In recent years, plaintiffs’ lawyers have filed a number of management liability lawsuits against the executives of companies that have experienced high-profile data breaches. These lawsuits have either been filed as shareholder derivative lawsuits or securities class action lawsuits. By and large, the cases filed as shareholder derivative lawsuits have been unsuccessful. However, in a development that represents a milestone in several different respects, the parties to the Yahoo data breach-related derivative lawsuit have agreed to settle the case for $29 million. As discussed below, this settlement may have important implications for future data breach-related derivative litigation. The Court’s January 4, 2019 order approving the settlement can be found here (see calendar Line 5 in the order). Continue Reading
As I have noted in prior posts (for example, here), a few plaintiffs’ law firms have launched a wave of lawsuits under the Americans with Disabilities Act (ADA) based on website inaccessibility allegations. In one of the first appellate court decisions on the legal issues these cases present, the Ninth Circuit recently reversed a lower court dismissal of a website and mobile app accessibility lawsuit that had been filed against Domino’s Pizza. The appellate court’s ruling underscores the exposures companies face for these kinds of lawsuits. The Ninth Circuit’s January 15, 2019 opinion in Robles v. Domino’s Pizza can be found here.
Guillermo Robles is legally blind. Robles uses screen-reading software to access the Internet. On two occasions Robles attempted to order a pizza online from Domino’s. He was unable to do so because, he contends, Domino’s failed to design its website and mobile app so his software could read the sites. Robles filed a lawsuit against Domino’s failed to design and operate its website and mobile app to be full accessible as required by the ADA. He sought injunctive relief to compel Domino’s to adopt its sites to private industry accessibility standards (WCAG 2.0).
Domino’s moved for summary judgment, arguing that the ADA did not apply to its website and app, and that, in any event, because the U.S. Department of Justice had not issued applicable accessibility guidelines, applying the ADA as the plaintiff requested would violate its due process rights. Domino’s also invoked the primary jurisdiction doctrine, which permits a court to dismiss a complaint pending resolution of controlling issues by an administrative agency with special competence.
In a March 20, 2017 Order (here), Central District of California Judge S. James Otero granted Domino’s summary judgment motion. Judge Otero agreed with the plaintiff that the ADA’s prohibition of discrimination against disabled persons applied to Domino’s website and app. But he also held that requiring Domino’s to comply with the ADA would violate the company’s due process rights because the DOJ, the agency responsible for developing regulations to enforce the statute, had not yet issued relevant standards regarding website or mobile app accessibility. In view of the long-awaited but not yet issued guidelines from the DOJ, Judge Otero invoked the primary jurisdiction doctrine and dismissed the plaintiff’s complaint. The plaintiff filed an appeal to the Ninth Circuit.
The January 15, 2019 Opinion
In a January 15, 2019 opinion written by Judge John Owens for a unanimous three–judge panel, the Ninth Circuit reversed the district court’ dismissal of the plaintiff’s complaint and remanded the case for further proceedings.
The Ninth Circuit began its analysis by concluding that the ADA’s requirements did apply to Domino’s website and app. The alleged inaccessibility of the website and app “impedes access to good and services of its physical pizza franchises.” In reaching this conclusion, the appellate court noted that customer use the website and app to order pizzas for at-home delivery or in-store pickup. The online resources “are two of the primary (and heavily advertised) means of ordering Domino’s products to be picked up at or delivered from Domino’s restaurants.” This “nexus” between Domino’s website and app and its physical restaurants is “critical to our analysis.” The appellate court noted in a footnote that it “need not decide” if the ADA applies to websites or apps “where the inaccessibility does not impede access to good and services of a physical location.”
The court then turned to Domino’s argument that applying the accessibility standards to the company in the absence of DOJ guidelines would violate the company’s due process rights. The appellate court rejected this argument. The ADA, the court said, “articulates comprehensible standards to which Domino’s conduct must conform.” Since at least 1996, Domino’s “has been on notice that its online offerings must effectively communicate with disable customers.” The constitution “only requires that Domino’s receive fair notice of its legal duties, not a blueprint for compliance with its statutory obligations.”
Moreover, “the possibility that an agency might issue technical standards in the future does not create a due process problem.” The constitution, the court said “does not require that Congress or DOJ spell out exactly how Domino’s should fulfill [its] obligation.” The court speculated that the DoJ’s delay may in fact be intentional to allow companies to have “maximum flexibility” to decide how to go about meeting the ADA’s requirements. The appellate court also rejected Domino’s argument that requiring the company to comply with the WCAG 2.0 standard, in the absence of DoJ guidelines, would violate the company’s due process rights.
Finally the appellate court concluded that the district court erred in invoking the primary jurisdiction doctrine. The district court’s ruling on this issue, the appellate court said, would unduly delay the resolution of an issue the court can decide, in violation of the principles underlying the doctrine.
The appellate court remanded the case to the district court for further proceedings to decide whether the website and app provide the blind with accessibility required by the ADA’s mandates.
As the Blank Rome law firm noted in its January 2019 memo discussing the Ninth Circuit’s decision (here), the appellate court’s ruling in the case suggest that companies “should consider taking steps to remediate their platforms to ensure people with disabilities have equal access to consumer-facing content.”
It is important to note that the Ninth Circuit did not say that the ADA’s accessibility mandates apply to every company’s website or mobile app. Indeed, in a footnote the Court expressly emphasized that it was not reaching the issue whether the ADA applies to websites or apps “where their inaccessibility does not impede access to the goods and services of a physical location.” Indeed the appellate court said that the “nexus” between Domino’s website and apps and its physical restaurants was “critical to our analysis.” Although the court expressly did not reach the issue, the implication is that the ADA’s requirements might not apply or might not require accessibility accommodation in the absence of this “nexus” between the website or app and a company’s physical location.
The court’s emphasis that companies may have flexibility in adapting to the ADA’s requirements also could be helpful in some instances. Given the rapid pace of technological change a flexible approach may be preferable, at least assuming that the accessibility mandates apply in the first place.
In any event, the Ninth Circuit’s ruling that the ADA’s accessibility requirements apply to Domino’s website and app is the latest in a series of rulings that have held companies’ websites must provide accessibility to the blind. Significantly, the Ninth Circuit did not reach the issue of whether or not Domino’s website violates the accessibility requirement but rather it remanded the case to the district court for further proceedings on that issue.
There have been cases in which the proceedings have reached the point where there was an affirmative conclusion reached on the issue of whether or not a specific company’s website violated the accessibility requirements; for example, as discussed here, in June 2017, a federal judge in the Southern District of Florida, following a bench trial, entered a verdict that the website of the Winn-Dixie grocery store chain was inaccessible to a visually impaired person in violation of the ADA.
As I have noted in prior blog posts, there have been quite a number of these kinds of ADA lawsuits filed in recent years. The Ninth Circuit’s ruling in this case highlights the risks that companies may face when it comes to these kinds of website and mobile app accessibility issues. In its memo about the case to which I linked above, the Blank Rome law firm emphasized the Ninth Circuit’s decision’s practical implications: “While the Robles decision does not specifically require every website and app to comply with WCAG 2.0, from a practical standpoint, any business with a website and/or an app should perform audits to ensure its websites and apps are accessible to screen reader software and devices used by blind and visually impaired individuals and are as compliant as possible with the WCAG 2.0.”
In that regard, it is worth noting that the Judge in Winn-Dixie case noted above, in shaping relief in the case, imposed an injunction adopting the WCAG 2.0 guidelines. As one commentator noted at the time, the Judge’s use of the guidelines “further points to the WCAG 2.0 as the de facto standard for website accessibility.”
These kinds of cases could represent a substantial litigation exposure for companies involved, as well as for their EPL insurers. The possibility of this type of lawsuit includes not only the risk of damages awards but also includes the costs of defense, as well as the possibility of an award of the claimants’ attorneys’ fees.
In a three-post series, Jonathan Legge, a Senior Vice President at RT Pro Exec, is taking a look at the key insurance issues relating to Private Capital Investment. In the first of the three articles in the series (here), Jon examined the issues involved with getting the insurance for private equity-backed portfolio companies right. In today’s post, the second in the three-part series, Jon discusses transactional risk insurance, and in particular, contingent liability insurance. I would like to thank Jon for allowing me to publish his series of articles as guest posts on this site. I welcome guest post submissions from responsible authors on topics of interest to this site’s readers. Please contact me directly if you would like to submit a guest post. Here is Jon’s article. Continue Reading
The risk of extreme weather events resulting from climate change and the collective global failure to address climate change represent the most significant current global risks, according to the World Economic Forum’s annual survey of global risks. These kinds of risks represent significant concerns for human safety, social and business disruption, and property loss. As discussed below, and as recent claims have shown, these risks may present management liability concerns as well. The World Economic Forum’s January 15, 2019 Global Risks Report can be found here. Continue Reading
As I noted at the time (here), on December 19, 2018, Delaware Vice Chancellor Later held that under Delaware law, a corporate charter provision specifying that liability actions under Section 11 of the Securities Act of 1934 must be brought in federal court are invalid and ineffective. A copy of Laster’s opinion in Sciabacucchi v. Salzburg (referred to below as the Blue Apron decision) can be found here. In the following guest post, Paul Ferrillo, Robert Horowitz, and Steven Margolin of the Greenberg Traurig law firm take a look at the Blue Apron decision and examine whether or not Congress will act to eliminate concurrent state court jurisdiction for state court claims. The authors also examine the steps companies should take now in light of the possibility of facing litigation in both state and federal court. I would like to thank the authors for their willingness to allow me to publish their article as a guest post. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit an article. Here is the authors’ article. Continue Reading
As I have noted in a prior post, 2018 was a very eventful year in the world of directors and officers liability. In the following guest post, written by Kelly S. Johnson, Esq., Claims Counsel, Hiscox USA; Elan Kandel, Esq., Bailey Cavalieri; and Jennifer Lewis, Esq., Bailey Cavalieri, the authors make it clear that 2018 was also a very eventful year for important D&O insurance coverage decisions. I would like to thank the authors for allowing me to publish their article. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is the authors’ guest post. Continue Reading
In the now more than a year since the #MeToo phenomenon first arose, there have been a number of D&O lawsuits filed against companies and their boards in which the plaintiffs allege that company officials either allowed the alleged sexual misconduct to take place or turned a blind eye. In the latest D&O lawsuits to follow in the wake of allegations of sexual misconduct, two Alphabet shareholders have filed separate derivative lawsuits in California state court against the company’s board based on underlying allegations of alleged sexual misconduct at the company’s Google unit. Continue Reading
Want some good news? During calendar year 2018, there were exactly zero bank failures in the United States. Zero. Nil. Nada. Zilch. The last time there were no U.S. bank failures was waaaay back in 2006. Needless to say, a lot has happened since then. But the best part of all is that because of a strong economy, and because of the purifying effects of the financial refiners’ fire, the banking sector is as healthy as it has been in many years. Hugh Son’s January 10, 2019 CNBC article about the U.S. banks’ current healthy state can be found here. Continue Reading
Back in 2015, the California Legislature enacted Labor Law Section 558.1, making an “other person” acting for an employer (defined as any natural person who is owner, director, officer, or managing agent of the employer) who causes the employer to violate the state’s wage and hour laws liable as the employer for the violation. As I noted at the time, this new statutory provision, which created personal liability for individuals for the employer’s wage law obligations, was quite controversial. However, as noted in a December 21, 2018 post on the Sheppard Mullin law firm’s Labor & Employment Law Blog entitled “Managers Beware: Can You Be Held Personally Liable for Wage and Hour Violations” (here), a California appellate court recently confirmed that “even in the absence of this new section, the labor code imposes personal liability” for California minimum wage and overtime violations. Continue Reading
On January 4, 2019, the U.S. Supreme Court granted cert in a case that will determine what a plaintiff must plead in order to state a claim for false statements or omissions in connection with a tender offer under Section 14(e) of the Securities Exchange Act of 1934. The Ninth Circuit held in the case at issue that a plaintiff needs only plead negligence, differing on the issue from at least five different federal circuit courts that had previously held that in order to establish a claim a plaintiff must plead that the defendants acted with scienter. The U.S. Supreme Court’s ruling in the case could have a significant impact on merger objection lawsuits filed in connection with tender offers. The Supreme Court’s January 4, 2019 order in Emulex Corporation v. Varjabedien can be found here. Continue Reading