Georgia Business and Technology Litigation Blog

LAWYERS: GROUPONS AND COUPONS ARE NOT AN OPTION FOR MARKETING LEGAL SERVICES

The Arizona State Bar recently joined other state bar associations by finding that Groupon and other social media coupon programs should not be used to market legal services because of inherent eithical problems.  As noted in Arizona Eithics Opinion 13-1, these problems include the ability to screen clients for conflicts of interest, confidentiality, ensuring a lawyer is competent to handle matters that come in blindly without any screening, and fee-sharing concerns based upon the presence of non-lawyer marketing companies such as Groupon in these transactions.

DON’T GET KICKED IN THE APP—FEDERAL TRADE COMMISSION VERY CONCERNED ABOUT PRIVACY ISSUES FOR APPS AND LOOKING TO DO SOMETHING ABOUT IT

The Federal Trade Commission (FTC) is taking a serious look at privacy practices for apps based on concerns about whether the app community has adequate privacy policies in place to control the collection and use of personal information (especially for children), and whether it is properly disclosing those policies to users (and their parents).

The FTC’s concern is clear from its two recent reports concerning app-privacy and its corresponding moves to strengthen and enforce privacy rights for apps.  One report relates to COPPA (the Children's Online Privacy Protection Act) and prompted the FTC to develop its Final COPPA Rule, which becomes effective on July 1, 2013.  The other report relates to mobile privacy disclosures and the FTC’s support of H.R. 1913, the proposed Application Privacy, Protection and Security Act of 2013 (becoming known as the “Apps Act”).  Because the FTC believes that app-providers are falling seriously short when it comes to privacy, the FTC's recent actions indicate that it will aggressively enforce privacy laws governing apps, to remedy violations and to demonstrate to the app and mobile community that this is a real issue with real consequences.  Therefore, app developers and providers must evaluate their privacy policies and practices, now, to be sure they are keeping up with the evolving law in this area.

A clear area of FTC concern about apps is privacy issues related to children, who are protected by COPPA, a statute, which in turn has a related Rule that provides specific guidance concerning privacy practices for children (defined by COPPA as younger than 13 years old).  In December 2012, the FTC issued its final amendment to the COPPA Rule, which becomes effective on July 1, 2013.  This Rule makes many changes specifically directed at apps, including changes aimed at closing what the FTC sees as a serious “loophole” that previously allowed apps to avoid many requirements of COPPA.  The FTC based its Rule largely on a study which found that a large number of app providers have seriously failed to have adequate privacy policies, which study is summarized in a report with a name that says it all:  "Mobile Apps for Kids:  Disclosures Still Not Making the Grade."

Describing that report on its website, the FTC explained that, “since FTC staff’s first survey of kids’ mobile apps in 2011, staff found little progress toward giving parents the information they need to determine what data is being collected from their children, how it is being shared, or who will have access to it.”  Although many significant members of the app community have asked the FTC to delay the July 1 implementation date for the new COPPA Rule because of the many changes, the FTC refused and has instead just sent letters to app developers (by FedEx) encouraging them to review their privacy policies in time to meet the implementation date.  (One letter relates to persistent identifiers;  the other to photographs and recordings of children.)

The FTC’s other report, entitled ”Mobile Privacy Disclosures:  Building Trust Through Transparency," trumpets the importance of having adequate privacy policies for app use and clearly communicating those policies to consumers.  These findings are largely behind the proposed Apps Act (introduced by Georgia Congressman Hank Johnson) which, if passed, will require privacy policies for all apps, not just apps directed toward kids.

So, while everyone in the app community would be wise to audit their app-related privacy policies, those offering apps likely to be used by children must act now to get their houses in order, or else risk sanctions and potential lawsuits for failure to comply with the new COPPA Rule by July 1.

NETWORK ADVERTISING INITIATIVE (NAI) RELEASES REVISED CODE OF CONDUCT FOR ONLINE ADVERTISING

The NAI is a well-known online advertising organization that describes itself as “the leading self-regulatory body governing ‘third parties’ in the online advertising ecosystem.”  Yesterday, it released its final, revised “2013 NAI Code of Conduct” (Download the 2013 Code).  Although the new Code only governs NAI members, online advertisers who are non-members should still take heed, because courts often use industry standards such as the Code to identify whether a company fulfilled its obligations and acted reasonably in a particular case.

Some of the interesting changes made since the last, 2008 version of the Code are:

• Notice:  Expanded notice requirements for the benefit of users.

• Geolocation Data:  Removed from definition of “Personally Identifiable Information” (PII) and from classification as “Sensitive Data,” such that geolocation data now has its own section; users must still opt-in before geolocation data can be used for advertising, however.

• Health Data:  Expanded treatment that includes additional notice and disclosure requirements.

• Sexual Orientation:  Added as form of “Sensitive Data” with specific requirements and limitations.

ONLINE RETAILERS: WHAT IF I ACCIDENTALLY RELEASE A COUPON CODE FOR 90% OFF?

Arnold & Porter’s Consumer Advertising Blog has an interesting post (link here) describing a mistake by online retailer Razer when it accidentally released a coupon code offering 90% off of many products.  As so often the case, the best way to handle such an unfortunate situation is to get ahead of the game by ensuring that you have appropriate online terms and conditions that provide some flexibility in dealing with orders.  So, it's not ever a bad idea to audit your terms of conditions to make sure you're protected.

UPDATE: CONTESTED OWNERSHIP OF SOCIAL MEDIA ACCOUNTS BETWEEN EMPLOYERS AND EMPLOYEES

Several months ago (see post here), I discussed two cases involving disputes between employers and employees over ownership of social media accounts—a Twitter case and a LinkedIn case.

The moral of both stories appeared to be that employers and employees both benefit from having a strong social media policy that clearly indicates who owns what. On the one hand, an employee who builds a large following on her own, over years, should be able to control the Twitter or Linkedin account that she built. On the other, a sales company that requires its employees to have a Linkedin account which adheres to a company-required format, and is maintained by company staff, may have a legitimate claim to that account.

Twitter Case

Since my last post, the fight between Noah and his former employer Phone Dog over his Twitter account has settled, allowing Noah to keep his Twitter account and its many followers (after he had changed his handle from one that included “Phone Dog’s” name, to a handle solely in his name). And, a post-settlement quote by Noah himself suggests that both sides in that dispute wish they had clearly explained their expectations regarding ownership of social media accounts at the outset of their relationship.

LinkedIn Case

Since that last post, another court ruling has come down in the LinkedIn case (Eagle v. Morgan) that further demonstrates the need for employers who want to control social media to have strong, clear social media policies so that employer and employee alike know what they’re getting into. (Order linked here for those interested.) As discussed in detail in my last post, although the former employer in the Eagle case did hijack its former president’s LinkedIn account, the court ultimately yearned for a clear company policy that indicated who owned what.

For instance, while the employer had invested substantial time in having company staff maintain current LinkedIn pages for employees according to a consistent company format, there was no company policy expressly informing employees that it owned their LinkedIn accounts. While the court sympathized with the employer’s clear investment of time in maintaining employees’ LinkedIn accounts, the court also seemed to expect a company policy making clear who owned what. Although the court didn’t rule on whether such a policy could have given the employer ownership of the employee’s LinkedIn account, it did note that the LinkedIn “user agreement” would have of course factored into that analysis.

So what happened? The employee in the LinkedIn case ultimately “won” and received a whopping award of $0.00—a fitting tribute to the mess created by a lack of any clear social media policy. (As a fellow attorney, I hope that one wasn’t taken on contingency.)

Lessons

Employers:

• Before you rely upon employee social media accounts or spend a lot of time maintaining accounts for your business, consider your objectives and create a social media policy to accomplish them.

• Specifically address ownership and control of accounts. 

• Consider how each social media provider’s applicable user agreements and terms of service will affect ownership rights, and consider creating a new “company” account for each employee at the inception of his or her employment to start fresh, without any baggage. 

• Although it is a broad subject for another day and post, employers must be careful regarding social media policies to respect employee rights to discuss and even complain about their work. The National Labor Relations Board (NLRB) has very specific ideas of employee rights in this regard and is coming after employers both for policies that interfere with employee rights of dissent on social media, and for employment decisions that arise from social media use. While you may think that the NLRB only handles labor union issues and will never affect your business, think again. It has the authority to police employer social media practices and is using it.

Employees:

• To protect your rights to social media accounts that you may have created through your own effort, be sure to inquire early on about an employer’s expectations concerning your accounts.

• In the absence of any clear agreement, be wary of how using an account for both personal and company purposes could open you up to a claim that the company has some rights in the account.
  

Or—you can pay lawyers a lot of money to fight in court over this issue and you may even hit a $0.00 home run like the employee in the LinkedIn case.

SERVICE OF PROCESS IN THE DIGITAL AGE--FIRST INTERNET CHAT; NOW FACEBOOK

In a prior post from some time ago, I noted how courts were catching up with the digital age and allowing service of process by electronic means, rather than requiring the traditional hand-delivery of lawsuit papers to the person being sued.  I see from a recent post in Evan Brown's Internet Cases Blog that the Federal Trade Commission (FTC) has recently been allowed to serve legal documents via Facebook, as well.

These alternative, electronic means of service are helpful when traditional means prove unsuccessful.  Even in the old, pre-internet days, a disreputable person or business could duck and dodge a process server or detective, frustrating even aggressive service efforts.  Now that the internet allows people to do business (and cause damage) all around the globe, today's would-be defendants can evade service more than ever.

This does not mean that you should worry about checking your Facebook account for service, of course.  As noted in both cases referenced above, courts only considered allowing alternative, electronic means of service after other, traditional means had demonstrably failed.  And, if you ever find yourself as a plaintiff looking to sue someone, serving the initial court documents by traditional means is a sounder practice that will prevent from having to defend against motions challenging the effectiveness of alternative, electronic service.

NO CAUSE OF ACTION FOR "INEVITABLE DISCLOSURE" IN GEORGIA

The “inevitable disclosure” doctrine allows a trade secret owner to protect its trade secrets when a former employee has confidential knowledge in her head that she will inevitably disclose if she goes to work for a competitor.  Employers typically resort to “inevitable disclosure” arguments when they cannot prove that a former employee has actually used, or is about to use, protected trade secrets, and there is no restrictive covenant agreement (such as a non-solicitation or non-competition agreement) in place to prevent the likely disclosure to a competitor.  For example, “inevitable disclosure” can help where a former employee has returned or destroyed all confidential data and papers in her possession but still may know enough in her head to use protected information for the benefit of a competitor.

As noted by the Supreme Court of Georgia, the doctrine effectively allows an employer to create or extend a noncompetition agreement:

The inevitable disclosure doctrine provides that a plaintiff may prove a claim of trade secret misappropriation by demonstrating that defendant’s new employment will inevitably lead him to rely on the plaintiff’s trade secrets.  The doctrine enables a trade secret owner to prevent a former employee from working for a competitor by demonstrating the employee’s new job duties will inevitably cause the employee to rely upon knowledge of the former employer's trade secrets.  The doctrine may impose a noncompete covenant where one does not exist or, as in this case, extend a covenant not to compete beyond the time negotiated by the parties.

Holton v. Physician Oncology Services, Case No. S13A0012 (decided May 6, 2013) (See link to court's opinion, here.)

Although courts in some jurisdictions outside of Georgia recognize legal claims based upon the “inevitable disclosure” doctrine, the issue has remained unclear in Georgia.  Not anymore.  In the  Holton case, quoted above, the Supreme Court of Georgia held that parties canNOT use the “inevitable disclosure” doctrine as a basis to state a claim for trade secret misappropriation.

Therefore, employers and others looking to protect proprietary information under Georgia law should do so by carefully drafting confidentiality and non-competition agreements.  Recent, pro-employer amendments to Georgia’s restrictive covenants law are helpful in this regard because they allow employers to more aggressively draft restrictive covenants that prohibit competition, because employers can be now confident that a court will modify, rather than invalidate, any terms of a restrictive covenant that are found to go too far in restricting a former employee’s ability to compete.

BUSINESSES THAT TEXT CUSTOMERS BEWARE—THE LITIGIOUS ARE OUT THERE LOOKING TO SUE YOU!

Businesses that communicate with consumers by telephone—whether calling or sending SMS (text) or MMS (multimedia) messages—must worry about litigious consumers (and their attorneys) who are on the lookout for possibly technical violations of the law that can be used to extort settlements from businesses.  Even a weak case that likely can’t go the distance and produce a win at trial can still be a costly stick used to force a business to pay an early settlement, rather than pay expensive defense costs to vindicate its rights in court.  As explained below, a recent case filed against a Washington cab company shows why businesses must be careful.

The applicable law is the Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 277.  It prohibits a business from using an automatic telephone dialing system (“ATDS”) to make a call or send a message to a cell phone, without having the express prior consent of the person being called/texted.  Although an ATDS was initially defined as a system that called random numbers, it now includes equipment used to contact specific numbers, say, from a customer list.  To determine whether a business actually used an ATDS, courts consider whether a system can dial numbers “without human intervention” and look at factors such as the volume of, and reason for, a challenged set of calls or messages.  Damages under the TCPA include a $500 penalty for each violation, which can be trebled to reach $1,500 for a knowing and willful violation.

Certainly, the TCPA is not a bad thing since none of us wants to be harassed with junk calls or messages that can cause charges and consume monthly data allowances.  However, a recent case filed against a cab company demonstrates that seemingly innocent and well-intended communication practices can still land a company in court.

In Torrey Gragg v. Orange Cab Company, Inc. (case no. C12-0576RSL in the U.S. District Court for the Western District of Washington), the plaintiff is an Orange Cab customer who ordered an Orange Cab on a Saturday evening and used it to travel somewhere.  Then, on the following Sunday, sometime after 9:00 p.m., he received a text from Orange Cab stating that a cab had been dispatched at 5:20 p.m. in response to his call, and including an invitation to use Orange Cab’s app.  Yes, that’s the entire “beef” upon which this case is based.

The plaintiff initially sued Orange Cab but had his complaint thrown out by the court because he had simply alleged that Orange Cab had violated the TCPA by using an ATDS to text him—believing that the more than 24-hour gap between his order and the company’s text showed this as an improper telemarketing practice worthy of damages under the TCPA.  Because the plaintiff had ordered a cab shortly before receiving the text responding to that order, however, the court was not willing to assume that the cab company's text was in fact sent by an ATDS rather than a person.  But, then plaintiff then amended his complaint to claim (not prove) that Orange Cab had used a phone system to send tens of thousands of consumers a similar text to market its app.  Unfortunately for Orange Cab, the court just ruled in an Order that the plaintiff had added allegations that were sufficient to survive the company’s motion to dismiss.  And so the case, and the related legal fees, continue.

While the cab company certainly has numerous defenses that it can raise, doing so will probably involve costly discovery and additional motion practice--expenses that will almost certainly not be recoverable in the case and that will continue to make settlement an option worth considering.

What’s more, the plaintiff has indicated in other filings that this will be a class action including other consumers who received similar texts—and who will each likely demand at least $500 per text from Orange Cab.  This is especially concerning for companies facing TCPA class actions, because a 2012 ruling by the U.S. Supreme Court indicates that the TCPA provides a claim under federal law, which means that any plaintiff can file a TCPA claim in federal court without needing to meet requirements for diversity of citizenship or amount in controversy.  That ruling is also problematic for companies facing class actions, because it removes previously available state law defenses to attempts to bring class actions.  (The Supreme Court case is Mims v. Arrow Financial Services, LLC, Case No. 10-1195.  Download Mims opinion here.)

Although Orange Cab reasonably did not anticipate becoming mired in this litigation based on its texting practices, its travails should serve as a warning to other businesses:  Because savvy plaintiffs and their lawyers are out there looking for an excuse to bring the next TCPA class action, businesses must consider the law's requirements in all telephonic communications.

LAWYERS, DON'T “FRIEND" JUDGES (or at least not the good ones)

They say that “a good lawyer knows the law and a great lawyer knows the judge.”  While there is some truth to that adage, a recent Florida case suggests that it should now say that “a great lawyer knows the judge, but doesn’t ‘friend’ him”–at least not in Florida.

Why not?  Or, as the band War so memorably sang, “why can’t we be friends?”

Though not too melodic, the answer is:  because public, social media “friendships” between a judge and lawyer can wrongly suggest that there is an extra-legal personal relationship which could affect a judge’s impartiality.

The case at issue involved a Florida trial judge who was found to be Facebook “friends” with the prosecutor in a criminal case.  Therefore, the criminal defendant moved to disqualify the trial judge, who saw no problem and denied the motion to disqualify himself from the case.  The Florida District Court of Appeal disagreed and held that Florida’s ethical rules for judges prohibit judges from publicly friending lawyers on a social media site because of the improprieties suggested by a “friendship.”

For those interested, the appellate court’s full decision can be viewed here:   Download Domville v State Opinion.  Following is an excerpt explaining the court’s reasoning:

We find an opinion of the Judicial Ethics Advisory Committee to be instructive. See Fla. JEAC Op. 2009–20 (Nov. 17, 2009).  There, the Committee concluded that the Florida Code of Judicial Conduct precludes a judge from both adding lawyers who appear before the judge as “friends” on a social networking site and allowing such lawyers to add the judge as their “friend.”  The Committee determined that a judge's listing of a lawyer as a “friend” on the judge's social networking page-“[t]o the extent that such identification is available for any other person to view”-would violate Florida Code of Judicial Conduct Canon 2B (“A judge shall not convey or permit others to convey the impression that they are in a special position to influence the judge.”).

. . . .

The issue, however, is not whether the lawyer actually is in a position to influence the judge, but instead whether the proposed conduct, the identification of the lawyer as a “friend” on the social networking site, conveys the impression that the lawyer is in a position to influence the judge.  The Committee concludes that such identification in a public forum of a lawyer who may appear before the judge does convey this impression and therefore is not permitted.

 

CAN EMPLOYERS REALLY DEMAND SOCIAL MEDIA PASSWORDS FROM APPLICANTS AND EMPLOYEES?

Recently, I’ve received numerous questions and seen online discussions about an apparently increasing practice where employers are demanding social media login and password information from applicants and employees.

Although I’m not aware of any legislation in Georgia that concerns this employment practice, it's becoming popular enough to warrant the attention of at least two state legislatures.  Both Maryland and Illinois are currently considering bills that would limit an employer’s ability to obtain social media login and password information from applicants and employees.  (Here are links to Illinois bill HB3782 and Maryland bill HB0964.)

Regardless of this proposed legislation, employers can and do look at publicly available social media information posted by applicants and employees.  As many employers know, this can be a double-edged sword.  While viewing such information can allow an employer to dodge a bullet by avoiding or discontinuing an employment relationship with an unqualified employee, an employer’s awareness of social media information can also subject an employer to risk of being sued.   This is because social media may allow an employer to learn information about an applicant or employee that could support a discrimination claim.   For instance, an employer’s knowledge of an applicant’s religion could support that applicant’s claim that the employer chose not to hire him because of his religion, even if the employer had another, legitimate basis for not hiring him.

An employer may also review social media postings by its employees to look for unfavorable comments that could defame or otherwise hurt the employer's business reputation.   Here, again, caution is necessary because the National Labor Relations Board (NLRB) has recently taken the position that an employer's acts which chill employee complaints about the employer on social media sites can be illegal interference with an employee's right to complain as part of “concerted activity” that is protected by the National Labor Relations Act.   Although this is a complex topic that will be discussed in detail in forthcoming posts here, even non-union employers must be very careful when creating social media policies for their employees, and especially before making any employment decisions based on an employee’s social media postings complaining about his or her employer.  For those interested, here's a copy of the NLRB's recent memo that provides employers guidance about the NLRB's position on employees' rights to criticize their employers on social media.