Bernstein Shur Business and Commercial Litigation Newsletter #79
April 2018 | Issue 79
Our April recap addresses a Supreme Court challenge to a class action settlement involving Google, an enforcement action against Equifax related to a massive data breach, and other news that will have an impact on business and litigation.
The U.S. Supreme Court has agreed to hear an appeal from judgment approving a class action settlement involving Google where settlement funds will be awarded to unrelated third-party charities rather than affected class members.
In the underlying case, class plaintiffs brought claims against Google for breach of privacy and other interests based on Google’s “referrer header” architecture for website searches. Through this search engine architecture, Google allegedly provides the landing page website with access to the precise search terms submitted to Google. The websites in turn may be able to utilize that data for its own purposes. Under the settlement affirmed by the Ninth Circuit Court of Appeals, Google would pay total of $8.5 million to third-party organizations to promote public awareness and education regarding the protection of privacy on the internet. As part of the settlement, Google agreed to disclose on its website how user data was used, but did not agree to change any practices. Class members objected to the so-called “cy pres” charitable award, which can be used where it is difficult to quantify or distribute damages to class members. The term “cy pres” is derived from the French expression “cy pres comme possible,” or “as near as possible.” The appeal to the U.S. Supreme Court was led by Ted Frank, who challenged the determinations that the settlement was reasonable, fair, and adequate for class members, who total more than 100 million users.
A Massachusetts trial court has allowed the nation’s first enforcement action to proceed against Equifax in relation to a massive data breach that compromised the personal data of 143 million individuals.
The suit, which was brought by Massachusetts Attorney General Maura Healey, alleges that Equifax failed to take sufficient precautions to ensure that personal information and data would not be exploited by hackers. The suit also alleges that Equifax failed to provide prompt notice of the infiltration by hackers, who accessed private data through a public “dispute portal” available to consumers to submit complaints. Some three million Massachusetts residents were affected by the data breach, which took place from March, 2017 through July, 2017. As an initial salvo in the litigation, Equifax sought dismissal of the enforcement action, arguing that the Commonwealth’s claims were not plausible. While acknowledging that a data breach alone does not violate Massachusetts law, Judge Kenneth Salinger concluded that the Commonwealth plausibly alleged breach of data security statutes based on the failure to safeguard sensitive information and the failure to upgrade known security vulnerabilities.
The U.S. Supreme Court has rejected a challenge to the current “inter partes” patent review system that has been employed by the U.S. Patent and Trademark Office since 2012.
The system, which was created by Congress to review the “patentability” of patent claims on limited grounds, has been viewed by observers as a means of providing an inexpensive mechanism for testing weak patent claims. In Oil States Energy Services, LLC v. Greene’s Energcy, Group, LLC, a Texas-based services company challenged the legality of inter partes review, arguing that it deprived the company on a jury trial on the issue of patentability of the challenged patent. Employing the so-called “public-rights doctrine,” the Supreme Court held that in matters addressed to publicly granted rights, Congress has significant latitude to assign adjudication duties to departments other than regular federal courts. Because the Court viewed the challenge to the validity of the patent as “second look” at the grant by the U.S. PTO, the Court held that there was no right have a jury adjudicate issues that arise in an inter partes review proceeding.
Lance Armstrong, the former cycling athlete, has agreed to pay $5 million to the U.S. Postal Service to settle federal fraud claims.
The settlement of claims follows years of litigation, which centered on whether Armstrong defrauded his sponsor, the U.S. Postal Service after he was found to have used banned substances to enhance his performance in competition. The underlying litigation was notable because it was brought by fellow teammate Floyd Landis under the False Claims Act and later was joined by the U.S. Government. Under the False Claims Act a “relator” who possesses evidence of fraud relating to federal contracts or programs may bring suit on behalf of the U.S. Government. Although Landis and the U.S. Government originally sought recovery of approximately $100 million in damages and penalties, a looming trial date of May 7, 2018 presumably provided the impetus for settlement. Armstrong won the Tour de France seven times, but was stripped of his titles and has been banned from professional cycling for life.