CALIFORNIA AND FEDERAL ANTITRUST LAW UPDATE: PROCEDURAL DEVELOPMENTS

By Thomas Greene¹

I. STANDING

A. Ninth Circuit Articulates Rules for Post-Spokeo Standing

Patel v. Facebook, Inc.²

This case arose from alleged violations of the Illinois Biometric Information Privacy Act (BIPA).³ Representative plaintiffs were Illinois residents who alleged that Facebook failed to protect and properly eliminate biometric face templates as required by BIPA. Face templates are an individual set of measurements and mathematical relationships that allow identification of individuals from photographs.

The plaintiffs brought their action in California where Facebook maintains its headquarters. Facebook moved to dismiss this action on standing grounds, which motion was denied. The trial court subsequently certified a class of Facebook users located in Illinois for whom Facebook had created and stored a face template after June 7, 2011.

At issue in this appeal was whether the plaintiffs had standing to bring their action. In response to a remand from the U.S. Supreme Court in Spokeo v. Robbins,⁴ the Ninth Circuit had already adopted a two-step approach to whether the violation of a statute confers standing. The 9th Circuit asks two questions: "(1) whether the statutory provisions at issue were established to protect [the plaintiff’s] concrete interests (as opposed to purely procedural rights) and, if so, (2) whether the specific procedural violations alleged in this case actually harm, or present a material risk of harm to, such interests.⁵

As to the first question, Circuit Judge Ikuta surveys the history of protection of privacy over time. She starts by citing with approval the seminal article co-written by the future Justice Brandeis, which reviewed the then-preceding 150 years of law on privacy.⁶ She goes on to survey recent decisions on the common law roots of the right to privacy and the intertwining of these common law rights into current First and Fourth Amendment jurisprudence.⁷ She notes that the judgement of the Illinois Legislature "is ‘instructive and important’ to our standing inquiry."⁸ She quotes with approval the conclusion of the Illinois Supreme Court that "an individual can be ‘aggrieved’ by violation of BIPA whenever ‘a private entity fails to comply" with the requirements of the law. She concludes that the provisions of the Illinois law "were established to protect an individual’s ‘concrete interests’ in privacy, not merely procedural rights."⁹

[Page 20]

Turning to the second question, she concludes that Facebook’s failure to comply with BIPA "is the very substantive harm targeted by BIPA." Since BIPA protects that plaintiffs’ concrete privacy interests and violations of the procedures in BIPA "actually harm or pose a material risk of harm to those privacy interests [citation omitted] the plaintiffs have alleged a concrete and particularized hard, sufficient to confer Article III standing."¹⁰

This decision is an important one and may well generate a petition for certiorari. But this analysis provides a road map to legislatures on how to write statutes that will be given effect in federal courts. It also provides a road map to both plaintiffs and defendants litigating privacy cases.

The Ninth Circuit is a leading voice in privacy protection. The results in other circuits have been mixed. For example, a D.C. trial court rebuffed a smorgasbord of potential theories of loss, concluding that only actual damages count.¹¹ Also in the mix is the remand by the U.S. Supreme Court back to the Ninth Circuit of a decision involving Google.¹² This SCOTUS decision appears to be less friendly to standing than the 9th Circuit’s decision in Patel. That said, the thoughtful opinion of Circuit Judge Ikuta may carr y the day.

II. ARBITRATION

A. Ninth Circuit Determines Federal Arbitration Act Does Not Preempt California Right to Seek Public Injunctions

Blair v. Rent-A-Center, Inc.¹³

In the underlying litigation, plaintiff claimed that Rent-A-Center had engaged in pricing and other conduct that violated the Karnette Rental-Purchase Act.¹⁴ Plaintiff brought a putative class action seeking relief under the unfair Competition Law¹⁵ and the Consumer Legal Remedies Act.¹⁶

[Page 21]

However, an arbitration contract precluded trial court actions, which Rent-A-Center sought to enforce. At issue in this appeal was whether the consumer could be required to forgo seeking a public injunction under the UCL or the CRLA. Such injunctions under these Acts can include prohibitions on future violations of the Acts, an accounting, individualized notice to those consumers whose rights had been violated, and restitution.

The Ninth Circuit found that California’s prohibitions against claimants seeking public injunctions—the so-called McGill rule¹⁷—was not designed to limit arbitration. Rather, the rule protects consumers from waiving their rights to public injunctions in any forum. On this basis the court found that the purported waiver was precluded by state law.

Rent-A-Center has had success in the past enforcing its arbitration contracts,¹⁸ so a petition for certiorari can be expected.

B. California Supreme Court Voids Arbitration Agreement as Unconscionable

OTO L.L.C. v. Kho¹⁹

Under the Federal Arbitration Act’s savings clause, unconscionability is a valid ground for invalidating an arbitration agreement.²⁰ This appeal arises from an administrative action filed by a mechanic seeking back pay from a Toyota dealership. While this decision arises from an ordinary labor setting, it substantially clarifies California’s law of unconscionability. It also provides a tutorial on drafting arbitration agreements.

Plaintiff Kho was an automobile technician working for One Toyota, the trade name for OTA L.L.C. Three years into his tenure with OTA, Kho was approached by a "porter" with the personnel department who asked him to sign some papers. Since he was in the middle of a job, he took approximately four minutes to review and sign the documents. The principal document was a dense, single-spaced arbitration agreement that mandated arbitration for most employment issues; required that arbitration be handled by a retired superior court judge; required adherence to all California rules of pleading, discovery and evidence; and provided for resolution by summary judgement or judgment on the pleadings.

The allocation of costs was not specified except by a cite to a code section that generally provides that parties must pay their own costs. This agreement replaced a simpler, less formal Berman proceeding provided by Cal. Labor Code §§ 98-98.8.²¹ Several months after his employment ended, he filed a wage claim against OTA with the Labor Commissioner.

[Page 22]

The question for the California Supreme Court was whether this contract was unconscionable. The Court had previously decided that any agreement that eliminated the Berman proceeding was contrary to California law and policy so could not be imposed on employees.²² This decision was reversed and remanded by the U.S. Supreme Court, relying on AT&T Mobility LLC Concepcion.²³ Upon remand, the California Supreme Court concluded that an agreement to arbitrate wage disputes (in lieu of using the Berman process) can be enforceable so long as it provides an accessible and affordable process for resolving these disputes.²⁴

Unconscionability in California has a procedural element and a substantive element. "The procedural element addresses the circumstances of contract negotiation and formation, focusing on oppression or surprise due to unequal bargaining power. Substantive unconscionability pertains to the fairness of an agreement’s actual terms and to assessments of whether they are overly harsh or one-sided."²⁵

Examining the first element, procedural unconscionability, the Court noted that the "circumstances relevant to oppression include, but are not limited to, (1) the amount of time the party is given to consider the proposed contract; (2) the amount and type of pressure exerted on the party to sign the proposed contract; (3) the length of the proposed contract and the length and complexity of the challenged provision; (4) the education and experience of the party; and (5) whether the party’s review of the proposed contract was aided by an attorney."²⁶

The Court criticized that environment during the signing and the lack of explanation for the "opaque" provisions of the contract. The Court strongly criticized "complex" sentences in the agreement filled with "statutory references and legal jargon." The Court concluded that the "circumstances here demonstrate significant oppression."²⁷

Turning to the second element, substantive unconscionability, the Court found that the agreement did not explain how to start an arbitration; the procedure itself was "difficult for an unsophisticated, unrepresented wage claimant to navigate," and imposed potentially significant legal costs on the claimant.²⁸ The Court found that this element of the test was also met.

Although this decision arises from an employment dispute, the discussion of the fatal weaknesses in the agreement are relevant to anyone drafting or litigating an arbitration agreement. Standout issues include:

[Page 23]

• Make clear how arbitration can be started and who pays for the process;
• Plain English is a must;
• But if the weaker party’s primary language is not English, that factor may be added to the unconscionability analysis although that issue was left open in this case.²⁹
• Unexplained references to code sections or cases are not appropriate;
• The weaker party should be given time to review the agreement and that party should have the opportunity to ask questions and receive informed answers; and
• Any waivers of rights should be prominently displayed.

If your responsibilities include arbitration agreements, this is a must-read case.

C. SCOTUS Denies Certiorari for A California Decision Denying Arbitration Based on California Unconscionability Law

Ramos v. Superior Court³⁰

While a denial of certiorari is not strong precedent, this is a denial worth knowing about.

Remands of California decisions denying arbitration on various grounds have become commonplace since the U.S. Supreme Court’s decision in AT&T Mobility v. Concepcion.³¹As in OTO, noted above, the California response has been to assess arbitration agreements under California law for unconscionability, the argument being that these rules apply to all contracts so are not strictly speaking anti-arbitration.

In this case, a highly paid "income partner" of a national law firm asserted that her arbitration agreement was substantively and procedurally unconscionable under California law. Although the plaintiff was a very sophisticated, highly paid lawyer, the Court of Appeal agreed. Review was denied by the California Supreme Court as was certiorari was subsequently by the U.S. Supreme Court.

This leaves in place the court of appeal decision in this case as well as the California Supreme Court’s decision upon which it relied, Armendariz v. Foundation Health Psychcare Services, Inc.³²

Great care is required in interpreting the precedential effect of a denial of certiorari, but the conjunction of denial and seemingly good facts for the defense suggests that the California approach to arbitration may be gaining traction in the U.S. Supreme Court.

[Page 24]

If you are responsible for drafting arbitration agreements, the Court of Appeal’s analysis is worth a close look. Although the plaintiff presumably understood the arbitration agreement she signed, the court nonetheless easily found that the contract was procedurally and substantively unconscionable.

III. ANTI-SLAPP MOTIONS

A. California Supreme Court Issues Three Opinions Limiting SLAPP Practice

Rand Resources, LLC v. City of Carson³³

FilmOn.com Inc. v. DoubleVerify Inc.³⁴

Wilson v. Cable News Network, Inc.³⁵

California provides powerful tools to address strategic lawsuits against public participation (SLAPP).³⁶ The paradigm case is one in which a citizen opposes the construction of a power plant and is then subjected to expensive litigation designed to eliminate this opposition. To address situations like this, the law provides a form of immediate summary judgement that freezes all discovery. If the SLAPP motion is denied, the movant can seek immediate appeal, during which time discovery remains stayed. Anti-SLAPP motions have become a powerful tool in California courts. In 2019, the California Supreme Court has provided important, new guidance on the scope of the Act.

In Rand Resources, plaintiffs alleged that they had an exclusive contract with the City of Carson to negotiate with the National Football League to bring an NFL team to a new stadium to be built in that city. Instead, the city sent emails of its own to the NFL to initiate negotiations for an NFL team and a new stadium. Since a communication was involved, the trial court granted anti- SLAPP relief to the city, denying most of plaintiffs’ claims.

The Supreme Court concluded otherwise, finding that while a new stadium was of public interest, the anti-SLAPP statute does not "swallow a person’s every contract with government, nor does it absorb every commercial dispute that happens to touch on the public interest."³⁷ The Court concludes that while many of the claims of tortious interference and fraud "involved oral and written exchanges, few of those exchanges were themselves" protected speech, so those statements were not properly subject to anti-SLAPP motions to dismiss.³⁸

In FilmOn.com, FilmOn distributed entertainment content consisting of "hundreds of television channels, premium movie channels, pay-per-view channels and over 45,000 video-on-demand titles."³⁹ FilmOn sued DoubleVerify over confidential reports DoubleVerify prepared for advertisers about the nature of the content on its site. The core of FilmOn’s claim was that defendant had improperly tagged some of its content as either "Adult Content" or "Copyright Infringement: Streaming or File Sharing," and that these tags dissuaded advertisers from buying ads on its content.

[Page 25]

At issue before the Supreme Court was the scope of a catch-all provision that extended anti-SLAPP protection to statements that are not public statements about a public issue. DoubleVerify argued that its tags were a form of protected speech. Based on the context of its statements, the Supreme Court concluded that DoubleVerify’s statements— although about important issues—did not "contribute to the public debate."⁴⁰ Therefore, DoubleVerify’s tags were not within the catch-all provision of the anti-SLAPP statute.

In Wilson, the issue before the Supreme Court was whether, in an employment discrimination or retaliation case, the employer’s alleged motive to discriminate or retaliate eliminates any anti-SLAPP protection that might otherwise attach to the employer’s practices.⁴¹ Here, a television journalist who was black and Latino alleged that after taking a paternity leave, he was marginalized, discriminated against and fired. His employer defended that his writing had declined and that he had plagiarized content from other sources for an important story.

On the key issue, the Court opines that the defendant in a "discrimination suit must show that the complained-of adverse action, in and of itself, is an act in furtherance of its speech or petitioning rights."⁴² The Court goes on to say that "[c]ases that fit that description are the exception, not the rule."

Since the defendant is a major news organization, the Court finds that remand on its anti-SLAPP motion with respect to its plagiarism claim is proper. The Court finds wanting its other anti-SLAPP claims.

Taken together, the Court clarifies the applicability of the anti-SLAPP statute in the less obvious corners of speech and petitioning. This should begin to rein in SLAPP-based claims that only tangentially affect speech rights.

B. Negative Online Reviews Merit SLAPP Protection

Salo v. Lahiji⁴³

This case arises from an attorney-client relationship that went bad. The upshot of the soured relationship was a series of negative Yelp reviews about an individual lawyer and his firm. Reviews included statements that the lawyer and firm:

• Used "a law student" to "negotiate with an insurer";
• Were "Underhanded and shady";
• Were "unprofessional and unethical";
• Used "scare tactics"; and
• Had an "awful moral compass."

[Page 26]

The court concluded that these statements were protected activity within the meaning of the SLAPP statute.⁴⁴ This shifted the burden to defendant to show that it was likely to prevail.

IV. CLASS ACTIONS

A. SCOTUS Precludes Use of General Removal Statute or CAFA Removal Provision by Defendants Named in Counterclaim

Home Depot USA Inc. v. Jackson⁴⁵

Lender filed a state court action against an individual consumer to recover credit card debt arising from the purchase of a home water treatment system. The consumer filed a counterclaim and third-party class action claims against the manufacturer and the retailer. The issue before the Court were whether Home Depot, a third-party to the original action, could remove the lender’s state court action to federal court under either (i) the general removal statute⁴⁶ or (ii) the removal provision of the Class Action Fairness Act.⁴⁷

Citing Scalia and Garner’s book Reading Law, Justice Thomas concludes for the majority that neither statute applies.⁴⁸ With respect to the removal statute, he concludes that the general removal statute

. . . does not permit removal based on counterclaims at all, as a counterclaim is irrelevant to whether the district court had "original jurisdiction" over the civil action. And because the "civil action . . . of which the district cour[t]" must have "is the action as defined by the plaintiff’s complaint, "the defendant" to that action is the defendant to that complaint, not a party named in a counterclaim.⁴⁹

The majority summarily concludes that CAFA removal is likewise unavailable, with the Court concluding that "any defendant" in CAFA refers to the defendant or defendants in the original complaint, not any defendants added in a counterclaim.⁵⁰

[Page 27]

These conclusions draw a sharp dissent from Justice Alito, writing for himself, Chief Justice Roberts and Justices Gorsuch and Kavanaugh. They argue that the statutes should be understood to include counter-claim defendants based on the intent and broad policy foundations for each statute. They also criticize the majority for validating a "tactic" used by plaintiffs to avoid CAFA.

At one level, this is an odd opinion. Thomas, a leading conservative, uses textual analysis to reach a conclusion endorsed by his liberal colleagues but blasted by his usual allies. At another, this decision puts important limits on removal so it should at least be front of mind when you deal with removal issues. For plaintiffs, the dissent may be right. If this provides a roadmap for sidestepping CAFA, this may turn out to be an extremely important decision.

B. SCOTUS Denies Equitable Tolling for Appeal of Denial of Class Certification

Nutraceutical Corp. v. Lambert⁵¹

This appeal arose from a class action filed for alleged improprieties in the marketing of a dietary supplement. The trial court had initially certified the requested class but revisited its decision and decertified the class. Fed. R. Civ. P. 23(f) provides that the plaintiff has 14 days within which to ask for Court of Appeals, here the 9th Circuit, for permission to appeal a denial order. Plaintiff ignored this provision. Instead, he filed a motion for reconsideration. Plaintiff’s motion for reconsideration and the trial court’s decision on this motion occurred well after the 14-day period had run.

The issue before the Court was whether the equitable tolling doctrine applied to plaintiff’s delayed filing with the Circuit Court. Writing for a unanimous court, Justice Sotomayor opined that "whether a rule precludes equitable tolling turns not on its jurisdictional character but rather whether the text of the rule leaves room for such flexibility."⁵² After reviewing the text of Rule 23(f), the cross references to the rule in the Federal Rules of Appellate Procedure and various circuit cases, she concludes for a unanimous Court that "Rule 23(f) is not amenable to equitable tolling."⁵³

C. En Banc Ninth Circuit Decision Reinvigorates National Class Actions Based on State Law

In re Hyundai and Kia Fuel Economy Litigation⁵⁴

Readers of this decision may experience whiplash. A decision by a 3-judge panel in 2018 arguably killed multi-state, national class actions in the 9th Circuit.⁵⁵ This en banc decision, by contrast, reinvigorates multistate, national class actions by, among other things, imposing on objectors (rather than settlors) the burden of showing that the law of non-forum states materially differs from the law of California.

[Page 28]

Because there are few en banc 9th Circuit decisions on class actions, this is also a good reference case on recurring issues, including predominance, sufficiency of class notice, appropriate claims processing and attorney fees based on use of a lodestar.

The case arose from misstatements of fuel economy by the manufacturer of Hyundai and Kia automobiles. Higher-than-actual estimates of fuel economy were included in federal Monroney stickers as well as in national ads.⁵⁶ Over 50 cases were consolidated under the MDL process and settled.

A key premise of the en banc panel was that this was a settlement class, not a litigation class so manageability was less of an issue. Against this background, the 9th Circuit concluded that:

• California law imposes on objectors the burden of demonstrating that non-forum law is materially different than the law of California.⁵⁷ The 9th Circuit concluded that no objector argued that differences among the consumer protection laws of the 50 states precluded certification of a settlement class. "Consequently, neither the district court nor class counsel were obligated to address choice-of-law issues beyond those raised by the objectors."⁵⁸
• Notice to the class was proper. Noting that Rule 23(e)(1) requires that notices of a settlement "present information about a proposed settlement neutrally, simply and understandably."⁵⁹ The notices here met this standard.
• Requiring claims forms that allowed for verification that the claimant is the current owner, former owner, or current or former lessee of a qualifying vehicle was proper, even if claims were made for only 21% of potential claimants.⁶⁰
• Use of a lodestar to determine fees supplemented by a modest multiplier was proper, and high fees did not support the assertion that the settlement was collusive.⁶¹

Circuit Judge Ikuta, who wrote the opinion in the 3-judge panel decision, dissented. She was joined in whole or in part by three other Circuit Judges.⁶² The dissent largely repeats the earlier 3-judge panel decision.

[Page 29]

D. California Supreme Court Clarifies Ascertainability Standard

Noel v. Thrifty Payless, Inc.⁶³

This appeal was triggered by denial of class certification for a putative class of purchasers of blow-up pools for alleged misrepresentation of the size of the product. At issue in the appeal was whether plaintiff had shown the existence of an ascertainable class.

Defendant argued that plaintiff "bore the burden of introducing evidence in connection with his certification motion that would show how members of the putative class could be identified later in the proceeding, so they could be provided notice of the pending action."⁶⁴ Defendant grounded its argument on a line of cases that required this "more demanding standard," exemplified by Sotelo v. Medianews Group, Inc.⁶⁵ Plaintiff argued that there were numerous ways notice could be provided, and that it had "no obligation" to provide such information at the certification stage of the litigation. Plaintiff relied on another line of California cases exemplified by Estrada v. FedEx Ground Package System, Inc.⁶⁶

Chief Justice Cantil-Sakauye wrote the opinion for a unanimous court to eliminate the conflict between these two lines of cases. Noting that California’s standards for ascertainability had not been particularly "pellucid," the Chief Justice returned to the court’s earliest jurisprudence on class actions, citing Daar v. Yellow Cab Co.⁶⁷ for the proposition that "the requirement that a plaintiff show an ascertainable class does not subsume a ‘necessity of identifying the individual members of such class as a prerequisite to a class suit.’" She then carefully reviews both state and federal precedent on ascertainability, citing with approval the Seventh Circuit’s decision in Mullins v. Direct Digital, LLC.⁶⁸

The Court concludes that a class is "ascertainable" within the meaning of California law "when it is defined ‘in terms of objective characteristics and common transactional facts’ that make the ‘ultimate identification of class members possible when that identification becomes necessary.’"⁶⁹ No demonstration of ability to contact individual class members individually is required at the certification stage, given that "the circumstances of each case determine what forms of notice will adequately address due process concerns."⁷⁰

This resolves the conflict among California courts on ascertainability. However, the Court leaves open the possibility that inability to contact class members may affect what must be shown under "another requirement for a proper class proceeding," notably manageability.⁷¹

[Page 30]

If you handle class actions in state court, this is an important decision to review.

E. Opiates Trial Court Approves Negotiation Class

County of Summit, Ohio v. Purdue Pharma L.P. (In re Nat’l Prescription Opiate Litig.)⁷²

Judge Polster of the Northern District of Ohio has over 2000 federal opioid cases before him. He has expressed his view that a settlement of these cases is "especially important as it would expedite relief to communities so they can better address the devastating national health crisis" represented by opioids.⁷³

At the suggestion of counsel and the special master handling these cases, the court has certified a "negotiation class" to manage negotiations of a possible global or near-global settlement. This process has five stages:

• Allocation and Voting: Class members first develop a plan to allocate any lump sum settlement among the classes and a plan for voting on the reasonableness of any lump sum payment if one is achieved.
• Class Certification: With the allocation and voting plans in place, the plaintiffs move for certification of the negotiation class.
• Notice and Opt-Out Period: If the Court approves the motion, class members are given an opportunity to opt out, presumptively within 60 days.
• Lump Sum Settlement Negotiation: After the size of the class is determined, negotiations may begin with defendants.
• Judicial Approval, Including Class Vote: The last step in the process is review and approval by the trial court. As part of this process, class members can vote to accept the proposed deal.⁷⁴

The trial judge makes a compelling argument that this is the best way to proceed with these complex cases and a path forward that is consistent with Rule 23.⁷⁵

This is a fascinating effort to use Rule 23 to solve real problems in a creative way. This kind of solution may not make sense in your cases, but it certainly suggests what may be possible at the boundaries of Rule 23.

[Page 31]

V. DISCOVERY

A. SCOTUS Protects Confidential Commercial Information from Disclosure Under FOIA

Food Marketing Institute v. Argus Leader Media⁷⁶

The Argus Leader, a South Dakota newspaper, requested data maintained by the U.S. Department of Agriculture under the Freedom of Information Act. It sought store-level details about the Supplemental Nutrition Assistance Program (a.k.a. the food stamp program). Unsatisfied with what it got from U.S.D.A., the Argus Leader sued the agency. At issue was the scope of the exemption from disclosure of "commercial or financial information obtained from a person and privileged or confidential."⁷⁷

At trial, USDA argued that the information was commercially important, kept confidential by the stores, and that its release would give advantages to competing grocery stores. Nonetheless, relying on circuit precedent requiring a demonstration of competitive harm from release of commercial information before the exemption applied, the trial court ordered production of the detailed, store level information requested by the Leader. This was affirmed by the Eighth Circuit.⁷⁸

Justice Gorsuch, writing for the majority, rejected this analysis. Criticizing the statutory analysis contained in the leading case supporting the competitive harm test, Nat’l Parks and Conservation Assn. v. Morton,⁷⁹ as "a relic from a ‘bygone era of statutory construction,’" the Court rejected the substantial competitive harm test and found that the requested store-level information fell within the exception because the data was (i) normally kept confidential by the stores and (ii) the government had promised to keep the information confidential.⁸⁰

This decision is something of a two-edged sword. On the one hand, this is very good news for businesses that provide confidential business information to the government. On the other, this will throttle what has become a cottage industry of FOIA requests for business information.

One hanging issue is whether the discussion of the government’s promise that store-level information would be protected is dicta or not. If dicta, a promise from the government to protect specific kinds of submissions would not be necessary to protect otherwise confidential business information. This reading appears to be consistent with the language and history of this exemption. However, if not dicta, this language may limit the utility of this decision for companies that supply confidential information to government agencies.

[Page 32]

VI. SETTLEMENT

A. Attorney’s Notation of Approval as to Form and Content Does Not Foreclose Conclusion That Attorney Bound by Confidentiality Provisions of Settlement

Monster Energy Co. v. Schechter⁸¹

This appeal arose from the settlement of a products liability and wrongful death action arising from the death of a 14-year old girl. The settlement agreement required that the terms of the agreement be kept confidential by the parties and their attorney, Schechter. The parties signed the agreement as parties and the attorney signed the agreement under the notation "Approved as to form and content."

Subsequently, the attorney discussed the settlement with a reporter for LawyersandSettlements.com. Monster sued for breach of contract. The attorney defended, arguing that his role was limited to reviewing the agreement for form and content only. The Court of Appeal agreed with the attorney, concluding that the signature of the attorney under this heading did not bind him to the terms of the agreement.⁸²

The California Supreme Court found to the contrary. The Court reviewed the terms of the settlement agreement, noting that the agreement repeatedly referenced counsel as covered by the confidentiality provisions of the settlement. Against this background, the Court opined that "an attorney’s signature on document with a notation that it is approved as to form an content does not, as a matter of law, preclude a factual finding that the attorney intended to be bound by the document’s terms."⁸³

This seems like a just result under the circumstances. But it also cautions us all about the potential implications of signing a document as to form and content.

B. Court of Appeal Provides Tutorial on Settlements

Red & White Distribution, LLC v. Osteroid Enterprises, LLC⁸⁴

This is explicitly a teaching case, with the appellate court noting: "We publish to remind practitioners whose clients settle a dispute involving payments over time how to incentivize prompt payment properly, and what may happen if done incorrectly."⁸⁵

At issue in this appeal was whether a payment provided for in a settlement agreement included an unlawful liquidated damage clause. Under Cal. Civ. Code § 1671(b), parties can include a liquidated damages clause in an agreement unless it "bears no relationship to the range of actual damages that the parties could have anticipated from a breach."⁸⁶

[Page 33]

The court found that over $700,000 of a payment was an unlawful "penalty," not a valid liquidated damages amount. This extra sum was apparently included in the event of default to incent the borrower to pay its debt. The court suggests the way to do this successfully is for "the parties to stipulate that the debt is a certain number, [but] agree that it may be discharged for that number minus a specified amount. They may also agree that in the event the debtor does not timely make the agreed payments, a stipulated judgement may be entered for the full amount."⁸⁷

This strategy avoids problems with unlawful penalties while creating a strong incentive for the debtor to promptly pay its debt.

VII. CRIMINAL LAW

A. SCOTUS Reaffirms Dual-Sovereignty Doctrine

Gamble v. United States⁸⁸

An ordinary traffic stop triggers a torrent of scholarly analysis of the meaning of the 5th Amendment.

Mr. Gamble’s car was stopped by a police officer in Mobile, Alabama because of a broken headlight. Smelling marijuana, the officer searched Gamble’s car and found a loaded 9-mm handgun. Gamble had previously been convicted of second-degree robbery, so his possession of a firearm was a violation of Alabama law. After Gamble pleaded guilty to state crimes, he was prosecuted by federal authorities under federal law relying on the same facts used by state prosecutors.

Mr. Gamble asserted that the two prosecutions violated the Double Jeopardy Clause contained in the 5th Amendment. Justice Alito, writing for the majority, analyzed authorities from before and after adoption of the 5th Amendment—including a decision of the English Court of Chivalry cited by appellant—and reaffirmed the so called dual-sovereignty doctrine.

Despite pages of analysis of very old precedent, the conclusion was straightforward. The double jeopardy language in the 5th Amendment states that individual defendants are protected from being twice put in jeopardy "for the same offense."

What may be an "offense" within the meaning of the 5th Amendment is the question presented by this appeal. Based on 170 years of precedent, Justice Alito concludes for the majority that:⁸⁹

We have long held that a crime under one sovereign’s laws is not "the same offense" as a crime under the laws of another sovereign. Under this "dual-sovereignty" doctrine, a State may prosecute a defendant under state law even if the Federal Government has prosecuted him for the same conduct under a federal statute.

[Page 34]

This decision got some press at the time it was issued because it meant that a presidential pardon for a federal crime will not preclude prosecutions under state law.

For us, however, this decision is more basic. It reaffirms California’s ability to prosecute price fixing and other violations under its own law even if a defendant has been prosecuted for the same transactions under federal law. This analysis also supports California’s authority to provide remedies to indirect purchasers of price-fixed products even if damages under federal law are limited to direct purchasers.

B. Antitrust Division Allows Consideration of Compliance Programs at Charging and Sentencing

Prior to July 2019, the Antitrust Division had eschewed consideration of corporate compliance programs at the charging stage of criminal cases. Although other components of the Justice Department considered such programs among a host of other factors at charging, the Antitrust Division provided that "credit should not be given at the charging stage for a compliance program." This language has now been eliminated.

New guidance describes nine key elements of an effective compliance program.⁹⁰ This guidance also provides analysis of how compliance programs should be assessed by Division prosecutors at both charging and sentencing. When a compliance program fails to deter conduct, prosecutors need to determine "whether the Guidelines’ presumption that a compliance program is not effective and, if it does, whether the presumption can be rebutted under U.S.S.G. § 8C2(f)(3)(C)(i)-(iv)."⁹¹

This change was made to augment incentives for effective compliance programs.⁹² However, at both charging and sentencing, the Justice Manual makes clear that compliance programs are only one of several factors to be considered by prosecutors."⁹³

VIII. PATENT LAW DEVELOPMENTS

A. SCOTUS and Federal Circuit Clarify Status of Public Agencies in PTAB Proceedings

Return Mail Inc. v. United States Postal Service⁹⁴

Regents of the University of Minnesota v. LSI Corp.⁹⁵

[Page 35]

In Return Mail, the U.S. Postal Service sought to challenge a patent for a technology to process undeliverable mail under the covered-business review process authorized by the Leahy-Smith America Invents Act of 2011.⁹⁶ Citing a presumption against including a government agency in the term "person," the Court concluded that the USPS was not a "person" within the meaning of the Act, so could not challenge the disputed patent in this process although it could defend itself in any infringement action. The opinion was written by Justice Sotomayor, who was joined by ChiefJustice and Justices Thomas, Alito, Gorsuch, and Kavanaugh. A dissent was filed by Justice Breyer who was joined by Justices Ginsburg and Kagan.

In University of Minnesota, the university had sued alleged infringers of some of its patents in U.S. District Court. The putative infringers filed petitions for inter partes review before the Patent Trial and Appeal Board. The university challenged the PTAB petitions based on sovereign immunity. The Federal Circuit concluded that the defense was not applicable citing an earlier decision involving a Native American tribe.⁹⁷

IX. NEW RULES

A. Federal Developments

The federal rules of procedure are generated by a process under which proposals from the Federal Judicial Center are forwarded to the U.S. Supreme Court, which can disapprove or modify the proposed rules. The Court, in turn, forwards newly proposed rules to the Congress, which can amend or disapprove new rules on or before December 1, 201 9.⁹⁸ The rule changes described here are before Congress. Ordinarily Congress does not modify rules approved by the Supreme Court.

1. Federal Rules of Appellate Procedure

Amendments are pending for Rules 3, 5, 13, 25, 26.1, 28, 32 and 39.

Rule 3 is modified to make clear that notices of appeal may, under specified circumstances delineated in other rules, be served electronically.

Rule 5 is adjusted to eliminate a requirement for a proof of service. This is eliminated as unnecessary when service is made through the court’s electronic filing system.

Rule 13, relating to appeals from the Tax Court, is adjusted to reflect electronic filing.

Rule 21, with respect to writs of mandamus and other writs, is amended to eliminate a requirement for proofs of service. This is rendered unnecessary by electronic filing.

Rule 25, relating to filing and service, is modified to lay out requirements of proof of service, if a paper "was served other than through the court’s electronic filing system."

[Page 36]

Rule 26, allowing extra time for certain kinds of service, receives clarifying amendments which are not substantive.

Rule 26.1, concerning disclosures, is expanded. Rule 26.1(a) now provides that "Nongovernmental corporations" are required to identify "any parent corporation and any publicly held corporation that owns 10% or more of its stock." This requirement also applies to nongovernmental corporations that seek "to intervene." Unless the government shows good cause, Rule 26.1(b) provides that it must file a statement that identifies "any organizational victim of the alleged criminal activity." If the organizational victim is a corporation, the additional requirements of Rule 26.1(a) apply "to the extent [such information] can be obtained through reasonable diligence."

These updated disclosure requirements are designed to help judges decide whether they must recuse themselves. This is probably the most important change in the Appellate rules and should be reviewed for all cases.

Rule 28, concerning briefs, is modified to conform with amendments to Rule 26.1.

Rule 39, concerning bills of costs, is adjusted to eliminate the requirement for a proof of service when papers are filed electronically.

2. Federal Rules of Bankruptcy

Amendments are pending for Rules 4001, 6007, 9036 and 9037.

Rule 4001, containing extensive regulation of when a bankrupt can seek credit, is modified to exclude simpler Chapter 13 bankruptcies. The rationale for this change is that the prior rule was designed to address complex post-petition financing issues particular to debtor Chapter 11 cases.

Rule 6007, concerning abandonment or disposal of property, is modified to specify the parties to be served with a motion to compel the trustee to abandon a property.

Rule 9036, relating to notice, is amended to permit both notice and service by electronic means. However, service is "not effective if the filer or sender receives notice that it did not reach the person to be served."

Rule 9037, relating to privacy protection for filings previously made in court, clarifies the rule in two major ways: (1) a motion can cover more than one document, and (2) the filer of the motion may be, but is not limited to, the filer. Amendments specify what the filer must supply the court in terms of redactions.

3. Federal Rules of Civil Procedure

Surprisingly, there are no changes proposed for the Rules of Civil Procedure, although significant changes Fed. R. Civ. P. 30(b)(6) are expected for December 2020.⁹⁹

[Page 37]

4. Federal Rules of Criminal Procedure

Rule 16.1 requires an early conference between that attorney for the government and counsel for the defendant. This conference is to take place "[n]o later that 14 days after arraignment." The rationale for this amendment is the volume and complexity of modern criminal discovery, particularly discovery of electronically stored information. After the discovery conference, new Rule 16.1(b) provides that "one or both parties may ask the court to determine or modify the time, place, manner or other aspects of disclosure to facilitate preparation for trial." This is certainly the most important change in the Rules of Criminal Procedure this year.

Rule 5(e) is amended to make clear that a petitioner may file a reply to the respondent’s answer or other pleading" and that "[t]he judge must set the time to file unless the time is already set by local rule." These changes overrule a line of cases that made replies optional.

5. Federal Rules of Evidence

Perhaps the most interesting change overall is a significant modification in Rule 807, the residual exception to the hearsay rule. In its prior version, the rule provided for potential admission of a hearsay statement or document had "equivalent circumstantial" indicia of reliability as exceptions in Rules 803 and 804. This older formulation was criticized because existing exceptions have dramatically different support for their reliability. This made application of the old rule difficult and uneven. The equivalence standard is eliminated by this amendment.

The amendment authorizes admission if (1) "the statement is supported by sufficient guarantees of trustworthiness-after considering the totality of circumstances under which it was made and evidence, if any corroborating the statement;" and (2) the hearsay statement "is more probative on the point for which it is offered than any other evidence that the proponent can obtain through reasonable efforts." Although the court should consider corroborating evidence, if available, such evidence is not required for admission.

Notice to the opposing party is required. Specifically:

• Notice must be of the "substance" of the statement;
• A prior requirement that the declarant’s address be disclosed has been eliminated;
• The pretrial notice must be in writing; and
• A good cause exception may allow admission of a hearsay statement even if a pretrial notice is not provided under specific circumstances.

B. State Developments

1. Court Rules

The latest amendments to the California Rules of Court can be found at: https://www.courts.ca.gov/3025.htm. There appear to be no amendments that are particularly pertinent to members of the section.

[Page 38]

2. California Legislature

This year saw several significant legislative changes in civil practice in California. All changes become effective on January 1, 2020.

• CCP § 340.6 and Bus. & Prof. Code § 6206: Section 340.6 of the Code of Civil Procedure is amended to toll the time required to seek judicial review from an arbitration decision during the time a dispute over fees or costs is pending between the lawyer and client. Cal. Bus. & Prof. Code § 6206 is amended to allow commencement of arbitration upon request by a client, following commencement of an action in any court.
• CCP § 695.215: This legislation amends Cal. Code Civ. P. § 695.215 to provide that payment of a money judgment "does not constitute a waiver of the right to appeal, except to the extent that the payment is a product of a compromise or is coupled with an agreement not to appeal."
• CCP § 1011: This section is amended to provide extra time during which service is allowed. Service can be made at an attorney’s office from 9:00 a.m. to 5:00 p.m. Service at a party’s home is allowed from 8:00 am to 8:00 p.m.
• CCP §§ 2030.210 and 2033.210: These sections are amended to require provision of electronic versions of demands for discovery and responses, interrogatories and responses, requests for admissions and responses to the opposite party within three days of a request.
• CCP §§ 2030.300, 2031.310 and 2033.290: These sections are amended to authorize elimination of the separate statement requirement. Instead, courts may now permit parties to submit a "concise outline of the discovery request and each response in dispute" for motions to compel further responses for (1) demands for inspection; (2) interrogatories and (3) requests for admission. Note that Cal. Rules of Ct. 3.1345 lays out what is required if you choose not to ask a court to waive the separate statement requirement.
• CCP § 2031.280: Current law provides that discovery documents may be produced in the order they are kept. An amendment to Cal. Code Civ. P. § 2031.280 eliminates this option and requires production keyed to the specific request number to which the documents respond.

[Page 39]

——–

Notes:

^1. Thomas Greene is a trial attorney for the Antitrust Division of the U.S. Department of Justice. The views expressed here are those of the author and do not necessarily reflect those of the Antitrust Division or the U.S. Department of Justice. These are a selection of the developments prepared for presentation at the Golden State Institute on November 14, 2019, reflecting developments as of that date.

^2. 932 F.3d 1264 (2019).

^3. 740 Ill. Comp. Stat. 14/1 et seq.

^4. ___ U.S.___, 136 S.Ct. 1540 (2016).

^5. Patel, 932 F.3d at 1270-71 (quoting Robins v. Spokeo, 867 F.3d 1108, 1113 (9th Cir. 2017 (Spokeo II)).

^6. D. Warren and Louis D. Brandeis, The Right to Privacy, 4 Harv. L. Rev. 193, 198 (1890).

^7. Patel, 932 F.3d at 1271-73.

^8. Id. at 1273.

^9. Id. at 1274.

^10. Id. at 1275.

^11. Attias v. CareFirst, Inc., 365 F. Supp. 3d 1 (D.D.C. 2019).

^12. Frank v. Gaos, ___ U.S. ___ , 139 S. Ct. 1041 (2019).

^13. 928 F.3d 819 (9th Cir. 2019).

^14. Cal. Civ. Code §§ 1812.620 et seq.

^15. Cal. Bus. & Prof. Code §§ 17200 et seq.

^16. Cal. Civ. Code §§ 1750 et seq.

^17. McGill v. Citibank, N.A., 2 Cal. 5th 945 (2017).

^18. Rent-A-Center West v. Jackson, 561 U.S. 63 (2010).

^19. 8 Cal. 5th 111 (2019).

^20. AT&T Mobility v. Concepcion, 593 U.S. 333, 339 (2011).

^21. Pleadings are limited to a complaint and answer. There is no discovery process. All relevant evidence is admitted. The hearing officer is authorized to assist the complainant with cross-examination and may explain the process to him or her. OTA, 8 Cal. 5th at 121-22.

^22. Sonic-Calabasas A. Inc. v. Moreno, 51 Cal. 4th 659 (2011) ("Sonic I").

^23. AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011).

^24. Sonic-Calabasas A. Inc. v. Moreno, 57 Cal. 4th 1109, 1146 (2013) ("Sonic II").

^25. OTA, 8 Cal. 5th at 125 (citing Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US) LLC, 55 Cal. 4th 223, 246 (2012)).

^26. Id. at 126-127 (citing Grand Prospect Partners L.P. v. Ross Dress for Less, Inc. 232 Cal. App. 4th 1332, 1348 (2015)).

^27. Id. at 127.

^28. Id. at 129-138.

^29. Id. at 128 n. 8.

^30. 28 Cal. App. 5th 1042 (2018), rev. denied, 2019 Cal. LEXIS 981 (Cal., Feb. 3, 2019), cert. denied, Winston & Strawn LLP v. Ramos, 2019 U.S. LEXIS 4778, 2019 WL 4921371 (Oct. 7, 2019).

^31. 563 U.S. 333 (2011).

^32. 24 Cal. 4th 83 (2000).

^33. 6 Cal. 5th 610 (2019).

^34. 7 Cal. 5th 133 (2019).

^35. 7 Cal. 5th 871 (2019).

^36. Cal. Code Civ. P. § 425.16.

^37. Rand Resources, 6 Cal. 5th at 630.

^38. Id.

^39. FilmOn.com, 7 Cal. 5th at 141.

^40. Id. at 153.

^41. Wilson, 7 Cal. 5th at 883.

^42. Id. at 890.

^43. 40 Cal. App. 5th 882 (2019).

^44. Id. at 884.

^45. ___ U.S. ___ , 139 S. Ct. 1743 (2019).

^46. 28 U.S.C. § 1441.

^47. 28 U.S.C. § 1453(b).

^48. Home Depot, 139 S. Ct. at 1748 (citing A. Scalia and B. Garner, Reading Law 167 (2012)).

^49. Id. at 1748.

^50. Id. at 1750.

^51. ___ U.S. ___, 139 S. Ct. 710 (2019).

^52. Id. at 714.

^53. Id. at 715.

^54. 926 F.3d 539 (9th Cir. 2019).

^55. In re Hyundai and Kia Fuel Economy Litig, 881 F.3d 679 (9th Cir. 2018).

^56. In re Hyundai and Kia Fuel Economy Litig. , 926 F. 3d at 560.

^57. Id. at 561 (citing Wash. Mut. Bank, FA v. Superior Court, 24 Cal. 4th 906 (2001)).

^58. Id. at 562.

^59. Id. at 567 (citation omitted).

^60. Id. at 568.

^61. Id. at 570-572.

^62. Id. at 572-582.

^63. 7 Cal. 5th 955 (2019).

^64. Id. at 964.

^65. Id. at 965 (citing Medianews, 207 Cal. App. 4th 639 (2012)).

^66. 154 Cal. App. 4th 1 (2007).

^67. Noel, 7 Cal. 5th at 972 (citing Daar v. Yellow Cab Co., 67 Cal.2d 695, 706 (1967)).

^68. Id. at 976 (citing Mullins v. Direct Digital LLC, 795 F.3d 654 (7th Cir. 2017)).

^69. Id. at 979 (referencing Mullins and quoting Hicks v. Kaufman & Broad Corp., 89 Cal. App. 4th 908, 915 (2001)).

^70. Id. at 982.

^71. Id. at 986.

^72. 2019 U.S. Dist. LEXIS 155118 (N.D. Oh., Sept. 11, 2019).

^73. Id. at *60-*61.

^74. Id. at *66-*69.

^75. Id. at *69-*115.

^76. ___ U.S. ___ , 139 S. Ct. 2356 (2019).

^77. 5 U.S.C. § 552(b)(4).

^78. Argus Leader Media v. USDA, 889 F.3d 914, 915 (8th Cir. 2018).

^79. 498 F.2d 765 (D.C. Cir. 1974).

^80. Argus Leader Media v. USDA, 139 S. Ct. at 2263.

^81. 7 Cal. 5th 781 (2019).

^82. Monster Energy Co. v. Schechter, 26 Cal. App. 5th 54 (2018).

^83. Monster Energy, 7 Cal. 5th at 794.

^84. 38 Cal. App. 5th 582 (2019).

^85. Id. at 584.

^86. Id. at 582 (citing Ridgley v. Topa Thrift & Loan Assn., 17 Cal. 4th 970, 977 (1998)).

^87. Id. at 589.

^88. ___ U.S. ___ , 139 S. Ct. 1960 (2019).

^89. Id. at 1963.

^90. U.S. Department of Justice, Evaluation of Corporate Compliance Programs in Criminal Antitrust Investigations, July 2019, available at https://www.justice.gov/criminal-fraud/page/file/937501/download

^91. Id. at 15.

^92. Makan Delrahim, "Winds of Change: A New Model for Incentivizing Antitrust Compliance Programs," July 11, 2019, available at https://www.justice.gov/opa/speech/assistant-attorney-general-makan-delrahim-delivers-remarks-new-york-university-school-l-0.

^93. Justice Manual, § 9-28.300.

^94. ___ U.S. ___ , 139 S. Ct. 1853 (2019).

^95. 926 F.3d 1327 (Fed. Cir. 2019).

^96. 15 U.S.C. §§ 100 et seq.

^97. Saint Regis Mohawk Tribe v. Mylan Pharmaceuticals, Inc., 896 F.3d 1322 (Fed. Cir. 2018), cert. denied, ___ U.S. ___, 139 S.Ct. 1547 (2019).

^98. See https://www.uscourts.gov/rules-policies/archives/packages-submitted/us-supreme-court-rules-package-2018.

^99. See https://www.uscourts.gov/rules-policies/archives/preliminary-draft/preliminary-draft-proposed-amendments-2018.