Connecticut Business Litigation Blog : Connecticut Business Lawyer & Attorney : N. Kane Bennett : Aeton Law Partners LLP : Hartford, Middletown, Glastonbury

After making national news, Stamford Marriott Hotel & Spa has requested that its attorneys withdraw a special defense in a case involving a rape in its hotel parking garage. 

In 2006, a 40 year old woman was sexually assaulted in front of her two small children in the hotel's garage.  The assailant admitted the crime and was sentenced to prison.  As such, the rape was not in dispute.  The woman later sued and brought a complaint against the Marriott alleging various allegations of negligence. 

As detailed by Christian Nolan of The Connecticut Law Tribune, the attorneys representing Marriott raised two special defenses to the woman's complaint that caused a public backlash against Marriott.  Reportedly, Marriott's defenses included contributory negligence of the rape victim and failure to mitigate damages for the children. 

Marriott quickly changed its course and withdrew the defenses.   Marriott's withdrawal of the defenses may spare it further public relations problems, but the potential for an angry jury at trial could remain a problem. 

At least one Connecticut attorney estimated that a jury might very well award a premium for that type of defense if pursued at trial and not proved.  Although Marriott has now withdrawn the defenses, it could still become a problem at trial based on Connecticut law concerning withdrawn pleadings. 

In Connecticut, withdrawn pleadings are no longer judicial admissions by the party, but they can remain available at trial as an evidentiary admission.   If this matter goes to trial, Marriott will have various ways to argue against admissibility of the pleading, but the initial defenses could still wind up in front of a jury as an evidentiary admission.  Once in evidence, Marriott should get the chance to explain the circumstances of raising the defenses, which may help mitigate any damage done.

In high exposure cases, the decision to raise certain special defenses is not always easy or a formality as in some jurisdictions.  In Marriott's case, although it seems difficult to understand why the defenses were raised, we should not automatically assume there was no basis for it without knowing the full details.    Nevertheless, it appears Marriott did the right thing in withdrawing the defenses.

The rule on withdrawn pleadings serves as a reminder that withdrawing a claim in a pleading will not always prevent your opponent from using it against you in court.  As such, in Connecticut, business owners will want to consider the contents of certain pleadings filed in court because the pleadings could be used against the business as an admission. 

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One of the first things lawyers check for when contesting an oral contract is the statute of frauds.  The statute of frauds comes from an English rule dating back to the 1600's.  At its most basic level, the statute of frauds requires certain types of contracts to be in writing or else they are not enforceable in court actions.  However, sometimes, even when a contract is in writing, it still will not satisfy the statute of frauds.

That is what happened in SS-II, LLC v. Bridge Street Associates, an advanced opinion released today by the Connecticut Supreme Court.  The dispute involved an option to purchase property pursuant to a commercial lease that was in writing.  The tenant wanted to exercise the option and the seller did not want to close on the sale. 

When the tenant brought a lawsuit for specific performance trying to force the sale, the owner raised the Connecticut Statute of Frauds as a defense and won in court.  In Connecticut, the agreements that must be in writing under the statute of frauds include the following:

• any agreement by any executor promising to answer damages out of his own property
• any promise to answer for the debt, default or miscarriage of another
• any agreement made upon consideration of marriage
• any agreement for the sale of real property or any interest in or concerning real property
• any agreement that is not to be performed within one year 
• any agreement for a loan in an amount which exceeds fifty thousand dollars.

Not only do these agreements have to be in writing, but they also have to contain the contract's essential terms.  In a contract to sell land, the terms must describe a certain price, the parties to the contract, and the land.  In the SS-II case, the contract did not comply with the statute of frauds because the purchase price was not certain and was subject to some conditions.  Although there are counter defenses to the statute of frauds, such as partial performance, the court deemed that they did not apply. 

The takeaway from this case is to be cautious with oral contacts and do not assume a writing alone will make the agreement enforceable.  A contract has to be in writing, signed, and have the proper terms in it or else you may not have an enforceable agreement if the statute of frauds applies.  

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 A recent decision by the United States Court of Appeals for the Ninth Circuit serves as reminder of the types of litigation that can arise from simply maintaining a website. Although the decision involved a dispute between two law firms, the facts could easily be related to competing businesses. 

The case involved Brayton Purcell, LLP, a California law firm that successfully sued another law firm for copyright infringement based on website content.   Brayton Purcell had copyright protection for its substantial website content on elder law.  According to the decision, a competitor law firm must have liked the content because the competitor copied the content verbatim for its own website.  This resulted in an undisclosed arbitration ruling in favor of Brayton Purcell.

Any business with a website should consider having a legal review done to determine if potential problems exist with the website's content.  Facing a lawsuit over a website is one the problems I discussed in a recent lecture on 5 Technology Bombs That Can  Sink Your Business.

There are many ways that a website can lead to litigation.  Stanley Jaskiewicz authored an excellent article for E-Commerce Law & Strategy featured on Law.com related to "clearing" rights to publish content on websites.  He cited a simple example of how a business website can infringe a copyright by merely copying and pasting a photograph from one website to the business' website.  In the process, the business might infringe the rights of the original photographer and the website owner.

A basic legal compliance review for a website can avoid this type of problem.  It starts with a risk assessment of the website and its content, including a review for potential claims involving: 

• Copyright & Trademark infringement.  Copying from the the look and feel, content, and slogans from another website are some of the ways you can run afoul of copyright and trademark laws.
• Defamation & Disparagement.  Posting content that is defamatory or disparaging of a competitor could result in litigation because the statements could be viewed by millions.
• Unfair Trade Practices.  This type of claim is usually a tag along to some other actionable conduct.  This claim is often used to obtain an injunction or to recover greater damages and attorney's fees.
• False Advertising and Misrepresentation.  A website should be viewed no differently than traditional advertising.  False claims can bring lawsuits from consumers who make decisions based on website content.
• Domain Name Disputes.  These disputes often occur when two companies want a similar domain name.  Depending on a variety of facts, one company may have greater rights to use the name regardless of who registers the name first.

Here are some tips to avoid a lawsuit concerning website content: 

• Conduct a risk assessment.   This includes an audit and inventory of the website content.
• Obtain "clearance" rights. If any of your content might violate copyright or trademark laws, you should seek to obtain clearance to use the material.  This involves the concept of searching out property right holders or authors and seeking permission or paying for use of the content.  
• Avoid use of protected materials.  For example, do not copy another website verbatim as the law firm did in the California case.  This might seem like a no brainer but many people believe that anything posted on the Internet somehow loses its copyright and trademark protection. 
• Protect your content.  In the California case, it was noted that the law firm had copyrighted its online content.     The law firm also monitored for any other website copying its content by use of Copyscape website.  Copyscape allows a user to input a website address or specific page to search the web for plagiarism. 
• Cooperation or settlement.  Lawsuits involving property rights for website content usually begin with one website owner sending another a "cease and desist letter."  This is a demand that an owner take down infringing material.  One way to avoid a lawsuit is to simply agree and take down the material.  Alternatively, you might be able to reach an agreement for use of the material. 

The bottom line is that your business does not need the headache of a lawsuit over a website.  Taking caution from the beginning with website content can help eliminate the risk.

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This month's business technology tip arises from the recent David v. Goliath story reported on by Douglas Malan of the Connecticut Law Tribune.  Kent Johnson, the owner of a small computer repair shop in Connecticut was sued by the software Goliath Microsoft for allegedly selling one improperly licensed version of Microsoft Office. Microsoft put 15 people on the case and sued Mr. Johnson in federal court for copyright infringement.  

Mr. Johnson represented himself against Microsoft and reportedly reached a favorable settlement.   Mr. Johnson has a website that provides all the details of the case form the very beginning.   As much as Mr. Johnson's apparent success against Microsoft was unusual, the notion of Microsoft going after business owners for copyright infringement is not. 

Microsoft, and other software publishers, might pursue an infringement case directly or through enforcement groups such as the Business Software Alliance (BSA) and the Software & Information Industry Association (SSIA).  These groups estimate that piracy costs software publishers seven billion dollars annually.

When you purchase software for your business, the software comes with a license that restricts your use of the software.  If you violate the restrictions in the license by copying or distribution, software publishers consider it piracy.  For example, typically you cannot install a software program for several users on multiple computers without purchasing additional licenses.  Also, you generally cannot install a program on a network server and let multiple users have access to it without the proper number of licenses.

Violation of a software license or copyright can implicate significant civil (and potential criminal penalties) in piracy cases.  Penalties can range up to $150,000 per offense for copyright infringement and there may be additional damages for lost profits. Many of these cases result in significant financial settlements in favor of the software publisher. 

You might be wondering how Microsoft finds out about a small company violating its software license.   Typically, an anonymous informant (an employee or IT consultant) reports the company to the software publisher, BSA, or SSIA in hopes of recovering a reward.  These groups openly advertise rewards of up to a million dollars for anonymous tips that lead to successful enforcement  actions. 

Many times businesses can inadvertently run afoul of licensing restrictions without realizing it.  Violations can occur when trying to cut costs, relying on bad advice from IT professionals,  or an employee's improper downloading of software.  When groups like the BSA become aware of allegations of software piracy, they usually issue a software audit letter to the business or initiate a lawsuit in federal court.  The BSA will request proof of proper licensing from the business.

After receiving an audit letter a business will have to decide to either fight it in court or cooperate.  Facing Microsoft or the BSA in court can be risky financially and many businesses chose to cooperate.  Problems often arise for businesses that cooperate because they cannot establish sufficient proof of licensing or the business is not aware of the extent of the infringement. 

The best way to prevent problems with software licensing or an audit is to implement a software asset management plan.  Ideally, the plan would include at a minimum a written policy covering: (a) terms for copying, use,and transfer of company software; (b)  the risks or improper use of software and piracy; and (c) disciplinary action for employee misuse.  The plan should also include software management including a system for record keeping of all receipts, licenses, and original copies of the software.  The plan should further include regular self-audits of company computer systems to verify proper licensing.

With a good software management plan in place, a business will be better equipped to defend a software audit or avoid it in the first place.  In either case, if your business is facing an audit or other enforcement action, you should seek legal advice.  If you face Goliath alone, do not count on obtaining the same success as Mr. Johnson.

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The Connecticut Judicial Branch will implement mandatory electronic filing in Connecticut state superior courts in all civil cases by December 5, 2009.  The Judicial Branch is also going paperless for short calendar and notices will no longer be sent by paper in the mail (unless the firm or litigant is exempt) starting September 1, 2009.

The mandatory e-filing will be implemented in phases as follows:

E-filing will be available in all remaining civil cases (with few exceptions) starting August 22, 2009.

E-filing is mandatory in all foreclosure cases starting September 1, 2009.

E-filing is mandatory in all remaining civil cases starting December 5, 2009.

Law firms and attorneys can receive e-filing training in each judicial district.

E-filing will be mandatory starting December in Connecticut in both state superior and federal district courts unless a law firm or litigant qualifies for an exemption.

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In an issue of first impression, the Connecticut Supreme Court confirmed that partnerships can expel a partner rather than dissolve when there is a breakdown of the business of the partnership.  The case is Brennan v. Brennan Associates, et al.  The official opinion will be released on August 18, 2009, but the advanced opinion already was released online. 

The case involves a complicated set of facts and circumstances surrounding the deterioration of a once successful partnership that operated a shopping center in Trumbull.  The breakdown of the partnership began after the death of a partner.

The decedent partner essentially ran the partnership and kept all the books until his death.  The decedent's will directed that his interest go to his two cousins.  Following the will reading, the partnership broke down over disputes on check writing authority, access to records, the transfer of interest, and an old tax conviction of a surviving partner who was the plaintiff in the case. 

The plaintiff  offered to buy out the decedent's interest, which as rejected by the estate.  The plaintiff subsequently filed a lawsuit seeking, among other things, to accomplish a buy out of the decedent's partnership interest and to gain access to the books and records.  The surviving partners wanted to continue the partnership's business rather than dissolving it.  As such, in addition to other claims by the defendant administrators, they filed a counterclaim application seeking to expel the plaintiff from the partnership under section 34-355 of Connecticut's Uniform Partnership Act.

The statutory scheme at issue permits a trial court to grant an application for expulsion if a partner engages in conduct that "makes it not reasonably practicable to carry on the business in the partnership with the partner." In this case, after a bench trial, the court issued a ruling granting the application filed by the surviving partners to expel or dissociate the plaintiff partner.  The plaintiff appealed claiming that acrimony and distrust between partners may be proper for a dissolution, but it was not a proper basis for dissociation.

On appeal, the Connecticut Supreme Court  disagreed with the plaintiff and ruled that dissociation was an available remedy given the facts present as an alternative to dissolution.  The supreme court noted that under Connecticut's Partnership Act,

a partnership now has a choice, either to dissolve the partnership or to seek the dissociation of a partner who has made it not reasonably practicable to carry on the partnership with him.  The new remedy of dissociation permits a financially viable partnership to remain intact without dissolving the partnership and reconstituting it.

In this case, the conduct at issue for the dissociated partner was a past felony tax conviction, a pattern of adversarial conduct toward other partners, and a false accusation of fraud against the others partners.  With these facts present, the supreme court found that a trial court had enough to grant an application for expulsion and dissociation of the partner.  The court stated:  

irreparable deterioration of a relationship between partners is a valid basis to order dissolution, and, therefore, is a valid basis for the alternative remedy of dissociation.

It is worth noting that the court indicated that an old felony conviction standing alone likely would not meet the required standard.   In any event, the case essentially provides that there is no basis for a higher burden for dissociation as opposed to dissolution.

My takeaway from the decision is that it promotes the policy of cooperation amongst partners by confirming expulsion as an option for getting rid of a "problem" partner.  As noted in the decision, prior to the statutory scheme permitting dissociation, partnerships faced with similar problems had to dissolve.  This process could perhaps create too much leverage for a "problem" partner forcing dissolution.  Instead, this decision confirms the statutory availability of dissociation under no higher of a standard than dissolution.  This may be a more preferable remedy for many Connecticut partnership disputes.

The decision also serves as a reminder of how a partnership or  closely held company can breakdown following the death or disability of a partner or key member of the business.  These circumstances highlight the need for specificity in partnership and operating agreements including buy out provisions for death and disability, transfer or assignment of interests, and continuation of operations.   

It is also important to note that the supreme court left open the dissociated partner's rights to bring a proceeding to compel valuation and purchase of his interest after dissociation.  The court also indicated that the partnership agreement could have included a provision allowing the remaining partners to initiate a valuation proceeding, but it did not in this case.

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If your business is advertising on Facebook, or considering it, you should do some research on the newest allegations of advertising fraud against the online giant.  Facebook reportedly has over 250 million users so it is understandable that a business would want access to Facebook's users.  Facebook offers businesses advertising space online that is targeted to specific demographics of its users.  Facebook charges for the advertising based on the number of views or clicks that the ad receives from users.

As reported by TechCrunch's Michael Arrington, massive complaints started surfacing recently against Facebook for "click fraud."  Basically, advertisers were clicking on competitor's ads, or paying others to do it, to artificially drive the price up.  Advertisers were also reporting that Facebook was charging for more clicks than the ad was actually receiving. There are now three lawsuits filed against Facebook for advertising click fraud.

 The most recent lawsuit was filed on July 31st by an individual advertiser seeking class action status.   The second lawsuit was filed by Unified ECM, a software company, seeking class action status for massive click fraud by Facebook.  The first click fraud lawsuit was filed by sports company RootZoo and it also seeks class action status. 

BNET Media's Catharine Taylor posted a good report on the details of the first two lawsuits including email comments from Facebook.  In the email, Facebook maintained that the Unified lawsuit is "unnecessary and baseless."  Wendy Davis of Online Media Daly posted a good report on the fist lawsuit by RootZoo. All three suits alleged discrepancies between the charges by Facebook and the actual number of clicks recorded by the advertisers.

Although Facebook has denied all the fraud allegations, TechCrunch takes the position that the click fraud problem is real and confirmed by Facebook. The Lost Press Marketing Blog presents a different view accusing Unified ECM of a "marketing stunt" to get exposure through press coverage of its lawsuit. 

Any business considering advertising with a pay per click campaign, should take caution whether on Facebook, another website, or a search engine.  If you want to measure your return on investment, you should consider monitoring any pay per click campaign internally.   If you are considering Facebook, you should wait to see what Facebook does to reassure its advertisers that fraud will be monitored effectively.  For now, the problem does not appear to be going away.

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