Commercial Litigation Alert Blog

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.

Eleventh Circuit Rules FTC’s Data Security Cease and Desist Order Against LabMD Is Unenforceable

Eleventh Circuit Rules FTC’s Data Security Cease and Desist Order Against LabMD Is Unenforceable

In its June 6, 2018 decision, the Eleventh Circuit concluded that the Federal Trade Commission’s (“FTC”) Final Order against LabMD lacked adequate specificity and therefore was unenforceable. The Eleventh Circuit had previously issued a stay of enforcement of the FTC’s Final Order – as reported by this blog on November 16, 2016  – which had concluded that LabMD’s data security practices were “unreasonable” and constituted an “unfair” business practice in violation of Section 5 of the Federal Trade Commission Act (“FTC Act”), 15 U.S.C. §45(a) and (n). The FTC initiated an enforcement action against LabMD in August 2013, alleging that LabMD, which operated as a clinical laboratory testing center, failed to implement reasonable data security measures to protect patients’ sensitive personal information. LabMD’s alleged data security failures allowed an employee to install and maintain file-sharing software on a work-related computer for a period of at least three years, which allowed exposure of patient information on a peer-to-peer network accessible daily by millions of users. In July 2016, and on appeal following a hearing before an Administrative Law Judge, the FTC concluded that LabMD’s failures had caused, and were also likely to cause, substantial consumer injury, including identity theft and medical-identity...

Third Circuit Affirms the Dismissal of a Putative Class Action against TD Bank for Failure to Meet Pleading Requirements

Third Circuit Affirms the Dismissal of a Putative Class Action against TD Bank for Failure to Meet Pleading Requirements

Last month, the Third Circuit upheld the dismissal of a putative class action against TD Bank, finding that plaintiffs’ conclusory allegations lacked sufficient evidence and failed to satisfy Rule 9(b)’s heightened pleading standard for claims that sound in fraud. In MZL Capital Holdings, Inc. et al. v. TD Bank, N.A. et al., two account holders with TD Bank filed a proposed class action accusing the Bank of obscuring its exchange rates and improperly charging an embedded fee for converting foreign currency, thereby defrauding its customers in violation of the New Jersey Consumer Fraud Act. Shortly thereafter, plaintiffs amended their complaint to add claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and violation of numerous other state consumer-protection laws. TD Bank moved to dismiss plaintiffs’ claims for failure to state a claim, and the District Court granted TD Bank’s motion, dismissing all of plaintiffs’ claims. On appeal, the Third Circuit affirmed the district court’s decision, concluding that plaintiffs’ claims were inadequately pled. At the outset, the Court re-affirmed the basic principle that claims brought under the Consumer Fraud Act sound in fraud and therefore must comply with Rule 9(b)’s particularity requirement. The Third...

New Jersey Appellate Court Upholds Class Waiver & Arbitration Provision

New Jersey Appellate Court Upholds Class Waiver & Arbitration Provision

The New Jersey Supreme Court has noted that both “federal and state policies favor[] arbitration.” Nevertheless, the High Court’s Atalese v. Legal Servs. Grp. decision—rejecting the enforceability of an arbitration clause—continues to raise questions about whether New Jersey state courts view such provisions with more skepticism than other jurisdictions. In this regard, the Appellate Division’s recent decision in Signor v. GWC Warranty Corp. provides some welcome guidance. In Signor, the trial court refused to dismiss and compel arbitration of class claims grounded in a particular automobile service contract. The contract contained an arbitration provision with language including: ARBITRATION PROVISION: READ THE FOLLOWING ARBITRATION PROVISION (“Provision”) CAREFULLY, IT LIMITS CERTAIN RIGHTS, INCLUDING YOUR RIGHT TO OBTAIN RELIEF OR DAMAGES THROUGH COURT ACTION. Any and all claims, disputes, or controversies of any nature whatsoever . . . shall be resolved by binding arbitration before a single arbitrator. You agree that any arbitration proceeding will only consider Your Claims. Claims by, or on behalf of, other individuals will not be arbitrated in any proceeding that is considering Your Claims. You and We understand and agree that because of this Provision neither You nor Us will have the right to go to court except as provided...