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September 2016

August 2016

Industry-Led Strike Force Convenes to Address Robocall “Scourge”

MobileInCarBy John L. Flynn and Bradley Humphreys

The experience is familiar—perhaps an interruption during dinner by “Rachel from Cardholder Services,” a recording announcing that you’ve won an all expenses paid cruise, or, more ominously, one claiming to be from the IRS demanding payment of delinquent taxes.  Robocalls.  The FCC receives over 200,000 robocall-related complaints per year, making them the FCC’s number one consumer grievance.  This summer, Chairman Wheeler called on industry players across the telecommunications “ecosystem” to band together to fight the “scourge” of robocalls.  The result was the formation of the Robocall Strike Force (RSF)—made up of companies and industry organizations—which held its first meeting on August 19, 2016.

The RSF will report to the Commission its findings and recommendations by October 19, 2016.  By then, it should become clearer whether industry-supported solutions to combating robocalls are likely, or whether we should expect further Commission-led action.

To learn more about the background of this issues, as well as the Robocall Strike Force and its mission, click here to read the full Jenner & Block client alert on this topic.

Twitter May Face Trial for Alleged Tweet Spam

Mobile Apps iStock_000019512727LargeBy Daniel A. Johnson

Last month, Twitter was dealt a setback in a case where it is accused of sending unwanted texts with “recycled” phone numbers in violation of the Telephone Consumer Protection Act (TCPA).  The case is a putative class action titled Nunes, et al. v. Twitter Inc., No. 3:14cv02843 (N.D. Cal.), and on July 1, the court denied Twitter’s motion for summary judgment, and granted the plaintiff’s cross-motion. 

According to the court’s opinion, some Twitter users sign up to receive tweets via text message, but will later change phone numbers without bothering to inform Twitter.  This can be a problem because sometimes cell phone carriers “recycle” old discarded phone numbers, assigning them to new cell phone users, in which case the person with the recycled number may allegedly receive unwanted tweets.  The plaintiff in the case claims to have been in this position.  On that basis, she brought suit under the TCPA, which allegedly renders it unlawful to “make any call” —a phrase courts interpret as including texts—using an automatic telephone dialing system without the consent of the recipient. 

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California Court Puts Case Against Starbucks on Ice

Coffee-1018062_960_720By Jeremy M. Creelan

On August 19, U.S. District Judge Percy Andersen of the Central District of California dismissed a putative class action brought by Alexander Forouzesh on behalf of Starbucks customers who have purchased cold drinks there.  Plaintiff alleged that Starbucks indicated on its website that customers would receive a certain number of ounces of “beverage” in their cold drinks, but in practice Starbucks employees were trained to fill each cup with liquid up to a visible “fill line” and then fill the rest of the cup with ice, leading to the liquid contained in each cup to fall short of the ounces listed on the website.  Plaintiff alleged that this constituted violations of California’s Consumer Legal Remedies Act, Unfair Competition Law, and False Advertising Law, and a breach of express and implied warranties, among other common law claims. On a motion to dismiss decided without oral argument, the District Court rejected Plaintiff’s claims, principally because “[I]f children have figured out that including ice in a cold beverage decreases the amount of liquid they will receive, the Court has no difficulty concluding that a reasonable consumer would not be deceived into thinking that when they order an iced tea, that the drink they receive will include both ice and tea and that for a given size cup, some portion of the drink will be ice rather than whatever liquid beverage the consumer ordered.”  The opinion is available hereAlexander Forouzesh v. Starbucks Corporation, case number 2:16-cv-03830 in the U.S. District Court for the Central District of California.

California Supreme Court Clarifies Proper Methodologies for Awarding Attorney’s Fees in Class Action Cases

New-Development-IconBy Jeremy M. Creelan

On August 11, the California Supreme Court issued a ruling in Lafitte et al. v. Robert Half Int’l, Inc., that clarified the proper methodologies for awarding attorney’s fees in class action cases. In a class action alleging employment law violations under California law, the trial court approved a settlement of $19 million after a class had been certified, and a fee award of $6.3 million (which was one third of the settlement).  The trial court approved that fee award based upon not only the percentage of the common fund settlement, but also after performing a reasonableness “cross-check” of the amount against the information provided by the plaintiffs’ counsel using a lodestar method.  That calculation revealed that the proposed amount would mean a multiplier over lodestar of 2.03 to 2.13.  Given the complexity, duration, and contingency risk involved in the matter, the trial court (and the intermediate Court of Appeal) found the requested amount to be reasonable.  The Supreme Court affirmed, and provided a lengthy discussion of the two methods of calculating a fee award in class actions.  The Court made clear that its earlier opinion in Serrano v. Priest (1977) requiring use of the lodestar method, rather than a percentage of common fund method, applied only to cases brought under the “private attorney general” doctrine.  In other cases involving a common fund for recovery by class members, the Court found that using a percentage method would not be per se unreasonable, particularly where the court performs a cross-check based on the lodestar method to confirm the reasonableness of the award.  Interestingly, Judge Liu wrote a separate concurrence to encourage courts to improve the reasonableness of attorney fee awards by using several measures recommended by the Task Force on Selection of Class Counsel convened by the Court of Appeals for the Third Circuit.  Those measures include reviewing and conditionally approving the terms of attorney compensation at the start of a litigation, and in larger cases that do not involve sophisticated plaintiffs, appointing “class guardians” to play “devil’s advocate” and present arguments to the court concerning the reasonableness of requested fees.  Click here to view the opinion.

Gulf Coast Flood Update: Insurance Coverage Considerations

Flood_337x220By Brian S. Scarbrough and Jan A. Larson

As reports concerning the nature and extent of the flood-related damage along the Gulf Coast continue to develop, commercial property damage and business interruption insurance will be critical to the effort to recover and rebuild.  Our insurance work in connection with other disasters, including the 2011 Japanese earthquake and tsunami; Thai floods; Hurricanes Katrina and Ike; and Superstorm Sandy can help companies implement strategies now that increase their ability to later maximize their insurance recoveries.

As you look to protect your business interests, the details below should help you to assess and address the implications and coverage considerations related to the ongoing and historic flooding along the Gulf Coast.    

Identify potentially applicable types of coverage.

  • Commercial property policies are designed to cover both (1) property damage losses and (2) business interruption losses, including specialized coverages related to lost business income:
    • Ingress/Egress (e.g., shipments or employees unable to reach facility due to storm-related damage)
    • Civil Authority (e.g., access to facility or operations of facility prohibited by order of a civil authority)
    • Service Interruption (e.g., a power outage that prevents normal operations)
    • Extra Expense (e.g., additional costs in excess of normal operating expenses incurred to continue operations while damaged property is repaired or replaced)
    • Debris Removal (e.g., costs to clean up storm-related damage)
    • Contingent Business Interruption (e.g., lost income/profits resulting from an interruption to the business of a direct or indirect supplier or customer)

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FCC Clarifies Application of TCPA to Government Contractors

Fashion-person-woman-handBy Alexander M. Smith

In response to a petition filed by Broadnet Teleservices LLC and two other government contractors, the FCC issued a ruling on July 5, 2016 clarifying that “the TCPA does not apply to calls made by or on behalf of the federal government.”  Drawing upon a longstanding presumption that the statutory term “person” does not apply to governmental entities, the FCC first concluded that the TCPA’s prohibitions on automated phone calls—which apply only to “persons”—do not apply to the federal government itself.  Acknowledging that the Supreme Court rejected categorical TCPA immunity for government contractors this year in Campbell-Ewald Co. v. Gomez, the FCC nonetheless concluded that federal contractors “enjoy derivative immunity to the extent they act under authority ‘validly conferred’ by the federal government and in accord with the government’s instructions.”   

As Law360 reports, some consumer advocates have urged the FCC to reconsider its position.  The National Consumer Law Center filed a brief last month on behalf of dozens of legal aid and consumer advocacy organization urging the FCC to stay and reconsider its ruling.  Consumers Union (the advocacy arm of Consumer Reports) submitted a letter to the FCC last week in which it argued that this ruling “will lead to an increase in unwanted calls to consumers from federal government contractors,” which are “costly for many consumers” and “compromise their privacy.”  The FCC has not yet responded.

FTC Insists on Data Security in LabMD Ruling

IStock_000002108956LargeBy Daniel A. Johnson

Last month, the Federal Trade Commission issued an opinion and order concluding that a clinical laboratory, LabMD, Inc., committed an unfair act or practice in violation of Section 5 of the FTC Act as a result of its allegedly “unreasonable” data security practices.  This FTC matter has been closely watched and may well have a significant impact as an official confirmation—or arguably a broadening—of the law’s scope.

According to the FTC’s opinion, LabMD operated as a clinical laboratory that conducted tests on patient specimen samples and reported the test results to its physician customers.  As a result, it had collected sensitive personal information for over 750,000 patients over the course of its operations, including their names, addresses, dates of birth, Social Security numbers, insurance information, diagnosis codes, and physician orders for tests and services.  According to the FTC, LabMD allegedly failed to institute “basic security practices” at least from 2005 until 2010.  For example, it allegedly lacked the following measures: “file integrity monitoring or intrusion detection system”; “adequate[] monitor traffic coming across its firewalls”; “data security training” for “its information technology personnel or other employees”; “a policy requiring strong passwords”; software “update[s]” to “protect against known vulnerabilities”; and overly broad assignment of “administrative rights” that permitted management employees to download peer-to-peer (P2P) file-sharing applications. 

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