Gibbons Law Alert Blog

Clearing the Bar: SDNY Reminds Litigants of High Standard for Imposing Sanctions Under Rule 37(e)(2)

A recent decision out of the Southern District of New York once again illustrates the risk of sanctions under several sections of Fed. R. Civ. P. (“Rule”) 37 for spoliation of evidence and discovery misconduct, as well as the high burden a party must satisfy when seeking sanctions under Rule 37(e)(2). In Bursztein v. Best Buy Stores, L.P., despite finding that defendant flouted discovery obligations, failed to communicate promptly with its adversary, and raised baseless objections throughout discovery, the Court declined to impose sanctions under Rule 37(e)(2), though it did award sanctions – both monetary and in the form of evidence submission to the jury – under Rule 37(e)(1).

Following Duguid, South Carolina District Court Limits Reach of TCPA’s Autodialer Definition

In April 2021, the U.S. Supreme Court resolved a circuit split interpreting the Telephone Consumer Protection Act’s (TCPA) definition of “automatic telephone dialing system” or (ATDS). In Facebook, Inc. v. Duguid, the Court held that the clause “using a random or sequential number generator” in the statutory definition of ATDS, 47 U.S.C. § 227(a)(1), modifies both “store” and “produce,” thereby “specifying how the equipment must either ‘store’ or ‘produce’ telephone numbers.” Accordingly, “a necessary feature of an autodialer under § 227(a)(1)(A) is the capacity to use a random or sequential number generator to either store or produce phone numbers to be called.” Duguid thus reversed the Ninth Circuit’s interpretation that the clause “using a random or sequential number generator” modifies only “produce,” such that a device could be an autodialer if it has the capacity to store and automatically dial numbers, even if the numbers are not generated by a random or sequential number generator. Under Duguid, equipment that makes calls to “targeted…numbers linked to specific accounts” are excluded from liability under the TCPA. In June, the U.S. District Court for the District of South Carolina had the opportunity to apply the Supreme Court’s decision. In Timms v. USAA Federal Savings Bank, the plaintiff sought to recover damages from the defendant for alleged violations of the Fair...

NJ Supreme Court Holds a Supervisor’s Use of Two Racial Slurs Was Enough to Send the Claims to a Jury

On June 16, 2021, the New Jersey Supreme Court ruled in Rios v. Meda Pharmaceutical, Inc., Tina Cheng-Avery, Glenn Gnirrep, et. al. that a supervisor’s use of two offensive slurs based on race/national origin and directed at a Hispanic employee was sufficiently “severe and pervasive” to establish a hostile work environment claim under the New Jersey Law Against Discrimination (“LAD”), survive summary judgment, and proceed to trial. In Rios, Meda Pharmaceutical, Inc. (“Meda” or “Company”), hired plaintiff, Armando Rios, Jr., a Hispanic male, as the Company’s Director of Brand Marketing, reporting to individual defendant Tina Cheng-Avery, the Senior Director of Commercial Operations (“supervisor”). Plaintiff alleged that his supervisor directed the term “Sp–” towards him while at work. More specifically, plaintiff claimed that a month after his hire in May 2015, he told his supervisor that he and his wife were searching for a new home, and, in response, she stated, “it must be hard for a Sp– to have to get FHA loans.” According to plaintiff, shortly after this comment was made, his supervisor allegedly stated to him that an actress who had been “auditioning” for a company commercial would be hired “if she didn’t look too Sp–ky.” (Chief Justice Rabner noted that the court had used “the offensive language in the record” as it...

A Poor Substitute: The Eastern District of Texas Holds That Facebook Screenshots Are Not Sufficient to Avoid Sanctions Under Rule 37

In Edwards v. Junior State of America Foundation, the Eastern District of Texas determined that screenshots of social media messages are not sufficient evidentiary substitutes for spoliated native files. As a result of the plaintiffs’ discovery misconduct and spoliation of relevant electronically stored information (ESI), the court imposed sanctions under Rule 37(c) and (e) against the plaintiffs for failing to preserve Facebook messages in native format, including its metadata, which prevented the defendant from authenticating the messages. The plaintiffs filed a complaint against the defendant alleging that a student member of the defendant, a youth organization, sent “racist and homophobic Facebook messages” to one of the plaintiffs (the “Messages”). After the alleged Messages were sent, the student’s father filed a complaint with the youth organization which included .jpeg “snapshot” images of the Messages. During the litigation, the defendant served written discovery requests on the plaintiffs, seeking production of ESI from the plaintiff’s Facebook Messenger account to authenticate the alleged Messages, including the production of the Messages in HTML or JSON format. The native format of Facebook messages can typically be retrieved and produced in HTML or JSON format and contain metadata that can be used for authenticity purposes. The defendant’s request for native format would have allowed the defendant to authenticate the Messages. The plaintiffs never...

Case Law Alert: Third Circuit Finds No Fraudulent Transfer Liability in Connection With Revocation of Pennsylvania Gaming License

In a June 29, 2021 decision concerning an alleged $50 million fraudulent transfer to the Commonwealth of Pennsylvania, the United States Court of Appeals for the Third Circuit affirmed the dismissal of an action by the liquidating trustee of Philadelphia Entertainment and Development Partners (d/b/a Foxwoods Casino Philadelphia) (the “Debtor”) under Bankruptcy Code Sections 544(b), 548, 550, and 551 to recover the value of a gaming license that had been revoked by the Commonwealth. The Third Circuit determined that, because the license was not a property right under Pennsylvania state law, sovereign immunity barred the trustee’s action against the Commonwealth. The decision turned on the distinction between transferable ownership rights in property versus mere “privileges.” Although the Third Circuit’s opinion in this matter is non-precedential, it nevertheless underscores the importance that state law plays in determining “property of the estate,” and the resulting consequences for debtors and their creditors. By way of example, we would expect to see the same result under New York law with respect to liquor licenses, which – unlike in New Jersey and certain other states – are non-transferable licenses and thus not estate property under Bankruptcy Code Section 541 and state law.

United States Supreme Court Decision Explains that Public School Students Have Broader Free Speech Protections When Off Campus

In an 8-1 majority opinion, the United States Supreme Court ruled on June 23, 2021 that the Mahanoy School District in Pennsylvania violated the First Amendment rights of a high school cheerleader who argued that she could not be punished by her school for a social media post she made outside of school. With ubiquitous social media in the pockets of everyone from ages 8 to 88, this case has been closely followed to see how the highest Court balances the free speech rights of public school students and the concerns of school administrators over off-campus speech, including speech occurring online that could be considered bullying or that disrupts a school’s ability to educate its students. Background In Mahanoy Area School District v. B.L., a Minor, By and Through her Father, LEVY, et al., No. 20-55 (June 23, 2021), Brandi Levy, a student of Mahanoy Area High School, was cut from the school’s varsity cheerleading squad and placed on the junior varsity squad. She reacted, as many young adults might, through social media and posted Snapchat images while off campus on a Saturday, voicing her disappointment about not making the school’s varsity cheerleading squad. The images were posted to Levy’s Snapchat story, allowing any of her approximately 250 friend group members to view the images...

Fourth Time’s a Charm: The Third Circuit Reverses Dismissal of Trade Secrets Complaint and Clarifies Pleading Standard

The Third Circuit issued a precedential decision in Oakwood Laboratories LLC v. Bagavathikanun Thanoo et al. that clarified the pleading requirements for trade secrets misappropriation claims under the Defend Trade Secrets Act, 18 U.S.C. § 1836(b) (DTSA). In that decision, the Third Circuit held that the Third Amended Complaint was “so factually detailed that, on appeal, we conclude it easily meets the pleading requirements of the Federal Rules of Civil Procedure and pertinent substantive law.” Earlier, the District Court for the District of New Jersey had dismissed four of Oakwood Laboratories LLC’s (“Oakwood”) complaints on the grounds that each complaint was not specific enough to support a claim. The District Court dismissed Oakwood’s Third Amended Complaint (its most recent attempt), because it did not show precisely how defendants misappropriated Oakwood’s trade secrets, but noted that Oakwood did plead facts sufficient to identify its trade secrets and support the information’s protected status. Oakwood appealed, and the Third Circuit reversed. Oakwood alleged that defendants Aurobindo Pharma U.S.A. and its subsidiaries misappropriated Oakwood’s trade secrets regarding microsphere technology when Aurobindo hired an Oakwood employee who specializes in this technology, Dr. Bagavathikanun Thanoo, and relied on a memorandum provided for the limited purpose of exploring a business opportunity to develop Aurobindo’s own microsphere technology. In reversing the District Court’s...

NJDEP Unveils Resiliency Planning Toolkit

On February 2, 2021, Governor Phil Murphy signed P.L. 2021 c. 6, which requires municipalities to incorporate assessments of climate change hazards into Master Plan Land Use Elements adopted after its enactment. No doubt many municipal officials, faced with tight budgets and heavy obligations, greeted this news with trepidation. However, the New Jersey Department of Environmental Protection (NJDEP) has come to the rescue with an extensive and well-designed online toolkit. The launch of the toolkit was announced by NJDEP Commissioner Shawn LaTourette on June 10 at the New Jersey Planning and Redevelopment Conference. The toolkit provides detailed guidance to assist communities in developing and implementing public processes to assess local vulnerabilities and create strategies to address them. It provides step-by-step procedures for creating teams to engage local stakeholders in defining their vision and developing plans to gather data, assess vulnerabilities, and develop strategies. Each section of the toolkit provides useful training modules, prototype documents and templates, and links to critical informational resources. The final section assists in tracking progress and contains links to federal and state sites providing information on funding and financing options. The toolkit is comprehensive, flexible, and user-friendly. It will be invaluable to municipalities in meeting their statutory obligations. It also provides a valuable model for other states, regional planning agencies, and...

OSHA Issues Long-Awaited COVID Guidance and Emergency Temporary Standard

On June 10, 2021, the United States Department of Labor’s Occupational Safety and Health Administration (OSHA) finally issued its long-awaited update to its COVID-19 workplace safety guidance, setting forth best practices for all employers as employees return to the physical workplace after a lengthy absence. The same day, OSHA issued an Emergency Temporary Standard (ETS)—pursuant to the DOL’s rule-making authority—establishing mandatory procedures for “covered healthcare employers.” We summarize the obligations and recommendations imposed on healthcare and non-healthcare employers below.

Inviting Scrutiny: “Obstructionist” Conduct Leads to District Court Ordering Forensic Examination of Defendant’s Cell Phone

Courts have been authorizing forensic experts to conduct examinations of electronic devices for decades. However, we have noticed a recent uptick of district courts ordering the appointment of an independent forensic expert to create images of and forensically examine cell phones to ensure the preservation and production of relevant electronic data particularly where the party in control of the evidence has been less than forthcoming in their discovery obligations. The District Court for the Southern District of Florida is one of the latest courts to order such a remedy, granting plaintiff’s motion to compel a forensic examination and ordering that an independent expert “mirror image and/or acquire all data present on Defendant’s cell phone.”