Direct competition not required to assert Lanham Act false advertising claim

By Dan Larsen
April 2, 2014

There is little debate that the Lanham Act, 15 USC 1125(a), entitles direct competitors to sue each other for false advertising, while consumers (including business consumers) lack standing to sue under the Act.  For parties that are neither competitors nor consumers, however, the landscape has been far from clear.  In Lexmark International v. Static Control Components, Inc., the United States Supreme Court last week clarified that the class of plaintiffs entitled to assert a false advertising claim under the Lanham Act includes any party that suffers injury to a commerical interest in reputation or sales flowing directly from the deception.   

Lexmark manufactures and sells laser printers, including the toner cartridges for those printers.  Static Control does not sell printers or toner catridges but it manufactures a microchip that remanufacturers may use to refurbish Lexmark toner catridges.  Although Lexmark and Static Control are not direct competitors, Static Control sells its microchips to Lexmark's competitors.  Lexmark allegedly informed consumers that it was illegal to use Static Control's microchips to refurbish Lexmark toner catridges, and then sued Static Control for copyright infringement.  Static Control countersued Lexmark under the Lanham Act for false advertising.  The District Court dismissed Static Control's counterclaim on the ground that only a direct competitor has standing to sue. 

The Supreme Court ruled that direct competition is not required to assert a Lanham Act false advertising claim, and that Static Control stated a claim for relief against Lexmark where Lexmark disparaged Static Control and its products, thereby causing injury to Static Control's reputation.     

Target of social media criticism can sue for defamation, Oregon Court of Appeals holds

By Lori Bauman
March 31, 2014

The Oregon Court of Appeals recently held that a business owner can pursue a defamation claim against an individual who posted a negative on-line review.  In Neumann v. Liles, plaintiff, who operates a wedding venue, was the target of a review on google.com calling her, among other things, "two faced, crooked, and . . . rude."  She sued the author of the review, who had been a guest at a wedding hosted at plaintiff's venue.

The on-line critic in response filed a "special motion to strike" under Oregon's SLAPP statute.  SLAPP stands for "strategic lawsuit against public participation," and the anti-SLAPP statute creates a procedure for dismissing at an early stage an unfounded lawsuit designed to quash speech or activism on issues of public interest.  While the statute protects certain speech-related activities, it does not shield defendants who engage in defamatory speech. 

According to the Court of Appeals, the trial court should not have granted the anti-SLAPP motion to strike the complaint because plaintiff had offered sufficient evidence that the review was in fact defamatory.  While defendant claimed that the review represented his opinion and was merely "figurative, rhetorical, or hyperbolic," the Court of Appeals concluded that most of the post was "nonrhetorical and factual" and contained specific, potentially defamatory, statements about plaintiff's honesty and business ethics.  Accordingly, the trial court should have allowed the case to proceed to trial.

Oregon Supreme Court addresses seller's UCC remedies

By Lori Bauman
March 28, 2014

When a party refuses to perform its contract to purchase goods, the Uniform Commercial Code entitles the aggrieved seller to sell the goods to another buyer and recover damages from the defaulting party.  Often the seller must sell at less than the contract price and then recover as damages the different between the unpaid contract price and the resale price.  The UCC offers as an alternative measure of damages the difference between the contract price and the market price for the goods.

What the UCC does not make clear is whether the seller may recover the difference between the unpaid contract price and the market price in circumstances where the market price damages would exceed resale price damages.  Last week the Oregon Supreme Court held that the jilted seller may in fact recover market price damages, even if those damages would cause the seller to recover more than the actual loss suffered. 

In Peace River Seed Co-operative, Ltd. v. Proseeds Marketing, Inc., the court considered the relevant text, context and legislative history to conclude that "an aggrieved seller can seek [market price] damages even if the seller has resold the goods and market price damages exceed resale price damages."  The court noted that a fixed price contract always requires the parties to bear the risk of market price fluctuations.  Subjecting the buyer to damages based on market price is consistent with that risk. 

EEOC files suit challenging employer's standard settlement terms

By Stacey Mark
February 19, 2014

The EEOC has filed suit in Chicago against pharmacy giant CVS to stop it from using certain terms in its settlement agreements with employees.  The EEOC claims that the company unlawfully violated employees' rights to communicate with the EEOC and to file discrimination charges, in violation of Section 707 of the Civil Rights Act of 1964.

According to the EEOC, CVS conditioned the receipt of severance benefits for certain employees on an overly broad severance agreement set forth in five pages of small print.  The agreement purportedly interferes with employees' right to file discrimination charges and/or communicate and cooperate with the EEOC.  The terms objectionable to the EEOC include the following:

    1.     A cooperation clause that requires employees to notify CVS' general counsel upon receipt of a subpoena, deposition notice, or inquiry in connection with a suit or proceeding, including an administrative investigation;

    2.    A non-disparagement clause prohibiting employees from making statements that disparage the business or reputation of the company, its directors, officers, or employees; 

    3.    A confidentiality clause prohibiting the disclosure of Confidential Information, including personnel data revealing the skills, abilities or duties of employees, wage and benefits structures, succession plans, and information pertaining to affirmative action plans and planning;  

    4.    A general release of claims; and

    5.    A covenant not to sue that encompasses any claims, actions or proceedings and requires the employees to reimburse the company for any attorney fees incurred as the result of a breach of the agreement.  The covenant not to sue contains a qualification explaining that it is not intended to interfere with an employee's right to cooperate with or participate in a state or federal agency proceeding to enforce discrimination laws.

CVS reportedly used the foregoing terms in more than 650 agreements in 2012 alone.  All of the foregoing types of clauses are common in employment-related separation agreements, and often provide much of the incentive for employers to enter into such agreements.  Consequently, the EEOC's case against CVS is one that employers will want to monitor closely.  

 A copy of the EEOC complaint is available here.

NLRB Abandons Controversial Posting Rule

By Stacey Mark
January 9, 2014

The National Labor Relations Board (NLRB) announced this week that it will not seek U.S. Supreme Court review of two Court of Appeals decisions invalidating its controversial posting rule.  The rule required most private sector employers to post a notice advising employees of their rights under the National Labor Relations Act, including the right to:

  • Organize a union to negotiate with employers concerning wages, hours, and other terms and conditions of employment;
  • Form, join or assist a union;
  • Bargain collectively through representatives of employees’ own choosing for a contract setting wages, benefits, hours, and other working conditions;
  • Discuss terms and conditions of employment or union organizing with co-workers or a union;
  • Engage in protected concerted activities with one or more co-workers to improve wages, benefits and other working conditions; and
  • Choose not to do any of these activities, including joining or remaining a member of a union.

Since the initial injunction barring the NLRB from enforcing the posting requirement, the NLRB has increased its scrutiny of employer rules and policies that could be interpreted as chilling employees' rights to engage in concerted activity.  The policies and rules that tend to be problematic are those that could be construed as limiting employee communication about working conditions and terms of employment, including social media, confidentiality, and non-disparagement policies.  Such policies routinely come under review when the NLRB receives a charge alleging an unfair labor practice (ULP), even when the ULP does not implicate the particular rule or policy.   Given the NLRB's decision to abandon the posting rule, its scrutiny of employer policies is likely to continue in 2014. 

Oregon Court of Appeals Adopts Broad Definition of "Employee" for Minimum Wage Statute

By Shemia Fagan
January 6, 2014

Last month, in Cejas Commercial Interiors, Inc., v. Torres-Lizama, the Oregon Court of Appeals adopted the “economic realities test” for determining whether an individual is an employee under Oregon's minimum wage statute.  The statute, ORS 653.025, provides that “no employer shall employ * * * any employee” at a wage lower than the “Oregon minimum wage.”  A challenge for courts is to determine whether a worker is an employee of the purported employer.

Before last month’s ruling, trial courts in Oregon applied two different tests to determine whether an individual is an “employee” for purposes of the minimum wage statute.  One test, called the “right-to-control test,” looks at whether the presumed employer has formal control over the individual workers. A second test, the one adopted by the Court of Appeals, focuses more broadly on whether “an entity has functional control over workers even in the absence of the formal control.”  The goal of the economic-realities test is to determine whether, “as a matter of economic reality,” the worker is dependent on the alleged employer.

In Cejas Commercial Interiors, Inc., v. Torres-Lizama, the workers alleged that Cejas, a drywall contractor, was their employer while they did drywall work that Cejas had subcontracted to Viewpoint Construction, LLC. The workers sought compensation from Cejas when Viewpoint disappeared without paying them, claiming that Cejas and not Viewpoint was their employer.  The Court of Appeals agreed with the trial court that, even applying the broader economic-realities test, the workers were not “employees” of Cejas, and therefore Cejas did not owe them minimum wages.  The court found that Cejas “neither formally nor functionally controlled the terms and conditions of employment.”  Further, the court found that the workers were not economically dependent on Cejas and Cejas was a “mere business partner” of the workers' direct employer, Viewpoint.

Oregon Court of Appeals holds the line on pleading prejudgment interest

By Lori Bauman
January 2, 2014

Last week the Oregon Court of Appeals reinforced the challenges facing parties seeking prejudgment interest.  In Davis v. F.W. Financial Services, Inc., defendant asserted a counterclaim for conversion of funds, and sought interest accruing on that sum of money through the date of judgment. 

According to the court, a claim for prejudgment interest is properly pleaded when the claimant alleges the exact amount due and the dates during which the claimant was deprived of the funds.  While the defendant in Davis did allege in its counterclaim the exact amount converted by plaintiff, defendant was denied prejudgment interest because it incorrectly stated the date on which the conversion began.  The court reached that result even though the plaintiffs themselves had properly stated in their complaint the date on which they took control of the funds.  Because defendant "pleaded only legally erroneous dates" it was not entitled to prejudgment interest.

Oregon Supreme Court disavows precedent on personal jurisdiction

By Lori Bauman
December 31, 2013

The Oregon Supreme Court earlier this month refined its test for personal jurisdiction, rejecting thirty-year-old precedent and adopting a flexible approach consistent with more recent U.S. Supreme Court case law. 

Robinson v. Harley-Davidson Motor Co. focuses on the test courts use to determine whether a lawsuit arises from or is related to the out-of-state defendant's contacts with the forum.  In Robinson, plaintiff was a resident of Oregon who purchased a motorcycle in Oregon, had the motorcycled serviced by defendant dealership in Idaho, and was injured in Wyoming due to defendant's allegedly negligent repair.  Plaintiff sued defendant in Oregon, and defendant sought to dismiss on the ground that it was not subject to personal jurisdiction in an Oregon court.

Plaintiff argued for specific jurisdiction, claiming that defendant was subject to suit because it engaged in activity in Oregon and the claim arose from or related to that activity.  While the defendant dealership had no physical presence in Oregon, its contacts with the state included selling a limited number of products to Oregon residents through its interactive web site, advertising in publications distributed in Oregon, and selling products to Oregon residents who visit its Idaho location. 

In 1982 the Oregon Supreme Court held in State ex rel. Michelin v. Wells that a court may exercise personal jurisdiction when at least one of the defendant's contacts with the forum state is substantively relevant to the cause of action.  The court in Robinson acknowledged that this so-called "substantive relevance" test has been rejected by certain federal courts as "mechanical and rigid" and not consistent with more recent U.S. Supreme Court opinions on personal jurisdiction.  The court accordingly disavowed Michelin, and stated that litigation arises from and relates to the defendant's activity in the forum if the activity (1) is a but-for cause of the litigation and (2) provides a basis for a determination that the litigation was foreseeable. 

Applying this test, the supreme court concluded that defendant's contacts in Oregon were not such that it was reasonably foreseeable that it would be sued in Oregon as a result of work performed in Idaho.  On that basis the court affirmed dismissal of the claim against the dealership.

Free, hands-on Cover Oregon training for businesses and individuals

By Lori Bauman
October 16, 2013

State Representative (and Ater Wynne attorney) Shemia Fagan is hosting a free Cover Oregon training for businesses and individuals interested in learning about the new online health insurance marketplace.  This hands-on training will be more extensive than the presentations Cover Oregon has conducted, as attendees can bring their laptop computers, connect to Wi-Fi ,and walk through the website and options during the training.   A representative from Cover Oregon will be on hand to answer questions and guide the training.

When:
Wednesday, October 30, 7:30am - 9:00am

Where:
Monarch Hotel, Pacific Ballroom, 12566 SE 93rd Ave Clackamas, OR 97015

What:
Bring your laptop! Wireless access is available, and a Cover Oregon representative will be on hand to walk you through the process of getting signed up.

RSVP to rep.shemiafagan@state.or.us

 

 

 

Justice questions Oregon Supreme Court's remedy clause jurisprudence

By Lori Bauman
September 30, 2013

Last week the Oregon Supreme Court invalidated a statutory cap on noneconomic tort damages.  The plaintiffs in Klutschkowski v. PeaceHealth asserted a medical malpractice claim to recover for injuries their son had sustained during birth.  Plaintiffs contended that the damages cap violated the right to a remedy of Article I, Section 10 of the Oregon Constitution, and the right to jury trial of Article I, Section 17.  The Court applied the reasoning of the 2001 case Smothers v. Gresham Transfer, which held that if the common law recognized a right to recover when the Oregon Constitution was adopted in 1857, then a court may enforce a statute abolishing the remedy only if the legislature provides a constitutionally adequate substitute remedy.  The Court concluded that the claim at issue in this case did exist in 1857 and could not be limited by a statutory cap.

Justice Jack Landau wrote a lengthy concurring opinion, acknowledging that the majority properly applied the Smothers analysis, but questioning Smothers and other cases requiring "imaginative reconstruction of nineteenth-century case law" in order to resolve issues of state constitutional law.  Justice Landau challenged "the notion that this state's constitution today means no more than what it meant in 1857" and characterized the "hyper-originalism" required by the case law as "untenable."  He next disputed the historical interpretation of the remedy clause adopted in Smothers:  "My own view is that it is unlikely that the framers intended the remedy clause to serve as a limitation on legislative authority."  He suggests that the Court in future cases "should invite advocacy . . . to address the issues that I have raised."

The question now is whether other members of the judiciary will take up Justice Landau's call to broadly re-think how they interpret the Oregon Constitution.