April 23, 2018

Archives for June 2012

Paul Karlsgodt: Tenth Circuit Holds that Mere Allegation by Plaintiff of Intent Not to Seek More than $4,999,999.99 in Damages Is Not Dispositive of CAFA Jurisdiction

Yesterday, the Tenth Circuit joined the majority of Circuit Courts of Appeals in holding that a plaintiff cannot conclusively avoid federal removal jurisdiction under the Class Action Fairness Act of 2005 (CAFA) by including in the complaint a statement of intention not to seek more than $4,999,999.99 in damages on behalf of the putative class.  In Frederick v. Hartford Underwriters Insurance Company, No. 12-1161 (10th Cir. June 28, 2012) the Tenth Circuit followed decisions from the First, Second, Fourth, Sixth, Seventh, Eighth, and Eleventh Circuits in holding that a Defendant may support jurisdiction by showing by a preponderance of the evidence that the amount in controversy exceeds $5 million, even if the plaintiff expressly pleads a lesser amount.  It rejected a more stringent “legal certainty” standard, which has been applied by the Ninth and Third Circuits.

The Frederick decision means that plaintiffs cannot foreclose federal jurisdiction in class actions through creative pleading in the Tenth Circuit.  However, the burden is still on the defendant to prove as a matter of fact that the amount at stake in the case exceeds $5 million.  Therefore, it also highlights the need for defense counsel to gather, plead, and be prepared to prove specific facts showing the amount at stake in the case.

It is always important to remember that proving the amount in controversy does not require the defendant to prove the damages that are likely to be awarded against it in the case (of course most defendants would say that this amount is zero).  Instead, it requires the defendant to establish the highest amount that the plaintiff class could conceivably win based on the legal claims presented, the relief sought (both damages and other relief sought expressly and damages that could legally flow from the claims presented), and the maximum potential value that the plaintiff could reasonably put on that relief.  The preponderance standard requires the defendant to prove facts that would cause more than $5 million to be awarded if the plaintiff proves the claims and potential theories of damages that flow from those claims.

Paul Karlsgodt is a partner at Baker Hostetler who focuses his practice on class action defense and other complex commercial litigation. He is editor and primary contributor to www.ClassActionBlawg.com, where this post originally appeared on June 28, 2012.

Suzanne Carlson Appointed as Sixth Judicial District Court Judge

On Friday, June 29, 2012, Governor John Hickenlooper announced his appointment of Suzanne Carlson to serve as a district court judge in the Sixth Judicial District, which covers La Plata, Archuleta, and San Juan counties. Carlson will fill the judgeship created pursuant to HB12-1073. Her judicial appointment is effective July 1.

Carlson has served as a judge for the Southern Ute Indian Tribe since 2005. She currently practices at the law firm of Lisa Ward LLC with a focus on divorce and child custody matters. Previously, she practiced with the Deputy State Public Defender and has served as a Legal Research Attorney for the Sixth Judicial District.

Carlson earned her bachelor’s degree from the University of Colorado and her law degree from the University of Colorado Law School.

Stephanie Dunn Appointed as Colorado Court of Appeals Judge

On Friday, June 29, 2012, Governor John Hickenlooper announced his appointment of Stephanie Dunn to the Colorado Court of Appeals. Dunn will fill the vacancy created by the retirement of the Honorable Arthur P. Roy on November 23.

Dunn is currently a partner at Perkins Coie LLP in Denver, where she practices extensively in business and appellate litigation as well as white collar and government investigations. Previously, she worked as an associate at Dewy & LeBoeuf LLP, where she participated in the Denver City Attorney’s trial program and worked as a special prosecutor prosecuting criminal violations of the Denver Municipal Code. Dunn was also a law clerk to former Chief Justice Luis Rovira at the Colorado Supreme Court.

Dunn earned her bachelor’s degree from the University of Colorado at Boulder and her law degree from the University of Denver Sturm College of Law.

Finalists Selected to Fill Judgeships on Jefferson County Court

The First Judicial District Nominating Commission has nominated six candidates for two Jefferson County court judgeships. One was created pursuant to HB 12-1073, effective July 1, 2012, and the other by the retirement of the Honorable John A. DeVita II, effective August 31.

The nominees for the bench are Harold Sargent and Thomas Walsh, both of Lakewood, Joel Schaefer and AnnMarie Spain, both of Arvada, Ryan Stuart of Littleton, and Jean Woodford of unincorporated Jefferson County. All were selected by the Commission on June 27, 2012.

Under the Colorado Constitution, Governor Hickenlooper has until July 13 to appoint two of the nominees as county court judges for Jefferson County.

Tenth Circuit: Unpublished Opinions, 6/28/12

On Thursday, June 28, 2012, the Tenth Circuit Court of Appeals issued two published opinions and nine unpublished opinions.

United States v. Dell

LaRiviere, Grubman & Payne LLP v. Phillips

Atkinson v. Schmidt

United States v. Rios-Mendoza

Vandagriff v. CIR

Farrill v. Astrue

Marshall v. Rudek

United States v. Bland

United States v. Baker

No case summaries are provided for unpublished opinions. However, published opinions are summarized and provided by Legal Connection.

Colorado Court of Appeals: Week of June 24, 2012 (No Published Opinions)

The Colorado Court of Appeals issued no published opinions and thirty-three unpublished opinions for the week of June 24, 2012.

Neither State Judicial nor the Colorado Bar Association provides case summaries for unpublished appellate opinions. Case announcements are available here.

Tenth Circuit: Unpublished Opinions, 6/27/12

On Wednesday, June 27, 2012, the Tenth Circuit Court of Appeals issued no published opinions and five unpublished opinions.

United States v. Jameson

United States v. Wright

United States v. Gonzalez

Vigil v. Walters

United States v. Roberts

No case summaries are provided for unpublished opinions. However, published opinions are summarized and provided by Legal Connection.

Death Penalty Post-Trial Procedures Amended by Colorado Supreme Court

On June 27, 2012, the Colorado Supreme Court announced a change to Criminal Procedure Rule 32.2 – Death Penalty Post-Trial Procedures. Crim.P. 32.2(c)(1) is amended to read as follows:

Unitary Notice of Appeal. The notice of appeal for the direct appeal and the notice of appeal for all post-conviction review shall be filed by unitary notice in the supreme court within 7 days after the trial court’s order on post-conviction review motions, or within 7 days after the expiration of the deadline for filing post-conviction review motions if none have been filed. The unitary notice of appeal need conform only to the requirements of sections (1), (2), (6) and (8) of C.A.R. 3(g).

These amendments were adopted on June 21 and are effective July 1.

Click here to review the red line changes to Crim.P. 32.2, outlined as Rule Change 2012(09).

“Rule of Seven” Comment Added to Four Colorado Procedure Rules

On June 27, 2012, the Colorado Supreme Court announced four amendments to various Colorado procedure rules regarding the “rule of seven” for procedural time calculations. Colorado Civil Procedure Rules 6 and 306, Criminal Procedure Rule 45, and Colorado Appellate Rule 26 were all amended with the following Comment:

AFTER THE PARTICULAR EFFECTIVE DATE, TIME COMPUTATION IN MOST SITUATIONS IS INTENDED TO INCORPORATE THE RULE OF SEVEN. UNDER THE RULE OF SEVEN, A DAY IS A DAY, AND BECAUSE CALENDARS ARE DIVIDED INTO 7-DAY WEEK INTERVALS, GROUPINGS OF DAYS ARE IN 7-DAY OR MULTIPLES OF 7-DAY INTERVALS. GROUPINGS OF LESS THAN 7 DAYS HAVE BEEN LEFT AS THEY WERE BECAUSE SUCH SMALL NUMBERS DO NOT INTERFERE WITH THE UNDERLYING CONCEPT. DETAILS OF THE RULE OF SEVEN REFORM ARE SET FORTH IN AN ARTICLE BY RICHARD P. HOLME, 41 COLO. LAWYER, VOL. 1, P 33 (JANUARY 2012).

TIME COMPUTATION IS SOMETIMES “FORWARD,” MEANING STARTING THE COUNT AT A PARTICULAR STATED EVENT [SUCH AS DATE OF FILING] AND COUNTING FORWARD TO THE DEADLINE DATE. COUNTING “BACKWARD” MEANS COUNTING BACKWARD FROM THE EVENT TO REACH THE DEADLINE DATE [SUCH AS A STATED NUMBER OF DAYS BEING ALLOWED BEFORE THE COMMENCEMENT OF TRIAL]. IN DETERMINING THE EFFECTIVE DATE OF THE RULE OF SEVEN TIME COMPUTATION/TIME INTERVAL AMENDMENTS HAVING A STATUTORY BASIS, SAID AMENDMENTS TAKE EFFECT ON JULY 1, 2012 AND REGARDLESS OF WHETHER TIME INTERVALS ARE COUNTED FORWARD OR BACKWARD, BOTH THE TIME COMPUTATION START DATE AND DEADLINE DATE MUST BE AFTER JUNE 30, 2012. FURTHER, THE TIME COMPUTATION/TIME INTERVAL AMENDMENTS DO NOT APPLY TO MODIFY THE SETTINGS OF ANY DATES OR TIME INTERVALS SET BY AN ORDER OF A COURT ENTERED BEFORE JULY 1, 2012.

These amendments were adopted on June 21, 2012, and are effective July 1.

Click here to review the red line changes to these rules, outlined as Rule Change 2012(08).

Affordable Care Act Upheld by the United States Supreme Court

According to SCOTUSBlog, the United States Supreme Court has upheld the entirety of President Obama’s health care reform law known as the Affordable Care Act. Chief Justice Roberts joined the Court’s four left-leaning justices and penned the opinion, validating the individual mandate as a tax rather than under the Commerce Clause. For a more detailed evaluation, visit SCOTUSBlog for continuing analysis throughout the day.

In Plain English: The Affordable Care Act, including its individual mandate that virtually all Americans buy health insurance, is constitutional. There were not five votes to uphold it on the ground that Congress could use its power to regulate commerce between the states to require everyone to buy health insurance. However, five Justices agreed that the penalty that someone must pay if he refuses to buy insurance is a kind of tax that Congress can impose using its taxing power. That is all that matters. Because the mandate survives, the Court did not need to decide what other parts of the statute were constitutional, except for a provision that required states to comply with new eligibility requirements for Medicaid or risk losing their funding. On that question, the Court held that the provision is constitutional as long as states would only lose new funds if they didn’t comply with the new requirements, rather than all of their funding.

Law Firms and Small Businesses: Protecting Security Interests (Part 2)

Editor’s Note: This is the second in a two-part series of cyber security articles. Part one can be found here.

Reasonable Contractual Expectations

One of my best contractual stories revolves around a conversation with the president of a local web site design firm – a good friend and one who feels comfortable with being candid with me. During one of his development projects, I offered to do a free security evaluation of the soon-to-be-released web application. His rejection of my offer came with the rationale that if the web application was ever compromised, he wanted to be able to honestly tell the client that, to the best of his knowledge, the delivered web site was secure.

I haven’t the faintest idea of the legality of my friend’s hope for plausible deniability, but it should be obvious that two very poor consequences come out of his approach to security. The first is that his client will end up with an unsecure web site, when they could just as easily have had a product that would have withstood all but the most experienced and persistent hackers.

The second eye-opening realization is that the client never asked about security, and the development contract never addressed security. In this case, the client (and potentially the law firm that reviewed the contract) never included security development and testing as one of the primary requirements of the relationship. A single section added to the development contract might have the effect of preventing a devastating security breach.

A favorite statement of mine goes as follows:

Businesses end up with a lack of security because they never, ever ask about it. 

Almost all web site development contracts include obvious legal details like payment schedules, software ownership, and product specifications. These terms protect the interest of the business as well as the development firm – standard boilerplate.

A well-written contract should also include a requirement that the contracted web site be developed under strict security guidelines (consider OWASP as a source of information) and that a comprehensive third-party security penetration test (Acunetix as one such test) be run and presented before product acceptance.

The additional cost for security-oriented development should be minimal, since a knowledgeable development firm should be adhering to these practices regardless of a request. The third-party security penetration test can be contracted for with one of many firms and should cost only a few thousand dollars.

Again, the role of a law firm in this environment should certainly be the crafting and approval of the basic development contract, but also making sure security validation is a well-defined requirement of the overall agreement.

How to Respond After a Breach

When a security breach does occur, businesses (and their counsel) need to be ready to react thoroughly and decisively. A few of my suggestions for the days, weeks, and months following a breach are:

  • Don’t panic. Carefully consider the nature of the breach, what data (if any) has been compromised and what the business’ next steps should be. A premature release of breach information may cause unnecessary customer panic or, even worse, make management look even more inept when they revise information sent out too hastily. Advise them to take the time to respond with dignity and thoughtfulness.
  • If required, inform the appropriate financial and legal entities as soon as possible. Depending on the industry, there may be strict requirements for reporting security breaches. Your client’s problem will only get worse if they are caught hiding information. Keep in mind that many security breaches become public knowledge as the compromised data is used or sold within the cyber underground, not as a result of company disclosure. As a side note, an embarrassingly large number of security breaches are never discovered by the company that was breached.
  • Inform users or clients and customers as soon as appropriate. There is a line between keeping a company viable and an ethical responsibility to customers. My thoughts on this line are to consider the damage that might be done to customers and think about how you would expect to be treated.
  • Call the insurance company. Depending of the nature of the breach, the business may be covered for some, if not all, of the expenses associated with recovery. Suggest that the business give their insurance company a call. They might also take the time to talk about cyber insurance with their agent – for the next time.

As a legal professional, you should easily be able to see the pitfalls inherent in panic-stricken businesses reacting to security breaches. Legal, financial, and professional stakes surrounding a security breach may be high enough to shut down the business. The correct reaction may be well outside of the expertise of the business, or, even worse, the business may naively attempt to react on their own.

Conclusion

Hopefully, I have provided food for thought on the security opportunities and responsibilities of law firms supporting small businesses and their own technological infrastructure. Obviously, I’ve brought up far more issues and concerns than solutions. My hope is that even a casual discussion of security problems will prepare you with far more knowledge than the majority of your clients.

It’s a mean world out there; cyber crime is an industry run by foreign nationals from countries where cyber criminals are not prosecuted. An industry-accepted statistic is that more than 70% of all Internet web sites contain critical security vulnerabilities. Many of your clients, and your own web sites, undoubtedly are on the wrong side of this depressing number.

One final note to add one more level of additional worry: Web application security awareness has only recently entered mainstream web site development. If your web site or your client’s is more than four years old, not only is it certainly open to a critical security attack, but it is probably a target for even the most amateurish hackers: script kiddies, young kids who hack web sites because doing so is more fun than playing a predictable Xbox game.

Alan Wlasuk is a managing partner of 403 Web Security, a full service, secure web application development company. A Bell Labs Fellow award-winner with 18+ years of experience building secure web applications, Wlasuk is an expert in web security – from evaluation to web development and remediation.

Learn More: Cyber Security/Privacy CLE Homestudy Programs

Is Your Sensitive Data Secure: Cyber Insurance for Your Firm and Your Clients (video on-demand and mp3 download)

Avoiding The Lawyer’s Digital Nightmare: How To Safeguard Your and Your Clients’ Sensitive Information And Survive The Inevitable (?) Security Breach (video on-demand, mp3 download, and audio CD)

Ethics in a Wild Wired World (video on-demand, mp3 download, and audio CD)

To Use and Protect: Privacy Basics for Business (video on-demand and mp3 download)

Tenth Circuit: Unpublished Opinions, 6/26/12

On Tuesday, June 26, 2012, the Tenth Circuit Court of Appeals issued two published opinions and three unpublished opinions.

United States v. Hartman

United States v. Norwood

United States v. Wilkerson

No case summaries are provided for unpublished opinions. However, published opinions are summarized and provided by Legal Connection.