The Supreme Court on Wednesday issued a divided opinion in a case that raised an important issue of arbitration law: should an arbitrator or a judge decide whether an international treaty requires a private party to bring a commercial dispute before a judge prior to attempting arbitration? In BG Group PLC v. Republic of Argentina, the Court ruled 7-2 against Argentina, concluding that arbitrators acted within their power when they concluded that a British firm was not required to file suit in Argentina’s courts before seeking arbitration. Chief Justice Roberts, joined by Justice Kennedy, dissented; they argued that in signing the bilateral UK-Argentina investment treaty, Argentina agreed to arbitration only on condition that investors bring their disputes to an Argentine court first. But there was one point on which the justices agreed unanimously: Argentina has a sorry history of living up to its contractual commitments to investors. That point of agreement does not bode well for Argentina, which in two pending Supreme Court cases is asking the Court to permit it to invoke sovereign immunity as the basis for resisting repayment of sovereign debt.
The case involved claims by a British firm, BG Group plc, that Argentina breached a natural gas distribution contract. Washington, D.C.-based arbitrators awarded BG Group $185 million in damages, and Argentina turned to American courts to overturn the award. It cited the terms of the UK-Argentina treaty as the basis for its claim that the arbitrators lacked jurisdiction to hear the case. The treaty provides that an investor asserting a claim under the treaty may not initiate arbitration until 18 months after filing a claim against Argentina in an Argentine court.
The arbitrators held that BG Group should be excused from complying with the 18-month litigation requirement. They noted that Argentina, after taking steps that essentially expropriated BG Group’s property, adopted a series of laws designed to block any BG Group lawsuit. They held that these laws, “while not making litigation in Argentina’s courts literally impossible, nonetheless hindered recourse to the domestic judiciary to the point where the Treaty implicitly excused compliance with the local litigation requirement.” Continue reading
With the conclusion of the Federal Rules Advisory Committee’s public comment period last month, the first leg of what The Legal Pulse has described as the long and winding road to reform of the federal rules for discovery is now over. We have at last reached the “end of the beginning,” to borrow Churchill’s phrase.
Comments contributed by the business community conveyed the consistent message that the current rules encourage over-preserving documents, a practice that ill-serves the interests of justice. The committee record is replete with anecdotes demonstrating this point, but it had lacked aggregate data until recently. Enter a Preservation Costs Survey conducted by Professor William Hubbard (my former contemporary at the University of Chicago Law School who has returned to teach there now), which thoroughly documents systematic over-preservation of electronic materials and its profound costs. A summary of Professor Hubbard’s findings is available here.
Business Defendants’ Stories. In its comment to the Advisory Committee, 307,000-employee General Electric noted that in order to preserve information contained in emails alone, it is “faced with a universe of approximately 4,770 terabytes” of data. (Just 10 terabytes, by comparison, is roughly enough storage for the Library of Congress’s entire book collection.) The comment cited one example from 2011 in an instance where litigation had not yet been filed. GE incurred “fees of $5.4 million to collect and preserve 3.8 million documents totaling 16 million pages.” The company also reported it must spend over $100,000 a year to simply maintain those documents.
Pfizer explained in its comment that it currently has over 300 active legal holds in place impacting over 80,000 employees. It preserves 5 billion emails, and expects that amount to grow by 1 billion per year. Allstate reported that in the past 5 years it has spent over $17 million on e-discovery costs alone.
Ford provided several case studies in its comment, including one arising from a suit in Montana. There, Ford’s legal staff invested more than 800 hours and paid outside lawyers $2 million to produce nine computer hard drives containing 360 gigabytes of documents and 1,200 witness transcripts from past lawsuits. The plaintiff was unsatisfied with Ford’s production and filed a motion for sanctions, which the court denied. In the end, the plaintiff sought to introduce one document from the massive trove it requested from Ford. Continue reading
The U.S. Supreme Court this week has a chance to strike a blow for judicial modesty and at the same time call a halt to a disturbing trend being pushed by the plaintiffs’ bar: class-action lawsuits in which no one was injured but that seek millions of dollars in “damages.” The Court is being asked, in the case of First National Bank of Wahoo v. Charvat, to consider whether federal courts possess jurisdiction to hear such no-injury lawsuits. The Court should accept the invitation and announce that attorneys will no longer be permitted to flout Article III of the U.S. Constitution, which limits the filing of federal lawsuits to those who have actually suffered an injury.
The case involves two small Nebraska banks that, like most banks, charge a small fee to non-customers who use their ATM machines. Federal law requires banks to provide notice that they charge such a fee. The two Nebraska banks did provide notice (on the very first screen seen by ATM users), and no one has come forward to claim that he or she used one of the ATMs without being aware that a fee would be incurred.
Here’s the wrinkle: at the time this lawsuit arose, federal regulations (since repealed) also required a second form of notice—on a small placard physically attached to the ATM. Some of the ATMs maintained by the First National Bank of Wahoo and the Mutual First Federal Credit Union did not display the placard. Jarek Charvat, an enterprising young man working with a local plaintiffs’ law firm, knew about the ATM fees and observed that the banks were not in full compliance with the federal placard regulation. So he went from bank branch to bank branch, making ATM withdrawals and deliberately incurring a $2.00 fee at each stop. Continue reading
We admit that before scrutinizing the related wave of food labeling class action litigation, we had never seen the term “evaporated cane juice” (ECJ). It might be fair to wonder whether many of the plaintiffs in these suits had ever noticed it on food labels either. But claims alleging that using ECJ on a food label violate federal rules (and thus also California law) have become ubiquitous. As of January 22, there were over 50 suits pending in federal courts with an ECJ claim. Thanks to an action yesterday by the Food and Drug Administration (FDA), those claims may not survive beyond March.
FDA formally reopened the comment period for draft guidance first published on October 7, 2009. That draft guidance informed industry that “dried cane syrup,” not evaporated cane juice, is the common or usual name under federal rules for “the solid or dried form of sugar cane syrup.” FDA never finalized that guidance, but true to FDA form, the agency still invoked it in warning letters sent to companies using the term evaporated cane juice. Continue reading
Washington Legal Foundation filed an amicus brief supporting the petitioner in Halliburton v. Erica P. John Fund, on which we were represented by Lyle Roberts on a pro bono basis. The brief is available here.
If you would like a copy of Mr. Robert’s comments, click here.
by Ross Coker*
Since its debut in the early 2000s, Google has grown at a startlingly rapid pace, becoming not only a global behemoth in the online search engine and advertising markets, but expanding its reach through smartphones, computer operating systems, and more. Just this month, Google surpassed ExxonMobil as the world’s second largest company by market capitalization.
In the United States, such success inevitably makes one a target of class-action lawsuits. To avoid being dragged into one of the country’s notorious Judicial Hellholes,® companies like Google include venue and forum selection clauses in their consumer contracts. In addition to avoiding plaintiff-friendly jurisdictions, such clauses allow companies to resolve legal disputes close to “home” in a manner that minimizes disruption to conducting business.
A recent federal district court ruling, Rudgayzer et al. v. Google Inc., reflects the importance and effectiveness of these forum-selection clauses and clarifies their strategic underpinning. Rudgayzer filed suit in the Eastern District of New York (EDNY) alleging improper notice after Google settled another class action suit involving the now-defunct “Buzz” product. The judge dismissed Rudgayzer’s suit because the plaintiff had assented to Google’s consumer contract, which contained the forum-selection clause.
Santa Clara County, CA
In order to reach that conclusion, the court had to first determine whether the clause could be enforced. The court noted that the federal circuits are split on the legal standard to apply in this situation. The Second Circuit, whose precedents bind the EDNY, permits dismissal under Federal Rule of Civil Procedure 12(b)(3) if the consumer was made aware of the forum-selection clause, the clause is mandatory by the terms of the contract, and state contract law permits the imposition of such a clause. The plaintiff can escape the clause only if it can show that the transfer of its case would be “unreasonable or unjust.” Continue reading
Featured Expert Column – Environmental Law and Policy
by Samuel B. Boxerman, Sidley Austin LLP
On February 12, 2014 the Environmental Protection Agency (EPA) published a notice that the agency was releasing an interpretive memorandum and technical recommendations for the use of “diesel fuels” in hydraulic fracturing. N1 The guidance is another step in the direction of increased EPA regulation of oil and gas development, a regulatory area long the province of state governments.
In the Energy Policy Act of 2005, Congress had largely exempted hydraulic fracturing from the Underground Injection Control (UIC) program of the federal Safe Drinking Water Act (“SDWA”). EPA did retain some authority to regulate, however, as Congress amended the SDWA to provide that “underground injection … means the subsurface emplacement of fluids by well injection;” but excludes “the underground injection of fluids or propping agents (other than diesel fuels) pursuant to hydraulic fracturing operations related to oil, gas, or geothermal production activities.” (emphasis added). N2
EPA’s “Diesel Guidance” N3 has been in the works at the agency since well before it was first proposed in May 2012. N4 EPA has claimed, but not exercised, a right to regulate hydraulic fracturing fluids that included diesel fuels, in part because as industry pointed out, Congress did not define the phrase “diesel fuels” in the SDWA. EPA first sought to pursue this authority by quietly publishing a change in policy on its website, but that effort was challenged and the agency withdrew that posting. Instead, EPA proposed the draft guidance and allowed public comment. N5 The documents were before the Office of Management and Budget (OMB) for many months, before OMB released them shortly after President Obama’s State of the Union.
The Diesel Guidance consists of three separate documents: EPA’s “Permitting Guidance for Oil and Gas Hydraulic Fracturing Activities Using Diesel Fuels: Underground Injection Control Program Guidance #84 (Feb. 2014) (“EPA Guidance #84), a Memorandum to the agency’s Regional Administrators and State/Tribal UIC program directors, N6 and a response to public comments. N7 In these documents, EPA essentially does three things: Continue reading