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Archive for May, 2016

President Obama Signs Bipartisan Bill Creating Federal System Of Trade Secrets Law

Posted on: May 12th, 2016

By: Mike Wolak and Amanda Cash

On May 11, 2016, President Obama signed the Defend Trade Secrets Act (“DTSA”) into law.  The DTSA is intended to create a more predictable, nationwide body of trade secrets law through a single federal statute.  The new law, which overwhelmingly passed both houses of Congress, will give companies a direct path to federal court as a plaintiff.  Until now, employers and businesses had to bring trade secrets claims under state law, which often presented disadvantages for large employers operating in multiple states.  The DTSA creates a federal cause of action that, for the first time, gives federal district courts original jurisdiction over trade secret disputes, including contract and tort claims that are currently asserted under state laws.  Companies can now consolidate their claims and file directly in federal court, which many argue is better equipped than state court to handle the often complex and highly technical aspects of trade secret cases.  This is important for employers who face daunting hurdles in protecting their trade secrets, especially given the constantly increasing risks associated with technological advances and cyber security issues.  It is important to note that the DTSA does not preempt state law, but will co-exist with state trade secret laws.

Employers must also be cognizant of the DTSA’s other important provisions, such as the following:

  • The DTSA Seizure Clause:  The DTSA allows trade secret owners, including employers, to make ex parte applications to a court for an order seizing property necessary to prevent dissemination of trade secrets.  This provides employers with a mechanism to forcefully recover trade secrets from alleged misappropriators, without a hearing or answer from the accused.  The DTSA limits this “extraordinary remedy” to situations where a request for a temporary restraining order or preliminary injunction would be inadequate.  Employers should pursue this remedy with extreme caution, however, and ensure they possess the requisite evidence to warrant such a seizure.  A wrongful or excessive seizure can support a claim against the trade secret owner for damages, including lost profits.
  • Whistleblower Immunity.  The DTSA provides a safe harbor in the form of civil and criminal immunity to those who disclose trade secrets to the government to investigate potentially criminal activity.  The DTSA thus requires that employees be notified of their right to disclose trade secrets as part of government investigations.  This notice must be provided in any contracts or employment agreements that govern the use of trade secrets or confidential information.  Rather than merely inserting the DTSA’s language into future employment contracts, employers should ensure they have policies for handling confidential information and whistleblower policies that are made available to employees.  Furthermore, without this express notice to employees, employers will not be permitted to recover punitive damages or attorneys’ fees if they pursue trade secret theft claims.  Finally, employees must also be advised that they are permitted to turn over confidential information to their attorneys or to the court in a retaliation suit, so long as the disclosure is made under seal.

The DTSA contains a number of critical changes to trade secret law that employers need to be aware of.  The DTSA gives employers unique opportunities to protect trade secrets in federal court and to employ forceful mechanisms to prevent dissemination.  Employers, however, must also be aware of the compliance requirements and limiting provisions of the DTSA, including the communication of certain whistleblower rights to employees, the consequences of a wrongfully implemented seizure, and the provisions aimed at preventing injunctions that unfairly restrict employee mobility.

For more information, please contact Mike Wolak at [email protected] or at 770.303.8638.

Department of Justice – North Carolina Duel Over Transgender Individuals’ Civil Rights.

Posted on: May 11th, 2016

By: Agne Krutules

On May 9, 2016, the Department of Justice (DOJ) filed a complaint against the State of North Carolina, the University of North Carolina (UNC) and the North Carolina Department of Public Safety (DPS) in the U.S. District Court in Greensboro, North Carolina.  The lawsuit seeks a preliminary injunction to block implementation of House Bill 2 (H.B.2), the North Carolina law passed in March, which requires that people using bathrooms, locker rooms and similar facilities in state and local buildings use the facilities corresponding to the gender listed on their birth certificates.  H.B.2 was prompted by the City of Charlotte’s adoption of an ordinance barring discrimination against gay or transgender individuals and specifically allowing them to use bathrooms and locker rooms that conform to their gender identity.   Thus, the measure also blocks localities from implementing anti-discrimination provisions for lesbian, gay, bisexual and transgender individuals.

The DOJ complaint claims that the North Carolina measure violates Title VII of the Civil Rights Act of 1964 (Title VII), prohibiting discrimination in the workplace, and Title IX (Title IX) of the Education Amendments of 1972, which prohibits discrimination based on gender in schools and school activities, and the Violence Against Women Reauthorization Act of 2013 (VAWA), which prohibits states receiving funding under that law from discriminating based on “sex” or “gender identity.”  The DOJ’s legal action amounts to a counter-suit to the one that Patrick L. McCrory, North Carolina’s Governor, filed earlier on Monday in the U.S. District Court in Raleigh, North Carolina, where he sought injunctive relief to block the DOJ’s demand that the State stop implementing H.B.2, and asked the court to declare that H.B.2 did not violate Title VII or VAWA.

In tandem, these cases create the potential for a future Supreme Court case interpreting whether federal civil rights law provide protections for transgender individuals. Although neither Title VII not Title XI explicitly include protections for transgender individuals and several Circuit Courts have held that Title VII does not outlaw discrimination against transgender persons, the Supreme Court has yet to rule on this issue.  Thus, the implications of such a decision will be significant and one that employers will need to continue to monitor.



Georgia Adopts Protection for Design Professionals from Hold Harmless Clauses

Posted on: May 11th, 2016

By: Bart Gary

Georgia recently adopted legislation that declares an indemnity or hold harmless agreement in connection with or collateral to a contract or agreement for engineering, architectural, or land surveying services against public policy and void and unenforceable.  The legislation excepts, and therefore permits, indemnification for losses and damages, “to the extent caused by or resulting from the negligence, recklessness, or intentionally wrongful conduct of the indemnitor” (the party obligated to indemnify the other) or his or her employee or agent.

In the convoluted way statutes are written, this new law voids indemnity clauses in agreements for services by an architect, engineer or land surveyor, unless the clause is confined to instances, or “to the extent,” caused by the negligence, recklessness, or misconduct of a party. The important language is the phrase “to the extent of,” which is already used in many form indemnity clauses, and has been interpreted to call for a comparison of the negligence or  fault of an indemnitor with that of the party to receive indemnity protection  or third parties .  In other words, the indemnitor is only responsible for that portion of the loss it caused.  The new law is written to apply to any party to the design contract, but is mainly for the benefit of the designer.

Georgia still outlaws indemnity clauses in construction-related agreements that purport to indemnify one for his or her own sole negligence, and care needs to be used in drafting contracts in light of that law. Now in contracts for design services prudent drafting dictates that the indemnity clause should expressly adopt the exception in the new law with inclusion of the “to the extent of” language for the actual fault of the designer.

One question that the new law does not address is the status of design/build contracts where a single party, usually a general contractor or construction manager, is responsible for both the design and construction of a building or structure. Since design/build contracts include architectural and engineering services, the indemnity agreement in the contract could be made unenforceable even if the loss was unrelated to the design services. In any event, the extent of the indemnity coverage for the project owner in a design/build contract may be less that under current law.

The new legislation is codified in Section 13-8-2 (c) of the Georgia Code and goes into effect on July 1, 2016. The new law does not affect existing agreements, but would apply to those coming into existence after July 1, 2016.

TCPA Cases Stayed Pending SCOTUS Spokeo Ruling

Posted on: May 10th, 2016

By: Matt Foree

Telephone Consumer Protection Act (“TCPA”) litigants are anxiously awaiting a decision from the Supreme Court of the United States in Robins v. Spokeo, Inc., 742 F.3d 409 (9th Cir. 2014) cert. granted, 135 S.Ct. 1892 (2015) (“Spokeo”).  In Spokeo, the Supreme Court is addressing the issue of “[w]hether Congress may confer Article III standing upon a plaintiff who suffers no concrete harm, and who therefore could not otherwise invoke the jurisdiction of a federal court, by authorizing a private right of action based on a bare violation of a federal statute.”

In Spokeo, the plaintiff raised a claim under the Fair Credit Report Act (“FCRA”) alleging, through a bare statutory violation, that he was damaged when Spokeo published false information about him.  Although Spokeo concerns a claim under the FCRA, the outcome of the case could affect TCPA litigation.  If the Supreme Court rules in favor of the defendant in Spokeo, TCPA plaintiffs alleging statutory violations without a concrete injury also may lack standing such that their cases would be subject to dismissal.  Because of the potentially significant impact on TCPA cases, numerous courts across the country have granted stays pending the Spokeo decision.

On November 2, 2015, the Court heard oral argument in Spokeo, which was sharply divided.  The death of Justice Scalia appears to have complicated the outcome, as it is understood that Scalia favored defendant’s position.  As such, many believe that a split 4-4 decision is likely.  Such a decision would effectively uphold the Ninth Circuit’s ruling, which held that a bare statutory violation was sufficient to confer Article III standing.

The Supreme Court will not be releasing additional opinions until, at the earliest, May 16th, and the Court recesses at the end of June. It remains possible that Spokeo will be reheard next term.


Show Me the Money! The Supreme Court Leaves Open the Possibility of Mooting Class Claim by Depositing Money to Satisfy Representative Plaintiff

Posted on: May 4th, 2016

By: Ze’eva Kushner Banks

In the recent Supreme Court case Campbell-Ewald Company v. Gomez, 136 S. Ct. 663 (2016), the Navy contracted with the advertising company Campbell-Ewald (“Campbell”) to develop a multimedia recruiting campaign. The campaign included sending text messages to a target group of young 18 to 24 year olds who previously had consented to receiving texts on topics such as service with the Navy.  Mr. Jose Gomez was a recipient of one of these text messages, however he was 40 years old and had not consented to receiving such texts.  Gomez brought a nationwide class action alleging Campbell violated the Telephone Consumer Protection Act (“TCPA”) by sending text messages to cell phones without having prior consent of the recipients and sought damages.

Campbell tried to get rid of the case by filing an offer of settlement pursuant to Federal Rule of Civil Procedure 68 before the motion for class certification deadline. The offer was for costs, not including attorneys’ fees, and $1,503 per message for the May 2006 message at issue, in addition to any others received subsequently, but did not admit liability.  Gomez did not accept the offer.  Campbell then filed a motion to dismiss for lack of subject matter jurisdiction arguing no Article III case or controversy remained because the offer of judgment mooted Gomez’s individual claim by providing him complete relief.  Additionally, Campbell argued the putative class claims had become moot because Gomez’s individual claim became moot before any class was certified.  After limited discovery and a summary judgment motion on discrete sovereign immunity related grounds, eventually the Supreme Court granted certiorari to resolve the issue over whether an unaccepted offer can moot a plaintiff’s claim, thus depriving federal courts of Article III jurisdiction.  The Court held that “an unaccepted settlement offer or offer of judgment does not moot a plaintiff’s case, so the District Court retained jurisdiction” to adjudicate the plaintiff’s complaint.  136 S. Ct. at 672.  The Court left open the issue of whether the result would be different “if a defendant deposits the full amount of the plaintiff’s individual claim in an account payable to the plaintiff, and the court then enters judgment for the plaintiff in that amount.” Id.

Consequently, as reported previously, it still may be possible to force settlement of a class action by offering full relief to the named plaintiff if the full amount of plaintiff’s claim is deposited into an account payable to the plaintiff.  The lower courts are grappling with this issue now. If you have any questions or need help with a TCPA case, please contact one of our attorneys for guidance.