Supreme Court Finds Waiver of Right to Arbitrate by Failure to Pay In Tahisha Roach v. BM Motoring, LLC

Bruce M. Gorman, Jr.

In Tahisha Roach v. BM Motoring, LLC (077125) (A-69-15), the New Jersey Supreme Court held that a used car dealership’s knowing refusal to cooperate with plaintiffs’ arbitration demands, filed in reasonable compliance with the parties’ agreement, amounts to a material breach, barring the breaching party from later compelling arbitration.

The decision stemmed from two separate litigations involving a used car dealership’s dispute resolution agreement (“DRA”). Plaintiffs had separately purchased used cars from two used car dealerships (operating under the same name), which turned out to be lemons. Plaintiffs’ respective efforts to file an arbitration before the AAA were met by the dealer’s refusal to advance its arbitration fees, and the AAA’s subsequent dismissal of the petition. Efforts to file in court were met by motions to dismiss in favor of arbitration, which the lower courts granted. Ultimately, a joint action was filed, and the lower court directed the plaintiffs to attempt to refile before the AAA, and dismissed their complaint with prejudice. An appeal was taken, and the Appellate Division affirmed. Continue reading “Supreme Court Finds Waiver of Right to Arbitrate by Failure to Pay In Tahisha Roach v. BM Motoring, LLC”

Federal Appeals Court Dismisses “Lime-a-Rita” Class Action

David Kistler

In a March 16, 2017 decision, the United States Court of Appeals for the Ninth Circuit affirmed the dismissal of a putative consumer class action against Anheuser-Busch Companies, LLC. In this action, plaintiffs alleged that the labeling on defendant’s “Rita” malt beverages (including Bud Light Lime-a-Rita) was misleading and asserted claims for false advertising, omission, and breach of warranty under California law. Plaintiffs alleged that use of the word “Light” was misleading because the products contained considerably more calories and carbohydrates per ounce than other Budweiser products. The Ninth Circuit was called upon to review the District Court’s dismissal of the action with prejudice under Rule 12(b)(6).

In affirming the District Court, the Ninth Circuit held that “no reasonable consumer would be deceived by the label on the carton into thinking that ‘Bud Light Lime Lime-a-Rita,’ which the label calls a ‘Margarita With a Twist,’ is a low calorie, low carbohydrate beverage, or that it contains fewer calories or carbohydrates than a regular beer.” The Ninth Circuit noted that the label makes clear that the product is “not a normal beer” and that the label picture shows a bright green drink served over ice in a margarita glass. According to the Ninth Circuit, comparable products would include a hypothetical Budweiser Lime-a-Rita product (as opposed to a Bud Light) or a tequila margarita, both of which would contain more calories and carbohydrates than the product at issue. For these reasons, the Ninth Circuit dismissed both the false advertising and omission claims.

While this decision is not binding in New Jersey, New Jersey businesses should take note of the Ninth Circuit’s reasoning regarding what constitutes a comparable product for purposes of consumer deception.

Appellate Division Rules that High-Low Agreement Supersedes Offer of Judgment Rule

Jeremy N. Kolman

The offer-of-judgment rule and the high-low agreement are two mechanisms that exist to help litigants manage their risk in litigation. The offer-of-judgment rule, codified at Rule 4:58-1 to -6, allows a party to take a monetary judgment, or to allow a judgment to be taken against it, for a sum certain. If the offer of a claimant is not accepted and the claimant obtains a money judgment equal to or greater than 120 percent of the offer, the claimant is entitled to costs including all reasonable litigation expenses incurred following non-acceptance of the offer. See R. 4:58-2(a).

A high-low agreement is a settlement agreement that guarantees a minimum recovery for a plaintiff and limits a defendant’s exposure to an agreed upon maximum, regardless of the jury’s award. This maximum, or high-limit, is inclusive of costs and fees and it is a basic assumption of high-low agreements that the plaintiff cannot recover more than the “high-limit.”

Recently, the New Jersey Appellate Division addressed the intersection of these two risk management mechanisms. In Serico v. Rothberg, Plaintiff brought a medical malpractice action for failure to diagnose colon cancer. While the matter was awaiting a trial date, Plaintiff made an offer-of-judgment to accept $750,000 from the Defendant. Defendant did not respond to the offer. The matter went to trial and while the jury was deliberating, the parties entered a high-low agreement that provided a “low” of $300,000 for the Plaintiff and limited Defendant’s liability to a “high” of $1 million. During negotiations for the high-low agreement, Plaintiff’s possible entitlement to fees under the offer-of-judgment rule (R. 4:58-2(a)) was never discussed. It was not expressly waived by the Plaintiff, no demand for waiver was made by the Defendant, and the offer of judgment was not mentioned when terms of the high-low agreement were placed on the record.

The jury then returned a verdict in favor of the Plaintiff for $6 million, well over 120 percent of Plaintiff’s offer-of-judgment. Absent the high-low agreement, Plaintiff would have been entitled to costs and fees under the offer-of-judgment rule. However, Although the high-low agreement permitted a maximum award of $1 million. Despite this ceiling, Plaintiff’s counsel filed a motion for an award of attorney’s fees and costs, arguing that absent an express waiver, a high-low agreement does not waive a plaintiff’s right to seek sanctions under R. 4:58-2(a). Plaintiff claimed that the purpose of the Rule is “to impose financial consequences on a party [that] rejects a settlement offer” and the offer-of-judgment rule “accords judges no discretion regarding whether or not to award attorney’s fees.” The Court disagreed and the Appellate Division affirmed.

The Appellate Division explained that by entering into the high-low agreement, Plaintiff “could not recover any amount beyond the ‘high’ to which she agreed.” A high-low agreement is a contract and, like any contract, if the terms of the agreement are clear they must be enforced as written. The high-low agreement made no mention of Plaintiff’s offer of judgment and “Plaintiff did not come forward with any evidence that she preserved her rights [to attorney’s fees] under the Rule.” Although parties are always free to preserve any claim they might have, they must clearly state that intention at the time of the settlement. Unless expressly preserved, a claim for an additional amount beyond the “high-limit” is considered to be encompassed within the negotiated high-low agreement.

Ascertainability Requirement for Class Certification

Blank Rome LLP

Blank Rome Partner Michael A. Iannucci will speak at the upcoming Strafford CLE webinar titled, “Ascertainability Requirement for Class Certification,” on Thursday, March 16, 2017, from 1:00 p.m. to 2:30 p.m.

The webinar will provide class counsel with a review of federal circuit court decisions addressing the ascertainability requirement for class certification. The panel will examine the scope and impact of differing circuit rulings on certification proceedings and provide insights into how defense counsel are faring with challenging certification on the grounds that the proposed class is insufficiently ascertainable. Continue reading “Ascertainability Requirement for Class Certification”

The Global Anti-Corruption Corner: A Primer to the Foreign Corrupt Practices Act

Shawn M. Wright, Carlos F. OrtizMayling C. BlancoAriel S. Glasner

Any company doing business abroad is subject to the long reach of the Foreign Corrupt Practices Act (“FCPA”). Small or privately-held companies, just like large or public companies, are subject to the criminal specter of the FCPA. The operative inquiry is whether the company is operating and/or transacting any type of business abroad with the government, government owned entities, or involving foreign officials—either directly, through joint ventures, or indirectly, through agents. A foreign official also includes employees of entities owned by the government. Continue reading “The Global Anti-Corruption Corner: A Primer to the Foreign Corrupt Practices Act”

Employer Cannot Be Liable for Interfering with Non-Compete It Doesn’t Know Exists, Third Circuit Holds

Ethan Simon

simonRestrictive covenants are common in many industries. Under New Jersey and Pennsylvania law, a defendant may be liable for tortious interference with a restrictive covenant only if it has actual knowledge of the contract with which it allegedly interferes. In Acclaim Systems, Inc. v. Infosys, Ltd.,[1] the Third Circuit reaffirmed this rule in the context of IT consulting non-competes and expressed its reluctance to recognize any exceptions.

In Acclaim Systems, Time Warner Cable (“TWC”) was looking to cut costs on its Sales Force Dot Com (“SFDC”) project by switching providers for certain IT services. When TWC switched from Acclaim to Infosys, TWC asked Infosys to consider retaining four individuals who were already working on SFDC on behalf of Acclaim. All of these individuals had non-competes with Acclaim that prohibited them from working on SFDC on behalf of Infosys. Continue reading “Employer Cannot Be Liable for Interfering with Non-Compete It Doesn’t Know Exists, Third Circuit Holds”

Third Circuit Enforces Non-Compete Agreement Posted on Internet

Jonathan Korn

aa559a96d2ef7db0cff214478e922bd7Our society is becoming increasingly paperless. As a result, our courts are constantly confronting factual scenarios that could not be contemplated ten years ago. In the latest example, the Third Circuit recently affirmed the enforceability of a non-compete agreement posted online. ADP, LLC v. Jordan Lynch, No. 16-3617 (3d Cir. Feb. 7, 2017).

ADP sought to enforce a non-compete agreement against two employees who had left to work for a direct competitor. The non-compete was for one year and prohibited the employees from soliciting current and prospective clients. The District Court enforced the non-solicitation clause but declined to enjoin the employees from working for the competitor. The employees appealed the injunction order claiming that the District Court erred because there was nothing to prove that they agreed to the contents of the non-compete, despite their affirmance that they read it. Continue reading “Third Circuit Enforces Non-Compete Agreement Posted on Internet”