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How Hulk Hogan Scored $140 Million in a Single Lawsuit

Surely the most salacious legal development of 2016 (so far) is Hulk Hogan’s $140 million verdict in March from a Florida court against the online media company and blog network Gawker Media LLC for publishing a video of him having sex with the wife of his then friend, a radio personality by the name of “Bubba the Love Sponge Clem.” Gawker’s conduct must have angered the jury. It didn’t help when a former Gawker editor acknowledged at trial that he had said at his deposition that there would be a public interest in promoting child pornography of the children of celebrities if they were over the age of four, but claimed that he was just being sarcastic. The case took on renewed interest with the disclosure in late May that billionaire tech investor Peter Thiel provided $10 million in litigation funding for Hulk (real name Terry G. Bollea) to get revenge against Gawker for outing him as gay several years ago.

The prurient aspect of the case of course sells newspapers and drives clicks, but the case also raises the issue whether the First Amendment interest in Gawker’s publication of a video about a public figure outweighed Hulk’s interest in privacy. We leave that issue for others to discuss and for the appeal. Our interest in is the nuts and bolts of how the plaintiff’s legal team got the jury to award $140 million verdict in a single plaintiff case not involving death or serious bodily injury.

The case was originally filed in October 2012 and took over three and a half years to get to a trial. The trial lasted two weeks. The cause of action was not defamation. It was intentional infliction of emotional distress and invasion of privacy. The jury awarded $55 million in economic damages based on expert testimony that Gawker had been enriched by all of the site traffic drawn by the video, $60 million in emotional distress damages based on the testimony of Hulk and one other fact witness about the emotional distress Hulk felt, and $25 million in punitive damages in a second deliberation. The collectability of the verdict is unknown, although media reports have suggested that the case and other pending defamation cases against Gawker threaten its existence. Gawker has already begun the appeal.

The takeaway for those who follow litigation as a matter of business is that in today’s litigation climate, large jury verdicts can be expected—even without death or bodily harm—where harm to economic, reputational, or emotional interests arise out of proven misconduct. Punitive damages are not necessarily the key to a large recovery; economic damages can result in large verdicts and emotional distress damages in particular can be significant because they are unlikely to be disturbed by the trial court or on appeal. We don’t hear about these cases all that often because they settle or because plaintiffs cannot afford or find litigation counsel ready to bring the case to trial. Whether or not the Gawker Media verdict stands on appeal, the message to defendants who inflict economic and emotional harm on others is clear: beware the consequences when the case finally gets to the jury.

New Law Creates Federal Trade Secrets Cause of Action

New Law Creates Federal Trade Secrets Cause of Action

On May 11, 2016, President Obama signed into law the Defend Trade Secrets Act (DTSA), which provides a federal cause of action for trade secret misappropriation. Prior to the DTSA, plaintiffs seeking to enforce trade secrets rights relied exclusively on state law; most states have adopted the Uniform Trade Secrets Act (UTSA).

With limited exceptions, the rights granted under the DTSA are the same as under the UTSA. The basis for liability is the same. The damages are the same. Both the UTSA and the DTSA permits the recovery of enhanced double damages and attorneys’ fees for willful misappropriation of trade secrets.

One difference is that the DTSA provides immunity to whistleblowers who disclose trade secrets to law enforcement officials, or to an attorney, for the sole purpose of reporting or investigating a suspected violation of law. The DTSA provides immunity to parties who disclose a trade secret in a lawsuit, if the disclosure is made in a filing made under seal. The DTSA also requires employers to provide notice of this immunity in a contract or agreement with an employee that governs the use of trade secrets. Employers who fail to provide such notice are barred from recovering enhanced damages and attorneys’ fees.

Note to practitioners: employers who are concerned about the potential for trade secret misappropriation will want to update their policy manuals, employment contracts, or other employment materials to give the notice required by the DTSA if they want to take advantage of the possibilities for recovering enhanced damages and attorneys’ fees.

Another difference is that the DTSA forecloses the possibility of injunctive relief based on the inevitable disclosure doctrine. The DTSA requires evidence of threatened misappropriation before an injunction will issue. This differs from the law in many states, which authorize injunctive relief where use or disclosure of trade secrets is inevitable even if not yet proved.

Unlike the UTSA, the DTSA provides for ex parte civil seizure in extraordinary circumstances. Courts can issue seizure orders where the party against whom the seizure would be ordered misappropriated or conspired to misappropriate the trade secret at issue and is in possession of the trade secret. Such orders are appropriate where an injunction is insufficient because the party against whom the injunction order would be issued would not comply with the order.

The Bottom Line—Trade Secret Plaintiffs Can go to Federal Court if They Want

The differences between the DTSA and the UTSA will only matter in rare cases, with one exception: the right to bring suit in federal court. The DTSA ensures that every plaintiff who wants to bring a trade secrets claim in federal court can do so. But if there is no other basis for federal court jurisdiction (such as diversity of citizenship), a plaintiff can file in state court and avoid removal to federal court simply by pleading a state law trade secrets claim without reliance on the DTSA. This option to proceed in federal court now provides an important advantage for plaintiffs in trade secrets cases.

 

 

 

Steve Harvey Law Turns Two; Federal Rules Amendments Take Effect

Wow! It’s been two years to the day since I opened Steve Harvey Law LLC, and we are still here, representing clients in diverse matters, and growing the client base and the team.

If there’s one thing I have learned in the past two years, it’s that the key to law firm success over time is keeping true to core principles: integrity, service to clients, respect, collegiality, and the pursuit of excellence. By adherence to these principles we deliver great value to our clients.

As I begin my third year at Steve Harvey Law, I am grateful for the many friends and clients I have worked with, and the many I continue to work with! I wish you all the best and happiest times as we get ready to close out 2015.

As if to commemorate our law firm anniversary, the federal judiciary rolled out the newest set of amendments to the Federal Rules of Civil Procedure effective December 1, 2015. Originally enacted in 1938, the Rules govern civil proceedings in United States federal courts. Many state courts also look to them for guidance. They are of great interest to those of us who represent clients in lawsuits for business or principle.

Over the years, the Rules have been amended 37 separate times in varying degrees of importance to address issues affecting federal litigation. This most recent set (affecting Rules 1, 4, 16, 26, 30, 31, 33, 34, 37, 55, and 84) attempts to fix some of what is perceived to be wrong with the discovery process, i.e., exchange of written information, documents, and electronic materials between parties in litigation. Discovery is widely viewed as the most expensive part of litigation.

Speaking very broadly, plaintiffs generally want more and defendants (such as corporations) generally want less discovery. These interests had a chance to influence the amendments, through comments ranging from civil rights advocates like the NAACP to business interests such as the U.S. Chamber of Commerce.

The biggest thing in the new Rules is “proportionality” in discovery. Except that it isn’t new; federal courts were always able to disallow discovery not proportionate to the needs of the case. But proportionality is now being given much more emphasis. Indeed, the scope of discovery in Rule 26 has been revised to put proportionality on a par with relevance.

New Rule 26 provides: Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party’s claim or defense and proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties’ relative access to relevant information, the parties’ resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.

Everything in italics is new to Rule 26, but these are familiar concepts in federal litigation. The question is whether the proportionality emphasis will make much of a difference in practice. Many commentators are skeptical that the new emphasis will have any significant effect, because most courts and litigators have long taken these factors in consideration.

Another change to Rule 26 is the elimination of the concept that relevant information need not be admissible to be discoverable as long as it is “reasonably calculated to lead to the discovery of admissible evidence.” That famous legal phrase used to settle many a discovery dispute is no more. The Rule now simply provides, after the language quoted two paragraphs above: “Information within this scope of discovery need not be admissible in evidence to be discoverable.”

Rule 26 as amended also permits a party to serve Rule 34 discovery requests more than 21 days after service of the summons and complaint and well in advance of the Rule 26(f) conference, but the time for responding does not begin until the Rule 26(f) conference. The thinking is that serving Rule 34 requests early could ensure productive Rule 26(f) conferences. No other discovery requests may be served before the Rule 26(f) conference.

If the changes to Rule 26 favor parties opposing greater discovery, changes to Rule 34 should make it harder for them to hide behind a smoke screen of objections. New Rule 34 provides that objections must be stated with “specificity” and “the production must then be completed no later than the time for inspection specified in the request or another reasonable time specified in the response.” In an effort to eliminate the last great refuge of scoundrels, new Rule 34(b)(2)(C) provides that “[a]n objection must state whether any responsive materials are being withheld on the basis of that objection.” These changes should cut down on discovery deficiency letters.

Rule 16 includes several common sense changes, including elimination of the provision for consulting at a scheduling conference by “telephone, mail, or other means.” Courts and parties are now expressly required to confer in person, by phone, or other means of direct simultaneous communication.

New Rule 37 authorizes and specifies measures a court may employ if information that should have been preserved is lost, and specifies the findings necessary to justify these measures. This sounds more severe than it is in reality. It requires a finding of “prejudice to another party from loss of the information,” as a condition to any sanctions for failing to preserve electronically stored information, and then no “greater than necessary to cure the prejudice.” It reserves the more drastic sanctions of adverse inferences, jury instructions, and dismissals and defaults “only upon finding that the party acted with the intent to deprive another party of the information’s use in the litigation.” These standards are new to Rule 37, but well known to practitioners as the legal standard in effect through the case law for years.

Other changes are made to Rules 1, 4, 30, 31, 37, 55, and 84. Anyone who wants a good overview of all the changes should read the memorandum submitted on September 26, 2014, by Judge John D. Bates of the Judicial Conference of the United States to the Supreme Court. It includes the relevant commentary from the Committee on Rules of Practice and Procedure of the Judicial Conference.  A copy of Judge Bates’ memo can be found here.

For those of you who just can’t get enough of the new amendments to the Federal Rules, the American Bar Association Section of Litigation and the Duke Law Center for Judicial Studies are jointly presenting a 13-city series of three-hour presentations, which you can read about here. The next session is December 3 in St. Louis.

Or you can call me and I will be happy to discuss your questions. Better yet, stop by for a coffee and help me celebrate the start of my third year at Steve Harvey Law.

 

Steve Harvey

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December 2, 2015