Business and Commercial Litigation Newsletter – Issue 62

By Paul McDonald, Dan Murphy, Eben Albert and Kevin Decker

Our June recap highlights cases regarding a class action concerning online tracking of children by media companies, a recent case addressed to ME’s Nonprofit Conversion Statute, and other news that will have an impact on business and litigation.

The Third Circuit Affirms Dismissal of a Class Action against Google and Viacom Challenging their Tracking of Children’s Online Viewing Activities.

In the underlying case, plaintiffs commenced a class action against Google, Inc. and Viacom, Inc., asserting that their receipt of user IP addresses and other information obtained from cookies violated the Video Privacy Protection Act. Under this law, it is illegal to disclose personally identifying information relating to viewers’ consumption of video services. The act was enacted in the 1980’s after the video rental history of Robert Bork, former U.S. Supreme Court nominee, was publicly disclosed. Plaintiffs argued that the companies’ tracking of online internet activities and planting “cookies” on computers to gather data violated the Video Privacy Protection Act. Among other things, they identified a wide range of information gathered from children by defendants, including users’ unique IP addresses and tracking tools, browser and operating system settings data, and unique device identifiers. Narrowly construing the Video Privacy Protection Act, the Third Circuit rejected the plaintiffs’ claims, holding that a defendant could be liable under the act for only disclosure, and not receipt of information. The court also held that the information received by Google and Viacom did not implicate personally identifiable information under the Video Privacy Protection Act.

To read more about this development click here and to access the Court’s opinion click here

The Law Court Rules that ME’s Nonprofit Conversion Statute Does not Require Identical Treatment of Shares of Stock.

In a recent case, ME’s highest court ruled that a for-profit corporation that converts to a nonprofit corporation is not required to treat all its shares of stock identically pursuant to ME’s nonprofit conversion statute, 13-C M.R.S.A. §§ 931–936 (the “Conversion Statute”). The conversion statute permits for-profit corporations to convert to nonprofit corporations with only minimal restrictions on the conversion, one being that a corporation must reclassify all its shares of stock into a membership or other interest in the nonprofit. In Nathalie Taft Andrews et al. v. Sheepscot Island Company, the plaintiffs challenged a plan of nonprofit conversion set forth by the Sheepscot Island Company (“SICO”), a corporation that owns land and facilities on MacMahan Island in the town of Georgetown and provides water, sewer and other services to the cottages on the island. The plaintiffs each owned shares of SICO’s common stock before the conversion, but received varying membership interests in the nonprofit corporations depending on whether or not they owned a cottage on the island. The Law Court held that SICO’s plan of nonprofit conversion complied with Conversion Statute by reclassifying all of the shares of SICO into a membership in the nonprofit, as well as the right to participate pro rata in any eventual liquidation of the nonprofit. The Law Court held that the conversion did not violate Section 601 of ME’s for-profit corporation statute (13-C M.R.S.A. § 601), which applies only to for-profit corporations and generally requires that all shares of a single class in a for-profit corporation be treated equally unless otherwise set forth in the articles of incorporation.

Read the Law Court’s Full decision here.

Volkswagen AG has Reached Terms on Consent Decrees with the U.S. Department of Justice and 44 States, Pledging to Pay More than $15 Billion to Affected Consumer and Other Groups.

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 including nearly 500,000 vehicles from 2009-2015 in the United States alone. Under the consent decrees, VW will set aside $10 billion to fund the repair or repurchase of vehicles and to pay additional compensation to affected owners. In addition, the company will provide $2 billion to pay for environmental programs administered by the U.S. Environmental Protection Agency and the state of California. If the company misses deadlines, it could face additional penalties.

To read more about this development click here.

A Delaware Court Allows a Suitor to Walk Away from a Major Merger Based on the Lack of a Required Tax Opinion.

In the underlying matter, Energy Transfer Equity LP (ETE) sought in September 2015 to merge with Williams Companies, Inc., two oil-and-gas pipeline companies initially valued at more than $33 billion. However, in the wake of uncertainty in energy markets and sharp declines in the value of Williams’ shares, the economic rationale for the merger became less clear for ETE. Seeking a means of extricating itself from the merger, ETE took the position that its tax attorneys, Latham & Watkins, could no longer issue a required legal opinion that a particular exchange would qualify for tax-free treatment, creating an impediment to timely closing of the merger. In response, Williams claimed that ETE failed to use commercially reasonable efforts to obtain the required tax opinion and that it should be estopped from terminating the merger agreement between the companies. Addressing the parties’ disputes, Vice Chancellor Sam Glasscock III of the Delaware Court of Chancery acknowledged ETE’s economic motives in avoiding the merger, but ultimately agreed with ETE that the inability to obtain a required tax opinion provided a sufficient basis for the company to terminate the merger agreement.

To read more about the story click here and to read the opinion click here.