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

Judge Hellerstein Authorizes § 1782 Discovery to Law Firm in Aid of Anticipated Dutch Suit Against Firm Client

In an opinion yesterday, Judge Hellerstein authorized discovery from the law firm Cravath under 28 U.S.C. § 1782 relating to a claim that the petitioning party planned to file, but had not yet filed, in the Netherlands against a Cravath client.

Judge Hellerstein rejected Cravath’s argument that, since the Netherlands case hadn’t been filed, the discovery was not (in the words of the statute) “for use in a proceeding in a foreign or international tribunal”: Continue Reading

Suit Challenges President Trump’s Business Holdings Under Emoluments Clause

In a suit filed today, a citizen watchdog group is challenging Donald Trump’s business dealings under the U.S. Constitution’s Emoluments Clause.  Article I, Section 9, Clause 8 reads:

No title of nobility shall be granted by the United States: and no person holding any office of profit or trust under them, shall, without the consent of the Congress, accept of any present, emolument, office, or title, of any kind whatever, from any king, prince, or foreign state.

The complaint argues that payments from foreign countries to Trump companies (such as the Commercial Bank of China, a state-owned enterprise which leases office space in Trump Tower) violate the Emoluments Clause, which was intended to prevent conflicts of interests and foreign influence in U.S. government decisions.  The group, Citizens for Responsibility and Ethics in Washington, claims standing based on the time and resources spent monitoring the issue, which cannot be spent elsewhere.  The complaint contains claims for declaratory and injunctive relief against the Emoluments Clause violations.

The case is pending before Judge Abrams.

Paul McCartney Seeks to Reclaim Rights to Beatles Songs Under the Copyright Act

Sir Paul McCartney aims to reclaim his rights to popular Beatles songs in a complaint filed yesterday.  The complaint seeks a declaratory judgment that his copyright termination notices are valid ahead of the 2018 expiration of the Copyright Act’s term for pre-1978 copyrights – 56 years after McCartney and John Lennon began composing together in 1962.  Sony/ATV Music Publishing, the defendant in the case, is the successor in interest to a group of music companies that purchased the copyrights to various Beatles songs in the 1960s.  The termination notices were served from 2008 to 2015 and cover hundreds of songs composed by McCartney and Lennon, including “A Hard Day’s Night,” “Let it Be,” “Hey Jude,” and “Yesterday.”

The case is pending before Judge Ramos.

Judge Schofield Rules that State Courts Should First Interpret a Lobbying Law under First Amendment Challenge

In an opinion yesterday, Judge Schofield invoked so-called “Pullman”-abstention and thereby declined to rule on a case raising a novel state question.  The case is a constitutional challenge by PR firms to a New York law requiring lobbyists to make certain disclosures.  The firms argued that an advisory opinion by state regulators could be interpreted to mean that the law covered their communications with the press, in violation of the First Amendment.

Judge Schofield ruled that the state courts should interpret the law in the first instance because doing so would “avoid the ‘friction-generating error that can result when a federal court endeavors to construe a novel state [a]ct not yet reviewed by the [s]tate’s highest court,’ and because a state court determination of the meaning of the Advisory Opinion will likely resolve or modify the federal constitutional issue.”

Judge Pauley Rejects $360 Hourly Fees for “Temporary Associates”

In an opinion last week concerning a class action fee award, Judge Pauley reduced the requested $360 hourly rate for temporary associates at the plaintiff’s law firm, because he concluded they were functionally contract attorneys, who are ordinarily paid less: Continue Reading

Judge Daniels Denies Motion to Dismiss Challenge to Delays in Bronx Criminal Court

In an opinion last week, Judge Daniels denied a motion to dismiss a case alleging that extreme delays in the Bronx Criminal Court system violated the constitutional guarantee of a speedy trial.  While Judge Daniels found that the named plaintiffs lacked standing because their cases had been resolved, Judge Daniels allowed 30 days for the plaintiffs to be replaced with plaintiffs having pending cases in the Bronx Criminal Court system.

On the merits, he found that the plaintiffs had stated a claim: Continue Reading

New York Court of Appeals Answers Question First Raised by Judge McMahon: No Common Law Right of Public Performance For Pre-1972 Sound Recordings

Today, the New York Court of Appeals, in response to a question certified from the Second Circuit (after being certified for interlocutory review by Judge McMahon), held that New York common-law copyright law does not recognize a right of public performance for creators of sound recordings predating the 1972 federal Copyright Act.  The question was certified as part of a putative class action of artists of pre-1972 sound recordings (led by The Turtles, who wrote “Happy Together”) seeking royalties from Sirius XM Radio for allegedly playing recordings without permission. Continue Reading

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