Antitrust and Unfair Competition Law

Competition: Spring 2016, Vol 25, No. 1


By Thomas Greene1


This Article provides a selection of litigation developments that may be of particular importance to members of the Antitrust and Unfair Competition Section, presenting federal and California procedural developments in the areas of jurisdiction, pleadings, discovery, evidence, patent and copyright procedures, appeals, and ethics. Please consult other references for all of the developments that may be important to your practice.


A. United States Supreme Court Limits International Reach of United States Courts

1. OBB Personenverkehr AG v. Sachs2

This case arose from a tragic accident in Austria. The plaintiff was seriously injured when she tried to board an OBB train at Innsbruck in Austria. The plaintiff, a Berkeley resident, subsequently sued OBB, the Austrian state-owned railway system, in United States District Court in San Francisco.

The question before the Supreme Court was the scope of the Foreign Sovereign Immunities Act.3 That Act generally provides that no foreign state nor any agency or instrumentality of such a state can be sued in federal court. However, specific exceptions abrogate this rule. One of these is an exception for suits "based upon a commercial activity carried on in the United States."4

The plaintiff alleged that she had purchased a Eurail pass in the United States, which she argued trigged the "commercial activity" exception of the Act. Writing for a unanimous Court, Chief Justice Roberts concluded that her injury was not "based upon" OBB’s commercial activities in the United States. Rather, he wrote:

Under any theory of the case that Sachs presents, there is nothing wrongful about the sale of the Eurail pass standing alone. Without the existence of the unsafe boarding conditions in Innsbruck, there would have been nothing to warn Sachs about when she bought the Eurail pass. However Sachs frames her suit, the incident in Innsbruck remains its foundation.5

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Closing the door on plaintiffs action, the Chief Justice cited a letter from Justice Holmes to then-Professor Frankfurter, noting that Holmes "wrote that the ‘essentials’ of a personal injury narrative will be found at the ‘point of contact’—’the place where the boy got his fingers pinched.’"6


A. California Legislature Beefs Up Sanctions for Bad Faith Pleadings

Until the early 1990s, a basic tool for litigators facing bad faith tactics in state court was California Civil Procedure Code § 128.5. This provision was eviscerated by a 1992 decision that required a showing of both objective and subjective bad faith.7 The statute received a coup de grace in 1995 when the California Legislature limited its use to cases initiated on or before December 31, 1994. At the same time, however, the Legislature enacted California Civil Procedure Code §128.7, which is roughly analogous to Federal Rule of Civil Procedure 11. Section 128.7 is still in use today.

In the most recent session of the Legislature, Section 128.5 was brought back to life. The new legislation was premised on the view that courts "have lost an important tool used to ensure that bad faith actions that can materially harm the other party or the fairness of a trial are discouraged."8

In its new incarnation, Section 128.5:

  • Authorizes courts to "order a party, the party’s attorney, or both to pay the reasonable expenses, including attorney’s fees, incurred by another party as a result of bad-faith actions or tactics that are frivolous or intended to cause unnecessary delay."9
  • Applies to "[a]ctions or tactics" that include "making or opposing of motions."10 However, the section does not apply to "disclosures and discovery requests, responses, objections, and motions."11
  • Defines "Frivolous" as: "totally and completely without merit or for the sole purpose of harassing an opposing party."12
  • Requires compliance with the procedural requirements of Section 128.7, which means giving the offending party or attorney notice of a potential motion and the opportunity to correct the offensive conduct.13

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New Section 128.5 became effective on January 1, 2016 and is slated to sunset on January 1, 2018 unless reenacted.14 Use of the new provision requires notice to the California Research Bureau of the California State Library. This will inform the Legislature on the usefulness of this provision.15

This section still sets a high bar for sanctions and does not apply to discovery processes. However, it does eliminate the previous requirement that sanctions under Section 128.5 require proof of both objective and subjective bad faith. You can expect to see motions under revived Section 128.5 become commonplace in state courts very quickly.

B. Class and Representative Actions

1. California Supreme Court Finds Class Action Waiver Not Unconscionable, and Therefore Enforceable

Sanchez v. Valencia Holding Co., LLC16

This is the post-Concepcion decision on the enforceability of a class action waiver in an arbitration agreement.

The case grew out of the purchase of a late model Mercedes-Benz for $53,000. After the sale, Mr. Sanchez complained that Valencia, a car dealer specializing in used luxury automobiles, made false representations about the condition of the vehicle and failed to fully disclose the financial terms of the purchase. Sanchez sued on behalf of himself and a class of similarly situated customers alleging violations of the Consumer Legal Remedies Act, the Unfair Competition Law, and the Song-Beverly Consumer Warranty Act.

The issue on appeal was the extent to which the Federal Arbitration Act ("FAA"), as construed by AT&T Mobility LLC v. Concepcion,17 preempted the bar against class action waivers contained in the Consumer Legal Remedies Act ("CLRA"). The court concludes that "the CLRA’s anti-waiver provision is preempted insofar as it bars class waivers in arbitration agreements covered by the FAA."18 However, the court goes on to state: " Concepcion requires enforcement of the class waiver but does not limit the unconscionability rules applicable to other provisions of the arbitration agreement."19

Thus, while the headline for this decision is that the California Supreme Court has now implemented Concepcion, the major importance of this decision is a restatement (and, according to the dissent, a dilution) of the California standard for unconscionability.

Under California law, "the doctrine of unconscionability has both a procedural and a substantive element, the former focusing on oppression or surprise due to unequal bargaining power, the latter on overly harsh or one-sided results."20 As applied, "the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice-versa."21

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The court opines that while there have been many formulations of the doctrine, "[a]ll of these formulations point to the central idea that unconscionability doctrine is concerned not with ‘a simple old-fashioned bad bargain,’ but with terms that are ‘unreasonably favorable to the more powerful party.’"22

In applying this unified theory to the Sanchez facts, the court found that with respect to the procedural prong of the test, "the adhesive nature of the contract is sufficient to establish some degree of procedural unconscionability."23

The court then goes through an analysis of the arbitration agreement itself to see if it constitutes substantive unconscionability. This analysis proceeds through every major provision of the arbitration agreement and is very detailed and fact-driven. At the end of the process, the court finds that, on balance, the various provisions of the agreement are not unconscionable. For example, limiting appeals to arbitral decisions that were either zero or $100,000 was determined to have value for both the consumer and the car dealer. Likewise, special review provisions for any grants of injunctive relief were appropriate "[b]ecause of the broad impact that injunctive relief may have on the car seller’s business, the additional arbitral review when such relief is granted furnishes a ‘margin of safety’ that provides the party with superior bargaining strength a type of extra protection for which it has a legitimate commercial need."24

Justice Chin concurred in the result, but dissented on what he regards as a significant reformulation of the California unconscionability standard, writing: "I part company with the majority insofar as it continues to endorse several alternative formulations for substantive unconscionability, i.e. overly harsh, unduly oppressive, unfairly one-sided."25 Instead, he argues for a "shock the conscience" standard, which he believes is more limiting than the standard articulated by the majority.26

There are four important takeaways from this decision: First, the California Supreme Court agrees that the FAA, as interpreted by Concepcion, preempts the anti-arbitration waiver portion of the CLRA. Second, if the dissent is to be believed, the Court has lowered the bar for unconscionability determinations in state courts. Third, to the extent this is correct, this decision will affect far more than cases dealing with arbitration agreements. Finally, this is a very detailed, fact-based opinion. It does not reject arbitration agreements altogether. Rather, it carefully weighs their value to both the consumer and the seller. This decision invites study by representatives of sellers and consumers.

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2. Ninth Circuit Limits Restitution in Government UCL Action to Extent Claims Were Settled in a CAFA Class Action

California v. Intelligender, LLC27

Intelligender sold an over-the-counter product that claimed to predict the sex of babies in vitro. These claims were challenged in a class action that was transferred to a federal court pursuant to the Class Action Fairness Act. A modest settlement compromised class members’ claims for restitution.

Class members were notified of the settlement, and notices were also sent to public enforcement agencies pursuant to 28 U.S.C. § 1715. This provision requires notices to federal and state agencies, and allows them to challenge the fairness of any proposed settlement. No public agency challenged the Intelligender settlement. Subsequently, the San Diego City Attorney’s Office filed a public action under the Unfair Competition Law seeking restitution and injunctive relief for the same practices.

The issue before the Ninth Circuit was the extent to which the class settlement affected the city attorney’s action. The court started its opinion with the statement: "This case sits squarely at the intersection of the Class Action Fairness Act (‘CAFA’) and a sovereign’s right to protect its citizens from unscrupulous, fraudulent, or harmful business practices."28 The key legal issue was whether class members were in sufficient privity with the state and its enforcement action to warrant the application of res judicata to the state’s claims. The court noted that caution was appropriate, stating: "And, as the Supreme Court recently cautioned, ‘issuing an injunction under the relitigation exception is resorting to heavy artillery. For that reason, every benefit of the doubt goes toward the state court; an injunction can issue only if preclusion is clear beyond peradventure.’"29

However, in this case, the court concluded that the state, through the San Diego City Attorney, could not seek restitution for members of the class. Further, an injunction was proper to keep the city attorney from seeking such relief under res judicata principles.30 This left open claims for penalties and injunctive relief.31

3. Ninth Circuit Overturns Trial Court’s Determination that Individual Calculations of Restitution Claims Preclude Class Certification

Pulaski & Middleman, LLC v. Google, Inc.32

This was a class action brought under California’s Unfair Competition Law ("UCL") and False Advertising Law ("FAL") by purchasers of advertising services from Google. The gravamen of the case was the allegation that Google failed to disclose that some ads were displayed on websites that had no customers, but nonetheless charged for these ads.

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In determining whether class certification was proper, the federal trial court found that plaintiffs did not demonstrate that common issues predominated because, "even assuming the plaintiff class could prevail on liability, common questions did not predominate on the issues of entitlement to restitution and amount of restitution due each class member."33

The Ninth Circuit reversed, criticizing the trial court for failing to take into account the fact that "[e]ntitlement to restitution is a separate inquiry from the amount of restitution owed."34 The court went on to reaffirm its seminal decision in Yokoyama v. Midland National Life Insurance Co. that "damage calculations alone cannot defeat certification." 35

In reaching its decision, the Ninth Circuit brushed aside respondent’s argument that Comcast Corp. v. Behrend36 required common issues to predominate in damage calculations. Instead, it wrote:

In Levya v. Medline Industries, Inc., we reaffirmed that damage calculations alone cannot defeat class certification. We explained that Comcast stood for the proposition that "plaintiffs must be able to show that their damages stemmed from the defendant’s actions that created the legal liability." . . . "[B]ut the Court did not hold that proponents of class certification must rely on a classwide damages model to demonstrate predominance."37

This decision is a clean win for class plaintiffs, and significantly clarifies the scope of Comcast in this circuit.

4. A Potentially Big Year for Class Action Jurisprudence in the United States Supreme Court May Be Affected by the Death of Justice Scalia

The Supreme Court’s docket for this term could have dramatically altered class action jurisprudence. In particular, attorneys for the United States Chamber of Commerce expected that three of these cases—Tyson Foods, Spokeo, and Campbell-Ewald—could "really hammer class actions"38 So far this Term, this has not been true. Three of these cases have now been decided—DIRECTV, Campbell-Ewald, and Tyson Foods—with defendants winning one and plaintiffs winning two. The remaining case—Spokeo—has the potential for major impact, but the resolution of this case may well be affected by the death of Justice Scalia. The decided cases have not been decided by the usual splits of justices into liberal and conservative camps, and it now appears that this Term is unlikely to be remembered for hammering class actions.

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DIRECTV; Inc. v. Imburgia39

DIRECTV was the first of the four cases decided by the Court. The issue was the extent to which language in an arbitration agreement used in 2007 allowing class actions if the "law of your state" precluded limits on class actions in arbitration agreements. At the time this version of the DIRECTV arbitration agreement was employed, California law prohibited class action waivers. Subsequently in AT&T Mobility LLC v. Concepcion, the Court struck down this rule as preempted by the Federal Arbitration Act.40

Justice Breyer wrote the majority opinion for an unusual coalition ofJustices, including the Chief Justice and Justices Scalia, Kennedy, Alito, and Kagin. Justice Thomas dissented. Justice Ginsburg separately dissented and was joined by Justice Sotomayor.

According to Justice Breyer, the question presented was whether the language in the agreement allowing for class actions based on local law "included invalid California law."41 His opinion is animated by a Federalism concern. He writes:

No one denies that lower courts must follow this Court’s holding in Concepcion . . . Lower court judges are certainly free to note their disagreement with a decision of this Court. But the "Supremacy Clause forbids state courts to disassociate themselves from federal law because of disagreement with its content or a refusal to recognize the superior authority of its source."42

He then goes on to conclude that relying on a statute that is not general, but that is not only invalid but also specifically limits arbitration, offends the Federal Arbitration Act.

With one exception, this decision is unlikely to make waves in class action law because it is based on a vintage agreement that is unlikely to be used again.

The exception, however, is potentially a big one. Justice Ginsberg’s stinging dissent opines that the Court’s recent string of arbitration decisions "misreads the FAA to deprive consumers of effective relief against powerful economic entities that write no-class-action arbitration clauses into their form contracts."43 This part of her dissent appears to offer a detailed roadmap to how a more liberal majority of the Court might revisit and alter these cases.

Campbell-Ewald Co. v. Gomez44

The other decided case is Campbell-Ewald. This case presents the question of whether an unaccepted settlement offer for the full value of a class representative’s claim moots a class action under Article III. This case clarified that such an offer does not deny a federal court ofjurisdiction, clarifying an earlier decision by the Court in Genesis HealthCare Corp. v. Symczyk45 and resolving a major split in the circuits.46

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Justice Ginsburg, writing for a majority consisting of herself, Justices Kennedy, Breyer, Sotomayor, and Kagan, and joined by Justice Thomas, concludes that "we hold that [Class Plaintiff’s] complaint was not effaced by Campbell’s unaccepted offer to satisfy his individual claim."47

Bouaphakeo v. Tyson Foods, Inc.48

Tyson Foods was a class action on behalf of employees who worked in a Tyson slaughter house. To do their work safely, employees "donned and doffed" protective clothing before and after each shift. Class plaintiffs asserted that when their time putting on and taking off protective gear was included in their work weeks, they worked overtime for which they were not compensated. To determine the scope of uncompensated overtime, plaintiffs had an expert take video of a sample of employees in various departments in the plant to determine how much time—on average—was required to don and doff their protective clothing. The issue in the case was whether, under the predominance requirement in Federal Rule of Civil Procedure 23(b)(3), the plaintiffs could reasonably infer that individual plaintiffs took the average amount of time determined by the expert to put on and take off their safety equipment. If the answer was yes, the case could proceed as a class action.

Justice Kennedy wrote the majority opinion sustaining the lower court’s approval of class treatment of the employees’ claims. Justice Kennedy was joined by Chief Justice Roberts and Justices Ginsburg, Breyer, Sotomayor, and Kagan. The Chief Justice wrote a separate concurring opinion. Justice Thomas dissented and was joined by Justice Alito.

The Court rejected the invitation of petitioner and various amici to announce a "broad rule" against using so-called "representative evidence" in class actions.49 The Court found that:

A categorical exclusion of that sort, however, would make little sense. A representative or statistical sample, like all evidence, is a means to establish or defend against liability. Its permissibility turns not on the form a proceeding takes—be it a class or individual action—but on the degree to which the evidence is reliable in proving or disproving the elements of the relevant case of action.50

The Court went on to determine that the statistical analysis could have been used in either an individual or class action, allowing it to distinguish the statistical analysis it disapproved of in Wal-Mart.51

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This would appear to be a clean win for class plaintiffs. However, the majority analysis left open how the lower court would insure that uninjured workers would be precluded from receiving any recovery from the class action. The majority dismissed the problem as one of Tyson’s own making, in that the company did not keep any records of the time employees spent donning and doffing safety equipment. 52 The Chief Justice in his concurring opinion, however, suggested that this will be a major, if not insurmountable, hurdle in the lower court.53

Justice Thomas’s dissent is very critical of the majority’s analysis, arguing, among other points, that this decision contradicts the Court’s earlier Comcast decision on predominance.54

This case may mark a pendulum shift away from the Court’s prior decisions. How dramatic that shift might be is unclear, but the vote split suggests that the Court has less appetite than in the past for further weakening class actions in federal courts.

Robins v. Spokeo, Inc.55

In Spokeo—a case that has been argued but not decided—the question presented is whether Congress can authorize plaintiffs who have not suffered concrete harm to sue for statutory damages even if they allegedly did not suffer Article III injury. This appeal arises from alleged violations of the Fair Credit Reporting Act for posting inaccurate information on the Internet about plaintiff and members of his class. Plaintiff asserted that his employment prospects had been affected by defendant’s inaccurate reports. The Ninth Circuit concluded that this constituted injury within the meaning of Article III.

On the other side, Spokeo, the United States Chamber of Commerce, and a "Who’s Who" of Silicon Valley amici argue that there was no injury and that plaintiff had no Article III standing. They also argue that resolution of this case in favor of Spokeo would preclude actions under the Debt Collection Practices Act, the Fair Housing Act, the Americans with Disabilities Act, the Telephone Consumer Protection Act, and numerous other federal statutes.

This is an important case, but one with potential dry rot at its core. Plaintif claimed actual injury in his complaint and in all subsequent pleadings. There has been no trial court determination that he was not injured. This means that the Court may be flirting with a potential advisory opinion if it proceeds.


A. Judge Peck (S.D.N.Y.) Provides a Retrospective on his Da Silva Moore Decision, Creating a Handy Reference on Technology Assisted Review

1. Rio Tinto PLC v. Vale S.A.56

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Judge Andrew Peck of the Southern District of New York is a thought-leader on the use of advanced technology to assist with discovery. For example, he wrote the first opinion in the nation recognizing and validating the use of Technology Assisted Review ("TAR") to tame the dramatically larger sets of e-documents that have become common in major cases.57

Rio Tinto provided Judge Peck the opportunity to summarize the current law on TAR and comment on possible future developments. Highlights include:

  • "In the three years since Da Silva Moore, the case law has developed to the point that it is now black letter law that where the producing party wants to utilize TAR for document review, courts will permit it."58
  • "In contrast, where the requesting party has sought to force the producing party to use TAR, the courts have refused."59
  • "One TAR issue that remains open is how transparent and cooperative the parties need to be with respect to the seed or training sets"60
  • However, "[i]f the TAR methodology uses ‘continuous active learning’ (CAL) as opposed to simple passive learning (SPL) or simple active learning (SAL), the contents of the seed set is much less significant."61

Judge Peck’s actual mission in this decision is to approve a proposed TAR protocol developed cooperatively between the parties, which he attaches to his decision. Overall, this decision is a succinct and useful guide to the current law of Technology Assisted Review.

B. New Federal Rules of Civil Procedure—Effective on December 1, 2015—Make Major Changes in Federal Discovery and Spoliation Rules

On December 1, 2015, significant changes in the Federal Rules of Civil Procedure, became effective for Rules 1, 4, 16, 26, 30, 31, 34, 37, 55, and 84.

Highlights include:

  • Rule 1, relating to the scope and purpose of the Federal Rules of Civil Procedure, is amended to require that the rules "should be construed, administered, and employed by the court and the parties to secure the just, speedy, and inexpensive determination of every action and proceeding." The Committee Note states that the amended rule is designed to make clear that "the parties share the responsibility" to use the rules in a cost-effective manner. Moreover, the Note continues: "Effective advocacy is consistent with—and indeed depends upon—cooperative and proportional use of procedure."
  • Rule 4, relating to summons, is amended to authorize the dismissal of an action if a defendant is not served within ninety days after the complaint is filed in court, unless good cause is shown by the plaintiff.62 In addition, the Appendix of Forms is amended for Rule 4 to provide text to be used when seeking a waiver of service.
  • Rule 16 is amended to require the issuance of a scheduling order within "the earlier of 90 days after any defendant has been served with the complaint or 60 days after any defendant has appeared"’63 Courts are also authorized and encouraged to issue orders that "provide for disclosure, discovery, or preservation of electronically stored information."64 This is buttressed by a new requirement that parties discuss preservation issues in their pre-hearing conference.
  • Rule 26(b)(1) is amended to limit discovery to material that is "relevant to any party’s claims or defenses and proportional to the needs of the case considering the importance of the issues at stake, 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 proposed discovery outweighs its likely benefit . . ."

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Most of these factors already appear in Rule 26(b)(2)(C)(iii), which was adopted in 1983. The Committee Note argues that "the present amendment restores the proportionality factors to their original place in defining the scope of discovery." That conclusion was previously disputed in a series of comments on the rule from many plaintiffs’ representatives and law professors who argued that the new rule would unduly limit the traditional scope of discovery.65

Criticism of earlier proposals led to changes that soften potential problems with inclusion of proportionality as a limit on the scope of discovery. For example, the "amount in controversy" factor was dropped to second position in the list of proportionality factors, giving primacy to "importance of the issues." In addition, a new factor—"relative access to information"—was added to address information asymmetry.

The Committee Note makes clear that the change is not "intended to permit the opposing party to refuse discovery simply by making a boilerplate objection that it is not proportional." The Note also includes that statement that "the burden of responding to discovery lies heavier on the party who has more information and properly so." The Note also discusses the relationship of the various proportionality factors, noting, for example that "monetary stakes are only one factor, to be balanced against other factors."

The Committee Note also points out that technology assisted review should be seriously considered to reduce the burden of discovery, noting: "Computer-based methods of searching such information continue to develop . . . [and] . . . [c]ourts and parties should be willing to consider the opportunities for reducing the burden or expense of discovery as reliable means of searching electronically stored information become available."

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  • Rule 26(b)(2)(C) is amended to give courts "on motion or on its own" the power to limit discovery that is outside the scope of Rule 26(b)(1).
  • Rules 30(a)(2), relating to depositions by oral examination, 31(a)(2), relating to depositions by written question, and 33(a)(1), relating to interrogatories, are amended to cross-reference the new proportionality principle enunciated in amended Rule 26(b)(1). These changes replace an initial proposal to halve the number of allowed depositions and interrogatories, which generated strong protests at public hearings.
  • Rule 34, relating to production of documents and electronically stored information ("ESI"), is changed in three ways:
    • Responding parties must respond "within 30 days after being served or—if the request was delivered under Rule 26(d)(2)—within 30 days after the parties’ first Rule 26(f) conference."
    • "The responding party may . . . produce copies of documents or of [ESI] instead of permitting inspection."
    • "An objection must state whether any responsive materials are being withheld on the basis of that objection"
  • Rule 37, relating to failures to disclose or to cooperate, is significantly altered:
    • Rule 37(e) applies to "[ESI] that should have been preserved in the anticipation or conduct of litigation . . . ."
    • Rule 37(e)(1) is amended to require a finding of "prejudice to another party" and limits sanctions to "measures no greater than necessary to cure the prejudice."
    • For the most serious sanctions, notably adverse inference instructions or terminating sanctions, Rule 37(e)(2) requires a showing that "the party acted with the intent to deprive another party of the information’s use in the litigation."

With respect to Rule 37, the Committee Note comments that:

  • Amended Rule 37(e) applies only to ESI.
  • Rule 37 does not create any new duty, so is "based on [the] common-law duty" to preserve.
  • The new rule leaves open the effect of a non-common law duty to preserve on the operation of the rule. An example of such a duty is the duty imposed on corporate entities by the Sarbanes-Oxley Act to retain information related to a government investigation.66
  • Counsels courts to be "sensitive" to the related sophistication of some parties with respect to preservation.
  • "[T]he initial focus should be on whether the lost information can be restored or replaced through additional discovery."
  • "The rule does not place a burden of proving or disproving prejudice on one party or the other," noting that "placing the burden of proving prejudice on the party that did not lose the information may be unfair."
  • The requirement for a kind of ESI specific intent "rejects cases such as Residential Funding Corp. v. DeGeorge Financial Corp., 306 F.3d 99 (2d Cir. 2002), that authorize the giving of adverse-inference instructions on a finding of negligence or gross negligence." This leaves open how this new mens yea requirement might be met via circumstantial evidence.
  • Though adverse inference instructions are circumscribed, the new rule "would not prohibit a court from allowing the parties to present evidence to the jury concerning the loss and likely relevance of information and instructing the jury that it may consider that evidence, along with all the other evidence in the case, in making its decision."

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All in all, these new rules are not as bad as some of the early hearings may have suggested. However, the keys to appropriate interpretation of these rules are (1) a full understanding of the drafting history, particularly as the draft rules and notes were changed to make them more even-handed, and (2) a mastery of the rich lode of commentary in the new Committee Notes.


A. Second District Court of Appeals Provides Additional Guidance on the Admissibility of Expert Opinion after Sargon

1. Cooper v. Takeda Pharmaceuticals America, Inc.67

In 2012, the California Supreme Court significantly altered state practice with respect to expert opinion evidence in Sargon Enterprises, Inc. v. University of Southern California.68 Sargon underscored the role of state trial judges as "gatekeepers," and ushered in a new era for expert testimony in state practice.69

The Sargon court extensively cited to federal decisions, notably Daubert v. Merrell Dow Pharmaceuticals, Inc.70 and Kumho Tire Co., Ltd. v Carmichael.71 This raised the important question of the extent to which California courts would be adopting Dauhert.72

The issue in Takeda Pharmaceuticals was the admissibility of expert testimony by a leading cancer researcher on the cause of plaintiff’s bladder cancer. Plaintiff’s expert considered various causes of plaintiff’s illness—notably his smoking behavior and possible exposure to environmental pollutants—but concluded in a "differential diagnosis" that the most substantial cause of his cancer was Takeda’s diabetes drug, Actos.

The trial court excluded the testimony of plaintiff’s expert for failing to definitively exclude causes other than Actos for plaintiff’s cancer, and then granted a motion for judgment notwithstanding the verdict for lack of proof of causation. The court of appeal criticized the trial court for: (1) failing to take into account the basic standard of proof in a civil case involving multiple causes of injury, and (2) failing to limit its gatekeeper role to the confines of Sargon.

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On the overall standard of proof, the appellate court noted:

The law is well settled that in a personal injury action causation must be proved within a reasonable medical probability, based upon competent expert testimony. . . . A possible cause only becomes "probable" when, in the absence of other reasonable causal explanations, it becomes more likely than not that the injury was the result of its action.73

Given this standard, "the plaintiff must offer an expert opinion that contains a reasoned explanation illuminating why the facts have convinced the expert, and therefore should convince the jury, that it is more probable than not the negligent act was a cause-in-fact of the plaintiff’s injury."74 Thus, "it is not necessary for a plaintiff to establish the negligence of the defendant as the proximate cause of injury with absolute certainty so as to exclude every other possible case of plaintiff’s illness, even if the expert’s opinion was reached by performance of a differential diagnosis."75

On abuse of the Sargon standard, the trial court criticized the statistical analysis in over a dozen articles and studies relied on by plaintiff’s expert, arguing that they did not definitively rule out other causes of defendant’s injury. As described by the court of appeal:

The trial court abused its discretion by essentially stepping in and resolving the debate over the validity of the studies. In particular, the trial court’s piecemeal rejection of individual studies was inappropriate and ignored the testimony of [another plaintiff’s expert] that the results of the individual studies as a whole, including in the meta-analysis, was what really persuaded them that Actos causes bladder cancer. All studies have limitations and flaws, and it is entirely valid to interpret each study’s results by taking into account these limitations and flaws. However, it is essential that the results of other studies conducted by other scientists on the same subject, that aim to correct for the limitations and flaws in prior studies, be taken into account, and the body of studies be considered as a whole.76
Quoting from Sargon, the court recalled that:
The trial court’s preliminary determination whether the expert opinion is founded on sound logic is not a decision on its persuasiveness. The court must not weigh an opinion’s probative value or substitute its own opinion for the expert’s opinion. Rather, the court must simply determine whether the matter relied on can provide a reasonable basis for the opinion or whether that opinion is based on a leap of logic or conjecture.77

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There are at least three major takeaways from this decision. The first, and most important, is that the gatekeeper function exercised by state trial courts is far more limited than the role assumed by many federal trial courts under Daubert. Second, the conclusions of the expert must be understood against the background of the burden of proof carried by the party sponsoring the expert. As in all civil cases, the burden is preponderance, not certainty, so some leeway is both necessary and appropriate. Finally, the court rejects the classic attack strategy used by both defendants and plaintiffs to pick apart individual studies, rather than view them as a whole.

B. State and Federal Courts Clarify Admissibility of Web-Based Content

1. In re K.B.78

In re K.B. arose from the prosecution in state court of a minor for possession of a firearm. K.B. and an adult defendant were on felony probation, which terms forbade their possession of firearms. During a search of their apartment authorized by their probation, officers observed two guns tossed out of the back window of the apartment through a curtain made of camouflage cloth. The issue was whether either defendant possessed a firearm in violation of their probation conditions.

The cell phones of the two occupants were seized, and the phones searched. This revealed incriminating Instagram photos of the two individuals brandishing handguns wearing the same clothes they wore at the time of the search and standing before a curtain that matched the curtains in their apartment. Over the objection of the defense, these photos were admitted into evidence at trial.

On appeal, K.B. argued that the prosecutor had not sufficiently authenticated the photos, relying on People v. Beckley.79 The court demurred, agreeing with the People that the photos were authenticated by the fact that the phone was password protected and the content clearly associated with defendant K.B. The court also noted that:

In making the initial authenticity determination, the court need only conclude that a prima facie showing has been made that the photograph is an accurate representation of what it purports to depict. The ultimate determination of authenticity of the evidence is with the trier of fact, who must consider any rebuttal evidence and balance it against the authenticating evidence in order to arrive at a final determination on whether the photograph, in fact, is authentic.80

This burden shifting analysis dramatically reduces the burden on those seeking admission of web-based content.

2. United States v. Lizarraga-Tirado81

In Lizarraga-Tirado, a federal criminal case, the defendant was accused of being a previously removed alien who illegally reentered the United States. At the time of his arrest, a Border Patrol Agent contemporaneously recorded the GPS coordinates of defendant’s arrest using a handheld GPS device. At trial, these coordinates were entered into Google Earth, which showed that the arrest took place within the borders of the United States.

[Page 15]

Defendant argued that the Google report was inadmissible hearsay. In an opinion by Judge Kozinski, the court noted that: "For hearsay purposes, a statement is defined as ‘a person’s oral assertion, written assertion or non-verbal conduct, if the person intended it as an assertion.’"82 The Google Earth representation would only be hearsay if the location was drawn in by a human actor. If not, as in this case, it was not hearsay.

However, analogizing the Google Earth image to a machine that "tells" us something, like a clock, the court stated that a decision that a statement by a machine or technology is not hearsay does not end the inquiry. According to the court:

A proponent must show that a machine is reliable and correctly calibrated, and that the data put into the machine (here GPS coordinates) is accurate. A specific subsection of the authentication rule allows for authentication of a "process or system" with evidence "describing [the] process or system and showing that it produces an accurate result." . . . That burden could be met, for example, with testimony from a Google Earth programmer or a witness who frequently works with and relies on the program. It could also be met through judicial notice of the program’s reliability as the Advisory Committee Notes specifically contemplate.83

This decision nicely summarizes the interplay of hearsay and authentication rules, and provides a tutorial on the various ways Web content can be authenticated.


A. Federal Circuit Begins to Review PTAB Decisions

Last year’s program covered expedited review procedures used by the Patent Trial and Appeal Board ("PTAB") at the Patent and Trademark Office.84 The first PTAB cases to reach the Federal Circuit were decided this year. So far, PTAB has been largely successful.

1. Versata Development Group, Inc. v. SAP America, Inc.85

In Versata, for example, the Federal Circuit in a Covered Business Method ("CBM") review:

  • Sustained PTAB’s "broadest reasonable interpretation" approach to claim construction;86
  • Sustained PTAB’s authority under 35 U.S.C. § 101 to determine if claims in the challenged patent represent an abstract idea, rather than a patentable invention;87 and
  • Affirmed PTAB’s conclusion that four claims in a patent were unpatentable under Section 101.88

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2. Microsoft Corp. v. Proxyconn, Inc.89

In Microsoft, PTAB got mixed marks for an inter partes review. The Federal Circuit:

  • Reaffirmed PTAB’s use of its "broadest reasonable interpretation standard" in inter partes reviews; 90
  • Overturned PTAB’s dismissal of some claims but affirmed others;91 and
  • Sustained the ability of PTAB to limit amendments of patent claims through internal judicial process, and not just via regulation.92

Taken together, these decisions show a new administrative tribunal going through some growing pains, but nonetheless largely fulfilling its function under the America Invents Act to expedite review of potentially faulty patents.

B. Copyright Holders Must Consider Fair Use Before Sending Takedown Notices

1. Lenz v. Universal Music Corp.93

This appeal arose from the posting of a YouTube video by a young mother of her infant son dancing to a Prince song. She received a "takedown" notice from the copyright holder pursuant to the Digital Millennium Copyright Act ("DMCA")94 and things went from there.

There are two important takeaways from this case. First, in a decision of first impression, the Ninth Circuit concludes that the DCMA incorporates the "fair use" doctrine codified in 17 U.S.C. § 107.95 Second, the court concludes that a copyright holder must consider the fair use doctrine before issuing a takedown notice, or potentially face liability for misrepresentation.

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A. United States Supreme Court Clarifies When a Notice of Appeal is Due in an MDL Proceeding

1. Gelboim v. Bank of America Corp.96

This decision arose from consolidated actions seeking damages for manipulation of the London InterBank Offered Rate ("LIBOR"). Plaintiff Gelboim represented a class asserting a single claim that defendants had conspired to fix this important reference rate in violation of federal antitrust law in order to keep their borrowing costs low. The trial court dismissed the action based on a failure to demonstrate antitrust injury.

Petitioner appealed, but the Second Circuit dismissed the appeal because the "order appealed from did not dispose of all claims in the consolidated action."97 In the Supreme Court, petitioners argued that dismissal of their case in its entirety removed their case from the multidistrict litigation ("MDL") and triggered their right to appeal under 28 U.S.C. § 1291. Respondent banks argued that consolidated cases proceed as a single unit throughout the consolidation. Deciding for petitioner, a unanimous Court concluded that:

The sensible solution to the appeal-clock trigger is evident: When the transferee court overseeing the pretrial proceedings in multidistrict litigation grants a defendant’s dispositive motion "on all issues in some transferred cases, [those cases] become immediately appealable . . . while cases where other issues remain would not be appealable at that time."98

The headline for this case is that if all of your claims are dismissed—even in the context of an MDL proceeding—you can and must appeal.

But the Court was not unsympathetic to the point that appeals are best considered together. The Court noted the appropriateness of granting certifications for interlocutory appeals under Federal Rule of Civil Procedure 54(b), but warned that "Rule 54(b) is designed to permit acceleration of appeals in multiple-claim cases, not to retard appeals in single-claim cases."99 In this regard, this decision is a tutorial on how to use disparate rules to cobble together practical procedures to platoon appeals in complex, MDL proceedings.

B. Local Rules for First District Court of Appeal of CaliforniaAugment Requirements for E-Briefs

1. Local Rules of the Court of Appeal First Appellate District: Rule 16, Electronic Filing

It is always important to check local rules before submitting a brief or pleading. This is particularly true in California where local courts have significant discretion over their own processes. A case in point is new Local Rule 16 for the Court of Appeal for the First Appellate District specifying requirements for electronic filing of briefs and records on appeal.

[Page 18]

For e-briefs, the rule provides that: "Electronic bookmarks to each topic heading in the text (as listed in the table of contents) in briefs are recommended and required for all briefs exceeding forty (40) pages."100 In a similar vein: "Each part of the record . . . shall clearly state the volume and page numbers included within that part and include an index of contents, with a descriptive electronic bookmark including exhibit number or letter."101

These are certainly reasonable requirements, but one does need to build sufficient time into the briefing process to meet them. This rule became effective on May 1, 2015.


A. California Bar Issues Opinion on Ethical Duties of Attorneys When Handling Discovery of ESI

1. State Bar Standing Committee on Professional Responsibility & Conduct, Formal Opinion No. 2015-193 (Handling of Discovery of ESI)102

This opinion addresses the ethical duties of a California attorney "in the handling of discovery of [ESI]." This takes the form of a hypothetical that raises questions about the duty of competence, the duty to supervise subordinates in the gathering and protection of ESI, and the duty of confidentiality.

Discovery in major cases has increasing become e-discovery. Failure to understand the nuances of this part of practice is no longer acceptable in California. As pointedly noted by the Committee: "Depending on the factual circumstances, a lack of technical knowledge in handling e-discovery may render an attorney ethically incompetent to handle certain matters involving e-discovery, absent curative assistance under rule 3-110(C), even where the attorney may otherwise be highly experienced."103

The effects of this opinion are not limited to ethics cases. This opinion has already been featured in a case imposing substantial spoliation sanctions on a company and its lawyers in United States District Court.104 Specifically, lead counsel had to pay significant monetary sanctions for failure to set a litigation hold105 and failure to supervise subordinate attorneys and non-attorney employees.106 In addition, the court imposed an adverse inference instruction on his client.

This is a must-read for California lawyers, and is worth sharing with technology employees who assist you with e-discovery tasks.

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1. Thomas Greene is special litigation counsel with the Bureau of Competition, Federal Trade Commission. The views expressed in this Article are those of the author, and do not necessarily reflect those of the Federal Trade Commission. This Article is adapted from a presentation delivered at the Golden State Antitrust and Unfair Competition Law Institute on October 29, 2015, and reflects developments as of that date.

2. 136 S. Ct. 390 (2015).

3. 28 U.S.C. § 1605.

4. 28 U.S.C. § 1605(a)(2).

5. Sachs, 136 S. Ct. at 396.

6. Id. (internal citation omitted).

7. W. Coast Dev. v. Reed, 2 Cal. App. 4th 693 (1992).

8. Bill Analysis: Concurrence in Senate Amendments AB 2494 (Cooley), Assembly 2013-2014 (Cal. Aug. 25, 2014), available at

9. Cal. Civ. Proc. Code § 128.5(a) (emphasis added).

10. § 128.5(b)(1).

11. § 128.5(e).

12. § 128.5(b)(2) (emphasis added).

13. § 128.5(f).

14. § 128.5(i).

15. § 128.5(h)(1).

16. 61 Cal. 4th 899 (2015).

17. 563 U.S. 333 (2011).

18. Sanchez, 61 Cal. 4th at 924.

19. Id. at 907.

20. Id. at 910 (quoting Sonic-Calabasas A., Inc. v. Moreno, 57 Cal. 4th 1109, 1133 (2013)).

21. Id. at 911 (citations omitted).

22. Id. (citations omitted).

23. Id. at 915.

24. Id. at 917.

25. Id. at 936 (Chin, J., concurring and dissenting) (citations omitted).

26. Id. at 935—36 (Chin, J., concurring and dissenting).

27. 771 F.3d 1169 (9th Cir. 2014).

28. Id. at 1171.

29. Id. at 1176-77 (quoting Smith v. Bayer Corp., 131 S. Ct. 2368, 2375-76 (2011) (footnote omitted) (citations omitted)).

30. Id. at 1179.

31. Id. at 1181-82.

32. 802 F.3d 979 (9th Cir. 2015).

33. Id. at 984.

34. Id. at 985.

35. 594 F.3d 1087, 1094 (9th Cir. 2010).

36. 133 S. Ct. 1426 (2013).

37. Pulaski & Middleman, 802 F.3d at 987-88 (citations omitted).

38. Lawrence Hurley, U.S. Supreme Court’s Business Docket Targets Class Actions, Reuters (Oct. 2, 2015),

39. 136 S. Ct. 463 (2015).

40. 563 U.S. 333, 352 (2011).

41. DIRECTV, 136 S. Ct at 469.

42. Id. at 468 (internal citations omitted).

43. Id. at 476.

44. 136 S. Ct. 663 (2016).

45. 133 S. Ct. 1523 (2013).

46. Campbell-Ewald, 136 S. Ct. at 669-70.

47. Id. at 670.

48. No. 14-1146 (U.S. Mar. 22, 2016).

49. Id. at 10.

50. Id. (citation omitted).

51. Id. at 12-14 (discussing Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011)).

52. Id. at 15-17.

53. Id. at 5-6 (Roberts, C.J., concurring).

54. Id. at 7-8 (Thomas, J., dissenting) (discussing Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013)).

55. 742 F.3d 409 (9th Cir. 2014), cert. granted, 135 S. Ct. 1892 (Apr. 27, 2015) (No. 13-1339).

56. 306 F.R.D. 125 (S.D.N.Y. 2015) (Peck, M.J.).

57. Da Silva Moore v. Publicis Groupe & MSL Grp., 287 F.R.D. 182 (S.D.N.Y. 2012) (Peck, M.J.), aff’d, 2012 WL 1446534 (S.D.N.Y. Apr. 26, 2012).

58. Rio Tinto, 306 F.R.D. at 127 (emphasis added) (citations omitted).

59. Id. at 128 n.1 (citations omitted).

60. Id. at 128 (citations omitted).

61. Id.

62. Fed. R. Civ. P. 4(m).

63. Fed. R. Civ. P. 16(b)(2).

64. Fed. R. Civ. P. 16(b)(3)(iii).

65. A useful resource on the evolution of these rules is Thomas Allman’s summary of the final rules package sent to Congress. Thomas Y. Allman, The 2015 Civil Rules Package as Transmitted to Congress, Sedona Conr J., Fall 2015. Mr. Allman is the former General Counsel and Chair Emeritus of the Sedona Conference WG 1 on E-Discovery and the E-Discovery Committee of Lawyers for Civil Justice.

66. 15 U.S.C. § 1520.

67. 239 Cal. App. 4th 555 (2015).

68. 55 Cal. 4th 747 (2012). Sargon and its immediate progeny were discussed in our 2013 program materials.

69. Id. at 769.

70. 509 U.S. 579 (1993).

71. 526 U.S. 137 (1999).

72. See David L. Faigman & Edward J. Imwinkelried, Wading into the Daubert Tide: Sargon Enterprises, Inc. v. University of Southern California, 64 Hastings L.J. 1665 (2013). The same authors wrote an earlier article that was extensively cited by the California Supreme Court in its Sargon decision. See Edward J. Imwinkelried & David L. Faigman, Evidence Code Section 802: The Neglected Key to Rationalizing the California Law of Expert Testimony, 42 Loy. L.A. L. Rev. 427 (2009).

73. Cooper v. Takeda Pharms. Am., Inc., 239 Cal. App. 4th 555, 577 (2015) (quoting Jones v. Ortho Pharm. Corp., 163 Cal. App. 3d 396, 402-03 (1985)).

74. Id. at 578 (quoting Jennings v. Palomar Pomerado Health Sys., Inc., 114 Cal. App. 4th 1108, 1118 (2003)).

75. Id.

76. Id. at 589.

77. Id. at 592 (quoting Sargon v. Univ. of S. Cal., 5 Cal. 4th 747, 772 (2012)).

78. 238 Cal. App. 4th 989 (2015).

79. 185 Cal. App. 4th 509 (2010).

80. In re K.B., 238 Cal. App. 4th at 997.

81. 789 F.3d 1107 (9th Cir. 2015).

82. Id. at 1109 (citations omitted).

83. Id. at 1110 (citations omitted).

84. Thomas Greene & Thomas A. Papageorge, California Antitrust and Unfair Competition Law and Federal and State Procedural Law Developments, 24 Competition 1, 38 (2015).

85. 793 F.3d 1306 (Fed. Cir. 2015).

86. Id. at 1327.

87. Id. at 1329.

88. Id. at 1336.

89. 789 F.3d 1292 (Fed. Cir. 2015).

90. Id. at 1297 (citing In re Cuozzo Speed Techs., LLC, 778 F.3d 1271, 1282 (Fed. Cir. 2015)).

91. Id. at 1298, 1302.

92. Id. at 1306.

93. 801 F.3d 1126 (9th Cir. 2015).

94. 17 U.S.C. § 512.

95. Lenz, 801 F.3d at 1132.

96. 135 S. Ct. 897 (2015).

97. Id. at 904 (emphasis added).

98. Id. at 905 (alterations in original) (quoting David F. Herr, Multidistrict Litig. Manual: Practice Before the Judicial Panel on Multidistrict Litig. § 9:21, at 312 (2014)).

99. Id. at 906.

100. Cal. Ct. App. ist Dist. Local R. 16(b)(3) (emphasis added).

101. Cal. Ct. App. ist Dist. Local R. 16(d)(1) (emphasis added).

102. State Bar of Cal. Standing Comm. on Prof. Responsibility & Conduct, Formal Op. No. 2015-193 (2015), available at

103. Id. at 7.

104. HM Elecs., Inc. v. R.F. Techs., Inc., No. 12-CV-2884, 2015 WL 4714908, at *21-22 (S.D. Cal. Aug. 7, 2015).

105. Id.

106. Id. at *24.

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