Judge Engelmayer

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On Wednesday, Reddit Inc. sued Perplexity AI and three “data scrapers,” alleging the companies are circumventing its technological safeguards to unlawfully acquire Reddit’s copyrighted data to “feed” Perplexity’s artificial intelligence model.

Reddit is one of the largest online discussion platforms in the world and “comprises nearly two decades of human conversational data organized across interest-based, user-created communities (referred to as “subreddits”) spanning subjects on virtually every topic imaginable.” According to Reddit, this human-generated content is “widely seen as invaluable to AI companies,” who require a consistent source of new data to “train and operate their AI products.” Reddit “does not permit unauthorized commercialization of Reddit content absent an express agreement with guardrails in place to ensure that Reddit and its users’ rights are protected.”Continue Reading Reddit Sues Perplexity AI and Data Scrapers for “Industrial-Scale” Theft of “Valuable Copyrighted Content”

In an opinion last week, Judge Engelmayer dismissed a class action brought by 16 student-athletes against the National Collegiate Athletic Association (the “NCAA”) over claims arising from NCAA’s use of the student-athletes’ names, images, and likeliness (“NIL”) in advertisements and other commercial endeavors. The plaintiffs’ amended complaint alleges unjust enrichment and violations of the Sherman Act, including a conspiracy aimed at suppressing the market for the plaintiffs’ NIL and a monopolization of the markets for student-athlete labor, images, and footage.Continue Reading Judge Engelmayer Dismisses NCAA Student-Athletes’ Untimely “Names, Images, and Likeness” Case

On Saturday, Judge Engelmayer granted an application for temporary restraining order filed that day by the Attorneys General of 19 States. They requested that, pending a hearing for preliminary injunction, the Court restrain access by the Department of Government Efficiency (“DOGE”) — or others that normally lack access — to the Treasury Department’s “payment record, payment systems, or any other data systems maintained by the Treasury Department containing personally identifiable information and/or confidential financial information of payees.”

Among the arguments advanced by the Attorneys General is that the Privacy Act of 1974 limits the disclosure of confidential information within an agency to specified persons within that agency, without any authority for disclosure to DOGE staffers or others outside Treasury.

The Court, in granting the temporary restraining order and scheduling a hearing for a preliminary injunction for February 14, agreed with the States that, absent a TRO, there was risk of sensitive information being compromised or the system being vulnerable to hacking:Continue Reading Judge Engelmayer Grants TRO Blocking Access to Treasury Databases

In an opinion last week, Judge Engelmayer dismissed most of the SEC’s fraud claims against the software company SolarWinds over the so-called “SUNBURST” cyberattack in 2020 that is generally attributed to state-sponsored Russian hackers.

Judge Engelmayer allowed the SEC’s claims to proceed as to certain pre-SUNBURST statements on SolarWinds’ website touting its cybersecurity practices, but dismissed the SEC’s claims based on statements the company made after the fact, finding that those claims “impermissibly rel[ied] on hindsight and speculation.” For example, a Form 8-K filed after the attack allegedly left out certain details about the extent of the harm, but Judge Engelmayer noted that “perspective and context are critical,” including that the filing was made as the facts were evolving and that, overall, the Form 8-K “by any measure bluntly reported brutally bad news for SolarWinds.”

Judge Engelmayer rejected a novel theory advanced by the SEC that SolarWinds’ cybersecurity failures violated a provision of the Securities Exchange Act requiring issuers to maintain “internal account controls sufficient” to prevent unauthorized “access to assets,” finding that the language concerned “financial accounting,” not cybersecurity:Continue Reading Judge Engelmayer: Securities Law Requiring “Internal Accounting Controls” Does Not Reach Cybersecurity Deficiencies

In an opinion last week, Judge Engelmayer denied defendant’s motion for summary judgment regarding the “unorthodox transaction” exception to Section 16(b) of the Securities Exchange Act. Previously, the Second Circuit had vacated and remanded Judge Engelmayer’s earlier decision, which had granted summary judgment, on the grounds that the defendant had not “carried his burden” to show that there was no genuine dispute that he “did not have access to inside information.”

In line with the Second Circuit’s mandate, the Court reopened discovery on this limited factual issue. Ultimately, the only evidence on the relevant issue was testimonial. The plaintiffs allege that the defendant received inside information during a phone call, but the two participants to the call say they only discussed public information. Reviewing the evidence on remand, Judge Engelmayer held that the defendant still had not carried his burden to “indisputably” prove his affirmative defense.

As an initial matter, Judge Engelmayer pointed out that there is no consensus from appellate courts on the moving party’s burden at summary judgment when the moving party has the burden of proof on the merits of the issue:Continue Reading Judge Engelmayer: Summary Judgment Is Not Appropriate Where “Uncontradicted” Testimonial Evidence Could Still Be Disbelieved By Jury

Today, Judge Engelmayer dismissed with prejudice a putative securities class action filed against DraftKings, Inc., and denied Plaintiffs’ leave to replead. Plaintiffs’ Second Amended Complaint alleged that a company that DraftKings had acquired in the course of going public, SBTech (Global) Limited (“SBTech”), had secretly operated in “black-market” jurisdictions, thereby exposing DraftKings to regulatory and criminal risks. It further alleged that DraftKings made materially false and misleading statements about, and failed to disclose, SBTech’s violations of foreign law and their potential consequences.

Plaintiffs argued that DraftKings’s shares traded at artificially inflated prices until June 15, 2021, when a short seller, Hindenburg Research published a report that revealed SBTech’s ostensible operations in black market jurisdictions and the risks to which the merger with SBTech allegedly exposed DraftKings. That day, DraftKings’s shares fell 4.17%.

In dismissing the Second Amended Complaint, the Court focused on Plaintiffs’ reliance on the Hindenburg report without having verified the information contained in the report:Continue Reading Judge Engelmayer Dismisses Putative Securities Class Action Because Allegations Were Based On Unconfirmed Allegations in Short Seller’s Report

In an opinion last week in a Fair Labor Standards Case, Judge Engelmayer reduced the requested fee award for plaintiffs’ counsel from $155,000 down to approximately $5,000. The plaintiffs had prevailed, but only as to a narrow aspect of the claim. After the liability verdict in the plaintiffs’ favor (in part), their counsel asked for a fee award without bothering, until prompted by Judge Engelmayer, to request damages for the plaintiffs themselves.

Judge Engelmayer explained that the fee reduction was justified because, inter alia, “plaintiffs’ counsels’ lawyering in support of these claims was anemic”:
Continue Reading Judge Engelmayer Slashes Requested Fee Award Based on “Anemic” Lawyering

It is rare for a judge to express views on the merits of a case ahead of a trial, but last week Judge Engelmayer did so, apparently at the urging of the parties who both thought that it would foster settlement. The views were set forth in an Order last week denying summary judgment in a case over escrowed funds following a corporate acquisition (see an earlier ruling here with more background). In the Order, Judge Engelmayer “took note of counsels’ observation that their attempts to resolve this matter would be assisted by some guidance from the Court as to its present assessment of certain issues in the case.”

Accordingly, ahead of a forthcoming bench trial, Judge Engelmayer essentially foreshadowed that the buyer had a strong case that the seller breached a particular warranty in the deal documents, but some risk associated with its associated theory of damages:
Continue Reading Judge Engelmayer Shows Willingness to Preliminarily Assess Contract Dispute, to Help Foster Settlement

In an opinion Wednesday, Judge Engelmayer largely granted the plaintiffs summary judgment in a case challenging New York City’s failure to make signalized intersections accessible to the blind. Only a small percentage of intersections have Accessible Pedestrian Signals, which “are devices that communicate ‘walk’ and ‘don’t walk signals to pedestrians in a non-visual format, through audible tones, speech messages, and/or vibrating surfaces.” This makes crossing the street in New York “harrowing” and “dangerous” for those who are blind or visually impaired:
Continue Reading Judge Engelmayer: City’s Crosswalks Do Not Provide Meaningful Access to the Blind, Violating ADA

In a 147 page opinion today, Judge Engelmayer vacated the so-called “conscience rule” that would have allowed health care providers who receive federal funds to decline to provide services to patients based on religious or moral grounds.  The plaintiffs, a group of state and local governments, challenged the regulation based on improper rulemaking, violations of the Establishment Clause, and because the threat of denying federal funds to health care providers who did not allow employees to decline care based on religious grounds was unconstitutionally coercive.

While Judge Engelmayer declined to invalidate the rule on Establishment Clause grounds, the opinion cited several fatal flaws with how the rule was enacted, including that the alleged reason the rule was drafted in the first place (a spike in health care workers raising “conscience” complaints) was factually untrue.  Given the pervasive nature of the issues, Judge Engelmayer concluded that the rule was so “shot through with glaring legal defects” that it had to be invalidated entirely:
Continue Reading Judge Engelmeyer Vacates HHS “Conscience Rule” In Its Entirety