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Legal News Report 4-15-2016
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Judge Dismisses Investor Lawsuit Against SeaWorld
Apr 12, 2016 | Associated Press
By Mike Schneider
A judge in southern California has dismissed a securities fraud lawsuit brought by investors in SeaWorld Entertainment, Inc. who claimed company officials misled them about the impact of the documentary "Blackfish" on the company's financial performance and attendance at its parks. -
No Warrant Required for Phone Location Records, Court Rules
Apr 13, 2016 | Wall Street Journal
By Joe Palazzolo
Federal agents can obtain cellphone records that reveal a caller’s location without a warrant, a Cincinnati-based federal appeals court said on Wednesday in the latest ruling to tackle the scope of privacy protections for data transmitted by personal devices. -
Exxon Fires Back at Climate-Change Probe
Apr 13, 2016 | Wall Street Journal
By Amy Harder, Devlin Barrett and Bradley Olson
Exxon Mobil Corp. went to court Wednesday to challenge a government investigation of whether the company conspired to cover up its understanding of climate change, a sign the energy company is gearing up for a drawn-out legal battle with environmentalists and officials on the politically charged issue. -
Legal Fight Hits General Motors’ Acquisition of Cruise Automation
Apr 14, 2016 | Wall Street Journal
By Gautham Nagesh
Cruise Automation Inc. and its founder Kyle Vogt have filed a lawsuit against engineer Jeremy Guillory for allegedly delaying the company’s $1 billion acquisition by General Motors Co. by demanding a stake in the startup. -
Microsoft lawsuit against government relies on speech, privacy rights
Apr 15, 2016 | Reuters
By Dan Levine
When the U.S. Department of Justice sought permission to search a Microsoft Hotmail account in 2014, a judge rejected one condition the agency asked for - an order preventing Microsoft from ever telling its customer about the search.
Legal News
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Judge Dismisses Investor Lawsuit Against SeaWorld
Apr 12, 2016 | Associated Press
By Mike Schneider
A judge in southern California has dismissed a securities fraud lawsuit brought by investors in SeaWorld Entertainment, Inc. who claimed company officials misled them about the impact of the documentary "Blackfish" on the company's financial performance and attendance at its parks.
U.S. District Judge Michael Anello said the investors failed to show that SeaWorld officials had deliberately made false statements, that "Blackfish" alone caused attendance declines and that SeaWorld officials knew "Blackfish" had caused attendance declines.
The lawsuit was brought by pension retirement programs for Arkansas state workers and Danish workers on behalf of all investors who had purchased shares in the company after its initial public offering April 2013 until August 2014.
The documentary chronicled the life of SeaWorld's killer whale, "Tilikum," who has been linked to the deaths of three people, including SeaWorld trainer Dawn Brancheau. The film suggested that captivity provokes mental distress and violent behavior in the enormous marine mammals. Attendance declined after the film's release.
"As currently pleaded, plaintiffs' attendance allegations are insufficient to demonstrate that a material misrepresentation or omission regarding Blackfish caused attendance to decline at all SeaWorld Entertainment parks," the judge wrote in his March 31 order.
SeaWorld Entertainment not only runs three SeaWorld parks in Orlando, San Diego and San Antonio, but also two Busch Garden parks, three water parks, a marine mammal interactive park and Sesame Place park.
SeaWorld doesn't typically comment on pending litigation, "but we are pleased with the Court's decision to dismiss the case at this stage," said SeaWorld spokeswoman Aimée Jeansonne Becka.
The investors claimed in their lawsuit that materials SeaWorld filed with the U.S. Securities and Exchange Commission before its initial public offering in April 2013 were false since they failed to acknowledge the allegations made in the documentary. They also said that then-CEO James Atchison and other SeaWorld executives made false statements when they attributed quarter-to-quarter attendance declines to bad weather, a new pricing strategy and changes on the calendar for spring break and Easter, instead of blaming "Blackfish." The investors said competitors Universal Studios and Disney faced similar challenges and saw attendance increases.
But the judge said SeaWorld can't be compared to the other theme parks companies since their parks are in different cities, and that weather may affect SeaWorld more than the other parks because animals are involved. The Disney and Universal parks also had new, high-profile expansions which SeaWorld lacked, he said.
In the past year and a half, several of SeaWorld's top executives named in the lawsuit, including Atchison, have left the company.
New CEO Joel Manby announced last month that SeaWorld was ending its killer whale breeding program and that it would soon stop using killer whales for theatrical performances. Manby said society's view of killer whales in captivity had shifted and SeaWorld's decision reflected that change.
http://abcnews.go.com/US/wireStory/judge-dismisses-investor-lawsuit-seaworld-38333606
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No Warrant Required for Phone Location Records, Court Rules
Apr 13, 2016 | Wall Street Journal
By Joe Palazzolo
Federal agents can obtain cellphone records that reveal a caller’s location without a warrant, a Cincinnati-based federal appeals court said on Wednesday in the latest ruling to tackle the scope of privacy protections for data transmitted by personal devices.
The records obtained by the Federal Bureau of Investigation from wireless carriers in 2011 showed that two Detroit men were near the scene of several robberies at the time they were committed. Timothy Carpenter and Timothy Sanders, who were ultimately convicted of participation in nine armed robberies, sought to exclude the records, saying they were protected by the Fourth Amendment.
A 2-1 panel of the Sixth U.S. Circuit Court of Appeals ruled that location records created when a mobile phone connects to a nearby cell tower were the equivalent of the writing on the outside of an envelope, rather than the letter inside.
“Cell-site data—like mailing addresses, phone numbers, and IP addresses—are information that facilitate personal communications, rather than part of the content of those communications themselves,” wrote Judge Raymond Kethledge. “The government’s collection of business records containing these data therefore is not a search.”
Judge Jane Branstetter Stranch joined the ruling in part but was skeptical of lumping location records together with bank and credit card records that law enforcement officers can retrieve from financial firms without a warrant.
“This case involves tracking physical location through cell towers and a personal phone, a device routinely carried on the individual’s person,” she wrote. “I am not convinced that the situation before us can be addressed appropriately with a test primarily used to obtain business records such as credit card purchases.”
Harold Gurewitz, a lawyer for Mr. Carpenter, said he and his client were considering their next move. They could ask the Sixth Circuit to rehear the case or petition the U.S. Supreme Court to review it. Until the high court steps in, Mr. Gurewitz said, “I think the issue is just going to be unclear.”
A spokeswoman for the U.S. attorney’s office in Detroit, which prosecuted the case, declined to comment.
The ruling aligns the Sixth Circuit with two other regional appeals courts and means that law enforcement officers in Kentucky, Michigan, Ohio and Tennessee can obtain a court order for location data by showing merely that the records are relevant to an ongoing investigation. A warrant requires a showing of probable cause.
A three-judge panel of a fourth federal appeals court ruled in Augustthat police need a warrant to obtain such records. That ruling is under review by the full court.
In recent years, the U.S. Supreme Court has erred on the side of privacy in disputes over whether the Fourth Amendment protects against the installation of a global positioning system tracker on a suspect’s vehicle or a search of his phone during an arrest.
But Judge Kethledge said he was bound a 1979 ruling in Smith v. Maryland in which the U.S. Supreme Court held that the numbers dialed by a caller on a landline aren’t protected by the Fourth Amendment, because the caller knowingly gives that information to phone companies.
“The same things are true as to the locational information here,” he wrote. “Any cellphone user who has seen her phone’s signal strength fluctuate must know that, when she places or receives a call, her phone ‘exposes’ its location to the nearest cell tower and thus to the company that operates the tower.”
The cell records obtained by the FBI showed that Mr. Carpenter and his half brother, Mr. Sanders, were nearby the scene of four robberies in Warren, Ohio, and Detroit in 2010 and 2011.
Mr. Carpenter was sentenced to more than 116 years in prison, while Mr. Sanders was sentenced to about 14 years.
Nathan Freed Wessler, a lawyer for the American Civil Liberties Union, which filed a brief on behalf of Messrs. Carpenter and Sanders, said the ruling failed to account for the privacy violations made possible by devices that “we all need to carry around to live our lives normally.”
He went on, “When police obtain months’ worth of cell phone data comprising thousands of individual locations, like they did in this case, they should have to get a search warrant from a judge,” he said.
http://blogs.wsj.com/law/2016/04/13/no-warrant-required-for-phone-location-records-court-rules/
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Exxon Fires Back at Climate-Change Probe
Apr 13, 2016 | Wall Street Journal
By Amy Harder, Devlin Barrett and Bradley Olson
Exxon Mobil Corp. went to court Wednesday to challenge a government investigation of whether the company conspired to cover up its understanding of climate change, a sign the energy company is gearing up for a drawn-out legal battle with environmentalists and officials on the politically charged issue.
The company filed court papers in Texas seeking to block a subpoena issued in March by the attorney general of the U.S. Virgin Islands, one of several government officials pursuing Exxon. Wednesday’s filing argues that the subpoena is an unwarranted fishing expedition into Exxon’s internal records that violates its constitutional rights.
“The chilling effect of this inquiry, which discriminates based on viewpoint to target one side of an ongoing policy debate, strikes at protected speech at the core of the First Amendment,” the filing says.
Exxon also dismisses the notion that there is any suggestion of a crime, saying Attorney General Claude Earl Walker “issued the subpoena without the reasonable suspicion required by law and based on an ulterior motive to silence those who express views on climate change with which they disagree.”
A request for comment to the U.S. Virgin Islands’ attorney general’s office wasn’t immediately returned.
In the subpoena, the U.S. Virgin Islands told Exxon it could be violating two state laws, by purportedly obtaining money under false pretenses and conspiring to do so.
Both sides see this as a pivotal moment in a growing campaign by environmentalists to deploy a legal strategy used against tobacco companies in the 1990s by arguing that oil companies have long hidden what they know about climate change. Tobacco firms’ finances and credibility were badly damaged by lawsuits accusing them of hiding the truth about their products.
A key meeting in the new push unfolded in January behind closed doors at a Manhattan office building. The session brought together about a dozen people, including Kenny Bruno, a veteran of environmental campaigns, and Bill McKibben, founder of 350.org, two activists who helped lead the successful fight to block the Keystone XL pipeline.
The new campaign’s goals include “to establish in public’s mind that Exxon is a corrupt institution that has pushed humanity (and all creation) toward climate chaos and grave harm,” according to an agenda of the meeting viewed by The Wall Street Journal.
This new legal strategy stems in part from environmentalists’ frustration at what they see as the inadequacy of recent climate deals. Their hope is to encourage state attorneys general and the U.S. Justice Department to launch investigations and lawsuits that ultimately will change Exxon’s behavior, force it to pay big damages and drive public attention to climate change.
“It’s about helping the larger public understand the urgencies of finding climate solutions,” said Lee Wasserman, director of the Rockefeller Family Fund, which hosted the January meeting. “It’s not really about Exxon.”
Exxon and its supporters dismiss the comparison with tobacco. Cigarettes are a harmful, addictive product used by a portion of the public, they say, while fossil fuels are fundamental to the world economy.
In Wednesday’s filing, Exxon’s lawyers say the company has confirmed for more than a decade that it sees the risks of climate change, and that it has publicly advocated for a carbon tax as the best way to regulate carbon emissions.
A key part of the activists’ strategy is to seek documents that show otherwise: that Exxon, despite knowing the dangers of climate change, has sought to challenge the scientific consensus. Such revelations would help “delegitimize [Exxon] as a political actor,” the January agenda said.
In a twist, the initiative is set to be bankrolled partly by the heirs of John D. Rockefeller, the founder of Exxon’s forebear, Standard Oil. The Rockefeller Family Fund has signaled it will help fund the campaign through its existing backing of 350.org, though it hasn’t provided a figure.
Wednesday’s filing is Exxon’s first legal salvo in what could be a long war, since at least four state attorneys general have launched investigations and a dozen others have signaled they might.
None has been as aggressive as New York Attorney General Eric Schneiderman, whosubpoenaed Exxon in November seeking information about the company’s research on climate change over several decades. Exxon hasn’t challenged that subpoena, partly because a New York law called the Martin Act gives Mr. Schneiderman wide latitude to investigate businesses for possible fraud or misrepresentation.
The new legal theory has yet to gain momentum within the Justice Department, according to officials familiar with internal discussions. But after prodding by lawmakers, the Federal Bureau of Investigation is conducting a preliminary review.
The issue also has seeped into the political arena. Democratic presidential front-runner Hillary Clinton has called for an investigation of Exxon, and Sen. Sheldon Whitehouse (D., R.I.), pressed U.S. Attorney General Loretta Lynch on the matter at a recent congressional hearing.
The activists are focusing on internal Exxon documents that have surfaced in news outlets—including in publications or investigative projects that were funded partly by the Rockefeller Brothers Fund and Rockefeller Family Fund, which favor strong climate action. The media outlets involved—the Los Angeles Times and InsideClimate News—have said the reporting was done without influence by the funding sources.
The activists’ biggest challenge may be to establish clear culpability for global warming. Millions of individuals contribute with their use of fossil fuels, while national governments have done little despite knowing the risks, said David Uhlmann, a University of Michigan law professor and former federal environmental crimes prosecutor.
“Exxon should have been far more forthright about the risks associated with climate change, but all of us are culpable for our collective failure to change,” Mr. Uhlmann said. “The likelihood that these investigations will lead to significant damages are small.”
But Sharon Eubanks, who led the tobacco litigation during the Clinton and Bush administrations and attended the January meeting, said she believes a lawsuit by the government against Exxon is viable under the Racketeer Influenced and Corrupt Organizations Act. RICO allows the government to pursue civil lawsuits against a people or entities working in concert to violate the law.
http://www.wsj.com/articles/exxon-fires-back-at-climate-change-probe-1460574535
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Legal Fight Hits General Motors’ Acquisition of Cruise Automation
Apr 14, 2016 | Wall Street Journal
By Gautham Nagesh
Cruise Automation Inc. and its founder Kyle Vogt have filed a lawsuit against engineer Jeremy Guillory for allegedly delaying the company’s $1 billion acquisition by General Motors Co. by demanding a stake in the startup.
Cruise is a three-year-old company that creates technology to enable driverless cars. Early on the company built hardware that would retrofit existing Audis, but last year it shifted to software that enables autonomous cars to operate in cities. Mr. Vogt sold his videogame streaming service to Amazon.com Inc. for roughly $1 billion in 2014.
General Motors agreed to acquire Cruise earlier this year in a deal valued at more than $1 billion in cash and stock, according to people familiar with the details. That deal has yet to close, but GM has touted the partnership widely and Cruise has posted a number of jobs on its website while promising to deploy the world’s largest fleet of driverless cars.
Now Cruise and Mr. Vogt have filed a lawsuit against Mr. Guillory for allegedly claiming an equity interest in Cruise that they say he isn’t entitled to. The lawsuit claims Mr. Vogt consulted briefly with Mr. Guillory soon after Mr. Vogt founded Cruise in 2013, but ultimately the two decided to go their separate ways.
The lawsuit says Mr. Guillory was listed on Cruise’s application to the startup incubator Y Combinator in 2013, but says Mr. Vogt interviewed with the Y Combinator partners on his own. It claims Mr. Guillory never wrote any code or created any technology for Cruise, and that he was never issued any stock options.
Mr. Guillory filed a countersuit against Cruise and Mr. Vogt Thursday. According to the countersuit, Mr. Guillory earned a Master’s degree in mechanical engineering from University of Texas at Austin and was working on driverless car technology long before he met Mr. Vogt in 2013 and the pair applied to Y Combinator together.
Mr. Guillory declined to comment further through a spokesman.
Y Combinator president Sam Altman posted Cruise’s lawsuit onlineWednesday along with a blog post calling Mr. Guillory’s claim “completely baseless and opportunistic.” He also said “it obviously comes at a bad time for the company with the merger still pending.”
“Mr. Guillory’s baseless allegations have also caused an unnecessary and damaging delay in the sale of Cruise to General Motors,” states the lawsuit. “Time is truly of the essence in the highly competitive and frenetic race in the development of autonomous technology. Any continued delay damages Plaintiffs.”
A General Motors spokesman said, “We are aware of the complaint filed by Cruise Automation and support their efforts to bring the matter to a prompt conclusion. We expect our acquisition to close on schedule in the second quarter.”
http://www.wsj.com/articles/legal-fight-hits-general-motors-acquisition-of-cruise-automation-1460686414
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Microsoft lawsuit against government relies on speech, privacy rights
Apr 15, 2016 | Reuters
By Dan Levine
When the U.S. Department of Justice sought permission to search a Microsoft Hotmail account in 2014, a judge rejected one condition the agency asked for - an order preventing Microsoft from ever telling its customer about the search.
Microsoft was not asked to submit its views in the case, nor did it attempt to do so. On Thursday, however, Microsoft cited the Hotmail ruling as a key precedent in a lawsuit the company filed against the government challenging indefinite gag orders when the government subpoenas information from a customer account.
The company sees such orders as a possible barrier to potential clients considering the purchase of cloud storage services, an increasingly important part of Microsoft’s business.
When a company keeps data on its own servers, the government must approach it directly with any warrant to search for data. But if the company relies on a third party for cloud storage, the government could go directly to the cloud provider, and the company might never know.
"We're hearing from our customers about it," said Brad Smith, Microsoft’s president and chief legal officer.
Over the past 18 months, federal courts have issued nearly 2,600 secrecy orders "silencing Microsoft from speaking about warrants," the company said in its lawsuit. Two-thirds of those were indefinite, meaning there was no end date for how long they remained in effect.
The Justice Department has said it is reviewing the filing.
Microsoft’s lawsuit challenges indefinite government secrecy orders as a violation of the company's First Amendment free speech rights, as well as a violation of Fourth Amendment privacy rights.
In the Hotmail case, U.S. Magistrate Judge Paul Grewal ruled a limited gag order could be appropriate.
"The problem is that the government does not seek to gag Microsoft for a day, a month, a year, or some other fixed period," Grewal wrote. "Having persuaded the court that a gag order is warranted, it wants Microsoft gagged for ... well, forever."
Another magistrate judge in Texas came to a similar conclusion on First Amendment grounds in 2008, and Grewal followed up the Hotmail ruling with a similar one involving a Yahoo email user.
For its privacy argument, Microsoft relies partly on a Supreme Court ruling that police must announce themselves while serving a warrant.
U.S. District Judge James Robart in Seattle will oversee the Microsoft lawsuit, according to the court docket. Robart, nominated to the court by former President George W. Bush, also presided over recent smartphone patent litigation between Microsoft and Google's Motorola Mobility unit.
Robart valued the Google (GOOGL.O) patents much closer to Microsoft's position than Google's, a ruling upheld on appeal.
http://www.reuters.com/article/us-microsoft-privacy-precedents-idUSKCN0XC05Z
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