Lit Alerts—November 2016
In This Issue:
- Employment: DC Circuit Finds NLRB Litigated Claims in Bad Faith and Awards Attorneys' Fees
- Discovery: Proposed Amendments to the New York Commercial Division Rules Seek to Increase Efficiency and Protect Companies' Sensitive Information
- Arbitration: Illinois Federal Court Denies Hertz's Motion to Compel Arbitration
Employment: DC Circuit Finds NLRB Litigated Claims in Bad Faith and Awards Attorneys' Fees
Last month the DC Circuit issued an opinion awarding attorneys' fees to the defendant in a suit brought by the National Labor Relations Board (NLRB) against an employer for allegedly violating the National Labor Relations Act (NLRA). The court found that the NLRA had pursued its case through trial and an appeal with the knowledge that its position was in opposition to the established law of the circuit, and awarded US$17,649 in attorneys' fees to the defendant/appellant.
The court awarded the appellant attorneys' fees to reprimand the NLRB for pursuing a policy termed "nonacquiesence." As the court observed, the NLRB had a history of pursuing appeals that were clearly in opposition to the law of the relevant circuit, even though the NLRB had little history of petitioning the US Supreme Court in the event of an inevitable adverse decision. The court stated its belief that the NLRB used the "nonacquiesence" policy to bully companies into obeying its commands, regardless of the applicable law, by threatening companies with the obligation to fund an appeals process the court summarized as: "[w]e don't care what the law says, if you want to beat us, you will have to fight us."
This case is not the first time a party appealing an NLRB ruling has recovered attorneys' fees for defending against legally unsupportable positions. The court cited an 11th Circuit case awarding attorneys' fees to an appellant in similar circumstances. While it is not commonplace for prevailing appellants to recover attorneys' fees from the NLRB, this decision is evidence that parties can recover fees if a court feels the NLRB has behaved too aggressively toward a counterparty.
Discovery: Proposed Amendments to the New York Commercial Division Rules Seek to Increase Efficiency and Protect Companies' Sensitive Information
On October 6 and October 12, 2016, the Administrative Board of the Courts of New York (the Administrative Board) proposed amendments to the New York Commercial Division Rules aimed at streamlining litigation in the Commercial Division of New York State Supreme Court.
The Administrative Board proposed amending Rule 6 to expressly grant judges the discretion to require parties to use hyperlinks in electronically filed documents. A hyperlink is an electronic functionality that permits a reader to click on and be immediately directed to a cited authority. The proposed rule limits hyperlinks to (1) other portions of the same electronically filed document; (2) documents previously electronically filed with the court; (3) government websites; and (4) statutes, rules, regulations, and other court decisions. Optional hyperlinking is already permitted and encouraged in the local rules of the First, Second, Third, and Fourth Circuits, as well as certain district courts.
The Administrative Board also proposed a new rule, Rule 11-h, which sets forth the standard that parties must meet in order to file court records under seal. Proposed Rule 11-h expands on the existing language of Rule 216.1 of the Uniform Civil Rules, which states that "a court shall not enter an order in any action or proceeding sealing the court records . . . except upon a written finding of good cause." Notably, proposed Rule 11-h defines "good cause" to "include the protection of proprietary or commercially sensitive information, including without limitation, (i) trade secrets, (ii) current or future business strategies, or (iii) other information that, if disclosed, is likely to cause economic injury or would otherwise be detrimental to the business of a party or third-party."
If approved by the Administrative Board and enacted, the rules would place the Commercial Division in line with federal courts, many of which encourage hyperlinking and require that companies' sensitive and competitive information be filed under seal.
Arbitration: Illinois Federal Court Denies Hertz's Motion to Compel Arbitration
On October 11, an Illinois federal court denied Hertz's attempt to extend an arbitration agreement beyond the scope of the underlying contract.
In Tillman v. The Hertz Corporation, d/b/a Hertz Rent-A-Car, Case No. 16 C 4242 (N.D. Ill. Oct. 11, 2016), the plaintiff, on behalf of a putative class of consumers who received automated calls on their cell phones without their consent, sued Hertz for violations of the Telephone Consumer Protection Act. In early January, the plaintiff's mother had rented a car from Hertz and provided Hertz with plaintiff's telephone number as an "emergency contact." The contract between plaintiff's mother and Hertz contained an arbitration agreement. Later that month, the plaintiff rented cars from Hertz, and Hertz alleged that those rental agreements also contained arbitration agreements. In February, the plaintiff received automated calls from Hertz relating to his mother's rental car, and used those calls as the basis for this lawsuit.
Although the plaintiff was not a party to his mother's rental contract, Hertz moved to compel arbitration on the grounds that the plaintiff's own car rental agreements with Hertz contained arbitration provisions. Hertz argued that those arbitration agreements applied to all disputes arising from communications with Hertz. The court disagreed, holding that the plaintiff's rental agreements were irrelevant to a dispute that does not arise under those contracts: "[a]n arbitration agreement is logically and necessarily tied to the underlying contract that specifies arbitration as the agreed upon method of dispute resolution."
The decision is a strong reminder that arbitration provisions only apply to parties that have agreed to arbitrate their claims, and then only to disputes that fall within the scope of those agreements.