3/30. The U.S. Court of Appeals (1stCir) issued an opinion in AmeriFirst Bank v. TJX, a case regarding the liability of retailers whose computer networks are hacked to banks that issued credit and debit cards and had to reimburse their customers for fraudulent use of their card information.

The present action is one of many that followed TJX's loss of data. This case only concerns liability to the banks that issued cards. There is separate consumer litigation. It should also be noted that the hackers themselves are subject to criminal prosecution. In this matter, some have been prosecuted. See, story titled "DOJ Announces Cyber Crime Indictments" in TLJ Daily E-Mail Alert No. 1,808, August 7, 2008.

In the present case, the District Court dismissed some claims, denied class action status, and transferred the case to state court. The just released opinion addresses the jurisdiction of the District Court to render the judgment that it did, various theories of retailer liability for injuries resulting from theft of data from computer systems, class action certification, and the jurisdiction of the District Court going forward. This case, which is far from over, is remanded to the District Court.

If courts develop rules for imposing private liability upon operators of computer systems that hold personal and financial information for failure to prevent hacking and other unauthorized access, then this has the potential to provide both recourse for injured parties, and incentives for operators to improve their computer security. This, in turn, may thereby obviate or lessen the need for statutory creation of private remedies against, and government regulation and penalization of, most categories of holders of such data.

TJX is a Massachusetts based discount retailer with thousands of stores. Its customers make purchases with debit and credit cards. TJX obtains and stores debit and credit card information on its computer systems.

Someone accessed its computer system and stole customer credit and debit card information. That information was then used for fraudulent purposes. Both consumers and card issuing banks suffered harm. AmeriFirst Bank (AFB), based in Atlanta, Georgia, is one such bank.

In this action, AFT filed a complaint in the U.S. District Court (DMass) against TJX and others alleging negligence, breach of contract, negligent misrepresentation, and unfair or deceptive practices under statutes of the state of Massachusetts, which is codified in Chapter 93A of the Massachusetts General Laws. It also sought class action status for issuing banks.

These are all state law claims. AFB asserted that federal jurisdiction is based upon the Class Action Fairness Act, which is codified at 28 U.S.C. § 1332.

The District Court granted TJX's motion to dismissed without prejudice the negligence and breach of contract claims, but denied the motion to dismiss the negligent misrepresentation and statutory claims. It also denied AFB's motion to amend its complaint, to add a conversion claim. Finally, it denied class action status, and transferred the case to the state courts of Massachusetts.

Cross appeals followed.

The Court of Appeals first held that the District Court "had provisional jurisdiction to decide those merits issues -- because whether class action status was sustainable depended in part on what claims were on the table".

The Court of Appeals affirmed the District Court's dismissal of the negligence and breach of contract claims. It affirmed the District Court's denial of AFB's motion to amend the complaint.

With respect to negligent misrepresentation, the Court of Appeals wrote that the "plaintiffs argue that by accepting credit cards and processing payment authorizations, defendants impliedly represented that they would comply with MasterCard and Visa regulations and this was the negligent misrepresentation". But, the Court opined that there was no representation within the meaning of Massachusetts law, which is based upon the Restatement (Second) of Torts.

However, the Court continued, "Yet we stop short of holding that the district court had to dismiss the misrepresentation claim in this case on the face of a complaint that explicitly alleged misrepresentation. ... The present claim thus survives, but on life support."

On the statutory Chapter 93A claim, AFB asserted two theories on appeal -- negligent misrepresentation (discussed above), and violation of the Federal Trade Commission Act.

The Federal Trade Commission (FTC) brought and settled an administrative action against TJX. The FTC alleged in its complaint [3 pages in PDF] that TJX failed to use reasonable and appropriate security measures to prevent unauthorized access to personal information on its computer networks, in violation of Section 5(a) of the FTC Act, which is codified at 15 U.S.C § 45(a). See, March 27, 2008, Agreement Containing Consent Order [7 pages in PDF].

The Court of Appeals rejected that argument that the FTCA theory must be rejected because it was a mere consent decree. It held that the Chapter 93A claim can go forward on the FTCA theory.

As for denial of class action certification, the Court of Appeals noted that AFB declined to appeal the denial as to the negligent misrepresentation and Chapter 93A claim based upon the negligent misrepresentation theory, and decided to leave it to the District Court, on remand, whether to certify the class on the Chapter 93A claim based upon the other theory.

The Court of Appeals vacated the transfer order, and remanded to the District Court.

This case is AmeriFirst Bank et al. v. TJX Companies, Inc., et al., U.S. Court of Appeals for the 1st Circuit, App. Ct. Nos. 07-2828, 08-1075, 08-1076, appeals from the U.S. District Court for the District of Massachusetts, Judge William Young presiding. Judge Boudin wrote the opinion of the Court of Appeals, in which Judges Lipez and Howard joined.

3/27. The U.S. Court of Appeals (9thCir) issued its opinion [PDF] in Chalk v. T-Mobile, an appeal from the U.S. District Court (DOre), which dismissed a class action complaint involving wireless internet service, because of a mandatory arbitration clause in the service agreement.

The Court of Appeals, applying Oregon law, held that the arbitration clause is unenforceable as unconscionable. The Court of Appeals relied upon its opinion [29 pages in PDF] in a similar 2007 case arising in California, Shroyer v. New Cingular Wireless, which is also reported at 498 F.3d 976. See also, story titled "9th Circuit Holds Arbitration Clause in Cell Phone Contract Unenforceable" in TLJ Daily E-Mail Alert No. 1,624, August 20, 2007.

The just released opinion is a victory for class action lawyers, and a defeat for a wide range of consumer services providers who rely upon arbitration clauses in consumer contracts. Whether consumers benefit from, or are harmed by, arbitration agreements or opinions such as this one is hotly debated. See for example, story titled "House Judiciary Committee to Hold Hearing on Arbitration Fairness Act" in TLJ Daily E-Mail Alert No. 1,658, October 19, 2007.

The plaintiffs, Ellen Chalk and Paul Stewart, signed service agreements with T-Mobile for wireless internet access. They purchased the associated wireless LAN PC cards from Sony Ericsson. The service agreement provides for mandatory arbitration of disputes, waiver of jury trials, and waiver of class action litigation. The plaintiffs assert that the cards do not work.

The plaintiff's filed a complaint in U.S. District Court (DOre) against T-Mobile and Sony Ericsson alleging a wide range of state and federal claims. The defendants moved to dismiss the complaint pursuant to the Federal Arbitration Act, which is codified at 9 U.S.C. § 1, et seq.

9 U.S.C. § 2 provides, in full, that "A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract."

The District Court dismissed the complaint.

Plaintiffs brought the present appeal. The Court of Appeals reversed.

It held, citing the Oregon court's opinion in Vasquez-Lopez v. Beneficial Oregon, Inc., 152 P.3d 940 (Or. Ct. App. 2007), that the service agreement's class action waiver is substantively unconscionable and therefore unenforceable under Oregon law. It also held that the waiver is not severable.

The case returns to the U.S. District Court for litigation, rather than to arbitration.

This case is Ellen Chalk and Paul Stewart v. T-Mobile USA, Inc. and Sony Ericsson Mobile Communications USA, Inc., U.S. Court of Appeals for the 9th Circuit, App. Ct. No. 06-35909, an appeal from the U.S. District Court for the District of Oregon, Judge Anna Brown presiding, D.C. No. CV-06-00158-BR. Judge Stephen Reinhardt wrote the opinion of the Court of Appeals, in which Judges Alfred Goodwin and Harry Pregerson joined.

3/30. The Supreme Court denied certiorari in Tavory v. NTP, a patent and copyright infringement case related to the NTP v. Research In Motion patent litigation. See, Orders List [7 pages in PDF] at page 2.

RIM reached a settlement with NTP that included payment of $612.5 Million. Oren Tavory co-wrote, back in 1991, software that was later acquired by NTP. Tavory filed a complaint in the U.S. District Court (EDVa) in 2006 against NTP seeking correction of inventorship to add Tavory as a co-inventor of relevant patents, and alleging copyright infringement and unjust enrichment.

The District Court entered judgment against him on all claims. It also awarded attorneys fees to NTP under 17 U.S.C. § 505. The Court of Appeals affirmed the attorneys fees award in its October 28, 2008, opinion [13 pages in PDF] of the U.S. Court of Appeal (FedCir). See also, October 27, 2008, opinion [PDF] for a more detailed recitation of the underlying facts.

The denial of certiorari lets stand the October 28, 2008, opinion.

Section 505 of the Copyright Act provides in part that "In any civil action under this title, the court in its discretion may allow the recovery of full costs by or against any party other than the United States or an officer thereof. Except as otherwise provided by this title, the court may also award a reasonable attorney’s fee to the prevailing party as part of the costs."

This case is Oren Tavory v. NTP, Inc., Supreme Court of the U.S., Sup. Ct. No. 08-952, a petition for writ of certiorari to the U.S. Court of Appeals for the Federal Circuit, App. Ct. No. 2008-1090. The Court of Appeals heard an appeal from the U.S. District Court for the Eastern District of Virginia, D.C. No. 3:06-CV-628, Judge James Spencer presiding. See also, Supreme Court docket.

3/27. President Obama announced his intent to nominate Larry Strickling to be head of the National Telecommunications and Information Administration (NTIA). See, White House news office release.

He was Chief of the Federal Communications Commission's (FCC) Common Carrier Bureau from 1998 through 2000.

He has also worked for the law firm of Kirkland & Ellis, Ameritech (now part of AT&T), Allegiance Telecom, CoreExpress, Inc., and Broadwing Communications (now part of Level 3 Communications).

Kyle McSlarrow, head of the National Cable and Telecommunications Association (NCTA), stated in a release that Strickling "is an exceptional choice to lead the NTIA during this critical period in our nation’s history. Larry's vast experience will be critical as NTIA establishes and implements programs that are designed to improve broadband access and spur adoption across America."

Walter McCormick, head of the US Telecom, stated in a release that Strickling's selection is "further evidence of the administration's unwavering commitment to unleash the full power and potential of broadband."

Gigi Sohn, head of the Public Knowledge, stated in a release that Strickling "will bring a wealth of experience and knowledge at a time when the agency is facing one of its biggest challenges."

3/19. Sen. John Kerry (D-MA) and Sen. Olympia Snowe (R-ME) introduced S 649 [LOC | WW], the "Radio Spectrum Inventory Act".

This bill would require the National Telecommunications and Information Administration (NTIA) and the Federal Communications Commission (FCC) every two years to "Conduct a report that includes an inventory of each radio spectrum band, from 300 Megahertz to 3.5 Gigahertz, managed by each such agency".

This report "shall" include "the licenses or government user assigned in the band", "the total spectrum allocation", and "the number of intentional radiators and end-user intentional radiators that have been deployed in the band with each license or government user".

The bill would also mandate the creation of "a centralized portal or website utilized by each such agency to make the inventory of the bands of such agency available to the public via an Internet-accessible website".

Steve Largent, head of the CTIA, stated in a release that "We know that additional spectrum will be needed for commercial providers to meet consumers' increasing appetite for mobile broadband services, and the Kerry-Snowe bill is a good first step toward identifying where that spectrum will come from. Given the long lead time that is often involved between identifying spectrum for commercial use and moving it to market, this is a very timely proposal."

This issue contains the following items:
 • 1st Circuit Rules on Liability of Retailers in Data Theft Case
 • 9th Circuit Holds Arbitration Clause in Wireless Internet Service Contract Unenforceable
 • Supreme Court Denies Cert in Tavory v. NTP
 • Obama Picks Strickling for NTIA
 • Senators Kerry and Snowe Introduce Bill to Require Spectrum Inventory

The House will meet at 10:30 AM for morning hour, and at 12:00 NOON for legislative business. The schedule for the week includes consideration of HR 985, [LOC | WW], the "Free Flow of Information Act of 2009". Rep. Hoyer's schedule for the week of March 30.

The Senate will meet at 10:00 AM. It will resume resume consideration of SConRes 13, the Senate Budget Resolution, Fiscal Year 2010.

10:00 AM. The Senate Judiciary Committee (SJC) will hold an executive business meeting. It will continue its mark up of S 515 [LOC | WW], the "Patent Reform Act of 2009". See, notice. Location: Room 226, Dirksen Building.

10:00 AM. The House Appropriations Committee's (HAC) Subcommittee on Financial Services will hold a hearing on the Federal Trade Commission (FTC). Location: Room 2358-A, Rayburn Building.

11:00 AM - 12:00 NOON. The Federal Communications Commission's (FCC) Advisory Committee for the 2011 World Radiocommunication Conference (WRC-11 Advisory Committee) will meet. See, FCC notice [PDF] and notice in the Federal Register, February 12, 2009, Vol. 74, No. 28, at Pages 7046-7047. Location: FCC, Commission Meeting Room (TW-C305), 445 12th St., SW.

2:00 PM. The House Judiciary Committee's (HJC) Subcommittee on Commercial and Administrative Law will hold a hearing titled "VoIP -- Who Has Jurisdiction to Tax It?". See, notice. This event will be webcast by the HJC. Location: Room 2141, Rayburn Building.

2:00 PM. The House Homeland Security Committee's (HHSC) Subcommittee on Emerging Threats, Cybersecurity, and Science and Technology will hold a hearing titled "Do the Payment Card Industry Data Standards Reduce Cybercrime?". Rita Glavin, (acting AAG in charge of the DOJ's Criminal Division), Robert Russo (Payment Card Industry Data Security Standards Council), Joseph Majka (Visa), Dave Hogan (National Retail Federation), and Michael Jones (Michaels Stores Inc.). The HHSC will webcast this event. Location: Room 311, Cannon Building.

POSTPONED. 2:00 - 3:30 PM. The Department of Justice's (DOJ) Antitrust Division will host a seminar conducted by Sergei Koulayev (Columbia University) on his paper [PDF] titled "Vertical integration in sequential negotiations". This is a game theoretical paper that also addresses video programming and the News Corp. Directv merger. Location: Bicentennial Building, 600 E St., NW.

6:30 PM. Sen. John Kerry (D-MA) will speak at a dinner that is part of the National Cable and Telecommunications Association's (NCTA) Cable Show '09. Location: Constitution A, Level 3B, Grand Hyatt, 1000 H St.,  NW.

Deadline for the Office of the U.S. Trade Representative (OUSTR) to submit to the President and Congress its annual National Trade Estimate Report on Foreign Trade Barriers (NTE). This report is required by 19 U.S.C. § 2241.

Deadline for the Office of the U.S. Trade Representative (OUSTR) to conclude its review of the operation, effectiveness, and implementation of and compliance with trade agreements regarding telecommunications products and services, including the World Trade Organization (WTO) General Agreement on Trade in Services, the North American Free Trade Agreement (NAFTA), free trade agreements (FTAs) with Australia, Bahrain, Chile, Morocco, and Singapore, the Dominican Republic-Central America-United States FTAs. See, notice in the Federal Register, November 25, 2008, Vol. 73, No. 228, at Page 71707-71708.

Deadline to submit comments to the Bureau of Industry and Security (BIS) regarding its various mandates for information collections, notifications, reports, and exchanges. The BIS estimates that these mandates affect 1,427,450 persons or entities. The BIS also asserts that regulated persons and entities can comply with various mandates in a little as "5 seconds". See, notice in the Federal Register, January 30, 2009, Vol. 74, No. 19, at Pages 5637-5638

The House will meet at 10:00 AM for legislative business. The schedule for the week includes consideration of HR 985, [LOC | WW], the "Free Flow of Information Act of 2009". See, Rep. Hoyer's schedule for the week of March 30.

10:00 AM. The House Homeland Security Committee's (HHSC) Subcommittee on Intelligence, Information Sharing and Terrorism Risk Assessment Hearing will hold a hearing titled "The Future of Fusion Centers: Potential Promise and Dangers". The witnesses will be Leroy Baca (Los Angeles County Sheriff’s Department), Robert Riegle (DHS), Russell Porter (Iowa Intelligence Fusion Center), John Bateman (Texas Department of Public Safety), Bruce Fein (The Litchfield Group), Ned Norris (Tohono O’odham Nation), David Gersten (DHS). The DHS's December 11, 2008, report [PDF] titled "Privacy Impact Assessment for the Department of Homeland Security State, Local, and Regional Fusion Center Initiative" identified a number of risks for privacy, including data mining, inaccurate or incomplete information, participation of the private sector, and mission creep. The HHSC will webcast this event. Location: Room 311, Cannon Building.

2:30 PM. The Senate Judiciary Committee (SJC) may hold a hastily scheduled hearing on the nominations of Judge David Hamilton to be a Judge of the U.S. Court of Appeals (7thCir) and Robert Weich to be Assistant Attorney General in charge of the Office of Legislative Affairs. See, notice. The SJC will webcast this event. Location: Room 226, Dirksen Building.

Planned implementation date of the Copyright Office's (CO) new fees for registration of claims, special services and Licensing Division services. See, notice in the Federal Register, October 14, 2008, Vol. 73, No. 199, at Pages 60658-60662. See also, story titled "Copyright Office Proposes to Raise Registration Fees" in TLJ Daily E-Mail Alert No. 1,843, October 15, 2008.

Day one of a three day event hosted by the National Cable and Telecommunications Association (NCTA) titled "Cable Show". Location: Washington Convention Center (WCC).

Day one of a three day event hosted by the American Intellectual Property Law Association (AIPLA) titled "Legal Secretaries and Administrators Conference". See, conference brochure [PDF]. Location: Westin Alexandria Hotel, Alexandria, VA.

Deadline to submit reply comments to the Federal Communications Commission (FCC) regarding competitive bidding procedures for Auction 79. This is proceeding is AU Docket No. 09-21 (122 FM broadcast construction permits). See, February 27, 2009, Public Notice (DA 09-422), and notice in the Federal Register, March 11, 2009, Vol. 74, No. 46, at Pages 10578-10581.

The House will meet at 10:00 AM for legislative business. The schedule for the week includes consideration of HR 985, [LOC | WW], the "Free Flow of Information Act of 2009". See, Rep. Hoyer's schedule for the week of March 30.

9:30 AM. The House Commerce Committee's (HCC) Subcommittee on Communications, Technology, and the Internet will hold a hearing titled, "Oversight of the American Recovery and Reinvestment Act of 2009: Broadband". See, notice. Location: Room 2322 Rayburn Building.

10:00 AM. 10:00 AM. The House Homeland Security Committee (HHSC) will hold a hearing titled "Homeland Security Policymaking:  HSC at a Crossroads and Presidential Study Directive 1". The witnesses will be Frances Townsend (former homeland security and counterterrorism advisor to President Bush), Kenneth Wainstein (O'Melveny & Myers, former AAG in charge of the DOJ's NSD, and former advisor to Bush), Philip Palin (National Institute for Strategic Preparedness), Bruce Hoffman (Georgetown University), Tom Frazier (Major Cities Chiefs Association). The HHSC will webcast this event. Location: Room 311, Cannon Building.

1:00 PM. The House Foreign Affairs Committee's (HFAC) Subcommittee on Terrorism, Nonproliferation and Trade will hold a hearing titled "Export Controls on Satellite Technology". The witnesses will be Larry Wortzel (U.S. - China Economic and Security Review Commission), Pierre Chao (Center for Strategic and International Studies), and Patricia Cooper (Satellite Industry Association). See, notice. Location: Room 2175, Rayburn Building.

2:00 - 4:00 PM. The House Intelligence Committee (HIC) will hold a closed hearing titled "SIGINT". See, notice. Location: Room HVC-304.

Day two of a three day event hosted by the National Cable and Telecommunications Association (NCTA) titled "Cable Show". Location: Washington Convention Center.

Day two of a three day event hosted by the American Intellectual Property Law Association (AIPLA) titled "Legal Secretaries and Administrators Conference". See, conference brochure [PDF]. Location: Westin Alexandria Hotel, Alexandria, VA.

The House will meet at 10:00 AM for legislative business. See, Rep. Hoyer's schedule for the week of March 30.

9:30 AM. The U.S. Court of Appeals (DCCir) will hear oral argument in Council Tree Communications, Inc. v. FCC, App. Ct. No. 07-1454. Judges Brown, Griffith and Silberman will preside. This is one of several cases pertaining to the FCC's eligibility standards for bidding credits for designated entities in spectrum auctions. In this case Council Tree challenges the FCC's 700 MHz auction. See, FCC's brief [57 pages in PDF]. Location: 333 Constitution Ave.

Day three of a three day event hosted by the National Cable and Telecommunications Association (NCTA) titled "Cable Show". Location: Washington Convention Center.

Day three of a three day event hosted by the American Intellectual Property Law Association (AIPLA) titled "Legal Secretaries and Administrators Conference". See, conference brochure [PDF]. Location: Westin Alexandria Hotel, Alexandria, VA.

Deadline to submit applications to testify at the Copyright Office's (CO) hearings regarding its triennial DMCA rulemaking proceeding on possible exemptions to the prohibition against circumvention of technological measures that control access to copyrighted works. The hearings will be held on May 1, 2009, at Stanford law school, in Palo Alto, California, and on May 6-8, 2009, at the CO in Washington DC. See, notice in the Federal Register, March 9, 2009, Vol. 74, No. 44, at Pages 10096-10097. See also, story titled "Copyright Office to Hold Hearings on DMCA Exemptions" in TLJ Daily E-Mail Alert No. 1,911, March 10, 2009.

The House will not meet the week of April 6-10 or 13-17.

8:30 AM - 5:00 PM. Day one of a two day meeting of the Judicial Conference of the United States' Advisory Committee on Rules of Criminal Procedure. This meeting is open to the public for observation, but not participation. See, notice in the Federal Register, January 26, 2009, Vol. 74, No. 15, at Page 4459. Location: Thurgood Marshall Federal Judiciary Building, One Columbus Circle, NE.

2:00 - 4:00 PM. The Department of Transportation's (DOT) Intelligent Transportation Systems Program Advisory Committee (ITSPAC) will meet. See, notice in the Federal Register, March 12, 2009, Vol. 74, No. 47, at Pages 10800-10801. Location: DOT, Conference Room 2, West Building, 1200 New Jersey Ave., SE.

The U.S. Patent and Trademark Office (USPTO) and others will host an event titled "USPTO Design Day 2009". See, notice. Location: USPTO, Madison Auditorium, Alexandria, VA.

8:30 AM - 5:00 PM. Day two of a two day meeting of the Judicial Conference of the United States' Advisory Committee on Rules of Criminal Procedure. This meeting is open to the public for observation, but not participation. See, notice in the Federal Register, January 26, 2009, Vol. 74, No. 15, at Page 4459. Location: Thurgood Marshall Federal Judiciary Building, One Columbus Circle, NE.

2:00 - 3:30 PM. The Department of Justice's (DOJ) Antitrust Division will host a seminar conducted by Yongmin Chen (University of Colorado at Boulder) and David Sappington (University of Florida) on their paper [33 pages in PDF] titled "Exclusive Contracts, Innovation, and Welfare". This is a theoretical paper that also addresses AMD, Intel and microprocessor chips. Sappington worked at the FCC during the Chairmanship of Michael Powell. To request permission to attend, contact Patrick Greenlee at 202-307-3745 or atr dot eag at usdoj dot gov. Location: Bicentennial Building, 600 E St., NW.

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