Minding Your Business

Proskauer’s perspective on developments and trends in commercial litigation.

FTC Report Warns Against Overconfidence in AI Tools to Combat Online Harm

Last month, the FTC issued a report to Congress advising governments and companies to exercise “great caution” in using artificial intelligence (“AI”) to combat harmful online content.  The report responds to Congress’s request to look into whether and how AI may be used to identify, remove, or otherwise address a wide variety of specified “online harms.”  Among the “harms” covered by Congress’s request were impersonation scams, fake reviews and accounts, deepfakes, illegal drug sales, revenge pornography, hate crimes, online harassment and cyberstalking, and misinformation campaigns aimed at influencing elections.

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Infant Formula Shortage Update

Lawmakers in Washington, D.C., and California have taken recent steps to further protect the infant formula market from price gouging. On June 7, 2022, the D.C. Council passed the “Infant Formula Consumer Protection Emergency Act.” The Act, which will remain in effect for 90 days, targets companies selling baby formula at extremely high prices. The Act provides that companies may be subject to a $5,000 fine, for first-time offenses, or a $10,000 fine, for subsequent offenses, if they sell infant formula at a price greater than 20% of what they previously sold substantially similar formula in the District over the 90-day period prior to February 17, 2022. If the retailer never sold a substantially similar formula product in that 90-day period, they would face fines if they sell infant formula at a price greater than 20% of the average price of substantially similar infant formula product from substantially similar retailers. Continue Reading

Supreme Court Rules on the Requirements for a Waiver of the Right to Arbitrate

The United States Supreme Court recently resolved a circuit split regarding when a party has waived its contractual right to arbitrate by participating in litigation prior to seeking to arbitrate a dispute. In Morgan v. Sundance, Inc., the Court held that the party seeking to resist arbitration does not need to show that it has been prejudiced by the other party’s delay in seeking to compel arbitration. Notably, and in holding that “the Eighth Circuit erred in conditioning a waiver of the right to arbitrate on a showing of prejudice,” the Supreme Court decided against the use of “custom-made rules, to tilt the playing field in favor of (or against) arbitration.”

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Supreme Court to Re-Examine Fair Use: Warhol Foundation v. Goldsmith

On March 28th, the Supreme Court granted certiorari in Warhol Foundation v. Goldsmith, a case involving the core issues around copyright fair use. The case involves a series of Warhol drawings and silkscreen prints adapted from an original photograph of Prince taken by Lynn Goldsmith. Likely to interplay with the recent fair use decision in Google v. Oracle, the Supreme Court’s decision in this case has the potential to reshape the contours of fair use and the fate of the transformative use test. The outcome of the decision will have a widespread impact on how artists, particularly appropriation artists and creators of “fan art,” draw from other works.

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Blockchain Service: In an Apparent First, Lawyers Serve Legal Papers Using an NFT

Fundamental to the due process of law is notice—a requirement that all parties are made aware that a lawsuit could alter their legal rights or duties.  Most defendants will be served in person by a process server.  But when the defendant is unreachable this way, some creativity may be required, especially when the defendants are only traceable through their actions on the blockchain, an instrument famous in part for its ability to keep its users private.  After a hack of almost $8,000,000 of its funds, Liechtenstein-based cryptocurrency exchange LCX AG allegedly traced some of its stolen digital assets to different digital wallets.  LCX AG was able to freeze the funds, but with no name stitched into the digital wallet, it still lacked a name and place to pursue legal action.  At least, it lacked a physical place.  But if LCX AG knew the location of the wallet, then perhaps it could serve the virtual place.

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Amendment to Rule 7.1 Seeks to Resolve Federal Court Diversity Issues at the Outset of Cases But It May Not Achieve Its Goal

A proposed amendment to Federal Rule of Civil Procedure 7.1, which had previously required information so judges could determine if they had a conflict of interest, would require a party in a diversity action to name and disclose the citizenship of every individual or entity whose citizenship is attributed to that party. Chief Justice Roberts submitted the proposed amendment on April 11, 2022. The amended Rule 7.1 takes effect December 1, 2022, unless Congress acts.

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Florida’s High Court Clarifies that Incorporating AAA Rules into an Arbitration Provision Delegates Arbitrability to Arbitrator

When a litigant seeks to compel arbitration pursuant to the Federal Arbitration Act (“FAA”), there are two issues that must be resolved: (1) whether there is an agreement to arbitrate; and, if so, (2) whether the dispute at issue falls within the scope of the arbitration agreement.  The Florida Supreme Court’s recent decision in Airbnb, Inc. v. Doe, deals with who decides this second issue—the court or an arbitrator.

In Airbnb, a couple sued Airbnb and Wayne Natt (the property owner) for issues arising out of their stay at Natt’s condominium, which was listed for rent on Airbnb’s website.  Airbnb moved to compel arbitration, arguing that the couple was required to arbitrate their claims because Airbnb’s Terms of Service included an arbitration provision that integrated the AAA Rules.  All parties agreed that the couple was bound by the arbitration agreement—the issue then became whether the court or the arbitrator should decide if the couple’s claims against Airbnb were arbitrable.

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