Bernstein Shur Monthly – August 2017

Drone Wars

By: Mike Bosse

What do the Golden State Warriors and a California Wildfire Have in Common?  That’s Right – Drone Wars.

I recently came across two issues regarding drone usage in California, and they highlight the movement towards banning drones from certain areas or events, and the progression towards more drone blocking or drone disabling technology.

The first was in June of this year. The Golden State Warriors had just defeated the Cleveland Cavaliers for its second NBA title in three years. After winning a title, the next event is the parade. The Golden State Warriors and Oakland, California worked with an anti-drone company, Dedrone, to ensure that the parade was “drone free.” The company sells sensor and camera installations that alert security workers when the equipment detects a drone in the air. Part of the rationale was to ensure that police and media helicopters that were present would not be at risk from an encounter with a drone. Although the system is not designed to disable a drone and bring it down, it detects the location of the drone so that security can then deal with the situation as appropriate.

The second incident in California was just a couple of weeks ago and involved the Eden wildfire that is currently burning in Santa Clara County. The fire department was forced to confiscate a DJI drone that was flying over the wildfire and forced a helicopter to land instead of dropping its load of water on the fire.

Both of these events show some of the counterweights to the proliferation of drone purchases and drone usage in the past couple of years. They included safety related concerns and a possible accident between a drone and another aircraft such as a helicopter. In the coming months, we should expect to see more stories like these, as municipalities and other governmental entities grapple with the limits of drone usage and in which situations drones should be banned outright.

The Digital Millennium Copyright Act

By: Ari Solotoff

If your business operates a website or mobile application that allows users to post content, including comments and reviews, you should take advantage of the Digital Millennium Copyright Act (“DMCA”), which provides safe harbors from copyright infringement liability. In order to enjoy the DMCA safe harbors, you need to designate an agent with the U.S. Copyright Office, renew this designation every three years, and have appropriate language in your website’s terms and conditions. We can assist you with addressing all of these steps.

As of December 31, 2017, the U.S. Copyright Office will no longer accept paper-based registrations of designated agents to receive notices of alleged copyright infringement. An online service provider’s old registration will expire at the end of the year, unless the service provider submits a registration for a new designated agent through the Copyright Office’s new online registration system.

The Digital Millennium Copyright Act (“DMCA”) provides safe harbors from copyright infringement liability for online service providers.  Any service provider that delivers internet access or that hosts a social media platform, mobile application, or website that allows users to post or store content on their network or systems must renew its designated agent registration online before the end of the year in order to retain the DMCA’s safe harbor protections. Absent protection under the safe harbor, a service provider may be held liable for transmitting or storing user-generated content that is subject to copyright protection.

To designate an agent, a service provider must:

• Make certain contact information for the agent available to the public on its website
• Provide the same information to the Copyright Office

Service providers that previously submitted a paper-based designated agent registration prior to December 1, 2016 must submit a new designation to the Copyright Office using the online registration system by December 31, 2017 in order to maintain an active designation.

The purpose of the designated agent registry at the Copyright Office is to allow a copyright owner whose work is being infringed through a service provider’s service to notify the service provider of claimed infringement through a “takedown notice” delivered to the service provider’s designated agent. Upon receipt of a compliant takedown notice, a service provider must respond and remove material claimed to be infringing or be subject to infringement liability.

Property Tax Alerts!

By: N. Joel Moser and Zachary Brandwein

Law Court upholds assessment methodology for island properties

ME’s Law Court recently concluded that evidence of higher building costs for island properties is sufficient to uphold an assessment on island structures that is twice the value of mainland structures.

In Roque Island Gardner Homestead Corporation v. Town of Jonesport, 2017 ME 152, —A.3d—, Roque Island Gardner Homestead Corporation (“RIHC”) challenged a property tax assessment on buildings it owned on Roque Island that were assessed significantly higher than mainland structures. The Town of Jonesport had applied an “economic obsolescence factor” to all island buildings that resulted in a 200% increase in value over comparable mainland structures. RIHC argued the higher assessment resulted in unjust discrimination.

At hearing, the Town Assessor testified that island structures suffered from higher construction costs due to the expense of transporting materials and workers, and that building contractors often double their fees for island projects. The Assessor further testified that other municipalities also employ similar factors and designations that reflect the higher cost for constructing island properties, and that all island properties are, for assessment purposes, considered a single neighborhood, separate from mainland properties.

On appeal, the ME Supreme Judicial Court (the “Law Court”) upheld the higher assessment on the island properties. In an important decision, the Law Court reasoned there was ample evidence to uphold the higher valuation and that the higher assessment on the RIHC properties treated the island properties like other, similarly-situated island properties in the town. A copy of the decision is available here.

Property tax recovery surcharges on international and interstate telecommunications are exempt from taxation

In MCI Communications, Inc., a telecommunications provider passed on a percentage of the real and personal property taxes it paid on property used to provide international and interstate telecommunications services to its customers. The provider did this through property tax recovery charges and such revenue was ultimately taxed by ME Revenue Services. After a lengthy appeal process, ME’s Law Court concluded that the property tax surcharges imposed by a telecommunications provider on its customers to recover international and interstate telecommunications services are exempt from taxation. A copy of the opinion is available here.

Bernstein Shur’s Property Tax and Valuation Team is ready to partner with municipalities, tax practitioners, businesses, not-for-profit entities and individuals on property tax matters.

Wells Fargo Inadvertently Discloses Sensitive Client Data

By: Daniel Murphy

International banking and finance services company, Wells Fargo, is embroiled in a controversy regarding the inadvertent production of highly sensitive customer files in response to a subpoena issued to the bank.

Wells Fargo was issued a subpoena in a case concerning a dispute between two brothers regarding their jointly managed Wells Fargo brokerage account. In response to the subpoena, counsel for Wells Fargo produced electronic mail from a limited number of custodians. A third party vendor that assisted counsel for Wells Fargo produced thousands of emails to the requesting party, including confidential customer account information for tens of thousands of clients. According to media reports, the sensitive files were disclosed because of improper coding used in the  vendor’s document review software. To add insult to injury, the electronic files, which included sensitive personal  data, were shared in part with the New York Times, which promptly published a story highlighting the bank’s error. Wells Fargo is presently requesting courts in both New York and New Jersey to compel litigants and custodians to the return the disclosed confidential information. A New Jersey court has ordered the safeguarding of data pending a hearing in September, along with the destruction of duplicative file copies held by counsel.

Read more about this development here,

and here.

Class Actions in the Construction Industry: Clear Sailing Or Storm Clouds?

By: Mike Bosse

There is a lot in the news about class actions: banks, pharmaceuticals, and discrimination cases. Consumer products that are advertising as one thing but deliver another. But, class actions also sprout up in the construction industry too. The United States Supreme Court has made it harder in the past ten years for a claimant to assert and prosecute a case on a class-wide basis, but they persist nonetheless, and in some cases, they may be the appropriate vehicle for disposing of large scale litigation. Any construction companies involved in asbestos litigation might wish that litigation had been resolved by class actions instead of millions of individual lawsuits.

This article will lay out the standard for class actions, and then discuss when you might encounter them in the construction industry. Class actions are big time litigation, and you might get drawn into them whether you are a general contractor, subcontractor, or supplier in the industry.

The Class Action Structure

Before addressing what class actions exist in the construction industry, laying out what a claimant needs to certify a class action is useful. These are the requirements:

1.         Numerosity

Rule 23(a)(1) of the Federal Rules of Civil Procedure requires that the class be so numerous that joinder of all members is impracticable. “Evidence of exact class size or identity of class members is not required to satisfy the numerosity requirement.” Millett v. Atl. Richfield Co., No. Civ.-98-555, 2000 WL 359979, at *6 (Me. Super. Mar. 2, 2000). The word impracticable in the context of Federal Rule 23 has been interpreted to mean impractical, unwise or imprudent rather than impossible or incapable of being performed. See Duhaime v. John Hancock Mut. Life Ins. Co., 177 F.R.D. 54, 62 (D. Mass. 1997) (to meet numerosity requirement, plaintiffs “need only show that it is difficult or inconvenient to join all the members of the class”). In practical terms, numerosity can be a hundred people, or it might be thousands of people – it depends on the type of case and the allegations made.

2.         Commonality

Rule 23(a)(2) requires that there be questions of law or fact common to the class. “It is not necessary for plaintiffs to demonstrate that identical questions of law or fact are common to the class.” Millett, 2000 WL 359979, at *6. This requirement is met “if plaintiffs’ grievances share a common question of law or fact.” Id. Class actions require that class members have things in common. That is the whole point of a class action, that the class members have common issues such that an action for the whole class is appropriate.

3.         Typicality

Rule 23(a)(3) requires that the claims of the representative plaintiff or plaintiffs be typical of the claims of the class. “Typicality does not mean that the claims of class members must be identical.” Karofsky v. Abbott Labs., No. CV-95-1009, 1997 WL 34504652, at *6 (Me. Super. Oct. 16, 1997) (Saufley, J.). Rather, the typicality requirement “focuses on the similarity of legal theory upon which plaintiffs’ claim rests” and “a strong similarity of legal theory will satisfy typicality requirements even where substantial factual differences exist.” Id. at *7. This basically means that the lead class plaintiff’s claim must be typical of the class members claims. The lead plaintiff needs to be like the class members to make the class action work.

4.         Fair and Adequate Representation

Rule 23(a)(4) directs that representative plaintiffs must fairly and adequately protect the interests of the class. Plaintiffs must demonstrate that “(1) the representatives and their attorneys are able and willing to prosecute the action completely and vigorously and (2) each representative’s interests are sufficiently similar to those of the class that it is unlikely that their goals and viewpoints will diverge.” Karofsky, 1997 WL 34504652, at *7. What this means is that the class plaintiff must sincerely protect the class, and he or she must have appropriate lawyers representing the class plaintiff and the class generally.

5.         Predominance and Superiority

Rule 23(b)(3) requires that “the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that the class action is superior to other available methods for the fair and efficient adjudication of the controversy.” In considering the standards for Rule 23(b)(3), the court is directed to consider:

• The interest of members of the class in individually controlling the prosecution or defense of separate actions;
• The extent and nature of any litigation concerning the controversy already commenced by or against members of the class;
• The desirability or undesirability of concentrating the litigation of the claims in the particular forum;
• The difficulties likely to be encountered in the management of a class action.

The Advisory Committee Notes accompanying Federal Rule 23(b)(3) note that this section “encompasses those cases in which a class action would achieve economies of time, effort, and expense, and promote uniformity of decision as to persons similarly situated, without sacrificing procedural fairness or bringing about other undesirable results.” Fed. R. Civ. P. 23(b)(3) advisory committee’s note; see also Millett, 2000 WL 359979, at *10 (citing the Advisory Committee Notes). Essentially, a class action has to be the best way to resolve the particular dispute.

Construction Class Actions

Now you have the background, although this framework is just the tip of the iceberg in prosecuting or defending a class action. In the construction industry, the most obvious source of class actions will be from building products, including shingles, windows, decking products, siding and the like. They can also arise from equipment, like boilers or HVAC equipment. The allegation will most likely be that some defect in the product or equipment causes the product to: either not fulfill the function it is supposed to, or that it will not last as long as it is supposed to. If you are a supplier of the project, or otherwise in the chain leading to the ultimate building owner, then you can easily get drawn into the class action along with the product manufacturer.

Companies can also be struck by class actions from within. If there are allegations of discrimination based on gender, age or race, and you are a large company, a class wide lawsuit might succeed. Wage and hour issues are a favorite for class action lawyers, including inappropriate wages being paid, or overtime being incurred but not paid.

Let’s hope none of you readers are pulled into or become the subject of a class action. Having this framework is helpful as you move through the paces each day, playing your part in the industry and on construction projects.