Business Litigation Alert

Business Litigation Alert

Practical Perspectives on Litigation Developments & Trends

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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Classwide Arbitration is a Gateway Issue That Must Be Decided by Courts Not Arbitrators

Posted in Class Action Defense

In Opalinski v. Robert Half International Inc., the Third Circuit recently tackled the question of whether a district court— rather than an arbitrator—should decide if an agreement to arbitrate between two parties also authorizes the arbitration of unidentified individuals’ claims on a classwide basis. Concluding that the district court should decide this question, the Third Circuit joined the Sixth Circuit as the only Courts of Appeals to squarely confront the “who decides” inquiry.

In Opalinski, Plaintiffs David Opalinski and James McCabe brought suit against their former employer on behalf of themselves “and other individuals” alleging that Robert Half International Inc. (“RHI”) violated the Fair Labor Standards Act. RHI moved to compel arbitration of Plaintiffs’ claims on an individual basis as both Plaintiffs’ employment agreements contained an arbitration clause, requiring any dispute arising out of or relating to the their employment to be submitted to arbitration. Notably, neither agreement mentioned classwide arbitration. The district court granted the motion in part, compelling arbitration but leaving the determination “of individual versus classwide arbitration [] for the arbitrator to decide.”

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Delaware Enacts Legislation Authorizing 20-Year Statute of Limitations for Certain Breach of Contract Actions

Posted in General Litigation

Delaware has recently enacted legislation authorizing parties to a written contract involving at least $100,000 to agree to a statute of limitations of up to 20 years for actions based on that contract. The amendment to 10 Del. C. § 8106, embodied in new subsection (c), gives parties to a written contract the freedom to agree to a limitations period longer than the typical three or four years from accrual of the cause of action, without the need to resort to Delaware’s technical requirements for a contract under seal. The synopsis to the legislation explains that examples of the limitations period to be stated in the contract include, without limitation, (i) a specific period of time, (ii) a period of time defined by reference to the occurrence of another event, another document or agreement or another statutory period, and (iii) an indefinite period of time.

To ensure they get the benefit of the new 20-year limitations period, contracting parties should consider not only including in their written agreements a Delaware choice-of-law clause, but also a Delaware choice-of-forum clause inasmuch as limitations periods are sometimes deemed to be procedural in nature and, therefore, governed by the law of the forum state.

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Pennsylvania Supreme Court Holds that General Contractor was Immune from Suit by Employee of Subcontractor Under Workers’ Compensation “Statutory Employer” Doctrine

Posted in Construction, Construction Litigation, Contract Claims

In a case which has attracted a great deal of attention from construction and insurance industry groups, and prodded the filing of numerous amici curiae briefs, the Pennsylvania Supreme Court in Patton v. Worthington Associates, overturned a $1.5 million jury verdict and ruled in favor of the defendant general contractor based on the “statutory employer” immunity doctrine under Pennsylvania’s Workers’ Compensation Act (the “Act”).

Worthington Associates, Inc. was engaged as general contractor on a construction project. Worthington, in turn, hired Patton Construction, Inc., a corporation wholly-owned by Earl Patton, as a subcontractor. Mr. Patton suffered significant back injuries when he fell at the project site. He and his wife filed a negligence suit against Worthington alleging failure to maintain a safe jobsite. Worthington moved for summary judgment, arguing that, pursuant to Section 302 of the Act, it was secondarily liable for the payment of workers compensation benefits to its subcontractors’ workers and, as such, entitled to immunity from tort claims (as the so-called “statutory employer”) even if it did not have to make such payments. The motion was denied and the matter was tried before a jury, which found that Patton was an independent contractor of Worthington and awarded the Pattons $1.5 million. This decision was affirmed by the Pennsylvania Superior Court.
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New Jersey Appellate Division Issues Two Opinions Clarifying Local Public Contracts Law

Posted in Construction, Construction Litigation

In recent months the New Jersey Appellate Division issued two opinions clarifying aspects of the New Jersey Local Public Contracts Law, which generally mandates that contracts above a specified amount be awarded by municipalities to the lowest responsible bidder after public advertising for bids and bidding, N.J.S.A. § 40A:11-4, and also sets forth specific, non-waiveable bid requirements, the absence of which will result in a per se disqualification of the bid. N.J.S.A. § 40A:11-23.2.

An exception to the lowest-responsible-bidder mandate is recognized when the municipality has publicly advertised on two prior occasions but was unable to obtain reasonably-priced bids, in which case a municipality is permitted to negotiate a public contract without public advertising and bidding. See N.J.S.A. § 40A:11-5(3). In C&H Industrial Services, Inc. v. City of Vineland, the court considered whether defects in proposals submitted pursuant to the LPCL’s negotiated procurement process set forth in N.J.S.A. § 40A:11-5(3) can invalidate proposals in the same manner as defects in bids submitted pursuant to the public advertisement process.
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New Jersey Supreme Court Formally Adopts and Defines the Scope and Application of the Common Interest Rule

Posted in General Litigation

In a matter of first impression, the New Jersey Supreme Court in O’Boyle v. Borough of Longport expressly adopted the common interest rule in New Jersey as articulated in LaPorta v. Gloucester County Board of Chosen Freeholders. Although previously addressed and analyzed by lower courts within New Jersey, the Court’s ruling clarifies the boundaries of the rule and offers guidance in resolving the scope of its application.

Mr. O’Boyle, a private citizen, filed several lawsuits against the Borough of Longport, planning and zoning members, and borough residents. A private attorney representing a planning and zoning board member and two borough residents sought to engage in a joint defense with the municipal attorney with respect to the lawsuits that Mr. O’Boyle had filed and might later file against their clients. To that end, the private attorney prepared and sent to the borough attorney a joint strategy memorandum and CDs containing a number of documents that had been selected by the private attorney. While the opinion is unclear whether a joint defense arrangement was ever consummated, the memorandum and the CDs were later returned to the private attorney, without the borough keeping copies.

Later, Mr. O’Boyle filed an OPRA request seeking, in part, the materials exchanged between the private attorney and the municipal attorney. The borough withheld the joint strategy memorandum and the documents on the accompanying CDs because, among other reasons, the documents were privileged. Mr. O’Boyle thereafter filed a verified complaint against the borough seeking access to the withheld documents under OPRA and New Jersey’s common law right of access. The trial court dismissed the case with prejudice, and the Appellate Division affirmed.
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California High Court Holds That Federal Arbitration Act Preempts Arbitration Agreements with Class Action Waivers

Posted in Class Action Defense

The California Supreme Court, in Iskanian v. CLS Transportation Los Angeles, LLC, recently overturned precedent holding that class action waivers in arbitration agreements are unenforceable in California. Citing AT&T Mobility LLC v. Concepcion et ux, California’s high court strengthened the enforceability of class action waivers in arbitration agreements by holding that the Federal Arbitration Act (FAA) preempts the state’s refusal to enforce such a waiver on grounds of public policy or unconscionability.

In Iskanian, the plaintiff filed a class action and representative complaint on behalf of himself and other employees asserting a number of wage-and-hour violations. The defendants initially moved to compel arbitration based upon a class and representative action waiver contained in the arbitration agreement executed by all employees, but the defendants withdrew their motion after the California Supreme Court decided Gentry v. Superior Court, which held that class action waivers in employment arbitration agreements are invalid under certain circumstances.

During the course of the litigation, however, the United States Supreme Court decided Concepcion, which held that arbitration agreements with mandatory class action waivers are generally enforceable, notwithstanding contrary state law. The defendants then renewed their motion to compel arbitration, which was granted and affirmed on appeal. The California Supreme Court also affirmed, finding that Concepcion had abrogated Gentry and that arbitration agreements containing class action waivers are generally enforceable. The California Supreme Court observed that Concepcion held that “[r]equiring the availability of classwide arbitration interferes with fundamental attributes of arbitration and thus creates a scheme inconsistent with the FAA,” and explained that “states cannot require a procedure that interferes with fundamental attributes of arbitration[.]” The California Supreme Court held that, “[u]nder the logic of Concepcion, the FAA preempts Gentry’s rule against employment class waivers.” As such, the Court held that Iskanian’s class action claims are subject to binding arbitration on an individual basis.
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Wrap Up of United States Supreme Court’s 2013-2014 Term

Posted in General Litigation

With the close of the United States Supreme Court’s 2013-14 term, we offer this wrap-up of the Court’s term, focusing on the Court’s most important business and commercial cases (excluding intellectual property opinions):

Halliburton Co. v. Erica P. John Fund: The Court upheld the fraud-on-the-market theory first set forth in Basic Inc. v. Levinson, which allows investors to satisfy the reliance element of a section 10b-5 securities fraud claim by invoking a presumption that the price at which stock is purchased in an efficient market reflects all public, material information — including material misstatements. Basic’s presumption of reliance facilitates the certification of class actions by absolving investors of establishing individual reliance on alleged misstatements. In Halliburton, however, the Court threw defendants a bone in holding that the presumption can be rebutted at the class-certification stage by direct evidence that the alleged misrepresentation did not in fact affect the stock price. While such evidence has always been admissible during the merits stage to rebut the Basic presumption, the Court’s decision to allow it at the threshold class-certification stage is notable. The decision is not the game-changer it would have been had Basic been overturned, but it does give defendants another potential “out” — and will almost certainly drive up the cost of litigating securities class actions by virtue of the additional price impact work that economic consultants will be retained to furnish prior to class certification.

Fifth Third Bancorp v. Dudenhoeffer: The Court unanimously threw out the defense-friendly presumption of prudence that ERISA fiduciaries of employee stock ownership plans, or ESOPs, have used to avoid liability when the price of company stock in which they are invested drops. In finding that ESOP fiduciaries owe no lesser duty of prudence than any other ERISA fiduciary (except that they need not diversify the fund’s assets), the Court rolled back almost twenty years of precedents from the circuit courts, the bulk of which, beginning with the Third Circuit’s 1995 decision in Moench v. Robertson, conferred on ESOP fiduciaries a presumption that they acted consistently with ERISA by investing fund assets in employer stock. The practical impact of the opinion is likely to be far less radical, however, as the Court went on to observe that a fiduciary’s reliance on publicly available stock-price information is not typically imprudent. Nor is the allegation that an ESOP fiduciary failed to act on non-public information likely to survive a motion to dismiss since the duty of prudence neither requires a fiduciary to violate insider trading laws nor to sabotage the value of the stock it already holds by disclosing negative information that isn’t mandated by the securities laws. Fifth Third Bancorp’s bark, in other words, may well prove worse than its bite.

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