Business Litigation Alert

Practical Perspectives on Litigation Developments & Trends

Delaware Supreme Court Holds Valid International Forum Selection Clause Dispositive in Determining Jurisdiction

By Christian A. Stueben on Posted in General Litigation

In National Industries Group (Holding) v. Carlyle Investment Management LLC, Delaware’s Supreme Court unanimously held that a valid forum selection clause is dispositive in determining which court has jurisdiction over disputes arising under the contract. Even if a foreign corporation is party to the contract, Carlyle holds that any considerations weighing in favor of applying the doctrine of international comity do not override an otherwise valid forum selection clause.

Appellant National Industries Group (Holding) (“NIG”), a Kuwait-based company, made a $25 million investment in a Carlyle-affiliated closed-end investment fund. Soon after NIG made its investment, the fund collapsed, falling victim to the subprime-mortgage crisis that roiled financial markets in 2008. The Subscription Agreement governing NIG’s investment contained a broad forum-selection clause vesting exclusive jurisdiction over any dispute in the Delaware courts. Despite this, in November 2009, NIG sued Carlyle Investment Management LLC (“Carlyle”) in Kuwait to recover its investment. NIG claimed that under Kuwaiti law, because Carlyle was not licensed to sell securities in Kuwait, the investment contract and thus the forum selection clause therein were void.

Shortly after NIG served Carlyle with notice of the Kuwait suit, Carlyle sought injunctive relief in Delaware Chancery Court to preliminarily and permanently enjoin any action subject to the forum-selection clause from proceeding in any forum outside Delaware. Despite receiving multiple notices of the Delaware proceeding, NIG elected not to respond in Delaware, and so Carlyle obtained a default judgment. Even after being served with a copy of that judgment, NIG nevertheless continued to prosecute the Kuwait action.

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Gibbons Attorneys Listed as 2013 Super Lawyers & Rising Stars in New Jersey & Pennsylvania

By Gibbons P.C. on Posted in General Litigation

Several attorneys in the Gibbons Business & Commercial Litigation Department were listed as leaders in their fields by Super Lawyers and Super Lawyers Rising Stars in New Jersey and Pennsylvania for 2013.  Overall, 80 lawyers in the firm were featured in New Jersey Super Lawyers and New Jersey Super Lawyers Rising Stars and 7 lawyers were featured in Pennsylvania Super Lawyers and Pennsylvania Super Lawyers Rising Stars. In addition, Michael R. Griffinger was ranked as one of the top 10 and top 100 attorneys in New Jersey, and Patrick C. Dunican Jr. was ranked as one of the top 100 attorneys in New Jersey.

The following attorneys were listed as Super Lawyers:

Those listed in the New Jersey Rising Stars section include:

The Super Lawyers selection process comprises hundreds of thousands of statewide or regional surveys supplemented by a comprehensive examination of each nominee’s background and experience, focusing on such criteria as verdicts and settlements; transactions; representative clients; honors and awards; educational background; and any other outstanding achievements. Only 5 percent of the total lawyers in the state are selected for inclusion in Super Lawyers.

The Foreign Trade Antitrust Improvements Act: A Recent Take in the S.D.N.Y.

By Kevin R. Reich on Posted in Antitrust

The Foreign Trade Antitrust Improvements Act (“FTAIA”) removes from the ambit of the Sherman Antitrust Act otherwise actionable anti-competitive conduct abroad that does not have a “direct, substantial, and reasonably foreseeable” effect on domestic commerce. Questions persist as to what effects qualify as being sufficiently “direct” and also whether the FTAIA is jurisdictional in nature or goes to the substantive merits of a claim. A recent decision out of the Southern District of New York addressed both questions in dismissing an antitrust suit brought by one Chinese corporation against its Chinese competitors.

The litigants in Lotes Co. v. Hon Hai Precision Industry Co. produce USB 3.0 connectors that link peripherals, like printers, monitors, and keyboards, to notebook and desktop computers made in China and sold in the U.S. As part of the standard-setting process by which the USB 3.0 became the industry standard for connectors of this type, defendants agreed to license to any entity that wanted to adopt the 3.0 standard, like plaintiff Lotes, the patents defendants contributed to facilitate its creation. Lotes, however, alleged that defendants refused to grant it a license in these patents and, in fact, brought two patent infringement suits in China against Lotes subsidiaries to enjoin Lotes from making certain USB 3.0 connectors. Such conduct, Lotes claimed, was designed to foreclose it from relevant markets and confer on defendants monopoly status.

The Court held that defendants’ alleged anticompetitive conduct was not subject to the Sherman Act because it was not covered by the FTAIA. Adhering to Second Circuit precedent holding that the FTAIA sets forth the standard for determining when subject-matter jurisdiction exists to adjudicate a foreign-based violation of the Sherman Act, the Court dismissed plaintiff’s claims for lack of subject- matter jurisdiction under Fed. R. Civ. P. 12(b)(1) rather than for failure to state a claim under Fed. R. Civ. P. 12(b)(6). Notably, however, the Court acknowledged the circuit split on this issue, recognizing that the Second and Ninth Circuits view the FTAIA as a jurisdiction-defining statute while the Third and Seventh Circuits regard the FTAIA as imposing an additional substantive element on an antitrust claim.

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Law Division Holds Unfiled Discovery Protected From Common-Law Right of Access

By Thomas J. Cafferty on Posted in General Litigation

The Law Division in a to-be-published opinion in Drinker Biddle & Reath LLP v. New Jersey Department of Law & Public Safety, Division of Law, recently held that public policy does not favor access to unfiled discovery in public sector litigation under New Jersey’s common-law right of access.

Plaintiff filed a complaint in lieu of prerogative writs for failure to comply with the Open Public Records Act, (“OPRA”), and the common-law right of access in refusing to provide plaintiff with copies of unfiled transcripts of expert depositions in environmental litigation brought by the State of New Jersey, Department of Environmental Protection (“NJDEP”). Because the transcripts in their entirety had not been filed with the Court, NJDEP denied plaintiff’s OPRA request on privilege and confidentiality grounds.

As discussed in a previous blog post, the Appellate Division affirmed the lower court’s earlier decision denying plaintiff’s request for the materials under OPRA, but directed the trial court, on remand, to conduct a balancing test to determine if the unfiled discovery deposition transcripts of the NJDEP’s examination of the adverse party’s expert witnesses are accessible under the common-law right to access public records.

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New Jersey’s Prompt Payment Act Does Not Apply to Contracts for the Upkeep and Maintenance of Land

By Damian V. Santomauro on Posted in Construction, Construction Litigation

New Jersey’s Prompt Payment Act (“PPA”) can be a valuable tool available to contractors, subcontractors, sub-subcontractors, and product suppliers that are owed money on New Jersey construction projects, as aggrieved parties can recover interest on unpaid amounts at prime plus one (1%) percent in the event payment is not made within the time period provided by the PPA and attorneys’ fees. N.J.S.A. § 2A:30A-2. In TBI Unlimited, LLC v. Clearcut Lawn Decisions, LLC, the United States District Court for the District of New Jersey considered the scope of the PPA, which is only the subject of a handful of written opinions.

The Court noted that obligations imposed by the PPA are only triggered when there is contract for an improvement to real property, N.J.S.A. § 2A:30A-1 and that the definition of “improve” in the PPA includes things that resulted in permanent changes to the land. Accordingly, the Court concluded that “mere maintenance and upkeep of land” is not an improvement to real property.

While the line between services and supplies that “improve” real property within the meaning of the PPA and those that do not may not always be clear, the TBI decision sets forth a relatively straightforward and reasonable approach to resolving the issue by focusing on the result that the services or supplies have on the property. As the Court stated, the PPA “is limited to those activities which serve to permanently alter the character of real property, rather than simply those activities targeted at the maintenance or upkeep of such property.” Of course, even if an aggrieved party’s claim is not covered by the PPA because its contract involved maintenance of upkeep, that party would still be entitled to pursue breach of contract and potentially other claims for non-payment. However, the additional remedies provided by the PPA would not be available.

Damian V. Santomauro is a Director in the Gibbons Business & Commercial Litigation Department and a member of the Construction Litigation Team.

New Jersey Appellate Division Takes “Hands-Off” Approach to Contractual Breaches of the Duty of Good Faith and Fair Dealing

By Christian A. Stueben on Posted in General Litigation

In Sun Pharmaceutical Industries v. Core Tech Solutions, New Jersey’s Appellate Division affirmed a Trial Court order dismissing plaintiff’s claims that defendants had breached their contractual duty of good faith and fair dealing. The decision is notable because it sheds light on the definition of “good faith” in the context of a preliminary agreement, an area where there is little New Jersey precedent.

By way of background, respondent Core Tech Solutions, Inc. (“Core Tech”) was a small, five-employee medical technology business that performed research and development for pharmaceutical companies. Appellant Sun Pharmaceutical Industries, Inc. (“Sun”) was a pharmaceutical company interested in bringing one of Core Tech’s proprietary products to market. The two parties signed a Letter of Intent, or “LOI,” which, in pertinent part, called for Sun to make a down payment of $150,000 and for the two parties to negotiate in good faith to reach a definitive agreement within 90 days of the LOI’s execution. As it turned out, no final agreement was reached.

Sun sued, seeking preliminary and permanent injunctive relief, alleging that Core Tech had violated the LOI’s implied covenant of good faith and fair dealing, having sought merely to pocket the $150,000 down payment it received. In support of its claim, Sun set forth thirteen examples of Core Tech’s supposed bad faith. The Trial Court credited certain of Sun’s allegations, but ultimately determined that they were insufficient to establish bad faith. Instead, they evidenced Core Tech’s frustration with Sun’s conduct during the negotiations.

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Six Gibbons Attorneys to Speak at Upcoming NJSBA 2013 Annual Meeting & Convention

By Gibbons P.C. on Posted in Class Action Defense, E-Discovery, General Litigation

The New Jersey State Bar Association 2013 Annual Meeting and Convention will be held May 15-17, 2013, at the Borgata Hotel Casino & Spa. Six Gibbons attorneys will be featured as speakers and moderators at this years convention. The Gibbons attorneys, Fruqan Mouzon, Mary Frances Palisano, Damian V. Santomauro, Judge Edwin H. Stern, Jennifer Marino Thibodaux, and Chief Justice James R. Zazzali, will be covering topics ranging from developments in E-Discovery to white collar crime and the Consumer Fraud Act.

  • Consumer Fraud Act: Remedies & Defenses for Purchases of Property and Home Renovation Contracts
    • Damian V. Santomauro, Director in the Gibbons Business & Commercial Litigation Department
    • Thursday, 8:30 – 9:45 am, The Water Club.

This panel will cover the rights and remedies available under the Consumer Fraud Act to consumers who have contracted for purchase of property or for home renovation contracts. Mr. Santomauro will discuss the elements of a CFA claim, specifically construction law cases, businesses as CFA plaintiffs, and individual liability of principals and officers for CFA claims.

  • White Collar Crime
    • Judge Edwin H. Stern, Counsel to the Gibbons Business & Commercial Litigation Department, & Mary Frances Palisano, Counsel to the Gibbons Criminal Defense Department
    • Thursday, 10:00 – 11:15 am, The Borgata

Judge Stern and Ms. Palisano will discuss various white collar crimes, including embezzlement and public contract fraud.

  • Recent Legal and Technological Developments in E-Discovery: What Every State and Federal Practitioner Should Know
    • Jennifer Marino Thibodaux, Associate in the Gibbons Business & Commercial Litigation Department
    • Thursday, 1:00 – 2:15 pm, The Borgata

Ms. Thibodaux’s panel will discuss important technological and legal developments in E-Discovery, such as predictive coding, recent court decisions related to the use of search terms, social media and information preservation.

  • Inside Trenton
    • Fruqan Mouzon, Director in the Gibbons Business & Commercial Litigation Department
    • Thursday, 3:00 – 4:15 pm, The Borgata

Mr. Mouzon will moderate this panel, which will cover the latest developments in Trenton. The panelists will offer insight into the legislative process and hot topics in the capitol such as gubernatorial and legislative races.

  • Justice at Stake
    • Chief Justice James R. Zazzali, Counsel to the Gibbons Business & Commercial Litigation Department
    • Friday, 9:45 – 11:00 am, The Borgata

Chief Justice Zazzali’s panel will discuss the threats facing the independence and integrity of the New Jersey Judiciary. The panelists will not only provide a statewide overview, but a national overview of this topic and the challenges that various states are facing.

For more information on the other panel discussions going on throughout the convention, please click here.

Supreme Court Rules that FLSA Collective Actions Are Distinct From Rule 23 Class Actions, But Fails to Resolve Circuit Split on Effect of Unaccepted Offers of Judgment

By Jennifer Marino Thibodaux on Posted in Class Action Defense

On April 16, 2013, the U.S. Supreme Court ruled in Genesis Healthcare Corp. v. Symczyk, that a plaintiff-employee’s Fair Labor Standards Act (“FLSA”) collective action could not proceed because her claims were moot after the defendant offered the plaintiff, per Federal Rule of Civil Procedure 68, full relief for her individual claims. Although the decision is limited to FLSA collective actions, the Court’s rationale has the potential to apply to Rule 23 class actions as well.

By way of background, the plaintiff-employee brought a collective action against defendant Genesis Healthcare, which answered the Complaint and served an offer of judgment under Rule 68 in which Genesis agreed to pay plaintiff the full amount of her claim. When the plaintiff did not respond to the offer, Genesis filed a motion to dismiss for lack of subject matter jurisdiction, arguing that the plaintiff’s claim was moot because she “no longer possessed a personal stake in the outcome of the suit” due to the offer that made her whole. The District Court granted the motion to dismiss. On appeal, the Third Circuit found that that the offer made plaintiff whole − regardless of whether she accepted it, but reversed and held that the collective action should not be dismissed because the defendant attempted to “pick off” the plaintiff with a Rule 68 offer “before certification[, which] could short circuit the process, and, thereby, frustrate the goals of collective actions.”

The Supreme Court reversed in a 5-4 decision and held that the District Court had properly dismissed the action for lack of subject matter jurisdiction. Notably, the Court did not reach the issue of whether an unaccepted offer of judgment pursuant to Rule 68 would moot an individual plaintiff’s claim; finding that the plaintiff had failed to raise that argument so it was not properly before the Court. Because the named plaintiff’s claims were moot and no other plaintiffs opted in, the Court held that the lawsuit itself was thus moot. In so concluding, the Court held that “the mere presence of collective-action allegations in the complaint cannot save the suit from mootness once the individual claim is satisfied.” Continue Reading

Expert Witness Selection: Choosing an Expert Without the Right Experience Can Be Fatal to a Claim

By Elyssa Kay on Posted in Construction, Construction Litigation

The selection of an expert witness can be critical to the outcome of a construction dispute. A well-qualified and strong expert witness can be essential to a party prevailing on its claim or defense. Conversely, as the recent New Jersey Appellate Division decision in Wellinghorst v. Arnott, highlights, retaining the wrong expert can have significant negative consequences and potentially result in the dismissal of a claim.

In Wellinghorst, the plaintiff was injured in 2007 while walking when she tripped over the edge of a utility trench that had been cut in the roadway in connection with a construction project. Plaintiff retained a professional engineer as her expert. The expert conducted a site investigation, during which he took measurements, made observations, and took photographs. Based on the foregoing, the expert opined in 2011 that the asphalt patch covering the trench sunk, while the surrounding roadway did not, due to improper backfill. At his deposition, he testified that because the backfilling had occurred approximately four years earlier, he was unaware of any test that could determine why the patch had sunk. He further stated that there were no tests he could perform to determine whether there was insufficient compaction of the trench because any tests would have had to have been performed at the time the trench was backfilled. However, when questioned about “ground penetration radar testing,” he testified that he was not familiar with it, and when asked about a Westervelt cake test, he acknowledged that he was “not certified to make” that test. The defendant that oversaw the construction project filed a motion to bar plaintiff’s expert, which was granted. The court ruled that although the expert had more than 30 years of experience as an engineer, his opinion lacked any factual or reasonable scientific basis because he was not present when the patch sunk and he failed to conduct any tests to determine what happened. As such, the court determined that his opinion that improper backfill caused plaintiff’s injury was not admissible.

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Performance of Corrective Work Does Not Extend the Deadline to File Mechanics’ Lien Claims in Pennsylvania

By William G. Frey on Posted in Construction, Construction Liens

Mechanics’ liens are powerful remedies for contractors involved in payment disputes with owners of construction projects in Pennsylvania, but the six month deadline under the Mechanics’ Lien Law is strictly construed and contractors who delay filing them may lose their rights. 

In Neelu Enterprises, Inc. v. Agarwal, the Pennsylvania Superior Court considered the deadline for a contractor to file lien claims “within six months after the completion of his work” set forth in Section 502 of the Pennsylvania’s Mechanics’ Lien Law.  Specifically, the two issues in the case were whether the deadline begins to run after a contractor is terminated and whether the deadline can be extended by the subsequent performance of corrective or remedial work.  After disputes developed on the project, the plaintiff contractor and defendant owners signed a one-page termination agreement.  The parties acknowledged that the contractor was being terminated and that the owners would be using their own subcontractors to complete the work.  The contractor filed a mechanics’ lien claim more than six months later, claiming that the deadline was extended by a post-termination return to the property by the contractor and various subcontractors to inspect the work and address the owner’s complaints.  Because there were disputed issues of fact, the trial court conducted a hearing on the timeliness of the mechanics’ lien claim.  The contractor testified that he brought his subcontractors back to the property to perform remedial work and to resolve outstanding disputes.

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