EMPLOYMENT Litigation News and Analysis • Legislation • Regulation • Expert Commentary VOLUME 31, ISSUE 12 / JANUARY 4, 2017

Westlaw Journal EMPLOYMENT Litigation News and Analysis • Legislation • Regulation • Expert Commentary VOLUME 31, ISSUE 12 / JANUARY 4, 2017

WHAT’S INSIDE AUTOMOTIVE 3 Goodyear asks SCOTUS to restrict federal judges’ inherent sanctions power

BANK & LENDER LIABILITY 5 U.S. justices could allow Miami to sue banks over lending bias Bank of America Corp. v. City of Miami (U.S.)

BANKRUPTCY 6 Justices debate creditor collusion, role of settlements in bankruptcy cases Czyzewski v. Jevic Holding Corp. (U.S.)

EMPLOYMENT REUTERS/Jonathan Ernst 9 Business groups urge Red velvet drapes hang at the back of the courtroom at the U.S. Supreme Court building in Washington. The court’s 2016-2017 term began in October Supreme Court to OK with eight justices, and the chances of a ninth justice being nominated and confirmed by the end of the term are uncertain. narrower review of EEOC subpoena rulings McLane Co. v. EEOC (U.S.) SPECIAL ISSUE ENVIRONMENTAL 11 Landowners’ bid to split U.S. Supreme Court report: A preview of upcoming cases parcel on protected river now before high court U.S. Supreme Court decisions affect the laws the Fair Housing Act; which standard appellate Murr v. Wisconsin (U.S.) and jurisprudence across many practice areas. courts should apply to a trial court’s decision In this special year-end issue, Westlaw Journals to quash or enforce an Equal Employment HEALTH LAW provides subscribers with a comprehensive look Opportunity Commission subpoena request; 13 Supreme Court wades at cases pending before the nation’s top court. and whether creditor settlements can ignore into ‘transgender restroom’ bankruptcy priority. dispute, taking on case Our writers contribute analysis of cases in the from Virginia myriad fields we cover throughout the year. The Westlaw Journals also reports on a case before Gloucester County School court’s rulings in practice areas such as business the court asking if high-ranking federal officials Board v. G.G. (U.S.) and finance, class actions, employment, can be sued for the detention of non-citizens INTELLECTUAL PROPERTY bankruptcy, technology and health frequently after the 9/11 attacks. influence the law in many other subjects. 15 U.S. top court to hear We trust readers will find this compendium of dispute over trademark In a challenge to the Obama administration, groundbreaking legal developments helpful for band The Slants the court will decide if the U.S. Department of in keeping up with the ever-changing legal Lee v. Tam (U.S.) Justice overreached by sending public schools a landscape. WHITE-COLLAR CRIME letter telling them to generally treat transgender Westlaw Journals will continue to provide 20 Supreme Court to hear students consistent with their gender identity. updates on the high court’s actions in the qualified immunity case Some other issues before the court include: coming months. over 9/11 detentions whether a city can be an “aggrieved person” under Ashcroft v. Turkmen (U.S.) Westlaw Journals editorial team

41969500 TABLE OF CONTENTS Westlaw Journal Employment

Published since May 1986 U.S. SUPREME COURT REPORT Director: Mary Ellen Fox Automotive Goodyear asks SCOTUS to restrict federal judges’ inherent sanctions power...... 3 Editors: Tricia Gorman [email protected] Bank & Lender Liability Amy Grossberg, Esq. U.S. justices could allow Miami to sue banks over lending bias (U.S.)...... 5 Managing Desk Editor: Bankruptcy Robert W. McSherry Justices debate creditor collusion, role of settlements in bankruptcy cases (U.S.)...... 6 Claims for time-barred debt do not violate FDCPA, debt collector argues (U.S.)...... 8 Desk Editors: Alex Horowitz, Jennifer McCreary, Employment Katie Pasek, Sydney Pendleton, Business groups urge Supreme Court to OK narrower review of EEOC subpoena rulings (U.S.)...... 9 Maggie Tacheny Environmental Graphic Designers: Landowners’ bid to split parcel on protected river now before high court (U.S.)...... 11 Nancy A. Dubin, Ramona Hunter Health Law Westlaw Journal Employment Supreme Court wades into ‘transgender restroom’ dispute, taking on case from Virginia (U.S.)...... 13 (ISSN 2155-594X) is published biweekly by Thomson Reuters. Intellectual Property U.S. top court to hear dispute over trademark for band The Slants (U.S.)...... 15 Thomson Reuters Patent exhaustion case added to Supreme Court’s queue (U.S.)...... 15 175 Strafford Avenue, Suite 140 Attorneys weigh in on high court ‘substantial portion’ patent debate (U.S.)...... 17 Wayne, PA 19087 Justices hear clashing arguments over laches defense to patent suits (U.S.)...... 19 877-595-0449 Fax: 800-220-1640 White-Collar Crime Supreme Court to hear qualified immunity case over 9/11 detentions (U.S.)...... 20 www.westlaw.com Customer service: 800-328-4880 Expert Analysis: By Elizabeth Kurpis, Esq., Mintz, Levin, Cohn, Ferris, Glovsky & Popeo For more information, or to subscribe, Knockoffs: To kill or not to kill, that is the copyright question before the Supreme Court...... 22 please call 800-328-9352 or visit west.thomson.com. Expert Analysis: By Matthew D’Amore, Esq., Morrison & Foerster Supreme Court to consider reach of U.S. patent laws to exported goods...... 24 For the latest news from Westlaw Journals, visit our blog at http://blog.legalsolutions. Expert Analysis: By Alexandra Laks, Esq., Morrison & Foerster thomsonreuters.com/tag/westlaw-journals. Class dismissed … But not quite: Supreme Court to review appealability of class certification denials when plaintiffs voluntarily dismiss case...... 26

Reproduction Authorization Aviation Authorization to photocopy items for internal Aviation company wins support in Supreme Court challenge of FAA rule (U.S.)...... 28 or personal use, or the internal or personal Supreme Court asked to clarify Montreal Convention’s 2-year filing limit (U.S.)...... 29 use by specific clients, is granted by Thomson Reuters for libraries or other users regis- Bank & Lender Liability tered with the Copyright Clearance Center Lawyer wants Supreme Court to review CFPB ratification of enforcement action (U.S.)...... 30 (CCC) for a fee to be paid directly to the Copyright Clearance Center, 222 Rosewood Bankruptcy Barclays says high court need not take preemption case in SemGroup Chapter 11 (U.S.)...... 31 Drive, Danvers, MA 01923; 978-750-8400; www.copyright.com. Class Action Collective-action waivers in employee arbitration clauses arrive at high court (U.S.)...... 32

Thomson Reuters is a commercial publisher Derivatives of content that is general and educational Big banks ask Supreme Court to review Libor antitrust decision (U.S.)...... 33 in nature, may not reflect all recent legal Employment developments and may not apply to the EEOC urges Supreme Court not to expand pre-suit conciliation process (U.S.)...... 34 specific facts and circumstances of individual transactions and cases. Users should consult Insurance with qualified legal counsel before acting Insurance group asks Supreme Court to review Michigan tax for ERISA conflict (U.S.)...... 36 on any information published by Thomson Reuters online or in print. Thomson Reuters, Medical Malpractice its affiliates and their editorial staff are not a Federal court lacked jurisdiction in VA benefits dispute, government tells justices (U.S.)...... 37 law firm, do not represent or advise clients in any matter and are not bound by the profes- Pharmaceutical California high court erred on jurisdiction when it let Plavix case proceed, petition says (U.S.)...... 38 sional responsibilities and duties of a legal practitioner. Securities Litigation & Regulation Securities law profs ask justices to hear tolling issue in Deepwater Horizon suit (U.S.)...... 40 Government contractor asks Supreme Court to review ‘failure to disclose’ securities suit (U.S.)...... 41

Toxic Torts Manufacturers ask high court to hear jurisdiction dispute in toxic exposure case (U.S.)...... 42

Case Index...... 43

AUTOMOTIVE Goodyear asks SCOTUS to restrict federal judges’ inherent sanctions power

By Alison Frankel (Reuters) – In its 1991 decision in Chambers v. NASCO Inc., 501 U.S. 32 (1991), the U.S. Supreme Court gave federal trial judges a lot of leeway to police the integrity of their dockets.

Cert. granted The case involved a The Supreme Court found that the sanctions Louisiana television were akin to a criminal penalty because they Sept. 29 station operator that were intended to punish the union, not to backed out of a deal to coerce compliance with the injunction. In sell the station, then engaged in all sorts of that circumstance, the court said, the union litigation chicanery when the purchaser sued was entitled to the due process protections to enforce the sales contract. The justices for criminal defendants. held that the district judge properly exercised In a concurrence, Justice Antonin Scalia his inherent power when he awarded the highlighted a fundamental concern about erstwhile purchaser all of its attorney fees judges issuing sanctions. REUTERS/Mike Blake to punish the TV station operator for its misconduct. “That one and the same person should The tire company filed its merits brief be able to make the rule, to adjudicate its Nov. 14, arguing that if Bagwell and Chambers Various federal rules of civil procedure might violation, and to assess its penalty is out of are in tension — which they certainly seem to have covered some of the operator’s bad accord with our usual notions of fairness be — then Bagwell should control. According acts, the Supreme Court said, but “requiring and separation of powers,” he wrote. “And to Goodyear’s lawyers at Squire Patton the court to apply the other mechanisms it is worse still for that person to conduct Boggs, the 9th U.S. Circuit Court of Appeals to discrete occurrences before invoking the adjudication without affording the mistakenly relied on Chambers to affirm a the inherent power to address remaining protections usually given in criminal trials.” $2.7 million sanction against the company instances of sanctionable conduct would and its outside lawyers, awarded under the serve only to foster extensive and needless I’m reminding you about these two seemingly trial judge’s equitable powers. satellite litigation, which is contrary to the divergent takes on federal judges’ power to aim of the rules themselves.” set sanctions because the current court is The underlying product liability case claimed going to have to reconcile them this term that Goodyear tires were responsible for Three years after the Chambers decision, the in Goodyear Tire & Rubber Co. v. Haeger, a motor home accident that injured four Supreme Court looked at sanctions for civil No. 15-1406, cert. granted, 137 S. Ct. 30 members of the Haeger family. After about contempt in International Union, United Mine (U.S. Sept. 29, 2016), which presents the five years of litigation, Goodyear settled the Workers v. Bagwell, 512 U.S. 821 (1994). In question of whether trial judges must “tailor case in 2010 for an undisclosed amount. Bagwell, which involved contempt sanctions compensatory civil sanctions imposed under Several months later, the Haegers’ lawyer for the union’s repeated violations of an inherent powers to harm directly caused by read an account of a different case involving injunction against strike-related activities, sanctionable misconduct when the court the same supposedly defective tires. In that the justices were more leery of federal judges’ does not afford sanctioned parties the case, Goodyear produced data from heat and power. protections of criminal due process.” speed tests that the company did not turn over in the Haegers’ suit. The Haegers argued that the entire course of the case was warped by that failure to disclose the testing data. (In their brief Alison Frankel updates her blog, “On the Case,” multiple times opposing Goodyear’s petition for Supreme throughout each day on WestlawNext Practitioner Insights. A founding Court review, the Haegers’ Supreme Court editor of Litigation Daily, she has covered big-ticket litigation for more than 20 years. Frankel’s work has appeared in The New York Times, counsel, John Egbert of Jennings Strouss & Newsday, The American Lawyer and several other national publications. Salmon, said the company “sent the Haegers She is also the author of “Double Eagle: The Epic Story of the World’s on a completely misdirected frolic.”) Most Valuable Coin.” The trial judge, U.S. District Judge Roslyn Silver of Phoenix, agreed. She wrote a

© 2017 Thomson Reuters JANUARY 4, 2017 n VOLUME 31 n ISSUE 12 | 3 lengthy opinion detailing Goodyear’s alleged Question presented misconduct and, citing her inherent authority to issue sanctions, ended up awarding the Is a federal court required to tailor compensatory civil sanctions imposed under inherent Haegers $2.7 million — just about all of their powers to harm directly caused by sanctionable misconduct when the court does not lawyers’ fees and costs in the case. Haeger v. afford sanctioned parties the protections of criminal due process? Goodyear Tire & Rubber Co., 906 F. Supp. 2d 938 (D. Ariz. 2012). Goodyear’s failure to disclose the testing more sweeping relief for subtler forms of The judge said it would be “inappropriate data, the company contends, did not misconduct,” it said. to limit the award to the fees and costs that cause the Haegers to incur legal costs of could be directly linked to the misconduct” The company also claimed the 9th Circuit $2.7 million. because “it would be impossible to draw decision is “dangerous” precedent that the precise causal connections between “Causation functions as an important check essentially allows trial courts free rein to the misconduct and the fees (the Haegers) on a court’s inherent power,” the brief said. punish misconduct. incurred.” “Without this constraint, courts are free to “The absence of a causation requirement impose more drastic monetary sanctions A split 9th Circuit panel issued its affirmance pries open the door to an almost boundless under inherent powers than those available of Judge Silver’s sanction in March 2016. view of monetary awards under inherent for the ostensibly more serious sanction of Haeger v. Goodyear Tire & Rubber Co., 813 F.3d authority,” the brief said. “The 9th Circuit contempt.” 1233 (9th Cir. 2016). majority took a step in that direction, implying Under the Supreme Court’s holding in that lost settlement value might justify a high In its Supreme Court brief, Goodyear said Bagwell, Goodyear said, if the company had sanctions amount. But going beyond fees Judge Silver effectively hit the company with defied a court order from Judge Silver and would be the equivalent of transforming an a criminal penalty because the sanctions been found to be in contempt, it would be inherent powers sanctions award into a tort award is not tethered to whatever harm the on the hook for less money than the judge remedy, creating a host of proof and due Haegers suffered from the alleged litigation awarded via her inherent authority. Goodyear process problems.” misconduct. (That is especially true, the called that a “perverse” outcome. company said, because the Haegers recently The views expressed in this article are not settled a fraud suit against Goodyear’s “Given that contempt covers direct defiance those of Reuters News. WJ outside counsel that sought the same fees of a court order, one would not expect Related Filings: and costs they were awarded in the sanctions inherent authority sanctions to entail much Petitioner’s brief: 2016 WL 6768939 decision.) Opposition brief: 2016 WL 3440022

WESTLAW JOURNAL AUTOMOTIVE

This publication provides up-to-date information on developments in automotive product liability suits from around the country. Included are a tire defect report supplement, coverage of federal preemption issues, and important developments on class action claims, vehicle stability, seat belts, air bags and crashworthiness. Lemon laws, design defects, engine failure, and the efforts of the National Highway Traffic Safety Administration (NHTSA) are also reviewed in depth.

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(Reuters) – The U.S. Supreme Court on Nov. 8 indicated it could allow Miami to pursue lawsuits accusing major banks of predatory mortgage lending to black and Hispanic home buyers resulting in loan defaults that drove down city tax revenues and property values.

Bank of America Corp. et al. v. City of Miami, No. 15-1111; Wells Fargo & Co. v. City of Miami, No. 15-1112, oral argument held (U.S. Nov. 8, 2016). The eight justices heard arguments in appeals filed by Bank of America Corp. and Wells Fargo & Co. challenging a lower court’s decision to permit the lawsuits by the Florida city against the banks. The cases were filed under the Fair Housing Act, a federal law REUTERS/Larry Downing REUTERS/Shannon Stapleton outlawing discrimination in housing. The justices heard arguments in appeals filed by Bank of America and Wells Fargo challenging a lower court’s decision to permit the lawsuits by the Florida city against the banks. In September 2015, the Argument held Atlanta-based 11th U.S. But it was possible that a ruling for Miami to the banks, particularly over the amount of Nov. 8 Circuit Court of Appeals could allow the lawsuits to move forward damages they could face. overturned a lower while narrowing the scope of the cases and Liberal Justice Elena Kagan was among court’s decision to dismiss such lawsuits potentially lowering the amount of damages those who seemed open to the case moving by the city against Bank of America, Wells the city could win. forward, saying the Fair Housing Act was Fargo and Citigroup Inc. City of Miami v. Wells Chief Justice John Roberts seemed most designed to address harms to communities, Fargo & Co., 801 F.3d 1258 (11th Cir. 2015); skeptical of the city’s lawsuit, at one point not just individuals. City of Miami v. Bank of Am. Corp., 800 F.3d questioning whether a loss of property taxes “Who better than the city to recognize that 1262 (11th Cir. 2015). could count as a direct injury that could interest and assert it?” Justice Kagan said. Citigroup decided not to appeal to the give rise to a lawsuit. Chief Justice Roberts The banks have said a ruling favoring Miami Supreme Court. If the court splits 4-4, the said the city’s alleged injuries are “derivative would lead to a surge of similar suits. 11th Circuit ruling would stand and Miami of the injury to the homeowners who had would prevail, but no national precedent the subprime mortgages and who suffered The court is due to rule by the end of June. the foreclosure and so on.” would be set. Miami accused Wells Fargo, Bank of Based on the questions asked by the justices, Fellow conservative Justice Anthony America and Citigroup of steering non- it appeared unlikely the banks would gain the Kennedy, who could cast the key vote to avoid white borrowers into higher-cost loans they five votes needed to win the case outright. a 4-4 split, seemed somewhat sympathetic often could not afford, even if they had good credit. Questions presented The city said the banks’ conduct caused Miami to lose property tax revenues, drove Bank of America Corp. v. City of Miami down property values and required the city 1. By limiting suit to “aggrieved person[s],” did Congress require that a Fair Housing Act to pay the costs of repairing and maintaining plaintiff plead more than just Article III injury-in-fact? properties that went into foreclosure due to discriminatory lending. 2. The FHA requires plaintiffs to plead proximate cause. Does proximate cause require more than just the possibility that a defendant could have foreseen that the remote Several U.S. cities, including Los Angeles and plaintiff might ultimately lose money through some theoretical chain of contingencies? Oakland, have launched similar lawsuits. WJ Wells Fargo & Co. v. City of Miami (Reporting by Lawence Hurley; editing by Will Dunham) 1. Whether the term “aggrieved” in the Fair Housing Act imposes a zone-of-interests Related Filing: requirement more stringent than the injury-in-fact requirement of Article III. Argument transcript: 2016 WL 6600973 2. Whether the city of Miami is an “aggrieved person” under the Fair Housing Act.

By Donna Higgins Attorneys for a trucking company and its former drivers who were left out of a deal that resolved the firm’s bankruptcy case squared off Dec. 7 before the justices of the U.S. Supreme Court, who asked about the role of settlements in bankruptcy cases and the threat of collusion among creditors.

Czyzewski et al. v. Jevic Holding Corp. et al., been with any other possible outcome, he Question presented No. 15-649, oral argument held (U.S. Dec. 7, said. 2016). The Bankruptcy Code gives courts discretion Whether a bankruptcy court may The drivers are seeking to approve such settlements, he said. authorize the distribution of settlement Argument held proceeds in a manner that violates the to overturn a ruling Justice Sonia Sotomayor said she did not see statutory priority scheme. Dec. 7 from the 3rd U.S. why this case was all that unusual. Circuit Court of Appeals upholding a settlement that resolved “It seems to me that wanting to exclude At that time Jevic owed more than $20 million Jevic Transportation Inc.’s Chapter 11 case the claims of one or more creditors is the in taxes and general unsecured debt, plus without a formal reorganization plan, a ordinary situation,” she said. “Every junior another $53 million to Sun Capital Partners move known as a “structured dismissal.” creditor wants money. They’re happy to exclude anybody they can … or anybody who IV LLP, which had acquired Jevic in a 2006 The settlement did not pay the drivers will concede to doing it.” leveraged buyout, and CIT Group/Business anything on their claims for severance pay Credit Inc., which later refinanced Sun’s debt, The high court is weighing whether, under the Worker Adjustment and Retraining according to Jevic’s brief opposing Supreme outside the context of a formal Chapter 11 Notification Act, 29 U.S.C.A. § 2101, which Court review. requires employers to provide notice to reorganization plan, a bankrupt company’s Four years later, the Bankruptcy Court, over employees before a mass termination. assets can be distributed to creditors in a way the drivers’ objections, approved a settlement Instead, all the money was used to pay the that differs from the Bankruptcy Code’s rules that resolved a fraudulent-conveyance Jevic bankruptcy estate’s administrative for the order in which claims are paid. action that the creditors committee had filed expenses, taxes or general unsecured Jevic’s position, if adopted, “would wreak against Sun and CIT. Under the agreement, creditors. havoc on the basic process of bankruptcy,” the Chapter 11 case would be dismissed once the settlement was implemented. The question for the high court is whether Section 507’s The U.S. District Court for the District of priority scheme — which clearly applies to Chapter 11 Delaware, and later the 3rd Circuit, affirmed reorganization plans — is also mandatory in Chapter 11 cases the settlement and dismissal. In re Jevic resolved through structured dismissals. Holding Corp. et al., No. 08-11006, 2014 WL 268613 (D. Del. Jan. 24, 2014); In re Jevic Holding Corp., 787 F.3d 173 (3d Cir. 2015). Wage-related claims have a higher priority under the Bankruptcy Code’s distribution the drivers’ counsel, Danielle Spinelli of The drivers then petitioned the Supreme scheme than claims of general unsecured Wilmer Cutler Pickering Hale and Dorr, told Court for review, which was granted. creditors, but they come in below the justices. administrative expenses. “If debtors could distribute estate property ‘AN UNCONFIRMABLE PLAN’ This case presented unusual circumstances to creditors at any time without regard to the Justice Elena Kagan asked why the that made the settlement the best possible priority scheme before a plan, there wouldn’t Bankruptcy Code does not address outcome, even though the drivers got be much left of the scheme,” she said. the applicability of the priority rules to nothing, Kirkland & Ellis’ Christopher settlements outside Chapter 11 plans. CHAPTER 11 FILING Landau, who argued for Jevic, said during the “Did Congress just not think that this might one-hour session before the eight justices. New Jersey-based Jevic fired the drivers happen?” she asked. around the same time it filed for bankruptcy The settlement maximized the recovery for Settlements were not intended as a method in May 2008 in the U.S. Bankruptcy Court for the creditors who did get paid, while leaving for distributing an estate’s assets, Spinelli the District of Delaware, where the company the drivers no worse off than they would have replied. was incorporated.

6 | WESTLAW JOURNAL n EMPLOYMENT © 2017 Thomson Reuters Settlements yield funds that become assets for the U.S. government as amicus curiae in Section 363(b) but they have discretion to of the bankruptcy estate, which are then support of the drivers. allow settlements that violate priority under distributed to creditors in accordance with “What you have is an agreement that is, in extraordinary circumstances like the ones in priority, she said. essence, an unconfirmable plan,” she said. this case, he said. The code provides only two options for “Congress enacted the priority scheme “Let’s just assume that you are right, distributing estate assets, both of which precisely to prohibit the kind of collusive- that … this is one of these extraordinary must abide by the priority scheme — either looking agreements that happened here, circumstances in which some people can be a confirmed reorganization plan under where you have high-priority and low-priority made better off and nobody will be made Chapter 11 or conversion to Chapter 7, after creditors kind of squeezing out the middle worse off,” Justice Kagan said. “Still, the which the estate is liquidated and creditors creditors,” Harrington said. question is: Where is the authorization for are paid with those funds, Spinelli said. that in the Bankruptcy Code? Because that’s If neither of those options is feasible, a case THE WORLD OF 363(B) like a big principle. … I think we would have known about it if that’s the way bankruptcy can be dismissed, meaning that no assets The Bankruptcy Code’s priority rules proceedings were supposed to go.” are distributed and the parties revert to their apply only in the context of Chapter 11 prebankruptcy positions, she said. reorganization plans, Landau said. The lack of a statutory provision allowing approval of settlements that violate priority “No provision of the Bankruptcy Code permits Outside of that context, he said, courts also troubled Justice Stephen Breyer. what happened here,” she said. “This was a have discretion under Section 363(b) of the naked priority violation for its own sake. … Bankruptcy Code, 11 U.S.C.A. § 363(b), to “So where does the bankruptcy trustee or any Taking value from senior creditors and giving make decisions about the use, sale or lease court get the power to say that a group of it to junior creditors for its own sake is not of estate assets. people can, in fact, reverse the order in which permitted.” these assets will be distributed?” Justice “Congress drew a line that the absolute- Structured dismissals like the one in this priority rule as such applies to plans,” he said. Breyer asked. “That is what is bothering case are often used when a debtor and its “When you are not in the world of plans, you me, and presumably the government, and WJ creditors cannot agree on a reorganization are in the world of 363(b), which has play in certainly the workers here.” plan, according to Sarah E. Harrington, the joints.” Related Filing: Argument transcript: 2016 WL 7117910 assistant to the solicitor general, who argued Adherence to priority is a major factor judges use when making decisions under

WestlaW journal bankruptcy

This reporter offers comprehensive coverage of significant issues in both business and consumer bankruptcy proceedings. The editors track dockets, summarizing recent developments and their implications for the debtor, its creditors, officers and directors, employees, and other parties. This reporter covers a wide range of topics regarding business and consumer bankruptcies and includes analysis of the most noteworthy case law and legislation. Important litigation documents are also included.

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© 2017 Thomson Reuters JANUARY 4, 2017 n VOLUME 31 n ISSUE 12 | 7 BANKRUPTCY most notably, the code’s core purpose of comprehensively bringing all of a debtor’s Claims for time-barred debt do not violate debts into a single bankruptcy proceeding and resolving them,” Midland argues in the FDCPA, debt collector argues brief.

By Donna Higgins The code includes extensive protection for debtors and makes it a simple matter for Filing proofs of claim for debts that are time-barred under state statutes of debtors or the trustees who oversee their limitation, as allowed under the Bankruptcy Code, does not violate the federal bankruptcy estates to weed out old debts, law that bans misleading debt collection tactics, a collection firm has argued the company said. in its opening brief to the U.S. Supreme Court. FDCPA PROTECTS CONSUMERS, Midland Funding LLC v. Johnson, No. 16-348, association representing debt purchasers; NOT CREDITORS petitioner’s opening brief filed (U.S. Nov. 14, ACA International, which represents Even if a stale claim slips through, in most 2016). collection agencies and other creditors; cases that will not harm the debtor, Midland Debt collectors should the National Creditors Bar Association contends. Argument set and corresponding state associations; and not have to fear they In most Chapter 13 cases, when a debtor’s Resurgent Capital Services, a company that might be violating the repayment plan is confirmed, the debtor Jan. 17 files proofs of claim in bankruptcy cases and Fair Debt Collection is required to dedicate all of his or her says it has faced similar FDCPA suits. Practices Act when they file proofs of claim disposable income to the plan, so the number that comply with all requirements of the FDCPA SUIT of allowed claims will not affect the debtor’s Bankruptcy Code, Midland Funding LLC says monthly payments, Midland argues. in the Nov. 14 brief. Johnson filed for Chapter 13 relief in 2014 in the U.S. Bankruptcy Court for the Southern Only other creditors would be harmed if an Midland is seeking to overturn a ruling District of Alabama. Midland filed a proof of invalid claim were to be allowed, because from the 11th U.S. Circuit Court of Appeals claim for the credit card debt even though they would get a smaller portion of the in Aleida Johnson’s FDCPA suit against the a collection suit would have been barred by debtor’s plan payments — but the FDCPA company stemming from its efforts to collect Alabama’s six-year statute of limitations for is designed to protect consumers, not on a credit card debt. Johnson v. Midland such claims, Ala. Code § 6-2-34. bankruptcy creditors, Midland says. Funding LLC, 823 F.3d 1334 (11th Cir. 2016). Johnson objected to the claim, and the Finally, Midland argues, even if the FDCPA The FDCPA, 15 U.S.C.A. § 1692, prohibits debt Bankruptcy Court disallowed it. Shortly could be interpreted to ban proofs of claim collectors from using “any false, deceptive after that, she filed her FDCPA suit against for stale debts, the Bankruptcy Code’s or misleading representation or means in Midland in the U.S. District Court for the provisions allowing such claims would still connection with the collection of any debt.” Southern District of Alabama. be controlling because the code was enacted Numerous other federal appeals courts a year after the FDCPA. The District Court granted Midland’s motion have held that filing a proof of claim for a to dismiss the case, and the 11th Circuit “It would be inconsistent with Congress’ stale debt does not violate the FDCPA, so reversed. Midland petitioned the high court objective in expanding the definition of the Supreme Court should correct the 11th for review, which was granted in October. ‘claim’ to construe an earlier-enacted, Circuit’s “outlying interpretation,” Midland nonbankruptcy statute to limit the proofs argues. The Bankruptcy Code defines a “claim” of claim that can be filed in a bankruptcy broadly, and including time-barred debts Midland has received support, in the form of proceeding,” Midland said. WJ within that definition is “wholly consistent amicus curiae briefs, from the U.S. Chamber Attorney: with the policies animating bankruptcy: of Commerce; DBA International, a trade Petitioner: Kannon K. Shanmugam, Williams & Connolly, Washington, DC Questions presented Related Filings: U.S. Chamber of Commerce amicus brief: 1. Whether the filing of an accurate proof of claim for an unextinguished time-barred debt 2016 WL 6873060 DBA International amicus brief: 2016 WL 6892605 in a bankruptcy proceeding violates the Fair Debt Collection Practices Act. ACA International amicus brief: 2016 WL 6916171 2. Whether the Bankruptcy Code, which governs the filing of proofs of claim in bankruptcy, Creditors’ bar associations amicus brief: precludes the application of the Fair Debt Collection Practices Act to the filing of an 2016 WL 6916170 Resurgent Capital’s amicus brief: 2016 WL 6892606 accurate proof of claim for an unextinguished time-barred debt. Petition: 2016 WL 4983173

By Tricia Gorman Appellate courts should defer to trial court decisions regarding subpoena requests by the Equal Employment Opportunity Commission, several business groups and law professors say in two amici briefs recently filed in the U.S. Supreme Court.

McLane Co. v. Equal Employment Damiana Ochoa filed a sex discrimination The EEOC appealed, and the 9th Circuit Opportunity Commission, No. 15-1248, claim with the EEOC against McLane in panel reversed in part and vacated in part, amici briefs filed (U.S. Nov. 21, 2016). 2008 after she was fired for failing to pass finding the requested information relevant to A trial court has conducted hearings, heard a physical capability test following her the agency’s investigation. EEOC v. McLane witness testimony, and “is the closest to maternity leave. Co., 804 F.3d 1051 (9th Cir. 2015). the factual and evidentiary issues at play,” She alleged the company violated Title VII “At the investigative stage, the EEOC is trying so a more thorough de novo review is of the Civil Rights Act, 42 U.S.C.A. § 2000e, to determine only whether ‘reasonable cause’ unnecessary, the business groups say in a by discriminating against her based on her exists ‘to believe that the charge is true,”’ the Nov. 21 brief. gender when it terminated her employment. panel said. “So the relevance standard in this context sweeps more broadly than it would Cert. granted In September the In investigating Ochoa’s claims, the EEOC Supreme Court agreed asked the company for information about the at trial.” to hear food distributor test and the employees who have taken it. Sept. 29 IRRELEVANT INFO McLane Co.’s challenge McLane provided some general information, In its petition for certiorari filed with the to the 9th U.S. Circuit Court of Appeals’ including the gender and test scores, but Supreme Court in April, McLane argued that reversal of a lower court ruling and approval refused to provide “pedigree information” — the information the EEOC sought on other of the EEOC’s subpoena seeking personal names, addresses, Social Security numbers employees was irrelevant to its investigation information of other company employees and phone numbers — of the test takers. It since Ochoa had not compared the in its investigation of a worker’s sex also refused to provide information about company’s treatment of her to the treatment discrimination claim. when and why it had terminated employees of other workers. The company has asked the high court to who failed the test, according to 9th Circuit determine the proper standard of review of opinion. By allowing the commission broad subpoena powers to collect material, the 9th Circuit a court’s ruling in an EEOC administrative The EEOC filed a subpoena enforcement essentially nullified limits that Title VII places action, noting that the 9th Circuit is the only action against the company in Arizona on the EEOC’s jurisdiction, the petition said. appellate court to conduct a de novo review federal court in 2012. instead of a narrower or more deferential Opposing the company’s petition, the EEOC U.S. District Judge G. Murray Snow required review for clear legal error only. said the appeals court properly conducted a McLane to provide some additional de novo review of Judge Snow’s subpoena De novo review requires the appellate court information but said the pedigree information decision because the panel found legal to determine if the trial judge has was not necessary for the agency to error. The panel determined that the judge misconstrued the law, while a clear-error determine if the company used the strength erred in ruling that the commission did not review determines if the judge made an test in a discriminatory way. obvious error in deciding the facts. need certain information to establish if the company’s strength test was discriminatory, RELEVANT AND NECESSARY INFO Question presented the EEOC said. The case came before the 9th Circuit after the Whether a district court’s decision to ’ABUSIVE INVESTIGATIVE TACTICS’ U.S. District Court for the District of Arizona quash or enforce an EEOC subpoena refused to enforce an EEOC subpoena against should be reviewed de novo, which The Chamber of Commerce, Equal McLane seeking information related to the only the 9th Circuit does, or should Employment Advisory Council and National company-mandated employee strength test. be reviewed deferentially, which eight Federation of Independent Business Small EEOC v. McLane Co., No. 12-2469, 2012 WL other circuits do, consistent with the Business Legal Center said in their brief 5868959 (D. Ariz. Nov. 19, 2012). Supreme Court’s precedents concerning supporting McLane that de novo review of the choice of standards of review. subpoena decisions would only prolong the

Sage Knauft, partner with Walsworth LLP Orange, California While McLane v. EEOC will turn on whether the 9th Circuit should provide more deference to the district courts, and thereby fall in line with the standard of review employed by all other federal courts of appeal, it may have far-reaching implications on the proper scope of the EEOC’s subpoena power when it investigates employment discrimination claims. The District Court in McLane expressed the view that the EEOC should only be entitled to employees’ private information which can lead to identity theft when it is misappropriated by others, in certain narrowly defined circumstances. As Justice Milan D. Smith stated in his concurring opinion in the 9th Circuit’s underlying opinion, “it may be that the EEOC’s insistence here on obtaining Social Security numbers and other information that could be used to steal an employee’s identity will endanger the very employees it seeks to protect.” Employers wishing to safeguard their employees’ private information should follow this case closely.

Timm Schowalter, shareholder with Sandberg Phoenix & von Gontard, St. Louis The key issue for employers is the manner in which the courts have interpreted the scope of the EEOC’s investigative authority. The leading case involving EEOC requests for information is the U.S. Supreme Court’s decision in Equal Employment Opportunity Commission v. Shell Oil Co., 104 S. Ct. 1621 (1984), which set forth a “relevancy” standard for the scope of the EEOC’s investigative authority. The EEOC consistently has relied on Shell Oil to argue that the concept of “relevancy” in commission investigations is far broader than that provided under the Federal Rules of Civil Procedure. The court in Shell Oil articulated that although the EEOC is “entitled to access only to evidence ‘relevant’ to the charge under investigation, … courts have generously construed the term ‘relevant’ and have afforded the commission access to virtually any material that might cast light on the allegations against the employer.” However, the Supreme Court also made it clear that the EEOC’s subpoena power is limited to access documents or data “relevant to the charge under investigation.” Since Shell Oil, the EEOC has aggressively used its subpoena power to burden employers with overreaching subpoenas that at times are tantamount to roving fishing expeditions, especially under the current administration. The EEOC’s modus was never more apparent in McLane where the EEOC sought information that the District Court found to be entirely immaterial to the pending charge of discrimination and, therefore, quashed the subpoena. Then, the 9th Circuit reviewed the request de novo, opting not to show deference to the District Court’s decision on the EEOC subpoena. Thus, the only legal issue before the Supreme Court is whether federal appellate courts give deference to district court judgments on EEOC subpoenas or whether the appellate courts review such decisions de novo. Given the limited issue before the Supreme Court it is likely that the Supreme Court will limit its review to the lone legal issue before the court and not provide a substantive ruling on the EEOC investigative authority under Shell Oil. With that said, however, we anxiously anticipate dicta on the scope of the EEOC’s authority that may provide some persuasive authority to thwart the aggressive tactics of the EEOC.

Christina Alabi, associate with Gould & Ratner, Chicago The Supreme Court’s ruling will either allow the 9th Circuit to maintain its oft-freestanding reputation or bring the circuit in line with eight other circuits. Reversing the 9th Circuit will certainly move the circuit split more toward a deferential standard of review. If the Supreme Court upholds the 9th Circuit’s ruling, it will in effect broaden the relevance scope in EEOC administrative investigations and the like. The relevance employee Social Security numbers nationwide will provide to admissible prima facie evidence is minimal, at most, if at all, to the gender discrimination issue. With respect to an employer’s disclosure of Social Security numbers pursuant to a subpoena, I highlight Judge Milan D. Smith’s concurrence point: “The EEOC’s insistence … on obtaining Social Security numbers and other information that could be used to steal employee’s identity [may] endanger the very employees it seeks to protect.” The Supreme Court’s ruling is certainly an opinion administrative agencies, employers and employment law attorneys await.

10 | WESTLAW JOURNAL n EMPLOYMENT © 2017 Thomson Reuters EEOC’s already lengthy process that often In a separate brief filed Nov. 21, law professors The professors note that the 9th Circuit is includes “abusive investigation tactics,” the who teach and write about federal procedure the only circuit to follow the de novo review brief says. and administrative law said they also support standard on such decisions, and they say the “The EEOC often demands as part of a deferential review of trial court subpoena high court must “unify” all of the circuits in investigation of even the most straightforward decisions. deferring to a trial court. individual claim, voluminous information The professors “regard the allocation of “In resolving this case, the court’s guidance that has no relevance to the charge under adjudicative responsibilities to the different will transcend the specific context of EEOC investigation in an effort to ‘fish’ for possible federal courts based on their institutional subpoenas,” the professors say. WJ targets for systemic enforcement,” the competencies to be of paramount Related Filings: groups say. importance,” the brief says. Business groups’ brief: 2016 WL 6892598 Law professors’ brief: 2016 WL 6873055

ENVIRONMENTAL Landowners’ bid to split parcel on protected river now before high court

A Wisconsin family’s state court challenge to a county ordinance that merged their adjacent riparian parcels on the federally protected St. Croix River, preventing them from selling or developing one of them, is fully briefed and pending before the U.S. Supreme Court.

Murr et al. v. Wisconsin et al., No. 15-214, 1.25-acre lot along the St. Croix River in sought a variance from the county so the reply brief filed (U.S. July 27, 2016). Troy, Wisconsin. The Murrs later bought a family could sell the undeveloped parcel as virtually identical adjacent lot for investment a buildable lot. Cert. granted The Murr family says the merger of the two lots for purposes, according to the Court of Appeals The Murrs say the purpose of the intended developmentJan. 15, purposes amounted opinion. sale was to finance “flood proofing” to an improper regulatory taking The St. Croix is one of the original rivers given improvements to the cabin, which had been because2016 it interfered with their full federal protection under the National Wild damaged in multiple floods over the years. use of the property. and Scenic Rivers Act of 1968, 16 U.S.C.A. County authorities denied the variance The Murrs’ suit against the state of Wisconsin § 1271. application. The decision was affirmed by and St. Croix County went as far as the In the mid-1970s St. Croix County passed the St. Croix County Circuit Court in August Wisconsin Court of Appeals, which affirmed an ordinance intended to mitigate poor 2008 and by the Wisconsin Court of Appeals a summary judgment for the defendants. shoreline planning, prevent soil erosion in February 2011. Murr v. State, 359 Wis. 2d 675 (Wis. Ct. App. and pollution, minimize flood damage, 2014). and preserve the river’s scenic and natural TAKINGS ACTION The state Supreme Court denied the family’s characteristics. The Murr children then sued the county petition for review in April 2015. The ordinance provides that lots cannot be and the state in the Circuit Court, saying But in January the U.S. Supreme Court developed unless they have at least 1 acre of the ordinance and the state code provision granted certiorari to consider whether the project area. on which it was based effected an uncompensated taking of their property “parcel as a whole” concept in property Each of the Murrs’ lots has insufficient project under Article I, Section 13, of the Wisconsin takings cases requires that commonly owned, area because much of the property is too Constitution. contiguous parcels must be combined to steep for development, the opinion said. determine if a taking occurred. After the Circuit Court granted summary In 1994 and 1995 the couple gave the lots judgment to the defendants, the Wisconsin The case is a rare example of the Supreme to their four children, one of whom later Court choosing to review a state court decision that the state’s highest court has Question presented declined to review. In a regulatory taking case, does the “parcel as a whole” concept as described in Penn TWIN RIVERSIDE PARCELS Central Transportation Co. v. City of New York, 438 U.S. 104, 130-31 (1978), establish a rule In 1960 William and Margaret Murr bought that two legally distinct, but commonly owned contiguous parcels, must be combined for and later built a recreational cabin on a takings analysis purposes?

© 2017 Thomson Reuters JANUARY 4, 2017 n VOLUME 31 n ISSUE 12 | 11 Court of Appeals affirmed the ruling in into parts rather than aggregation of two each would fetch a total of $771,000. Such December 2014. parcels into one. a small economic loss “fell far short of the The appeals court said that although The high court’s decisions in takings cases mark” to be a regulatory taking, the county the ordinance effectively merged the two have rejected both segmentation and says. adjacent lots for sale or development aggregation of lots, the petitioners say. The state of Wisconsin says the case boils purposes, the Murrs failed to make a The Murrs argue the ordinance treats them down to whether lots created and defined sufficient showing of economic loss because unfairly because a landowner who owned under state law, then merged pursuant to they were not deprived of all or substantially a single undeveloped, nonconforming a pre-existing state law merger provision, all practical use of the property. lot would have its development rights should be considered a single “parcel” grandfathered. for regulatory takings purposes.The The case is a rare example relevant parcel should be determined by a RESPONDENTS’ BRIEFS landowner’s “reasonable expectations” as of the U.S. Supreme Court shaped by state law, the state argues, citing choosing to review a state The county and the state filed response briefs Lucas v. South Carolina Coastal Council, 505 court decision that the in June. U.S. 1003 (1992). state’s highest court has Contesting the relevance of Penn Central, Under this approach, the two lots given declined to review. St. Croix County says the “parcel as a to the Murr children are clearly a single whole” theory is a red herring in this case parcel because their objectively reasonable because, whether the Murr lots are separate expectations were that they would take title ‘PARCEL AS A WHOLE’ or combined, the owners retain “sufficient to a single merged parcel under pre-existing In their April opening brief and July reply valuable use” of the property to preclude a Wisconsin regulations, the state says. brief, the Murrs assert both the “takings” takings claim. Former Vice President Walter Mondale, clause of the Fifth Amendment and the The county maintains that the appeals court competing groups of states, environmental 14th Amendment’s provision that no “state correctly compared the value of the adjacent organizations, and pro-development factions deprive any person of life, liberty or property, lots with separate residences on each to the are among the parties behind the 20 amicus without due process of law.” value of the lots with only one residence on briefs filed in the case. WJ both and found less than a 10 percent value They say the state Court of Appeals wrongly Related Filings: applied the “parcel as a whole” presumption reduction. Reply brief: 2016 WL 4072806 of Penn Central Transportation Co. v. City of The state court said the combined parcel County’s response brief: 2016 WL 3254214 New York, 438 U.S. 104 (1978), because that with one house was worth $698,000, while State’s response brief: 2016 WL 3227033 Opening brief: 2016 WL 1459199 case involved segmentation of a single parcel the two lots sold separately with a house on

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By Michael Scott Leonard The U.S. Supreme Court will decide whether the Obama administration overreached by using Title IX’s ban on sex discrimination to protect transgender students who want to use public school restrooms that correspond to their gender identity rather than their biological sex.

Gloucester County School Board v. G.G. petition added. “If the court looks the other ex rel. Grimm, No. 16-273, cert. granted, way, then the agency officials in this case — 2016 WL 4565643 (U.S. Oct. 28, 2016). and in a host of others to come — will have Granting certiorari Oct. 28, the justices become a law unto themselves.” agreed to review a 4th U.S. Circuit Court SCHOOL BOARD DECISION of Appeals decision upholding the policy. G.G. ex rel. Grimm v. Grimm’s dispute with the school board stems Cert. granted Gloucester Cty. Sch. Bd., from the board’s decision in December 2014 822 F.3d 709 (4th Cir. to ban transgender students from using Oct. 28 2016). bathrooms corresponding to their gender identity. The resolution allowed trans A divided 4th Circuit panel concluded in students to use private unisex bathrooms if July that an informal U.S. Department they would prefer. Grimm’s school has three of Education letter describing the of those. administration’s position to the petitioner in the case, Virginia’s Gloucester County School based on their sex, among other things. The According to the petition, the board adopted Board, was a binding agency rule entitled to law contains a regulatory exception allowing the policy after students and parents a high degree of judicial deference. sex-segregated bathrooms. complained that Grimm’s presence in the boys’ room violated the privacy rights of The unpublished letter, sent after the Courts are more deferential to agency non-transgender boys. Grimm, who has litigation by transgender student Gavin interpretations of their own rules than considered himself a boy since the age of Grimm was already underway, directed the to their construction of statutes within 12, had begun using the boys’ room that school district to let Grimm use the boys’ their administrative jurisdiction, and the fall, with permission, after formally starting room. Grimm, identified in court documents Department of Education letter did not his gender transition the previous summer, as G.G. because he is only 17, was born a girl deserve the benefit of that deference, the the petition said. but identifies as a boy. school board said in its petition. Parents also allegedly expressed concerns In its Supreme Court petition, the school “Some regard transgender restroom access that a policy of letting transgender students board challenged the level of scrutiny the as one of the great civil rights issues of our use the bathrooms of their choice would 4th Circuit applied to the Department of time,” the board said. “[But] this case is invite abuse by peeping Toms. Education letter, arguing that the appeals not really about whether G.G. should be court erred by analyzing the letter as an allowed to access the boys’ restrooms, nor Shortly after the school board announced the agency’s reading of its own rule rather than even primarily about whether Title IX can be resolution, trans-rights lawyer Emily Prince, as a construction of Title IX. interpreted to require [that result]. who was not formally counsel for Grimm, sent an email notifying the Department Title IX, 20 U.S.C.A. § 1681(a), prohibits “Fundamentally, this case is about whether of Education about the board’s ruling and schools that receive federal funding from an agency employee can impose that policy requesting guidance. discriminating against students or employees in a piece of private correspondence,” the An official responded in January 2015 with Questions presented a letter stating that in the agency’s view, Title IX requires public schools to let 1. If Auer v. Robbins, 519 U.S. 452 (1997), is retained, should deference extend to an transgender students use the bathroom unpublished agency letter that, among other things, does not carry the force of law and corresponding to their gender identity. was adopted in the context of the very dispute in which deference is sought? 2. With or without deference to the agency, should the Department of Education’s specific interpretation of Title IX and 34 C.F.R. § 106.33 be given effect?

© 2017 Thomson Reuters JANUARY 4, 2017 n VOLUME 31 n ISSUE 12 | 13 A STATUTORY INTERPRETATION The appeals court noted that under Auer v. and Republican Gov. Pat McCrory in federal Robbins, 519 U.S. 452 (1997), courts are court. Calling the unisex bathrooms “stigmatizing,” supposed to uphold an agency’s reading of Grimm challenged the board’s resolution The federal civil rights suit accuses them of an ambiguity in its own regulation unless it is in the U.S. District Court for the Eastern violating Title IX and Title VII, 42 U.S.C.A. “plainly erroneous.” District of Virginia in June 2015, two days 2000e, which prohibits workplace sex after the end of the school year, alleging Given the purposes of Title IX and society’s discrimination. United States v. North violations of his rights under Title IX. evolving understanding of transgenderism, it Carolina, No. 16-cv-425, complaint filed, was not plainly erroneous to determine that 2016 WL 2730796 (M.D.N.C. May 9, 2016). U.S. District Judge Robert G. Doumar “sex” discrimination includes discrimination dismissed the Title IX claim three months McCrory filed his own suit in federal based on gender identity, the panel said. later. G.G. ex rel. Grimm v. Gloucester Cty. Sch. court the same day, accusing the Justice Bd., 132 F. Supp. 3d 736 (E.D. Va. 2015). After the full 4th Circuit declined to rehear Department of stretching the definition of the case en banc, the panel refused to stay sex discrimination beyond its commonly Judge Doumar agreed with the school its ruling for the duration of any Supreme accepted meaning and usurping Congress’ board’s argument that the Department of Court appeal. G.G. ex rel. Grimm v. Gloucester authority by substantively broadening Education letter constituted a statutory Cty. Sch. Bd., 824 F.3d 450 (4th Cir. 2016); Title VII and Title IX. McCrory v. United States, interpretation rather than an administrative No. 16-1733, 2016 WL 3743189 (4th Cir. No. 16-cv-238, complaint filed, 2016 WL one. Unpublished guidance letters, unlike July 12, 2016). 2616917 (E.D.N.C. May 9, 2016). formal agency rules, do not deserve judicial deference in that context, he said. To hold otherwise would effectively turn “If the court looks the other way, then the agency officials informal agency opinions into binding rules in this case — and in a host of others to come — will have of law, which would ultimately encourage become a law unto themselves,” the petition says. agencies to bypass formal rulemaking procedures that safeguard the public’s The Supreme Court reversed that part of the The controversy has cost North Carolina at rights, the judge found. decision when it accepted the case, staying least $500 million, according to conservative AUER DEFERENCE the 4th Circuit’s decision pending its own estimates, as large companies like PayPal ruling. have scrubbed plans to expand in the state Turning to the merits, Judge Doumar rejected The nation’s highest court will now have the and sports leagues like the NBA and college the proposition advanced by Grimm and the chance to resolve the issue — if the court basketball’s Atlantic Coast Conference have Obama administration that Title IX’s ban soon seats a ninth justice, or if five members moved major events out of Charlotte. on sex discrimination also protects gender of its shorthanded roster can agree on a On May 13, four days after the Justice identity. result before then. Department and North Carolina sued each The only way Title IX protects gender- other, the agency and the Department of identity discrimination is if the law means NATIONAL CONTROVERSY Education sent a “dear colleague” letter out “subjective gender” wherever it refers to Meanwhile, as Grimm’s suit was moving to public schools across the country advising “sex,” but that interpretation would have the through the trial and appeals courts, it was them that restricting bathroom usage by absurd and impermissible result of allowing helping to spark a national controversy over transgender students violated Title IX. discrimination based on biological sex, he how to weigh the desire of transgender Nine states challenged the dear-colleague said. people to use the bathrooms where they feel letter in a Texas federal court less than two Grimm appealed. most comfortable against the concerns of weeks later. Texas v. United States, No. 16-cv- Reversing, a 4th Circuit panel held 2-1 in April others offended or threatened by that idea. 54, complaint filed, 2016 WL 3023276 (N.D. that a Department of Education regulation In March, North Carolina passed a high- Tex. May 25, 2016). promulgated under Title IX — 34 C.F.R. profile new law, House Bill 2, requiring Others have since followed suit. WJ § 106.33, which permits sex-segregated people in public schools or government restrooms — is ambiguous regarding Related Filing: buildings to use bathrooms corresponding to Petition: 2016 WL 4610979 whether a transgender boy counts as male or their biological sex at birth. female. The U.S. Department of Justice responded May 9 — just three weeks after the 4th Circuit’s Grimm ruling — by suing the state

(Reuters) – The U.S. Supreme Court on Sept. 29 agreed to decide whether a federal law barring trademarks on racial slurs violates free speech rights in a case involving an Oregon band called The Slants.

Lee v. Tam, No. 15-1293, cert. granted (U.S. The tribunal relied on a provision of the 1946 In April, the federal government asked Sept. 29, 2016). Lanham Act that prevents the registration of the Supreme Court to hear its appeal of The justices said they would hear the Obama marks that may disparage certain people. the ruling in the band case, saying that if administration’s appeal of a lower court In appealing to the U.S. Court of Appeals not overturned, the decision would permit ruling last year that sided with the Portland- for the Federal Circuit in Washington, Slants trademarking “even the most vile racial based Asian-American rock band in its front man Simon Tam argued the band epithet.” free-speech challenge adopted the name to reclaim the word slants Argument set to part of the 1946 as a “badge of pride.” The Federal Circuit ruled that law governing federal The Federal Circuit ruled last December that the disparagement provision Jan. 18 trademarks. the disparagement provision of the 1946 of the 1946 Lanham Act was John Connell, a lawyer for The Slants, said he Lanham Act was unconstitutional. Though it was pleased with the court’s decision to hear might lead to more hateful trademarks in the unconstitutional. the appeal and looked forward to vindicating future, the court said, the First Amendment the band’s First Amendment rights. forbids government from banning offensive The administration said the law does not The Supreme Court will hear arguments and speech. In re Tam, 808 F.3d 1321 (Fed. Cir. restrict speech because the disputed names decide the case in its coming term, which 2015). may still be used without federal registration. begins Oct. 3 and ends next June. Such registration, however, can help protect Question presented trademarks nationwide in court and block The cases began after the band lost a ruling the import and sale of counterfeit goods. at the U.S. Patent and Trademark Office. An Whether the disparagement provision Paul Fucito, a trademark office spokesman, agency tribunal refused to grant trademark in 15 U.S.C.A. § 1052(a) is facially declined to comment. WJ protection for the band’s name in 2013, invalid under the free speech clause of saying it was offensive to people of Asian the First Amendment. (Reporting by Andrew Chung; editing by Will descent. Some consider the term “slant eye” Dunham) a racist slur.

INTELLECTUAL PROPERTY Patent exhaustion case added to Supreme Court’s queue

By Patrick H.J. Hughes Printer cartridge reseller Impression Products has convinced the U.S. Supreme Court to hear arguments over the applicability of the patent exhaustion doctrine, hoping the high court will overturn a Federal Circuit win for printer manufacturer Lexmark International.

Impression Products Inc. v. Lexmark Cert. granted Generally, the patent for the Federal Circuit ruled that the doctrine International Inc., No. 15-1189, cert. granted, exhaustion doctrine does not apply to products first sold abroad 2016 WL 1117396 (U.S. Dec. 2, 2016). Dec. 2 terminates the right or sold with certain post-sale restrictions. The high court agreed to consider whether to sue a customer who Impression wants the Supreme Court to patent exhaustion applies in foreign purchased an authorized patented product, declare that a sale abroad exhausts a U.S. jurisdictions, a decision that could have meaning patent holders cannot prohibit patent holder’s right to sue for infringement, significant consequences for various resales or set a resale price. as the court recently held in a decision over industries engaged in international trade. However, in the case involving Impression copyrighted works. and Lexmark, the full U.S. Court of Appeals

© 2017 Thomson Reuters JANUARY 4, 2017 n VOLUME 31 n ISSUE 12 | 15 “Once again the Supreme Court has granted Questions presented cert. in a case where the Federal Circuit drew a distinction between patent and copyright 1. Whether a “conditional sale” that transfers title to the patented item while specifying law,” said Kirkland & Ellis partner John C. post-sale restrictions on the article’s use or resale avoids application of the patent O’Quinn, who is not involved in the case. exhaustion doctrine and therefore permits the enforcement of such post-sale restrictions “The Supreme Court’s decision to review the through the patent law’s infringement remedy. case shows that at least some on that court 2. Whether, in light of Kirtsaeng v. John Wiley & Sons Inc., 133 S. Ct. 1351 (2013), that the believe as a presumptive matter that where common law doctrine barring restraints on alienation that is the basis of the exhaustion they address similar issues, patent and doctrine “makes no geographical distinctions,” a sale of a patented article — authorized by copyright law should be interpreted to reach the U.S. patentee — that takes place outside of the United States exhausts the U.S. patent the same result,” O’Quinn added. rights in that article.

PATENT EXHAUSTION The case concerns discounted single-use In March, Impression asked the high court to U.S. GOVERNMENT’S ADVICE review the Federal Circuit’s ruling. cartridges Lexmark sold under a program The government chimed in with its opinions that expressly prohibited resale and required about the case in October. buyers to return empty cartridges for FOLLOWING KIRTSAENG “This court has repeatedly found patent recycling. In its petition Impression noted the Supreme rights exhausted … even when the patentee Court recently eliminated boundaries for Impression obtained Lexmark’s cartridges attempted to impose restrictions on the first-sale doctrine for copyright holders in the U.S. and abroad, modified them to post-sale use or resale,” the government’s in Kirtsaeng v. John Wiley & Sons Inc., 133 S. Ct. circumvent the patented single-use design, brief said. and resold them in the U.S., according to 1351 (2013). The government also said the high court documents. The Kirtsaeng court said foreign and court should review the Federal Circuit’s domestic sales alike exhaust a copyright When Lexmark sued for infringement, proclamation that foreign sales never trigger holder’s right to sue for infringement in the Impression presented a first-sale defense, the exhaustion of U.S. patent rights. arguing that Lexmark could not enforce United States. Impression says the same The U.S. government advocated a rule of patent rights after the first sale. logic should apply to patent cases. “presumptive exhaustion,” whereby patent The company also says the Federal Circuit’s The case eventually made it to the Federal owners can reserve their domestic patent decision erroneously removed important Circuit. rights after authorized foreign sales through limits on patent rights, adding that “there an express license, but those rights otherwise In a 10-2 decision in February, the en banc is no room in the exhaustion doctrine for expire automatically. court said Lexmark’s foreign sales did not continuing post-sale restrictions.” exhaust the company’s right to sue for This understanding follows legislation Numerous friend-of-the-court briefs patent infringement in the U.S. Lexmark enacted by Congress and free trade supported Impression’s arguments, urging Int’l v. Impression Prods., 816 F.3d 721 (Fed. agreements signed by the president, the the high court to reverse the Federal Circuit’s Cir. 2016). government said. WJ decision. Regarding the post-sale restrictions, the Related Filings: Federal Circuit reiterated its decision in Lexmark, on the other hand, said precedent Reply brief: 2016 WL 3098606 Opposition brief: 2016 WL 2997339 Mallinckrodt Inc. v. Medipart Inc., 976 F.2d has already answered the questions Petition: 2016 WL 1130030 700 (Fed. Cir. 1992), that a “single-use only” Impression raised. restriction was a valid condition for the “Because patent law precedents offer no resale of a patented medical device and did conflict or other reason to grant review, not prevent a patent owner from suing for Impression looks to this court’s interpre- infringement. tation of the Copyright Act in Kirtsaeng,” Lexmark’s opposition brief said.

By Patrick H.J. Hughes After the Supreme Court grilled biotech firms Life Technologies Corp. and Promega Corp. on the practical implications of finding that sending a single component of a patented invention abroad can constitute infringement, IP experts told Thomson Reuters how they expect the justices to decide the issue.

Life Technologies Corp. et al. v. Promega Dori Hines, who leads the electrical and “If the questioning at oral argument is any Corp., No. 14-1538, oral argument held computer technology practice group at indication of how the court will rule, I expect (U.S. Dec. 6, 2016). Finnegan, Henderson, Farabow, Garrett & that the Vegas odds makers are predicting At oral argument Dec. 6, the justices Dunner, found that the justices’ examination that the Supreme Court will reverse the weighed Life Tech’s request that they of the Patent Act, and their examples of Federal Circuit and rule that 271(f)(1) overturn the U.S. Court of Appeals for the when components are substantial, applies to multiple components, not one,” Federal Circuit’s decision that under the foreshadowed an opinion in favor of a he said. U.S. Patent Act, one American-made qualitative approach. “Most of the justices seemed skeptical of component — a polymerase — was a “This focus on the language of the statute the argument that one should construe “substantial portion” of a DNA test at the and the practical implications of the decision 271(f)(1) as qualitative instead of quantitative, heart of the dispute. should lead to a flexible standard for emphasizing the complexities that would The “substantial portion” verbiage at infringement under Section 271(f)(1), rooted result from the former compared to the the center of the dispute comes from in a qualitative analysis,” Hines said. latter,” DiMatteo added. Section 271(f)(1) of the Patent Act, 35 U.S.C.A. Morrison & Foerster IP partner Matthew Tom Duston, IP partner at Marshall Gerstein, § 271(f)(1), which lays out inducement D’Amore said he thought a key question at the predicted before the oral argument that liability for Americans oral argument was whether the presumption a decision in favor of patent owners may, Argument held supplying allegedly against extraterritoriality applied, noting ironically, disadvantage U.S. suppliers. Dec. 6 infringing components that statute expressly contemplates an “Faced with such potential liability under U.S. to foreign companies. extraterritorial impact as opposed to a patent law, foreign customers may simply Promega has asked the Supreme Court to statute that is silent as to its extraterritorial turn to non-U.S. suppliers whose goods do follow the Federal Circuit’s interpretation effect. not present these risks,” Duston warned. of Section 271(f)(1). Rather than applying a quantitative analysis, the appeals “To … provide clear direction for all manufacturers with court favored a qualitative approach to determining whether a single component international operations, the Supreme Court will need to could constitute a substantial portion of a provide a clear definition or standard for determining the patented invention. ‘substantial portion of the components of the patented invention,’” Baker Botts partner Daniel Hulseberg said. ATTORNEY OBSERVATIONS ON ORAL ARGUMENT Baker Botts LLP partner Lisa M. Kattan, who He also noted the specific facts in the dispute THE PATENT AND THE COMPONENT between Life Tech and Promega do not lead previously served as a senior investigative Madison, Wisconsin-based Promega is the to a clear test for suppliers. attorney at the International Trade exclusive assignee of U.S Patent Reissue No. Commission, said the justices frequently “While a qualitative test like that adopted 37,984, which covers a kit for determining a raised questions about the “real-world by the Federal Circuit might benefit patent person’s identity through DNA. implications” of their interpretation of holders, it increases the uncertainty for Promega accused Life Tech and several Section 271(f)(1). suppliers, and unless the court comes out others of infringing the ’984 patent in 2010 in with a quantitative-type test, the court’s She found it noteworthy that Justice Anthony the U.S. District Court for the Western District decision may not resolve that uncertainty Kennedy commented on the complexity of of Wisconsin. global supply chains, while Justice Stephen even if it reverses or remands,” D’Amore said. Promega said California-based Life Tech, Breyer expressed concern about the John DiMatteo, a partner at Holwell which had a license to sell the patented extraterritorial effects of the court’s decision. Shuster & Goldberg, predicted the case DNA-testing kit in certain fields, was making, would turn in favor of Life Tech.

© 2017 Thomson Reuters JANUARY 4, 2017 n VOLUME 31 n ISSUE 12 | 17 Question presented The polymerase’s importance to the DNA- kit shows it is a substantial portion of the Whether the Federal Circuit erred in holding that supplying a single, commodity product, Promega argued. component of a multi-component invention from the United States is an infringing act Promega also dismissed the fear that under 35 U.S.C.A. § 271(f)(1), exposing the manufacturer to liability for all worldwide sales. U.S. suppliers would be threatened if Section 271(f)(1) was interpreted broadly, saying the other elements of induced using and selling the products to those in SECTION 271(F)(1) infringement also have to be shown. fields not covered by the license, such as At the oral argument, Life Tech reiterated “[Suppliers] have to, number one, know that clinical diagnostics and research markets. its objection to the Federal Circuit’s there is a patent. They have to know that the While many of the kits were assembled and interpretation of the Patent Act, saying product is going to be combined with others. sold outside the U.S., Promega said Life its reading of Section 271(f)(1) conflicted They have to know that the combination, Tech and others violated Section 271(f)(1) with Section 271(f)(2), which says special if practiced in the United States, would because the allegedly infringing product’s circumstances have to exist for a single infringe,” Promega said. five components included one supplied commodity to violate the Patent Act. Promega said Life Tech had to have known from the U.S. Justice Samuel Alito asked Life Tech for a its product would have been combined with In February 2012 the District Court tossed specific number of components that would others, and if that combination would have the $52 million jury verdict, saying Life Tech constitute “substantial portion.” happened in the U.S., the result would have could not be liable under Section 271(f)(1) been infringement. While Life Tech admitted that “substantial because one component could never be a portion” is ambiguous, the company also The solicitor general’s office also offered substantial portion of a multicomponent said the term should be interpreted narrowly. the government’s view that a single invention. Promega Corp. v. Life Techs. Corp., commodity component is never enough to No. 10-cv-281, 2012 WL 12862829 (W.D. Wis. “The principle against extraterritoriality satisfy Section 271. drives you in the direction of saying Congress Sept. 13, 2012). “We are asking the court to hold that (f)(1) meant only to allow U.S. patents to operate On appeal, the Federal Circuit overturned the reaches the supply of all or a large portion outside the United States in very narrow District Court ruling. Promega Corp. v. Life of the components of the invention, not any circumstances,” Life Tech said. Techs. Corp., 773 F.3d 1338 (Fed. Cir. 2014). important portion of the invention. And the The decision allowed Promega to salvage When Justice Alito asked Promega what way we had put it is that it reaches the supply some of a $52 million jury verdict that the “substantial portion” meant, Promega’s of all or something tantamount to all of the trial court vacated on post-trial motions. attorney said a jury should be told to components,” the government argued. WJ follow the dictionary definition, which Life Tech filed a certiorari petition in June Related Filing: says “considerable in importance and/or 2015. Argument transcript: 2016 WL 7104318 amount.”

WESTLAW JOURNAL INTELLECTUAL PROPERTY

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18 | WESTLAW JOURNAL n EMPLOYMENT © 2017 Thomson Reuters INTELLECTUAL PROPERTY litigation tactics resulting in undue damages or forced settlements based on weak or Justices hear clashing arguments frivolous patent claims.” over laches defense to patent suits Afterward, Wong observed that the justices seemed swayed by SCA Hygiene’s reasoning By Patrick H.J. Hughes that “in the patent context, damages are limited to a reasonable royalty … and limited Two diaper manufacturers have presented to the U.S. Supreme Court reasons to only six years, so the cost to the innovator for and against letting patent infringement defendants take advantage of the would not be that significant.” laches doctrine, an equitable defense applied when a plaintiff waits too long Christopher K. Larus, partner at the to sue. Minneapolis office of Robins Kaplan LLP, who is not involved in the litigation, also said SCA Hygiene Products Aktiebolag et al. v. “The issue in the case … is whether the the court, including Chief Justice John First Quality Baby Products LLC et al., judge-made equitable doctrine of laches Roberts, appeared to lean in favor of barring No. 15-927, oral argument held (U.S. Nov. 1, survives the six-year limitation on damages laches in patent cases. 2016). provided by Congress,” he said, noting that in However, Larus also observed that the Petrella, laches did not survive a similar First Quality Baby justices — Justice Stephen Breyer in particular Argument held limitations period in copyright law. Products said the U.S. — raised concerns about how patent owners Nov. 1 Court of Appeals for the “Although there are obvious differences and those accused of infringement would Federal Circuit properly between copyrights and patents, the be affected if laches were no longer available recognized the defense as necessary to Supreme Court has been unwilling recently as a defense. protect alleged infringers prejudiced by a to make special rules for patent cases,” patent owner’s delay in bringing suit, and he said. the high court should, too. The fear of “patent trolls” John DiMatteo, a partner at Holwell Shuster is unwarranted, SCA Hygiene Products, on the other hand, & Goldberg in New York, who is not involved said the high court should rule as it did in in the case, predicts that “the court will the petitioner said. Petrella v. Metro-Goldwyn-Mayer Inc., 134 S. follow the logic of Petrella and preclude the Ct. 1962 (2014), which abolished laches for defense of laches in patent cases.” “Maintaining the status quo would generally copyright cases. At argument Justice Ruth Bader Ginsburg, be favorable for companies facing patent At oral argument Nov. 1, the parties discussed who wrote the Petrella opinion, appeared infringement claims, who may seek to use a the differences between copyright and to want to “follow her previous logic and laches defense to avoid large damage awards patent law to see if the court’s reasoning in deny the defense of laches in patent cases,” where a patent holder’s delay in bringing Petrella could be applied to patent cases. DiMatteo said. suit has either made it harder to defend the case or led the defendant to make economic They also debated whether giving courts Justice Ginsburg seemed to be joined by decisions based on the expectation that no discretion to allow the laches defense would Justices Sonia Sotomayor, Samuel Alito and suit would be brought,” Larus said. frustrate Congress’ intent in enacting the Elena Kagan, he noted. Patent Act, which contains a six-year time Ha Kung Wong, a New York-based partner THE DIAPER PATENT SUIT limit on filing suit and does not mention of Fitzpatrick, Cella, Harper & Scinto, who is The controversy stems from U.S. Patent laches. not involved in the case, also said the court No. 6,375,646, which covers SCA Hygiene’s appeared to be leaning toward eliminating EXPERTS’ REACTIONS “absorbent pants-type diaper.” laches in patent suits. J. Michael Jakes, a partner at Finnegan, Beginning in 2003 SCA Hygiene, a Before the oral argument, Wong had Henderson, Farabow, Garrett & Dunner in paper-products maker headquartered warned that “the elimination of this long- Washington, who is not involved in the case, in Stockholm, sent letters accusing First standing defense could potentially expose described the decision the high court has Quality Baby Products, a New York-based the innovative industry to increased abusive to make. hygienic supply company, of infringing the ’646 patent. However, SCA Hygiene did not Question presented sue First Quality until 2010. After several years of litigation, First Quality Whether and to what extent the defense of laches may bar a claim for patent infringement moved for summary judgment based on brought within the Patent Act’s six-year statutory limitations period. laches.

© 2017 Thomson Reuters JANUARY 4, 2017 n VOLUME 31 n ISSUE 12 | 19 U.S. District Judge Joseph H. McKinley Jr. of “Injecting judicial discretion into the statutory offense, as “independent invention is no the Western District of Kentucky granted the scheme would frustrate the will of Congress defense.” motion. SCA Hygiene Prods. v. First Quality and create uncertainty about something Copyright law requires knowledge that a Baby Prods., No. 10-cv-122, 2013 WL 3776173 as fundamental as the timeliness of suit,” work is infringing, and the potential infringer (W.D. Ky. July 16, 2013). SCA Hygiene argued. “can always choose some other form of expression,” First Quality said, noting that An egregious patent holder can wait for a company to invest accused patent infringers do not have such before bringing suit and collecting profits from the alleged an option. infringers’ most profitable years, the respondent said. An egregious patent holder can wait for a company to invest before bringing suit and collecting profits from the alleged infringers’ In September 2014 a three-judge Federal However, Justice Breyer, who wrote the most profitable years, First Quality said. Circuit panel affirmed. SCA Hygiene Prods. v. dissent in Petrella, said the differences First Quality Baby Prods., 767 F.3d 1339 (Fed. between the two intellectual property law This fear of “patent trolls” is unwarranted, Cir. 2014). areas were relevant to whether laches SCA Hygiene said, noting that principles of should still apply in patent suits. estoppel can still apply to punish misleading A year later, a split en banc Federal Circuit conduct. court also affirmed. SCA Hygiene Prods. v. Copyright law’s limitation period only allows First Quality Baby Prods., 807 F.3d 1311 (Fed. damages from profits earned during the “And if you search for cases where so-called Cir. 2015). statutory period minus the costs to produce patent trolls have been barred by laches, you those profits, Justice Breyer said. will find very, very few,” SCA Hygiene said. SCA Hygiene filed a certiorari petition in WJ January, and the high court agreed in May to In a patent dispute, a company might spend Attorneys: decide the issue. hundreds of millions of dollars on research Petitioner: Martin J. Black, Dechert LLP, and development in reliance on a technology, Philadelphia, PA COPYRIGHT VS. PATENT only to be sued later for all the profits from a Respondent: Seth P. Waxman, Wilmer Cutler During the oral argument, SCA Hygiene particular patent, he explained. Pickering Hale & Dorr, Washington, DC reminded the justices that they held in First Quality reiterated Justice Breyer’s Related Filing: Petrella that a statute with an express distinction and added that unlike in copyright Argument transcript: 2016 WL 6460339 limitations period should not have that time law, patent infringement is a strict liability period shortened with the laches doctrine.

WHITE-COLLAR CRIME The plaintiffs sought damages from high- ranking federal officials, including former Supreme Court to hear qualified immunity U.S. Attorney General John Ashcroft and former FBI Director Robert Mueller, asserting case over 9/11 detentions they knew there was no evidence the plaintiffs were connected to terrorism. By Phyllis L. Skupien, Esq. The detainees claimed they were subjected The U.S. Supreme Court has agreed to review a ruling that exposes senior to harsh conditions including sleep federal officials to suits for tort damages for their detention of non-citizens deprivation, verbal and physical abuse by after the 9/11 attacks. jail guards, and solitary confinement due to their religion and ethnic background. Ashcroft et al. v. Turkmen et al., No. 15-1359; Argument set The lawsuit arose from Ziglar v. Turkmen et al., No. 15-1358; Hasty the arrest of Arab and 9/11 DETAINEES et al. v. Turkmen et al., No. 15-1363, cert. Muslim individuals who Jan. 18 After the Sept. 11 attacks, illegal immigrants granted (U.S. Oct. 11, 2016). were illegally in the deemed to be “of interest” to the investigation United States and detained for months “Efforts to hold government officials were subjected to an unwritten “hold after the Sept. 11 terrorist attacks. In the personally liable for alleged official until cleared” policy, under which they would original suit, filed in the U.S. District Court misconduct are highly disruptive and not be released until the FBI had cleared for the Eastern District of New York in likely to impair the performance of their them of any connections to terrorism. duties,” Richard Samp, chief counsel of the 2002, the plaintiffs said the length and During the investigation, federal officials Washington Legal Foundation, said in a conditions of their confinement violated their arrested over 700 illegal immigrants statement. constitutional rights.

20 | WESTLAW JOURNAL n EMPLOYMENT © 2017 Thomson Reuters on charges that they had violated U.S. immigration law. The detainees were held in the Administrative Maximum Special Housing Unit in Brooklyn, New York, where they remained under restrictive conditions for three to eight months. As they were illegal immigrants and in violation of immigration policy, their arrest was not at issue. But the plaintiffs contend that the authorities lacked any individualized information that indicated they were terrorists and justified their confinement and its restrictive conditions. Eight plaintiffs originally sued top administrative official and prison officials, seeking compensatory and punitive damages, as well as attorney fees and costs. Citing Bivens v. Six Unknown Names Agents of the FBI, 40 U.S. 388 (1971), they alleged their treatment violated their substantive REUTERS/Kevin Lamarque/File Photo The lawsuits claim former FBI Director Robert Mueller (L) and former U.S. Attorney General John Ashcroft (R), shown here in 2004, knew due process and equal protection rights, there was no evidence the plaintiffs were connected to terrorism. entitling them to damages from the officials in their individual capacity. In Bivens, the Ashcroft and Mueller filed the petition in Thornburgh, along with former FBI directors U.S. Supreme Court held that a violation of May. In it, they argue that the judicially William Sessions and William Webster. Fourth Amendment rights by federal officers inferred remedy of Bivens should not be They argue the senior officials are entitled under color of federal authority can give rise extended to high-level policymakers dealing to qualified immunity for their alleged role to a claim for damages. with issues of national security. They also in the treatment of the detainees because contend that they did not personally condone it was not clear that the FBI could not hold LOWER COURT PROCEEDINGS discriminatory policies after the attacks. them until the agency confirmed they were In 2013 the District Court granted motions not connected to terrorism. The U.S. Justice to dismiss by the federal officials. Turkmen v. AMICUS BRIEF Department’s Office of Inspector General Ashcroft, 915 F. Supp. 2d 314 (E.D.N.Y. 2013). The Washington Legal Foundation filed the issued a report in 2003 criticizing the FBI’s But the 2nd U.S. Circuit Court of Appeals only amicus brief in favor of granting certiorari procedure. allowed the claims to proceed in an opinion in conjunction with former U.S. attorneys The amicus brief also says discriminatory issued June 17, 2015. Turkmen v. Hasty, 789 general William Barr, Alberto Gonzales, intent cannot be shown due to the obvious F.3d 218 (2d Cir. 2015). Ed Meese, Michael Mukasey and Dick explanation that the Department of Justice did not want to allow dangerous individuals Questions presented to leave the United States and continue to be a threat. 1. Whether the judicially inferred damages remedy under Bivens v. Six Unknown Named The Supreme Court on Oct. 11 agreed to hear Agents of Federal Bureau of Narcotics, 403 U.S. 388 (1971), should be extended to the novel the case and is expected to issue its ruling by context of this case, which seeks to hold the former attorney general and director of the the end of June 2017. FBI personally liable for policy decisions made about national security and immigration in In response to the grant of the writ of the aftermath of the Sept. 11, 2001, terrorist attacks. certiorari, WLF Chief Counsel Richard 2. Whether the former attorney general and FBI director are entitled to qualified immunity Samp said: “The appeals court decision for their alleged role in the treatment of respondents, because it was not clearly established wrongly strips the attorney general and FBI that aliens legitimately arrested during the Sept. 11 investigation could not be held in director of the protection from tort claims restrictive conditions until the FBI confirmed that they had no connections with terrorism. to which the qualified immunity doctrine 3. Whether respondents’ allegations that the attorney general and FBI director personally entitles them. … Qualified immunity is condoned the implementation of facially constitutional policies because of an invidious supposed to protect all government officials animus against Arabs and Muslims are plausible, as required by Ashcroft v. Iqbal, 556 except those who are plainly incompetent or WJ U.S. 662 (2009), in light of the obvious alternative explanation — identified by the court in knowingly violate the law.” Iqbal — that their actions were motivated by a concern that, absent fuller investigation, the Related Filings: Petition: 2016 WL 2732091 government would unwittingly permit a dangerous individual to leave the United States. Washington Legal Foundation amicus brief: 2016 WL 3194588

By Elizabeth Kurpis, Esq. Mintz, Levin, Cohn, Ferris, Glovsky & Popeo

Argument held On Oct. 31, the U.S. concept of “conceptual separability” to POTENTIAL OUTCOMES AND Supreme Court heard protect their designs. THE FASHION INDUSTRY oral arguments in Star Oct. 31 Conceptual separability essentially allows A Supreme Court ruling in favor of Star Athletica LLC v. Varsity for a component of an article that is separate Athletica could deal a significant blow to Brands Inc., No. 15-866, a case in which from its utility aspect to be copyrighted. the fashion industry in terms of copyright Varsity Brands has alleged that competitor protection. Star Athletica infringed Varsity’s copyrighted Because there is no concise and uniform definition of “conceptual separability,” stripe, chevron, color block and zigzag Generally speaking, companies and designers the meaning of this term has become an designs by applying them to Star Athletica’s have been able to rely on copyrights to important unresolved question in U.S. cheerleading uniforms. protect things such as original fabric prints. copyright law. The issue was not whether each company’s Here, Varsity is arguing that the chevron Further compounding the issue, federal stripes and chevrons were substantially designs on their cheerleading uniforms courts have applied a variety of tests to similar. Instead, the issue was whether fall more in line with a fabric “print” or determine when, if ever, a design on clothes Varsity’s designs were copyrightable at all — “design,” rather than a utilitarian and is conceptually separable. Unfortunately, no and this is where things get fuzzy. non-copyrightable aspect of the uniform. clear-cut rule has emerged to settle disputes The case was first heard by the U.S. District like the one that exists in the Star Athletica Court for the Western District of Tennessee, case. Because there is no concise which held that Varsity’s designs are not As a result, when Star Athletica’s petition and uniform definition of separable from the utilitarian function of the for certiorari was granted, IP professionals cheerleading uniform and therefore are not “conceptual separability,” and owners expected the Supreme Court copyrightable. the meaning of this term to finally address the confusion that has The 6th U.S. Circuit Court of Appeals mounted with regard to this concept. has become an important reversed, concluding that the designs could Unfortunately, many were disappointed, as unresolved question in be copyrighted because the combinations of the justices seemingly failed to do so based U.S. copyright law. stripes, chevrons, color blocks and zigzags on their line of questioning. allow the garment to be recognizable as a cheerleading uniform, which conceptually They neither brought up the issue directly Stripping away legal protection would separates it from the basic function of the nor showed interest in discussing under essentially be saying that stripes, chevrons, underlying article of clothing. what circumstances a useful article can be color blocks and zigzags as applied to a protected. uniform would not be copyrightable, but Star Athletica then petitioned the Supreme Rather, the justices focused overwhelmingly would be if they were a printed design — Court to review the case in hopes of getting on whether the specific designs in question a seemingly lopsided result. some clarity. were utilitarian or not, leading one to believe And because these designs were actually Because a useful article itself cannot be that we may end up with a far narrower ruling copyrighted already, a ruling for Star copyrighted, copyright owners rely on the than most interested followers had hoped for. Athletica would undermine the rights designers assumed they already had, a tough pill to swallow where often their work already straddles numerous IP protections — usually without neatly falling under any. If the Supreme Court rules for Varsity and Elizabeth Kurpis is an attorney with Mintz, Levin, Cohn, Ferris, establishes a single test for determining Glovsky & Popeo in New York. She advises fashion companies on a variety of legal issues and matters, including trademark, licensing whether a design is conceptually separable and other intellectual property-related issues, supplier management, from its utilitarian function, it would likely manufacturer negotiations, import-export issues, privacy, technology provide the fashion industry with more concerns, and corporate structuring and restructuring. She can be reached at [email protected]. confidence in the ability to protect through copyright certain design elements of apparel and accessories.

22 | WESTLAW JOURNAL n EMPLOYMENT © 2017 Thomson Reuters Question presented the designs that may not have been deemed creates a host of IP issues, some of which the copyrightable may become so. Supreme Court may touch upon here. What is the appropriate test to They will also have to carefully assess how At the most basic level, any objects printed determine when a feature of a useful any new judicial standard will affect each that are strictly nonfunctional or ornamental, article is protectable under Section 101 copy. They will further need to analyze such as a unique jewelry design, would be of the Copyright Act? whether elements that were traditionally protected by U.S. copyright law. considered “useful” may be copyrightable On the other hand, objects that are designed under the new standard. Designers will have clearer guidance on strictly as utilitarian and functional articles, how best to protect portions of their work This will be risky business until the new test such as a hanger, would not be. that may not have been deemed covered is litigated and the fashion industry can see The issues affecting the 3-D printing industry how the courts apply it in practical terms. under U.S. copyright law because they were fall somewhere in between and also involve considered to be strictly “useful.” Although it is not known if this case will lead the doctrine of conceptual separability. to a single test for determining conceptual At present, numerous tests exist for analyzing Should the Supreme Court rule in favor of separability, one thing that is clear from oral whether such elements are copyrightable. As Varsity, the law would allow the utilitarian arguments is that the justices understand a result, at present the outcome depends on core of an object to be separated from its the implications of their decision. the test used in the jurisdiction where the creative parts and therefore be eligible for enforcement action is brought or maintained. Justice Sonia Sotomayor pointed out that copyright protection. depending on the end result, the knockoff Of particular interest to the fashion industry Such a ruling would change the landscape might be eliminated altogether. is the effect that the high court’s ruling will of the law, as copyrights would then be have on powerhouse fast-fashion retailers allowed to apply to certain “useful articles,” and others currently relying on the lack of A Supreme Court ruling in protections for which were traditionally not protections for designs in U.S. copyright law. favor of Star Athletica could available. Because so few protections currently exist deal a significant blow to The potential consequences for the 3-D for such fashion designs, some powerhouse printing industry are enormous, as this fast-fashion retailers have been able to the fashion industry in terms expansion can hypothetically apply to any generate substantial revenue producing of copyright protection. printed object so long as the owners can near-copycat designs from the runways argue that there are elements that are not strictly utilitarian. of luxury brands and selling them at a This could have a deep impact on fast-fashion significantly lower price point. retailers in particular because knockoffs are For instance, a 3-D printed pen cap that does They are able to do so much faster than the the foundation of their business model. anything other than strictly cover the top of a pen can be protected by U.S. copyright law. traditional model allows. As a result, such While the justices understand the broad knockoff pieces can become available in financial and legal implications of their With the Star Athletica case, the 3-D printing stores even before the original designs are decision, there is a lot of basic information industry is hoping the Supreme Court will produced and delivered to retailers. they need to digest. Justice John Roberts provide some guidance on how to separate creative, copyrightable designs from Under those circumstances, the merchandise made that clear when he asked whether it unprotected utilitarian objects because the from fast-fashion companies is often posted would make a difference if the chevrons and survival of the industry may depend on it. on a retailer’s website as soon as samples are stripes were stitched rather than applied. available, which allows customers to order Other justices struggled with the issue of Star Athletica is a case that the copyright the pieces as production is being completed. whether camouflage should receive copyright world generally, and the fashion world specifically, has anxiously been following in These fast-fashion companies understand protection, since it is a distinctive design that hopes of receiving some clarity in the murky that the protections afforded to ready- also serves a practical purpose. body of copyright law that has developed to-wear companies and their designs are Considering that the answers to these over the years. extremely limited and difficult to enforce. questions are still uncertain, one would think In addition to the fashion industry, the Because of these limitations, they have that a concise test would be the best way to advancement of a test by the Supreme Court created successful business models that resolve these ambiguities. for determining when certain elements of are based on exploiting the ambiguity in MORE THAN JUST FASHION a useful article are copyrightable may have copyright protection by copying only the significant implications for other industries Although this case mainly focuses on the uncopyrightable elements of a fashion that produce goods that combine artistic and fashion industry, the Supreme Court’s design, including shapes and visual elements utilitarian elements. of a garment, while taking care to avoid ruling may also have ramifications for other copying logos or specific custom prints. industries such as that of 3-D printing. Depending upon which side the Supreme Court ruling falls, the parameters of copyright As with any new copying technology — If the Supreme Court rules in favor of Varsity, protection in the fashion industry may be think CD burners and Napster for the music fast-fashion retailers will have to adjust their clarified or even completely redefined. We industry — the invention of 3-D printers business models accordingly, as elements of wait with bated breath, Supreme Court. WJ

By Matthew D’Amore, Esq. Morrison & Foerster

In an important case for manufacturers and BACKGROUND it could not apply to the export of a single life sciences companies that supply their component from the U.S. LifeTech made or procured Taq polymerase, products from the United States to overseas an enzyme used for amplifying DNA for In Promega Corp. v. Life Technologies Corp., markets, the United States Supreme Court analysis, in the United States and supplied 773 F.3d 1338 (Fed. Cir. 2014), the Federal heard argument on December 6, 2016, that enzyme to a manufacturing center in Circuit reversed. over whether the shipment of a single non- the United Kingdom. There, the enzyme is infringing article from the United States Focusing on whether the polymerase packaged into a genetic testing kit to be sold could make the supplier liable for worldwide represented a “substantial portion” of the worldwide, including in the U.S. damages under the U.S. patent laws if that kit, the court observed that, “[w]ithout Taq article is used in an infringing composition Promega sued for patent infringement, polymerase, the genetic testing kit recited in outside the United States. contending, among other things, that the the [Promega] patent would be inoperable” genetic testing kit manufactured in the UK and that “LifeTech’s own witness admitted EXECUTIVE SUMMARY would infringe a U.S. patent. that the Taq polymerase is one of the ‘main’ At the urging of petitioner Life Technologies Corporation (“LifeTech”) and the Solicitor The Federal Circuit’s decision has created substantial General, on June 27, 2016, the Supreme Court ambiguity, because it forces U.S. producers to guess at granted certiorari of the following question: whether their single component is itself a “substantial portion” “Whether the Federal Circuit erred in holding that supplying a single, of combinations assembled outside the U.S. commodity component of a multicomponent invention from the United It argued not only that the sales of that kit and ‘major’ components of the accused kits.” States is an infringing act under 35 U.S.C. into the U.S. infringe its patents under Id. at 1356. § 271(f)(1), exposing the manufacturer to 35 U.S.C. § 271(a), but also that LifeTech’s liability for all worldwide sales.” The appellate court thus found § 271(f)(1) shipment from the U.S. of the kit’s Taq was satisfied by the supply of a single The Supreme Court will thus decide whether enzyme made LifeTech liable for damages component: “The evidence demonstrates the manufacture of a product outside the based on sales of the kit worldwide under that LifeTech supplied a substantial portion United States, and the sale of that product 1 35 U.S.C. § 271(f)(1). of the patented invention — the polymerase outside the United States, could give rise to The jury found for Promega and awarded — to its overseas facility as a component of worldwide liability in the U.S. if that product lost profits based on the worldwide sales of its accused genetic testing kits.” Id. would infringe a U.S. patent and if it contains LifeTech’s kits. a single component or ingredient supplied LifeTech petitioned for certiorari, and the from the U.S. The district court overturned that verdict, Supreme Court asked for the views of the holding that because § 271(f)(1) refers to Solicitor General. A decision in the case is expected by the end the supply of “all or a substantial portion of of June 2017. After the SG filed a brief supporting LifeTech’s the components of a patented invention,” position, the Supreme Court granted certiorari to consider LifeTech’s liability.2

IMPORTANCE OF THE DECISION Matthew D’Amore is a partner in Morrison & Foerster’s intellectual property and life sciences practice groups in New York. He advises and Under the Federal Circuit’s decision, represents life sciences clients in resolution of complex IP disputes, U.S. manufacturers, including chemical including Hatch-Waxman litigation, inter partes review proceedings companies, pharmaceutical manufacturers, and patent licensing. Additionally, he has represented clients in patent matters involving medical devices, biotechnology, internet technology, and component manufacturers, could be software design, interactive television, electronics, semiconductors, liable for patent infringement for the shipment manufacturing and financial services. He can be reached at mdamore@ of a single non-infringing component or mofo.com. This expert analysis was first published as a Morrison & Foerster Client Alert on June 28. Republished with permission. ingredient from the U.S. to another country — if that component or ingredient represented a “substantial portion” of the patented

24 | WESTLAW JOURNAL n EMPLOYMENT © 2017 Thomson Reuters product made outside the United States, The Supreme Court’s decision may clarify patent if such combination occurred within the and if the manufacturers actively induced the these questions and provide increased United States, shall be liable as an infringer.” combination or assembly of that patented certainty to U.S. exporters. WJ 2 The Supreme Court did not grant review of product. another question presented by LifeTech — whether NOTES 35 U.S.C. §271(f)(1) required the inducement The Federal Circuit’s decision has created of a third party. The Federal Circuit held that it substantial ambiguity, because it forces U.S. 1 35 U.S.C. § 271(f)(1) provides that “whoever did not — that the combination is what must be without authority supplies or causes to be producers to guess at whether their single induced, not a separate actor. The SG argued supplied in or from the United States all or a against certiorari on that question, contending component is itself a “substantial portion” substantial portion of the components of a that the Federal Circuit’s decision was correct of combinations assembled outside the U.S. patented invention, where such components and also that the question need not be reached are uncombined in whole or in part, in such because it appeared that separate but affiliated The appellate court’s decision also expands manner as to actively induce the combination companies were involved in LifeTech’s conduct. the extra territorial reach of the U.S. patent of such components outside of the United laws. States in a manner that would infringe the

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© 2017 Thomson Reuters JANUARY 4, 2017 n VOLUME 31 n ISSUE 12 | 25 EXPERT ANALYSIS Class dismissed … But not quite: Supreme Court to review appealability of class certification denials when plaintiffs voluntarily dismiss case

By Alexandra Laks, Esq. Morrison & Foerster

Does a federal court have jurisdiction to The plaintiffs filed a 23(f) petition with the Question presented review an order denying class certification Ninth Circuit, but the Ninth Circuit denied after the named plaintiffs voluntarily dismiss the petition. Whether a federal court of appeals has their claims with prejudice? That is the In 2011, the Baker plaintiffs — who had opted jurisdiction under both Article III and question the Supreme Court will consider in out of the original action — filed a virtually 28 U.S.C. § 1291 to review an order Microsoft Corp. v. Baker, Docket No. 15-457. identical lawsuit in the same District, arguing denying class certification after the Class action plaintiffs that an intervening Ninth Circuit decision named plaintiffs voluntarily dismiss Cert. granted have increasingly relied on this tactic to required a different result. their individual claims with prejudice. obtainJan. immediate 15, appellate review of The district court disagreed, striking Baker’s district2016 court denials of class class allegations. Plaintiffs again filed a which expressly governs appellate review certification decisions, even where 23(f) petition, which the Ninth Circuit again of class certification decisions and gives the the Court of Appeals denied. appellate court discretion to grant or deny has denied discretionary review under interlocutory appeals of such decisions. Rule 23(f). The Baker plaintiffs then voluntarily dismissed the case with prejudice. Their The Supreme Court in Coopers & Lybrand v. The Supreme Court’s decision in Baker will express purpose was to obtain immediate Livesay, 437 U.S. 463 (1978), rejected former determine whether plaintiffs may continue Ninth Circuit review of the district court’s decisions requiring federal courts to accept this practice. class certification order. immediate appeals of class certification BAKER BACKGROUND The Baker case concerns a challenge to The Baker decision promises to clarify the viability of a current Microsoft’s Xbox 360 game console. A group trend in class action litigation: lose class certification, of plaintiffs filed an action in the Western dismiss the case with prejudice, and then file for appeal. District of Washington in 2007, alleging that the Xbox drive scratched game disks during normal game play. THE NINTH CIRCUIT REVIEWS denials to avoid the “death knell” of class THE CASE claims, finding that the benefit to plaintiffs The district court denied certification, finding was outweighed by the burden on judicial that only a small percentage of the consoles Plaintiffs filed an appeal from the court’s resources in requiring immediate review. actually manifested the defect, and that final judgment, challenging the court’s class determining whether scratching resulted certification decision. Congress then adopted Rule 23(f) in 1998 as a compromise to address the “death from a defect versus misuse would require Microsoft argued that permitting the appeal individual inquires. knell” issue, permitting plaintiffs to petition allowed plaintiffs to end run Rule 23(f), a Court of Appeals to grant discretionary, interlocutory review for any reason — including because the costs of litigation exceed the plaintiff’s individual claim — while at the same time rejecting immediate appeals as of right from class certification Alexandra Laks is a litigation associate in the San Francisco office of decisions. Morrison & Foerster. Her practice focuses on false advertising, unfair competition, False Claims Act and privacy litigation, including the The Ninth Circuit ignored Microsoft’s defense of consumer class actions, agency enforcement proceedings, qui tam actions and complex commercial litigation. She can be arguments. reached at [email protected]. This expert analysis was first published Relying on its prior decision in Berger v. Home on Morrison & Foerster’s Class Dismissed blog May 26. Republished with permission. Depot USA, Inc., 741 F.3d 1061 (9th Circ. 2014), the court focused on the existence of an actual controversy, stating that “‘in the

26 | WESTLAW JOURNAL n EMPLOYMENT © 2017 Thomson Reuters absence of a settlement, a stipulation that because plaintiffs voluntarily dismissed their Microsoft’s “atextual” reading of Rule 23(f) leads to a dismissal with prejudice does case, there is no longer a case or controversy and the “final judgment” rule under 28 U.S.C. not destroy the adversity in that judgment required for Article III jurisdiction and 1291, Plaintiffs argue, fails as a matter of law necessary to support an appeal….’” Baker v. plaintiffs’ claims are moot. and policy. Microsoft Corp., 797 F.3d 607, 612 (9th Cir. Plaintiffs filed their responding brief on BAKER’S BOTTOM LINE 2015), cert. granted in part, 136 S. Ct. 890, May 16. They argue that prohibiting 193 L. Ed. 2d 783 (2016) (quoting Berger, appeals of class certification decisions from The Baker decision promises to clarify the 741 F.3d at 1064). viability of a current trend in class action litigation: lose class certification, dismiss the Microsoft argues that Plaintiffs’ voluntary case with prejudice, and then file for appeal. dismissal tactic violates Livesay and thwarts the discretionary While Plaintiffs risk losing their individual review process created under Rule 23(f). claims if their appeal is denied, they view the ability to obtain immediate review of the district court’s class certification decision as Microsoft filed a petition for a writ of certiorari. voluntary dismissals will undermine class being worth it. actions, as the cost of litigating individual The Supreme Court granted the petition on If the Supreme Court in Baker sides with claims vastly exceeds the minimal value of January 15, 2016. Microsoft, this practice will end. such claims. Moreover, the Supreme Court’s decision SUPREME COURT STATUS UPDATE They contend that the Supreme Court’s may impact current Ninth Circuit food holding in United States v. Procter & Gamble, Microsoft and amici filed their opening briefs misbranding decisions on appeal, such as 356 U.S. 677, 680-681 (1958), in which the in March. Jones v. ConAgra, which reached the Ninth Court rejected the defendant’s argument Microsoft argues that Plaintiffs’ voluntary Circuit through this practice. that it lacked jurisdiction because the United dismissal tactic violates Livesay and thwarts States had requested dismissal of its claims, An early decision in Microsoft’s favor could the discretionary review process created forecloses Microsoft’s argument. deprive the Ninth Circuit of jurisdiction to under Rule 23(f). Microsoft also argues that, hear Jones and similar cases altogether. WJ

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© 2017 Thomson Reuters JANUARY 4, 2017 n VOLUME 31 n ISSUE 12 | 27 AVIATION precedent set by the Supreme Court in Auer v. Robbins, 519 U.S. 452 (1997). Aviation company wins support in For centuries, the brief argues, the definition of a common carrier focused on its defining Supreme Court challenge of FAA rule quality at common law, that being a man “undertaking for hire” to carry the goods of A flight-sharing company’s U.S. Supreme Court challenge to a Federal other persons. Aviation Administration determination that the company must comply with Conversely, private transporters who do not regulations for common carriers has won the support of a think tank and hold themselves out for public hire are not public interest law firms. common carriers, the brief says.

Flytenow Inc. v. Federal Aviation Under this long-established common Administration, No. 16-14, brief of amici law, Flytenow pilots would need to hold curiae Southeastern Legal Foundation et al. themselves out for public hire to be common filed (U.S. July 29, 2016). carriers, the brief says. Flytenow Inc. v. Federal Aviation Admini- The Flytenow cost-sharers retain the right stration, No. 16-14, brief of amici curiae to reject any member of the public for any Cato Institute et al. filed (U.S. July 25, 2016). reason, which means they cannot be a The suit challenges a final FAA order that says pilots who common carrier, according to the brief. Amicus briefs by the Cato Institute and communicate via Flytenow’s flight-sharing website are common carriers who must obtain a commercial license. a group of interested parties headed by Rather than deferring to the FAA’s interpretation of a common law term, the the Southeastern Legal Foundation and The FAA issued a final order Aug. 14, 2014, D.C. Circuit should have followed the lead the National Federation of Independent ruling that pilots who communicate via the of the majority of federal appeals courts, Business Small Business Legal Center website are common carriers who must which have found no judicial deference support Flytenow Inc.’s position that the obtain a commercial license. FAA’s interpretation of is owed to an agency’s interpretation of After concluding that the FAA’s decision was Petition filed the common law term common law terms, the brief argues. not plainly erroneous and did not infringe “common carrier” is not the pilots’ free speech rights, the District of June 24 entitled to deference. Columbia Circuit Court of Appeals denied The petitioner is asking the Flytenow’s petitions for review and for a FLYTENOW’S PETITION Supreme Court to decide rehearing en banc. Flytenow Inc. v. FAA, what level of deference Flytenow’s petition says the company 808 F.3d 882 (2015). operates a program, much like the Uber is due an agency’s Flytenow filed its certiorari petition June 24, service for drivers, that allows pilots who interpretation of common asking the Supreme Court to decide what are planning a flight to communicate with level of deference is due an agency’s law terms. passengers who may want to fly with them interpretation of common law terms. The and share expenses, such as fuel costs. petition challenges the FAA’s conclusion Flyetnow does not employ pilots; it simply The Southeastern Legal Foundation’s amicus that pilots who do not earn a commercial acts as a facilitator between pilots and brief argues that any deference afforded to a profit are nonetheless common carriers. federal agency must be consistent with the potential ride-sharing passengers, according Constitution and administrative law. to the petition. The petition also challenges the court of appeals’ decision that the FAA could Any deference afforded a federal agency The FAA has long recognized the right of discriminate against content-based internet offends the constitutional principle of pilots and passengers to share expenses, communications. separation of powers because it enables the petition says. Traditionally, pilots posted the agency to interpret the rules that it their planned flights on local airport bulletin THE AMICUS BRIEFS promulgates, according to the brief. boards for potential passengers to see. But in January 2014, Flytenow launched The Cato Institute is a think tank that Similarly, deference to agency determinations an internet-based platform to communicate describes itself as “dedicated to advancing exempts agencies from the notice-and- the availability of flight-sharing. the principles of individual liberty, free comment requirements of the Administrative markets, and limited government.” It is joined Procedure Act, again leaving agencies free to The FAA notified pilots that their internet- in its amicus brief by nonprofit technology promulgate regulations and later interpret based communications were unlawful, and policy think tank TechFreedom. them, the brief says. WJ the agency considered operations advertising on Flytenow’s website to be illegal charter The brief says the D.C. Circuit erred when Related Filings: Amicus brief (Southeastern Legal Foundation): services. it granted broad deference to the FAA’s 2016 WL 4120701 determination of what constitutes common Amicus brief (Cato Institute): 2016 WL 4268635 carriage under the highly deferential Petition: 2016 WL 3564280

By Aaron Rolloff The U.S. Supreme Court has been asked to decide whether a federal suit filed after the expiration of the Montreal Convention’s two-year limitations period is timely if the plaintiff had first filed in a foreign court within that time.

Von Schoenebeck et al. v. Koninklijke The Von Schoenebecks filed an action in Further, the petition says, under the 9th Luchtvaart Maatschappij NV, aka KLM South Africa in 2010, within the Convention’s Circuit ruling, plaintiffs would have to file Royal Dutch Airlines, No. 16-670, petition two-year limit. But under South African law, duplicate lawsuits in every jurisdiction in for cert. filed (U.S. Nov. 8, 2016). KLM demanded that the couple pay security which they might later find they need to Johanna Von Schoenebeck filed suit in South for the costs of litigation. litigate. This would lead to a flood of filings Africa within two years after her flight on KLM Unable to pay the money, the Von and cause carriers to have to defend against Royal Dutch Airlines, Schoenebecks withdrew the South African multiple suits in different countries, leading Petition filed but then sought to file action and filed suit in the U.S. District Court to a situation that would benefit no one, the Nov. 8 in the U.S. after the for the Northern District of California in petition says. two-year period ended. October 2013. The 9th U.S. Circuit Court of Appeals ruled in KLM argued that the U.S. suit was untimely, The petitioners argue August that the U.S. suit was untimely under falling outside the two-year limit under the that the 9th Circuit ruling the Montreal Convention. Convention. The District Court agreed. Von is an impermissible Schoenebeck et al. v. Koninklijke Luchtvaart Von Schoenebeck and her husband, Andre, judicial modification of an took a KLM flight from Amsterdam to San Maatschappij NV, aka KLM Royal Dutch Francisco in August 2008, according to their Airlines, No. 13-cv-4992, 2014 WL 1867001 international treaty. petition for a writ of certiorari. (N.D. Cal. May 8, 2014). On the flight, Von Schoenebeck was The 9th Circuit affirmed in August. Von The Montreal Convention is intended to allegedly injured when she bent forward to Schoenebeck et al. v. Koninklijke Luchtvaart protect passenger rights, but the 9th Circuit pick up her handbag and the passenger in Maatschappij NV, aka KLM Royal Dutch ruling undermines those rights, allowing air the seat in front of her tried to adjust his Airlines, No. 14-16061, 2016 WL 4207975 (9th carriers, as “repeat players,” to use litigation headrest. The headrest malfunctioned, Cir. Aug. 10, 2016). tactics to prevent passengers from bringing causing the seat back to collapse and The Von Schoenebecks filed their petition successful claims, the Von Schoenebecks say. allegedly crush Von Schoenebeck, who for certiorari Nov. 8, arguing that the U.S. Finally, an opinion from the U.S. District sustained back and neck injuries, the Supreme Court should review the 9th Circuit Court for the Southern District of New York, in petition says. decision in order to clarify the two-year limit the 2nd Circuit, conflicts with the 9th Circuit The Montreal Convention, 2242 U.N.T.S. not only for U.S. air passengers, but for ruling, according to the petition. The court in 309, 1999 WL 33292734 (May 28, 1999), to millions of other international passengers In re Air Crash off Long Island, New York, on which the United States and South Africa are around the world. July 17, 1996, 65 F. Supp. 2d 207 (S.D.N.Y. signatories, provides passengers with certain The petition argues that the Convention’s 1999), ruled that in the inverse situation, a rights against air carriers. two-year limit applies only to the first new suit could be filed in France after the two-year window when a suit had been filed Article 35(1) of the Convention sets a two- suit filed in a competent court and that in the U.S. during the two-year period. WJ year limit for passengers to bring an action subsequent suits do not need to be initiated against a carrier, starting from the date of the in the two-year window. Related Filing: Petition: 2016 WL 6877084 passenger’s arrival at his final destination. The Von Schoenebecks also argue that the 9th Circuit ruling is an impermissible judicial modification of an international treaty.

By Stephanie Backes A California attorney has asked the U.S. Supreme Court to review an appeals panel’s decision upholding the Consumer Financial Protection Bureau’s retroactive ratification of a 2012 enforcement action initiated before the U.S. Senate confirmed the appointment of the agency’s director.

Gordon v. Consumer Financial Protection “If federal officials are permitted to Ratification of a prior, invalid action requires Bureau, No. 16-673, petition for cert. filed retroactively affirm ultra vires acts without “a subsequent determination” by “a properly (U.S. Nov. 17, 2016). giving more than a momentary thought appointed official” who “has the power to conduct an independent evaluation of In a petition for certiorari, Chance E. Gordon to their propriety, Article II’s limitations the merits and does so,” the petition says, argues the 9th U.S. Circuit Court of Appeals on the president’s appointment powers quoting Intercollegiate. incorrectly concluded that the CFPB was will be reduced to ‘a mere demarcation authorized to prosecute on parchment,’” the petition says, quoting In Advance Disposal Services East Inc. v. Petition filed the enforcement action James Madison’s The Federalist No. 48. NLRB, 820 F.3d 592 (3d Cir. 2016), the 3rd and order him to repay Circuit required a “detached and considered Nov. 17 NO STANDING $11 million to clients affirmation” of an agency’s previous action as he allegedly duped via a prepaid “mortgage The petition says federal courts lack subject a condition for a valid ratification. relief” program. matter jurisdiction over the dispute because Unlike the 9th Circuit, which upheld “blanket Cordray was a private citizen during the The 9th Circuit in April held that CFPB ratification,” the 3rd Circuit in Advance CFPB action against Gordon. Director Richard Cordray was authorized to approved ratification only after a thorough ratify all actions taken during the18-month period between his initial installation as “By authorizing federal courts to entertain suits under federal director and the Senate’s confirmation, despite the fact his 2012 recess appointment statues at the behest of individuals who have no authority was invalid. Gordon v. CFPB, 819 F.3d 1179 to enforce them …, [the 9th Circuit decision] constitutes a (9th Cir. 2016). significant relaxation of [constitutional] standing requirements In a dissent, Circuit Judge Susan Ikuta and thus erodes the separation of powers,” the petition says. said federal courts lack subject matter jurisdiction over the dispute since no one “By authorizing federal courts to entertain had the executive power required to file and analysis of each ratification point, the petition suits under federal statues at the behest of prosecute the enforcement action. says. individuals who have no authority to enforce It says Supreme Court precedent also favors them …, [the 9th Circuit decision] constitutes RECESS APPOINTMENT strict limitations on retroactive ratification, a significant relaxation of [constitutional] citing Federal Election Commission v. NRA President Barack Obama, mistakenly standing requirements and thus erodes the Political Victory Fund, 513 U.S. 88 (1994), in believing the Senate was in recess, installed separation of powers,” the petition says. Cordray as CFPB director Jan. 4, 2012, using which the high court said a ratifier must have had the ability “to do the act ratified at the the Recess Appointments Clause of Article II CIRCUIT SPLIT of the Constitution, U.S.C.A. Const. Art. II § 2, time the act was done.” According to the petition, courts have never cl. 3. The Senate eventually confirmed the Congress also frowns on after-the-fact allowed ratification of judgments resulting appointment in July 2013. ratification, according to the petition. from unauthorized enforcement actions, and Prohibiting retroactive ratification makes it According to the petition, the Senate was the 9th Circuit’s ruling directly contradicts more likely that officials will adhere to the in session on that date, meaning Cordray recent decisions of the District of Columbia appointment limitations outlined in Article II, was not a validly appointed officer of the Circuit and the 3rd Circuit. United States in 2012 and therefore lacked the petition says. WJ The petition says the D.C. Circuit, in executive authority to file and prosecute Related Filing: Intercollegiate Broadcasting System Inc. v. the enforcement action. His retroactive Petition: 2016 WL 6892852 Copyright Royalty Board, 796 F.3d 111 (D.C. ratification of the action violates Article II, the Cir. 2015), placed limits on ratification to petition says. ensure independent evaluation of the merits of a prior action.

By Lisa Uhlman An appeals court rightly found a Bankruptcy Code provision barring bankruptcy trustees from avoiding allegedly constructively fraudulent swap transactions also applies to bankrupt SemGroup’s litigation trustee, Barclays Bank has argued to the U.S. Supreme Court.

Whyte v. Barclays Bank PLC et al., No. 16- Whyte countered that the safe harbor did 239, respondent’s brief filed (U.S. Oct. 24, not apply because she was suing in her role 2016). as a litigation trustee, not as a bankruptcy trustee. The 2nd U.S. Circuit Court of Appeals correctly held that the “presumption against The District Court sided with Barclays and preemption” of state law does not apply dismissed the case, and the 2nd Circuit when the federal affirmed the decision. Petition filed government has long REUTERS/Sergio Perez Aug. 19 regulated the area, ATTEMPTED ‘END RUN’ such as commodities Whyte filed a certiorari petition in August, Trust Corp., 511 U.S. 531 (1994), but Barclays markets, the bank said in a brief opposing arguing that the 2nd Circuit wrongly found says that case is distinguishable because the litigation trustee’s petition for certiorari. the presumption against preemption does the court found nothing countered the not apply in bankruptcy cases. She also assumption that an extensive state law UNDERLYING RULINGS said Section 546(g) does not bar creditors regulatory background was relevant to the claims at issue. Section 546(g) of the Bankruptcy Code, from bringing state law claims to avoid 11 U.S.C.A. § 546(g), provides a “safe harbor” constructively fraudulent swap transactions. “Here, unlike in BFP, there is not a long that prevents bankruptcy trustees from In its opposition brief, Barclays argues that history of creditors bringing constructive seeking to avoid constructively fraudulent the 2nd Circuit properly rejected Whyte’s fraudulent-conveyance claims under state transfers a debtor makes in connection with attempted “end run” around Section 546(g). law to unwind securities transactions after a debtor has filed for Chapter 11 bankruptcy,” swap transactions. Trustees may only avoid While the litigation trustee argued that the the bank says. intentionally fraudulent transfers. appeals court ignored the presumption Here, a week before its 2008 bankruptcy against preemption, the court actually Even if the 2nd Circuit had found the filing, SemGroup paid Barclays $143 million applied the Supreme Court’s own presumption against preemption is never to accept a risky portfolio of commodities preemption framework in finding that the applicable in bankruptcy, the case still derivatives. The deal “protected the market “history of federal rather than state power” in would not warrant high court review because from the potentially severe disruption that this context means “the presumption applies application of the presumption would not could have been caused by the default of a with little force,” the bank says. alter the outcome, Barclays says. major market participant,” Barclays says in The Supreme Court has given the Federal law preempts state law, even in fields its brief. presumption more weight in areas where states traditionally regulate, when the SemGroup ultimately confirmed a historically regulated by the federal state law conflicts with Congress’ purposes, reorganization plan that established a government, and the 2nd Circuit correctly it explains. litigation trust, to which the creditors held that the regulation of creditors’ rights in “Permitting creditors or litigation trustees assigned certain claims, including state law bankruptcy regarding financial transactions to bring constructive fraudulent-conveyance avoidance actions. is a matter of federal law, Barclays says. claims — when bankruptcy trustees are In 2012, when the commodities positions The appeals court noted that Section 546(g)’s barred from bringing those same claims by had allegedly become profitable, litigation safe harbor involves securities markets, Section 546’s safe harbors — would render trustee Bettina M. Whyte sued Barclays in which the federal government extensively Section 546 a nullity,” the bank says, noting the U.S. District Court for the Southern regulates, and found there was “no Congress’ intention to minimize market District of New York, seeking to avoid the measurable concern about federal intrusion volatility. transaction as a constructively fraudulent into traditional state domains.” Barclays therefore urged the Supreme Court conveyance under New York law. to deny Whyte’s petition for certiorari. WJ NO CONFLICT WITH PRIOR RULING Barclays moved to dismiss, saying Related Filings: Section 546(g) preempted the claims. Whyte also argued that the appeals court’s Respondent’s brief: 2016 WL 6247551 decision conflicted with BFP v. Resolution Petition: 2016 WL 4474567

© 2017 Thomson Reuters JANUARY 4, 2017 n VOLUME 31 n ISSUE 12 | 31 CLASS ACTION Murphy Oil v. Nat’l Labor Relations Board, 808 F.3d 1013 (5th Cir. 2015). Collective-action waivers in employee FEDERAL ARBITRATION ACT arbitration clauses arrive at high court Because the appellate opinions now before By Michael Scott Leonard the high court came down on opposite sides of the issue, the pending petitions challenge Four similar employment disputes have reached the U.S. Supreme Court this rulings on both sides of the circuit split. term, with workers challenging arbitration clauses that require them to waive Patterson and the NLRB have asked the their collective-action rights and employers urging the justices to order the Supreme Court to hold that employee contracts enforced. contracts requiring individual arbitration violate the NLRA and are therefore Petition filed Ernst & Young LLP 4 PETITIONS unenforceable pursuant to the “savings et al. v. Morris et al., Each of the four cases at the high court’s clause” of the Federal Arbitration Act, No. 16-300, respon- Sept. 8 doorstep accuses an employer of violating 9 U.S.C.A. § 2. dents’ brief filed (U.S. the wage-and-hour provisions of the Fair The FAA generally requires the enforcement Nov. 21, 2016). Labor Standards Act, 29 U.S.C.A. § 201, of arbitration clauses, but the law’s Petition filed Epic Systems Corp. v. through practices such as stiffing employees savings clause provides that an arbitration Lewis, No. 16-285, on overtime and misclassifying them as agreement is invalid if any “grounds … exist Sept. 2 respondents’ brief filed contractors. at law or in equity for [its] revocation.” (U.S. Nov. 14, 2016). Two of the petitioners are defendants: According to Patterson’s petition, the NLRA National Labor Petition filed accounting giant Ernst & Young and health would preempt the FAA’s arbitration- Relations Board v. care software company Epic Systems Corp. promoting purpose even absent the explicit Sept. 9 Murphy Oil USA Inc., No. 16-307, respondents’ brief filed Each of the four cases at the high court’s doorstep accuses (U.S. Nov. 10, 2016). an employer of violating the wage-and-hour provisions of the Patterson et al. v. Petition filed Fair Labor Standards Act through practices such as stiffing Raymours Furniture employees on overtime and misclassifying them as contractors. Sept. 22 Co., No. 16-388, petition for cert. filed (U.S. Sept. 22, 2016). They are asking the Supreme Court to savings clause, since normal statutory rules teach that a later-adopted statute The employers and workers filed certiorari review rulings by the 9th and 7th U.S. Circuit implicitly repeals any existing law with which petitions in September focusing on the Courts of Appeals, respectively, which earlier it is incompatible. The FAA’s enactment National Labor Relations Board’s 2012 ruling this year adopted the NLRB’s conclusion predated the NLRA’s by a decade. that contract clauses requiring individual that federal law prevents employers from arbitration of employment-related claims requiring workers to waive their collective- The FAA’s savings clause makes that result violate Section 7 of the National Labor action rights. Morris v. Ernst & Young, 834 obvious, both Patterson and the NLRB say. F.3d 975 (9th Cir. 2016); Lewis v. Epic Sys. Relations Act, 29 U.S.C.A. § 157, which “If statutory labor protections could be Corp., 823 F.3d 1147 (7th Cir. 2016). guarantees workers the right to bargain and bypassed so easily, nothing would prevent litigate collectively. A third petitioner, former Raymours Furniture employers from prohibiting their employees The board also found that the arbitration Co. employee Connie Patterson, has asked from picketing, striking or taking other agreements violated Section 8 of the NLRA, the justices to reverse a 2nd Circuit decision concerted actions to improve workplace 29 U.S.C.A. § 158, which makes it an unfair that rejected her proposed collective action conditions — as long as the employer required its employees to pursue their labor practice for employers to interfere in September, finding the company’s arbi- workplace complaints through an individual with their workers’ rights under Section 7. tration agreements enforceable. Patterson v. Raymours Furniture Co., No. 15-2820, arbitration procedure instead,” Patterson After two federal appeals courts agreed with 2016 WL 4598542 (2d Cir. Sept. 2, 2016). wrote in her Sept. 22 petition. the NLRB and three rejected the board’s Patterson’s petition also cites Sections 2 reasoning, four of the five losing parties The fourth petitioner is the NLRB itself, and 3 of the Norris-LaGuardia Act, appealed, asking the Supreme Court to which wants the high court to restore 29 U.S.C.A. §§ 102 and 103, which declare determine whether Section 7 collective- the board’s ruling allowing a Murphy Oil any contract that interferes with workers’ action rights can overcome the federal worker to pursue a collective action against “full freedom of association, self-organization statutory presumption that arbitration the company. The 5th Circuit overturned and designation of representatives of [their] agreements are valid. the board’s decision in October 2015. own choosing” to be unenforceable.

32 | WESTLAW JOURNAL n EMPLOYMENT © 2017 Thomson Reuters ‘CONTRARY CONGRESSIONAL led it to the wrong result,” Ernst & Young “This critical question involving the COMMAND’ wrote in its Sept. 8 petition. intersection of the FAA and NLRA has percolated through several appellate courts,” The other two petitions, filed by Ernst & “The majority expressly declined to search Murphy Oil wrote in its respondents’ brief Young and Epic Systems, take the opposite for a ‘contrary congressional command’ Nov. 10. “A deep circuit split has developed position, challenging appellate decisions and ignored the presumption in favor of between the 5th, 2nd and 8th circuits on the that invalidated their employee arbitration arbitration by attempting to reconcile the one hand and the 7th and 9th circuits on the agreements on NLRA grounds. NLRA and the FAA on an equal footing,” the petition added. “But … [i]f the majority’s other.” The two employers say the decisions against approach were correct, the FAA would yield “Despite the fact that the 5th Circuit, not the them ignored the Supreme Court’s ruling — any time an arbitration agreement could [NLRB], has correctly decided this issue, the in CompuCredit Corp. v. Greenwood, 132 S. Ct. conflict with another federal statute.” court should grant the board’s petition for a 665 (2012), and other related cases — that writ of certiorari,” the brief added. courts must “rigorously enforce arbitration That would eviscerate the FAA’s policy of agreements” unless “the FAA’s mandate has promoting arbitration, the accounting firm Former Epic Systems employee Jacob Lewis been overridden by a contrary congressional argues. filed a brief Nov. 14 opposing certiorari, command.” calling the circuit split “shallower [and] less 2 RESPONDENTS SUPPORT clear” than the other litigants say. WJ According to those petitions, another federal CERTIORARI statute cannot preempt the FAA’s general Related Filings: Respondents’ brief (Morris): 2016 WL 6916215 rule merely by including provisions that are Three of the four respondents have filed Respondents’ brief (Lewis): 2016 WL 6873250 incompatible with the arbitration law. The Supreme Court briefs. In an unusual turn, Respondents’ brief (Murphy Oil): 2016 WL 6803229 “contrary congressional command” standard two of the three — Murphy Oil and former Petition (Patterson): 2016 WL 5390666 requires statutory language explicitly Ernst & Young employee Stephen Morris — Petition (NLRB): 2016 WL 4761717 overriding the FAA’s mandate, they say. asked the justices to review the rulings in Petition (Ernst & Young): 2016 WL 4710181 their favor, stressing the importance of Petition (Epic Systems): 2016 WL 4611259 “The [9th Circuit] majority … followed the resolving a growing circuit split over a wrong mode of analysis, which unsurprisingly recurring question of national importance.

DERIVATIVES Big banks ask Supreme Court to review Libor antitrust decision

By Peter H. Hamner, Esq. Several global banks are asking the U.S. Supreme Court to review a decision that revived antitrust claims accusing them of conspiring to manipulate the Libor benchmark interest rate.

Bank of America Corp. et al. v. Gelboim Defendants named in actions alleging Libor In 2011 Charles Schwab Corp. sued the banks et al., No. 16-545, petition for cert. filed manipulation are Credit Suisse Group AG, in three complaints on behalf of itself, the (U.S. Oct. 20, 2016). Bank of America Corp., JPMorgan Chase & Schwab Short-Term Bond Market fund and Co., HSBC Holdings, Barclays Bank, Lloyds the Schwab Money Market Fund, alleging the Petition filed In their petition for certiorari, the banks Banking Group, WestLB AG, UBS AG, Royal banks manipulated Libor in their own favor Oct. 20 argue the 2nd U.S. Bank of Scotland, Deutsche Bank, Citibank, from August 2007 to May 2010. Circuit Court of Appeals Rabobank Group, Norinchukin Bank, Bank of Schwab claimed the rate manipulation incorrectly reversed a lower court’s decision Tokyo-Mitsubishi UFJ, Societe Generale and lowered its returns on financial instruments that dismissed antitrust allegations in the Royal Bank of Canada. that it and its funds purchased in violation ongoing multidistrict litigation against of federal and state antitrust laws and ALLEGED RATE-RIGGING 16 banks. the Racketeer Influenced and Corrupt Libor is set daily by the British Bankers’ The 2nd Circuit in May held that the plaintiff Organizations Act, 18 U.S.C.A. § 1961. Association and represents the mean of bondholders and Charles Schwab Corp. Ellen Gelboim and Linda Zacher, known rate quotes reported by member banks adequately alleged that they suffered an as the bondholder plaintiffs, later sued the considered to be the most creditworthy. It is antitrust injury by paying artificially fixed banks in the Southern District of New York the published rate that international banks prices. Gelboim et al. v. Bank of Am. Corp., in 2012 on behalf of all purchasers of debt charge each other for short-term loans and it 823 F.3d 759 (2d Cir. 2016). securities tied to Libor. They claimed the underpins many financial transactions.

© 2017 Thomson Reuters JANUARY 4, 2017 n VOLUME 31 n ISSUE 12 | 33 manipulation reduced the value of debt jurisdiction because Judge Buchwald’s ruling 2nd Circuit heard the case and revived the securities that they owned. was not a “final decision” and did not dispose claims. The Judicial Panel on Multidistrict Litigation of all claims in the consolidated action. SECOND TRIP? consolidated all Libor-related suits for In re Libor-Based Fin. Instruments Antitrust pretrial proceedings before U.S. District Litig., Nos. 13-3565 and 13-3636, 2013 WL The banks are now asking the top court to Judge Naomi Reice Buchwald of the 9557843 (2d Cir. Oct. 30, 2013). review the appeals court ruling that vacated Southern District of New York in 2011. In re the dismissal of the antitrust claims. Libor-Based Fin. Instruments Antitrust Litig., “[T]he decision … takes They claim the court should grant the 802 F. Supp. 2d 1380 (J.P.M.L. 2011). antitrust law into uncharted petition because the alleged manipulation did not affect competition. DISMISSAL, REVIVAL OF THE — indeed, forbidden — ANTITRUST CLAIMS territory,” the petition says. “Any alleged manipulation of the noncompetitive USD Libor-setting process Judge Buchwald agreed to toss the antitrust cannot have impaired or displaced claims in 2013, finding that the plaintiffs FIRST SUPREME COURT TRIP competition, because there was never any failed to allege they suffered an antitrust competition over Libor in the first place — and injury through reduced competition. In re The bondholders petitioned the Supreme Court to review the 2nd Circuit’s decision, because competition in the actual market for Libor-Based Fin. Instruments Antitrust Litig., financial products continued unabated,” the 935 F. Supp. 2d 666 (S.D.N.Y. 2013). and the high court unanimously reversed the panel’s holding. Gelboim v. Bank of Am. Corp., petition says. The plaintiffs’ alleged harm came from the 135 S. Ct. 897 (2015). “By allowing to proceed claims that are defendant banks’ misrepresentations, not based on conduct that did not impede any reduced competition, the judge said. Writing for the high court, Justice Ruth Bader Ginsburg said, “Nothing about the initial competitive process, and on an injury that Although her decision disposed of all the consolidation of their civil action with other cannot have flowed from any competitive Schwab and bondholder claims, the judge cases in the Libor [multidistrict litigation] harm, the decision … takes antitrust law into allowed other investors to go forward with renders the dismissal of their complaint in uncharted — indeed, forbidden — territory,” nonantitrust-related claims. any way tentative or incomplete.” the banks argue. WJ The 2nd Circuit rejected appeals by Schwab Following the Supreme Court’s decision to Related Filing: and the bondholders, saying it lacked allow the antitrust appeal to proceed, the Petition: 2016 WL 6135490

EMPLOYMENT commission discretion in filing discrimination claims on behalf of a class of employees, the EEOC urges Supreme Court not to expand brief says. “For a court to conduct a more searching pre-suit conciliation process inquiry — by, for example, requiring the By Tricia Gorman commission to take specified investigative steps or to secure particular types of The U.S. Supreme Court should reject a challenge that would require the information in every case — would be to Equal Employment Opportunity Commission to identify and investigate the depart from the statute Congress enacted claim of every individual subjected to alleged discrimination before it can sue and impose the sort of ‘extraprocedural an employer, the agency says. requirements’ that Mach Mining rejected,” the EEOC says. The Geo Group Inc. v. Equal Employment to believe that a worker’s claims are true The Geo Group, which runs federal and state Opportunity Commission et al., No. 16-302, and try to eliminate the alleged wrong via correctional and detention facilities, has opposition brief filed (U.S. Nov. 10, 2016). “conference, conciliation and persuasion.” asked the high court to review an appellate decision that reversed summary judgment Petition filed Title VII of the Civil In its Nov. 10 opposition brief, the EEOC Rights Act of 1964, says the high court precluded the challenge for the company after finding that the EEOC Sept. 6 42 U.S.C.A. § 2000e- filed by The Geo Group Inc., in its ruling in did not have to identify and investigate 5(b), mandates that Mach Mining LLC v. EEOC, 135 S. Ct. 1645 every allegedly aggrieved employee. the EEOC attempt to settle discrimination (2015). ALLEGED SEXUAL HARASSMENT disputes with employers before filing suit. The justices’ opinion in Mach Mining found The commission must investigate to that a court may conduct a limited review The case arose in September 2010 when determine if a “reasonable cause” exists of the conciliation process and gives the the EEOC sued The Geo Group in the U.S.

34 | WESTLAW JOURNAL n EMPLOYMENT © 2017 Thomson Reuters District Court for the District of Arizona Mach Mining did not address whether the alleging it violated Title VII by subjecting a EEOC’s conciliation process was sufficient, female correctional officer to a hostile work only how much judicial oversight is permitted, environment because of her gender and to the company says. harassment and retaliation. “The 9th Circuit’s decision improperly The commission and the Civil Rights Division empowers EEOC to disregard the statutory of the Arizona attorney general’s office had prerequisites established by Congress — that investigated claims by corrections officer EEOC may only sue on claims it has already Alice Hancock that a male supervisor investigated, issued a reasonable cause grabbed her crotch and that the company determination and attempted conciliation,” failed to stop the harassment. the petition says. Hancock was ultimately terminated, In opposing the company’s petition, the allegedly in retaliation for her complaints, EEOC argues that the Mach Mining decision according to the commission’s brief. says the commission can fulfill its conciliation WESTLAW JOURNAL The EEOC and the state agency found other requirements on behalf of a class and that current and former female workers who the commission has discretion over the scope alleged they had suffered similar “egregious” of an investigation. EMPLOYMENT harassment, the brief says. The agencies unsuccessfully attempted “The 9th Circuit’s decision conciliation with the company in the process improperly empowers EEOC This publication provides of seeking relief for Hancock and more than information about the 20 unidentified women, the brief says. to disregard the statutory prerequisites established by latest developments in But Judge Susan Bolton found that the two agencies had failed to complete pre-suit Congress,” the petition says. employment-related conciliation by not fully investigating the lawsuits. It covers such unidentified women’s claims. Arizona et al. v. According to the commission, Title VII does issues as the Americans Geo Group Inc. et al., No. 10-cv-1995, 2012 WL not require it to identify each individual with Disabilities Act, the 8667598 (D. Ariz. Apr. 17, 2012). during a preliminary investigation. Rehabilitation Act, the Title VII requires “individual conciliation,” “Because the existence and scope of an Age Discrimination in the judge said, granting The Geo Group unlawful employment practice may be clear Employment Act, the Older summary judgment. before every individual adversely affected by Workers Benefit Protection The agencies appealed to the 9th U.S. Circuit that practice has been identified, the EEOC Court of Appeals. has long relied on 42 U.S.C.A. § 2000e-5 Act, Title VII, sexual to bring suits seeking relief for groups or harassment, the Family The appeals court panel unanimously classes that include individuals who have vacated Judge Bolton’s ruling, saying that and Medical Leave Act, not yet been identified when the suit is filed,” under Mach Mining, the EEOC need not labor issues, whistleblower, the brief says. identify and conduct conciliation on behalf of the Uniformed Services each affected employee. The EEOC says identifying every individual Employment and would undermine Title VII, prolong SUPREME COURT REVIEW investigations and increase costs. WJ Reemployment Rights Act, civil rights violations, The Geo Group filed its certiorari petition Attorneys: Petitioner: Shawn Oller and Kristy L. Peters, Sept. 6, asking the high court to determine privacy, and arbitration. Littler Mendelson PC, Phoenix, AZ; Philip L. if the 9th Circuit erred in its decision because Ross, Littler Mendelson PC, Walnut Creek, CA the EEOC had not identified or investigated Respondents: P. David Lopez, Jennifer S. all the claims. Goldstein, Lorraine C. Davis and Anne N. Occhialino, U.S. Equal Employment Opportunity The company argues that the appeals court Commission, Washington, DC improperly cited Mach Mining as the basis for Related Filings: its decision to overturn summary judgment. Opposition brief: 2016 WL 6679336 Petition: 2016 WL 4728799

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By Thomas Parry An insurance industry association has asked the U.S. Supreme Court to review a federal appellate court’s ruling that a Michigan health insurance tax does not interfere with the administration of plans governed by the Employee Retirement Income Security Act.

Self-Insurance Institute of America Inc. v. The District Court dismissed the suit, and the attempted to govern an area that Congress Snyder et al., No. 16-593, petition for cert. 6th U.S. Circuit Court of Appeals affirmed, intended ERISA to control exclusively, the filed (U.S. Oct. 31, 2016). finding that HICA’s aim was to collect taxes, panel said. The Self-Insurance Institute of America not regulate ERISA plans. Self-Ins. Inst. of ‘TALISMANIC INCANTATION’ argued in an Oct. 31 certiorari petition Am. Inc. v. Snyder, 761 F.3d 631 (6th Cir. 2014). that Michigan’s Health Insurance Claims In March 2016 the U.S. Supreme Court In its certiorari petition, SIIA argued that the Assessment Act, Mich. Comp. Laws Ann. vacated the decision in light of its judgment 6th Circuit had “paid only lip service” to the § 550.1731, ran afoul in Gobeille v. Liberty Mutual Insurance Co., Supreme Court’s holding in Gobeille. Petition filed of ERISA’s express 136 S. Ct. 936 (2016), a case that touched on Calling the panel’s interpretation of Gobeille Oct. 31 preemption provision, state regulations and ERISA. “myopic,” “anti-textual” and “constrained,” 29 U.S.C.A. § 1144(a). SIIA argued that the Supreme Court had REAFFIRMATION Passed in 2011, HICA imposed a 1 percent tax ruled that ERISA could preempt state tax on health insurance claims for all in-state On remand, the 6th Circuit reaffirmed. Self- collection law. services rendered to Michigan residents, Ins. Inst. of Am. Inc. v. Snyder, 827 F.3d 549 The 6th Circuit panel relied on a “talismanic court documents noted. (6th Cir. 2016). incantation” that tax collection did not intrude on health plan administration, SIIA The Michigan law required that plan administrators argued. submit quarterly tax returns and other records However, Michigan’s HICA tax and reporting requirements imposed administrative to the state, a requirement that the Self-Insurance burdens on ERISA managers’ core fiduciary Institute of America says interfered with the duty of processing and disbursing payments management of health plans governed by ERISA. for health care services, SIIA argued. The burdens would impact ERISA HICA also required that plan administrators In Gobeille the Supreme Court had held that administration by encouraging managers submit quarterly tax returns and other a Vermont law was preempted by ERISA to organize payments in line with the records to the state, a requirement that the because it intruded on the regulation of “a newly state-required documentation, the Self-Insurance Institute of America argued central matter of plan administration,” the association argued. interfered with the management of health panel explained. According to SIIA, the Supreme Court gave plans governed by ERISA. Michigan’s record-keeping requirements the 6th Circuit a chance to clarify ERISA’s SIIA first made this argument in a 2011 made no such intrusion, the panel said. preemption powers, but the panel instead reaffirmed its pre-Gobeille interpretation lawsuit against Republican Gov. Rick Snyder Furthermore, the panel held that the and other state officials in the U.S. District and added to the “quagmire” giving rise to “deliberately expansive” powers of ERISA’s confusion over the law’s role. WJ Court for the Eastern District of Michigan. express preemption provision did not create It sought a declaration that ERISA’s express “a state law-free zone.” Related Filing: Petition: 2016 WL 6520049 preemption provision prohibited the SIIA’s suit failed under the preemption application of HICA to any ERISA-covered provision because it did not show that HICA entities.

A veteran’s petition to the U.S. Supreme Court should be denied because it relates only to the payment of benefits and not medical malpractice, according to the government.

Milbauer v. United States, No. 16-236, his torn rotator cuff, ending his 37-year career appeals court for the circuit where the VA response brief filed (U.S. Nov. 23, 2016). in construction, according to his petition. facility is located, and finally to the Supreme Court. Petition filed Richard Milbauer failed Milbauer sued in the U.S. District Court for to follow the proper the Middle District of Florida for medical The District Court held that the Veterans Aug. 17 procedures for bringing negligence under the Federal Tort Claims Judicial Review Act barred Milbauer’s claims his claims against a Act. because they concerned a “particular benefit” Florida Veterans Affairs clinic under the Veterans Judicial Review Act, 38 U.S.C.A. § 511, which bars federal district court review The petitioner says the 11th Circuit erroneously decided of any VA decision related to “the provision that “the performance of diagnostic procedures” of benefits” to veterans, according to the and similar decisions are “benefit” issues because government’s response brief. all medical determinations are beyond the jurisdiction While Milbauer argues that the clinic’s of the Board of Veterans’ Appeals. failure to arrange an open MRI at a civilian facility or offer any alternative diagnostic procedures for 10 months was malpractice, While FTCA claims are made in federal courts, and “the process of obtaining that benefit.” the government maintains it was a benefits the Veterans Judicial Review Act creates a Milbauer v. United States, No. 11-cv-149, decision that should have gone through the separate administrative review process that 2013 WL 3815625 (M.D. Fla. July 22, 2013). Department of Veterans Affairs. begins with the local VA office. Veterans must Milbauer twice appealed the decision, but the appeal the local office’s determination to the The Veterans Judicial Review Act addresses 11th U.S. Circuit Court of Appeals ultimately Board of Veterans’ Appeals. disputes over payments of benefits while held that resolving the claim would have another law, the Federal Tort Claims Act, If that fails, the veterans may appeal to the required the District Court to decide whether 28 U.S.C.A. § 1346, routinely allows veterans Court of Veterans’ Claims, then to the federal he “was entitled to a certain level of benefits” to sue VA personnel for medical negligence, and whether VA doctors “properly followed” as Milbauer has done, according to his VA policies. Milbauer v. United States, petition for certiorari. 587 Fed. Appx. 587 (11th Cir. 2014). The appeals court denied a rehearing, and OPEN OR CLOSED MRI? the petition for certiorari followed. Milbauer says he visited the Florida clinic Milbauer argues the 11th Circuit erroneously for a shoulder injury in 2005. His VA doctor decided that “the performance of diagnostic ordered an MRI at the clinic, which has only a procedures” and similar decisions are closed MRI machine, but Milbauer allegedly “benefit” issues because all medical could not undergo the test because he suffers determinations are beyond the jurisdiction of from severe claustrophobia. the Board of Veterans’ Appeals. Milbauer says his VA treating physicians never proposed sedation so he could GOVERNMENT’S RESPONSE endure the clinic’s closed MRI or offered any The federal government argues in a brief in alternative diagnostic procedure. Instead, opposition to the petition that the District they suggested he undergo an “open” MRI, Court correctly viewed the lawsuit as a at a non-VA facility, he says. benefits issue. But Milbauer says had to pursue the “The court reasoned that petitioner sought paperwork for obtaining and arranging an to challenge ‘the process of obtaining open MRI himself, which delayed treatment authorization for the VA to pay for the MRI’ of his shoulder for 10 months. That ultimately The plaintiff says his physicians never proposed sedation so he could endure the clinic’s closed MRI, like the one shown here, and that his grievance is therefore ‘with the made it impossible for VA doctors to repair and instead suggested he undergo an “open” MRI, at another facility.

© 2017 Thomson Reuters JANUARY 4, 2017 n VOLUME 31 n ISSUE 12 | 37 VA’s benefits procedure, not with the medical claims would require a court to assess the Attorneys: treatment he received,’” the response brief VA’s process for providing a benefit or to Plaintiff-appellant: Mahesha P. Subbaraman, Subbaraman PLLC, Minneapolis, MN says. determine whether the VA acted properly in denying a benefit,” according to the brief. Defendant-respondent: acting Solicitor General Similarly, the 11th Circuit properly found Ian H. Gershengorn and Principal Deputy that the Veterans Judicial Review Act barred Both courts agreed that Milbauer’s assertion Assistant Attorney General Benjamin C. Mizer, Milbauer’s claims, the government says. that the VA doctors failed to offer him Department of Justice, Washington, DC Related Filings: “The court reiterated that the VJRA alternative diagnostic procedures was raised late in the proceedings and was too closely Response brief: 2016 WL 6916214 bars claims that the VA ‘failed to render Petition: 2016 WL 4474572 appropriate medical services’ when such tied to the benefits issue to qualify as a medical negligence claim, the government said. WJ

PHARMACEUTICAL California high court erred on jurisdiction when it let Plavix case proceed, petition says

By Michael Scott Leonard Bristol-Myers Squibb is urging the U.S. Supreme Court to overturn a California Supreme Court decision that the drugmaker’s business contacts with the state gave its courts personal jurisdiction over injury claims involving the blood thinner Plavix.

Bristol-Myers Squibb Co. v. Superior Court the less “related” they must be to the “Nine circuits have held that a plaintiff’s suit for the County of San Francisco et al., lawsuit for a plaintiff to establish specific does not ‘relate to or arise out of’ a defendant’s No. 16-466, petition for cert. filed (U.S. jurisdiction. forum-state contacts unless those contacts Oct. 7, 2016). The court followed that approach when it in some way caused the plaintiff’s injury,” the petition says. “But the California Supreme In an Oct. 7 certiorari let nearly 600 non-California plaintiffs join Petition filed Court … holds that a defendant is subject petition, Bristol-Myers a lawsuit over Plavix, which Bristol-Myers to specific jurisdiction even if the plaintiff says the state court is did not research, design or manufacture in Oct. 7 would have suffered precisely the same part of a “persistent the state, the petition says, adding that the injuries had the defendant never made minority” of high-level tribunals that company also did not prepare “marketing, contact with the forum. have ignored the U.S. Supreme Court’s packaging or regulatory materials” there. jurisdictional precedents, improperly blurring the line between specific and general Petitioner Bristol-Myers says the California high court is part jurisdiction through a hybrid inquiry that is incompatible with due process. of a “persistent minority” of high-level tribunals that have ignored the U.S. Supreme Court’s jurisdictional precedents. According to the petition, the California high court has adopted a “sliding scale” approach to the rule that specific jurisdiction According to the petition, the sliding- “That is wrong, and the enduring division is proper only when a defendant’s in-state scale test improperly meets the general- on this question is intolerable,” the petition contacts are directly related to the plaintiffs’ jurisdiction inquiry halfway, even though the adds. claims. Supreme Court has made clear that specific and general jurisdiction are distinct concepts BLOOD DISORDER ALLEGATIONS General jurisdiction, meanwhile, is subject to different rules. appropriate whenever a defendant has such The Plavix case, filed in San Francisco state “continuous and systematic” contacts with a The justices must resolve the pronounced court, accuses Bristol-Myers of failing to warn state that it is fair to say the company is “at divide between the different appeals circuits users that Plavix, an anticoagulant designed home” there. and state high courts, Bristol-Myers says, to protect users against strokes and heart noting that California’s state courts now attacks, also creates an unacceptably high But under the sliding-scale test, the more use a different jurisdictional test from its risk of both those conditions, as well as “intense” a defendant’s California contacts, federal courts, leaving the door open to internal bleeding and potentially fatal blood “jurisdictional gamesmanship” by plaintiffs. disorders such as ulcers and hematomas.

38 | WESTLAW JOURNAL n EMPLOYMENT © 2017 Thomson Reuters have taken varying, incompatible approaches to the “relatedness” requirement, the company says. Some of those courts have “concluded that the relatedness requirement is satisfied only if the defendant’s forum-state conduct is a ‘but for’ cause of the plaintiff’s injury,” according to the petition. Others focus instead on proximate cause, asking whether having to go to court in a given state would have been a reasonably foreseeable consequence of the defendant’s lawsuit-related business contacts, the drugmaker says. And a third group, including the California Supreme Court, does not require any causal connection at all between the defendant’s business and the plaintiff’s injuries, so long as the defendant does enough total business

REUTERS/Jeff Haynes in the state. “Courts on every side of the split recognize The suit, which is not a class action, involves Bristol-Myers’ nationwide marketing of Plavix the significance of the choice between these 86 named plaintiffs from California and 575 created enough of a nexus with California three standards,” the petition says. “These from other states. to support specific jurisdiction there, the different tests have produced divergent appellate court said. The drugmaker moved to toss the case on results in suits materially indistinguishable jurisdictional grounds, but the trial court held The state Supreme Court agreed in August. from this one.” that the company’s business in California Bristol-Myers Squibb Co. v. Super. Ct., 1 Cal. The justices should step in to provide some — where it maintains five “small” offices, 5th 783 (Cal. 2016). long-overdue clarity and uniformity, Bristol- according to the petition — was sufficient to Myers says. WJ confer general jurisdiction. A MULTIPRONGED CIRCUIT SPLIT Attorneys: On appeal, the 1st District Court of Appeal In its petition, Bristol-Myers says that ruling Petitioner: Anand Agneshwar, Arnold & Porter, reversed that ruling but found California’s misinterpreted the requirement that a New York, NY; Daniel S. Pariser, Arnold & Porter, courts have specific jurisdiction over the company’s in-state business “relate” directly Washington, DC; Neal K. Katyal, Jessica L. Ellsworth, Frederick Liu, Sean Marotta and case. Bristol-Myers Squibb Co. v. Super. Ct., to the claims against it. Mitchell P. Reich, Hogan Lovells US LLP, 228 Cal. App. 4th 605 (Cal. Ct. App., 1st Dist. In the absence of direct guidance from Washington, DC 2014). the U.S. Supreme Court, different federal Related Filing: appeals courts and state supreme courts Petition: 2016 WL 5904964

© 2017 Thomson Reuters JANUARY 4, 2017 n VOLUME 31 n ISSUE 12 | 39 SECURITIES LITIGATION & REGULATION Transocean on Sept. 30, 2010, asserting claims for violations of Sections 14(a) and Securities law profs ask justices to hear 20(a) of the Securities Exchange Act of 1934, 15 U.S.C.A. §§ 78n(a) and 78t(a). tolling issue in Deepwater Horizon suit DeKalb joined the suit in December 2010, By Peter H. Hamner, Esq. and the fund and Bricklayers successfully formed a lead plaintiff group in 2011. A group of securities law professors is asking the U.S. Supreme Court to U.S. District Judge Lorna G. Schofield of the review an appeals panel’s ruling that a shareholder waited too long to file a Southern District of New York dismissed lawsuit alleging Transocean Ltd. misrepresented the safety of the Deepwater Bricklayers from the case for lack of standing Horizon oil rig. in 2012. Bricklayers and Masons Local Union No. 5 Ohio Pension Fund v. Transocean Ltd., DeKalb County Pension Fund v. Transocean The Deepwater Horizon disaster in April 2010 866 F. Supp. 2d 223 (S.D.N.Y. 2012). Ltd. et al., No. 16-206, amici brief filed (U.S. killed 11 workers, injured 17 others and caused She then dismissed DeKalb’s claims in Sept. 14, 2016). one of the largest oil spills in American 2014, finding that the window for filing the history. Petition filed In their friend-of-the- suit expired Oct. 2, 2010, three years after court brief, the 11 law The explosion at a Transocean oil rig in the Transocean issued the proxy statement in Aug. 12 professors say hearing Gulf of Mexico revealed that Transocean dispute and two months before DeKalb first the case will allow the had “dramatically underinvested” in appeared in the case. DeKalb Cty. Pension court to revisit its decision in American Pipe & environmental and worker-protection Fund v. Transocean Ltd., 36 F. Supp. 3d 279 Construction Co. v. Utah, 94 S. Ct. 756 (1974). measures despite telling shareholders the (S.D.N.Y. 2014). opposite in the proxy statement, the suit said. In American Pipe, the high court said that Judge Schofield found that the three-year under certain circumstances, the filing of a DeKalb, which had exchanged its statute of repose applicable to Section 14 class action tolls the limitations period for GlobalSantaFe stock for Transocean stock in claims began to run from the date of the later individual actions that purported class the merger, said it suffered damages when alleged violation and not from when the members bring. Transocean’s share price plummeted in the alleged misrepresentations were disclosed. wake of the disaster. The 2nd U.S. Circuit Court of Appeals had She also ruled that DeKalb’s claims did declined to apply the American Pipe tolling Bricklayers and Masons Local Union No. 5 not relate back to September 2010, when principal to a Transocean shareholder’s Ohio Pension Fund filed a complaint against Bricklayers filed the original complaint. lawsuit because the limitations period at issue in the case was a statute of repose and the panel decided that American Pipe applies only to statutes of limitations. DeKalb Cty. Pension Fund v. Transocean Ltd et al., 817 F.3d 393 (2d Cir. 2016). A statute of limitations period begins to run when an injury occurs or should have been discovered, while a repose period is a fixed timespan that starts at the time of the event that allegedly caused the injury. Repose periods cannot be tolled for any reason. In their brief in support of petitioner DeKalb County Pension Fund, the law professors say the 2nd Circuit decision incorrectly limits American Pipe’s scope.

EXPLOSION REVEALS PROXY MISSTATEMENTS According to DeKalb’s suit, Transocean’s October 2007 proxy statement on the quality of its drilling fleet and safety practices led GlobalSantaFe Corp. investors to vote in favor REUTERS/U.S. Coast Guard/Handout Eleven law professors say a federal judge incorrectly dismissed as untimely a securities fraud lawsuit stemming from the Deepwater of a merger with Transocean even though the Horizon oil rig explosion. Here, fire boat crews battle the blazing remnants of the rig April 21, 2010. negotiated price per share was too low.

40 | WESTLAW JOURNAL n EMPLOYMENT © 2017 Thomson Reuters The 2nd Circuit affirmed, finding that “Interpreting American Pipe to apply only to “Injured investors with Section 14 claims American Pipe’s tolling provision does not some time bars — those deemed ‘statutes of who have any inkling that the original filer apply to statutes of repose. limitations’ rather than ‘statutes of repose’ might turn out to be a flawed representative under the modern usage of those terms — are well-advised to make protective filings, THE PETITION AND LAW would be inconsistent with its purpose,” the whether moving to intervene or filing a PROFESSORS’ BRIEF petition says. separate lawsuit in the same or a different DeKalb is now petitioning the Supreme Court The law professors concur, arguing that the court, prior to the expiration of the three-year to review the 2nd Circuit’s holding. 2nd Circuit’s decision will clog the courts. limitations period to avoid having their rights cut off,” the law professors said. WJ According to DeKalb’s petition for certiorari, The ruling will “induce putative class Related Filings: the top court should hear the case because members to make protective filings in nearly Amici brief: 2016 WL 4938266 the terms “statute of limitations” and half of securities class actions that reach Petition: 2016 WL 4363502 “statute of repose” were not around when a court order on class certification and at American Pipe was decided, leading to least one-quarter of all filed securities class confusion among the courts. actions,” the professors’ brief says.

SECURITIES LITIGATION & REGULATION Leidos did not disclose the audit team’s March 9 findings in its Form 10-K, filed with Government contractor asks Supreme Court the SEC just two days later, March 11, 201l, and it did not disclose at the end of that to review ‘failure to disclose’ securities suit month that the federal government charged SAIC’s project manager and the staffing By Peter H. Hamner, Esq. firm’s employees with fraud, the opinion said. A government contractor is urging the U.S. Supreme Court to review a The contractor announced June 2, 2011, that decision to revive a lawsuit accusing it of failing to disclose that it overcharged the U.S. attorney’s office for the Southern New York City for work on a payroll modernization project. District of New York and the New York City Department of Investigation were probing Leidos Inc. v. Indiana Public Retirement sufficiently showed Leidos potentially the CityTime contract. System, No. 16-581, petition for cert. filed violated federal securities laws. In re SAIC Inc. As a result, the company’s stock price (U.S. Oct. 31, 2016). Sec. Litig., No. 12-cv-1353, 2014 WL 4953614 fell from $17.21 to $12.97 between June 2, In its Oct. 31 petition (S.D.N.Y. Sept. 30, 2014). 2011, and Sept. 1, 2011 — one day after the Petition filed for certiorari, Leidos Oct. 31 Inc. says the 2nd U.S. “This is a question of critical importance given the sheer Circuit Court of Appeals volume of securities litigation in the United States, particularly incorrectly determined the company violated securities laws by failing to comply with in the 2nd and 9th circuits, which see more federal securities two Securities and Exchange Commission cases than the rest of the circuits combined,” the petition says. regulations: Item 303 of Regulation S-K, 17 C.F.R. § 229.303, and Financial CITYTIME PROJECT city terminated the CityTime contract, the Accounting Standard No. 5. opinion said. According to the 2nd Circuit, New York The shareholders allege Leidos violated the City hired Leidos in 2000 as the prime regulations by failing to disclose the billing FAILURE TO DISCLOSE government contractor for its CityTime issue on its March 2011 10-K form. The 10-K venture, a project to develop an automated The Indiana Public Retirement System and form is an annual report that publicly owned timekeeping program for city employees. two affiliated pension funds filed a securities companies must submit to the SEC. fraud suit against SAIC in 2012, and the Leidos officials and a staffing firm allegedly Item 303 requires disclosure of any known company moved to dismiss. engaged in a kickback scheme that led to trends or uncertainties that could have hiring too many workers and overbilling the U.S. District Judge Deborah A. Batts of the a material impact on a firm’s financial city, the appeals court’s opinion said. Southern District of New York declined to condition, and FAS 5 requires disclosure of toss the Item 303 and FAS 5 claims but “loss contingencies” — a potential event, The company’s audit team eventually dismissed allegations related to Leidos’ such as a lawsuit, that will cause a negative discovered the fraud and reported its finding alleged misstatements about its internal outcome if it occurs. to the company March 9, 2011. Although the controls and misrepresentations in its original budget for CityTime was $63 million, A three-judge panel of the 2nd Circuit held 2011 annual report. In re SAIC Inc. Sec. Litig., Leidos billed the city $635 million, 10 times that the failure-to-disclose allegations as much, through May 2011, the opinion said.

© 2017 Thomson Reuters JANUARY 4, 2017 n VOLUME 31 n ISSUE 12 | 41 No. 12-cv-1353, 2013 WL 5462289 (S.D.N.Y. The pension funds appealed and the 2nd Cir. 2014), that Item 303 does not create Sept. 30, 2013). Circuit unanimously overruled Judge Batts’ a duty to disclose that is actionable under Leidos asked Judge Batts to reconsider, and decision, finding the shareholders’ Item 303 federal securities laws, the company said. she dismissed all the claims against SAIC and FAS 5 allegations support their claim The Supreme Court denied certiorari in that on Jan. 30, 2014. In re SAIC Inc. Sec. Litig., that SAIC violated federal securities laws. case. No. 12-cv-1353, 2014 WL 407050 (S.D.N.Y. “This is a question of critical importance CIRCUIT SPLIT Jan. 30, 2014). given the sheer volume of securities litigation Leidos is now urging the Supreme Court The shareholders then asked for leave to file in the United States, particularly in the 2nd to review the 2nd Circuit’s decision, saying a proposed amended complaint with only the and 9th circuits, which see more federal a circuit split exists between the 2nd and Item 303 and FAS 5 claims but Judge Batts securities cases than the rest of the circuits 9th circuits that the high court should resolve. WJ denied the request as futile. In re SAIC Inc. combined,” the petition says. Sec. Litig., No. 12-cv-1353, 2014 WL 4953614 The 9th Circuit held in In re NVIDIA Corp. Related Filing: (S.D.N.Y. Sept. 30, 2014). Securities Litigation, 768 F.3d 1046 (9th Petition: 2016 WL 6472615

TOXIC TORTS In a 6-1 decision, the state high court agreed with the trial judge. Manufacturers ask high court to hear “Montana courts have general personal jurisdiction over BNSF under the FELA and jurisdiction dispute in toxic exposure case Montana law,” the majority said. By Kenneth Bradley, Esq. The railway company appealed to the U.S. A manufacturers association is asking the U.S. Supreme Court to hear the Supreme Court. appeal of a railway company that says the Montana Supreme Court wrongly In its amicus brief, NAM says it is important decided its state courts have jurisdiction to hear a lawsuit alleging the for the high court to hear the petition. The justices have already found that a state company exposed an employee to several toxins. court can only exercise general personal jurisdiction over businesses that are “at BNSF Railway Co. v. Tyrrell et al., No. 16-405, Tyrrell alleged that Brent was exposed to home” in that state, by way of incorporation amicus brief filed (U.S. Oct. 28, 2016). various carcinogenic materials while working or by having their principal place of business for BNSF, developed kidney cancer as a “In violation of fair play and justice, there, according to the brief. manufacturers and other businesses are result and died, according to an opinion the NAM cites Daimler AG v. Bauman, 134 S. Ct. routinely sued in jurisdictions with little or Montana Supreme Court handed down, 746 (2014), in support of its argument. no connection to the Tyrrell v. BNSF Railway Co., 383 Mont. 417 Petition filed lawsuits,” which could (Mont. 2016). In Daimler the Supreme Court established have a profound impact The complaint did not allege that Brent ever the test for determining whether a business Sept. 28 on asbestos-related worked for the railway company in Montana is “at home” in a particular state, NAM says. litigation, the National or that any of the alleged exposure took If the Montana Supreme Court’s ruling is not Association of Manufacturers says in an place there, according to the opinion. reversed, it “will dissolve the significance of amicus brief filed with the high court Oct. 28. BNSF unsuccessfully moved for dismissal Daimler,” the brief says. The groups says Montana has become a in the trial court. The company argued the “Manufacturers and other businesses should destination for claims raised under the court had no personal jurisdiction over it. not be compelled to appear in jurisdictions Federal Employers’ Liability Act, 45 U.S.C.A. The trial judge found his court had when they have insufficient connection to § 56, because its Supreme Court has general jurisdiction under Montana’s the locale and when the incident, people and interpreted the statute of limitation in a more long-arm statute, Montana Rule of Civil evidence are hundreds or thousands of miles liberal way than have several federal circuit Procedure 4(b)(1), because of BNSF’s away,” NAM argues. courts. “continuous and systematic activities NAM represents small and large within Montana,” according to the state The high court should hear the appeal manufacturers in every industry across all Supreme Court opinion. because letting the Montana decision stand 50 states, according to the brief. would create exceptions to the U.S. Supreme BNSF appealed to the Montana Supreme Court’s general jurisdiction, the association The dispute here is based partly on a suit Court, where the appeal was consolidated says. WJ Kelli Tyrrell, as special administrator of with that of another out-of-state BNSF Brent Tyrrell’s estate, filed in Montana’s employee who had filed a lawsuit under Related Filings: Yellowstone County 13th Judicial District FELA related to knee injuries he allegedly Amicus brief: 2016 WL 6472612 Petition: 2016 WL 5462798 Court against BNSF Railway Co. sustained while serving as a fuel truck driver.

Ashcroft et al. v. Turkmen et al., No. 15-1359; Ziglar v. Turkmen et al., No. 15-1358; Hasty et al. v. Turkmen et al., No. 15-1363, cert. granted (U.S. Oct. 11, 2016)...... 20

Bank of America Corp. et al. v. City of Miami, No. 15-1111; Wells Fargo & Co. v. City of Miami, No. 15-1112, oral argument held (U.S. Nov. 8, 2016)...... 5

Bank of America Corp. et al. v. Gelboim et al., No. 16-545, petition for cert. filed (U.S. Oct. 20, 2016)...... 33

BNSF Railway Co. v. Tyrrell et al., No. 16-405, amicus brief filed (U.S. Oct. 28, 2016)...... 42

Bristol-Myers Squibb Co. v. Superior Court for the County of San Francisco et al., No. 16-466, petition for cert. filed (U.S. Oct. 7, 2016)...... 38

Czyzewski et al. v. Jevic Holding Corp. et al., No. 15-649, oral argument held (U.S. Dec. 7, 2016)...... 6

DeKalb County Pension Fund v. Transocean Ltd. et al., No. 16-206, amici brief filed (U.S. Sept. 14, 2016)...... 40

Epic Systems Corp. v. Lewis, No. 16-285, respondents’ brief filed (U.S. Nov. 14, 2016)...... 32

Ernst & Young LLP et al. v. Morris et al., No. 16-300, respondents’ brief filed (U.S. Nov. 21, 2016)...... 32

Flytenow Inc. v. Federal Aviation Administration, No. 16-14, brief of amici curiae Cato Institute et al. filed (U.S. July 25, 2016)...... 28

Flytenow Inc. v. Federal Aviation Administration, No. 16-14, brief of amici curiae Southeastern Legal Foundation et al. filed (U.S. July 29, 2016)...... 28

Gloucester County School Board v. G.G. ex rel. Grimm, No. 16-273, cert. granted, 2016 WL 4565643 (U.S. Oct. 28, 2016)...... 13

Gordon v. Consumer Financial Protection Bureau, No. 16-673, petition for cert. filed (U.S. Nov. 17, 2016)...... 30

Impression Products Inc. v. Lexmark International Inc., No. 15-1189, cert. granted, 2016 WL 1117396 (U.S. Dec. 2, 2016)...... 15

Lee v. Tam, No. 15-1293, cert. granted (U.S. Sept. 29, 2016)...... 15

Leidos Inc. v. Indiana Public Retirement System, No. 16-581, petition for cert. filed (U.S. Oct. 31, 2016)...... 41

Life Technologies Corp. et al. v. Promega Corp., No. 14-1538, oral argument held (U.S. Dec. 6, 2016)...... 17

McLane Co. v. Equal Employment Opportunity Commission, No. 15-1248, amici briefs filed (U.S. Nov. 21, 2016)...... 9

Midland Funding LLC v. Johnson, No. 16-348, petitioner’s opening brief filed (U.S. Nov. 14, 2016)...... 8

Milbauer v. United States, No. 16-236, response brief filed (U.S. Nov. 23, 2016)...... 37

Murr et al. v. Wisconsin et al., No. 15-214, reply brief filed (U.S. July 27, 2016)...... 11

National Labor Relations Board v. Murphy Oil USA Inc., No. 16-307, respondents’ brief filed (U.S. Nov. 10, 2016)...... 32

Patterson et al. v. Raymours Furniture Co., No. 16-388, petition for cert. filed (U.S. Sept. 22, 2016)...... 32

SCA Hygiene Products Aktiebolag et al. v. First Quality Baby Products LLC et al., No. 15-927, oral argument held (U.S. Nov. 1, 2016)...... 19

Self-Insurance Institute of America Inc. v. Snyder et al., No. 16-593, petition for cert. filed (U.S. Oct. 31, 2016)...... 36

The Geo Group Inc. v. Equal Employment Opportunity Commission et al., No. 16-302, opposition brief filed (U.S. Nov. 10, 2016)...... 34

Von Schoenebeck et al. v. Koninklijke Luchtvaart Maatschappij NV, aka KLM Royal Dutch Airlines, No. 16-670, petition for cert. filed (U.S. Nov. 8, 2016)...... 29

Whyte v. Barclays Bank PLC et al., No. 16-239, respondent’s brief filed (U.S. Oct. 24, 2016)...... 31

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