the committee’s recommendations to the Court could result in further rule changes.

Gibbons will continue to monitor the local rules of the District of Delaware and other district courts.

Christopher Viceconte is a Director in the Gibbons Business & Commercial Litigation Department. Gianna Cricco-Lizza, an Associate in the Gibbons Business & Commercial Litigation Department, co-authored this post. This blog originally appeared on the Gibbons IP Law Alert on October 21, 2014.

Put Away that Midnight Oil: New Rule in the District of Delaware

Posted in Legislation Updates

On October 2, 2014, Chief Judge Leonard Stark of the U.S. District Court for the District of Delaware announced a new deadline of 6:00 p.m. Eastern Time for all filings other than initial pleadings. As of October 16, 2014, “[a]side from initial pleadings, all electronic transmissions of documents (including, but not limited to, motions, briefs, appendices, and discovery responses) must be completed by 6:00 p.m. Eastern Time, in order to be considered timely filed and served that day.” Initial pleadings which are filed before midnight will still be considered timely.

Chief Judge Stark’s standing order modifies section (F) of the Court’s Revised Administrative Procedures Governing Filing and Service by Electronic Means and presents a significant change from the familiar practice of filing up until 11:59 p.m. The new rule applies to pending as well as future matters. The District of Delaware is second only to the Eastern District of Texas in the number of patent cases filed; both of which have nearly three times the number of patent cases as the third busiest district, the Central District of California. Accounting for over 40% of the patent cases filed in the United States, Texas and Delaware have become favorites of plaintiff-patent holders due to, among other things, the jurisdictions’ streamlined pre-trial processes and skilled judges. Given Delaware’s ranking as the second most active district court in number of filings (788 to date for 2014) and parties (2395 to date for 2014), the nationwide patent litigators who represent clients in the District of Delaware should ensure that their Delaware counsel are provided pleadings and discovery materials sufficiently in advance of the new deadline to ensure timely filing and service.

Gibbons will continue to monitor other district courts’ local rules to see if other courts adopt a similar rule.

Christopher Viceconte is a Director in the Gibbons Business & Commercial Litigation Department. Gianna Cricco-Lizza, an Associate in the Gibbons Business & Commercial Litigation Department, co-authored this post. This blog originally appeared on the Gibbons IP Law Alert on October 14, 2014.

Seventh Circuit Rejects Unbalanced “Division of Spoils” Between Class Counsel and Class Members in RadioShack Settlement

Posted in Class Action Defense

In Redman v. RadioShack Corp., the Court of Appeals for the Seventh Circuit, in an opinion by Judge Richard Posner, reversed and remanded the district court’s judgment approving the settlement terms for a class action filed against RadioShack Corp. alleging violation of the Fair and Accurate Credit Transactions Act. The court expressed concern about “the division of spoils between class counsel and class members” and found it likely that “each class member has a valid claim to a good deal more than one $10 coupon, and it would seem therefore that the equities favor a reallocation of some of what we are calling the spoils from class counsel to class members who have submitted claims for the coupons.”

In May of 2013, “the named plaintiffs (realistically, class counsel) agreed with RadioShack on the terms of settlement” under which each class member who responded to the notice of settlement and selected to participate would receive a $10 RadioShack coupon. Ultimately, however, only about 83,000 out of an estimated 16,000,000 class members, approximately 0.5% of all class members, submitted claims for coupons.

The Seventh Circuit characterized the magistrate judge’s conclusion that the class generally approves of the settlement because over 99.99% of members did not object as “naïve.” According to the court, “[t]he fact that the vast majority of the recipients of notice did not submit claims hardly shows ‘acceptance’ of the proposed settlement: rather it shows oversight, indifference, rejection, or transaction costs.” The panel also found that the magistrate judge “questionably treats one-half of one percent as being a ‘considerable portion’” of class members approving the settlement.

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