Wrap Up of United States Supreme Court’s 2014-2015 Term

With the close of the United States Supreme Court’s 2014-15 term, we offer this wrap up of the Court’s term, focusing on the Court’s most important business and commercial cases (excluding patent cases):

Omnicare, Inc. v. Laborers Dist. Council Constr. Indus. Pension Fund: It is widely known that if the registration statement an issuer files with the SEC contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein not misleading, then a purchaser of securities sold pursuant to the registration statement may sue the issuer for damages. But what about statements of opinion that appear in a registration statement? In Omnicare, the Supreme Court held that a sincere statement of pure opinion — even if the issuer’s belief is ultimately proven wrong — is not actionable under Section 11 of the Securities Act, because the opinion expresses merely a view, not a certainty. That is good as far as it goes, but it’s not the end of the story. That’s because if, as the Court also held, an opinion is at odds with other information the issuer has, then omitting from the registration statement facts about that other information can create Section 11 liability. To steer clear of opinion liability under Section 11, then, an issuer should divulge the basis for its opinion or else make clear the real tentativeness of its belief so as not to mislead.

Tibble v. Edison Int’l: A fiduciary of a 401(k)/retirement plan has a duty not only to exercise prudence in selecting investments for inclusion in the plan but also to continually monitor those investments and remove imprudent ones. A claim for breach of that continuing duty will be deemed timely if it is filed within six years of the alleged breach — the statute of limitations for a breach of fiduciary duty under ERISA. The plaintiffs in Tibble filed their complaint in 2007, alleging that the fiduciaries of their company 401(k) plan acted imprudently by adding six retail-class mutual funds to the plan — three in 1999, the other three in 2002 — which had higher fees than their identical institutional-class counterparts. In a unanimous decision, the Supreme Court vacated the Ninth Circuit’s decision and held that the claims relating to the mutual funds added in 1999 were not automatically time-barred just because they were selected more than six years before the complaint was filed. On remand, the court was to determine whether the plaintiffs stated a viable claim for breach insofar as the defendants failed, at any time between 2001 and 2007, to conduct a regular review of the investment options in the plan.

Hana Financial, Inc. v. Hana Bank: A trademark owner who modifies its trademark may still retain the priority of its original mark under the so-called “tacking” doctrine if the successor and predecessor marks are “legal equivalents,” meaning that both marks “create the same, continuing commercial impression.” Until this term there was a split among the circuit courts as to whether the judge or the jury should decide whether two marks are “legal equivalents” for purposes of the tacking doctrine. The Supreme Court resolved that split in Hana, holding that the issue is one for the jury, unless the particular facts of a case make summary judgment appropriate under the ordinary standards of Rule 56.

B&B Hardware, Inc. v. Hargis Indus., Inc.: The Court held that a finding by the Trademark Trial and Appeal Board that there was a likelihood of confusion between two marks when it determined that one of the marks should not be registered with the Patent and Trademark Office may have an issue-preclusive effect in a subsequent infringement action in district court. Unless “a statutory purpose to the contrary is evident,” adjudicative decisions of an agency should be given the same preclusive effect as a judicial decision. Because no such contrary purpose is evident in the Lanham Act, decisions of the Trademark Trial and Appeal Board should be given issue-preclusive effect so long as: 1) the other elements for issue preclusion (as set forth in the Restatement (Second) of Judgments) exist, and 2) “the usages adjudicated by the [Board] are materially the same as those before the district court.” Both caveats are important and may nearly swallow the default rule of preclusion. As the Court acknowledged, “for a great many registration decisions issue preclusion obviously will not apply because the ordinary elements [of issue preclusion] will not be met.” In addition, as Justice Ginsberg emphasized in her concurring opinion, preclusion will often be inappropriate because registration decisions look at the usages of the mark indicated in the application to the Patent and Trademark Office, while an infringement action looks to how the mark is actually used in commerce. Consequently, it may frequently be the case that the usages adjudicated by the Board are not the same as those adjudicated by the district court, in which case no preclusive effect should be given to the Board’s findings.

Dart Cherokee Basin Operating Co. v. Owens: Defendants seeking to remove a case from state court to federal court on diversity grounds must only include in their notice of removal a plausible allegation that the amount in controversy exceeds the jurisdictional threshold and need not support that allegation with actual evidence. In the event that the plaintiff contests the defendant’s allegation, both sides then submit proof and the court decides whether the amount-in-controversy requirement has been met, by a preponderance of the evidence. Such was the Court’s holding in Dart Cherokee, a case that arose in the context of the Class Action Fairness Act (CAFA), which was enacted to ensure that class actions can be adjudicated in federal court, and that has a procedural history so peculiar that four of the Justices dissented on the ground that the merits of the case were not properly before the Court.

Gelboim v. Bank of Am. Corp.: When a district court in a multi-district litigation renders a decision which resolves all issues in one of several actions transferred to the MDL but does not resolve all claims in the other actions, may the losing party in the one fully resolved case appeal the decision as of right under 28 U.S.C. § 1291? In Gelboim, the Court answered “yes.” Gelboim’s putative class-action complaint alleged a single Sherman Act claim against several banks arising out of their alleged conspiracy to manipulate the London InterBank Offered Rate (“LIBOR”). The Gelboim action was transferred to a MDL where it was joined with over 60 other LIBOR-related actions, which asserted other federal and state law claims (in addition to federal antitrust claims) arising out of the LIBOR scandal. On a motion to dismiss several categories of claims in the MDL, the district court concluded that none of the plaintiffs in the MDL had suffered an antitrust injury and thus dismissed all antitrust claims. Because the Gelboim complaint asserted only an antitrust claim, the plaintiffs filed a notice of appeal to the Second Circuit, which dismissed the appeal on its own because the order of dismissal did not dispose of all claims in the MDL. The Supreme Court reversed the dismissal of the appeal, finding that the dismissal of the only claim in Gelboim complaint was a final order and that Gelboim and her fellow plaintiffs therefore had the right to appeal the decision to the Second Circuit.