File First, Litigate Later? Procedural Fencing explored in Epic Tech, LLC v. Arno Res., LLC

Vince Lombardi, the famed NFL Coach already knew this when he stated, “winning isn’t everything, it’s the only thing.”

Well, when it comes to the Fifth Circuit, it does not favor races to the courthouse.

The parties and predecessors in this case have been engaged in various disputes regarding a gaming software agreement (Software Agreement) since the early 2000s. In August of 2004, Custom Games Design (Games Design) and Gateway Gaming, LLC (Gateway) entered into the Software Agreement. Here, Games Design agreed to develop games and give Gateway a license to use its proprietary software (Software). If Gateway refused to make payments, hire current Games Design employees, or solicit Games Design employees within 180 days of termination, the Software Agreement was terminated.

By February of 2017, the original parties to the Software Agreement had dramatically altered. Gateway dissolved in January of 2013 transferring its assets to Epic Tech, LLC; Winter Sky, LLC and Frontier Software Systems, LLC (collectively referred to as Epic Tech). While Gaming Design entered into a licensing agreement with Arno Resources (Arno) granting, conveying and assigning all of its rights, title and interest to Software including the right to bring suit arising out of its misuse.

In May of 2013, Arno’s legal counsel sent a demand letter to Epic Tech alleging unauthorized use of the Software. Although the demand letter asserted Arno would pursue all remedies available both at law and equity, it also noted a potential discussion surrounding settlement possibilities.

Instead of replying to Arno’s demand letter by May 22, 2020, Epic Tech replied with a declaratory judgement action in Travis Country District Court. In its action, Epic Tech argued the Software Agreement terminated December 31, 2005; Gateway previously purchased rights to all Software development, and Arno’s claims were released by a previous settlement agreement.^[1] In an effort to preserve its rights, Arno filed suit in the Northern District of Georgia alleging violations to the Georgia Uniform Deceptive Trade Practices Act, civil conspiracy, and aiding and abetting a breach of contract through fraud and injunctive relief. ^[2]

Arno opines the court should use its discretion to dismiss Epic Tech’s action under the anticipatory exception to the first-to-file rule. By filing an action after receipt of a demand letter, Arno proclaims Epic Tech’s suit was improperly filed and deprived Arno of its chosen forum. Epic Tech protests noting its efforts were merely to eliminate a baseless claim under Texas law and the first-to-file rule should apply. Under the Federal Declaratory Judgement Act (Act), a federal court may declare rights and other legal obligations of any interested party (28 U.S.C. §2201(a)). Under the Act, Congress creates an opportunity, not a duty, to grant appropriate relief to qualifying litigants.

When two cases are pending before two federal courts, the first-to-file rule states the subsequent case may be dismissed if the issues raised by the cases substantially overlap.^[3] Cases do not have to be identical. Rather, substantial overlap exists when the core issue is the same or if a majority of the evidence brought would be identical.^[4] The Fifth Circuit generally notes the court where the action was first filed is appropriate when the subsequent case filed involves substantially similar issues. However, the Fifth Circuit will deviate from the first-to-file rule when a declaratory judgment is filed in anticipation of a suit, creating an opening for forum shopping and depriving a potential plaintiff of their chosen forum (the Anticipatory Filing Exception).

To apply the Anticipatory Filing Exception, the court looked to Paragon^[5] where the court failed to apply the first-to-file rule when a party filed a declaratory action in lieu of responding to a demand letter. Similarly, the court did not apply the first-to-file rule in Bedrock Logistics ^[6] when a party filed a suit in federal court four days after receiving a settlement offer. Here, Arno’s pre-suit demand letter enclosed a draft of a yet to be filed Georgia complaint if the case was not settled and noted the possibility of discission settlement options. The court did not find evidence of Epic Tech engaging in improper or abusive tactics. Even so, the court found Epic Tech’s declaratory judgement was anticipatory and deprived Arno from filing suit in the Northern District Court of Georgia.

Although Epic Tech was the first to file in their respective district court, this case shows “winning doesn’t always mean being first.” ^[7]

^[1] Epic Tech v. Arno Resources, D-1-GN-20-02870 (261st Dist. Ct., Travis County, Tex. May 29, 2020).

^[2] Arno v. Epic Tech, No 1:20 CV-2540-CAO (N.D. Ga. June 17, 2020).

^[3] Cadle Co. v. Whataburger of Alice, Inc., 174 F.3d 599, 603 (5th Cir. 1999).

^[4] Int’l Fid. Ins. Co. v. Sweet Little Mexico Corp., 655 F.3d 671,678 (5th Cir. 2011).

^[5] 2008 U.S. Dist. Lexis 6565, 2008 WL 3890495 at *1-5

^[6] 2017 U.S. Dist. LEXIS 65432, 2017 WL 1547013, at *5

^[7] Bonnie Blair

What’s In Your Cosmetic Products?

Blog, Law and Entertainment, Lifestyle

“. . . the urge to decorate ourselves is one of the most fundamentals instincts of human nature” [1]

When completing my Master of Science in Law at Northwestern Pritzker School of Law, I wrote a demand for change regarding Food and Drug Administration (FDA) regulations on cosmetics. Cosmetics, according to the FDA, include makeup, moisturizers, hair dyes, straighteners, and removers, perfumes, colognes and nail care products. Some of these products are ones that I use everyday. Before I wrote this paper, I was fascinated (and still am) with the power and influence the beauty industry has on women and girls.

I LOVE beauty products. Considering I recently went to Sephora, this is a perfect time to introduce you three of my latest products. First, the Clinique: Take the Day Off is ESSENTIAL for anyone who wears makeup. This is an oil based makeup remover that leaves your face super soft and clear of any residue. If you are wondering if your makeup remover wipes are better, they aren’t. This is the sh*t and this little size is just $10. That’s less than a manicure people, so pull out your card and buy it already.

Second, one of my friends recommended I get the Grande Lash- MD lash enhancing serum. Actually it wasn’t a friend friend. Rather someone I met talking at the grocery store. Quarantine really has me lacking in human interactions so I talk to people any chance I get. Her judgment was on point. I have been on a quest for more bold and beautiful lashes (can you blame me?!). I usually get my beauty advice from my friends in medical school, so the MD in the title makes it looks hella official. . . I’m into it.

Confession time: The Moroccan Oil Body Polishing Scrub is a free sample, but it has grown to be one of my absolute FAVORITES. I feel very refreshed and it leaves your skin super smooth. . . no complaints here.

ANYWAY, I got lost in a cosmetic wonderland. Back to my paper.

I wanted to write something that touched my life and could potentially make an impact on others and how we view everyday cosmetics. As a disclaimer, this paper was written in 2018. Some sources and statistics used may be outdated. However, its message remains as a powerful reminder to uphold the integrity of the beauty industry through proper regulation of products.

Hope you enjoy!

The cosmetic industry is expected to reach 130 billion dollars in global sales by 2019 [2]. Its success is attributed to its flexibility. The cosmetic industry, driven by the preoccupation with youthful image and aesthetics, is timeless and continuously shaped by social trends and identity. Usage of cosmetics and personal care products function to redefine gender lines, push global boundaries, and positively influence self confidence. These aspects promote evolution, but allow the cosmetic industry to feed off of a self-regulatory structure. It is essential to modernize FDA’s statutory authority over cometic products because its current self-regulatory framework presents significant problems in establishing safety and guidelines for consumers. Modernizing FDA authority over cosmetics with an Act that enforces (1) pre-market testing procedures, (2) ingredient safety assessments and (3) a centralized cosmetic database will provide uniformity of products and standards while protecting consumers worldwide. Examining and enforcing these updates to the Food, Drug and Cosmetic Act of 1938 will require a comparison and adoption of regulations set forth by the European Union (EU) Cosmetic Directive.

Is There A Cosmetic Regulation Or Just An Illusion?

“In regulating cosmetics, the agency functions like a highway patrolman. . . the FDA regulation of cosmetics is entirely ex post.” [3]

The 1930s sparked a dramatic expansion of cosmetic products in the marketplace, allowing many consumers to assume there was protection where none existed. The disparity between regulatory reality and consumer presumptions provided to be dangerous especially when cosmetic products began harming consumers. Cuticle removers removed both fingernails and cuticles, mascara’s binding ingredient was rat poison and other personal products consisted of acetone, formaldehyde and mercury. [4] Publicizing these stories gained publicity and propagated the formation of the 1938 Act. Lack of updating the 1938 Act leaves consumers blindly trusting cosmetic companies with their products with no pre-market testing procedures. In a multi-billion dollar industry, citizens should prioritize the safety and function of the cosmetic industry. Although publicized media should be used as a political agent, solely relying on this method is not effective to change legislation.

Modernizing the current statute will allow the FDA to actively oversee the safety of cosmetic products before entering the marketplace. Despite myths, harmonizing the cosmetic industry promotes the same goals as a self-regulatory system: autonomy, growth and entrepreneurship. Valued at 74 billion euros in 2016, the EU cosmetic market thrives under regulation, making it the largest in the world. [5] Pre-market surveillance will shift consumer safety as the primary objective. Testing the chemical structure, level of exposure and an analysis of product safety based its application (ie. lips, scalp, eyes) [6] will hold the industry accountable for its actions. Building trust through actions rather than assumptions will yield greater economic equity while promoting consumer advocacy.

Trustworthy Ingredients

The U.S. Cosmetic Ingredient Review (CIR) is an independent non-profit organization responsible for reviewing active cosmetic ingredients and assessing their conditions for use. After its establishment 1976, the FDA refused to create a federal safety assessment program for cosmetic ingredients. Although CIR is financed by the cosmetic industry, scientists are independent academics who are prohibited to work for a cosmetic company. Configuration of this organization was designed to promote a sense of collaboration between the public, government and the industry. Sure, research done by CIR can help mitigate concerns but, it fails to establish any legal obligation for cosmetic firms. Still, the 1983 Act does not require “premarket testing, premarket notification, premarket approval, or any other form listing [ingredient] registration.” [7]

Failure to adequately check substance prior to market places profits over people, promoting capitalistic reputation over the protection of consumers. The products that all citizens use everyday are put on the market until they are caught deceiving customers by claiming “all-natural” products despite their use of harmful synthetics, designing shampoos that cause hair loss or promoting “Drinkable Sunscreen” with healing properties. [8] Updating the 1938 Act with an ingredient selection approved and recorded by the FDA will not eliminate trust between consumers and cosmetic firms. Instead, it will provide a centralized ingredient standard that enables a clear safety evaluation of cosmetic ingredients before it can potentially harm consumers.

Solutions for an Innovative Industry

The FDA set the standards for the beauty industry in 1938. Since then, the cosmetic industry has transformed, updated and evolved with the progression of technology. The rapid globalization of the cosmetic industry has encouraged the development of advancing technologies. This shift in global perspective requires companies to change their business plans, and justify modernization of the cosmetic regulatory structure. Technologically advanced skincare products can now function as illegal new drugs, and filtered through the cosmetic industry distinguished as “advanced skin care products.”

The regime of self regulation has grown out of its historical origins. The emergence of the beauty industry has become an empire and the FDA’s reliance on self-regulation places burden on consumers to be informed, vigilant and aware to safeguard their own health. Self regulation can be more effective when cosmetic industry players are more transparent with their consumers with detailed information about safety testing and the standards used. Establishing a pre-market surveillance procedure, ingredient assessment and a centralized database will provide a robust, internationally recognized standard that enforces product safety while catering to technological developments in the cosmetic industry.

WHAT DO YOU THINK?

I understand we are at a moment in time where we are constantly in a delta of change. Sure, the lack of cosmetic regulation allows anyone to open up a cosmetic line. . . but at what cost? Should we continue to place the responsibilities of cosmetics on companies or should we have more regulation? Will more regulation ensure the safety of cosmetic products?

Until next time,

Lauryn

[1] Lindy Woodhead, War Paind: Madame Helena Rubensteing and Miss Elizabeth Arden: Their Lives, Theiir Times, Their Rivarly 10 (2003)

[2] Forbes Magazine

[3] Richard, Merill, Science for Judges II: the Practice of Epidemiology and Administrative Agency Created Science: FDA Regulatory Requirements as Tort Standards (2004).

[4] Examples of Cases from the FDA “Chamber of Horrors: complied to amend the 1906 that would five jurisdiction over the beauty industry.

[5] Cosmetic Europe: The Personal Care Association

[6] EU Cosmetic Regulation

[7] Petr Barton Hutt, A History of Government Regulation of Adulteration and Misbranding of Cosmetics in Cosmetic Regulation in a Competitive Environment

[8] “Drinkable Sunscreen”: Osmisis LLC and Harmonized Water LLC located in Iowa claimed that they have treated water in order to have “amazing medicinal or cosmetic properties,” including the abilities to “protect against cancer causing UV rays, repel mosquitos that might carry the Zika virus.” Source” Dietary Supplemental & Cosmetics Legal Bulletin, Issue 48. March 2017.

Video Games and the Law

Blog, Law and Entertainment

There’s a lot of extra time to play video games. I think I have spent the past couple of days playing Super Smash Bros. . . in fact I am playing some right now. . .

Before quarantine I wasn’t familiar with Fornite, NBA 2k or any other video game. However, it might be the end of live sports games for a while so I figured I’d grab my own personal controller and see what things are all about.

At the intersection of law and this new found ~~love~~ entertainment comes an exciting case out of North Carolina.

U.S. District Judge Terrence W. Boyle of the Eastern Division of North Carolina held Michael Heidbreder must proceed his case by arbitration pursuant to the End User License Agreement (“EULA”) with Fornite developer, Epic Games.

Michael Heidbreder, a Missouri resident filed a punitive class action alleging Epic Games’ vulnerable security allowed hackers to charge fraudulent in-game purchases to his debit card between November 2018 and January 2019. Heidbreder brought both statutory and common law claims including negligence, breach of implied contract and violation of state consumer-protection and data-breach statutes.

In October, Epic Games moved to compel Heidbreder’s claims to arbitration, pursuant to the EULA. Features to the arbitration provision include: “ (1) an agreement to arbitrate on an individual basis only; (2) delegation clause granting the arbitrator the power to determine whether a specific dispute is governed by the arbitration clause; (3) a venue selection clause giving user the choice of venue between their home state or North Caroline; (4) Epic Games’ agreement to pay arbitration fees under $10,000, share costs after $10,00 and not seek attorney fee’s against users and (5) a 30 -day opt-out provision, giving users a 30 day window after agreeing to the End User License Agreement to opt out of arbitration provision.”

Heidbreder presented three compelling, yet unsuccessful arguments.

First, he asserts his minor son lacked contractual capacity to agree to the EULA. Judge Boyle rejected this argument noting “under the basic principles of principal-agent law” his son acted as Heidbreder’s agent giving him both actual and apparent authority to agree.

Second, Heidbreder argues privacy related matters are outside the scope of arbitration. According to common law, when the parties contract delegates the arbitrability question too an arbitrator, a court may not override the contract.” Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524, 529 (2019). Therefore, the arbitrator, rather than the court, determines the scope of these provisions.

Lastly, Heidbreder claims the class action waiver, arbitration clause and class action clause are unconscionable because Epic Games is applying the agreement retroactively. Judge Boyle acknowledges yet quibbles Heidbreder’s last argument noting the terms at issue “are common terms in modern contracts that have been recently sanctioned by the courts and can hardly be considered substantively unconscionable.”

This case appears to be successful for Epic Games. However, this “game” could face a turn for the worse if parents stop allowing their children to make in-game purchases using their credit card information. However, with extending stay-at-home orders and uncertainty about school returning in the fall, I highly doubt this would happen.

What’s your favorite video game during COVID-19?

Until next time,

Lauryn <3

Comcast Corp. v. National Association of African American-Owned Media

Blog, Law and Entertainment

Earlier this year the Supreme Court issued its opinion about a racial discrimination case. The justices decided this case by a 9-0 vote.

Bryon Allen, entrepreneur and owner of Entertainment Studios Network (ESN) sought to have Comcast carry its channel. Comcast rejected this proposition, claiming bandwidth constraints and lack of demand for ESN programs. ESN alleged Comcast violated §1981(a), a statute that guarantees “all persons… the same right…to make and enforce contracts… as is enjoyed by white citizens.” The District Court dismissed the complaint for failing to show Comcast would have contracted with ESN, but-for racial motivations. The Ninth Circuit disagreed, holding ESN had a viable claim because it only needed to show race played a “sole role” in Comcast’s decision-making. In order for ESN to seek redress, it must demonstrate that, but for Comcast’s unlawful conduct, its alleged injury would not have occurred. These essential elements must stay constant through the life of the lawsuit.

In a slightly fractured unanimous decision, the Supreme Court held, that to prevail, a plaintiff must initially prove that but for race, it would not have suffered the loss of a legally protected right. Justice Gorusch acknowledged but rejected ESN’s argument that §1981 creates an exception to proving but-for causation and essential elements of a claim do not need be constant throughout the lawsuit. ESN further claims that it should overcome at least a motion to dismiss if it can plausibly show race was a determining factor in the decision. Instead, Gorusch reasoned that, statutory language along with past precedent, suggest §1981 follows the general rule. Statutory language of §1981 guarantees equal rights enjoyed by white citizens and nothing in the statute signals this test should change when confronted with a motion to dismiss. Gorusch’s examination of legal precedent and neighboring provision §1982 reveal that courts have interpreted “because of race” to be associated with but-for causation. ESN asks the court to rely on the “motivating factor” test in the Civil Rights Act of 1964, with no avail. The Court reasons ESN mistakenly misplaces a process-oriented right with the motivating factor test. Thus, the court vacated the judgement of the court of appeals and remanded the case to determine the sufficiency of ESN’s pleadings under the correct legal rule.

In a four-page opinion concurring in part and concurring in the judgment, Ginsburg agreed but quibbled that racial violation under §1981 protects the right “to make and enforce contracts” which includes the manner in which the contract is carried out. Therefore, if race accounted for Comcast’s conduct during the contract-formation process, it should not escape liability for those injuries.

The Supreme Court held that a plaintiff alleging racial discrimination in contracts must show that the plaintiff’s race was the actual cause of the alleged injury in failing to reach agreement on a contract.

Ultimately, this case was a set back compared to traditional in civil rights cases. As the Supreme Court continues to hear cases via teleconference due to the COVID-19 pandemic, it will be interesting to see how other cases may impact law and entertainment. . .

Feel free to share your thoughts below!

Until next time,

Lauryn

Who’s Following You?

Blog, Law and Entertainment

The Social Media Black Market

The law has the vitality of an organism. Although it may seem like the law is developed through various social movements and stuffy political leaders, laws originate from purpose. Our social purpose. Without us spreading ideas we value most, there would be no change. Social change has many components. It involves me and you. Together, we work together to challenge the social and political dimensions– creating a direct impact on society. We may not feel it every day, but we have the power to make it happen. Today, you and I will address the issue of privacy and our social media identity. Let’s make change together.

We can all use more likes on our pictures, views on our Instagram story or just more attention in general. But has it come to a point where we pay for it? Apparently so.

Money can’t buy you happiness but it can buy you…followers. As we will see, popularity and privacy have its price.

I know you saw the word privacy and probably thought of Facebook or Cambridge Analytica.

Yes, your preliminary ideas of privacy may be correct. Unfortunately, there are more social media bullies out there. A lot more.

Who can blame them? In a world where we value Likes more than a spoken compliment, why wouldn’t someone develop a company to exploit our horrible priorities.

Sounds like great business idea….

Imagine the moderate-to-frequent social media user. Although he or she may like the occasional picture of their favorite actor or travel page, they use social media for its fundamental purpose. To connect. Liking pictures of their best friend, partner, crush or even their ex. Hey, I’m not trying to get all up in your business about what you do on social media but Devumi does.

Devumi, a social media marketing company, advertise their unique services: selling followers, likes, and views to celebrities, Instagram influencers, your co-workers, best friend, grandmother, basically anyone that wants to look like they have friends online.

It’s social media fraud people. The worst part, according to The NY Times, Devumi often creates a duplicate profile of real users. This includes but is not limited to using the same name, hometown and other personal details of a REAL person. These automated accounts known as “Bots,” promote just about anything. From the new cafe in town, to pornographic sites, there are no limits.

YOU MAY HAVE A DUPLICATE ACCOUNT AND YOU DON’T EVEN KNOW IT.

Sorry, don’t mean to scare you. But hey that’s life.

To make matters scarier, Twitter does not require its accounts to be operated by a real person. Therefore, companies like Devumi can set up these automated accounts (called “Bots”) with little to no effort and make millions.

So why did I write this article. To scare you of course. But in all seriousness, there are a bigger issue here. This appears to be mass identity theft. But, regulation of social media lies in the grey area when it comes to the law. There have been many developments in protecting the collection and sharing of our personal information through The Global Data Protection Regulation enacted in May of 2018. But continued social media fraud can be dangerous. In today’s age, it is inevitable that our social media posts, followings and pictures are a reflection of our values often evaluated by our friends, co-workers and employers.

So what’s the solution? Let’s take a sociological perspective on the current issue: Athletes, TED Speakers, actors, executives, businesses, and Instagram models now have a common denominator. They are apart of Devumi’s enormous customer base of 200,000 people.

To get to the root of the issue, we have to be real with each other. What are we accomplishing with all these followers? Have we become so obsessed that we are willing to pay someone to develop a robot to like our pictures just so we can brag to Tina at Starbucks?!

Newsflash Tina doesn’t care.

Don’t get me wrong, we can develop a space where we all care about each other’s well-being. For example, I really love fashion, healthy eating and travel (I’m basic). So I choose to follow accounts that post these things as well.

There is nothing wrong with creating a social media platform to show the world who you are and what you love. In fact, I applaud you for your self expression. But, it is critical to examine when our motives reach a bifurcation point. When do our inspiration transform from passion into fame, popularity or constant approval from others? Exploitation of our misplaced values is where companies like Devumi thrive.

What can we do today?

Changes in the law are an indicator of the complexities of social change. For now, we should use the law as a catalyst, to propagate social change where there are blatant inequalities in our privacy and protection of our identities. For now, let’s be curious about our personal and digital privacy. It’s definately worth it.

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