Please Join Us for a CLE Program on September 23rd from 12:00 – 1:30pm -Cost $25  includes CLE & Lunch  (OH, IN & KY)

Location: Hyde Park Country Club 3740 Erie Ave. Cincinnati OH 45208

Settlemet Tools and Tips

Presented by:  William T. “Tay” Robinson, IV

12:00 – 1:00pm CLE Presentation

1:00 – 1:30pm Lunch – Eat in or carry out

DESCRIPTION:  The following topics will be covered during Tay’s presentation:

Personal jurisdiction, of course, is a two-part analysis. A court first must examine whether the Ohio long-arm statute and Civil Rule regarding service, R.C. 2307.382 and Rule 4.3, respectively, permit the exercise of jurisdiction. Analogizing to the technology of yesteryear–letter writing–the Court explained the allegedly defamatory statemetns were “published” in Ohio by virtue of their actual receipt by several individuals in Ohio. That fact brings the case within R.C. 2307.382(A)(3) and Rule 4.3(A)(3), which confer jurisdiction over allegedly tortious acts committed in Ohio.

This, of course, is something of a legal fiction, as the postings were certainly not created within Ohio. As a fall-back position, the Court cites R.C. 2307.382(A)(9) and Rule 4.3(A)(6), which create jurisdiction over allegedly tortious acts committed outside Ohio where the alleged tortfeasor might reasonably expect that someone in Ohio would be injured by the acts. The Court’s fall-back seems to be the stronger position and probably should have been the primary holding. It will be interesting to see whether the Court’s holding that the publication actually occurred in Ohio by virtue of its receipt in Ohio has any unexpected consequences in the future. (Though to be fair, this is simply an extension of existing precedent, not new doctrine, so perhaps the concern is misplaced.)

Having established that the long-arm statute and Civil Rule are satisfied, the second part of the personal-jurisdiction analysis comes under the due process clause of the Fourteenth Amendment. As relevant here, due process requires that the exercise of jurisdiction arise out of the defendant’s contacts with Ohio. The defendant must have purposely availed itself of the privilege of acting in Ohio, and must have reasonably anticipated that it may be haled into court in Ohio; the defendant’s contacts with Ohio must not be random, fortuitous, or attenuated.

Employing the well-known Calder “effects test,” the Court held that the defendant’s allegedly tortious conduct was not simply “untargeted negligence,” but rather purposeful activity directed at a resident of Ohio. The defendant therefore should have assumed that the effects of his actions should be felt in Ohio, and as a result he could reasonably anticipate being haled into court in Ohio.

Kauffman is not a landmark decision. It is well-supported by existing law on both personal jurisdiction and defamation. But it is another example of courts’ willingness to engage with technology and to fit current doctrine into the new world order. Let’s hope that Ohio continues down its path of reasonableness in this regard.

As a side note, Kauffman is now officially my favorite opinion of 2010, thanks to the explanatory parenthetical in ¶13 of “(emoticons omitted).”

The case has an interesting procedural history. A man saw an ad for Victor’s Secret in a local paper, “was offended by what he perceived to be an attempt to use a reputable company’s trademark to promote the sale of unwholesome, tawdry merchandise,” and sent a copy of the ad to Victoria’s Secret. Litigation ensued, and the Supreme Court in 2006 determined that the lower courts had applied the incorrect standard of review in addressing whether Victoria’s Secret had been harmed. (Specifically, the Court held that only actual dilution by tarnishment was actionable under the Federal Trademark Dilution Act of 1995.)

While the case was still pending, Congress updated the trademark law to overrule the Supreme Court, adding a new claim under which a trademark owner could recover for likelihood of dilution by tarnishment. Under this new cause of action, the owner of a trademark can obtain an injunction or damages if it is likely that a new mark will harm the reputation of a senior mark, and the two marks are associated with each other due to their similarity.

The case was remanded to the district court, which held that it was indeed likely that people would associate Victor’s Secret with Victoria’s Secret due to their similarity, and that Victoria’s Secret’s reputation would be harmed as a result. The grounds for the ruling was that the association with Victor’s Secret was likely to cross that fine line between “sexy and playful” (as Victoria’s Secret described itself) and “sexually explicit” (as Victor’s Secret concededly was).

Yesterday the court of appeals affirmed, holding that “the [updated trademark] Act creates a kind of rebuttable presumption, or at least a very strong inference, that a new mark used to sell sex related products is likely to tarnish a famous mark if there is a clear semantic association between the two,” and that Victor’s Secret failed to rebut that presumption in this case. One judge concurred in the judgment but disagreed that the updated trademark act created a presumption — instead, he would call it simply an “inference.” The third judge dissented, observing that the updated act contains no language at all regarding any presumptions, and would have held that the single incident of association is not sufficient to create a cause of action.

Aside from the obvious problem of the Sixth Circuit creating a presumption where a statute contains none (actually, query whether it is indeed a presumption or an inference; how will district courts interpret this holding?), isn’t this a difficult decision to justify based simply on common sense? If Victoria’s Secret can obtain an injunction because of an association with sex, where will it end? Could a burger joint named McDuffy’s be enjoined if its food was too fatty, or its service too slow? This decision seems to create a slippery slope for courts with respect to the rights of junior mark holders.

On the other hand, perhaps this is a lesson in lawyering. Both the district court and the court of appeals based their decisions in part on the fact that Victor’s Secret failed to present any evidence that the two marks were not associated, or that Victoria’s Secret would not be harmed. Maybe the take-away in this case is simply that even when a claim appears absurd on its face, it still must be defended aggressively.

The Sixth Circuit decision is here [PDF]; the district court’s decision can be found here.

Victor’s Secret, for what it’s worth, plans to seek an en banc rehearing or to petition the Supreme Court for certiorari.

When Michael Bustle started working as a hairstylist at Michael’s in 1995, he signed an agreement which included a one-year non-compete clause. He left in August 2007 and rented a booth at a competing salon. Michaels sued Bustle several months later, after noticing that his clients did not return. The parties agreed to a settlement under which Bustle would not provide any hair styling or hair care treatment for one year — that is, Bustle essentially agreed to abide by his non-compete clause — and the trial court journalized an entry incorporating their agreement.

After Bustle’s customers still did not return, Michaels hired a private investigator to determine whether Bustle was violating the court’s order. After a seven-month investigation the PI determined that Bustle was still providing the prohibited services, and Michaels filed a motion for contempt.

At the contempt hearing, Bustle admitted to providing prohibited services to 180 former Michaels clients and had profited over $37,000 in nine months of doing so. Testimony from Michaels revealted that its lost profits for the same work would have been about twice as much, and that it had incurred about $15,000 in attorney’s fees and about $52,000 in PI fees. The trial court found Bustle in contempt, awarded damages and costs totaling about $140,000 to Michaels, and enjoined Bustle from competing for an additional 11 months.

On appeal, the First District rejected Bustle’s arguments that the agreed order did not comply with Rule 65 (because Bustle agreed to it, he had no cause to complain — somewhat similar to invited error, if any error) and that Michaels waited too long to pursue its contempt motion (the court found the time to be reasonable due to the necessary investigation).

On the issue of whether Michaels was awarded a double recovery by virtue of a disgorgement of profits and an extended non-compete term, the court explained that in a contempt case, the court has power to both coerce compliance with the court’s order, and to compensate the the party injured by the contempt. By disgorging the profits and awarding the costs to Michaels in addition to extending the non-compete term, the First District said, the parties were merely put back in the position that they would have been in if there had been no contempt. As a result, there was no double recovery.

Judge Hendon disagreed on the double recovery issue. Because the non-compete period has now expired, however, and cannot be undone, she concurred in the judgment.

In reaching its conclusion that the statute was facially constitutional, the Court relied in part on the statute’s legislative history, explaining that it “embodies the General Assembly’s intent to significantly curtail an employee’s access to common-law damages for what we will call a ‘substantially certain’ employer intentional tort” — but also noted that the statute “does not abolish the tort entirely.”

The Court also reiterated its prior holding that “the legislative branch of government is ‘the ultimate arbiter of public policy’” and that “the legislature is entrusted with the power to continually refine Ohio’s laws to meet the needs of our citizens.” Furthermore, the Court wrote that “[i]t is not the role of the courts to second-guess the General Assembly’s policy choices,” including policy choices which “alter, revise, modify, or abolish the common law.”

As to the merits of the certified questions, the Court rejected the argument that the current version of R.C. 2745.01 was so similar to prior unconstitutional versions that stare decisis must apply to invalidate it. Instead, the current version differs in the required standard of proof and lacks several limitations on damages contained in prior versions.

The cases are Stetter v. R.J. Corman Derailment Services, LLC, 2010-Ohio-1029 [PDF] and Kaminski v. Metal & Wire Products Company, 2010-Ohio-1027 [PDF].

The relevant statute is R.C. 2307.76, which provides that a product is defective if the manufacturer knew or should have known about the risk associated with the product, and if the manufacturer failed to provide the warning or instruction that a manufacturer exercising reasonable care would have provided.  The so-called “knowledgeable employer” or “sophistocated user” defense provides that a manufacturer’s duty to warn can be discharged by providing information about the dangers to a third person on whom it can reasonably rely to communicate the warning to the ultimate users of the product.  Whether a manufacturer can reasonably rely on that third person is a fact-specific determination.

The court held that it was reasonable for the manufacturers to rely on the purchasing company here because the purchaser had knowledge about the dangers that was equal to or greater than that of the manufacturer–it had created a task force to study the dangers, and there was some evidence that it had wanted to remain “officially ignorant” of the cause of the disease suffered by its employees.  The purchaser also regulated its employees’ safety requirements, retained professionals in health and occupational safety, and had exclusive control over delivery of the chemicals.

The court additionally affirmed the trial court’s decision to grant summary judgment on the employees’ intentional tort claims on statute-of-limitations grounds.

The case is Perry v. Biggs.

The injured person additionally sued the contractor who built the bookshelves into the stair landing, arguing that they were negligently installed, which narrowed the landing and created a visual distraction for visitors approaching the step.  Although the court agreed that ”[a] contractor is liable to all those who may be foreseeably injured by the dangerous condition of a structure, not only when the contractor fails to disclose known dangerous conditions, but also when the work is negligently done,” the court again explained that if any dangerous condition existed, it was “noticeable,” and the injured person therefore should have been able to discover it.

The case is Adab v. Faradid U.S., Inc. [PDF]