Bernstein Shur Business and Commercial Litigation Newsletter #66

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October 2016 | Issue 66

Our October recap highlights cases regarding resolution of a portion of the Volkswagen diesel scandal, Yahoo email scanning software, alleged false advertising by Draftkings and Fanduel, a class action over the Samsung Galaxy Note 7 recall, and other news that will have an impact on business and litigation.

U.S. District Court Judge Charles Breyer has approved the $14.7 billion settlement arising out of the Volkswagen diesel emissions cheating scandal, one of the biggest corporate settlements on record.

Under the settlement, Volkswagen has agreed to pay up to $10 billion to buy back over 480,000 affected vehicles and to provide owner compensation. The automaker also will spend an additional $4.7 billion on programs to offset excess emissions and boost clean-vehicle projects. Volkswagen will repurchase affected vehicles using the NADA Clean Trade-In value of the car before the emissions-cheating conduct became public, and will provide an additional payment of between $5,100 and $10,000 to affected owners. While some owners argued the compensation should be higher, the judge rejected those arguments, calling the agreement “fair, reasonable, and adequate.”

Yahoo, Inc. is at the center of a public controversy for secretly installing software that scans user email for purposes of U.S. intelligence surveillance.

In response to orders from the U.S. Foreign Intelligence Surveillance Court, Yahoo in 2015 secretly employed custom software programs that scanned all Yahoo email accounts to obtain communications that match a particular data profile provided by government officials. Yahoo reportedly has complied with similar orders no less than 20 times in the past decade. Numerous advocacy groups filed suit in the U.S. Foreign Intelligence Surveillance Court seeking release of the Yahoo orders, but the request was denied on grounds of national security. Yahoo was issued under the Foreign Intelligence Surveillance Act, which applies to agents or foreign power and wiretap of specific “facilities,” such as a phone number or specific email account. The instant case involving Yahoo is unique in that an entire email service traditionally has never been considered a “facility under the FISA. The Obama Administration provided briefing to congressional staff about Yahoo’s compliance with the secret orders, but has declined to publicly disclose additional details.

Draftkings and Fanduel reached a $12 million settlement with New York Attorney General Eric Schneiderman.

Draftkings and Fanduel each agreed to pay $6 million to settle lawsuits filed by the Attorney General last year claiming that the companies engaged in false advertising. The Attorney General’s yearlong investigation found deceptive advertising that included the use of misleading testimonials suggesting that average, everyday fantasy sports players could win large amounts of money, when in reality the person giving the testimonial was a professional fantasy player. The Attorney General’s office also found that the companies’ advertising used misleading statistics about the likelihood of winning and provided less generous rebates than advertised. In addition to agreeing to pay $12 million, Draftkings and Fanduel also agreed to provide clearer disclosures of terms and conditions and expected winnings.

Access the settlement agreements here and here

Galaxy Note 7 users have filed a class action lawsuit against Samsung over a recall.

Samsung announced a recall of the Galaxy Note 7 phones, which received widespread media attention for exhibiting a tendency to burst into flames and explode, in September. The class action, filed in New Jersey, alleges that users stopped using the recalled phones, but had to wait days or weeks to receive a replacement. The lawsuit seeks to represent a nationwide class to recover the cost of voice and data plans paid by users after they stopped using the phones but before they received replacements.

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