Third Circuit Lets Google Give Cookies to Kids

Rarely does whether a child has a cookie rise to the level of a federal question.  However, on June 27, 2016, in In re Nickelodeon Consumer Privacy Litigation, No. 15-1441, a panel of the Third Circuit Court of Appeals substantially affirmed the dismissal of a multi-district, class-action lawsuit against Viacom and Google alleging that the defendants unlawfully used internet site-tracking cookies to target advertisements at children who watched videos and played games at Nickelodeon’s website.  This decision substantially relied on a November 2015 decision from the same court, finding Google not liable under federal privacy laws for bypassing cookie-blockers on Apple’s Safari and Microsoft’s Internet Explorer web browsers.  The Nickelodeon Court did permit plaintiffs’ claim against Viacom for invasion of privacy under New Jersey law to proceed.

The plaintiff class—children under the age of 13—alleged that Viacom and Google tracked their web-browsing and video-watching habits by installing cookies on their computers through Viacom websites like Nick.com, and shared this information with Google.  Plaintiffs also alleged that Google used the cookies it installed to track users across any website on which Google displays ads.  Plaintiffs alleged that Viacom’s and Google’s conduct violated federal laws such as the Wiretap Act, the Stored Communications Act, and the Video Privacy Protection Act (VPPA), and also brought state statutory and common law claims.

After finding that the plaintiffs had standing, the Court dismissed plaintiffs’ Wiretap Act, Stored Communications Act, and state statutory claims based on the Court’s previous Google decision.  The Court also dismissed plaintiff’s claim for violation of the VPPA, holding the VPPA: (i) only prohibits the disclosure, not the receipt, of personally identifying information relating to viewers’ consumption of video-related services; and (ii) only prohibits the disclosure of information that would allow an ordinary person to identify a specific individual’s video-watching behavior, not disclosures of IP addresses, as occurred in Nickelodeon.  The Court revived one count against Viacom and remanded the case to the district court, finding that a reasonable jury could find Viacom liable for invasion of privacy, based on Viacom’s representation on Nick.com that it did not collect or share any personal information about its visitors.

For more information on internet privacy law or the implications of In re Nickelodeon, please contact Kathleen Barnett Einhorn, Esq., Director of the firm’s Complex Commercial Litigation Group at keinhorn@genovaburns.com, or Jennifer Borek, Esq., a Partner in the Complex Commercial Litigation Group at jborek@genovaburns.com.

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NJ Appellate Division Decertifies Class in Suit Over TGI Friday’s Menus and Drink Prices

New Jersey bar patrons alleging that the chain restaurant, TGI Friday’s, Inc. (TGIF), violated consumer protection laws by omitting drink prices from its menus will have to proceed with their claims as individual plaintiffs after the New Jersey Appellate Division decertified their class.

The Panel reversed the trial court’s class certification in a lawsuit against TGIF that began more than six years ago, when a woman claimed that she was charged $2.00 for a beer at the restaurant’s bar and later charged $3.59 for the same beer at a table in the restaurant. The woman claimed that the price discrepancy and the fact that TGI Friday’s does not print drink prices on its menus were in violation of the New Jersey Consumer Fraud Act (NJCFA), N.J.S.A. 56:8-1, et seq., and the Truth in Consumer Contract Warranty and Notice Act (TCCWNA), N.J.S.A., 56:12-11, et seq.  Two additional plaintiffs joined the lawsuit and the trial judge granted class certification to anyone who ordered unpriced drinks at any corporate owned TGI Friday’s in New Jersey from 2004 through 2014.

The Panel’s decision to decertify the class relied on the requirement of New Jersey Court Rule 4:32-1(b)(3), the class action rule, which requires that “questions of law or fact common to the members of the class predominate over any questions affecting only individual members.”  In a published decision dated March 24, 2016, the Panel held that the plaintiffs did not meet the “predominance” requirement for class action certification because “individualized inquiries” would be necessary to establish whether individual plaintiffs received a TGIF menu that violated the law and whether the lack of pricing on the menu caused plaintiffs’ damages.  Dugan v. TGI Fridays, Inc., 2016 WL 1136486, at *4 (N.J. Super. Ct. App. Div. Mar. 24, 2016).

With respect to the NJCFA claim, the Panel concluded that people who either were not given menus or did not ask for the price before ordering a drink could not prove causation, while those who relied upon the stated price could conceivably have claims. Therefore, claims for damages would necessarily involve inquiries to determine whether or not individual class members were provided a menu in order to determine whether each class member sustained a loss caused by the absence of prices on the menus.

Similarly, with respect to the TCCWNA claim—which  does not contain the NJCFA’s fee shifting or treble damages provisions but does provide for statutory and actual damages—each individual class member would be required to demonstrate that they were actually provided with a menu that contained technical violations of state or federal law.  Id. at *9-10.

Significantly, the Panel’s decision may slow the sudden rush of class actions brought under the TCCWNA by eliminating cases based on technical violations where consumers cannot actually prove that they received the material that forms the basis for thein violation.

For more information regarding the NJ Consumer Fraud Act, TCCWNA, or the Court’s decision in Dugan, please contact Kathleen Barnett Einhorn, Esq., Director of the firm’s Complex Commercial Litigation Group at keinhorn@genovaburns.com, or Jennifer Borek, Esq., a Partner in the Complex Commercial Litigation Group at jborek@genovaburns.com.

 

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Third Circuit Blows Whistle on Suit Challenging Super Bowl Ticket Lottery

A panel of the Third Circuit Court of Appeals has affirmed the dismissal of a class-action lawsuit that sought to challenge the method by which the National Football League distributed tickets to last year’s Super Bowl XLVIII, held at MetLife Stadium in the New Jersey Meadowlands. In finding that the plaintiffs lacked standing to sue in federal court, the panel’s opinion in Finkelman v. NFL, No. 15-1435, serves as a warning to plaintiffs, appellants, and district courts alike that a party’s standing must be addressed before a court can reach the merits of that party’s claims.

The named plaintiffs relied on an obscure and rarely litigated provision of the New Jersey Consumer Fraud Act called the “Ticket Law,” which generally prohibits event organizers from withholding more than 5% of tickets from sale to the general public. The Ticket Law was meant to prevent event organizers from favoring privileged insiders to the detriment of the general public. According to the complaint, approximately 99% of all tickets to Super Bowl XLVIII went to NFL teams or other League insiders like broadcast networks or media sponsors and only 1% of tickets were made available for purchase by the general public through a lottery system. Neither of the two named plaintiffs entered the NFL’s ticket lottery: one named plaintiff, Josh Finkelman, purchased tickets in the resale market at an alleged $1,200 mark-up, and the other, Ben Hoch-Parker, decided not to purchase any tickets when faced with the high ticket prices on the resale market.

The District Court found that Finkelman (but not Hoch-Parker) had standing to bring the suit, but then dismissed the complaint on its merits, reasoning that the Ticket Law only applied to tickets that are intended for release to the general public – i.e., the 1% – all of which were released.

The Third Circuit agreed that Hoch-Parker’s failure to buy any Super Bowl tickets deprived him of Article III standing, but vacated the District Court’s judgment on the merits, concluding that Finkelman too lacked standing because he never entered the Super Bowl ticket lottery. Thus, the Third Circuit held, Finkelman could not claim that his inability to obtain face-price Super Bowl tickets was traceable to the NFL’s conduct.

“Many of us have felt the disappointment of wanting to attend a concert or athletic event only to discover that the event has sold out,” the Finkelman opinion laments, but “Article III requires more.” In other words, as in the NFL, with Article III standing, there is a difference between being “hurt” and being “injured.”

For more information on federal Article III standing or the implications of Finkelman v. NFL, please contact Kathleen Barnett Einhorn, Esq., Director of the firm’s Complex Commercial Litigation Group at keinhorn@genovaburns.com, or Jennifer Borek, Esq., a Partner in the Complex Commercial Litigation Group at jborek@genovaburns.com

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Supreme Court Reiterates the FAA’s Preemptive Authority

On Monday, the United States Supreme Court in DIRECTV, Inc. v. Imburgia, 577 U.S. ___, No. 14-462, slip op. at 1 (Dec. 14, 2015), doubled down on its previous holdings that the Federal Arbitration Act (“FAA”) preempts state law judicial interpretations that do not place arbitration contracts “on an equal footing with all other contracts.” Imburgia is the Supreme Court’s latest rebuke of state courts that are hostile to arbitration clauses and class-arbitration waivers, and signals to lower courts that they may not utilize state contract law principles to interpret arbitration provisions so as to end-run the mandates of the FAA.

In 2005, the California Court of Appeal held in Discover Bank v. Superior Court that class-arbitration waivers were unenforceable in “consumer contract[s] of adhesion” that “predictably involve[d] small amount of damages” and met certain other criteria (known as the Discover Bank rule). In 2011, the Supreme Court decided AT&T Mobility LLC v. Concepcion, which held that the FAA preempts state law that bars enforcement of arbitration agreements if such agreements do not permit parties to utilize class-action procedures in arbitration or in court, thus invalidating the Discover Bank rule. The Supreme Court found that the Discover Bank rule stood as an “obstacle to the accomplishment and execution of the full purposes and objectives” of the FAA.

Compounding on its holding in Concepcion, the Supreme Court in Imburgia declared that Section 2 of the FAA preempts state law interpretation of a contract’s arbitration provision based on a rule that the state’s courts had applied only in the arbitration context, concluding that such a ruling “does not rest ‘upon such grounds as exist . . . for the revocation of any contract.’”

In Imburgia, Petitioner DIRECTV, Inc. entered into a service agreement with customers containing an arbitration provision governed by the FAA that provided for a class-arbitration waiver reading: “if the ‘law of your state’ makes the waiver of class arbitration unenforceable, then the entire arbitration provision ‘is unenforceable.’” Following a class action brought by Respondents in California state court, DIRECTV moved to compel arbitration, which was denied by the trial court. The California Court of Appeal affirmed, holding that the “law of your state” language in the arbitration provision meant that that the parties had agreed that California’s Discover Bank rule would govern, notwithstanding the holding of Concepcion.

The Supreme Court, by a 6-3 vote, reversed and remanded, finding that because such an interpretation of the arbitration clause was “unique, restricted to that field,” and because “California courts would not interpret contracts other than arbitration contracts the same way,” the interpretation was impermissible as preempted by the FAA. Going forward, the Supreme Court has made explicit that arbitration agreements, and specifically class-arbitration waivers, should be enforced by state courts—even in the face of a state’s former invalidation of such waivers. Imburgia stands as the latest in a series of pro-arbitration rulings under Chief Justice Roberts, and instructs states that its courts may not use novel interpretations of state contract law to intrude on otherwise valid arbitration agreements.

For more information on the FAA or implications of DIRECTV, Inc. v. Imburgia, please contact Kathleen Barnett Einhorn, Esq., Director of the firm’s Complex Commercial Litigation Group, at keinhorn@genovaburns.com.

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Section One’s Shining Moment: A new antitrust lawsuit threatens the NCAA

This year, the term “March Madness” meant more than basketball tournaments to the National Collegiate Athletic Association, its conferences and member schools.  On March 17, 2014, a group of college basketball and football players filed a federal class-action lawsuit in New Jersey against the NCAA and its five “power” conferences (the Southeastern, Big Ten, Pacific-12, Atlantic Coast, and Big 12).  The suit, Jenkins v. NCAA, alleges violations of Section 1 of the Sherman Antitrust Act, and seeks to remove the cap on compensation that colleges and universities can provide to their Division I basketball and Football Bowl Subdivision players.  The rules targeted by the suit also allow the NCAA to deny athletic eligibility to individual players, and to sanction or boycott its member schools who do not comply with the NCAA’s rules regarding athlete compensation.

The Jenkins plaintiffs assert that these rules are really a price-fixing and boycotting scheme that violates the Sherman Act, which broadly prohibits competing business entities from entering into agreements – “horizontal agreements” – that restrain trade.  The Supreme Court has declared horizontal maximum price-fixing to be per se illegal under Section 1, meaning the practice will be deemed illegal without further inquiry into its reasonableness or its beneficial effects.  Group boycotts have also been found per se illegal by the Supreme Court under Section 1, but only when the boycotting entities have market power; otherwise courts will apply the “rule of reason” approach which permits inquiry into the purpose of the boycott and its effects on competition.

The NCAA is no stranger to antitrust allegations under Section 1.  In a seminal case, the Supreme Court in NCAA v. Board of Regents, 468 U.S. 85 (1984), held that the NCAA’s then-current television plan, which limited the number of times college football teams could appear on television each season, violated Section 1.  And two pending Section-1-based class-actions against the NCAA have already garnered significant publicity.  The first case, filed in 2009 by former UCLA basketball star and former New Jersey Net Ed O’Bannon, confines its arguments to compensation derived from the use of players’ names, likenesses and images by broadcasters.  The second case, filed weeks ago by former University of West Virginia running back Shawne Alston, confines its arguments to the NCAA rules that cap the value of full athletic scholarships below the full cost of attendance.  The Jenkins case generally makes the same arguments and allegations as the O’Bannon and Alston suits, but does not seek monetary damages on behalf of the entire class, and seeks to invalidate the overall limit on compensation for athletes (unlike those prior suits).

Jenkins may be the most direct legal challenge to the NCAA’s amateurism model yet, but it faces significant obstacles.  Most importantly, although the Supreme Court invalidated the NCAA’s television plan in Board of Regents, the Court also stated that some horizontal restraints on competition, including requirements that athletes attend classes and remain unpaid,  were “essential” to the availability of the NCAA’s product – intercollegiate athletic competitions.  Therefore, the Court held that the rule of reason, instead of the per se rule, should be used to evaluate the NCAA’s policies.  Employing the rule of reason, multiple federal courts applying Section 1 have upheld NCAA policies regarding individual and institutional sanctions.

The Jenkins plaintiffs will likely have to argue that the Supreme Court’s statement regarding the essentiality of not paying players was dicta that does not bind lower courts, and that the ever-increasing amount of money flowing into big-time college football and basketball justifies a thorough evaluation of whether caps on athlete compensation support or undermine competition in big-time college sports.  The O’Bannon plaintiffs used similar arguments to successfully avoid dismissal of their claims last November, and even to partially prevail on summary judgment in April of this year – two rulings on which the plaintiffs in Jenkins will heavily rely.  However, questions regarding what rules the NCAA can promulgate in the name of promoting amateur athletics are very real, and likely cannot be answered by simply pointing to escalating coaches’ salaries, valuable broadcast contracts and licensing agreements, or even the recent National Labor Relations Board ruling that football players at Northwestern University qualify as university employees and can unionize.

The NCAA may be the favorite in its matchup against the players in this newest case.  But in litigation, as in March Madness, anything can happen.

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