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

Imagine your company is so busy preparing for a board meeting that a secretary sets aside paperwork from a recently served lawsuit for a billion dollars over trade secrets.  Imagine further that your company bureaucracy fails to put it together that a lawsuit has been filed until such a time that your company becomes defaulted in the case, to the tune of $1.26 billion dollars.  Ouch. 

Well, that is exactly what happened at PepsiCo according to a report by Lynne Marek in the National Law Journal.  According to the story, PepsiCo for various reasons, failed to realize a lawsuit had been filed or a motion for default until it was too late.  The case involved allegations that PepsiCo stole trade secrets and ideas for Aqaufina from two Wisconsin men.  When the suit went unnoticed,  a Wisconsin state court judge granted a motion for default against PepsiCo.

Marek writes that PepsiCo is trying to undo the damage and vacate the default.  Perhaps PepsiCo can vacate the default, but if not, it is a devastating blow in litigation to lose your liability defenses. By all accounts PepsiCo indicates the lawsuit is questionable suggesting numerous defenses exist.  Unfortunately, it appears there is a chance they may never get to assert the defenses.

In Connecticut, if you are defaulted for failing to respond to a lawsuit and a default judgment enters against you, you also can lose the ability to defend against the allegations in the complaint.  If you further fail to appear in the case before the court determines the amount of damages (usually at a hearing), then you may also lose your ability to defend against damages claims. Of course, there are various ways to avoid a default judgment (such as filing an appearance before judgment enters), but if a lawsuit is ignored too long, you could face a similar fate as PepsiCo.

To avoid the PepsiCo disaster, Connecticut businesses should have a policy in place to handle all matters related to litigation or lawsuits.  A business should designate one person that all staff can refer litigation issues, lawsuit papers or any other documents.  Lawsuits should be given immediate attention so as to not miss any deadlines. 

In state court, deadlines can determined from civil summons or cover page of the lawsuit. 

• A defendant has to file an appearance within 2 days of the return date listed on the civil summons
• A defendant also has 30 days from the return date to file a responsive pleading to the complaint . 

These deadlines should not be ignored.  Although there are methods for vacating a default, even a frivolous lawsuit can end in a judgment if ignored for too long.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Here are some quick hits from Blogs I read around the country on business litigation.

Dionne Searcey of the Wall Street Journal law blog reports on the intellectual property fight over the red, white, and blue "Hope" image of President Barrack Obama created by Los Angeles artist Shepard Fairey.  Fairey is claiming his rights to the work, but apparently is confused as to his source material leading to the withdrawal of his duped attorneys. 

Rush on Business breaks down his tips for negotiating Franchise Agreements. Rush highlights the need to have an attorney review your franchise agreement and not to believe any franchisor that says you do not need an attorney or that they will not hold you to certain terms of the agreement.

A win for digital technology was reported on by Mack Sperling in the North Carolina Business Litigation Report.  Mack reports on a case where a settlement agreement was challenged under the statue of frauds because it involved land and there were no written signatures.  You can read here an earlier post from me on the statute of frauds in Connecticut.  The court upheld the agreement in part based on electronic signatures in emails exchanged between counsel. 

Nancy Savitt of the Privacy Law Blog reports on an enforcement action concerning the Children's Online Privacy Protect Act (COPPA).  The Federal Trade Commission fined Iconix Brand Group, Inc $250,000 for "collecting personal information from children without complying with COPPA's parent consent..."  The personal information at issue was dates of birth.  Collecting personal identifiers such as dates of birth can be a real risk for any business.  Read here for some of my posts on how Connecticut businesses can address privacy concerns.

 Jeffrey Mehalic's West Virginia's Business Litigation Blog discusses an interesting suit involving misappropriation of trade secrets against the Pittsburgh Post-Gazette.  A corporation, Mylan, brought a lawsuit against the paper claiming misappropriation of trade secrets and conversion for articles that were allegedly not favorable to Mylan.

Edward McNally of Delaware Business Litigation Blog reports on a case upholding Delaware as a forum for a trade secret case.  This post is informative in that it discusses why Delaware is often a preferred forum for corporate litigants trying to protect trade secrets. 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

In the Business Torts category of this blog, I recently covered the basic law in Connecticut concerning interference with business relationships.  Today's post concerns another business tort known as "defamation" and how it intersects with the growing use of social networking sites.

There already have been several lawsuits for defamation arising out of use of social networking sites, such as Twitter and Facebook. For example,  The California Defamation Blog lists several celebrities involved in defamation cases, including Courtney Love who was sued by a fashion designer for defamation after a series of derogatory Twitter posts by Love.  Craig Kanalley of Chicagonow.com reported that a property owner sued a tenant for disparaging Twitter comments. The Chicago Tribune recently reported on a defamation lawsuit brought by a mother and her son after a phony Facebook profile was created showing the son was a racist.   

Should Connecticut businesses be concerned?  Clearly, the type and variety of these suits are on the rise. In legal circles, these type of claims have a category of their own called "cyber slander" or "internet defamation."  Given the popularity in use of social networking sites, and the ease in which statements can be broadcast to millions, it is safe to  predict that more defamation cases will be filed in the future. 

Connecticut businesses can be affected by defamation suits involving social networking sites and the internet in a number of ways, such as:

• Employees making comments about a competitor
• Employees making comments about supervisors or co-employees
• Employees making comments about the company's products
• Competitors making derogatory comments about the company
• Phony Facebook or Twitter profiles
• Derogatory comments about the company 

In Connecticut, defamation encompasses defamation by spoken (slander) and written (libel) words. In general, to raise a proper claim for basic defamation, a plaintiff must show that:

1. A defamatory statement was made
2. The statement identified the plaintiff to a third person
3. The statement was published to a third person
4. The plaintiff's reputation suffered injury as a result of the defamatory statement

In regards to businesses, there is also a defamation claim sometimes referred to as "commercial disparagement" or "trade libel."  For this type of claim, a plaintiff must prove disparagement of a business' goods or services by falsehoods published or communicated to a third person.

With the ease of publication to millions over the internet, it is easy to see how someone might publish a defamatory comment whether it be on a blog, social networking site, or website.   Chances are, if you are in business, either you, someone who works for you, or a competitor has commented about the business in cyberspace.

For a business, the best way to avoid a lawsuit for defamation as a result of employee use of sites such as Twitter and Facebook is to have a written policy that governs employee use.  The details of each policy will differ depending on your business, but clearly the policy should prohibit any defamatory or derogatory comments about the business, employees, or competitors.

In situations where a competitor or customer disparaged your business' products or services, a business may want to consider legal action and determine if grounds exist to issue a cease and desist letter, a take down letter, or initiate a lawsuit.  Internet defamation can ruin a business' reputation overnight and should be addressed immediately regardless of whether the business pursues legal action.   

For a business, whether legal action is taken may depend on the severity of the disparagement and the damage done.  In some cases, a cease and desist or retraction is a practical solution especially when a defamation suit would bring added attention to the matter.  In other cases, legal action, such as a defamation lawsuit, may be required to stop ongoing damage or serious problems.

Regardless of the situation, Connecticut businesses should, at a minimum, monitor cyberspace for defamatory comments.  Comments that might lead to a lawsuit could come from your own employees, a competitor, or a disgruntled customer.  A written policy is a good way to minimize risks of employee comments.  As for competitors and customers, Google alerts is a good way to monitor use of a business' name on the Internet. The alert will send you an email every time your business name is found on the internet. 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

A whole series of new laws went into effect starting October 1, 2009.  For a full list of the laws you can find a link on Dan Schwartz's Employment Law Blog.  For a humorous "quick and dirty" summary you can go to Ryan McKeen's Connecticut Law Blog. If you want to know the new taxes and higher fees, read these articles by Susan Haigh of the Day and Christopher Keating of the Courant.

If you just want to know the laws affecting business, the Connecticut Office of Legislative Research puts together a nice summary.  From that summary, I offer a few highlights of the laws that went into effect October 1, 2009. 

BUSINESS CORPORATE ACT CHANGES-- PA09-55

There are several changes to the Connecticut Business Corporation Act.  To most significant change is on Dissolution and is summarized in section 23.  Here are the highlights:

• eliminates requirement that court dissolve corporation in certain situations involving deadlock in management and elections
• permits, instead of requires, court to dissolve corporation in certain situations involving deadlock and irreparable injury is threatened because of the deadlock

Safeguarding Personal Information-- PA 09-71

This is an act concerning state chartered banks and requires safeguarding of personal information, which is information that can be associated with an individual through an identifier like a Social Security number.  The act gives the Department of Banking authority to enforce the law against state chartered banks.  Any bank that adopts the security and privacy provisions that comply with the federal Gramm-Leach-Bliley Act is in compliance with the state act.

Penalty for Doing Business Without Authority -- PA09-83

This act increases the penalty on foreign businesses that conduct business without registering.  I covered this act on an earlier blog post here.

Consumer Privacy and Identify Theft -- PA 09-239

Several changes were made to social security numbers and the personal identifier information.  There were also changes to the laws concerning identity theft. 

Most significant to businesses are the provisions that penalize employers for failing to:

• obtain and retain job applications securely
• take reasonable steps to destroy applications when disposing of them
• allows the Department of Consumer Protection and Attorney General to enforce its provisions
• a civil penalty between $500 and $500,000 may be imposed for failure to comply. The fines will be deposited into a newly established Privacy Protection Guaranty and Enforcement Account

I intend to a more detailed blog post on this topic in the future.  Businesses should also be aware of the Act Concerning Social Security Numbers, which I wrote about in an earlier technology tip post here.

Customer Access to Restrooms - PA09-129

This act mandates that retail establishments give access to restrooms to individuals with certain medical conditions, even if the restroom is not open to the public.  The act applies to customers with proof of certain medical conditions, such as inflammatory bowel disease.  The act does not require any changes in construction for the non-public bathrooms.

 Employment--PA09101

This act makes changes to the ban on employer discrimination for gender in compensation to employees.  Allows the court to award back pay, compensatory, and punitive damages for claims that fall under the act.  Dan Schwartz details the provisions of this act here.

• Email This
• Print
• Comments
• Trackbacks
• Share Link