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Archive for March, 2018

Breaking News: U.S. Supreme Court Rules that State Courts Maintain Jurisdiction Over Certain Securities Class Actions Pursued Under Federal Law

Posted on: March 20th, 2018

By: Theodore C. Peters

For years, litigants have battled over whether and to what extent state courts have concurrent jurisdiction over securities class actions brought under the Securities Act of 1933.  The 1933 Act was enacted during the Great Depression following the stock market crash of 1929. The Act requires that, absent an exclusion, every offer or sale of securities that uses the means and instrumentalities of interstate commerce to be registered with the SEC.  Prior to the Act, securities regulation was primarily governed by state laws, also known as blue sky laws.  Such laws, however, were left intact after the passing of the 1933 Act, paving the way for continued state court jurisdiction over many types of securities claims.

In 1988, Congress enacted the Securities Litigation Uniform Standards Act (“SLUSA”) which provided that “[n]o covered class action based upon the statutory or common law of any State or subdivision thereof may be maintained in any State or Federal court by any private party alleging – (A) a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security, or (B) that the defendant used or employed any manipulative or deceptive device or contrivance in connection with the purchase or sale of a covered security.”  Additionally, SLUSA provided that all “covered class actions” (defined as a suit brought on behalf of more than 50 plaintiffs) filed in state courts could be removed to federal court.  The U.S. Supreme Court ruled in 2006 that SLUSA operated to preempt certain state law claims arising from the fraud-induced purchase or sale of securities.  Merrill Lynch v. Dabil, 547 U.S. 71 (2006).

On March 20, 2018, in the case of Cyan v. Beaver County Employees Retirement Fund, a case arising from a California Court of Appeal, the  U.S. Supreme Court unanimously concluded that while SLUSA may limit state court jurisdiction over certain securities class actions based on state law, SLUSA “does nothing to deprive state courts of jurisdiction over class actions based on federal law.” (Opinion at pg. 3)  Cyan, a former telecommunications company, urged the court to decide that SLUSA preempted securities class actions, and that the statute should be interpreted as mandating that federal courts have exclusive jurisdiction of such actions. Not only did the high court find that SLUSA does not strip state courts of jurisdiction over class actions alleging violations of only the 1993 Act, it also concluded that SLUSA does not provide defendants with a right to remove such action from state to federal court.

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

BREAKING – D.C. Circuit Sets Aside Key Portions of FCC Ruling in Long-Awaited TCPA Decision

Posted on: March 20th, 2018

By: Matthew N. Foree

The United States Court of Appeals for the District of Columbia Circuit has finally issued its decision in the appeal of the Federal Communication Commission’s July 2015 Declaratory Order regarding the Telephone Consumer Protection Act. The industry has been anxiously awaiting this decision for over two years. The decision provides helpful guidance to those defending TCPA claims. The highlights are set forth below.

First, the decision rejects the FCC’s guidance concerning the qualifications of an automatic telephone dialing system (ATDS). Whereas the FCC defined ATDS broadly such that it took into consideration the device’s potential ability to store or produce telephone numbers to be called and to dial such numbers in determining its “capacity” to do so, the D.C. Circuit found that this definition was impermissibly expansive.  Among other things, the D.C. Circuit found that the FCC’s decision “fails to satisfy the requirement of reasoned decisionmaking.”  Therefore, the court set aside the FCC’s treatment of the issue.

Also, the D.C. Circuit considered the FCC’s treatment of reassigned cellular telephone numbers and particularly the issue of consent provided by one user of a cell phone when that number is reassigned to another user.  The FCC determined that callers could have one free call to continue to rely on the previous subscriber’s consent.  The D.C. Circuit questioned why the consent should stop at one call and determined that the FCC did not provide a satisfactory answer to this question.  As such, the court set aside the FCC’s treatment of reassigned numbers as a whole.

Additionally, the D.C. Circuit considered the revocation of consent, an issue that has become particularly active in TCPA litigation. The D.C. Circuit did not set aside the FCC’s determination that consent could be revoked at any time by any reasonable means.

Please join Matt Foree and Jennifer Lee on Thursday, March 29, 2018 at 3:00 PM EST for a webinar entitled “Unpacking the D.C. Circuit’s Decision on the FCC’s 2015 TCPA Ruling.”  We will discuss in more detail the D.C. Circuit’s decision, including the impact of the ruling on the defense of TCPA cases moving forward.

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

Economic Resolution of Cases Through An Expedited Jury Trial

Posted on: March 16th, 2018

By: Melina Shahbazian

It is no secret that litigation is time consuming and extremely expensive. Sometimes, depending on the circumstances of the case, the lengthy costly litigation process is the only choice.  Other times, particularly with lesser value cases, the parties have the option of conducting expedited jury trials in civil cases.

California’s expedited jury trial is a consensual, binding jury trial before a reduced jury panel and a judicial officer. (Code Civ. Proc. § 630.01(a).) The trial is heard by eight jurors (instead of twelve), with six votes needed for a verdict. Each side is allowed to exercise up to three peremptory challenges (unless the court permits additional challenges), and is given five hours to put on their case, inclusive of jury selection.

The parties can request an expedited jury trial, by submitting a Consent Order to the court, no later than 30 days before any assigned trial date. (Code Civ. Proc. § 630.03(a); Cal. Rules Ct., Rule 3.1547(a).) The proposed Consent Order must confirm parties’ understanding and agreement to participate in an expedited jury trial, outline the roadmap for the trial, and their agreement to alter any procedures, such as method of presenting evidence, limitation of witnesses, and any agreements on damages. The parties could set a cap for damages by entering into a “High/Low Agreement” prior to trial which specifies a minimum amount of damages that a plaintiff is guaranteed to receive from the defendant, and a maximum amount of damages that the defendant will be liable for, regardless of the ultimate verdict. (CCP § 630.01(b).)

If the parties agree to an expedited jury trial, the verdict is binding and they waive their rights to an appeal. The verdict from an expedited jury trial can only be disregarded in the event of misconduct by a judicial officer or the jury, or corruption or fraud or some bad act that prevents a fair trial. Otherwise, the court will enter a judgment based on the verdict.

The expedited jury trial offers a streamlined method for handling civil actions to promote the speedy and economic resolution of cases and conserve judicial resources. Has it? Only time will tell.

If you have any questions or would like more information, please contact Melina Shahbazian at [email protected].

When the Midas Touch Does Not Protect You From Your CLE Obligations

Posted on: March 15th, 2018

By: Jonathan M. Romvary

As part of every attorney’s ongoing duty of competence, each jurisdiction requires attorneys to attend Continuing Learning Education classes each year. The failure to attain the minimum required credit hours for substantive and ethical topics may result in fines, suspension or worse. Multi-jurisdictional attorneys have a further obligation to remain in compliance with each of their jurisdiction’s varying CLE obligations.

Recently, the general counsel for TBC Corp., the parent company of car parts companies Midas and National Tire & Battery, got a two-year stayed suspension from the Board of Professional Conduct of the Supreme Court of Ohio for practicing out-of-state despite prior suspensions from the state for failing to comply with his CLE obligations. The decision arises out of charges that the general counsel engaged in unauthorized practice in Florida while under suspension in Ohio.

In 2009, Marciak was hired as general counsel for Florida-based TBC Retail Group and later promoted to senior vice president, general counsel and secretary of TBC Corp. As General counsel, Marciak oversaw a team of in-house attorneys managing litigation and was otherwise in a legal position requiring him to have a current license to practice. Despite his legal work in Florida, Marciak did not obtain a certification as an “authorized house counsel” until December of 2015.

Marciak’s problems began when a former employee of TBC filed a bar complaint with the State of Florida in 2015 alleging Marciak was being engaged in the unauthorized practice of law, resulting in disciplinary  action. The same employee thereafter filed a bar complaint with the State of Ohio alleging violation of their local rules, including the practice of law in another jurisdiction while suspended.

According to the court’s records, Marciak was suspended from the practice of law in Ohio in 2007 and sanctioned in 2009 and 2011 for failing to comply with his Ohio CLE credits. According to the Court Marciak failed to certify his compliance with Ohio’s biennial CLE compliance reporting for seven years. Further, Marciak only obtained the Florida certificate as authorized house counsel after the initial bar complaint was filed against him. Ultimately, the Ohio Supreme Court entered the two-year stayed suspension, saying that Marciak did not represent a future risk to the public and was attending and presenting at CLE classes. However the court warned that if Marciak failed to remain in full compliance, the stay would be immediately lifted and he would be required to serve the entire two-year suspension.

Despite receiving a stayed suspension, the lessons from Marciak’s natter is clear: every lawyer must familiarize themselves with the rules of the court and professional rules of conduct for the jurisdiction in which you practice and any other states in which you might practice law.

If you have any questions or would like more information, please contact Jonathan Romvary at [email protected].

Head In the Cloud – United States Supreme Court Takes On Application of Domestic Warrant To Information Stored Internationally

Posted on: March 9th, 2018

By: Glenn M. Kenna

The Supreme Court is set to decide a vital question this term – Can the government use a warrant served in the United States to obtain emails stored abroad?  The United States Government says it can, Microsoft disagrees.  The Case is United States v. Microsoft Corporation, in which the Supreme Court heard oral argument on February 27, 2018.

To understand the nature of the conflict a little back story is necessary.  Congress passed a law in 1986, the Electronic Communications Privacy Act (ECPA).  Part of title II of the ECPA, 18 USC § 2703, allows law enforcement agencies to issue warrants, so called Section 2703 Warrants, to discover electronic communications stored in an “electronic communications system.”  In other words, the government can serve a warrant on an email service provider, such as Microsoft, and obtain emails stored on Microsoft’s servers.

In the Microsoft case, the Government did exactly that.  It served a warrant on Microsoft in Redmond Washington to discover electronically stored communications in connection with an ongoing investigation into a crime allegedly committed in the United States.  The issue at the heart of the dispute is that the warrant sought the contents of communications stored on servers in Ireland.  In response to the warrant, Microsoft turned over domestically stored information (in this case certain metadata about the emails) but refused to turn over the contents of the communications stored abroad.  A legal battle between the Government and Microsoft has ensued, ultimately leading to the Supreme Court granting cert.

In the ongoing dispute between Microsoft and the Government, Microsoft contends that the Government’s attempt to enforce the warrant is an extraterritorial act, i.e. and attempt by the Government to enforce Untied States Law abroad.  It further asserts that complying with the warrant could run afoul of the law in the country where the information is stored.  The United States’ position is that, should the ECPA not apply to information stored abroad, every service provider would simply move their servers out of the United States – taking the communications beyond the reach of US law enforcement agencies.  Moreover, it reasons, Microsoft can access the information domestically regardless of where the information is stored, which the government contends does not require the application of the ECPA abroad.

The ECPA pre-dates the internet.  Email as we know it today did not exist in 1986.  The drafters of the ECPA could not have imagined a world where people stored their entire lives on remote servers, or a world where those servers could be located anywhere across the globe.  Those are issues with which courts continue to struggle, including the Supreme Court in this case.

It remains to be seen how the Court will rule in the Microsoft case, or if Congress will act to modernize the ECPA before the Court’s decision (indeed, a bipartisan group of senators has introduced the CLOUD act to address the issues raised in the Microsoft case.)  What is clear, however, is that Microsoft represents just one small part of an ongoing clash between law and technology.  While not at issue directly in the Microsoft case, the dispute also raises the question, what right do we have in the privacy of our electronic worlds?

If you have any questions or would like more information, please contact Glenn Kenna at [email protected].