The Centers for Medicare and Medicaid Services (CMS) released a revised version of the MMSEA Section 111 NGHP User Guide on April 6, 2015.  The revised User Guide is version 4.6.  The revisions are the results of an NGHP Section 111 Alert issued on November 25, 2014, regarding Section 111 querying with partial Social Security Numbers (SSNs).  The revisions were made to Chapter IV: Technical Information (pp. 1-1 (summary of revisions), 8-6) and Chapter V: Appendices (p. 1-1 (summary of revisions) and Table F-1).  The revisions inform Responsible Reporting Entities (RREs) of the steps they need to take to remain in compliance with the NGHP Section 111 reporting requirements when RREs or their agents query using partial SSNs and receive a response indicating the information they submitted identified multiple Medicare beneficiaries.  When this occurs, RREs will receive the disposition code “DP” (for duplicate) or other messaging on the Beneficiary Not Found page indicating multiple Medicare beneficiaries were identified.  When RREs receive a response indicating multiple beneficiaries have been identified based on the partial SSN and other required query information, RREs are instructed to:
1) verify that the SSN, name, gender, and date of birth were entered accurately and re-submit; and
2) resubmit the individuals information using the full 9-digit SSN (if available).
If a match is still not located after resubmission, RREs must call the Benefits Coordination & Recovery Center (BCRC) at 855-798-2627 and file a self-report with the BCRC customer service representative to remain in compliance.
NGHP Section 111 Alert:
CMS also issued an NGHP Alert on April 8, 2015.  The Alert reminds RREs that beginning on October 1, 2015, RREs will be required to report ICD-10-CM diagnosis codes on claim reports with a CMS Date of Incident (DOI) on or after October 1, 2015.  The Alert encourages RREs and their reporting agents to commence testing with ICD-10-CM codes if they have not already done so.  While testing is not required, it is strongly encouraged.  Testing is the only way for RREs to ensure they will be able to beginning reporting with ICD-10-CM diagnosis codes on October 1, 2015.
Additional information regarding NGHP Section 111 reporting is available at, including links to the revised NGHP Section 111 User Guide and all NGHP Section 111 Alerts.

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Sometimes our lessons come in more bizarre ways than others. As reported by Law360 last week (subscription required), three Florida lawyers were charged by disciplinary authorities over a January 2013 incident involving the firm’s paralegal. The three lawyers were defending defamation claims against their client, who was a local radio talk show host known as “Bubba the Love Sponge Clem.” The plaintiff was another radio personality.

Reports at the time suggested that, on the evening after the media-focused defamation trial started, the defense firm’s paralegal spotted plaintiff’s counsel at a local bar near his home. She contacted lawyers at her firm, returned to the bar with a friend, and sat down next to opposing counsel.  Over the next two hours, the paralegal is reported to have lied about where she worked, flirted with opposing counsel and ordered drinks, including buying defense counsel a vodka cocktail and shots of Southern Comfort. She also stayed in touch with the three lawyers from her firm, sending them more than 90 texts and emails over the course of the evening.  Later, opposing counsel’s lawyer stated that it was clear that the paralegal was in an undercover role and was making sure “all the parties knew exactly what was transpiring virtually every minute.”

Shortly after she first reported what was going on at the bar, a call was made by one of the lawyers to an acquaintance in the police department and an officer was posted outside the bar to wait for the plaintiff’s lawyer’s departure. When he eventually left, the paralegal convinced him to drive her car several blocks from a parking garage to a new parking space. As he did, he was arrested for DUI. The next morning, defense counsel touted the arrest to the media.  Bar charges (a disciplinary complaint, not the tab for cocktails) accused the three lawyers of being involved in what appeared to be using the paralegal to set up opposing counsel.

The ethics problems for the three lawyers included failing to instruct the paralegal not to have contact with opposing counsel. Under Florida’s version of Model Rule 5.3, a lawyer with direct supervisory authority over a non-lawyer must make reasonable efforts to ensure that the non-lawyer’s conduct is compatible with the lawyer’s own professional obligations.

One of the lawyers also admitted to having made inaccurate, statements to the media about opposing counsel’s arrest.  Florida’s version of Model Rule 3.6 bars extrajudicial statements that a reasonable person would expect to be disseminated by means of public communication if the lawyer knows or reasonably should know that it will have a substantial likelihood of materially prejudicing an adjudicative proceeding — in this case, the defamation case involving opposing counsel’s client and “Bubba the Love Sponge Clem.”

Oh yes, and when opposing counsel was arrested for DUI, he left his briefcase full of confidential trial documents in the back of the paralegal’s car. This led to the three lawyers also being charged with failing to immediately notify opposing counsel that they had the briefcase.

One of the lawyers agreed to surrender his license for five years in an agreed disposition of the ethics charges, and the other two agreed to 91-day suspensions; but on March 26, a judge rejected that deal as too lenient.  A new hearing schedule will be set.

Moral of this odd tale? The usual:


  • remember your supervisory duties;
  • don’t put yourself in a position where your conduct can be questioned;
  • watch what you say to the media; and
  • if someone leaves a brief case full of legal documents in the back seat of your paralegal’s car after being pulled over for DUI, return it — fast!
This blog was originally posted on The Law for Lawyers Today blog on April 2. Click here to read the original entry. 


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In the pilot episode of Fox’s smash-hit series Empire, Cookie Lyon, explaining why, after her release from jail, she’s returning to her husband Lucious Lyon’s fictional record label, Empire Entertainment, says simply: “I’m here to get what’s mine.”  This is, of course, in reference to the formerly-jailed matriarch having taken the rap for Lucious to the tune of 17 years behind bars for drug-running while he built his music “empire.” Coincidentally, it also may sum up the thinking over the last couple of months by real-life label, Empire Distribution, Inc. (“Empire Distribution”) which, in asserting that its alleged intellectual property rights have been improperly appropriated by the record-breaking show, appears to also be similarly attempting to “get what’s mine.”  But in doing so, it appears to have awoken another sleeping empire, Fox, and now faces an uncertain fate of its own.

According to the declaratory judgment complaint (the “Complaint”) filed by Twentieth Century Fox and its television subsidiaries (collectively, “Fox”) in the Central District of California last week (No. 15-cv-02158), on February 16th  of this year, three days after Empire broke viewership ratings records for its fifth consecutive week, Fox received a cease and desist letter from Empire Distribution alleging that Fox, by using the word “Empire” in conjunction with the title of the show and its fictional record label, coupled with the fact that the show’s fictional label was run by Lucious Lyon, a “homophobic drug dealer prone to murdering his friends,” was committing trademark infringement and diluting Empire Distribution’s brand through tarnishment.  In a follow-up telephone call with Fox, Empire Distribution demanded $8 million dollars to resolve its potential claims.  Fox executives must have rejected this initial settlement pitch out-of-hand, because on March 6th, Empire Distribution sent a second letter, not only reiterating its claims, but adding a claim for unfair competition as against Fox.  This time, according to the Complaint, Empire Distribution gave Fox three possible options — (a) pay $5 million dollars to the label and include the artists it represents as guest stars on Empire; (b) pay the full $8 million dollars previously demanded; or (c) stop using the word “Empire.”

Perhaps Empire Distribution should have paid heed to what Jamal Lyon once told his brother Hakeem, “You always coming to me for advice. I’m going to give you some. Don’t ever underestimate me, little brother.”  Empire Distribution clearly underestimated Fox here, sensing Fox may just pay the label off rather than duke it out in the legal system.  But rather than being bullied into paying the ransom, Fox chose option (d): “Ignore the patently-ridiculous claims in the attempt at a shakedown, and file a declaratory judgment action in federal court seeking the vindication of rights to continue use the word “Empire” in conjunction with the show.”  Besides seeking the Court’s agreement with its contention that it has not committed the claims it was accused of in the cease and desist letters, Fox also seeks a permanent injunction against Empire Distribution and its employees from “making false statements and representations to third parties asserting that Fox has violated its trademark rights, if any,” as well as attorney’s fees for having to file the action at all.

Well, does Empire Distribution have a case here?  Fox alleges that despite claiming rights to three separate marks, “Empire Distribution,” “Empire Recordings” and “Empire,” and even though Empire Distribution may have been using its name in commerce prior to the show’s conceptualization and premiere (they claim they started using “Empire” in conjunction with the record company back in 2010), that it’s not clear Empire Distribution will be able to prove any of its claims here.  To boot: (1) Empire Distribution has never applied for a federal trademark for “Empire”; and, more importantly, (2) the still-pending, renewed application for registration of the marks “Empire Distribution” and “Empire Recordings” was originally denied due to likelihood of confusion with other existing “Empire” marks.  Indeed, the Empire Distribution logo apparently does not even appear on the company’s album covers and Google searches performed on the filing date of the Complaint show that Empire Distribution’s webpage fails to provide a “hit” until the sixth page of a search for “empire record label.”  Adding insult to injury for Empire Distribution, the “hit” also turned up after “hits” for several other record labels containing “Empire” in their names, as well as pages related to, you guessed it, the 1995 movie Empire Records, as well.  Ouch.

So, Empire Distribution has no registrations for its word marks, none of its alleged marks are particularly distinctive, nor have they acquired any secondary meaning for Empire Distribution (see, e.g. the other record companies that use “Empire” in their name).  As such, there really is no argument that a likelihood of confusion could exist here either. What does the Insider expect to happen in this one?  Well, perhaps we should break it down like this — while the power struggle for Lucious Lyon’s fictional “empire” will continue for a record-breaking Season Two, it appears that Empire Distribution’s claims will not even last until the new season’s premiere.  Indeed, as Cookie Lyon also once said, “The streets ain’t made for everybody.  That’s why they made sidewalks.”  Empire Distribution tried to hit the streets and make the big time here.  In the end, unfortunately, it appears it won’t be long until its right back on the sidewalks where it came from.

This blog was originally published on March 31. Click here to read the original entry. 


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Did You Make a Record in Your Own Office?

Posted on April 2, 2015 05:46 by Steve Crislip

My handwriting was so bad that my mother always asked me to call from college, not write.  We all had to develop some way of keeping readable to us notes once we got to college, and certainly in Law School.  In the pre-computer days, we even had fancy leather-bound law notebooks with room to annotate the notes and attach the case briefs to match.

Reading California lawyer Megan Zavich’s article on taking better notes in our offices made me think of the need to re-assert this as a loss prevention item in all law firms.  Most of us have a strong background in taking some form of notes, but I have observed they are often lacking in the routine claims against lawyers I examine. Perhaps it is the classic “Cobbler’s Children Have No Shoes” Syndrome.  Many files just lack documentation of the legal mission or advice given.

As a trial lawyer, I got to the point where mock jury responses no longer surprised me.  I had the opportunity to view a number of live, and also taped, jury deliberations in legal malpractice cases.  The theme there that surprised the non-litigators was that jurors believed it did not happen unless the lawyer wrote it down.  “They are lawyers, aren’t they?” was a frequent comment by jurors.  The failure of the defendant lawyer to document events or advice to the client often decided the case, and always against him or her.  

Trial lawyers learn to make a record, and to vouch the record to avoid the void of what would have been offered if allowed.  Business lawyers document for their clients by due diligence, but many lawyers do not have notes in their files of what they did, decided not to do, or advised a client not to do.  We probably did a little better in the days when we routinely dictated letters on so many issues.  

Megan Zavich pointed out there are many ways to do it now.  We just need to get lawyers to re-start the discipline of making notes and in reality, making their own record for their files in their own office.  

We all know lawyers tend to be an independent lot and they often resist the idea of anyone telling them what to do (despite the fact we all operate under extreme sets of laws and regulations in our occupation).  After the claim has been filed training is not a great way to learn.

In firms, for many reasons, I advocate a peer review of files on a periodic basis.  If you have, or are developing, a culture of preventing claims and losses, this is just good quality control.  If such spot reviews show a lack of documentation of key decisions, actions or inactions, you have a good teaching moment and the opportunity to repair.  The best example is to question the attorney how he/she would defend themselves if the client made a claim that was contrary to the work shown in the file.

Unfortunately, defensive law is needed in the modern world.  When you do not take a case, a communication to that effect is the great exhibit.  I have advised you to do X, but have made the decision to do A, B and C instead sure will help when that train goes off the track and they blame you.  Why the inaction?  A note to the file might just convince the Disciplinary Committee there was an external reason at play.  In other words, lawyers do a better job to defend yourselves.  Keep a good file that you could show before a jury.  Remember the lay jurors comment: “If they did not write it down, it did not happen.  They are lawyers.” 

This entry was posted on April 2 on the Lawyering for Lawyers blog. Click here to read the original entry. 

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More and more jurisdictions are requiring retailers use eco-friendly containers, packaging, etc.  In addition, business are voluntarily switching to those products as part of their sustainability strategy.  An important concern in the future will be whether these eco-friendly containers adequately and safely protect the public.  It wouldn't surprise me in the very near future to see a lawsuit arise out of a customer injury due to a weaker, biodegradable container that failed in some respect.  Many of our clients could find ourselves in the "chain of liability" lawsuit, including the retailer, the maker of the container, the maker of the materials, etc.  Exterior lighting of a retail establishment is another "green" issue retailers are facing.  Many cities and municipalities are requiring retailers to use less energy lighting their properties.

What has your company done or what have you advised your clients to do to protect against this liability?  What should trump...public safety or the environment? 

Christian Hardigree of Kennesaw State University will be addressing many of these issues during his discussion at the Retail and Hospitality Litigation and Claims Management Seminar in Chicago (May 7–8) titled The Legal Pitfalls of Going Green in the Food and Beverage Industry.

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Plaintiffs have made food labeling class actions a rapidly-growing field in recent years, particularly in the Northern District of California.  They typically rely on California’s regimen of consumer fraud statutes when bringing those claims. California also has Proposition 65, which requires labeling of substances that a state agency concludes may cause cancer or birth defects.  The threshold for labeling is quite low, meaning that even the most mundane items often include—or should include—warnings.  Indeed, plaintiffs recently have used the “lack” of a Proposition 65 label on food products as a basis for consumer fraud and other claims even though the Food and Drug Administration finds no health risk from the relevant ingredient and already dictates labeling requirements regarding the ingredient.  Such lawsuits are irreconcilable with the purpose of federal food labeling requirements.  

Proposition 65 and Its Relationship To 4-MeI in Beverages.      

In the past year, interest has grown in 4-methylimidazole (“4-MeI”) and its possible link to cancer.  4-MeI is formed as a byproduct in some foods and beverages as part of the cooking process. It also forms in trace amounts when manufacturing certain types of caramel coloring frequently used in some dark beverages, such as cola and dark beer.  

At this point, it is useful to address some of the science regarding 4-MeI.  A 2007 study by the National Toxicology Program (“NTP”) seems to be the genesis of this recent concern. That study did not find any increased cancer risk in rats exposed to high doses of 4-MeI but did see an increased rate of lung tumors in mice.  In broad strokes, a human would need to drink approximately 300 cans of soda every day for two years to consume the same amount of 4-MeI given to the mice and rats in the NTP study. The FDA has monitored available data and states on its website: “Based on the available information, FDA has no reason to believe that there is any immediate or short-term danger presented by 4-MeI at the level expected in food from the use of caramel coloring.”  The FDA is currently reviewing “all available data on the safety of 4-MeI,” but “is not recommending that consumers change their diets because of concern about 4-MeI.”

Much of the interest and litigation activity arose after Consumer Reports published an article in February 2014. Consumer Reports noted that its tests showed that customary servings of some popular soft drinks contain 4-MeI above the limits set by the California Office of Health Hazard Assessment (“COHHA”) under Proposition 65. That law requires labeling substances that COHHA concludes have a 1 in 100,000 chance of causing cancer or birth defects. That list of substances is quite long and includes things such as “Salted fish, Chinese-style,” “Oral contraceptives,” and “Alcoholic beverages, when associated with alcohol abuse.” Under the law, substances with more than 29 micrograms (a microgram is one-millionth of a gram) of 4-MeI must have a warning label; this means that COHHA believes that one excess cancer case will arise per 100,000 people exposed to more than 29 micrograms of 4-MeI daily for a lifetime.    

Putative Class Actions Regarding 4-MeI.

Class actions against PepsiCo and Goya Foods soon followed the Consumer Reports article. The article identified those companies’ products as having more than 29 micrograms of 4-MeI per serving. We now have inconsistent rulings in those cases. The most recent decision in the Goya Foods matter, moreover, shows how difficult it can be when a court may not understand the underlying science. 

Riva: There is not Sufficient Exposure to or Toxicity of 4-MeI in These Drinks.

In Riva v. PepsiCo, Inc., No. C-14-2020-EMC (N.D. Cal. Mar. 4, 2015), the court granted a motion to dismiss with prejudice. That decision addressed a putative medical monitoring class action in which the named plaintiffs alleged that consuming Pepsi products caused them to experience an increased risk of bronchioloalveolar cancer. Those plaintiffs cited the NTP report in their amended complaint, so the court analyzed that report closely.  First, even the NTP report concludes that the amounts of 4-MeI ingested from such beverages may not be significant.  Absent sufficient exposure for 4-MeI from consuming Pepsi products, those plaintiffs could not establish a credible risk of cancer from that consumption. The court was also reluctant to apply the NTP study to humans because it only found an increased risk of cancer in mice; that study implied that any effect may be species specific because rats did not experience a similar increase in that type of cancer. As the NTP study recognized, various species absorb, distribute, metabolize, and excrete the substance differently.  Of course, it was also difficult to conclude that humans would be exposed to 4-MeI at the same level as the mice in the NTP study (i.e., approximately 300 cans of soda per day). Moreover, because so many different products contain 4-MeI, those plaintiffs did not establish that consuming Pepsi products (as opposed to consuming other products) would have been the source of any alleged increased risk of that cancer.

Stated more simply, what does Riva mean? That court concluded that the study the plaintiffs relied on does not establish a significant risk of increased cancer from normal human consumption of beverages with 4-MeI. As we are about to see, however, a judge in the Southern District of California recently concluded that it was plausible that a different manufacturer misled consumers by not including a Proposition 65 warning on its beverages. So we have one judge finding that no increased health risk exists that would warrant medical monitoring but a second judge ruling that it may amount to consumer fraud to fail to warn consumers of this same “risk.”  

Cortina: Manufacturers may Need to Include Proposition 65 Warnings on Products With 4-MeI.

In Cortina v. Goya Foods, Inc., No. 14-CV-169-L(NLS) (S.D. Cal. Mar. 19, 2015), the named plaintiffs alleged several California consumer fraud claims because the defendant did not disclose “material facts about the levels of 4-MeI” in its beverages.  In essence, those plaintiffs argued that the beverages must contain a Proposition 65 notice because the caramel coloring adds more than 29 micrograms of 4-MeI to the products. That court rejected a federal preemption argument under the Nutrition Labeling and Education Act of 1990.  That federal statute expressly preempts state laws that would impose labeling obligations not imposed by the FDA.  Undeniably, federal law requires products with artificial flavoring, artificial coloring, or chemical preservatives to state that fact on the labels.  21 U.S.C. § 343(k).  The defendant argued that requiring additional labeling regarding 4-MeI (which arises from caramel coloring) would amount to an additional requirement beyond what federal law requires.  The court disagreed, reasoning that the allegations had nothing to do with caramel coloring. “Plaintiffs’ claims are based on a theory of omission—that defendant’s products failed to disclose the presence of substances known to the state to cause cancer.”  Apparently, under this reasoning, the state could compel a manufacturer to include a Proposition 65 warning about 4-MeI even though (1) federal law already dictates what a label must state regarding artificial coloring (the source of 4-MeI) and (2) the FDA states on its website that there is no reason to believe of any health risk from consuming foods with 4-MeI.  

The Cortina court also refused to defer to the FDA under the primary jurisdiction doctrine.  That is a prudential doctrine under which courts will await a regulatory agency’s actions regarding subject matter within the agency’s purview.  Such deference seems warranted here because the FDA is reviewing available data regarding the safety of 4-MeI to determine if it should take additional action.  Thus, this is not a situation of a defendant arguing hypothetically that a regulatory agency may look at the issue; quite the contrary, the FDA indicates it is actively doing so. Nonetheless, the court will not wait for the FDA’s ongoing review to conclude. Thus, the putative class action will plow forward even though the FDA may soon state that there remains no reason to believe a viable health risk exists.    

The Cortina court also concluded that the plaintiffs’ claims were plausible even though the FDA states that there is no reason to believe there is immediate or sort-term danger to consumers.  The court latched on to the FDA’s statement that it reached that conclusion “[b]ased on the available information . . . .”  The court inferred that meant some limit on the usefulness of the data.  Indeed, the court concluded that “it appears that the FDA is saying that it does not know whether, and in what amounts, 4-MeI presents a danger, but is looking into the situation.” That is an untenable interpretation of the FDA’s comments.  If that standard were sufficient, any plaintiff could always argue that one more test or one different analysis somehow may reach a conclusion different from what all existing analyses have reached. It will always be possible to suggest that some undefined additional testing should occur. It is not clear on what the FDA could base its statement other than “the available information.” It certainly could not base its conclusion on unavailable information.

These Cases Help Show That Proposition 65 Labeling Of Food Or Beverage Is Untenable.

At this point, we have one federal court in California holding that the science does not suggest any increased risk of cancer to humans from consuming beverages with 4-MeI in anticipated amounts.  Because of that lack of risk, there is no basis to order medical monitoring.  On the other hand, a different court in California concluded that it may amount to consumer fraud to fail to warn consumers about that same substance.

To be sure, Riva and Cortina present different legal theories—medical monitoring and consumer fraud, respectively. But the underlying premise is fundamentally the same.  In Riva, there is no need to test for cancer because 4-MeI does not lead to an increased risk of the disease.  In Cortina, however, it is deceptive to fail to warn consumers that beverages contain 4-MeI because that substance ostensibly is linked to an increase risk of cancer. And in both settings, the FDA knows that caramel coloring results in products containing 4-MeI; nonetheless, it permits using that coloring and only requires that the label note the use of “artificial coloring” in those situations.          

This morass points to the difficulties that Proposition 65 and questionable science create.  The standard for requiring Proposition 65 labeling is quite low—one more cancer in a population of 100,000 over a lifetime of exposure.  Put that into perspective. Using the most recent data available from the CDC (2011), the United States saw approximately 67 instances of lung cancer per 100,000 people.  Under Proposition 65, a manufacturer must label a substance that, with a lifetime of exposure, theoretically leads to 68 instances of lung cancer per 100,000 people—a 1.5 percent increase over the expected 67 instances.

Moreover, the science underlying these determinations is not always sound or certainly is questionable in terms of extrapolating to ordinary human exposure. Would anyone really consume 300 cans of soda a day for two years?  That is the approximate exposure required to replicate the 2007 NTP study. We know that “‘the dose makes the poison’; this implies that all chemical agents are intrinsically hazardous—whether they cause harm is only a question of dose.”  Bernard D. Goldstein and Mary Sue Henifin, Reference Guide on Toxicology, in Federal Judicial Center, REFERENCE MANUAL ON SCIENTIFIC EVIDENCE 636 (3d ed. 2011). Nonetheless, the reasonableness of the dose doesn’t seem to enter the calculus for these claims.  Even the NTP study only found increased incidence of cancer in mice; rats did not show such results. If such differences exist between those species, how can we reliably extrapolate to humans?

This is not an issue the FDA is ignoring. Rather than allow lawyer-driven litigation to proceed, we would be better served to leave these issues to that regulatory body and to real science.  

James D. Smith is a partner in the Phoenix office of Bryan Cave LLP.      

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This is a relatively new legal subject, so there isn’t much law out there.  In December, 2011, a Pennsylvania federal court answered this question in the negative.  In the case of Eagle v. Morgan, Linda Eagle, the founder of a company, Edcomm, had developed a significant LinkedIn presence closely connected to Edcomm. In 2010, Edcomm was purchased.  In 2011, she was terminated and Edcomm took over her LinkedIn account. She sued Edcomm.  Shortly thereafter, she regained control of her LinkedIn account and refused to return it to Edcomm. Edcomm counterclaimed against her in her lawsuit, contending that by regaining control of the LinkedIn account and refusing to return it to Edcomm, she had misappropriated Edcomm’s trade secrets.  She moved to dismiss Edcomm’s misappropriation claim. With little analysis, the court dismissed the claim, stating that the LinkedIn contacts on the Eagle/Edcomm account were “generally known . . . or capable of being easily derived from public information.”

In March, 2012, a Colorado federal court came to a different conclusion. In Christou, et al. v. Beatport, LLC, a nightclub company sued an ex-employee for stealing the company’s MySpace “friends” list.  The ex-employee moved to dismiss the lawsuit, arguing that a MySpace “friends” list couldn’t be a trade secret.  The court denied the ex-employee’s motion, holding that a company’s MySpace profiles and friends list can be a trade secret because, online, a MySpace profile contains a lot more information than just the “friend’s” name.  It gives the owner of the profile the “friend’s” personal information, including interests, preferences, and contact information that can have commercial value. It allows the “friend” to be contacted and advertised to.  This information goes beyond what is publically available. Duplicating all the information available from the “friends” list would be time-consuming and costly. The public can see the names of the company’s “friends” online, but the public does not have all the other information that the company gets by virtue of having these “friends.”  

In September, 2014, another federal court held that LinkedIn contacts could be a trade secret.  In Cellular Accessories For Less, Inc. v. Trinitas, LLC, a company sued an ex-employee who had left to form a competing company and taken his LinkedIn contacts with him. The ex-employee moved for dismissal of the lawsuit.  The court denied his motion, holding that the LinkedIn contacts that he had developed while working for his former company could be the company’s trade secret. The company had encouraged the employee to develop LinkedIn contacts during the employment.  The court said that the LinkedIn contacts may – or may not – have been viewable by other LinkedIn users; the ex-employee’s motion papers did not say whether the contacts were publically viewable.  Since they may not have been publicly viewable, they could be the company’s trade secrets.  

There you have it. What do you think?

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The Ninth Circuit recently published an opinion in consolidated antitrust class actions regarding DVD rentals and sales.  In re Online DVD-Rental Antitrust Litig., No. 11-18034 (9th Cir. Feb. 27, 2015).  The first half of the opinion affirms summary judgment for the defendants, finding that the plaintiffs did not raise triable issues of fact as to whether they suffered antitrust injuries.  It is a well-reasoned opinion applying principles of antitrust injury in a straightforward manner.  This article, however, focuses on the second half of the opinion, which addresses taxable costs in federal court.  In that second part of the opinion, the Ninth Circuit spent approximately 20 pages addressing taxable costs, primarily in the context of e-discovery.  While the topic may seem mundane at first glance, the opinion provides very useful information to practitioners who want to seek certain e-discovery expenses as taxable costs in litigation.

Defense counsel and their clients don’t often have a way to recover substantial litigation expenses, particularly in class actions.  Plaintiffs often use e-discovery as leverage in large cases, knowing the expenses are substantial but that individual named class representatives don’t face a similar cost.  Thus, e-discovery often is a ratchet that only increases costs in one direction.  In DVD-Rental, Netflix sought and originally obtained an award of more than $700,000 in taxable costs.  While the Ninth Circuit reduced that total award and remanded for additional evaluation by the district court, it confirmed that successful defendants may recover certain e-discovery costs.     

Back To Basics: 28 U.S.C. § 1920 And Recovering Costs For Copies Necessarily Obtained For Use In A Case.           

Before diving too deeply into the opinion, I want to review taxable costs under federal law.  Those are creatures of statute, and the statute is fairly restrictive.  As e-discovery has become more prevalent and expensive, however, parties have looked to recover some of the expenses of e-discovery by relying on this category of allowable costs: “Fees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in a case.”  28 U.S.C. § 1920(4) (emphasis added).  That provision originally encompassed photocopies, so courts often consider whether e-discovery activities are analogous to photocopying hardcopy materials when evaluating fee requests.  And DVD-Rental showed the Ninth Circuit’s focus on the highlighted clause in the statute.     

DVD-Rental emphasizes many times that parties seeking e-discovery expenses as costs must provide specific information about the services the e-discovery vendor provided to establish those services fit within the statute.  The descriptions of tasks and services must have “sufficient specificity, particularity, and clarity” to establish that data collected or processed were “necessarily obtained for use in the case.”  [Slip Op. at 27]  In broad strokes, this means that invoices or declarations from an e-discovery vendor with generic descriptions like “data collection,” “data processing,” or “electronic discovery services” will not suffice.  Just as lawyers decades ago had to abandon invoices with generic statements such as “legal services rendered” and a dollar total, e-discovery vendors will need to provide sufficient detail if parties want to recover those expenses as taxable costs. 

Certain Costs Associated Exclusively With Modern Discovery—Like Optical Character Recognition—May Be Recoverable.             

The court’s first tip of the hat to modern discovery’s complexities is acknowledging that “copying” data isn’t the same as photocopying paper.  Current practice may involve optical character recognition (“OCR”) (making material text-searchable), providing metadata, and converting materials to non-editable formats (so a reviewer can’t alter a produced email, for example).  The parties may agree to such production, a trial court may order it, or one party may demand it.  “When copies are made in a fashion necessary to comply with obligations such as these, costs are taxable so long as the copies are also ‘necessarily obtained for use in the case.’”  [Slip Op. at 27]  While it is encouraging to see the court recognize that OCR, sequentially numbering data, or providing metadata are recoverable costs in the modern era, don’t leave it to chance.  Memorialize an agreement with your opponent about producing data in such formats to enhance your ability to recover the costs.   

Specific Expenses The Court Addressed. 

            The Vendor’s Expertise Typically is not Recoverable.

Often, an e-discovery vendor does much more than mechanically gather and process data.  The vendor may provide guidance and expertise about the best ways to harvest data, de-duplicate data, recreate archived data, etc.  A party won’t be able to recover that type of “intellectual effort involved in [data] production” under § 1920(4), though.  [See Slip Op. at 36 (quotations omitted)]  Work with your vendor to ensure that its invoices segregate this type of intellectual effort from the more mechanical (and recoverable) aspects of data production.  Absent that type of specificity, the court likely will deny the request.     

Creating a Database to Review Data may not be Recoverable.

Netflix and its vendor indicated that uploading documents was necessary to create a new database so Netflix’s counsel could select documents for production.  That included reviewing for privilege.  The Ninth Circuit believes that reflected the process that Netflix and its vendor wanted to use; it did not indicate that reviewing an uploaded copy in a new database was necessary for use in the case.

Admittedly, this seems like a very narrow view.  Even in the days of hardcopy-only review, no one would want the legal team handling the original documents—the risk of tearing pages, spilling coffee, or misplacing papers was too great.  You made a Bates-numbered set for the team to work with.  Nonetheless, uploading data for review likely isn’t recoverable in the Ninth Circuit.   

            Filtering or “Keywording” may not be Recoverable.

The next challenged expense related to “keywording” activities.  That is the process of filtering data (e.g., emails, Word documents) to identify those containing key words; those without the key words typically are deemed non-responsive.  The court concluded that was akin to a lawyer reviewing documents to identify which were responsive to discovery requests.  Accordingly, using automated software filtering processes to identify the documents to produce was not a taxable cost. 

            Enhanced Processing for Production Sets is Recoverable.         

The next cost was a flat $10,000 charge for copying nearly 80 gigabytes of data—the equivalent of tens of millions of pages of documents—for production (not merely review).  Some of those tasks would be recoverable, such as OCR, conversion to TIFF, and other activities essential to making copies that were necessary to the case.  Anything beyond those activities in the $10,000 charge, however, could not be recovered.

The Key Takeaways For Practitioners.       

The Ninth Circuit gave clear guidance that costs attributable to OCR, converting documents to TIFF, and “endorsing” activities—all of which the plaintiffs had requested—were recoverable.  “Endorsing” activities include tasks such as sequentially numbering every image produced (also known as “Bates numbering”).  This especially is the case when the parties agree to such production formats, the trial court orders them, or a party’s requests for production demand it.  Other points include:

Your vendor must provide specific task descriptions on its invoices.  What exactly did the vendor do and how do we know that expense related to copies “necessarily obtained for use in the case”?  Task-based work descriptions may be necessary. 

Your vendor should track what proportion of data collected you actually produced.  For example, if you produced 27 gigabytes of 100 gigabytes collected, you have a stronger case for recovering 27% of bulk costs.  You should still be able to recover all of your OCR, etc., costs associated with the 27 gigabytes you produced in all events.      


James Smith is a partner in the Phoenix office of Bryan Cave LLP.  He is a member of the Class & Derivative Actions Client Service Group.

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The Sharon Academy v. Massachusetts Bay Insurance Company, et al., Vermont Superior Court, Docket No. 442-7-13 Wncv (Feb. 25, 2015).

Relevant Facts:

Student goes on a study-abroad program in India (“Program”) sponsored by a Vermont school (“School”). The program is run and managed by a coordinator (“Coordinator”), and has both U.S.-based and Indian national employees in India.  Shortly after arriving, the student claimed that she was sexually assaulted by one of the Indian national employees of the program. Eventually the student files a lawsuit against the school and the coordinator in Vermont (“Underlying lawsuit”).  The underlying lawsuit alleges that the school and the coordinator were negligent in hiring and supervising the Indian national who (allegedly) assaulted the student. The school refers the claim to its insurer (“Insurer”). The insurer denies coverage under both a primary CGL policy and an umbrella policy. The insurer contends that the alleged assault occurred in India, which is not within the “coverage territory” of the CGL policy. Therefore, there is no coverage under that policy or under the umbrella. The school then sues the insurer for breach of contract and bad faith and, in the alternative, sues its insurance broker for failing to procure coverage. The school moves for summary judgment against the insurer, requesting a determination that the underlying lawsuit is covered. The insurer cross-moves for:  1) a determination of no-coverage, 2) to strike the school’s bad faith claim, and 3) for a determination that if it is required to cover the underlying lawsuit, it can choose defense counsel, rather than having to retain defense counsel of the school’s choosing.  The court granted the school’s motion, finding that the underlying lawsuit is covered under both the CGL and umbrella policies; that the insurer breached the policy by refusing to defend; and that the insurer must reimburse the school for reasonable defense costs incurred to date. However, the court rules that the insurer can retain defense counsel of its own choosing.

Here is a brief review of the court’s decision:

The primary CGL policy:

The court begins by citing and quoting cases that stand for the long-standing principles that if the claims in the underlying suit might be covered by the policy, the insurer must provide a defense, and that any ambiguities in the policy will be construed in favor of coverage.

The court notes that the policy includes a sexual molestation endorsement that includes the disputed “coverage territory” language. The sexual assault alleged in the underlying lawsuit describes injury that comes within the endorsement. The issue is whether the assault occurred within the “coverage territory.”  “Coverage Territory” in the endorsement is the United States, but also “all other parts of the world if the injury or damage arises out of the activities of a person whose home is in the U.S. but who is away for a short time on the insured’s business.” Thus, more specifically, the issue is whether the alleged assault arose out of the activities of a person whose home is in the U.S. but who was in India on the school’s business.  

Acknowledging that the “coverage territory” term of the policy has apparently not been litigated in Vermont and has been little-litigated elsewhere, the court concludes that there is coverage because the alleged sexual assault arose out of the student’s activities, and she lives in the U.S. but was in India for a short time on the school’s business.  

The court then rejects the insurer’s argument that the “coverage territory” definition above refers only to the alleged assaulter, i.e., the Indian national employee of the program.  The insurer argues that it was the assaulter’s, and only the assaulter’s, activities that specifically “caused” the alleged harm to the student, and that he, as an Indian national, is not within the coverage territory.  The insurer argues that, notwithstanding the allegations in the underlying lawsuit, the program's U.S.-based employees did not cause the student's harm.  The insurer argues that the phrase “arises out of” must be narrowly construed to mean “causation,” and that the assaulter – not the school, nor the program or its U.S.-based employees, nor the coordinator – is the only person who actually “caused” the student’s harm.  The court disagrees. It finds that the phrase “arises out of” is a broad term that includes much more than “causation.” The policy could have used the term “causation” instead of “arising out of,” but didn’t. The policy could have defined “arising out of,” but didn’t.

Because the court concludes that the student is a covered person, it does not address the school’s argument that its teachers/employees – who are alleged in the underlying lawsuit to have been negligent – are covered persons.

The umbrella policy:

The court notes that the umbrella policy contains two separate endorsements that exclude coverage for sexual molestation. But one of the endorsements (the 12/05 endorsement) contains an exception, which exception provides that the exclusion does not apply if there is coverage for sexual molestation in the underlying insurance (which, as explained above, the court found there was). The court rejects the insurer’s argument that only the endorsement without the exception (the 01/07 endorsement) should apply because that endorsement has a later date on it. The court finds that the two competing endorsements in the umbrella policy create an ambiguity that is to be construed against the insurer. The court rejects as unreasonable the insurer’s argument that the long string of numbers on the bottom of each page of the policy, including the two exclusionary endorsements, would inform the policyholder (the school) that the endorsement with the exception is overruled by the one without the exception because the latter one was added into the policy later. The court finds that the typical policyholder would not understand that an endorsement containing a string of numbers ending in “07” means that the endorsement is added later – and therefore invalidates – an endorsement containing a string of numbers ending in “05.”

Thus, the insurer must provide coverage for the school, and is in breach of the policy.

Defendant Coordinator:

The court agrees with the insurer that there is a fact dispute over whether the coordinator was an employee of the school, and therefore covered, versus whether she was an independent contractor. Therefore, the court denies summary judgment to the school on this issue.

The School’s Bad Faith Claim:

The court denies the insurer’s request that the school’s bad faith claim be stricken.  The court finds that the insurer’s behavior in this case could amount to bad faith. The court will allow the school to have discovery on this issue.

The School’s Defense Costs To Date:

The court agrees that, because the school was entitled to coverage all along, the insurer is liable to the school (but not to the coordinator – at least yet) for reasonable defense costs incurred to date.

Choice of Defense Counsel:

The court finds that although the insurer must provide a defense, it can do so with independent counsel of its own choosing, not the school’s existing, or preferred, defense counsel.  It relies on a 2011 Vermont superior court decision, Northern Ins. Co. v. Pratt, from another judge (now a Vermont federal judge) for this decision.  The Vermont Supreme Court has not yet addressed the issue of whether an insured can choose its own defense counsel, at the insurer’s expense, where there is a coverage conflict between the insured and the insurer.

Note that the court’s analysis under the CGL policy is different from the main argument that the school made. The school pointed out that the underlying complaint alleges that the school’s teachers/employees were negligent in hiring and supervising the Indian national who allegedly assaulted the student. The school argued that these persons were covered under the “coverage territory” definition in the policy because they were based in the U.S. Instead, the court found coverage based on the activities of the (allegedly assaulted) student in India. The school did cite to the court one case (Spears v. Nationwide) that construed this same “coverage territory” language in a situation where the insured’s employee was in the Ukraine and was the victim of an automobile accident there. In that case, the court found that the employee – the accident victim herself – was covered because the accident arose out of her activities. In this case the court did not cite Spears as support for its conclusion.  

Disclosure: the author of this article represents the insurance broker in this case.


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A recently-filed case in a California federal court has Jay-Z and his promoters at Live Nation wondering whether they’ll continue to reap the benefits of the 1999 hit single Big Pimpin’ or whether they’ll be “spending G’s” to clean up a potential infringement posed by a sample looped throughout one of S. Carter’s most famous tracks. Last week, an Egyptian plaintiff named Osama Ahmed Fahmy sued Live Nation Entertainment, Inc., seeking unspecified actual damages and costs, alleging Live Nation’s continued “use” of Big Pimpin’ in the promotion of Jay-Z concerts all over the world constitutes infringement (direct, contributory and vicarious) of plaintiff’s copyright in the original musical composition of the Egyptian song Khosara Khosara.  We’ll get to more about the case in a moment.  First, though, a “life and times” of the allegedly-infringed work is in order.

According to the complaint, Khosara Khosara, a recognizable piece to even the most untrained ear, was composed in 1957 by an influential Egyptian composer, Baligh Hamdy, for use in the Egyptian film Fatha Ahlami.  It was legally and properly registered under Egyptian copyright law in 1960.  The composition was apparently recorded by the vocalist Abdel Halim Hafez for the movie (with conducting and arrangement by Hamdy), and Hamdy apparently retained full copyright ownership over the musical composition (and the Hafez sound recording, as well) until his death in 1993.  At that point, under Egyptian copyright law, the legal rights in the copyrights then passed to his children.  According to Fahmy (who, while not one of Hamdy’s children, has owned the copyright jointly with Hamdy’s surviving children since 2002), in or about 1995, the owners of the copyrights licensed the right to “mechanically reproduce” the Hamdy version of Khosara Khosara (via the Hafez sound recording), without changes or alterations, on to records and cassettes.  Shortly thereafter, in 1997, the Hafez sound recording of Hamdy’s Khosara Khosara appeared in the United States on an album titled “The Movie Collection,” which contained original movie soundtracks sung by Hafez.  Still with me?

Then, sometime in 1999, a producer by the name of Timothy Mosely, who Insider readers may also know as Timbaland, allegedly “came into possession of a recording of Khosara Khosara” (presumably the Hafez sound recording), which he allegedly played for Sean Carter.  Insider readers will note that Mr. Carter is better known to the world as the great Jay-Z.  The rest, as they say, is history.  Jay-Z recorded and released Big Pimpin’, which Fahmy alleges “consists of (a) a significant portion of the Khosara Khosara composition, (b) electronic beats, and (c) Mr. Carter’s rap”, on his album Volume III: Life and Times of S. Carter, and it became one of Jay’s biggest and most recognizable hits.  Fahmy alleges this is due, in no small part, to the fact that Khosara Khosara “is looped throughout…[and] gives Big Pimpin’ its unique identity.”

So, it’s no wonder that Fahmy is suing Jay-Z for infringement here.  Wait, what’s that?  Oh.  Fahmy is NOT suing Jay-Z for infringement here — not this time, at least.  Indeed, Fahmy appears to be taking a novel approach in attempting to vindicate his IP rights by suing Live Nation which is, of course, perhaps the single largest promoter and organizer of concerts and tours for recording artists in the world.  At first glance, it doesn’t necessarily make sense how Live Nation would have any sort of liability for the infringement of the Khosara Khosara composition (or recording) in question.  However, Fahmy alleges that, since 2008, when Live Nation allegedly entered into an agreement with Jay-Z to “sponsor, promote, and/or facilitate” his concerts and tours, Jay-Z has performed Big Pimpin’ at every single one of his concerts, in one form or another.  He alleges that Live Nation owned or had exclusive booking rights to the venues where Jay publicly performed Big Pimpin’ and that the track has been used in concert reviews and previews as one of the songs Jay would be performing or had performed.  As a result of the “infringement” in Jay Z’s public performances of Fahmy’s copyrighted work, he says that Live Nation has infringed the work and “profited substantially” therefrom, in both ticket sales and merchandising at the events, and among many “other revenue streams,” as well.  As a result, Fahmy is seeking unspecified damages for copyright infringement, both direct and indirect, from Live Nation.

The Insider should note that it certainly seems like plaintiff may have 99 Problems proving his case against Live Nation.  Putting aside the fact that it appears from the complaint that he may not necessarily be the rightful owner of the Hafez sound recording that was sampled (and his vague pleading on the subject is evidence of same), Fahmy has sat on this particular alleged litigation with Live Nation, knowing Jay-Z was performing his song night after night, for at least seven years without filing suit.  This, alone, may constitute a waiver or constructive waiver of his rights with respect to the alleged “infringement.” Further, it’s also pretty clear that Live Nation wasn’t the direct infringer here.  While Live Nation put on the concerts, it was Jay-Z, likely an independent contractor, who publicly performed the infringing work time and again, and so it was he, and not Live Nation, who would have violated the exclusive public performance right in the work (which, while not registered in the United States, allegedly is entitled to protection under our Copyright Act via the Berne Convention and other treaties).  And, because Jay-Z is almost certainly an independent contractor, and not a Live Nation employee, there could be no respondeat superior argument for direct infringement here, either.  Lastly, while it’s entirely possible that Live Nation could be an indirect infringer, a defendant infringes contributorily by intentionally inducing or encouraging direct infringement, and infringes vicariously by profiting from direct infringement while declining to exercise a right to stop or limit it.  There’s no allegation and/or evidence of Live Nation’s “intent” to induce the infringement of Khosara Khosara, nor is there an allegation of how they “declined” to stop the alleged infringement during Jay-Z concerts after being alerted of same — this of course assumes, arguendo, that Live Nation had ever been alerted of the alleged infringement in the first place, an allegation that exists nowhere in the Complaint.  Fahmy has his work cut out for himself.

Yet, the question remains: why wouldn’t he simply sue the actual performer, Jay-Z, for infringement?  Well, as the Hollywood Reporter notes, this isn’t Fahmy’s first foray into claiming infringement of “his” work: “Few legal disputes in the entertainment industry are older than Osama Ahmed Fahmy’s war over ‘Big Pimpin’.'  Jay-Z himself as well as MTV, Paramount Pictures, Warner Music and others are still involved in an 8-year-old case examining allegations that the song’s unmistakably catchy hook illicitly derives from Khosara, Khosara…”  So, while still embroiled in that litigation which has, to date, proven to be unsuccessful, it appears that he’s attempting to fight the same suit on yet another front.  Or, as Jay-Z might say, Fahmy is On to the Next One.  And while you certainly Can’t Knock the Hustle of Fahmy continuing to litigate cases based on Khosara Khosara’s copyright, in the end, the Insider believes that this will likely just result in a dismissal and end up making Fahmy, the purported owner of the Song[,] Cry.

This blog was originally published on 2/27 at

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