Business Law Legal Research Blog

CIVIL PROCEDURE: Right to Appeal Dismissal of Case Consolidated for Pretrial Proceedings in Multidistrict Litigation

Posted by Paul A. Ferrer on Wed, Sep 9, 2015 @ 10:09 AM

The Lawletter Vol 40 No 7

Paul Ferrer, Senior Attorney, National Legal Research Group

     Federal law permits "civil actions involving one or more common questions of fact" that are pending in different districts to be transferred to any district for coordinated or consolidated pretrial proceedings by the judicial panel on multidistrict litigation ("MDL"). 28 U.S.C. § 1407(a). Another federal statute grants an unsuccessful litigant in a federal district court the right to take an appeal, as a matter of right, from a "final decision" of the district court. Id. § 1291. In Gelboim v. Bank of America Corp., 135 S. Ct. 897 (2015), the Supreme Court decided the question of whether the right to appeal secured by § 1291 is affected when a case is consolidated for MDL pretrial proceedings under § 1407.

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Topics: Paul A. Ferrer, civil procedure, multidistrict legislation, The Lawletter Vol 40 No 7

TRADEMARKS: Effect in Court of Decision by TTAB

Posted by Timothy J. Snider on Mon, Jul 27, 2015 @ 09:07 AM

The Lawletter Vol 40 No 6

Tim Snider—Senior Attorney, National Legal Research Group

     In opposed trademark registration proceedings, the administrative adjudicative body is the Trademark Trial and Appeal Board ("TTAB"). It hears the appeals of applicants for registration and of those who oppose registration who are aggrieved by the decision of the Patent and Trademark Office whether to grant or deny registration to an application for registration of a trademark. There is a further level of appeal to the Federal Circuit, and a plaintiff can always seek cancellation of a registered trademark in district court. An issue often involved in registration proceedings is whether there is a likelihood of confusion between the applicant's mark and the opposer's mark. Unlike court proceedings, there is no discovery and no live testimony. The TTAB makes its decision based on the written record that is submitted to it by the parties. If the TTAB makes a determination that there is a risk of confusion between the marks in suit, what weight should be assigned to that determination by a court that is hearing a dispute between two markholders, one of whom claims that the other's mark infringes on its mark?

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Topics: trademarks, Timothy J. Snider, TTAB, registration proceedings, B&B Hardware, Inc. v. Hargis Industries

ARBITRATION: FAA Preempts New York Statute Prohibiting Mandatory Arbitration Clauses in Consumer Contracts

Posted by Charlene J. Hicks on Thu, Jul 9, 2015 @ 12:07 PM

The Lawletter Vol 40 No 5

Charlene Hicks, Senior Attorney, National Legal Research Group

      In a matter of first impression, the New York Supreme Court, Appellate Term, recently ruled that a state law prohibiting mandatory arbitration clauses in consumer contracts was preempted by the Federal Arbitration Act ("FAA"). In Schiffer v. Slomin’s, Inc., No. 2013-1867NC, 2015 WL 1566198 (N.Y. App. Term Mar. 30, 2015), consumers filed a lawsuit against a security systems provider that sold and installed home security systems. The complaint contained causes of action against the security systems provider for breach of contract, breach of warranty, and fraud. In response, the security systems provider filed a motion to compel arbitration pursuant to an unsigned contract provided to the buyers that contained a mandatory arbitration clause.

     A New York state law, General Business Law section 399-c, generally prohibits mandatory arbitration clauses in consumer contracts. The Schiffer plaintiffs were homeowners-consumers; therefore, the arbitration clause the security systems provider sought to enforce was void under New York state law.

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Topics: arbitration clause, Charlene J. Hicks, The Lawletter Vol 40 No 5, consumer contract

BANKING LAW: Finality—Appealability

Posted by Timothy J. Snider on Thu, Jun 11, 2015 @ 16:06 PM

Tim Snider, Senior Attorney, National Legal Research Group

      Very few principles of federal appellate practice are more fundamental than that only final judgments may be appealed. Mohawk Indus. v. Carpenter, 558 U.S. 100 (2009). That said, bankruptcy presents a unique situation, in that often adversary proceedings finally conclude the dispute between and among the parties to those proceedings and thus are appealable, even though the entire bankruptcy case may not yet be concluded. Howard Delivery Serv. v. Zurich Am. Ins. Co., 547 U.S. 651, 657 n.3 (2006) ("Congress has long provided that orders in bankruptcy cases may be immediately appealed if they finally dispose of discrete disputes within the larger case.").

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Topics: bankruptcy, Chapter 13, legal reseasrch, Timothy J. Snider, order declining to confirm Chapter 13 plan

CORPORATIONS: Minority Shareholders Appraisal Rights

Posted by Timothy J. Snider on Thu, Mar 19, 2015 @ 09:03 AM

Tim Snider, Senior Attorney, National Legal Research Group

     Typically, the circumstances under which a minority shareholder in a corporation may compel appraisal and purchase of his shares by the corporation is made explicit by statute. Occasionally, however, a case tests the outer boundaries of a shareholder's appraisal rights. In Fisher v. Tails, Inc., Record No. 140444, 2015 WL 103679 (Va. Jan. 8, 2015), Tails was organized as a Virginia corporation to operate as a regional franchisee of RE/MAX LLC, a Delaware limited liability company ("LLC"). On August 9, 2013, Buena Suerte Holdings, Inc., another affiliate of RE/MAX, and Tails signed a "Plan of Reorganization and Purchase Agreement" in which Tails would be sold to Buena Suerte in four steps. First, Tails would become a Delaware corporation, changing its state of incorporation from Virginia to Delaware pursuant to Virginia Code § 13.1-722.2 and Delaware Code title 8, § 265. Second, Tails would merge with and into a newly formed Delaware LLC, Tails, LLC. Tails, LLC, would be a subsidiary of a newly formed holding company, Tails Holdco, Inc. (Holdco), and Holdco would hold all of Tails, LLC's membership interests. Third, Holdco would cause Tails, LLC, to amend and restate its LLC agreement to remove certain LLC provisions. Finally, Holdco would sell Buena Suerte all of its membership interests in Tails, LLC.

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Topics: corporations, minority shareholders, appraisal rights

CONTRACTS: Harsh Arbitration Provisions May Be Found to Be Unconscionable Under State Law

Posted by Gale Burns on Tue, Jul 22, 2014 @ 13:07 PM

The Lawletter Vol 39 No 5

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Topics: legal research, Charlene Hicks, contracts, Washington Supreme Court, The Lawletter Vol 39 No 5, arbitration provision, unconscionable, US Supreme Court controversial cases require indiv, Concepcion, 131 S. Ct. 1740, Stolt Nielsen, 559 U.S. 662, unconscionable claim analyzed under state law, Gandee v. LDL Freedom Enterprises, limits scope of Concepcion and Federal Arbitration

COPYRIGHTS: First-Sale Doctrine—Importation

Posted by Gale Burns on Mon, Jul 15, 2013 @ 16:07 PM

The Lawletter Vol 38 No 4

Tim Snider, Senior Attorney, National Legal Research Group

Under the "first sale doctrine," the owner of a copyrighted item, such as a book or a recording, is free to use it, sell it, lend it, or give it away under whatever conditions the owner chooses to impose.  This doctrine derives from a long line of jurisprudence, see Bobbs-Merrill Co. v. Straus, 210 U.S. 339 (1908), and is now embodied in the Copyright Act, 17 U.S.C. § 109(a) ("[T]he owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.").  Until now, the extent of the application of the first-sale doctrine to books sold overseas and then imported into the United States remained an open question.

Kirtsaeng v. John Wiley & Sons, 133 S. Ct. 1351 (2013), has now resolved that question.  John Wiley & Sons, Inc., an academic textbook publisher, often assigns to its wholly owned foreign subsidiary (Wiley Asia) rights to publish, print, and sell foreign editions of Wiley's English-language textbooks abroad.  Wiley Asia's books state that they are not to be taken (without permission) into the United States.  When Supap Kirtsaeng moved from Thailand to the United States to study mathematics, he asked friends and family to buy foreign edition English‑language textbooks in Thai book shops, where they sold at low prices, and to mail them to him in the United States.  He then sold the books, reimbursed his family and friends, and kept the profit.  Wiley sued Kirtsaeng, claiming copyright infringement. 

Wiley prevailed in the district court and in the Second Circuit.  The Supreme Court reversed.  The majority in a 6-3 decision concluded that nothing in the language of the statute would require that copyrighted works imported from overseas should be treated any differently than goods that are initially sold domestically.  Furthermore, as a practical matter, an application of the Copyright Act that would require buyers of copyrighted works to ascertain their provenance is simply unworkable.  The volume of foreign trade in which the United States engages is simply too large for enforcement to be feasible.  The burden of requiring those importing copyrighted goods into this country for a variety of purposes, such as exhibitions of works of art or acquisitions by museums, to seek out the copyright owners to obtain a license would be onerous.  Thus, an interpretation of the Copyright Act that would treat goods initially acquired outside the United States differently from those that are acquired domestically, for purposes of the first-sale doctrine, would be unenforceable.

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Topics: legal research, Tim Snider, copyrights, first-sale doctrine, importation, Copyright Act, 17 U.S.C. § 109, owner imposes restrictions, Kirtsaeng v. John Wiley & Sons, imported copyrighted works treated as goods, application of provenance unworkable, importer not immunized from liability for infringe, owner protection narrowed, The Lawletter Vol 38 No 4, U.S. Supreme court

CONSUMER PROTECTION: A Merchant Could Be Liable for Requiring a Customer Using a Credit Card to Give His or Her ZIP Code

Posted by Gale Burns on Wed, May 1, 2013 @ 11:05 AM

The Lawletter Vol 38 No 2

Alistair Edwards, Senior Attorney, National Legal Research Group

Some states have statutes prohibiting a merchant from requiring its credit card customers to give or write certain "personal identification information" in a credit card transaction or on a credit card form.  For example, pursuant to section 105 of chapter 93 of Massachusetts General Laws, the Massachusetts General Court has declared:

(a)        No person, firm, partnership, corporation or other business entity that accepts a credit card for a business transaction shall write, cause to be written or require that a credit card holder write personal identification information, not required by the credit card issuer, on the credit card transaction form. Personal identification information shall include, but shall not be limited to, a credit card holder's address or telephone number.  The provisions of this section shall apply to all credit card transactions; provided, however, that the provisions of this section shall not be construed to prevent a person, firm, partnership, corporation or other business entity from requesting information [that] is necessary for shipping, delivery or installation of purchased merchandise or services or for a warranty when such information is provided voluntarily by a credit card holder.

Mass. Gen. Laws Ann. ch. 93, § 105(a).  Similarly, California's Song‑Beverly Credit Card Act ("Credit Card Act") provides:

(a)        Except as provided in subdivision (c), no person, firm, partnership, association, or corporation that accepts credit cards for the transaction of business shall do any of the following:

(1)        Request, or require as a condition to accepting the credit card as payment in full or in part for goods or services, the cardholder to write any personal identification information upon the credit card transaction form or otherwise.

(2)        Request, or require as a condition to accepting the credit card as payment in full or in part for goods or services, the cardholder to provide personal identification information, which the person, firm, partnership, association, or corporation accepting the credit card writes, causes to be written, or otherwise records upon the credit card transaction form or otherwise.

Cal. Civ. Code § 1747.08(a)(1)-(2).

Several courts have recently considered whether a Zone Improvement Plan code ("ZIP code") constitutes personal identification information.  For example, in Pineda v. Williams‑Sonoma Stores, 246 P.3d 612 (Cal. 2011), the California Supreme Court held that a business's act of requesting and recording a cardholder's ZIP code could violate the Credit Card Act and that the customer's ZIP code constituted personal identification information.  There, the court explained:

Section 1747.08, subdivision (a) provides, in pertinent part, "[N]o person, firm, partnership, association, or corporation that accepts credit cards for the transaction of business shall . . . : [¶] . . . [¶] (2) Request, or require as a condition to accepting the credit card as payment in full or in part for goods or services, the cardholder to provide personal identification information, which the person, firm, partnership, association, or corporation accepting the credit card writes, causes to be written, or otherwise records upon the credit card transaction form or otherwise." (§ 1747.08, subd. (a)(2), italics added.) Subdivision (b) defines personal identification information as "information concerning the cardholder, other than information set forth on the credit card, and including, but not limited to, the cardholder's address and telephone number."  (§ 1747.08, subd. (b).)  Because we must accept as true plaintiff's allegation that defendant requested and then recorded her ZIP code, the outcome of this case hinges on whether a cardholder's ZIP code, without more, constitutes personal identification information within the meaning of section 1747.08.  We hold that it does.

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Topics: legal research, Alistair Edwards, consumer protection, credit card, personal information, ZIP code, online versus in person request, The Lawletter Vol 38 No 2

BUSINESS LAW UPDATE: New or Proposed State Legislation Impacting Businesses

Posted by Gale Burns on Tue, Mar 19, 2013 @ 11:03 AM

March 21, 2013

Charlene Hicks, Senior Attorney, National Legal Research Group

The advent of a new year marks the introduction of new state legislation that impacts business and commercial transactions, sometimes in significant ways.   A few newly enacted statutes that change existing laws and ways of doing business within the state are highlighted below.


On January 1, 2013, Senate Bill 474 came into effect.  Under this new law, a construction contract is void if it requires a subcontractor to insure, indemnify, or defend a general contractor, construction manager, or other subcontractor from its own active negligence or willful misconduct, design defects, or claims that do not arise out of the subcontractor's own work.  This law effectively eliminates "Type I," or active negligence, indemnity clauses in construction contracts.  The law does not affect "Type II," or passive negligence, indemnity clauses, nor does it apply to design professionals.

Also effective on January 1, 2013, Assembly Bill 1396 requires all employee commission agreements to be set forth in writing and to explain the method by which commissions will be computed and paid.  For purposes of this law, "commissions" are defined as compensation paid to any person in connection with the sale of the employer's property or services and based proportionately on the amount or value thereof.  However, commissions do not include short-term productivity bonuses or bonus and profit-sharing plans unless such payments are based on the employer's promise to pay a fixed percentage of sales or profits as compensation for work.

North Carolina

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Topics: legal research, Charlene Hicks, business law, NC mechanic's lien statute, multistate legislation re employee privacy rights, new state legislation, California construction contracts

COMMERCIAL LAW: Mortgagee Not Liable for Its Servicer's Truth-in-Lending Violation

Posted by Gale Burns on Mon, Jan 28, 2013 @ 13:01 PM

The Lawletter Vol 37 No 11

Alistair Edwards, Senior Attorney, National Legal Research Group

The Truth in Lending Act ("TILA"), 15 U.S.C. §§ 1601 et seq., imposes certain obligations upon the holder/owner of a mortgage (the mortgagee) as well as upon the servicer of the mortgage loan.  Recently, in Kievman v. Federal National Mortgage Ass'n, No. 1:12-cv-22315-UU, 2012 WL 5378036 (S.D. Fla. Sept. 14, 2012), the court considered whether a mortgagee could be liable for the servicer's TILA violation.

In that case, the plaintiff-mortgagors alleged a violation of 15 U.S.C. § 1641(f)(2) and attempted to hold the mortgagee and the servicer liable for this violation.  That statutory section, referring only to the servicer, provides:

Upon written request by the obligor, the servicer shall provide the obligor, to the best knowledge of the servicer, with the name, address, and telephone number of the owner of the obligation or the master servicer of the obligation.

15 U.S.C. § 1641(f)(2).  Moreover, § 1640 imposes liability for noncompliance with § 1641(f)(2):

[A]ny creditor who fails to comply with any requirement imposed under this part, including . . . subsection (f) or (g) of section 1641 of this title . . . with respect to any person is liable to such person[.]

Id. § 1640(a).  Confusingly, although § 1641(f)(2) refers only to a servicer, § 1640(a) refers only to a creditor (the mortgagee).  The plaintiffs emphasized this fact to argue that a creditor-mortgagee should be held liable for its servicer's violation of § 1641(f)(2).  Rejecting this argument, the court stated:

This Court . . . declines to extend liability to obligation owners—be they creditors or assignees—for their servicers' failures to comply with § 1641(f)(2).  The reference to "subsection (f)" in § 1640(a) is best explained by the fact that the owner of an obligation may sometimes act as the servicer of that obligation.  The statute contemplates this scenario in the first paragraph of subsection (f), which reads:  "A servicer of a consumer obligation . . . shall not be treated as an assignee of such obligation for the purposes of this section unless the servicer is or was the owner of the obligation."  15 U.S.C. § 1641(f)(1).  In the case of an owner‑servicer, then, failure to comply with subsection (f) does subject it to liability.  See Khan, 849 F.Supp.2d at 1382 n. 2 ("The Court notes that an entity that is both the servicer and lender on a loan would clearly be liable for damages."); Davis v. Greenpoint Mortg. Funding, Inc., No. 1:09-cv-2719, 2011 WL 707221 at *3 (N.D.Ga. Mar. 1, 2011) (noting that subsection (f)(1) "limits a servicer's liability to situations in which the servicer was once an assignee or owner of the loan").  But there is no question of vicarious liability for the servicer's violation if the servicer could not itself be held liable.  See Holcomb, 2011 WL 5080324, at *7 ("[I]t remains unclear what liability would transfer given that [the servicer] itself bears no liability under the facts alleged.").

Kievman, 2012 WL 5378036, at *3.  As the court logically pointed out, a mortgagee that services its own loan could be liable for a violation of § 1641(f)(2).  "[T]his Court's interpretation recognizes that § 1640(a)'s reference to subsection (f) creates a private right of action against those obligees who might employ unfair practices in servicing their loans[.]" Id. at *4 (court's emphasis).

Thus, a mortgagee may very well not be liable under TILA for its servicer's violation of the Act.  However, it should be noted that there is likely a division of authority on this issue.  In fact, the same district responsible for the Kievman decision had previously held that a creditor-mortgagee could be held vicariously liable for damages under TILA for a loan servicer's failure to properly respond to a borrower's request for information about the loan owner under § 1641(f)(2).  Khan v. Bank of N.Y. Mellon, 849 F. Supp. 2d 1377 (S.D. Fla. 2012).

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Topics: legal research, Alistair Edwards, The Lawletter Vol 37 BNo 11, commercial law, mortgagee liability for servicer violation of TILA, Kievman v. Fed. Natl Mortg. Assn, SD Florida, mortgagee not liable if not servicer

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