August 01, 2010

In this edition of The Spotlight, we discuss a number of continuing trends.  Courts continue to monitor e-discovery practices closely.  Judge Scheindlin narrowed the language of her opinion regarding negligence in the collection of documents, and a magistrate judge imposed sanctions for the inadvertent destruction of electronic data, but declined to dismiss the action in question (Pension Comm., Medcorp Electronic Discovery).  On a related note, the Eleventh Circuit affirmed the exclusion of evidence of damages as a sanction for violation of Federal Rule of Civil Procedure 26 (Mee Indus. v. Dow Chem. Co., Complex Commercial Litigation).

In addition, we note a trend strengthening the enforceability of contract provisions.  The United States Supreme Court issued a major arbitration decision, holding that a party specifically must challenge a clause requiring an arbitrator to determine enforceability in order for a court to hear the challenge; a broad challenge to the validity of the agreement will be determined by an arbitrator. (Rent a Center, Arbitration).  The Court also upheld the validity of forum-selection clauses contained in bills of lading issued abroad by foreign carriers for shipments into the United States.  (Kawasaki Kisen Kaisha Ltd. v. Regal-Beloit Corp., Complex Commercial Litigation).  In another matter, a district court refused to confirm an arbitration award when the alleged agreement containing the arbitration clause had not been signed by the defendant and thus did not satisfy the “writing requirement” of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”).  (Quanqing (Changshu) Cloth-Making Co. Ltd. v. Pilgrim Worldwide Trading, Inc., Arbitration).  In one exception, a district court found than an arbitration clause was void on public policy grounds because the application of Bahamian law would have prevented plaintiff from recovering under a cause of action created by U.S. statute. (Watt v. NCL (Bahamas) Ltd., Arbitration).

We also discuss the ongoing examination of the pleading standard required by Bell Atlantic Corp. v. Twombly (In re Packaged Ice Antitrust Litigation, Antitrust), and cases limiting damages (Mattel v. MGA Entertainment, Appellate; Rule v. Fort Dodge Animal Health Inc. Product Liability).  In Mattel, the Ninth Circuit called into question a $100 million jury verdict in the Bratz doll case, while the First Circuit limited economic damages in a consumer fraud action in Rule.

We also discuss two Delaware matters where the courts have overridden other states’ laws.  One court allowed an arbitrator to award punitive damages notwithstanding the fact that New York law, which governed, generally does not allow arbitrators to award punitive damages (Credit Suisse Securities LLC v. Investment Hunter, LLC, Arbitration).  Another Delaware court applied Delaware privilege law to Massachusetts  communications (3Com Corp. v. Diamond II Holdings, Inc., Attorney-Client Privilege).

Finally, the United States Supreme Court also held that while the appointment of the members of the Public Company Accounting Oversight Board violates the Constitution, the appointment provision is severable from the remainder of the Sarbanes-Oxley Act and held that making the members removable at will was a sufficient remedy (Free Enterprise Fund, Ethics).

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