Tag: Litigation

Court Reversed Order Appointing Temporary Administrator Due To A Lack Of A Bond

In In re Robinett, a party filed a petition for writ of mandamus, challenging a trial court’s order appointing a temporary administrator. No. 03-21-00649-CV, 2022 Tex. App. LEXIS 926 (Tex. App.—Austin February 9, 2022, original proc.). The petitioner complained that the trial court failed to hold an evidentiary hearing and also appointed a temporary administrator without a bond. Regarding the hearing complaint, the court of appeals disagreed:

Under Section 55.001 of the Texas Estates Code, “[a] person interested in an estate may, at any time before the court decides an issue in a proceeding, file written opposition regarding the issue.” Relators are correct that such interested persons are entitled “to process for witness and evidence, and to be heard on the opposition.” Id. But, based on the record before us, they did not file any “written opposition” to the appointment until they filed their motion to reconsider three days after the appointment had already been decided. The trial court therefore did not abuse its discretion by appointing the temporary administrator without first conducting a hearing pursuant to Section 55.001 because there was no requirement for the trial court to hold a hearing under that statute.

Id. The court, however, agreed that the trial court abused its discretion by appointing the temporary administrator without bond:

The Estates Code expressly requires that the order appointing a temporary administrator “set the amount of bond to be given by the appointee.” Moreover, the Estates Code requires that a party must enter into a bond unless they meet one of a limited number of exceptions: (1) a will directs that no bond be required; (2) all the relevant parties consent to not requiring bond; or (3) the appointee is a corporate fiduciary. And other statutory provisions require a hearing and evidence before “setting the amount of a bond.” Based on the record before us, there is no evidence that the temporary administrator met any of the exceptions to the bonding requirement, nor is there any indication that the trial court undertook any evidentiary hearing regarding the bond amount. Accordingly, the trial court abused its discretion by failing to follow the statutory requirements for setting bonds as part of a temporary administrator appointment.

Id.

© 2022 Winstead PC.
For more articles about civil procedures in litigation, visit the NLR Civil Procedure section.

Court Rejects Use of Eminent Domain for Recreational Trail

There has been a major development in the ongoing legal fight over the ability of the Mill Creek Metropolitan Park District in Mahoning County to condemn private property for its bikeway project.

While previous efforts to stop the bikeway focused on a newly passed state law providing that a park district cannot take property for a recreational trail in counties with populations of a certain size (i.e., the size of Mahoning County), the property owner in The Board of Commissioners of the Mill Creek Metropolitan Park District v. Hess tried a different tack, arguing that the statute authorizing park districts to take private property by eminent domain (Ohio Revised Code 1545.11) did not permit a taking for a recreational trail. Rather, it only permits such a taking for “conversion into forest reserves and for the conservation of the natural resources of the state.”

Although the trial court was not persuaded by this argument, the Seventh District Court of Appeals was. The Court of Appeals focused its analysis on whether the taking was to conserve natural resources, ultimately concluding it was not, despite the expansive definition of what constitutes a “natural resource,” i.e., any natural element of feature that supplies human needs; contributes to the health, welfare, and benefit of a community; and is essential for the well-being of such community and the proper enjoyment of its property.

In reaching its decision, the Court found it significant that another section of the Ohio Revised Code expressly empowers the Department of Natural Resources to condemn property for recreational trails. Based on this explicit statutory authorization, the Court was unwilling to read an implied authorization to exercise eminent domain for the same purpose into R.C. 1545.11.

The Court’s ruling was also influenced by the fact that the land at issue was in “a rural area where it appears the public need is speculative at best and the harm to the private property owners is great.”

Finally, the Court pointed out that the purpose of public recreation was not sufficient to authorize the Park District to take private property, reasoning that simply because something provides recreation does not mean it constitutes the conservation of natural resources. In this regard, the Court analogized the recreational trail at issue to movie theaters, shopping malls, and bowling alleys.

Based on these considerations, the Court held that the resolutions to appropriate passed by the Park District were insufficient because they did not include any language tying the demand for the recreational trail to the conservation of natural resources. The Court further held that the Park District abused its discretion by filing an eminent domain lawsuit. Accordingly, the Court remanded the case to the trial court with instructions to enter judgment in favor of the property owner.

The Hess case demonstrates the well-established principle that statutory delegations of the power of eminent domain must be strictly construed in favor of property owners, and is a reminder to all eminent domain practitioners that the legal authority for a proposed taking must be closely scrutinized.

©2022 Roetzel & Andress
For more content about city planning, visit the NLR Public Services, Infrastructure & Transportation section.

Wisconsin Judge Rules that the WDNR Lacks Authority to Regulate PFAS

On April 12, 2022, a Wisconsin judge ruled in the case of Wisconsin Manufacturers & Commerce, Inc. and Leather Rich, Inc. v. WDNR, (Waukesha County Case 2021CV000342) that the WDNR lacks the authority to regulate PFAS chemicals because the Wisconsin Legislature has not established regulatory standards for them. According to the lawsuit, Leather Rich, Inc. entered into a voluntary WDNR environmental cleanup program in 2019, and the following year WDNR indicated that the businesses enrolled in the program were required to test for emerging contaminants, including PFAS. The plaintiffs in the case argued that because the WDNR had created a list of emerging contaminants without any legislative oversight or opportunity for public comment, and had not adopted regulatory standards through administrative rulemaking, the WDNR lacked the authority to require such testing. The judge’s ruling would require the WDNR to wait until legislators have established standards for PFAS through adoption of regulatory limits in state law or through administrative rules. It is estimated that the adoption of standards for PFAS could require 1-2 years. An attorney for the WDNR indicated that the WDNR plans to appeal the decision and file a motion to place the judge’s order on hold.

The WDNR has historically taken the position that the agency has authority under Wisconsin’s “Hazardous Substance Spill Act” (“Spill Act” – Wis. Stats. 292.11) to regulate PFAS even in the absence of established standards, as the Spill Act gives the WDNR broad authority to require testing and remediation of such chemicals. In late February, the WDNR’s Natural Resources Board (NRB)—the entity that sets policy for the WDNR—took steps toward the adoption of statewide standards for two of the most common PFAS compounds, which included an approval to adopt a drinking water standard of 70 parts per trillion (ppt) for two of the most common PFAS compounds; perfluorooctanoic acid (PFOA) and polyfluorooctane sulfonate (PFOS).

PFAS is an acronym for per- and polyfluorolalkyl substances, which are chemicals that were widely used from the 1960s to the early 2000s in the manufacture of a variety of consumer products, such as stain resistant carpets, non-stick cookware (e.g., Teflon), firefighting foam, food packaging (e.g., microwave popcorn bags/pizza boxes), water resistant clothing (e.g., pre-2000 GoreTex), water resistant repellent (e.g., Scotchgard) and dental floss. While the use of PFAS compounds has largely been phased out in the U.S., these compounds are still used in the manufacturing of many products worldwide. These substances, known as “forever chemicals,” have received considerable attention by federal and state environmental regulatory agencies because of their resistance to chemical breakdown due to the chemical bond between carbon and fluorine atoms in the PFAS compounds, which is one of the strongest in nature. Because of this, humans can still be exposed to PFAS long after the chemicals were released into the environment.

The WDNR has identified approximately 90 sites throughout Wisconsin with PFAS contamination, including municipalities such as Madison, Marinette, Peshtigo and Wausau with PFAS-contaminated groundwater.

©2022 von Briesen & Roper, s.c
For more articles about state lawsuits, visit the NLR Litigation section.

L’Oreal PFAS Lawsuit Again Shows ESG Risks of Marketing

In less than six months, L’Oreal has now found itself to be the target of PFAS lawsuits related to its mascara products. The latest L’Oreal PFAS lawsuit was filed in the New Jersey federal court on April 8, 2022. Cosmetics and PFAS is a topic that saw increased scrutiny from the scientific community, legislature, and the media in 2021. As we predicted in early 2021, the increased attention on the industry presented significant risks to the cosmetics industry, and our prediction was that the developments made the cosmetics industry the number two target for future PFAS lawsuits. In less than three months, four industry giants – Shiseido, CoverGirl, L’Oreal and Burt’s Bees – were hit with lawsuits related to their cosmetics and PFAS content in some of the companies’ products.  The industry, insurers, and investment companies interested in the consumer goods vertical with niche interest in cosmetics companies must pay careful attention to the cosmetics lawsuits and the increasing trend of lawsuits targeting the industry.

PFAS and Cosmetics: the 2021 Foundation

On June 15, 2021, a scientific study in the Journal of Environmental Science and Technology Letters published conclusions regarding testing of a variety of cosmetics products from the United States and Canada for PFAS content, and found PFAS present in over half of the products. On the same day that the study was published, the No PFAS In Cosmetics Act 2021 was introduced in the Senate by U.S. Senators Susan Collins (R-ME), Richard Blumenthal (D-CT), Dianne Feinstein (D-CA), Maggie Hassan (D-NH), Jeanne Shaheen (D-NH), Kirsten Gillibrand (D-NY), and Angus King (I-ME). The bill sought to ban PFAS in cosmetics.

These two developments led us to conclude “with these developments, our prediction that cosmetics is the number two target for PFAS litigation issues behind water rings true.”

Why PFAS In Cosmetics Is A Concern

PFAS content in cosmetics raises concerns for human health in scientific communities due to the fact that PFAS are capable of entering the bloodstream in ways other than direct oral ingestion, and one of these ways includes dermal absorption. Concerns have also been raised regarding absorption of PFAS into the bloodstream by way of tear ducts. The absorption issue is one that is being studied fairly extensively through various pending scientific studies. At the end of 2021, the federal Agency for Toxic Substances and Disease Registry (ATSDR) went so far as to recommend that citizens in Southern New Hampshire reduce their risk of further PFAS exposure by avoiding the use of certain consumer goods, including cosmetics.

L’Oreal PFAS Lawsuit

On April 8, 2022, plaintiff Rebecca Vega filed a lawsuit in the New Jersey federal court seeking a proposed class action lawsuit against LOreal. The L’Oreal PFAS lawsuit alleges that the company does not disclose to consumers that its mascara and other products contain PFAS. Instead, the lawsuit states, the products were fraudulently and misleadingly marketed as safe for consumers and environmentally friendly, in violation of federal and state consumer laws. The Complaint details several examples of L’Oreal marketing indicating the safe nature of the products.

The plaintiff seeks certification of the class action lawsuit, injunctive relief, damages, fees, costs and a jury trial. The proposed class is any consumer in the United States, or in the subclass of New Jersey, who purchased the relevant L’Oreal products.

Just the Beginning For Cosmetics Industry

With studies underway, legislation pending that targets cosmetics, and increasing media reporting on cosmetics concerns to human health, the cosmetics industry has a target on its back with respect to PFAS that will have impacts on the industry’s involvement in litigation. Twelve months ago, we made this prediction: “Personal injury / products liability cases, false advertising, and failure to disclose theories of liability are some of the more prominent allegations that cosmetics companies are likely to face. Further, the cosmetics industry is concerned about federal and state level regulatory enforcement action for environmental pollution remediation costs stemming from placing PFAS waste into the environment as a by-product of the manufacturing process.”

The first part of our prediction is becoming reality, as four significant cosmetics industry players now find themselves embroiled in litigation focused on false advertising, consumer protection violations, and deceptive statements made in marketing and ESG reports. The lawsuits may well serve as a test case for plaintiffs’ bar to determine whether similar lawsuits will be successful in any (or all) of the fifty states in this country. Each cosmetics company faces the stark possibility of needing to defend lawsuits involving plaintiffs in all fifty states for products that contain PFAS.

It should be noted that these lawsuits would only touch on the marketing, advertising, ESG reporting, and consumer protection type of issues. Separate products lawsuits could follow that take direct aim at obtaining damages for personal injury for plaintiffs from cosmetics products. In addition, environmental pollution lawsuits could seek damage for diminution of property value, cleanup costs, and PFAS filtration systems if drinking water cleanup is required.

Conclusion

It is of the utmost importance that businesses along the whole supply chain in the cosmetics industry evaluate their PFAS risk. Public health and environmental groups urge legislators to regulate PFAS at an ever-increasing pace. Similarly, state level EPA enforcement action is increasing at a several-fold rate every year. Now, the first wave of lawsuits take direct aim at the cosmetics industry. Companies that did not manufacture PFAS, but merely utilized PFAS in their manufacturing processes, are therefore becoming targets of costly enforcement actions at rates that continue to multiply year over year. Lawsuits are also filed monthly by citizens or municipalities against companies that are increasingly not PFAS chemical manufacturers.

©2022 CMBG3 Law, LLC. All rights reserved.
Article By John Gardella with CMBG3 Law.
For more articles on ESG lawsuits, visit the NLR Environmental, Energy & Resources section.

Look at Me, Not Through Me: Supreme Court Limits Federal Jurisdiction for Post-arbitration Award Petitions

On 31 March 2022, the United States Supreme Court in Badgerow v. Walters limited federal subject matter jurisdiction over post-arbitration award petitions under the Federal Arbitration Act (FAA) §§ 9 and 10. After years of widening disagreement between circuit courts regarding when a federal court may exercise jurisdiction to confirm or vacate an award, the Supreme Court weighed in and held that federal courts may only exercise jurisdiction to confirm or vacate an award if the face of the application supports diversity or federal-question jurisdiction. One of the implications of this ruling is that many more post-arbitration proceedings to confirm or vacate an arbitration award may be channeled into state courts.

BACKDROP: FAA SECTIONS AT ISSUE

Section 4 states that a party seeking to compel arbitration can file suit in any court that, “save for” the arbitration agreement, would have federal jurisdiction over the underlying dispute.1

Section 9 provides that parties may apply to confirm an arbitration award in the United States court “in and for the district” where the award was made.2

Section 10 provides that parties may apply to vacate an arbitration award in the United States court “in and for the district” where the award was made.3

PRELUDE: VADEN

In its 2009 decision in Vaden v. Discover Bank, the Supreme Court found that federal-question jurisdiction could exist under a “look-through” approach in a § 4 petition to compel arbitration.4 In that case, two questions were presented: (1) whether a district court, when asked to compel arbitration, should “look through” the petition and compel arbitration if the court originally would have had federal jurisdiction; and (2) if so, may the court exercise jurisdiction over the § 4 petition when the original complaint rests on state law but the counterclaim rests on federal law?

The Supreme Court answered the first question affirmatively. In doing so, it emphasized that a “federal court may ‘look through’ a § 4 petition to determine whether it is predicated on an action that ‘arises under’ federal law; in keeping with the well-pleaded complaint rule.”5 However, the Court found that the district court could not exercise jurisdiction over the petition presented in that case, because the complaint was “entirely state-based” and “federal-court jurisdiction cannot be invoked on the basis of a defense or counterclaim.”6

Since Vaden, circuit courts have been divided over whether the “look-through” approach also applies to applications to confirm or vacate awards under FAA §§ 9 and 10. For example, the Fifth Circuit acknowledged the circuit split in Quezada v. Bechtel OG & C Constr. Servs., Inc., noting that the Third and Seventh Circuits decline to apply the look-through approach for confirmation, vacatur, or modification of arbitration awards, but the First, Second, and Fourth Circuits permit the look-through approach.7

Ultimately, a divided Fifth-Circuit panel in Quezada agreed with the majority and held that the Vaden look-through approach applies to applications to confirm or vacate arbitration awards.

OPENING ACTS: BADGEROW V. WALTERS IN THE LOWER COURTS

Badgerow v. Walters followed, implicating the Supreme Court’s Vaden decision and the Fifth Circuit’s Quezada decision on the issue of whether a federal court has subject-matter jurisdiction to review an application to confirm or vacate an arbitration award when the underlying dispute presents a federal question.

The plaintiff in Badgerow initiated arbitration against her former employer’s principals, alleging violation of federal employment law. The arbitration panel dismissed all of her claims, so she filed an action in state court to vacate the arbitration award. The defendants removed the action to the United States District Court for the Eastern District of Louisiana and filed a motion to confirm the award. Plaintiff moved for remand to state court, arguing that the district court did not have jurisdiction over the award; however, the district court denied remand and granted defendant’s motion to confirm the award.8

On appeal, the Fifth Circuit held that it was bound by its precedent in Quezada and applied the look-through approach.9 The Fifth Circuit thus affirmed the district court’s decision to exercise jurisdiction over the dispute.

Plaintiff filed a petition for writ of certiorari, which the Supreme Court granted on 17 May 2021.10

FEATURE: THE SUPREME COURT’S DECISION

In an 8-1 decision,11 the Supreme Court reversed and remanded the case, holding that FAA §§ 9 and 10 lack § 4’s “distinctive language directing a look-through” approach. Thus, without statutory language directing otherwise, “a court may look only to the application actually submitted to it in assessing its jurisdiction.”12 Noting that Congress could have replicated § 4’s look-through language in §§ 9 and 10 but chose not to, the Court held that a federal court only has jurisdiction over an application to confirm or vacate an arbitration award when the face of the application demonstrates diversity or federal-question jurisdiction.

Applying the new rule to the facts of plaintiff’s appeal, the Court explained that the parties were not contesting the federal employment dispute at this stage; rather, the parties were contesting enforcement of the arbitration award. Therefore, the Court held that federal jurisdiction was not appropriate because enforcement of the award, which was “no more than a contractual resolution of the parties’ dispute,” did not amount to federal-question jurisdiction and the parties were not diverse.

SOUVENIR: THE KEY TAKEAWAYS

Following the Supreme Court’s decision in Badgerow limiting federal subject matter jurisdiction over arbitration awards, counsel and parties seeking to confirm or vacate arbitration awards must analyze whether their application, on its face, supports an independent basis for federal subject-matter jurisdiction if they wish to bring their application in federal court. Without the “look-through” approach for §§ 9 and 10 petitions, and in particular where the parties to arbitration provisions are citizens of the same state (and thus lack diversity jurisdiction), state courts will more likely be the primary venue for post-award petitions.

FOOTNOTES

1 9 U.S.C. § 4.

2 9 U.S.C. § 9.

3 9 U.S.C. § 10.

4 Vaden v. Discover Bank, 129 S. Ct. 1262, 1268 (2009) (“A federal court may ‘look through’ a § 4 petition and order arbitration if,” notwithstanding the arbitration agreement, “the court would have jurisdiction over ‘the [substantive] controversy between the parties.’” (citations omitted)).

5 Id. at 1273.

6 Id. at 1269.

7 Quezada v. Bechtel OG & C Constr. Servs., Inc., 946 F.3d 837, 841 (5th Cir. 2020) (“After Vaden, a circuit split developed regarding whether the same look-through approach also applies to applications to confirm an arbitration award under section 9, to vacate under section 10, or to modify under section 11.”).

8 Badgerow v. Walters, — S. Ct. —-, 2022 WL 959675, at *3 (2022).

9 Badgerow v. Walters, 975 F.3d 469, 472–74 (5th Cir. 2020).

10 Badgerow v. Walters, 141 S. Ct. 2620 (2021).

11 Justice Breyer in dissent wrote that although the Court’s decision “may be consistent with the statute’s text,” practical application would create curious consequences, artificial distinctions, and results that are “overly complex and impractical.” Badgerow, 2022 WL 959675, at *10 (Breyer, J., dissenting).

12 Badgerow, 2022 WL 959675, at *3.

Copyright 2022 K & L Gates
For more articles about Supreme Court cases, visit the NLR Litigation section.

Full Ninth Circuit Removes Unwarranted Hurdles to Class Certification in Big Tuna Antitrust Case

Court delivers a necessary course correction in the law of class certification.

There was reason for optimism in August 2021, when the Ninth Circuit Court of Appeals granted rehearing en banc of a 2-1 decision that would have made it more difficult for antitrust claimants to secure class certification. The three-judge panel in Olean Wholesale Grocery Coop., Inc. v. Bumble Bee Foods LLC, 993 F.3d 774 (9th Cir. 2021) had determined that Federal Rule of Civil Procedure 23(b)(3) required a district court to find that no more than a de minimis number of class members are uninjured before a class may be certified. Having announced this de minimis rule in its opinion, the court then took the unusual step of inviting the parties to argue whether the full court should rehear the issue en banc.

As we wrote last year when en banc rehearing was granted, with its de minimis rule, “the panel really jumped the median strip.” We argued that the rule conflated the question of whether issues common to the class predominate over issues unique to individual class members with the question of how the class is defined and that the Ninth Circuit’s new and unrealistic de minimis requirement erected an unnecessary procedural hurdle to class certification. Other commentators and amici argued that requiring proof that all but a de minimis number of class members are injured requires a determination on the merits, impermissible at the class certification stage.

In welcome news for claimants and attorneys who bring antitrust class actions, the Ninth Circuit sitting en banc decided against the de minimis rule, for all of the foregoing reasons, in Olean Wholesale Grocery Coop., Inc. v. Bumble Bee Foods LLC, No. 19-56514, 2022 U.S. App. LEXIS 9455 (9th Cir. Apr. 8, 2022).

In a thorough review of the requirements for class certification under Rule 23, the Ninth Circuit held that the movant’s burden is to prove the prerequisites of Rule 23 by a preponderance of the evidence, bringing the Ninth Circuit in line with the law in the First, Second, Third, Fifth, and Seventh Circuits. As for the predominance requirement of a Rule 23(b)(3) class, the court cited In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 311 (3d Cir. 2008) as amended (Jan. 16, 2009), to hold that, when assessing whether a plaintiff has proven that a common question related to a central issue in the claim predominates, a district court is limited to resolving whether the evidence establishes that a common question is capable of class-wide resolution, not whether the evidence in fact establishes that plaintiffs would win at trial.”

In rejecting the de minimis rule, the court began with the notion that class-wide proof is not required for all issues. Thus, the need for individualized assessment of a class member’s damages does not preclude a court from certifying a class. It contradicts this notion to require proof of injury of not more than a de minimis number of class members.

The presence of uninjured class members, the court held, does not defeat predominance. Predominance is defeated only where the class members cannot rely on the same body of common evidence to establish the common issue.

The presence of a large number of uninjured class members, however, could require a district court to consider whether the class definition is “fatally overbroad.” The remedy in that case, the court said, is to “redefine the overbroad class to include only those members who can rely on the same body of common evidence to establish the common issue.” “[T]he problem of a potentially ‘over-inclusive’ class,” the court said, “can and often should be solved by refining the class definition rather than by flatly denying class certification on that basis” (citation and internal quotation omitted).

With that, the Ninth Circuit reversed the three-judge panel and affirmed the certification of the classes by U.S. District Judge Janis L. Sammartino of California’s Southern District*, holding that the district court did not abuse its discretion in concluding that the methodology employed—statistical regression analysis and other expert evidence—”was capable of showing that a price-fixing conspiracy caused class-wide antitrust impact.”  [*Judge Sammartino subsequently recused herself and the case was reassigned to Chief Judge Dana Sabraw.]

The 9-2 decision was written by Circuit Judge Sandra S. Ikuta. In a dissenting opinion, Circuit Judge Kenneth K. Lee said as much as a third of the class members were unharmed. This is a “victory to plaintiffs” who will now be able to settle the action without having to prove their case trial, he said.

The suit was brought by direct purchasers of tuna products, indirect purchasers of bulk-sized tuna products, and individual end purchasers against the owners of Bumble Bee Foods LLC (currently in Chapter 11), StarKist Co., and Chicken of the Sea—which sell more than 80 percent of the packaged tuna in the United States. The industry has also been investigated by the Department of Justice in recent years, resulting in criminal guilty pleas by industry executives for participating in a price-fixing conspiracy.

Nothing in Rule 23 suggests that the presence of more than a de minimis number of uninjured class members affects whether questions affecting only individual class members predominate.

The now vacated de minimis rule conflates impact with damages and the predominance inquiry with potential overbreadth in the class definition. The Ninth Circuit’s en banc decision is a model of clear thinking and a welcome course correction in the law of class certification.

Article By Dan Mogin and Jonathan Rubin of MoginRubin

For more antitrust legal news, click here to visit the National Law Review.

© MoginRubin LLP

Apple Smartwatch Antitrust Case Survives, Showing ‘Freedom of Design’ is Not Absolute

Judge Cites ‘Associated’ Anticompetitive Conduct Claims

It’s a case that challenges the limits of the “freedom of design” usually enjoyed by companies accused of product design changes alleged to harm competition. Ordinarily, a design change is not the kind of conduct that runs afoul of the antitrust laws, but on March 21, U.S. Judge Jeffrey S. White from the Northern District of California denied Apple Inc.’s motion to dismiss an antitrust case brought against it by AliveCor Inc. The suit alleges that Apple unlawfully maintained its monopoly in the market for heart rate analysis apps by updating WatchOS, the Apple Watch operating system on which AliveCor’s heart rate analysis app runs. (AliveCor, Inc. v. Apple Inc., No. 21-cv-03958-JSW, N.D. Calif.).

Heart rate analysis apps analyze the user’s heart rate in real time using a sensor close to the user’s wrist and determine whether the user’s heart rate is normal or irregular. The app runs constantly while the device is worn and alerts the user when a situation arises requiring an ECG recording and medical analysis. AliveCor also sells an electrocardiogram-capable wrist band for the Apple Watch and related WatchOS software that analyzes reading from the band. AliveCor claims that its products—the ECG-wristband hardware and software and its heart rate analysis app—“helped change the perception of the Apple Watch from an accessory to a personal health monitoring tool.”

AliveCor calls its heart rate monitoring app “SmartRhythm.” According to AliveCor, when sales of SmartRhythm took off Apple was inspired to announce an update to WatchOS with its own heart monitoring app designed to exclude AliveCor from the U.S. market for WatchOS heart rate analysis apps.

SmartRhythm works by using data from the Apple Watch’s heart rate algorithm. According to the complaint, Apple’s update to WatchOS altered the heart rate algorithm in a way that prevents third-party developers from being able to detect heart rate fluctuations and irregularities. As a result of these changes, SmartRhythm could not provide accurate heart rate analysis, and AliveCor removed it from the market.

Consequently, Apple is a monopolist in the WatchOS heart rate analysis app market, which AliveCor claims Apple is maintaining with exclusionary design changes to WatchOS, in violation of Section 2 of the Sherman Act, California’s Unfair Competition Law, and Section 17200 of California Business and Professions Code.

The court denied Apple’s motion to dismiss AliveCor’s monopolization claim in what it characterized as the “[single brand] aftermarket for WatchOS apps.” Applying the factors enumerated by the court in Newcal Indus., Inc. v. Ikon Office Sol., 513 F.3d 1038, 1044 (9th Cir. 2008), the court found that the WatchOS app aftermarket was wholly derivative from the primary smartwatch market, the alleged restraint applied only to the aftermarket, Apple’s aftermarket power was not obtained through contract terms reached in the primary market, and that competition in the smartwatch market does not discipline anticompetitive practices in the WatchOS app aftermarket. Accordingly, the court ruled that AliveCor’s market definition met the Newcal standards for a “single product” relevant market.

Apple argued that a company that improves a product to the benefit of consumers does not violate antitrust laws “absent some associated anticompetitive conduct,” citing the leading “freedom of design” case of Allied Orthopedic Appliances Inc. v. Tyco Health Care Group LP, 592 F.3d 991, 998-99 (9th Cir. 2010). The court quoted the holding of Allied: “If a monopolist’s design change is an improvement, it is necessarily tolerated by the antitrust laws, unless the monopolist abuses or leverages its monopoly power in some other way when introducing the product.”

Apple argued that its update to WatchOS was purely a design change that benefitted users, with no associated anticompetitive conduct. It observed that AliveCor hadn’t established that consumers use Apple’s app instead of some third-party app, or that Apple rejected any third-party apps, or that no other third-party heart apps are available to Apple Watch users. But the court rejected those arguments, noting that Apple failed to provide any legal authority that would require such allegations.

Apple ignored AliveCor’s allegations that Apple abused or leveraged its monopoly power “in some other way” by changing its heart rate algorithm to make it effectively impossible for third parties to inform a user when to take an ECG. AliveCor contended that Apple’s updated heart rate algorithm, which was pushed out to all earlier Apple Watch models, did not improve user experience. Its purpose was to prevent third parties from identifying irregular heart rates and offering competing apps based on that data. “These allegations present the type of ‘associated conduct’ that makes product design changes cognizable under antitrust law. Plaintiff’s allegations plausibly establish that Apple’s conduct was anticompetitive,” Judge White held. A case management conference set for May 20.

Commentary

It is truly difficult to see how some separate, “associated” conduct by Apple other than its design change to WatchOS violates Section 2. It seems more straightforward to consider the design change itself to be a cognizable anticompetitive act. It may be time to drop the fiction maintained in Allied v. Tyco that design changes are “never” antitrust violations unless accompanied by some “other” conduct. Here, Apple has created the market itself in the form of an OS platform used by millions of consumers who depend on it to access all manner of competing complementary products. Under those circumstances, it should be uncontroversial to hold a platform operator liable under the antitrust laws for design changes that exclude competitors or foreclose participants from the market, without indulging in the fiction of “associated” conduct.

Article By Jonathan Rubin of MoginRubin

For more antitrust legal news, click here to visit the National Law Review.

© MoginRubin LLP

Ohio Court of Appeals Affirms $30 Million Libel Verdict Against Oberlin College

The Ohio Court of Appeals affirmed a judgment in excess of $30,000,000 against Oberlin College, holding that Oberlin was responsible for libelous statements made during the course of a student protest. Gibson Bros., Inc. v. Oberlin College, 2022 WL 970347 (Ohio Ct. App. March 31, 2022). The court’s rationale, if followed elsewhere, could lead to significantly broader institutional and corporate liability for statements by students and employees.

The case arose out of an incident in which an employee of the Gibson Brothers Bakery and Food Mart accused a black student of shoplifting, and then pursued and held the student until police arrived. Over the next few days, large groups of student protestors gathered outside the bakery and among other things handed out a flyer describing the incident as an “assault,” and stating that the bakery had a “long account of racial profiling and discrimination.” The day following the incident, the student senate passed a resolution calling for a boycott. It likewise described the incident as an assault on the student and stated that the bakery had a “history of racial profiling and discriminatory treatment of students….” The resolution was emailed to the entire campus and posted on the senate bulletin board, where it remained for over a year. The court found the statements to be factually untrue, because the student pled guilty to the shoplifting charge and admitted racial profiling did not occur, and the College presented no evidence of any past racial profiling or instances of discrimination at the bakery.

The court acknowledged that there was no evidence that Oberlin participated in drafting the flyer or the student senate resolution. Instead, the court found Oberlin liable on the theory that one who republishes a libel, or who aids and abets the publication of a libelous statement, can be liable along with the original publisher. As to the flyer, the court cited the following as evidence sufficient to support a jury finding that Oberlin had either republished or aided and abetted its publication:

  • Oberlin’s Dean of Students attended the protests as part of her job responsibilities;
  • the Dean of Students handed a copy of the flyer to a journalist who had not yet seen it and told students they could use a college copier to make more copies of the flyer;
  • the associate director of a multicultural resource center was seen carrying a large number of flyers, which he appeared to be distributing to others to redistribute to the public; and
  • the College provided a warming room with coffee and pizza at a site near the protests.

As to the student senate resolution, the court cited:

  • the senate was an approved organization;
  • the College created the senate’s authority to adopt and circulate the resolution;
  • the senate faculty moderator was the Dean of Students; and
  • despite having knowledge of the content of the resolution, neither the President nor the Dean of Students took any steps to require or encourage the student senate to revoke the resolution or to remove it from the bulletin board.

The court then held that despite the publicity the bakery received once the dispute arose, at the time of the protests and resolution the bakery and its owners were private persons, not public figures. Thus, the bakery only had to show that Oberlin had been negligent, rather than that it acted with reckless indifference as to the truth or falsity of the statements published.

Particularly in these polarized times, university administrators should be aware of and take steps to manage legal risks when external disputes become the subject of campus discussion and activism. Student organizations, faculty and administrators should be reminded that, to the extent they participate in protests or other public commentary outside their official roles, they should make clear they are acting for themselves and not the institution. Institutional responses to causes espoused by students or faculty need to be carefully vetted to assure that any factual assertions about third parties are accurate.

Article By Barry P. Kaltenbach and Robert T. Zielinski of Miller Canfield

For more litigation legal news, click here to visit the National Law Review.

© 2022 Miller, Canfield, Paddock and Stone PLC

So You Wanna Play with Copyright? “Joyful Noise” Ostinato Isn’t Original Expression

The US Court of Appeals for the Ninth Circuit affirmed a district court’s order vacating a jury award of damages for copyright infringement and granting judgment as a matter of law, explaining that the musical work alleged to have been copied did not qualify as an original work of authorship but consisted only of “commonplace musical elements.” Marcus Gray PKA Flame et al. v. Katheryn Elizabeth Hudson PKA Katy Perry et al., Case No. 20-55401 (9th Cir. Mar. 10, 2022) (Clifton, Smith, Watford, JJ.)

Key Definitions:

  • A musical scale is a sequence of musical notes or tones by pitch.
  • A subset of seven notes is called the minor scale and can be referred to with alphabetic names (A, B, C, etc.) or scale degrees (1, 2, 3, etc.).
  • An ostinato is a repeating musical figure (for example, 3-3-3-3-2-2).

In 2007, Marcus Gray (Flame) purchased an ostinato and used it in the song “Joyful Noise.” The song was released in 2008. While “Joyful Noise” did not achieve significant commercial success or airtime, it received millions of views online. In 2013, American singer-songwriter Katy Perry created “Dark Horse,” which was a hit, resulting in her performance at the Super Bowl halftime show in 2015.

The “Joyful Noise” ostinato consists of notes, represented as 3-3-3-3-2-2-2-1 and 3-3-3-3-2-2-2-6, whereas Dark Horse’s ostinato contains 3-3-3-3-2-2-1-5. Both have a uniform rhythm and equal note duration in time.

Plaintiffs sued Perry and her co-defendants for copyright infringement. Plaintiffs presented circumstantial evidence that the defendants had a reasonable opportunity to access “Joyful Noise” and that the ostinatos in both songs were substantially similar. Plaintiffs did not present direct evidence that Perry and the others had copied elements of the song, instead relying on testimony from their expert musicologist, Dr. Todd Decker.

Decker testified that the ostinatos were similar in many aspects, but he also testified that there was no single element that caused him to believe the ostinatos at issue were “substantially similar” when viewed “in isolation.” The jury also heard testimony from Perry’s expert, who disagreed altogether that the ostinatos were substantially similar.

The jury found that the defendants had a reasonable opportunity to hear “Joyful Noise” before composing “Dark Horse,” that the two songs contained substantially similar copyrightable expression and that “Dark Horse” used protected material from “Joyful Noise.” The jury found the defendants liable for copyright infringement and awarded $2.8 million in damages. The district court vacated the award and granted judgment as a matter of law to defendants, concluding that the evidence at trial was legally insufficient to show that the “Joyful Noise” ostinato was a copyrightable original expression. The plaintiffs appealed.

The Ninth Circuit explained that because the plaintiffs did not present any direct evidence that the defendants copied the “Joyful Noise” ostinato, they were required to show that the defendants had access to the work and that the ostinatos were substantially similar.

The Ninth Circuit began with its analysis of the “substantially similar” prong, employing a two-part test having “extrinsic” and “intrinsic” components. The Court noted that while it must refrain from usurping the jury’s traditional role of evaluating witness credibility and weighing the evidence, the extrinsic test requires that the Court ensure that the evidence of objective similarities between two works is legally sufficient to serve as the basis of a copyright infringement claim, regardless of the jury’s views. The Court explained that the substantial similarity test focuses on the protectable elements standing alone and disregards non-protectable elements.

To be a protectable element under copyright law, the “Joyful Noise” ostinato had to qualify as “original expression.” Based on the trial record, the Ninth Circuit found that the “Joyful Noise” ostinato consisted entirely of commonplace musical elements, and that the similarities between the two ostinatos did not arise out of an original combination of these elements. Without original expression, no element identified by Flame was individually copyrightable. For example, the Court noted that “the fact that Joyful Noise and Dark Horse both make use of sequences of eight notes played in an even rhythm is a trite musical choice outside the protection of copyright law.”

Finding the evidence presented at trial legally insufficient to establish that the musical elements were individually copyrightable, the Ninth Circuit determined that the jury’s verdict finding defendants liable for copyright infringement was unsupported by substantial evidence. Thus, the Court affirmed the trial court’s grant of judgment as a matter of law.

Article By Jodi Benassi of McDermott Will & Emery

For more intellectual property legal news, click here to visit the National Law Review. 

© 2022 McDermott Will & Emery

The Rocky Waters of Absentee Ballots

This Legal Update will help you navigate through those rough waters involving absentee ballots.

Absentee Voting

No election issue seems to be more of a lightning rod over the past year than absentee voting. While voting absentee has always occurred, this alternative voting option has been thrust into the spotlight due to the COVID-19 pandemic and the public scrutiny onslaught since the 2020 Presidential Election.

Wisconsin has been at the forefront of a variety of conflicts over absentee voting. Presently, a lawsuit is pending before the Wisconsin Supreme Court concerning absentee voting and the use of ballot boxes, which are drop boxes some municipalities used to collect absentee ballots throughout the pandemic. In January 2022, a Waukesha County Circuit Court Judge ruled against the use of ballot boxes; however, the Wisconsin Court of Appeals stayed that Judge’s ruling due to the close proximity of the February 15, 2022, election primary. The Wisconsin Supreme Court then took over the case from the Court of Appeals and, on February 11, 2022, issued a temporary decision allowing ballot boxes for the February 15, 2022, primary but not the April 5, 2022 election. Local officials continue to wait for the Wisconsin Supreme Court’s final decision, which hopefully will provide greater legal direction for absentee ballots.

In the meantime, following are FAQs on the fundamentals for absentee voting.

Who is an absentee elector?

An absent elector is a qualified voter, but who is unable or unwilling to appear in person, at the polling place in his or her applicable ward or election district to vote. An individual can choose to vote absentee for any reason.

What are the qualifications for voting absentee?

Most registered Wisconsin voters can vote absentee by mail. The specific qualifications are: (1) be a U.S. citizen, (2) be at least 18 years old, and (3) have resided in their voting district for at least 28 days.

What is an absentee ballot?

An absentee ballot is used by an absent voter to cast their vote. The ballot is printed and sealed in an envelope, that then needs to be mailed or hand-delivered to the municipal clerk. The municipal clerk will ensure that the absentee ballot is received by the proper polling place on election day, as long as the municipal clerk receives the ballot on time. The law provides specific requirements concerning timeframes regarding valid absentee ballots – those details are beyond the scope of this article and it is encouraged to consult with legal counsel for further direction.

Do the same absentee voting rules apply to military and overseas voting?

No. Military and overseas voters have special rules as well as additional options for voting. For instance, they can access their absentee ballot online.

How can a voter request an absentee ballot?

An absentee ballot can be requested in the following ways: by mail, by email, online, by fax, or in person. To find out more specific information to your voting district, you should go to your municipality’s website.

What about the use of drop boxes for an absentee ballot?

There is substantial debate currently regarding the use of ballot drop boxes for absentee ballots. It is strongly encouraged to communicate with legal counsel concerning this issue. However, given the pending Waukesha County Court case referenced above and in consideration of the WEC’s withdrawal of its guidance in that case, the safest approach would be to refrain from using a drop box until further direction from the Wisconsin Supreme Court.

This information is provided as a review of the fundamental requirements when it comes to balloting. Ideally, this information will be available for reference when basic questions or conflicts occur for a quick resolution. Nevertheless, more complicated questions may arise and it is strongly encouraged to reach out to your legal counsel for timely answers as these issues develop.

©2022 von Briesen & Roper, s.c
For more articles about elections, visit the NLR election & Legislative section.