Speedread: February/March 2020 | Practical Law

Speedread: February/March 2020 | Practical Law

A round-up of legal updates for litigation attorneys.

Speedread: February/March 2020

Practical Law Article w-023-7227 (Approx. 10 pages)

Speedread: February/March 2020

by Practical Law Litigation
Published on 22 Jan 2020USA (National/Federal)
A round-up of legal updates for litigation attorneys.

Practice & Procedure

Presumption of Mootness Following Legislative Change: Ninth Circuit

In Board of Trustees of the Glazing Health & Welfare Trust v. Chambers, the Ninth Circuit reversed its prior decision on a rehearing en banc and held that legislative action that repeals, amends, or expires a law creates a presumption that a lawsuit challenging the older version of the law is moot, unless there is a reasonable expectation that the legislature plans to reenact the same or a similar law in the future (941 F.3d 1195 (9th Cir. 2019)).
See Ninth Circuit Civil Appeals Toolkit for a collection of resources to assist counsel in litigating a civil appeal in the Ninth Circuit, including petitioning for rehearing en banc.

Registration of Judgments: Tenth Circuit

Noting a circuit split between the Second and Seventh Circuits, the Tenth Circuit in Caballero v. Fuerzas Armadas Revolucionarias de Colombia joined the Second Circuit in holding that federal courts may register only federal court judgments, not state court judgments, under the federal registration statute, 28 U.S.C. § 1963. The court explained that by its express terms, Section 1963 applies only to the registration of federal court judgments in another federal court. Therefore, a litigant must file a new federal court action to enforce a judgment entered by a state court. ( (10th Cir. Dec. 27, 2019).)

State Sovereign Immunity Waiver by Removal: Ninth Circuit

In a matter of first impression for the court, the Ninth Circuit held in Walden v. State of Nevada that a state defendant that removes a case to federal court waives its Eleventh Amendment immunity from suit on all federal claims brought by the plaintiff. The court explained that this includes those federal claims that Congress failed to apply to the states through unequivocal and valid abrogation of their Eleventh Amendment immunity, an issue that the court expressly did not decide in a prior decision, Embury v. King. (945 F.3d 1088 (9th Cir. 2019).)
See Practice Note, Sovereign Immunity of States Under the Eleventh Amendment for more on the sovereign immunity doctrine and its application to states in federal court.

Limitations Period for CERCLA Contribution Claims: Third Circuit

In Cranbury Brick Yard, LLC v. United States, the Third Circuit held that when a party administratively settles its liability for pollution under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), the settlement triggers the start of the statute of limitations period for any contribution claims the settling party may bring against other polluters (943 F.3d 701 (3d Cir. 2019)).


Remedies for SEPs Subject to F/RAND Commitments: DOJ, USPTO, and NIST

The Antitrust Division of the Department of Justice (DOJ), the US Patent and Trademark Office (USPTO), and the National Institute of Standards and Technology (NIST) issued a joint policy statement on available remedies following the failure of licensing negotiations for standard-essential patents (SEPs) that are subject to reasonable and non-discriminatory or fair, reasonable, and non-discriminatory (F/RAND) commitments. The policy statement replaces a 2013 DOJ/USPTO statement and clarifies that while a patent owner's F/RAND commitment is a relevant factor in determining appropriate remedies, it does not bar any particular remedy.

Largest Ever Divestiture in Proposed Merger: FTC

The Federal Trade Commission (FTC) reached a settlement with Bristol-Myers Squibb Company (BMS) and Celgene Corporation, which, if accepted by the court, will allow a proposed merger to proceed following the largest divestiture ever required by a US merger enforcement agency. Celgene's Otezla is the most popular oral medication to treat moderate-to-severe psoriasis, and BMS is currently developing a similar treatment to compete with Otezla. According to the FTC, the divestiture of the Otezla business to Amgen, Inc. will ensure that an established pharmaceutical company can effectively compete with BMS's new product.
See Practice Note, How Antitrust Agencies Analyze M&A for more on the FTC's merger review process.

Bankruptcy & Restructuring

Federal Rule Amendments

Amendments to the following federal rules governing bankruptcy procedure became effective on December 1, 2019:
See Federal Rules of Bankruptcy Procedure and Federal Rules of Civil Procedure Comparison Chart for more on the federal rules governing bankruptcy procedure.

Creditor Standing in Involuntary Bankruptcies: Ninth Circuit

Joining the First and Fifth Circuits, the Ninth Circuit held in Montana Department of Revenue v. Blixseth that a creditor lacked standing under section 303(b)(1) of the Bankruptcy Code to file an involuntary bankruptcy petition against a debtor because a portion of the creditor's claim was subject to a bona fide dispute. The creditor was disqualified even though the undisputed portion of its claim exceeded the statutory minimum amount required for a creditor to initiate an involuntary bankruptcy. (942 F.3d 1179 (9th Cir. 2019).)
Based on this decision, creditors seeking to file an involuntary petition against a debtor should take care to find qualifying creditors to file the petition or consider forgoing the disputed portions of their claims to establish standing under section 303(b)(1).
See Practice Note, The Involuntary Bankruptcy Process for more on the procedure and requirements for filing an involuntary bankruptcy petition.

Commercial Transactions

Newly Enacted TRACED Act Targeting Robocalls

On December 30, 2019, President Trump signed into law the Pallone-Thune Telephone Robocall Abuse Criminal Enforcement and Deterrence Act (TRACED Act), which:
  • Imposes a new civil forfeiture penalty for intentional violations of the Telephone Consumer Protection Act (TCPA) by marketers and others who make prerecorded or autodialed telephone calls (robocalls).
  • Extends the statute of limitations for the Federal Communications Commission to bring an action for intentional TCPA violations from one year to four years.
  • Adds several new requirements relating to robocalls for phone service providers and the government.

Voluntary Self-Disclosure of Export Violations: DOJ

The National Security Division of the DOJ released an updated policy on its voluntary self-disclosure program to encourage companies to voluntarily self-disclose all potentially willful violations of statutes implementing US export control and sanctions regulations. The updated policy builds on guidance the DOJ released in October 2016.
See Practice Note, Core Elements of an Export Compliance Program for guidance on complying with US export laws and regulations.

Employee Benefits & Executive Compensation

Constitutionality of the ACA's Individual Mandate: Fifth Circuit

In a highly anticipated ruling, the Fifth Circuit in Texas v. United States affirmed the district court's holding that the Affordable Care Act's (ACA's) individual mandate is unconstitutional. The Fifth Circuit reasoned that because the 2017 Tax Cuts and Jobs Act (TCJA) amended the ACA to reduce the payment for violating the individual mandate to zero, the mandate lacked essential features of a tax (for example, generating revenue) and could no longer be upheld as a legitimate exercise of Congress's taxing power under the Taxing and Spending Clause. The Fifth Circuit remanded the case to the district court to determine whether the individual mandate is severable from the rest of the ACA. (945 F.3d 355 (5th Cir. 2019).)
See Affordable Care Act (ACA) Toolkit for a collection of resources to help plan sponsors and their advisors comply with the ACA and Tax Cuts and Jobs Act (TCJA) Compliance for Fringe Benefits and Health Plans Toolkit for a collection of resources to help employers comply with TCJA-related changes to certain fringe benefit arrangements.

Controlled Group Liability for Private Equity Funds: First Circuit

In Sun Capital Partners III, LP v. New England Teamsters & Trucking Industry Pension Fund, the First Circuit reversed the district court's ruling and held that two private equity funds that each owned less than 80% of a portfolio company were not jointly and severally liable for the withdrawal liability incurred by the portfolio company after it filed for bankruptcy and stopped contributing to a multiemployer pension fund. The Fifth Circuit applied the factors set out by the US Tax Court in Luna v. Commissioner for determining whether a partnership exists and concluded that the two funds did not form an implied partnership-in-fact that was in common control with the portfolio company under the Employee Retirement Income Security Act of 1974 (ERISA), as amended by the Multiemployer Pension Plan Amendments Act of 1980. (943 F.3d 49 (1st Cir. 2019).)
See Practice Note, Controlled Group and Affiliated Service Group Rules for more on controlled group rules that apply to employee benefit plans governed by the Internal Revenue Code and ERISA.

Intellectual Property & Technology

Attorneys' Fees in Section 145 Patent Actions: Supreme Court

In Peter v. NantKwest, Inc., the US Supreme Court held that the USPTO cannot recover attorneys' fees as "expenses" under Section 145 of the Patent Act (35 U.S.C. § 145). Section 145 provides that a patent applicant may challenge an unfavorable Patent Trial and Appeal Board decision in a civil action in the Eastern District of Virginia and that the applicant is required to pay all "expenses" of the proceeding. The Supreme Court held that the American Rule, under which each litigant pays their own attorneys' fees regardless of the outcome, applies in Section 145 litigation in part because Congress did not provide a sufficiently specific and explicit indication in the statute of its intent to overcome the American Rule's presumption against fee shifting. (140 S. Ct. 365 (2019).)
The Court did not address fee shifting under 15 U.S.C. § 1071(b)(3), an analogous provision of the Lanham Act that applies to actions challenging adverse rulings by the Trademark Trial and Appeal Board (TTAB).
See Practice Note, Patent Application Prosecution Overview for an overview of the patent application filing and prosecution procedure in the USPTO.

Attorneys' Fees in Lanham Act Cases: Seventh Circuit

Agreeing with the prevailing view of the circuit courts, the Seventh Circuit held in LHO Chicago River, L.L.C. v. Perillo that the exceptional case standard set out by the Supreme Court in Octane Fitness, LLC v. Icon Health & Fitness, Inc. for attorneys' fees in patent cases also applies to Lanham Act cases. Under the Octane Fitness standard, an exceptional case is one that stands out from others based on:
  • The substantive strength of a party's litigating position (considering both the governing law and the facts of the case).
  • The unreasonable manner in which the case was litigated.
In so holding, the Seventh Circuit rejected as overly rigid its existing abuse of process standard for determining whether a case is exceptional under 15 U.S.C. § 1117(a). (942 F.3d 384 (7th Cir. 2019).)
See Practice Note, Trademark Litigation: Monetary Relief for more on attorneys' fee awards and other monetary remedies under the Lanham Act.

Claim Preclusive Effect of TTAB Judgments: Ninth Circuit

In V.V.V. & Sons Edible Oils Ltd. v. Meenakshi Overseas, LLC, the Ninth Circuit held that a TTAB judgment from an inter partes proceeding did not have claim preclusive effect against claims of infringement, dilution, and unfair competition in federal litigation. The court explained that an exception to claim preclusion applies where a party could not have brought the claim before the TTAB due to limitations on its subject matter jurisdiction. An inter partes proceeding before the TTAB is a limited proceeding where the TTAB is allowed to determine only the right to register a mark, not questions of use, infringement, or unfair competition. ( (9th Cir. Dec. 27, 2019).)
See Practice Note, Trademark Infringement and Dilution Claims, Remedies, and Defenses for more on litigating trademark infringement and dilution claims.

Process Patent Infringement: Federal Circuit

In Syngenta Crop Protection, LLC v. Willowood, LLC, the Federal Circuit held that Section 271(g) of the Patent Act (35 U.S.C. § 271(g)) does not require that a single entity perform, control, or direct all steps of a patented process before infringement liability can attach. In reaching its holding, the court considered the text of Section 271(g) (which makes liable those who without authority import into the US or offer to sell, sell, or use within the US a product made by a process patented in the US), as well as the legislative history and statutory scheme as a whole. (944 F.3d 1344 (Fed. Cir. 2019).)
Search Practice Note, Patent Litigation: Infringement for more on process patent infringement and other patent infringement theories.

Labor & Employment

Offers of Judgment on FLSA Claims: Second Circuit

Reversing and vacating the district court's decision, the Second Circuit in Mei Xing Yu v. Hasaki Restaurant, Inc. held that judicial approval is not required to settle Fair Labor Standards Act (FLSA) claims pursuant to a Federal Rule of Civil Procedure 68(a) offer of judgment (944 F.3d 395 (2d Cir. 2019)).

Pay Discrimination Claims Under Title VII: Second Circuit

In Lenzi v. Systemax, Inc., the Second Circuit held that establishing a prima facie pay discrimination claim under Title VII of the Civil Rights Act of 1964 (Title VII) does not require a plaintiff to first establish an Equal Pay Act (EPA) violation. To establish a prima facie case under Title VII, the plaintiff must show that an employer discriminated against her based on her sex, but not that she received unequal pay for performing work equal to a male counterpart. (944 F.3d 97 (2d Cir. 2019).)
See Practice Note, Sex Discrimination Under Title VII and the EPA and Title VII and EPA Comparison Chart for more on claims of sex discrimination in compensation.

Post-Arbitration Deferral Standard: NLRB

In United Parcel Service, Inc., the National Labor Relations Board (NLRB) unanimously overruled recent precedent and returned to a longstanding, less stringent standard for determining whether to defer to an arbitrator's prior resolution of a grievance in labor disputes involving employee discipline or discharge alleged to violate the National Labor Relations Act (369 N.L.R.B. No. 1 (2019)). The Board's ruling applies retroactively to all pending cases and makes deferral to arbitration awards, grievance settlements, and pending arbitration more likely when presented with the same issue in a separate unfair labor practice proceeding.
See Practice Note, Labor Arbitration for more on labor arbitration proceedings and the NLRB's deferral standards.

Overtime Compensation Under the FLSA: DOL

The Department of Labor (DOL) issued a final rule, which became effective on January 15, 2020, that updates and clarifies regular rate and basic rate regulations for calculating overtime compensation under the FLSA. Although employers may feel more comfortable offering additional benefits and perks without the fear of increased overtime pay liability, they should continue to use caution when excluding any payment from an employee's regular rate, particularly if its excludable status remains unclear under the final rule.
See Practice Note, Compensable Time Under the FLSA: Overview for more on overtime compensation under the FLSA and Practice Note, The Regular Rate of Pay Under the FLSA: Statutory Exclusions for more on the types of payments employers should include and exclude when determining an employee's regular rate of pay.

Real Estate

Statute of Repose for Multi-Building Projects: D. Mass.

In D'Allesandro v. Lennar Hingham Holdings, LLC, the District of Massachusetts held that construction of a multi-building condominium complex was a single "improvement" for purposes of Massachusetts' six-year statute of repose for tort actions arising from improvements to real property. Therefore, the statute of repose for claims arising from the construction of each individual building in the complex begins to run only when construction of all buildings in the project is complete. ( (D. Mass. Oct. 28, 2019).)
Based on this decision, counsel should consider how contracts describe multi-building projects, particularly if developed in multiple phases, to avoid prolonging liability for design or construction defects until projects are fully completed.
See Practice Note, Construction Laws and Customs: Massachusetts for guidance on Massachusetts laws and customs relating to public and private construction projects.