New Jersey Appellate Division Invalidates Jenny Craig Employee Arbitration Provision

This week, in Marilyn Flanzman v. Jenny Craig Inc. et al., No. A-2580-17, a panel of the Appellate Division found that an arbitration provision between weight loss company Jenny Craig and a former employee was unenforceable because the agreement failed to identify where or how the parties would arbitrate their dispute.

The plaintiff’s employment was terminated when she was 86 years’ old and after she had worked for Jenny Craig for 26 years.  The trial court had sent her age discrimination case to an arbitrator based on an arbitration agreement signed in 2011.

Congress passed the Federal Arbitration Act (“FAA”) almost a century ago to address the hostility courts had towards private arbitration and put arbitration agreements “on\equal footing” with other contracts.   Jenny Craig’s arbitration agreement did not identify where and how the parties would arbitrate the dispute (such as, through the American Arbitration Association, or by creating a process for the selection of an arbitrator).  This failure doomed the provision,  the Appellate Division held, because under New Jersey law, the parties must have reached a “meeting of the minds” to successful enter into a contract.  Without knowing what rights would replace their right to judicial resolution of their dispute, the Court concluded, the parties could not have properly agreed to the provision.

Though dealing with a single case, any decision invalidating an arbitration provision is likely to result in a negative reaction from the business community.  Jenny Craig may still seek review by the New Jersey Supreme Court, which has as recently as September 2018 taken up cases to clarify the interplay between New Jersey contract law and the FAA.

For more information on arbitration, the FAA and this decision 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 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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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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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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Supreme Court Narrows Choice of Court to File Patent Infringement Actions

The Supreme Court used a dispute over flavored drink mix to settle a question regarding the proper venue for patent infringement actions, unanimously ruling in TC Heartland LLC v. Kraft Foods Group Brands LLC, No. 16-341, that such actions, when brought in the venue where a defendant corporation “resides”, may only be brought in the judicial district where the corporation is incorporated.

The patent venue statute, 28 U.S.C. §1400(b), provides that patent infringement actions may be brought in “the judicial district where the defendant resides or where the defendant has committed acts of infringement and has a regular and established place of business.”  Interpreting that law in Fourco Glass Co. v. Transmirra Prods. Corp., the Supreme Court held that a domestic corporation “resides” only in its state of incorporation for patent venue– differing from the general venue statute, 28 U.S.C. §1391(c), which provided that a corporate defendant “resides” in any state in which it is subject to personal jurisdiction, including any state in which the corporation conducts a sufficient amount of business.  A 1988 congressional amendment to the general venue statute appeared to expand its scope and undermine the holding in Fourco.  Indeed, in 1990, the Court of Appeals for the Federal Circuit held that the general venue statute had generally supplanted the patent venue statute, and that corporations could be sued for patent infringement in any venue where the corporation was subject to personal jurisdiction.

However, the Supreme Court held in TC Heartland that Congress did not intend to supplant or change the meaning of the patent venue statute as set forth in Fourco.  The Court noted, among other things, that congressional amendments to the general venue statute in 2011 clarified that it does not apply when venue is “otherwise provided by law,” and deleted statutory language broadening the scope of the law.

Although the Court’s ruling is technical in nature, it will have a real effect on where patent infringement plaintiffs can file lawsuits.  Commentators have predicted that the decision will increase litigation in Delaware, New York, and California.

For more information on intellectual property law or the implications of TC Heartland, 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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News-Gatherer not Nightcrawler: District Court Denies NYPD’s Motion to Dismiss Photojournalist’s First Amendment Complaint

The U.S.  District Court in Manhattan recently allowed a photojournalist’s complaint against the New York Police Department (NYPD) and City of New York to go forward.  In Jason B. Nicholas v. The City of New York, 15-CV-9592, the photojournalist-plaintiff alleged that the NYPD’s and City’s revocation of his press credentials violated his First Amendment and Fourteenth Amendment rights.

Nicholas recounted a series of encounters with the NYPD that led to the revocation, including an altercation with a retired NYPD detective while on assignment for the New York Daily News.  On multiple occasions, Nicholas refused to stay in an NYPD-imposed “press pen,” resulting in his press credentials being seized.  In the most recent incident, while photographing a rescued worker being loaded into an ambulance on-scene at a building collapse in Manhattan, Nicholas’s credentials were seized and revoked by the NYPD for allegedly not being in the press pen near the scene, although he alleges that other photographers were outside of the press pen and operating unimpeded.  The credentials were not returned until nearly eight months later.

Refusing to dismiss Nicholas’s complaint, the Court held that he had stated a viable claim for violation of his First Amendment rights.  The Court reiterated that “under the First Amendment, press organizations have a . . . right of access to newsworthy events in their capacity as representatives of the public and on their own behalf as members of the press.” The Court observed that “[e]qual press access is critical” to news-gatherers, citing case law extending protections against content-based or arbitrary exclusions.

The Court also allowed Nicholas’s due process claim, finding he had sufficiently alleged facts to show he had a protected interest in his press credentials; he was deprived process for revocation of his protected interest by the NYPD’s establishment of a “frozen zone” post-exigency; he was injured as a result of an official policy, custom, or practice of the municipality; and he was in danger of future harm, as evidenced by the pattern of multiple revocations of his press credentials by the NYPD.

Commentators and scholars have pointed to this recent decision, as well as decisions dating back decades upholding First Amendment claims by journalists excluded from covering public officials, including a case from the District of Columbia Circuit that found it impermissible to exclude White House press passes in a content-based or arbitrary fashion.

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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Supreme Court to Review Whether “Offensive” Names Can Be Trademarked

The U.S. Supreme Court agreed today to review the Federal Circuit’s decision to strike down the Lanham Act’s ban on “disparaging” trademarks.  The case, Lee v. Tam, No. 15-1293, involved an Asian American dance-rock band’s attempt to trademark their name THE SLANTS. The U.S Patent and Trademark Office (USPTO) refused, citing the Lanham Act’s prohibition on “disparaging” trademarks. The Federal Circuit held that this prohibition violated trademark applicants’ First Amendment Rights. (See Litigation Law Blog’s previous post about the Federal Circuit’s decision from December 23, 2015.)

The Supreme Court’s decision could impact the more famous battle over an attempt to cancel the trademark registration for the NFL’s Washington Redskins as disparaging to Native Americans.

In the Washington Redskins case, a federal district court had ruled that the football team’s trademark disparaged Native Americans.  The team had appealed the case to the Fourth Circuit Court of Appeals, which was scheduled to hold oral argument in December.  On October 18, 2016, the Fourth Circuit agreed to stay consideration of the appeal until the Supreme Court decides Lee v. Tam.

For more information on the Lanham Act or the Supreme Court’s grant of certiorari in Lee v. Tam, 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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Recent Supreme Court Decision Expands Freedom of Speech Rights for Those in Common-Interest-Communities

The New Jersey Supreme Court’s December 3, 2014 decision in Dublirer v. 2000 Linwood Avenue Owners, Inc., et al., extended the free speech rights of those living within private common-interest communities relating to political speech and the right to distribute political materials therein.

In Dublirer, the Court addressed an action filed by a resident in a high-rise private cooperative apartment building (the “Co-op”) against the Co-op’s board of directors (the “Board”) who prevented the resident from distributing leaflets under his neighbors’ doors criticizing the Co-op’s governance and promoting his own candidacy for the Board. The Board’s rule banned the distribution of all written materials “anywhere upon the premises without written authorization of the Board of Directors.”

The Court noted that an essential element of living within a co-op community is the residents’ agreement to be bound by the co-op’s by-laws and rules. However, while the Board’s stated purpose for barring the distribution of such written materials was “to preserve the residents’ quiet enjoyment of their apartment and to cut down on litter pollution,” the Court found that the residents’ rights in speaking out about the governance of their community outweighed the “minimal intrusion [of] when a leaflet is placed under a neighbor’s apartment door.” The residents of the Co-op were not outsiders, and thus had both property and free speech rights within the Co-op. The Court developed a test for such restrictions, holding that courts “should focus on the purpose of the expressional activity undertaken in relation to the property’s use, and should also consider the general balancing of expressional rights and private property rights.”

The Dublirer Court found that the resident’s leaflets were akin to political speech, thus affording it the highest Constitutional protection. The Court took into account the potentially intrusive nature of the resident’s leaflets, noting that here, the resident “did not seek approval to use a bullhorn or a loudspeaker, or to erect a large sign in the lobby,” and that “residents could simply ignore or throw away any literature placed under their doors.” In considering the reasonableness of the Board’s restriction, the Court found no “convenient, feasible, and alternative means” for engaging in the same speech, finding that the resident had sought “the most direct and least expensive way possible,” and that there were not substantially similar alternatives for communicating the same message to his neighbors.

The Court held that “[s]peech about matters of public interest, and about the qualifications of people who hold positions of trust, lies at the heart of our societal values,” and thus is entitled to protection whether or not that speech involves those who hold positions of trust within private common-interest communities.

Similar common-interest communities, such as condominium associations, should be aware of the Dublirer holding and potential claims by residents against their boards. The Court’s characterization of certain types of resident speech as protected political speech requires particular focus, as the Court stated that such should be afforded the greatest protection. However, the Court did not find that a board of directors in common-interest communities could never impose any speech restrictions, noting that the Board could have adopted “reasonable time, place, and manner restrictions to serve the community’s interest.” Such restrictions, however, must be designed to promote the quiet enjoyment of the residents of the community, “without unreasonably interfering with free speech rights.” Thus, in designing by-laws and house rules related to speech, boards must take into account the practical effect of any such proposed limitations on speech and the effect it would have on the residents, paying particular attention to the availability for substantially similar (and cost effective) mechanisms for the residents to accomplish a similar result.

For more information regarding the firm’s Complex Business Litigation Program, please contact Kathleen Barnett Einhorn, Director of the Complex Commercial Litigation Practice Group, at keinhorn@genovaburns.com.

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