Wednesday, September 29, 2010

Authentication of Web Pages and Screen Shots as Evidence at Trial in the Sixth Circuit

In today's world litigators, in preparation for trial, routinely scan the internet to build up evidence for their case.  It is common place to search internet sites like Linkedin, Myspace, Facebook, Twitter, Google, and even the blogashpere to find dirt on a party opponent.  But when you find a golden nugget of evidence, how does one proceed to capture that evidence so it can be properly authenticated and admitted as probative evidence in your case.  A recent article written over on back in January goes into an in depth explanation of this issue and some emerging trends in the law on how some courts are dealing with it.  I recommend reading the article as it is well written and provides a base of knowledge on the issue I am about to delve into as it pertains to federal courts in the Sixth Circuit.

As the article explains, courts generally fall into three camps with respect to the scope of testimony that FRE 901(b)(1) requires in order to authenticate and admit evidence of web pages and screen shots.  Since the Sixth Circuit Court of Appeals has yet to announce a formal standard, it is important to consider all three approaches and how courts within the Sixth Circuit have ruled on the issue so far.

The first camp takes a more stringent and conservative approach, requiring testimony showing that the information proffered was actually posted by the individual to whom the information is attributed to, in the form of a "statement or affidavit from ... [the website's] web master or someone else with personal knowledge."  In Re Homestore, Inc. Sec. Litig., 347 F.Supp. 2d 769, 782 (C.D. Cal. 2004); see also, Wady v. Provident Life and Accident Ins. Co of Am., 216 F. Supp. 2d 1060 (C.D. Cal 2002) (sustaining objection to affidavit because affiant lacked personal knowledge of who maintained the website or authored the documents).  As stated in the above referenced article, this is similar to authenticating a letter, which requires showing that it was written by the individual to whom it is attributed.  So far, I have not come across authority in the Sixth Circuit that requires this type of showing.

The second approach taken by courts is much more permissive and all that is typically required to introduce web page and screen shot evidence is testimony from the person who created the screen shot that the image "accurately reflects the content of the Web site and the image of the page on the computer at which the [screen shot] was made."  Toytrackerz LLC v. Koehler, 2009 WL 2591329, at 6 (D. Kan. Aug. 21, 2009); see also, Nightlight Sys., Inc. v. Nitelites Franchise Sys., Inc., 2007 WL 4563875, at 5-6 (N.D. Ga. May 11, 2007)).  This is basically the same standard as what is applied to photographs and the party proffering the evidence does not have to authenticate the information as authored or sponsored by the individual to whom it is attributed.  All that needs to be shown is that the screen shot or web page accurately reflects what was on the site.  Solo, Inc. v. Catona, 2008 WL 4906115, at 1, n.5 (C.D. Cal. Nov. 10, 2008) (court admitted screen shot noting that although the declarant "may not have [had] knowledge as to how the Web site works on a technological level, his declaration establishes sufficient knowledge to attest that the screen shots are an accurate representation of what he encountered upon visiting the web site."); Victaulic Co. v. Tieman, 499 F.3d 227, 236 (3rd Cir. 2007).

From what I have found through my research, courts in the Sixth Circuit fall into the second camp and, they tend to be even more permissive than the courts noted above.  In Schneider Saddlery Co. v. Best Shot Pet Prods. Int., LLC., 2009 U.S. Dist. LEXIS 27227, at *25 (N.D. Ohio March 31st, 2009), the Northern District of Ohio, was faced with the issue of whether unauthenticated images taken from web pages could be considered by the court in a motion for summary judgment.  Citing Nightlight Sys., supra at *16, for support, the Northern District found that the images were not admissible and needed to be authenticated by presenting evidence from a "percipient witness stating that the printout accurately reflected the content of the page and the image of the page on the computer at which the printout was made.". citing, cf., Lorraine v. Markel Am. Ins. Co., 241 F.R.D. 534, 561 (D. Md. 2007) ("Photographs have been authenticated for decades under Rule 901(b)(1) by testimony of a witness familiar with the scene depicted in the photograph who testifies that the photograph fairly and accurately represents the scene).

The Middle District of Tennessee appears to have taken the same approach as the Schneider court.  See Smith v. Pfizer Inc, 2010 U.S. Dist. LEXIS 47698, *17 (M.D. Tenn. 2010) (court allowed authentication of e-mails lacking any routing or contact information because " document[s] can... be authenticated by '[t]estimony that a matter is what it is claimed to be' [citation ommitted] and [the proponents] ... testimony [was enough to] authenticate the document."); Capital Confirmation, Inc. v. Auditconfirmations, LLC, 2009 U.S. Dist. LEXIS 77440 (M.D. Tenn 2009) (screen shots of website that confirmed the statements of affiants and broader arguments were properly considered by the court).

The Southern District of Ohio, in United States v. Standring, 2005 U.S. Dist. LEXIS 41330 (S.D.Ohio March 15, 2006), allowed evidence of documents from third-party websites without any testimony and held that evidence of this type can be authenticated with merely a declaration.  The court held that a declaration attesting to the evidence, "when view in combination with the documents' circumstantial indicia of authenticity (such as the dates and web addresses that appear thereon)... would support a reasonable juror in the belief that the documents are what [the proponent] says they are." id. at *5, citing Perfect 10, Inc. v. Cybernet Ventures, Inc., 213 F. Supp.2d 1146, 1154 (C.D. Cal. 2002) ("computer printouts are the only practical method by which the allegations of the complaint can be brought before the Court and there is generally a reduced evidentiary standard in preliminary injunction motions"), United States v. Tank, 200 F.3d 627, 630 (9th Cir. 2000). This type of authentication is done under FRE 901(b)(4) rather than 901(b)(1).

The Schneider, supra, court also considered and allowed printouts from parties' web-sites that were unauthenticated.  Because the dispute was over trademarks, the court took judicial notice of the images on the parties' websites that were the subject of the dispute.  Id. at *23-24.  But this was mainly because there was no contention by either party that the images were inaccurate or could not be properly admitted before a jury. citing, Comedy III Prods., Inc. v. New Line Cinema, 200 F.3d 593, 594 (9th Cir. 2000) ("[T]he district court took judicial notice of the motion picture's contents."); cf. Thomas v. Walt Disney Co., 2008 U.S. Dist. LEXIS 14643, at *5 (N.D. Cal. Feb. 14, 2008) ("[T]he Court grants Defendants' request for judicial notice of the text of 'Squisher the Fish' and the motion picture 'Finding Nemo'."). Therefore it is also possible for judicial notice to used as a tool for authentication in some instances.

As stated on in the article referenced earlier, the third camp lies somewhere between the first and the second, and the evidence required typically depends on the circumstances.  For Example, in United States v. Jackson, 208 F.3d 633, 637 (7th Cir. 2000), a white supremacist group claimed responsibility on its website for the alleged actions of the defendant.  The court refused to admit screen shots of the supremacist group's website offered by the defendant because the defendant did not prove the website's owner actually posted the information.  The court noted, however, that the type of evidence required to meet the prima facie burden depends on the proponent's incentive and ability to falsify evidence. In that case, the proponent, the defendant, was a sophisticated computer user and had every incentive to try to place the blame on someone else.  Therefore, because of the incentive, the court required the defendant to link the information directly to the website's sponsor.

For lawyers practicing in the Sixth Circuit who wondered where the Circuit stood on the issue of authenticating web sites and screen shots, I hope this post, read in conjunction with the article, was able to shed some light on the issue.

Sunday, September 26, 2010

Personal Jurisdiction of Corporate Officers Under Alter-Ego Theory

The corporate form is a beautiful thing. It allows businesses to raise capital and take risks that without the shield of limited liability, would normal subject individuals to horrific losses if things took a turn for the worse.  Alter-ego theory allows plaintiffs to pierce the shield of limited liability when corporate officers abuse corporate privileges to perpetrate frauds.

The case described below is an illustration of how individual officers of corporations are typically not subject to the jurisdiction of courts simply because the corporation they work for has been sued. Without the requirements necessary to meet the alter-ego theory doctrine, employees and officers of corporations should feel safe that their actions conducted in the normal course of business operations will not subject them to individual liability (most of the time) in a court of law.

In, Keene Building Products Co., v. Stuc-O-Flex Int'l, Inc., No. 1:10 CV 1511 (N.D.OH, September 23rd, 2010).  Plaintiff, Keene, manufacturer of sound and moisture control products, sold products to Defendant, Stuc-O-Flex for five years, who in turn sold and distributed their products to customers in the State of Ohio and elsewhere.  Keene alleged in its complaint that Stuc-O-Flex and its owners owed them over $220,000 for breach of contract, unjust enrichment, fraudulent inducement to contract and misrepresentation, interference with contracts and business relationship, and defamation.  Stuc-O-Flex counter claimed that Keene had violated a exclusivity agreement with Stuc-O-Flex by selling the products of competitors.

Individual corporate officers of Stuc-O-Flex filed a motion to dismiss because of lack of personal jurisdiction.  Typically, corporate officers are not necessarily subject to personal jurisdiction just because the corporation they work for is.  For a court to exercise personal jurisdiction over an individual or corporation that would not ordinarily be subject to it, the plaintiff must show that the individual is an alter ego of a corporation that is subject to personal jurisdiction in that court.  This is because under alter ego theory, the corporation and the individual are the same entity, as the person merely uses the corporation as a fraudulent means to abuse corporate protections and escape personal liability.

Some of the things necessary to show that an individual should be subject to personal jurisdiction under alter ego theory are: (1) the corporation is grossly under capatilezed; (2) corporate formalities (board meetings, minutes, etc.) are not followed; (3) the corporation incurs debt when it is already insolvent; (4) shareholder hold themselves out to be personally liable for debt when they are not; (5) funds and other property of the corporation are diverted for personal use by an individual; (6) there is an absence of corporate records; and (7) the corporation is merely a facade for the operations of the dominant shareholders.

The court found that Keene failed to show that the individuals named in the suit were subject to personal jurisdiction under alter ego theory.  Keene argued that when personal jurisdiction was proper because when he sold product to Stuc-O, he named the individual defendants, as well as the corporation as having title to the goods as he shipped them and the defendants were involved with sales and marketing activities on behalf of their corporation.  These allegations were found to be very insufficient to meet the alter ego theory requirements.

Wednesday, September 22, 2010

Plaintiff Alleges Sufficient Facts to Survive Dismissal in Contract Over $100 Million in Furnace Coke

This post is a summary brief of a case. Follow the link to the case to read more.

ARCELORMITTAL CLEVELAND, INC., et al., v. JEWELL COKE COMPANY, L.P., CASE NO. 1:10-CV-00362 (Ohio Northern District, September 21st 2010).

The Plaintiff sued seeking reformation of an alleged mistake in a long-term contract for the supply of blast furnace coke. The parties originally agreed that Defendant would provide an annual supply of approximately 700,000 tons of blast furnace coke to Plaintiff for 3 years with an option to extend for two more years. The parties executed an amended agreement later to make it for the whole 5 years and for a new annual sale contract of 700,000 tons of coke from January 1, 2008 through 2020 under a new pricing formula. The parties based their amended purchase agreement pricing formula on the price of coke sold under a former agreement.

In its complaint, the Plaintiff alleged that the pricing formula for the furnace coke in the amended purchase agreement contained an error that required the Plaintiffs to pay a 50% premium for Defendant's furnace coke and were being overcharged $100 million.  On the other hand, the Defendant contended that the pricing formula in the agreement was correct. The accurate interpretation of the disputed formula turned on whether the weighted average of a calculation from the previous agreement belonged in the numerator or the denominator of the pricing multiplier.

The Defendant argued that (1) the Plaintiff failed to state a plausible claim of either mutual or unilateral mistake; (2) the Plaintiff's mistake claims failed because the Plaintiff was negligent in discovering the alleged mistake; (3) the Plaintiff's claim of mutual mistake failed because the Plaintiff did not adequately plead mutual mistake, and instead plead an implausible scrivener’s error; (4) the Plaintiff's unilateral mistake claim failed due to an insufficient pleading of the Defendant’s knowledge of the mistake; (5) the Plaintiff's unilateral mistake claim failed because the Plaintiff bore the risk of mistake; and (6) the Plaintiff's claim for unjust
enrichment was barred since an express contract governed the dispute.

The court found that the Plaintiff alleged sufficient facts to support their claim of mistake based upon negotiation of the contract and amended contract, that the Defendant's coke was supposed to be priced at a discount, and was mistakenly priced at a premium.  The court found that the Plaintiff's claim that they did not notice the mistake because of an illustration provided by the Defendants during negotiations which did not show the mistaken pricing formula that the Plaintiff relied upon was enough to satisfy the pleading standard of “good faith and fair dealing” required under Ohio law, and that negligence did not bar the Plaintiff's claim. The court found that a "scrivener's error" could be grounds for mutual mistake under Ohio law and was sufficiently pleaded.

The court also found that unilateral mistake was also sufficiently pleaded because the term at issue in the contract was material and it was plausible that the Defendant should have known of the mistake because the Defendant drafted the contract, provided a inaccurate illustration of the contract, engaged in negotiation with plaintiff based on the illustration, and then later accepted the steeply inflated payments. The court found that the Plaintiff's unjust enrichment claim was not barred as a matter of law because although the parties had an agreement that would normally govern their dispute, the agreement itself was disputed so an unjust enrichment claim was proper.  Accordingly, the court denied all of the Defendant's arguments for dismissal.

Sunday, September 19, 2010

Class Action Against Whirlpool, Allegation of Fraud, That "Energy Star" Logo Doesn't Convey The Need To Run Extra Cycles To Clean Clothes

This post is a summary brief of a case. Follow the link to the case to read more.

In In re: WHIRLPOOL CORP. FRONT-LOADING WASHER PRODUCTS LIABILITY LITIGATION, CASE NO. 1:08-WP-65000, (N.D. Ohio September 15th, 2010), the Plaintiff's Complaint alleged Whirlpool had violated various state and federal laws in the marketing and sale of its front-loading washing machines because alleged defects in the machines lead to mold problems. The Plaintiffs also alleged violations of the Ohio Consumer Sales Practices Act, tortious breach of warranty, negligent design and failure to warn, breach of express and implied warranties, unjust enrichment, and fraud-based violations of numerous state consumer protection and deceptive trade practices statutes.

The Plaintiff's complaint alleged that the energy star logo on defendants products makes express representations about the quality of its washing machines, namely, that the washing machines sold are “High Efficiency” and they save water and energy. The complaint did not allege that these representations were false.  Instead, the Plaintiffs complaint stated that while labeling its products ENERGY STAR compliant, Whirlpool concealed the fact that customers would need to run extra cycles of hot water and other cleaning products to combat mold problems in the machines. 

The Defendant, Whirlpool Corporation, moved to dismiss the Plaintiffs’ fraud claims on the grounds that the claims (1) lacked particularity, (2) failed to allege any actionable false statement, and (3) were prohibited by the relevant state consumer fraud statutes as a matter of law. The Court denied Whirlpool's motion. The court found that the amended complaint was enough to assert an allegation for fraud.  The Defendant's motion was therefore denied.

Defendant Wins Summary Judgment for $3 Million in Damages Arising From the Misclassification of a Loan

This post is a summary brief of a case. Follow the link to the case to read more.

In CHARITY v. GMAC MORTGAGE INVESTMENTS, INC., et al.,CASE NO. 4:09-CV-02958-SL, (N.D. Ohio September 14, 2010), the Court granted Defendant GMAC's motion for summary judgment. Plaintiff and her then husband Rodney Cheatham (“Cheatham”) took out a mortgage and loans from Defendants in the amount of over $200,000. On February 15, 2008, nearly three years after receiving the home equity line of credit, Plaintiff filed a Complaint against Defendants in Trumbull County Common Pleas Court alleging that with regard to two loan applications she submitted Defendants had failed to meet various statutory notification requirements and had unlawfully discriminated against her in violation of the Federal Trade Commission Act (“FTCA”) and the Fair Credit Reporting Act (“FCRA”). Plaintiff sought $2 million in compensatory damages and $1 million in punitive damages. Shorty after Plaintiff filed she ceased making payments on the mortgage loan and home equity line of credit. As a result, Defendants initiated a foreclosure action against Plaintiff and Cheatham.  On or about August 25, 2008, Plaintiff and Defendants entered into a settlement agreement.

Within one year of having settled , Plaintiff submitted to ditech three separate applications seeking to refinance her loans. Defendants contend that for each of the refinancing applications Plaintiff submitted the available interest rate offered wa not materially lower than the interest rate Plaintiff enjoyed on the Senior Loan. As such, because of the costs associated with refinancing, there was no financial incentive for Plaintiff to refinance. Consequently, Defendants maintain, Plaintiff informed ditech that she was no longer interested in refinancing, and the applications were classified as “withdrawn and cancelled” in accordance with ditech company policy. Plaintiff then filed the Complaint in the within case, challenging Defendants’ stated rationale for classifying her applications for refinance as withdrawn and cancelled. Plaintiff alleged that Defendants violated numerous statutory reporting requirements, and breached the Charity I Settlement Agreement. Plaintiff sought $2 million in compensatory damages and $1 million in punitive damages.

On Plaintiffs first claim the court found that Plaintiff has failed to offer any evidence of damages arising out of Defendants’ alleged conduct with respect to the modification of the Junior Loan. On Plaintiffs second allegation, that even if Defendants were found to have “hidden” Plaintiff’s Junior Loan within the confines of the ditech website, Plaintiff failed to offer any evidence of damages resulting from her inability to find and pay her Junior Loan online. On Plaintiff's third claim the court found that the defendant did not exploit the plaintiff's ignorance in the original settlement and that nothing in the agreement that she signed obligated her to pay her original obligations to the company and that the agreement contained a clause specifically releasing the company from further claims. On Plaintiff's fourth claim was that because a co-borrower to the original home equity line of credit failed to sign the modification agreement, the converted loan is fraudulent. The court found that her husbands signature was unecessary to execute the loan and that she failed to establish any damages she sustained as a result of her ex-husband’s signature not being required on the Junior Loan modification agreement or the converted loan.

Plaintiff’s fifth claim was that Defendants breached the Charity I Settlement Agreement by failing to remove Plaintiff’s ex-husband from the Junior and Senior Loans. The court found that evidence indicated that the Plaintiff was fully aware that removal of her ex-husband’s name from the loans would not be part of the Charity I Settlement Agreement and that Plaintiff’s ex-husband’s removal from the loans a term of the Charity I Settlement Agreement.  Plaintiffs final allegation was that Defendant's caused Plaintiff duress and violated Ohio Unconscionable Consumer Sales Acts or Practices by initiating foreclosure proceedings against Plaintiff during settlement negotiations. The Court found that Defendants had a legal right to initiate foreclosure proceedings and that under Ohio law“[i]t is never duress to threaten to do that which a party has a legal right to do.” Accordingly, the court summary judgment on the claims to the defendant.

Monday, September 13, 2010

Help, My Floors Are...Magnetized!?!

This post is a summary brief of a case. Follow the link to the case to read more.

In Jones, v. Centex Homes, 10th Dist. Nos. 09AP-1032 and 09AP-1033, 2010-Ohio-4268, the Franklin County Court of Common Pleas affirmed grant of summary judgment in favor of defendant's Centex Homes ("Centex").  Appellants (Jones) entered into "Real Estate Sale Agreements" with Centex whereby Centex agreed to sell newly constructed single family homes to the Appellants. Each of the agreements included a limited home warranty.

Appellants alleged causes of action for breach of contract, breach of express and implied warranties, negligence, and failure to perform in a workman like manner.  In both complaints, the appellants alleged that "the metal floor members on the 2nd floor were magnetized," resulting in interference with televisions, telephones, and computers. The trial court granted summary judgment in favor of Centex finding that the appellants "agreed to waive any claims for property damage other than claims covered under the Limited Home Warranty" and the Warranty did not cover magnetized steel framing.

On appeal, appellants asserted: (1) the limited warranty provided in their contract failed its essential purpose; (2) a waiver of the implied duty to construct a home in a workmanlike manner is against public policy; (3) the language employed in the agreements is insufficient to waive appellants' limited warranties; and (4) the waiver of claims and limitations of remedies should not be enforced on grounds of unconscionability.

The Franklin Court of Common Please held that (1) Ohio law does not preclude a builder-vendor from offering an express limited home warranty while disclaiming warranties implied by law and that the essential purpose doctrine was not applicable to general contract law, only UCC; (2) a valid disclaimer of implied warranty is not against public policy; (3) the disclaimer provided in the contract was not insufficient or ambiguous as it was clearly worded and located on the cover of the warranty in bold print and italics; (4) the transaction was not unconscionable as the appellants were grown adults, there was not evidence to suggest the builder exerted undue pressure on them, and the limited warranty language claims were clearly worded and were conspicuous. Accordingly, the judgment of the trial court was affirmed.

Saturday, September 11, 2010

Plaintiffs Lawyers Continue to Wail About Iqbal and Twombly, But Statistics Show No Rise in Dismissal Rate From Higher Pleading Standard

Tougher pleading standards are making it harder for for investor claims and employee litigation against large corporations. As reported by Bloomberg:
Where once it was enough to give a defendant “fair notice” of a claim and the grounds on which it rested, the high court’s 2007 holding in Bell Atlantic Corp. v. Twombly required an antitrust complaint to contain enough facts to show a claim that is “plausible on its face.” Two years later, in Ashcroft v. Iqbal, the court applied Twombly to all federal civil suits.
The Supreme Court rulings mean that someone who wants to sue in federal court “should not subject a defendant to the costs and burdens of litigation when there is no plausible basis for their claims,” Lisa Rickard, president of the U.S. Chamber of Commerce’s Institute for Legal Reform, said in an e-mail.
Plaintiffs lawyers have railed against the higher pleading standard from the beginning,
"[They] say the justices’ new threshold unfairly closes the courthouse to their clients or increases their costs by forcing them to gather facts before suing, often before they can gain access to key information.
Plaintiffs lawyers point to recent lawsuits brought against a waste management firm owned by Credit Suisse Group AG and Dollar General Corp, which were dismissed on account of the higher pleading standard, as evidence that the new standard, "unfairly closes the courthouse to... clients or increases [the] costs" of litigation.

However, "case law to date does not appear to indicate that Iqbal has dramatically changed the application of the standards used to determine pleading sufficiency,” according to a July 26 Judicial Conference public memorandum. In a sample of cases, "dismissals were granted 38 percent of the time they were requested in both the four months before Twombly and the four months after Iqbal, according to an Aug. 12 report by the Administrative Office of the U.S. Courts, the support agency for the federal system. Nonetheless, "[s]ome U.S. lawmakers are seeking a return to the old, less restrictive standard" by passing legislation that refers to the previous "no set of facts" pleading standard previously used.