INSIDE THIS ISSUE
Scott+Scott is proud to announce that partner Joseph Guglielmo served as a panelist at The Sedona Conference TAR Case Law Primer on February 22, 2017 (the “Primer”). This program consisted of a comprehensive review of court decisions addressing the use of “Technology-Assisted Review (TAR)” in civil discovery from 2012 through 2016. The Primer, the result of careful review and analysis by a diverse team of The Sedona Conference Working Group 1 members, was updated in response to public comment and was designed to be an introduction and guide to the use of TAR in civil litigation and government investigations, without passing judgment on the efficacy of particular TAR applications or methodologies.
Mr. Guglielmo has been a frequent lecturer on litigation and eDiscovery topics and is a member of the Steering Committee of the Sedona Conference, an organization devoted to providing guidance and information concerning issues, such as discovery and production issues, as well as areas focusing on antitrust law, complex litigation, and intellectual property.
In addition to Mr. Guglielmo, other panelists included Editorial Team Leaders Lea Malani Bays and Sandra Rampersaud, Senior Contributing Editor Gareth Evans, and Judicial Observed Andrew J. Peck, U.S. Magistrate Judge (Southern District of New York).
The Primer is available for download free of charge from The Second Conference website, and no membership or registration is required to access these materials. Please visit https://thesedonaconference.org/publication/TAR%20Case%20Law%20Primer? for more information.
Scott+Scott successfully turned back a motion to dismiss its claims against Ann Inc., the parent company of Ann Taylor Factory and LOFT Outlet stores. Plaintiffs alleged that Ann engaged in a deceptive pricing scheme by inflating the cost of “original” prices for women's clothes and then deceptively advertising “sales” of 40% or 50% off. Ann also deceived consumers by falsely claiming that the clothes sold at its “factory” and “outlet” stores were once sold in its retail stores at significantly higher prices. Plaintiffs challenged both practices on behalf of a nationwide class of consumers.
Ann attempted to dismiss the suit by arguing both that Plaintiffs could not seek redress in court and that the consumer protection laws of several states actually allowed Ann to engage in its deceptive pricing scheme. By Order dated January 24, 2017, Judge J. Paul Oetken of New York's Southern District rejected all of Ann's arguments and denied its motion to dismiss in its entirety.
Like many corporate defendants caught engaging in phantom pricing, Ann argued that Plaintiffs – who are residents of California and Pennsylvania – could only pursue their case on behalf of consumers residing in those states, leaving consumers deceived in violation of other states’ consumer protection laws to fend for themselves. Judge Oetken noted that the question has divided courts within the Second Circuit, but firmly agreed with Plaintiffs that such arguments should not be considered at the earliest stages of litigation and should instead be reserved until Plaintiffs moved for class certification.
Scott+Scott has consistently worked to hold retailers accountable for their deceptive pricing practices and has pursued similar actions against other national retailers, including Sears.
Judge Oetken ordered Ann to file an Answer to Plaintiffs' Complaint and the case will now proceed to discovery.
The case is Morrow v. Ann Inc., No. 1:16-cv-03340 (S.D.N.Y.).
On February 13, 2017, Magistrate Judge Maureen P. Kelly issued a Report and Recommendation ("R&R") recommending that The Wendy's Company's ("Wendy's") motion to dismiss be denied in its entirety in First Choice Fed. Credit Union v. The Wendy's Co., et al., a proposed class action brought by financial institutions and associations of credit unions. Scott+Scott serves as co-Lead Counsel on behalf of the class of financial institutions. The lawsuit is the result of one of the largest data security breaches in the United States. The breach potentially affected millions of retail consumers, but its consequences especially impacted financial institutions who spent considerable sums in efforts to protect their customers.
Seeking to recoup their costs, these financial institutions filed a consolidated class action complaint alleging that Wendy's negligently failed to protect the personal and financial information of potentially millions of their customers, and that Wendy's violated the Ohio Deceptive Trade Practices Act (Ohio Rev. Code §4165.01, et seq.) ("Ohio DTPA"). In addition, the financial institutions raised claims for injunctive and declaratory relief. Associational plaintiffs, such as state credit union networks, did not bring class claims, choosing instead to seek equitable relief on their own behalf. Wendy's moved to dismiss all of these claims, but Magistrate Judge Kelly has recommended that Wendy's motion to dismiss be completely denied.
Magistrate Judge Kelly first found that the economic loss doctrine was not a basis for dismissal because it was plausible that the plaintiffs alleged damage to property in the form of computer data. With respect to their negligence claim, Magistrate Judge Kelly noted that the financial institutions advanced a plausible claim, notably highlighting the many specific negligent acts and omissions on the part of Wendy's alleged by the financial institutions. Magistrate Judge Kelly also recommended that the financial institutions' negligence per se claim be upheld, as §5 of the Federal Trade Commission Act has served as a basis for such a claim. Furthermore, Magistrate Judge Kelly recommended that the financial institutions' Ohio DTPA claim be sustained because Wendy's misrepresented the level of security of its payment card system, and that the financial institutions sufficiently alleged that they were damaged as a result of these misrepresentations.
In recommending that the financial institutions' claims for declaratory and injunctive relief be upheld, Magistrate Judge Kelly concluded that contrary to Wendy's arguments, the institutions had in fact plead sufficient facts to demonstrate that Wendy's misconduct concerns continuing action, and thus, that a real and immediate risk of a future breach existed. With respect to the associational plaintiffs, Magistrate Judge Kelly found that associational standing was appropriate where the association seeks declaratory and injunctive relief on behalf of its members.
In federal court, when a magistrate judge issues a report and recommendation, that recommendation must be ratified by a full Article III judge, who in this case, is Judge Nora Barry Fischer. Wendy's will have the opportunity to object to the R&R. If Judge Fischer ratifies the R&R, the case will move into discovery.
In a sentencing hearing in Bridgeport, Connecticut, on January 5, 2017, U.S. District Judge Stefan R. Underhill adopted a recommendation from the U.S. Department of Justice (the “DOJ”) and ordered four major banks to pay a combined $2.5 billion for conspiring to manipulate the prices of U.S. dollars and euros in the foreign exchange ( “FX” ) spot market.
The Defendant banks – Citigroup Inc. (“Citi”), Barclays Plc (“Barclays”), JPMorgan Chase & Co. (JPMorgan), and Royal Bank of Scotland Group Plc (RBS) – pled guilty in May 2015 to rigging currency rates. According to the plea agreements filed in the District of Connecticut, between December 2007 and January 2013, euro-dollar traders at Citi, JPMorgan, Barclays, and RBS manipulated FX benchmark rates through using electronic chats and coded language. As detailed in the plea agreements, these traders also used electronic chats to manipulate the euro-dollar exchange rates by agreeing to withhold bids or offers for euros or dollars to avoid moving the exchange rates in a direction adverse to open positions held by co-conspirators. By agreeing not to buy or sell at certain times, the traders protected each other’s trading positions by withholding supply of or demand for currencies and suppressing competition in the FX market.
By adopting the DOJ’s recommendation in the plea agreements, Judge Underhill imposed the following fines on each bank: (1) Barclays - $650 million; (2) Citi - $925 million; (3) JPMorgan - $550 million; and (4) RBS - $395 million. Judge Underhill also ordered Barclays to pay an additional $60 million criminal penalty based on its violation of its non-prosecution agreement with the DOJ. Each bank also received a three-year probationary term requiring them to report any potential misconduct or investigations by authorities, and Judge Underhill ordered that he would retain jurisdiction over the Defendants to supervise their fulfillment of their probation.
Judge Underhill strongly encouraged the DOJ to pursue prosecutions against individuals and seek prison sentences for those responsible for the misconduct. Judge Underhill noted that while corporate defendants are primarily punished by substantial fines, the individuals who committed the wrongdoing should face criminal sentences as the opportunity for further “mischief” exists. He suggested that Defendants fire these individuals and seek to recover their ill-gotten compensation.
Most Americans assume their retirement advisors work on their behalf, but in reality, some advisors pick and choose investments based on special perks and financial gain. With an estimated 73% of all investors consulting a financial advisor before purchasing shares and an estimated total of $24 trillion dollars held in U.S. retirement assets, conflicted advice can have a significantly negative affect on Americans and their retirement portfolios. A 2015 report by the Obama Administration found Americans lose about $17 billion a year on conflicted advice costs regarding their retirement savings.
A financial regulation intended to eliminate conflicts of interest between investors and financial advisors regarding retirement portfolios was set to take effect in April, but was halted this month by a presidential executive order. This regulation, known as the “fiduciary rule,” was approved by the Obama administration with the intention to require a higher level of accountability than the present suitability standard for advisors. Under the “fiduciary rule,” financial advisors are obligated to act in their client’s best interest and to receive no more than reasonable compensation. Investment firms would also have to disclose all of their compensation and incentive arrangements. Currently, brokers, financial advisors, and other financial professionals have no such legal obligation; they are only obligated to prove an investment recommendation meets their client’s defined need and objective. There is no duty to disclose a certain recommendation was selected because the investment yields a better commission for the advisor rather than it being the most beneficial for the client’s portfolio. The “fiduciary rule” was passed by the Department of Labor last year to more closely align the interests and goals of Americans saving for retirement and their advisors. However, its implementation is now in question.
On February 3, 2017, President Donald Trump signed an executive order directing the Department of Labor to overturn the “fiduciary rule.” This executive order now grants the Secretary of Labor the power to rescind or revise the “fiduciary rule” before it goes into effect this April. The order not only delays the rule’s implementation by 180 days, but instructs the Department of Labor to carry out an “economic and legal analysis” on the rule’s potential impact. But until then, advisors will continue to be held to the suitability standard with the potential to negatively impact a client’s retirement portfolio, costing Americans billions of dollars. Scott+Scott will continue to report on developments as they occur.
March Events in the USA
+March 4-7, 2017
California Association of Public Retirement Systems (CALAPRS)
350 Calle Principal
Monterey, CA 93940
This year’s theme is, “Navigating Deep Waters Ahead” The main focus of CALAPRS General Assembly conference is to provide an educational and informational forum for the public retirement systems in the state of California. Various service providers, university professors, as well as professional retirement organizations such as National Institute on Retirement will give educational presentations. The program generally offers practical guidance in a post-GASB World and will include a special session on “System Governance.”
+March 9-10, 2017
3rd Annual ESG, SRI & Impact Investing Summit produced by Financial Research Associates
Marines’ Memorial Club & Hotel
San Francisco, CA
Environmental, Social and Governance (ESG) refers to the three main areas of concern that have developed in recent years as many investments have had an ethical and environmental impact on businesses, society and the climate. “According to the forum for Sustainable and Responsible Investment, SRI investing grew by 929 percent- a 13.1 compounded annual growth rate- between 1995 and 2014”, Financial Advisor Playbook, Special to CNBC.com, Sept. 25, 2015. This year’s conference will focus on how you can best incorporate responsible investments that meet your return standards.
+March 20-22, 2017
Georgia Association of Public Pension Trustee (GAPPT) Annual Trustee School
Macon Marriott City Center
The Georgia Association of Public Pension Trustees is hosting its Fourth Annual Certified Pension Plan Trustee School with the aid and expertise of its dedicated service providers. GAPPT is a nonprofit association formed solely to promote and support the education and development of the Trustees and Administrators of Georgia’s Public Pension Funds. Trustee Certification school is open to all members of GAPPT. The two day program will be followed by an exam day. The Curriculum is designed to deal with pension administration, investing, funding and actuarial topics.
+March 26-28, 2017
PA County Commissioners Spring Conference (PA CCAP) in Dauphin County
Hilton Conference Center
The County Commissioners Association of Pennsylvania is a statewide, nonprofit, bipartisan association representing the commissioners, chief clerks, administrators, their equivalents in home rule counties, and solicitors of Pennsylvania's 67 counties. The County Commissioners’ Association of Pennsylvania (CCAP) and its member counties are committed to excellence in county government. CCAP advocates for and provides leadership on those issues that will enhance and strengthen the ability of county commissioners to better serve their citizens and govern more effectively and efficiently. The Association strives to educate and inform the public, administrative, legislative and regulatory bodies, decision makers, and the media about county government. The Spring conference is known as CCAP’s Legislative Conference.
+March 29, 2017
22nd Annual Meeting of the Public Finance Outlook Conference -Office of the CT State Treasurer
Rentschler Field 3rd Flr Club
East Hartford, CT
The Connecticut State Treasurer, Denise Nappier, provides a forum of the exchange of information in state finance. In addition to the financial outlook, the Treasurer gives an update for the Municipal Employees’ Retirement Fund as well as the Short-Term Investment Fund (STIF). This is an informational conference designed to assist state and municipal financial officials. The one day conference offers attendees an opportunity to meet and discuss matters of mutual concern as well as exchange information regarding best practices and innovative policies. Topics usually cover economic policy issues, financial regulatory reform, state aid to municipalities, legislative issues and efforts on behalf of the state college savings plan (CHET), municipal bond issues and other issues of concern to the group. This year’s conference will include a session on protecting your community against cyberhacking.
Government Finance Officers’ Association Conferences
+March 1-3, 2017
North Carolina Government Finance Officers’ Association (GFOA) Spring Conference
Sheraton Imperial Hotel and Convention Center
Durham, North Carolina
+March 5-8, 2017
Oregon Government Finance Officers’ Association (GFOA) Spring Conference
Salishan Conference Resort
Gleneden Beach, Oregon
+March 12-16, 2017
Missouri City Clerks & Finance Officers’ Association Spring Institute
Holiday Inn Executive Center
+March 29-31, 2017
New York State Government Finance Officers Annual Conference
Albany, New York
+March 30-31, 2017
New England States GFOA 25th Annual Spring Seminar
WalthamWoods Conference Center
+March 31, 2017
Michigan Government Finance Officers’ Association (GFOA) and (MMTA) Spring Seminar
East Lansing, Michigan