Case Comments
| Publication year | 2018 |
| Author | Lowell Anderson |
Lowell Anderson
Stetina Brunda Garred & Brucker
A conflict arose from a prior representation in which 119 hours were billed over the prior 5 years—with no termination letter. Whether a contract with a new client, waiving past and future conflicts and agreeing to arbitrate all disputes, is legal and therefore enforceable is an issue for judicial determination and any preliminary determination by an arbitrator is not binding on the court. "[A]n attorney contract that has as its object conduct constituting a violation of the Rules of Professional Conduct is contrary to the public policy of this state and is therefore unenforceable." Under Cal. Rule Prof. Conduct 3-110(C) (3), "without informed written consent, 'an attorney's firm cannot simultaneously represent a client in one matter while representing another party suing that same client in another matter.'" Sheppard Mullen represented a prior client that was suing a new client but did not notify the new client when the new client signed a waiver of conflicts so the new client did not give "informed" consent. "To be informed, the client's consent to dual representation must be based on disclosure of all material facts the attorney knows and can reveal." The disclosure obligation applies whether the client is an individual or a sophisticated, multinational corporation with a large law department. Here, the conflict affected the whole of the law firm's engagement agreement involving a qui tam action, rendering the entire agreement unenforceable—including its arbitration clause. An arbitrator's award of $1.3 million dollars in fees and interest to the law firm was reversed and remanded for a quantum meruit evaluation. Sheppard, Mullin, Richter & Hampton, LLP v. J-M Mfg. Co, Inc., 6 Cal. 5th 59 (2018).
An arbitration award of attorneys' fees was vacated for an undisclosed conflict of interest that rendered the entire agreement unenforceable, but the recovery of some fees was not automatically barred—according to the majority decision. "California law does not establish a bright-line rule barring all compensation for services performed subject to an improperly waived conflict of interest, no matter the circumstances surrounding the violation." "We instead hold that the issue is generally one for the discretion of the trial court, to be exercised in light of all the circumstances that gave rise to the conflict." "Although the law firm may be entitled to some compensation for its work, its ethical breach will ordinarily require it to relinquish some or all of the profits for which it negotiated." An arbitrator's award of $1.3 million in attorney fees and interest for 10,000 hours of services was reversed and remanded for potential recovery based on quantum meruit, an equitable remedy based on case-specific factors for which the law firm has the burden of proof. Sheppard, Mullin, Richter & Hampton, LLP v. J-M Mfg. Co., Inc., 6 Cal. 5th 59 (2018).
The Computer Fraud and Abuse Act (CFAA) prohibits unauthorized access to a computer or exceeding authorized access where the defendants acts result in a loss of $5000 in a one-year period from the access. Ticketmaster sent defendants a cease-and-desist letter identifying violations of its website's terms of use and denying permission to use automated software bots to obtain tickets. That letter made future use of the bots unauthorized and shifted liability from merely breaching the terms of use for Ticketmaster's website, to a violation of the CFAA because the bot access was unauthorized. Costs incurred in analyzing, investigating and responding to defendants' actions that incured costs exceeding $5000 were plausibly pled and need not be itemized in the pleadings. A motion to dismiss was denied. Ticketmaster LLC v. Prestige Entm't West, Inc., 315 F.Supp.3d 1147, 127 U.S.P.Q.2d 1266 (C.D. Cal. 2018).
Whether a contract imposes a "restraint of a substantial character" on an employee is a mixed question of law and fact as to whether the facts satisfy the statutory standard so the conclusion of law is reviewed de novo. A restraint of trade under Cal.Bus. & Prof. Code § 16600 "extends beyond noncompetition agreements to any 'restraint of a substantial character." "[S]ection 16600 "speaks in categorical terms: it refers to 'every contract by which anyone is restrained' from practicing a 'profession, trade, or business of any kind." (original emphasis). "[A] restraint can be substantial even if it is reasonable...and even if it is narrow...." "[W]e conclude that a contractual provision imposes a restraint of a substantial character if it significantly or materially impedes a person's lawful profession, trade, or business." "[I]ts restraining effect must be significant enough that its enforcement would implicate the policies of open competition and employee mobility that animate section 16600." An agreement barring a doctor from staff privileges at the former employer's facilities was upheld, but terms barring the doctor from working at facilities contracting with the former employer, even if the relationship was formed after the doctor was employed—was a restraint of a substantial character and barred by § 16600. Judge Smith dissented, in part because the contract was in settlement of a lawsuit and the terms were agreed to by plaintiff before a magistrate judge—but plaintiff later refused to sign. Golden v. Cal. Emergency Physicians Med. Grp., 896 F.3d 1018 (9th Cir. 2018).
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Where copying is disputed and there is substantial evidence of access, an inverse ratio rule jury instruction may be appropriate. On remand of whether Stairway to Heaven was infringing, the court should consider an inverse ratio jury instruction. Skidmore v. Led Zeppelin, ___ F.3d ___ (9th Cir. Sep. 28, 2018).
A Russian defendant sold software creating "cheats" that allowed players of FORTNITE to modify the multiplayer video game to give players powers not authorized by the game. After authorized service by email the defendant defaulted but judgment is entered only after evaluating seven Eitel factors based on allegations in the complaint. Cessation of sales provided some of the requested injunctive relief. Defendant did not inject the cheat into the games and thus did not prepare a derivative work. It was unclear whether a copyright in source code creates rights in screen displays so the scope of copyright protect was unclear. It was unclear whether displaying video games was a public performance because granting the source code author rights to control when and where the games were displayed during play would unduly restrain consumers playing the game. No trademark causing confusion was allegedly used in connection with the cheat software so no trademark rights were violated. No tangible product was sold so no false designation of origin was proven. A default judgment was denied, but with leave to file an amended complaint alleging additional facts. Epic Games, Inc. v. Mendes, 127 U.S.P.Q.2d 1387 (N.D. Cal. 2018).
Before the early meeting of counsel, the court authorized Rule 45 subpoenas directed to the ISP used by doe defendants during a specified period of infringement, to obtain the true name and address associated with each defendant, and the time to serve the doe defendants was extended. In re Various Strike 3 Holdings, LLC, 127 U.S.P.Q.2d 1703 (E.D.N.Y. 2018).
The statute provides that "No person shall, without authority of the copyright owner or the law...intentionally remove or alter any copyright management information.knowing, or.having reasonable grounds to know, that it will induce, enable, facilitate, or conceal an infringement of any" copyright. Removing copyright management information (CMI) may make infringement possible, but is insufficient to meet the statutory knowledge requirements. "Instead, the plaintiff must provide evidence from which one can infer that future infringement is likely, albeit not certain, to occur as a result of the removal or alteration of CMI." A summary judgment dismissal after discovery closed was affirmed. A Rule 56(d) request for discovery was properly dismissed as the discovery related to whether CMI was knowingly removed, not whether defendants induced, enabled, facilitated or concealed any infringement. Stevens v. CoreLogic, Inc., 893 F.3d 648, 127 U.S.P.Q.2d 1247 (9th Cir. 2018).
A non-profit company published online copies of standards, rules and regulations incorporated into public laws and created by numerous different standard setting organizations. Infringement of all standards, rules etc. was found on summary judgment, an injunction issued and an appeal followed. Addressing the statutory fair use factors, the court discussed the "for profit" issue and found that trial court failed to adequately consider whether distributing copies of the law to facilitate public access could constitute transformative use even without altering the underlying work. Paraphrases, summaries and descriptions lack the precision needed to evaluate written laws. As to the nature of the copyrighted work, "we think that standards incorporated by reference into law are, at best, at the outer edge of 'copyright's protective purposes.'" "Where the consequence of the incorporation by reference is virtually indistinguishable from a situation in which the standard has been expressly copied into law, this factor weighs heavily in favor of fair use. But incorporation does not always lead to easy substitution. As to the extent of copying, if only the sections and sub-sections incorporated to establish the law and needed to establish its import were taken, that "would weigh strongly in favor of finding fair use here, especially given that precision is ten-tenths of the law." The effect on the market was wrongly decided because the...
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