Third Circuit Finds ADT Consumer Class Action Correctly Returned to State Court

The Third Circuit upheld a decision to remand a class action to state court, agreeing that one of the defendants  could not be disregarded as a “nominal party” even though it had transferred all of its contracts, assets, debts, and liabilities to another company. Walsh v. Defenders, Inc., Civ. No. 18-2156 (3d Cir. July 2, 2018).

The plaintiff is a New Jersey citizen who filed a class action, consumer fraud complaint in New Jersey state court relating to cancellation fees under contracts for home security equipment.  The plaintiff named three entities as defendants: Defenders, Inc., an Indiana citizen; ADT Security Services, Inc., n/k/a Tyco Integrated Security LLC (ADT SSI-TYCO), a New Jersey citizen; and ADT LLC, a Delaware citizen.  The Defendants argued that ADT SSI-TYCO should be disregarded as a “nominal party” for purposes of determining Class Action Fairness Act (CAFA) diversity jurisdiction because years before the suit, it had transferred all its assets and liability to ADT LLC.

Rejecting this argument and finding that ADT SSI-TYCO was a real party to the suit, the Third Circuit noted that, though ADT SSI-TYCO transferred the contracts and related liabilities to co-defendant ADT LLC, it nonetheless continued in operation and serviced the commercial contracts. Because ADT SSI-TYCO remainaaked an active company, its transfer of assets and liabilities could not discharge claims unless the plaintiff consented to the transfer and discharge.

The Third Circuit then affirmed the District Court’s ruling that the case fit the “local controversy exception” to the federal court’s CAFA jurisdiction—ADT SSY-TYCO is a New Jersey citizen, just like the named plaintiff, and its conduct formed a significant basis for the claims asserted.

The Third Circuit’s decision highlights the difficult questions that can arise when a company merges with or sells assets to a different entity.  These issues can be amplified in the class action context where a party’s citizenship can make the difference in keeping the case in state court and out of federal court.

For more information on the Walsh decision and on jurisdictional issues, please contact Kathleen Barnett Einhorn, Esq., Director of the firm’s Complex Commercial Litigation Group at keinhorn@genovaburns.com, or Jennifer Borek, Esq., a Partner in the Complex Commercial Litigation Group at jborek@genovaburns.com.

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Supreme Court Rules Retailer Physical Presence No Longer Required For States to Tax Sales in Wayfair Decision

In a highly anticipated decision issued today, the Supreme Court overruled decades of its own precedent and held that states can require out-of-state retailers to collect and remit sales tax proceeds, even if the business has no physical presence in the state.  The Court’s decision in South Dakota v. Wayfair, No. 17-494 (2018), could have a significant impact on retailers who sell goods or services through the internet, as states rush to enact legislation forcing online sellers to collect and remit sales tax for transactions within those states.

The case was a challenge by Wayfair and other on-line retailers to a South Dakota law requiring large out-of-state sellers to collect and remit sales tax as if the seller had a physical presence in the state.  In two previous cases – National Bellas Hess, Inc. v. Department of Revenue of Ill., 386 U.S. 753 (1967) and Quill Corp. v. North Dakota, 504 U.S. 298 (1992) the Supreme Court had ruled that states could not require sellers to collect and remit sales taxes if they had no physical presence in the state.  In those situations, states were forced to rely on their residents to voluntarily pay sales tax owed on purchases.  The Court noted that consumer compliance is as low as 4%, causing states to lose as much as $33 billion in combined sales tax revenue every year.

Referring to the “internet revolution” and the modern dynamics of the national economy, Justice Kennedy writing for a majority of the Court overruled Bellas Hess and Quill, finding that the rule in those cases amounted to a judicially-created tax shelter for businesses with no physical presence in a state.  The Court noted that modern e-commerce does not analytically align with a test based on the physical location of brick-and-mortar stores.  Instead of the physical location test, the Court concluded, to be subject to a state’s tax, there must be a “substantial nexus” between the state and the taxed activity.  Just how substantial a nexus remains to be seen and will likely result in future litigation.

The dissenting opinion, authored by Chief Justice Roberts and joined by Justices Breyer, Sotomayor, and Kagan, agreed that the Court’s older decisions were wrong, but contended that Congress, not the Court, should fix the problem and determine the extent to which states may burden interstate sellers with the duty to collect sales or use taxes.

For more information on the implications of Wayfair, please contact Kathleen Barnett Einhorn, Esq., Director of the firm’s Complex Commercial Litigation Group at keinhorn@genovaburns.com, or Jennifer Borek, Esq., a Partner in the Complex Commercial Litigation Group at jborek@genovaburns.com.

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Monkey See, Monkey Sue: Ninth Circuit Finds Naruto Cannot Sue Under Copyright Act

Last week, the Ninth Circuit Court of Appeals panel affirmed dismissal of copyright infringement claims brought on behalf of a macaque monkey, Naruto, against a wildlife photographer. The Court found that Naruto had Constitutional standing to file suit, but that he could not maintain an action under the Copyright Act. Naruto v. Slater, No. 16-15469.

In 2011, Naruto, then a seven-year-old crested macaque living in Indonesia, took several pictures of himself with a camera that had been left unattended by wildlife photographer David Slater.  Slater subsequently published these “monkey selfies” in a book.  In 2015, PETA filed a complaint on Naruto’s behalf alleging copyright infringement, which a district court in California dismissed.

Affirming dismissal, the Ninth Circuit found that PETA did not have standing as “next-friend” of Naruto because animals cannot be represented by “next friends” absent express statutory authorization and PETA had failed to allege that it had a significant relationship with Naruto.  The Court also criticized PETA for seeking dismissal of Naruto’s appeal after PETA entered into a settlement agreement with the photographer following oral argument in the case.  Since the settlement did not include Naruto as a party, the settlement and subsequent motion gave the appearance that Naruto was being used for PETA’s institutional interests, which undermined PETA’s attempt to establish itself as Naruto’s next friend.

Relying on a prior decision of the Ninth Circuit from 2004, Cetacean Community v. Bush however, the court held that Naruto had Constitutional standing on his own to sue.  In Catacean Community, the Ninth Circuit found that the world’s whales, dolphins, and porpoises, had standing to sue through their self-appointed attorney.  The panel in Naruto’s case criticized that earlier decision as “wrongly decided,” but ruled that they were bound by it until the full Ninth Circuit or the Supreme Court revisited it.

Ultimately, however, the Court found that the language of the Copyright Act did not authorize animals to file copyright infringement suits.  The Court emphasized that a lawsuit by an animal is only allowable if the statute specifically permits it –  a rule meant to prevent monkey business.

For more information on animal law, intellectual property, constitutional or statutory standing, or the implications of Naruto, please contact Kathleen Barnett Einhorn, Esq., Director of the firm’s Complex Commercial Litigation Group at keinhorn@genovaburns.com, or Jennifer Borek, Esq., a Partner in the Complex Commercial Litigation Group at jborek@genovaburns.com.

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New Jersey Supreme Court Unanimously Limits Scope of Consumer Protection Statute

The New Jersey Supreme Court issued an important decision on the scope of the New Jersey consumer protection statute called the Truth-in-Consumer Contract, Warranty and Notice Act or TCCWNA.

The two class action matters involved allegations that Select Comfort Corp. and Bob’s Discount Furniture violated the TCCWNA by failing to include, among other things, specific language regarding a consumer’s right to cancel an order as a result of delayed delivery. The Supreme Court held that a violation of this regulation could constitute a violation of a “clearly established legal right or responsibility of sellers” to constitute a violation of TCCWNA.

Separately, and of broader significance, the Supreme Court was asked whether a consumer must suffer an actual adverse consequence to be entitled to the statutory minimum penalty of $100 per person provided by the TCCWNA.  None of the plaintiffs in either of the cases had alleged that they suffered any actual harm, monetarily or otherwise, from the defendants’ technical violations of the regulations.   The question before the Court was whether these plaintiffs could be considered “aggrieved consumers” to qualify for TCCWNA’s statutory penalties.

Analyzing the statutory language, the unanimous Supreme Court noted that certain sections of the TCCWNA use the term “consumers” whereas the term “aggrieved consumer” was used in the section of the TCCWNA discussing damages. The addition of the term “aggrieved” before “consumer,” the Court held, must be given meaning and, under a plain reading of this word, denotes the plaintiff’s suffering some actual harm, even non-monetary harm.  As an example of the type of harm that may be sufficient to render a consumer “aggrieved” under the TCCWNA, the Supreme Court hypothesized a potential furniture seller customer who contends he would have sought a refund after a late furniture delivery but did not because of a company’s “no refund” statement (in violation of the regulation).

The Supreme Court’s decision will likely impact the uptick in putative class actions filed by consumers under TCCWNA. In addition to reducing the number of individuals who might be entitled to TCCWNA statutory damages, the decision will also make it more difficult for consumers to maintain class actions since each class member potentially must demonstrate that they suffered an “adverse consequence.”

For more information on the Supreme Court’s decision, the TCCWNA or consumer class actions, please contact Kathleen Barnett Einhorn, Esq., Chair of the firm’s Complex Commercial Litigation Group at keinhorn@genovaburns.com, or Jennifer Borek, Esq., Partner in the Complex Commercial Litigation Group at jborek@genovaburns.com.

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Supreme Court Clarifies Appeal Timing for Consolidated Cases

The U.S. Supreme Court has ruled that when a final decision has been issued in one of several consolidated civil cases, the losing party can immediately appeal, even if other of the consolidated cases are ongoing. Hall v. Hall, No. 16-1150.

The decision, though technical, resolves an issue that has vexed lower courts and litigants.  Federal Rule of Civil Procedure 42(a) gives the district courts broad discretion to consolidate different actions involving “common questions of law or fact.” Hall involved cases consolidated in the Federal District Court in the Virgin Islands, relating to an inter-family dispute between siblings about rents collected for a vacation home.  At trial, the jury ruled against the daughter in both cases, awarding the son $2 million in damages, but entering separate judgments. The daughter appealed the judgment in one case, even though post-trial proceedings remained in the individual case.

The Third Circuit Court of Appeals dismissed the appeal stating that it lacked jurisdiction because the trust judgment was not final when the claims concerning the individual case remained in the district court.

Reversing the Third Circuit, the unanimous Supreme Court (in a decision authored by Chief Justice John Roberts) explained that had the actions not been consolidated, there would be no issue as to whether the daughter had the right to appeal the judgment in the trust case because the litigation was final. After reviewing cases from the founding of the country and the original 1813 statute, the Court held that that consolidation is a matter of convenience and judicial economy and does not merge the suits or change the rights of parties or make a party to one action a party to another consolidated action.

For unsuccessful litigants whose cases have been consolidated, the decision in Hall reaffirms their ability to appeal immediately without waiting for the rest of the consolidated cases to finish.  On the flip side, parties must now be alert and understand that even though two or three cases between the same or similar defendants and different plaintiffs have been consolidated, the time to appeal for one case will begin to run.  The decision will most likely impact large companies that are often the target of class action, product liability, or mass tort litigation where there are a vast number of claims against them and similar defendants.

For more information on the Supreme Court’s decision, please contact Kathleen Barnett Einhorn, Esq., Director of the firm’s Complex Commercial Litigation Group at keinhorn@genovaburns.com, or Jennifer Borek, Esq., Partner in the Complex Commercial Litigation Group at jborek@genovaburns.com.

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“Blurred Lines” Infringes Gaye’s “Got to Give it Up”, Ninth Circuit Holds

Yesterday, a divided panel of the Ninth Circuit Court of Appeals largely affirmed a trial court judgment finding that Pharrell Williams, Clifford Harris and Robin Thicke’s 2013 hit single “Blurred Lines” infringed upon the defendants’ copyright in Marvin Gaye’s 1977 song “Got to Give it Up.” Williams v. Gaye, No. 15-56800.

The decision of the panel majority (Judges Milan D. Smith and Mary Murguia) is a cautionary tale of how the procedural posture of a case can be outcome determinative. The majority held that following a full trial on the merits, the appeals court could not review the trial court’s earlier denial of a summary judgment motion.  The issues to be resolved were not purely legal, the majority continued, and the factual issues hotly disputed by the parties’ experts. Because of the full trial, the majority concluded that they could not conduct its own summary judgment analysis.

The Court then reviewed the verdict and found there was no basis to overturn the jury’s decision as it related to the Thicke Parties because there was sufficient evidence from which they could conclude that Williams, Harris and Thicke had access to Gaye’s work and the two songs were substantially similar. After a jury verdict, the Court continued, an appellate court cannot weigh the evidence for itself and make credibility rulings on the parties’ experts.

The dissent (Judge Jacqueline H. Nguyen) decried the majority’s opinion as allowing Gaye to “to accomplish what no one has before: copyright a musical style” and setting “a dangerous precedent that strikes a devastating blow to future musicians and composers everywhere.” Though there are some similarities between the songs, the dissent contended, most of the similarities were short patterns that are not themselves protectable under the copyright laws. The dissent warned that the majorities’ decision will stifle creativity as copyright law is only meant to protect authors’ expression as opposed to the idea underlying that expression.

Williams, Harris and Thicke now have the option of asking for review from the entire Ninth Circuit or seeking review by the U.S. Supreme Court.

For more information on copyright law or the  Ninth Circuit’s decision, please contact Kathleen Barnett Einhorn, Esq., Director of the firm’s Complex Commercial Litigation Group at keinhorn@genovaburns.com, or Jennifer Borek, Esq., a Partner in the Complex Commercial Litigation Group at jborek@genovaburns.com.

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New Jersey Appellate Division Clarifies Rights to Disclosure of School Records Under Public Records Law

In a lengthy, published opinion, the New Jersey Appellate Division recently ruled on four appeals from different trial courts (that had reached conflicting results) about the ability of a nonprofit advocacy organization for disabled students and one of the parent’s efforts to obtain copies of settlement agreements from public school districts relating to the provision of special services to other qualified students.

The issue was how to strike a balance between privacy rights in educational records reflected in the New Jersey Pupil Records Act, and the Federal Family Educational Rights and Privacy Act of 1974, on the one hand, and the broad right to obtain public records under New Jersey’s Open Public Records Act or OPRA, on the other hand.  (See Litigation Law Blog’s Post on a Series of Recent OPRA Decisions by the New Jersey courts.)

The Appellate Division Panel held that the non-profit entity plaintiffs in three of the cases were entitled to copies of the requested records with personal identifying information redacted, if they establish that they are “bona fide researchers” under the New Jersey Public Records Act or if they obtain in advance an order from the trial court granting them access. The school districts were directed to not turn over the redacted records until first providing reasonable advance notice to the parents or guardians of the affected students.

The Court distinguished one of the cases on appeal in which the requestor sought a report that exclusively mentioned her own child, affirming parents’ right to obtain unredacted records relating to their children.

For more information on OPRA, please contact Kathleen Barnett Einhorn, Esq., Chair of the Firm’s Complex Commercial Litigation Group, at keinhorn@genovaburns.com or Jennifer Borek, Esq., Partner in the Complex Commercial Litigation Group, at at jborek@genovaburns.com.

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New Jersey Supreme Court Holds that Consumers Cannot Pursue Class Action Claims Against TGI Fridays for Inflated Drink Prices, But May Do So Against Carrabba’s Italian Grill

The New Jersey Supreme Court issued a decision on two consumer class actions under the New Jersey Consumer Fraud Act (“CFA”) and the Truth in Consumer Contract, Warranty and Notice Act (“TCCWNA”).  In two separate cases, consumers sought damages against TGI Fridays and the operator of several Carrabba’s Italian Grill, respectively, alleging unlawful practices with respect to the disclosure of prices for alcoholic and non-alcoholic beverages to customers.

With respect to TGI Fridays, the Court held that the named plaintiffs failed to show that common questions of law and fact predominate over individual issues.  The plaintiff had advanced a “price inflation” theory – that the fraudulent marketing drove up the cost of the drinks – but the Court rejected it noting that its prior decisions had found this theory did not support a claim under the CFA.

With respect to Carrabba’s, on the other hand, the plaintiff’s allegations focused on specific pricing practices, which plaintiff claimed are supported by receipts showing that each customer making this claim was charged different prices for the same brand, type, and volume of beverage in the course of a single visit. Because the proposed class had been redefined to only include customers who make that specific CFA claim, they met the predominance requirement for class certification.

In both cases, the Court found that the plaintiffs had failed to meet the standards for a class action as to their TCCWNA claims. Under TCCWNA, a claimant must prove that they received a written sign (here, a menu), which contained information in violation of a consumer law.  Because each individual claimant would have to prove that they received a menu, the Court held, the cases were not suitable for resolution as a class action.

For more information on class actions, the CFA or TCCWNA, please contact Kathleen Barnett Einhorn, Esq., Chair of the Firm’s Complex Commercial Litigation Group, at keinhorn@genovaburns.com or Jennifer Borek, Esq., Partner in the Complex Commercial Litigation Group, at jborek@genovaburns.com.

 

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Federal Circuit Paves Way for Additional Discovery in Autonomous Car Case

The Federal Circuit reinforced limits on its own jurisdiction by rejecting an appeal brought by intervenor Anthony Levandowski in the much-publicized case Waymo LLC v. Uber Technologies, Inc., et al., No. 17-cv-00939-WHA (N.D. Cal.). The Federal Circuit’s September 13, 2017, decision relies heavily on – and leaves intact – two District Court rulings compelling the production of certain potentially important discovery materials.

According to Waymo’s allegations, Levandowski, its former employee, improperly downloaded information relating to Waymo’s driverless vehicle technology, and then left Waymo to found Ottomoto (“Otto”), which was subsequently acquired by Uber.  Before Uber’s acquisition was complete, attorneys for Otto and Uber jointly retained Stroz Friedberg, LLC (“Stroz”) to investigate Otto employees who had previously worked for Waymo, including Levandowski.  The resulting report by Stroz is at the heart of the discovery dispute at issue.

During discovery, the Magistrate Judge granted Waymo’s motion to compel Otto and Uber to produce the Stroz report, and also refused to quash Waymo’s subpoena to Stroz seeking the report and related documents.  Both rulings were affirmed by the District Court.  His subsequent appeal to the Federal Circuit acknowledged that the appellate court’s two main avenues to jurisdiction – final judgments relating to patents and certain special categories of interlocutory orders – would not apply in this case.  Instead, Levandowski argued that his appeal should be treated as a petition for a writ of mandamus pursuant to 28 U.S.C. 1651(a), a general statute that grants all courts created by Congress the power to issue “all writs necessary or appropriate in aid of their jurisdictions[.]”  Levandowski argued that such a writ was necessary because disclosure of the Stroz report would violate his Fifth Amendment right against self-incrimination.  He also argued that the Perlman doctrine, which permits a privilege-holder to immediately appeal a discovery order aimed at a disinterested third-party custodian, should apply.

In rejecting each of Levandowski’s arguments, the Federal Circuit first noted that a writ of mandamus was only appropriate if, among other things, the petitioner had no other adequate means of relief, and could show a clear and indisputable right to issuance of the writ.  According to the court, a post-judgment appeal would suffice to protect Levandowski’s rights.  Additionally, he failed to establish a clear right to issuance of the writ, as the District Court’s legal conclusions were proper, including the findings that Levandowski couldn’t invoke the attorney-client privilege, work-product doctrine, common interest doctrine, or Fifth Amendment to prevent disclosure of the Stroz report.  Lastly, the court rejected the doctrine’s application in this case because Uber is not a disinterested third-party, but is instead a defendant in the case.

For more information on intellectual property law, trade secret issues, or the implications of Waymo, please contact Kathleen Barnett Einhorn, Esq., Director of the firm’s Complex Commercial Litigation Group at keinhorn@genovaburns.com, or Jennifer Borek, Esq., a Partner in the Complex Commercial Litigation Group at jborek@genovaburns.com.

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New Jersey Courts Hands Victories to Open Government Records Advocates

Over the past month, the New Jersey courts have handed down several rulings clarifying the scope of New Jersey’s Open Public Records Act, or OPRA.   The rulings have resulted in several significant victories for advocates of more access to public records.

In Paff v. Galloway Township, the New Jersey Supreme Court addressed the scope of a municipality’s obligation to disclose electronically stored information.  The plaintiff had requested specific information fields from emails sent between the Township Clerk and Chief of Police, including “sender,” “recipient,” “date” and “subject” over a two-week period.    The Supreme Court found that this information about the emails—in legal parlance, “metadata”— is a government record under OPRA and must be produced.  Although this may impose some burden on a municipality, the Court point to the ability under OPRA to charge a service fee where the records requested require “a substantial amount of manipulation or programming of information technology.”

In North Jersey Media Group, Inc. v. Township of Lyndhurst, the New Jersey Supreme Court addressed the issue of public access to criminal investigatory records associated with the shooting of an individual by police following a high-speed chase.  The Court ultimately ruled that the plaintiff was entitled to disclosure of unredacted Use of Force Reports under OPRA and dash-cam recordings of the incident under the common law, but not to investigative reports, witness statements, and similarly detailed records while the investigation remained ongoing.

The next case, in re New Jersey Fireman’s Association Obligation to Provide Relief Applications Under the Open Public Records Act, involved the polar opposite of the typical OPRA case.  In that case, the question was whether, after a public entity denies a citizen’s record request, the public entity may institute a court action to obtain a judgment from the court declaring the record to not be subject to disclosure.  The Court ultimately ruled that this procedure may be proper in some instances, but under the facts of the case, since the public entity had already denied the OPRA request, only the requestor may file an action to compel the disclosure.

In North Jersey Media Group v. State of New Jersey Office of Governor, a case stemming out of the “Bridgegate” scandal, New Jersey’s Appellate Division held that the court has the authority under OPRA to impose civil penalties for knowing and willful violations of OPRA, and remanded the case for a ruling on whether certain individuals in the Governor’s office intentionally violated OPRA.

In Verry v. Franklin Fire District No. 1, the Appellate Division held that a local a fire department should be considered an “instrumentality” of the larger fire district, and is therefore a public agency required to comply with OPRA.

For more information, please contact Kathleen Barnett Einhorn, Esq., Chair of the Firm’s Complex Commercial Litigation Group, at keinhorn@genovaburns.com or Jennifer Borek, Esq., Partner in the Complex Commercial Litigation Group, at jborek@genovaburns.com.

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