Recent Articles in Corporate & Commercial Litigation from LexMonitor

That May Be A $500 Bow Tie I'm Wearing

kendallgray@andrewskurth.com (Kendall Gray) — Thu, 02 Sep 2010 18:16:12 GMT

I will admit it. My sense of style is not for everyone. Atypical. Iconoclastic. Nerdy. Or just bad. I would accept any of those words as accurate descriptors.

But as I sit here in my Brooks Brothers seersucker suit and my Brooks Brothers regimental stripe bow tie, I am torn between feeling the outrage of a genetically predisposed defense lawyer and disappointment that my ship came in and I simply missed it. I was alerted to my lost opportunity by stories in the ABA Law Journal, the Wall Street Journal, Law360 and Reuters.

You see, my natty bow tie is fitted with the Adjustolox mechanism, allowing me to adjust a "one size" bow tie to fit my scrawny neck without the slippage that occurs with inferior mechanisms. Naturally, such a useful and novel invention as the Adjustolox mechanism is patented.

Or, was patented. You see, the patents expired in 1954 and 1955.

Which was also probably the last time that large numbers of men dressed like I do.

Alas for my beloved Brooks Brothers, because a bow-tie-wearing patent lawyer purchased some bow ties still marked with the expired patent numbers. He brought a "false marking" claim against the glorious font of men's business style.

Apparently the very future of The Republic is placed at risk if one wrongly claims a patent for the Adjustolox. Presumably the market is being improperly excluded from the useful arts and sciences of bow tie adjusting technology. As a result the feds can fine you $500 for each Adjustolox you sell with expired patent numbers--if you do so for the purpose of deceiving the public. See 35 U.S.C. § 292.

Let's see:

$500 x [gajillion ties sold] = No longer practicing law to earn a living.

If, however, you sell falsely labeled Adjustoloxae simply because no one has looked at a bow tie since 1955, it's all good.

But you still have to prevail against Raymond E. Stauffer, the bow-tie-festooned patent lawyer, because 35 U.S.C. § 292 allows "any person" to seek a $500-per-Adjustolox penalty and share 50% of the take with the gubmint.

That was the ruling in Stauffer v. Brooks Brothers, Inc., released Tuesday by the Federal Circuit. Congress can create its own "injury in fact" -- a statutory violation -- and then essentially deputize "any person" to pursue collection for that injury.

Of course, the Federal Circuit was not asked to rule upon the wisdom of such a statute. That is the purview of Congress alone. If it were otherwise, little that Congress commits to writing would survive.

But who knew that my retro wardrobe could be such source of potential riches? No telling what revenue I could garner from investigating the patents on other aspects of my geezer lifestyle. No telling what else I prize is marked with patents that expired 50 years ago.

Mobile Content Providers Settle Unauthorized Billing Class Action

Thu, 02 Sep 2010 17:00:00 GMT

While the FCC has taken an interest in mobile marketing by carriers -- most notably with investigations of carrier early termination fees and proceedings examining wireless consumer "bill shock" -- it also is helpful to remember that the mobile content providers are subject to enforcement for deceptive marketing practices. Our colleagues at the Ad Law Access blog covered a recent settlement of a class action lawsuit by several mobile marketers. They remind marketers to clearly and conspicuously disclose costs so that consumers know what they are obligated to pay. Mobile service providers should ensure that their billing and collection agreements impose such an obligation on the content provider and that the carrier properly polices compliance.

Read the Ad Law Access story here.

FDCPA Fee-Shifting Applies To Appellate Proceedings, Tenth Circuit Holds

Thu, 02 Sep 2010 16:07:46 GMT

In Anchondo v. Anderson, Crenshaw & Associates, L.L.C, --- F.3d ---, 2010 WL 3261155 (10th Cir. Aug. 16, 2010), the Tenth Circuit held that, like that of the Truth in Lending Act (TLA), the Fair Debt Collection Practices Act’s (FDCPA) fee-shifting provision encompasses appellate...

More Bad News for James Hardie and Its Asbestos Compensation Fund

Thu, 02 Sep 2010 14:26:33 GMT

Managing legacy liabilities is never easy. For some, it can be a nightmare. Thus, James Hardie and its asbestos compensation fund took yet another hit yesterday through the loss of a tax appeal. The loss is described here in mass media in Australia. The mass media is focused on the fund's long term survival prospects in light of the adverse ruling and the continuing slumps in the building sector that buys product from James Hardie entities.

The company issued a statement yesterday (go here to investor relations page), but did not include a link to the opinion. According to the statement. the loss will result in a charge of about $ 330 million (US) unless there is a successful further appeal. The company also says it will not violate loan covenants by taking the charge.

Whch Mass Tort Cases Deserve Settlement?

Thu, 02 Sep 2010 10:00:38 GMT

Fordham Law professor Howard Erichson (http://law.fordham.edu/faculty/1095.htm) has posted a new working paper that addresses the thorny issue of settlements in mass tort cases. Titled Uncertainty and the Advantage of Collective Settlement, (forthcoming, DePaul Law Review) it posits six different types of uncertainty in mass torts, each of which he links to well-known cases. According to Erichson, there is uncertainty about

1. General causation (eg, Bendectin litigation)
2. Liability (tobacco/Agent Orange)
3. Exposure (ephedra/Wolburn leukemia clusters)
4. Product ID (asbestos)
5. Individual medical causation (Vioxx)
6. Damages

Erichson argues that, for cases 4, 5, and 6, aggregate settlement is a good idea, while litigation is probably better for cases 1, 2, and 3. What's his definition of "good idea"? He makes a few casual references to "justice," but what he really seems to mean is a settlement where the defendant pays compensation in proportion to the harm it (likely) caused. As Erichson puts it:

When parties face uncertainty about individual causation, a collective settlement may offer an excellent opportunity for an outcome that reflects proportional liability even in the absence of a proportional liability rule of tort law. However, collective settlement offers this advantage only when the uncertainty relates to the likelihood that each plaintiff will prevail on causation. If causation is uncertain but it is clear that each plaintiff can or cannot meet the preponderance standard, then collective settlement would reflect the same overliability or underliability that would result from individual or collective adjudication.

When liability and causation are clear but the amount of damages is uncertain, collective resolution – whether by adjudication or settlement – offers the benefit of reducing variability and possibly providing greater accuracy. Particularly with regard to punitive damages, collective resolution can serve the important function of reducing variable results among similarly situated claimants.

Erichson likes typologies, and views himself as providing starting points for further analysis by other researchers. So the fair question to ask is: is this a useful breakdown of types of uncertainty? And the answer is: somewhat.

One problem is that it seems Erichson stretched a little to get six categories. In particular, "individual medical causation" feels like a fudge. There's little to distinguish it from liability, except that--according to Erichson--in one case, the legal question is uncertain, and in the other, the factual question is. In either case, however, it would require individual trials to determine whether the substance caused the illness, and whether that meant that the manufacturer was liable. (For example, in some mass tobacco cases, it appears one of the larger problems with aggregate treatment was how to address the difficult issue of determining individual medical causation.)

And the second problem is that Erichson really doesn't consider the means by the settlement will be achieved, and the method of settlement can have a tremendous effect on its "justice." There's no question that the parties would have difficulty pushing through a mass-tort settlement as a classwide settlement. And while it is possible to settle a mass tort without invoking Rule 23, those settlements bring their own problems. Among other issues, settling many different cases on the same "take it or leave it" terms seems unfair, but engaging in a lengthy plaintiff-by-plaintiff claims may not save much time or money over the original trials. As Judge Eldon Fallon observed about the Vioxx settlement:

The potential harm to the public's perception of the judicial process is especially acute in the instant case because of the large number of claimants participating in the settlement. The approximately 50,000 plaintiffs and the $4.85 billion settlement fund have captured the public's attention, resulting in a heightened degree of public scrutiny on the settlement proceedings and the judicial process in general. Disproportionate results and inconsistent standards threaten to damage the public's faith in the judicial resolution of mass tort litigation by creating an impression of inherent unfairness.

That, right there, is the rub. To make the settlement seem fair, it has to be fair, treating like cases similarly, and different cases differently. Judge Fallon's solution was to assert the power to review individual plaintiffs' lawyers contingent-fee contracts (which would check the lawyers' understandable impulse to settle as many cases as possible on whatever terms). That is an unwieldy solution, but better than nothing. How to resolve mass-tort claims like this--where individual causation is uncertain--remains a very difficult question. Erichson's proposed typology is useful on the easier questions, but unfortunately glosses over one of the most challenging issues in aggregate litigation today.

Late-Filed Forms Update: Airband Seeks Review of FCC Denial

Wed, 01 Sep 2010 13:15:32 GMT

Last week, we posted an entry about the tough stance the FCC's Wireline Competition Bureau is taking on late-filed Universal Service Forms submitted by contributors. One of the parties whose USF appeal was denied, Airband Communications, has filed an application for review of the Bureau decision. The Commission yesterday asked for comment on the request. Comments are due September 30 and October 15.

The FCC's quick action is unusual in one sense: the deadline for petitions for reconsideration or applications for review of the Denial Order is not until September 14. Other parties to the same order may file additional petitions on the same issue.

Medical Malpractice in Pennsylvania - Part 2

Wed, 01 Sep 2010 13:00:50 GMT

In this video, Anthony Zabicki, Shareholder in Stark & Stark's Accident & Personal Injury Group, discusses the various issues you need to consider if you or a loved on are every involved in a medical malpractice case. Mr. Zabicki also discusses the necessary components for a successful medical malpractice case such as the assistance of medical experts and health care professionals.

Medical Malpractice - Part 2 from Stark & Stark on Vimeo.

Johnson & Johnson Hip Implant Recall

Wed, 01 Sep 2010 04:42:52 GMT

It’s been over two years since the FDA started getting complaints about the failure of a hip replacement implant manufactured by DePuy Orthopaedics, a division of Johnson & Johnson. Over 93,000 people worldwide have had hip implant surgery with these devices, and the FDA has had over 400 complaints about it since 2008. Apparently, the failure happens early after surgery and a second, painful surgery is then required.

The high early failure rate of these implants (called ASR implants) has been known of for some time. ASR implants are part of a category of implants called metal-on-metal implants that cause debris from wear, inflammation and sometimes even tissue damage.

This is one of many recalls of many of Johnson & Johnson’s best-selling products. The giant pharmaceutical company is clearly in trouble – if you can call any pharmaceutical company whose earnings are down “in trouble.” The fact is, Big Pharma cleans up on meds and products. Last year, DePuy Orthopaedics had sales of almost $5.4 billion – and it’s just a division of J&J! I wonder if when asked what they wanted to be when they grew up in class, the leaders of these giants said, “I want to be the CEO of a huge pharmaceutical company that sells defective products and dangerous medications, and make a fortune doing it.”

For the full story, click "CONTINUE READING" below.

Johnson & Johnson Recalls Hip Implants
By NATASHA SINGER
Published: August 26, 2010

More than two years after the Food and Drug Administration began receiving complaints about the failure of a hip replacement implant made by the DePuy Orthopaedics unit of Johnson & Johnson, the company said Thursday that it was recalling two kinds of hip implants.

DePuy said that it had made the decision to withdraw the products because many patients required a second hip replacement after the company’s implants had failed.

The news compounded problems for Johnson & Johnson, which has recalled a succession of some of its best-selling and best-known products, including liquid children’s Tylenol in the United States and, just this week, Acuvue contact lenses in Japan and other countries in Asia and Europe. The Tylenol recall led to the temporary closing of a plant owned by the McNeil Consumer Health Care unit, which is the subject of a federal inquiry over its handling of recent recalls of over-the-counter products.

In addition to DePuy’s recall, the F.D.A. this week criticized the company in a warning letter, contending that it had illegally marketed an unapproved knee device and had also sold a hip implant for an unapproved use. (A spokeswoman for DePuy said that the company was examining the F.D.A.’s concerns.)

“All this makes it seem like it’s pile-on time for J.& J.,” said William Trombetta, a professor of pharmaceutical marketing at Saint Joseph’s University in Philadelphia. “This is a company that was purer than Caesar’s wife, this was the gold standard, and all of a sudden it just seems like things are breaking down.”

In the latest Johnson & Johnson case, DePuy said in a statement that it was recalling two products: the ASR XL Acetabular System, a hip socket used in traditional hip replacement, and the ASR Hip Resurfacing System, a partial hip replacement that involves placing a metal cap on the ball of the femur, a method intended to preserve more bone. The traditional implant has been available worldwide, and the resurfacing implant was approved for use in countries outside the United States.

About 93,000 of these devices have been implanted worldwide, said Lorie Gawreluk, a DePuy spokeswoman. The New York Times reported in March that for more than two years, the F.D.A. had been receiving complaints that the devices failed early in some patients, requiring expensive and painful operations to put in new hip replacements. Since the start of 2008, the F.D.A. has received about 400 complaints involving patients in the United States who received the devices, an agency spokeswoman said Thursday.

DePuy said that the majority of hip replacements using the ASR devices had been successful. But the company advised patients who had had hip replacements with the recalled products to visit their surgeons for an evaluation and annual monitoring. The company said it would pay reasonable and customary medical costs associated with the recalled products, including new hip replacement operations.

DePuy had sales last year of about $5.4 billion, according to a Johnson & Johnson earnings report.

The high early failure rate of the ASR implants was reported this year in several articles in The New York Times. These devices have come under scrutiny over the last few years because they are part of a category of implants called metal-on-metal bearings, which can generate debris from wear, causing inflammation and tissue damage in certain patients.

In March, the British agency that regulates medical devices issued an advisory on metal debris generated by hip implants. A spokeswoman for the F.D.A. said the agency was planning to meet soon with professional medical groups to discuss the British advisory.

Late last year, DePuy said it was phasing out the implants because of slowing sales. In March, the company warned doctors that the implants might have a high failure rate in some patients.

In one New York Times article, some orthopedic experts expressed dismay that DePuy had not halted sales of the devices earlier. About 12 to 13 percent of patients needed a second hip replacement within five years of receiving an ASR implant, the statement from DePuy said, citing new unpublished data from a national registry in Britain. Previously reported follow-up data, including internal company information and clinical trials, had reported lower rates of second hip replacement comparable to similar devices by other companies, the statement said.

But many medical centers in the United States that specialize in joint replacement surgery had already noticed a higher failure rate with the DePuy hip implants, said Dr. Joshua J. Jacobs, the chairman of orthopedic surgery at Rush University Medical Center in Chicago.

“Most major medical centers have seen issues with this device,” Dr. Jacobs said. “This does not come as a surprise.”

Dr. Jacobs added that the DePuy recall pointed to the importance of having a national registry for joint implants that can serve as an early warning system for product problems. Britain, Australia and some other countries have such national registries, he said, but the reporting system currently used by the F.D.A. does not necessarily capture every device failure.

David Floyd, president of DePuy, said in a statement that the recall would be a concern for patients and their family members and for surgeons.

“We are committed to assisting patients and health care providers by providing information through multiple channels and paying for the costs of doctor visits, tests and procedures associated with the recall,” he said.

Johnson & Johnson comprises more than 250 different operating companies in 60 countries. But the recent recalls and F.D.A. warning letters to several units at Johnson & Johnson raise questions about whether there may be companywide problems, industry analysts said.

“No. 1, is there a systemic issue at J.& J.?” said Rick Wise, an analyst at Leerink Swann, a health care investment bank. “No. 2, is this” hip implant recall “reflective of that systemic issue? And, No. 3, is there more to come?”

Mr. Wise added that F.D.A. warnings and J.& J. recalls had come at a time of increased vigilance about product safety by the agency and health care companies. He said that he believed the various problems at J&J were separate and not part of a systemic issue.

Dr. Trombetta, the pharmaceutical marketing professor, compared Johnson & Johnson to Toyota, another multinational firm whose reputation has suffered this year during a series of recalls. The recalls may be tarnishing Johnson & Johnson’s apple-pie image, Dr. Trombetta said, but he predicted that the company would eventually recover public trust as Toyota largely had.

Shares of Johnson & Johnson closed at $57.80 on Thursday, down 18 cents.

Important Medicare Preemption Decision

Tue, 31 Aug 2010 21:24:09 GMT

At long last, the Ninth Circuit Court of Appeals issued its opinion in the Uhm v. Humana, Inc. (.pdf), matter, finding the Medicare Act’s exhaustion requirements and preemption provision barred all of the plaintiffs’ common law claims. (-- F.3d -- (9th Cir. 2010).) Originally, the court issued an opinion two years ago, but vacated the decision last summer and took the case under submission after soliciting amicus assistance from the Centers for Medicare and Medicaid Services. The new Uhm decision is strong support for Medicare Act preemption, reflecting CMS’ underlying thesis that state law claims interfering with Medicare standards and regulations must be preempted.

New Jersey Appellate Division Holds that Shareholders of New Jersey Corporations Have a Limited Right to Inspect Board of Directors and Executive Committee Minutes

Tue, 31 Aug 2010 18:50:24 GMT

In the recent decision Cain v. Merck & Co., Inc., the New Jersey Appellate Division held that shareholders of New Jersey corporations are entitled to inspect board of directors and executive committees minutes, in addition to minutes of shareholder meetings. The Appellate Division made clear, however, that shareholders must demonstrate a “proper purpose” in exercising this right and that the scope of board of directors and executive committee minutes required to be made available for shareholder review are limited to only those minutes pertinent to that proper purpose.

In Cain, the plaintiffs made a written demand, pursuant to N.J.S.A. 14A:5-28(4), for the inspection of certain books, minutes and records of the company in connection with the plaintiffs’ claim that the company had engaged in wrongful conduct and mismanagement in failing to disclose the results of a clinical drug trial for a period of twenty-one (21) months. The trial court ruled that the plaintiffs were entitled to inspect all of the board of director and executive committee minutes for that period.

Section 14A:5-28 provides that: (1) a corporation is required to “keep the books and records of account and minutes of the proceedings of its shareholders, board and executive committee”; (2) upon request, a corporation shall provide certain financial statements to a shareholder; (3) a shareholder holding at least five (5%) percent of the outstanding stock of a corporation, or who has owned his stock for at least six (6) months, has the right to inspect “for any proper purpose” a corporation’s “minutes of the proceedings of its shareholders and records of shareholders”; and (4) a court may, “upon proof by a shareholder of proper purpose . . . compel production . . . of the books and records of account, minutes, and record of shareholders” of the corporation. In construing the statutes, the Appellate Division acknowledged that shareholders have a qualified common law right, not limited to simply stock transfer records, to examine corporate books and records, provided that the inspection request was made in good faith and for a proper purpose. The Appellate Division further noted that unlike the language of subsection (3) of the statute, the language of subsection (4) was not specifically limited to minutes of shareholder meetings. Accordingly, the Appellate Division held that under N.J.S.A. 14A:5-28(4), a shareholder is entitled to inspect the minutes of the board of directors and executive committees of a corporation.

Recognizing that an unfettered right to inspect board of directors and executive committee minutes could be detrimental to the best interests of the corporation and its shareholders, the Appellate Division made clear that this inspection right is not unqualified. A shareholder has the burden of proving a “proper purpose” for its inspection demand, based upon “specific and supported, credible allegations of mismanagement.” “Fishing expeditions” by shareholders based upon general or unsubstantiated claims of mismanagement are not permitted. Additionally, a court has the power to specifically circumscribe the scope of the inspection, limiting the inspection to only those documents relevant to the shareholder’s demonstrated proper purpose. In Cain, therefore, the Appellate Division limited the scope of the minutes available for plaintiffs’ inspection to only those portions of board of directors and executive committee minutes dealing with the clinical drug trial during the period the plaintiffs alleged the company wrongfully withheld the results of the trial. The plaintiffs were not entitled to inspect all corporate minutes for that period, as previously allowed by the trial court.

K&L Gates Webinar: HUD Interpretive Rule - Are Marketing Agreements Under Siege?

Tue, 31 Aug 2010 17:17:50 GMT

K&L Gates Webinar: HUD Interpretive Rule – Are Marketing Agreements Under Siege?

Date/Time: Tuesday, September 14, 2010 at 2:00 p.m. EDT

Location: Attend via Webinar. Login directions will be distributed via email the day before the event.

RSVP: Click here to register online. Registration closes at 5:00 p.m. EDT on September 10.

As Section 8 of the Real Estate Settlement Procedures Act ("RESPA") provides an exemption for payments made by one person to another person for actual, necessary, and distinct services, mortgage lenders, homebuilders, real estate brokers, title insurance companies, and other settlement service providers have maintained marketing agreements for decades without much guidance from the U.S. Department of Housing and Urban Development ("HUD"). That all changed on June 25, 2010 when HUD issued a RESPA interpretive rule regarding the permissibility of marketing agreements between home warranty companies and real estate brokers and agents. Although the interpretive rule provided RESPA guidance in the limited circumstance of per-transaction home warranty marketing agreements, HUD's interpretation has caused settlement service providers generally to question the RESPA compliance of flat fee marketing and service agreements, as well as the permissible types of marketing services performed under these agreements.

Join us on Tuesday, September 14, 2010 from 2:00 p.m. until 3:15 p.m. Eastern Daylight Time for a webinar to learn more about HUD's interpretive rule and the effects this interpretation could have on your existing marketing agreements. Time for questions and answers will follow the webinar presentation.

Speakers Include:

Phillip L. Schulman, Partner, Washington, D.C.
Holly Spencer Bunting, Associate, Washington, D.C.

The Common Sense Approach to Determining Amount-In-Controversy

Tue, 31 Aug 2010 13:54:14 GMT

Decided one day apart, both Roe v. Michelin North America, Inc., No. 09-15141 (11th Cir. Aug. 5, 2010) and Berniard v. Dow Chemical Co., No. 10-30497 (5th Cir. Aug. 6, 2010), address whether, in the context of removal to federal court, defendants who relied solely on the nature of the allegations in the plaintiffs’ complaints—wherein the amount of damages was unspecified—had met their burden to establish the requisite amount in controversy. While the courts ultimately came to opposite conclusions based on the facts of each case, both decisions recognize the authority of federal district courts to independently evaluate a complaint’s allegations to determine the reasonable value of a claim for amount-in-controversy purposes where damages have not been specified.

In Roe, the plaintiff’s decedent was killed in an automobile crash when the tread on the vehicle’s tires allegedly separated, causing the vehicle to lose control. Roe originally filed his complaint in Alabama state court, seeking unspecified damages under Alabama’s Wrongful Death Act. Michelin removed the case to federal court on diversity grounds, arguing that it was apparent on the face of the complaint that the case satisfied the jurisdictional minimum. Roe moved to remand, claiming that Michelin had failed to prove by a preponderance of the evidence that the amount in controversy exceeded $75,000. The District Court for the Middle District of Alabama denied Roe’s motion, finding that the jurisdictional requirement was satisfied.

In affirming the district court decision, the Eleventh Circuit considered both the goal of the Alabama Wrongful Death Statute—namely, to prevent death and “preserve human life by making homicide expensive”—as well as the five factors that a jury is instructed to consider when calculating a damages award under the statute. Id. at 15. The court found that “[w]hen the value of Roe’s claims are analyzed with judicial experience and common sense, and in light of the five factors [], they likely exceed the $75,000 jurisdictional requirement.” Id. at 16.

The Roe court also emphasized that its “common sense” approach was necessary to protect the rights of defendants to remove cases to federal court. It warned against plaintiffs, skilled in a form of “artful pleading,” who could “defeat federal jurisdiction simply by drafting his pleadings in a way that did not specify an approximate value of the claims and thereafter provide the defendant with no details on the value of the claim,” thereby making federal jurisdiction “disappear.” Id. at 13 (internal quotations omitted). The court concluded that “[b]oth policy and precedent counsel against rewarding such obfuscating tactics.” Id.

Yet at first blush it appears that these same “obfuscating tactics” may have worked to the benefit of the plaintiffs in Berniard v. Dow Chemical Co., No. 10-30497 (5th Cir. Aug. 6, 2010).

In Berniard, a tank located at a Union Carbide facility experienced a sudden release of ehtyl acrylate, a potentially noxious chemical. As a result, the local department of emergency preparedness closed some roads and evacuated residents and business from an area stretching two miles eastward of the facility. Several class action suits were filed and were removed to the United States District Court for the Eastern District of Louisiana pursuant to the Class Action Fairness Act (“CAFA”). CAFA authorizes federal jurisdiction over class actions that allege (1) the class of plaintiffs would exceed more than 100 persons; (2) at least one member of the class is diverse in citizenship from at least one of the defendants; and (3) the aggregate quantum of damages suffered by members of the plaintiff class exceeds $5 million (exclusive of interest or costs). See 28 U.S.C. §1332(d)(2) and (5)(B).

Decided the day after Roe, Berniard upheld the federal district court’s decision that jurisdiction over the matter was lacking under CAFA due to defendants’ failure to show that the amount-in-controversy requirement had been met. In affirming the district court’s decision, the Fifth Circuit noted with apparent disdain the speed at which the plaintiffs’ attorneys filed petitions relating to the “sudden, isolated, and relatively limited” chemical release. Id. at 5. Nevertheless, the court ultimately found that, “[g]iven the generalized and conclusional nature of the allegations of the [ ] petitions and complaints, . . . we cannot say that . . . the Defendants-Appellants carried their burden of showing not only what the stakes of the litigation could be, but what they are in light of the plaintiffs’ demands.” Id. at 10.

While it may appear at first glance that the Berniard defendants were done in by the “artful pleading” tactics cautioned against in Roe, in reality the Berniard court’s decision upheld the same principle championed in the Roe opinion: the use of judicial experience and common sense to assist in determining the value of a plaintiff’s claims as pled in the complaint. The Berniard court acknowledged that the plaintiffs’ petitions were rife with allegations regarding the expansive geographical reach of the chemical dispersal, the large number of persons likely affected, the seriousness and extent of injuries, and the potential monetary value of the damages incurred by the affected parties, including compensatory damages and those for pain and suffering, future damages, and even punitive damages. But the Berniard court ultimately came to the conclusion that the plaintiffs’ state court petitions presented “an oxymoronic picture.” Id. at 11.

[Plaintiffs’ petitions] also contain minimizing allegations, such as the fact that the road closure and evacuation of residents . . . covered only a two-mile stretch to the east of the Taft facility, as well as implications and deductions that in reality the release was quickly contained, atmospherically diluted, and relatively minor and temporary in its deleterious effects, and that the incident was short-lived, with normalcy being restored in short order.

Id.
Thus, despite their facial incongruity, both Roe and Berniard can be read to support a court’s authority to make an independent assessment of the value of a plaintiff’s claim where damages are not specified in the complaint.

How to Oppose FLSA Collective Actions

Tue, 31 Aug 2010 09:55:13 GMT

In the world of class actions, case brought under the Federal Labor Standards Act (FLSA) stand apart from other class actions. Unlike a standard Rule 23 class action, the plaintiff in an FLSA action has the option of filing a class action under Rule 23, a collective action under the FLSA, or both.

What is a collective action? Like a class action, a plaintiff in a collective action trades individual control over her lawsuit for the economies of scale and the bargaining leverage that come with group litigation. But FLSA collective actions follow different procedural rules than Rule 23 class actions, ones generally considered more permissive. FLSA certification usually occurs in two parts. First, in the "notice stage," the trial court decides whether it should notify other “similarly situated” employees who might wish to opt in to the litigation. If the court decides in favor of notice (and with it, conditional certification), it informs the putative class members with a court-ordered notice and gives them an opportunity to opt into (not out of) the class. After any other plaintiffs opt in, discovery commences. After discovery is complete, the defendant can move for decertification. If the court decertifies the proposed opt-in class action, it dismisses the opt-in plaintis without prejudice to reasserting their claims individually.

This more permissive procedure means that employment actions under the FLSA have become a growth industry for plaintiffs' lawyers. And the difference in procedure means that the strategies for opposing certification are different. So how does one oppose an FLSA action? Shook Hardy lawyers William C. Martucci and Jennifer Oldvader have published an article in the Kansas Journal of Law & Public Policy answering just that question. (The cite, for those interested, is 19 Kan. J.L. & Pub. Pol'y 433.) And they have several strong proposals for opposing the increasingly-common practice of filing concurrent Rule 23 class actions and FLSA collective actions:

Attack the "common scheme or plan" allegation. "One way of gathering such evidence is to collect declarations from other employees, who can provide vital information on compensation and time-clock policies as well as how these policies are put into practice." If the declarations show that the "policy" was implemented in different ways at different times by different people, a court will have a harder time certifying a class.
Argue that enough discovery has occurred to allow for heightened certification standard. "Generally, the rationale behind the "lenient" conditional certification standard is that a plaintiff has not had time to conduct any discovery at the conditional certification stage. However, where discovery has occurred, a defendant may be able to successfully argue that a heightened standard of review is more appropriate."
Argue the conflict between collective action and class action. "When faced with the possibility of an opt-in FLSA collective action and an opt-out state law class action, a defendant may be able to successfully argue that a district court should decline to exercise supplemental jurisdiction because the state law class action predominates over the FLSA collective action."

Martucci and Oldvader focus their article on "off the clock" actions where plaintiffs are allegedly not paid for time they worked (as opposed to misclassification actions, where plaintiffs are denied overtime because their job does not qualify for it). But their tactical advice is sound. For attorneys looking to defend these kinds of cases, this is essential reading.

California Supreme Court Rules That an Insured Seeking to Undo a Settlement Agreement with Its Insurer Must Sue for Rescission and Return the Settlement Proceeds

Mon, 30 Aug 2010 22:10:33 GMT

This case arises out of an insured’s claim against its insurer for property damages caused by an earthquake that struck the Los Angeles area in 1984. After a protracted dispute (during which the insurer made substantial payments) over the value of the claimed damages, and the extent to which they were earthquake-related, the parties entered into a settlement agreement. The insurer agreed to pay an additional $1.5 million, and the insured executed a standard release by which it waived its right to recover any undiscovered damages and agreed to forbear bringing suit on any and all claims, known or unknown.

Several years later, the insured brought a lawsuit seeking to recover additional damages under the policy. It argued that it was fraudulently induced into entering into the settlement agreement and that under general contract principles it could elect to affirm the agreement (and thus keep the money it had already received) and sue for damages caused by the alleged fraud. The trial court, relying on decades of precedent from the Supreme Court and the Court of Appeal, as well as the statutory scheme governing settlements and releases, granted dispositive motions in favor of the insurer. The authorities, the court said, made clear that a party seeking to undo a settlement agreement must seek rescission and return any monies obtained as consideration for the release. The Court of Appeal reversed. Distinguishing the prior authorities on the basis that they involved third-party personal injury claims, rather than first-party breach of contract claims, the court found that public policy supports the rule (followed in several jurisdictions) that a policyholder may affirm, keep the money, and sue, despite having executed a full release.

The Supreme Court reversed the Court of Appeal. Village Northridge Homeowners Ass’n v. State Farm Fire and Casualty Company, __Cal.4th__ (Aug. 30, 2010). The sole purpose of the settlement agreement (unlike in the cases cited by the Court of Appeal) was to permit the insurer to buy its peace and avoid future litigation. There is no principled basis on which to distinguish this case from the personal injury cases, and the statutes enacted by the Legislature make clear that a party seeking to avoid its obligations under a settlement which includes a litigation waiver must do so through rescission, which requires it to return any consideration received. To hold otherwise would lead to a palpably inequitable result – the insured could affirm that part of the agreement that was favorable to it (the receipt of money) while voiding that part of the agreement that favored the insurer (forbearance of litigation). Neither public policy, case precedent, nor legislation support such a rule of law.

Dealing with a Startup Creeper

info@ryanrobertslaw.com (Ryan Roberts) — Mon, 30 Aug 2010 19:35:54 GMT

Advisors are great for startups. They can provide your startup with guidance on a wide range of topics and typically take a seat on your startup’s advisory board. But sometimes a person who gives your startup infrequent, casual advice will broadcast to the world that he or she is an advisor to your startup in [...]

Advisors are great for startups. They can provide your startup with guidance on a wide range of topics and typically take a seat on your startup’s advisory board.

But sometimes a person who gives your startup infrequent, casual advice will broadcast to the world that he or she is an advisor to your startup in an “official” capacity — which is (shocking) news to you and your co-founders. Awkward.

How did this “advisor” turn into a creeper?

The Genesis of the Startup Creeper

Most startup founders do a tremendous amount of networking. Through this networking, a founder may become acquainted with someone willing to provide some expertise, advice and/or connections. Most of the time, startups and the “advisor” have no problem with this unofficial, undocumented relationship. The startup isn’t looking for routine advice or time from the advisor, and the advisor isn’t looking for anything from the startup (e.g., cash, equity, geek cred).

But occasionally this “advisor” makes his or her role unilaterally public creating the awkward situation.

A founder will typically find out when someone he or she knows in the startup ecosystem tells the founder, “Hey, [Startup Creeper Name] told me he was an advisor to your startup.” Or maybe news of the official relationship is on their Twitter or LinkedIn page. Regardless, this “official relationship” is news to you and your co-founders. The casual advisor relationship has now turned creepy.

I got married before the Myspace/Facebook era, but I imagine this is something like going on a first date coming home to find your Facebook status now has you “in a relationship with” your date. Creepy.

Don’t Lead Them On

You lead on a startup creeper by continuing to either solicit or accept their advice and connections. You may think they’ve been giving some decent advice, but you don’t really know why they are hanging around — or you are trying to figure out their angle. At this point, you have both failed to bring up the status of your startup-advisor relationship.

The Decision

No matter how you arrived at this point with your Startup Creeper, you have 2 choices:

(1) Make it official and offer them a position on your advisory board.

If the initial shock wears off and you are OK with it, immediately sign up the advisor to an advisory board agreement. Anyone providing more than casual advice should be signed up to an advisory board agreement — especially someone receiving confidential information regarding your startup and/or identifying themselves as an advisor.

This is an important task because the advisory board agreement will most likely contain provisions such as a nondisclosure of confidential information, inventions assignment, and a no conflicts rep & warranty. Your advisor will likely be privy to various inside info regarding your startup and it is to document that he or she cannot use it for someone else’s benefit, or more importantly, to the disadvantage of your startup.

(2) Kick the Startup Creeper to the curb, in the most tactful way possible.

If you are still feeling slimy after the initial shock wears off, then you need to wrap up the relationship in an expeditious manner. Difficult conversations are a part of business and this type of situation presents a great time to tackle your (likely) first one.

But do so without burning a bridge — no matter how creepy the advisory relationship is. Communicate in private, and opt for in-person over telephone conversations. If you cannot meet in person, choose telephone over email. Don’t forget to thank them, because they did share their expertise, time, and/or connections with your startup. And the situation would likely not have reached this level of awkwardness without leading them on in some capacity. Now, maybe they can shift their focus on another project or startup.

Conclusion

There are tons of great startup advisors out there (although they are hard to find). People want to help your startup and that’s a good thing. But you have to manage these relationships, before they turn into awkward situations like the Startup Creeper scenario.

K&L Gates Webinar: The Politics of Dodd-Frank Rule Making - Comment Letters Are Not Enough

Mon, 30 Aug 2010 14:16:57 GMT

K&L Gates Webinar: The Politics of Dodd-Frank Rule Making – Comment Letters Are Not Enough

Date/Time:
Thursday, September 16, 2010 at 2:00 p.m. EDT

Location:
Attend via Webinar. Login directions will be distributed via email the day before the event.

RSVP:
Click here to register online. Registration closes at 5:00 p.m. EDT on September 14.

K&L Gates is pleased to invite you to our complimentary Webinar on the politics of rule making under the Dodd-Frank Act conducted by members of our Public Policy Practice Group in consultation with our Financial Services Practice Area.

The recently enacted Dodd-Frank Act is the most comprehensive regulatory reform in the financial services industry affecting nearly every part of the financial services industry. The new law is over 2000 pages long with 315 required rule makings, 145 required studies and reports, and dozens of ambiguities and internal contradictions. Many significant issues and thousands of details have been left to the regulators – who must proceed (and are proceeding) immediately and with unusual speed to fill in much of the substance – including issues such as:

To what extent will investment companies or their managers be considered companies "predominately engaged in financial activities" falling within the scope of Financial Stability Oversight Council (FORC) regulations that are to be designed to "identify risks to the financial stability of the U.S.," "promote market discipline" and "respond to emerging threats to the stability of the U.S. financial system"
What investor protection regulations will be considered by the new Investor Advisory Committee to be established within the SEC to advise and consult on investor protection, the effectiveness of disclosure and related issues?
What will be the prohibitions on sponsoring or investing in private funds under the Volcker Rule?
What is a "major swap participant" or a "major security-based swap participant," what constitutes a "substantial position" in swaps that could have systemic implications, and what positions will be deemed to constitute hedging or mitigating of "commercial risk," which will be excluded from computation of a substantial position?
What is a qualified residential mortgage loan under the risk retention rules?
How will the Bureau of Consumer Financial Protection define "unfair"?

But this is not simply a dry, technical process dependent on the filing of substantive comments in response to the notice of proposed rule making. Certainly that will be necessary. But those impacted by the new law just file comments at their peril.

This policy making process will be political from the start, with the regulators responsive to Congressional informal oversight and direction (which could change dramatically with the fall elections). One House Subcommittee Chairman held an oversight hearing with the SEC before the bill was even signed! Moreover, Congressional leaders already have recognized the need for additional legislation to make "technical corrections" and possibly substantive modifications as well. Companies and their trade associations will be seeking to use this process to minimize burdens and to advantage themselves competitively. What will you do? Some companies make things happen – others just say "what happened?" This Webinar will discuss how getting involved early and adopting a comprehensive approach to regulatory implementing activity can provide significant benefits.

To learn more, please join us for a one-hour complimentary Webinar on Thursday, September 16.

We’ll leave time at the end of the Webinar for questions.

For more information please visit the Financial Services Reform Webpage.

Speakers Include:

Bruce J. Heiman, Partner, Washington, D.C.
Daniel F. C. Crowley, Partner, Washington, D.C.
William A. Kirk, Partner, Washington, D.C.
Karishma Shah Page, Associate, Washington, D.C.

FCC Preparing Multiple "Junk Fax" Enforcement Actions

Sun, 29 Aug 2010 23:28:31 GMT

There has not been an official announcement, but indications are strong that the FCC is planning soon to issue a number of forfeitures and proposed forfeitures for the sending of so-called "junk faxes." Under the Telephone Consumers Protection Act of 1991 ("TCPA"), it is unlawful to send "unsolicited advertisements" via facsimile. In the past two weeks, the Enforcement Bureau has begun "circulating" 11 new orders that appear to be junk fax enforcement orders. (Circulation is the process of submitting an order for a vote by the Commission.)

The Commission, rather than the Bureau, must vote on all proposed fines above $100,000, so one may presume that each item involves a significant fine. Significant fines also are likely because several of the subjects of the draft enforcement orders have histories of prior FCC enforcement actions. One company -- The Hot Lead LLC -- received a fine of $2.5 million in 2008 for junk faxes. Pending against it are four proposed fines, of $739,500, $695,000, $47,000 and $51,500. Another company -- Sunstar Travel and Tours -- received a fine of $169,500 in 2008 and has a proposed fine of $136,000 pending now.

In addition, one potential action appears to be against an alleged "fax broadcaster." If issued, it would be the first proposed forfeiture issued under the Commission's "high degree of involvement" standard for fax broadcaster liability.

Caveat: Circulation of an item does not necessarily indicate impending action by the FCC. Four apparent "junk fax" orders began circulating in June 2009. 14 months later, those orders remain under consideration.

Alabama Civil Appellate Cases Released August 27, 2010

Sat, 28 Aug 2010 20:13:59 GMT

Following are the cases released by the Alabama Supreme Court and Court of Civil Appeals on August 27, 2010.

From the Alabama Court of Civil Appeals:

Berry v. Deutsche Bank National Trust Company

Willow Lake Residential Association, Inc., et al. v. Juliano

Ex parte Pierson; Petition for Writ of Certiorari (In re: Pierson v. Jefferson County Personnel Board)

Claybrook v. Claybrook

Ross v. Deutsche Bank National Trust Company

Hill v. Premier Builders and Realty, LLC

B.R.G. v. G.L.M.

E.D. v. Madison County Department of Human Resources

Water Works Board of the City of Birmingham v. Isom

Complete List of Cases from the Alabama Court of Civil Appeals

From the Alabama Supreme Court:

Southern Homes, AL, Inc. v. Southern Lakes, LLC

Ross v. Rosen-Rager

Custom Performance, Inc. v. Dawson

Ex parte Landrum; Petition for Writ of Certiorari to the Court of Criminal Appeals (In re: Landrum v. State of Alabama)

Dudley, Hopton-Jones, Sims & Freeman, PLLP v. Knight

Ex parte Coleman; Petition for Writ of Certiorari to the Court of Criminal Appeals (In re: Coleman v. State of Alabama)

Complete List of Cases from the Alabama Supreme Court

"Tells" for Executive Lies During Investor Calls ?

Sat, 28 Aug 2010 14:01:32 GMT

This story from The Economist explains an academic effort to formally look for "tells" on when executives were lying during investor conference calls. Key "tells" are said to be use of extreme adjectives, a lack of ums and ahs, and swearing. Some might think the same principles also could be applied to testimony of persons involved in the litigation industry.

Fated To Lose

the10bdaily@hotmail.com (Lyle Roberts) — Sat, 28 Aug 2010 04:15:40 GMT

He's back. Judge Easterbrook has authored a new securities litigation decision for the U.S. Court of Appeals for the Seventh Circuit and, as always, it is interesting and contentious. In Schleicher v. Wendt, 2010 WL 3271964 (7th Cir. Aug. 20,...