Karen Morris' Bio
Karen Morris is a Distinguished Professor of Business Law at Monroe Community College in Rochester, New York where she has taught for 31 years. She is also an elected town judge and the author of two textbooks - New York Cases in Business Law and Hotel, Restaurant and Travel Law. Karen also writes a treatise on New York Criminal Law and a column in Hotel Management Magazine. She recently published her favorite work - Law Made Fun Through Harry Potter's Adventures. Professor Morris is the recipient of numerous teaching awards and recently received the Humanitarian Award from her county Bar Association.
Marianne Jennings' Bio
Professor Marianne Jennings is a member of the Department of Management in the W.P. Carey School of Business at Arizona State University and is a professor of legal and ethical studies in business. At ASU she teaches graduate courses in the MBA program in business ethics and the legal environment of business. She served as director of the Joan and David Lincoln Center for Applied Ethics from 1995-1999. From 2006-2007, she served as the faculty director for the MBA Executive Program.
We use them casually and frequently. Those emojis are shortcuts in communication. emphasis in messages, and shorthand humor. We just may not realize what can happen if our texts and e-mails end up as critical communications in a lawsuit. Two professors from Deakin Law School in Melbourne, Australia have an article that sheds light on emojis and litigation. Elizabeth A. Kirley and Mariilyn McMahon, "The Emoji Factor: Humanizing the Emerging Law of Digital Speech, Tennessee Law Review (forthcoming April 2018).
To illustrate the possible confusion, consider this excerpt from a recent Wall Street Journal article:
Debra Katz, an employment lawyer in Washington, D.C., says she was stumped by a combination of emojis that included horses and one that “looked like a muffin” in text messages associated with a harassment case. She solicited opinions from her colleagues in the office about what it might mean. Her client told her it meant “stud muffin.” She says her client viewed the emojis as an extension of the alleged unwelcome advances at issue in the dispute. Mike Cherney, "Lawyers Faced With Emojis an Emoticons Are -\_(")_/-," Wall Street Journal, January 30, 2018, p. A1.
One can see how such symbols can demonstrate issues of sexual harassment. If you are the plaintiff in a personal injury suit but have happy emoticons in your communications, you could undermine your case, A text message in which your emoji indicates that your are just fine also undermines credibility. What does the red-lipstick Emoji mean in the context of office text messages? And what do a smiley face, a comet, a champagne bottle, dancing Playboy bunnies, and a chipmunk mean when responding to a landlord offering an apartment for rent? The landlord took it to mean that the couple sending them wanted to rent the apartment. The landlord removed the apartment from real estate listings and then the couple quit responding. The landlord was left with a vacant apartment and sued the couple, relying on the Emojis for their intent.
Emojis make their way into criminal law as well. In France, a judge found that sending the gun Emoji to an ex-girlfriend was sufficient to show a criminal threat. In Virginia Emojis have been used to establish computer harassment. For more examples, read here.
Text messages, e-mails, and online posts are discoverable and admissible as evidence. The increasing use of Emojis and Emoticons as shorthand communications has resulted the need for interpretation. Those Emojis and Emoticons can and will be used against you in a court of law. Use carefully and sparingly.
Make a list of the types of legal actions where Emojis and Emoticons could be controlling of the outcome.
What do you learn about casual communication using symbols?
Larry Nasser, long time doctor for the girls’ Olympic gymnastic team and many sports teams at Michigan State University, pled guilty to ten counts of first-degree criminal sexual conduct. This Michigan crime is defined as including sexual penetration where the victim is between 13 and 16 years old, and the defendant is “in a position of authority over [the victim] and coercively used this authority to force submission.”  Nassar was sentenced to 40-175 years in prison. The presiding judge, the Honorable Rosemarie Aquilina, commented, “You do not deserve to walk outside a prison ever again. You have done nothing to control those urges and anywhere you walk, destruction will occur to those most vulnerable.”
Prior to the judge announcing the sentence, 150 plus victims testified at the sentencing hearing (the proceeding at which a defendant’s sentence is determined and announced by a judge) about the impact on them of Nassar’s abusive conduct.
Nassar, age 54, made a brief statement, saying the testimony had “shaken me to my core.” He turned to face the victims and apologized.
One of the gymnasts, now a lawyer, said Nassar groped, fondled and penetrated her with his hands when she was 15 years old. Many victims said he used his ungloved hands to penetrate them, often without explanation, while they were on a table seeking help for various gymnastic-related injuries. Many said they were children at the time, trusted Nassar, were afraid to speak up, and in denial about what was happening. Nassar won their allegiance with candy, Olympic souvenirs, and encouraging words.
The judge praised the victims who testified. They included many Olympic stars including Aly Raisman, Jordyn Wieber and McKayla Maroney.
Victims’ rights laws require that all sentencing judges consider the impact of the crime on the victim. Information about that impact can be presented to the judge in several ways. A pre-sentence investigation report, usually prepared by a probation officer, informs the judge of much information about the defendant including family, schooling, medical issues , addictions, military status, education, work history, and any other relevant information. The report will also contain a recommendation by the probation department concerning an appropriate sentence. Both the prosecutor and defendant’s attorney will have a chance to argue for or against the recommendation.
Sometimes victims want to speak at the sentencing. In many states, the sentencing judge must allow the victim to be heard. Other states leave to the “sound judgment” of the judge whether or not to allow victims to testify. Some states mandate that a sentencing court consider not only the impact of the crime on the victim, but also her opinion about the length and type of sentence she thinks should be imposed.
Virtually all states and the Federal Rules of Criminal Procedure grant both the defendant and defense counsel the right to speak to the court before a sentence is imposed.
Sentencing often takes only moments, especially if the judge is imposing a sentence that was part of a plea bargain, and so agreed upon at the time of the plea. The duration of Nassar’s sentencing hearing and the number of victims permitted to testify is unusual. Another judge might have asked the group of victims to identify a few or several representatives to speak rather than permitting all of them to address the court.
Nassar’s sentence – 40 to 175 years in prison – is an example of an indeterminate sentence, meaning a prison term that is indefinite in duration and contains a range of years. The first number is the minimum number of years the defendant must serve before becoming eligible for parole (early release from prison subject to conditions and monitoring by a parole officer). The second number is the maximum number of years defendant will serve if he is not not granted parole. Once a defendant becomes eligible for parole, if he is denied he can request again after the passage of a state-specified number of years. In New York, for example, a defendant can reapply every two years.
A parole board determines whether a defendant will be granted parole. Members of the board are nominated by the governor and must be approved by the state senate. Overriding concerns when deciding parole or no parole are whether parole supervision would be in the best interest of society, and an aid to the rehabilitation of the offender as a law-abiding citizen. In making its decision, a parole board considers the following: prior criminal history, indications of violent behavior while incarcerated, participation in rehabilitation efforts while imprisoned (substance abuse programs, anger management, sexual deviancy, etc.), participation in educational programs to improve work skills, and input from prison counselors, the victim, treatment providers, police, and family members. Other factors the parole board will review include performance on a temporary release program if applicable, and the availability of an appropriate release plan addressing community resources, employment, education, training, and available support.
Note: While many athletes reported to coaches, trainers and others the inappropriate treatment by Nassar, no action against the doctor was taken. As a result, those who were in a position to pursue Nassar and end the abuse are losing their jobs. These include the president and the athletic director at Michigan State University, and many Olympic officials.
For more information, click here.
If you were the judge in Nassar’s case, would you have permitted all 150 plus victims to testify? Why or why not?
 Michigan Penal Code Section 750.520(b).
 Federal Rules of Criminal Procedure 32(i)(4)(A).
It was the story that went round the globe and back, complete with Twitter outrage. Why was Mark Wahlberg paid $1.5 million (or $2 million as some stories reported) for reshoots while Michelle Williams was paid only $1,000? USA Today ran a full page of outrage from Hollywood stars and analysis of equal pay requirements before the real story emerged. Erin Jensen, "Celebs Erupt Over the News of Reshoot Wages,: USA Today, January 11, 2018, p. 2D. As it turns out, Hollywood is not the evil discriminator the Twiiter accounts believed. The real story is that the film, "All the Money in the World,' was plagued by an unforeseen event. Kevin Spacey, the lead actor in the drama about the kidnapping of the grandson of J. Paul Getty, was forced out of the film on a morals clause because of allegations about his sexual misconduct. The result was that the film had to have many scenes reshot with the new lead actor, Christopher Plummer.
Because of the setback for the film (the trailers had already gone out for advertising purposes with Mr. Spacey in those clips) and the expense of the re-shootings, Ms. Williams waived her contract fees for reshooting. She was paid what the screen actors guild requires for work -- $1,000. When an actor waives his or her fee, payments of $80 in per diem. In other words, Ms. Williams agreed to work for scale. Ms. Williams told the producers and Ridley Scott that she would waive her fee because it was so important to her that Mr. Spacey not appear in the film. The reshoots cost an additional $10 million on top of the film's original budget. The film's low box office take (so far $20 million) has made the film a money loser, largely because of the commitment to not have Mr. Spacey in the film. Without the waiver by Ms. Williams, the film might never have made it to the box office because of its struggle to get "greenlit," and subsequent issues with distribution through a number of company transfers.
Mr. Wahlberg, on the other hand, had already agreed to a reduced fee for his work in the film because he signed on before the film had been given the so-called green light. That means that he had committed to the project, including the inability to take on other projects, despite the risk that film would not go. When the re-shootings were required, he was paid in order to compensate him for time beyond his original commitment which had been undertaken at a bargain price. On the other hand, Ms. Williams explained, "I said I'd be wherever they needed me, whenever they needed me. And they could have my salary, they could have my holiday, whatever they wanted. Because I appreciated so much that they were making this massive effort."
The law does permit differing pay in several circumstances: when there is longevity, when there is meritorious extra pay, when there are union rules on pay scales, and, as in this case, when contract workers agree to pay reduction because they have an interest in the project. Hollywood actors are paid more than Hollywood actresses, but the measure is box office draw. Forbes magazine offered some insight into the economics of star pay. Mr. Wahlberg has had a series of 15 successful films in which he was the leading star in those films. Ms. Williams has enjoyed critical acclaim for her work, but she has been in supporting roles in films that are not blockbuster at the box office. For example, Ms. Williams appeared in a film in 2010 with Ryan Gosling (Blue Valentine). Both were paid approximately the same amount for that film. However, Mr. Gosling has had six major box office hits since then. His pay per film is significantly higher than Ms. Williams because she has been in lesser films in supporting roles, films whose box office receipts were a fraction of the Gosling films. While we may be puzzled as to why some films and stars explode into the mega-hit and star categories, Hollywood is using the same formula for computing talent cost and compensation. Hollywood actors are compensated under contracts that are limited in time and generally are for one film project. Those contracts are negotiated by agents for the actors whose business is to know what the market will bear and what their clients can bring. Their commission-based compensation gives them a vested interest in maximization. However, their clients ultimately control what they will and will not do and for how much. An agent cannot stop a client from waiving reshoot fees that are almost always provided for in the contract.
The last legal issue in this scenario is the journalistic coverage of the pay issue. As the old saying goes, a lie can travel halfway around the world before the truth gets its boots on (and there are variations of that saying as well as differences in attribution -- perhaps Mark Twain, who may have borrowed from Jonathan Swift --"Falsehood flies, and truth comes limping after it.") The variations in this story are astonishing in everything from the amount Mr. Wahlberg paid to the swift condemnations of everyone from Mr. Wahlberg to Hollywood producers to all of Hollywood. The story is a lesson on the challenges of journalism and the need to question why there is a pay disparity, not just assume that there is discrimination.
One additional fact that did not make its way into the news: Mr. Wahlberg donated, in Ms. Williams' name, his $1.5 million in re-shooting fees to the legal fund for #TimesUp, in order to show his support for her and for the cause to which she is dedicated. Sometimes, all the facts are unknown, misleading, incorrect, and very important to know before we tweet our thoughts.
Explain how Hollywood actors’ pay for films is determined.
Discuss the obligations of journalists on stories such as this one on pay disparity.
‘Tis a complex business when businesses seek priority on Google searches. The travel business industry appears to be a new area for questions about how priorities are set.
The structure of the online travel industry, which has replaced the brick-and-mortar travel businesses, is now dominated by OTAs (online travel agencies) such as Expedia, Priceline, and Travelocity. OTAs do business by buying up blocks of hotel rooms and offering them at cheaper prices or a part of package deals that include airfare, rental cars, and tourist package items. OTAs make their money from commissions that hotels pay for every room booking they make for the hotels (about 20%).
With this business model, snagging traffic first is important. And 60% of all travelers begin their search for hotels and flights on Google. “Google-Hotel Travelopoly,” Wall Street Journal, December 28, 2017, p. A14. Google sets its “first appearers” in response to a search using two different methods. Businesses that wish to advertise bid on key words. For example, “San Francisco Hotels” or “Hotels in San Francisco.” Google then makes its decision on the first site to appear based on which business is willing to pay for each click that results.
Google also has a meta search. Meta search results appear below the auction ads but above the generic search results. The meta search box has a box with OTAs that allow travelers to shop and compare the various OTA hotels and prices. The OTAs have to pay per click for the box status, and Google often asks for 10-15% of the OTAs’ commissions in exchange for the priority placement
However, Google is also operating its own OTA through work with the hotels.
The hotels, increasingly facing competition from Airbnb, find the OTA commissions are eating into their profits. And Google would like a leg up on the other OTAs. The result has been that Google is enforcing hotels’ requests that OTAs not be permitted to bid on or use search terms that include the hotel brand name. The result is that consumers are not permitted to know brand-name hotel deals and pricing.
In addition, Google has been requiring OTAs to provide it with information that then allows Google to know inventory, pricing, etc. that allows its OTA to makes its pricing more competitive.
Google maintains that the travel industry is booming and no one is curbing that thriving market. However, the OTAs maintain that they are being cut out because of their inability to use brand names in winning key word search or meta box positions. Also, smaller hotels and motels simply cannot afford to pay the Google commissions and that part of the market is then cut out from consumer searches.
Like so many areas of the law, antitrust applications have not quite caught up with search-engine monopolization, market allocation, or pricing. The sheer volume of activity, information, and transactions make investigations difficult. For now, the Google Travelopoly is a market to watch to determine Google’s effect on OTAs.
Explain Google’s processes for determining who has priority positions in travel searches.
What antitrust violations could you see developing?
A case against Starbucks accusing it of under-filling lattes to reduce milk costs has been dismissed by a federal district court for lack of evidence.
A few latte fans sued the coffee giant claiming it deceived customers by under-filling the cups. The plaintiffs proposed a nationwide class action (a lawsuit with multiple plaintiffs all injured from the same cause) and sought damages for fraud (false statements made intentionally to mislead) and false advertising (false statements made intentionally in advertisements).
Said the complaint, “By under-filling its lattes, thereby shortchanging its customers, Starbucks has saved countless millions of dollars in the cost of goods sold and was unjustly enriched by taking payment for more product than it delivers.”
All parties agree that latte is a coffee drink made with espresso, steamed milk, and foam. The Oakland, California-based judge held that reasonable customers expect foam to occupy some of the volume of the drink. Further, Starbucks’ cups hold more than the advertised number of ounces for the various sizes of lattes. Therefore the judge held plaintiffs failed to prove that lattes contain less than the promised beverage volume.
The court first established that plaintiffs’ claims require proof of a false or misleading representation. Plaintiff sought to prove this element based on three distinct theories: 1) the capacity of the cups is exactly the promised beverage volume, leaving no room for steam; 2) milk foam added to Lattes should not count towards promised beverage volume; and 3) the total volume of the ingredients used to make lattes do not add up to the promised beverage volume.
Concerning the first theory, plaintiffs alleged that only when the cup is “filled to the brink” is the promised beverage volume achieved. Since space for the steam prevents filling the cup to the brim, the promised beverage volume, per plaintiffs’ arguments, is not achieved. Starbucks’ senior manager of quality assurance and food safety for packaging testified that Starbucks requires its suppliers to manufacture cups used for hot drinks with volume capacities that are at least 8-12% greater than the promised beverage volume. Testimony established that the hot cups are actually 14-20% greater than the promised beverage volume. Plaintiffs conceded they have insufficient evidence on this theory and withdrew this argument.
Concerning the second theory, plaintiffs argued the foam added to the top of Starbucks’ lattes should not count toward the volume of its beverages. The court rejected this argument because, as plaintiffs agree, milk foam is a component of a latte. The court referenced a related precedent involving a class action that alleged Starbucks defrauded customers by advertising cold drinks as containing more liquid than the drinks actually contained . Per the complaint in that action, Starbucks under-filled its cold drinks by adding ice to make the cups appear full. The court dismissed the case noting that a reasonable customer knows that a portion of the drink will consist of ice. Further, the customer can increase the amount of beverage by ordering “no ice.”
Likewise in the current case, the court held no reasonable consumer would be deceived into believing that lattes, which include a component of milk foam, contain the promised beverage volume exclusive of the milk foam. Also, plaintiffs can increase the amount of liquid beverage they receive if they order a latte with light or no foam. Per plaintiff’s own allegation, a latte consists of three ingredients: expresso, steamed milk, and milk foam. A reasonable consumer who purchases a latte would not expect to receive a beverage that contains the promised beverage volume exclusive of one of those components, including milk foam.
Plaintiffs’ third theory is that the “Fill-To” lines on steaming pitchers used by baristas to make Lattes are too low for the finished product to contain the promised beverage volume. Stated differently, plaintiffs assert that Starbucks pitchers direct coffee makers to use quantities of ingredients that do not add up to the promised beverage volume. However, plaintiffs made no showing that the sum of the cold milk measurements indicated on Starbucks steaming pitcher plus espresso and milk foam results in lattes that are less than the promised beverage volume.
Since plaintiffs failed to prove a false statement or misrepresentation by Starbucks, their lawsuit is unsubstantiated. The court thus granted summary judgment for the coffee vendor.
For more information, see Strumlauf v. Starbucks Corp., 2018 WL 306715 (N.D. Calif., 1/5/2018).
What do you think might have prompted the plaintiffs to pursue this lawsuit?
The final frontier in electronic contracting has been conquered. Visa announced that it would no longer require merchants to obtain a signed document from customers as proof of their sales transactions (except in the case of merchants who do not have chip technology – those merchants will still need signatures as proof). However, even those merchants are only requiring signatures above a certain dollar amount. Gas stations, which have enjoyed a longer period during which to switch to chip machines, have relied on the use of billing zipcodes as a means of authorization. Mastercard, American Express, and Discover have already indicated that they will be taking the same step. AnnaMaria Andriotis, “Visa Joins Its Peers, Jettisons Signatures,” Wall Street Journal, January 13, 2018, p. B1. Visa, with 835 million cardholders, is the largest credit card company. Mastercard has 405 million holders, followed by Discover at 51 million and American Express at 50 million.
The credit card companies have developed better security with the chip technology than a signature, either electronic or on a paper receipt, have been able to provide. The embedded code in the chip allows for authorization of each transaction with a code number. In short, without the original card, use of a duplicate card is impossible if the original has a chip. As a result, the duplication of the card is much more difficult. As a result, fraud has been reduced because use of the card no longer provides an opportunity for duplication. In Europe, the chip has been in use longer than in the United States. In addition, consumers there not only use the chip but must enter a pin code for both debit and credit transactions.
One of the problems with the signature requirement is that consumer no longer take them seriously and sign quickly and illegibly. The companies have discovered smiley faces, geometric figures, stick figures, and other sorts of messages in customer signatures that make them useless in terms of attribution of card use. One member of a restaurant wait staff discovered the signature was a phone number of a patron and a request for a call. The signature has become a game with some consumers – one of trying to see what will be accepted as a signature.
The Electronic Signature Act required universal acceptance of such signatures in the United States, but technology has evolved so quickly that the act is outmoded. Credit card companies have developed ways to provide “authentication,” which is the new requirement for contract formation. Our signatures are no longer there, but the use of the card is the authentication of the transaction. Ifa card holder claims fraud, the proof is in the chip, not in the signature, of whether they entered into the contract.
How does chip technology prevent fraud?
Why is a signature not necessary for contract formation when there is a chip?
A potential pitfall of using one’s own name in conjunction with a business is demonstrated in a pending case involving a standout restaurant in New Orleans. The Israeli cuisine eatery is named Shaya and is owned in partnership by award winning Chef Alon Shaya, its namesake, celebrity chef John Besh, and restaurateur Octavia Mantilla. It won the national award for Best New Restaurant in 2016. Chef Shaya has worked with Besh since 2003.
An expose published in fall, 2017, in the New Orleans newspaper the Times-Picayune reported that 25 women complained about repeated and pervasive sexual harassment at Shaya and other restaurants owned by Besh’s company, Besh Restaurant Group. The allegations included vulgar and offensive comments, demands for sex in exchange for promotions, aggressive unwelcomed touching and sexual advances condoned and sometimes encouraged by managers, sex demanded on business trips, and retaliation for complaints about the harassment.
Besh learned that Chef Shaya had cooperated with the newspaper reporter and terminated the partnership. Besh retained operation of Shaya Restaurant. Chef Shaya, concerned about his name, applied for a federal trademark on the terms “Shaya” and “Alon Shaya.” He then sent a cease-and-desist letter (a communication demanding that the recipient stop perceived violation of the sender’s rights) to Besh, demanding that the restaurant stop using the name Shaya. In response Besh sued Shaya for a declaratory judgment , which is a legal determination by a court that resolves a legal uncertainty. Unlike most other civil lawsuits, resolution of a declaratory judgment case does not entitle either party to a financial remedy; instead, the outcome is the judge’s opinion resolving a legal issue. Besh seeks a ruling that he has the right to the restaurant’s name. The suit challenges Chef Shaya’s attempt to register the trademark.
Besh claims the name Shaya’s first use in commerce was in conjunction with the restaurant. The term “first use in commerce” refers to the date when the goods branded by the mark were first sold or shipped, or services were first rendered in exchange for payment. A trademark cannot be registered until its first use in commerce.
In response to Besh’s lawsuit for a declaratory judgment, Shayla counter-claimed to retain the rights to use his name in future endeavors. “I am now forced to fight in court for the rights to my own name. . . Shaya is more than a sign on a restaurant. It is my personal and culinary heritage and I will not give up my fight to reclaim it.”
The party entitled to the trademark protection is the one who first used the mark, whether or not in commerce and whether or not that person is the trademark registrant. If someone other than the first user obtained a trademark registration on the name, the first user should be able to successfully challenge the trademark owner’s right to the name. So, if Chef Shayla used the name Shayla to promote goods or services prior to use of the name in conjunction with the restaurant, he would be the one with superior rights to the name.
You might be asking yourself - If first use determines priority of ownership, why register a trademark at all? The answer is this. Registration creates a presumption (albeit rebutable) of exclusive trademark rights, and so constitutes a heavier burden for the challenger to overcome in court.
The issues surrounding Chef Shaya’s right to the name could easily have been avoided by contract. When the Chef lent his name to the business he should have insisted on an agreement with Besh that addressed the issue of rights to the name in the event of a possible breakup of the partnership. Such an agreement could have saved the partners the expense, time and angst of an avoidable lawsuit.
What contract terms should a person lending his/her name to a partnership business negotiate? What terms would the other partner want to negotiate concerning the name?
Most banks refuse to create bank accounts for marijuana producers, dispensers, and sellers. While the sale and use of marijuana make be legal in some states, banks are wary of having these successful businesses as customers because of federal law. Even when banks agree to take on marijuana businesses as customers, their investors are uneasy. For example, First Green bank in Orlando, Florida closed all cannabis customer accounts after the banks investors expressed uneasiness about the bank’s strategy for growth. First Green’s chairman of the board had developed the strategy after he witnessed his wife’s ability to ease pain and recover from the use of marijuana. Only 1% of banks in the United States accept marijuana businesses as clients.
However, federal law still prohibits the possession, use, sale, and production of marijuana. There is great uncertainty under the law because federal laws against the production, sale, and use of marijuana have remained unchanged despite the movement to legalization in the states. If a bank were to take on marijuana businesses as customers, they could be charged for being part of a criminal drug conspiracy under federal law. Although Wells Fargo was the first to recruit marijuana clients, it quickly jettisoned the strategy because of the legal risk. Federal officials who have spoken at banking seminars make the slippery-slope argument – that bankers would be eased into taking money, perhaps unwittingly, from the clients that came from other types of drug transactions. In other words, money-laundering is the concern.
The Justice Department did issue a memo in 2013 that provided some clarification in that it listed eight priorities of focus for the federal government for prosecution of those producing or selling marijuana. One such priority is focusing on those businesses using marijuana sales as a front for other illegal activity: the interstate shipment of marijuana to other states where marijuana remains illegal. However, with Jeff Sessions taking over as attorney general in 2017, there is a new policy that indicates strict enforcement of all federal laws, including those of “partners in crime.” As a result, federal banking regulators have told banks to stay away from the marijuana businesses. State banking officials remain quiet and have not taken any enforcement actions.
Under federal law, the banks are required to report large cash transactions, as they would with any other customer. The result is that marijuana businesses have transactions that are reported daily because of the large cash flow in their businesses. Employees are also paid in cash, which makes them targets as well. In one business, the weekly payroll is $22,000, which must be carefully distributed to employees. Some businesses distribute their payroll from a bag carried by the owner. Insurance is non-existent for these businesses, and the heists continue to be reported, such as one in which the thieves broke through the roof of a marijuana warehouse.
The risk that elected officials see is that the marijuana businesses are left with dealing in cash. Some of the smallest of the marijuana businesses are taking in $250,000-$300,000 per month and operating on a cash basis. That cash makes the businesses targets for robbery. Some of the businesses have to arrange for decoy cars and irregular transfer of their funds to other locations in order to avoid heists planned around any observed, regular transfers.
As a result, Partner Colorado, a credit union, decided to take the business opportunity and recruit marijuana businesses in Colorado. Despite advice from its lawyers on the money-laundering and potential racketeering charges (criminal enterprise charges), the credit union has been successful in recruiting a substantial number of marijuana customers, who pay about $1,000 per month in fees to have an account at the credit union. Champion Bank, one of the few banks in Colorado that takes marijuana clients had its total business customer fees increase from $11,000 to $752,000. Robb Mandelbaum, "High Finance," New York Times Magazine, January 7, 2018, p. 46.
Partner Colorado has 13 employees dedicated to compliance. Their jobs are to monitor everything about the marijuana customers’ accounts. They require the businesses to be completely transparent with their financials. The businesses have to be able to document every sales transaction. Partner Colorado has terminated customers when there is a hint of suspicion. For example, one client had sales transactions from every customer for between $300 and $400. When the credit union was unable to determine why its customers’ average spending was so much higher, it ended the relationship. Using money-laundering experts, the credit union has developed its mechanisms for monitoring. Their on-site visits have them go through a six-page checklist to determine compliance. One part of the checklist requires the businesses to get rid of ATMs the compliance officers find on site. The ATMs are there for customer convenience since the businesses deal only in cash, but ATMs are a typical means of money laundering. The employees in compliance who do the monitoring are encouraged to go and watch from their cars the activity at their clients’ businesses to determine whether there is any odd activity.
As lawyers have told all financial institutions, there is no safe harbor in banking for these customers. However, the Partner Colorado has developed a business model for observation that allows it to stop relationships when the slightest suspicion arises. Since its marijuana program began three years ago, the credit union has had three state and federal reviews and there were no issues that the regulators raised in those reviews. Lawyers say there is no “safe harbor” for banks with marijuana clients. However, the credit unions have been successful in their navigation because they have been willing to spend the time and money to watch their clients.
In addition, Bitcoin has proven to be a solution for the marijuana industry. For those who could not understand the rise of Bitcoin stock, the explanation may lie in this issue: those who cannot do business with banks need a way to do business other than cash. Bitcoin has proven to be a solution.
Explain the risk for banks that do business with marijuana businesses in states in which the production, sale, and possession of marijuana is legal.
Why are credit unions pursuing these customers?
hiQ is a people analytics firm that gathers information that is available on the Web and creates software for use by human resources departments (or talent development departments). The software provides HR departments with a summary of thee credentials and skills of their workforce but also provides them with information as to who is at risk for leaving the company. One of hiQ’s fundamental resources for this software development is LinkedIn, the Microsoft company that has 500 million people with skills and credential profiles.
hiQ received an e-mail from LinkedIn’s lawyer requesting that it stop doing business because it was using LinkedIn’s proprietary information. hiQ filed suit seeking a court order that prohibited LinkedIn from telling it to go out of business and allowed it to continue operating while the issues underling the use of LinkedIn’s public data is reviewed. hiQ Labs, Inc. v. LinkedIn Corp, 2017 WL 3473663 (N.D. Cal. 2017).
The court granted hiQ a preliminary injunction that has permitted it to stay in business while the issues related to their rights to LinkedIn data are reviewed for possible violations of various federal and state laws, including the Computer Fraud and Abuse Act (CFAA) which provides two ways of committing the crime of improperly accessing a protected computer: (1) obtaining access without authorization, and (2) obtaining access with authorization but then using that access improperly. LinkedIn is focusing on the second means as criminal action on the part of hiQ. In addition, LinkedIn has argued that hiQ’s use violates the terms users of LinkedIn agree to when they sign up for the site.
Another argument in the privacy issue raised by LinkedIn, which is that users' information is being used for a purpose that they did not anticipate. However, LinkedIn users have a choice about which information about them is available publicly.
LinkedIn has also argued that their intent was to have users browse the site but not to have a "bot brigade copying data at scale." Drake Bennett, "Big Brother vs. Little Brother," Bloomberg Business, November 20, 2017.
The case brings to mind the Supreme Court precedent in United States v. Jones, 565 U.S. 400 (2012) in which the court held that police attaching a GPS tracking device to a car was a violation of the driver's privacy even thought a police officer driving behind such a driver meant the officer was able to accomplish the same thing and was not a violation of privacy. LinkedIn is arguing that casual surfing of a website for information is different from bot invasion for purposes of copying the data.
An appeal to the 9th Circuit is pending. The court of appeals, and possibly the U.S. Supreme Court, have the task of deciding what constitutes privacy and permissive use in an era in which technology moves faster than our laws and court decisions.
Make the arguments pro and con on hiQ's use.
Discussion the implications of hiQ's use.
A 25 year old woman who was a victim of sex trafficking by an abusive pimp was killed by strangulation in a Portland, Oregon Hilton Doubletree Hotel. The murderer was a man who connected with her after seeing her pictures on the internet site Backpage.com, notorious for its use by sex traffickers to advertise their victims. The perpetrator was convicted of manslaughter in June, 2017, and sentenced to 18 years in prison. The victim’s estate has now filed a $3.6 million lawsuit against the hotel.
The complaint asserts the hotel failed to properly train staff or implement preventative measures. The suit alleges the hotel missed several known clues that sex trafficking was occurring. These include: cash was used to pay for the room; the victim and pimp carried no luggage; and they provided personal information that conflicted with data the hotel had on file for the person whose hotel benefits program number the pimp had stolen and was using. Said her attorney, “ Sex trafficking is an epidemic largely because of companies who turn a blind eye to it for the sake of profit.”
Sex trafficking means someone uses physical force, fraud or coercion to arrange commercial sex, which involves payment for sexual acts, or, stated simply, forced prostitution. Coercion and fraud may take the form of promised (but never delivered) immigration of a victim’s family members, promised care of a victim’s family member, or a promised marriage. Another scheme is the demand for commercial sex acts in exchange for an apartment or other services provided to the victim by the trafficker.
Hotels are viewed by traffickers as a convenient venue to carry out their business because, not only do rooms include beds, but all parties can remain anonymous by paying in cash, and few hotels have questioned traffickers’ activities or summoned police. Law enforcement has begun to involve hotels in efforts to curb sex trafficking. Housekeepers, front desk staff and room service personnel are seen as potential key players in identifying traffickers.
Hotels can face criminal and civil liability based on a federal statute. At least one state, Pennsylvania, has adopted a law expressly imposing liability on hotels. Similar statutes are under consideration in several states.
Criminal and civil liability under federal and Pennsylvania law can result to a hotel employee and the employer hotel for knowingly renting a hotel room to a perpetrator of sex trafficking. Additionally, an employee and the hotel can be liable even in circumstances where an employee did not know sex trafficking was occurring but the employee acted with reckless disregard of that fact. This means the employee should detect the illegal activity based on cues exhibited, but then consciously disregards them and fails to notify management or law enforcement, or take any other protective action.
The following are known Indicators of sex trafficking; disregard of them by hotels may result in liability: extended stay with few possessions; payment for the room in cash; request for a room overlooking the parking lot (to watch for the arrival of customers and possibly police); excessive foot traffic in and out of the room; frequent requests for new linens and/or towels; frequent requests for restocking an in-room refrigerator; and a female who exhibits fear, anxiety, or submissive behavior, is constantly monitored, has poor hygiene and/or is malnourished. Additional clues include minor girls accompanied by older men, women being treated in an aggressive manner, girls in groups dressed inappropriately for their age, and minors on the premises during school hours.
Lawsuits against hotels for harboring sex traffickers is a fairly new phenomenon. Several cases are currently pending. None has yet been resolved. Insurance companies that provide coverage for hotels are now adding sex trafficking liability to exclusions from coverage of their policies.
An available phone app encourages travelers to help law enforcement locate traffickers by taking pictures of their hotel rooms and uploading them to a designated site. The pictures are then compared against photos taken in hotel rooms and then used by traffickers to promote sex with children on sites such as Backpage.com. The app is named TrafficCam.
For further information, click here.
What components should be included in a training program for hotel employees concerning the possibility of sex trafficking occurring at the hotel where they work?
Leyenda, a female-owned cocktail bar in Brooklyn, announced in December 2017 that it would have a special holiday theme for Christmas 2017 that would feature Beyoncé, aka Mrs. Knowles-Carter. The name of the bar would be changed to “Sleyenda,” as a tribute to Queen Bey for her ability to “slay.” The menus were printed on Beyoncé Christmas cards. The letter announcing the theme included the following, "Of course, we're celebrating ALL of those who slay, simply inspired by Bey's #lemonade words."
The Knowles-Carter lawyers were quick to pounce with a cease-and-desist letter. The letter was unusual because it contained the usual threats of litigation, but began with a kindly explanation:
“It appears that you area dedicated fan of Mrs. Carter, and for that support, Mrs. Carter thanks you. There is a line, however, between fandom and infringement of intellectual property rights, and we are concerned that this pop-up bar will cross that line.”
Leyenda posted a copy of the letter from the lawyers on its Instagram account. The letter asked that the bar not use the singer’s name, trademark, copyright lyrics, and artwork. The Latham & Watkins letter closed with the usual threat of litigation, “Please know that Mrs. Carter and BGK do not wish to initiate legal proceedings against you, but unless you comply with the foregoing demands, they will not be left with many options for protecting their rights.”
Mrs. Knowles-Carter is a fierce protector of the use of her name. During the same time period her lawyers also sent a letter to a small New York brewery for its limited edition “Bieryoncé” pilsner. The can had that name in pink similar to the logo that Mrs. Knowles-Carter uses. The owner of the small Brooklyn Lineup Brewery brewed about 150 cases of the special beer before receiving the cease-and-desist letter. Katarina Martinez, the owner of the brewery, said that the beer was her own formula and that she was just making a limited-run tribute to Beyoncé because she is a big fan of the singer.
The lawyers are focused on misappropriation – the use of someone’s name, likeness, or image, without permission, for commercial gain. The two small businesses involved in the unauthorized use of the star’s name are unlikely to have a national effect, but many stars have, in conjunction with their lawyers, developed policies on stopping name, image, or likeness use. For example, some stars follow a policy of stopping every use. Others follow a policy of addressing certain types of uses, such as in this case, the use of the star’s name in conjunction with the sale of alcohol or other products.
The tort of misappropriation is one that allows us to control when and how are names and images are used. Without permission and/or compensation, even the fun, playful, a court will halt use of names and images.
Explain the tort of misappropriation.
Discuss why the lawyers are vigilant, even against small businesses.
In 2014, Terrence Byrd was driving a rental car on the interstate in Pennsylvania. He had not rented the car, and he was not listed as an authorized driver. His fiancé had rented the car. A Pennsylvania state trooper pulled Mr. Byrd over for three reasons: (1) His hands were at the 10:00 and 2:00 positions on the steering wheel; (2) he was driving a rental car; and (3) he did not move over to the right lane quickly enough after passing a slow-moving truck.
In looking at the rental agreement, the trooper realized that Mr. Byrd was not an authorized driver on the contract he concluded, based on a Third Circuit decision, that he had no expectation of privacy in the rented car. The trooper also felt that Mr. Byrd appeared nervous and concerned about opening the console between the driver and passenger seats. Upon searching the vehicle, the trooper found body armor and 49 bricks of heroin in the trunk.
His lawyer moved to suppress the evidence because of an unlawful search, but the judge admitted the evidence and Mr. Byrd was convicted of federal drug charges and sentenced to 10 years. U.S. v. Byrd, 2015 WL 5038455 (M.D. Pa. 201
Most rental car contracts provide that the only persons authorized to drive the car are the renter, the renter’s spouse, the renter’s employees (to cover business renters,) and any additional drivers who present identification and license at the time of renting nd sign an additional driver form.
If someone who is not authorized by the contract or additional signature drives the car, no crime is committed. You have simply breached your rental contract, with remedies lying between you and the rental car company.
However, the issues of privacy and searches for purposes of criminal law and procedure are different from the civil breach of contract provisions. The trial court admitted the evidence. Mr. Byrd appealed his conviction on the grounds of unlawful search and seizure.
The Third Circuit Court of Appeals held that Mr. Byrd had no expectation of privacy when driving a rental vehicle that was rented by someone else and for which he was not an authorized driver. U.S. v. Byrd, 679 Fed. Appx. 146 (3rd Cir. 2017). The court was following Third Circuit precedent in affirming the admission of the evidence. The court also noted that the trooper has discretion in determining whether there has been a traffic violation and has the right to stop drivers to question them about a lane change and it timing.
However, there is a split among the federal judicial circuits on the issue of rental car searches when a non-renter is driving. As a result of that split, the U.S. Supreme Court has granted certiorari in order to produce a uniform federal standard on these types of searches. 138 S.Ct. 54 (2017)
The federal government has taken the position in the Supreme Court case that the terms of the rental contract should be honored and that a great deal of drug trafficking is done using rental cars rented by others and that requiring warrants would hamper law enforcement efforts to stop the flow of drugs.
Several interest groups have also taken a position in the case against the search because data show that poor Hispanics and African-Americans are more likely to rent vehicles and that the no-warrant rule will affect them adversely.
Explain the circumstances of Mr. Byrd’s arrest.
Mr. Byrd has argued that he and his fiancé have been together for 17 years and have 5 children together. Why is this information relevant to the case?
In 1992, with former NBA star and then-Senator Bill Bradley leading the way, and the sports industry offering its support, Congress passed PASPA, the Professional and Amateur Sports Protection Act. PASPA prohibits states from “authorizing” sports betting. Following Pete Rose’s betting activities, there was strong support from the industry to halt the spread of sports gambling (except in Nevada, which was grandfathered in by PASPA). All of this was done in the pre-Internet days. Since then, estimates are that there are $150 billion bet online annually on sporting events.
In 2012, New Jersey, eyeing a potential revenue pot in gambling dollars, passed a statute that opened up sports betting in New Jersey. The NCAA and professional sports teams came together to challenge the New Jersey expansion of Internet gambling. NCAA v. Christie, 926 F. Supp. 2d 551 (2013). The federal district court enjoined New Jersey Sports wagering law on the grounds that it was preempted by Congressional domination of sports betting. The court also held that PASPA was a legitimate exercise of congressional authority under the Commerce Clause. The court also found that New Jersey’s wagering law and PASPA could not coexist, thus, the New Jersey law was preempted. The court of appeals affirmed. 730 F.3d 208 (3rd Cir. 2013) The U.S. Supreme Court denied certiorari in this case.
As a result of these judicial defeats, New Jersey tried a new approach and passed a new statute that exempted casinos and racetracks from the ban and then established a regulatory mechanism for limited online gambling through these venues in New Jersey. The case went to court again with the same results, and New Jersey appealed to the U.S. Supreme Court, which in this case granted certiorari. 799 F.3d 259 (N.J. 2015); 832 F.3d 389 (3rd Cir. 2016); and 137 S.Ct. 2326 (2017).
The U.S. Supreme Court held oral argument in the case on December 4, 2017, and several of the judges seemed to be skeptical. Adam Liptak, “Skepticism From Court Over Ban On Betting,” New York Times, December 5, 2017, p. A20. Some of the judges saw PASPA as a federal law requiring states to keep a prohibition against sports betting on the books. Referred to as commandeering, the justices expressed concerns about the federal government telling the states how to legislate. If the federal government has undertaken regulation and the states interfere with that regulation it is preemption that permits the federal government to override the state legislation. However, the federal government must regulate in order to invoke preemptive rights. The judges were concerned about prohibitions on state legislation.
The oral arguments revealed justices with differing views, but also questioning attitudes that did not tip their hands on which way the case will go. However, with the decision (expected in June 2018), there will be new clarification on the powers of preemption and the doctrine of commandeering. And, depending on the result, new opportunities for sports betting.
Discuss the judicial history of the New Jersey statutes.
Explain the difference between preemption and commandeering.