Business Litigation Alert

Business Litigation Alert

Practical Perspectives on Litigation Developments & Trends

Wrap Up of United States Supreme Court’s 2014-2015 Term

Posted in General Litigation

With the close of the United States Supreme Court’s 2014-15 term, we offer this wrap up of the Court’s term, focusing on the Court’s most important business and commercial cases (excluding patent cases):

Omnicare, Inc. v. Laborers Dist. Council Constr. Indus. Pension Fund: It is widely known that if the registration statement an issuer files with the SEC contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein not misleading, then a purchaser of securities sold pursuant to the registration statement may sue the issuer for damages. But what about statements of opinion that appear in a registration statement? In Omnicare, the Supreme Court held that a sincere statement of pure opinion — even if the issuer’s belief is ultimately proven wrong — is not actionable under Section 11 of the Securities Act, because the opinion expresses merely a view, not a certainty. That is good as far as it goes, but it’s not the end of the story. That’s because if, as the Court also held, an opinion is at odds with other information the issuer has, then omitting from the registration statement facts about that other information can create Section 11 liability. To steer clear of opinion liability under Section 11, then, an issuer should divulge the basis for its opinion or else make clear the real tentativeness of its belief so as not to mislead.

Tibble v. Edison Int’l: A fiduciary of a 401(k)/retirement plan has a duty not only to exercise prudence in selecting investments for inclusion in the plan but also to continually monitor those investments and remove imprudent ones. A claim for breach of that continuing duty will be deemed timely if it is filed within six years of the alleged breach — the statute of limitations for a breach of fiduciary duty under ERISA. The plaintiffs in Tibble filed their complaint in 2007, alleging that the fiduciaries of their company 401(k) plan acted imprudently by adding six retail-class mutual funds to the plan — three in 1999, the other three in 2002 — which had higher fees than their identical institutional-class counterparts. In a unanimous decision, the Supreme Court vacated the Ninth Circuit’s decision and held that the claims relating to the mutual funds added in 1999 were not automatically time-barred just because they were selected more than six years before the complaint was filed. On remand, the court was to determine whether the plaintiffs stated a viable claim for breach insofar as the defendants failed, at any time between 2001 and 2007, to conduct a regular review of the investment options in the plan.
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Online News Sources Have Standing to Protect Free Speech Rights for Anonymous Users, According to New Jersey Appellate Division

Posted in General Litigation

Online newspapers, internet service providers, and website hosts have standing to assert the constitutional rights of their users, according to the New Jersey Appellate Division’s recent unpublished decision in Trawinski v. Doe.

In Trawinski, the Appellate Division affirmed the denial of a plaintiff’s request for a subpoena requiring NJ.com to disclose the identity of an anonymous commenter. Underlying plaintiff’s request were allegedly defamatory remarks made by an anonymous poster using the screen name “EPLifer2” concerning plaintiff and her husband, a borough council member of Elmwood Park.

A threshold question for the court was whether NJ.com had standing to oppose the subpoena. The panel noted that New Jersey has not yet addressed the issue in a published decision. Accordingly, the Court looked to other jurisdictions for guidance and found that an online newspaper and internet service provider have standing to assert the rights of their readers and subscribers as third parties. In reaching this conclusion, the Appellate Division considered the difficulty anonymous commenters may face to assert their own First Amendment rights without sacrificing their anonymity, the fact that the newspaper itself has the requisite injury-in-fact to litigate, and the fact that the newspaper would zealously argue on behalf of the poster.

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Class Action Certified in In re Yahoo Mail Litigation for Violations of Stored Communication Act and California’s Invasion of Privacy Act

Posted in Class Action Defense, Data Privacy & Security

On May 28, 2015, U.S. District Judge Lucy Koh in the Northern District of California certified a class of email users in a privacy action that claims Yahoo Inc. (“Yahoo”) violated the federal Stored Communications Act (“SCA”) and California’s Invasion of Privacy Act (“CIPA”) through its practice of scanning and analyzing emails of non-Yahoo Mail subscribers in order to display targeted ads to Yahoo Mail subscribers. In re Yahoo Mail Litigation, No. 13-CV-04980-LHK, (N.D. Cal. 2015). Plaintiffs are non-Yahoo Mail subscribers who sent emails to Yahoo Mail subscribers from non-Yahoo email accounts and allege that Yahoo routinely copies and extracts key words from emails and stores this information for later use. Plaintiffs allege that Yahoo’s practices violate § 2702(a)(1) of the SCA, which prohibits, among other items, divulging the contents of a communication without consent and § 631 of CIPA, which prohibits the recording or reading of any type of communication without the prior consent of all parties.

In light of the court’s prior decision in In re Google Inc. Gmail Litigation, No. 13-MD-2430-LHK (N.D. Cal. Mar. 18, 2014) which dealt with a very similar set of facts, the plaintiffs seek injunctive relief under Federal Rule of Civil Procedure 23(b)(2) instead of seeking class-wide damages under Rule 23(b)(3), which among other things, requires a showing of the predominance of common questions of law and fact and ascertainability of the members of the class. The injunctive relief sought would require Yahoo to cease scanning the emails of non-Yahoo Mail subscribers without consent, permanently delete all data Yahoo has collected and stored from non-Yahoo Mail subscribers without consent, and identify all individuals and entities with which Yahoo has shared or sold information or data collected from non-Yahoo Mail subscribers’ emails.

In finding that the plaintiffs satisfy all four requirements under Rule 23(a), the court stated that the numerosity requirement under Rule 23(a)(1) is satisfied because the estimation of potentially hundreds of thousands of class members is not disputed by plaintiffs and Yahoo. The court stated that Rule 23(a)(2)’s commonality element requires just a single common question and does not require that all issues be common. The court also identified common questions to the case, such as when and whether Yahoo intercepts emails and whether the contents are disclosed to third parties. With regard to typicality, the court held that Rule 23(a)(3) requires only that the plaintiffs’ claims are “reasonably co-extensive,” not “substantially identical” with the proposed class members’ claims. Plaintiffs and the proposed class members are subject to the same interception and scanning practices by Yahoo and the court held this was sufficient to satisfy the typicality requirement. The court also found the plaintiffs to be adequate class representatives pursuant to Rule 23(a)(4), and the plaintiffs’ strategic decision to only pursue certification of an injunctive relief class under Rule 23(b)(2) did not affect the plaintiffs’ adequacy to serve as class representatives. Here, the court also pointed out that certification of a Rule 23(b)(2) class does not preclude subsequent individual damages claims by class members.
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Foreign Judgment by Confession Issued Without Pre-Judgment Notice Can Be Domesticated in New Jersey

Posted in General Litigation

New Jersey, like many states, is suspicious of judgments by confession and allows them to be issued only if the procedures in R. 4:45-2 are strictly followed. Among those procedures is a requirement that the prospective judgment debtor be given notice of the prospective judgment creditor’s application for entry of judgment and an opportunity to be heard.

Some states, including Maryland, do not require pre-judgment notice, although Maryland does give the judgment debtor 60 days after the entry of a judgment by confession to seek to open, modify, or vacate the judgment. What happens when a judgment creditor seeks to enforce in New Jersey a Maryland judgment by confession issued without any pre-judgment notice?

New Jersey’s Appellate Division, in a recently issued to-be-published opinion, Ewing Oil, Inc. v. John T. Burnett, Inc., answered that question, holding that New Jersey courts may — indeed, must — enforce such a judgment despite the fact that Maryland provided fewer procedural safeguards to the judgment debtor than New Jersey would have.
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Supreme Court Set to Weigh in on Whether Offer of Judgment for Complete Relief to Named Plaintiff in Putative Class Action Moots TCPA Claims

Posted in Class Action Defense

The Supreme Court of the United States has granted certiorari in Campbell-Ewald v. Gomez, which is positioned to resolve the circuit split as to whether an offer of judgment to the named plaintiff in a class action for the full amount of the plaintiff’s individual claim can moot claims brought under the Telephone Consumer Protection Act (“TCPA”) for that named plaintiff only and prevent the matter from proceeding to the class certification stage.

In Gomez, Campbell-Ewald was charged with violating the TCPA by transmitting unsolicited marketing text messages. Campbell-Ewald served on Gomez a Rule 68 offer of judgment to pay three dollars above the maximum allowable statutory recovery, plus reasonable costs. Gomez rejected the offer by allowing it to lapse. Campbell-Ewald moved to dismiss, alleging Gomez’s rejection of the offer mooted the personal and putative class claims. The District Court denied the motion to dismiss but later granted summary judgment for Campbell-Ewald on other grounds.

Gomez appealed to the Ninth Circuit, which vacated the summary judgment. Regarding Campbell-Ewald’s mootness argument, the court found that “an unaccepted Rule 68 offer of judgment—for the full amount of the named plaintiff’s individual claim and made before the named plaintiff files a motion for class certification—does not moot a class action.” In vacating the summary judgment the Ninth Circuit also confirmed the potential for vicarious liability in the TCPA context where the defendant did not actually make the calls in question. On this point, the Ninth Circuit stated that “the Court must presume that Congress intended to apply the traditional standards of vicarious liability” in the absence of a “clear expression of Congressional intent to apply another standard.”
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Federal Law Preempts NJ Fair Credit Report Act and TCCWNA Claims, New Jersey Court Says

Posted in Class Action Defense

Claims based on a retailer’s improper inclusion of too many credit card digits or a credit card expiration date on a sales receipt may not be brought under either the New Jersey Fair Credit Report Act (“NJFCRA”) or New Jersey’s Truth-in-Consumer Contract, Warranty, and Notice Act (“TCCWNA”), according to a recent ruling by the New Jersey Law Division.

Judge Robert C. Wilson of Bergen County held in an unpublished opinion in Kim v. Paris Baguette America, Inc., that the federal Fair Credit Reporting Act (“FCRA”), as amended by the Fair and Accurate Credit Card Transactions Act (“FACTA”), expressly preempts both NJFCRA and TCCWNA claims predicated on a failure to omit credit card information. Nevertheless, a plaintiff may bring claims under FCRA for the same conduct in New Jersey state courts.

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New Jersey Appellate Division Says Ascertainability Not Required for Class Certification

Posted in Class Action Defense

As recently reported by this blog, the U.S. Court of Appeals for the Third Circuit upheld and clarified the implied requirement of Rule 23 that a class be ascertainable in order to be certified. But a New Jersey appellate court recently ruled that there is no such requirement under the New Jersey Court Rules, at least where each class member holds a low-value claim.

In Daniels v. Hollister Co., the plaintiff brought the case on behalf of a putative class of Hollister customers who received $25 gift cards that allegedly possessed no expiration date, but were nonetheless voided by Hollister. The trial court granted class certification, and the Appellate Division granted leave to appeal. On appeal, Hollister argued that an ascertainability requirement is embedded in Rule 4:32-1 – and recognized by some courts in the state – and that the proposed class was not ascertainable.

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Missed the Starting Gun? Application of the Statute of Repose in Construction and Defective Product Cases

Posted in Construction Litigation

On April 30, 2015, the New Jersey Supreme Court decided State of New Jersey v. Perini Corporation, et al., which is likely to become a seminal case on how the ten-year limitations period of New Jersey’s Statute of Repose is applied in construction cases, in particular those involving multi-phase projects. The Perini case is also noteworthy for its ruling that the statute of repose does not apply to claims against manufacturers and suppliers of allegedly defective materials supplied on a project.

In February 1995, the State retained Perini Corporation to design and build a 26 building correctional facility. L. Robert Kimball & Associates, Inc. acted as the architect and engineer on the project, and Natkin & Company was the principal contractor for heating, ventilation, and air conditioning. The project included an underground high-temperature hot water distribution system (“HTHW”) to serve the entire facility. It also included a central plant from which the hot water was distributed to the various buildings that comprised the project. Perma-Pipe, Inc. manufactured the underground piping used in the HTHW system, and Jacobs Facilities, Inc. was retained by the State to provide construction oversight services throughout the entire project.

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New Jersey Appellate Panel Upholds Pre-Discovery Dismissal of Weak Class Action Claims

Posted in Class Action Defense

In Myska, et al. v. New Jersey Manufacturers Insurance Co. et al., New Jersey’s Appellate Division recently upheld a pre-discovery striking of a complaint’s class allegations and dismissal of its Consumer Fraud Act claims because the complaint, the underlying policies, and other documents referenced by the complaint showed that class treatment was not warranted and that the plaintiffs could not prevail on their Consumer Fraud Act claims.

In Myska, the plaintiffs, who were each insured by one of two insurance companies and had been involved in different accidents, filed class action lawsuits against the two insurers for their failure to provide adequate coverage for accidents caused by underinsured or uninsured motorists. On a pre-answer motion to dismiss, the trial judge struck plaintiff’s class allegations, “concluding a class action would be unsuitable based on the nature of the significant factual differences regarding the allegations supporting each plaintiff’s action.”

The Appellate Division affirmed. Although the panel acknowledged that “courts must liberally view class allegations and allow reasonable inferences to be gleaned from the complaint’s allegations and search for a possible basis for class relief to avoid premature dismissals,” it held that “the test does not merely turn on the stage of the litigation” and the striking of class allegations is not precluded when a court, following the required analysis, “determines alleged claims do not properly lend themselves to class certification.” The Court “flatly reject[ed] plaintiffs’ urging to impose a bright-line rule prohibiting examination of the propriety of class certification until discovery is undertaken[.]” Here, class action treatment was inappropriate because the complaint and documents referenced by it showed that “the facts underpinning each plaintiff’s claims were dependent upon the individual insurance policy provisions, the distinct vehicle damaged, and the specific calculation of damages alleged, which require separate litigation of every action.” Moreover, citing the New Jersey Supreme Court’s decision in Iliadis v. Wal-Mart Stores, Inc., the court held that the plaintiffs’ individual damages amounts were not insignificant and could support individual suits, whereas the purpose of the class action device is to adjudicate small-value claims. The Appellate Division also left undisturbed the trial court’s dismissal of the policyholders’ CFA claims, noting the inapplicability of the CFA to the dispute regarding payment or scope of coverage.
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Business Organizations Seeking Quick and Inexpensive Resolutions of Business Disputes Need to Know About Delaware’s Rapid Arbitration Act

Posted in General Litigation

Arbitration is supposed to achieve quick, fair, and inexpensive resolutions of business disputes. But, seemingly more often than not, arbitration fails to fulfill its promise due to expensive and time-consuming pre-hearing discovery, lengthy hearings, and spiraling judicial review of arbitral awards.

The Delaware Rapid Arbitration Act, which became effective on May 4, 2015, is Delaware’s unique and cutting-edge effort to offer a new brand of arbitration designed to achieve the original promise of quick and efficient justice. While the ultimate effectiveness of Delaware’s Rapid Arbitration program remains to be seen, any business organization looking to resolve its disputes quickly and efficiently should be aware of Delaware’s new arbitration program and consider taking advantage of it in appropriate circumstances.
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