The Delaware Supreme Court confirmed for the first time that the Garner doctrine, a fiduciary exception to the attorney-client privilege, is available in stockholder derivative suits, including in "books and records" actions under Section 220 of the Delaware General Corporation Law (DGCL). The decision may embolden stockholder plaintiffs who contemplate bringing suits alleging breaches of fiduciary duty against boards of directors.

In Wal-Mart Stores, Inc. v. Indiana Electrical Workers Pension Trust Fund IBEW, a Wal-Mart stockholder made a demand to inspect documents relating to an alleged scheme of illegal bribery payments by Wal-Mart's Mexican subsidiary. Wal-Mart produced over 3,000 documents in connection with the demand, most of which were highly redacted, and also withheld documents as protected by the attorney-client privilege and work product doctrine.

In response, the stockholder filed a complaint under DGCL Section 220 in the Delaware Court of Chancery, alleging deficiencies in Wal-Mart's document production. The court ordered Wal-Mart to produce additional documents, including privileged documents, invoking the Garner doctrine first adopted by the Fifth Circuit in Garner v. Wolfinbarger. The doctrine allows stockholders to invade a corporation's attorney-client privilege on a showing of good cause to prove fiduciary breaches by those in control of the corporation.

After reviewing the relevant jurisprudence, the Delaware Supreme Court affirmed and held that the Garner doctrine should be applied in Delaware in both plenary stockholder/corporation and Section 220 proceedings. The Delaware Supreme Court further explained that in a Section 220 proceeding, an inquiry about whether the documents sought are "necessary and essential" for the demand must precede any privilege inquiry. (95 A.3d 1264 (Del. 2014).)

See Legal Update, Delaware Supreme Court Adopts Fiduciary Exception to Attorney-Client Privilege for more on this decision.

See Practice Notes, Shareholder Derivative Litigation and Practice Note, Attorney-Client Privilege: Clients and Client-Agents (Federal) for more on derivative suits and the Garner doctrine.

Service of process on a corporation's officer within the forum state while the officer is there in his corporate capacity is insufficient to create general jurisdiction over the corporation. Rather, a plaintiff must show that jurisdiction is proper based on a minimum contacts analysis.

In Martinez v. Aero Caribbean, the plaintiffs, who brought suit in California federal court, asserted that under the US Supreme Court's decision in Burnham v. Superior Court, service of process on a corporate officer while he was in California on company business conferred general jurisdiction over the company. The Supreme Court had held in Burnham that personal service on a physically present individual defendant suffices to confer jurisdiction, regardless of the duration or nature of the defendant's presence in the forum state (often referred to as tag jurisdiction). In Martinez, the district court concluded that it could not exercise general jurisdiction over the company consistent with federal due process and granted the company's motion to dismiss.

The Ninth Circuit affirmed and held that the company was not subject to general jurisdiction in California. In its reasoning, the Ninth Circuit reiterated the minimum contacts rule set forth by the Supreme Court in International Shoe Co. v. Washington and declined to extend Burnham to corporations. The Ninth Circuit explained that corporations can be present in a state only through their contacts and that a corporate officer is not the corporation, even when the officer is acting on the corporation's behalf. (No. 12-16043, (9th Cir. Aug. 21, 2014).)

See Legal Update, No Personal Jurisdiction Over a Corporation Whose Officer was Served in the Forum State: Ninth Circuit for more on this decision.

See Practice Note, Commencing a Federal Lawsuit: Initial Considerations for more on personal jurisdiction.

If a foreign entity's structure is functionally equivalent to a limited liability company (LLC), there is no diversity jurisdiction where any of the entity's member investors is a citizen of the same state as the opposing party, the Seventh Circuit recently held.

In Fellowes, Inc. v. Changzhou Xinrui Fellowes Office Equipment Co., the plaintiff, a citizen of Illinois, filed a breach of contract suit in federal district court against the defendant, a business established under the laws of China, invoking international diversity jurisdiction under 28 U.S.C. § 1332(a)(2). The district court entered a preliminary injunction for the plaintiff. The defendant appealed, arguing that it should have been treated as an LLC, which has the citizenship of every member investor, and that the court lacked diversity jurisdiction since one of its member investors, like the plaintiff, was a citizen of Illinois.

The Seventh Circuit agreed and held that since the defendant's structure is functionally identical to an LLC, it must be treated in the same manner as a domestic LLC for the purpose of determining diversity jurisdiction. The Seventh Circuit noted that it was not circumscribed by the juridical-entity approach in People of Puerto Rico v. Russell & Co., where the Supreme Court held that a Puerto Rican entity known as a sociedad en comandita should be treated as a citizen of Puerto Rico when determining federal court jurisdiction. That approach was limited to the sociedad en comandita and did not apply to other foreign entities. (759 F.3d 787 (7th Cir. 2014).)

See Legal Update, International Diversity Jurisdiction Is Determined by Member Investors of an LLC Functional Equivalent: Seventh Circuit for more on this decision.

See Practice Note, Commencing a Federal Lawsuit: Initial Considerations for more on diversity jurisdiction.

The Fifth Circuit refused to attribute the actions of a party's co-defendants to the party for the purpose of arbitration waiver, holding that even though the defendants were jointly owned, the co-defendants' pursuit of litigation could not be imputed to a defendant that did not take part in the litigation.

Al Rushaid v. National Oilwell Varco, Inc. involved a contract dispute. The plaintiffs served each defendant except National Oilwell Varco Norway (NOV Norway) by August 2011. After removal of the case, the federal district court scheduled a trial for June 2013 and the parties engaged in extensive pretrial discovery. In August 2012, the plaintiffs served NOV Norway under the Hague Convention. While the other defendants continued to participate in the litigation, NOV Norway moved to compel arbitration, invoking a written price quotation which referenced a separate document containing an arbitration provision. The price quotation stated that the terms and conditions were "based on" the general conditions stated in the separate document.

The Fifth Circuit reversed the district court's denial of NOV Norway's motion to compel arbitration, holding that:

(757 F.3d 416 (5th Cir. 2014).)

See Legal Update, Court Refuses to Attribute Actions by Co-defendants for Purposes of Arbitration Waiver: Fifth Circuit for more on this decision.

See Practice Note, Compelling Arbitration in US Federal Courts for more on motions to compel arbitration.

The announcement of an investigation alone is insufficient to establish loss causation when pleading securities fraud claims, according to the Ninth Circuit. The decision highlights that securities fraud plaintiffs must allege more than a mere risk of, or potential for, fraud to survive the pleading stage.

Loos v. Immersion Corp. involved a consolidated securities fraud class action against Immersion Corporation and five of its executives. Immersion had posted a net loss for all four quarters in 2008 and the first quarter in 2009. On July 1, 2009, Immersion made a public announcement that disclosed a potential problem with its previously reported revenues and that it was undertaking an internal investigation. Immersion's stock price dropped over 23% following this announcement. The plaintiff's theory of loss causation alleged that Immersion's fraudulent accounting was revealed to the market through its disclosures of the earnings results and subsequent announcement of the related investigation.

The Ninth Circuit affirmed the district court's dismissal of the complaint for failure to state a claim, first noting that securities fraud plaintiffs must allege that the market learned of and reacted to the fraud, as opposed to reacting to a company's poor financial health in general. Applying this standard, the Ninth Circuit concluded that fraud could not be reasonably inferred from Immersion's earnings results and that they merely indicated poor financial health.

Additionally, the Ninth Circuit held that announcement of an investigation alone is insufficient to establish loss causation, stating that the market cannot possibly know when an investigation is announced what it will ultimately reveal. In reaching its holding, the Ninth Circuit agreed with the Eleventh Circuit's reasoning in Meyer v. Greene, which found that the announcement of an SEC investigation by itself did not reveal fraudulent practices to the market. (No. 12-15100, (9th Cir. Aug. 7, 2014).)

See Legal Update, Pleading Loss Causation in Securities Fraud Class Action Requires More than Announcement of Investigation: Ninth Circuit for more on this decision.

See Articles, The Rise and Reformation of Private Securities Litigation and Expert Q&A on the Fraud on the Market Presumption for more on pleading standards in securities class actions.

A complaint filed recently by the Federal Trade Commission (FTC) against several pharmaceutical companies shows the FTC's continued willingness to pursue anticompetitive pay-for-delay agreements.

The FTC's complaint against AbbVie Inc., Besins Healthcare, Inc. and Teva Pharmaceuticals USA, Inc. concerned the pharmaceutical companies' actions surrounding the release of a generic form of AbbVie's brand name drug, AndroGel. AbbVie and its partner, Besins, had filed separate patent infringement suits against Teva and non-party Perrigo Company in connection with their generic drugs. Under the Hatch-Waxman Act, once a patent holder files a patent infringement suit, a 30-month stay of Food and Drug Administration (FDA) approval for the generic drug is automatically triggered. This allows the patent holder to reap 30 months of profit without competition.

Teva and Perrigo filed counterclaims asserting that the infringement claims were baseless. To settle their litigation, AbbVie and Teva entered into a pay-for-delay agreement where AbbVie supplied Teva with a generic form of a cholesterol drug to sell in exchange for Teva delaying the release of its generic form of AndroGel.

The FTC's complaint alleged that the companies engaged in anticompetitive conduct in violation of Section 5 of the FTC Act. In particular:

(Compl., FTC v. AbbVie Inc., No. 14-5151, (E.D. Pa. Sept. 8, 2014).)

See Legal Update, FTC Charges Pharmaceutical Companies with Entering into Illegal Pay-for-delay Settlements for more on this decision.

See Practice Note, Reverse Payment Settlement Agreements for more on patent infringement pay-for-delay settlements in the pharmaceutical industry.

The Third Circuit held that establishing a likelihood of success on the merits does not automatically trigger a presumption of irreparable harm for preliminary injunction determinations in Lanham Act cases. The Third Circuit joins every other circuit court that has considered and extended the applicability of the Supreme Court's decisions in eBay Inc. v. MercExchange, L.L.C. and Winter v. Natural Resources Defense Council, Inc. to injunction determinations in cases outside of the patent context.

The dispute in Ferring Pharmaceuticals, Inc. v. Watson Pharmaceuticals, Inc., arose from inaccurate statements about the plaintiff pharmaceutical company's (Ferring's) drug, which were made by its competitor's (Watson's) paid consultant while promoting Watson's drug at two Watson-hosted presentations. Ferring filed a false advertising action under Section 43(a) of the Lanham Act, and moved for both a preliminary injunction to enjoin Watson from making further false statements and an order for corrective advertising. The district court found, and Watson admitted, that the statements at issue were either false or misleading, but denied Ferring's motion because it had not established irreparable harm.

The Third Circuit agreed with the district court and held that Ferring was not entitled to a preliminary injunction. Applying eBay and Winter, the Third Circuit held that Lanham Act plaintiffs:

The Third Circuit rejected Ferring's argument that eBay, a patent case, should not apply because of differences between the Patent Act and the Lanham Act, noting the Supreme Court's suggestion in eBay that courts cannot presume irreparable harm for federal causes of action without explicit congressional direction. (No. 13-2290, (3d Cir. Aug. 26, 2014).)

See Legal Update, Third Circuit: False Statements Do Not Trigger Presumption of Irreparable Harm in Lanham Act False Comparative Advertising Cases for more on this decision.

See Practice Note, Comparative Advertising Law in the US for more on comparative advertising, including litigating claims under the Lanham Act.

The Delaware Court of Chancery recently upheld as facially valid a Delaware corporation's forum selection clause selecting a non-Delaware jurisdiction as the exclusive forum for intra-entity claims against the corporation and its directors, providing further support for exclusive forum selection by-laws.

In City of Providence v. First Citizens BancShares, Inc. (C.A. No. 9795, (Del. Ch. Sept. 8, 2014)), the court expanded its decision in Boilermakers Local 154 Retirement Fund v. Chevron Corp., which held that a by-law selecting Delaware as the exclusive forum for intra-entity claims was reasonable because the claims would be decided by courts with the authoritative, final say on the interpretation of the governing law. As the First Citizens court explained, nowhere in Chevron did the court hold that Delaware was the only reasonable forum for that interpretation.

Additionally, the First Citizens court held that the board's adoption of the by-law on the same day that it approved a merger agreement for the corporation was not grounds to find the by-law's adoption unreasonable. The decision affirms that the timing of the adoption of an exclusive forum selection by-law does not raise suspicions of inequitable conduct under Delaware law.

Notably, this issue remains open in some courts. For example, in Roberts v. TriQuint SemiConductor, Inc., an Oregon state court recently refused to enforce a by-law selecting Delaware as the exclusive forum because the board adopted it on the same day that a merger was announced. However, most state courts that have addressed Chevron have upheld forum selection by-laws without distinguishing between by-laws adopted on "clear" or "cloudy" days.

See Legal Update, Delaware Court of Chancery Upholds Board-adopted By-law Selecting Foreign Jurisdiction as Exclusive Forum for more on this decision.

See Standard Clause, By-laws or Certificate of Incorporation: Delaware Forum Selection for a model clause selecting the Delaware Court of Chancery as the exclusive jurisdiction for intra-entity disputes, with explanatory notes and drafting tips.

Two circuit courts issued conflicting rulings regarding whether Section 36B of the Internal Revenue Code, the premium tax credit statute related to health care reform's health insurance exchanges, should be interpreted to authorize a tax credit to individuals who purchase health insurance coverage on federally-facilitated exchanges. Counsel can expect to see additional rulings on this issue in future months.

Section 36B permits a tax credit for certain low- and middle-income individuals to offset the cost of insurance policies purchased through the exchanges. In final regulations, the IRS broadly interpreted Section 36B to authorize a tax credit to individuals who purchase insurance on both state-run or federally-facilitated exchanges (26 C.F.R. § 1.36B-2(a)(1)). Significantly, availability of the tax credit impacts other health care reform provisions, including the employer mandate.

In Halbig v. Burwell, the DC Circuit rejected the IRS's interpretation of Section 36B, holding that:

(758 F.3d 390 (D.C. Cir. 2014).) The DC Circuit has granted rehearing en banc and vacated the judgment in Halbig.

The Fourth Circuit, in contrast, concluded in King v. Burwell that Section 36B is ambiguous and upheld the IRS's interpretation as a permissible exercise of the agency's discretion. The Fourth Circuit applied a test under which, if a statute is reasonably susceptible to multiple interpretations, a court defers to the agency's interpretation as long as it is based on a permissible construction of the statute. (759 F.3d 358 (4th Cir. 2014).)

See Legal Update, Conflicting Rulings on Tax Credits under Health Care Reform for more on this decision.

See Health Insurance Exchanges Toolkit for a collection of resources to assist employers and their advisors in understanding the health insurance exchanges under health care reform.

A recent decision by the US District Court for the Southern District of New York significantly limits the ability of a bankruptcy trustee to recover from foreign entities. While the case involved a narrow issue, the deci sion may have far-reaching ramifications on the extraterritorial application of other Bankruptcy Code provisions.

In Securities Investor Protection Corp. v. Bernard L. Madoff Investment Securities LLC, the court held that a trustee cannot use section 550(a)(2) of the Bankruptcy Code to recover fraudulent transfers of funds that occurred entirely outside of the US. Foreign investment funds, or feeder funds, which pooled their customers' assets to invest with Madoff Securities, withdrew funds from their Madoff accounts and subsequently transferred the funds abroad to various foreign entities. Following the collapse of Madoff Securities in 2008, many of these feeder funds entered into liquidation in their home countries.

Madoff Securities' trustee sued to recover the allegedly fraudulent transfers made to the feeder funds and the subsequent transfers made by those funds to their foreign transferees. Applying the standard set by the Supreme Court in Morrison v. National Australia Bank Ltd., the district court determined that the strong presumption against extraterritorial application of federal laws applied because:

Further, even if the trustee rebutted the presumption against extraterritoriality, use of section 550 here would be precluded by principles of international comity. (513 B.R. 222 (S.D.N.Y. 2014).)

See Legal Update, SIPC v. Madoff Investment Securities LLC: Fraudulent Transfers between Foreign Parties Not Recoverable under Section 550(a)(2) for more on this decision.

See Practice Note, Fraudulent Conveyances in Bankruptcy: Overview for more on fraudulent transfers.

In a matter of first impression, the Second Circuit held that security-based swaps (SBS) referencing stocks traded exclusively in foreign jurisdictions cannot be the basis of liability under Section 10(b) of the Exchange Act for statements made in foreign jurisdictions by foreign individuals, even if the SBS trades themselves took place in the US. The decision provides an important interpretation of the Supreme Court's holding in Morrison v. National Australia Bank Ltd.

In Parkcentral Global Hub Ltd. v. Porsche Auto. Holdings SE, the plaintiffs entered into domestic SBS referencing Volkswagen AG (VW) stocks traded exclusively in foreign jurisdictions. The SBS were so-called synthetic short positions which would increase in value if the value of the VW stocks fell. The plaintiffs alleged that Porsche, a foreign company, made fraudulent statements disclaiming any intention to acquire a controlling share of VW, despite a secret plan to acquire the minimum 75% interest needed to gain control. The alleged statements were exclusively made abroad. The plaintiffs further claimed that when Porsche ultimately announced its plan, it resulted in a huge rise in the VW stock price that caused the plaintiffs to incur substantial losses.

The Second Circuit affirmed the district court's dismissal of the complaints, concluding that while a domestic securities transaction or listing is a necessary element for applying Section 10(b), it is not the only factor to consider. Morrison provided necessary, but not necessarily sufficient, conditions for applying Section 10(b), and the relevant conduct here was so predominantly foreign as to be inconsistent with the presumption against extraterritoriality. However, the Second Circuit refused to create prescriptive rules of extraterritoriality, electing to allow courts to create rules as different fact patterns regarding novel securities arise. (No. 11-403, (2d Cir. Aug. 15, 2014).)

See Legal Update, Parkcentral v. Porsche: Security-based Swaps on Foreign Securities Not Subject to 10(b) Liability for more on this decision.

See Practice Notes, Liability Provisions: Securities Offerings and US Securities Laws: Overview for more on Section 10(b) liability and its extraterritorial application.

The Ninth Circuit held that the Terms of Use (TOU) presented in a browsewrap agreement did not establish a website user's unambiguous assent to the TOU's arbitration provision, highlighting courts' traditional reluctance to enforce browsewrap agreements against individual consumers.

In Nguyen v. Barnes & Noble Inc., the plaintiff sued Barnes & Noble alleging deceptive business practices and false advertising when Barnes & Noble cancelled orders for a handheld tablet after experiencing unexpected demand. Barnes & Noble unsuccessfully moved to compel arbitration, arguing that the plaintiff had constructive notice of, and was therefore bound by, its website TOU's arbitration provision. The plaintiff argued he was not bound because he had neither clicked on the TOU hyperlink nor read the TOU.

On appeal, the Ninth Circuit found that while a browsewrap agreement presenting terms through a hyperlink can create a binding contract, Barnes & Noble's TOU did not provide the actual or constructive notice needed to establish mutual assent. Although Barnes & Noble posted the TOU hyperlink prominently on each web page, it did not:

(No. 12-56628, (9th Cir. Aug. 18, 2014).)

See Legal Update, Actual Notice or Affirmative Acceptance Required for Mutual Assent in a Browsewrap Agreement: Ninth Circuit for more on this decision.

See Standard Document, Website Terms of Use for a website terms of use template, with explanatory notes and drafting tips, and Practice Note, Compelling Arbitration in US Federal Courts for more on motions to compel arbitration under the Federal Arbitration Act.

In a pair of decisions, the Federal Circuit has clarified the appropriate infringement analysis to be applied to cases filed under the Hatch-Waxman Act. Where an abbreviated new drug application (ANDA) does not include specifications or data addressing the asserted claim elements, the patent owner bears the burden of proving that the accused infringer is likely to market an infringing product.

In Ferring B.V. v. Watson Laboratories, Inc.-Florida, the Federal Circuit found that two proposed generic versions of a new drug did not infringe the plaintiff's patents, holding that:

(No. 14-1377, (Fed. Cir. Aug. 22, 2014); No. 14-1416, (Fed. Cir. Aug. 22, 2014).)

Following these decisions, where an ANDA filer can show bioequivalence without including data relating to each element of the asserted claims, it may be more difficult for a patent owner to prove infringement.

See Legal Update, ANDA Infringement Analysis Must Focus on Likely or Actual Commercial Product: Federal Circuit for more on this decision.

See Practice Note, Hatch-Waxman Act: Overview for more on litigation under the Hatch-Waxman Act.

In a significant development for attorneys, the US District Court for the Southern District of New York held that the copying of copyrighted briefs in online legal databases was a non-infringing fair use. The decision follows recent court precedent finding that the wholesale copying of literary works to repurpose them for search and research is protected as transformative fair use.

In White v. West Publishing Corp., the plaintiff sued defendants West Publishing Corp. and Reed Elsevier, Inc. d/b/a LexisNexis, for including two of his legal briefs in their online databases. These databases allow the defendants' subscribers to search legal documents that were filed without seal in state and federal courts.

The district court explained that three fair-use factors weighed in the defendants' favor, noting that:

The final fair-use factor was neutral because although the defendants copied the briefs in full, copying them in their entirety was necessary to make them text-searchable. (No. 12-1340, (S.D.N.Y. July 3, 2014).)

See Legal Update, Copyrighted Briefs in Online Legal Databases Are Fair Use: SDNY for more on this decision.

See Practice Note, Copyright: Case Tracker for a table tracking key decisions on copyright issues, including fair use.

A recent decision from the Federal Circuit should support and simplify accused infringers' motions to stay litigation pending Covered Business Method (CBM) post-grant review by the Patent Trial and Appeal Board (PTAB) under the Leahy-Smith America Invents Act (AIA).

In VirtualAgility Inc. v. Salesforce.com, Inc., the US District Court for the Eastern District of Texas denied the accused infringers' motion to stay the litigation pending CBM review of the asserted patent. In ruling that the district court had abused its discretion in denying the stay, a split panel of the Federal Circuit held that the district court:

In holding that a district court should not review the PTAB's institution decision or the merits of the CBM review when deciding whether to grant a stay, the court's decision should streamline motions to stay and provide support for AIA Section 18(b)(1) stay factors one (simplification of issues for trial) and four (reduction of litigation burden), particularly if the CBM review covers all asserted patent claims and is based on multiple unpatentability grounds. (759 F.3d 1307 (Fed. Cir. 2014).)

See Legal Update, District Court Abused Discretion in Denying Stay Pending Covered Business Method Review: Federal Circuit for more on this decision.

See Practice Notes, USPTO Post-prosecution Patentability Proceedings and USPTO America Invents Act Trial Tracker (PTAB) for more on CBM review proceedings under the AIA.

In a case of first impression for the circuit courts, the Sixth Circuit held that employees cannot waive their right to participate in a collective action under the Fair Labor Standards Act (FLSA) in a separation agreement when the agreement does not contain an arbitration clause.

In Killion v. KeHE Distributors, LLC, an employer discharged 69 employees and provided separation agreements that, among other things, required the employees to waive their right to participate in any collective action against the employer related to their employment or termination. Subsequently, several employees sued the employer for unpaid overtime in violation of the FLSA.

After consolidation of the lawsuits, two of the plaintiffs moved to certify a collective action that would include all employees employed in the previous three years. The district court enforced the collective action waiver against the employees whose separation agreements contained the waiver clause and granted summary judgment to the employer, concluding that it properly applied the FLSA's outside sales exemption.

The Sixth Circuit reversed the district court's ruling. Relying on its decision in Boaz v. FedEx Customer Information Services, Inc., the Sixth Circuit concluded that although agreements waiving employees' right to participate in FLSA collective actions are permitted when the agreement provides an alternative forum such as arbitration, employees cannot be forced or agree to waive substantive or procedural FLSA rights in a separation agreement without an arbitration clause. Further, the district court erred in determining, as a matter of law, that the plaintiffs made sales as required for application of the outside sales exemption. (Nos. 13-3357, 13-4340, (6th Cir. July 30, 2014).)

See Legal Update, Collective Action Waiver Not Permitted in Separation Agreement Outside of Arbitration Context: Sixth Circuit for more on this decision.

See Practice Note, Defending Wage and Hour Collective Actions for more on FLSA collective actions.

The Tenth Circuit clarified in an FLSA case that a district court has broad discretion to award attorneys' fees, and that an attorneys' fee award does not need to be proportionate to the damages award. While it remains unclear whether this holding will be applied to attorneys' fee awards under other statutory schemes, the decision highlights the potential risk of loss for employers even on smaller claims.

In Garcia v. Tyson Foods, Inc., employees brought class and collective actions against their employer, Tyson Foods, Inc., alleging insufficient compensation for pre- and post-shift activities under the FLSA and the Kansas Wage Protection Act (KWPA). A jury awarded the plaintiffs damages of $166,345 under the FLSA and $336,666 under the KWPA, and the district court awarded nearly $3.4 million in attorneys' fees. Subsequently, and following an unsuccessful motion for judgment as a matter of law, Tyson appealed, challenging the district court's denial of its motion and arguing that the fee award was excessive.

The Tenth Circuit affirmed the district court's decision and held, among other things, that the district court acted within its discretion when it:

(No. 12-3346, (10th Cir. Aug. 19, 2014).)

See Legal Update, FLSA Attorneys' Fees Questions Clarified: Tenth Circuit for more on this decision.

See Practice Note, Compensable Time for information on the standards that courts employ to determine what tasks constitute compensable time under the FLSA.

A recent Third Circuit decision offers guidance on the presumption of receipt under the "mailbox rule," and highlights that employers mailing out legally mandated notices to employees on Family and Medical Leave Act (FMLA) leave should be prepared to provide proof of receipt.

In Lupyan v. Corinthian Colleges Inc., the Third Circuit held that an FMLA plaintiff rebutted the presumption under the mailbox rule that she received a properly addressed notice her employer mailed by swearing in an affidavit that she did not receive it. The Third Circuit reversed summary judgment for the employer and allowed her to go to trial on whether her FMLA rights were violated.

In its reasoning, the Third Circuit distinguished between strong and weak presumptions of receipt, and concluded that the presumption was weak in Lupyan. Although the employer submitted affidavits from employees who had personal knowledge of its customary mailing practices, the employer did not send the notice by registered or certified mail, request a return receipt or use any other mailing method that assigns a tracking number.

Further, the Third Circuit noted that in this age of computerized communications, it is not expecting too much to require businesses to use a form of mailing that includes verifiable receipt when mailing important legally mandated notices to their employees. (No. 13-1843, (3d Cir. Aug. 5, 2014).)

See Legal Update, Employee's Affidavit Destroys Presumption that FMLA Notice Sent Via Regular Mail Was Received: Third Circuit for more on this decision.

See Practice Note, Family and Medical Leave Act (FMLA) Basics for more on the rights and obligations of private employers and employees under the FMLA and Standard Document, FMLA Notice of Eligibility, Rights and Responsibilities for a standard form to notify employees about their eligibility for FMLA leave, with explanatory notes and drafting tips.

The Third Circuit settled the pleading standard that plaintiffs must meet to state a claim for unpaid overtime wages under the FLSA.

In Davis v. Abington Memorial Hospital, the Third Circuit held, among other things, that to state a plausible FLSA overtime claim, plaintiffs must sufficiently allege they worked 40 hours in a given workweek and some uncompensated time in excess of the 40 hours. The plaintiffs' allegations that they "typically" worked full time shifts of between 32 and 40 hours per week and "frequently" worked extra time were not sufficient to state a claim.

The Third Circuit observed that courts have adopted different approaches regarding the detail necessary to plead an FLSA overtime claim. Some courts have required plaintiffs to allege approximately the number of hours worked for which wages were not received, while others have adopted a more lenient approach and held that it is sufficient for plaintiffs to allege that they worked more than 40 hours in a workweek and did not receive overtime compensation. The Third Circuit's holding adopts the middle-ground approach taken by the Second Circuit in Lundy v. Catholic Health System of Long Island Inc.

The Third Circuit clarified that plaintiffs are not required to identify the exact dates and times that they worked overtime. For example, it is sufficient for a plaintiff to claim that he:

(No. 12-3522, (3d Cir. Aug. 26, 2014).)

See Legal Update, Fair Labor Standards Act Does Not Cover "Gap Time" Claims and Requires Specificity in Pleading: Third Circuit for more on this decision.

See Practice Note, Wage and Hour Law: Overview for information on calculating overtime under the FLSA.