Just the FAX, ma’am
Could a tiny FCC infraction drive a White Bear Lake printer out of business?
Remember fax machines? Once they were a cutting-edge technology, but most of what made them important has been superseded by the advent of cheap printers, PDFs and high-speed computers.
Doug Walburg, who owns Mariposa Publishing in White Bear Lake, remembers faxes only too well. An omission he made on one advertising fax he sent out half a dozen years ago has brought him a lawsuit that could end up costing him almost $48 million.
The suit was initiated by Michael Nack, an attorney in St. Louis. Nack was unhappy at receiving an unrequested fax with no opt-out possibility (and, really, whose day would not be completely ruined by such an occurrence?). Omitting the opt-out box in a fax is a federal offense that carries with it a fine of $500 to $1,500 per fax sent. That, Walburg points out, would quickly add up to a fine that would drive him out of business.
Nack’s no-opt-out irritation with faxes has surfaced in previous lawsuits. For those and the current suit, he hired St. Louis attorney Max Margulis, who specializes in fax cases. He has prosecuted over 2,000, mostly class action fax-related suits. For this suit Nack created an aggrieved class composed of all the people who had received opt-out-less faxes from Walburg. While members of the class will participate in any winnings, the lawyer who brings the case takes one-third of the money off the top.
Some would accuse the people behind the suit of pursuing it only for money. But Margulis says these suits are protection for those who receive unwanted faxes, and he is only following federal law. “If someone gets hundreds of [unwanted] faxes,” he says, “they have to call hundreds of people to opt out. And the regulations in this case, set by the FCC, are pretty clear: That any advertising fax letter . . . had to have a clear opt-out notice.” Otherwise, Margulis warns, recipients of the unwanted faxes would lose the use of their fax machine, paper and toner.
Not surprisingly, Walburg’s attorney Tim Wolf has a different view. “I’m not aware,” he says, “of any social benefit associated with this case.” The case has wound through several courts, all the way up to the U.S. Supreme Court. It refused to review the case and sent it back to the trial court in early 2014.
Wolf says the case looks a lot like making use of federal law for personal benefit. That, he says, is one reason he has filed a petition with the FCC to change the regulation under which the suit is brought. In his petition, Wolf says that the “practical consequences” of not overturning the decision against Mariposa would be “to permit parties to obtain crippling monetary damages on the basis of unlawful FCC regulations.”
In November, the FCC found in favor of granting Walburg a waiver for the opt-out box, sparing him the liability delineated in the federal Telephone Consumer Protection Act.
“I’m relieved,” Walburg told the Star Tribune. “It’s been kind of stressful having a $48 million lawsuit against you.”
Things are heating up at Globe
Yet again, two for-profit universities are taken to court.
The jointly owned Globe University (GU) and Minnesota School of Business (MSB) have been sued so often these last few years, you’d think they might consider offering a course on how to run afoul of the law. They’ve faced intense scrutiny for, among other things, the high cost of the degrees they offer, poor graduation rates, leaving their students deep in debt and consumer fraud.
Last year a former Globe dean turned whistleblower, Heidi Weber, accused the school of violating multiple accreditation standards, falsifying job placement numbers and using unethical tactics to mislead students. A second suit, brought by a former MSB dean, accused his former employer of exaggerating its job placement record and inflating its graduation rate. Both won their suits.
Former students have sued the company on multiple occasions. Now the Minnesota attorney general’s office is suing the schools, alleging four major complaints that they say add up to consumer fraud and a violation of the Uniform Deceptive Trade Practices act:
- Misleading marketing
The lawsuit states that it is only after enrolling (and paying class fees) that some students find out the criminal justice degree offered by GU will not qualify them to become police officers in Minnesota. And though Globe says that information is fully spelled out in both their catalogue and their written enrollment agreement, their advertising seems to offer a different message. One of the school’s ads shows a police officer in uniform with a badge saying, “Make the world a better place. Earn a criminal justice degree.”
- Misrepresented job opportunities
The lawsuit says Globe’s website promises “a lifetime job placement service. [Globe’s] career services department works diligently with students and graduates [to secure employment].” But students joined in the AG’s lawsuit tell a far different story. After completing his MSB business management bachelor’s degree, “T.S.” says he was “placed” in a job that required a high school education and paid $12 an hour. He has been unable to find a business management position and now works as a bartender.
- Shady sales tactics
Businessweek’s title for its article on this lawsuit was “How to Run a Business School Like the Wolf of Wall Street.” Stories about students facing the school’s high-pressure salesmanship abound. When E.C., a former student and participant in the lawsuit, told her Globe advisor that she needed time to think about enrolling, she was told she needed to enroll that day to secure a spot at the school.
- Misleading information about the transfer of credits
Globe/MSB boast to their students that they are nationally accredited. What they don’t emphasize to students, says the attorney general, is their credits are unlikely to be transferrable to any Minnesota university. After earning his business associate degree, J.G. transferred to Metropolitan State University to complete a bachelor’s degree. Because Metropolitan State, like most Minnesota universities and colleges, does not accept MSB’s credits, J.G., who already had $30,000 in student loans, had to start his business schooling all over again at Metro State.
Naomi McDonald, a spokesperson for the two schools, says the AG’s suit unreasonably inflates the problem, and “ignores both the school’s written disclosures . . . as well as the student’s written acknowledgement of those disclosures.” She says the attorney general “identified approximately 34 of over 10,000 students . . . who ‘claimed’ that they didn’t read or understand our school’s clearly described disclosures.”
Since 2010, enrollment at the Globe/MSB campuses has plummeted from over 10,000, to just 4,900, according to Kyle McCarthy, writing in the Huffington Post. Last June, McCarthy reports, the school was forced to close its Shakopee facility due to low enrollment.
Hennepin County District Court has scheduled a December 2015 trial.
Battle of the monster corporations
‘It really came down to the money.’
When giants rumble it often takes a giant to bring clarity to the situation. And so when Starbucks Coffee decided in 2010 to unilaterally break its contract with Kraft Foods, Kraft called in Robins Kaplan’s Mike Ciresi to help arbitrate the fight.
The nasty divorce started with a wedding, as always. Starbucks wanted a higher profile in grocery stores, and Kraft had the distribution force to accomplish that. It looked like the perfect fit. So Starbucks signed an agreement in 1998 that gave Kraft exclusive right to sell, market and distribute its bagged and bottled coffee in grocery stores across the nation.
Kraft performed admirably. When the agreement was signed, Starbucks grocery sales were only $50 million a year. By the time of the divorce, Kraft had raised that to about $500 million a year. It also multiplied by 10 the number of grocery stores that sold Starbucks products.
The problem for Starbucks was that its contract with Kraft locked it out of much of the fast-growing coffee “pod” market. It stipulated that Starbucks could make brew-cups only for the Kraft-owned Tassimo machine. But Keurig had captured the market, and that market was closed to Starbucks.
Starbucks wanted out of its contract with Kraft, and offered $750 million to terminate it. It’s not noted whether Kraft snickered at that, but they did turn it down. In 2010, four years before the contract’s end, Starbucks decided to break with Kraft.
Starbucks claimed that Kraft had breached the deal by devising advertising programs without Starbucks’ feedback, and by failing to provide market projections and timely budgets.
When the $750 million offer was rejected, the two companies went into arbitration. Before its resolution, Starbucks decided to abandon the agreement. And with that, Mike Ciresi was called.
Kraft’s general counsel Marc Firestone knew Ciresi from representing Philip Morris in the 1994 tobacco lawsuit, and this time wanted him on his side. Ciresi was hired to lead the arbitration. The arbitrators concluded Starbucks owed $2.7 billion to Kraft. That’s a lotta lattes.
Ciresi told ReelLawyers.com that “Starbucks, and specifically Howard Schultz, wanted to get the business back, but didn’t want to pay for it, so he alleged a breach in the contract. It really came down to the money. Starbucks valued the business at about $700 million and Kraft at about $2.9 billion, and the decision was $2.75 billion.”
A whistle-blowing Viking sues to change NFL culture.
If you think the NFL has seen trouble this year, imagine what mayhem would have resulted if an NFL coach had said “Let’s round up all the African-Americans, send them to an island and nuke it till it glows.”
Vikings special teams coach Mike Priefer might well be able to imagine such a comment, seeing as last year he said that exact thing, only he said “gays” instead of “African-Americans.” Then-Vikings punter Chris Kluwe was there and was not amused. He berated the coach for the statement and, he says, the coach replied that it was just a joke among friends. Some joke.
In a year that’s seen the disgraceful behavior of Ray Rice, Sam Hurd and Adrian Peterson, among others, Vikings fans can be proud they had a player like Kluwe, who got himself in trouble for his zealous fight against what he considered injustice.
Kluwe, says his attorney Clayton Halunen, is a person of strong convictions. “It was a dream for him,” Halunen says, “to end up in the NFL. But when the amendment barring gay marriage came up in Minnesota, he was against it with every fiber of his being. He became a leader in the fight against the amendment and was willing to risk his career to do that. He knew he could lose his job.”
The state constitutional amendment barring gay marriage was defeated in the 2012 election, and the following May, Gov. Mark Dayton signed into law a bill that allows same-sex couples to officially marry. That same month Kluwe was let go by the Vikings.
Kluwe decided to sue. He believed that he lost his job in retaliation for outspokenness, both against Priefer and the amendment.
The pre-suit draft complaint his lawyer presented to the Vikings alleges, among other things, that he was a victim of:
- Breach of contract
- Religious discrimination. Kluwe, “cheerfully agnostic,” claimed that Priefer had many times warned him he was going to hell—with the gays—because he wasn’t a Christian.
- Age discrimination. Kluwe says the coach had warned him he was, at 32, “past his peak.”
- Reprisal. Because of his strong and very public views on gay marriage.
“The comment about ‘nuking’ the island,” says Halunen, “was the last straw for Kluwe. He tried to get a number of players who heard the comment to sign an affidavit about it, and he went to management to make them aware of it. And then, several weeks later, his contract was not renewed.”
The Vikings say that his release had nothing to do with his advocacy and had everything to do with his performance on the field. They suspended Priefer for three games (later reduced to two) after he acknowledged making the “nuke ’em” statement. They also commissioned an investigatory team, led by former Chief Justice of the Minnesota Supreme Court Eric Magnuson, to determine whether the contract nonrenewal was based on retaliation or on ability.
The report found “The record fails to support the claim that the Vikings released Kluwe because of his activism on behalf of same-sex marriage, but instead because of his declining punting performance in 2012 and potentially because of the distraction caused by Kluwe’s activism as opposed to the substance of such [italics ours].”
After that, Kluwe and the Vikings went into discussions to find a resolution acceptable to both sides. Though Kluwe did not get his “dream job” back, the Vikings agreed to substantial efforts to benefit the GLBT community, including donating a “significant” amount of money to five GLBT charities, implementing a zero-tolerance policy for anti-gay comments, and sponsoring a national symposium, to be held this year in Minneapolis, on homophobia in professional sports.
Though Kluwe received no monetary settlement, Halunen says “the suit for him was never, ever about money,” but about “changing and opening the dialogue on homophobia in professional sports.”
A suit to repair Minnesota’s severely dysfunctional sexual offender program.
Remember the advertisement for the Roach Motel? “They check in, but they don’t check out.”
That could well be the motto of the Minnesota Sexual Offender Program (MSOP). Since it began in 1995, over 700 offenders have been locked up at MSOP’s two major incarceration facilities at Moose Lake and St. Peter, yet no one has ever been released. Eighteen prisoners have died serving time there.
That dismal record is the basis of a class-action lawsuit brought by 14 of the program’s inmates, who claim it is unconstitutional, because while it was originally intended to rehabilitate inmates, it has become a prison where they are held indefinitely.
Prisoners are sent to Moose Lake or St. Peter ostensibly to receive rehabilitative therapy to help them avoid reoffending when released. But treatment at the center represented only 11 percent of the $67 million spent on the facilities in 2011. According to a devastating series of articles in the Duluth News Tribune, three of Moose Lake’s therapists had only high school diplomas.
State and federal courts have held that the program is legal only if adequate treatment is provided—all inmates, after all, have served their complete prison terms before they are sent there. Treatment was the raison d’être of the program, and yet most everyone seems to agree that it has morphed from a treatment center to a high-security prison.
Inmates at Moose Lake receive fewer hours of therapy there than they would in a regular state prison. Dr. Michael Farnsworth, one of the program’s co-founders, told the Associated Press that he left the program in 2003 because the operation had become a detention center rather than a treatment center. “My job is to provide treatment,” he said, “not to run prisons.”
Minnesota deputy Attorney General Nate Brennaman told the Pioneer Press that the law doesn’t require successful treatment outcomes for MSOP inmates, and it is in line with acceptable standards.
The lawsuit has fallen into the hands of U.S. District Judge Donovan Frank, who wrote that the program stands a good chance of being found unconstitutional. Frank’s decision was influenced both by a report on the system issued by the Legislative Auditor and by a panel report Frank commissioned. Both investigations found serious flaws in MSOP.
Frank’s 75-page ruling urged the Minnesota Legislature to come up with a solution so that the lawsuit doesn’t result in a takeover of the system by the federal government or the release of all the offenders at once. He called MSOP “one of the most draconian sex offender programs in existence.”
To date, the Minnesota Legislature and the governor’s office have been unable to formulate a plan to meet Judge Frank’s demands.
Attorney Dan Gustafson, of Gustafson Gluek, who is arguing the case for the prisoners, says the Legislature is not the place to seek this kind of change. “If you leave these kinds of decisions to the ballot box,” says Gustafson, “you will not be releasing people. We need to have decisions made by medical people and not politicians.”
Gustafson says his claims for systemwide change will be based on the 14th Amendment right to liberty, as well as issues detailed in the state auditor’s report on MSOP. “Most of these people,” he says, “are violent offenders, I get that, but not all of them are. There are the elderly . . . the low cognitive-development group, which even the state has acknowledged don’t belong there . . . and people who committed their sexual infractions as juveniles.”
Meanwhile, the clock is ticking. While no one is released from the two facilities, 50 inmates a year are added, at a cost to the state of an average of $120,000 per inmate year. The case will go before Judge Frank again in February.
Jesse rides again
The former governor sues, and pulls off another Minnesota miracle.
It may be hard to imagine how anything could much hurt the reputation of Jesse Ventura. He is, after all, the guy who seriously discussed the theory that lizard-like, shape-shifting humanoids are not only real, but masquerading as trusted world leaders. Famous retired wrestlers, perhaps?
But this summer it was concern for his reputation that brought Ventura to a Minnesota courtroom, in a lawsuit he brought against the estate of Iraq War hero Chris Kyle.
The suit concerned a story Kyle tells in his best-selling book American Sniper. Kyle relates that at a 2006 gathering of Navy SEALS, he punched out a guy he identifies as “Scruff-face,” after Scruff-face said derogatory things about then-President George W. Bush, the war in Iraq and the SEALs. In the fight that ensued, Scruff-face ended up worse for wear, on the sidewalk with a black eye. In a later series of radio interviews, Kyle identified “Scruff-face” as Ventura.
This story, Ventura claimed, brought his career “to a screeching halt.” More moderately, the lawsuit claimed the story had seriously injured Ventura’s reputation and undermined his “future opportunities as a political candidate, author, speaker, television host and personality.”
This was certainly the ironic trial of the year. Ventura righteously denied he had made the anti-American statements Kyle attributed to him, even though years earlier he had publicly denounced the U.S. as a “fascist” nation akin to Soviet-era East Germany. To gain back his lost reputation he filed suit against the widow of an American war hero. And, as the Star Tribune’s Jon Tevlin pointed out, a guy who got famous staging fake fights sued a guy over a faked fight.
But once the case was brought to court, the issue became a matter of law. Defamation attorney Zorislav Leyderman says defamation cases like this one are very difficult to win, and even more so when it involves a celebrity, where the evidentiary bar is higher.
The jury, says Leyderman, had to decide if Kyle, who had since died, was lying or telling the truth. If he was telling the truth, the case would end. If the story was untrue, did Kyle know it was false, and did he publish it knowingly or with a reckless disregard for the truth? In the case against a public figure such as Ventura, it also must be established that the defendant acted with malice. And, finally, could it be conclusively shown that the story damaged Ventura’s reputation? Leyderman adds that “while no formula exists for determining the value of a damaged reputation, presenting objective evidence can assist the jury in awarding meaningful damages.”
This the lawyers did, enlisting a parade of witnesses to the event, all testifying to the court that the event did, or did not, happen. In his summary to the jury, Kyle’s lawyer John Borger said to conclude Kyle was lying would mean that all 11 of his witnesses were lying as well. Ventura’s lawyer, of course, could have said the same about his witnesses.
Determining the damage to Ventura’s reputation required a cause-and-effect relationship that seemed impossible to prove. Borger scoffed at Ventura’s claim that Kyle used the story, and Ventura’s name, to sell books. Borger expressed doubt that Kyle’s book had become a best-seller because of a few pages, and he suggested that the former governor’s popularity had fallen off of its own accord.
Though most defamation lawyers were betting against it, Ventura pulled off another Minnesota miracle. The jury, split 8-2, ruled in Ventura’s favor, awarding him $1.845 million. Last September, attorneys for the Kyle estate asked a federal judge to throw out the judgment or retry the case. That motion has yet to be acted on.
Target: a trendsetter as always
“Once more unto the breach, dear friends . . .”
—King Henry in Shakespeare’s Henry V
It’s been a trend-setting company for years, but this was one trend Target would have rather avoided.
In December 2013, the company revealed that its credit card security had been breached and up to 70 million names, along with home and email addresses, had been stolen. It was the largest credit card breach in the country. But shortly after that, Home Depot announced it too had been cyber-attacked, and the breach was even larger than Target’s. After Home Depot came an even-larger-yet attack on JP Morgan. Even our neighborhood Dairy Queen stores had cyber-theft.
But Target was the first, and it couldn’t have come at a worse time for the retailer—in the middle of Christmas buying season. Black Friday morphed into a very dark season.
The breach was traced to a company Target hired to monitor the efficiency of its energy systems. The company burned Target badly. Hackers were able to use the security credentials given to that company to break into Target’s computer system.
But, according to Bloomberg, it didn’t have to happen. It quoted an independent cyber-security expert who called the attack “absolutely unsophisticated.” After Target’s appearance before a Senate investigating committee, some senators seemed to agree. Sen. Richard Blumenthal told Target’s CFO that the company had “multiple warnings” about the breach, “and to be quite blunt,” he said, “these multiple warnings were ‘missed by management.’ ” Sen. Jay Rockefeller said Target fell “far short” of protecting its customers.
Ouch. Such statements not only served to wake management up, but helped nourish the feeding frenzy that animated courtrooms across the nation. It took only two days after the breach before consumers filed the first two lawsuits. Over the last nine months, they have cascaded from all corners of the country. U.S. District Judge Paul Magnuson in Minneapolis, presiding over all the resulting suits, divided them into three clusters.
The first, and largest, group consists of consumers who claim they have been hurt by the breach. This group is smaller than might be expected. Wendy Wildung, an attorney with Faegre Baker Daniels, handling the suits for Target, told the Star Tribune that, as in other breach cases, “the largest majority of them have been dismissed,” because the damage they suffered was not actual harm but prospective harm. The Star Tribune quotes Visa’s Ellen Richey as saying it had not seen the expected levels of fraud since the breach, and credited that to Target’s quick public disclosure of the problem.
A second group consists of banks and credit unions that suffered credit losses and losses from the costs of reissuing cards. As of last February, banks and credit unions across the country spent more than $200 million reissuing cards, according to the Star Tribune. Finally, there are four cases of shareholder lawsuits. Judge Magnuson has scheduled trials for each cluster, beginning in early 2016.
Target’s cost from the breach fallout is estimated at up to $1 billion. As of August, it said its costs have run to $148 million.
Target has taken full responsibility for the breach. The company has promised to cover any customer losses. In addition, it offered free credit card monitoring. Maybe more importantly, the company is overhauling its systems to bring them up to state of the art.
Minnesota’s latest Indian war in the courtroom
‘When men are hungry, they help themselves.’
It’s a long way from modern New Ulm’s raucous celebrations of Oktoberfest to the 1859 siege of New Ulm. But that year New Ulm became the site of the largest battle waged over a U.S. city since the battles of the Revolutionary War. The conflict was part of a six-week war between the displaced Dakota people and the new settlers. It ravaged a large part of the state and, according to the Minnesota Historical Society, “was a long time in the making, of bloody duration and brutal in its aftermath. It was complicated, and still is.”
Those complications have reverberations even in today’s court system. A class-action lawsuit filed by a group of Dakota Indians demanding the 12 square miles of land that was promised to them 150 years ago by the U.S. Congress is making its way through U.S. District Court in Minnesota. To understand the suit, the court has to unravel the details behind a less than honorable century-and-a-half-old war.
The war started when a few young Indian warriors, on a mission to find food, came across some white settlers and killed them. They went back to their leaders for protection and urged a war on the settlers. Little Crow, one of those leaders, thought war was a losing proposition for his tribe, but events had been set in motion, and he led the group to war.
The war that ensued was notable for viciousness on both sides. The Dakota slaughtered hundreds of settlers. By the time they attacked New Ulm, the city had erected defenses and, despite heavy losses, was able to repel the attack. After six weeks the Dakota surrendered and were brutally treated by the victors. Over 300 Indian prisoners, with no legal representation, were convicted of murder and rape by a military tribunal and sentenced to death. President Lincoln personally reviewed the trial and reduced the number sentenced to hang to 38 men (the rest, he decided, were engaged in war, not murder or rape). In what is still the largest mass execution in the history of the U.S., the 38 men were hung.
Lincoln’s exoneration did not sit well with Minnesota’s leaders. Gen. John Pope, who helped lead the settlers, represented a widespread attitude toward the Dakota when he wrote, “They should be treated as maniacs or wild beasts, and are by no means a people with whom treaties or compromises can be made.”
The maniacs, needless to say, had a different story. In the near-famine of 1862, the Dakota were denied both the money due them by the government and any access to government food stores. With no money, their credit to buy food was cut off. They were quite literally starving. Wrote one to the U.S. agent in charge of food and money distribution: “We have waited a long time. The money is ours but we cannot get it. We ask that you, the agent, make some arrangements so we can get food… or else we may take our own way to keep from starving. When men are hungry, they help themselves.”
Not everyone supported their own people’s side in the war. Some white settlers tried to help the Indians, and some Indians protected white people from the death and devastation. And that fact is the basis of the suit currently before the U.S. District Court.
Because a small subgroup of Dakota refused to go to war and protected the white settlers in their area, a law passed by Congress promised them a swath of land near the Minnesota River. That decision was supported by no less an authority than Gen. Ulysses S. Grant. Like many government promises to the Indians, though, this one was never fulfilled. But it was never withdrawn, either, and remains on the books. So now the great-great-grandchildren of those settler-friendly Dakota have filed a suit, asking the judge to help them claim the land promised to them—12 square miles in southern Minnesota, stretching across parts of Redwood, Renville and Sibley counties.
Recovering that land holds many difficulties, not least of which is the scores of people who live there, many whose ancestors have owned the land for a century. Also on that land: Jackpot Junction Casino Hotel. The first suit by the Dakota heirs was filed 11 years ago and sought a share of the proceeds of Mystic Lake, Treasure Island and Jackpot Junction casinos. It failed. The current lawsuit is part of a decade-long effort by Dakota descendants led by attorney Erick Kaardal, to reclaim what on paper seems to still be legally theirs.
“The critical thing to remember,” says Kaardal, “is there’s a federal statute giving this land to my clients. And after the U.S. gave the land to the Indians and their heirs forever, the U.S. then sold the land.”
Words, words, words
Exceptional children are nice; exceptional loopholes, not so nice.
Ladies and gentlemen, we are about to descend into the world of legal wordplay. But this wordplay involves big stakes—not just the survival of a small Brooklyn Park sports equipment manufacturer, but, potentially, the restraining of patent trolls.
Though patent trolls sound like cute little elves, they are legal demons that clog the court system and blackmail small and large companies everywhere. Nineteen percent of all patent lawsuits filed from 2007 to 2011 were patent troll cases— infringement suits by businesses whose sole mission is to extract often-dubious royalties. Last year more than 100,000 businesses were threatened by trolls, and Brooklyn Park-based Octane Fitness was one of those.
Octane is a maker of elliptical workout machines. They are nationally recognized for their quality and innovation, and have found their way into homes and gyms across the country. Utah-based Icon Health and Fitness also makes elliptical machines, and they must have watched warily as Octane took more and more of the market.
Icon must have decided the courts might be a good tool to use against Octane and it sued for two patent infringements. The first involved a heart-monitoring feature, but that claim was so unreasonable that Icon dropped it early in the litigation. The second alleged that Octane was using a linkage system Icon had developed and patented.
Icon lost the suit. Then Octane, feeling its oats (and backed by its insurance company) decided to take on the monster of patent trolling. They countersued Icon, claiming that the original patent suit was frivolous and without legal merit. Octane wanted Icon to pay their legal fees, which at this point were approaching $2 million.
St. Louis-based Rudy Telscher, Octane’s lawyer, was outraged. “They invent something, it doesn’t work, they don’t bring it to market,” he said, “and then they say our machines are somehow conceived by their patent. Imagine a small company, you make less than $10 million a year and you’ve got the prospect of spending $2 million on a patent case. That can put you under.”
The legal requirements for the kind of attorney fee-shifting Octane wanted were that the case showed “materially inappropriate conduct,” whose claims were “objectively baseless” and “in bad faith.” It also had to be deemed by the courts as an “exceptional” case.
So was Octane’s an exceptional case? The federal appeals court thought not, and rejected Octane’s demand for legal fees. Octane brought the case to the Supreme Court, which gave its ruling last April.
Let the word games begin.
It became clear that the Supreme Court thought the standards for fee-shifting were being interpreted too strictly, in a way that encouraged frivolous lawsuits. They believed that lower courts should have greater latitude in deciding those cases. In order to relax those standards, the court had to relax the definition of what an “exceptional” case was.
In the end, they decided to eliminate the “objectively baseless” and “in bad faith” clauses. Now an “exceptional case” has become “one that stands out from the others with respect to the substantive strength of a party’s litigating position.” There was, said the court, “no precise rule or formula for making these determinations, but instead equitable discretion should be exercised” by district courts.
And with that, the justices struck down the appellate court’s refusal to grant Octane payment of their lawyer’s fee, which enabled the company to recoup $2.3 million.
My high-fructose corn syrup is so refined
The great Minnesota sweetener war.
This much we know to be true: Roses are red, violets are blue, sugar is sweet and so is high-fructose corn syrup (HFCS). The question remains: Are sugar and HFCS nutritionally the same?
This is far more than an academic question for several of Minnesota’s largest agribusinesses, which produce sweeteners for the $77 billion national market. One group includes Cargill and Archer Daniels Midland (ADM), among others, who manufacture their sweetener out of corn. The other group includes the state’s sugar beet growers, who make the more familiar table sugar you put in your coffee or baked goods.
Now these two groups are at each other’s throats, and duking it out in court.
The first shot in the war was fired by the Cargill-ADM group’s liquid HFCS, which has found its way into many American products, including almost all sodas, sauces and salad dressings, and many processed snack foods. Introduced in the 1970s, HFCS quickly caught on with American food processors, not least because it was cheaper than sugar.
But around 2000, sales of HFCS began to plummet. Some scientists said HFCS-sweetened soda was linked to an increase in obesity. Between 2003 and 2008, sales of HFCS dropped 11 percent. In 2008, the corn processors fought back with a public relations campaign designed to minimize the health claims, and to deny that there was any significant difference between their sweetener and ordinary table sugar. They asserted that, essentially, “sugar is sugar,” and that “your body can’t tell the difference.” Then they petitioned the FDA to change the name HFCS officially to “corn sugar.”
This sent the sugar group into a frenzy, pointing out that HFCS was different chemically from table sugar. The FDA turned down the application for the name change. In 2008, HFCS backers began a $100 million-plus advertising campaign touting it as nutritionally the same as sugar.
This all was too much for the sugar interests, who sued in 2011, accusing HFCS manufacturers of false advertising. Then they began their own campaign—what the corn syrup lobby describes as a systematic and intensive effort to identify HFCS as a health danger “more responsible for obesity than sugar . . . . [which] causes the body to release less appetite-suppressing hormones than sugar.”
Inevitably, corn syrup countersued.
Adam Fox, the lawyer for the sugar interests, with the Los Angeles office of Squire Sanders, says comparing the two groups is completely unfair. “It’s difficult to see,” he says, “how a national advertising campaign in excess of $100 million . . . can be compared . . . [to] writing a few letters to newspapers, in order to correct the record.”
That left the court to decide several major issues:
- Was there valid science to support the health claims made against HFCS?
- Is processed sugar different from HFCS in ways that are beneficial to health?
- Is either side guilty of false advertising?
This suit has generated over 700,000 pages of documents and brightened the prospects of some of the nation’s best law firms. A trial date was expected in November.
Steve Kaplan was editor of Minnesota Law & Politics for 20 years.
This article is reprinted in partnership with Twin Cities Business.