Judge Forrest: UPS Liable for Shipping Untaxed Cigarettes in New York State

On Friday, Judge Forrest held UPS liable to the City and State of New York for shipping millions of dollars worth of untaxed cigarettes from Native American reservations to locations elsewhere in the state (see our previous coverage of the case here).  The order comes after a bench trial held last September, where UPS asserted that packages it delivered containing untaxed cigarettes did not violate a previous Assurance of Discontinuance (AOD) signed with the State of New York in 2005.

Judge Forrest found that UPS had improperly shipped untaxed cigarettes, and should have known that the packages contained untaxed cigarettes based on numerous red flags.  As a result, significant penalties were appropriate (though the court highlighted UPS’ now-improved internal procedures): Continue Reading

New Complaint Seeks Damages from Saudi Arabia for Ties to 9/11 Attacks

A complaint filed this week by families of 9/11 victims alleges that the government of Saudi Arabia knowingly gave aid and support to al Qaeda, allowing the terrorist organization to carry out the 9/11 attacks in New York, Washington, and Pennsylvania.  According to the complaint, state-run charities funneled money to al Qaeda while members of the Saudi government provided logistical support and resources used to carry out the attacks.  The complaint was filed pursuant to the Justice Against Sponsors of Terrorism Act (JASTA), passed into law over President Obama’s veto last year.

The complaint includes claims under JASTA and the Alien Tort Claims Act, as well as state law.

A judge has not yet been assigned.

Judge Sullivan: No Extension of Pretrial Deadlines for Expected, But Not Finalized, Settlement

In an order yesterday, Judge Sullivan refused an to extend the time for the SEC to oppose motions in limine in a six-year-old case.  The SEC sought the extension because the parties reached a settlement awaiting formal Commission approval, but Judge Sullivan found that those grounds were not enough, particularly because the request itself was untimely:

On October 6, 2016, the Court ordered the parties to file motions in limine by February 10, 2017, with responses due by March 10, 2017 and replies due by March 24, 2017. On March 10, 2017 — the day on which responses to motions in limine were due — the SEC and Defendant . . . advised the Court that they had reached an agreement in principle and requested that the schedule for motions in limine be stayed pending the SEC’s approval of the settlement, which was expected to take “about six weeks.” The Court denied the request, noting that while the parties may choose not to respond to motions in limine if they are confident that the agreement in principle will be approved by the SEC, the original scheduling order remained intact.

The Court is now in receipt of another request from the SEC, this time requesting permission to file its opposition to Defendant[‘s] motions in limine out of time, on the grounds that the SEC’s formal approval of the settlement, which it now expects to be done by March 24, 2017, will “render the pending motions in limine moot.”  The request, which was submitted five days after the due date of the responsive filings, is itself untimely and in violation of the Court’s individual practices. Moreover, the fact that the parties have reached a potential settlement more than six years after the commencement of this action does not justify the scuttling of the pretrial order that was issued many months ago.

Judge Failla Dismisses Chipotle E. coli Class Action

This week, Judge Failla dismissed a putative class action stemming from the 2015 food-borne illness outbreak among Chipotle customers.  According to the complaint, at least seven E. coli outbreaks at Chipotle restaurants in 2015 were caused by Chipotle’s switch from processing produce at a central facility to processing produce in each of its 1,900 restaurants.  The complaint alleged that Chipotle and its executives failed to disclose the change in produce processing and the resulting increase in the risk of food-borne illness outbreaks.

Judge Failla found that these statements were not actionable:

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Judge Pauley: Moody’s Whistleblower Whose False Claim Act Case Was Dismissed Cannot Share in Related Government FIRREA Settlement

In an opinion last week, Judge Pauley dismissed a second amended False Claims complaint brought by a former Moody’s managing director who claimed that Moody’s false ratings caused various government overpayments  (our coverage of the dismissal of the original complaint is here).

The opinion notes that, as a consequence of the dismissal, the plaintiff was not eligible to share in an $864 million settlement between Moody’s and the government for violations of FIRREA and parallel state laws, even though the plaintiff was apparently helpful to the government: Continue Reading

Judge Furman: Arbitrator’s Criminal Conviction During Case Does Not Void Award (Steptoe Success)

In an opinion yesterday, Judge Furman upheld an arbitration award worth over $200 million in favor of a company affiliated with Israeli businessman Lev Leviev, and against his former partners in a series of diamond businesses.  The former business partners argued that the award should be set aside because one of the arbitrators was convicted of tax offenses in Belgium while the case was ongoing, and had not disclosed from the outset that the charges were pending.  Judge Furman, quoting a Seventh Circuit opinion from Judge Posner, disagreed:

A judge’s decisions are not voidable on the basis of an undisclosed criminal conviction, even in a capital case, if the conviction had no impact on the decision, and we do not see why a stricter rule should apply in arbitration, especially since the standard due process entitlement to an impartial tribunal is relaxed when the tribunal is an arbitral tribunal rather than a court.

Steptoe & Johnson represented the petitioner in successfully obtaining the award’s confirmation.

The case was covered in (among other outlets) the N.Y. Post, N.Y. Daily News, Reuters, and the N.Y. Law Journal.

Judge Caproni Warns Serial Class Objector About Using Local Counsel as Sanctions Shield

In an opinion yesterday, Judge Caproni warned Christopher Bandas, an attorney who serially files class action objections, about his apparent practice of attempting to use local counsel as a shield against sanctions, though she ultimately declined to sanction Mr. Bandas:

Bandas’ failure to provide any legitimate support for [the class objection] would be enough to cause this Court concern. But Bandas’ behavior throughout this proceeding has been unfitting for any member of the legal profession. Even though Bandas was substantially involved in all stages of the [objection]—he drafted [the objection] and substantial portions of [the] opposition brief . . . —Bandas refused to enter a notice of appearance in this case, and he refused to sign any of the filings that he himself drafted.

Instead, Bandas orchestrated other attorneys . .. to “appear” on the various filings that Bandas drafted or prepared behind the scenes. Bandas’ machinations were designed to avoid his professional responsibilities to the Court and were explicit with respect to [local counsel]: [local counsel] required as a term of his engagement that Bandas would “prepar[e] the substantive filings including Motions” and required Bandas to agree to indemnify him if he were sanctioned for his role in this case.

The sanctions-indemnity provision in the engagement agreement . . .  appears to the Court to be an improper attempt by [local counsel] to avoid any financial repercussions for sanctionable behavior and a way for Bandas to avoid any collateral consequences to himself if his conduct resulted in sanctions being imposed.

The Court required Mr. Bandas to “provide a copy of this opinion to any local counsel he seeks to engage for any case pending in the Southern District of New York.”

Judge Rakoff: Executives Cannot Buy Company Products at Grossly Inflated Prices to Trigger Earnout Bonus

The summary judgment ruling, issued yesterday, begins:

Why would the executives (and former principals) of a paddle-board division of a sports and recreation company cause the company to make a one-time $60,500 purchase of one million stickers that the executives themselves immediately attempted to repurchase from the company for approximately $4 million? The answer is that they thereby hoped to stick the company with a $10 million “earnout” payment to the executives, thus netting themselves a cool $6 million. Thanks, however, to the age-old doctrine of good faith and fair dealing, and similar legal protections, in the end it is these executives who are stuck.

Judge Sullivan: Qui Tam Plaintiff Who Voluntarily Dismisses Case Cannot Share in Proceeds from Settlement of Later-Filed Government Case

In an opinion last week, Judge Sullivan concluded that the False Claims Act did not allow a “relator” (a private citizen suing on behalf of the government for fraud against the government) who voluntarily dismissed his case to share in the proceeds from a case that the government later filed on its own.

The False Claim Act states that, when a relator brings a claim, the government may choose whether to intervene and take over the case, or may “may elect to pursue its claim through any alternate remedy available,” and in either case the relator should typically share in the recovery.  The relator argued that the government’s separate litigation was an “alternate remedy,” but Judge Sullivan, while acknowledging the issue was one of first impression in the Second Circuit, disagreed: Continue Reading

Judge Koeltl Holds That Video Game Players Lack Standing to Challenge Use of Their Facial Images

Yesterday, Judge Koeltl dismissed a putative class action complaint against video game company Take-Two claiming that the company had improperly used facial recognition software.  The complaint alleged that the MyPlayer feature in Take-Two’s “NBA 2K15” and “NBA 2K16” games, which created an image of the game player’s face for a custom character in the game, violated Illinois’ Biometric Information Privacy Act (BIPA).

Applying the U.S. Supreme Court’s recent holding in Spokeo, Inc. v. Robins, Judge Koetl found that that the plaintiffs – players whose facial scans were stored by Take-Two – could not show a sufficiently individualized and concrete injury required for Article III standing, in part because the feature worked exactly as advertised: Continue Reading