‘Breaking Contracts has Consequences’ – Third Circuit Backs Employer with Restrictive Covenant Agreements

A recent decision from the Third Circuit addresses a grant of preliminary injunction against an employee who signed multiple agreements with restrictive covenants, and violated them immediately upon beginning employment with a direct competitor, reports Genova Burns.

Authors Dina M. Mastellone and James W. Sukharev discuss the case of Heartland Payment Sys., LLC v. Volrath.

In that case, a former employee of Heartland breached a manager agreement by sending confidential information to his former employer’s competitors.

Read the article.



Service Contracts and the Magnuson-Moss Warranty Act

Although it is tempting to focus only on state laws when evaluating how a service contract is regulated, the federal Magnuson-Moss Warranty Act (MMWA) provides an important reminder that federal law may be equally as significant, point out Brian T. Casey and Jon L. Gillum of Locke Lord in an article for Warranty Week.

“Although service contracts mirror many of the features of traditional insurance products, most states expressly exclude them from the statutory definition of insurance, and the majority of states go one step further by establishing formal licensing and financial security requirements that govern the sale of service contracts to consumers by service contract provider or obligors,” they explain.

But such contracts also are potentially subject to the MMWA.

Read the article.



Download: Top 10 Compliance Trends eBook

NAVEX Global has published a new eBook titled “Top 10 Ethics & Compliance Trends for 2019.” The book is available for download at no charge from the company’s website.

“Transparency and trust define our industry’s challenges and opportunities for 2019,” the company says on its website. “With each expert opinion found in this year’s annual trends report, you’ll see how shifts in the workplace and regulatory environment bring to light the importance of authenticity and ethical practices.”

Some of the topics covered are:

  • Protected Activity & Corporate Governance
  • Third-Party Risk Beyond FCPA
  • Artificial Intelligence
  • New Global Business Practices
  • GDPR Enforcement Updates

Download the eBook.



Limiting Exposure With a Limitation of Liability Clause

Gregory J. Reigel asks and answers the question: Can you really limit your liability simply by including certain language in your agreements?

He finds the answer in a recent Texas Supreme Court ruling in Bombardier Aerospace Corp. v. SPEP Aircraft Holdings, LLC.  In that case, plaintiff aircraft purchasers sued Bombardier, alleging that the engines installed on the plane they bought were not new equipment. A jury found in favor of the plaintiffs and awarded $2.7 million in actual damages and $5.4 million in punitives.

On appeal, Bombardier relied on a limitation of liability clause in the purchase agreement. The state Supreme Court ruling shows that “where sophisticated parties have bargained for a limitation of liability clause in an arms-length transaction, courts are likely going to enforce that clause to limit the damages that may be recovered,” Reigel writes.

Read the article.



Outsourcing Contracts in the USA

International business - globe -worldKilpatrick Townsend & Stockton has compiled a structured guide to outsourcing contracts in the United States. The guide is available on Lexology.com.

The guide covers the various types of contract forms for outsourcing arrangements, due diligence, customer base, business requirements, HR issues, third-party contracts, duration and renewal, supplier selection, service specifications, charging methods, warranties and indemnities, and ending the agreement.

Authors of the article are James Steinberg, Joshua M. Benson, Farah F. Cook, Joshua S. Ganz, Julie C. Grundman, Maha Khalaj, Lance McCord, Michelle Tyde, Amanda M. Witt and Vita Zeltser.

Read the article.



Overbroad Geographic Restriction Dooms Covenant Not to Compete

A recent Texas court decision highlights the requirement that any covenants not to compete, including geographic restrictions, must be reasonable to be enforceable, according to a report on the Ogletree Deakins website.

Lawrence D. Smith writes about Fomine v. Barrett, which involved a non-compete agreement for a case manager in a chiropractic clinic. The agreement prohibited the employee from being involved in any competitive business within a 500-mile radius of the employer’s clinic.

The Houston appellate court found the 500-mile radius to be “significantly broader than the geographic scope” of the former employee’s actual employment activities on behalf of the clinic. It is therefore “broader than is reasonably necessary” to protect the employer’s business interests.

Read the article.



Google Fails to Get IP Suit Transferred Out of Plaintiff-Friendly East Texas

Alphabet Inc.’s Google will have to fend off a patent infringement lawsuit in East Texas after a federal appeals court refused to reconsider moving the case to another court, reports Bloomberg Law.

A panel of the U.S. Court of Appeals for the Federal Circuit denied Google’s petition to rehear the issue of whether having servers in third-party facilities establishes a regular place of business for the purposes of filing a lawsuit, according to Bloomberg’s Malathi Nayak.

“SEVEN Networks LLC sued Google in for allegedly infringing patents related to data network traffic optimization through servers in East Texas,” Nayak writes. “Google said the case should be transferred because the presence of its servers in the district doesn’t amount to a regular and established place of business under the patent venue statute.”

Read the Bloomberg Law article.



Notice of Terms via Buried Link within a Post-Sale Email Unenforceable

Terms conditions contractsThe Second Circuit affirmed a ruling that denied a web service’s motion to compel arbitration, finding that the user did not have reasonable notice of the arbitration provision contained in the terms and conditions that were communicated via a hyperlink in a post-sale email, reports Proskauer Rose in its New Media and Technology Law Blog.

Jeffrey Neuburger, a partner in the firm, wrote the article.

“While the court recognized that a party has a duty to read a contract, it stressed that this does not morph into a duty to ‘ferret out contract provisions when they are contained in inconspicuous hyperlinks,’ particularly where, as in this case, the user was presented with multiple documents, each containing different sets of terms,” Neuburger writes.

Read the article.



IBM Watson in Quiet Talks With Law Firms to Expand AI Offerings

Bloomberg Law reports that the makers of IBM’s Watson artificial intelligence tool have been in quiet, informal discussions with a small group of prominent law firms in a bid to launch an expansion of offerings for firms and to help them collaborate around AI.

Brian Kuhn, co-founder and global leader of the Watson legal practice at IBM, said the company until now has mostly focused its legal business marketing of Watson to legal departments within large corporations, according to Bloomberg’s Sam Skolnick.

Kuhn said the company is preparing for a large-scale entrance into the American and British law firm markets, adding to its existing arrangements with U.S. and U.K.-based firms already in place.

Read the Bloomberg Law article.



Texas Court Addresses Bad Acts in an Oil-Patch Lease Play

Writing in Gray Reed’s Energy & the Law blog, Charles Sartain points out that parties to a transaction need to be mindful that if a business deal is a partnership, there will be rights and duties not present in arms-length commercial transactions.

He discusses a recent appellate court opinion and considers the main question: Was a partnership formed by a letter agreement, a participation agreement and the actions of the parties?

Stephens et al v. Three Finger Black Shale Partnership et al. is a complicated petroleum development deal that included all those elements. The jury trial ended with a multimillion dollar judgment for actual and exemplary damages in favor of two separate groups of plaintiffs and intervenors against several groups of defendants.

The appellate court determined that there was no evidence of a partnership, which meant that no fiduciary duty was owed by the defendants.

Read the article.



Trade Secrets Take Center Stage, and Contracts Play a Lead Role

Trade secretWith increasing attention on trade secrets and a developing body of case law around Defend Trade Secrets Act claims, an emphasis on contracts also is growing, point out Douglas R. Nemec and P. Anthony Sammi in a post for Skadden, Arps, Slate, Meagher & Flom.

“Breach-of-contract claims frequently have appeared alongside trade secret claims in lawsuits over the years and often materially impacted the results,” they write. “But a contract should not be viewed as a mere alternative to trade secret protection. Properly crafted, and if necessary properly litigated, a contract can both strengthen and expand the reach of a trade secret claim.”

Their article covers defining confidential information, term limitations and their risks, and maintaining confidentiality.

Read the article.



Knowledge Qualifiers in IP Representations and Warranties

In most transactions involving the sale or license of intellectual property, a buyer or licensee will request that a seller or licensor represent and warrant that such intellectual property does not infringe or misappropriate the intellectual property rights of a third party.

In a post on the Morgan Lewis website, Rahul Kapoor and Shokoh H. Yaghoubi explain that this representation and warranty is often heavily negotiated in a license or purchase agreement. That’s because the seller or licensor wants to limit its obligations for breach of this representation to limit its liability under the agreement, whereas the buyer or licensee wants to keep this provision as broad as possible to ensure that it receives appropriate protection from third-party claims for the intellectual property it licenses or buys.

Their article offers some advice on structuring this type of contract clause.

Read the article.



Bionpharma Fails to Get Rival’s GC Disqualified in Supply Spat

Bloomberg Law reports that Generic drug distributor P&L Development LLC’s general counsel and an outside firm may continue to represent P&L in its breach-of-contract and fraud suit against Bionpharma Inc., a federal court in North Carolina ruled.

Bionpharma wanted to disqualify Charles Cain, P&L’s general counsel. P&L is suing Bion for breach of supply agreements that Cain approved when he was general counsel at a defunct predecessor of Bion’s, explains Bloomberg’s Martina Barash.

But any confidential information about the predecessor’s capabilities that Cain acquired during the agreements’ drafting wouldn’t help P&L in this suit, the court said.

Read the Bloomberg Law article.



Lawyer Sues Apple, Says FaceTime Bug Allowed Secret Recording of Deposition, Caused Emotional Trauma

AppleCourthouse News Service reports that an attorney in Houston filed a lawsuit claiming he was conducting a deposition with a client when he encountered Apple’s latest bug that allowed others to access his iPhone’s microphone without him answering a FaceTime call.

The New York Times explains how the bug worked:

“By adding a second person to a group FaceTime call, you can capture the audio and video of the first person called before that person answers the phone, or even if the person never answers.”

The Houston lawyer, Larry D. Williams II, seeks punitive damages against Apple and unknown parties for claims of product liability, negligence, warranty and fraudulent misrepresentation.

CNBC reports that Williams claimed the experience caused “sustained permanent and continuous injuries, pain and suffering and emotional trauma that will continue into the future” and that Williams “lost ability to earn a living and will continued to be so in the future.”

Read the Courthouse News Service article.




Evaluating Current Contracts for Use In the New Year

Snell & Wilmer offers some advice for businesses that may need to take a look at their existing contract templates to evaluate a refresh or, in certain circumstances, a major overhaul.

The article, posted on JDSupra.com, discusses updating contracts for changes in the law, creating a family of templates with consistent legal terms, creating a state addendum for use on contracts across multiple states, new delivery models, and new technologies and techniques.

Read the article.




Three Recent Cases Consider the Interpretation and Enforceability of Arbitration Agreements

A post on the website of  McGuireWoods LLP discusses three recent cases before the Supreme Court and the Third Circuit relating to the interpretation and enforceability of arbitration agreements.

The Third Circuit found in favor of Kaplan University in a case in which a student challenged an arbitration agreement included in an e-signed enrollment.

The Supreme Court ruled in a case in which the justices rejected a judicially created exception limiting enforcement of arbitrability.

And the Supreme Court upheld statutory exemption for an independent contractor.

Read the article.




No Fees for You: Non-Class Counsel Get Stiffed in VW Diesel Litigation

Volkswagen AG is paying out $175 million to plaintiffs’ attorneys in the $10 billion settlement over the “clean diesel” litigation. But many who say they worked on those cases won’t be getting any money, according to Bloomberg Law.

“Only attorneys chosen as class counsel in the consolidated litigation, and attorneys working on assignments from class counsel, are entitled to attorneys’ fees, the U.S. Court of Appeals for the Ninth Circuit said Jan. 22,” reports Bloomberg’s Martina Barash.

“That means numerous attorneys who worked on suits before the appointment of class counsel won’t get paid,” she adds. “That includes for work they did filing complaints, attempting to negotiate early settlements, and fielding calls with clients and other attorneys.”

Read the Bloomberg Law article.



Another Reason Not to Use Fixed Price Buy-Sell Agreements

A recent post on the  Farrell Fritz website describes the uses and possible pitfalls of using fixed price buy-sell agreements.

Author Peter Mahler explains:

“A fixed price buy-sell agreement is one in which co-owners of a business select a specific dollar amount, expressed either as enterprise or per-share value, for calculation of the future buyout price to be paid an exiting owner or his or her estate upon the happening of specified trigger events such as death, disability, retirement, or termination of employment.”

Fixed price buy-sell agreements in theory offer two main advantages over pricing mechanisms that utilize formulas or appraisals at the time of the trigger event: certainty and the avoidance of transactional costs.

Read the article.



Brexit Vote Prompts New Questions for UK, US Businesses

EU- BrexitThe historically large rejection of Prime Minister Theresa May’s Brexit proposal is creating new uncertainty for companies doing business in the United Kingdom.

“Questions about the terms of Brexit is already affecting currency exchange rates and the confidence of business leaders and long-range investment plans,” says Tony Magee, a former Chancery Barrister practicing in the U.K., and now a trial attorney in Dallas. “The risk for U.S. companies is that if Brexit happens without a clear long-term deal on customs rules and tariffs, that could inhibit trade with the U.K. and encourage U.S. companies to deal more with the European Union.”

Magee notes that while it is too early to predict the overall Brexit process and timing, the situation is very dynamic and volatile with the Prime Minister now required to come back to the House of Commons within three days to outline her “Plan B” proposal.

“It is possible that Brexit could be delayed by mutual consent and that the government could hold a second referendum to ask the electorate to vote on whether they still want to leave the E.U. But it is unlikely that a second referendum could be scheduled before the March 29 Brexit deadline. Publicly, May’s cabinet is not currently willing to hold a second referendum, but there are reports of differences of opinion in the cabinet on that score. Things could develop and change very quickly.”



A Top 10 Verdict in Texas

A team of lawyers with Boyd Powers & Williamson alleging deceptive business practices against BBVA Compass Bank won a $98 million verdict for their client, a real estate developer who was working to build three luxury subdivisions in Tarrant County, Texas.

On its website, the firm explains the case:

“David Bagwell is a real estate developer who was working to build three luxury subdivisions in Tarrant County, Texas. Following the financial crisis of 2008, Mr. Bagwell entered into modification negotiations with his bank, BBVA Compass, to refinance the loans which were funding the new developments. In the course of the negotiations, Compass repeatedly told Mr. Bagwell that his loans would be renewed. However, after secretly negotiating with one of his competitors, those same loans were sold off at a discounted rate. A short time later, the competitor foreclosed and Mr. Bagwell was forced into bankruptcy.”

Read details about the case.