Commercial Litigation Alert Blog

Wrap-Up of United States Supreme Court’s 2017-2018 Term

Wrap-Up of United States Supreme Court’s 2017-2018 Term

With the close of the United States Supreme Court’s 2017-18 term, we offer this wrap-up, focusing on decisions of special interest from the business and commercial perspective (excluding patent cases): In a much talked-about decision in the antitrust field, the Court held in Ohio v. American Express Co. that American Express’s anti-steering provisions in its merchant contracts, which generally preclude merchants from encouraging customers to use credit cards other than American Express, are not anticompetitive and therefore do not violate Section 1 of the Sherman Act. In so holding, the Court found that credit card networks are two-sided transaction platforms, one side being the merchant and the other side being the merchant’s customer. Thus, when assessing whether the anti-steering agreements are anticompetitive, the effects on both sides of the platform must be considered. The plaintiffs’ proof that American Express had increased its merchant fees over a period of time was insufficient to show an anticompetitive effect because it neglected the customer side of the platform, where consumers have received the benefit of ever-increasing rewards from credit card companies and other improvements in services that those higher merchant fees enable. Bringing an end to a fight that New Jersey had been waging...

SCOTUS to Have the Last Word on “Wholly Groundless” Standard for Delegation of Arbitrability

SCOTUS to Have the Last Word on “Wholly Groundless” Standard for Delegation of Arbitrability

If the parties to an arbitration agreement have agreed that an arbitrator should decide whether a dispute is arbitrable, the question of arbitrability should be decided by an arbitrator. But who should decide arbitrability when the suggestion of arbitrability is so frivolous as to be wholly groundless? Should the party resisting arbitration be required to arbitrate arbitrability before seeking judicial relief? The United States Supreme Court will soon decide. According to the United States Supreme Court, questions of arbitrability are “undeniably . . . issues for judicial determination”—“unless the parties clearly and unmistakably provide otherwise.” Thus, when contracting parties have clearly and unmistakably agreed that an arbitrator must decide questions of arbitrability, the parties’ dispute should be sent to an arbitrator in the first instance to determine whether the dispute is arbitrable. Some circuits, however, provide exception to this rule where the argument for arbitrability is “wholly groundless.” In such instances, the parties’ dispute can proceed directly to court without a stop at an arbitrator’s desk. The Fifth Circuit initially adopted this rule in Douglas v. Regions Bank, and most recently applied it in Archer and White Sales Inc. v. Henry Schein, Inc. In Archer, a dental-equipment distributor sued its...

Third Circuit Affirms Narrow Definition of Autodialer Under the TCPA

Third Circuit Affirms Narrow Definition of Autodialer Under the TCPA

In a precedential decision, the Third Circuit affirmed a narrow reading of autodialer under the Telephone Consumer Protection Act (“TCPA”), the first such decision within this Circuit following the D.C. Circuit’s rejection of the FCC’s 2015 definition of autodialer in ACA International. In Dominguez v. Yahoo, Inc., plaintiff purchased a cell phone with a reassigned telephone number, the prior owner of which had subscribed to Yahoo’s Email SMS Service. Because the prior owner of the number never cancelled the subscription, plaintiff received a text message from Yahoo every time the prior owner received an email, which amounted to thousands of text messages. Plaintiff filed a putative class action alleging that Yahoo had violated the TCPA, which requires that plaintiff prove that Yahoo’s Email SMS Service was an “automatic telephone dialing system,” i.e., an autodialer. Following the FCC’s 2015 ruling, plaintiff amended his complaint to allege that the Email SMS Service “ha[d] the potential capacity to place autodialed calls.” Yahoo moved for summary judgment, and both parties submitted expert reports addressing the Email SMS Service’s latent or potential capacity. The District Court granted Yahoo’s motion to exclude plaintiff’s expert reports and granted summary judgment in favor of Yahoo. On appeal, the...

Supreme Court Limits American Pipe Tolling, Holds Tolling Does Not Apply to Successive Class Actions

Supreme Court Limits American Pipe Tolling, Holds Tolling Does Not Apply to Successive Class Actions

The Supreme Court has acted to ensure that the class action device cannot be used to indefinitely extend the statute of limitations, holding in China Agritech, Inc. v. Resh that American Pipe tolling does not apply to successive class actions. American Pipe tolling dates to 1974, when the Supreme Court held that the filing of a class action tolls the statute of limitations for absent class members who seek to intervene after the court has denied class certification. Nine years later, in Crown, Cork & Seal, the Supreme Court extended the rule to toll the statute of limitations for absent class members who choose to file their own individual actions. Resolving a split amongst the Circuits, the Supreme Court held that American Pipe tolling does not apply where class certification is denied and a class member subsequently seeks to bring a new class action after the expiration of the statute of limitations. The Court opined that the “efficiency and economy of litigation” that underpin the American Pipe rule do not support tolling for successive class actions. Rather, the Court determined, barring tolling in such situations will promote efficiency by requiring all litigants who wish to act as class representatives to come...

New Jersey Appellate Division Continues to Hold Sky-High Bar for Arbitration Clauses

New Jersey Appellate Division Continues to Hold Sky-High Bar for Arbitration Clauses

In determining the enforceability of arbitration agreements, the New Jersey Appellate Division recently considered the interplay of the U.S. Supreme Court’s 2017 decision in Kindred Nursing Ctrs. v. Clark and the New Jersey Supreme Court’s 2014 decision in Atalese v. U.S. Legal Services Grp., L.P. In Defina v. Go Ahead and Jump 1, the Appellate Division held that Kindred Nursing did not abrogate the holding in Atalese. In Defina, the plaintiff, a minor, broke his ankle while playing trampoline dodgeball at Defendant’s facility. Plaintiff’s father had signed a document entitled “Participation Agreement, Release, and Assumption of Risk,” which contained the following arbitration provision: If there are any disputes regarding this agreement, I on behalf of myself and/or my child(ren) hereby waive any right I and/or my child(ren) may have to a trial and agree that such dispute shall be brought within one year of the date of this Agreement and will be determined by binding arbitration before one arbitrator to be administered by JAMS pursuant to its Comprehensive Arbitration Rules and Procedures. . . . Plaintiffs sued, and the trial court granted Defendant’s motion to compel arbitration. On appeal, the Appellate Division reversed, holding that “the arbitration clause at issue in this...

Delaware Chancery Court Rejects Appraisal Rights for Stockholders Who Relinquish Control of their Corporation Through Merger Involving a Special Merger Subsidiary

Delaware Chancery Court Rejects Appraisal Rights for Stockholders Who Relinquish Control of their Corporation Through Merger Involving a Special Merger Subsidiary

Delaware law generally grants appraisal rights to shareholders of corporations involved in statutory mergers or consolidations. But, what are the rights of shareholders when control of their corporation is relinquished through a merger between a specially-created merger subsidiary and another corporation? According to Chancellor Bouchard’s recent opinion, the shareholders have no appraisal rights because they do not own shares in a “constituent corporation in the merger.” Chancellor Bouchard also found that the shareholders are not entitled to appraisal rights because they will retain their shares in the parent corporation in the contemplated transaction. Dr. Pepper Snapple Group, Inc., a publicly-traded corporation, and Keurig Green Mountain, Inc., a privately-held corporation, wanted to combine their businesses. They therefore agreed to a so-called reverse triangular merger, pursuant to which (1) Dr. Pepper will create a new subsidiary, (2) that subsidiary will be merged into Keurig’s owner, Maple Parent Holdings Corp., and (3) Maple Parent will become a wholly-owned subsidiary of Dr. Pepper. In addition, Maple Parent will pay a $9 billion dividend to Dr. Pepper and receive enough shares in Dr. Pepper to give it a controlling 87% share of Dr. Pepper’s common stock. Maple Parent’s $9 billion payment to Dr. Pepper will...

Third Circuit Holds Anti-Assignment Clauses in ERISA Plans Are Enforceable

Third Circuit Holds Anti-Assignment Clauses in ERISA Plans Are Enforceable

The Third Circuit, in a decision that may limit the remedies available to medical providers in the event of non-payment, recently clarified that “anti-assignment clauses in ERISA-governed health insurance plans as a general matter are enforceable.” In so holding, the Third Circuit joins all other circuit courts that have addressed the issue. On the basis of that clause, the Court held that the plaintiff out-of-network health care provider seeking reimbursement for a participant’s medical claims lacked standing to pursue the claim against the insurers on the participant’s behalf. In October 2015, the plaintiff provider performed shoulder surgery on a patient who was covered by an ERISA-governed health-insurance plan. In billing the individual for the procedure, the provider – because it was not part of the plan’s provider network – charged amounts that far exceeded the plan’s reimbursement limits for the surgery. The plan’s insurers applied its out-of-network limit in processing the claim and reimbursed only a fraction of the total amount charged. The provider appealed the claim on the patient’s behalf. At the same time, the provider had the patient sign an assignment-of-benefits form which assigned to the provider the patient’s right to pursue claims under his health-insurance plan for the...

Access Denied: NJ Appellate Division Clarifies Shareholder’s Right to Inspection of Corporate Records

Access Denied: NJ Appellate Division Clarifies Shareholder’s Right to Inspection of Corporate Records

In R.A. Feuer v. Merck & Co., Inc., the New Jersey Appellate Division, in a to-be-published opinion, narrowly construed the scope of a shareholder’s right to inspect a corporation’s records under N.J.S.A. 14A:5-28 and the common law. A Merck & Co, Inc. shareholder appealed from the dismissal of his complaint seeking various corporate records, including twelve broad categories of documents. The shareholder sought evidence that Merck acted wrongfully in its acquisition of another pharmaceutical firm. After Merck appointed a working group to assess the shareholder’s concerns, the shareholder requested documents pertaining generally to the working group’s activities, communications, and formation; documents provided to the board regarding the target pharmaceutical firm and two of its drugs; and the board’s considerations of the shareholder’s demands and the working group’s recommendation. Merck disclosed pertinent minutes of the board and of the working group, but denied the remainder of the shareholder’s demand. The trial court determined that the shareholder’s demand exceeded the scope of the “books and records of account, minutes, and record of shareholders,” which the shareholder had a statutory right to inspect and that the common law did not expand that statutory right. The Appellate Division affirmed, narrowly construing the plain language...

Gibbons Attorneys Author Article Featured in New Jersey Law Journal

Gibbons Attorneys Author Article Featured in New Jersey Law Journal

Frederick W. Alworth and Jonathan S. Liss, Directors in the firm’s Commercial & Criminal Litigation Department, published the following article in the June 18 issue of the New Jersey Law Journal, after a recent decision by the New Jersey Superior Court Appellate Division made it more difficult for shareholders to challenge corporate actions in New Jersey. Is this part of a trend toward making New Jersey more business friendly? The full article can be found here.