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, the Delaware Supreme Court, and the Delaware Chancery Court from mid-May 2007 through early July 2007.

U.S. Supreme Court

Antitrust
Antitrust allegations fall short of pleading standards
A class of telephone and Internet service subscribers cannot state an antitrust claim against local carriers by merely alleging anticompetitive parallel conduct, but must claim as a factual matter that the companies agreed to engage in anti-competitive conduct.
Bell Atlantic v. Twombly. Docket No. 05-1126. Decided May 21, 2007.

Consumer Rights
‘Willful’ violation of credit reporting law
includes recklessness
A willful violation of the Fair Credit Reporting Act includes actions taken in reckless disregard of a consumer’s rights.
Safeco Insurance v. Burr. Docket No. 06-84. Decided June 4, 2007.

Employment Law
‘Continuing violation’ doctrine rejected for Title VII disparate pay claims
The statute of limitations on a Title VII disparate pay claim begins to run when the original decision on salary is made. There is no new violation each time a paycheck is issued.
Ledbetter v. Goodyear Tire and Rubber Co., Inc. Docket No. 05-1074. Decided May 29, 2007.

Environmental
CERCLA permits
cost recovery for
company that cleans
up contaminated site
A company that cleans up a contaminated site can recoup cleanup costs from other potentially responsible parties under §107(a) of the Comprehensive Environmental Response, Compensation and Liability Act.
U.S. v. Atlantic Research Corp. Docket No. 06-562. Decided June 11, 2007.

Labor Law
‘Agency-shop fee’ prohibition is constitutional
A state law prohibiting public-sector labor unions from using agency-shop fees from non-union members for political purposes without affirmative consent from the non-members does not violate the First Amendment.
Davenport v. Washington Education Association. Docket No. 06-1589. Decided June 14, 2007.

Patent Law
Court rejects
‘obviousness’ test
The Federal Circuit’s approach of determining a patent’s “obviousness” by the “teaching, suggestion or motivation” test is too rigid.
KSR International Co. v. Teleflex, Inc. Docket No. 04-1350. Decided April 30, 2007.
Overseas installation
of software code doesn’t infringe patent
Software code that infringes U.S. patent rights and is shipped overseas for installation doesn’t violate patent law.
Microsoft Corp. v. AT&T Corp. Docket No. 05-1056. Decided April 30, 2007.

Pensions
Pension termination okayed
An employer’s decision to terminate a pension plan during bankruptcy proceedings – rather than merge the pension plan into the union’s pension management fund – does not amount to a breach of fiduciary duty by the company.
Beck v. Pace International Union. Docket No. 05-1448. Decided June 11, 2007.

Securities Law
Antitrust complaint that’s ‘incompatible’ with securities law can’t proceed
Securities law implicitly precludes complaints based on antitrust laws in cases where the antitrust action is clearly incompatible with securities law.
Credit Suisse Securities v. City of New York. Docket No. 06-134. Decided June 18, 2007.
Inference of wrongdoing has to be ‘compelling’
Under the Private Securities Litigation Reform Act, an inference of awareness of wrongdoing must be more than merely plausible or reasonable – it must be cogent and at least as compelling as any opposing inference of non-fraudulent intent.
Tellabs, Inc. v. Makor Issues & Rights, Ltd. Docket No. 06-484. Decided June 21, 2007.

1st Circuit

Bankruptcy
Filing of petition while solvent not ‘bad faith’
A commercial landlord’s motion to dismiss a tenant’s bankruptcy petition was denied because the petition was not filed in bad faith, despite the landlord’s assertion the tenant was solvent at the time and had no present need for bankruptcy protection.
In Re: Capitol Food Corp. of Fields Corner. Docket No. 06-2327. Decided June 6, 2007.

Employment Law
‘Rehabilitation position’ not proof of disability
A judgment in favor of an employer in a handicap discrimination suit should be affirmed, as the employer’s placement of the employee in a permanent “rehabilitation position” following a back injury did not bar the employer from asserting that the employee had failed to establish a substantial limitation of a major life activity.
Rolland v. Potter. Docket No. 06-2536. Decided June 28, 2007.
Harassment claim
survives based on
‘single-employer’ theory
A judgment for an employer in a harassment suit – based on a judge’s finding that the individual who allegedly committed the harassment was employed by an entity other than the defendant employer – must be vacated because an issue of material fact exists as to whether the employer of the plaintiff and the employer of the alleged harasser, though nominally two separate companies, are so interrelated as to constitute a single employer subject to liability under Title VII.
Torres-Negron v. Merck & Company, Inc., et al. Docket No. 06-1260. Decided May 23, 2007.

Insurance
Insurance agency’s breach of exclusivity provision
not covered by ‘errors
and omissions’ policy
Where (1) an insurance agency was held liable in an arbitration proceeding for breaching the exclusivity clause of a contract with an insurance company and (2) the agency claimed to be entitled to defense and indemnification under an “Insurance Agents and Brokers Errors and Omissions Liability Insurance Policy,” the carrier was properly awarded summary judgment because the agency’s breach of the exclusivity provision was a business decision and not a “professional” act covered by the policy.
Massamont Insurance Agency, Inc. v. Utica Mutual Insurance Company. Docket No. 06-2465. Decided June 7, 2007.

Labor
Union local compelled
to enforce payment and bonding provisions
A federal judge acted permissibly in confirming an arbitration award requiring a union local to enforce the payment and bonding provisions of a multi-employer collective bargaining agreement.
Int’l Assoc. of Bridge, Structural, Ornamental and Reinforcing Iron Workers Union Local # 7 v. Associated General Contractors of Massachusetts, Inc. Docket No. 06-2393. Decided June 7, 2007.

2nd Circuit

Administrative
‘Fleeting expletives’
standard fails
An order issuing notices of apparent liability against a television network’s broadcasts for violating the Federal Communications Commission’s indecency regime must be vacated where a new policy sanctioning “fleeting expletives” is arbitrary and capricious under the Administrative Procedure Act for failing to articulate a reasoned basis for its change in policy.
Fox Television Stations, Inc. v. FCC. Docket No. 06-1760. Decided June 4, 2007.

Arbitration
Award vacated over
‘evident partiality’
An arbitration award must be vacated because one of the three arbitrators acted with “evident partiality” by failing to investigate what he knew to be a potential business relationship between his corporation and one of the parties.
Applied Industrial Materials Corp. v. Ovalar Makine Ticaret Ve Sanayi, A.S., et al. Docket No. 06-3297. Decided July 9, 2007.

Corporate
Board chairman
erroneously defaulted over failure to produce documents
A $1.4 million default judgment – entered in favor of the defendants on their counterclaims based on the plaintiff’s failure to produce documents during discovery – must be vacated, because it is not clear whether the plaintiff, as chairman of a corporation’s board, has legal access to the requested documents.
Shcherbakovskiy v. De Capo Al Fine, Ltd., et al. Docket No. 05-0394(l). Decided June 11, 2007.

Jurisdiction
Website insufficient
basis for jurisdiction
A defamation case, based on the defendant’s Iowa-based website, was properly dismissed for lack of “long-arm” jurisdiction.
Best Van Lines, Inc. v. Walker. Docket No. 04-3924. Decided June 26, 2007.

Delaware Supreme Court

Insolvency
Creditors can’t sue directors of insolvent corporation
The creditors of a Delaware corporation that is either insolvent or in the zone of insolvency cannot bring direct claims for breach of fiduciary duty against the corporation’s directors.
North American Catholic Educational Programming Foundation, Inc. v. Gheewalla. Docket No. 521, 2006. Decided May 18, 2007.