Connecticut Business Litigation Blog : Connecticut Business Lawyer & Attorney : N. Kane Bennett : Raymond & Bennett Law Firm : Hartford, Middletown, Glastonbury

In a previous post, I linked to a story about a tenant who was sued for libel after posting an allegedly disparaging comment on Twitter about her apartment. The Twitter lawsuit was a hot topic on the internet for some time.   Many commentators believed it was only a matter of time before Twitter resulted in a damage award for libel.  Not so in this case.   A Chicago judge has tossed out the lawsuit.  Reports indicate that the Judge made a specific finding that the "tweet was nonactionable as a matter of law."   

In this case,  the tenant made a Twitter post that her apartment was moldy.  Before bringing the suit, the landlord might have considered how many people actually read the Tweet.  My guess is probably a few hundred at best.  After the lawsuit was filed, millions read about it.  At the time of the lawsuit, the landlord company issued a statement saying "we're a sue first, ask questions later kind of organization."   That is not a wise strategy in general, but in particular when it comes to an Internet defamation case.   Anything involving a lawsuit and social networking has a good chance of being picked up in the media and in various places on the Internet. 

The Chicago court's ruling that the statement on Twitter failed to meet the standard for defamation seems correct if you consider Connecticut's defamation standard, which is similar.  The takeaway here is that not every negative statement qualifies as a defamatory statement.  This does not mean a post on Twitter cannot constitute defamation.  In fact, Twitter postings remain fair game for defamation suits, and we are likely to see more of these claims. 

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As many of us know, the Connecticut Attorney General, Richard Blumenthal, is stepping down and running for Chris Dodd's U.S. Senate seat. Several candidates have stepped forward indicating that they are going to run for Attorney General.   The Connecticut Attorney General has a significant impact on businesses in this state.  For one thing, the Attorney General often brings lawsuits to protect businesses and consumers related to unfair trade practices.  For example, within the last few days,  Attorney General Blumenthal filed a lawsuit on behalf of over 400,000 Connecticut residents related to the Health Net data breach.  The old saying in legal circles is that the Attorney General runs the largest law firm in the state. 

Secretary of State Susan Bysiewicz is one of the candidates running for Attorney General.  Ryan McKeen, at A Connecticut Law Blog, has a very interesting post today about whether Susan Bysiewicz has the legal resume to meet the statutory qualifications to be elected Attorney General based on needing 10 years in "active" law practice.  The media has jumped on his blog post and there are several reports on it already in the news.     The Bysiewicz campaign has responded and claims that she is qualified despite only six years of practice in the state based on her years of "supervising" attorneys at the Secretary of State's office.   Now that the issue has been joined, everyone is waiting for Ryan to respond, including me. 

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On January 11, 2010, a class action lawsuit (download here) was filed against AT&T alleging that it improperly charged sales tax to access the Internet in violation of Connecticut law and the Internet Tax Freedom Act.

The case was brought on behalf of David Rock who subscribed with AT&T for a "wireless data plan that permits access to the Internet by radio device."  The plan permits Internet access remotely by computer or smartphone, such as an iPhone or BlackBerry.

The complaint alleges improper charges from AT&T for state and local sales taxes on internet access on monthly bills.  The complaint is based in part on Connecticut General Statutes 12-407(a)(26)(A) which excludes Internet access from the state's sales tax on telecommunications.  The Internet Tax Freedom Act also prohibits taxes on Internet access.  The complaint alleges thousands of potential members for the class in Connecticut.  The complaint alleges breach of contract and violation of Connecticut's Unfair Trade Practices Act.

Nate Anderson of ars technica reported on several identical lawsuits filed in Georgia, Indiana, and Alabama over the last month.  Mr. Anderson reported that the same lawyers where behind the multiple filings.  In a Hartford Courtant article today by Matthew Sturdevant, the attorney for Mr. Rock,Michael Koskoff, noted that perhaps a dozen similar suits will be filed in various states.

Mr. Anderson made a humorous comment that all the complaints in the Georgia, Indiana, and Alabama cases have the same typo or misuse of the word  "I-Phone" rather than iPhone.  The complaint in the Connecticut case has the same misuse of "I-Phone."  So, either there is some cooperation nationwide on the plaintiff side on the content of the complaints or perhaps none of the lawyers involved own iPhones.   

In any event, these cases will be interesting to track as all of the lawyers involved on the consumer side have significant experience in class action lawsuits, including against telecom providers.  I also agree with Mr. Anderson that the actual definitions of "sales tax" and "Internet access" might seem simple enough, but can actually be quite complicated.  I expect AT&T will make use of those complications. 

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A recently filed class action lawsuit (download complaint) against RockYou highlights the very real threats to businesses related to hackers stealing customer data also known as personally identifiable information (PII).

According to the complaint filed in federal court in San Francisco, RockYou is a publisher and developer of popular online applications and services for use with social networking sites such as Facebook and MySpace.  RockYou allegedly exposed 32 million of its users to identity theft by failing to encrypt or otherwise protect email account information and passwords.  The suit alleges violations of California Civil Code, breach of contract, and negligence.

 Jason Remillard of Web Host Industry Review provided a detailed post on the lawsuit noting that RockYou may face more difficulties than expected because RockYou is a "launchpad type of service, that hold credentials for other services (myspace, facebook, etc)..."  As such,  RockYou may face liability for data exposures across other platforms. 

Mr. Remillard notes that he has been warning site owners about the risks of holding PII information of consumers.  I agree with Mr. Remillard that avoiding storage of such personal data  in the first place is often the best way to prevent liability exposure for both loss of data and a security breach.  If a business must store PII in its systems then a data loss and security plan must be in place to protect the data.  In prior posts, I offer some suggestions and tips for Connecticut business owners that have sensitive data or store PII of its customers.

Dave Kravets of Wired.com offers some more details about RockYou's alleged security failures that apparently resulted from the same common vulnerability exploited by hackers in the cases of Hannaford Brothers, 7-Eleven and Heartland Payment System.  The vulnerability results from RockYou's SQL database,which relates to the actual storage method and management of millions of email accounts and passwords.  The complaint against RockYou alleges that the prior well publicized flaws in SQL should have been addressed with readily available protection measures.

Brennon Slattery of PCworld wrote about the security breach and compared RockYou's security system to storing passwords and emails on sticky notes.  He noted that RockYou stored the information in plain text words.  In other words, once the hacker got inside RockYou's system, the passwords and email accounts were easy to read like sticky notes because there was no encryption of the text. 

RockYou has issued a statement explaining the breach and intends to defend the lawsuit. RockYou also has implemented new steps to avoid future breaches including implementation of encryption for all passwords.  Encryption is the method used to make the passwords unreadable once the hacker gains access to the system. 

The RockYou case is another example of the increasing number of data loss and security lawsuits and should serve as a reminder to any business that stores PII to implement a data loss and security plan. 

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As we head to the new year, here is a round up from some fellow bloggers on contracts, cobra, wage disputes, patents, and oral agreements for limited liability companies. 

The California Business Lawyer Blog offers a very detailed post about contractual relationships  between manufacturers and suppliers.  The focus is on well drafted agreements eliminating the fears and concerns of both sides.

A lot of talk about the AT&T suits in different states for $1 billion dollars for unpaid overtime.  The suits picked up a lot of steam with a recent employee favorable ruling from the federal court in Connecticut allowing the claim to proceed as a class action. Rush on Business covers some tips for businesses to avoid these suits.

Just in time for Christmas, President Obama has extended the COBRA subsidy.  Dan Schwartz's Connecticut Employment Law Blog covers this topic in detail for employers.

Twin Cities Business Litigation Blog has an interesting post on concerns you might have as a shareholder of corporation that fails to follow corporate formalities.  Gavin Craig gives examples of how a shareholder could be exposed to liability.

Anyone who frequently litigates matters involving limited liability companies will tell you that there is not much case law out there in Connecticut.  It is still a developing area of the common law.  Delaware law is often a good option for law in this area because these issues are more frequently litigated by volume in Delaware.  A good resource is the Delaware Corporate and Commercial Litigation Blog.   Two recent posts concerning oral partnerships and LLC agreements are just an example.

PatentlyO hits on some themes for 2010, including an expected increase in patent prosecution and litigation.    They also have a cool picture of heat miser, a childhood classic.

Jeff Mehalic, author of the West Virginia Business Litigation Blog, writes a detailed follow up post to his coverage of the Connecticut dispute between Charter Oak Lending and CTX Mortgage.  Jeff also comments about a post I wrote on the same case.  The case remains significant as it is an example of what can go wrong when a business grows too fast and no written agreements are in place with employees.

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 Here's some humor for the holidays:

• A very funny post from Faces of Lawsuit Abuse.org.  It is a 2009 poll of the most ridiculous lawsuits of the year.  My vote was for the April winner: "Tourist sues New York club after she slipped while dancing on top of the bar."  (story here). The judge carefully examined the facts and made his ruling according to simple math:  drunk + dancing + wet bar = case dismissed.

• "You dont bring a gun to a snowball fight,"  brought to you by one of my favorites Above the Law, a legal tabloid.   This is now a viral holiday story about a snowball fight between a lawyer and a police officer.  Who do you think wins that fight?  Read the lawyer's take here, and to make your own decision, check out the video.

• Inmates do not like Christmas music, but judges do!  According to the Phoenix news blog,   the Maricopa County Sheriff has won its fifth lawsuit from inmates related to playing Christmas tunes in county jails.    My guess is they were playing Michael Bolton's Christmas album, which has made a few  "worst album ever" lists for christmas songs. Look for an appeal based on cruel and unusual punishment.

• Riskvue, a website for risk management professionals, has a detailed post on holiday party disasters and how to avoid them.   The Denver Business Journal says "Don't let Your Holiday Party Become A New Year's Lawsuit."  What is it about drinking at an office party and the photocopier?  For some funny videos, check out YouTube "holiday party disasters."  

• For some humorous reports on a series of recent lawsuits, check out Jester's Courtroom on the Center for Individual Freedom blog. 

 Happy Holidays everyone!

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The short answer is that it depends.  Settlement agreements are generally enforceable if the terms of the agreement are clear and authorized by the litigants or parties to the litigation.  In Gengaro v. City of New Haven (to be officially released December 29th), the Appellate Court had another opportunity to comment on the long standing law in Connecticut that "a compromise agreement . . . if free from fraud, mistake or undue influence . . . is conclusive between the parties." 

In Gengaro, a trial court granted summary judgment in favor of the City concerning employment claims because Gengaro had signed a confidential settlement agreement prior to the lawsuit.  Gengaro claimed he was forced to so sign the agreement because of threats of losing his job.  He claimed undue influence to attempt to invalidate the settlement agreement.   Gengaro claimed that he had serious financial and medical problems.  Coupled with the threat  of job loss, he claimed that he had no reasonable alternative but to agree to the settlement.  

The trial court granted summary judgment finding insufficient issues of fact concerning undue influence.  Essentially, the court concluded that the threat of losing his job was not sufficient for the exercise of undue influence.  The Appellate Court agreed.  For a good analysis of what employers should to to avoid these type of claims check of the Connecticut Employment Law Blog post on the case.

To establish undue influence in Connecticut, four elements must be established:

• a person is who is subject to influence
• an opportunity to exert undue influence
• a disposition to exert undue influence; and
• a result indicating undue influence

Relevant factors in the inquiry include age, physical and mental condition, whether the person had disinterested or legal advice, the consideration of value of the contracted for exchange, and active solicitations and persuasions by the other party.

In summary, undue influence is the exercise of control by one person over another in an attempt to destroy the person's free agency and "constrain him to do something other than he would do under normal control..."  Undue influence, if demonstrated, may invalidate a contract because the free assent of one party to the contract is lacking.

Settlements agreements are enforceable in court if the terms are clear and authorized by the parties.  Attempting to invalidate the agreement by showing undue influence, fraud, or mistake are difficult claims to make.  The take away here is to carefully review your settlement agreements with counsel because once you sign an agreement, it is likely to be enforced absent special factors.

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Recently,the Attorney General's office announced another criminal conviction against a home improvement contractor responsible for many failed home improvement contracts. The report also indicated that the homeowner consumers were going to get some financial relief from the Home Improvement Guaranty Fund (HIGF).  The HIGF offers up to $15,000 in relief to consumers who meet certain conditions including:

• failed contract with a register contractor
• contract was for residential dwelling
• you must first obtain a court judgment against the contractor
• you must take reasonable steps to enforce the judgment without success

Any consumer who meets this criteria can file an application that is posted online.  This applies to home improvements, not new construction.  Consumers of new home construction in Connecticut can apply to the New Home Guaranty Fund (NHGF) for  up to $30,000 in relief.  The same basic criteria apply here, but the fund involves new home construction contracts.

 Many times, when a contractor goes bankrupt or has no assets, the HIGF and NHGF are the only source of recovery for consumers that were victim of defective or negligent construction for new construction and home improvements.  When a consumer decides to bring a lawsuit against a contractor, the first questions asked should be whether the contractor has assets to pay any judgment.  If not, the funds may be the only realistic option for recovery

Of course, the goal is for homeowners to find their way to the many reputable contractors in Connecticut to avoid this type of problem.  Reputable contractors will urge consumers to look up a contractor's history of complaints with the Department of Consumer Protection before signing a contract.  Consumers should also ask for references and follow up on them before signing any contract.  A reputable contractor will have no problem providing several references and examples of work product. 

It is also critical that a consumer check to see if a contractor is properly registered before signing the contract.  Although failing to properly register may be criminal, the lack of registration could prevent a consumer from recovering even the limited amounts under the guaranty funds.

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Attorney General Richard Blumenthal issued a scathing press release related to Health Net's recent data loss and security breach.  Blumenthal called Health Net's story on it "sanitized" and its six month delay in reporting "unconscionable."  Blumenthal called for a federal investigation and intensified state efforts because of the sensitive financial and health information at risk for exposure.

Health Net is based in Shelton, Connecticut and is one of the largest health plans in the Northeast serving approximately 580,000 members.  A report by Lucas Mearian of Computerworld stated that the information stolen was a portable hard drive that had not been encrypted.  Proper encryption could have prevented access of the information.

Connecticut consumers have been affected by the data loss and more than a million people had social security numbers and financial and medical information exposed. Consumers in Arizona, New Jersey, and New York also had sensitive information exposed.  Thus far, there has been no report of identity theft or misuse of the information.

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