Independent contractor’s email was key factor in finding he had apparent authority to bind principal

Defendant petroleum producer hired an independent contractor to negotiate oil and gas leases on its behalf. One such lease was with plaintiff, which the independent contractor negotiated in large part using the email account defendant issued to him. After the price of oil dropped, defendant would not pay on the lease. When plaintiff sued, defendant claimed its independent contractor did not have the authority to bind defendant to the lease in the first place.

The trial court disagreed with defendant’s argument that its independent contractor did not have apparent authority to bind the principal-defendant. Defendant sought review. On appeal, the Court of Appeals of Texas affirmed.

It held that a reasonably prudent person would have believed the independent contractor possessed the authority to contract on defendant’s behalf because defendant acted with such a lack of ordinary care as to clothe the independent contractor with indicia of authority.

Among the most important evidence concerning these indicia of authority was the fact that the independent contractor communicated using the email account under defendant’s domain name. The court noted that another court had held that giving someone a company email address does not, in and of itself cloak that user with carte blanche authority to act on behalf the company. “Were this so, every subordinate employee with a company e-mail address—down to the night watchman—could bind a company to the same contracts as the president.” CSX Transp., Inc. v. Recovery Express, Inc., 415 F.Supp.2d 6, 11 (D.Mass.2006)

But in this case, defendant knew of the independent contractor’s negotiations by email, and did nothing to disclaim that he lacked authority to bind defendant to the lease.

PanAmerican Operating, Inc. v. Maud Smith Estate, — S.W.3d —, 2013 WL 3943091 (Tex.App.-El Paso, July 24, 2013)

Court slaps Prenda client with more than $20,000 in defendant’s costs and attorney’s fees

AF Holdings, represented by infamous copyright trolls Prenda Law, voluntarily withdrew its copyright infringement claims against the defendant, an alleged BitTorrent infringer. Defendant sought to recover his costs and attorney’s fees pursuant to the Copyright Act, which provides that:

In any civil action under this title, the court in its discretion may allow the recovery of full costs by or against any party other than the United States or an officer thereof. Except as otherwise provided by this title, the court may also award a reasonable attorney’s fee to the prevailing party as part of the costs.

The court found that all factors for an award of costs and attorney’s fees weighed in defendant’s favor:

  • Degree of success: There was no dispute that defendant completely prevailed in the case.
  • Frivolousness/Objective Unreasonableness: Plaintiff’s case was frivolous and objectively unreasonable in that it never presented any evidence (although it had the opportunity to do so) to support its claim that it had standing to assert a claim for copyright infringement. Moreover, the court found that plaintiff did not do a proper investigation to determine defendant was the one in the household who committed the alleged infringement. Instead, it simply alleged that he fit the best demographic of one who would infringe.
  • Motivation: The court found that it did not appear plaintiff was motivated to protect the copyright at issue, but merely to coerce settlements.
  • Compensation/Deterrence: The court awarded fees as a deterrent to copyright trolls everywhere: other persons or entities that might contemplate a similar business model that is not intended to protect copyrighted work but instead designed to generate revenues through suits and coerced settlements.
  • Furthering the Purpose of the Copyright Act: The primary objective of the Copyright Act is to encourage the production of original literary, artistic, and musical expression for the good of the public. But here, the court found, plaintiff had not acted to protect original expression but rather to capitalize on coerced settlements.

Based on these factors, and after considering the number of hours spent and the hourly rate of defendant’s counsel, the court ordered plaintiff to pay $19,420.38 in attorney’s fees and $3,111.55 in costs (mainly for electronic discovery and deposition costs). Copyright trolls be warned.

AF Holdings LLC v. Navasca
, 2013 WL 3815677 (N.D.Cal. July 22, 2013)

Fair use questions defeat class certification in Google Book Search case

Last year, the district court judge overseeing the Google Book Search case certified the plaintiff-authors as a class in the action the Authors Guild filed against Google in 2005. Google opposed the motion for class certification, and sought review of the issue with the Second Circuit. On appeal, the court vacated the class certification, holding that such certification was premature, given Google’s anticipated fair use arguments. The per curiam opinion provided that:

we believe that the resolution of Google’s fair use defense in the first instance will necessarily inform and perhaps moot our analysis of many class certification issues, including those regarding the commonality of plaintiffs’ injuries, the typicality of their claims, and the predominance of common questions of law or fact

Given that fair use is a fact-specific analysis, this decision seems sensible. And the decision gives Google a powerful new lever in settlement talks — litigation of the copyright claims on the merits just got a lot more expensive for the Authors Guild plaintiffs.

Authors Guild, Inc. v. Google Inc., — F.3d —, 2013 WL 3286232 (2nd Cir. July 1, 2013)

Court sides with Apple in copyright dispute over photo in iPhone commercial

Plaintiff photographer took a photo that Apple used in an April 2010 TV commercial for the iPhone 3GS. The 30-second commercial showed the photo for about 5 seconds. Plaintiff sued for copyright infringement, claiming Apple did not have the proper license to use the photo. She sought to recover Apple’s “indirect profits” on iPhone sales attributed to the infringement. Apple moved for partial summary judgment on the issue of damages, arguing such damages were “impermissibly speculative.” The court granted the motion.

Apple made four arguments showing a lack of a causal nexus between the use of the photo and plaintiff’s claim for profits. First, Apple contended that plaintiff proffered no evidence to support her claim that the photo itself caused any sales. Second, Apple argued that the iPhone was “well established in the consumer marketplace” at the time of the commercial which made it impossible to ascribe iPhone 3GS sales to the use of a single commercial, let alone one image in a single commercial. Third, two additional commercials ran during the time period that the commercial ran, each featuring different applications that can be used on an iPhone. Fourth, overall sales of the iPhone decreased during the relevant time period, February 28, 2010 to May 29, 2010, which is the time during which the commercial aired and the month immediately preceding and following that period.

The court found that plaintiff proffered no evidence that the use of the photo caused any iPhone 3GS sales, nor that the commercial did itself. The photo was integrated into no more than five seconds of a 30–second commercial where numerous images and various product functions were displayed. There was no evidence showing that sales resulted from the mere use of the photo. The court noted that as a threshold matter, it was plaintiff’s burden to establish a causal connection to some portion of profits before Apple would have to carry the burden of apportioning profits that were not the result of infringement. The court found that plaintiff did not proffer any evidence directly related to causation or even a method for showing that the alleged infringement actually influenced customers.

It’s important to note that this decision does not mean Apple has gotten away with copyright infringement. The decision is on the measure of damages, not liability (which remains an open question). Moreover, this case deals just with the question of actual damages under the Copyright Act. Plaintiff may yet assert an entitlement to statutory damages, which could range anywhere from $750 to $150,000.

Thale v. Apple Inc., 2013 WL 3245170 (N.D.Cal. June 26, 2013)

[Updated 7/2/13 to add last paragraph.]

Judge who was Facebook friends with victim’s father did not have to recuse himself

Case provides valuable guidance to judges on how to responsibly handle social media connections and communications.

Judge sent defendant to prison for assaulting defendant’s girlfriend. Defendant appealed his sentence claiming, among other things, that the judge was not impartial, given that the judge was Facebook friends with the girlfriend-victim’s father, and that the two of them had communicated through Facebook’s private message feature. The appellate court held that the judge did not err by not recusing himself.

The appellate court found that no rule prohibited the judge from being Facebook friends with the victim’s father. And the judge followed the proper procedure concerning the private message by:

  • discontinuing reading it once he realized it pertained to the case
  • warning the victim’s father not to communicate ex parte in that manner
  • printing the message out and placing it in the case file
  • notifying counsel for the parties

Moreover, the private message was not adverse to defendant, but actually asked for leniency. On these facts, the court found an insufficient showing of bias to find reversible error.

Youkers v. State, — S.W.3d —, 2013 WL 2077196 (Tex.App. May 15, 2013)

Can an LLC member violate the Stored Communications Act by accessing other members’ email?

Yes.

Two members of an LLC sued another member and the company’s manager of information services alleging violation of the Stored Communications Act, 28 U.S.C. 2701 et seq. Defendants moved to dismiss for failure to state a claim. The court denied the motion.

Plaintiffs alleged that the LLC’s operating agreement required “Company decisions” to be made based on four of the five members voting in favor. The company had no policy in place authorizing the search and review of employees’ email messages, nor did it inform employees that their email may be accessed. Plaintiffs did not consent to their emails being searched and reviewed.

In connection with a dispute among the LLC members, one of them allegedly (in cooperation with the manager of information services) accessed the company’s email server using administrative credentials. She allegedly performed over 2,000 searches, retrieving other members’ communications of a personal nature, as well as communications with those members’ legal counsel.

Defendants moved to dismiss under 12(b)(6), arguing that plaintiffs could not show the access was unauthorized. Defendants argued that there was no electronic trespass, as the access was accomplished simply by company procedure.

The court rejected defendants’ arguments, finding that plaintiffs had sufficiently alleged an SCA violation, since plaintiffs had not consented to the access, and because no policy existed permitting an individual to search and review emails of members or employees absent the four-fifths approval required by the operating agreement.

Joseph v. Carnes, 2013 WL 2112217 (N.D.Ill. May 14, 2013)

Ninth Circuit affirms that Righthaven had no standing to sue as a copyright owner

Righthaven LLC v. Hoehn, No. 22-16751 (9th Cir. May 9, 2013)

The copyright holder in certain newspaper articles granted to Righthaven the awkwardly-articulated rights “requisite to have Righthaven recognized as the copyright owner of the [articles] for purposes of Righthaven being able to claim ownership as well as the right to seek redress for past, present, and future infringements of the copyright . . . in and to the [articles].”

After the district court dismissed some of Righthaven’s cases for lack of standing, saying that Righthaven was not an owner of an “exclusive right” as required by the Copyright Act to maintain the suit, Righthaven sought review with the Ninth Circuit. On appeal, the court affirmed the lower court’s holding that Righthaven lacked standing.

The court found that the language used to grant rights to Righthaven did not in itself prove that Righthaven owned any exclusive rights. It held that the language in an assignment agreement purporting to transfer ownership is not conclusive. Instead, a court must consider the “substance of the transaction.” Since a separate agreement between Righthaven and the copyright holder placed limits on what Righthaven could do with any copyright assigned to it, Righthaven did not actually possess the required exclusive rights under the Copyright Act, and therefore lacked standing to sue.

Are courts wising up to BitTorrent copyright trolls?

BitTorrent copyright trolling continues despite Prenda Law’s self-implosion. But there is hope that courts are coming to their senses.

Earlier this week Judge Wright issued a Hulk smash order lambasting the tactics of notorious copyright troll Prenda Law and finding, among other things, that the firms’ attorneys’ “suffer from a form of moral turpitude unbecoming an officer of the court.”

Though Prenda Law’s copyright trolling days may be numbered, it is still too early to announce the death of BitTorrent copyright trolling. Copyright plaintiffs are still filing lawsuits against swarms of anonymous accused infringers, and courts are still allowing those plaintiffs to seek early discovery of John Does’ names.

But there is reason to believe that courts are recognizing the trolls’ disingenuous efforts to join scores of unknown defendants in a single action. Last week, a federal court in Ohio (in Voltage Pictures, LLC v. Does 1-43, 2013 WL 1874862) expressly recognized the concern that some production companies have been “misusing the subpoena powers of the court, seeking the identities of the Doe defendants solely to facilitate demand letters and coerce settlements, rather than ultimately serve process and litigate the claims.” Likewise, the court recognized that other BitTorrent plaintiffs have abused the joinder rules to avoid the payment of thousands of dollars in filing fees that would be required if the actions were brought separately.

So the court issued an ominous warning. Though it found that at this preliminary stage it was appropriate to join all 43 accused swarm participants in a single action, the court noted that “[s]hould [it] find that plaintiff has abused the process of joinder, the individual John Doe defendants may be entitled to — in addition to a severance — sanctions from plaintiff, under [the applicable rule or statute] or the Court’s inherent powers.” The court went on to warn that “[w]hile the Court will not automatically hold plaintiff responsible for the alleged abuses of others in its industry, it will not hesitate to impose sanctions where warranted.”

Though it has taken several years of abusive and extortion-like litigation brought by BitTorrent copyright trolls, we may be entering an era where courts will be more willing to require these trolls to show the courage of their convictions. No doubt we have Prenda Law and its possibly-unlawful tactics to thank mostly for this crackdown. Prenda had a good thing going (from its perspective, of course). Too bad it did not abide by the timeless maxim, “pigs get fed, hogs get slaughtered.”

Company sued by university can continue emailing that it will not hire students

University of Illinois v. Micron Technology, Inc., No. 11-2288 (C.D.Ill, Order dated April 11, 2013)

The University of Illinois sued Micron for patent infringement. Micron sent an email to several professors that read in part:

Because Micron remains a defendant in a patent infringement lawsuit that [the University] filed against Micron in Federal court in Illinois on December 5, 2011, effective immediately, Micron will no longer recruit [University] students for open positions at any of Micron’s world-wide facilities.

The University asked the court for a preliminary injunction barring future harassing communications from Micron to any University employee. The court denied the motion, holding that:

  • the term “harassing” was vague and therefore the requested injunction would violate Rule 65(d)’s requirement that the injunction describe in reasonable detail the acts to be restrained
  • the prior restraint of speech would likely violate Micron’s First Amendment rights
  • the sought after preliminary injunction did not pertain to the injury alleged in the complaint

Though the court sided in favor of Micron on the question of whether to enter an injunction, it questioned the company’s motives. It found Micron’s decision to be “without tact,” and was “very concerned” that Micron was trying to interfere with the litigation. But there was not sufficient evidence for the court to draw such a conclusion.

Business Facebook page did not support personal jurisdiction out of state

Woodhurst v. Manny’s Inc., 2013 WL 1452929 (Iowa App. April 10, 2013)

Plaintiffs alleged that defendant – a bar in Illinois just a few miles from the Iowa border – was liable for serving alcohol to one of its patrons who crossed over to Iowa and shot one of the plaintiffs. The Iowa court in which the suit was pending dismissed for lack of personal jurisdiction. Plaintiff sought review of the dismissal. On appeal, the Iowa Court of Appeals affirmed.

The court found there was no evidence that defendant “purposefully directed” its advertisements via its Facebook and MySpace pages to Iowa residents. So the case establishes that having a social media presence – even an interactive one like a Facebook page – does not automatically mean that a company will be subject to suit everywhere the page is available. Courts apparently require something more for activity to be purposefully directed.