December 01, 2010

In this edition of The Spotlight, we discuss some continuing trends as well as a number of notable developments. Continuing a trend noted in prior editions, several courts recently analyzed the relative powers of courts and arbitrators. The Ninth Circuit held that as long as a plaintiff’s challenge to the validity of an arbitration clause was a distinct question from the validity of the contract as a whole, the court could decide the question of arbitrability regardless of whether the challenge was raised as a distinct claim in the complaint, (Bridge Fund Capital Corp., Arbitration), and a district court vacated an arbitration award after finding that there was no enforceable agreement to arbitrate between the parties. (DeBeers, International Arbitration). However, the Fifth Circuit held that a court exceeded its authority in sanctioning an attorney for conduct during an arbitration that did not defy the court’s orders. (Positive Software Solutions, Arbitration).

Courts also have noted the emerging trend of requiring objecting parties to demonstrate the burden of electronic production, with one district court ordering a party to produce metadata in future productions because the party had failed to allege that doing so would be a burden while another district court held that, based on an expert affidavit, producing back-up tapes would be so costly as to render the tapes inaccessible. (Romero, Johnson v. Neiman, Electronic Discovery)

We also note two recent cases in which defendants were denied payment of attorneys’ fees to cover their defense. In the first, a district court held that an insurer did not have to pay defense costs under a D&O policy because it found that the alleged acts had “in fact” occurred (Pendergest-Holt, Insurance), and in the second, based on an analysis of a separation agreement that incorporated provisions of a corporation’s bylaws regarding the use of financial resources, the Tenth Circuit reversed an injunction requiring a corporation to advance defense fees (Flood, White Collar Defense).

In a reversal of a decision previously noted in the Spotlight, an Eleventh Circuit panel reversed its earlier decision that a named plaintiff in a CAFA action had to claim damages in excess of $75,000 for the court to have original jurisdiction over the class action. In response to a request for rehearing en banc, the panel reconsidered its prior position and held that no individual plaintiff had to claim damages in excess of $75,000 as long as the other requirements were met. (Cappuccitti v. DirecTV, Class Action). In another class-related decision, the Ninth Circuit held that a district court erred in refusing to certify a FACTA class based on the potentially ruinous liability due to statutory damages. (Bateman, Class Action)

Finally, the United States Supreme Court granted certiorari in three cases concerning whether state law claims related to generic drug labeling are preempted by federal law, and the New York City Bar issued an opinion that attorneys, and their employees, could not misrepresent themselves to gather evidence about individuals on social networking sites.

Regards, David J. Bradford and Craig C. Martin

Full Article