The US Supreme Court recently held that consolidation for pretrial proceedings in a multidistrict litigation (MDL) does not affect a party's right to appeal under 28 U.S.C. § 1291.

Gelboim v. Bank of America Corp. involved a class action complaint filed by the petitioners. The petitioners' case was consolidated with 60 related cases for MDL pretrial proceedings under 28 U.S.C. § 1407. The district court subsequently dismissed the petitioners' complaint in its entirety for lack of antitrust injury, though other consolidated cases that asserted additional or different claims remained pending in the MDL. The petitioners appealed under 28 U.S.C. § 1291, which allows parties to appeal as of right from "final decisions of the district courts." The Second Circuit dismissed the appeal for lack of appellate jurisdiction, holding that the district court's decision was not an appealable final order because it did not dispose of all claims in the consolidated action.

The Supreme Court reversed, concluding that cases consolidated for MDL pretrial proceedings retain their independent status and the consolidation does not affect a plaintiff's right to appeal under Section 1291. Therefore, the dismissal of the petitioners' complaint in its entirety qualified as an appealable final decision. In its reasoning, the Supreme Court rejected the defendants' argument that consolidated cases should proceed as one unit for the duration of the MDL and therefore are only appealable under Federal Rule of Civil Procedure (FRCP) 54(b), which applies to appeals in actions involving multiple claims or parties. However, the Supreme Court declined to address whether an order deciding a case in an all-purpose consolidation qualifies as an appealable final decision.

Further, the Supreme Court explained that plaintiffs with claims remaining in the MDL may use FRCP 54(b) to appeal at the same time as a plaintiff whose action has been entirely dismissed. (135 S. Ct. 897 (2015).)

See Legal Update, Supreme Court: Consolidation for Pretrial Proceedings in Multidistrict Litigation Does Not Affect Right to Appeal for more on this decision.

See Practice Note, Product Liability Multidistrict Litigation for more on the MDL process.

The Ninth Circuit affirmed the approval of a class action settlement agreement and held, among other things, that the portion of the settlement to be paid in gift cards was not a "coupon settlement" for purposes of the Class Action Fairness Act of 2005 (CAFA).

The dispute in In re Online DVD-Rental Antitrust Litigation arose from a district court's approval of a class action settlement and attorneys' fee award in which the defendant Walmart would pay a total of $27,250,000, which included both a cash component and gift card component, and the plaintiffs' class counsel would receive attorneys' fees in the amount of 25% of this total settlement fund. Six objectors appealed the district court's approval, arguing, among other things, that the district court erred in calculating the fee award based on the total settlement fund because the Walmart gift cards are "coupons" that fall within CAFA's special provisions for restricting attorneys' fees in coupon settlements (see 28 U.S.C. § 1712(a)).

In affirming the district court's decision, the Ninth Circuit examined CAFA's legislative history and various district courts' decisions to determine that the gift cards were not coupons. The Ninth Circuit reasoned that:

(No. 12-15705, (9th Cir. Feb. 27, 2015).)

See Legal Update, Gift Cards Not "Coupon Settlement" under CAFA: Ninth Circuit for more on this decision.

See Practice Notes, Class Action Fairness Act of 2005 (CAFA): Overview for more on coupon settlements and Settling Class Actions: Process and Procedure for more on the settlement approval process.

A company can be severely sanctioned under FRCP 37 if it presents an unprepared representative witness on its behalf for a deposition under FRCP 30(b)(6). To avoid this risk, counsel should prepare clients to be knowledgeable on all the issues specified in a subpoena or notice, including both helpful and harmful facts.

In Sciarretta v. Lincoln National Life Insurance Co., the Eleventh Circuit affirmed a sanction of $850,000 against a non-party for failing to produce a witness with knowledge in response to a Rule 30(b)(6) subpoena. The Eleventh Circuit concluded that:

(No. 13-12559, (11th Cir. Feb. 26, 2015).)

See Legal Update, Court Imposes $850K Sanction for Producing Unprepared, Non-party 30(b)(6) Witness for more on this decision.

See Practice Note, How to Prepare for and Successfully Defend a Rule 30(b)(6) Deposition for more on effectively preparing a 30(b)(6) deposition witness.

For the purpose of establishing diversity jurisdiction, the citizenship of a trust is determined by examining the citizenship of all its members, including trust beneficiaries, held the Tenth Circuit.

In ConAgra Foods, Inc. v. Americold Logistics, LLC, the Tenth Circuit disagreed with the defendants' assertion that the omission of the trust beneficiaries' citizenship from the notice of removal was not a jurisdictional defect because a trust's citizenship is determined exclusively by the citizenship of its trustees. In its reasoning, the Tenth Circuit:

(776 F.3d 1175 (10th Cir. 2015).)

See Legal Update, Citizenship of a Trust is Based on All Its Members: Tenth Circuit for more on this decision.

See Practice Note, Commencing a Federal Lawsuit: Initial Considerations for more on diversity jurisdiction.

State boards composed of active market participants may not be protected by state-action antitrust immunity.

In North Carolina Board of Dental Examiners v. Federal Trade Commission, the Supreme Court held that a board composed mostly of practicing dentists was not protected by state-action antitrust immunity when it allegedly violated the Federal Trade Commission Act by prohibiting non-dentists from providing teeth-whitening services in North Carolina. The Supreme Court based its holding on the state-action antitrust immunity doctrine, set out in its prior decision in Parker v. Brown, which concluded that states are immune from antitrust liability where anticompetitive acts are conducted under a state's sovereign authority.

The Supreme Court in North Carolina Board concluded that the board was a non-sovereign actor and explained that state-action antitrust immunity is granted to a non-sovereign actor only when:

The second requirement was not satisfied in this case, as the board admitted that the state did not actively supervise the challenged policy. Active supervision is needed when the non-sovereign actor in question is controlled by active market participants that may be tempted to engage in anticompetitive activity. (135 S. Ct. 1101 (2015).)

See Legal Update, Supreme Court Rules that State Board of Dental Examiners Not Protected by State-action Antitrust Immunity for more on this decision.

See Antitrust: Supreme Court Case Tracker for a chart providing summaries of recent Supreme Court antitrust decisions.

The US District Court for the Northern District of California has limited the kinds of technology and processes that qualify as automatic telephone dialing systems under the Telephone Consumer Protection Act (TCPA). The decision could potentially decrease liability for many services and businesses, though companies that reach out directly to consumers should still be vigilant about their obligations and restrictions under the TCPA and other advertising laws.

The TCPA prohibits parties from using automatic telephone dialing systems to call or text cell phones without first obtaining the recipient's prior express consent. In Glauser v. GroupMe, Inc., the court granted GroupMe, Inc., a smart phone application provider, summary judgment against a complaint that it violated the TCPA. The court held that because GroupMe's application lacked the capacity to dial numbers without human intervention, it did not constitute an autodialer under the TCPA and GroupMe could not be liable under the statute for sending texts through the application.

In reaching its decision, the court found that:

(No. 11-2584, (N.D. Cal. Feb. 4, 2015).)

See Legal Update, N.D. Cal: Smart Phone App Not an Autodialer under the TCPA for more on this decision.

See Practice Note, Direct Marketing for more on the TCPA and other federal rules that cover unsolicited commercial communications.

Long-awaited and controversial amendments to the Delaware General Corporation Law (DGCL) have been proposed to address the growing trend of shareholder suits that target public M&A transactions. If approved, most of the amendments would become effective on August 1, 2015. Specifically, the amendments address:

See Legal Update, DGCL Amendments Proposed on Fee-shifting, Forum Selection and Appraisal Rights for more on these proposed changes.

A proposed new Delaware statute, entitled the Delaware Rapid Arbitration Act, would allow business entities formed in Delaware to resolve business disputes through voluntary arbitration conducted by expert arbitrators under strict timelines.

Under the proposed statute, arbitrations must be completed within 120 days, with only one 60-day extension possible if all parties and the arbitrator agree. However, the statute would not apply to disputes:

In 2010, the Delaware Court of Chancery first attempted to introduce voluntary arbitration rules. These rules were subsequently found to be unconstitutional because the proposed arbitration proceedings would have functioned essentially as civil bench trials to which there is a qualified right of public access under the First Amendment. The proposed statute likely will avoid constitutional issues because the proceedings would be private and confidential as with other private arbitrations. However, if a challenge is filed with the Delaware Supreme Court, the proceedings would be treated as a typical appeal and subject to the public's right of access rules.

Ordinary principles of contract law must be applied in interpreting collective bargaining agreements (CBAs) that define rights to retiree health benefits.

In M&G Polymers USA, LLC v. Tackett, retirees claimed that language in their CBA created a vested right to lifetime health benefits that continued beyond the CBA's expiration. The Sixth Circuit ruled in the retirees' favor, relying on its decision in UAW v. Yard-Man, Inc. In Yard-Man and its progeny, the Sixth Circuit inferred that parties to a CBA intended to contractually vest ERISA welfare benefits for life absent specific language to the contrary.

The Supreme Court unanimously rejected the Yard-Man inferences, concluding that they conflicted with ordinary principles of contract law. The Supreme Court reasoned that the inferences unfairly placed "a thumb on the scale" in favor of vested retiree benefits, and were not based on evidence that employers and unions typically vest retiree health benefits. Moreover, the Supreme Court concluded that the Sixth Circuit's refusal to apply general durational clauses in CBAs to provisions governing retiree benefits distorted the CBAs' text and violated the contract law principle that a written agreement is presumed to encompass the parties' whole agreement.

A concurring opinion indicated that the Sixth Circuit, on remand, could consider extrinsic evidence if it concluded that the agreement was ambiguous after reviewing all relevant contractual language. (135 S. Ct. 926 (2015).) As a result, CBA ambiguities might still trigger litigation regarding whether extrinsic evidence of the parties' intent is admissible.

See Legal Update, Supreme Court Rejects Yard-Man Inference about Vesting of Lifetime Non-pension Retiree Benefits through CBAs for more on this decision.

See Practice Note, ACA Changes to Medicare Part D Affecting Retiree Medical Plans for more on the theories used to challenge modifications of retiree medical benefits.

A decision by the US District Court for the Southern District of New York may make it more difficult for companies to implement out-of-court restructurings without the unanimous consent of their noteholders, even if the actions taken are permitted by an indenture. The decision gives added leverage to minority noteholders to block a restructuring, and may result in increased bankruptcy filings and costs as more litigation ensues.

Marblegate Asset Management v. Education Management Corp. involved an out-of-court restructuring sought by Education Management Corporation (EDMC) to avoid a bankruptcy filing. EDMC negotiated a Restructuring Support Agreement (RSA) with its creditors to accomplish this purpose, and ultimately pursued a restructuring path under the RSA that did not require 100% noteholder consent. Although this path was permitted under the plain language of the relevant notes indenture, non-consenting unsecured noteholders would not have received payment on account of their notes. The non-consenting noteholders therefore sought a preliminary injunction to bar EDMC from taking this restructuring path.

The court denied the motion for a preliminary injunction, but stated in dicta that the plaintiffs would likely succeed on a claim that the restructuring would violate the Trust Indenture Act of 1939 (TIA). The court rejected a common, narrow reading of Section 316(b) of the TIA that it simply protects a legal entitlement to demand payment. Instead, the court reasoned that it offers broad protection against non-consensual debt restructurings, creating a substantive right for each noteholder to actually obtain payment. (No. 14-8584, (S.D.N.Y. Dec. 30, 2014).)

See Legal Update, Marblegate Asset Management v. Education Management Corp: SDNY Broadly Interprets Trust Indenture Act to Limit Non-consensual Out-of-Court Restructurings for more on this decision.

See Practice Notes, Out-of-Court Restructurings: Overview and Indenture and Indenture Trustee: Governing Laws for more on out-of-court restructurings and the TIA.

Parties may find it more difficult to overturn a district court's claim construction on appeal, following a decision by the Supreme Court. When challenging a claim construction that includes factual findings, parties should be prepared to explain why the construction is incorrect as a matter of law in light of those factual findings.

In Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc. (135 S. Ct. 831 (2015)), the Supreme Court held that when reviewing a district court's claim construction, the Federal Circuit must review any underlying factual findings for clear error, rejecting the Federal Circuit's less deferential de novo standard of review. However, the Supreme Court explained that the district court's ultimate claim construction can still be reviewed de novo, and clarified that when a district court reviews only intrinsic evidence, the resulting claim construction is solely a question of law that should be reviewed de novo.

The Supreme Court reasoned, among other things, that:

See Legal Update, Supreme Court: Facts Underlying Claim Construction Must Be Reviewed for Clear Error for more on this decision.

See Patent Litigation Claim Construction Toolkit for a collection of resources to assist patent litigation counsel with claim construction.

Whether trademark tacking is warranted is a question for the jury where a jury trial has been requested and neither summary judgment nor judgment as a matter of law is appropriate, held the Supreme Court in a unanimous decision. The case resolves a circuit split on who should decide the issue of tacking.

The dispute in Hana Financial, Inc. v. Hana Bank arose from a trademark infringement suit brought by Hana Financial, Inc. (HFI) against Hana Bank (HB). HB claimed that its mark was entitled to an earlier priority date than HFI's mark, based on HB's earlier use of a similar mark. The jury was instructed that HB could be entitled to an earlier priority date if its previously used mark is the legal equivalent of its allegedly infringing mark, meaning the marks create the same, continuing commercial impression from the consumer's perspective. This is known as trademark tacking. The jury determined that tacking applied, and returned a verdict for HB. On appeal, the Ninth Circuit affirmed.

The Supreme Court granted certiorari to resolve a circuit split on whether tacking should be decided by a jury or the court. In affirming the Ninth Circuit, the Supreme Court explained that juries are well-suited to determine an ordinary consumer's understanding of the impression that a mark conveys. The Supreme Court cited other contexts in which the jury generally is the decision-maker when the relevant question is how an ordinary person or a community would make an assessment. (135 S. Ct. 907 (2015).)

See Legal Update, Supreme Court Resolves Circuit Split: Jury Should Determine Whether Tacking is Available for more on this decision.

See Practice Note, Loss of Trademark Rights for more on trademark tacking.

The US District Court for the District of Maryland recently applied the exceptional case standard articulated by the Supreme Court in Octane Fitness, LLC v. Icon Health & Fitness, Inc., a patent infringement action, in awarding attorneys' fees to the defendant in a trademark infringement case.

Section 35(a)(3) of the Lanham Act allows prevailing parties to recover attorneys' fees in exceptional cases, but does not define the term exceptional (see 15 U.S.C. § 1117). In Teal Bay Alliances, LLC v. Southbound One, Inc., the court applied Octane in determining whether the plaintiff's ill-grounded trademark infringement action constituted an exceptional case under this Lanham Act provision.

In its reasoning, the court considered the Third Circuit's opinion in Fair Wind Sailing, Inc. v. Dempster, the only US Court of Appeals decision to address the issue. There, the Third Circuit noted that the Supreme Court made clear in Octane that it was defining the term exceptional not just for the attorneys' fee provision of the Patent Act, but also for the identically worded Lanham Act provision. Guided by these precedents, the court in Teal Bay held that the case was exceptional and awarded the defendant its reasonable attorneys' fees. (No. 13-2180, (D. Md. Jan. 26, 2015).)

See Legal Update, Octane Fitness Exceptionality Standard for Patent Infringement Attorneys' Fees Applies to Trademark Claims: D. Md. for more on this decision.

See Legal Update, Supreme Court's Exceptionality Standard for Attorneys Fees Awards under the Patent Act Applies to Lanham Act Claims: Third Circuit for more on the Fair Wind decision.

An administrative agency is not required to use the notice and comment rulemaking procedures when altering its interpretation of a regulation, even if the new interpretation deviates significantly from its prior interpretation, held the Supreme Court. The decision removes a major stumbling block to agency action.

Perez v. Mortgage Bankers Association involved an interpretive rule issued by the Department of Labor (DOL) in 2010, finding that mortgage loan officers do not qualify for the administrative exemption to the Fair Labor Standards Act. The 2010 interpretation, issued without following the notice and comment procedures set out in the Administrative Procedure Act (APA), reversed a 2006 DOL opinion letter which reached the opposite conclusion. The DC Circuit vacated the 2010 interpretation based on its holding in Paralyzed Veterans of America v. D.C. Arena L.P., which required that agencies follow the notice and comment procedures when issuing a new interpretation of a regulation that is significantly different from a prior interpretation.

The Supreme Court reversed the DC Circuit's ruling and rejected the holding in Paralyzed Veterans. Examining the text of the APA, the Supreme Court found that:

Among other things, the Supreme Court rejected the argument that an agency's new interpretation of a regulation that substantially deviates from a prior interpretation constitutes an amendment under Section 1 of the APA triggering the notice and comment procedures. (135 S. Ct. 1199 (2015).)

See Legal Update, SCOTUS: DOL Permitted to Change Interpretation Rules Without Notice and Comment Rulemaking for more on this decision.

See Practice Note, Wage and Hour Law: Overview and Standard Document, Questionnaire to Determine Exempt Status under the FLSA for more on the exemptions to the Fair Labor Standards Act.

The Second Circuit joined several other circuits in clarifying that while individualized damages may be one factor weighing against class certification, they are not a complete bar to class certification where other common questions of law and fact predominate. The decision is particularly useful to plaintiffs in the context of employment discrimination and wage and hour cases, which typically involve individualized determinations on damages, even where employees were the victims of a common violation or policy.

In Roach v. T.L. Cannon Corp., the Second Circuit vacated and remanded a district court's decision denying FRCP 23 class certification in a wage and hour case because the district court misread the Supreme Court's decision in Comcast Corp. v. Behrend as requiring that class certification be granted only when damages are measurable on a classwide basis. Instead, the Second Circuit concluded that Comcast does not overrule Second Circuit precedent holding that the fact that damages may have to be ascertained on an individual basis is:

The Second Circuit explained that Comcast does not require plaintiffs to use a classwide damages model to support class certification, but requires that if plaintiffs use a model for determining damages under a particular theory of injury, the model must actually measure damages attributable to that theory. (778 F.3d 401 (2d Cir. 2015).)

See Legal Update, Second Circuit: Supreme Court's Comcast Ruling Does Not Require Wage & Hour Class Action Damages Be Measurable Classwide for more on this decision.

See Practice Note, Class Actions: Certification for more on the requirements for certifying a class.

A Fourth Circuit decision addresses two novel issues for the circuit regarding retaliation claims brought under the Sarbanes-Oxley Act of 2002 (SOX).

In Jones v. Southpeak Interactive Corp. of Delaware, the plaintiff filed a complaint with the Occupational Safety and Health Administration (OSHA) alleging retaliation following her termination from Southpeak Interactive Corp. After OSHA failed to issue a final order within 180 days, she brought a retaliation suit against Southpeak under SOX in June 2012, more than two years but less than four years after her termination. The trial court ultimately awarded her back pay, compensatory damages for emotional distress and attorneys' fees. The defendants appealed, arguing, among other things, that her suit was untimely and the award of emotional distress damages was not permitted under SOX.

The Fourth Circuit denied the appeal in its entirety, holding that:

(777 F.3d 658 (4th Cir. 2015).)

See Legal Update, Four-year Limitations Period Applies to Sarbanes-Oxley Retaliation Claims; Emotional Distress Damages Available: Fourth Circuit for more on this decision.

See Practice Note, Whistleblower Protections under Sarbanes-Oxley and the Dodd-Frank Act for more on SOX retaliation claims.