Originally published by robertslawfirm.
Laboratory Corporation of America Holdings (LabCorp) has been hit by a class action lawsuit that alleges the company is overcharging patients for diagnostic…
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Originally published by Darin Klemchuk.
Intellectual Property Indemnification – Generally Indemnity clauses (sometimes referred to as hold harmless clauses) are common in agreements where one party wishes to shift certain […]
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Originally published by lawschool academicsupport.
Do you remember the game show “Supermarket Sweep”? (If not, click here for a short video.) The concept was simple: contestants had a short period of time to spend as much money as possible in a grocery store. The team…
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Originally published by Peggy Keene.
Intellectual Property Protection for Fireworks Every July 4th, we celebrate an American tradition with food, friends, family, and, of course, fireworks. While fireworks are generally easy […]
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Originally published by Barry Barnett.
For almost half a century, you could wait (and wait and wait) to decide whether or not to opt out of a class action. You didn’t have to squawk until you got formal notice of your right to remove yourself from the class and then failed to timely respond by saying “I opt out. Leave me alone. I would rather do it myself!”
But the thing that gave you leisure — American Pipe tolling — went partially poof last week. The Supreme Court ruled 5-4 that tolling may apply to a statute of “limitations” but doesn’t stop the tick-tock under a statute of “repose”. California Public Employees’ Retirement Sys. v. ANZ Securities, Inc., No. 16-373 (U.S. June 26, 2017). So wake up!
Securities Act of 1933
The case arose from claims against firms that underwrote public offerings of securities in Lehman Brothers. Lehman, you’ll recall, spectacularly crashed and burned in the 2008-09 financial crisis.
Section 11 of the Securities Act of 1933, a New Deal-era law that aimed to inject honesty into the process of raising money in public markets, gave buyers a cause of action against issuers, underwriters, and others for losses resulting from misstatements and omissions. With negligence as the standard for liability and a full refund the main remedy, section 11 cast a fearsome shadow across Wall Street.
But section 13 of the Act put investors who chose to sue on the clock — two clocks, in fact. It provides:
No action shall be maintained to enforce any liability created under [§11] unless brought within one year after the discovery of the untrue statement or the omission, or after such discovery should have been made by the exercise of reasonable diligence . . . . In no event shall any such action be brought to enforce a liability created under [§11] more than three years after the security was bona fide offered to the public . . . .
15 U. S. C. § 77m. The first sentence creates a one-year statute of limitations, but the second one establishes a three-year statute of repose.
American Pipe
The difference matters because of the tolling doctrine the Court conjured in an antitrust case, American Pipe & Constr. Co. v. Utah, 414 U.S. 538 (1974). The Court there held that the filing of a class action complaint stopped the clock on limitations.
The ruling preserved the ability of claimants who fell within the complaint’s class definition to file their own individual actions even after the limitations period had expired (four years in the price-fixing case before theCourt in American Pipe).
Holding
The courts below in ANZ Securities ruled that tolling didn’t apply to the three-year repose period in setion 13 of the Securities Act. Agreeing with them, Justice Kennedy explained:
Tolling may be of great value to allow injured persons to recover for injuries that, through no fault of their own, they did not discover because the injury or the perpetrator was not evident until the limitations period otherwise would have expired. This is of obvious utility in the securities market, where complex transactions and events can be obscure and difficult for a market participant to analyze or apprehend. In a similar way, tolling as allowed in American Pipe may protect plaintiffs who anticipated their interests would be protected by a class action but later learned that a class suit could not be maintained for reasons outside their control.
The purpose of a statute of repose, on the other hand, is to allow more certainty and reliability. These ends, too, are a necessity in a marketplace where stability and reliance are essential components of valuation and expectation for financial actors. The statute in this case reconciles these different ends by its two-tier structure: a conventional statute of limitations in the first clause and a statute of repose in the second.
The statute of repose transforms the analysis. In a hypothetical case with a different statutory scheme, consisting of a single limitations period without an additional outer limit, a court’s equitable power under American Pipe in many cases would authorize the relief petitioner seeks. Here, however, the Court need not consider how equitable considerations should be formulated or balanced, for the mandate of the statute of repose takes the case outside the bounds of the American Pipe rule.
ANZ Securities, slip op. at 16. Justices Breyer, Ginsburg, Kogan, and Sotomayor dissented in an opinion that Justice Ginsburg wrote.
Implications
The Court’s decision confirms that class members whose claims face a statute of repose may not rely on class action tolling to protect them from a repose defense. They must file their own individual action, if at all, within the repose period.
The need to recognize the new reality has particular urgency for pension and mutual funds and other large buyers of securities in initial offerings. On an ongoing basis, they should focus on whether or not they will wish to pursue claims outside of a class action.
Because in the new regime they will have less information as well as less time to evaluate their options, they should consider engaging counsel able to pursue opt-out claims to assist them in the process.
Curated by Texas Bar Today. Follow us on Twitter @texasbartoday.
Originally published by Zach Wolfe.
Fivers, you may be wondering why I have not yet reported on the Texas legislature’s recent amendments of the Texas Uniform Trade Secrets Act. I like trade secrets law. I like litigation. And I like making fun of whatever the Texas legislature does. So what gives?
Well, three things. First, you can already find other good reports on this topic, like Leiza Dolghih’s blog post here. Second, the recent changes to the Texas trade secrets statute, while important, are not that big of a deal. And third, I predict that recent court decisions applying the Texas Citizens Participation Act (TCPA) are going to be a bigger deal for Texas trade secrets litigation.
That’s because filing a motion to dismiss under the TCPA is likely to become a routine move by defendants in Texas trade secrets lawsuits.
So how did we get here? To recap Part 1 and Part 2:
In Part 1, I explained how this issue provides a sort of case study for the “textualist” theory of statutory interpretation, which has received some airplay recently with Neal Gorsuch taking the Scalia seat on the Supreme Court. In Part 2, I hypothesized that the holding in Elite Auto Body is inconsistent with the legislature’s intent and suggested that this illustrates a problem with strict textualism.
But if you’re a lawyer or a party in a trade secrets lawsuit, you don’t care about all that. You want to know what Elite Auto Body means for your lawsuit.
It seems likely that defendants in trade secrets lawsuits will now routinely file motions to dismiss under the TCPA. First, because Elite Auto Body says they can. Second, because it will usually be good strategy.
The crux of the Elite Auto Body decision was the statute’s broad definition of the “exercise of the right of association” as “a communication between individuals who join together to collectively express, promote, pursue, or defend common interests.”[2]
The court found that the plaintiff alleged two kinds of communications falling under the statute’s broad definitions: (1) communications between the departing employees and the second employer disclosing confidential information or trade secrets; and (2) communications with employees of the first employer to induce them to work for the second employer.[3]
So, in any case where the plaintiff alleges either (1) communication of the plaintiff’s trade secrets or (2) solicitation of the plaintiff’s employees, the defendants have the option to file a motion to dismiss under Elite Auto Body. I will even provide this Form Motion to Dismiss you can use if you want.[4]
Filing a motion to dismiss will often have benefits for the defendant:
Of course, there are potential disadvantages to filing a motion to dismiss. Despite the Texas Supreme Court’s instruction to apply the plain meaning of the statute, some trial court judges will still be reluctant to dismiss trade secrets claims that do not implicate constitutional free speech rights. Fighting over the motion to dismiss will often be expensive, and if the judge denies the motion, it will tend to embolden the plaintiff, which could make settlement more difficult. Worst case, if the judge finds that the defendant’s motion was frivolous or solely intended to delay, the court can award attorneys’ fees to the plaintiff.[7]
Despite these concerns, in most cases filing an early motion to dismiss under the TCPA will be good strategy for defendants, if the plaintiff alleges “communication” of the alleged trade secrets.
But that’s a big “if.”
If it becomes routine for defendants to file a motion to dismiss in Texas trade secrets lawsuits, plaintiffs will catch on.
And Elite Auto Body suggests a solution for them. As I pointed out in Part 2, the court in Elite Auto Body said that the TCPA does not apply to allegations of using the alleged trade secrets, as opposed to communication of the trade secrets. That’s why the Austin Court of Appeals only dismissed the plaintiff’s claims in part. It did not dismiss the claims based on conduct that does not constitute “communications” as defined by the TCPA.[8]
So, as Patrick Keating suggested on his trade secrets blog here, it may become routine for plaintiffs to avoid a motion to dismiss by pleading only use of the alleged trade secrets rather than disclosure of the alleged trade secrets. (Here is a Form Original Petition that does just that.) If that happens, then case law applying the TCPA to trade secrets claims may become, as Keating says, “much ado about nothing.”
But I’m not sure this maneuver will become totally routine. First, the plaintiff doesn’t always have a basis to claim use of the trade secrets. Second, the disclosure of the trade secrets is sometimes just too good a part of the story to leave out.
In many cases, the employer will discover that an employee has taken company information and joined a competitor, but the employer will not have any direct knowledge that the employee has used the information. And it is not unusual for employees to take company information when they leave but to refrain from using it after coming to their senses (or talking to a lawyer).
In cases like that, it may be dangerous for the employer to plead that the employee has used the alleged trade secrets. The plaintiff must have a good-faith factual basis for the allegation. Look for more plaintiffs to plead “on information and belief” that the defendant has used the alleged trade secrets.
In other cases, the plaintiff will really want to plead disclosure of the trade secrets, because that will be the juiciest part of the story. When an employee secretly emails confidential company information to his next employer, who can resist emphasizing that fact in the lawsuit? In those situations, the plaintiff’s lawyer will have to weigh the value of pleading bad acts by the defendants against the possibility of inviting a motion to dismiss.
On the other hand, the plaintiff’s lawyer can simply avoid this dilemma by filing suit in federal court under the federal Defend Trade Secrets Act. All you need is a sufficient connection to interstate or foreign commerce, and any claim you would make under the Texas trade secrets statute can be made under the federal statute. And then the TCPA would not apply.
Or would it? I will let the appellate lawyers and former law review editors discuss among themselves.
____________________________________________________________
These are his opinions, not the opinions of his firm or clients, so don’t cite part of this post against him in an actual case. The provided forms are only for the convenience of other lawyers. Every case is different, so don’t rely on this post or the forms as legal advice for your case.
[1] Elite Auto Body LLC v. Autocraft Bodywerks, Inc., No. 03-15-00064-CV, 2017 WL 1833495 (Tex. App.—Austin May 5, 2017, no pet. h.).
[2] Tex. Civ. Prac. & Rem. Code § 27.001(2).
[3] Elite Auto Body, 2017 WL 1833495 at *8.
[4] See my disclaimer about forms above.
[5] Tex. Civ. Prac. & Rem. Code § 27.003(c). Under Section 27.006(b), for good cause the court may allow “specified and limited discovery” relevant to the motion.
[6] See Tex. Civ. Prac. & Rem. Code § 27.005(c).
[7] Tex. Civ. Prac. & Rem. Code § 27.009.
[8] Elite Auto Body, 2017 WL 1833495 at *9.
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Originally published by Teri Rodriguez.
10. New Texas law bans child marriages (yes, you read that right!) – Michelle O’Neil of O’Neil Wysocki P.C. @ONeilWysocki in Dallas
9. Why Videotaped Deposition Testimony can be More Powerful than Live Witnesses – Drew York of Gray Reed & McGraw @GrayReedLaw in Dallas and Houston
8. Shale Oil and Gas Development in Texas: Pros and Cons – Bill Smalling of The Law Office of C. William Smalling, P.C. in Houston
7. Into the Lions’ Dens – Barry Barnett of Susman Godfrey L.L.P. @contingencyblog in Houston, Los Angeles, New York, Seattle
6. If the ghost of Lochner lurks about, it must pay toll. – David Coale of Lynn Pinker Cox & Hurst, LLP @600camp in Dallas
5. Guilt by association: One way that eyewitness testimonies go wrong – Rita Handrich of Keene Trial Consulting @KeeneTrial in Austin
4. Supreme Court Limits Class-Action Tolling – Sim Israeloff of Cowles & Thompson, P.C. @reverse_render in Dallas and Plano
3. Waiver Problems (or Why You Should Hire an Appellate Lawyer) – Jason P. Steed of Bell Nunnally @BellNunnally in Dallas
2. Ninth Circuit Ruling Sets Rules for Virtual Trespassing – Peggy Keene of Klemchuk LLP @K_LLP in Dallas
1. Great American Ins. Co. v. Hamel: The “Fully Adversarial Trial” On Trial – Jeffrey C. Glass of Hanna & Plaut LLP in Austin
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