Antitrust and Unfair Competition Law

Competition: Spring 2015, Vol. 24, No. 1



By Thomas Greene and Thomas A. Papageorge1


This article provides a selection of litigation developments that may be of particular importance to members of the Antitrust and Unfair Competition Section. The first part of this article presents cases that reflect recent California substantive law developments related to the Cartwright Act, covenants not to compete, the Consumer Legal Remedies Act, the Unfair Competition Law, and false advertising law. The second part of this article provides federal and California procedural law developments in the areas of forum, the Foreign Trade Antitrust Improvements Act, discovery, class actions, evidence, settlements, appeals, patent law, ethics, and developments abroad. This latter part also provides a selection of relevant new rules and other notable developments. Please consult other references for all of the developments that may be important to your practice.


A. Cartwright Act2

There were some notable Cartwright Act developments in 2014. First, in a pending case, the California Supreme Court will join the U.S. Supreme Court in the high-stakes debate over "reverse payment" or "pay-for-delay" patent settlements and decide the proper standard for determining when such settlements violate the Cartwright Act. Second, the California Attorney General reached a $3.75 million settlement with eBay over an anticompetitive "no-poach" agreement with Intuit. Third, the Second District discussed continuing the per se status of resale price maintenance under the Cartwright Act. Fourth, the failure to exhaust judicial remedies dooms doctor’s Cartwright Act and Unfair Competition Law ("UCL") claims. Finally, a California district court finds that a challenge to the Internet Corporation for Assigned Names and Numbers ("ICANN") naming authority fails to sufficiently plead antitrust conspiracy.

1. In re Cipro Cases I & II3

The California Supreme Court will decide the standard for Cartwright Act applicability to "pay-for-delay" patent settlements in In re Cipro Cases I and II. At issue

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are the interaction between federal patent rights and antitrust principles of competition, and the rule of reason/per se distinction in such matters.

The lengthy coordinated class action matter involves plaintiffs’ antitrust claims concerning ciprofloxacin (branded as "Cipro"), an antibiotic patented by Bayer Corporation. Plaintiffs alleged that Bayer and several generic drug manufacturers violated the Cartwright Act, the Unfair Competition Law, and common law monopolization principles by entering into a patent infringement settlement in which Bayer agreed to make payments (ultimately totaling $398 million) in exchange for the generic manufacturers’ agreement not to manufacture the generic version of Cipro until the patent expired. This arrangement is characterized by the plaintiffs as "pay-for-delay" monopolization and by the defendants as legitimate "reverse payments" to settle bona fide patent litigation.4

The trial court granted defendants’ summary judgment motion, ruling the settlements were neither illegal per se under the Cartwright Act nor unreasonable under the rule of reason. It also found no triable issue as to whether the agreements produced "anticompetitive effects on competition beyond the exclusionary scope of the . . . patent itself."5

The California Fourth Appellate District affirmed summary judgment for defendants,6 adopting defendants’ proposed legal standard, derived from In re Tamoxifen Citrate Antitrust Litigation,7 in which the Second Circuit held that "in the absence of any plausible allegation that [a] patent infringement lawsuit [is] baseless or that the Settlement Agreement otherwise restrained competition beyond the scope of the . . . patent," the plaintiff’s antitrust complaint fails to state a claim on which relief can be granted.8

Reviewing the Tamoxifen rule and similar holdings, the Fourth Appellate District held those principles properly govern this issue under the Cartwright Act. Since "the Cipro agreements did not restrain competition outside the exclusionary zone of the . . . patent, we cannot view the Cipro agreements as lacking any redeeming virtue. Accordingly, we conclude they are not unlawful per se."9 And under the rule of reason, the court found reverse payment agreements to be consistent with federal and state policies favoring dispute resolution and a "natural byproduct of patent litigation" under then-current federal law.

Summarizing the court’s version of the Tamoxifen rule, the court "conclude[d] that unless a patent was procured by fraud, or a suit for its enforcement was objectively baseless, a settlement of the enforcement suit does not violate the Cartwright Act if the settlement restrains competition only within the scope of the patent."10

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The California Supreme Court granted plaintiffs’ petition for review on February 15, 2012,11 and extensive amici participation followed. Briefing was stayed in September 2012 pending the United States Supreme Court’s consideration of these issues in FTC v. Actavis, Inc.,12 which ultimately held that the Federal Trade Commission Act’s § 5 unfair competition allegations in the AndroGel reverse payment matter were not forestalled by federal patent law principles.

In November 2013, plaintiffs and defendant Bayer reached a settlement of Bayer’s portion of the matter, agreeing to a settlement pool of $74 million.13 The covered class was consistent with the 2004 formulation eliminating those purchasers of Cipro who had paid only a flat co-payment amount.14 On October 1, 2014, the supreme court dismissed the settling Bayer defendants from the pending review.15

Deputy Attorney General Cheryl Johnson reports that the supplemental round of briefing addressing the impact of the Actavis opinion has now been completed, with all parties and numerous amici curiae briefing the matter. The California Attorney General has asserted that the per se standard should govern the Cartwright Act claim and has also argued for application of the non-competition covenant principles of Business and Professions Code section 16600 et seq.16 The court has not yet set oral argument in the matter.

2. California v. eBay, Inc.17

On August 29, 2014, in California v. eBay, Inc., San Jose U.S. District Court Judge Edward J. Davila signed an order approving the settlement of the California Attorney General’s Cartwright Act and UCL action against eBay alleging an anticompetitive "no-poach, no-hire" personnel agreement between eBay and Intuit.

In November 2012, the Attorney General’s Antitrust Section filed its Cartwright Act and UCL complaint against online giant eBay, naming fellow high-tech firm Intuit as a co-conspirator. The suit alleged that from 2006 to 2009 senior executives at both companies entered into a "no-poach, no-hire" agreement that neither company would hire the other’s employees, thus blocking the career progress of their employees and depriving the marketplace of the benefits of competition for qualified high-tech personnel.18 The U.S. Department of Justice filed parallel charges under the Sherman Act.19

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Defendant eBay’s motions to dismiss both actions were resolved in related decisions on September 27, 2013. Judge Davila denied eBay’s motion to dismiss the U.S. action, finding the Department of Justice had adequately pleaded a Sherman Act section 1 market division case. Judge Davila dismissed California’s complaint with leave to amend, and California filed its amended complaint in October 2013.20 Before further motions could be heard, the U.S. and California agencies filed motions for approval of separate settlements with eBay.

The California settlement approved by Judge Davila includes injunctive relief barring eBay from entering into similar agreements and prohibiting the enforcement of the existing provisions.21 The judgment calls for $2.375 million in restitution payments to natural persons, with any unclaimed portion used to fund cy pres beneficiaries, including a charitable organization that supports employment mobility, and $1.375 million to the State of California, including $250,000 in civil penalties. Significantly, the court approved $300,000 of that amount as payment for the harm the anticompetitive conduct caused to the state’s economy, reportedly the first time a state antitrust settlement has explicitly recovered additional funds for general harm to the economy.

3. Alsheikh v. Superior Court22

In an unpublished (noncitable) opinion, Alsheikh v. Superior Court, a panel of the Second Appellate District recently discussed its assessment of the continuing per se illegality of vertical price fixing under California’s Cartwright Act, notwithstanding the United States Supreme Court’s Leegin Creative Leather Products, Inc. v. PSKS, Inc.23 opinion.

Plaintiff Sylvia Ingoglia sued bakery company Sara Lee and others alleging she was denied wage and hour benefits, and asserting that if she were an independent contractor, as defendants claimed, defendants violated the Cartwright Act and the UCL by imposing resale prices on her, a practice unlawful per se under the California Supreme Court’s standard for such conduct in Mailand v. Burckle.24 Defendants countered that Mailand should no longer be controlling after the United States Supreme Court’s abandonment of the per se rule in Leegin. The Second Appellate District ultimately found plaintiff’s pleadings inadequate and remanded with leave to amend.

However, in describing the legal standard to be applied by the trial court on remand, the Second Appellate District added: "Had the distribution agreements . . . operated in such a way as to ‘limit[] the distributor’s freedom to sell the supplier’s product at a price independently selected by the distributor . . .’, then a Cartwright Act violation might be stated. We also note that if there were vertical price fixing, that would, under Mailand v. Burckle, . . . be a per se violation under the Cartwright Act, notwithstanding a change of

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law under the Sherman Antitrust Act . . . . We are bound to follow the law set forth by our supreme court applying state law."25

California enforcement authorities have consistently signaled their ongoing application of the Mailand v. Burckle precedent. This unpublished opinion suggests that state appellate courts will continue to apply the per se standard, absent contrary instructions from the California Supreme Court.

4. Lin v. Dignity Health-Methodist Hospital of Sacramento26

In Lin v. Dignity Health-Methodist Hospital of Sacramento, plaintiff Dr. Lin, a cardiologist with privileges at the defendant hospital, was discharged from the hospital after a patient’s death and the resulting administrative hearing, which found that the plaintiff engaged in practices endangering patients. Dr. Lin refused to participate in the hospital’s administrative hearing, believing it to be a sham, and instead filed suit in federal court alleging violations of the Cartwright Act, the UCL, and federal and state anti-discrimination statutes. The defendant filed a motion to dismiss and an anti-strategic lawsuit against public participation ("SLAPP") motion, seeking to strike the plaintiff’s complaint as a SLAPP suit that sought to interfere with the defendant’s "protected act" (the hearing process) without a reasonable prospect of success.

U.S. District Court Judge Kimberly Mueller granted the motions to dismiss and strike. Regarding the Cartwright Act and UCL claims, Judge Mueller concluded that the plaintiff’s failure to exhaust the available administrative and judicial remedies (including a writ of mandamus if the hospital’s hearing was defective) doomed her suit. "In light of plaintiff’s failure to exhaust her judicial remedies, she has not shown a reasonable probability she can succeed on her claims for violations of California Business and Professions Code §§ 16720 and 17200. . . ."27 Judge Mueller found that, as a result, both the motion to dismiss and the anti-SLAPP motion to strike were in order.

5. Name. Space, Inc. v. Internet Corporation for Assigned Names & Numbers28

In Name.Space, Inc. , the plaintiff owns and operates alternative "generic top level domain" names ("gTLDs", which are equivalents of ".com" and ".net") and hoped to register them for widespread use under the authority of the Internet Corporation for Assigned Names and Numbers, the entity assigned the exclusive authority over such domain names by the U.S. Department of Commerce. When ICANN conducted two "Application Rounds" in 2000 and 2012 to permit applicants to obtain new Internet domain names, the plaintiff applied unsuccessfully, and then sued in federal court. The plaintiff claimed that ICANN had engaged in a number of unlawful acts, including restraints of trade and monopolization in violation of the Sherman Act, the Cartwright Act, and the UCL.

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U.S. District Court Judge Percy Anderson granted ICANN’s motion to dismiss. The (unreported) court order addressed the pleading requirements under the terms of Bell Atlantic Corp. v. Twombly29 for both the Sherman Act and Cartwright Act claims. Finding that "[t]he analysis under California’s law mirrors the analysis under federal law,"30 Judge Anderson found the plaintiff had not met the Twombly standard since it had "not alleged sufficient facts explaining who it believes participated in the conspiracy, and what the alleged co-conspirators actually agreed to do in violation of the antitrust laws."31

B. Covenants Not to Compete32

In a development regarding covenants not to compete, the First Appellate District determined that standards for noncompetition provisions apply differently to property orders in marital dissolutions.

1. In re Marriage of Greaux and Mermin33

The First Appellate District, addressing an apparent issue of first impression for the district, has determined that the standards for covenants not to compete found in Business and Professions section 16600 et seq. apply differently where a family court determines that such orders are necessary for an equal division of marital property, such as a jointly-owned business.

The Court stated that California’s "settled public policy in favor of open competition,"34 which voids most covenants not to compete, must be balanced against "the family court’s authority to issue any orders—and specifically a noncompetition order—to achieve an equal division of marital property."35

Analogizing to business sales and goodwill evaluations, the court concluded: "[I]f an ongoing marital business is being awarded to one spouse, and if the value of that business includes goodwill, a family court should have the power . . . to issue a noncompetition order so that the value of that asset is preserved, just as a noncompetition clause in a business purchase and sale agreement is designed to protect the value of the asset purchased."36

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C. Consumer Legal Remedies Act37

There have been a few notable developments related to the Consumer Legal Remedies Act ("CLRA"). First, the California Supreme Court held that taxability issues must be resolved through the Board of Equalization process, not through a UCL/CLRA lawsuit. Second, a California federal district court decided that CLRA claims for computer monitor defects are limited by the Daugherty doctrine. Finally, another California federal district court decided that claims of failure to disclose auto defects satisfy the Daugherty standard and may proceed.

1. Loeffler v. Target Corporation38

Providing a lengthy discourse on California’s tax regulatory process, the California Supreme Court has held that a private lawsuit brought under the CLRA and the UCL challenging the sales tax representations of retailer Target was improper. It held that an issue involving taxability can only be properly addressed by the State Board of Equalization through its administrative process.

Chain retailer Target operates food counters in its stores that offer take-out coffee. Target routinely charged its take-out customers an additional sum represented as the sales tax on the coffee purchases, when, in fact, to-go coffee orders are exempt from sales tax. Private plaintiffs filed an action and sought class certification for their allegations that Target’s practice was unlawful and fraudulent under the UCL and an unlawful misrepresentation of Target’s authority to collect taxes in violation of the CLRA.

The trial court sustained Target’s demurrer and the Fourth Appellate District affirmed, holding that permitting superior court litigation of the CLRA/UCL claims would be inconsistent with the state constitution’s provision barring any "legal or equitable process . . . to prevent or enjoin the collection of any tax" except in the manner specified by the California Legislature in the Revenue and Taxation Code, which parallels article XIII, section 32 of the California Constitution.39

The California Supreme Court affirmed, by a four-three majority, on somewhat different grounds: "[W]e conclude that permitting plaintiffs to use the UCL or CLRA to challenge Target’s collection of a sales tax reimbursement on the ground that the sale was not taxable is inconsistent with the tax code provisions relating to the sales tax, particularly in light of the primary role assigned to the Board [of Equalization] with regard to the resolution of sales tax issues . . . . When a consumer claim such as plaintiffs’ is dependent upon the resolution of the taxability question, a UCL or CLRA lawsuit . . . is inconsistent with the method established by the Legislature as the exclusive means for ascertaining whether a transaction is subject to the sales tax."40

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A detailed dissent by Justice Liu (joined by Justices Werdegar and Moore) concludes: "[T]his is not really a tax case. This is a case about the reach of consumer protection statutes that prohibit unfair business practices, including misrepresentations by a retailer as to what its customers are actually paying for."41 Justice Liu further commented that none of the majority opinion’s reasoning "speaks to whether a retailer may represent to its customers that it is collecting sales tax on a transaction when the transaction is not actually subject to sales tax."42

2. Rasmussen v. Apple, Inc.43

Plaintiff consumer Rasmussen sought certification of a class action against computer maker Apple under the CLRA and UCL, alleging that Apple failed to disclose a known defect that caused permanent dimming of the monitor screens on its all-in-one computers. Apple moved to dismiss for failure to state a claim.

U.S. District Court Judge Edward Chen expressed reservations about the limitations on consumer rights inherent in present California law, but concluded that the CLRA warranty claim did not sufficiently state an actionable failure to disclose in light of the Daugherty v. American Honda Motor Company44 precedents. Interpreting the CLRA claim under Daugherty and its progeny, Judge Chen held that when a CLRA claim is based on a manufacturer’s failure to inform customers of a latent defect (manifesting itself outside the warranty period), the manufacturer generally has a duty to disclose that defect only when it involves a safety issue, absent affirmative misrepresentations. Here the defect did not implicate safety concerns, so under Daugherty no CLRA duty was breached. While the statements plaintiffs asserted – misrepresentations of durability or quality – only "constitute[d] inactionable puffery."45

3. Aguilar v. General Motors LLC46

Illustrating the type of CLRA claim that meets the Daugherty standard for failures to disclose defects, U.S. District Court Judge Lawrence O’Neill held that the plaintiffs’ class action lawsuit against General Motors for failing to disclose known steering defects validly pleaded a breach of the CLRA duty to disclose.

Judge O’Neill reviewed the Daugherty standard, as interpreted by the Ninth Circuit, and ruled: "Because GM had knowledge of the steering defect, the steering defect constituted material [safety-related] information, and GM did not disclose the defect, the Court DENIES GM’s motion to dismiss Aguilar’s duty to disclose claims under the CLRA and UCL."47

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4. Chapman v. Skype, Inc.48

In Chapman v. Skype, the Second Appellate District held that plaintiffs’ CLRA claims against voice over Internet protocol ("VoIP") provider Skype included adequate allegations of the requisite CLRA elements based on deceptive advertising to avoid demurrer.

D. Unfair Competition Law49

In notable Unfair Competition Law developments, the California Supreme Court held that statistical extrapolation in UCL class action cases must satisfy appropriate statistical standards and due process concerns. California and federal courts also continue to wrestle with the multi-faceted issue of the applicability of the UCL to specific business practices and contexts where other regulatory schemes are involved. As a result, there have been a number of important UCL cases addressing claims of federal preemption, preclusion, or bar by state regulatory schemes. For example, the California Supreme Court held that the Attorney General’s UCL labor classification case was not preempted by the Federal Aviation Administration Authorization Act ("FAAAA"). The Ninth Circuit also found that there was no Food, Drug, and Cosmetic Act ("FDCA") preemption of UCL/false advertising law ("FAL") in a mislabeling case.

There have also been notable developments related to arbitration and unconscionability in consumer contracts after AT&T Mobility, LLC v. Concepcion.50 The United States Supreme Court’s decision in Concepcion, upholding the preemptive effect of the Federal Arbitration Act ("FAA")51 on inconsistent state principles, stands as a bar to UCL or FAL actions challenging unfair business practices or false advertising by businesses using contracts with mandatory arbitration clauses. While the California Supreme Court has given broad scope to the FAA’s preemptive effect, in cases such as Iskanian v. CLS Transportation,52 the interface between arbitration and unconscionability principles continues to be the subject of extensive litigation. The cases provided below are a survey of some of the more prominent unfair competition matters addressing the principles of arbitration and unconscionability after Concepcion.

The California Supreme Court currently has at least ten Concepcion-related appellate cases pending. Six of those cases deal with the single issue of the unconscionability of the arbitration and class waiver clause in the standard auto sales contract used by nearly all California car dealerships for the past decade. The leading case of this group is Sanchez v. Valencia,53 which has been pending before the court since March 21, 2012. The California Supreme Court’s resolution of the interface between the FAA and unconscionability principles will determine the fates of all these matters.

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This section also provides recent examples of the continuing challenge of interpreting the complaint pleading and certification requirements for class actions and other private actions under the UCL and FAL. In the wake of the financial system crisis of 20072009 and the resulting collapse of real property values, a massive wave of foreclosure actions brought widespread allegations of lender abuse through the use of so-called "dual tracking" practices. In such practices, lenders offered to help homeowners with mortgage assistance while at the same time aggressively pursuing foreclosure, often unbeknownst to the homeowners. Numerous lawsuits and class actions alleging UCL and FAL violations in these and similar practices are now entering the appellate phase.

Finally, an Attorney General loan modification case clarifies UCL liability proof issues and remedy standards.

1. Statistical Sampling and Class Certification

In Duran v. U.S. Bank National Association,54 plaintiffs, employees of defendant U.S. Bank, brought suit under the UCL and obtained certification of a class on the basis of overtime-misclassification allegations. The trial judge permitted extensive use of surveys and statistical sampling of the class members and extrapolations from that sampling in both the liability and damages phases of the case.

On appeal from the trial court’s judgment for plaintiffs, the First Appellate District reversed, finding due process violations regarding the methodology of the statistical sampling (which had margins of error up to 43%) and abuse of discretion in denying defendant’s second motion to decertify after evidence appeared that individual issues predominated in the case.

The California Supreme Court affirmed the reversal and the decertification of the class. While recognizing that many courts permit statistical methods to play a role in appropriate cases in determining liability or damages, the court emphasized that proper statistical standards must be followed to avoid due process concerns. "If sampling is used to estimate the extent of a party’s liability, care must be taken to ensure that the methodology produces reliable results. With input from the parties’ experts, the court must determine that a chosen sample size is statistically appropriate and capable of producing valid results within a reasonable margin of error."55

The court also emphasized the importance of protecting the defendant’s right to put on affirmative defenses: "[A]ny class action trial plan, including those involving statistical methods of proof, must allow the defendant to litigate its affirmative defenses . . . . If statistical methods are ultimately incompatible with the nature of the plaintiffs’ claims or the defendant’s defenses, resort to statistical proof may not be appropriate."56

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2. No Preemption of or Bar to UCL Action

In People ex rel. Harris v. Pac Anchor Transportation, Inc.,57 the California Attorney General filed a UCL case against the defendant trucking company for alleged improper classification of employees as independent contractors. The trial court held the FAAAA58 preempted the UCL in this case. The Second Appellate District reversed, finding the People’s action was not related to the truck carrier’s prices, routes, or services. The California Supreme Court granted review on August 31, 2011, and affirmed the finding of no preemption.

The supreme court held that the FAAAA does not preempt the UCL, either facially or as applied to this labor classification case. The UCL does not conflict with Congress’s regulatory purpose in this field: "The FAAAA embodies Congress’s concerns about the regulation of motor carriers with respect to the transportation of property; a UCL action that is based on an alleged general violation of labor and employment laws does not implicate these concerns."59

The application of the UCL and the state labor standards to the practices at issue here also does not materially affect "price, route, or service" within the meaning of the FAAAA. As applied here, "even though the People’s UCL action may have some indirect effect on defendants’ prices or services, that effect is ‘too tenuous, remote, [and] peripheral . . . to have pre-emptive effect.’"60

In Lilly v. ConAgra Foods, Inc.,61 the Ninth Circuit Court of Appeals held that the federal FDCA does not preempt a claim of mislabeling of the sodium content of sunflower seeds under California’s UCL and FAL. The Ninth Circuit determined that the UCL and FAL, and the related state laws at issue, collectively impose no greater labeling requirements than those imposed by the federal FDCA, which expressly disavows preemption of state laws consistent with the labeling requirements of the FDCA Act.

In Dilts v. Penske Logistics, LLC,62 the Ninth Circuit Court of Appeals held that California’s meal and rest-break laws, which plaintiffs, a class of the defendant’s employees, sought to enforce in a UCL action, were not preempted by the FAAAA. "The FAAAA does not preempt California’s meal and rest break laws as applied to Defendants [motor carriers], because those state laws [the state labor laws and the UCL] are not ‘related to’ Defendants’ prices, routes, or services."63

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In Allergan, Inc. v. Athena Cosmetics, Inc.,64 the Federal Circuit Court of Appeals affirmed U.S. District Court Judge James Selna’s grant of summary judgment in favor of plaintiff Allergan, which brought an action against its competitor, Athena, alleging Athena was unlawfully selling unapproved drugs in violation of the UCL. The appellate court agreed with the plaintiff that "the FDCA does not impliedly preempt its UCL claim. . . . The fact that the California Health Code parallels certain FDCA provisions does mean that it does not implicate an historic state power."65 However, the court reversed the portion of the injunctive order that applied beyond California.

In Hawaii ex rel. Louie v. HSBC Bank Nevada, N.A.,66 a case brought under Hawaii’s very similar versions of the California UCL and CLRA, the Ninth Circuit Court of Appeals held that actions brought by the Hawaii Attorney General against six credit card issuers alleging credit card "cramming" were not preempted by the National Bank Act,67 and were not removable under the Class Action Fairness Act.68

3. Preemption of or Bar to UCL Action

In Solus Industrial Innovations, LLC v. Superior Court,69 the Orange County District Attorney’s Office brought a UCL enforcement action seeking to enforce Cal/ OSHA workplace standards in a case where the defendant manufacturer installed a residential water heater in an industrial facility, leading to an explosion that killed two workers. The Fourth Appellate District ruled that application of the California Labor Code and the UCL to this conduct was preempted by federal Occupational Safety and Health ("OSH") Act standards, because the federal OSH Act law expressly preempts any state law workplace safety enforcement mechanism that has not been specifically incorporated in the workplace safety plan submitted to and approved by the U.S. Secretary of Labor.70 Since UCL enforcement was not adequately incorporated into California’s 1973 application for its own state standard, the federal OSH Act preempts the UCL action here. The California Supreme Court has granted review of this opinion.71

In Pinon v. Bank of America, NA (In re Late Fees & Over-Limit Fee Litigation),72 the Ninth Circuit Court of Appeals held that the district court properly dismissed a UCL challenge to defendant banks’ late fees and over-limit charges under the unlawful practice prong of California Business and Professions section 17200 et seq. The challenged fees were permissible under the National Bank Act,73 and the Depository Institutions

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Deregulation and Monetary Control Act ("DIDMCA").74 "Because constitutional due process jurisprudence does not prevent enforcement of excessive penalty clauses in private contracts, and the fees were permissible under the National Bank Act and the DIDMCA, the district court did not err in dismissing the complaint."75 Certiorari was subsequently denied by Pinon v. Bank of America, NA.76

4. Arbitration Clauses Upheld

In Iskanian v. CLS Transportation Los Angeles, LLC,77 the California Supreme Court held that Conception78 abrogated Gentry v. Superior Court,79 but that it did not bar labor code private attorney general actions.

Sounding the death knell for the doctrine of non-waivable labor law rights in Gentry, the California Supreme Court has held that Concepcion impliedly overruled Gentry, and thus mandatory arbitration provisions must be enforced even when they require arbitration of wage and hour issues protected by California’s labor laws. The supreme court concluded: "[A] state’s refusal to enforce [this arbitration] waiver on grounds of public policy or unconscionability is preempted by the FAA. . . . [O]ur holding to the contrary in Gentry . . . has been abrogated by recent United States Supreme Court precedent."80 The court further noted: "Concepcion held that the FAA does prevent states from mandating or promoting procedures incompatible with arbitration. The Gentry rule runs afoul of this latter principle. We thus conclude in light of Conception that the FAA preempts the Gentry rule."81

However, the supreme court ruled that an arbitration agreement requiring the employee to give up the right to bring representative actions under the Labor Code Private Attorneys General Act of 2004 ("PAGA") is against public policy and unenforceable. The Supreme Court distinguished between FAA-protected arbitration requirements and acts to force employees to waive rights provided by the California Legislature to bring private attorney general cases enforcing state labor laws. "[T]the rule against PAGA waivers does not frustrate the FAA’s objectives because . . . the FAA aims to ensure an efficient forum for the resolution of private disputes, whereas a PAGA action is a dispute between an employer and the state Agency."82

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"[T]he FAA’s goal of promoting arbitration as a means of private dispute resolution does not preclude [the state] Legislature from deputizing employees to prosecute Labor Code violations on the state’s behalf [under PAGA]."83 Thus, the court "conclude[d] that California’s public policy prohibiting waiver of PAGA claims, whose sole purpose is to vindicate the Agency’s interest in enforcing the Labor Code, does not interfere with the FAA’s goal of promoting arbitration as a forum for private dispute resolution."84

In Ferguson v. Corinthian Colleges, Inc.,85 the Ninth Circuit Court of Appeals held that Conception abrogates California’s Broughton-Cruz rule. College students had filed and sought to certify a class action against defendant, a for-profit college, alleging UCL, FAL, CLRA, and contract law violations involving false statements of employment prospects and other misrepresentations. In light of Concepcion, the Ninth Circuit concluded that the FAA preempted California’s Broughton-Cruz rule that claims for injunctive relief could not be arbitrated.

The Ninth Circuit analyzed the policies of the Broughton-Cruz rule and found them to be in unavoidable conflict with the FAA principles of Concepcion. "Of particular significance to this case is the Court’s statement [in Conception] that ‘[w]hen state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward: The conflicting rule is displaced by the FAA.’"86 That analysis resolved this case because, "[b]y exempting from arbitration claims for public injunctive relief under the CLRA, UCL and FAL, the Broughton-Cruz rule similarly prohibits outright arbitration of a particular type of claim."87

In Sanchez v. CarMax Auto Superstores California, LLC,88 the Second Appellate District held that an arbitration agreement was not substantively unconscionable because of limitations on discovery, where those limitations were equally applicable to all parties and the plaintiff failed to demonstrate that the limitations would keep him from obtaining necessary evidence. Additional requirements regarding written awards, confidentiality, and consolidation of claims of multiple employees were also held not unconscionable. The court concluded: "We disagree with the trial court’s conclusion that the arbitration agreement and the [dispute resolution rules and procedures] ‘are permeated with unconscionability.’ None of the provisions addressed by the trial court’s decision is substantively unconscionable. We therefore do not need to determine whether the court abused its discretion in declining to sever unconscionable provisions."89

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In Vasquez v. Greene Motors, Inc.,90 the First Appellate District disagreed with its sister panel in Natalini v. Import Motors, Inc.,91 and held the arbitration clause in the standard vehicle sales contract not unconscionable. Thus, the arbitration clause was enforceable.

In McGill v. Citibank, N.A.,92 the Fourth Appellate District followed the Ninth Circuit in Ferguson v. Corinthian Colleges, Inc.,93 and held that the FAA preempts California’s Broughton-Cruz rule purporting to limit the arbitration of UCL, FAL, and CLRA injunction actions brought for the public’s benefit.

5. Arbitration Clauses Rejected

Post-Concepcion California and federal decisions have held that a lack of bilaterality, sufficient to constitute unconscionability, remains a defense under the FAA and state law.94 Even after Iskanian v. CLS Transportation Los Angeles, LLC95 ended the Gentry labor-law waiver rule, principles of unconscionability stemming from Armendariz v. Foundation Health Psychcare Services96 continue to be the basis of unconscionability findings resulting in refusals to enforce mandatory arbitration.

In Sanchez v. Valencia Holding Co.,97 the Second Appellate District held an arbitration clause in the defendant’s standard auto purchase contract to be unconscionable under general California contract principles, notwithstanding the Concepcion issue of the class action waiver in the contract. The California Supreme Court granted review on March 21, 2012.

In Natalini v. Import Motors, Inc.,98 the First Appellate District Court agreed with the Sanchez v. Valencia court and found that an arbitration clause in the industry-standard motor vehicle installment sales contract was unconscionable and thus unenforceable, notwithstanding Concepcion. The California Supreme Court granted review on May 1, 2013, adding this case to the Sanchez v. Valencia queue.

In Imburgia v. DIRECTV, Inc.,99 the S econd Appellate District Court ruled that the trial court correctly found the class-wide arbitration waiver in the agreement between defendant DIRECTV and its customers to be unenforceable under the UCL and CLRA where the contract specifically provided that the waiver was subject to "the law of [the

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consumer’s] state."100 This language was reasonably interpreted to mean that California law banning such waivers would be enforced, even when the arbitration waiver would have been enforceable under the preemption principles of Concepcion.101

In Sabia v. Orange County Metro Realty, Inc.,102 ruling in the context of a contract for foreclosure relief services, the Second Appellate District held that the arbitration clause in that contract was unconscionable and unenforceable because it was substantively one-sided and lacking in mutuality (clients were prohibited from court relief but the business was not), and because it was procedurally unconscionable having been presented in English to Spanish-speaking customers with signatures obtained in an adhesive manner. The supreme court granted review on September 24, 2014, in another Sanchez v. Valencia deferral.

In Chavarria v. Ralphs Grocery Co.,103 the Ninth Circuit Court of Appeals held that the arbitration term in Ralphs’ employment application was both substantively and procedurally unconscionable, and upheld the district court’s denial of enforcement. On the continuing viability of unconscionability as a defense in arbitration matters, the appellate court concluded: "The Supreme Court’s holding that the FAA preempts state laws having a ‘disproportionate impact’ on arbitration cannot be read to immunize all arbitration agreements from invalidation no matter how unconscionable they may be, so long as they invoke the shield of arbitration."104

In Nguyen v. Barnes & Noble, Inc.,105 in a deceptive business practices and false advertising suit, the Ninth Circuit Court of Appeals upheld the trial court’s denial of enforcement of the defendant’s arbitration term. The appellate court found that consumers purchasing the computer equipment online had neither actual nor constructive notice of the defendant’s Terms of Use that included the arbitration term. Therefore, there was no mutual assent to that provision and it could not be enforced.

In Knutson v. Sirius XM Radio Inc.,106 the Ninth Circuit Court of Appeals held that defendant Sirius XM Radio failed to meet its burden of proving the existence of an arbitration agreement with plaintiff purchaser of a new truck equipped with the defendant’s radio receiver. The court of appeals found that there was inadequate proof of mutual assent to the arbitration provision in the contract terms at issue, and the provision was thus unenforceable.

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6. Standing, Injury, and Reliance Pleadings

In Jones v. Farmers Insurance Exchange,107 the plaintiff, seeking to represent a putative class of employees of defendant insurance company, brought a UCL action against defendant for alleged wage and hour violations. The trial court denied certification, and the employee appealed.

The Second Appellate District remanded with instructions, finding that plaintiff had sufficiently shown that common issues predominated and that a class action was the superior method of resolving the dispute, but had failed to show he was an adequate class representative and had failed to establish prejudice from any error in the trial court’s striking of his amended class certification motion. The plaintiff was given leave to amend to name a suitable representative.

In Boorstein v. CBS Interactive, Inc.,108 plaintiff Boorstein appealed from a dismissal entered after the trial court sustained defendant’s demurrer to causes of action for violations of Civil Code section 1798.83 et seq. (the Shine the Light or "STL" Law) and the UCL. The Second Appellate District affirmed, agreeing with the trial court that the plaintiff inadequately pleaded and proved standing to pursue causes of action under either the STL or the UCL.

The STL, a disclosure statute designed to "shine the light" on businesses’ information-sharing practices, provides various civil remedies, as does the UCL. However, the STL requires that a plaintiff have made or have attempted to make a disclosure request. The court found that, "because it is undisputed that the plaintiff has not alleged, and cannot allege" that he did so, the STL cause of action was properly dismissed.109 Furthermore, since the UCL claim was derivative of the STL claim, the plaintiff could not adequately plead actual injury cognizable in a private UCL action.

7. Foreclosure-Related "Dual Tracking" Cases

In Rufini v. CitiMortgage, Inc.,110 the First Appellate District ruled that the trial court erred in granting defendant bank’s demurrer to the UCL cause of action here. The borrower was not required to allege a predicate act involving a violation of some other statute in order to maintain the UCL claim. The court found that the plaintiff sufficiently alleged actual injury and damages, as is required for standing to bring a private UCL claim.

In Lueras v. BAC Home Loans Servicing, LP,111 although sustaining the trial court’s demurrer regarding several other causes of action, the Fourth Appellate District reversed the trial court’s grant of demurrer regarding the borrower’s UCL action, finding that the borrower sufficiently alleged fraudulent and/or unfair practices in violation of the UCL.

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In Alvarez v. BAC Home Loans Servicing, LP,112 the plaintiff homeowners brought action under the UCL and other theories against mortgage lender defendants for "fraud and unfair business practices in the origination of [their] residential mortgage loans, and negligence in the subsequent servicing of the loans, including negligent review of [their] applications for loan modification."113 The trial court sustained the defendants’ demurrer without leave to amend, and homeowners appealed.

The First Appellate District, in the published portion of the opinion, struggled with the "poorly drafted" complaint, but agreed that "potentially meritorious claims can be distilled from the allegations," including a UCL cause of action.114 Of particular note, the appellate court held that the bank defendants owed homeowners a duty to exercise reasonable care in the review of their loan modification applications once they had agreed to consider them.

8. UCL Liability Proof Issues and Remedy Standards

In People ex. rel. Harris v. Sarpas,115 the California Attorney General’s Office sued defendants Sarpas and Nazarzi, partners doing business as "US Homeowners Assistance (USHA)."116 USHA, a boiler room operation, was cold-calling vulnerable homeowners in jeopardy of losing their homes to entice them to enter into $1,000-$4,500 agreements for "home loan modifications" and claiming a "97 percent success rate" in obtaining such modifications.117 However, "[n]o credible evidence was presented at trial that USHA ever obtained a loan modification, or did anything of value, for any customer."118 After trial, defendants appealed the joint and several judgment against them, which enjoined their practices and ordered payments of up to $2.047 million in restitution and in excess of $2 million in civil penalties.

The Fourth Appellate District upheld the entire judgment, remanding only one penalty calculation. The court first held that "individualized proof of harm was unnecessary, . . . the law was settled that restitution and civil penalties under the UCL and FAL could be ordered against them without individualized proof of harm."119

The appellate court further ruled that: (1) restitution can be ordered paid even if the defendants were not paid directly by victims; (2) the ordered civil penalties were appropriate here and the burden is on defendants to demonstrate inability to pay as partial mitigation; (3) the evidence of involvement of the part owner and the office manager was sufficient to support the imposition of penalties and restitution; and (4) no due process violation resulted from the defendants’ inability to cross-examine the additional victim/ witnesses who did not testify at trial.

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In notable false advertising law developments, California appellate courts decided that: California has specific jurisdiction over an out-of-state drug manufacturer in a products liability/UCL/FAL class action suit; a restaurant owner’s challenge to Yelp’s statements was not subject to an Anti-SLAPP motion; and a trier of fact determines tendency or capacity to deceive in FAL suits.

1. Bristol-Myers Squibb Co. v. Superior Court121

The First Appellate District has ruled that a class of prescription drug users may bring a products liability and UCL/FAL action against a non-resident drug manufacturer, and that this class may include hundreds of non-resident co-plaintiffs making the same allegations.

Plaintiffs, including many non-residents (the real parties in interest or "RPI" in this case), were purchasers of defendant Bristol-Myers Squibb’s ("BMS’s") heart disease medication, Plavix, who had suffered adverse side effects. These plaintiffs sought to sue non-resident BMS on products liability, UCL, and FAL theories in a California court. The defendant sought a writ of mandate after the trial court denied its motion to quash the summons. The First Appellate District denied the writ.

After a thoroughgoing review of contemporary principles of general and specific jurisdiction, the First Appellate District concluded that the RPI plaintiffs had met the California Supreme Court’s contemporary standards for the specific jurisdiction doctrine, found in Vons Companies, Inc. v. Seabest Foods, Inc.,122 including minimum contacts, relatedness, and balance of convenience. "Thus, given BMS’s substantial, continual contacts with California, including its extensive sales of Plavix here, the presence of dozens (not one or two) of resident plaintiffs who allege precisely the same wrongdoing by BMS and McKesson (also a Cal. resident) as is alleged by the RPI, as well as the interstate nature of BMS’s business and its nationwide sales of Plavix are even more significant in determining whether the RPI’s claims are sufficiently connected to BMS’s California activity so that assertion of specific jurisdiction satisfies the traditional conception of fair play and substantial justice."123

The court stated: "In short, we hold that the RPI have sustained their burden of showing sufficient contacts with California and the relatedness of these contacts to the claims at issue so as to satisfy the traditional test for specific jurisdiction under the United States and California Supreme Court cases discussed at length in this opinion."124

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On November 19, 2014, the California Supreme Court granted review in this matter, and, as a result, at least some portions of this sweeping analysis will now be evaluated by the California high court.

2. Demetriades v. Yelp, Inc.125

The Second Appellate District held that a restaurant operator’s UCL/FAL action challenge to the truth of Yelp’s statements about its filtering process was within the commercial speech exemption of the anti-SLAPP statute since Yelp’s statements were intended to reach third parties to induce them to engage in a commercial transaction by patronizing its website. Thus, it was error to grant Yelp’s motion to strike.

3. Chapman v. Skype Inc.126

The Second Appellate District found that, in cases under the Business and Professions Code section 17500, determining whether a statement has the tendency or capacity to deceive is a question of fact to be resolved by the trier of fact. The court stated that this issue can be decided on demurrer "only if the facts alleged in the complaint, and facts judicially noticed, compel the conclusion as a matter of law that consumers are not likely to be deceived."127


In forum developments, the United States Supreme Court narrowed the Younger abstention doctrine in Sprint Communications, Inc. v. Jacobs,128 and determined procedures for enforcing forum-selection clauses in Atlantic Marine Construction Co. v. U.S. District Court.129

1. Sprint Communications, Inc. v. Jacobs130

This case arose from a battle between Sprint, a national telecommunications company, and Windstream, the former Iowa Telecom. For years, Sprint paid access fees to Windstream for long distance calls placed by Sprint customers to Iowa. Relying on provisions of the Telecommunications Act of 1996 preempting intrastate regulation of VoIP communications, Sprint stopped paying fees for such calls. In response, Windstream threatened to discontinue all services to Sprint customers in Iowa.

Sprint responded by filing a complaint against Windstream with the Iowa Utilities Board ("IUB") seeking an order directing that the local phone company continue to provide services to Sprint customers. Windstream withdrew its threat, but the IUB

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retained the matter to determine the underlying legal issues. Sprint responded with a two-front attack on Iowa regulators. First, it filed a petition in Iowa state court seeking a declaration that the IUB was preempted by federal law from imposing access fees on VoIP traffic. Second, Sprint filed a federal action against IUB board members in their official capacities in federal district court seeking a declaration that any local access fees on VoIP traffic were preempted and requesting an injunction against the IUB proceeding.

The IUB sought a remand from the district court based on the Younger131 abstention doctrine, which was granted based on the lower court’s reading of the Supreme Court’s decision in Middlesex County Ethics Committee v. Garden State Bar Association.132 The Eighth Circuit Court of Appeals affirmed this decision.133

Invoking one of its earliest cases, Justice Ginsberg, writing for a unanimous Court, opined that:

Federal courts, it was early and famously said, have "no more right to decline the exercise of jurisdiction which is given, than to usurp that which is not given." Jurisdiction existing, this Court has cautioned, a federal court’s "obligation" to hear and decide a case is "virtually unflagging."134

Justice Ginsberg underscored that Younger abstention is "exceptional," and limited to "state criminal prosecutions," "civil enforcement proceedings," and "civil proceedings involving certain orders that are uniquely in furtherance of the state courts’ ability to perform their judicial functions."135

She rejected the Eighth Circuit’s characterization of Middlesex as requiring Younger abstention whenever "[t]here is (1) ‘an ongoing state judicial proceeding, which (2) implicates important state interests, and (3) . . . provide[s] an adequate opportunity to raise [federal] challenges.’"136 According to Justice Ginsberg, this misapprehended Middlesex because it ignored the fact that the case arose from an ethics prosecution by a state bar that was "akin to a criminal proceeding."137 Slamming the door on the use of Middlesex as a springboard for a broad application of Younger abstention, she concluded that:

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Divorced from their quasi-criminal context, the three Middlesex conditions would extend Younger to virtually all parallel state and federal proceedings, at least where a party could identify a plausibly important interest. That result is irreconcilable with our dominant instruction that, even in the presence of parallel state proceedings, abstention from the exercise of federal jurisdiction is the "exception, not the rule."138

Ultimately, according to the Court, "Younger extends to the three ‘exceptional circumstances’ identified in [New Orleans Public Service, Inc], but no further."139

2. Atlantic Marine Construction Co. v. U.S. District Court140

Appellant, Atlantic Marine, a Virginia contractor, entered into a subcontract with a Texas company, J-Crew Management, to assist in the construction of a childcare center at Fort Hood, located in western Texas. Despite the locus of the work in Texas, the contract contained a forum-selection clause requiring that any disputes over the contract "shall be litigated in the Circuit Court for the City of Norfolk, Virginia, or the United States District Court for the Eastern District of Virginia, Norfolk Division."141

Following a dispute over payment, J-Crew Management sued Appellant. Ignoring the forum-selection clause, it filed suit in the U.S. District Court for the Western District of Texas. Both the district court and the Fifth Circuit Court of Appeals concluded that the case could proceed in Texas. The Supreme Court reversed.

Writing for a unanimous court, Justice Alito first concluded that the appropriate way to handle such situations is with the doctrine of forum non conveniens, codified in 18 U.S.C. § 1404(a). Section 1404(a) provides for change of venue—for "the convenience of parties and witnesses, in the interests of justice, a district court may transfer any civil action to any other district or division where it might have been brought or to any district or division to which all parties have consented."142

Both the doctrine of forum non conveniens and § 1404(a) rely on a broad balancing of public and private interests to determine an appropriate venue. However, this test was adjusted to fit a forum-selection clause, specifically:

  • Contrary to the allocation of burden employed by the trial court, Justice Alito concluded that "the party defying the forum-selection clause . . . bears the burden of establishing that transfer to the forum for which the parties bargained is unwarranted."143

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  • Private interests in using an alternate forum—including convenience of parties and witnesses—do not count, because "[w]hen parties agree to a forum-selection clause, they waive the right to challenge the preselected forum as inconvenient or less convenient for themselves or their witnesses, or for their pursuit of the litigation."144
  • Only public interests—not found in this case—can be considered in doing the analysis, and "[o]nly under extraordinary circumstances unrelated to the convenience of the parties should a § 1404(a) motion be denied."145
  • When a party "flouts" a forum-selection cause, the transfer back to the preselected forum will not bring with it the choice-of-law rules from the forum chosen by the party ignoring the forum-selection clause.146
  • When parties select a non-federal forum, the doctrine of forum non conveniens applies and "courts should evaluate a forum-selection clause pointing to a nonfederal forum in the same way that they evaluate a forum-selection clause pointing to a federal forum."147

Between sophisticated parties, this analysis makes sense, although clients may need to be counseled on the importance of looking for forum-selection clauses in standard contracts. However, in contracts with consumers or unsophisticated small businesses, the Court’s strong endorsement of forum-selection clauses may lead to untoward results. For this reason, apparently, the Court leaves open the possibility that a forum selection clause could be contractually invalid.148


In Foreign Trade Antitrust Improvement Act ("FTAIA") developments, the Ninth Circuit Court of Appeals, in United States v. Hui Hsiung,149 decided that the FTAIA does not bar criminal price-fixing convictions, and affirmed a penalty based on gross gains of conspiracy. In a revised FTAIA decision, Motorola Mobility LLC v. AU Optronics Corp.,150 the Seventh Circuit Court of Appeals precluded damage claims by foreign subsidiaries but protected federal enforcement actions.

1. United States v. Hui Hsiung151

Addressing "complicated issues of first impression regarding the reach of the Sherman Act in a globalized economy," the Ninth Circuit provides guidance on the FTAIA and

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other issues in a criminal antitrust case.152 The appeal arose from criminal prosecutions of two individuals and a company for participation in an international price-fixing conspiracy in the sale of Thin-Film-Transistor Liquid-Crystal Displays ("TFT-LCDs"). The individual defendants, Hui Hsiung and Hsuan Bin Chen, were sentenced to thirty-six months in federal prison and fined $200,000 each; the corporate defendant, AU Optronics ("AUO"), was fined $500 million and sentenced to three years of probation with detailed conditions.

The court initially addressed venue, rejecting the defendants’ argument that the standard of proof is beyond a reasonable doubt. The court noted succinctly that "[t]he defendants’ position . . . has no support in the law."153 Turning to the record, the court concluded that evidence of meetings to negotiate prices for TFT-LCDs with Hewlett Packard and Apple in the Northern District and the presence of an AU Optronics sales office in the district was "sufficient to establish by a preponderance of the evidence that overt acts in furtherance of the conspiracy occurred in the Northern District."154

The court swept aside claims that the Sherman Act does not apply to foreign conduct and that the per se rule does not apply to foreign price-fixing.155

Turning to the FTAIA, the court parsed the language of the Act, distinguishing between "import trade" and "trade or commerce (other than import trade or import commerce) with foreign nations."156 Cutting through the less than transparent prose of the FTAIA, the court writes:

Although the statute is a web of words, it boils down to two principles. First the Sherman Act applies to "import trade or import commerce" with foreign nations. Put differently, the FTAIA does not alter the Sherman Act’s coverage of import trade; import trade is excluded from the FTAIA altogether. Second, under the FTAIA, the Sherman Act does not apply to nonimport trade or commerce with foreign nations, unless the domestic effects exception is met. For the Sherman Act to apply to nonimport trade or commerce with foreign nations, the conduct at issue must have a "direct, substantial, and reasonably foreseeable effect—(A) on trade or commerce which is not trade or commerce with foreign nations . . . ."157

The court focused initially on whether the commerce involved is "import trade," which is not affected by the FTAIA. Quoting with approval the Seventh Circuit’s decision in Minn-Chem, Inc. v. Agrium, Inc.,158 the court writes, "transactions that are directly between the [U.S.] plaintiff purchasers and the defendant cartel members are

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the import commerce of the United States."159 Reviewing the trial record, the court found abundant evidence that the commerce at issue was import commerce based on evidence that:

  1. AUO imported over one million price-fixed panels per month into the United States.
  2. Conspirators earned over $600 million from imports into the United States.
  3. AUO executives negotiated with U.S. buyers in the United States in order to sell products at price-fixed prices.

Addressing a defense argument that AUO was not technically an "importer," the court stated that the defense "misses the point" because "[t]he panels were sold into the United States, falling squarely within the scope of the Sherman Act."160

The Ninth Circuit amended its original opinion on January 10, 2015.161 Although the original version of the opinion did not decide whether the trade alleged had "direct, substantial, and reasonably foreseeable" effects on domestic U.S. commerce, the court nonetheless provided some guidance, albeit arguably in the form of dicta.162 The amended decision concludes that "[t]he constellation of events that surrounded the conspiracy leads to one conclusion—the impact on the United States market was direct and followed as ‘an immediate consequence’ of the price-fixing."163 As it did in the original opinion, the court rejects the assertion of prosecutors that the FTAIA is an affirmative defense, so, presumably, the burden of proof is on defendants.164

Referring to the Seventh Circuit’s Motorola Mobility decision, discussed infra, the Ninth Circuit’s amended decision states: "Ultimately the private antitrust claim failed because of the indirect-purchaser doctrine of Illinois Brick Co. v. Illinois, but, as the court explained, ‘[i]f price fixing by the component manufacturers had the requisite statutory effect on cellphone prices in the United States, the Act would not block the Department of Justice from seeking criminal or injunctive remedies.’"165 Thus, the Ninth Circuit finds support in Motorola Mobility for its own conclusion.

However, this formulation suggests that the reason that Motorola failed to secure consideration of its subsidiaries’ claims was the direct-purchaser rule of Illinois Brick, not the jurisdictional provisions of the FTAIA. Such a formulation provides a firmer basis for distinguishing between enforcement actions by the Antitrust Division and actions by private plaintiffs with indirect purchaser claims, disallowed under federal law (but not California law).

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The court concludes its opinion by clearing up issues with the Alternate Fine Statute.166 It concludes: "[T]he statute unambiguously permits a ‘gross gains’ calculation based on the gain attributable to the entire conspiracy."167 The court also rejects the defendants’ argument that the $500 million fine against AUO should be reduced by the amounts already paid by its co-conspirators, writing: "No statutory authority or precedent supports AUO’s interpretation of the Alternate Fine Statute as requiring joint and several liability and imposing a ‘one recovery’ rule."168

This is one of the most significant antitrust decisions of the year, and merits special review.

2. Motorola Mobility LLC v. AU Optronics Corp.169

This decision arose from a private case brought by Motorola Mobility against AU Optronics. Motorola averred that it "purchased over $5 billion worth of LCD panels from cartel members."170 In an earlier decision, Judge Posner disputed this claim, writing that only 1% of the $5 billion figure represented purchases by Motorola; the rest were purchases through subsidiaries.171

This directly implicated the domestic effects exception of the FTAIA, which allows antitrust actions to proceed if, though they may involve transactions by foreign companies, the challenged conduct has a "direct, substantial, and reasonably foreseeable effect" on the United States.172 While Judge Posner concedes that there was "doubtless some effect" on Motorola, it was not a "direct effect."173 Judge Posner assumes that the brunt of the injury was borne by Motorola’s subsidiaries that should not, in his view, be able to take advantage of federal courts. In addition, Judge Posner wrote that the FTAIA also requires that Motorola itself be subject to an antitrust action because of the challenged conduct.174The effect of his decision was to reduce Motorola’s potential claim by 99%.

After noting that prices of "many products exported to the United States are elevated to some extent by price fixing," Judge Posner concluded that his decision was nonetheless appropriate because "[t]he Supreme Court has warned that rampant extraterritorial application of U.S. law ‘creates a serious risk of interference with a foreign nation’s ability independently to regulate its own commercial affairs.’"175

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Judge Posner’s narrow interpretation of the domestic effects prong of the FTAIA drew immediate and strong reactions. The U.S. Department of Justice and the Federal Trade Commission filed an amicus brief asking the court to reverse itself. But criticism was not limited to federal agencies, the New York Times scored the opinion as representing a "cramped view of antitrust laws" that could "tear a gaping hole in American antitrust law."176

Subsequently, the Judge Posner decision was vacated and the case set for rehearing.177

The most recent decision of the Seventh Circuit provides support for the observation that even judges read the papers. Decided in November 2014, the court’s latest opinion, also written by Judge Posner, disallows claims brought by Motorola for purchases by its foreign subsidiaries, but vindicates the ability of federal authorities to enforce federal antitrust laws even if the effects of offshore price-fixing flow through foreign firms to American consumers.178 Judge Posner squares this circle by finding that federal authorities will respect foreign nations, while private plaintiffs will not, citing an on-line journal.179

The court’s analysis of Motorola’s private claims is virtually identical to its earlier decision, but with an expanded argument that the Supreme Court’s decision in Illinois Brick Co. v. Illinois,180 would be nullified if Motorola were allowed to proceed on claims for purchases made by foreign subsidiaries.181 As in its prior decision, this opinion reduced Motorola’s claims by over $4.9 billion.

This decision is a major win for defendants in damage actions in the Seventh Circuit, and will be widely cited in other jurisdictions. But this decision underscores the need for either congressional action or Supreme Court review of the scope of the FTAIA.


In discovery developments, three federal circuit courts rejected broad work-product claims against expert discovery. The Federal District Court for the District of Nevada rejected the use of predictive coding without an agreement with the adverse party. Finally, California’s Second Appellate District clarified responsibilities of third parties in responding to state subpoenas for electronically stored information ("ESI").

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1. Republic of Ecuador v. Hinchee182 Carrion v. For the Issuance of a Subpoena Under 28 U.S.C. §1782(a) (In re Republic of Ecuador)183 Republic of Ecuador v. Mackay184

These three cases proceed from the same general fact pattern. Chevron was sued in Ecuador for pollution that allegedly injured the environment and its local workers in Ecuador. The action spilled into the U.S. court system because Ecuador requested U.S. federal courts to order discovery of specific information in support of a foreign arbitration. In all three cases, the demand was for information from Chevron’s testifying experts, including communications (and notes of communications) with non-attorneys. The non-attorneys at issue included other experts for Chevron and Chevron employees.

Chevron sought to cloak these communications in a broad reading of 2010 Amendments to Federal Rule of Civil Procedure 26(b), related to expert discovery. Summing up Chevron’s claims, the Tenth Circuit wrote:

Chevron argues that the 2010 revisions to the Federal Rules caused a sea change in the discoverability of documents held by experts. It argues that the Rule 26(b)(3)(A)’s "by or for another party or its representative" language protects trial preparation materials prepared by or provided to a testifying expert. Further, it argues that the amendment to Rule 26(a)(2)(b)(ii)’s reporting standard was intended to make clear that reporting [consulting] experts are protected by the work-product doctrine. Finally, it argues that the two limited protections of Rules 26(b)(4)(B) and (C) are not the exclusive protections for expert materials but merely "examples of the broader protection provided by Rule 26(b)(3)(A)."185

The Tenth Circuit reviewed the history of the 2010 Amendments, focusing on the concern of the drafters that attorney work product was jeopardized by broad interpretations of the 1993 Amendments to Rule 26.186 The 2010 Amendments, according to the court, protected core work product—impressions and judgments—but not every piece of information the attorney helped the expert to see or review. Therefore, "the revisions appear to alter only the outcome of cases either allowing discovery of draft reports or attorney-expert communications"187

In Hinchee, similar arguments were addressed by the Eleventh Circuit. After another exegesis of the history of the 2010 amendments, the court found that:

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None of this suggests the drafters’ intent to confer work-product status on the notes of a testifying expert or on a testifying expert’s communications with other experts. Rather, the 2010 Amendments to Rule 26(a)(2)(B) were intended to protect the opinion work-product of attorneys in the context of expert discovery. As the 2010 Advisory Committee put it: "[t]he refocus of disclosure on ‘facts or data’ is meant to limit disclosure to material of a factual nature by excluding theories or mental impressions of counsel." At the same time, the term "facts or data" should "be interpreted broadly to require disclosure of any material considered by the expert from whatever source, that contains factual ingredients." . . . In other words, the term "facts or data" includes all materials considered by a testifying expert, except the core opinion work-product of attorneys.188

In Mackay, the Ninth Circuit came to the same conclusions as its sister circuits.189 The Ninth Circuit concluded:

[T]the Committee sought to balance the competing policy considerations, including the need to provide an adversary with sufficient information to engage in meaningful cross-examination and prepare a rebuttal, on the one hand, and the need to protect the attorney’s zone of privacy to efficiently prepare a case for trial without incurring the undue expense of engaging multiple experts, on the other. There is no indication that the Committee intended to expand Rule 26(b)(3)’s protection for trial preparation materials to encompass all materials furnished to or provided by testifying experts, which would unfairly hamper an adverse party’s ability to prepare for cross-examination and rebuttal. We accordingly reject Chevron’s argument.190

These three cases take a restrictive, but pragmatic, approach to the 2010 Amendments concerning expert discovery. One important implication is that many litigators—on both sides of the aisle—will find this balance of interests unhelpful. In such instances, a stipulation on expert discovery makes very good sense.

2. Progressive Casualty Insurance Co. v. Delaney191

In a contentious piece of litigation in Nevada, parties agreed in 2013 to an e-discovery protocol that relied on key word searches. After this approach yielded approximately two million e-documents, the producing party unilaterally applied predictive coding (also known as technology-assisted review) to the results of the word searches. The demanding party objected, partly because (i) this was a major (and unilateral) change in a carefully negotiated discovery agreement, and (ii) the responding party failed to disclose the underlying seed sets of documents and other important information needed to assess the quality of the predictive coding review.

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In a thoughtful opinion, the district court concluded that, while it would have authorized the use of predictive coding as part of an agreement with the adverse party, unilateral use of this technology—particularly without revealing how the searches were made—was unacceptable.192

Of particular practical interest, the court relied on an online white paper prepared by the responding party’s e-discovery vendor, Equivio, to make the point that predictive coding is highly sensitive to the seed sets selected by the "expert" lawyer guiding discovery, as well as other systemic issues. This paper193 is a smart, short guide to major issues associated with the use of this powerful technology.

3. Vasquez v. California School of Culinary Arts, Inc. (Sallie Mae, Inc.)194

This case arose from a class action by 1,034 former students of a culinary academy who alleged that the academy had misrepresented their post-graduation job prospects in order to obtain large tuition payments financed by student loans. Sallie Mae, Inc., the real party in interest in this appeal, services many of the former students’ loans. Plaintiffs subpoenaed electronically stored loan records from Sallie Mae pertaining to 746 plaintiffs. Plaintiffs sought forty-four specific fields of information from these files and specified that Sally Mae’s response be "on digital data disk(s) in a reasonably useful form."195

California’s Electronic Discovery Act, enacted in 2009 and amended in 2012, creates a structure for such disputes. Under the Act,

  • A subpoena may require production of"electronically stored information."196
  • The party serving the subpoena can "specify the form or forms in which each type of information is to be produced."197
  • If necessary, the responding party, at the reasonable expense of the demanding party, shall "through detection devices, translate any data compilations included in the subpoena into a reasonably useable form."198
  • A responding party can object to a subpoena for ESI because the demanded records are "not reasonably accessible because of undue burden or expense" to produce, but the objecting party bears the burden of establishing inaccessibility.199

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  • • Even if collecting the records is burdensome, the trial court can nonetheless order production, but may limit the scope of discovery or impose conditions, including "allocation of the expense of discovery."200

In response to plaintiffs’ subpoena, Sallie Mae’s attorney objected that the lender had "no obligation to do research on the loans . . . and to prepare a spread sheet."201 Plaintiffs repeatedly offered to pay for the reasonable costs of Sallie Mae’s work, but Sallie Mae refused to supply a cost estimate.

Sallie Mae then moved to quash plaintiffs’ subpoena on various grounds, including relevance and burden. It asserted that it had no duty to do anything other than produce existing documents and records.202 Plaintiffs responded based on the Electronic Discovery Act and prevailed, leading to an award of fees and costs to plaintiffs. Sallie Mae appealed.

The Second Appellate District reviewed the plain text of the California Electronic Discovery Act, finding that California law required Sallie Mae to respond. The court also relied on federal precedent, noting in particular that in Gonzales v. Google, Inc.,203 non-party Google was required under federal discovery rules to produce information that it could extract from its databases, even if the information was not ordinarily kept in the form specified. Sallie Mae was directed to produce the requested information and pay plaintiffs their reasonable costs and fees for opposing Sallie Mae’s motion to quash.

This case is useful for at least two reasons. First, it clarifies the obligations of third parties in responding to subpoenas for ESI under California law. Second, given the paucity of state court precedent for the California Electronic Discovery Act, the Second Appellate District’s reliance on federal precedent suggests that federal decisions will be useful in addressing e-discovery issues in state courts.


In class action developments, the Supreme Court overturned the Tenth Circuit on the Class Action Fairness Act ("CAFA") pleading standard in a decision that can potentially have broader implications.

1. Dart Cherokee Basin Operating Co. v. Owens204

This started as a simple correction of a procedural decision under the Class Action Fairness Act, but may have broader implications in the future. The core of the case is the language of CAFA that says that a defendant seeking to remove a case from a state court to a federal forum must file a notice of removal in the federal court "containing a short and plain statement of the grounds for removal."205 Notwithstanding this language, the trial court decided that actual proof of the amount in controversy was required in the notice.

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Defendant Dart petitioned the Tenth Circuit for permission to appeal relying on 28 U.S.C. § 1453(c)(1), which provides that a court of appeal "may accept an appeal from an order of a district court granting or denying a motion to remand."206 An equally divided Tenth Circuit declined to exercise this discretionary authority.207

The Supreme Court granted certiorari on the CAFA pleading issue. However, during briefing, amicus Public Citizen, Inc. noted that since review by the Tenth Circuit was discretionary, the only possible appellate question before the Court was whether the Tenth Circuit had abused its discretion by denying Dart permission to appeal the trial court’s decision.208 This put the majority in a box. On the one hand, they had a simple statutory interpretation issue they wanted to resolve. On the other, the Tenth Circuit had not reviewed the substantive CAFA issue and its simple denial of a discretionary appeal was only reviewable under the abuse of discretion standard.

The majority, led by Justice Ginsburg, solved this problem by asserting that the Tenth Circuit must have agreed with the trial court or it would have granted discretionary review. Starting from this assumption, the majority proceeded through the text and legislative history of CAFA, concluding that the statute means what it says: a "short and plain statement" is all that is required in the initial removal notice.

The opinion could have ended there, but it did not. In a stinging dissent authored by Justice Scalia and joined by Justices across the spectrum of the Court (Justices Kennedy, Kagan, and Thomas209), he argued that the majority only got to the CAFA issue by imputing a decision on the merits to the Tenth Circuit, a decision which, Scalia noted, could have been for "countless other permissible reasons."210 The dissent argued that, "[o]nce we found that the issue presented differed from the issue we granted certiorari to review, the responsible course would have been to confess error and to dismiss the case as improvidently granted."211

The upshot of all this is that an apparently simple correction of a straightforward problem of statutory interpretation under CAFA has potentially made a hash of the abuse of discretion standard of review. There are a couple of possibilities moving forward. The most likely is that the Supreme Court will walk back any dilution of the abuse of discretion standard, confining this case to its unique, if contentious, facts. The other alternative is that Dart may become a tool to require courts of appeals to exercise appellate jurisdiction over CAFA decisions. This latter alternative is unlikely, but certainly possible given the drive-by approach of the majority to this traditionally deferential standard of review.

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In evidence developments, a district court judge in Nevada provided a tutorial on the authentication of web materials, including websites, emails, text message, and YouTube videos.

4. Randazza v. Cox212

This was an ugly case involving a pro per defendant and a lawyer plaintiff who was chastised for failing to authenticate evidence properly. The basic allegation was that defendant Cox had harassed the plaintiff, a lawyer, with the intention of extorting money from the lawyer and his immediate family.213 This allegation was packaged into allegations of cybersquatting under 15 U.S.C. § 1125(d) and various other common law violations.

This decision was triggered by competing summary judgment motions. Citing Orr v. Bank of America,214 the court noted that "unauthenticated documents cannot be considered in a motion for summary judgment." The court also commented that summary judgment "requires consideration of the same caliber of evidence that would be admitted at trial."215 Against this background, a clearly frustrated district court judge addressed numerous problems with the web evidence offered by the two sides. Briefly, the judge concluded:

  • Websites: "[W]ebsite print-outs [are] sufficiently authenticated where the proponent declared that they were true and correct copies of pages on the internet and the print-outs included their webpage URL, address and the dates printed."216
  • • Letters, Emails, and Text Messages: Documents (and e-documents) can be "authenticated by personal knowledge ‘by a witness who wrote it, signed it, used it, or saw others do so.’"217 In addition, "circumstantial evidence— like an email’s context, email address or previous correspondence between the parties—may help authenticate an email."218 Using these tools, the trial judge let some evidence in, but rejected one e-mail string because it had an unexplained gap and a text message screen shot because it did not have "circumstantial indicia of authenticity." Among other problems with the text messages was a lack of information on the sending and receiving phones.219

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  • • YouTube Video: Citing United States v. Hassan,220 the court opined that "videos from the online video network are self-authenticating as a certified domestic record of a regular[ly] conducted activity if their proponent satisfies the requirements of the business-records hearsay exception."221 While the video was supported by a declaration from the plaintiff, an affidavit from YouTube was required in order to verify that "the page had been maintained as a business record in the course of regularly conducted activities."222

If one needs to authenticate web materials for summary judgment or trial, this decision provides a nice overview of the latest cases.


In settlement developments, the Second Circuit overturned a trial judge’s rejection of a Securities and Exchange Commission ("SEC") consent decree as an abuse of discretion, reaffirming the deference standard. In addition, both a district court and an appellate court, while not necessarily starting a trend, rejected putative class settlements after close scrutiny, finding the settlement deals to be inadequate.

1. SEC v. Citigroup Global Markets, Inc.223

U.S. District Court Judge Jed Rakoff has gained renown for not approving settlements between the SEC and financial services firms because they do not contain an admission of guilt or admissions of facts supporting the agency’s complaints.

The Second Circuit dusts off Judge Rakoff’s rationales for disapproving the SEC’s settlement in a sharply written decision. Specifically:

  1. "[T]here is no basis in the law for the district court to require an admission of liability as a condition for approving a settlement between the parties."224
  2. "It is an abuse of discretion to require, as the district court did here, that the S.E.C. establish the ‘truth’ of the allegations against a settling party as a condition for approving the consent decrees. Trials are primarily about the truth. Consent decrees are primarily about pragmatism."225
  3. "It is not within the district court’s purview to demand ‘cold, hard, solid facts, established either by admissions or by trials.’"226
  4. "The job of determining whether the proposed S.E.C. consent decree best serves the public interest, however, rests squarely with the S.E.C., and its decision merits significant deference . . . ."227

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In evaluating a proposed consent decree, a trial court "should at a minimum, assess (1) the basic legality of the decree; (2) whether the terms of the decree, including its enforcement mechanism, are clear; (3) whether the consent decree reflects a resolution of the actual claims in the complaint; and (4) whether the consent decree is tainted by improper collusion or corruption of some kind."228

The appellate court omitted "adequacy" as an appropriate metric for reviewing a public settlement, concluding that the trial court appeared to borrow this standard from review of class action settlements. In class action settlements, but not in public settlements, parties’ rights are extinguished by the settlement, which makes a review for adequacy appropriate, indeed essential.229

This decision clears away underbrush about necessary elements in a public settlement. In doing so, the Second Circuit reaffirms the division of labor between federal judges and federal prosecutors, opining that: "federal judges—who have no constituency—have a duty to respect legitimate policy choices made by those who do."230

2. Eubank v. Pella Corp.231

In re High-Tech Employee Antitrust Litigation232

Two court decisions do not necessarily represent a new trend. Nonetheless, in two significant decisions, two different courts peered deeply into the structure, mechanisms and dollars achieved in settlement, and found both deals inadequate.

In Eubank, the appellate court rejected what it characterized as a "scandalous settlement." According to the court, the settlement was chock-a-block with procedural and substantive "red flags," including:

  1. The initial lead class representative was the father-in-law of the lead counsel for the class;
  2. The lead class counsel was being investigated for ethical breaches by the Illinois Bar (and was ultimately disbarred for thirty months), so he had a strong interest in securing a settlement before his ethics case was resolved;
  3. The lead counsel was to receive fees up front, including $2 million before the notice concerning the settlement was sent to the class;

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  1. Claim forms were complicated, discouraging claims. Specifically, forms were more than twelve pages long and required "a slew of arcane data."233

"In sum," the court wrote, "almost every danger sign in a class action settlement that our court and other courts have warned district judges to be on the lookout for was present in this case."234

This case is interesting for at least two reasons. First, it contains an encyclopedic overview of what can go wrong with a class settlement. Second, its searching examination of a restrictive claims process may implicate other cases in which claims-form formalities discourage claims.

Closer to home, in High-Tech, Northern District Court Judge Lucy Koh, sitting in San Jose, rejected settlements Apple, Adobe, Intel, and Google reached a month before trial.

A prior set of settlements with smaller firms (by comparison to Apple and Intel) had generated a settlement fund of $20 million; these firms represented approximately 5% of the employee class.235 However, according to the court, just to be as good as the settlement with the smaller, early settlers, a settlement with the remaining large defendants would have to "total at least $380 million."236 But the actual proposed settlement for these firms was $324.5 million, with 25% of that figure available for attorneys’ fees.

The court found the mismatch between the early settlements and the later settlement "particularly troubling in light of changes in the procedural posture of the case between the two settlements," notably class certification and denial of summary judgment.237

Plaintiffs pointed to various weaknesses in their cases, each of which Judge Koh dissected and found wanting. She concluded: "The Court recognizes that Plaintiffs face substantial risks if they proceed to trial. Nonetheless, the Court cannot in light of the evidence above, conclude that the instant settlement is within the range of reasonableness, particularly compared to the settlements with the Settled Defendants . . . ."238

Judge Koh’s decision generated a writ from defendants. Argument is scheduled for March 13, 2015 in the Ninth Circuit’s Browning Courthouse in San Francisco.239

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In developments in appellate procedure, the U.S. Supreme Court clarified when a lower court decision is considered "final" for purposes of filing a timely notice of appeal.

1. Ray Haluch Gravel Co. v. Central Pension Fund240

Under Federal Rule of Appellate Procedure 4(a)(1)(A), parties in civil actions normally have 30 days "after entry of judgment or order appealed from" to file a notice of appeal. Failure to file a timely notice of appeal is jurisdictional.241

This case raised the question of whether the thirty-day clock started when the substantive decision issued or when a subsequent contract-based fee and cost claim was resolved. In a prior decision, the Court concluded that in cases in which fee and cost claims are based on statutes, the time for filing a notice of appeal runs from entry of the decision on the merits.242

In Haluch, the funds filed their notice of appeal within thirty days of a decision on fee and cost claims, but well after the trial court’s decision on the merits. They argued that the rule of Budinich was inapplicable because their claims were based on contract provisions, not a statute. Writing for a unanimous court, Justice Kennedy rejected this distinction, concluding that "[o]perational consistency is not promoted by providing for different jurisdictional effect to district court decisions that leave unresolved otherwise identical fee claims based solely on whether the asserted right to fees is based on a contract or a statute."243 In reaching this conclusion, Justice Kennedy rejected concerns about "piecemeal litigation," arguing that such concerns are "counterbalanced by the interest in determining with promptness and clarity whether the ruling on the merits will be appealed."244

The cold conclusion was that "[t]here was no timely appeal of the District Court’s . . . order."245

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In procedural developments in patent law, the U.S. Supreme Court, in three instances, rejected the approach taken by the Federal Circuit. First, in Nautilus, Inc. v. Biosig Instruments, Inc.,247 the Supreme Court rejected the Federal Circuit’s standard for definitiveness of patent claims. Second, in Medtronic v. Mirowski Family Ventures,248 the Supreme Court rejected the Federal Circuit’s allocation of the burden of proof in declaratory relief actions, shifting the burden to the patentee. Finally, in Octane Fitness, L.L.C. v. Icon Health & Fitness, Inc.,249 the Supreme Court rejected the Federal Circuit limits on fee petitions, and further held in Highmark, Inc. v. Allcare Health Management System, Inc.250 that district court fee awards are reviewable only for abuse of discretion. In addition, as an important statutory development, trial procedures for the new Patent Trial and Appeal Board were finalized in 2012, providing for expedited, post-grant, third-party challenges to patents.

1. Nautilus, Inc. v. Biosig Instruments, Inc.251

U.S. Patent Law requires that a patent specification "conclude with one or more claims particularly pointing out and distinctly claiming the subject matter which the [applicant] regards as the invention."252 These claims are crucial because they establish the scope of the monopoly granted by a patent.

Until this decision, the applicable standard applied by the Federal Circuit was that a claim was sufficient if it was "amenable to construction" or did not suffer from "insoluble ambiguity." Writing for a unanimous Supreme Court, Justice Ginsberg rejects these formulations, concluding that "the Federal Circuit invoked a standard more amorphous than the statutory definiteness requirement allows."253

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This decision appears to reflect increasing concern by the Supreme Court about the quality of U.S. patents. The Court notes that "a patent must be precise enough to afford clear notice of what is claimed, thereby ‘appris[ing] the public of what is still open to them.’"254 Absence of such clarity "foster[s] the innovation-discouraging ‘zone of uncertainty’ against which this court has warned."255 Moreover, the Court notes, it is in the interest of patentees to make sweeping, ambiguous claims, citing testimony and patent law reference works.256

The Court concludes that: "[A] patent’s claims, viewed in light of the specification and prosecution history, [must] inform those skilled in the art about the scope of the invention with reasonable certainty. The definitiveness requirement, so understood, mandates clarity, while recognizing that absolute precision is unattainable."257

In setting this standard, the Court notes that the rejected standards "permeate the Federal Circuit’s recent decisions."258 While some commentators have suggested that the new standard provides less guidance than it might have, this decision is clearly a brushback against recent Federal Circuit decision-making, and should lead to tighter, clearer patent claims.

2. Medtronic, Inc. v. Mirowski Family Ventures, LLC259

Medtronic, a manufacturer of medical devices, entered into a licensing agreement with Mirowski to use certain of its patents. Upon the introduction of new devices to the market by Medtronic, Mirowski informed the manufacturer that its products infringed Mirowski’s patents. One option for Medtronic was to ignore the warning and await a patent infringement suit, with attendant risks of significant damages. Instead, Medtronic sought declaratory relief in district court.

The issue in this appeal was who bears the burden of proof in a declaratory relief action. Relying on the fact that in a patent infringement action the burden lies with the patentee, the trial court found that the burden of showing infringement should also be on the patentee in a declaratory relief action. The Federal Circuit reversed.

Justice Breyer, writing for a unanimous Court, reversed the Federal Circuit, concluding that: "In our view, the burden of persuasion is with the patentee, just as it would be had the patentee brought an infringement suit."260

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The Court determined that its view was supported by traditional case law and public policy. Pragmatically, the Court noted that placing the burden on the alleged infringer creates an "obstacle" to an otherwise useful mechanism to challenge patents.261

Although a seemingly obscure decision on procedure, this decision protects a cost-effective procedure for challenging overbroad patents. It is another example of the Court pushing back against what it perceives to be a circuit court that is overprotective of patentees.

3. Octane Fitness, L.L.C. v. Icon Health & Fitness, Inc.262

Highmark Inc. v. Allcare Health Management System, Inc.263

Section 285 of the Patent Act provides that a district court "in exceptional cases may award reasonable attorney fees to the prevailing party."264 The Federal Circuit interpreted this provision narrowly, concluding that a case is "exceptional" in only two circumstances: (1) when "there has been material inappropriate conduct," or (2) when the litigation is both (a) "brought in subjective bad faith," and (b) "objectively baseless."265

Justice Sotomayor, writing for the majority in Octane Fitness,266 rejected this standard, finding that: "[T]he framework established by the Federal Circuit in Brooks Furniture is unduly rigid, and it impermissibly encumbers that statutory grant of discretion to district courts."267

Relying on a plain reading of the statutory text and its legislative history, the Court concludes that:

We hold, then, that an "exceptional" case is simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated. District courts may determine whether a case is "exceptional" in the case-by-case exercise of their discretion, considering the totality of the circumstances.268

The decision of the Federal Circuit was reversed, and the case remanded for further proceedings consistent with the opinion.269

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In Highmark, Justice Sotomayor, writing for a unanimous Court, criticized the Federal Circuit for analyzing fee awards de novo, as if they were questions of law. The Court noted with approval that Judge Mayer of the Federal Circuit dissented from this view.270 The Court concluded: "For reasons we explain in Octane, the determination whether a case is ‘exceptional’ under § 285 is a matter of discretion. And as in our prior cases involving similar determinations, the exceptional-case determination is to be reviewed only for abuse of discretion."271

Taken together, the two opinions tell the Federal Circuit to "back off" from protecting losing parties from paying fees in appropriate cases. Although these decisions are framed as matters of statutory interpretation and normal appellate review, they have been hailed as providing a mechanism to rein in abusive patent litigation.

4. Patent Trial and Appeal Board Takes Off

The America Invents Act of 2012 contained new procedural mechanisms for expedited, post-grant, third-party challenges to patents.272 Section 6 of the Act provided for Inter Partes Reexamination, Post-Grant Opposition and Business Methods Review. Each of these innovations was predicated on the perspective that a potentially significant number of patents were either not new or made overbroad claims, and that these problems should be addressable early by an expert administrative forum.

The forum for these cases is the Patent Trial and Appeal Board ("PTAB"), located within the Patent and Trademark Office.273 Trial procedures for this new forum were finalized in late 2012.274

This year, the Patent and Trademark Office provided data on this court’s work and the resolution of its first litigated cases. The results are startling.

Cases filed per month have jumped from just over twenty per month in September 2012 to over 140 per month for September 2014.275 This makes PTAB one of the busiest federal trial courts in the United States.

PTAB petitions breakdown by industry as 63.8% Electrical/Computer, 24.1% Mechanical, 4.0% Chemical, 7.8% Bio/Pharma, and 0.3% Design.276

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The most striking statistics reflect how tough PTAB panels have been on patent claims. For example, for inter partes reviews in the 2014 fiscal year, there were 210 settlements, thirty-nine adverse judgments, and 130 written opinions.277 In percentage terms, 30% of all written opinions ended in an adverse judgment. This may reflect early challenges to very low quality patents, but the percentage of adverse judgments is very high.

Procedures at PTAB are highly expedited. And oral argument is typically before a three-judge panel consisting of expert judges who understand science and technology. One advocate reported to the Wall Street Journal that appearing before a PTAB panel was like "getting CAT-scanned, MRI-ed, and X-rayed, all within a three-hour period."278

These proceedings are still very new, and not without their critics. Randall Rader, the former chief judge of the Federal Circuit, characterized the PTAB’s panels as "death squads . . . killing property rights."279

Historically, antitrust counterclaims to patent infringement lawsuits were classic strategies to test the quality of a patent. Although not eliminated by the America Invents Act, the new, fast procedures at PTAB may begin to displace these actions.


In developments in professional ethics rules, the American Bar Association ("ABA") limited lawyer access to jurors’ social media pages, and the California Bar is considering extending the duty of competence to include a "basic understanding" of e-discovery.

1. ABA Committee on Ethics & Professional Responsibility, Formal Op. 466280

The American Bar Association has issued a new ethics opinion on lawyer review of a juror’s Internet presence. California has not adopted the ABA model rules, but the state has a rule that is analogous to the rule interpreted by this opinion. At issue was the applicability of ABA rules to use of social media sites to assess jurors. The springboard for the analysis is ABA Model Rule 3.5. In relevant part, it says:

A lawyer shall not:

  1. seek to influence a judge, juror, prospective juror or other official by means prohibited by law;
  2. communicate ex parte with such a person during the proceeding unless authorized by law or court order . . . .281

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The key issue is when does a lawyer (or his or her agent) "communicate" with a juror. Using the analogy that it would be okay to drive "down the street where a prospective juror lives to observe the environs in order to glean publicly available information that could inform the lawyer’s jury-selection decisions,"282 the ABA concludes that reviewing a publicly available web page, like a juror’s Facebook page, is not prohibited communication but allowable observation. However, an access request from a lawyer (or the lawyer’s agent) is a form of prohibited communication. But if the mere observation of a page creates a notice from the social media provider, that notice is not deemed to be communication by the lawyer, but communication from the service provider.

This is a logical and practical set of solutions to the nettlesome issue of when lawyers can ethically get information from social media pages.

The analogous California rule is Rules of Professional Conduct, Rule 5-320(B) that states: "During trial a member connected with the case shall not communicate directly or indirectly with a juror."283 This rule has yet to be definitively interpreted for social media pages.

However, in an analogous situation in which members are prohibited from contacting represented parties under Rule 2-100, the San Diego County Bar Legal Ethics Committee concluded that "nothing blocks an attorney from accessing a represented party’s public Facebook page."284 Asking for access, however, as in the ABA opinion, crosses the line.

2. State Bar Standing Committee on Professional Responsibility & Conduct, Proposed Formal Opinion Interim No. 11-0004 (ESI and Discovery Requests)285

The California Bar’s Standing Committee on Professional Responsibility and Conduct invited and recently received comments on a draft ethics opinion that would conclude:

An attorney’s obligations under the ethical duty of competence evolve as new technologies develop and then become integrated with the practice of law. Attorney competence related to litigation generally requires, at a minimum, a basic understanding of, and facility with, issues relating to e-discovery, i.e. the discovery of electronically stored information (ESI). . . . Lack of competence in e-discovery issues can also result in certain circumstances in ethical violations of an attorney’s duty of confidentiality, the duty of candor and/or the ethical duty not to suppress evidence.286

Input on this proposed opinion closed on June 24, 2014. This opinion is expected to issue in some form. If one does not regularly keep up on ESI issues and the latest on

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predictive coding, this potential adjustment in the rule of competence creates a strong incentive to sign up for a Continuing Legal Education program ("CLE") (or two).


Several new federal rules in appellate procedure, civil procedure, and evidence became effective on December 1, 2014. In September 2014, the Federal Judicial Conference forwarded a more controversial set of rule changes to the Supreme Court, which will potentially become effective by December 1, 2015. Further, several new state rules became effective on January 1, 2014 and July 1, 2014.

1. Federal Rules Effective December 1, 2014

On April 25, 2014, Chief Justice Roberts forwarded proposed changes in the federal rules to the House of Representatives.287 These rules became final on December 1, 2014.288 Major changes include:

1. Federal Rules of Appellate Procedure

Rule 6(b)289 is adjusted to provide a streamlined procedure for re-designating and forwarding the record on appeal for direct appeals of bankruptcy court decisions.

2. Federal Rules of Civil Procedure

Rule 77290 is amended to provide that a court may require that the clerk’s office be open during specified hours on Saturday.

3. Federal Rules of Evidence

In the most significant amendment, the Federal Rules of Evidence are amended to provide that records that meet standard hearsay exceptions, including business records, presumptively come into evidence if the elements of the exception are met. Once this showing is made, the burden explicitly shifts to the opponent of admission to "show that the source of information or the method or circumstances of preparation indicate a lack of trustworthiness." This approach applies to Records of Regularly Conducted Activities,291 Absence of a Record of Regularly Conducted Activity,292 and Public Records.293

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2. More Controversial Federal Rules in the Pipeline

Further, the Federal Judicial Conference forwarded a more controversial set of rule changes to the Supreme Court in September 2014.294 If these rules are approved by the Supreme Court early this year, they could become effective by December 1, 2015. These rules originally cut in half the number of interrogatories and depositions presumptively allowed under the Federal Rules of Civil Procedure, but those changes were dropped after strong negative responses from numerous legal organizations and individual lawyers.

The remaining proposals, however, are still significant. The most important are:

  • Proposed Rule 26(b)(1) provides that the scope of discovery is limited to "matter that is relevant to any party’s claim or defense and proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties’ relative access to relevant information, the parties resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the discovery in resolving the issues outweighs its likely benefit."295
  • Proposed Rule 37(e) significantly limits the ability of federal courts to issue terminating or adverse inference sanctions for spoliation of evidence. 296

These proposed amendments have already been the subject of numerous articles and CLE programs. We expect more coverage throughout the year.

3. State Rules Effective on January 1, 2014 and July 1, 2014

The Ethics Standards for Neutral Arbitrators in Contractual Arbitration are amended to increase disclosures of (1) personal relationships of persons close to the arbitrator who also have relationships with one of the parties to the arbitration and (2) actual or possible business relationships with one of the parties to the arbitration. The most significant change is Standard 17, which is amended to limit "solicitation" of business.297 On these same dates, amended California Rules of Court become effective regulating petitions under the California Environmental Quality Act.298

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There were two important international developments in 2014. First, the European Union enacted a directive on private antitrust damage actions. Second, the Supreme Court of Canada addressed indirect purchaser class actions in three significant decisions.

1. Directive 2014/104/E.U. of the European Parliament and of the Council of 26 November 2014 on Certain Rules Governing Actions Under National Law for Infringements of the Competition Law Provisions of the Member States and the European Union, 2014 O.J. (L349) 1299

On November 26, 2014, the European Union enacted standards for damage actions brought under the competition laws of the European Union or its Member States. Major changes include:

  • Full Compensation: Article 3 provides that any natural or legal person harmed by a competition law violation is entitled to "obtain full compensation for that harm."300
  • Disclosure of Evidence: Article 5 provides for disclosure of "reasonably available facts and evidence sufficient to support the plausibility of [plaintiff’s] claim for damages."301 This is subject to a proportionality principle.302 Confidentiality is to be protected,303 as is "applicable legal professional privilege."304
  • Collateral Estoppel: Article 9 provides that "infringement" of local or E.U. competition law is "deemed to be irrefutably established" for purposes of a damage action by a "final decision of a national competition authority or by a review court."305
  • Limitation Period: Article 10 provides that the statute of limitations may not be less than five years. This period is tolled by actions of competition authorities and is triggered when the illegal activity "ceased and the claimant knows, or can reasonably be expected to know" about the activity.306

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  • Joint and Several Liability: Article 11 creates joint and several liability for "joint behavior."307 This principle is limited, however, for defined "small or medium-sized enterprises," which are liable only for damages to their "own direct and indirect purchasers."308 A similar limitation protects any "immunity recipient."309
  • Passing-On: Article 12 provides that "direct or indirect purchasers" harmed by an infringement can recover for their injuries.310 Recoveries are limited to "actual loss at any level of the supply chain," but should not exceed the harm suffered at that level.311 Article 13 recognizes a passing-on defense, but the burden of demonstrating passing-on "shall be on the defendant." Indirect purchasers bear the burden of showing injury, but this is presumed when the indirect purchaser shows:
    1. the defendant violated the law;
    2. the violation resulted in an overcharge to the downstream claimant; and
    3. the claimant purchased goods or services that were the "object of the infringement" or "has purchased goods or services derived from or containing them."312
  • The defendant can rebut this presumption by demonstrating "credibly to the satisfaction of the court that the overcharge was not, or was not entirely, passed on to the indirect purchaser."313
  • Quantification of Harm: Article 17 provides that "neither the burden or the standard of proof for the quantification of harm" may render "exercise of the right to damages practically impossible or excessively difficult."314
  • Settlement: Following a "consensual settlement, the claim of the injured part is reduced by the settling co-infringer’s share of the harm."315 "Any remaining claim of the settling claimant shall be exercised only against non-settling [defendants]."316
  • Effective Date: Member States "shall bring into force the laws, regulations and administrative provisions necessary to comply with" the Directive by December 27, 2016.317

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These new standards set the stage for a new era of private litigation in the European Union. If your clients have potential E.U. exposure, this is a must-read statute and suggests that you will want to monitor nation-by-nation implementation of these standards.

These standards are also potentially interesting to U.S. practitioners. In particular, the structure for addressing passing-on issues appears quite practical. The creation of a rebuttable presumption that anti-competitive overcharges will pass to downstream purchasers, after a minimum showing, is potentially a good way to address the complexity of inter-level damage disputes.

2. Pro-Sys Consultants, Ltd. v. Microsoft Corp.318

Sun-Rype Products, Ltd. v. Archer Daniels Midland Co.319

Infineon Technologies AG v. Option consommateurs320

These three decisions bring a relatively pro-plaintiff perspective to private antitrust litigation in Canada. The most important policy decision is Microsoft, in which the Canadian court addresses a litany of rationales for denying or limiting indirect purchaser damage actions. The court, for example: rejected the assertion that direct purchasers are the most effective private enforcers of the antitrust laws; rejected the idea that indirect purchaser actions are too complex; and acknowledged that its decision was different from the U.S. Supreme Court’s decision in Illinois Brick, citing with approval various state repealers of the Illinois Brick rule and the Supreme Court’s own decision in California v. ARC America,321 protecting such statutes from federal preemption.322

Canada’s high court rejected potential inter-level disputes as a basis for denying class certification, writing "to the extent that there is conflict between the class members as to how the aggregate amount is to be distributed . . . this is not a concern of respondents and is not a basis for denying indirect purchasers the right to be included in the class action.323

The court also adopted the rationale of the Quebec Court of Appeal, which had held that a contract between a seller and an end-user in Quebec conferred class action jurisdiction on Quebec trial courts.324

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Taken together, these decisions illuminate how different Canadian law is from U.S. law. Like the developments in the E.U., these decisions are very important to your international clients.


The Green Bag, a legal periodical famous during the Progressive Era and recently revived as a publication focused on good legal writing,325 recently honored a number of California judges and publications with exemplary legal writing awards.326 Honorees include:

  • District Judge Susan Ilston (N.D. Cal.) for her opinion in In re National Security Letter.327 The opinion addresses complex national security and First Amendment issues with clarity and assurance.
  • Circuit Judge Milan D. Smith, Jr. for his dissenting opinion in Lane v. Facehook, Inc.328 Judge Smith was joined by five circuit judges in questioning an expansion of the cy pres doctrine as applied to class actions. His opinion is a model of economy and precision.
  • Seventh Circuit Judge Diane Wood for her article in the California Law Review, When to Hold, When to Fold and When to Reshuffle: The Art of Decisionmaking on a Multi-Memher Court.329 This article starts with a quote from Mel Brooks and ends with thoughtful insights into how appellate courts really work.
  • Also singled out as among the best writing in the country were:
    • Circuit Judge John T. Noonan for his opinion in Kumar v. Holder.330 This is a thoughtful decision addressing the issue of what conduct is sufficient to eject an immigrant for his potential role in torturing political prisoners in his home country.
    • Chief Circuit Judge Alex Kozinski for his opinion in In re Motor Fuel Temperature Sales Practices Litigation.331 This is a short opinion rejecting the offer of an inter-circuit transfer of cases to another circuit. In effect, this is a judicial kiss-off, albeit done in meticulous prose.
    • Judge Otis T. Wright for his opinion in Ingenuity 13 LLC v. Doe.332 This order starts with a quote from Star Trek’s Mr. Spock and then dispatches a law firm that coerced settlements from individuals who had downloaded videos on pain of paying exorbitant legal fees.

    [Page 49]

    These are examples of the best legal writing in the United States. Award-winning writings are reprinted in the 2014 Green Bag Almanac and Reader.

    [Page 50]



    1. Thomas Greene is special litigation counsel with the Bureau of Competition, Federal Trade Commission. Thomas A. Papageorge is the head of the Consumer Protection Unit, San Diego District Attorney’s Office. The views expressed in this article are the authors’ alone and do not necessarily reflect the views of the Federal Trade Commission or the San Diego District Attorney’s Office.

    2. Cal. Bus. & Prof. Code § 16720 et seq.

    3. 200 Cal. App. 4th 442 (2011), petition for review granted, 269 P.3d 653 (Cal. 2012).

    4. See 200 Cal. App. 4th at 454 n.2.

    5. Id. at 455.

    6. Id. at 478.

    7. 466 F.3d 187 (2d Cir. 2006).

    8. Id. at 221.

    9. 200 Cal. App. 4th at 467.

    10. Id.

    11. In re Cipro Cases I & II, 269 P.3d 653 (Cal. 2012).

    12. 133 S. Ct. 2223 (2013).

    13. Order, In re Cipro Cases I & II, JCCP Nos. 4154 & 4220 (Sup. Ct. Nov. 18, 2013).

    14. See Frequently Asked Questions, Cipro Settlement, (last visited Jan. 27, 2015); see also In re Cipro Cases I & II, 121 Cal. App. 4th 402 (2004).

    15. In re Cipro Cases I & II, 334 P.3d 687 (Cal. 2014).

    16. Brief of the Cal. Attorney General, In re Cipro Cases I and II, No. S198616, 2014 WL 1765268 (Cal. Ct. App. Mar. 19, 2014).

    17. No. 12-cv-05874, 2014 WL 4273888 (N.D. Cal. Aug. 29, 2014).

    18. In 2010 and 2013 Intuit entered into consent-decree settlements with both the U.S. and California authorities. Stipulation, United States v. Adobe Sys, Inc., No. 10-cv-01629 (D.D.C. Sept. 24, 2010); Stipulation, California v. Intuit, Inc., No. 13-cv-02933 (N.D. Cal. June 26, 2013).

    19. Complaint, United States v. eBay, Inc., 12-cv-05869 (N.D. Cal. Nov. 16, 2012).

    20. United States v. eBay, Inc., 968 F. Supp. 2d 1030 (N.D. Cal. 2013); California v. eBay, Inc., No. 12-cv-05874, 2013 WL 5423774 (N.D. Cal. Sept. 27, 2013).

    21. eBay, Inc., 2014 WL 4273888.

    22. No. B249822, 2013 WL 5530508 (Cal. App. 2d Dist. Oct. 7, 2013).

    23. 551 U.S. 887 (2007).

    24. 20 Cal. 3d 367 (1978).

    25. Alsheikh, 2013 WL 5530508, at *3 (citing Kuhnert v. Mission Fin. Serv. Corp., 110 Cal. App. 4th 242, 263 (2003); Mailand, 20 Cal. 3d 367; Leegin, 551 U.S. 887; Auto Equity Sales, Inc. v. Superior Court, 57 Cal. 2d 450, 455 (1962)).

    26. No. S-14-0666, 2014 WL 3401451 (E.D. Cal. July 10, 2014).

    27. Lin, 2014 WL 3401451, at *6.

    28. No. 12-cv-8676, 2013 WL 2151478 (C.D. Cal. Mar. 4, 2013).

    29. 550 U.S. 544 (2007).

    30. Name.Space, 2013 WL 2151478, at *6 (quoting Cnty. of Tuolumne v. Sonora Cmty. Hosp., 236 F.3d 1148, 1160 (9th Cir. 2001)) (internal quotation marks omitted).

    31. Id. at *7.

    32. Cal. Bus. & Prof. Code § 16600 et seq.

    33. 223 Cal. App. 4th 1242 (2014).

    34. Id. at 1248 (internal quotation marks omitted).

    35. Id. at 1250.

    36. Id. at 1251 (citing similar decisions from other states).

    37. Cal. Civ. Code § 1750 et seq.

    38. No. S173972, 58 Cal. 4th 1081 (May 1, 2014).

    39. Id. at 1108.

    40. Id. at 1123-24.

    41. Id. at 1135.

    42. Id. at 1137.

    43. 27 F. Supp. 3d 1027 (N.D. Cal. 2014).

    44. 144 Cal. App. 4th 824 (2006).

    45. 27 F. Supp. 3d at 1042.

    46. No. 1:13-cv-00437, 2013 WL 5670888 (E.D. Cal. Oct. 16, 2013).

    47. Id. at *6.

    48. 220 Cal. App. 4th 217 (2013).

    49. Cal. Bus. & Prof. Code § 17200 et seq.

    50. 131 S. Ct. 1740 (2011).

    51. 9 U.S.C. § 1 et seq.

    52. 59 Cal. 4th 348 (2014).

    53. 201 Cal. App. 4th 74 (2012).

    54. 59 Cal. 4th 1 (2014).

    55. Id. at 42.

    56. Id. at 40.

    57. 59 Cal. 4th 772 (2014).

    58. 49 U.S.C. § 14501.

    59. 59 Cal. 4th at 783.

    60. Id. at 786 (alteration in original) (citing Morales v. Trans World Airlines, Inc., 504 U.S. 374, 390 (1992)) (internal quotation marks omitted).

    61. 743 F.3d 662 (9th Cir. 2014).

    62. 769 F.3d 637 (9th Cir. 2014).

    63. Id. at 650.

    64. 738 F.3d 1350 (Fed. Cir. 2013).

    65. Id. at 1355.

    66. 761 F.3d 1027 (9th Cir. 2014).

    67. 12 U.S.C. § 1 et seq.

    68. 28 U.S.C. § 1332(d).

    69. 178 Cal. Rptr. 3d 122 (Cal. Ct. App. 2014) (previously published at 229 Cal. App. 4th 1291), review granted, No. S222314, 2015 WL 177288 (Cal. Jan. 14, 2015).

    70. See 29 U.S.C. § 651(b)(3).

    71. 2015 WL 177288.

    72. 741 F.3d 1022 (9th Cir. 2014).

    73. 12 U.S.C. §§ 85-86.

    74. 12 U.S.C. § 1831d(a).

    75. 741 F.3d at 1028.

    76. 134 S. Ct. 2878 (2014).

    77. 59 Cal. 4th 348 (2014).

    78. 131 S. Ct. 1740 (2011).

    79. 42 Cal. 4th 443 (2007).

    80. 59 Cal. 4th at 360.

    81. Id. at 366.

    82. Id. at 384.

    83. Id. at 360.

    84. Id. at 388-89.

    85. 733 F.3d 928 (9th Cir. 2013).

    86. Id. at 934 (second alteration in original) (citing AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740, 1747 (2011)).

    87. Id.

    88. 224 Cal. App. 4th 398 (2014).

    89. Id. at 408-09.

    90. 214 Cal. App. 4th 1172 (2013), review granted, 302 P.3d 573 (Cal. 2013).

    91. 213 Cal. App. 4th 587 (2013), review granted, 299 P.3d 700 (Cal. 2013).

    92. 232 Cal. App. 4th 753 (2014).

    93. 733 F.3d 928 (9th Cir. 2013).

    94. See, e.g., Sonic-Calabasas A, Inc. v. Moreno, 57 Cal. 4th 1109 (2013), cert. denied, 134 S. Ct. 2724 (2014).

    95. 59 Cal. 4th 348 (2014).

    96. 24 Cal. 4th 83(2000).

    97. 201 Cal. App. 4th 74 (2011), review granted, 272 P.3d 976 (Cal. 2012).

    98. 213 Cal. App. 4th 587 (2013), review granted, 299 P.3d 700 (Cal. 2013).

    99. 225 Cal. App. 4th 338 (2014).

    100. Id. at 346-47.

    101. Id. at 343-46.

    102. 227 Cal. App. 4th 11 (2014), review granted, 334 P.3d 685 (Cal. 2014).

    103. 733 F.3d 916 (9th Cir. 2013).

    104. Id. at 927.

    105. 763 F.3d 1171 (9th Cir. 2014).

    106. 771 F.3d 559 (9th Cir. 2014).

    107. 221 Cal. App. 4th 986 (2013).

    108. 222 Cal. App. 4th 456 (2013).

    109. Id. at 463-64.

    110. 227 Cal. App. 4th 299 (2014).

    111. 221 Cal. App. 4th 49 (2013).

    112. 228 Cal. App. 4th 941 (2014).

    113. Id. at 943-44.

    114. Id. at 944.

    115. 225 Cal. App. 4th 1539 (2014).

    116. Id. at 1543.

    117. Id. at 1545.

    118. Id. at 1546.

    119. Id. at 1548-49.

    120. Cal. Bus. & Prof. Code § 17500 et seq.

    121. 228 Cal. App. 4th 605 (2014), review granted, 337 P.3d 1158 (Cal. 2014).

    122. 14 Cal. 4th 434 (1996).

    123. 228 Cal. App. 4th at 637.

    124. Id. at 637-38.

    125. 228 Cal. App. 4th 294 (2014).

    126. 220 Cal. App. 4th 217 (2013).

    127. Id. at 226-27.

    128. 134 S. Ct. 584 (2013).

    129. 134 S. Ct. 568 (2013).

    130. 134 S. Ct. 584.

    131. Younger v. Harris, 401 U.S. 37 (1971).

    132. 457 U.S. 423 (1982).

    133. Sprint Commc’ns. Co. v. Jacobs, 690 F.3d 864 (2012).

    134. 134 S. Ct. at 590-91 (citations omitted).

    135. Id. at 588 (citing New Orleans Pub. Serv., Inc. v. Council of New Orleans, 491 U.S. 350, 367-68 (1989)) (internal quotation marks omitted).

    136. Id. at 593 (citation omitted) (second and third alteration in original).

    137. Id. (internal quotation marks omitted).

    138. Id. (citations omitted).

    139. Id. at 594.

    140. 134 S. Ct. 568 (2013).

    141. Id. at 575 (citation omitted) (internal quotation marks omitted).

    142. Id. at 579 (internal quotation mark omitted). The Court rejected use of either 28 U.S.C. §1406(a) or Federal Rule of Civil Procedure 12(b)(3) because use of either provision requires a determination that the venue selected is "wrong" or "improper." Here the Texas venue may have been proper, but the parties had agreed to another, proper venue in Virginia. Id. at 577-79.

    143. Id. at 581.

    144. Id. at 582.

    145. Id. at 581 (emphasis added).

    146. Id. at 582.

    147. Id. at 580 (citation omitted).

    148. Id. at 581 n.5 ("Our analysis presupposes a contractually valid forum-selection clause.").

    149. 758 F.3d 1074 (9th Cir. 2014).

    150. No. 14-8003, 2014 U.S. App. LEXIS 22408 (7th Cir. Nov. 26, 2014).

    151. 758 F.3d 1074.

    152. Id. at 1078.

    153. Id. at 1081.

    154. Id.

    155. Id. at 1080-87.

    156. Id. at 1086.

    157. Id. (citing 15 U.S.C. § 6a).

    158. 683 F.3d 845 (7th Cir. 2012).

    159. 758 F.3d at 1090 (alteration in original) (quoting Minn-Chem, 683 F.3d at 855) (internal quotation marks omitted).

    160. Id. at 1091.

    161. United States v. Hui Hsiung, No. 12-10492, 2015 U.S. App. LEXIS 1590 (9th Cir. Jan. 30, 2015).

    162. 758 F.3d at 1092.

    163. Hui Hsiung, 2015 U.S. App. LEXIS 1590, at *51.

    164. Id. at *44.

    165. Id. at *53-54 (alteration in original) (citations omitted).

    166. 18 U.S.C. § 3571(d).

    167. Hui Hsiung, 2015 U.S. App. LEXIS 1590, at *56; see also 758 F.3d at 1095.

    168. Hui Hsiung, 2015 U.S. App. LEXIS 1590, at *58; see also 758 F.3d at 1096.

    169. No. 14-8003, 2014 U.S. App. LEXIS 22408 (7th Cir. Nov. 26, 2014).

    170. Id. at *6.

    171. Motorola Mobility LLC v. AU Optronics Corp., 746 F.3d 842, 843 (7th Cir. 2014).

    172. See 15 U.S.C. § 6a.

    173. 746 F.3d at 844.

    174. Id. at 845.

    175. Id. at 846 (quoting F. Hoffmann-La Roche Ltd. v. Empagran S.A., 542 U.S. 155, 165 (2004)).

    176. Editorial Board, A Cramped View of Antitrust Laws, The Motorola Mobility Ruling and Foreign Cartels, N.Y. Times, July 16, 2014, at A18.

    177. Motorola Mobility LLC v. AU Optronics Corp., No. 14-8003, 2014 U.S. App. LEXIS 12704 (7th Cir. July 1, 2014).

    178. Motorola Mobility LLC v. AU Optronics Corp., No. 14-8003, 2014 U.S. App. LEXIS 22408, at *25-32 (7th Cir. Nov. 26, 2014).

    179. Id. at *30 (quoting Robert E. Connolly, Repeal the FTAIA! (Or At Least Consider It as Coextensive with Hartford Fire), CPI Antitrust Chron. (Sept. 2014),

    180. 431 U.S. 720 (1977).

    181. Motorola, 2014 U.S. App. LEXIS 22408, at *18.

    182. 741 F.3d 1185 (11th Cir. 2013).

    183. 735 F.3d 1179 (10th Cir. 2013).

    184. 742 F.3d 860 (9th Cir. 2014).

    185. Carrion, 735 F.3d at 1183 (citations omitted).

    186. Id. at 1186; see, e.g., Elm Grove Coal Co. v. Dir., O.W.C.P., 480 F.3d 278, 303 (4th Cir. 2007) (finding work-product materials given to expert discoverable).

    187. 735 F.3d at 1186 (citing Fed. R. Civ. P. 26).

    188. Republic of Ecuador v. Hinchee, 741 F.3d 1185, 1194-95 (11th Cir. 2013) (citations omitted).

    189. See also Apple Inc. v., Inc., No. 11-1327, 2013 U.S. Dist. LEXIS 47124 (N.D. Cal. Apr. 1, 2013) (consulting experts must be prepared to testify at depositions on assistance provided to testifying expert).

    190. Republic of Ecuador v. Mackay, 742 F.3d 860, 870-71 (9th Cir. 2014).

    191. No. 11-cv-00678, 2014 U.S. Dist. LEXIS 69166 (D. Nev. May 19, 2014).

    192. Id. at *25-31.

    193. Top 10 Best Practices in Predictive Coding, Equivio, + update%3A+Epiq+adopts+Zoom%2C+Clustering+in+Zoom%2C + Case + Order + on+Relevance…&utm_campaign=Equivio+update+August+22&utm_medium=email (last visited Feb. 1, 2015).

    194. 230 Cal. App. 4th 35 (2014).

    195. Id. at 38.

    196. Cal. Civ. Proc. § 1985.8(a)(1).

    197. Id. § 1985.8(b).

    198. Id. § 1985.8(g).

    199. Id. § 1985.8(d).

    200. Id. § 1985.8(f)

    201. Vasquez, 230 Cal. App. 4th at 38 (internal quotation mark omitted).

    202. Id. at 39.

    203. 234 F.R.D. 674 (N.D. Cal. 2006).

    204. 135 S. Ct. 547 (U.S. 2014).

    205. 28 U.S.C. § 1446(a).

    206. Dart, 135 S. Ct. at 552 (emphasis added) (quoting 28 U. S.C. § 1453(c)(1)) (internal quotation mark omitted).

    207. Id.

    208. Id. at 555.

    209. Justice Thomas also wrote separately to disassociate himself from one sentence in the dissent of the four Justices and made the additional point that the Court did not have jurisdiction "to review even the Court of Appeals’ denial of permission to appeal" on the grounds that such decisions were not "cases" within the meaning of 28 U. S. C. § 1254. Id. at 562.

    210. Id. at 559.

    211. Id. at 558-59.

    212. No. 2:12-cv-2040-JAD-PAL, 2014 U.S Dist. LEXIS 49762 (D. Nev. Apr. 10, 2014).

    213. Id. at *2-3.

    214. 285 F.3d 764, 773 (9th Cir. 2002).

    215. Randazza, 2014 U.S. Dist. LEXIS 49762, at *5 (citations omitted).

    216. Id. at *7-8 (citing Haines v. Home Depot U.S.A., Inc., No. 1:10-cv-017863-SK, 2012 Dist. LEXIS 47967 (E.D. Cal. Apr. 4, 2012)).

    217. Id. at *8-9 (citing Orr v. Bank of America, 285 F.3d at 774 n.8).

    218. Id. at *9; see also Fed. R. Evid. 901(b)(4) ("distinctive characteristics of the item together with all circumstances"); Fed. R. Evid. 902(7) ("sign, tag or label . . . indicating origin, ownership, or control").

    219. Randazza, 2014 U.S. Dist. LEXIS 49762, at *9.

    220. 742 F.3d 104, 132-33 (4th Cir. 2014).

    221. Randazza, 2014 U.S. Dist. LEXIS 49762, at *12.

    222. Id. at *13.

    223. 752 F.3d 285 (2d Cir. 2014).

    224. Citigroup, 752 F.3d at 293.

    225. Id. at 295 (citation omitted).

    226. Id. (citation omitted).

    227. Id. at 297.

    228. Id. at 294-95 (citations omitted); see also SEC v. Randolph, 736 F.2d 525, 529 (9th Cir. 1984).

    229. See Citigroup, 752 F.3d at 294-95.

    230. Id. at 296 (citations omitted).

    231. 753 F.3d 718 (7th Cir. 2014).

    232. No. 11-CV-02509-LHK, 2014 U.S. Dist. LEXIS 110064 (N.D. Cal. Aug. 8, 2014).

    233. Pella, 753 F.3d at 725-26.

    234. Id. at 728-29 (citations omitted).

    235. High-Tech, 2014 U.S. Dist. LEXIS 110064, at *17.

    236. Id. at *18.

    237. Id. at *21-23.

    238. Id. at *58.

    239. Hearing schedule for Adobe Systems, Inc. v. USDC-CASJ, No. 14-7274, available at – James R. Browning U.S. Courthouse, San Francisco&dates=9-13, 17,18&year=2015 (last visited Feb. 2, 2015).

    240. 134 S. Ct. 773 (2014).

    241. 28 U.S.C. § 1291; see also Bowles v. Russell, 551 U.S. 205, 214 (2007).

    242. See Budinich v. Becton Dickinson & Co., 486 U.S. 196 (1988).

    243. Haluch, 134 S. Ct. at 780.

    244. Id. at 781.

    245. Id. at 783.

    246. This section is confined to procedural developments in patent law. However, no discussion of patent law in 2014 can ignore the leading substantive development in this area of the law, Alice Corporation Pty. Ltd. v. CLS Bank International. 134 S. Ct. 2347 (2014). Challenged in this action was a "computer-implemented scheme for mitigating ‘settlement risk’ (i.e. the risk that only one party to a financial transaction will pay what it owes) by using a third-party intermediary." Alice, 134 S. Ct. at 2351-52. The question presented was whether this was "patent eligible." This implicated the distinction between a new or useful process, machine manufacture, or composition of matter, on the one hand (patentable) versus a law of nature, natural phenomenon, or abstract idea, on the other (not patentable). This was last addressed by the Court in Bilski v. Kappos. 561 U.S. 593 (2010) (holding that the innovation was not patentable because it was an attempt to patent basic hedging practices). This distinction is crucial, the Court notes, because "’monopolization of [the basic tools of scientific and technological work] through the grant of a patent might tend to impede innovation more than it would tend to promote it,’ thereby thwarting the primary object of the patent laws." Alice, 134 S. Ct. at 2354 (citations omitted). Justice Thomas, writing for a unanimous Court, concluded that the Alice technology was not patentable. The result has been a significant reassessment of a number of patents and a possible reduction in enforcement actions by non-practicing entities that own a number of similar patents.

    247. 134 S. Ct. 2120 (2014).

    248. 134 S. Ct. 843 (2014).

    249. 134 S. Ct. 1749 (2014).

    250. 134 S. Ct. 1744 (2014).

    251. 134 S. Ct. 2120.

    252. 35 U.S.C. § 112.

    253. Biosig, 134 S. Ct. at 2131.

    254. Id. at 2129 (citation omitted).

    255. Id. at 2130 (citation omitted).

    256. Id. at 2129.

    257. Id.

    258. Id. at 2130.

    259. 134 S. Ct. 843 (2014).

    260. Id. at 849.

    261. Id. at 850-51.

    262. 134 S. Ct. 1749 (2014).

    263. 134 S. Ct. 1744 (2014).

    264. 35 U.S.C. § 285.

    265. Brooks Furn. Mfg., Inc. v. Dutailier Int’l, Inc., 393 F.3d 1378, 1381-82 (Fed. Cir. 2005).

    266. Justice Sotomayor delivered the opinion of the Court in which Justices Roberts, Kennedy, Thomas, Ginsburg, Breyer, Alito, and Kagan joined. Justice Scalia joined the majority opinion with the exception of three footnotes.

    267. Octane Fitness, 134 S. Ct. at 1755.

    268. Id. at 1756.

    269. Id. at 1758.

    270. Highmark, 134 S. Ct. at 1748-49.

    271. Id. at 1748 (citations omitted).

    272. Leahy-Smith America Invents Act, Pub. L. No. 112-29, 125 Stat. 284 (2011) (effective Sept. 16, 2012).

    273. 35 U.S.C. § 6(a).

    274. Patent & Trademark Office, Rules of Practice Before the Patent Trial and Appeal Board and Judicial Review of Patent Trial and Appeal Board Decisions, 37 C.F.R. § 42.1 et seq. (2012).

    275. Patent & Trademark Office, AIA Program Statistics-Graphical View and Subsets 1 (2015), available at

    276. Id. at 2. Patent & Trademark Office, Patent Trial and Appeal Board AIA Progress Statistics (as of 02/05/2015), available at (last visited Feb. 12, 2015).

    277. Id. at 5.

    278. Ashby Jones, A New Weapon in Corporate Patent Wars, Wall St. J. (Mar. 10, 2014),

    279. Id.

    280. ABA Comm. on Ethics & Prof’l Responsibility, Formal Op. 466 (2014).

    281. Model Rules of Prof’l Conduct r. 3.5.

    282. ABA Comm. on Ethics & Prof’l Responsibility, Formal Op. 466, at 4 (2014).

    283. Cal. Prof. Conduct, Rule 5-320(B).

    284. San Diego County Bar Assoc., Legal Ethics Op. 2011-2 (2011), available at

    285. State Bar of Cal. Standing Comm. on Prof. Responsibility and Conduct, Formal Op. Interim No. 11-0004 (2014).

    286. Id. at 1.

    287. See Summary of the Report of the Judicial Conference Committee on Rules of Practice and Procedure (Sept. 2013), available at

    288. See 160 Cong. Rec. H7933 (daily ed. Nov. 12, 2014); H.R. Doc. No. 113-161 (2014) (Fed. R. App. P. 6); H.R. Doc. No. 113-163 (2014) (Fed. R. Civ. P. 77); H.R. Doc. No. 113-164 (2014) (Fed. R. Evid. 801, 803).

    289. Fed. R. App. P. 6(b).

    290. Fed. R. Civ. P. 77.

    291. Fed. R. Evid. 803(6)(E).

    292. Fed. R. Evid. 803(7)(C).

    293. Fed. R. Evid. 803(8)(B).

    294. See Summary of the Report of the Judicial Conference Committee on Rules of Practice and Procedure (Sept. 2014), available at

    295. Proposed Amendments to the Fed. R. Civ. P. 10 (2014) (emphasis added), available at

    296. Id. at 36.

    297. Amendments to Ethics Standards for Neutral Arbitrators in Contractual Arbitration (2014), available at

    298. See Amendments to California Rules of Court R. 3.1365 (2014), available at

    299. 2014 O.J. (L349) 1, available at

    300. Id. at 12.

    301. Id.

    302. Id.

    303. Id.

    304. Id. at 13.

    305. Id. at 14-15.

    306. Id. at 15.

    307. Id.

    308. Id.

    309. Id.

    310. Id. at 16.

    311. Id.

    312. Id.

    313. Id. at 17.

    314. Id.

    315. Id. at 18.

    316. Id.

    317. Id.

    318. [2013] S.C.R. 477 (Can.).

    319. [2013] S.C.R. 545 (Can.).

    320. [2013] S.C.R. 600 (Can.).

    321. 490 U.S. 93 (1989). The author represented California in this appeal.

    322. Microsoft, [2013] S.C.R. 477, ¶¶ 44-59.

    323. Sun-Rype Prods., [2013] S.C.R. 545, ¶ 20.

    324. Infineon Techs., [2013] S.C.R. 600, ¶ 48.

    325. More on The Green Bag can be found at:

    326. Editors, Recommended Reading, 2014 Green Bag Alm. 6-10.

    327. 930 F. Supp. 1064 (N.D. Cal. 2013).

    328. 709 F.3d 791 (9th Cir. 2013).

    329. 100 Calif. L. Rev. 1445 (2012).

    330. 728 F.3d 993 (9th Cir. 2013).

    331. 711 F.3d 1050 (9th Cir. 2013).

    332. No. 2:12-cv-8333-ODW (JCx), 2013 U.S. Dist. LEXIS 64564 (C.D. Cal. May 6, 2013).

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