Bernstein Shur Business and Commercial Litigation Newsletter #67

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November 2016 | Issue 67

Our November recap highlights cases addressed to Wells Fargo’s practices concerning its retirement plan for employees, a successful Lanham Act claim, dismissal of a class action targeting Major League Baseball, and other news that will have an impact on business and litigation.

Wells Fargo’s employees have sued their employer over the financial institution’s retirement plan practices, alleging that it engaged in self-dealing and reckless investing by channeling employee’s retirement contributions into its own underperforming funds.

In the action, Wells Fargo employees seek damages on behalf of retirement plan participants based on alleged breach of fiduciary duty and other claims. Plaintiffs assert that Wells Fargo’s proprietary funds charged participants fees that were 2.5 times the fees charged for similar funds that were managed by other investment firms, such as Fidelity Investments and Vanguard. Plaintiffs also allege that the company invested more than $3 billion of employee funds in Wells Fargo’s underperforming funds to enrich itself at their expense, depriving them of more than $300 million in lost returns.

The U.S. Court of Appeals for the Third Circuit has ruled that a former franchisee’s continued use of Motel 6 trademarks amounts to counterfeiting under the Lanham Act.

HI Hotel Group, which operates a hotel in Carlisle, Pennsylvania, entered into a franchising agreement with Motel 6 in 2009, but later re-branded the hotel. However, the hotel continued to display Motel 6 trademarks on highway signs, buildings, and check-in forms. The trial court found that the continued use of a previously authorized trademark amounted to trademark infringement, but not counterfeiting. On appeal, the Third Circuit reversed the trial court’s decision, concluding that the conduct qualified as counterfeiting. The appellate court’s decision permits Motel 6 to collect enhanced damages—including treble damages and prejudgment interest—unless the former franchisee can show extenuating circumstances that would render such an award inappropriate. A jury previously awarded Motel 6 damages totaling $200,000 under the Lanham Act as well as costs and attorneys’ fees of approximately $350,000. There is a split among federal courts of appeal regarding whether the conduct at issue amounts to counterfeiting, as opposed to simple infringement.

A federal district court dismissed a class action brought against Major League Baseball based on its failure to provide protective netting in ball parks.

In the case, which was brought in the U.S. District Court for the Northern District of California, plaintiffs alleged that the lack of netting along the first and third base lines exposed spectators to unreasonable hazards. Earlier in the case, Judge Yvonne Gonzalez Rogers pared back the scope of the action when she ruled that plaintiffs lacked standing to assert claims against ball clubs that were located out of state. In her most recent ruling, Judge Rogers concluded that plaintiffs lacked standing to assert their remaining claims because they could not demonstrate any imminent risk of danger. In discovery, Major League Baseball demonstrated that the likelihood of injury at a game was well below 1 percent. The court noted that mere fear or anxiety of potential future harm was insufficient to meet the required showing for an “injury-in-fact,” a sufficiently concrete and particularized harm that is actual or imminent.

Amazon.com has filed several lawsuits against sellers of allegedly counterfeit goods.

In one lawsuit, Amazon accused ToysNet and Disk Vision of selling knockoff versions of the Forearm Forklift, a piece of equipment used to assist in lifting heavy objects, through Amazon.com. In another lawsuit, Amazon alleged that several third-party sellers sold counterfeit versions of TRX exercise products through its website. Both lawsuits, which were filed in Washington state courts, mark the first time that Amazon has used the court system to crack down on third-party sellers who sell counterfeit goods through Amazon’s website. Amazon filed its complaints a month after Apple sued a New Jersey company for allegedly flooding Amazon.com with counterfeit and unsafe Apple products.

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