Category: General Litigation

Proposed Nationwide FTC Ban on Non-Compete Clauses

On January 5, 2023, the Federal Trade Commission (FTC) announced a proposed rule (“Rule”) that would effectively impose a nationwide ban on all existing and future non-compete clauses between workers and employers. By way of background, a non-compete clause is a type of restrictive covenant that prevents a worker from working for a competitor or starting a competing business, generally within a certain geographical area and time frame after the worker’s employment ends. The FTC’s position, as stated in the Rule’s overview, is that non-compete clauses prevent workers from leaving jobs, lower competition for workers, and reduce wages. According to the FTC, non-compete clauses also stop new businesses from forming, stifle entrepreneurship, and prevent novel innovation that would take place if workers were able to freely share ideas. On the other hand, proponents of non-compete clauses have historically argued, among other things, that they are necessary to protect an employer’s confidential information, trade secrets, and intellectual property and its often considerable investment in the training and development of  its employees. Non-compete agreements are currently subject to state law. Key components of the proposed Rule include: Providing that it is an “unfair method of competition” for an employer to enter into a non-compete clause with a worker, attempt to do so, or inform a worker they...

An Anti-SLAPP Bill That Packs a Powerful Punch

Strategic lawsuits against public participation (SLAPP) are lawsuits intended to intimidate or punish those engaged in constitutionally protected activity by, essentially, suing them into submission or silence through the prospect of costly and time-consuming litigation. Thirty-two states have enacted some form of anti-SLAPP legislation designed to weed out these cases and, in most instances, provide for dismissal of such actions early in the process. New Jersey is not one of those states. That may soon change. State Senate Bill S2802, the Uniform Public Expression Protection Act (the “Act”), and its Assembly counterpart, A4393, were introduced in June 2022 and provide an expedited process for dismissal of SLAPP actions. The legislation is modeled after the Uniform Public Expression Protection Act (UPEPA) drafted by the National Conference of Commissioners on Uniform State Laws and approved and recommended by it in 2020 for enactment in all states. The Act would apply to a civil cause of action against a person based on the person’s (1) communications during a legislative, executive, judicial, administrative, or other governmental proceeding; (2) communications on an issue under consideration or review by such a body; or (3) engagement in any other activity that is protected by the First Amendment freedoms guaranteed by the United State Constitution or New Jersey Constitution and that relates to...

NJ Supreme Court to Decide Whether Counsel Fees Are to Be Awarded to a Prevailing Requestor of Government Records Under the Common Law

New Jersey provides a statutory and common law right of access to government records. While New Jersey’s Open Public Records Act (OPRA), the statutory right of access, expressly mandates an award of counsel fees to a prevailing requestor, there has been some confusion among New Jersey courts, based upon the New Jersey Supreme Court’s decision in Mason v. City of Hoboken, as to whether there is a corresponding right to an award of counsel fees to a prevailing common law requestor. The New Jersey Supreme Court has recently granted certification on this issue and will now have the opportunity to unequivocally clarify the right of a prevailing common law requestor to recover the attorney’s fees incurred in challenging a wrongful denial of access. The case before the Supreme Court involves a request by the Asbury Park Press for access to the internal affairs file of a Township of Neptune police sergeant who chased down his ex-wife’s car and executed her with his service revolver in the summer of 2015. That internal affairs file contained more than 25 reports for a host of incidents, including domestic violence and assaultive behavior on the job. There was, understandably, strong public outcry over the horrific event, and the Asbury Park Press sought information about the sergeant’s internal affairs history...

Parties’ Obligations Under the Federal Rules “Reign” Supreme and Render Language in ESI Protocol Unnecessary

In Raine Group v. Reign Capital, the Southern District of New York highlighted parties’ affirmative obligations under Federal Rules of Civil Procedure 26 and 34 when conducting ESI searches and determining the identities of custodians and locations of relevant documents or information. In particular, the court emphasized that an agreement regarding keyword search terms should work in “tandem” with the responding party’s independent and inherent obligations to search for and produce documents that are “reasonably accessible, relevant, and responsive within the meaning of Rule 34.” The court also made clear that parties have a fair degree of autonomy in determining what is “reasonable” under Rules 26 and 34. In this trademark infringement case, the plaintiff, a merchant bank with more than 100 employees, objected to certain provisions proposed by the defendant, a two-person real estate firm, in the parties’ ESI protocol and proposed search terms. After the parties’ failure to reach a resolution, the court intervened. The court ruled that the defendant’s proposed language regarding the parties’ search obligations in the ESI protocol was unnecessary, given the scope of Fed. R. Civ. P. 26 and 34, and because the provisions were overbroad. Specifically, the defendant’s proposal including the following provisions: “The parties also acknowledge that, apart from this ESI protocol, each party has an independent...

New Jersey Appellate Division Broadens Scope of Sham Affidavit Doctrine

Last month, in an opinion approved for publication, the New Jersey Appellate Division, in Metro Marketing, LLC, et al. v. Nationwide Vehicle Assurance, Inc., et al., addressed whether a party who switched sides mid-litigation entered a “sham affidavit,” a self-serving certification that directly contradicts prior representations in order to create an issue of fact, after the side-switching took place. In this non-compete litigation between rival telemarketing firms, the plaintiffs sued their former employees for misappropriation of trade secrets. Two scenarios arose in which the sham-affidavit doctrine was potentially implicated. The first was after a defendant who had been deposed returned to the plaintiffs’ employ and submitted a certification directly contradicting his prior deposition testimony. The second was after a co-defendant, who was also rehired by one of the plaintiffs’ companies after his deposition, contradicted his former testimony during a secretly recorded phone call. The trial court excluded both pieces of evidence and granted summary judgment to the defendants, dismissing all of the plaintiffs’ claims. On appeal, the Appellate Division ruled that the court below properly excluded contradictory testimony of the first defendant. On this issue of first impression, the court held that the sham-affidavit doctrine could apply in a side-switching scenario where: (1) a co-defendant is deposed; (2) that deponent thereafter obtains a job with...

Crash Course: Court Provides Refresher on Rule 37(e) Spoliation Sanctions

A recent decision from the District of Arizona provided a refresher for litigants and judges alike in the framework under which electronically stored information (ESI) spoliation sanctions must be addressed pursuant to Federal Rule of Civil Procedure 37(e). The author of the opinion – District Judge David Campbell – expressed his frustration that Rule 37(e) continues to be ignored by some judges and litigants in the application and adjudication of motions seeking ESI spoliation sanctions. Judge Campbell’s frustration is easily understood, as he chaired the Advisory Committee on the Federal Rules of Civil Procedure during the 2015 revision to Rule 37(e). In Fast v. GoDaddy.com LLC, Judge Campbell seized the opportunity to meticulously explain each requirement of Rule 37(e) and then apply those requirements to adjudicate the spoliation claims before him. In this case, involving sex and disability discrimination claims, the plaintiff claimed she was fired for lacking the technical skills required for her employment, and that male employees with lesser technical skills were retained by the defendants. At the close of discovery, the defendants asserted discovery violations against the plaintiff, seeking sanctions for the spoliation of relevant ESI under Rule 37(e) and for the failure to produce relevant information under Rule 37(c)(1). Since the 2015 amendments to Rule 37(e), there has been controversy as...

Keeping the Curtain Closed: Connecticut District Court Denies Discovery on Discovery Where No Basis to Claim Deficiencies Shown

Despite the broad scope of discovery under Federal Rule of Civil Procedure 26, courts are generally reluctant to permit “discovery on discovery,” i.e., discovery requests related to a party’s efforts to search for, locate, preserve, and collect relevant electronically stored information (ESI). In a case brought against Wesleyan University (the “University”) by a student expelled for alleged cheating, the United States District Court for the District of Connecticut recently declined to compel such discovery on discovery, where the plaintiff requested that the defendant identify and “catalog all of the devices on which responsive communications reside.” The discovery request was made well after the Rule 26 conference – discovery had been ongoing for nearly two years – and the plaintiff waited almost a full year after serving the requests to file her motion to compel. In light of these facts and the plaintiff’s failure to establish an “adequate factual basis” for requiring such discovery on discovery, the court denied portions of the plaintiff’s motion to compel. In Doe v. Wesleyan University, the plaintiff, a former student at the University, was expelled for allegedly cheating on her exams by improperly accessing the University’s “computerized learning management system” called “Moodle” during her exams. The University conducted an investigation and held an Honor Board proceeding, and the board decided...

Gibbons P.C. Presents “Keys to Negotiating Better Software and Software-as-a-Service Agreements”

From May 17-19, Peter J. Frazza, a Director in the Gibbons Commercial & Criminal Litigation Group, will lead a seminar in Las Vegas analyzing the negotiation of software licenses and software-as-a-service agreements, including data protection and privacy issues companies face that are specific to software transactions, artificial intelligence, and the Internet of Things (IoT). Mr. Frazza has over 30 years of experience handling complex lawsuits and contract negotiations on behalf of licensees and users in software licensing and software-as-a-service matters. For additional seminar details or to register, visit https://conta.cc/3CFGxws.

Instruction on Nominal Damages Was Anything but Instructive as Jury Returns $800,000 “Nominal” Damage Award

In its recent opinion in Graphnet, Inc. v. Retarus, Inc., the New Jersey Supreme Court revisited the role of nominal damages in the defamation context. This time, the issue arose after trial in connection with a jury instruction that advised the jury, in part, that it may award nominal damages to compensate a plaintiff for injury to reputation caused by a defendant’s defamation. In 2014 defendant Retarus published a brochure that contained allegedly defamatory statements about one of its competitors, plaintiff Graphnet. The jury found that Retarus did defame Graphnet but that Graphnet had not shown any actual loss. The jury, nonetheless, awarded Graphnet $800,000 in nominal damages. This exorbitant nominal damage award was, at least in part, the result of a confusing and contradictory jury instruction, which advised the jury both that it was “permitted to award nominal damages to compensate the plaintiff” and that “[n]ominal damages…are not designed to compensate a plaintiff.” Only the latter part of that instruction is correct. Nominal damages, as distinct from compensatory or actual damages, are not meant to compensate the plaintiff for actual loss. Rather, they serve the purpose of vindicating the character of a plaintiff who has not proved a compensable loss. Nuwave Inv. Corp. v. Hyman Beck & Co., Inc., 221 N.J. 495, 499 (2015)....

Pennsylvania Supreme Court Protects Due Process Rights and Rejects “Jurisdiction by Consent”

On December 22, 2021, a unanimous Pennsylvania Supreme Court held in Robert Mallory v. Norfolk Southern Railway Company that a foreign corporation is not subject to personal jurisdiction in the Commonwealth of Pennsylvania solely because of its registration to do business there. The Mallory decision is an affirmation of the due process rights of non-Pennsylvania corporate defendants and significantly impacts who can permissibly be sued in the Commonwealth. Mallory, a resident of the Commonwealth of Virginia, filed suit in Pennsylvania seeking damages under the Federal Employers’ Liability Act against his former employer, Norfolk Southern, a Virginia corporation, for injuries allegedly sustained in the course of the plaintiff’s work in Virginia and Ohio. The sole basis for the exercise of personal jurisdiction was Norfolk Southern’s registration to do business in the Commonwealth of Pennsylvania. Pennsylvania’s business registration statute is unique in that the statute conditions registration upon a corporation’s “consent” to personal jurisdiction in Pennsylvania courts. Before Mallory, Pennsylvania state courts and many of Pennsylvania’s federal courts generally permitted the exercise of personal jurisdiction over foreign corporations based solely on their registering to do business in Pennsylvania. The appeal in Mallory required the Pennsylvania Supreme Court to consider whether Pennsylvania’s broad exercise of personal jurisdiction through its corporate registration statute comports with the demands of due...