Litigation Tips

An Individual Cure is a Class Cure Under California’s New Privacy Act

By Litigation Tips

As most business leaders know, the most stringent privacy law in the United States—the California Consumer Privacy Act (“CCPA”)—went into effect this year and applies to all companies that do business in the Golden State.  The CCPA’s private right of action gives California residents the right to sue companies when their personal information is subject to unauthorized access, theft, or disclosure stemming from a company’s failure “to implement and maintain reasonable security procedures and practices.”  Because the CCPA creates a right to statutory damages (ranging from $100 to $750 per violation) without the need to prove actual harm, companies should prepare for a deluge of CCPA class actions. 

One critical aspect of such preparation should be to implement a security breach response plan that will promptly and effectively respond to individual consumer notices following an alleged security breach.  Under the “notice and cure” provision of the CCPA, a private plaintiff must provide a company with 30 days’ written notice prior to filing a lawsuit.  “In the event a cure is possible,” a company can avoid “individual statutory damages of class-wide statutory damages” if it “actually cures” the violation within 30 days and provides the consumer with a written statement to that effect.  The notice and cure provision thus provides a promising avenue for companies seeking to sidestep CCPA class actions.  That said, this section is sure to be one of the most hotly contested parts of the CCPA because the term “cure” is undefined by the statute. 

The attorneys at Lewis & Llewellyn are fully prepared to defend our clients’ interests in single plaintiff and putative class actions based on alleged CCPA violations.  Contact us to learn more about the CCPA or our deep experience addressing privacy issues in litigation. 

Major Change to Mandatory Arbitration Agreements

By Litigation Tips

Many employers insist that their employees sign mandatory arbitration agreements as a condition of employment.  However, on October 10, 2019, California Governor Gavin Newsom signed a bill into law that will prohibit employers from requiring mandatory arbitration agreements for nearly all types of employment claims.  The bill adds a new Section 432.6 to the California Labor Code prohibiting any person (including employers) from requiring an applicant or employee (as a condition of employment, continued employment, or the receipt of any employment-related benefit) to “waive any right, forum, or procedure” for alleged violations of the Fair Employment and Housing Act (FEHA) and the California Labor Code.  

In light of the sweeping reach of the new law, many anticipate a successful legal challenge on the ground that it is preempted by the Federal Arbitration Act.  This could lead to years of litigation, and ultimately, the issue may need to be resolved by the U.S. Supreme Court.  Given the current uncertainty, employers would be well-advised to consult with experienced employment counsel when considering whether to continue to use mandatory arbitration agreements or whether existing agreements need to be modified.

How to Avoid Accusations of Trade Secrets Theft

By Litigation Tips

Lewis & Llewellyn partner Nick Saenz is a regular contributor to Tech Crunch, one of the web’s leading publications focused on the technology industry.  In a recent article, Nick cautioned readers on how to avoid accusations of trade secrets theft, when either leaving for a competitor or onboarding new employees.  You can read the article, which includes Nick’s sage advice, below or on TechCrunch’s website.

Availability of Attorneys’ Fees in Defending Against Employee Non-Solicitation Claims

By Litigation Tips

In the previous litigation tip we discussed several recent cases that concluded employee non-solicitation provisions in employment agreements are per se invalid under California law.  It is axiomatic that parties in litigation generally pay their own attorneys’ fees.  Section 1021.5 of the California Code of Civil Procedure is an exception to this rule.  It allows a court to award attorneys’ fees to a litigant if (1) he or she is a “successful party,” (2) the action has resulted in the enforcement of an important right affecting the public interest, (3) the action has conferred a significant benefit on the public or a large class of persons, and (4) an attorney fees award is appropriate in light of the necessity and financial burden of private enforcement.  In AMN Healthcare, Inc. v. Aya Healthcare Servs., Inc., 28 Cal. App. 5th 923 (2018), the Court of Appeal affirmed the award of attorneys’ fees to the prevailing defendant who had successfully argued that an employee non-solicit provision contained in a contract was invalid.  The practitioner would be well-advised to keep this in mind when defending against claims involving employee non-solicit provisions.  The threat of attorneys’ fees could prove to be a powerful weapon in the litigator’s armory and could lead to a quick resolution of the dispute, or at least increase the stakes for the plaintiff.

Enforceability of Employee Non-Solicits in Doubt Following Several Recent Decisions

By Litigation Tips

At Lewis & Llewellyn we routinely advise and represent clients regarding all facets of employee mobility.  California businesses commonly include employee non-solicitation provisions in their employment agreements.  But several recent cases have concluded these provisions are per se invalid under California law, resulting in significant potential consequences for companies statewide.  It is well-established that California law favors employment mobility and does not recognize non-compete agreements restraining employees from leaving one job to work for a competitor.  This policy is codified in Business & Professions Code section 16600.  Unlike non-competes, however, courts have long held that employee non-solicit provisions barring individuals or companies from poaching company talent do not violate section 16600 because the restraint on employee mobility is minimal.  Until now:  in AMN Healthcare, Inc. v. Aya Healthcare Services, Inc., 28 Cal. App. 5th 923 (2018), the Court of Appeal cast significant doubt on the enforceability of employee non-solicits.  This analysis soon gained traction—federal courts in Barker v. Insight Glob., LLC, No. 16-CV-07186-BLF, 2019 WL 176260, at *3 (N.D. Cal. Jan. 11, 2019) and Weride Corp. v. Kun Huang, No. 5:18-CV-07233-EJD, 2019 WL 1439394, at *10 (N.D. Cal. Apr. 1, 2019), relied upon AMN Healthcare to conclude employee non-solicits were unenforceable under section 16600.  While it is too early to say whether these rulings will become the majority view, companies now face significant risk that former employees can legally raid the company’s talent pool.  Moreover, as with non-competes, companies can face liability for wrongful termination for firing an employee who refuses to agree to an employee non-solicit provision.  Accordingly, both company and outside counsel should closely monitor these developments to determine whether these cases are the new norm or a string of outliers.

Important Changes Impacting Settlement Agreements and Mediation

By Litigation Tips

As every litigator knows, most California settlement agreements include a waiver of Civil Code section 1542.  Because, in a settlement agreement, the parties typically agree to abandon, or give up, rights or claims that otherwise could be pursued or enforced, a section 1542 waiver is needed if the settling parties wish to include both known and unknown claims in a general release.  Effective January 1, 2019, the language of section 1542 has been amended as follows:

A general release does not extend to claims which that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release, which and that if known by him or her, must would have materially affected his or her settlement with the debtor or released party.

While these amendments may seem picayune, the practitioner would be well advised to be sure the new language is included in future settlement agreements, otherwise he or she risks the section 1542 waiver being ineffective.

The New Year also saw a change in the rules governing mediations.  Effective January 1, 2019, all parties to California based mediations will be required to sign a written disclosure form confirming that the client understands and agrees to mediation confidentiality.  The new rule, which is embodied in California Evidence Code section 1129, requires the attorney to obtain a printed acknowledgment, signed by that client, stating that he or she has read and understands the confidentiality restrictions governing mediation.  There are many samples of such forms, such as the one found here.  While some have criticized the new rule as fixing a non-existent problem, practitioners should ensure compliance as a matter of routine practice to avoid any issues on the day of the mediation.

Beware Confidentiality Provisions in Settlement Agreements

By Litigation Tips

When a case settles, most settlement agreements include a confidentiality provision for key terms.  Attorneys often believe they are bound by such terms either when they approve the settlement as to form or even when the agreement has broad language regarding its application to the client’s attorneys.

However, a recent ruling by the California Court of Appeal threw that assumption into doubt.  In Monster Energy Company v. Schechter, the parents of a 14-year old girl sued Monster Energy after she consumed two Monster brand energy drinks, went into cardiac arrest and died.  Thereafter, the parents’ attorney negotiated a settlement agreement which included a confidentiality provision purporting to bind him and his firm.  The attorney subsequently gave an interview in which he said the case had settled for “substantial dollars for the family.”  Monster Energy then sued the attorney and his firm alleging that they had breached the settlement agreement’s confidentiality provision.

The attorney and his firm then filed a special motion to strike under section 425.16 of the California Code of Civil Procedure (an anti-SLAPP motion) arguing that Monster Energy could not show a probability of prevailing on its breach of contract claim because the attorney and his firm were not parties to the settlement agreement.  The trial court denied the motion and an appeal followed.

The Court of Appeal held that “when a settlement agreement provides that the ‘[p]laintiffs and their counsel agree’ to keep the terms of the agreement confidential, and when the plaintiffs’ counsel signs the agreement under the words, ‘Approved as to form and content,” the plaintiffs’ counsel could not be liable to the defendant for breach of the confidentiality provision.  The Court noted: “The only reasonable construction of this wording is that they were signing solely in the capacity of attorneys who had reviewed the settlement agreement and had given their clients their professional approval to sign it.  In our experience, this is the wording that the legal community customarily uses for this purpose.”

Because confidentiality is often a key term of a settlement agreement, attorneys would be well-advised to keep this recent opinion in mind when drafting settlement agreements.  As the Court noted, one way to avoid this issue, and bind attorneys to a confidentiality provision, is “to draft a settlement agreement that explicitly makes the attorneys parties to the agreement (even if only to the confidentiality provision) and explicitly requires them to sign as such.”

New Fingerprinting Requirements For California Attorneys

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On May 23, 2018, the Supreme Court issued a new California Rule of Court which requires most active California attorneys to be re-fingerprinted. This requirement is part of an effort by the State Bar to come into full compliance with statutory mandates that require the Bar to receive notifications of attorney arrests and convictions from the California Department of Justice. The new rule came into effect on June 1, 2018, but attorneys have until April 30, 2019 to come into compliance. For anyone who has yet to do so, you can find the necessary information here.  Don’t wait until the last minute, as LiveScan locations can become crowded and fingerprints aren’t always accepted the first time. Failure to comply with these new requirements can result in monetary penalties, and if new prints haven’t been taken by the final deadline of December 1, 2019, you may face a suspension of your license.

Changes to the ADR Local Rules in the N.D. Cal.

By Litigation Tips

If you are filing a new case in the Northern District of California, and your case is assigned to the ADR Multi-Option Program, be advised that the initial case management scheduling order will no longer set a deadline by which the parties must either file a Stipulation and Proposed Order Selecting an ADR Process or a Notice of Need for ADR Phone Conference.  Instead, the scheduling order will set a deadline regarding when the parties must file a new form of ADR Certification.  This new form will include a space for parties to indicate if (1) they will be filing a Stipulation and Proposed Order Selecting an ADR Process or (2) if they need to discuss ADR at the case management conference.

In short, while ADR phone conferences may be requested or required in individual cases, they are no longer required in the standard scheduling order, effective May 1, 2018.

This new change aligns the ADR Local Rules with Civil Local Rule 16 and should streamline the process for litigation and the ADR.  As a firm that utilizes all tools in federal litigation, we look forward to following this new process.

Not all Competition is Lawful in California

By Litigation Tips

While California law promotes lawful competition, individuals cannot violate agreements with their former employer with impunity.  This was illustrated last week when a California jury awarded AeroVironment, Inc. $2.4 million after finding three former employees of the drone technology company engaged in fraud and breached patent and confidentiality agreements with their prior employer.  See Aerovironment, Inc. v. Gabriel Torres, et al., County of Ventura Superior Court Case No. 56-2015-00465460.

AeroVironment hired the three defendants to work in its engineering department where the company was developing drone technology for military use.  All three defendants signed agreements to keep AeroVironment’s proprietary information confidential and not to engage in any competing activities during their employment.  Notwithstanding these agreements, and while still employed by AeroVironment, defendants began planning a competing business and went so far as to found the drone sensor company for which they would all eventually work after their resignations.  AeroVironment filed suit soon after discovering such conduct.

The verdict in AeroVironment’s favor demonstrates that even in California, juries will hold former employees accountable for misusing protected information and actively competing with their current employers.  In general, California employees may prepare to compete as long as they are not actually pursuing competitive enterprises while employed, or using their employer’s resources to do so.  However, these defendants went too far in the jury’s view.  The case is a reminder that employers should ensure that their employees sign basic confidentiality agreements as well as agreements that they will not compete during employment.  Such agreements can be complemented with strong written policies, including handbooks that prohibit conflicts of interest and describe the employer’s expectations for maintaining confidences.

As with most things, an ounce of prevention is worth a pound of cure.  California employers who wish to remain competitive should take these simple steps, as AeroVironment had done, to protect their technologies.  The existence of standard agreements was key to AeroVironment prevailing at trial.

Lewis & Llewellyn has extensive experience litigating and advising clients on the myriad issues that can arise when an employee transitions from one company to another.  Click here to read more about our practice areas in the field of employee mobility.