Business and Commercial Litigation Newsletter

By Paul McDonald and Dan Murphy

Our March recap highlights cases that address the Department of Justice’s withdraw of a motion to compel Apple’s assistance in accessing encrypted iPhone data and other news that will have an impact on business and litigation.

DOJ Withdraws Controversial Motion to Compel Against Apple, Inc.

In a surprise move, the U.S. Department of Justice announced that it would abandon its effort to force Apple, Inc. to assist in extraction of data from a passcode-locked iPhone owned by one of the San Bernardino shooters. The iPhone at issue was used by Rizwan Farook, who carried out a mass shooting in December, 2015 that resulted in the deaths of fourteen people. In February, the DOJ filed an ex parte motion to compel Apple to cooperate in its efforts to unlock encrypted data and create of new software that could disable password protection. The Department based its request on the broad authority granted under All Writs Act of 1789, 28 U.S.C. § 1651(a), which empowers federal courts to issue “all writs necessary or appropriate … agreeable to the usages and principles of law.” The statute is viewed as source of residual authority and may be properly employed where the subject matter is not already covered by statute. On February 16, 2016, a federal magistrate granted the DOJ’s ex parte motion to compel Apple’s cooperation.

After receiving notice of the DOJ’s motion and the Court’s Order, Apple strenuously objected to the DOJ’s request and promptly filed a Motion to Vacate the Court’s February Order. Among other things, Apple argued that the DOJ was seeking to implement a backdoor method of evading Apple’s encryption systems, a power that was not granted by Congress. A copy of Apple’s Motion to Vacate the February Order can be accessed here. In addition, recent cases have cast doubt on whether the All Writs Act could be employed to force Apple to unlock encrypted iPhones. In a recent opinion, Judge James Orenstein of the Southern District of New York held that the authority of the All Writs Act could not be employed to force Apple’s cooperation. In addition, he also rebuked the DOJ for seeking “crypto-legislative authority from the courts,” rather than risking the chance that the legislative process might produce a result less to its liking. Access Judge Orenstein’s order here.

In the face of mounting public criticism and privacy concerns, the federal officials last week publicly stated that they hoped to unlock Farook’s iPhone without Apple’s assistance. On Monday, the DOJ submitted a filing with the court indicating that it “no longer required” the assistance of Apple.

Read more about this recent development here.

FTC Commences Enforcement Action Against VW in Relation to Diesel Scandal

The Federal Trade Commission filed an enforcement action against Volkswagen Group (USA) in the U.S. District Court for the Northern District of California seeking an order requiring the carmaker to compensate all U.S. consumers that leased or purchased its so-called “clean-diesel” vehicles. The action by the FTC came just days after VW indicated in a separate action commenced by the U.S. Department of Justice and Environmental Protection Agency that it would miss a March 24, 2016 deadline to provide the Court with a remediation plan for emissions that regulators would accept. In that case, U.S. District Court Judge Charles Breyer extended VW’s deadline for an emissions fix until April 21, 2016. The FTC action, which is based on the FTC Act’s prohibition on unfair and deceptive trade practices, seeks permanent injunctive relief, rescission, restitution, and refund of money paid by consumers. VW has conceded that it used software to selectively evade emissions limits, promoting “clean diesel” cars that actually emit up to 40 times the amount of acceptable limit of harmful emissions. More than 11 million vehicles worldwide are affected by VW’s defective emissions devices.

Read more about the FTC’s lawsuit here and access the FTC’s Complaint here. Read more about VW’s failure to meet its emissions remediation deadline here.