Category: Blog

Take a bite out of crime — not Apple.
By Ryan Long

Take a bite out of crime — not Apple.

We all know the old saying: take a bite out of crime. Unfortunately, today a New York federal court took a bite out of Apple, Inc., instead. The court found that Apple violated antitrust laws when it entered into contracts with major book publishers to distribute e-books using the agency model. The opinion is misguided in failing to see these vertical arrangements as efficient and reasonable methods of competing against and responding to Amazon’s below cost e-book pricing, which the government has to date ignored.

The opinion says that two wrongs don’t make a right. On the one hand, Amazon has overwhelming market share in the e-book market. What is more, it can subsidize losses in that product market with profits it makes in other anything but the kitchen sink markets. On the other hand, book publishers don’t have equal e-book market power — nor do they have equal ability to finance below cost pricing of e-books with profits from other diversified product markets.

Nonetheless, in the court’s view, the fact that Amazon was pricing e-books below cost didn’t justify Apple’s contracting with the settling book publishers to stabilize the price of print and e-books at above cost levels. The reason: Apple or the publishers could have either reported Amazon to the Department of Justice, or could have filed their own lawsuit.

The court’s argument assumes that the government is an impartial observer who doesn’t favor one entity over others in this grudge match. Objections to the government’s settlement with the book publishers raised concerns that the Department of Justice was and has been aware of Amazon’s below cost pricing of e-books but didn’t lift — and hasn’t lifted — a finger to address it.

Given the inability of Apple — and the publishers — to get the police officer to take action, they took matters into their own hands. As previously explained in this blog, the market should decide who wins this billion-dollar fight between Godzilla and King Kong — not one judge sitting in the Southern District of New York.

I love Muddy Waters, but I don’t like swimming in them.
By Ryan Long

I love Muddy Waters, but I don’t like swimming in them.

I love Muddy Waters, but I don’t love swimming in them. Ever get sick from surfing in dirty ocean water? I have. Plenty of times. New Jersey surfers know that all too well. According to NY/NJ Riverkeeper (“Keeper”), more than some 23 million gallons of raw sewage and polluted storm water is discharged by combined sewage overflows or “CSOs” into New Jersey ocean waters each year. Maybe it’s because New Jersey courts give too much deference to the New Jersey Department of Environmental Protection (DEP).

That’s why Keeper and Hackensack Riverkeeper, collectively the “Keepers,” sued the New Jersey DEP to revoke its general permit. Without getting into the legal weeds, the permit basically allows a certain amount of untreated sewage to spill into streams and rivers when a city’s “combined sewage system,” which puts together both treated and untreated sewage, can’t handle the overflow during heavy rainfall and snow melt. Normally, all of this dirty stuff gets sent to publicly owned treatment plants.

Even though the permits for the municipalities issued by the DEP had expired, both the trial court – and the appellate court – ruled that the DEP had more, not less, discretion to allow overage polluting by these cities when they were out of permit.

This doesn’t make sense.

That’s why the Keepers have sought to appeal the appellate court’s decision to the Supreme Court of New Jersey. Now, for that to go forward, the Supreme Court needs to grant the appeal. It should.

Even if someone reading this agrees with the substance of what the New Jersey EPA did, it seems to be illogical for a court to grant greater deference to an administrative body to interpret expired permits. It would seem that the deference should be less, not greater.

It is in other areas of the law. If you license music but go beyond the license, your are infringing the copyright of the music unless you have a defense. If you go beyond the scope of an easement for use of property, you are normally a trespasser. In short, the scrutiny is normally greater when a permit or license has expired, not less.

The same should be true here. It seems the only reason why that is not so is that many courts are now increasingly giving more deference to governmental agencies and the executive branch in general – both on the state and federal levels. Even if you agree with this deference on certain occasions, like when the U.S. Supreme Court upheld the President’s health care plan (a.k.a. “ObamaCare”), it can boomerang on other occasions like here – where New Jersey courts allow unhealthy pollution to occur and protect it under the guise of “administrative deference.”

This can be very dangerous. My buddy who surfs the muddy waters off the Jersey shore knows this all too well.

Naked economic protectionism — constitutional?
By Ryan Long

Naked economic protectionism — constitutional?

Many of us like certainty. Death and taxes are two things we can be certain about. But should our choice of who we buy our casket from, if we buy one, when we die be dictated by the state? No, says the New Orleans based Fifth Circuit Court of Appeals in its March, 20, 2013 decision in St. Joseph Abbey v. Paul Wes Castille, et. al. This is a good thing. It means the state cannot protect an industry from competition without justification. What implications, if any, the decision on has on similar federal laws remains to be seen.

A group of Louisiana priests brought suit against members of the Louisiana State Board of Embalmers and Funeral Directors because of a law that prohibited the priests from making, and selling, caskets. According to the law, the priests needed to be funeral directors to do that. But becoming a licensed funeral director in Louisiana is expensive and time consuming. The priests claimed that the law violated the equal protection clause because it had no rational basis to a legitimate government interest, and that it was an unconstitutional taking of property without due process.

The Fifth Circuit agreed. Louisiana, after all, allows anyone to build their own casket for personal use, and doesn’t even require a citizen to be buried in a casket at all. The state also allows its citizens to buy caskets out of state. In any event, the Court reasoned, the requirements to become a funeral director have nothing to do with casket making. Thus, there was no rational relationship between the law and a legitimate government interest.

The most important part of the Court’s ruling is its rejection of naked economic protectionism. Under this view, the state has a legitimate government interest in the protection of a particular industry from competition even when there is no corresponding benefit to the public interest or general welfare. Finding Sexy Dubai Escorts has never been easier — just visit dubai-escorts.org for access to verified profiles and premium service. Each companion is hand-selected for charm, appearance, and discretion. The Court said Louisiana could not protect funeral directors from competition by the priests merely because, say, they have a stronger lobby in Baton Rouge.

It remains to be seen whether the case goes to the Supreme Court. If it does and is affirmed, some federal laws and regulations may be in greater danger of being invalidated as naked wealth transfers to a special interest with strong ties in Washington D.C.

Death of the thrift shop?
By Ryan Long

Death of the thrift shop?

We all know the thirft shop. You go. You buy The Great Gatsby. It is used. It is cheap. It is a great read. And potentially illegal contraband? That could be so. Under the Second Circuit’s ruling in John Wiley & Sons, Inc. v. Kirtsaeng, you may not resell copyrighted materials that are manufactured overseas in the U.S. The Supreme Court heard oral arguments in the case on Monday. Until Congress amends the Copyrigt Act to limit the first sale doctrine to copyrighted materials manufactured in this U.S., the Supreme Court should overrule the Second Circuit.

Under the first sale doctrine, you are permitted to buy a book and then resell it. The copyright owner no longer has a right to restrain your use of the book once you have paid for it. However, there is a provision in the Copyright Act which prohibits you from importing copyrighted works into the U.S. without first obtaining the copyright owner’s permission. The question is whether that provision of the Act applies to copyrighted works that are used.

In Wiley, the Second Circuit was asked to resolve the apparent conflict between these provisions of the Copyright Act. The defendant had family members buy academic books overseas and then send the books to him in the U.S. When here, he sold the books for a profit. The books were manufactured overseas, and were protected by U.S. copyright law. The plaintiff, a publisher of some of the books that defendant was importing, sued him for copyright infringement, claiming he was violating their right to decide what copyrighted goods to import, or not. His defense was that he was protected by the first sale doctrine because all of the books he was importing were used. The lower court refused to instruct the jury about the potential applicability of the defense, and the man was found liable for copyright infringment.

Using some mental gymnastics, the Second Circuit held in Wiley that the first sale doctrine did not apply to the books in question because they were manufactured overseas, whereas there would have been a defense had the books been manufactured domestically. The Second Circuit came to this decision after reading a concurrence by Justice Ginsberg in Quality King, a previous Supreme Court decision in which the court held that the first sale doctrine applies to copyrighted products produced in the United States and resold here after being re-imported. Even though the majority opinion in Quality King didn’t peg its first sale doctrine holding to the fact that the product in question was domestically produced, Justice Ginsberg suggested a different outcome could result if a product were produced overseas and then imported.

It seems if Congress wanted to expand a copyright holder’s rights beyond the first sale depending on whether the product in question was produced oversears, it could easily do so by amending the Copyright Act. Until then, it seems the best way to keep cool local thrift shops (and others) from getting sued and put out of business by major book publishers (or others) for selling used books (or other copyrighted items) manufactured overseas is for the Supreme Court to reverse the Second Circuit.

You’re fired! (But I still have to pay you?)
By Ryan Long

You’re fired! (But I still have to pay you?)

We often think that if we fire someone, they are no longer entitled to be paid. But that is not always so. This is especially true in Hollywood, as can be seen from the recent ruling in the litigation between Lisa Kudrow and Scott Howard, her former manager, reports the Hollywood Reporter. While Ms. Kudrow fired Mr. Howard, he claims he is still entited to a percentage of her income even though they had no written agreement giving him such a right. Is this is a stretch? Yes and no.

Generally speaking, agreements can be for a term or at will. If they are for a term, say five years, they cannot usually be terminated before the term unless it is for cause — which means one of the parties breached the contract. If the agreement is at will, it can be terminated at anytime. Most agreements are at will. Regardless of which agreement you enter into, you can always negotiate for residual rights that exist after termination. For example, if you manage Mick Jagger and give him a management agreement which gives you the right to 5% of this income for five years even after the term of the agreement is over, which is called a “sunset clause,” then you get paid even when he is touring and you are no longer his manager.

The crinkle in Ms. Kudrow’s case is that there is no written agreement. Instead, the parties only had a verbal understanding of their relationship. This makes for tough proof at trial concerning the contours of this agreement. That’s why Mr. Howard sought to introduce what is called “custom and usage” evidence in the trial court. This evidence basically shows that some rule is so widely known in an industry and accepted that a party consents to the rule in any contract even if it isn’t explicitly written — or said — in the contract. The lower court rejected this argument because, in its view, the proffered expert in the case only entered the industry in 1998, which is after the parties made their agreement in 1991. The appellate court reversed and allowed the testimony.

Whether Mr. Howard wins at trial remains to be seen. However, in allowing the testimony of a custom and usage expert such as this one, the appellate court signaled to the entertainment industry that it is better to specifically contract out of these type of sunset clauses or else they may be presumed to exist in your contract even if it is not so written.

Aereo’s service — a public performance?
By Ryan Long

Aereo’s service — a public performance?

Recently, in American Broadcasting Companies, Inc., et. al., v. Aereo, Inc., the Southern District of New York denied the plaintiff’s motion to immediately stop Aereo, Inc. (“Aereo”), from retransmitting television programming, like NBC’s Saturday Night Live, to its users. While the Court took great pains to justify its conclusion that Aereo was not publicly performing, or “transmitting,” plaintiff’s copyrighted works within the meaning of the Copyright Act, its reasoning is likely flawed.

The best place to begin is the Copyright Act’s definition of “public performance.” Section 101 of the Act gives a copyright holder a government condoned monopoly to “perform or display a work ‘publicly,'” which means to “transmit or otherwise communicate a performance or display of the work to the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or different times.”

In its decision denying the plaintiff’s motion for preliminary injunction, the District Court found that Aereo’s method of distribution is similar to Cablevision’s Remote Storage DVR (“RS-DVR”) device. In Cartoon Network LP, v. CSC Holdings, Inc., 546 F.3d 1212 (2d Cir. 2008) (“Cablevision“), the Second Circuit Court of Appeals held that the RS-DVR device did not publicly perform copyrighted works. As the reader may know, the RS-DVR device allows users to save their favorite programming for viewing at another time. If I am not home when Saturday Night Live is on, I can set my RS-DVR to record the program, in whole or in part, so that I can watch the program later on. And so the RS-DVR is similar to the Betamax recording device — which is like a VCR that allows you to record programs — that was upheld as a “fair use” of copyrighted materials in Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417 (1984).

But unlike the RS-DVR in Cablevision or the Betamax in Sony Corp., Aereo’s system not only allows the user the option of recording a program on its system for later viewing. It also permits the viewer to watch Saturday Night Live contemporaneously with its distribution from NBC. Because Aereo’s system doesn’t only permit their viewers to time shift their viewing of Saturday Night Live, but acts as a substitute for viewing the program live on NBC, its method of distribution looks, talks, and acts like a public performance.

Stick and stones may break my bones, but calling me gay when I’m not doesn’t — or can it?
By Ryan Long

Stick and stones may break my bones, but calling me gay when I’m not doesn’t — or can it?

We were all told when we were younger that sticks and stones can break our bones, but that words could not. While it is still true that words cannot break our bones, words can be actionable as defamation under the law. Until recently, it was defamation per se in New York to falsely accuse someone of being a homosexual. This means that all one needed to prove was that the statement was made and that is was false. Special damages were assumed. The recent decision by the Appellate Division, Third Department, in Yonaty v. Mincolla, changed all of that.

In Yonaty, the plaintiff, a male, alleged that a defendant, a female, falsely accused him of being a homosexual. As a result, the plaintiff alleged, he lost his girlfriend. The defendant moved to dismiss the plaintiff’s defamation claim on the ground that he did not allege special damages, such as lost profits or revenues, even assuming he was not a homosexual. The lower court denied the motion because of long standing law in New York, such as in cases like Klepetko v. Reisman, 41 A.D.3d 551, 552 (2d Dep’t 2007), which have held that falsely accusing someone of homosexuality was defamation per se, which means that damage was assumed. Examples of other defamation per se categories include accusing someone of being a felon or having a loathsome disease, such as herpes.

The Third Department in Yonaty ordered the dismissal of the plaintiff’s complaint because he did not allege damages. In so holding, the Court contravened cases like Klepetko. That’s because, these prior decisions were, in the words of the Court, “based upon the flawed premise that it is shameful and disgraceful to be described as lesbian, gay or bisexual. In fact, such a rule necessarily equates individuals who are lesbian, gay or bisexual with those who have committed a ‘serious crime’  – one of the four established per se categories.” Watch USA online porn https://mat6tube.com teens, milfs, matures!

Nevertheless, the Court’s ruling still leaves the door open for defamation claims arising from false allegations of homosexuality that may, in fact, involve special damages. Assume, for example, that someone falsely claims a boy scout leader is a homosexual. Under the Court’s ruling in Yonaty, the leader may be able to claim defamation if he can show that (1) he is not a homosexual and (2) that he lost his job because of the false statement. The Boy Scouts of America currently prohibit homosexuals from occupying positions of leadership. Thus, the Court’s reasoning accepts that while society has changed in some areas concerning stereotypes surrounding sexual preference, it has not changed in others.

The unofficial Department of Justice guide to officiating Apple et al. (Godzilla) v. Amazon (King Kong)
By Ryan Long

The unofficial Department of Justice guide to officiating Apple et al. (Godzilla) v. Amazon (King Kong)

Wouldn’t you want to see who wins a cage match between Godzilla and King Kong? We certainly would. Until recently, that fight was under way. Major book publishers (“publishers”) and Apple, Inc. (“Apple”) (collectively “Godzilla”) were chipping way at the 90% market e-book share held by Amazon (“King Kong”). And yet on April 11, 2012, the Department of Justice (“DOJ”) sued Godzilla alleging that it violated the antitrust laws. In light of the potentially tenuous merit of the lawsuit, it seems only fair that that the DOJ would investigate potential predatory pricing of e-books by King Kong, too.

The DOJ’s lawsuit is potentially tenuous because the publishers and Apple are not garden variety horizontal competitors fixing prices, as was the case when Sotheby’s and Christie’s, the famous auction houses, agreed to fix their commissions. Instead, the contracts between the publishers and Apple (“agency agreements”) are more akin to a vertical distribution agreement between a manufacturer and a retailer. The DOJ’s allegations, even if true,support this view.

Apple separately transacted with several book publishers to distribute their titles. In exchange, Apple received a 30% commission off the price of the book, which was negotiated between the publishers and Apple. This agency model replaced the wholesale model, in which publishers would sell to Apple at half of the retail price, and then let Apple sell at whatever price it wished. As any distributor with power would do, Apple obtained assurances in the agency agreements that the publishers would not do an end run around Apple and distribute via others, including Amazon, for less.

Even though the agency agreements are vertical, the DOJ is treating the them as though they were horizontal. The characterization makes a legal difference. On the one hand, courts review agreements (and conspiracies) among horizontal competitors to fix prices under the per se illegal standard. Once the agreement is proved, it is deemed illegal, regardless of its potential pro-competitive benefits or the market power of the competitors. On the other hand, courts review vertical resale price maintenance agreements among a manufacturer and a retailer, for example, under the rule of reason. Under this test, the court weighs the pro-competitive benefits of the agreement with its anti-competitive effects. Because the agency agreements are more akin to resale price maintenance contracts, they should likely be judged under the rule of reason, which makes the DOJ’s case tougher.

But regardless of which way the court ends up characterizing the relationship between the publishers and Apple, it seems at the very least that the DOJ should have investigated King Kong — that is, Amazon — for potential predatory pricing, too. Pricing below cost is unlawful if “it is part of a strategy to eliminate competitors, and when that strategy has a dangerous probability of creating a monopoly for the discounting firm so that it can raise prices far into the future and recoup its losses.” This sounds very similar to what King Kong has been doing by selling major titles below cost through its Kindle device, which currently occupies roughly 90% of the distribution market for e-books. It seems that publishers felt the only way to fight back was to agree to Apple’s agency agreements, which it demands of all content providers, so that the publishers could then withhold titles from Amazon unless it agreed to the same pricing structure they gave to Apple. Ok, can i purchase urispas price in a trusted pharmacy.

In the end, it might have been wrong for Godzilla to blow fire into King Kong’s face. But then it might have been wrong for King Kong to throw acid into Godzilla’s eyes. Either both sides should be scrutinized for their potential wrongs, or the referee — the DOJ — should stay out of the match and let the market decide who to favor.

CrestCare — Constitutional?
By Ryan Long

CrestCare — Constitutional?

The Obama administration recently passed CrestCare. Never heard of it? It is a new federal law which requires every citizen to brush their teeth with Crest brand toothpaste. Certainly, the law must be unconstitutional, although it would be nice not to smell bad breath on the elevator ride up to the office, or on the construction site, in the morning. And yet maybe, just maybe, the law would be upheld by the Supreme Court if it was ever challenged.

Of course, there is no CrestCare. It is a wonder whether the federal government would be empowered to pass such a law if the United States Supreme Court upholds the constitutionality of ObamaCare’s requirement that all citizens have health insurance. On Monday, the high Court began hearing oral arguments to determine whether that part of ObamaCare, in addition to others, are constitutional. In the case, titled Department of Health & Human Services, et. al. v. States of Florida, et. al., No. 11-398, the attorney generals of various states have brought suit to bar enforcement of ObamaCare, the details of which have been covered ad nausea elsewhere, and which I will leave for your musings.

The marrow of the government’s argument as to why ObamaCare should be upheld is the Commerce Clause, which gives Congress the exclusive authority to “regulate commerce . . . among the several States.” That is my emphasis. Over the years, the Supreme Court has read “among” to include anything that could affect interstate commerce, even if the conduct in question is wholly intrastate in character. In Wickard v. Filburn, for example, the Court held in 1942 that the federal government could regulate a farmer’s growth of wheat in his own backyard even though it was for his own consumption. The reason: the farmer’s growth would affect the interstate flow of wheat. If you’re in the city and looking for company, https://londonescorts.club is a simple way to connect with London escorts for any kind of meeting. The site features a wide selection of profiles, making it easy to find someone who matches your vibe. Then, in Gonzalez v. Reich, the high Court in 2005 held that the feds could regulate wholly intrastate consumption of marijuana under California’s Proposition 215.

While the Court’s decisions in both Wickard and Gonzalez stretch the limits of “among the several states” to their intellectual limits, neither decision dealt with a federal law compelling someone to do something. Instead, both decisions involved a federal law prohibiting someone from doing something. Whereas part of ObamaCare compels every living citizen to buy health insurance. This seems to stretch the Commerce Clause so far that it has no limits left. Even if you like the idea of nationalized healthcare, this is not a constitutionally permissible way to go about it.

If the Court upholds the part of ObamaCare mandating health insurance for all citizens on Commerce Clause grounds, there is nothing barring the feds — or Crest — from mandating CrestCare.

Eat your cake but you shouldn’t be able to have it, too.
By Ryan Long

Eat your cake but you shouldn’t be able to have it, too.

Dewey, Cheatem, & Howe. P.C. (“Dewey”) is a Dutch based professional corporation, pictured above, that helps Somalia pirates rob and steal from you, a Nigerian citizen, on the high seas. The U.S. Supreme Court heard oral arguments on Tuesday in Kiobel v. Royal Dutch Pertroleum Company to determine whether you would be able to sue Dewey in the United States under the Alien Tort Statute (“ATS”) even though Dewey is a corporation. Given that corporations are considered “persons” for First Amendment purposes, companies should also be considered persons subject to suit under ATS. Otherwise, the lawyers at Dewey — Curly, Moe, and Larry — would be free to aid and abet the pirates, while none of them alone would be able to.

In Kiobel, 12 Nigerian citizens sued Royal Dutch Petroleum (“Royal Dutch”) under the ATS in U.S. federal court for allegedly aiding and abetting human rights violations by the Abacha dictatorship in Nigeria. The ATS, passed in 1789, allows federal courts to hear “any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.” The issue in the case is whether Royal Dutch may be sued even though it is a company and not a natural person. The law to date has only included natural persons within the scope of the ATS, which only defines who may sue but not who may be sued.

The opposing sides have arguments that are not supported by the text of the statute. Royal Dutch’s appellate lawyer, Kathleen Sullivan, argued to the Court that “[t]here is no country in the world that provides a civil cause of action against a corporation under their domestic law for a violation of the of nations,” reports The New York Times in Court Debates Rights Case Aimed at Corporations. Instead, she claims that “every convention for every international tribune excludes corporations.” The deputy solicitor general, Edwin S. Kneedler, argues on behalf of the plaintiffs that there need not to be a constraint on who may or may not be sued under the ATS because it “does not identify who the defendant may be.”

Regardless of what other countries do or the absence of textual guidance in the ATS, the Supreme Court recently reaffirmed its position that corporations are “persons” within the meaning of the First Amendment in Citizens United v. Federal Election Commissions. If Dewey were a professional corporation based in New York, it would have just as much protection under the First Amendment as you do. Given that this is the law of the land, it seems intellectually disingenuous to count corporations beyond the scope of the ATS as a matter of law but within the scope of the First Amendment. It seems a better approach would be to allow suits against companies like Dewey or Royal Dutch under the ATS but then potentially dismiss the suit for other reasons, including no violation of the law of nations or a treaty of the United States, until Congress hopefully amends the ATS to make it clearer.