Companies should use a conservative approach when offering protection plans for products, advises Weil, Gotshal & Manges LLP in its Product Liability Monitor.

The article points out that the terms “extended warranty” and “service agreement” are likely to cause confusion, in relation to the Magnuson Moss Warranty Act, which governs the terms of these warranties.

Two cases discussed in the article cover the differences in “service agreement” and “warranty” and how to avoid potential MMWA issues.

Read the article.

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.

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.

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.

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.

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.

Image by Norbert Aepli

The most critical driver for consumers’ adoption of autonomous vehicles, above technological advancement and adequate investment, is coherent national regulation amid consumer safety concerns. That’s according to a new survey of automotive and technology leaders and state and federal regulators by global law firm Perkins Coie LLP and the Association for Unmanned Vehicle Systems International (AUVSI), the world’s largest nonprofit organization devoted to advancing the unmanned systems and robotics community.

Survey participants indicated they saw a potential to increase convenience and reduce traffic incidents that stem from further development of autonomous vehicle technology. And while survey respondents are focused firmly on consumers’ perceptions regarding safety, no clear majority of respondents agree on which regulatory authority should be responsible for overseeing liability issues amid the current patchwork of federal, state and local rules.

“The emergence of any new technology requires adaptation of existing regulatory regimes,” said William G. Malley, office managing partner for Perkins Coie in Washington, D.C. “The same is true with automated vehicles. Regulators at every level will need to rethink and update existing requirements. In the long run, smart regulation can help to facilitate the development and deployment of this new technology by providing regulatory certainty and helping to reinforce the public’s confidence in the new technology.”

In a release, the firm discussed the survey:

Liability and Consumer Perception Top Challenges

Liability concerns ranked first among the challenges that industry leaders and regulators believe could impede the driverless-car market, just slightly ahead of consumers’ safety perceptions. Respondents also see an urgent need for infrastructure, such as smart signs, traffic lights and merge lanes, to make roads shared by fully autonomous, semi-autonomous and traditional cars safe for everyone.

“You don’t see liability issues go through the courts until you have already had an accident,” said Daniel P. Ridlon, Co-Chair of Perkins Coie’s Unmanned Vehicle Systems Industry group. “Participants in our survey from across the spectrum of industry and regulatory insiders understand this, telling us in a variety of ways that safety and product liability risk are principally important and closely related. They also recognize how both issues can affect consumer sentiment, impacting the industry well beyond the immediate costs related to lawsuits.”

Investment Opportunities Abound

With the market for driverless cars projected to grow to as large as $7 trillion by 2050, respondents see multiple investment opportunities as equally attractive and urgent. Vehicle-to-vehicle and vehicle-to-infrastructure communication technology, 5G technology and Advanced Driver Assistance Systems were seen as the most enticing investments, followed closely by precision mapping and location technology.

“This survey shows a young industry with tremendous potential and understandable growing pains as technology shapes the future of transportation,” said Brian Wynne, President and CEO of AUVSI. “Lawmakers, consumers and regulators alike should embrace the advantages of the future AV era as we work to resolve early-cycle challenges in the years ahead.

Other Key Survey Findings

• A majority – 54 percent – of industry respondents said they would rather see regulation come from the federal level. This reflects the difficulty automakers anticipate in achieving widespread adoption of AVs without a broad and coherent regulatory framework.
• All survey respondents – technology and automotive executives as well as regulators – saw the possibility of reducing vehicle accidents as the most important benefit of AVs. More survey respondents selected reduced traffic accidents as the greatest benefit to consumers than all other options combined.
• Respondents believe the price of investment, behind safety concerns, is one of the top obstacles to the growth of the AV industry with those in technology fields considering investment costs the most worrisome obstacle.

See the complete survey report.

Image by Montgomery County Planning Commission

Reuters is reporting that a federal judge on Thursday raised the prospect of not approving CVS Health Corp’s deal to buy insurer Aetna Inc, which closed earlier this week, during a routine portion of the legal process.

“I was reviewing your motion, which, of course is not opposed. And I kind of got this uneasy feeling that I was being kept in the dark, kind of like a mushroom,” Judge Richard Leon of the U.S. District Court for the District of Columbia told lawyers for the Justice Department and the two companies, noting that the American Medical Association, among others, had objected to the deal.

“I’m very concerned, very concerned that you all are proceeding on a rubber-stamp approach to this,” he told them, according to a transcript of the hearing.

Read the Reuters article.

TCPAland reports on a reversal of fortune: The Northern District of Alabama has officially been reconsidered and reversed itself on a contractual consent decision.

The court originally ruled that the plaintiff “could not unilaterally revoke her consent to receive debt-collection calls because she agreed to provide that consent as part of a bargained-for exchange.”

The court revisited some of the authorities surrounding its original ruling, and decided that it was wrong, and that a consumer may freely revoke contractual consent unless some term in the contract limits that right. explains Shane Micheil of Womble Bond Dickinson.

Read the article.

New York State has taken steps to smooth the often rough road for resolving international contract disputes, and parties are finding the new procedures comparatively easy to follow, according to post on the website of Daniel Kron.

He explains that “when international contracts have no forum selection clause, New York can be the only — or best — place to obtain personal jurisdiction. At the same time, given the relatively broad views of personal jurisdiction found in New York, foreign individuals may find they are taken to court in New York despite their desires.”

Read the article.

In addition to representations and warranties, merger and acquisition purchase agreements generally include indemnification provisions, pursuant to which any given party agrees to defend, hold harmless, and indemnify the other party or parties from specified claims or damages, according to a post on  the Goulston & Storrs website.

Daniel R. Avery explains that these typically include claims arising from a breach of the indemnitor’s representations and warranties or covenants set forth in the purchase agreement, or with respect to other specific matters.

“Indemnity caps are often one of the most intensely negotiated provisions of an M&A purchase agreement,” Avery writes. “The market amount for indemnity caps has historically been a direct reflection of the relative strength of buyers and sellers in the private company M&A market.”

Read the article.

Some state attorneys general and the U.S.  Department of Justice are looking into no-poach agreements that some companies are including in their franchise operating agreements, reports Skadden, Arps, Slate, Meagher & Flom.

“Such clauses typically prohibit franchisees from hiring employees directly from the franchisor or other franchisees for up to six months following the end of their employment. [Washington State Attorney General Bob] Ferguson has been touting the ongoing success of his investigation with respect to fast food chains, and franchise-based chains in other industries appear to be his next target,” according to the authors.

“Any employers that currently utilize no-poach agreements or are considering doing so should be sure to examine whether there are valid pro-competitive justifications for the agreement that outweigh any anti-competitive effect and whether the benefits of the no-poach agreement are worth the risk of the potential governmental or private challenge that is likely to occur.”

Read the article.

Equipment leasing presents a company with an opportunity to acquire the use of equipment without using its own cash or its bank line of credit, according to a post on the website of Steptoe & Johnson.

“An understanding of the unique features of equipment lease contracts should help a company work with its bank to structure and document a mutually acceptable lease agreement,” writes Andrew J. Kalgreen.

His article discusses end-of-term purchase and return options, maintenance requirements, tax benefit protection, third-party liability protection, disclaimers of product warranties, and termination risks.

Read the article.

If your client is going to contractually commit to using commercially rea­son­able ef­forts to do something — and if your client expects that obligation to require some­thing less than “all reasonable efforts” — then you’ll want to make that expectation clear in the contract itself, advises D.C. Toedt III in the On Contracts Blog.

He discusses a case in which the influential Dela­ware chancery court noted the chasm be­tween the meaning of that term to transactional lawyers versus to courts.

“Seemingly disregarding practitioners’ views, the chancery court continued the Delaware trend —which that court itself started — of treating com­mer­­ci­al­ly rea­sonable efforts as requiring the obligated party to take ‘all rea­son­able steps.’”

Read the article.

A new Seventh Circuit Court of Appeals case demonstrates the importance of filing suit in a timely manner in order to retain one’s contractual rights, writes Myanna Dellinger in ContractsProf Blog. It also shows just how nasty contractual parties may act towards each other in violation of the duty of good faith and fair dealing.

The article details the case in which JTE distributed products in Chicago for Bimbo Foods Bakeries Distribution Company for over a decade. The contract had no duration, but stipulated that it could be terminated in cases of non-curable breaches by one of the parties.

Bimbo allegedly did not meet the standard of good faith because, according to JTE, Bimbo “began fabricating curable  breaches.” However, because the four-year statute of limitations had run, JTE could still not have asserted that argument, the court found.

Read the article.

A post on the website of Meislik & Meislik discusses the differences between two contract provisions that sometimes are confused: forum selection and choice of law.

Ira Meislik explains:

What’s a forum selection provision? That’s the one your agreement says where you can file suit to enforce your agreement. What is often confused with a forum selection provision? That would be a choice of law provision. That’s where the parties agree as to which state’s law will apply to their agreement. Once you are properly in any state’s courts, those courts can apply whatever law you’ve agreed should be used.

His article describes how the two provisions work in various states and then concludes with six points to keep in mind during the drafting process.

Read the article.

Franchisors need to review their franchise agreements and take immediate action in response to the recent onslaught of legal action over “naked no-poaching” provisions in franchise agreements, according to a post in Franchise Law Update on the website of Fox Rothschild.

“In a typical franchise agreement, a franchisor will prohibit a franchisee from poaching its or its other franchisees’ employees during the term of the franchise agreement and for a period of time after the franchise agreement ends,” the authors explain.

In April 2018, the U.S. Department of Justice initiated a criminal complaint against a number of companies respecting naked no-poaching agreements. While the case settled with only civil penalties imposed, the DOJ expressly stated that it was reserving the criminal question and planned to “zealously enforce” the law.

Read the article.

“Choice of law” clauses in contracts are often overlooked in their potential importance, as the parties and counsel concentrate on the more immediate matter of the explicit commercial terms, write Val H. Stieglitz and R. Bruce Wallace for Nexsen Pruet.

“When the deal goes sour, however, and it comes time for the parties to assert and enforce their contractual rights, the spotlight often turns to the ‘choice of law’ provision – which perhaps no one had paid much attention to previously,” the authors explain.

Their article examines a recent case experience highlighted how “choice of law” distinctions can become significant once matters enter litigation.

Read the article.

The U.S. Federal Trade Commission failed to convince a federal judge in San Francisco that DirecTV should pay nearly $4 billion in restitution to customers for allegedly misleading consumers about the costs of programming packages, Bloomberg reports.

The said that “the scope of the maximum potential recovery in this case has been substantially curtailed,” according to reporter Pamela MacLean.

The FTC suit alleged that DirecTV failed to disclose to consumers in 40,000 print, mail, online and TV advertisements that its lower introductory pricing lasted just one year but tied buyers to a two-year contract.

Read the Bloomberg article.

A Tech & Sourcing blog post on the website of Morgan Lewis offers 10 framework issues to consider when in-house lawyers start thinking about how to support a business client that is looking to implement a new or replacement enterprise resource platform (or more commonly known as an ERP system).

The list, compiled by Barbara Murphy Melby and Ada Finkel, is intended to help in-house lawyers understand the objectives, parameters, and potential risk areas of a transaction.

Some of the issues discussed include key objectives, deal structure and success factors, third-party dependencies, an implementation plan, fees, key risk areas, and more.

Read the article.