Bernstein Shur Business and Commercial Litigation Newsletter #23

By Paul McDonald and Dan Murphy

December 2012 | Issue 23

We are pleased to present the 23rd edition of the Bernstein Shur Business and Commercial Litigation Newsletter. This month, we examine the relationship between computer access and jurisdiction, a case involving foreign bribery claims and a class action settlement with Toyota Motor Corp. We hope you enjoy the newsletter.

In the News:

The Second Circuit Court of Appeals holds that a U.S. employer may pursue trade secret claims against a former employee who allegedly misappropriated sensitive corporate information in Canada. The employer, MacDermid, Inc., asserted claims in Connecticut based on alleged cybertheft carried out in the former employee’s home in Canada. At the trial court level, the Canadian employee argued that her employer lacked personal jurisdiction over her because she only interfaced with computers in Canada. The U.S. District Court for the District of Connecticut agreed with the defendant and concluded that it lacked personal jurisdiction over the former employee. On appeal, the Second Circuit rejected the trial court’s reasoning, holding the defendant’s contact with the plaintiff’s Connecticut servers was sufficient to establish personal jurisdiction over the defendant. Construing Connecticut’s long-arm jurisdiction statute, the court underscored that jurisdiction could be established through use of a computer or a network located in Connecticut and concluded that the defendant’s remote access established sufficient minimum contacts. Click here to learn more about the case and here to read the Second Circuit’s opinion.

A federal judge expressed deep concern over a proposed settlement concluded by the SEC and IBM aimed at resolving foreign bribery claims. In 2011, IBM settled foreign bribery claims related to Chinese and South Korean contracts and paid a penalty of $10 million to the U.S. government without any admission of wrongdoing or liability. At a recent hearing addressed to similar allegations, the SEC and IBM requested court approval to resolve new foreign bribery claims in exchange for payment of $10 million. The latest charges stem from allegations that from 1998 to 2009, IBM allegedly made cash payments to South Korean officials and maintained slush funds at local travel agencies to fund travel for Chinese officials. In response to the proposed settlement, U.S. District Judge Richard Leon criticized the SEC for failing to specifically quantify the accounting violations that gave rise to the SEC’s complaint. Stating that he was not going to “roll over” like the SEC, Judge Leon ordered the parties to provide the court with underlying data, including annual reports quantifying compliance with the Foreign Corrupt Practices Act. The hearing on the proposed settlement has been continued until February, 2013. Read more about this development here.

Toyota Motor Corp. reached terms of settlement in the class action suit regarding unintended acceleration claims. The settlement, which involves payment of at least $1.1 billion to owners of affected Toyota models, will provide compensation for economic loss caused by potential problems related to acceleration systems, while excluding claims based on physical injury or wrongful death. The settlement also calls for repair of vehicles, including the installation of brake override systems in an estimated 3.25 million vehicles. Toyota did not admit any defects or fault in relation to the case. Read more about this development here.