Case Law For In-House Counsel

Below are summaries of important opinions affecting in-house attorneys issued by the U.S. Supreme Court, as well as the 1st and 2nd Circuits and the Delaware Supreme Court from mid-October 2006 through early January 2007 Readers can access the full text of the opinions at www.newenglandbizlawupdate.com.

U.S. Supreme Court

Patent Law
Despite making royalty payments under license, company can challenge validity of patent
A patent licensee does not have to breach a license agreement in order to file suit challenging the validity of the underlying patent.
MedImmune, Inc. v. Genentech, Inc. Docket No. 05-608. Decided Jan. 9, 2007.

1st Circuit

Arbitration
Arbitration award
ending commission
dispute upheld
A $3.5 million arbitration award – made to a firm claiming to be owed commissions under a marketing agreement – must be upheld where it did not contradict the express language of the agreement.
In re Vital Basics Incorporated. Docket No. 05-2741. Decided Dec. 29, 2006.

Civil Practice
Defense verdict affirmed in case alleging breach of settlement agreement
A jury verdict entered in favor of a defendant charged with breaching a settlement agreement must be upheld, where the plaintiffs failed to show any prejudice resulting from defense counsel’s conduct at trial.
Fonten Corp., et al. v. Ocean Spray Cranberries, Inc. Docket No. 04-2120. Decided Nov. 17, 2006.

Commercial
Erroneous instructions
on ‘holder in due course’ defense requires new trial
Where (1) an employee of the plaintiff deposited embezzled funds totaling $1.5 million into the employee’s account with the defendant broker and (2) a jury held the defendant liable to the plaintiff, a new trial must be ordered, as the judge gave erroneous instructions on the UCC “holder in due course defense” and the jury was not warranted in awarding the plaintiff anything more than the amount the defendant earned in commissions, fees and interest on the deposited sums.
Jelmoli Holding, Inc. v. Raymond James Financial Services, Inc., et al. Docket No. 05-1903. Decided Nov. 17, 2006.
Copyright
Composer’s claims against record company rejected
Judgment was properly awarded to a defendant record company in a suit filed by a plaintiff salsa composer who alleged the defendant had failed to compensate him for five albums that the plaintiff recorded and the defendant has been selling for more than 15 years, as (1) the plaintiff’s claim for rescission of his recording contract, based on the defendant’s purported material breach of that contract, is preempted by the Copyright Act, and (2) his claim for a declaratory judgment of ownership is time-barred.
Santa-Rosa, et al. v. Combo Records, et al. Docket No. 05-2237. Decided Dec. 15, 2006.

Corporate
‘Undertaking’ requires director to reimburse corporation for legal fees
Where a corporation – which paid a corporate director’s legal fees in connection with a civil enforcement action brought by the Securities and Exchange Commission concerning insider trading allegations – sought repayment of those sums, a judgment for the corporation should be affirmed in light of an “undertaking” signed by the parties.
Happ v. Corning, Inc., et al. Docket No. 06-1324. Decided Oct. 20, 2006.

Employment
Periods before and after break in service counts toward FMLA eligibility
In determining whether an individual has worked for an employer “for at least 12 months” and is eligible for leave under the Family and Medical Lave Act, a judge may add up periods the individual has worked for the employer before and after a break in service.
Rucker v. Lee Holding Company. Docket No. 06-1633. Decided Dec.18, 2006.

Burden is on military
discrimination defendant to prove lack of pretext
An employee charging discrimination under Uniformed Services Employment and Reemployment Rights Act need only show that military service was “a motivating factor” in order to prove liability, unless the employer can prove the adverse employment action would have been taken regardless of the employee’s military service.
Velazquez-Garcia v. Horizon Lines of Puerto Rico, Inc. Docket No. 06-1082. Decided Jan. 4, 2006.

Evidence
Corporate officer’s
objection to grand
jury questioning of corporate counsel rejected
A corporate officer’s objection to a court order requiring corporate counsel to answer grand jury questions regarding an allegedly privileged conversation must be rejected for lack of standing.
In Re: Grand Jury Proceedings Docket No. 06-2125. Decided Nov. 17, 2006.
Securities
Pre-tip disclosure
doesn’t preclude insider trading liability under misappropriation theory
An insider trading charge – accusing a defendant of misappropriating from her husband highly negative and non-public information about his publicly-traded company in order to tip her brother who owned company stock – should not be dismissed because the pre-tip disclosure to her husband, telling him that she intended to tip-off her brother, did not completely negate any liability under the misappropriation theory.
Securities and Exchange Commission v. Rocklage, et al. Docket No. 06-1571. Decided Nov. 14, 2006.

2nd Circuit

Antitrust
Antitrust suit dismissed due to insufficient
standing and inadequate allegations
In an action alleging violations of the antitrust laws based on a defendant’s anticompetitive rules, a dismissal of the complaint for failure to state a claim was proper because the plaintiff lacked antitrust standing and did not sufficiently allege concerted action.
Paycom Billing Services, Inc. v. Mastercard International, Inc. Docket No. 05-1845. Decided Oct. 27, 2006.

Corporate
Implied duties
found under PACA
Two corporations breached a duty impliedly imposed by the Perishable Agricultural Commodities Act in paying illegal gratuities to a U.S. Department of Agriculture inspector.
G&T Terminal Packaging Company, Inc., et al. v. U.S. Department of Agriculture. Docket No. 05-5634. Decided Nov. 22, 2006.

ERISA
Anti-cutback rule
given retroactive effect
A retiree is entitled to retroactive benefits that had been wrongfully suspended pursuant to a post-retirement amendment to a pension fund.
Swede v. Rochester Carpenters Pension Fund. Docket No. 06-0112. Decided Oct. 20, 2006.
Insurance
Insurance contracts
differ on number of
‘occurrences’ resulting from terrorist attack
The coordinated terrorist attacks of Sept. 11, 2001 – in which two jetliners crashed separately into the twin towers of New York’s World Trade Center – was a single “occurrence” under the terms of some insurance contracts and two occurrences under the terms of others.
SR International Business Insurance Company, Ltd., et al. v. World Trade Center Properties, LLC, et al. Docket No. 04-4500. Decided Oct. 18, 2006.

Pollution remediation costs to be allocated
over damage period
In an indemnification action arising out of state-required pollution remediation at four sites in New York, (1) costs of remediation should be allocated over the period in which property damage occurred, as nearly as possible according to the amount of property damage that occurred in each policy period, and (2) property damage includes the passive migration or spread of contaminants.
Olin Corp. v. Certain Underwriters at Lloyd’s London, et al. Docket No. 05-5123. Decided Nov. 7, 2006.

Products Liability
Summary judgment
for coffee-maker
manufacturer
reversed in fire case
A judge erred in awarding summary judgment to a defendant coffee-maker manufacturer in a products liability and breach of contract action, where (1) circumstantial evidence would permit a jury to infer reasonably that an unspecified defect in the coffee-maker was the more probable cause of a fire, and (2) a jury could also reasonably infer that the defect in the coffee-maker was not due to any post-purchase misuse or mishandling.
Allstate Insurance Company v. Hamilton Beach/Proctor Silex, Inc. Docket No. 04-6282. Decided Jan. 5, 2007.

Tort
‘Fiduciary duty’ claim must be addressed
In an ERISA action challenging a denial of a plaintiff’s claim for additional pension credits and alleging a breach of fiduciary duty by the defendant corporate employer, a summary judgment for the defendant must be vacated as to the plaintiff’s fiduciary duty claim and as to a denial of the plaintiff’s motion to amend the complaint, because the trial court must address the fiduciary duty claim in the first instance and, in light of its holding on that claim, consider whether it would be futile to amend the complaint.
Tocker v. Philip Morris Company. Docket No. 04-5904. Decided Nov. 22, 2006.

Delaware Supreme Court

Corporations
Shareholders can’t sue directors for failing to oversee bank operations
Shareholders of a bank could not bring a derivative suit over losses caused by the failure of certain employees to file “suspicious activity reports” where there was no evidence that the bank’s directors failed to act in good faith in exercising their oversight responsibilities.
Stone v. Ritter. Docket No. 93, 2006. Decided Nov. 6, 2006.