Gibbons Law Alert Blog

“Pharma Bro” Avoids the Most Serious Adverse Inference Sanction for Spoliating Evidence Under Rule 37(e)

In an opinion out of the Southern District of New York addressing alleged spoliation of ESI, Judge Denise Cote found that the plaintiffs – the Federal Trade Commission and a collection of states – only sufficiently established half of their spoliation claims sought against defendant Martin Shkreli. Shkreli, aka “Pharma Bro,” and his business partner, Kevin Mulleady, launched Vyera in 2014. The plaintiffs alleged that in November 2017 Vyera entered into several anti-competitive agreements, including exclusive supply agreements, with a company preparing to seek FDA approval for the manufacture of the active ingredient in one of Vyera’s branded drug products. The plaintiffs sought sanctions under Rule 37(e) against Shkreli, alleging he failed to preserve messages on two cellphones despite receiving a litigation hold in late 2015. The first phone – a company-issued phone – was allegedly used by Shkreli to communicate about issues relevant to the case. When Shkreli’s attorney sent the company phone to be forensically imaged in April 2020, it was discovered that it had been factory reset (i.e., wiped) sometime in 2016 or 2017. While neither Shkreli nor Vyera produced communications from this phone, Vyera represented that company-issued phones were backed up to iCloud. The second was a contraband phone Shkreli appeared to have possessed while in prison. A Vyera executive testified...

Effective March 20, 2024: New Flood Hazard Disclosure Requirements on New Jersey Property Sellers and Landlords

As previously reported, a new statute concerning real property and flood notifications in New Jersey was enacted on July 3, 2023. The new law, which amends the New Jersey Truth-in-Renting Act (P.L. 2001, c.313) and supplements the New Jersey Consumer Fraud Act (NJCFA) (P.L. 1960, c.39), applies to the sale and exchange of all residential and commercial property, as well as to all residential and commercial lease transactions, with certain exceptions. Effective March 20, 2024, New Jersey law now requires that all sellers of commercial or residential real property and all landlords entering into or renewing any commercial or residential leases disclose, in writing, the below enumerated flood risk information with respect to the subject property. New Seller Flood Disclosure Requirements For sales, the statute supplements the NJCFA, to require all sellers of real property to disclose, on the Property Condition Disclosure Statement (the “Disclosure Statement”) promulgated by the New Jersey Department of Community Affairs, whether the property is located in the FEMA Special or Moderate Risk Flood Hazard Area and any actual knowledge of the seller concerning flood risks of the property. The Disclosure Statement’s relevant flood disclosures are listed as questions 109-117. Pursuant to N.J.S.A. 56:8-19.2, all sellers of real property, regardless of whether such property is residential or commercial, must answer the...

Generative AI in USPTO Practice: Key Considerations Under the USPTO’s New Guidance

Generative Artificial Intelligence (AI) tools such as OpenAI’s ChatGPT, Anthropic’s Claude, Midjourney and others, have made waves across various industries and the legal profession is no exception. Specialized publications and recent news are replete of examples of professionals in all fields increasingly turning to these tools to streamline their work. However, the use of generative AI in legal practice also raises special concerns about the potential for errors, bias, and ethical violations. In recent high-profile cases, the use of ChatGPT by attorneys came under scrutiny when their court filing were found to contain false statements and references to non-existent legal authorities. In one case, two lawyers were sanctioned for submitting non-existent AI-generated judicial opinions with fake quotes and citations, without properly verifying the accuracy of such citations. See Mata v. Avianca., No. 22-CV-1461 (PKC), 2023 WL 4114965 (S.D.N.Y. June 22, 2023). This incident highlights the need for lawyers to exercise caution and maintain human oversight when using generative AI tools. Building upon the growing awareness of the pervasive use of generative AI, and its gradual adoption in the legal profession, the United States Patent and Trademark Office (USPTO) has taken steps to address the use of AI tools in practice before the agency. In February 2024, USPTO Director Katherine K. Vidal issued a memorandum to...

New Jersey Supreme Court Holds “Illusory Discounts” Do Not Support a Claim of Ascertainable Loss Under the Consumer Fraud Act

In a 4-3 opinion, the New Jersey Supreme Court held that the mere purchase of a product falsely represented as “discounted” does not, without more, satisfy the “ascertainable loss” element under the New Jersey Consumer Fraud Act (NJCFA). In Robey v. SPARC Group LLC, the plaintiffs – a proposed class of shoppers at the retail clothing store Aéropostale – alleged that the store advertised clothing as being discounted when, in fact, the items had never been offered or sold at the higher prices off of which the “discount” was taken. The plaintiffs contend that this practice of so-called “illusory discounts” violated the NJCFA, the Truth in Consumer-Contract, Warranty and Notice Act (TCCWNA), and various common law contract rights. The trial court dismissed the complaint for failure to state a claim, determining that the plaintiffs failed to allege an “ascertainable loss.” The Appellate Division majority disagreed and reversed, noting some confusion as to whether the NJCFA’s “ascertainable loss” requirement was the same as the TCCWNA’s “aggrieved consumer” requirement. The Supreme Court granted certification and reversed, finding that the plaintiffs’ NJCFA claim failed because they could show neither of the two recognized types of “ascertainable loss” for a claim based on a seller’s alleged deception: an out-of-pocket loss or a loss of the benefit-of-the-bargain. First, the plaintiffs...

Federal Trade Commission Issues Final Rule Banning Non-Compete Agreements, Prompting Immediate Litigation Blocking Enforcement. What Does It Mean For Your Business?

On April 23, 2024, the Federal Trade Commission (FTC) issued a final rule banning all future and most existing non-compete clauses, with few narrow exceptions for senior executives.  The rule, however, was immediately met with legal challenges, casting doubt on its future. The FTC has taken the position that entering into a non-compete agreement is an “unfair method of competition” within the meaning of the Federal Trade Commission Act, therefore rendering non-competes unlawful as a general matter. The FTC reasons that a non-compete ban was necessary to address conduct harming fair competition in the labor market, reducing wages, stifling innovation, and hindering business formation and entrepreneurship. Further, the FTC argues that the current state law approach, which assesses the enforceability of non-competes on a case-by-case basis, has not sufficiently addressed the competition concerns cited by the FTC. On the other hand, opponents of the FTC’s non-compete ban argue that the rule exceeds the commission’s statutory and constitutional authority and that non-competes are crucial in guarding an employer’s trade secrets, intellectual property, and significant investments in employee training and development. Key components of the final rule are: It is an “unfair method of competition” for any worker and an employer to enter into, or attempt to enter into, a non-compete clause, to enforce a non-compete clause,...

NJ Supreme Court Holds That Hospital’s Medical Staff Bylaws Do Not Create Implied Duties of Good Faith

Pursuant to New Jersey Department of Health regulations, New Jersey hospitals must implement bylaws to govern the hospital’s medical staff. Those bylaws typically address the qualifications and procedures for being admitted to the hospital’s medical staff and often include a right to a hearing and other procedural protections for a physician who has been denied privileges to the hospital. Though it has long been resolved that a physician may compel a hospital to comply with the procedures set forth in its bylaws, it was less clear whether a hospital’s bylaws created a contract between the hospital and its medical staff, which in turn would give rise to an implied duty of good faith and fair dealing, as well as a right to monetary damages for breach of contract. In Comprehensive Neurosurgical, P.C. v. Valley Hospital, the New Jersey Supreme Court resolved this open issue, holding that a hospital’s bylaws do not amount to a contract and thus do not, without more, give rise to implied duties or monetary damages. The Supreme Court, however, also recognized that an implied contract, which itself would include an implied duty of good faith, can arise from the course of dealings between a hospital and a physician group. In Comprehensive Neurosurgical, a group of neurosurgeons that held longstanding privileges at Valley...

Edwards Lifesciences Corp. v. Meril Life Sciences Pvt. Ltd.: Should “Intent” Be Reconsidered in 271(e)(1)?

Edwards Lifesciences Corp. v. Meril Life Sciences Pvt. Ltd., Appeal No. 22-1877 (Fed. Cir. March 25, 2024) Considerations of 271(e)(1), a 2-1 decision on appeal from a grant of summary judgement of non-infringement, addressed the question of whether 35 U.S.C. § 271(e)(1)’s safe harbor applies to the importation of two medical devices (transcatheter heart valve systems) into the U.S. for purposes of exhibiting the devices at a prominent medical conference that reported on the latest developments in cardiovascular medicine.

Sweeping Affordable Housing Reform Signed Into Law in New Jersey

On March 20, 2024, Governor Phil Murphy signed what could be the most significant and impactful affordable housing reform legislation in New Jersey since the original enactment of the Fair Housing Act (FHA) in 1985 in A4/S50 (the “Law”). After the New Jersey Supreme Court declared the Council on Affordable Housing (COAH) “moribund” in 2015, municipalities and developers, as well as interested advocacy groups, have been engaged in constitutional compliance litigation in an attempt to determine how best to create realistic opportunities for the construction of affordable housing. These various cases resulted in a large number of settlements across the state, with some very public and prolonged litigation still pending.

Refusal to Wear a Face Mask May Leave You Constitutionally Unprotected

Is there a constitutional free speech right to refuse to wear a face mask in public indoor spaces during a recognized public health emergency? The Third Circuit Court of Appeals recently determined there is not, as part of a precedential decision in the consolidated cases of Falcone v. Dickstein, et al. and Murray-Nolan v. Rubin, et al. The Third Circuit addressed the First Amendment issue in the Murray-Nolan case. Specifically, the issue the court confronted was whether, during the COVID-19 pandemic, plaintiff Gwyneth Murray-Nolan, an “advocate for parental choice in masking children at school,” was protected under the First Amendment in her refusal to wear a mask during a Board of Education (“BOE”) meeting, despite the BOE’s mask requirement and the Governor’s Executive Order mandating that New Jersey schools require the use of face masks. (The Falcone case, though likewise arising from an individual’s opposition to a mandatory masking policy, was decided on different grounds.) The plaintiff’s refusal to wear a mask was intended by her as a silent protest against the BOE’s masking policy and its lack of action to unmask children in schools. While the court recognized that the First Amendment protects some conduct in some settings, the court held that the refusal to wear a mask failed to satisfy the constitutional standard...