Author: Scripta Ad Astra Staff

2014 ABC Desk Guide

The Insolvency Law Standing Committee of the Business Law Section of the State Bar of California recently published the “2014 ABC Desk Guide,” coauthored by Anne Smiddy of Ad Astra Law Group LLP.  Ms. Smiddy co-authored the Desk Guide with Patrick Costello, Esq. of Vectis Law Group, Diana Donabedian Herman, Esq. of McKenna, Long, Aldridge LLP, and Justin E. Rawlins, Esq. of Winston & Strawn LLP, with Peter C. Califano, Esq. of Cooper, White & Cooper as editor.  The Desk Guide provides a convenient compilation and outline of the relevant state and federal statutes and cases affecting the operation of assignments for the benefit of creditors under California law.  The practice guide is available for purchase from the State Bar of California.

Ad Astra Law Group, LLP

Can Insiders be Guilty of Computer Hacking? Ad Astra attorney Michael Dorsi is interviewed

Among the questions posed in the Ninth Circuit Court of Appeals case of United States v. Nosal is whether a person can be convicted under an “anti-hacking statute” if they do not circumvent a technical or code-based access barrier. Ross Todd from The Recorder[1] interviewed Ad Astra associate Michael Dorsi and quoted Mr. Dorsi on the difficulty of defining a technical access barrier. The underlying events in the Nosal case took place in 2004. As stated in The Recorder:

Dorsi said one need only look at how long Nosal’s case has been pending to see the problem with tying CFAA allegations to some sort of technology-based standard.

Said Dorsi, “If we do end up with a ‘technological access barrier’ standard we will constantly be catching up with the question of ‘What is a barrier?’

In addition to its work on NovelPoster, Ad Astra Law Group presently represents workers’ compensation law firm Reyes & Barsoum in ongoing CFAA litigation in Los Angeles County Superior Court against another law firm, Knox Ricksen.

[1] Ross Todd, Nosal Appeal Could Extend Limits on Computer Hacking Law, The Recorder, October 16, 2015, available at http://www.therecorder.com/id=1202740085781/Nosal-Appeal-Could-Extend-Limits-on-Computer-Hacking-Law

Computer Crime Returns to the Ninth Circuit Court of Appeal

Author: Michael Dorsi[1]

Tomorrow the United States Court of Appeals for the Ninth Circuit will hear argument in United States v. Nosal, a case testing the meaning of the federal computer crime laws.

Petitioner David Nosal was convicted of a felony for his participation in a conspiracy by former employees of the executive search firm Korn/Ferry. The trial court found Nosal guilty of violating the federal Computer Fraud and Abuse Act[2] (“CFAA”) because his co-conspirators[3] used a password belonging to a then-employee of Korn/Ferry. After a jury trial, the district court concluded that the co-conspirators’ access was not authorized, and that using a current employee’s password falls within the CFAA.

This is the third time that the Ninth Circuit will hear argument in this case. In 2011, a three-judge panel considered an appeal of the dismissal of several charges. That panel reversed the district court, but on review en banc in 2012, the Ninth Circuit reversed the panel decision and affirmed the district court’s dismissal of causes of action. That decision held that the CFAA only prohibited wrongful access to — not wrongful use — protected computers and material found on those computers. Judge Kozinski’s opinion for the en banc panel[4] suggested that the court was concerned about the broad reach of the statute, but stopped short of striking down the statute for unconstitutional vagueness and overbreadth. That opinion considered but did not conclude that circumvention of a technological access barrier would be required to find a CFAA violation.

Interestingly, one of the eleven judges from the en banc decision in 2012, Judge M. Margaret McKeown, is on tomorrow’s panel. And during the en banc oral argument, Judge McKeown engaged in a brief colloquy with defense attorney Ted Sampsell-Jones, attempting to distinguish the charges now on appeal from those on appeal during the 2011 oral argument. Judge McKeown and Mr. Sampsell-Jones considered an analogy between passwords and keys to doors. Judge McKeown appeared to be under the impression that the defendants had kept their working passwords — like keeping a key after leaving — when in fact they used the password of a current employee. The text of the exchange suggests that Judge McKeown may not be as supportive of the defense argument now as she was in 2011–12:

“Mr. Sampsell-Jones: I don’t think that’s quite the same as picking a lock or stealing.

Judge McKeown: Well the one who’s left, has a key that he or she didn’t, quote, turn in, so to speak.

Mr. Sampsell-Jones: No the one who’s left doesn’t have a key anymore. The one who has left gets the key consensually from the one who is still there.

Judge McKeown: That’s called hacking.”[5]

While a single question is not entirely useful in forecasting the outcome, it will be interesting to see if Judge McKeown revisits the same question tomorrow.

[1] Mr. Dorsi is an associate at Ad Astra Law Group, counsel for amicus curiae NovelPoster. NovelPoster’s brief can be found here. All briefs are available online on a page hosted by the Electronic Frontier Foundation.

[2] The Computer Fraud and Abuse Act is codified at 18 U.S.C. § 1030. Mr. Nosal was convicted for his violation of 18 U.S.C. § 1030(a)(4).

[3] There are also arguments about whether Mr. Nosal can be guilty by way of conspiracy for these actions. Those arguments will not fit into a brief blog post, but are addressed in the briefs.

[4] 676 F.3d 854 (9th Cir. 2012).

[5] Oral Argument, Nosal, supra, 676 F.3d 854, at 46:45–47:10, available at http://www.ca9.uscourts.gov/media/view_video.php?pk_vid=0000006176.

Courts Say the Darndest Things II: Bill Cosby and Procedural Tricks

Author: Michael Dorsi

The Cosby case presented an unusual situation. The filings under seal were pending future review concerning sealing when the case settled. As a result, the Court did not rule until the Associated Press sought review years later.[1]

Settlements sometimes preserve confidentiality, but they cannot be relied on to happen at the right time. Sometimes litigants need to make a motion, and need to present the evidence they want sealed in order to provide adequate support for the motion. This can be a tricky situation for counsel.

The timing of motions permits state-court litigants more room to maneuver on noticed motions, at least compared to federal court litigants in the Northern District of California. California permits a party to file a redacted motion and conditionally lodge the un-redacted version of the motion under seal.[2]

Because the timing rules are the same for the motion to seal and any other motion other than summary judgment, the underlying motion often will be heard on the same or a later date than the motion to seal.

If the moving party prevails on the motion to seal, then that party is secure — at least for the time being. If the moving party loses a motion to seal, the filing under seal is returned to the moving party unless that party directs otherwise.[3] If the moving party also loses the underlying motion, then the moving party may be perfectly happy to have the moving papers not appear in the file. The difficult situation arises when the moving party prevails on the underlying motion but loses the motion to seal. At that point, the litigant must decide what is more important: obtaining relief on the motion or keeping the records out of public view.

Underlying Motion Granted, Motion to Seal Granted (moving party satisfied) Underlying Motion Granted, Motion to Seal Denied (moving party’s dilemma)
Underlying Motion Denied, Motion to Seal Granted (moving party maintains confidentiality) Underlying Motion Denied, Motion to Seal Denied (moving party has option to withdraw sealed papers)[4]

 

As a result, in California state court, a moving party that arranges the calendar well can guarantee that the motion to seal only matters if the party wins the motion.

 

In federal court, the Northern District’s local rules prevent this situation by employing an administrative motion process, which causes the motion to seal to be fully briefed in five days.[5] and that motion to be decided promptly, well before any ruling on the underling motion.[6]

 

[1] Memorandum Order (link)

[2] Cal. Rule of Court 2.551(b)(4).

[3] Cal. Rule of Court 2.551(b)(6).

[4] This blog post does not explore whether withdrawing such papers has an effect on preserving rights for appeal. As with any litigation decision, parties should consult with an attorney.

[5] N.D. Cal. L.R. 7-11.

[6] N.D. Cal. L.R. 7-11(c), 79-5(f).

 

Courts Say the Darndest Things: Bill Cosby and the Public’s Interest in Litigation

Author: Michael Dorsi

Last summer, a federal judge in Pennsylvania ruled in favor of unsealing Bill Cosby’s sworn testimony concerning the use of Quaaludes (Methaqualone) in sexual assaults against women.[1] The result should stand as a warning to litigants: you cannot guarantee that a sealed document will remain sealed.

Both federal[2] and California[3] law permit filing motions under seal — out of public view — but both impose restrictions and somewhat unpredictable tests.

In federal cases, Federal Rule of Civil Procedure 26 controls. The Rule is very vague, stating “The court may, for good cause, issue an order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense . . . .” A similarly vague test applies in California.”[4] While cases on the subject give attorneys a guide on what subjects to address, outcomes remain difficult to predict.

The fact that both parties to a case agree to seal records is insufficient.[5] California law explicitly states “The court must not permit a record to be filed under seal based solely on the agreement or stipulation of the parties.”[6] Courts faced with two-party motions to seal often reject those motions, viewing it as their job to police the public interest in knowledge of what happens in courts.

What happened in the Cosby case is similar. Both parties had wanted certain records sealed. Due to an unusual posture (explored in Part II of this series), the Court did not rule on sealing until years later the Associated Press sought the records. When it comes to filing under seal, there are no guarantees, even years after a case is closed.

[1] See Order (link), Memorandum Order (link).

[2] Fed. R. Civ. Proc. 26(c)(1)(F), (H).

[3] Cal. Rules of Court 2.550, 2.551.

[4] Cal. Rule of Court 2.550(d) (“The court may order that a record be filed under seal only if it expressly finds facts that establish: (1) There exists an overriding interest that overcomes the right of public access to the record; (2) The overriding interest supports sealing the record; (3) A substantial probability exists that the overriding interest will be prejudiced if the record is not sealed; (4) The proposed sealing is narrowly tailored; and (5) No less restrictive means exist to achieve the overriding interest.”)

[5] See Savaglio v. Wal–Mart Stores, Inc., 149 Cal.App.4th 588, 600 (2007).

[6] Cal. Rule of Court 2.551(a).

Ad Astra’s Super (Lawyer) Stars

Since 2004, an independent company has researched and reviewed attorneys in California and each summer released a list of the top 5% of attorneys in the state. These top 5% of attorneys are dubbed Super Lawyers and the title is an enormous honor. Attorneys under 40 who have been practicing for less than 10 years who otherwise make the cut are called Rising Stars.

Ad Astra Law Group, LLP, is proud to announce that David Nied has again earned the Super Lawyer title, as he has every year since 2005. Keeping with our astral theme, Katy Young and Michael Dorsi proudly don the Rising Star label. This year is Katy Young’s second consecutive Rising Star award and Michael Dorsi’s first.

All of our lawyers are talented practitioners and together we make an unstoppable team. Congratulations to our Super Lawyers!

Social Media and the Law: Defendant Breaches a Contract and Draws Fire via Twitter

Author: Katy Young

This month, I sat in on a microconference on forensics put on by DTI, Inc.- a major litigation support company that we use frequently for discovery matters. The presenters spent an hour discussing the evidentiary considerations of social media. As I listened, I was reminded of a fun case that I worked on years ago when I was a solo practitioner.

In that case, I represented a woman who had made a contract by email with a former friend/business partner of hers who had moved to Germany to get an MBA from a university there. The two parties to the contract had once been very close friends and they made a film together in New York. My client’s friend/ex business partner owed her monies from the fallout of the filmmaking process and they made a contract by email. The contract stated that he would pay her when he returned from Germany and obtained a job back in the U.S.

The parties lost contact for years, but all of the sudden, the person who owed my client money under the contract posted on Twitter “First day at my new job at Deutche Bank…damn it feels good to be a banker! #paid”. At this point, my client knew that he was back in the U.S. and clearly had a good job and would be able to resume payments as agreed. She was able to find out through social media that he had moved to Berkeley, CA, but we still could not locate him for the purpose of serving upon him the breach of contract lawsuit I had filed. Not to leave his loyal followers in the lurch about his exciting life, this man went on to tweet about his next new job “First day at Robert Half in San Francisco!” Someone responded to his tweet asking where the office is and he responded “50 California.” It just so happened that I worked at 50 California for many years and I was very familiar with the reception practices for the company called Robert Half in that building. I had once interviewed there, so I knew that although Robert Half is a huge company, they have a central reception agency on a low floor. I called my process server and directed him to go to the central reception floor at 50 California and tell the receptionist that he has a package for the new employee and give the defendant’s name. My process server did just that, the defendant came bounding out to reception excited to receive a package and was personally served with the lawsuit.

The case settled at mediation a couple of months later. The defendant was dumbfounded as to how we located him. A word to the wise: if you are trying to stay under the radar, Twitter is your enemy.

More Pain for Ellen Pao

Author: David Nied

It no doubt was extremely distressing for Ellen Pao to lose her pioneering gender discrimination lawsuit against her former employer, Kleiner Perkins Caufield & Byers, LLC, earlier this spring.  On Friday, however, the pain got worse.  San Francisco Superior Court Judge Harold Kahn awarded KPCB nearly $276,000 in costs against Ms. Pao.  How did this happen?

One of the tools available to litigants in California is the ability to make a pre-trial offer to settle a case pursuant to California Code of Civil Procedure section 998.  If you do better than your offer at trial, you can ask the court to have many of the costs that you incurred after the offer was made shifted to the “loser.”  KPCB decided in November 2014, several months before trial and before it had incurred most of its costs, to offer Ms. Pao nearly $1 million dollars under section 998.  Ms. Pao decided not to take the offer.  Her gamble didn’t pay off.

After the trial concluded, KPCB submitted a cost bill to the court totaling nearly $1 million dollars, the vast majority of which consisted of expert witness fees.  Ms. Pao opposed the bill on a number of grounds, some of which worked and some of which didn’t.  Most importantly, Ms. Pao argued that a recent California Supreme Court decision, Williams v. Chino Valley Independent Fire District, 61 Cal. 4th 97 (2015), precluded an award of costs against her because her lawsuit was not frivolous, which is the standard that applies when a successful defendant seeks to recover its costs under the Fair Employment and Housing Act.  Not so, said Judge Kahn.  Section 998 is different—it is a separate and distinct statute that a prior appellate court had found did not conflict with the FEHA.  Judge Kahn concluded that KPCB’s 998 offer of nearly $1 million was made in good faith and not token.  Although not addressed directly in the court’s order, the problem with the offer from Ms. Pao’s perspective is that it probably did not come anywhere close to covering her attorneys’ fees after nearly three years of hard-fought litigation.  Such is the dilemma that plaintiffs in a FEHA lawsuit face.

So what about those expert witness fees totaling nearly $865,000?  In determining whether the amounts were reasonable, Judge Kahn considered the parties’ respective resources in an effort to “scale” the expert fee award.  Conceding that his evaluation required a “rough” approximation of the parties financial positions, Judge Kahn noted that KPCB had “vastly” greater resources than Ms. Pao—but that Ms. Pao was not indigent.  Ultimately, Judge Kahn awarded KPCB expert witness fees that approximated what Ms. Pao herself had spent on her own experts.  And that is how you get to a cost award of nearly $276,000.

It might be of some solace to Ms. Pao that she was able to knock down KPCB’s request by $670,000, but it still can’t feel good.  And while a spokesman from KPCB described the ruling as a “fair result,” most savvy defense lawyers will recognize that the award probably won’t deter many employees from pursuing lawsuits under FEHA, since most of them have minimal economic resources.

Uber is ruled an employer in California by the Labor Commissioner

Author: Wendy Hillger

An Uber driver filed a complaint against Uber Technologies, Inc., asserting she was an employee of the ride-hailing company and thus owed back-wages and employee expenses. Uber has consistently maintained that its drivers are independent contractors. The California Labor Commission disagreed, and ruled recently that Uber is an employer.

The California Labor Commission examined the numerous factors identified by the Supreme Court (S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341) to evaluate the relationship between the driver and Uber. The commissioner noted that Uber maintains a substantial amount of control over its drivers: such as the equipment they must use (an Uber-provided iPhone), the fares they can charge, the model of cars they drive, and, to some extent, how often they work. Uber also does not allow drivers to negotiate their percentage of the fare and thus controlled their wages.
Uber was ordered to have to pay its employee reimbursable expenses and interest in the amount of $4,152. Uber did dodge a bullet by being spared from having to pay the driver an hourly wage, liquidated damages or waiting time penalties for this employee. The employee failed in her burden of proof on these issues by not providing the commissioner with her pay records.

The decision was appealed in the San Francisco County Superior Court on June 16, 2015, in the matter of CGC-15-546378. A copy of the Order is HERE. A timeline for the Superior Court’s ruling is unknown, but if the Labor Commission’s Order is upheld, the decision will have wide-ranging impacts upon the ride-hailing company and its competitors like Lyft.
For information as to whether your company may be improperly classifying its workers as independent contractors, please contact Ad Astra Law Group LLP.

Major League Baseball and the Computer Fraud and Abuse Act

Written by Katy Young

This morning, the New York Times ran an article about the St. Louis Cardinals organization allegedly hacking into the Houston Astros’ computer database containing proprietary player information. You can read the article here:

http://www.nytimes.com/2015/06/17/sports/baseball/st-louis-cardinals-hack-astros-fbi.html

Ad Astra is particularly interested in this story for two reasons: we are big baseball fans (in fact my brother, Chuckie Fick, pitched for both the Cardinals and then the Astros!) and big fans of the federal Computer Fraud and Abuse Act (CFAA), which creates both a criminal and civil cause of action for unauthorized access of information stored on a computer.

The Houston Astros apparently maintain a computer database containing proprietary information about its players and prospects. The database is called Ground Control and it is the brainchild of former Cardinals bigwig turned Astros’ General Manager Jeff Luhnow. The St. Louis Cardinals are accused of accessing the Astros’ database using an old master list of passwords because they were concerned that Luhnow took the Cardinals’ proprietary player information when he left the Cardinals to go work for the Astros. The CFAA doesn’t care why you accessed another’s database without authority, nor does the CFAA care what you did with that information after you accessed it (that’s a trade secret problem)- but the CFAA does create a cause of action if someone accessed your data without authority, altered or deleted anything, and you incurred at least $5,000 in damages trying to remedy the problem. The New York Times article states that the FBI is already involved, but we here at Ad Astra are wondering if the Astros want to look into filing a civil complaint against the Cardinals under the CFAA!