By Alexander M. Smith

The Supreme Court’s next term kicks off next week, when the court re-convenes for its first oral argument since last April.  The docket currently features four cases of interest to the consumer law and class action bar:

• In Lamps Plus, Inc. v. Varela, a divided panel of the Ninth Circuit construed a provision stating that “arbitration shall be in lieu of any and all lawsuits or other civil legal proceedings relating to my employment” to authorize class arbitration, even though the plaintiff’s employment agreement with Lamps Plus did not expressly authorize class-wide arbitration.  The Supreme Court granted certiorari to determine whether the Federal Arbitration Act “forecloses a state-law interpretation of an arbitration agreement that would authorize class arbitration based solely on general language commonly used in arbitration agreements.” 

• In Frank v. Gaos, the district court authorized a class-wide settlement of a lawsuit alleging that Google violated federal and state privacy laws by disclosing users’ search terms to third parties, even though the settlement consisted only of cy pres relief and attorneys' fees.  A divided panel of the Ninth Circuit affirmed, rejecting the objectors’ arguments that (1) a settlement that provided no direct relief to the class was inappropriate and (2) that the cy pres beneficiaries, which had previously received settlement funds from Google and which were affiliated with the law schools attended by class counsel, were improper.  The Supreme Court granted certiorari to determine “[w]hether, or in what circumstances, a cy pres award of class action proceeds that provides no direct relief to class members supports class certification and comports with the requirement that a settlement binding class members must be ‘fair, reasonable, and adequate.’”

By Michael W. Ross and Andrew J. Lichtman

September saw a flurry of activity that will help further define the cryptocurrency regulatory landscape.  The Financial Industry Regulatory Authority (“FINRA”) brought its first-ever crypto-fraud case and a court ruling by the U.S. District Court for the Eastern District of New York gave backing to the view that digital assets will be viewed as securities.  And, in two enforcements actions, the U.S. Securities and Exchange Commission (“SEC”) branched out beyond actions against fraudulent crypto-schemes and went after crypto companies for failing to register with the SEC.  The latter two cases signal that the SEC is committed to enforcing applicable securities law requirements beyond those accused of fraud, and therefore SEC enforcement activity remains an area for legitimate businesses to watch.

A Federal Court Rules On Whether Digital Assets Are Securities

Last October, the U.S. Attorney’s Office in Brooklyn brought charges against Maksim Zaslavskiy alleging that Zaslavskiy made false representations in connection with two cryptocurrencies and their related initial coin offerings (“ICOs”) in violation of U.S. securities law.  According to the indictment, Zaslavskiy induced investors to purchase tokens in an ICO for “REcoin” by falsely claiming that REcoin was backed by real estate investments.  Similarly, the government alleged, Zaslavskiy falsely claimed that a second cryptocurrency, “Diamond,” was backed by actual diamonds when it was not.

In an article for Law360, Partners Daniel T. Fenske and Justin C. Steffen examine anti-competition issues with blockchain.  The authors explain that anti-competition issues abound now that financial institutions, corporations and other industries are investing in blockchain technology.  The issues, they observe, can be mitigated through early planning.  The authors discuss the “basics” of blockchain and anti-competition risks.  “The antitrust risks of blockchain technology will be clarified as the technology develops and it is put to more uses,” they conclude.  “It is critical that you consult competent antitrust counsel when structuring blockchain technology and policies so as to best mitigate antitrust risk.”

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