Commercial, Corporate, and Contracts

imageExposure

A U.S. appeals court judge told me a few years ago that private contracts between businesses should call for settling disputes through bench trials rather than by arbitration.

But neither the judge nor I thought to mention a factor that may matter more than the relative quality of justice in courts versus private arbitration. As a recent 2-1 ruling by the Ninth Circuit just reminded us, federal courts strongly favor public access to case records — even if the records include deeply embarrassing documents that a party produced in discovery.
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imageBring your checkbook

Today resumes the series on take-aways from the epic case of Comcast Corp. v. Behrend — an antitrust class action that began more than a dozen years ago, produced dozens of opinions, and survived a loss in the U.S. Supreme Court before ending in a $50 million settlement, the benefits of which class members started receiving last month.

Today’s lesson underscores a harsh reality — and one that critics of class actions tend to forget: Class actions cost class counsel not only their time but also their money, potentially large quantities of it.
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Handshake with TearLast Thursday, the Association for Corporate Growth hosted a talk in Dallas about deals that result in a lawsuit or arbitration. Several dozen deal-makers, mergers and acquisitions lawyers, and consultants attended. The Honorable Jeff Kaplan of JAMS, Elizabeth Brandon of Vinson & Elkins, and I gave the talk. Ladd Hirsch of Diamond McCarthy organized and moderated the event. In a little over an hour, we discussed the characteristics that commonly occur in transactions that produce formal claims, offered suggestions on how deal-makers can manage the risk of earl disputes, and answered several thoughtful questions from the audience. I enjoyed the session immensely. Please see my review of the lively discussion below.
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imageThe Third Circuit’s decision in In re Avandia Marketing, Sales Practices & Product Liability Litigation, No. 14-1948 (3d Cir. Oct. 26, 2015), accepts a path-breaking fraud-on-the-intermediary theory under the Racketeer Influenced and Corrupt Organizations Act of 1970 (RICO), which allows you to recover three times your actual damages plus reasonable attorneys’ fees. Expect more cases like this.
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FundingBig dollars in business cases

Expenses in big-dollar lawsuits can run into the millions of dollars. An antitrust class action that I’ve handled since 2003, for instance, cost more than $8 million. The law firms representing the class fronted all that money, with no assurance we would ever get any of it back. Why would any sane person do such a thing?
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FundingSizable expenses

A big commercial case can cost millions in expenses — by which I mean out-of-pocket costs that the plaintiff or its counsel must pay net of attorneys’ fees. A portfolio of cases — for infringement of a patent or family of patents, say — can run many millions more. Who will bear that burden? And what will it cost?
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Banned ItemsIn 2016, despite contracts that mandate one-on-one arbitrations, consumers will likely gain the right to bring claims against banks, credit card issuers, and other lenders in class actions. The new rule, which the Consumer Financial Protection Bureau announced on October 7, 2015 it will probably issue next year, will partially reverse a string of recent Supreme Court decisions that made class-banning arbitration clauses broadly enforceable.

The action by the Bureau will vastly raise the stakes for disputes involving practices affecting large numbers of consumer finance customers.
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In 2010, when it passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, Congress created the Consumer Financial Protection Bureau as a watchdog for consumers who buy financial products and services. The CFPB’s mission included looking at the effect of arbitration clauses in consumer contracts and proposing rules to regulate them if appropriate.

HackedUnfair methods and data breaches

The Third Circuit has ruled that exposing credit card information to hackers can count as an “unfair method[] of competition” under the Federal Trade Commission Act. Federal Trade Comm’n v. Wyndham Worldwide Corp., No. 14-3514 (3d Cir. Aug. 24, 2015).

The decision opens the way for the FTC to seek injunctive and disgorgement remedies from companies whose cyber security measures fall short. It also has the collateral effect of bolstering consumer lawsuits for damages under the “Little FTC Acts” of California and 27 other states.

Any business that uses an online computer to store customer information should take notice.
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