Page 6 - Commercial Litigation

S6 | MONDAY, AUGUST 10, 2015 | Commercial Litigation
| NYLJ.COM
New York Courts:
A Continued Tradition of Important
which effectuate the goals of antitrust law. Given the court’s broad interpretation of a horizontal restraint, this case may have lasting effects for vertical transactions in
the future.
Employment
The Second Circuit just decided Glatt v. Fox Searchlight Pictures, Nos. 13–4478–cv et al., 2015 WL 4033018 (2d Cir. July 2, 2015), a putative class action of unpaid interns seeking compensation as employees under the Fair Labor Standards Act (FLSA) and New York Labor Law (NYLL). Both require an employer to pay employees a specified minimum wage, as well as applicable overtime pay, a require- ment that employees may not waive. The district court had granted plaintiffs’ motion
for partial summary judgment, holding they had been improperly classified as unpaid interns rather than employees. The dis- trict court also certified a New York class and conditionally certified a
nationwide collective action.
The Second Circuit vacated the district court’s order.1 In deter- mining the appropriate standard
under which an unpaid intern must be deemed an employee, an issue of first impression in this circuit, the court recognized that no Supreme Court decision decided the issue but reviewed a 1947 Supreme Court decision that railroad trainees should not be treated as employees.2 It also considered a 2010 Department of Labor (DOL) fact sheet providing that an employment relationship does not exist if all of six factors applied. The district court had applied the DOL test and classified the interns as employees using only
four of the factors.
The Second Circuit refused to defer to the
DOL test, finding it too rigid and unpersuasive. Instead, the court agreed with defendants and adopted a primary beneficiary test, which determines whether benefits to the intern are greater than the intern’s contribution to the business. It set forth a non-exhaustive set of seven considerations for use by courts along with other relevant evidence, and remanded to the district court to apply this standard.
As to class certification, the Second Cir- cuit found an intern’s employment status is “a highly individualized inquiry” in light of evidence below that different internship pro- grams varied across departments. Because common questions would not predominate and the most important question “cannot be answered with generalized proof,” the court vacated the grant of class certification. For substantially the same reason, plaintiffs in the proposed collective action were not similarly situated, and the Second Circuit vacated the district court’s conditional certification.
Commercial Decisions
BY JUDITH A. ARCHER AND JAMI MILLS VIBBERT
Judge Loretta Preska, Chief Judge of the Southern District of New York, recently gave a speech entitled “The Elements of Commerce in the Twenty-First Century: How Commercial Courts Enhance a City’s Position as a Financial, Commercial and Legal Hub.” Preska summarized the factors necessary for a city to be a commercial hub in the 21st Century, including an educated populace, safe investment environment, business transactions and infrastructure upgrades. She emphasized the importance of a fair process of dispute resolution to ensure continued investment, the key attributes
of such a system being independence, non-arbitrariness and even application
of a predictable rule of law.
Preska noted the historical role New York courts have played in deciding important commercial cases. Her speech recalled past important New York cases, including those involving the Titanic, the disaster at the Union Carbide plant in Bho- pal, India; and numerous multi-district litiga- tions involving the largest financial, pharma- ceutical and auto companies.
Today, New York state and federal courts routinely decide significant commercial dis- putes in a variety of industries and continue to play an important role in New York’s sus- tained status as a commercial center. These courts are populated with sophisticated judges who not only preside over such dis- putes, but many of whom practiced in those areas before taking the bench. New York courts decide cases that impact businesses in New York and worldwide, and this article will summarize several recent ones with just such an impact.
Antitrust
In June, the U.S. Court of Appeals for the Second Circuit upheld the district court’s find- ing that Apple coordinated with several book publishers in a price-fixing scheme designed to raise the per book price being charged by competitor Amazon. United States v. Apple, -- F.3d --, Nos. 13-3741 et al., 2015 WL 3953243 (2d Cir. June 30, 2015). Apple may now owe $450 million pursuant to a settlement involv- ing private plaintiffs over the same issues.
JUDITH A. ARCHER is a partner and JAMI MILLS VIB- BERT is a senior associate at Norton Rose Fulbright in New York.
The U.S. Department of Justice and sev- eral states sued Apple and the six largest U.S. book publishers. Apple had signed vertical agreements with each publisher for its e-book- store under an agency model in which the publishers determined the price and Apple took a percentage, with each contract requir- ing the books in Apple’s e-bookstore to have the lowest price offered. The court found this model would only be attractive if all of the major publishers cooperated because, under Apple’s contracts, the publishers could make less money per sale, but more money on new releases and bestsellers.
The Second Circuit found that the price- fixing conspiracy was a horizontal restraint on trade warranting a per se standard under Sherman Act §1, as opposed to a rule of reason analysis, which would apply if the conspiracy was a vertical restraint. This required the court to find the relevant agree-
ment was not the individual vertical agreements between Apple and the publishers, but an unwritten one “to raise consumer-facing ebook prices by eliminat- ing retail price competition.” Had there only been vertical agreements, noted the court, Apple would only have been liable if it actu- ally agreed to the illegal activity. The Second Circuit found that the vertical agreements created the framework allowing and were evidence of the horizontal restraint to col-
lectively challenge Amazon’s price.
A lengthy dissent by Judge Dennis Jacobs noted that Apple’s agency structure was the only way it could enter the market against Amazon, which had 90 percent market share. Because no one proposed “less restrictive means” by which Apple could have achieved the same procompetitive benefits, the dissent found Apple was merely deconcentrating the ebook market and removing a barrier to entry,
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