Video Interview: Discussing Nevada's Preliminary Injunction Against Uber on LXBN TV

Following up on my recent post on the subject, I had the opportunity to discuss Uber being hit with a temporary injunction in Nevada with Colin O'Keefe on LXBN.  In the interview, I explain the basics of what happens and what it means for the future of the ridesharing service in the Silver State. 

Uber Hit with Preliminary Injunction in Nevada

Uber is a ride-sharing company based in San Francisco that has been operating in major cities worldwide since its inception. Uber’s growing market presence has been met with much controversy. At the forefront of this resistance are livery companies along with the state and local regulatory bodies that govern them. While the opposition insists that Uber is a transportation company subject to all the same rules and regulations as a taxi or limousine company, Uber maintains that it is a “technology company that facilitates communication between a contracted driver and a person seeking a ride through a smartphone app.”

The State of Nevada is the first to respond favorably to Uber’s naysayers. On November 25, 2014, a district court judge in Washoe County issued a preliminary injunction requested by the Nevada Transportation Authority against Uber. Uber suspended all operations within the state of Nevada, referring to the injunction as a “temporary legal setback,” estimating that this would cost nearly 1,000 jobs. 

In general, there are four elements that must be met for a court to grant a preliminary injunction:  1) a likelihood of irreparable harm with no adequate remedy at law; 2) the balance of harm favors the movant; 3) the likelihood of success on the merits of the case; and 4) the public interest favors the granting of the injunction.

Notably, the Nevada Transportation Authority emphasized the public interest element in its request for the preliminary injunction, arguing that passenger safety was at risk since Uber was an unregulated transportation service. Uber does require its drivers to undergo a background check and hold up to $1 million in insurance. However, recent incidents—including the death of a 6-year old girl who was struck and killed by an Uber driver in San Francisco—have made public safety a potent question for Uber.

Despite the emphasis on public interest and safety concerns, Uber is still backed by many supporters. Shortly after the preliminary injunction was issued, Uber started an online petition in support of its continued service in Nevada. The petition has since gained over 18,000 signatures.

The preliminary injunction (or temporary restraining order) is a powerful tool in business litigation. A resourceful business litigation attorney will know how to effectively utilize a preliminary injunction or temporary restraining order to serve his or her client’s needs.

The Nevada Transportation Authority filed suit and sought its preliminary injunction against Uber just one month after Uber began operating in the state. Strategically intentional or not, the timing is favorable for the NTA’s case against Uber. The NTA’s position would much likely be weaker if Uber were allowed to continue expanding into the Nevada market, gaining an even more notable foothold than it currently holds (as evidenced by its online petition), as this case continues. Uber’s more established presence in other markets may be a large part of the reason why the legal battles in other states have not yet resulted in favorable outcomes for the livery companies/regulatory bodies. Among other things, the preliminary injunction will prevent Uber from bolstering its position as a safe and necessary market participant in Nevada, which may ultimately lead to a favorable outcome for the NTA in its suit. 

A Blip in the Transmission: Part 2

The second factor, whether there is a serious threat of irreparable harm, was, comparatively speaking, much more easily considered. While there is no assumption of harm for copyright claims in the 10th Circuit, the nature of a copyright claim does tend to make it easier for plaintiffs to prove this factor. Aereo argued that any financial damage they might have done to the plaintiffs were essentially insignificant, but the court found that appeal wanting, noting that one of the purposes of copyright is ensuring the exclusive control of the copyright material, so that the owner can ensure that the content’s value is not tainted or diluted by unauthorized use, such as the creation of inferior quality copies, or interference in potential business relationships based on the content. As a result, the court felt that this factor also weighed in favor of granting the injunction.

The third and fourth factors only merited truncated discussion. The court first examined the balance of harms and, although noting that Aereo did face a loss of business should the injunction be entered, in all likelihood, their entire business model was based on copyright infringement.  The loss of such a business was not grounds to prevent a preliminary injunction from being entered. The court then examined the public interest, noting that the public’s interest was in seeing the law of copyrights upheld. Our next post will deal with the scope of injunction, the bond, and Aereo’s attempt to transfer venue.

 

A Blip in the Transmission: Part 1

When technology changes the law often struggles to keep up. For decades, television was ruled by broadcast channels, free of charge to anyone with a television and, because of technological limitation, local affiliates were often tied to a major national network. While that has changed drastically in the intervening years, the copyright laws of America have not matched this technological evolution, creating various areas of uncertainty where old laws do not fit snugly against newer ideas.

Aereo is a company that has developed a way to allow people, for a fee, to watch broadcast television on their computers. For obvious reasons, this service has drawn the ire of television broadcasters, leading to a number of suits in various district courts throughout the country. Because the old copyright law regarding this particular issue was conceived of in the 1970s, when household computers, let alone using such a device to watch television, was more speculative than anything else, the circuits have split on whether or not current copyright law forbids Aereo from providing these broadcast streams to their customers, and the case is due before the Supreme Court in its next term to resolve the issue once and for all.

In the meantime, however, the case against Aereo in Utah, where it began providing its service in July 2013, has been stayed pending the outcome of the Supreme Court decision, but a district court still felt it necessary to rule on whether the plaintiff would be granted a preliminary injunction in the interim.

The crux of the Aereo cases, both here and in other circuits, has been the interpretation of the “Transmit Clause” that gives the copyright holder the exclusive right to publicly perform or transmit a performance. The question is whether or not Aereo’s service constitutes a public transmission, and thus violates that copyright act. Aereo’s argument, which has been successful in the Massachusetts, as well as the 2nd Circuit, is that its services merely allows its customers to view the transmission on a private basis, and so does not constitute a public performance. The opposing argument, made by broadcast networks around the country, is that Aereo’s service, technologically advanced though it may be, is, in practical terms, little more than a public retransmission of copyrighted broadcasts, and a clear violation of the Copyright Act, a view endorsed by courts in D.C. and California.

The Utah court ultimately agreed with the latter position. First, it noted that the “Transmit Clause” was enacted in 1976 as a result of the first cable systems’ habit of retransmitting local broadcast networks on their cable systems without paying for the right to do so, with the understanding that the revised language would force cable companies to receive a license to continue to retransmit these copyrighted works, and the position of Aereo is essentially analogous to those early cable companies.

The court then dismissed what had been a compelling argument for Aereo in other jurisdictions, a complex attack that relied on using prior decisions to create a distinction between public and private retransmission and to then argue that based on the specific mode of transmission used by Aereo, each retransmission created a unique copy to a single user, and should therefore be considered a private retransmission, not covered under the Copyright Act. The Utah court was unwilling to make this leap, instead relying on legislative history and its interpretation of the statute to reject this distinction, explaining that, technological technicalities aside, Aereo’s service did likely constitute a violation of the Copyright Act and, as a result, the plaintiffs in this case had a likelihood of success on the merits, clearing the first hurdle for a preliminary injunction.

Next week we will consider the second, third and fourth factors related to whether or not the plaintiff was granted a preliminary injunction.

For more information on the services we offer visit pattersonlawfirm.com or call us at 312.223.1699.

 

On the Farm

A preliminary injunction can be a powerful tool, but it is important to remember that it is only a piece of a larger puzzle.

In a recent Illinois Appellate Court decision, Moreland et al v. Scott et al., 2014 IL App. (5th) 130362-U, a preliminary injunction was vacated because of other defects in the case.

The case centered on the disposition of a plot of farmland in Christian County, located near the middle of Illinois. A man had leased the land to his brother and nephew for a three-year term, but had died shortly after executing the lease. His widow then sold the property to the plaintiffs, who, wanting to farm the land for themselves, began eviction proceedings against the defendants, attempting to clear them from the land. As part of the court proceedings, they received a preliminary injunction from the circuit court enjoining the defendants from further use of the land while the case was ongoing. The case then proceeded to trial, but, before the judge could render his verdict, the defendant filed an interlocutory appeal of the injunction and for dismissal of the case.

The appellate court ultimately ruled to vacate the injunction and dismiss the case without prejudice. Under the Forcible Entry and Detainer Act, which governs the process of evictions, it is required that any potential plaintiff give notice to the party in possession of the property before filing the suit in court in order for such an action to be maintained. The plaintiffs, in this case, had failed to issue proper notice before filing the lawsuit, and, as a result, the injunction was vacated and the action dismissed.

The important lesson here is that as important as a preliminary injunction can be to the outcome of the case, it cannot survive in a vacuum. An experienced commercial litigator will know that a preliminary injunction is just one of many tools that can be used to protect his or her client’s interests, but it is essential to understand how it fits into the larger picture of litigation.

The Patterson Law Firm handles a wide variety of emergency business litigation cases. To learn more about the services we offer visit pattersonlawfirm.com or call 312.223.1699.

 

 

Cooking with Gas

A recent court case out of Virginia showed how rigid, in certain respects, the rules governing the granting of a preliminary injunction can be. As part of a larger corporate strategy, petrochemical giant BP had sold many of its gas stations in Virginia to Southside, a company that owns and operates many gas stations throughout the region. As part of the deal, Southside agreed to continue to use BP branding at its stations. Another provision of the contract gave BP a right of first offer should Southside decide to rebrand or sell any of the gas stations, and a right of first refusal if Southside decided to divest itself of all of its gas station business, including a requirement forcing Southside to provide documentation of any proposed sale to BP so that they would have the opportunity to match it.

The agreement was due to expire on October 2, 2013, and, as part of the legal formalities surrounding the process, sent a letter of non-renewal to Southside, who informed  BP that they would not be renewing the agreement, ending their relationship. It turned out, however, that, in the months leading up to the end of the contract, an affiliate of Sunoco, a competitor of BP, had reached an agreement with Southside’s holding company to purchase all of Southside’s stations, and had signed the contract in August 2013, two months before the end of the BP agreement, with a term ensuring that the deal would not close before October 4, 2013, after Southside’s agreement with BP would be terminated. On October 4, Sunoco announced it had acquired the Southside gas stations, and BP almost immediately filed a suit for breach of contract. As part of the suit, BP asked for a preliminary injunction preventing the rebranding of the Southside stations from BP to Sunoco.

As always, when deciding whether to grant a preliminary motion, a court will look at four factors: (1) likelihood of success on the merits; (2) likelihood of suffering irreparable harm; (balancing of the harms to each party; and (4)the interests of the public.

As to the first issue, the court was skeptical that BP would succeed on the merits of its claims. While there may have been something underhanded in how Southside conducted its business, the court thought it was not certain that they had actually breached the contract, as they had not, technically speaking, closed out the new contract before the expiration of the BP contract and, more to the point, noted that it was likely not uncommon in the industry to line up a new gas supplier before the termination of the contract with the previous supplier  to ensure a steady stream of gasoline for their stations.

BP fared no better in the analysis of the second prong, as the court noted that any injury would have been speculative, as the injury, by BP’s theory of the case, would have come from their inability to utilize their right of first refusal and purchase the stations for themselves. But as the court noted, given that BP had sold these stations to Southside in the first place, in order to get out of the gas station business, it does not seem likely that they would have re-entered that market, and it is hard to say they were harmed by not being able to exercise a contractual option they almost certainly would not have used.

Even more problematically, by the time BP had filed its suit, 33 of the 35 stations Southside had sold to Sunoco had already been rebranded, and the injunction, if granted, would merely save the final two BP-branded stations remaining, which, at that point, was not likely to prevent any real injury, as the cat was already out of the bag on that matter.

The third and fourth factors were, for all intents and purposes, ruled a wash by the court, as the harms to each party were roughly the same, and to the extent there was any public interest in how the gas stations were branded, it did not tip the scales in any meaningful way. 

As a result, the court denied the preliminary injunction motion, as, even if Southside had acted somewhat unethically, BP simply could not meet the burden for the preliminary injunction.

False Start: A Steelers Fan's Doomed Attempt to Use Litigation to Save His Team

Not every case involving a matter of emergency business litigation is one of dire importance.

On December 29th, 2013, the Kansas City Chiefs played the San Diego Chargers with the fate of two teams on the line. The Chargers would reach the postseason with a win, but if they had lost, the Pittsburgh Steelers, by virtue of a tiebreaker, would gain the final playoff spot in the AFC instead. The game was tied 24-24 with just a few seconds left on the clock when the Chiefs’ kicker missed a field goal wide right that would have won the game.  Instead, the game remained tied at the end of regulation, forcing an overtime period where the Chargers eventually scored the game-winning field goal, ending the Steelers’ season.

The problem was, though, that the Chargers had broken the rules when defending against the Chiefs’ field goal attempt at the end of regulation, as they violated formation rules by placing more than six players on one side of the field, in an attempt to block the field goal by bringing superior numbers to bear on one side of the Chiefs’ offensive line. The penalty for this rule violation is five yards and a replay of down, and so the Chiefs, by rule should have been granted another field goal attempt which, if made, would have ended the game in their favor. The plaintiff contends that the NFL’s ‘challenge system’, which allows coaches to challenge certain rulings, was “fraudulent and negligent” because, due to the vagaries of the rule, coaches cannot make any challenges within the final two minutes of regulation time, and so the Chiefs’ coach was unable to challenge this erroneous ruling.

The plaintiff also called attention to a ruling made in the overtime period, where a member of the Chargers appeared to fumble the ball to the Chiefs, but as his helmet had been stripped from his head before the fumble occurred, the officials enforced a rule that declared the play dead as the result of the ball carrier losing his helmet during the play. The plaintiff contended that this rule, enacted by the NFL Rules Committee only a few years ago, did not comport with the intent of the NFL “Forefathers”, and was, therefore, unconstitutional.

The plaintiff then provided a number of suggestions for solving this crisis, such as replaying the controversial field goal attempt, replaying the entire game, or simply declaring the Chiefs the victors of the game, thereby giving the Steelers the Chargers’ spot in the playoffs.

Unfortunately, this request for a TRO was doomed to failure from the start, as the first factor that a court examines in determining whether to grant such an order is whether there is a likelihood of success on the merits. In this case, there appear to be two major defects, either of them fatal on their own, that prevent a TRO from being issued almost immediately.

First, it is unclear what the cause of action in this case was. The plaintiff appeared to make two claims, first, that the challenge system, as implemented, is fraudulent and negligent because the rules in the last two minutes of the game are different from those in the remainder of the game. That hardly seems to flow logically. The second claim is that the rule regarding helmets is “improper and unconstitutional” because it was not the intent of the NFL “Forefathers”. Obviously, that claim is defective as well.

Second, even if a cause of action could be chiseled out of this complaint, the plaintiff almost assuredly lacks standing to pursue the claim, as the plaintiff has no legally protected interest in this case. Even if the NFL has misapplied its own rules, the plaintiff, as a private citizen, would have suffered no cognizable injury, and in this case, the plaintiff is suing under the argument that it is the NFL’s rulemaking process that is at fault, rather than the actual operation of the rules.

In either case, the court would quickly find that there was no likelihood of success on the merits and, as a result, that the TRO could not be issued, ending the Steelers’ final chance of continuing their 2013 NFL season.

 

 

Sriracha: Hot Sauce, Hot Problems

Emergency business litigation does not always arise out of the board room. Sometimes, it can just drift in, like a cloud.

Sriracha, a hot sauce made mostly of chili peppers and vinegar, was originally invented decades ago in Thailand, before being reformulated in America by immigrants in Los Angeles’ Chinatown. Over the past few years, however, its popularity in the United States has skyrocketed, to the point where a brand new factory dedicated to making the sauce recently opened in Irwindale, California.

And that is where the troubles began.

As one might expect from a rather large factory that processes massive quantities of chili peppers, garlic, and various other spices, controlling the spread of odors from the factory is essential, lest the town of Irwindale be flooded with the intense smell of pepper and garlic in perpetuity. To that end, the company that operates the plant, Huy Fong Foods, installed a carbon-based filtering system to try and remove the odor from the plant’s emissions. Local residents complained that the smell of chili peppers was still pervasive, and was so intense that it caused health problems, such as burning of the eyes and irritated throats. Responding to their constituents, the city of Irwindale asked Huy Fong Foods to install a more expensive filtration system, estimated to cost the company $600,000. Huy Fong refused, protesting that the residents had exaggerated the intensity of the odor, noting that their factory workers, who were exposed to the unfiltered fumes at much closer proximity, were able to do their work without complaint.

The city of Irwindale countered with a suit alleging that the factory was a public nuisance, and filed for a TRO and a preliminary injunction to shut down the factory while the issue is being litigated. On Thursday, a Los Angeles Superior Court judge ruled on the TRO, denying it, and keeping the factory open for the time being.

His reasoning illustrates the one critical difference between a TRO and a preliminary injunction--timing. The city of Irwindale had asked the judge, on very short notice and without the benefit of a full hearing, to shut down an entire factory for an indefinite period of time, which, as the court noted, was a rather extreme request to make on such short notice.  The judge was unwilling to allow such a radical remedy even if, in the case of a TRO, it would only last until the city’s request for a preliminary injunction could be heard later that month.

Instead, the factory will remain open at least until the court can conduct a full hearing on whether or not the emanations from the factory are noxious to the point where an injunction is necessary.

This case just shows how emergency business litigation can come when one least expects it. Knowing how to defend against such litigation can be the difference between a business keeping its doors open, or being shut down for good.

The Patterson Law Firm is experienced in handling cases that need to be dealt with on an emergency basis—Tom Patterson wrote the book on temporary restraining orders and preliminary injunctions. To learn more about the services we offer visit pattersonlawfirm.com or call 312.223.1699.

 

The Stream Runs Downhill: Part 3

Today we will conclude our overview of the court's four-part decision in the Hearst v. Aereo copyright infringement case. If you recall, last week we concluded with the court's denial of Hearst's final two claims.

The court then turned to the question of whether Hearst had adequately shown that irreparable harm would be caused absent an injunction, and found that it had not. Hearst first claimed that allowing Aereo to continue its streaming service would leave Hearst unable to maintain its negotiating position in regards to the sale of rebroadcasting rights and the pursuit of other streams of revenue. While the court conceded that Aereo’s service might, in time, weaken Hearst’s ability to negotiate with rebroadcasters, it also noted that because these contracts were only re-negotiated every few years, rather than constantly, that the irreparable harm would likely not occur before the litigation ran its course, making a preliminary injunction unnecessary for preventing this damage.

Hearst next claimed that there would be irreparable harm to its advertising revenue, as advertising rates were based on viewership ratings, and those ratings did not measure those viewers who used streaming services such as Aereo. The court noted that Nielsen, the foremost ratings agency, had recently begun to count online viewers as part of its ratings, and thus ruled that Hearst had not shown irreparable harm from that source either. Finally, the court ruled that Hearst’s claim that Aereo’s service would harm Hearst’s efforts to create its own online streaming service was defective as well, as Hearst’s plans for such a service were too inchoate to be irreparably harmed at this time.

Having failed the first two prongs of the preliminary injunction test, the final two factors were more perfunctory than dispositive. The court, in two paragraphs, noted that the balance of harm does not appear to clearly favor either party, and the public interest similarly “cuts both ways.” In the end, it found that neither factor did much to change its earlier conclusions, and so ruled that because Hearst had failed to show a likelihood of success on the merits, and failed to show irreparable harm, its request for a preliminary injunction was denied.

What does this case mean in a larger context? For one, it is clear that attempts to use decades-old law to regulate cutting edge technology are bound to create serious problems of interpretation. The Copyright Law regarding these issues as cited by the court comes from 1976, when cable television was still in its infancy, and has not truly evolved to keep up with the times. The court’s ruling can be interpreted in different ways. Some will argue that it allows emergent forms of technology to effectively flout copyright laws and profit off the protected material of others due to unforeseen loopholes in the law. Others will take the opposing view, that the courts are unwilling to force new forms of technology into an antiquated regime of law, and will instead allow them to innovate new forms of content distribution until some elected body makes the conscious decision to regulate these new technologies.

 

The Stream Runs Downhill: Part 2

Last week’s post focused on the court’s rejection of Aereo’s motion to change venues. But that was all the good news that the Hearst Group would receive that day, as the court next denied its request for a preliminary injunction. As is mandated in these cases, the court looked through the four-part test for granting preliminary injunctions, and found that there were insufficient grounds to enjoin Aereo’s activities while the litigation was ongoing.

First, the court examined the likelihood of success on the merits, noting that, in the 1st Circuit, at least, this factor is the most important. At this point, the technological advancements of the past few years run headlong into the decades-old body of copyright law. The court first concedes that the 1st Circuit has never ruled whether the use of a DVR-like device infringes on the right of the copyright holder, more specifically, whether Aereo’s interception and conversion of the broadcast into a digital and recordable form infringes on the copyright holder’s exclusive right to control the public transmission of its works.

Lacking any direct precedent of its own, the court turned to the 2nd circuit, which had previously ruled that a DVR, in effect, created a personal recording of the broadcast, and then transmitted that personal copy to the viewer, meaning that it did not publicly re-transmit the broadcast, and so did not infringe on any copyright. Aereo, as the court noted, had already successfully defended its service in the 2nd circuit, and had won because the court found that its service was sufficiently similar to the earlier DVR case and that, therefore, no infringement had taken place. More specifically, that court had noted that Aereo only allowed viewers to view those digital copies that Aereo had specifically prepared for them at their request, and that each copy was unique.

In that decision, however, there had been a dissent, which argued that, due to advances in technology, it no longer made sense to determine whether a transmission was private by the nature of the copy, but instead whether or not the viewer saw what was, essentially, a public broadcast to begin with. They also noted that some district courts have appeared amenable to determining the nature of a broadcast by how it was originally transmitted rather than how it was ultimately received.

The court, however, found that attempting to use Hearst’s proffered interpretation would force an untenable construction of the Copyright Act, and so reverted to the 2nd Circuit’s ruling on the matter, finding that Hearst was not likely to prevail on its claim that Aereo had infringed on Hearst’s copyright through unauthorized retransmission.

The court next examined whether it was likely Hearst would prevail on a claim that Aereo had infringed on its copyright through unauthorized reproduction of Hearst’s broadcasts. The question here came down to a question of whether or not this type of copyright infringement could occur without volitional conduct by Aereo. As Aereo’s system automatically responds to user commands, Aereo itself lacks any sort of volitional conduct. According to Aereo’s argument, such a requirement is necessary in an infringement case, as otherwise innocent technology providers could be held liable for the wrongful acts of those using their products, such as a copy machine owner being held liable when a third party uses that machine to copy copyrighted material.

From its ruling, it is clear the court felt at least slightly uncomfortable with this aspect of the case, noting that the 1st Circuit has not yet ruled that volitional conduct is a necessary element, but other circuits have. The court ultimately decided that it was likely that some sort of volitional conduct element would be necessary in an infringement claim, but punted the issue, explaining that later discovery may change the contours of that particular claim, and it was a closer call than the unauthorized retransmission claim. That said, the court found that the likelihood of success on the merits was not high enough on this claim either to justify a preliminary injunction.

The court then quickly disposed of the final two claims made by Hearst on technical grounds. First, it claimed that, because Aereo was streaming the works rather than authorizing them for download, it is considered to be ‘performing’ rather than ‘distributing’ for the purposes of copyright law, and so cannot be found to have violated Hearst’s exclusive right to distribute its copyright works. Second, it ruled that although Aereo does convert its broadcasts into a different formats in order to allow it to be streamed, that act does not create a derivate work under the meaning of the Copyright Act, and so Hearst was also unlikely to prevail on a claim charging Aereo with infringing on Hearst’s exclusive right to create derivative works from its copyrighted material. In all, the court found that Hearst was unlikely to prevail on any of its claims on the merits, a crippling blow in its quest to gain a preliminary injunction.