Several Trump administration officials have personal or professional ties to Boeing’s man at the center of the 737 Max jetliner crash drama. He’s J. Michael Luttig, the longtime general counsel whom the company reassigned to lead its 737 response, reports Bloomberg.

“When he was a federal appellate court judge, Luttig brought on dozens of promising young clerks who are now spread throughout the judiciary and beyond,” explain Bloomberg’s Tom Schoenberg, Julie Johnsson and Peter Robison. “In more than a decade at Chicago-based Boeing, he stocked his department with ex-government lawyers. He also tapped Kirkland [& Ellis LLP], which has a big Chicago presence, for matters as varied as acquisitions and contract disputes.”

Luttig also is wired into the Supreme Court. He was a groomsman at the wedding of U.S. Chief Justice John Roberts.

Read the Bloomberg article.

Every real estate and construction contract contains a list of insurance requirements identifying specific types and amounts of coverage for one or both parties, but too often these requirements are included in a form exhibit that is attached to contracts year after year, project after project, without careful review.

In a new website post, Lyndon Bittle of Carrington Coleman discusses  “traps for the unwary” lurking in construction contract insurance requirements, focusing on the ubiquitous commercial general liability policy.

Many of the traps pop up in connection with making one party an additional insured on the other party’s liability policies, Bittle writes. “One deceptively problematic provision is a requirement that the owner be ‘named an additional insured,’ without further details. That request conveys almost nothing.”

Read the article.

Some companies, hoping to prevent negative online consumer reviews, include clauses in form contracts stating that bad reviews are prohibited and punishable by fines. However, the Federal Trade Commission seeks to protect U.S. consumers and ensure fair competition and business practices, according to a post on the website of Ryley Carlock & Applewhite.

The FTC’s Consumer Review Fairness Act states that such gas clauses  are illegal and void in form contracts.

Companies should treat such gag clauses in past contracts as void, and essentially should ignore negative reviews from a relatively few consumers, the authors advise.

Read the article.

A contract with an express end date means what it says, writes Glenn D. West for the Global Private Equity Watch of Weil, Gotshal & Manges.

“The end date for a contract without an express end date, or one that purports to continue indefinitely, or even forever, may in fact be subject to early termination, or have an implied end date, depending on the particular approach of the courts of the state governing that particular contract,” he adds.

He discusses a recent Minnesota Supreme Court decision, Glacial Plains Cooperative v. Chippewa Valley Ethanol Co., LLLP, in which the court held that a long-term agreement to supply grain to an ethanol plant, which did not otherwise contain an end date, did “not unambiguously express an intent to form a contract of perpetual duration, and [was] thus a contract of indefinite duration [that] . . . is terminable at will upon reasonable notice once a reasonable time has passed.”

Read the article.

The overwhelming majority of contracts and purchase orders are fulfilled without a major issue, but contractual limitation on liability can have significant impact for a business, warns Glen W. Price of Best Best & Krieger.

He discusses the two types of limitation of liability.

“The first limitation is on the type of damages you can claim if there is a breach of contract. The most common damages to be waived or limited in contracts are indirect or consequential damages and lost profits,” Price writes.

The second type of limitation on liability he discusses is a dollar limitation or cap.

Read the article.

Jeffrey Neuburger of Proskauer writes that two recent web scraping disputes highlight some important issues regarding whether a website owner may successfully allege a breach of contract action against a commercial party that has scraped website content contrary to “clickwrap” and “browsewrap” website terms of use.

Writing in the New Media and Technology Law Blog, West describes a Texas case in which a court declined to dismiss Southwest Airlines Co.’s breach of contract claim against an entity that scraped airfare data from Southwest’s site in violation of the website terms of use.

He also discusses a similar case in the Southern District of New York, in which the court granted the plaintiff’s request for a default judgment on some scraping-related claims.

Read the article.

Image by NY Photographic

A recent EY global survey of 1,058 senior legal practitioners around the world demonstrates the pressures that legal functions are currently under and how these may ultimately drive a change in operating models.

On its website the company describes the findings:

“In one of the most comprehensive surveys ever undertaken into the legal function, responses revealed that legal functions are having to balance an increase in demand against a squeeze on costs, while remaining compliant with a challenging and ever-changing regulatory environment. At the same time, they are struggling to capitalize on technological advances and are having difficulty attracting and utilizing talent resources.”

Read the survey results.

The growing complexity of the modern day supply chain creates an environment of uncertainty that is a good reason to reassess whether supply chain agreements are drafted with a mind toward key provisions that can protect a company, warns a post on the Foley & Lardner website.

One point to consider, the authors explain, involves indemnification and consequential damage disclaimers. They write that “it is important to ensure that contracts expressly address how indemnification clauses and damage disclaimers interact with one another.”

Other points discussed in the article are the company’s warranty limitations, force majeure provisions, and termination provisions.

Read the article.

The Texas Utilities Code was recently modified by House Bill 2845 to now require any person who leases land for a wind power facility (grantee) to be responsible for removing its wind power facility at the end of the lease, writes John Clardy, a summer associate at Holland & Knight.

“As part of this obligation, grantees must obtain financial assurance to secure the performance of the grantee’s wind power facility removal,” he explains in the firm’s Energy and Natural Resources Blog. “The new law specifies that land leases for a wind power facility must include particular provisions and voids any waiver that purports to exempt a grantee from the statute. The new law goes into effect on Sept. 1, 2019.”

Clardy added that the “decommissioning process entails clearing, cleaning and removing from the property each wind turbine generator (including towers and pad-mount transformers), each substation, each overhead power and communications line installed by the grantee, and all liquids, greases, or similar substances contained in wind turbine generators and substations.”

Read the article.

A post on the website of The In-house Advisor offers some cautionary advice about transactions that may be documented through a primary contract and subsidiary agreements that are referenced in, or even attached as exhibits to, the primary.

Shep Davidson of Burns & Levinson explains:

“While there is nothing inherently good or bad about papering a transaction this way, it is important to keep in mind that doing so may mean that the dispute resolution provisions of the primary contract do not apply if litigation arises and only involves a claimed breach of a subsidiary contract. Indeed, that is the hard lesson that was learned by the defendant in National Dentix, LLC v. Gold.”

He writes that the lesson here is that “even very closely related agreements still may be viewed as completely independent if there is a claim that only one of them has been breached.”

Read the article.

Dali Wireless, a maker of wireless systems designed to help improve cellular communications inside buildings, has prevailed over its much larger rival after a multiyear battle over both companies’ patents.

A federal jury in Dallas awarded California-based Dali $9 million, finding that rival CommScope infringed on two Dali patents. The same jury found Dali infringed on five older CommScope patents and awarded CommScope $1.98 million.

“We are very proud of our trial team,” said attorney Cris Leffler of the Seattle office of Dorsey & Whitney LLP, who represented Dali at trial. “The difference in the awards underscores the advantage of Dali Wireless’ innovative technology over CommScope’s older technology.”

In a release, Mark Strachan of the Dallas office of Bradley Arant Boult Cummings LLP, who also represented Dali Wireless stated, “Dali Wireless honored us by trusting us with this important challenge. We are very pleased that the jury recognized and protected the value of Dali Wireless’ intellectual property. If this were a football game, then Dali Wireless scored a touchdown and a field goal, and CommScope had only a field goal. As time ran out, Dali Wireless walked away with the trophy.”

Dali Wireless is represented by Cris Leffler, Stefan Szpajda, Madeline Hepler, Ryan Meyer, and David Tseng from the Seattle office of Dorsey & Whitney, LLP and by Mark Strachan and Dick Sayles from the Dallas office of Bradley Arant Boult Cummings LLP.

The dispute between the two tech companies dates to 2015, when Dallas Fort Worth International Airport chose Dali over North Carolina-based CommScope to install distributed antenna systems (DAS) in airport buildings. Considered a leading innovator in the field, Dali holds over 450 patents on its technology.

DAS uses a base station and remote units positioned throughout a building to receive and amplify cellphone signals and provide better cell service.

Following the DFW contract award, CommScope filed suit, claiming Dali had infringed on its patents. Dali countersued, claiming CommScope likewise had infringed.

The case is CommScope Technologies LLC v. Dali Wireless, Inc. No. 3:16-cv-477, in the U.S. District Court for the Northern District of Texas, Chief Judge Barbara Lynn presiding.

A Pepper Hamilton client alert discusses a Delaware case in which the court held that the sellers of a target corporation retained the right to assert attorney-client privilege over pre-merger communications with the target corporation’s counsel because the parties included a provision in the merger agreement that explicitly precluded the buyer from using the communications in a post-closing dispute with the sellers.

“The court’s opinion serves as an important reminder to sell-side counsel to negotiate for these provisions to ensure that privileged pre-merger communications between the target’s counsel and the sellers cannot be used against them in any future disputes,” the authors explain.

Read the article.

In a post on the firm’s website, George Nicholos of Vandeventer Black LLP provides an overview of contract terms addressing indemnity and requirements to hold harmless or responsible for the defense of another.

He cautions that these terms are often misunderstood, not fully appreciated, and found confusing by many.

Nicholos also warns that “it is critical that parties have a clear and informed understanding about what they are obligating themselves to in relation to the benefits of entering a contract in the first place.”

Read the article.

Reuters reports that a federal appeals court has determined that Amazon is not liable for facilitating the sale of a defective product manufactured by another company.

It’s the second time in just three weeks that courts have found Amazon not be liable for the defective products of their suppliers.

Reuters’ Alison Frankel reports that the 6th Circuit held in Fox v. Amazon that Amazon cannot be held responsible under state product liability law because it was not the seller of the defective product – even though the product was advertised on Amazon’s platform and Amazon shipped and collected payment for it.

Read the Reuters article.

Tara Lynch, writing for Gordon & Rees LLP’s Construction Law Blog, offers three clauses to consider when writing construction contracts, with an eye to limiting liability and maximizing profits.

One of the clauses covers waiver of consequential damages. “Prudent design professionals and contractors will strike this exception so as not to render the clause meaningless. A well-drafted waiver clause will be mutual, will define which damages are consequential versus direct, and will not contain exceptions,” she writes.

She also discusses clauses covering limitations of liability, and a percentage clause involving change orders.

Read the article.

Seeking bankruptcy and scrambling to complete a $1.3 billion state-mandated wildfire prevention plan, Pacific Gas & Electric will now have to prove that its newly hired directors are fit to transform the mega-utility blamed for starting the 2018 Camp Fire in Northern California, reports Courthouse News Service.

While the new members have “impressive resumes,” said Commission president Michael Picker, it’s not clear they have the safety experience or time to manage the overhaul of a publicly traded utility facing an estimated $30 billion in wildfire liabilities.

Courthouse News Service reporter Nick Cahill writes that many state lawmakers and Gov. Gavin Newsom have been skeptical of the additions, citing the new members’ ties to Wall Street.

Read the Courthouse News article.

By Andres Avila
Saxe Doernberger & Vita, P.C.

Image by Pictures of Money

Tennessee’s Supreme Court recently held that an insurer may not withhold repair labor costs as depreciation when the policy definition of actual cash value is found to be ambiguous. Tennessee joins other states like California and Vermont that prohibit the depreciation of repair labor costs in property policies.

In Lammert v. Auto-Owners (Mut.) Ins. Co., No. M201702546SCR23CV, 2019 WL 1592687, the Lammerts and other insureds sought property damage coverage from Auto Owners Insurance for hail damage to a home and other structures they owned in Tennessee.

Auto-Owners Insurance agreed to settle the claims on an actual cash value basis (ACV), which is a method of establishing the value of insured property that must be replaced to determine the indemnity by the insurer. There are multiple methods to calculate ACV. Auto-Owners decided to use the ACV calculation method of deducting depreciation from the cost to repair or replace the damaged property. Depreciation is the decline in value of a property since it was new because of use, age or wear. The rationale behind this method is that an insured should not make a profit by recovering the cost of, for example, a new roof for a damaged roof that was ten years old, and thus depreciation is deducted from the indemnity.

Auto-Owners, however, decided to deduct both the materials and the repair and replace labor costs, as depreciation, when calculating the ACV. Neither of both policies under dispute specifically mentioned that repair labor costs could be depreciated in their ACV definitions. The parties thus disagreed on whether depreciation applies only to the materials or to both materials and repair labor.

One of the policies defined ACV as “the cost to replace damaged property with new property of similar quality and features reduced by the amount of depreciation applicable to the damaged property immediately prior to the loss;” while the other did not define ACV but stated that ACV included a deduction for depreciation.

The insureds argued that depreciation should be limited only to the cost of the replacement materials. In their view, the language “depreciation applicable to the damaged property” eliminates labor costs, which are intangible and cannot be depreciated because they do not age or wear out. The insureds also argued that the “prior to the loss” policy language eliminated labor costs because the costs at issue were post-loss repair costs. Auto-Owners contended that neither policy was ambiguous because depreciation of a property is calculated based on the total replacement cost, which includes both labor and materials.

Allowing Auto-Owners to depreciate the cost of labor would leave the insureds with an out of pocket loss inconsistent with the principle of indemnity of insurance to make insureds whole. However, allowing the deduction may in turn cause a windfall to the insureds, also defeating the purpose of indemnity. The Tennessee Supreme Court sided with the policyholders and solved the dilemma by citing to case law from, among others, Oklahoma, Arkansas, Nebraska and Minnesota, as well as regulations in Vermont, California and Mississippi.

The Court noted that Oklahoma uses the “broad evidence” rule to determine ACV. This method, also followed in New York, allows insurers to consider any and every fact and circumstance that logically tends to a correct estimate of the loss.

Accordingly, in Redcorn v. State Farm Fire & Cas. Co., 55 P.3d 1017, 1020 (Okla. 2002), the Oklahoma Supreme Court ruled that repair labor must be depreciated under the “broad evidence” method.

A decade later, the Arkansas Supreme Court was more persuaded by the dissenters than the majority in Redcorn and concluded that labor was not depreciable because labor does not lose value due to wear and tear over time in Adams v. Cameron Mutual Insurance Co., 2013 Ark. 475, 430 S.W.3d 675 (2013). However, in 2017 the Arkansas legislature abrogated Adams and enacted Arkansas Statute section 23-88-106, which specifically included the cost of labor in its definition of an expense depreciation.

The Tennessee Supreme Court further noted that Nebraska, which also uses the “broad evidence” rule, sided with the Oklahoma Supreme Court majority. It held that property is a combination of materials and labor and thus repair labor costs must also be depreciated from the replacement cost to determine ACV. Henn v. American Family Mutual Insurance Co., 295 Neb. 859, 894 N.W.2d 179 (2017). The court also considered a third approach from Minnesota, which also follows the “broad evidence” rule. In Wilcox v. State Farm Fire & Cas. Co., 874 N.W.2d 780, 785 (Minn. 2016), the Minnesota Supreme Court held that certain labor costs may be depreciable making it an issue of fact rather than law.

The Court then turned for guidance to case law from the federal circuit courts of appeals involving the law of Missouri, Kansas and Kentucky. The Tennessee Court found that Missouri and Kentucky lean towards allowing insurers to deduct repair labor costs as depreciation; while Kentucky, on the other hand, leans towards seeing depreciation as an ambiguous term and thus interpreted against insurers, preventing carriers from subtracting repair labor costs as depreciation.

The Tennessee Court then turned to insurance departments’ regulations of the point in California, Vermont and Mississippi. California (Cal. Code Regs. tit. 10, § 2695.9(f)(1) (2019)) and Vermont (Insurance Bulletin No. 184) prohibit the depreciation of repair and replacement labor. On the other hand, the Mississippi Insurance Department Bulletin 2017-8 declared the absence of a statutory prohibition to labor costs depreciation in that state but that insurers should clearly provide for it in the insurance policy if they intended to do so.

Tennessee acknowledges both the “broad evidence” rule and the replacement-cost-less-depreciation method to determine ACV. The Tennessee Supreme Court was persuaded that, since neither of the policies explicitly stated whether labor costs are depreciable when calculating ACV, there was an ambiguity that had to be interpreted against insurers and in favor of insureds.

This decision in Tennessee serves as a warning that, absent policy language stating otherwise, property insurers cannot depreciate repair labor costs when calculating the ACV of a property using the replacement cost less depreciation method in Tennessee.

Smart contracts are best suited to execute somewhat rudimentary legal tasks, which typically involve transferring funds or imposing financial penalties when certain conditions are satisfied, explain Maria Alicia “Fernandez and Guillermo Gonzalez Frankenberger of Hogan Lovells.

“However, as the applications of blockchain and the assets controlled by it expand, the use of smart contracts is likely to become more complex and legally sophisticated,” they write in the firm’s Real Estate Horizons.

“Notwithstanding its promising applications,There are concerns that need to be addressed before the wide- spread application of smart contracts,” the authors explain.

Read the article.

The Ninth Circuit upheld the district court’s grant of a motion to compel individual arbitration in a case that “tests the outer limits of what constitutes a ‘reasonably conspicuous’ provision” in an online contract, according to Ballard Spahr.

The article says Holl v. United Parcel Service, Inc. “contrasts with prior Ninth Circuit rulings, arguably involving less extreme facts, which denied motions to enforce online arbitration clauses. Holl, however, was decided on a petition for mandamus, a remedy that requires the petitioner to establish clearly and indisputably that ‘extraordinary circumstances’ exist to overturn the district court’s decision.”

The class action complaint in Holl alleged that UPS systematically overcharged its retail customers.

Companies with online terms of use that include an arbitration clause must still exercise great care in designing the website so that users become contractually bound to arbitrate, the firm advises.

Read the article.

Thompson & Knight attorneys helped Randa Accessories acquire Dallas-based Haggar Clothing Co. The deal officially closed May 31, 2019.

Randa, a privately-held company founded in 1910, produces belts, wallets, headwear, slippers, luggage, neckwear, jewelry, and other accessories under 50 brands, including Levi’s, Tommy Hilfiger, Columbia Sportswear, Dickies, and Kenneth Cole. Randa distributes its products globally through more than 20,000 stores and employs over 4,000 associates at 26 offices located in 10 countries.
Since its beginnings in a one-room office in Dallas in 1926, Haggar Clothing Co. has grown from a manufacturer of men’s fine dress pants and slacks into one of the most recognized apparel brands in the market.

Haggar also owns Montreal-based Tribal. Tribal was founded in 1971 and is the largest women’s sportswear supplier to the specialty boutique market in North America, with more than 2,400 active accounts.

Haggar has more than 80 branded brick-and-mortar retail locations, a dedicated direct-to-consumer ecommerce platform, and its products are sold in over 10,000 stores throughout North America. Haggar will remain in Dallas and will be managed by Haggar’s current leadership team.

Thompson & Knight said in a release that Randa is funding the acquisition through a combination of cash on hand and committed financing provided by Wells Fargo Bank, National Association and JPMorgan Chase Bank, N.A.

The Thompson & Knight deal team was led by Michael C. Titens and included senior counsel Sharon M. Fountain, partners Jeremiah M. Mayfield, Brandon L. Bloom, Jessica S. Morrison and associates Susan Fisher and Catharine A. Hansard.