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The Standing Requirement Remains an Open Question But Still a Valid Defense to Cyber Claims

Posted on: June 26th, 2019

By: Jeff Alitz

In litigation proceeding in the Federal Courts, it has always been necessary for a successful plaintiff to in some manner establish that the harm sought to be remedied by a federal lawsuit falls within the authority of the courts to hear and decide such cases. Put another way, Article III of the Constitution limits the authority of Federal Courts to decide only those cases where the claimant has “standing” –  a cognizable interest in the dispute. That interest must be demonstrated by a showing of  1. A concrete injury, 2. The injury is attributable to the defendant’s actions and 3. The injury can in some way be addressed by a favorable decision in the case. Given the fact that in many cases claimants have demonstrated that a cyber breach has occurred for which a target defendant is responsible, only to be denied standing -and hence denied recovery- where no actual “harm” or loss has been established, just what constitutes that harm is an often-litigated issue that has been in many lawsuits a powerful defense to those parties alleged to have committed some type of cyber misstep. Several recent Supreme Court actions have both done little to clarify that issue – what type of “harm’ must be demonstrated for standing to be proven – but the actions have simultaneously served to preserve standing as a significant hurdle for cyber claim plaintiffs to clear in most states.

Specifically, on March 20, 2019, in reviewing the Frank v. Gaos decision decided by the Ninth Circuit which had approved the class action settlement between Google and a group (class) of Google users, the Supreme Court ordered the Ninth Circuit court to determine if the plaintiffs in that case had suffered a concrete injury before any settlement could be approved. But, in reaching that result, the Court did not give any guidance on how a court need decide if an injury- in- fact had occurred. Less than a week later, in denying certiorari to the parties in Zappos v. Stevens, the Court similarly declined to give any clarity to the injury in fact standard. In effect by refusing to resolve the split among the circuit courts where some have determined that simply identifying theft of information or cyber fraud and the THREAT of future misuse is sufficient to confer standing ( as the Sixth, Seventh, Ninth and D.C. Circuits have done) while others (the First, Second, Third, Fourth and Eighth Circuits) have held that simply alleging the threat of future harm is not enough to establish an actual harm sufficient for standing purposes, the Court has left that issue to the lower courts to continue to resolve on a piecemeal basis.

The Supreme Court’s inaction comes at a time when state legislatures are focusing on the injury -in- fact issue by enacting statutes that attempt to eliminate any requirement that a claimant must establish actual harm to succeed on cyber liability based lawsuit. California’s Privacy Act of 2018, Massachusetts Senate Bill 120 and the Illinois Biometric Privacy Act each either clearly state or simply suggest (in the case of the Illinois act)  that no injury apart from being subject to a theft or disclosure is needed to establish standing. Nevertheless, in those states that have NOT passed such legislation and in those states that are not within the jurisdictions of the Circuit Courts that have watered down the Article III requirement that a concrete injury be established to confer standing, defendants in cyber lawsuits – and their insurers and attorneys – can continue to focus on the lack of provable harm to defeat such claims.

If you have questions or would like more information, please contact Jeff Alitz at [email protected].

Kentucky Court of Appeals Reminds Plaintiffs They Bear a “Tall Burden” in Proving Bad Faith

Posted on: June 26th, 2019

By: Barry Miller

A Kentucky Court of Appeals decision adopted a federal court’s observation that Kentucky bad faith decisions fall into two broad categories. One category reflects “a more expansive approach to a finding of bad faith,” analyzing facts where the insurer’s conduct was oppressive and the facts establishing liability were clear. The second category represents the “greater number” of Kentucky cases which follow the “standards set forth in the landmark case of Wittmer v. Jones.”

In Wittmer the Supreme Court of Kentucky states three elements that a bad-faith claimant (whether first or third party) must meet: (1) The insurer must be obligated to pay the claim under the terms of the policy; (2) The insurer must have lacked a reasonable basis to delay or deny payment; and (3) The insurer must have known or been conscious of the fact that it lacked a reasonable basis to delay or deny. Later Kentucky cases make it clear that a claimant must show proof of all three.

According to the Messer court, the claimant thought his case fell into the “more expansive” category of bad faith claims, but instead it fell into the second and failed to meet the Wittmer standards. First, the case presented a legitimate coverage question. There was a question about whether the tortfeasor’s use of the insured vehicle was permissive, and if it was not, the claim was excluded. Messer makes it clear that an insurer does not have to prevail on a coverage question to avoid bad faith; the insured’s claim need only be reasonably debatable. Because coverage was debatable here, Messer could not meet the first Wittmer element of proving that Universal was obliged to pay his claim under the terms of its policy.

This was true even though Universal settled the claim against the tortfeasor. Liability also remained in doubt because that settlement occurred before the jury could decide the questions of liability and apportionment. The settlement did not foreclose the liability issue; under Kentucky law “settlements are not evidence of legal liability, nor to the qualify as admissions of fault.” Nor did the insurer’s reserves, which were discoverable, constitute evidence of coverage, liability, or fault.

The Court of Appeals concluded that Messer never produced evidence eliminating the possibility that a jury could have held him 100 percent at fault for causing the accident. Thus, it was reasonable for the insurer, throughout the case, to challenge the allegation that the tortfeasor was not liable for causing the accident, or for Messer’s damages.

Messer has 30 days to ask the Supreme Court of Kentucky for discretionary review. It can take the Supreme Court several months to consider such motions. If the Court of Appeals’ decision is allowed to stand, this opinion represents an important synthesis of Kentucky bad faith opinions that will remind bad faith plaintiffs of the “tall burden of proof” in a bad faith claim.

If you have questions or would like more information, please contact Barry Miller at [email protected].

Discrimination Without A Difference: Supreme Court To Decide Whether Section 1981 Requires “But For” Causation Or Whether Same-Decision Defense Applies

Posted on: June 24th, 2019

By: Michael Hill

The U.S. Supreme Court is poised to answer the question of where to draw the line when a decision is motivated in part by race discrimination. Must the plaintiff show the decision would not have been made but for his or her race, or is it sufficient to show that race was one factor behind the decision, even if the same decision would have been made for other, race-neutral reasons?

The case at issue, Comcast Corp. v. National Assoc. of African American-Owned Media, is not actually an employment discrimination case, but the Supreme Court’s decision will impact the realm of employment law because of the statute at issue, 42 U.S.C. § 1981 (“Section 1981”), prohibits race discrimination in making and enforcing contracts (which includes employment contracts).

The issue is whether Section 1981 requires “but for” causation, or whether a “mixed motive” analysis can be used. In Comcast, an African American-owned television network operator sued the cable company, alleging Comcast’s refusal to contract with the networks was racially motivated. The federal district court in California dismissed the case three times at the pleading stage, holding the complaints failed to allege facts to show Comcast had no legitimate business reasons for its decision not to contract with the networks. On appeal, a three-judge panel at the Ninth Circuit Court of Appeals unanimously reversed, holding a Section 1981 claim can proceed as long as race is alleged to have been one factor in the contract decision, even if there were other, race-neutral factors that would have led to the same decision.

The Supreme Court’s decision in Comcast will have a significant impact on the amount of damages available in cases alleges race discrimination in employment. Race discrimination claims under Section 1981 frequently are pled in tandem with Title VII of the Civil Rights Act. Title VII was amended in 1991 expressly to allow for “mixed motive” claims, but the only forms of relief available under a Title VII “mixed motive” claim are declaratory relief and attorney’s fees – no damages, back pay, or right to reinstatement. The language of Section 1981, however, contains no such limitation. Also, unlike Title VII, damages under Section 1981 are not capped; the statute of limitations is longer; and there is no requirement to submit the claim to the EEOC before suing in court. Thus, if the Supreme Court rules that Section 1981 covers “mixed motive” claims (and not just claims of “but for” discrimination), then claims alleging “mixed motive” race discrimination could become more valuable (and thus more costly to defend).

If you have questions or would like more information, please contact Michael Hill at [email protected].

Hooray! My Employee’s H-1B Visa Was Finally Approved! Now Why Am I Getting This Revocation Notice?

Posted on: June 19th, 2019

By: Ken Levine

For the past two years, USCIS has ramped up revocations of approved H-1B petitions. While there are no reliable government statistics, word of mouth in the immigration legal field, as well as increased federal litigation concerning H-1B revocations, clearly underscores the existence of this trend.

Under 8 C.F.R. 214.2(h)(11) USCIS must satisfy at least one of the below criteria in order to initiate H-1B revocation proceedings:

(1) The beneficiary is no longer employed by the petitioner in the capacity specified in the petition, or if the beneficiary is no longer receiving training as specified in the petition; or (2) The statement of facts contained in the petition was not true and correct; or (3) The petitioner violated terms and conditions of the approved petition; or (4) The petitioner violated requirements of section 101(a)(15)(H) of the Act or paragraph (h) of this section; or (5) The approval of the petition violated paragraph (h) of this section or involved gross error.

In particular, USCIS has taken to stretching the bounds of “gross error” criteria to justify revocation of petitions for occupations that USCIS now believes do not merit recognition as a specialty occupation. An example of this approach can be found in the Service’s increased attempts to revoke approved H-1B petitions for Systems Analyst or Market Research Analyst positions.

As well, USCIS has substantially increased scrutiny on H-1B workers in the information technology field. Employers in the IT field must be especially diligent in filing amendments when there are changes to the terms of the position or location of employment. Even minor position changes that come to light through a USCIS audit can easily trigger an H-1B revocation notice.

DOES AN EMPLOYER HAVE ANY DEFENSES TO AN H-1B REVOCATION?

The regulations allow for an employer one opportunity to rebut the basis of a USCIS revocation. USCIS must send a summary outlining the specific reasons why revocation has been initiated.  Employers are then given 30 days to file a response. If the response is deemed persuasive then USCIS will uphold the validity of the approval.  Otherwise, USCIS will formally revoke the petition.

However, just because a petition has been revoked does not mean the matter must end there. Employers who believe that the Service’s decision to revoke their H-1B petition was unwarranted should strongly consider challenging the revocation in Federal Court. Federal Judges are reluctant to afford deference to USCIS decisions if those decisions are not logical, rational or well founded.

For additional information related to this topic and for advice regarding how to navigate U.S. immigration laws you may contact Kenneth S. Levine of the law firm of Freeman, Mathis & Gary, LLP at (770-551-2700) or [email protected].

Fourth Circuit Affirms $61 Million TCPA Judgment

Posted on: June 18th, 2019

By: Matt Foree

The United States Court of Appeals for the Fourth Circuit recently affirmed a judgment based on a jury verdict of over $61 million for illegal telemarketing calls made under the Telephone Consumer Protection Act (“TCPA”). As a matter of background, plaintiff Thomas Krakauer brought the TCPA lawsuit against Dish Network, L.L.C. (“Dish”) after he received telemarketing calls from Dish’s third-party contractor, Satellite Systems Network (“SSN”), which made calls on its behalf, despite the fact that Krakauer had listed his telephone number on the national Do Not Call registry. The TCPA provides for a private right of action to those who have received more than one telephone solicitation within any 12-month period to a number listed on the Do Not Call registry without consent or an established business relationship. The TCPA provides for statutory damages of $500 per violation, which can be trebled to $1500 per violation for willful or knowing violations.

In 2015, Krakauer filed a class action lawsuit in the District Court for the Middle District of North Carolina. The District Court certified the class and the case went to a jury trial. The jury awarded $400 per call as damages and found that the calls were willful, thereby trebling the damages, which resulted in an over $61 million jury verdict.

Dish appealed the judgment on several bases. When it challenged the standing of some of the class members, the Fourth Circuit made quick work of that argument, relying on the U.S. Supreme Court’s recent Spokeo, Inc. v. Robins decision to find that standing existed. In so holding, the court underscored the legal traditions recognizing intrusions upon personal privacy. Dish also challenged class certification. Noting that Dish’s core argument seemed to be that the class included a large number of uninjured persons, the Fourth Circuit upheld class certification, finding that the class certified by the District Court easily met the demands of Rule 23.

Finally, Dish argued that it was not liable for SSN’s conduct and that the violations were not knowing or willful to permit treble damages. The court found that considerable evidence supported an agency relationship between Dish and SSN. Among other things, the court referred to the provisions of the parties’ contract giving Dish broad authority over SSN’s business and the fact that Dish authorized SSN to use its name and logo during its operations. Finally, the court found that the willful or knowing standard was met, thereby upholding the judgment.

Throughout the Fourth Circuit’s opinion, the court made several charitable statements about the TCPA, suggesting that the statute is straightforward and easy to apply. It also described the appropriateness of TCPA claims for class certification. In sum, this case provides a case study of many of the landmines confronted by TCPA defendants, including potentially devastating statutory damages, class certification, and vicarious liability issues. This case is just the latest reminder that those operating in this space would do well to ensure strict compliance with the TCPA to avoid a similar fate.

If you have questions or would like more information, please contact Matt Foree at [email protected].