Paul Porvaznik – Business Litigator – Page 170 – Case Notes and Summaries of Recent Cases (State and Federal Courts

Can Hijacking a LinkedIn Account Subject You to Invasion of Privacy and Missapropriation Claims?

In Eagle v. Morgan, 11-4303 (E.D. Pa. Mar. 12, 2013), an employee sued her employer for seizing the employee’s LinkedIn account and blocked her from it for several weeks.

After trial, the court ruled in Plaintiff’s favor on the following three state law claims:

(1) Claim: Statutory unauthorized use of name

Ruling and Reason: Plaintiff’s claim sustained. Plaintiff’s name has commercial value based on her investment of time and effort developing her reputation in the banking industry. Defendant (Edcomm) used plaintiff’s name without her consent for commercial purposes in that someone looking on-line for plaintiff, would instead be redirected to an Edcomm agent. *6.

2) Claim: Invasion of privacy

Ruling and reason: Judgment for plaintiff. Plaintiff has privacy interest in her name, picture and resume and plaintiff’s name in banking industry has “prestige and commercial value”. Edcomm appropriated plaintiff’s reputation, prestige and commercial standing for its own use by allowing plaintiff’s name to remain on LinkedIn URL. *7-8.

3) Claim: Misappropriation of Publicity

Ruling and reason: Judgment for plaintiff. Plaintiff has exclusive property right in her identity and sole right to control the commercial value of her name and the companion right to prevent others from exploiting it without her permission. Edcomm exploited plaintiff’s name and commercial value associated with her name by locking plaintiff out of her LinkedIn account and replacing plaintiff’s credentials with those of her successor. *8.

Damages

Plaintiff offered no specific, tangible damages evidence. Her lost profits and lost business opportunities claims were purely speculative and she failed to point to a single contract, client, prospect or transaction that didn’t materialize as a result of Edcomm’s conduct. *13-16.

Defendant’s Counterclaims

(1) Misappropriation – Edcomm claimed plaintiff misappropriated Edcomm’s LinkedIn account as her own when plaintiff retook control of her LinkedIn account after about 17 days post-firing. Edcomm claimed that it had the initial idea to use LinkedIn as a business marketing tool and that it retained the rights to the account after plaintiff was fired.

The Court disagreed and said that the LinkedIn user agreement was clearly between the individual user (plaintiff) and LinkedIn. The Court also noted that Edcomm didn’t have a written LinkedIn policy in which it dictated its employee’s LinkedIn use. *16.

(2) Unfair Competition – Edcomm asserted that plaintiff improperly recaptured her LinkedIn account to compete unfairly with Edcomm for business and clients. The court summarily rejected this by saying that Edcomm failed to show that plaintiff misappropriated her LinkedIn account and therefore could not show “passing off” or “likelihood of confusion” – the twin hallmarks of a common law unfair competition claim. *16.

Take-aways:

– Where a plaintiff can show she has invested time and energy into furthering her reputation in an industry, the plaintiff’s identity or “brand” will have commercial value and that value will be protectable;

– So who owns a LinkedIn account? If the employer sponsors the account and has a clearly defined policy concerning ownership and use of the account, an argument can be made that once an employee is terminated, that account devolves to the employer.

– Where a plaintiff can’t pinpoint any specific lost business opportunities, damages will be too speculative and she will get nothing.

How to Enforce Settlement Agreements In Federal Court

I once represented a plaintiff in a Federal question case (based on the Computer Fraud and Abuse Act) that settled with the defendant making installment payments over time. In the settlement agreement, I took great pains to emphasize that if the defendant missed a payment, I could immediately move to reinstate the case and accelerate the settlement amount plus fees and costs. For good measure, I provided that the court retains jurisdiction to enforce the settlement terms if the defendant defaulted. I thought I was doubly protected. Defendant’s counsel signed off on all the terms.

We then entered a stipulation to dismiss. The court dismissed the suit with prejudice. I remember feeling vaguely uneasy about the “with prejudice” language but quickly reminded myself that (a) dismissals with prejudice AND with the court retaining jurisdiction (seemingly an oxymoron) are entered all the time in State court and (b) the defendant’s counsel requested the with prejudice language as an inducement for getting his client to agree. After a ton of time and money on this case, both sides were anxious to put this one to bed.

Fast forward about 4 months into an 18-month payment arrangement and the defendant defaulted and my demand letter for compliance went unanswered. I quickly filed a motion to vacate the dismissal, to reinstate and enter judgment for the full settlement amount – just as the settlement agreement allowed me to. Imagine my shock when the court denied my motion?! Apparently, the “with prejudice” language has teeth.

I then filed a motion to vacate the dismissal under FRCP 60 – the rule that governs motions to vacate judgments on the basis of mistake, fraud, inadvertence or other reasons “that justify relief.” The Court denied this motion too. My only remedy was to now file a breach of contract action in State Court for breach of the settlement agreement (the contract). While we were able to recover some additional payments from the defendant after we filed in state court (before the defendant filed for bankruptcy protection), I had to consider the question of what I could have done differently?

Key Settlement Enforceability Rules

Federal courts don’t like to babysit settlement agreements (who knew?!). Seventh Circuit caselaw provides that when a case is dismissed pursuant to a stipulation to dismiss, the court does not automatically acquire jurisdiction over disputes arising out of an agreement that produces the stipulation. Kokkonen v. Guardian Life Ins. Co. v. Am., 511 U.S. 375, 378 (1994); McCall-Bey v. Franzen, 777 F.2d 1178, 1188 (7th Cir. 1985)(rejecting suggestion that federal judges have inherent power to enforce settlement agreements arising from lawsuits that were previously before them).

An important rule in the 7th Circuit is that “[a] settlement agreement, unless it is embodied in a consent decree or some other judicial order or unless jurisdiction to enforce the agreement is retained (meaning that the suit has not been dismissed with prejudice), is enforced just like any other contract.” Lynch, Inc. v. SamataMason, Inc., 279 F.3d 487, 489 (7th Cir. 2002).

The 7th Circuit holds that a district judge can’t dismiss a suit with prejudice and at the same time retain jurisdiction to enforce the settlement agreement: it’s a contradiction in terms. A signed stipulation of dismissal does not vest the Court with jurisdiction over an ancillary contract dispute just because the parties included retention of jurisdiction language in the stipulation. Parties cannot confer federal jurisdiction by agreement. Lynch, 279 F.3d at 489.

What About FRCP 60?

I was also surprised that my Rule 60 motion to vacate motion was denied. But, it turns out the standard for Rule 60 relief is high. Like life-and-death high. In Nelson v. Napolitano, 657 F.3d 586, 589 (7th Cir. 2011), the Court held that there may be “some instances” where a Federal court will vacate a voluntary dismissal on plaintiff’s motion, but it would have to be on the order of “a defendant faking his own death with a fraudulent death certificate in order to induce a plaintiff to voluntarily dismiss.”

The take-away:

In dismissing an action in Federal Court (at least in the 7th Circuit), it’s a bad idea to put “with prejudice” language in a dismissal order or stipulation if you want to be able to reopen the case at a later date (such as where a defendant misses an installment payment).

Even better, try to put the settlement payment terms in the dismissal order. This will increase your chances of getting the court to enforce a settlement if the defendant defaults.

If you can’t reinstate a case because of prior “with prejudice” language, then file a new suit for breach of contract (for breach of settlement agreement) in state court.

Commercial Tenant Can’t Share in Shopping Mall Condemnation Award

In Village of Palatine v. Palatine Associates, LLC, 2012 IL App (1st) 102707, an eminent domain (condemnation) suit, the defendant owned a shopping center and was a lessor on several commercial leases – all of which contained provisions that said in the event of condemnation proceedings, the tenant would share in any award. The plaintiff Village filed a condemnation suit about two years into a ten-year lease between the defendant landlord and a commercial tenant. The condemnation suit eventually settled with the landlord getting nearly $5M in proceeds to the exclusion of the tenant. Tenant appealed.

Held: Affirmed:

Basis: The First District agreed with the trial court that the landlord terminated the tenant’s lease before the condemnation award. The Court rejected tenant’s argument that the landlord’s 5-day notice was deficient and that the landlord waived the notice by accepting partial payment. In Illinois, acceptance of rent in a commercial lease setting is not a waiver if the notice explicitly gives the landlord the right to accept partial payment. Palatine Associates, ¶¶ 73-75.

The Court also discarded the tenant’s fraud in the inducement defense. The Court enforced the lease’s “non-reliance” clause, through which the tenant certified that it wasn’t induced to enter the Lease by any landlord representations. Id., ¶ 79. The non-reliance clause precluded the, tenant from establishing justifiable reliance – a required fraud in the inducement element. The court also rejected tenant’s claim that the non-reliance clause was an unenforceable exculpatory clause that immunized the landlord for wilful and wanton conduct. The reason: the lease text said nothing about insulating the landlord from intentional torts. (¶¶ 82-83).

Conclusion

Palatine Associates provides a good summary of Illinois contract formation, interpretation and enforcement rules in the commercial lease context. Though its serpentine procedural history is hard to follow, the general rules gleaned from the case are simple. For lessors, the case reaffirms the importance of both 5-day notices and that a lease specifically state that only full payment will waive a lease default. The case also shows that in commercial lease context, integration and non-reliance clauses are enforceable against tenant defenses based on pre-lease representations by a landlord.

For tenants, the case cautions to be leery of lease terms that allow landlords to accept partial payments without waiving the default as well as lease integration and non-reliance clauses. An integration clause will bar any evidence of a landlord’s oral representations that conflict with the written lease. A non-reliance provision will preclude a fraud in the inducement claim.

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