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A California state appellate court recently issued an opinion reviving a class-action lawsuit concerning alleged violations of requirements employers must follow when performing employment-related background checks. In its opinion, the Court reversed summary judgment entered in favor of book retailer Barnes & Noble in a class-action lawsuit accusing the retailer of failing to strictly comply with the requirements for obtaining authorization for background checks found in the Fair Credit Reporting Act (FCRA). The Court’s decision breathes new life into the putative class action which was remanded to the trial court for further proceedings.

The FCRA is a federal statute that is meant to protect consumer privacy and promote fair and accurate credit reporting. Part of the law contains a number of requirements that employers must follow when performing employment-related background checks. Two of these requirements are found in 15 U.S.C. 1681b and require an “employer who obtains a consumer report about a job applicant first to provide the applicant with a standalone, clear and conspicuous disclosure of its intention to do so, and to obtain the applicant’s consent.” The FCRA further requires that the disclosure be contained in a document that consists solely of the disclosure.

In 2018, the plaintiff applied to work for Barnes & Noble. During the application process, Barnes & Noble’s consumer reporting agency, First Advantage, emailed the plaintiff a link to a website containing the retailer’s consumer report disclosure and asked her to authorize Barnes & Noble to perform a background check. The plaintiff alleges that she clicked the link, viewed the disclosure, and authorized Barnes & Noble to perform the background check.

First Advantage had prepared the consumer report disclosure statement that appeared on Barnes & Noble’s website. Included with the statement was a footnote that stated:

Nothing contained herein should be construed as legal advice or guidance. Employers should consult their own counsel about their compliance responsibilities under the FCRA and applicable state law. First Advantage expressly disclaims any warranties or responsibility or damages associated with or arising out of information provided herein.

Continue reading ›

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The Texas Supreme Court dealt a fatal blow to Brazilian state-run petroleum company Petrobras’s breach of fiduciary duty claims against former joint venture partner Belgian Transcor Astra Group S.A. The Texas high court ruled that an $820 million settlement agreement between the two oil and gas companies precluded Petrobras from asserting breach of fiduciary duty claims accusing Astra of bribing certain high-ranking Petrobras employees.

In 2006, Petrobras and Astra formed an ill-fated joint venture of Pasadena Refining System Inc. The joint venture between the two multi-national oil companies soon began to unravel. After the parties found themselves embroiled in several disputes, they initiated an arbitration to break up the partnership which resulted in a 2009 arbitration award requiring Astra to sell its 50% interest to Petrobras for $640 million.

Astra alleged that pursuant to the arbitration award it turned over its interest in the Texas refining company, but Petrobras never paid the $640 million purchase price for that interest. A series of lawsuits ensued leading to Astra obtaining judgments against Petrobras totaling more than $750 million with more than $400 million more in pending claims when the parties agreed to a global settlement. Under the 2012 settlement agreement Petrobras agreed to pay Astra $820 million in exchange for a release by each party of all claims against the other party.

By 2016, the peace between the companies ended when Petrobras initiated two separate legal proceedings against Astra. First, Petrobras filed a lawsuit against Astra and several of its employees, asserting that they breached fiduciary duties owed to Petrobras by offering bribes to certain Petrobras officials and failing to disclose the offers during the parties’ settlement negotiations. Petrobras also asserted derivative claims for declaratory judgment, conspiracy, aiding and abetting, unjust enrichment, and exemplary damages and attorney’s fees, and sought to invalidate the 2012 settlement agreement and render it unenforceable. Simultaneously, Petrobras initiated arbitration proceedings to invalidate the 2006 stock-purchase agreement due to the bribes Astra allegedly paid to Petrobras officials in connection with that agreement. Continue reading ›

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We previously wrote about Chicago Bears legend Richard Dent’s lawsuit seeking the identities of individuals who he alleges defamed him and cost him and his company to lose a lucrative contract. Dent initially lost at the trial court level but won in the appellate court. The Illinois Supreme Court then agreed to consider the case.  In its recent opinion, the Court ruled against Dent finding that he is not entitled to discovery to determine the names of people that he claims wrongly accused him of sexual harassment and drunken behavior in the course of an investigation, which ultimately cost him and his company a lucrative marketing contract with an energy supplier.

Justice Michael J. Burke wrote the majority opinion, which was joined by everyone but Justices Rita Garman, P. Scott Neville, and Anne Burke, who took no part in the decision. Justice Garman penned a dissenting opinion which was joined by Justice Neville.

As we previously wrote about, the case revolves around the March 2019 Rule 224 petition filed in the Cook County Circuit Court by Dent and his company, RLD Resources, seeking discovery related to the identity of certain individuals the petitioners claimed defamed Dent. In their petition, the petitioners asked the judge to order energy supplier Constellation to disclose the names and addresses of at least three individuals who allegedly defamed Dent. Continue reading ›

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Approximately 38,000 consumer lawsuits have been filed against Johnson & Johnson for allegedly including asbestos in their baby powder, which allegedly caused ovarian cancer and mesothelioma. Executives at Johnson & Johnson allegedly knew about the risks of asbestos for decades and still included it in their baby powder. Those same executives deny the allegations that their product is contaminated or that it caused anyone to get sick.

The company finally pulled its baby powder off the shelves in 2020, but only because bad publicity had hurt sales, according to the giant pharmaceutical company.

The results of the lawsuits against Johnson & Johnson have been a mixed bag. The company has emerged victorious in some of those lawsuits but has been ordered to pay billions of dollars to plaintiffs in other lawsuits.

People with ovarian cancer or mesothelioma are too sick to work and need caregivers to tend to their basic needs, which means either a family member can’t work, or they need to hire a full-time caregiver. Those expenses could be covered by a settlement in the lawsuit against Johnson & Johnson, but the company, which is valued at $400 billion, has found a legal loophole to avoid facing those lawsuits. Continue reading ›

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In a recent decision, the U.S. Court of Appeals for the Eleventh Circuit revived a class action lawsuit filed against Avior Airlines accusing the airline of forcing passengers to pay undisclosed fees in order to board flights from Miami to Venezuela. In its decision, the appeals court ruled that the class action suit could proceed and that the district court erred when it found the claims preempted by the Airline Deregulation Act.

Plaintiffs Roberto Hung Cavalieri and Sergio Enrique Isea purchased tickets for flights operated by the defendant Avior Airlines. According to the plaintiffs’ compliant, the plaintiffs purchased tickets from Miami to Venezuela. The itineraries and receipts for the tickets indicated that the price “included taxes and fees.” However, on the day of their flights, the plaintiffs alleged that the airline forced passengers to pay an additional $80 “Exit Fee” before they were permitted to board their departing flights to Venezuela.

The plaintiffs filed suit against the airline alleging that the undisclosed fee constituted a breach of their contracts with the airline, formed when they purchased their tickets. The plaintiffs sought to represent a national class defined as “all persons that Avior charged an Exit Fee, from five years prior to the filing of the initial complaint through the earlier of: (i) the date, if any, Avior changes its contract to expressly include Exit Fees; and (ii) the date of class certification.”

The putative class action got off to a rough start, however. The district court dismissed the lawsuit finding that the Airline Deregulation Act preempted the breach of contract claims. According to the district court, the Act preempts all claims related to related to prices, routes, and services and the plaintiffs’ claims fell into the purview of the Act because it related to pricing.

The plaintiffs appealed the dismissal to the Eleventh Circuit, which disagreed with the district court on the issue of preemption. After examining the issue of jurisdiction and satisfying itself that it had jurisdiction to hear the appeal, the Court recounted the history of the Act. As the Court explained, Congress passed the Airline Deregulation Act in 1978 to eliminate regulation of air carrier prices. The Act includes a preemption provision, providing that “a State, political subdivision of a State, or political authority of at least 2 States may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of an air carrier.” Continue reading ›

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Covenants not to compete and non-solicitation agreements are frequent fixtures of employment agreements. They are also frequently found in operating, shareholder or partnership agreements. Though courts and legislatures across the country have become increasingly hostile to the notion of enforcing non-compete agreements against employees, courts have not displayed a similar reluctance to enforce restrictive covenants in shareholder disputes.

When shareholders have a dispute or desire to sell their interest in a company, restrictive covenants seek to protect the existing company and shareholders by placing limitations on what departing shareholders can and cannot do in terms of competing with the business. Non-compete agreements place limits on where and when and how a departing shareholder may compete against the company. Non-solicitation agreements place limits on who the departing shareholder may solicit for business or employment. Typically, non-solicitation agreements prohibit a departing shareholder from contacting the company’s customers or employees to convince them to leave for the departing shareholder’s new business. In disputes involving a departing shareholder, courts will often side with the existing business against a shareholder who has left the company and now seeks to compete against it.

As in every case involving restrictive covenants, whether a non-compete or non-solicitation agreement is enforceable depends largely on the language of the covenants in the applicable agreement. When deciding whether to enforce a non-compete or non-solicitation provision in a shareholder agreement, court will consider the reasonableness of the restraints. Continue reading ›

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Recently, the Delaware Court of Chancery refused to dismiss an action for post-closing damages stemming from alleged breaches of fiduciary duty brought by former stockholders of Authentix Acquisition Company, Inc. In doing so, the Court rejected the defendants’ arguments that a provision in a stockholders agreement entered by the plaintiffs waived such claims for breaches of fiduciary duties.

The dispute arose out of the sale of Authentix to Blue Water Energy in 2017. The plaintiffs in the case were holders of common stock in Authentix. In connection with their investment in the company, the plaintiffs entered into a Stockholders Agreement which provided that they would “consent to and raise no objections against” any sale of the company approved by Authentix’s board and holders of at least 50% of outstanding shares. In 2017, the board approved a sale to Blue Water Energy over the objection of one of the plaintiffs, a director stockholder. The sale was also approved by holders of more than 50% of the company’s outstanding shares.

In response to the sale, the plaintiffs filed suit for post-closing damages, alleging various breaches of fiduciary duties by three former directors and officers of Authentix as well as the preferred stockholders of Authentix who plaintiffs alleged controlled the company. In response, the defendants moved to dismiss the plaintiffs’ claims arguing that the plaintiffs had waived any right to bring such claims. According to the defendants, because the sale was approved by Authentix’s board and at least 50% of the outstanding shares, the Stockholders Agreement precluded plaintiffs from raising any objections related to the sale. Continue reading ›

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In a recent decision, the Supreme Court held that a copyright applicant’s inadvertent mistake of law in a copyright registration application does not invalidate the application or corresponding registration. In so holding, the Court erased an earlier victory for fashion retailer H&M in a long running copyright dispute with fabric designer Unicolors, Inc. handed down by an appeals court. Before the Supreme Court’s decision, the Ninth Circuit court of appeals had ruled in favor of H&M nixing a $750,000 win for Unicolors.

To obtain special rights for copyright holders afforded by the Copyright Act of 1976, the creator must apply for a copyright registration by, among other things, submitting a copy of the work and an application for the copyright to the federal Copyright Office’s Register of Copyrights. Under the Copyright Act, the application for registration of a copyright should not contain inaccurate information. However, in the event that an application does contain inaccurate information, the resulting registration is not automatically invalidated. The Copyright Act contains a safe harbor provision that provides that the registration will only be invalidated if the applicant knew that the information in the application was inaccurate and the inaccuracy is such that, if matters were accurately presented, the Register of Copyrights would have denied the application. Continue reading ›

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Many people are familiar with insurance companies denying claims for a variety of reasons. Every dollar they use to repair or replace property is a dollar they can’t categorize as a profit or distribute to their executives as a bonus, so it’s common for insurance companies to try to find ways out of paying for claims. What is less common is to hear a claims adjuster say they don’t believe your story because your area is supposedly rife with fraud. That’s exactly what Darryl Williams, a former property owner on the South Side of Chicago, heard when he filed a claim for damage done to one of his apartment buildings when a pipe burst.

Williams is Black and the South Side of Chicago is a predominantly Black neighborhood, so since State Farm had no evidence of fraud, Williams felt he was being discriminated against as a Black man. He sued State Farm in Illinois for racial discrimination in 2019 and his attorney asked for the lawsuit to be tried as a class-action lawsuit, but the judge denied the request, saying the attorney’s analysis was not sufficient evidence that others had had experiences like Williams’s. Then Carla Campbell-Jackson, a former employee of State Farm, reached out to back up Williams’s allegations.

Campbell-Jackson had worked for State Farm for almost 30 years and loved her job until she was promoted to the special investigations unit (SIU), where claims adjusters sent potentially fraudulent claims to be more closely reviewed. Shortly after her promotion, Campbell-Jackson realized State Farm executives wanted SIU employees to meet with claims adjusters to encourage them to send more claims to be investigated by the SIU. The goal, according to Campbell-Jackson, was to deny as many claims as possible. She alleges investigators were told at weekly meetings to focus on claims from urban areas that were supposedly at a high risk for fraud, which would allegedly make those claims easier to deny. Campbell-Jackson alleges they would even circulate lists of supposedly “high-risk” areas. In her testimony, she said it was a way to deny millions of dollars in payments to African Americans and other minorities. Continue reading ›

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Preemption is familiar battleground for class-action litigants prosecuting or defending product mislabeling claims concerning the labels of federally regulated products. Plaintiffs asserting state law mislabeling claims must contend with the fact that federal laws often expressly preempt state law claims out of a desire to prevent states from imposing requirements different from or stricter than those found in federal statutes or regulations.

Recently, the Ninth Circuit Court of Appeals analyzed the issue of federal preemption in a case involving the labeling of poultry products. In the case of Cohen v. ConAgra Brands, the plaintiff filed a putative class-action lawsuit alleging that that ConAgra’s “natural” and “preservative-free” claims on its frozen chicken product labels and website advertising were false and misleading under California state law.

In his complaint, the plaintiff alleged that ConAgra had been using synthetic ingredients in its products, despite claims to the contrary on its labels and website. This practice, the complaint alleged, ran afoul of California state law. A federal district court judge dismissed the case, holding that the plaintiff’s claims were preempted by the Poultry Products Inspection Act, which preempts state law claims challenging the Department of Agriculture’s application of federal labeling standards for poultry products. Specifically, the court held that the DOA’s Food Safety and Inspection Service had approved the very statements being challenged on ConAgra’s poultry labels and advertising. The plaintiff appealed the ruling to the Ninth Circuit Court of Appeals.

On appeal, the Ninth Circuit agreed with ConAgra that if the “evidence shows that ConAgra’s label was approved by [the Food Safety and Inspection Service], then plaintiff’s claims are preempted.” However, the Court noted that the record lacked any evidence regarding whether the ConAgra label at issue was actually reviewed and approved by the Food Safety and Inspection Service. Consequently, it remanded the claim for further development of the record on this point. Continue reading ›

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