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Posts Tagged ‘supreme court’

Can Governments be Liable for Mass Shootings under the Constitution?

Posted on: February 11th, 2019

By: Phil Savrin

The recent tragedies of mass shootings have spawned litigation over the civil liabilities of state governments for failing to protect members of the public from harm, particularly when there were advance warning signs that police departments overlooked or ignored. To evaluate whether States can be liable under the Constitution for such conduct we need to reach back 30 years to a decision by the Supreme Court called DeShaney. In that case, county officials had allowed an abused child to remain in a household despite knowledge of mistreatment, after which the boy was left permanently disfigured. In considering a civil rights claim brought on his behalf under the due process clause, the Supreme Court reasoned that the Constitution places limitations on the government’s ability to act and does not affirmatively require it to provide services that benefit the public. It is up to the individuals States to allocate resources to provide for public safety, in other words, as opposed to an obligation mandated by the Due Process Clause. That said, the Supreme Court reasoned that it is only when the State takes some action that puts a person in peril that the Constitution imposes “some corresponding duty to assume some responsibility for his safety and general well-being.”

Cases applying DeShaney’s reasoning are often heart-wrenching, as they tend to involve very egregious injuries that could have been avoided had law enforcement officers acted on knowledge they possessed. The most extreme example applying DeShaney can be found in the Supreme Court’s 2005 decision in Town of Castle Rock, where police officers refused the desperate pleas of a citizen to arrest her estranged husband who had violated a restraining order, resulting in the father’s murder of the couple’s three daughters. These harms could have been avoided had the State acted to intercede, yet it is only when the State by its conduct affirmatively puts the person in danger that the State has a constitutional obligation to protect that individual from harm.

Which brings us to the question of mass shootings such as the incidents at the Pulse nightclub in 2016 where a gunman killed 49 people or the high school in Florida in 2018 where a student opened fire killing 17 persons. In lawsuits that followed, allegations were made that government officials either ignored warnings or intentionally failed to act, thereby violating the constitutional rights of the victims. In both circumstances, however, the federal courts applied DeShaney to conclude that without danger created affirmatively by the State’s conduct, there is no constitutional right to protection where the harm begins and ends with the actions of a private citizen.

The absence of a constitutional claim in these circumstances does not, of course, mean that there can be no remedy of any sort. What these cases hold instead is that any such remedy exists by reference to state law as the federal Constitution is a bulwark against governmental interference in the public arena and is not a guarantor of safety for the citizenry.

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

Federal Securities Laws: Has the 9th Circuit Gone Rogue Again?

Posted on: February 4th, 2019

By: John Goselin

On January 4, 2019, the United States Supreme Court decided to hear an appeal from the Ninth Circuit’s April 20, 2018 decision in Varjabedian v. Emulex Corporation, 888 F.3d 399 (9th Cir. 2018). The Supreme Court is hearing this case to resolve a circuit split regarding whether a claim under Section 14(e) of the Securities Exchange Act of 1934 requires the plaintiff to plead a strong inference that the defendants acted with scienter (i.e. intent to defraud) or whether Section 14(e) merely requires an allegation that the defendants were negligent. Section 14(e) is a provision of the Securities Exchange Act of 1934 that prohibits a company involved in a tender offer from making a material misstatement or omit to state any material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading or to engage in any fraudulent, deceptive or manipulative acts or practices in connection with a tender offer.

Prior to the 9th Circuit’s April 20, 2018 opinion, no Circuit split had existed. Over the course of the forty-five preceding years, the Second, Third, Fifth, Sixth and Eleventh Circuits had uniformly held that Section 14(e) required a plaintiff to plead scienter when stating a claim pursuant to Section 14(e). Despite four and half decades of consensus, the 9th Circuit concluded that every Circuit Court to address this particular issue previously had simply gotten it wrong and that if the Supreme Court considered the issue, the Supreme Court would conclude that Section 14(e) only required the plaintiff to plead negligence.

Until recently, plaintiffs had historically chosen to challenge tender offers in state court, most often Delaware state court, pursuant to state law disclosure obligations. Challenging tender offers is big business as almost every tender offer conducted results in multiple state court class action lawsuits seeking injunctions to halt the tender offers until so-called disclosure deficiencies are rectified. The cases are high profile, high risk and involve significant legal defense costs that D&O carriers often end up paying pursuant to the provisions of D&O insurance policies.  The plaintiff’s lawyers have historically been successful in playing the role of the troll under the bridge collecting hefty tolls (a.k.a legal fees) for “improving” disclosures in tender offers as the tender offer participants seek to avoid the risk of a potential injunction that could halt the tender offer.

Recently, however, the Delaware state courts where the majority of these cases have been pursued have been clamping down on these “disclosure claims” making the state court forum less lucrative for the plaintiff’s bar. Hence, the plaintiff’s bar has been turning increasingly to Section 14(e) of the Securities Exchange Act of 1934 as an alternative cause of action in a federal forum in an effort to continue collecting their attorney fee tolls. The problem, however, is that if Section 14(e) requires the plaintiff to plead “scienter” and the plaintiff wants to bring a class action to put maximum pressure on the company, the plaintiff would have to comply with the heightened pleading requirements of the Private Securities Litigation Reform Act of 1995 and plead facts, not conclusory statements, sufficient to support a “strong inference” of scienter. The plaintiff’s bar would very much like to avoid this particular pleading, and burden of proof, hurdle.

So, the 9th Circuit’s decision adopting a mere negligence standard is a very big deal creating a window through which the plaintiff’s bar hopes to continue their troll under the bridge strategy at least out West and provides the plaintiff’s bar a new opportunity to challenge the prior holdings in the other Circuit Courts. The Supreme Court, however, has taken the opportunity to decide the issue and will either shut this particular door quickly or swing it wide open by deciding the issue of negligence or scienter for Section 14(e) claims.  Every securities lawyer in America will be watching closely.

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

The Supreme Court Weighs in on Arbitrability, But Questions Remain

Posted on: January 31st, 2019

By: Ted Peters

As reflected in a prior article, the United States Supreme Court recently agreed to take another look at the issue of arbitrability. In the case of Henry Schein, Inc. v. Archer & White Sales, Inc., the Fifth Circuit concluded that the court, and not an arbitrator, had the power to decide the threshold issue of arbitrability. In its ruling, the circuit court embraced the “wholly groundless” argument, concluding that submission of the dispute to the arbitrator was unnecessary because the assertion of arbitrability was “wholly groundless.” This decision underscored the ongoing split of authority among the lower courts wherein some courts, but not all, recognize the “wholly groundless” exception. On appeal, the appellants sought to have the Supreme Court reject the exception as inconsistent with the Federal Arbitration Act (“FAA”), the purpose of which is “to ensure that private agreements to arbitrate are enforced according to their terms.”

On January 8, 2019, newly appointed Justice Kavanaugh delivered the opinion of the court vacating and remanding the Firth Circuit’s decision. Writing for a unanimous court, Kavanaugh determined that the “wholly groundless” exception to the general rule that courts must enforce contracts that delegate arbitrability questions to an arbitrator is inconsistent with the FAA and Supreme Court precedent. Not surprisingly, the opinion revisited a number of prior cases in which the Court repeatedly held that the “agreement to arbitrate a gateway issue is simply an additional… agreement the party seeking arbitration asks the federal court to enforce, and the [FAA] operates on this additional arbitration agreement just as it does on any other.” (Opinion at p. 4, quoting Rent-A-Center, 561 U.S. 63, 70 (2010)). Kavanaugh noted that the Court had frequently rejected the argument that a claim of frivolity can derail the parties’ agreement to vest questions of arbitrability with an arbitrator and not a court. Citing Steelworkers v. American Mfg. Co., 363 U.S. 564, 568 (1960), Kavanaugh stated: “A court has ‘no business weighing the merits of the grievance’ because the ‘agreement is to submit all grievances to arbitration, not merely those which the court will deem meritorious.’”

On January 15, 2019, the Court issued a ruling in yet another case involving arbitration, New Prime Inc. v. Oliveira. Justice Gorsuch delivered the opinion of the court. In an 8-0 decision (Kavanaugh took no part in the consideration or decision of the case), the high court affirmed the First Circuit’s determination that a court should determine whether the Federal Arbitration Act’s Section 1 exclusion for disputes involving the “contracts of employment” of certain transportation workers applies before ordering arbitration. Unlike Henry Schein, which addressed the delegation of “gateway” questions of arbitrability, New Prime Inc. involved the judicial assessment of a statutorily based objection to arbitration.

But wait… there’s (one) more: Lamps Plus Inc. v. Varela, Dkt. No. 17-988. That case, argued on October 29, 2018, addresses whether the FAA forecloses a state-law interpretation of an arbitration agreement that would authorize class arbitration based solely on general language commonly used in arbitration agreements. An opinion is expected at any time.

Coming full circle, it is fairly clear that the high court seems to remain firm in its embrace of arbitration agreements without permitting judicial meddling, provided there is “clear and unmistakable evidence” that the parties affirmatively agree to delegate the decision of arbitrability to the arbitrator. (Henry Schein at p. 6, citing First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944). Yet, at the same time, the Justices appear receptive to judicial involvement as long as there is a reasonable statutory basis for it.

The takeaway? Parties to arbitration agreements should rest confident in their ability to affirmatively delegate disputes to arbitration provided that the statutory framework upon which arbitration is based leaves no basis for judicial tinkering. This may provide solace for some, but for many it leaves unanswered questions along with the risks and costs associated with uncertainty.

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

Yelp Can’t Be Ordered to Remove Defamatory Reviews by A California Lawyer’s Unhappy Former Clients

Posted on: December 3rd, 2018

By: Frank Olah

On July 2, 2018, in Hassell v. Bird (2018) 5 Cal.5th 522, the California Supreme Court held that Section 230 of the Communications Decency Act of 1996 prohibits courts from ordering Yelp to remove defamatory consumer reviews posted by an attorney’s former client.

Section 230 states that “[n]o provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” Moreover, “[n]o cause of action may be brought and no liability may be imposed under any State or local law that is inconsistent with this section.”  (Section 230(e)(3).)

The Hassell court held that Section 230’s broad immunity protects “interactive computer services” such as Yelp from defamation liability even in circumstances where Yelp was not itself sued for defamation. The court reasoned that a defamed plaintiff should not be able to avoid the immunity protections of Section 230 by intentionally not naming Yelp as a defendant. Instead, some defamed plaintiffs tried to circumvent Section 230’s immunity by enforcing a judgment against the defamer defendant, and then using the judgment and injunction to remove the defamatory Yelp posts. Such a strategic end-run around Section 230 is not permitted.

In June 2012, Ava Bird hired attorney Dawn Hassell to prosecute a personal injury lawsuit. After a few months, Hassell concluded Bird was unhappy and withdrew. Bird posted negative reviews on Yelp about Hassell’s lawyering skills. Hassell asked Bird to remove them; Bird declined. Hassell proceeded to sue only Bird for libel.

After a default prove-up hearing, the trial court entered judgment for Hassell for $557,919 in damages, apparently caused by three one-star Yelp reviews. The trial court also ordered both Bird and Yelp to remove the three defamatory reviews. Upon being served with the court’s order, Yelp moved to set aside and vacate the default judgment. The trial court denied the motion. The Court of Appeal affirmed. It found the removal order did not did not impose any “liability” on Yelp, as that term is used in Section 230(e)(3), since the default judgment and damages were against Bird and not Yelp.

The California Supreme Court reversed. It observed that the “immunity provisions within section 230 have been widely and consistently interpreted to confer broad immunity against defamation liability for those who use the Internet to publish information that originated from another source.” (Id. at 535.) It found that “lawsuits seeking to hold a service provider liable for its exercise of a publisher’s traditional editorial functions—such as deciding whether to publish, withdraw, postpone or alter content—are barred.” The Court found that Section 230 confers “blanket immunity from tort liability for online republication of third party content.” The Court reasoned that subjecting companies like Yelp to defamation liability for the republication of online content would tend to chill online speech. This chilling effect could materialize in the high costs for companies like Yelp of having to investigate potentially defamatory postings.

The Court found that Yelp was being held to account for nothing more than its ongoing decision to publish the challenged reviews. The Court concluded that Hassell’s legal remedies lay solely against Bird, and could not extend to Yelp. Notably, the Court ruled that Hassell had powerful remedies available to her, i.e. “the judgment requires Bird to undertake, at a minimum, reasonable efforts to secure the removal of her posts. A failure to comply with a lawful court order is a form of civil contempt… the consequences of which can include imprisonment.”

On October 18, 2018, Hassell filed a petition for writ of certiorari urging the United States Supreme Court to review the decision, which she argue renders California courts powerless to compel companies like Yelp to remove clearly unlawful content. Apparently, Hassell is not convinced that pursuing a contempt order against Bird and demanding that her former client be thrown in jail will improve her Yelp rating.

One criticism of the Hassell Court’s reasoning is its naïve willingness to adopt the fiction that Yelp is just a folksy old-fashioned newspaper publisher exercising a publisher’s traditional editorial functions. The reality is that Yelp applies its own judgment to award star ratings to businesses. In this case, Hassell claimed that the manner in which Yelp utilized Bird’s reviews caused its rating to drop to 4.5 stars. The trial court had observed that Yelp featured one of Bird’s defamatory reviews as a “Recommended Review” and that Yelp had not factored many positive reviews into Hassell’s overall rating. That is to say, Yelp promoted Bird’s negative reviews and gave them greater weight than many more positive reviews causing Hassell’s star-rating to drop.  And the lower Yelp star-rating caused Hassell to lose business.

Perhaps the U.S. Supreme Court will not want to parse the issue so finely. But Congress may wish to consider whether it makes sense to update Section 230 to allow a company like Yelp to be compelled to remove postings that the original poster was ordered to remove.

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

Supreme Court Revisits Interplay Between First and Fourth Amendments

Posted on: November 29th, 2018

By: Wes Jackson

Imagine you commit a minor crime and an officer approaches you. The interaction goes south when you call the officer a “pig” and remind him that your tax dollars pay his salary. He then arrests you. Were your constitutional rights violated?

That’s the question the Supreme Court considered Monday, November 26, 2018 when it heard oral arguments in Nieves v. Bartlett. In Nieves, two Alaska State Troopers were patrolling a multi-day ski and snowmobile festival when they decided to investigate some underage drinking. Bartlett, who was intoxicated, intervened and confronted the troopers. The officers arrested Bartlett and put him in a “drunk tank.” He was later released and charged with disorderly conduct and resisting arrest. The state declined to prosecute the charges due to budgetary reasons. Bartlett sued, alleging his arrest was retaliatory because he refused to assist the officers in their investigation of the minors drinking alcohol.

Retaliatory arrest claims, like the one in Nieves, occur at the intersection of the First and Fourth Amendments: the presence of probable cause bars a Fourth Amendment claim for false arrest, but the circuits are split as to whether probable cause will also bar a First Amendment claim for retaliatory arrest arising from the same incident. Those circuits applying the probable cause bar to retaliatory arrest claims employ a bright-line objective standard that protects the officer from protracted litigation or trial where it is clear (or even arguable) that a reasonable officer could believe the arrestee had committed a crime. Rejecting the probable cause bar to retaliatory arrest claims could subject officers to months or years of litigation probing their subjective intent behind making an arrest—i.e., did the officer arrest the plaintiff for his crime or his speech?

At the Nieves oral argument, the justices sought to find a balance between protecting First Amendment rights while also giving law enforcement officers enough cover to act decisively and make arrests in fast-paced situations. On one hand, Justice Kagan noted the concern that officers might use minor crimes as a pretext to arrest for speech they disagree with, stating “there are so many laws that people can break that police officers generally look the other way, but, you know, you’re saying something that the officer doesn’t much like, so he doesn’t look the other way.” On the other hand, Justice Breyer and other justices noted the obvious concern with the chilling effect that would accompany the possibility of officers being haled into court every time they arrest someone who hurls an insult—officers could be to hesitant to make otherwise appropriate arrests.

One possible solution the justices entertained was to keep the probable cause bar for retaliatory arrests, but to limit its application to situations where there was probable cause for the charge on which the officer made the arrest or other charges upon which the arrestee was soon indicted. Such a solution would keep the probable cause bar for retaliatory arrests but prevent officers from concocting post hoc justifications for the arrest months or years later in a civil rights lawsuit.

The Court should issue an opinion in Nieves v. Bartlett in the coming months. If you have any questions about this case or retaliatory arrest claims more generally, please contact Wes Jackson at [email protected].