Tag: supreme court

US Supreme Court Holds that Juries Should Decide the Issue of Trademark Tacking

Mintz Levin Law Firm

In the first substantive trademark decision it has issued in a decade, the US Supreme Court, in  Hana Financial, Inc. v. Hana Bank, case number 13-1211 (January 21, 2015), affirmed the Ninth Circuit by holding that whether two marks may be tacked for purposes of determining priority is a question for the jury.

The case involved two organizations providing financial services to individuals in the United States. The Respondent Hana Bank had been operating under that name in Korea since 1991, and first began to advertise its services to Korean expatriates in the US in 1994. Advertisements for those services in the US first appeared in Korean and in English under the name “Hana Overseas Korean Club,” and included the name “Hana Bank” in Korean. In 2000, it changed the name of “Hana Overseas Korean Club” to “Hana World Center,” and in 2002 began operating a bank in the United States under the name “Hana Bank.” This latter enterprise was its first physical presence in the United States.

Petitioner Hana Financial was established in 1994 as a California corporation and began using that name and an associated trademark in 1995. In 1996, it obtained a federal trademark registration for a logo design incorporating the name “Hana Financial” for use in connection with financial services.

In 2007, Hana Financial sued Hana Bank alleging trademark infringement. Hana Bank denied infringement by claiming that under the tacking doctrine it had priority of use of the mark “Hana” for financial services in the United States. The trial jury found in favor of Hana Bank and the Ninth Circuit affirmed that decision on appeal. Since there was a split among the federal circuit courts as to whether tacking should be decided by juries or judges, the Supreme Court granted Hana Financial’s writ of certiorari.

So what is “tacking”? The general rule is that use of two marks may be “tacked together” for purposes of establishing priority of use when the original mark and the revised mark are “legal equivalents.” Marks are “legal equivalents” when they “create the same, continuing commercial impression” so that consumers “consider both as the same mark.” There is no dispute that the commercial impression that a mark conveys must be viewed through the eyes of the consumer. Thus, Justice Sotomayor, writing for a unanimous Court, stated that pursuant to long recognized doctrine, “when the relevant question is how an ordinary person or community would make an assessment, the jury is generally the decisionmaker that ought to provide the fact-intensive answer.” Accordingly, the Court held that when the facts do not warrant entry of summary judgment or judgment as a matter of law on the question of tacking, the question of whether tacking is warranted must be decided by a jury.

The lesson here for trademark owners is to ensure that archival records of your use of your marks over time are diligently maintained. This will help ensure that in the event the mark is changed in any way for purposes of modernization or otherwise, you have sufficient evidence to prove your earliest date of first use of the “legally equivalent” mark to defend against claims of infringement.

ARTICLE BY

Susan Neuberger Weller
OF
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

Will The EEOC Get its Wings Clipped? Mach Mining's Challenge to the EEOC Before the Supreme Court

On Jan. 13, during oral argument, U.S. Supreme Court Justice Antonin Scalia echoed businesses’ skepticism about the EEOC’s pre-suit settlement strategy, saying  “there is considerable incentive on the EEOC to fail in conciliation so that it can bring a big­deal lawsuit and get a lot of press and put a lot of pressure on this employer and on other employers. There are real incentives to have conciliation fail.”

Justice Scalia made his comments in the case of Mach Mining L.L.C. v. Equal Employment Opportunity Commission. In the Mach Mining case, the EEOC sued the company for sex discrimination on behalf of a class of women who were denied jobs. The EEOC’s pursuit of high-profile litigation (accelerated during the Obama Administration and intended to “send a message to employers”)  is supposed to come after the EEOC has attempted to conciliate discrimination charges. But that conciliation process, and–in particular, court review of that process—is now before the Supreme Court.

By law, the EEOC is to “conciliate” cases after having found “reasonable cause” that a violation of the law has occurred, andbefore filing a lawsuit against the employer. Importantly, the language of Title VII specifically requires the EEOC to “endeavor to eliminate” alleged discrimination by “informal methods of conference, conciliation, and persuasion.”

But, after the EEOC filed suit against Mach Mining, the company accused the EEOC of failing to conciliate in good faith. The battle over the “good faith” conciliation has derailed the underlying case and for nearly two years, the case has been mired in a mini-battle about whether the EEOC has discretion on conciliation, or its conduct should be reviewed by a court. The EEOC’s position is that it has the discretion and should not be second-guessed; Mach Mining insists that “conference, conciliation, and persuasion” must be done in good faith, and subject to court review.

During the oral argument, Chief Justice Roberts said, “I am very troubled by the idea that the government can do something and we can’t even look at whether they’ve complied with the law.” Justice Kennedy noted that he couldn’t find another situation in which a court “has essentially declined to review a statutory precondition” to filing a lawsuit.

Yet, some justices were sympathetic to the EEOC’s position that companies are turning conciliation tactics into a legal strategy– to fight the EEOC about “good faith” conciliation to avoid and prolong the underlying discrimination case.

In the end, there seemed to be some agreement that judicial review of the conciliation process is appropriate, but, as Justice Breyer queried, “the issue is how much.” The lawyers and justices hinted at several options, even including directing the EEOC to issue regulations. Mach Mining and its supporters hope that the prospect of court review will cause the EEOC to be reasonable in its demands to employers before rushing to the Courthouse.

For more detailed legal analysis, visit the Supreme Court blog.

ARTICLE BY

Jeanine M. Gozdecki
OF
Barnes & Thornburg LLP

The “Top Ten” Intellectual Property Stories of 2014 (Most “Definitely”)

Schwegman Lundberg Woessner

I don’t think I can recall a more action-packed year for intellectual property law in my career, much less during the almost six years that I have been writing this blog. I am trying to write this while in transit, so there will be few footnotes or cites, but they are easy enough to find in my past posts, or online. I am not even sure that I outlined ten stories before I started typing, but here goes — in no particular order.

1,2,3 and 4. Mayo meet Alice meet Myriad – The Tortuous Path of s.101.

Although only Alice was decided in 2014, the excitement really started with the unexpected release of the PTO “Life Sciences” Guidelines in March (No. 1 Story). The draft Guidelines directed Examiners to reject claims to products of nature unless they were significantly different in structure from the products in their natural states, and declared that simple “If A, then B” diagnostic claims were patent-ineligible as attempts to patent natural phenomena.

The Guidelines were continuously criticized as based on a misreading of the earlier Mayo and Myriad S.Ct. decisions and were released in a revised form in December (No. 2 Story) via publication for comment in the Fed. Reg. The revised Guidelines recognized that the standards for claiming diagnostic tests were in flux but permitted consideration of functional differences in resolving the PE of natural products.

However, only a few days later, in U. of Utah Res. Fndn v. Ambry, (No. 3 Story) the Fed. Cir. held that primers could not be patented if not structurally changed from their natural sequence. Judge Dyk, writing for the panel, simply misread Myriad as holding that no isolated product of nature — as opposed to no naturally occurring DNA — could be patented unless it was markedly different than in its natural state. This decision followed the earlier invalidation of the claims to Dolly the cloned sheep in In re Roslin in which Judge Dyk, declared that no naturally-occurring living organism is patentable. The Utah panel also held that claims to comparing a subject’s DNA sequence to a reference sequence, wherein the claim also recited PCR amplification or probing, did not escape the Mayo requirement for an additional inventive concept in additional to the abstract idea of comparing sequences. This decision is ripe for rehearing en banc, if only to correct Judge Dyk’s manifest misreading of Myriad (and to keep the PTO Guidelines under some judicial control).

The title of this “news story” is meant to point up the tsunami-like “abstract idea” judicial exception to s. 101 patent-eligibility (PE). The Mayo v. Prometheus decision only mentions “abstract idea” once, and it is to cite to an earlier decision. The S. Ct. in Mayo reversed the Fed. Cir., holding that a claim reciting a natural phenomenon was required to recite some further inventive concept in order to be “significantly more” than a claim preempting use of the phenomenon. In Bilski, the Fed. Cir. fashioned the “machine or transformation test”. Judge Rader’s dissenting argument that a claim to hedging commodity risk was no more than an attempt to claim an abstract idea. The S. Ct. agreed with Judge Rader.

In Alice Bank, (No. 4 Story) the S. Ct. managed to marry the Mayo “test” for PE to the abstract idea exception of Bilski. The Court applied a two-step test. First, decide if a claim involves an abstract idea and then examine the claim to see if it contains significantly more than elements that are conventional and routine in the relevant art. Now, enter Utah Res. Foundation (Myriad) v. Ambry. While Ambry argued that the diagnostic claims were no more than an attempt to claim a natural phenomenon (mutations in DNA), the Fed. Cir. took a different tack and looked to itsMyriad decision for guidance.

And, lo and behold, at the Fed. Cir. level, Judge Lourie wrote that the DNA comparison claims were not PE, since they were directed to an abstract idea(!) So the Fed. Cir., simply applied the Mayo test as articulated in Alice and invalidated the method claims asserted by Myriad as attempts to claim an abstract idea, albeit with a bit of window dressing (PCR and probing). In the coming year, I can only hope that the PE of a simple “If A, then B” diagnostic claim will be resolved. And I also hope that Judge Breyer is not writing for the majority.

5. Kimble v. Marvel. The S. Ct. granted cert. to revisit the question of whether or not a requirement that a licensee pay post-expiration date royalties for a patent license is per se illegal (as it is presently).

6. Nautilus v. Biosig. While the S. Ct. tried to raise the bar for meeting s. 112(b) by requiring that claim elements be defined with “reasonable certainty,” rather than by the Fed. Cir.’s requirement that the meaning of the element not be “insolubly ambiguous” or “amenable to construction.” It is not at all clear where the new bar has been set.

7. Teva v. Sandoz. The S. Ct. granted cert. to resolve the question of whether or not it is proper for the Fed. Cir. to conduct de novo review of the district courts’ factual findings during claim construction. By the way, what is a mixed question of law and fact and how is a court to review them separately? Appeal to the Fed. Cir. and find out!

8. American Calcar v. American Honda Motors. This convoluted case stands for the observation that the inequitable conduct defense has risen from the grave of legal doctrines, to which it had been consigned by many commentators. Still, to prevail on this defense, a defendant is greatly assisted by the presence of a single (or perhaps two) “bad actors” who do things like try to patent a competitor’s drug — which, remarkably was the factual posture of two cases before the Fed. Cir. last year. You can advocate with vigor; just don’t lie.

9. Commil v. Cisco. Although the question present in the granted petition for cert. seems narrow (To what extent can evidence of a good faith belief in non-infringement negate the element of intent required to induce infringement?), this appeal is evidence that the S. Ct. is not yet tired of the challenges posed by Title 35.

10. Progress in Regulations Affecting Bringing Biosimilars to Market. In August, the FDA released its “Purple Book” listing approved reference products and actually accepted an application for a biosimilar “generic”. While some commentators feel that it will be more effective to re-conduct phase III trials than to try to navigate the hostile regulatory hurdles thrown up by the agency, the availability of biosimilar drugs seems inevitable.

ARTICLE BY

Warren Woessner
OF
Schwegman, Lundberg & Woessner, P.A.

U.S. Supreme Court Clarifies Procedures for Removal to Federal Court under Class Action Fairness Act

Jackson Lewis Law firm

In a divided 5-to-4 opinion, the U.S. Supreme Court has held that defendants seeking to remove a case to federal court under the Class Action Fairness Act (“CAFA”) need only allege in the notice of removal an amount in controversy in excess of the $5 million threshold and need not attach evidence to the notice of removal proving the amount in controversy. Dart Cherokee Basin Operating Co., LLC v. Owens, No. 13-719 (Dec. 15, 2014).

Reversing the Tenth Circuit Court of Appeals’ decision, the majority opinion (authored by Justice Ruth Bader Ginsburg and joined by Chief Justice John Roberts and Justices Stephen Breyer, Samuel Alito, and Sonia Sotomayor) held that a notice of removal need not contain evidentiary submissions because the plain language of the removal statute itself requires only a “short and plain statement of the grounds for removal.”

Background

In the case below, the plaintiff, Brandon Owens, had filed a putative class action in Kansas state court alleging that defendants Dart Cherokee Basin Operating Company, LLC and Cherokee Basin Pipeline, LLC underpaid royalties they owed to Owens and the putative class members under oil and gas leases. The complaint failed to plead a specific amount of damages, seeking only “a fair and reasonable amount” of damages on behalf of Owens and the putative class members.

The defendants removed the case to the U.S. District Court for the District of Kansas under CAFA. In their notice of removal, the defendants alleged that the purported underpayments to the putative class members totaled more than $8.2 million, but defendants did not attach to their notice of removal any evidence to support the alleged amount in controversy. The plaintiff moved to remand the case, alleging that the defendants’ notice of removal was deficient because it failed to include evidence proving the amount in controversy exceeded the $5 million threshold under CAFA. The District Court granted the plaintiff’s motion to remand. A divided Tenth Circuit Court of Appeals subsequently denied defendants’ petition for review and petition for en banc review.

Supreme Court Decision

In the majority opinion, the Supreme Court noted the federal statute setting forth the requirements for a notice of removal (28 U.S.C. § 1446(a)) requires only that the notice contain “a short and plain statement of the grounds for removal.” The majority went on to note that, “[b]y design, § 1446(a) tracks the general pleading requirement stated in Rule 8(a) of the Federal Rules of Civil Procedure” and that the legislative history of § 1446(a) indicates the statute was intended to “simplify the pleading requirements for removal and . . . clarify that courts should apply the same liberal rules [to removal allegations] that are applied to other matters of pleading.”

The majority went on to explain that “when a defendant seeks federal-court adjudication, the defendant’s amount-in-controversy allegation should be accepted when not contested by the plaintiff or questioned by the court.” When the plaintiff does contest the defendant’s amount-in-controversy allegation, the majority held, “both sides submit proof and the court decides, by a preponderance of the evidence, whether the amount-in-controversy requirement has been satisfied.” The majority concluded by stating that a notice of removal need only include “a plausible allegation” that the amount in controversy is met, and evidence to establish the amount in controversy is required only when the amount in controversy is contested by the plaintiff or questioned by the court.

Dissenting Opinion

 Justice Antonin Scalia’s dissent (which was joined by Justices Anthony Kennedy and Elena Kagan, and joined in part by Justice Clarence Thomas) did not focus on the underlying question regarding the requirements for removal under CAFA. The dissent questioned whether the Supreme Court could even address the substantive issue in light of certain procedural and jurisdictional questions, and does not call into question the reasoning of the majority’s substantive holding.

***

The majority’s opinion resolves a prior split among circuit courts regarding a defendant’s burden when removing a case under CAFA. The law is now settled that a removing defendant need only make a good faith allegation in the notice of removal regarding the amount in controversy in order to meet its burden on removal. Only if the amount in controversy is challenged must a defendant offer evidence. Moreover, the majority made it clear that there is no presumption against removal jurisdiction in cases removed under CAFA, rejecting an argument often made by the plaintiffs contesting removal under CAFA.

ARTICLE BY

William J. Anthony
OF
Jackson Lewis P.C.

Nation’s Highest Court Schedules Oral Arguments in King v. Burwell re: Affordable Care Act

Sheppard Mullin Law Firm

A Supreme Court of the United States (SCOTUS) spokesperson announced on December 22, 2014, that the Court will hear oral arguments in King v. Burwell on March 4, 2015. This means that not only could the highest court soon resolve the circuit split on the case’s key issue, but that the future course of the landmark Affordable Care Act (ACA) could be decided as soon as June 2015.

At issue in King is whether a May 2012 IRS rule should be upheld or stricken.[1] The rule provides that health insurance premium tax credits are available to all U.S. taxpayers, irrespective of whether they obtain coverage through a state or federal exchange. Challengers to the IRS rule contend that the plain language of the ACA restricts the availability of the tax credits to health insurance policies purchased through state exchanges and not through the federal exchange. Reading the ACA statutory language strictly, challengers note that there is no alternative interpretation to the words noting that premium tax credits are available for plans obtained “through an Exchange established by the State under section 1311” of the Act.[2] (italics added).

The government has countered that other provisions of the ACA support the legislative intent of Congress—that the premium tax credits are meant to be made available for all taxpayers nationwide, including those who purchase plans on the federal exchange. It has noted that the IRS rule should not be invalidated because of a simple drafting error.

Earlier this year in July, the U.S. Court of Appeals for the Fourth Circuit had unanimously concluded in King that the ACA was ambiguous on the question of whether the tax credits applied to plans purchased through the federal exchange. Because of this, it allowed for the government to have a “reasonable interpretation” of the ACA via the IRS rule.[3]This decision directly conflicted with the July 2014 U.S. Court of Appeals (District of Columbia) decision in Halbig v. Burwellon the same issue.

The D.C. Court sided with the plain language interpretation and restricted the tax credits to plans purchased through the state exchanges. The Court subsequently vacated the decision and is not expected to render its opinion until Spring 2015.

If SCOTUS resolves the circuit split in favor of the challengers, there are several potential implications that could leave millions of Americans without health insurance:

  • Coverage would be less affordable for those on the federal exchange;

  • Without the tax credit, individuals would be exempt from the individual mandate;[4] and

  • The ACA employer “pay-or-play” provision would not apply to as many employers.

The latter implication is likely due to the fact that pay-or-play penalties are triggered only if a covered employer fails to offer health insurance coverage and an employee takes advantage of a tax subsidy by purchasing an exchange plan.  Without premium tax credits or subsidies available through the federal exchange, fewer employers would be penalized for failure to provide coverage in the first place.

The Supreme Court’s decision in the summer of 2015 may set the tone for the longevity of the ACA in light of the most recent mid-term elections.

ARTICLE BY

Florence T. Wang
OF
Sheppard, Mullin, Richter & Hampton LLP

[1] See 26 C.F.R. § 1.36B–1(k); Health Insurance Premium Tax 7 Credit, 77 Fed.Reg. 30,377, 30,378 (May 23, 2012) (collectively the “IRS Rule”).

[2] See ACA § 1401(a), codified at 26 U.S.C. § 26B(c)(2)(A)(i).

[3] The Fourth Circuit U.S. Court of Appeals opinion can be found here.

[4] As a matter of law, health insurance would be “unaffordable” and the individual mandate would be waived. See 26 U.S.C. § 5000A.

United States Supreme Court Round-Up: Key Opinions from 2013 to 2014 and Upcoming High-Profile Business Disputes

Andrews Kurth

The 2013–2014 term of the United States Supreme Court resulted in a wide range of decisions of importance to business. In this article, we highlight some of the key opinions and explore their likely impacts. We also preview a few of the high-profile business disputes the Supreme Court has agreed to hear next term.

Key Business Cases from the 2013–2014 Term

American Chemistry Council v. Environmental Protection Agency: Holding: The Environmental Protection Agency (EPA) reasonably interpreted the Clean Air Act to require sources that would need permits based on their emission of chemical pollutants to comply with “best available control technology” for greenhouse gases. Effect: The decision reinforces the Supreme Court’s previous recognition that the EPA has the power to regulate greenhouse gases as pollutants. However, portions of the decision strongly cautioned the EPA against overreach, stating that the agency may not “bring about an enormous and transformative expansion in [its] regulatory authority without clear congressional authorization.” These comments suggest that the Supreme Court may take a hard line when the Obama Administration’s other climate regulations eventually go to court.

Daimler AG v. Bauman: Holding: A foreign company doing business in a state cannot be sued in that state for injuries allegedly caused by conduct that took place entirely outside of the United States. Effect: Daimler makes it much harder for plaintiffs to establish general jurisdiction over foreign entities. The opinion re-characterizes general jurisdiction as requiring the defendant to be “at home” in the state, a circumstance that the Supreme Court suggested will generally be limited to the places where the defendant is incorporated or where it has its principal place of business. Moreover, the fact that a domestic subsidiary whose activities are imputed to the foreign parent may be “at home” in the state will not make the foreign parent “at home” in that locale for purposes of general jurisdiction.

Halliburton v. Erica P. John Fund, Inc.: Holding: Plaintiffs in private securities fraud actions must prove that they relied on the defendants’ misrepresentations in choosing to buy stock. Basic v. Levinson’s holding that plaintiffs can satisfy this reliance requirement by invoking a presumption that the price of stock as traded in an efficient market reflects all public, material information, including material misstatements, remains viable. However, after Halliburton, defendants can defeat the presumption at the class certification stage by proving that the misrepresentation did not in fact affect the stock price. Effect: While investors will continue to pursue class actions following large dips in stock prices, the Halliburton decision helps to level the playing field by providing defendants a mechanism to stop such suits at the class certification stage.

Lawson v. FMR LLC: Holding: Employees of privately held contractors or subcontractors of a public company are protected by the anti-retaliation provision of the Sarbanes-Oxley Act of 2002 (SOX). Effect: Following Lawson, there will likely be an increase in SOX litigation against public and non-public companies. Because many of the issues concerning the scope and meaning of SOX have yet to be resolved, lower courts will continue to wrestle with defining the parameters of the law. Questions left unanswered byLawson include whether the whistleblower’s accusation must be related to work he or she performed for the company and whether the contract with the public company must have some relation to public accounting or securities compliance.

Chadbourne & Park LLP v. Troice: Holding: The Securities Litigation Uniform Standards Act of 1988 (SLUSA) does not preclude state-law class actions based on false representations that the uncovered securities that plaintiffs were purchasing were backed by covered securities. Effect: SLUSA bars the bringing of securities class actions “based upon statutory or common law of any state” in which the plaintiff alleges “a misrepresentation or omission of a material fact in connection with a purchase of sale of covered securities.” The statute defines “covered securities” to include only securities traded on a national securities exchange or those issued by investment companies.

U.S. v. Quality Stores: Holding: Severance payments to employees who are involuntarily terminated are taxable wages for purposes of the Federal Insurance Contributions Act. Effect: Employers should, under most circumstances, treat severance payments to involuntarily terminated employees as wages subject to FICA taxes. There are exceptions, however, and employers should therefore seek legal counsel to assist in determining the tax status of a particular severance arrangement.

Business Cases to Watch in the 2014–2015 Term

Integrity Staffing Solutions v. Busk: Whether time spent in security screenings is compensable under the Fair Labor Standards Act.

Mach Mining v. Equal Employment Opportunity Commission: Whether and to what extent a court may enforce the Equal Employment Opportunity Commission’s mandatory duty to conciliate discrimination claims before filing suit.

Omnicare v. Laborers District Council Construction Industry Pension Fund: Whether, for purposes of a claim under Section 11 of the Securities Act of 1933, a plaintiff may plead that a statement of opinion was untrue merely by alleging that the opinion itself was objectively wrong, or must the plaintiff also allege that the statement was subjectively false through allegations that the speaker’s actual opinion was different from the one expressed.

Young v. UPS: Whether, and in what circumstances, an employer that provides work accommodations to non-pregnant employees with work limitations must provide work accommodations to pregnant employees who are similar in their ability or inability to work.

As in recent years, the Supreme Court continues to grant review on more and more cases involving matters of concern to U.S. businesses. Andrews Kurth attorneys are available to provide further detail and guidance on the decisions highlighted here, and on any other issues of concern to your company that have reached the high court.

ARTICLE BY

Kelly Sandill
OF
Andrews Kurth

SCOTUS Grants Certiorari to Two Immigration-Based Cases for 2015 Term: Will the Government Have to Explain Its Exercise of “Discretion”?

Greenberg Traurig Law firm

The United States Supreme Court is back in session as of last Monday, Oct. 6—often referred to as “First Monday” due to the fact that the term must begin on the first Monday of October by law. Among its roughly 50 case docket, featuring headliners that will refine Fourth Amendment jurisprudence and agency regulatory authority, the Justices will tackle two cases that stand to have a considerable impact on American immigration law and procedure.

The first of those cases, Mellouli v. Holder, concerns the issue of whether a noncitizen—even a green card holder—can be mandatorily detained and deported for possessing drug paraphernalia.Section 237(a)(2)(B)(i) of the Immigration and Nationality Act broadly authorizes the deportation of noncitizens that find themselves caught up in charges related to a “controlled substance.” Currently, the circuits are split as to whether the drug paraphernalia itself, the possession of which is prohibited by some states, must be related to a substance listed in Section 802 of Title 21, the Controlled Substances Act, in order to properly form the basis of a deportation order under the immigration laws.

The defendant, Moones Mellouli, is a lawful permanent resident who earned two master’s degrees and worked as an actuary. He was convicted of a Kansas misdemeanor offense, “possession of drug paraphernalia,” a charge that did not make reference to a controlled substance. In fact, his conduct would constitute a crime neither under federal law nor under the laws of many states. Nonetheless, U.S. Immigration and Customs Enforcement (“ICE”) arrested Mellouli and sought to deport him for violating a state law “relating to a controlled substance.” This case could also simultaneously serve as a conduit for showing the public at large how draconian adherence to prioritizing the prosecution of “alien criminals” produces undesirable effects, such as insufficient due process and wildly disproportionate consequences—like deportation—for minor offenders.

The second case, Kerry v. Din, also has at its base important due process concerns. Here, they flow from a U.S. citizen petitioner’s rights before a Department of State (“DOS”) denial of her husband’s visa at one of its consular posts. At issue is (1) whether the consular officer’s refusal of a visa to a spouse of a U.S. citizen impinges upon a constitutionally protected interest of the citizen; and (2) whether a citizen-petitioner is entitled to challenge in court the refusal of a visa to her spouse and to require the government to identify a specific statutory provision rendering him inadmissible and the explicit conduct that would render the spouse ineligible in order to sustain the visa refusal.

Thus, Kerry v. Din will squarely exhort a review of the doctrine of “consular nonreviewability”—sometimes referred to as “consular absolutism.” This principle surged following the SCOTUS decision in United States ex rel. Knauff v. Shaughnessy roughly 65 years ago and embodies the notion that a consular officer’s (i.e., at an exterior post, by definition) decision to grant or deny a visa petition is not subject to judicial review. The Knauff court explicitly stated that “[w]hatever the procedure authorized by Congress is, it is due process as far as an alien denied entry is concerned.” [338 U.S. 537, 544 (1950)]. Those familiar with immigration law will recognize that this was but a culmination of successive rulings reinforcing the idea that the power to exclude aliens is both inherent in the sovereign and exclusive to its political branches of government; that a noncitizen’s rights are at their lowest prior to acceding to our borders. In practice, this means that the exercise of “discretion” by immigration agents often results in an unsatisfactory “because I said so” explanation by the government, without more, as if it were dealing with insolent children. In an area that impacts many fundamental facets of an individual’s daily life, the current dearth of due process and unquestioning reliance on a particular agent’s determinations is grossly misplaced.

Amber and Victor Ramirez of Kankakee, Illinois, is just one couple that has experienced the negative consequences of this amorphous agency “discretion” in 2011. USCIS granted Amber’s petition for a visa for Victor, her spouse. Victor then traveled to the U.S. consulate abroad—a routine practice for noncitizens that switch immigration status—in Juarez, Mexico to obtain the visa. The DOS consular officer refused to grant the already-approved visa, citing only that there was “reason to believe” Victor might engage in illegal activity in the United States. No further explanation was given.

As it turns out Victor has tattoos and the couple perceived that the consular office was focusing on them. “Victor has never been in a gang, and is not listed in Illinois’ gang database. Amber worked with the local police to explain that Victor’s tattoos did not match any known gang tattoos. The couple explained each of his tattoos, including the tattoo of the name of their daughter. The consulate refused to reconsider or to explain its reasoning, even though over 40 percent of American households include a member with tattoos. The family remains separated based solely on the word of an anonymous bureaucrat.”

This is precisely the category of government action that would be unreviewable under the prevailing consular nonreviewability doctrine, which forms the foundation of the government’s argument in Din. And Din, for its part, bears on the extent to which the government can get away with vague and perfunctory rationales—perhaps not even truly reaching the substantive inquiry of whether an agent’s subjective profiling of an individual is a lawful basis upon which a discretionary immigration action may be made.

Shaun Staller also contributed to this article.

©2014 Greenberg Traurig, LLP. All rights reserved.

Half-Billion Dollar Arbitration Award in Trade Secrets Case Affirmed by Minnesota Supreme Court in Trade Secrets Dispute

Jackson Lewis Law firm

The Minnesota Supreme Court has affirmed an arbitrator’s eye-popping award of $525 million plus prejudgment interest totaling $96 million and post-award interest in a trade secrets dust up between Seagate Technology, LLC and Western Digital Corporation, et al. Seagate Technology, LLC v. Western Digital Corporation, et al and Sining Mao, No. A12-1994 (Minn. October 8, 2014).  The Court’s decision is replete with lessons about the legal boundaries, risks, and protections for litigants in arbitration. It is notable also for the magnitude of the award which was, in part, the consequence of falsified evidence.

Seagate designs and manufactures hard disk drives for computers. Sining Mao was a senior director for advanced head concepts at Seagate working on technology that involves incorporating tunneling magnetoresistance (“TMR”) in to read heads to improve storage capacity. When he was hired by Seagate, he signed an employment agreement which included a requirement to preserve the confidentiality of trade secrets and to return company documents. The employment agreement contained an arbitration clause which stated, in part, that the “arbitrator may grant injunctions or other relief in such controversy” arising out of the agreement.  Arbitration was subject to the rules of the American Arbitration Association (“AAA”).

Mao left Seagate in September 2006 to join Western Digital, a competitor. Seagate then commenced a district court action seeking injunctive relief and alleging misappropriation of trade secrets related to TMR technology.  Western Digital invoked the arbitration clause of Mao’s employment agreement with Seagate, and the district court stayed the lawsuit pending arbitration.

Things started to go south for Western Digital and Mao argued that three of the alleged trade secrets had been publicly disclosed before Mao left Seagate because they were included in a PowerPoint presentation he gave at a conference.  Seagate argued that Mao had fabricated and inserted additional PowerPoint slides containing the information after the fact to make it appear as if this information had been made public.  The arbitrator found that “[t]he fabrications were obvious. There is no question that Western Digital had to know of the fabrications and yet continued to represent to the Arbitrator that Dr. Mao did in fact insert the disputed slides at the time of the conferences.” The arbitrator found that the fabrication and Western Digital’s complicity was an egregious form of litigation misconduct that warranted severe sanctions.

Specifically, the arbitrator precluded any evidence or defense by Western Digital and Mao disputing the validity of the three trade secrets or any defense to the allegation of misappropriation or use of the three trade secrets, which resulted entry of judgment on liability and monetary damages in the amount of $525 million, calculated based on an unjust enrichment method. Western Digital brought a motion to vacate the award in district court. The district court granted the motion in part, finding that the arbitrator exceeded the scope of his authority under the arbitration agreement.  The Minnesota Court of Appeals reversed the district court on the ground that Western Digital had waived its right to challenge the arbitrator’s ability to issue punitive sanctions by not raising the issue with the arbitrator himself (and because Western Digital had earlier sought sanctions against Seagate in the same matter).

The Minnesota Supreme Court affirmed the Court of Appeals although based on a different analysis. The Supreme Court held that Western Digital did not waive its right to challenge the Arbitrator’s authority under Minnesota statutes regarding arbitrations and requests for vacatur, specifically Minn. Stat. Section 572.19.   The high Court then went on to conclude that the arbitrator did have the authority to impose the disputed sanctions, looking at the employment agreement, AAA arbitration rules, and case law.

The Court noted that:

Some believe that arbitration has benefits, potentially including faster resolution and less expense than the judicial system as well as a higher degree of confidentiality. But the benefits come with costs, including significantly less oversight of decisions, evidentiary and otherwise, and very limited review of the final award. Here, despite the best efforts of experienced appellate counsel to argue otherwise, Mao and Western Digital’s decision to demand arbitration necessarily limited the availability of the protections and advantages of the judicial system.

It is unclear if a district court could have reached the same result as the arbitrator in the Seagate case, but the Minnesota Supreme Court’s decision suggests that arbitrators can have greater discretion than judges.  The case certainly highlights the fact that arbitration may not always be the best forum, depending on which side of the dispute you are on.

Jackson Lewis P.C. © 2014
ARTICLE BY

V. John Ella
OF
Jackson Lewis P.C.

U.S. Supreme Court Declines to Hear Wisconsin’s Same-Sex Marriage Case: How Does This Affect the Administration of an Employer’s Employee Benefits?

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On Monday, October 6, 2014, the U.S. Supreme Court denied certiorari in Wolfe v. Walker. As employers will recall, in June 2014, U.S. District Court Judge Crabb found that Wisconsin’s 2006 constitutional amendment barring recognition of same-sex marriages violated the equal protection clause of the U.S. Constitution. In September 2014, the Seventh Circuit affirmed that decision. The Supreme Court’s action means that Judge Crabb’s decision stands.

What Is the Effect of the Supreme Court’s Ruling? Hereafter, Wisconsin and its respective governmental subdivisions must issue same-sex marriage licenses and must recognize same-sex marriages, whether formed in Wisconsin or in other jurisdictions. Moreover, the ruling affects employer-provided employee benefits.

Eligibility for Health Plan Coverage. The ruling has different implications depending upon the type of health plan at issue. For ERISA plans, there is some uncertainty regarding how this will play out moving forward because of ERISA preemption. Following the 2013 U.S. Supreme Court decision in United States v. Windsor, the Department of Labor announced in guidance that it would interpret the terms “spouse” and “marriage” to include same-sex marriages valid in the state of celebration. However, since it appears that neither Windsor nor Wolf nor the DOL guidance addresses private discrimination or imposes an obligation on employers to provide same-sex benefits, ERISA may still preempt a state discrimination law.

There is an additional nuance under state insurance laws. The Department of Health and Human Services (HHS) has mandated that health insurance issuers providing policies that cover spouses ensure that same-sex spouse coverage is also available to consumers. The guidance HHS provided, however, does not mandate that employers obtaining that coverage actually offer the benefit. It is unclear how this will play out under state insurance law (which applies to insured ERISA plans) and further guidance from the state is required.

For plans that are not subject to ERISA, the preemption argument disappears. Thus, such non-ERISA plans failing to offer such coverage may now violate Wisconsin’s Fair Employment Act, which prohibits discrimination on the basis of sexual orientation and marital status. Even so, those plans that are exempt from ERISA because they constitute “church plans” may be able to assert a religious exemption from discrimination rules.

Employers contemplating providing only opposite-sex spousal benefits should be in close contact with their legal counsel regarding the risks associated with such a decision. Further, it will be very important to ensure that “spouse” is defined with precision in the plan materials.

Imputed Income. Previously, the Wisconsin Tax Code treated employer-provided coverage for same-sex spouses of employees as taxable income and Wisconsin employers were required to treat such coverage as imputed income for Wisconsin withholding purposes. Now that Judge Crabb’s decision has been permitted to stand, Wisconsin employers must stop imputing income for state tax purposes to employees who receive coverage for same-sex spouses (and certain dependents). Employers will also need to pay attention to how the Wisconsin Department of Revenue addresses the taxation of income that was previously imputed; that is, how employees and employers might recover excess amounts withheld by the state government based upon imputed income in prior months and years.

Note, nothing has changed as it relates to domestic partners benefits – employees are still subject to imputed income where the employee obtains coverage on behalf of his or her domestic partner.

Family and Medical Leave. As we advised in a June client alert, family and medical leave under the state law is largely unaffected by this decision because domestic partner coverage was already contemplated by the state law and same-sex spouses were deemed domestic partners for such purposes.

On a federal level, this decision accelerates the effective date of proposed regulations issued earlier this year by the U.S. Department of Labor in response to Windsor. Earlier this year, the Department of Labor issued proposed regulations to change the FMLA’s definition of spouse from an individual who is recognized as a spouse under the state law in the place of the employee’s residence to an individual who is considered legally married to the employee based upon the laws of the state of celebration. These regulations are not yet finalized. Nevertheless, the Supreme Court’s decision means that even under the current regulations Wisconsin same-sex married couples will be considered spouses for purposes of FMLA administration.

What should employers do now?

  • Account for those same-sex couples who may have been married in a state that permitted same-sex marriage or who are newly married in Wisconsin;

  • Determine if modification of benefit plan materials may be necessary;

  • Determine the appropriateness of a special enrollment opportunity to couples married in other jurisdictions prior to the Supreme Court’s ruling who would not otherwise be eligible for a HIPAA special enrollment opportunity based upon the date of the wedding; and

  • Determine if modification of FMLA policy/forms is warranted based upon the changes.

© MICHAEL BEST & FRIEDRICH LLP
ARTICLE BY

Charles P. Stevens
OF
Michael Best & Friedrich LLP

Think Tanks Ask Supreme Court to Clarify Definition of “Foreign Official” in FCPA (Foreign Corrupt Practices Act)

Katten Muchin Law Firm

Two think tanks, the Washington Legal Foundation and the Independence Institute, have filed anamicus brief in the Supreme Court on behalf of petitioners Joel Esquenazi and Carlos Rodriguez, who were recently convicted of violating the Foreign Corrupt Practices Act (FCPA). The amiciseek clarity of the definition of “foreign official” in the FCPA.  The FCPA prohibits certain persons or entities, including US businesses, from paying a “foreign official” for the purpose of obtaining or retaining business. The FCPA defines “foreign official” to include “any officer or employee of a foreign government or any department, agency, or instrumentality thereof.”

Esquenazi and Rodriguez were executives of Terra Telecommunications Corp., a Florida company that purchased phone time from foreign vendors and resold the time to US customers. Terra conducted business with Haiti-owned vendor Telecommunications D’Haiti S.A. (Haiti Teleco). Prosecutors argued that Esquenazi and Rodriguez made payments to Haiti Teleco officers to obtain lower rates. To determine whether Haiti Teleco was an “instrumentality” under the FCPA, the trial court instructed the jury to consider whether the company “provided services to the citizens and inhabitants of Haiti,” and whether it was majority owned by the Haitian government. Defendants were convicted, and Esquenazi was sentenced to 15 years’ imprisonment and Rodriguez received seven years’ imprisonment. The US Court of Appeals for the Eleventh Circuit affirmed, finding that an “instrumentality” is “an entity controlled by the government of a foreign country that performs a function the controlling government treats as its own,” and setting forth a list of factors.

Amici contend that the business community needs concrete guidance in this undeveloped area. They argue that the Eleventh Circuit’s definition is overly broad because (1) Haiti Teleco was never designated a government entity; (2) Haiti Teleco issues common stock, and the government was not an initial stockholder; and (3) Haiti Teleco, as a telephone service provider, does not perform a traditional government function.

Brief for Esquenazi and Rodriguez as Amici Curiae Supporting Petitioners, Esquenazi, et al. v. U.S., Sup. Ct. No. 14-189 (Aug. 14, 2014).

ARTICLE BY

Bruce M. Sabados
Margaret J. McQuade
OF
Katten Muchin Rosenman LLP