Today's General Counsel, December 2021

DECEMBER 202 1 VOLUME 1 8 / NUMBER 9 TODAYSGENER ALCOUNSEL.COM

INTERVIEW WITH GC OF THE COUNTRY’S LARGEST CANNABIS COMPANY • Epic's failed antitrust claims v Apple • Precarious privilege in data breach reports • Suing foreign infringers • Networking for workforce diversity • Mining contract data for risks and revenue

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contents 4 EDITOR’S DESK GC INTERVIEW

8 NICOLE STANTON, GENERAL COUNSEL OF TRULIEVE CANNABIS CORPORATION Banking problems, and a patchwork of state regulations.

DECEMBER 2021 Volume 18 / Number 9

COLUMN/THE ANTITRUST LITIGATOR

16 EPIC GAMES V. APPLE: THE ANTITRUST ANALYSIS Why all of Epic’s market definitions were rejected.

By Jeffery M. Cross

HUMAN RESOURCES

10 ADDRESSING WORKFORCE DIVERSITY Build networks and take a good look at the talent in front of you.

By Lisa Kathumbi INTELLECTUAL PROPERTY

12 SUING A FOREIGN PATENT INFRINGER Forum selection is key.

By Michael Albert, Jason Balich, and Alexandra Kim LITIGATION

14 PROTECTING PRIVILEGED FORENSIC REPORTS Keep it separate and pay out of the legal budget.

By Matt White and Alex Koskey

FEATURES

18 IMPORTANT SUPREME COURT RULING ON STANDING Concrete harm or technical violation?

By John Drury and Pamela Devata 20 LEGAL AND FINANCIAL RISKS IN YOUR CONTRACTS Why it pays to take a data-driven approach.

By Dave Parks NOVEMBER 202 1 TODAYSGENERALCOUNSEL.COM

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EDITOR’S DESK

T

he cannabis industry evolved for a long time before it was legalized, and as the subject of our General Counsel Interview in this issue can attest, it isn’t fully legal yet. Nicole Stanton,

general counsel of the nation’s largest cannabis company, deals with banking and regulatory problems that most attorneys in her position can barely imagine, and some of those have personal repercussions. In other articles, John Drury and Pamela Devata discuss a U.S. Supreme Court ruling from last June that will have major implications for class action lawsuits, and Dave Parks writes about the advantages of using AI in contract management. Jeffery Cross explains the antitrust implications of the recently concluded litigation between Epic and Apple. HR specialist Lisa Kathumbi answers some questions her clients have been asking about diversity initiatives. Matt White and Alex Koskey offer tips about protecting data breach reports under the attorney-client privilege, and Michael Albert, Jason Balich and Alexandra Kim explain the available options when you are suing a foreign infringer.

Bob Nienhouse, Editor-In-Chief bnienhouse@TodaysGC.com

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General Counsel Interview with Nicole Stanton

N

icole Stanton became the General Counsel of Trulieve Cannabis Corporation on October 1, 2021

when Trulieve acquired Harvest Health & Recreation Inc., where she’d served as Vice President, General Counsel and Secretary from July 2019 until the company was acquired. Her role at Harvest Health & Recreation included overseeing the legal department, the compliance program and providing legal advice on business strategy and the often-contradictory state regulatory frameworks around cannabis. Prior to joining Harvest, she was managing partner at the Phoenix office of Quarles & Brady LLP. She has taught legal ethics at Arizona State University’s Sandra Day O’Connor College of Law and is a member of the American Law Institute.

How does it feel to be general counsel of the country’s largest cannabis company?

Like being general counsel of any other fast-growing company. The truth is that my responsibilities are the same as the prototypical general counsel. I deal with overseeing mergers and acquisitions, contracts, IP and litigation. The one big difference is that cannabis is one of the most uniquely regulated industries at the state level — a true patchwork of medical and recreational programs administered by different state agencies from state to state — and of course, cannabis is currently illegal federally, so our employees go to work each day knowing that what we do is not sanctioned by the federal government.

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Is it hard to recruit quality employees under those circumstances?

No. The company is run by professionals from many industries who care passionately about making sure that our customers, who can also be thought of as our patients, receive innovative and high quality products accompanied by outstanding customer service.

I understand that banking in particular is a problem in the industry.

Correct, a big one. Until the Safe Banking Act passes we don’t have access to the traditional financing resources like other companies. And, our business is still largely a cash business. This lack of banking alternatives manifests itself in sometimes very personal ways. For example, I am not able to be on my home mortgage with my husband because I work for a cannabis company. I’m not able to roll over my company 401(k) into an existing IRA with an established institution because the proceeds are cannabis proceeds. That needs to change.

Is compliance kind of ad hoc due to the mish-mash of rules you deal with?

Has it been pretty smooth from the outset?

There have been some bumps. Access to cannabis has become personal for me. Two weeks after the Harvest and Trulieve merger was announced in May 2021, I was diagnosed with breast cancer. I had surgery in July and began chemotherapy in August 2021. I was thankfully well enough to work, by choice, throughout my entire treatment. Working on the Trulieve acquisition of Harvest became the best hours of my day, and my mind often turned to those in similar circumstances who have benefited over the years from the risks taken by the pioneers of the cannabis industry.

Of course there were hours spent Googling my prognosis and wringing my hands over “what ifs,” but when my mind wasn’t going there it was doing work that is challenging and rewarding.

I realized acutely that cancer tries to take everything from its victims. For those living with cancer, all that they want is to have a normal life. A day free of worry, nausea, fatigue. Going through treatment for cancer made me vividly aware of what the patients who are buying our cannabis products are trying to do. They are trying to string together those normal days. They want to fill the gaps in their lives stolen by cancer. So my own experience has made me more committed than ever to providing access to safe, effective cannabis products for any adult in America who wants them. I do find some irony in the fact I was diagnosed with cancer two weeks after the Harvest and Trulieve deal was announced, and it closed in October just two weeks before I finished chemotherapy. The closure of the deal and the end of my chemotherapy seem like fitting bookends to a time period in my professional and personal life that has fundamentally changed me. For the better.

I’m not able to roll over my company 401(k) into an existing IRA with an established institution because the proceeds are cannabis proceeds.

Actually, it’s rigorous. Some may think that this industry is without significant rules and oversight, but our long-term success depends on adhering to the highest regulatory compliance standards. I’m responsible for helping to shape our compliance strategy and we do it both in terms of what we see coming in the future with regard to legislation and/or regulation, but more importantly we are committed to delivering the highest quality standards in an industry that is, by and large, self-regulated in terms of quality, quality assurance, innovation and customer relations.

You have a résumé that includes a stint at a major firm. What did your colleagues there think when you got into the cannabis industry?

I know many of my professional colleagues from Big Law were stunned, given the concerns about federal illegality. It was honestly one of my best BACK TO CONTENTS

professional decisions. In just 24 months I was able to lead the legal department of my company through the largest acquisition in our industry to create the nation’s largest and most profitable multi-state cannabis company.

DECEMBER 202 1 TODAYSGENERALCOUNSEL.COM

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HUMAN RESOURCES

Addressing Workforce Diversity

By LISA KATHUMBI

O

ur country has experienced a multi-cultural movement around issues of race recently, and many employers have taken a critical look at workplace disparities and worked to enhance diversity, equity and inclusion (DEI).

Here are some of the questions I fielded from clients working to strengthen their DEI efforts without violating state and federal employment laws: • How do we increase diverse representation at the highest levels of leadership?

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• How do we treat DEI as a core leadership competency? How do we strengthen our internal investigation process?

• How do we respond to claims of implicit bias and systemic racism, as opposed to discrete, intentional acts of discrimination?

This article explains five actions for employers to consider.

GET CLEAR ON YOUR MISSION AND PLAN Like any other business initiative, it is critically important to have a

TODAYSGENERALCOUNSEL.COM DECEMBER 202 1

mission statement and strategic plan to drive the work. The mission statement communicates purpose and provides direction to leaders, stakeholders, and the clients, customers, or communities you serve.

Next, develop a strategic plan.

Be bold, but don’t set unrealistic goals. Over-promising and under-delivering can lead to erosion of employee trust. Wellintended but unfilled promises can be used in employment lawsuits or other litigation. Last year, several public companies were faced with shareholder derivative BACK TO CONTENTS

lawsuits alleging that company leaders made false and misleading statements regarding diversity and inclusion. It is important to treat DEI work like any other business imperative. Engage experts to help develop a plan for creating sustainable, measurable, and meaningful results.

UPDATE YOUR INTERNAL REPORTING AND INVESTIGATION PROCESS Like the Me Too movement, the Black Lives Matter movement has led to employees feeling empowered to share complaints. This creates a great opportunity for employers. An effective “speak up” culture can help drive DEI strategies. Handled properly, internal complaints and concerns help prevent legal exposure or reputation damage. As conversations around systemic racism become more common, and the EEOC remains

other protected class category, an employer can invest in creating, and insist on having, diverse candidate pools. This requires encouraging leaders and hiring managers to build networks long before a hiring decision needs to be made, as well as taking the time to see the talent in front of you (i.e., considering skill-based promotions or sponsorship programs). If you are not seeing results, consult counsel to evaluate and re-structure your hiring and promotion practices in a legally compliant manner.

TREAT DEI AS A BUSINESS IMPERATIVE AND LEADERSHIP COMPETENCY Too often, DEI work is structured and treated tangentially to the core work of an organization. This puts the onus on a small group of individuals, who are often not key decision-makers, to drive the work.

Well-intended but unfilled promises can be used in employment lawsuits or other litigation. focused on pattern and practice claims, now is the time to evaluate whether you have strong internal reporting and investigations. This should include a well-defined escalation process, and investigators operating with the appropriate level of training, cultural competency and awareness to effectively shepherd complaints.

BUILD DIVERSE NETWORKS One of the most urgent questions for companies committed to inclusion is how can I increase diverse representation, particularly at the highest levels of leadership? While it is unlawful to make a specific hiring or employment decision based upon race or BACK TO CONTENTS

Failing to communicate goals and expectations to everyone, not just under-represented or diversity-focused groups, can lead to misunderstandings, backlash and reverse race discrimination claims. Training all employees, and updating reoccurring training to reflect the changing legal and social climate, will decrease these risks. Unlike traditional anti-discrimination training that provided an overview of employer policies and employment laws, current workplace training needs to cover implicit bias, micro-aggressions, and bystander intervention to meet DEI goals.

In addition to training, give thought to what accountability

will look like. For example, evaluate whether you will discipline or provide educational opportunities in response to implicit bias, or how and if you should tie DEI efforts and results to compensation. These can be tricky areas and should involve counsel.

METRICS MATTER There are several fields and industries where racially diverse groups are grossly under-represented. It is important to separate industry challenges from organizational opportunities. This can be accomplished through privileged analysis of internal diversity metrics, climate surveys, or pay equity and other diversity audits to evaluate internal practices.

Metrics can be a powerful tool for identifying risks, setting goals and priorities, creating accountability, and measuring impact.

When engaging in these efforts, employers should think about the protections that can come from conducting reviews and audits under privilege with counsel, while also considering employee desire for transparency.

Organizations that integrate DEI into all aspects of their business will see the greatest return.

However, employers should consult with counsel and DEI experts to ensure that actions taken are legally compliant and appropriately structured to produce results.

Lisa Kathumbi is a shareholder at Littler Mendelson. She is an experienced employment and benefits litigator who provides training and counsel to employers and conducts high-stakes workplace investigations. kathumbi@littler.com

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INTELLECTUAL PROPERT Y

Suing a Foreign Patent Infringer

By MICHAEL ALBERT, JASON BALICH AND ALEXANDRA KIM

A

foreign company sees your success in the U.S. market and copies your product, infringing your U.S. patent in the process. How do you make them stop?

Start with a cease and desist letter. The foreign company may simply not have examined whether your product or service is protected by a patent. Sending a letter explaining their infringement is often a good first step and may yield results. If they don’t stop, the letter and the infringer’s response could help establish personal jurisdiction or demonstrate willful conduct, potentially allowing recovery of multiple damages and attorneys’ fees. An

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aggressive letter is not risk-free, however. It can enable the defendant to file a declaratory judgment in an unfavorable forum.

If a letter doesn’t work, it may be time for litigation. Your task then is to decide where to file your infringement action.

If the foreign company imports an infringing product or a product made by an infringing process, and you have the required “domestic industry” (e.g., you make or sell your patented product in the United States or license others to do so), then you could file a complaint with the U.S. International Trade Commission (ITC). There are many benefits to ITC litigation.

First, it moves quickly — about

TODAYSGENERALCOUNSEL.COM DECEMBER 202 1

eighteen months from initiation until a final order. Compare that with two or three years to bring a patent infringement case to trial in a federal district court. Second, at the ITC, you don’t need to prove personal jurisdiction over the foreign company. The jurisdiction is over the infringing products. Third, if you win, you are almost automatically entitled to an “exclusion order” keeping the infringing goods out of the country. But the ITC cannot offer all the relief you may be seeking.

Only federal district courts can award monetary damages.

If you cannot file in the ITC or are primarily seeking damages rather than an exclusion order, BACK TO CONTENTS

federal district court may be the appropriate forum. You will, however, need to show personal jurisdiction over the infringer in that court. If the foreign infringer has a physical location such as an office in the state where the court is located, it will be subject to personal jurisdiction there.

Intentionally targeting that state, for example, by selling products or

of serving foreign defendants is through the Hague Convention.

A copy of the complaint and summons (and if required, a translation that includes the patent) is provided to the foreign country’s central service authority tasked with serving the defendant and providing proof of service. This process can take months or even years, although if more than six

always easy, the ITC and district courts stand ready to adjudicate your complaint if a non-judicial approach has proven ineffective.

Using the ITC and court system requires a few up-front considerations, such as picking an appropriate forum that has jurisdiction and can provide the remedy you seek, and ensuring proper service. The investment

A common method of serving foreign defendants is through the Hague Convention. services directly into that location generally suffices as well. Murkier jurisdiction questions arise if all you have is the exchange of letters, but that can help. Also helpful is a federal law that allows you to sue a foreign defendant in any state’s federal courts if the defendant does business in the United States (e.g., displaying products at a trade show), but lacks sufficient connections to any one state to be subject to jurisdiction there.

The next task is serving the complaint and summons (or “notice of investigation” in an ITC case). This is critical because improper service can lead to the dismissal of the lawsuit.

Historically, the ITC served the complaint and notice of investigation. But during the Covid pandemic, the ITC has temporarily required the complainant to effectuate (and record) such service. The ITC’s rules allow for electronic service if no other form of service is possible. It is critical to follow the Commission’s instructions and raise any issues relating to service with the administrative law judge.

For district court actions, it has always been the plaintiff’s responsibility to serve the complaint and summons. A common method BACK TO CONTENTS

months have elapsed after diligent efforts had been made, the U.S. court can consider entry of a default judgment.

Some foreign countries allow service by mail. Where mail service isn’t allowed, district courts can authorize alternative methods of service. For example, some courts have authorized serving foreign defendants by email or through other electronic media, such as Facebook and WhatsApp. Using alternative means of service, however, is not automatic, and generally follows extensive efforts to comply with the Hague process.

Different U.S. judges have taken differing views on when and how alternative service should be allowed. One judge in a popular patent venue this past September allowed service on a foreign company through its U.S. attorneys. The Federal Circuit, in denying a mandamus petition, acknowledged the district courts’ discretion on alternative service issues. Still, attempting to comply with the target country’s rules is an important first step before seeking special dispensation from the court.

Although suing a foreign defendant for patent infringement isn’t

into these early considerations will help increase the chance of achieving the results you’re looking for and getting the foreign infringer to stop.

Michael Albert is a shareholder at Wolf Greenfield. He focuses on patent litigation.

Michael.Albert@ WolfGreenfield.com Jason Balich is an associate at Wolf Greenfield. He represents clients in intellectual property matters and commercial litigation.

Jason.Balich@ WolfGreenfield.com Alexandra Kim is an associate at Wolf Greenfield. Her experience includes writing patent validity opinions, and researching complex legal issues for inter partes review proceedings and proceedings at the district court level. Alexandra.

Kim@wolfgreenfield.com

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LITIGATION

Protecting Privileged Forensic Reports

By MATT WHITE AND ALEX KOSKEY

I

magine that after experiencing a data breach and taking all the necessary steps, including retaining a forensic vendor to conduct an investigation, your organization is named as a defendant in a class action lawsuit arising from the breach.

To make matters worse, plaintiffs’ attorneys are seeking to compel the production of the forensic report prepared by your vendor.

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It has become increasingly difficult for companies to protect forensic reports prepared in connection with a data breach. Despite their sensitive nature, these reports are frequently sought by plaintiffs’ attorneys in cyber-related litigation because they can provide a roadmap for their claims. Recent case law reveals that many courts are finding ways to compel the production of these reports.

TODAYSGENERALCOUNSEL.COM DECEMBER 202 1

The U.S. District Court for the District of Columbia was the latest court to hand down such a ruling in Guo Wengui v. Clark Hill, PLC. On January 12, 2021, the court ordered Clark Hill to produce the forensic report prepared by its forensic vendor at the direction of legal counsel. The court concluded that the report would have been created for business reasons irrespective of the litigation and thus failed the test relied upon to decide whether a document is protected by the work-product doctrine.

Clark Hill did not meet its burden in demonstrating that the report would not have been created regardless of ongoing litigation, considering that forensic investigation reports following a data incident are necessary to respond to such incidents. The court found that the forensic vendor’s role “was far broader than merely assisting outside counsel in preparation for litigation” and, as such, the report could not be protected under the work-product doctrine.

Previously, the U.S. District Court for the Eastern District of Virginia, overseeing multi-district litigation following the 2019 Capital One data breach, rejected claims that Capital One’s forensic report was protected based on similar reasoning. Despite having prepared two separate reports, distributing the report only to mostly legal staff, paying for the report primarily from the legal budget, and signing an engagement letter by its attorneys, the court found that Capital One failed to distinguish the forensic report from one that would have BACK TO CONTENTS

been prepared for business purposes, regardless of impending litigation.

In the court’s eyes, the original agreement between Capital One and its on-retainer cybersecurity vendor had only been “effectively transferred” to counsel after the breach, but it functioned the same as an operational investigation.

Other factors considered were payments initially paid from the existing retainer and subsequently attributed to the legal budget, and disclosure of the report to an outside auditor and various regulators.

These and numerous similar decisions in recent years have chipped away at preserving privilege over forensic reports.

may need to look outside their standard IT vendors and retain another vendor in preparation for litigation.

• Avoid putting analysis into the mitigation investigation report. When preparing the non-privileged investigation report for purposes of mitigation, companies should ensure that no analysis or interpretation is included. This report should reflect facts and technical information only. Discussion of next steps, effects of the breach, and characterizations of the attack that may occur in the mitigation investigation should remain in oral format until findings are solidified, at which point such findings

Companies may need to look outside their standard IT vendors and retain another vendor in preparation for litigation.

Therefore, we recommend the following steps to best ensure protection by attorney-client privilege or the work-product doctrine: • Create two separate reports.

Investigation teams should create one report reflecting a post-breach mitigation investigation, and one reflecting a post-breach analysis in preparation for litigation. If using one vendor, precautions should be taken to ensure that the court does not consider the transfer to counsel to be on paper only. Consider creating separate teams for mitigation and litigation, keeping the investigations completely separate with different responsibilities, preparing separate engagement letters, and paying for such services exclusively with the legal budget. Companies BACK TO CONTENTS

should be presented either in the legal investigation report or in a privileged attorney letter.

On the other hand, vendors and companies should be sure that non-privileged investigation reports include the measures and approaches the company took for the protection of data.

• Restrict access to the reports.

Avoid sharing the legal investigation report to the fullest extent possible. Sharing only the non-privileged mitigation report will also help demonstrate that the investigative report was created for purposes of litigation and not for regulatory or business purposes, thus overcoming any “because of” or similar test imposed by federal courts.

area. Before making decisions about the vendors you will retain, how you will structure those relationships, whether forensic reports will be prepared, and who will have access to those reports, you should seek advice from legal counsel experienced in dealing with these issues. Extreme care must be given to these dynamics to ensure that you are able to maintain the privileged nature of your forensic reports.

Matt White, a shareholder in the Memphis office of Baker Donelson, advises clients on a wide variety of cybersecurity and data privacy issues.

He is a certified information privacy professional and a certified information privacy manager. mwhite@bakerdonelson.com Alex Koskey is an attorney in Baker Donelson’s Atlanta office. He is a certified information privacy professional and represents financial institutions and organizations on a wide range of data privacy, regulatory and compliance, and litigation matters. akoskey@bakerdonelson.com

The preparation of forensic reports is a continually evolving DECEMBER 202 1 TODAYSGENERALCOUNSEL.COM

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COLUMN / THE ANTITRUST LITIGATOR

Epic Games v. Apple: The Antitrust Analysis

By JEFFERY M. CROSS

T

he recent decision by the U.S. District Court of the Northern District of California in Epic Games v.

Apple garnered a great deal of attention because of the court’s injunction under California’s Unfair Competition Law barring Apple’s anti-steering restrictions.

Epic Games, however, lost all of its antitrust claims.

Epic Games, producer of the highly popular Fortnite game, sued Apple for the restrictions imposed on consumers and app developers with Apple’s App Store. These restrictions included a requirement that app developers use Apple’s in-app purchases or in-app payments system. In addition, Epic Games challenged the 30 percent commission that Apple

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charged developers on all consumer purchases.

Epic Games used the “freemium” business model. Video games were free to download, but players could purchase “V-Bucks,” a form of video game currency, which could be used to purchase digital content such as cosmetic enhancements, in-game costumes, dance moves or locked content. Such in-app purchasers were subject to Apple’s restrictions, including the commission.

Apple managed its App Store by requiring app developers to adhere to Apple’s App Store Review Guidelines, which addressed issues of safety, privacy, performance and reliability. Apple performed app reviews that included both technical and human components

TODAYSGENERALCOUNSEL.COM DECEMBER 202 1

to make sure that apps conformed to the App Guidelines.

The district court began its analysis with the relevant market.

It noted that without a relevant market definition, there was no way to measure anti-competitive effect. Epic Games had asserted three separate markets: a smartphone operating systems original equipment market, which the court called a “foremarket”; a derivative or “aftermarket” of iOS In-App Distribution”; and another derivative market of “iOS In-App Payment Systems.” Apple, however, contended that the relevant market was “digital game transactions.”

The court rejected all of these market definitions, noting that the test of a relevant product market BACK TO CONTENTS

is to identify the group of sellers or producers who have the actual or potential ability to deprive each other of significant levels of business. The court noted that the boundaries for such an analysis involved the cross-elasticity of demand and reasonable substitutability. However, the court also found that there are practical indicia that could be applied to narrow the market. These

Apple and concluded that there was no concert of action as required by Section 1 of the Sherman Act. The agreement imposed by Apple on its developers was independent unilateral conduct. However, the court found that such a result, although supported by the law, was incongruous in terms of some of the alleged conduct. The tying claim, for example, did not require any meeting of the minds between the

The court found that Apple had plausible pro-competitive justifications for its restraint. included industry or public recognition of the market, the product’s peculiar characteristics and uses, unique production facilities, distinct customers, distinct prices, sensitivity to price change and specialized vendors. The court cautioned, however, that such practical indicia must be tethered to the fundamental concepts of the cross-elasticity of demand and reasonable substitutability.

Based on its application of these practical indicia, the court concluded that the relevant market was “mobile gaming transactions.”

For purposes of Section 1 of the Sherman Act, the court found that an initial requirement was a concert of action. Epic Games argued that Apple’s agreement with the app developers was such a concert of action. Apple argued that the restraints were independently imposed on developers

by Apple’s unilateral action. Such an argument was essentially the Colgate Doctrine, under which the Supreme Court held that a manufacturer could decide unilaterally with whom it would do business and announce in advance its conditions for so doing business.

The district court sided with BACK TO CONTENTS

buyer and seller. Rather, the seller used its market power in the tying product to force the buyer to buy the tied product. In light of such incongruity, the court went on to analyze the additional requirements under Sections 1 and 2.

In analyzing the restraints under both Section 1 and Section 2, the court applied the step-wise, burden-shifting approach recently adopted by the Supreme Court.

Under step one, the plaintiff has the burden of establishing an anti-competitive effect. If it does, the burden shifts to the defendant for step two to proffer plausible procompetitive justifications for the restraint. If defendant successfully does so, the burden shifts back to the plaintiff for step three to challenge those justifications as more restrictive than necessary to achieve the procompetitive purpose.

For step one, the court concluded that plaintiffs had established an anti-competitive effect. The court found that Apple’s market share was between 52 and 57 percent. The court concluded that this market share was below the range generally considered appropriate to find a

monopoly for purposes of Section 2, but was sufficient to find market power under Section 1.

As for step two, the court found that Apple had plausible procompetitive justifications for its restraint, particularly its rationale for protecting the security of consumers purchasing apps through the App Store. On the other hand, it found Apple’s assertion that the restraints were necessary to protect its intellectual property was pre-textual.

Finally, the court concluded that Epic Games failed to meet its burden to show that alternatives to the restraints were virtually as effective and could be implemented without significantly increased costs. The court concluded that Apple’s restraints were reasonable in terms of ensuring security for consumers, and it declined to second-guess Apple.

In short, the court did not break any new ground in terms of its antitrust analysis, and instead closely followed fundamental antitrust principles. The decision is valuable, however, in that it illustrates the application of traditional antitrust analysis to a high-tech industry.

Jeffery Cross is a columnist for Today’s General Counsel and a member of the Editorial Advisory Board. He is a partner in the Litigation Practice Group of Freeborn and Peters LLP and a member of the firm’s Antitrust and Trade Regulation Group. jcross@freeborn.com

DECEMBER 202 1 TODAYSGENERALCOUNSEL.COM

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FEATURE

Important Supreme Court Ruling on Standing

By JOHN DRURY AND PAMELA DEVATA

I

n June 2021, the U.S. Supreme Court issued its opinion in TransUnion LLC v. Ramirez, reversing a class action award of roughly $40 million in a case brought under the Fair Credit Reporting Act (FCRA). On appeal, the Court addressed whether class members who were not harmed

by TransUnion’s alleged violations could still recover damages in federal court based on purely technical violations of the law.

For decades, the Supreme Court said the infringement of rights that Congress has created by statute is a sufficient injury

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to allow standing to sue in federal court. In TransUnion LLC v.

Ramirez, however, the Court held that each class member in a federal class action must show they suffered a “concrete harm.”

Otherwise, they do not have standing to recover damages in federal court. In other words, it is not enough for a plaintiff to show a technical violation of a statute.

To recover damages, each person must show that he or she suffered a real, concrete injury.

The background of the case helps explain the difference between a plaintiff who is “harmed”

TODAYSGENERALCOUNSEL.COM DECEMBER 202 1

for standing purposes, compared to class members who are not harmed. TransUnion had prepared a credit report on Ramirez.

The report inaccurately identified Ramirez as being a potential match to a name on the terrorist watch list. Because of the credit report, Ramirez was unable to purchase an automobile. Ramirez then requested a copy of his credit file from TransUnion, which sent him two mailings in return. The first mailing included his credit file and a summary of his rights under the FCRA. The second mailing referenced the terrorist watch list BACK TO CONTENTS

but did not include the summary of rights.

Ramirez filed a class action in district court against TransUnion under the FCRA. First, he alleged that TransUnion violated the FCRA by only using name matching, and not following “reasonable procedures to assure maximum possible accuracy” of the class

harm must be something that traditionally has been recognized by courts, not Congress, as providing a basis for a lawsuit. The Supreme Court concluded that Ramirez and the other class members whose incorrect credit reports actually were sent to third parties showed a concrete harm and had standing in federal court.

It was different for the remaining class members.

The Court concluded that “the mere existence of inaccurate information” traditionally was not a basis for a lawsuit. Because this group of class members never had inaccurate credit files sent to anyone, they did not have standing to sue based on a violation of a statute or because of some potential “risk of future harm.” In its decision, the Court emphasized that Congress cannot legislate an entitlement to damages for individuals who do not suffer a real and concrete injury.

The Supreme Court also held that no one in the class (except Ramirez) had standing to recover based on how TransUnion responded to their credit file requests. Just because TransUnion sent two separate mailings (a technical violation of the statute) did not mean anyone was harmed.

None of the class members could show they suffered even an informational injury because they each received the required information, albeit in the wrong format.

The decision has the potential to significantly limit “no-harm” class actions in federal court. In the last several years, businesses have faced an increase in class actions under the FCRA, with many claims directed at technical

Many other consumer protection statutes involve similar allegations that may now fail to confer federal court standing. members’ credit files. Second, he alleged that TransUnion violated the FCRA by failing to provide class members with copies of their complete credit files in one mailing.

The parties agreed that the class included 8,185 members, but that only 1,853 class members actually had their credit files sent to a third party. At trial, the jury awarded every class member over $7,000 in statutory and punitive damages, for a total award of more than $60 million. The Ninth Circuit reduced the total award to around $40 million.

The Supreme Court reversed the Ninth Circuit and held that the vast majority of class members did not suffer any harm. Thus, they did not have standing to recover damages in federal court, regardless of the fact that Ramirez himself had been harmed. A person merely seeking to ensure a defendant’s compliance with a statute does not have standing to recover damages in federal court.

In short, “no concrete harm, no standing.”

So when does a class member suffer a “concrete harm?” The BACK TO CONTENTS

statutory violations that arguably cause no harm to named plaintiffs and putative class members.

Beyond the FCRA, many other consumer protection statutes involve similar allegations that may now fail to confer federal court standing.

That being said, this opinion is not a panacea against no-harm class actions based on statutory violations. Ramirez only addressed federal court standing.

Many state courts have more lenient standing requirements — in particular, California. There already had been a steady increase in class actions filed in state courts with concurrent jurisdiction over federal statutes such as the FCRA. Businesses should expect Ramirez to result in more class actions being filed and pursued in state court. However, this opinion will help cut down on class actions in federal court and a number of state courts.

John Drury is a Labor & Employment partner in Seyfarth’s Chicago office. His practice focuses on class action and single plaintiff litigation brought under the Fair Credit Reporting Act (FCRA) and state laws addressing background screening. jdrury@seyfarth.com Pamela Devata is a Labor & Employment partner in Seyfarth’s Chicago office, and leads the firm’s nationwide Background Screening Compliance and Litigation Defense team. pdevata@ seyfarth.com

DECEMBER 202 1 TODAYSGENERALCOUNSEL.COM

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FEATURE

Legal and Financial Risks in Your Contracts

By DAVE PARKS

C

ontracts play a critical role in helping companies manage their relationships with all parties in the supply chain, but poor contract management processes can impact a company’s bottom line. The risks due to ineffective contract life-cycle management (CLM) include overlooked penalties, missed obligations, lost revenue, lost savings, misplaced contracts, unauthorized access to sensitive information, unwanted renewals and potential brand damage.

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Despite the importance of contracts, many organizations still don’t have true insight into how their employees, partners and customers access and manage them.

Contracts could be stored in file cabinets, in folders, on personal computers or shared drives, and might be circulated inefficiently and insecurely throughout the organization via email or paper.

And what about the data? How do organizations monitor and ensure compliance with critical dates, deadlines, milestones

TODAYSGENERALCOUNSEL.COM DECEMBER 202 1

and obligations? Some use spreadsheets or email calendar reminders, which are risky. Some use nothing at all.

By digitizing and modernizing CLM processes, in-house legal teams can mitigate risks associated with human error and inefficiency, and spend more time on valuable and strategic risk management initiatives.

A data-driven approach to CLM is the most effective way to mitigate risk in contract management efforts. Enterprise CLM software gives busy teams in legal, procurement and contract administration a digital, integrated set of tools to handle the tasks associated with contract creation, negotiation, execution, and ongoing management including post-award rights, obligations, amendments and addendums. The main benefits of enterprise CLM software are visibility, automation, accuracy, security and collaboration.

VISIBILITY Centralizing all contracts and related documents is the backbone of the contract management process, supporting and enabling all the other key benefits. Centralizing contract data in a secure, dynamic, digital contract repository enables legal teams to search the organization’s contracts for information such as documents, contacts and dates, and to run reports and BACK TO CONTENTS

analytics on any of that data.

CLM software also gives legal teams visibility into the status of every contract. By harnessing contract data, they can see what contracts are being drafted versus negotiated versus executed, and what contracts are active versus pending versus terminated, and then deliver real-time reports on that information.

This kind of visibility enables legal teams to benchmark and track key performance indicators, another factor in mitigating

contract, automated features such as alerts and notifications ensure that legal teams never miss an important deadline, obligation or date.

ACCURACY In most organizations, contract requests happen over email because there is no centralized contract request system to leverage. This manual approach creates headaches for legal teams due to the risk of missed or inaccurate information, and can quickly become

Service Organizational Control 2, HIPAA and Federal Security Modernization Act compliant, and support multi-factor authentication and single sign-on, further strengthening the security of important legal agreements.

FRICTIONLESS COLLABORATION Using real-time capabilities in CLM software to collaborate and negotiate contracts allows legal teams to concurrently review, approve and mark up contracts, making the entire process seam-

The ability to automate business processes and routine tasks is a huge benefit of CLM software. risk. Legal teams can therefore accurately capture their contract data and present it in graphic dashboards. They can track key metrics, such as number and type of new contracts per month, number of requests for contracts, aggregate value of different contract types, number of contracts by internal or external organization, or how long it takes for each stage in the contract cycle.

AUTOMATION The ability to automate business processes and routine tasks is a huge benefit of CLM software for both pre- and post-award phases of a contract’s life cycle. It is a way to mitigate risks, and increase efficiency and compliance. Contract workflows can be automated and customized to ensure that contracts are moving through processes efficiently according to business rules. For example, for pre-award of a contract, capabilities such as automated workflows ensure that contracts are routed to the appropriate people at the appropriate time for situation drafting, review and approval. For post-award of a BACK TO CONTENTS

unmanageable. With standardized contract data intake forms, organizations ensure that all the information required to request, submit or begin drafting a contract is completely and accurately captured. CLM software can eliminate additional bottlenecks by empowering non-legal teams to assemble contracts using legally approved language and formats via clause and template libraries, as well as contract workflows that follow business rules. Finally, with automated versioning and tracking of all redlines and comments, in-house legal teams can rest assured that they have a complete and accurate history of all changes associated with a contract.

SECURITY CLM software also helps minimize risks by providing access to sensitive contract data only to those who need it. It allows organizations to manage access to contract data using organizational hierarchies and role-based and feature-based permissions functionality. In addition, some CLM software solutions are

less while providing an audit trail to minimize risk. This means no more missing emails and a more efficient way of version control.

E-signature capabilities that are integrated into these collaboration tools also significantly speed up the contract execution stage.

Contract data can be the legal team’s most valuable contract management asset. By taking a data-first approach to contract management, they can transform their contract data into fast, actionable and accurate insights, as well as mitigate risk, increase compliance, and uncover hidden revenue and cost-savings opportunities.

Dave Parks is Vice President of Product Marketing at Contract Logix. He is an active writer, contributor and speaker on contract management, digital transformation and legal technology. dparks@contractlogix.com

DECEMBER 202 1 TODAYSGENERALCOUNSEL.COM

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