Business Litigation Reporter -- June 2014

by Goodwin
Contact

Goodwin Procter’s Business Litigation Reporter provides timely summaries of key cases and other developments within dedicated Business Litigation sessions and related courts throughout the country – courts within which Goodwin Procter’s Business Litigation attorneys are continually litigating. In addition, each issue of the Business Litigation Reporter provides a more thorough discussion of one topic of particular importance to the business community. In this issue, we discuss the key elements of indemnification clauses and highlight the drafting decisions that are likely to impact the outcome of any future proceedings. We hope that you find the Reporter useful.

California

Trade Secrets Can Consist of Ideas, Not Just Information. In Altavion, Inc. v. Konica Minolta Systems Laboratory Inc., 2014 WL 1846104 (Cal. Ct. App. May 8, 2014), the First District Court of Appeal held that generalized ideas, inventions and design concepts, rather than just information, can constitute protected trade secrets.  As such, the court held, “if a patentable idea is kept secret, the idea itself can constitute information protectable by trade secret law.”  Applying this ruling, the court upheld a $5 million verdict for misappropriating digital stamping technology.

Arbitration Clause Barring Classwide Arbitration Held Unenforceable Based on Choice of Law Provision. In Imburgia v. DIRECTV, Inc., 225 Cal. App. 4th 338 (Apr. 7, 2014), the Second District Court of Appeal affirmed an order denying arbitration of a putative class action against DIRECTV.  The court did so on the reasoning that (i) the customer agreement’s arbitration clause prohibited classwide arbitration, (ii) the agreement also contained a general choice of law clause adopting California law and (iii) the enforceability of the arbitration clause was therefore subject to California law, which prohibited the waiver of classwide arbitration.  The court acknowledged that its ruling was contrary to a recent Ninth Circuit decision but rejected that decision as unpersuasive.

Certification of Damages Class Denied in Misbranding Case. In Lanovaz v. Twinings North America, Inc., 2014 WL 1652338 (N.D. Cal. Apr. 24, 2014), which was brought by California purchasers of allegedly misbranded tea, Judge Whyte granted class certification to pursue injunctive relief but not damages.  Relying on the U.S. Supreme Court’s recent decision in Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013), he held that plaintiff’s expert failed to provide a damages model capable of quantifying the price premium resulting from the allegedly misleading label statements.  The plaintiff has sought permission to appeal the denial of class certification. 

Delaware

Reduced Judicial Scrutiny for Certain Freeze-Out Mergers. In Kahn v. M&F Worldwide Corp., 2014 WL 996270 (Del. Mar. 14, 2014), a 43% stockholder acquired the remaining common stock under a process that required both (i) negotiation and approval of the terms by a special committee of independent directors and (ii) approval by a majority of the other shareholders.  Following the transaction, certain other shareholders sued for breach of fiduciary duty.  The Delaware Supreme Court held that because of the procedural protections afforded by those dual conditions, the terms of the merger were subject to judicial review only under the “business judgment” rule rather than the more demanding “entire fairness” test (which requires that the terms be entirely fair to minority shareholders).

“Clickwrap” Employment Agreements Held Enforceable.  In Newell Rubbermaid Ind. v. Storm, C.A. No. 9398-VCN, 2014 WL 1266827 (Del. Ch. Mar. 27, 2014), the Delaware Court of Chancery upheld the enforceability of a clickwrap agreement that set an employee’s non-disclosure and non-solicitation terms of employment.  In connection with an agreement involving the grant of restricted stock unit (“RSU”) awards, the employee had to visit a third-party website and agree to the terms of the grant program by checking a box indicating that she had read and agreed to the terms of the grant agreement and clicking an “accept” button.  The court held that the clickwrap agreement, “although certainly not the model of transparency and openness with its employees, was not an improper form of contract formation,” because the employee manifested her assent by clicking the checkbox and “accept” buttons after she had a “fair opportunity” to review the agreement.  The court also rejected the employee’s argument that there was no consideration for the non-compete covenants (since she lost her RSUs when she quit) because, under Delaware law, continued employment may constitute consideration sufficient to form a contract. 

Massachusetts

“Loser Pays” Indemnification Provision Held Unenforceable in Securities Action.  Crown v. Kobrick Offshore Fund, Ltd., 85 Mass. App. Ct. 214 (Apr. 24, 2014), involved a hedge fund’s counterclaim against an investor.  The counterclaim was based on a provision in the subscription agreement stating that the investor would be liable for the hedge fund’s legal fees arising out of any action for securities law violations instituted by the investor and resolved in the hedge fund’s favor.  Acknowledging a lack of controlling precedent and a split in relevant federal court decisions, the Appeals Court held that enforcing such “loser pays” clauses would discourage investors from bringing cases under the Massachusetts Uniform Securities Act and thus violated Massachusetts public policy.

Close Corporation Shareholder Not Relieved of Fiduciary Duties by Wrongful Termination. In Selmark v. Ehrlich, 467 Mass. 525 (Mar. 14, 2014), the Supreme Judicial Court rejected the argument that a shareholder and former employee of a close corporation was relieved of his fiduciary duty as a shareholder when his employment allegedly was wrongfully terminated.  After being terminated from the corporation, the shareholder retained his shares in the close corporation but began working for a competitor and soliciting business from the close corporation’s customers.  In affirming judgment against the former employee, the court held that an aggrieved fiduciary in a close corporation may not “seek retribution” but should pursue any remedies through the judicial system.

New York

Standard for Pleading Unjust Enrichment Claim Clarified. In Philips International Investments, LLC v. Pektor, Index No. 651526/11 (N.Y. App. Div. 1st Dep’t Mar. 18, 2014), the Appellate Division, First Department rejected the defendant’s argument that the decision in Georgia Malone & Co., Inc. v. Rieder, 19 N.Y.3d 511 (N.Y. Ct. App. 2012), had so changed the law of unjust enrichment as to justify a renewed motion to dismiss the plaintiff’s unjust enrichment claim.  Instead, the court held, Georgia Malone had merely clarified that although the plaintiff need not allege privity, it must “assert a connection between the parties that [is] not too attenuated.”  The court also held that, in any event, that standard was satisfied by the joint venture relationship between the parties.

Commercial Division Eyes Potential Rules Designed to Streamline Litigation.

Under a newly proposed rule, parties will have only 90 days to seek assignment of their case to the Commercial Division.  Under the current rules, parties seek such assignment at the same time that they file an RJI (request for judicial intervention), which often does not happen for many months after the case is filed.  The goal is to get the justices of the Commercial Division involved in the management of appropriate cases earlier in the process. 

The Commercial Division is also considering a rule that would allow attorneys working on complex commercial cases to log documents being withheld from production on the basis of privilege to use a category-based approach, as opposed to the traditional document-by-document approach.   The rule would require that a “responsible attorney” (a designation meant to exclude junior associates and paralegals) certify the facts warranting privileged treatment.  Opposing counsel could object to the designations and request a document-by-document explanation, but the court would be empowered to allocate the associated costs to the requesting party.   The new rule would also count a continuous, uninterrupted email chain as a single document, which would further reduce the costs associated with a privilege review.  

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Goodwin | Attorney Advertising

Written by:

Goodwin
Contact
more
less

Goodwin on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
Feedback? Tell us what you think of the new jdsupra.com!