Bernstein Shur Business and Commercial Litigation Newsletter #42

July 2014 | Issue 42

By Paul McDonald and Dan Murphy

We are pleased to present the 42nd edition of the Bernstein Shur Business and Commercial Litigation Newsletter. This month, we highlight recent cases that address controversies involving Google and privacy rights, the Foreign Corrupt Practices Act, and other news that will have an impact on business and litigation. We hope you enjoy the newsletter.

 In the News:

 Google must face a class action based on alleged violation of the privacy rights of users of its Android operating system. The class action, which is pending in the U.S. District Court for the Northern District of California, follows Google’s elimination of separate privacy policies for different products in favor of a single policy across its entire platform. Class plaintiffs, who are users of Google’s products, such as its Android operating system, Gmail, YouTube, and Google Maps, allege that Google implemented this change without their consent and without the opportunity to opt out. They argue that aggregating their data, key-word targeting, search history, and preferences in a single place constitutes a violation of their privacy rights by allowing Google to utilize private information across its platform to personalize advertising and other services. In the first quarter of this year, Google earned more than $15 billion in revenue, of which 90 percent was derived from advertising.

Read more about this case here.

Google agrees to block access to a sensitive email erroneously sent by Goldman Sachs to a stranger following a suit by the investment bank to compel deletion of the communication. The email, which contained highly confidential brokerage account data, was sent to a stranger when a contractor reflexively utilized a “gmail.com” address rather than a “gs.com” address. Google initially balked at blocking the email, stating that it would require a court order to reach into a user’s email inbox. However, Google later acceded to Goldman Sachs’ demand to block the email and now awaits court action to order permanent deletion of the communication. In support of its request to compel deletion of an email maintained in a private Gmail account, Goldman Sachs stated that it was seeking to prevent a “needless and massive” privacy breach.

Read more about this development here.

Smith & Wesson Holdings Corp. reaches settlement with the SEC regarding claims that its representatives bribed foreign officials to obtain supply contracts for foreign military and law enforcement agencies. The Foreign Corrupt Practices Act (FCPA) makes it unlawful to make payments to foreign officials for purposes of obtaining or retaining business. The SEC alleged that Smith & Wesson violated the FCPA by bribing foreign officials to secure contracts from government officials from Pakistan, Indonesia, Turkey, Nepal and Bangladesh. Among other things, the company was alleged to have provided pistols to Pakistani police officials in conjunction with sales to law enforcement agencies in that country. In addition, the company was alleged to have made improper payments in Turkey, Nepal, and Bangladesh, but sales were never consummated. Under the settlement, the company will pay approximately $2.0 million to resolve all outstanding charges without any admission of liability. In the wake of the action, the company has halted international sales and terminated its international sales force.

Read more about this settlement here.

The Securities Industry and Financial Markets Association (SIFMA), the representative body for hundreds of securities firms, banks, and asset managers, opposes a proposal to expand the definition of “fiduciary” under the Employee Retirement Income Security Act (ERISA), which would subject 401(k) and IRA providers to heightened duties. Under existing standards, fiduciaries under ERISA must perform due diligence on service providers and plan investments and act in the best interests of plan participants. The Department of Labor is seeking to implement new standards that would treat service providers for 401(k) and IRA accounts as fiduciaries subject to these heightened duties. SIFMA has opposed heightened duties for such providers, arguing that heightened standards will result in higher fee-based advisory accounts. The deliberation over applicable standards mirrors a similar debate over the SEC’s recommendation of a unified fiduciary standard for broker-dealers and registered investments advisors. Under authority of the Dodd-Frank Act, an advisory committee of the SEC recommended heightened, uniform fiduciary standards for such service providers. However, the effort to implement the recommended standards has stalled under the weight of competing priorities under the Dodd-Frank Act.

Access SIFMA’s position statement here.