Daily Archives: April 25, 2011

Lying on an Application About Criminal Conduct Bars Defamation Claim

Employers normally require new hires to complete job applications and certify that the information contained in their applications is true and accurate before hiring them. Job applications serve many laudable purposes: you can evaluate education, ensure that the applicant has the required experience and know-how to do the job and retrieve contact information for former employers from whom you can learn about the applicant’s skills and abilities before he or she is brought into your workplace. You can compare respective applicants on an “apples-to-apples” basis. A recent case now adds another reason: an application can also provide employers with a defense to later litigation where the new hire was untruthful or omitted material facts on his or her application.

In Van Hoven v. Pre-Employee.com, Inc., 156 Wn. App. 879 (2010), the plaintiff applied for a position with a hospital and signed a background authorization under penalty of perjury in which he affirmed that he had not been charged with or committed any crime. The hospital contracted with a consumer reporting agency to conduct a background check, as it did for all applicants. The hospital hired the plaintiff “conditioned” on a positive background check. The agency reported that the plaintiff had been guilty of possession of marijuana and drug paraphernalia. The hospital confronted the plaintiff with the report, who admitted that he had been guilty of possession of marijuana and drug paraphernalia but that, as part of a plea bargain, one of the charges had been dismissed. He also claimed to have been confused by the question – “Have you ever been convicted of any crime?” – though he did not deny the results of the background check or provide any clarification. The hospital rescinded its conditional employment offer, for it would not have initially hired him with such charges, and, more importantly, because he had lied on his application. The consumer reporting agency later corrected the report to explain that the marijuana possession charge had been, in fact, dismissed in a plea bargain. The plaintiff sued the consumer reporting agency for defamation.

Consumer reporting agencies are highly regulated entities. Washington has its own statutes that regulate consumer reporting agencies. See RCW 19.182, et al.  These statutes provide that a consumer like the plaintiff cannot assert a claim for defamation, invasion of privacy or negligence with respect to the reporting of information unless false information is furnished with malice or willful intent to injure. That is an elevated standard. In Van Hoven, the plaintiff could produce no evidence that the consumer reporting agency had acted with actual malice or intent to injure. The agency thus had immunity from the plaintiff’s claims.

The Van Hoven court noted that the plaintiff could also not establish damages. To establish a defamation claim, a plaintiff must show (1) falsity, (2) an unprivileged communication, (3) fault and (4) damages. Because the plaintiff did not deny the results or provide any clarification of the background check, and the hospital stated that it would not have hired him if he had disclosed such charges, he had no damages from the consumer reporting agency’s alleged inaccurate background check. The Van Hovencourt noted that the plaintiff had lied on his application when he answered “no” to the question of whether he had been convicted of any criminal offense. Even discounting the misinformation about his marijuana possession charge, he was still convicted of the drug paraphernalia charge. Without damages, he had no defamation claim.

The takeaways from Van Hoven are that employers should always require new hires to fill out applications, which mandate a certification for truth and accuracy. Employers should not accept a resume in lieu of a job application because resumes do not normally have certifications for truth and accuracy nor do they specify that the applicant will not be hired or can be terminated for misrepresenting information. Applications reveal education and background experience and provide third-party contact information to learn about the new hire’s skills and abilities. Further, if the applicant lies or omits information, that conduct can serve as a basis for refusing to hire or terminating upon its discovery. And, in litigation, a plaintiff can have his or her damage award reduced or limited by application lies or omissions. This is known as the “after acquired evidence” doctrine. The Van Hoven court also emphasized that such information can serve as a defense to a claim of damages – if you lie, you cannot expect the employer to hire you.  The other takeaway is that the employer correctly shared the background check with the plaintiff, providing him an opportunity to respond or rebut the information before taking adverse action. Such a step is highly advisable to avoid future litigation.

Petition Granted for Rehearing en banc of Akamai Technologies v. Limelight Networks

On April 20, 2011, the Federal Circuit granted the petition by Akamai Technologies for rehearing en banc its appeal in Akamai Technologies, Inc. v. Limelight Networks, Inc.  The order vacated the earlier opinion of December 20, 2010.  The order includes a request to file new briefs addressing this question:

If separate entities each perform separate steps of a method claim, under what circumstances would that claim be directly infringed and to what extent would each of the parties be liable?

This question asks for a definition of what constitutes joint infringement and how to apportion liability.  Joint infringement is based on a theory is that one acts as a “mastermind” who orchestrates the infringement and that the activities of the other joint infringer(s) must be under the “direction and control” of the mastermind.  The result is as if the mastermind performed the infringement by itself.  BMC Res., Inc. v. Paymentech, L.P., 498 F.3d 1378, 1380 (Fed. Cir. 2007).

The latest tests for what constitutes “direction and control” have been selective.  For example, the court in BMC Resources referenced a legal principle that imposed “vicarious liability on a party for the acts of another in circumstances showing that the liable party controlled the conduct of the acting party.”  And in the Akamai opinion of December 20, 2010 (just vacated), the Federal Circuit panel had set forth a standard that required an agency relationship between the parties.  It reiterated that joint infringement occurs when a party is contractually obligated to the accused infringer to perform its part of the method, according to cases like Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318 (Fed. Cir. 2008)  and BMC.

Questions of joint infringement are encountered frequently in patent litigation of software, e-commerce, and internet-related inventions.  It is not uncommon to find method claims reciting a step or two that a consumer or other user of the system might perform.  Consequently, it can be difficult to prove “direction and control” for a lot of software/internet method patents that involve more than one actor to perform the recited method steps (typically a consumer plus at least one other actor).  Accordingly, patent prosecutors endeavor to draft claims that require actions by a single actor whenever possible to avoid the extra hurdle that such cases have made to proof of joint infringement.  Of course, there are times when this is difficult to do because software systems are always evolving and it can take years for patents to issue.

Patents that have method claims requiring activities by multiple actors to infringe may not easily be corrected with reexamination, since valid claim amendments in reexamination cannot broaden claim scope.  Such corrections can be made in a broadening reissue application, but it must be filed within two years of issue of the original patent.

We shall have to wait for the decision of the en banc Court (and any resulting new law) to determine the best way to correct claims in view of any changes to joint infringement law.

Watch “Loose Lips” Statements in Terminations

Wrongful termination cases may be difficult enough to win. When you add the potential that the employee may also sue for defamation and other privacy related torts arising from termination, you increase the dangers. In Corey v. Pierce County, 154 Wn. App. 752 (2010), Pierce County learned how expensive such awards can be when the Washington Court of Appeals affirmed a $3 million award for defamation and privacy claims related to a deputy prosecuting attorney’s termination.

The plaintiff was a 30-year deputy prosecuting attorney who was promoted to chief criminal deputy. Shortly after her promotion, she raised concerns about a prosecutor in the sexual assault unit and sought to have him transferred. There were problems associated with his transfer, and the plaintiff’s superior, the Pierce County Prosecuting Attorney, became concerned about her ability to communicate and manage the transfer. When she challenged his decision, he started the process to terminate her. She, however, resigned before he could communicate the “good news.”

In her desk, the county discovered money that had been raised for a colleague whose child was ill, but had not been distributed. News of these collected funds leaked to a local newspaper which published an article about the money and her departure from the Prosecuting Attorney’s office.  In the article, her supervisor stated that he had lost confidence in her, questioned her truthfulness and claimed that she was subject to a “criminal investigation” regarding the money in her desk. In the article, her supervisor also stated that the plaintiff had told several lies in connection with the transfer of the deputy prosecutor out of the sexual assault unit. The plaintiff sued claiming that she was devastated emotionally and professionally, suffered severe depression, became suicidal and experienced epileptic seizures because of the article. She also claimed that she was unable to find another legal position and was unemployable for the rest of her life because of the article. She sued her supervisor and the County for invasion of privacy, defamation, defamation by implication, false light, outrage, intentional and negligent infliction of emotional distress and breach of contract. After a three week trial, the jury returned a verdict in excess of $3 million.

On appeal, the Court held that it could only overturn the jury verdict where there was a lack of substantial evidence and that the jury verdict would not be disturbed. Because her supervisor knew that the internal investigation had not revealed any improper conduct – simply money waiting to be disbursed to the child – his statements to the press established sufficient evidence for the defamation and false light claims. The Court also found that her supervisor’s statements concerning the investigation into missing donations, in which he had essentially accused her of criminal behavior despite knowledge that the internal investigation revealed a lack of substance, created a viable claim of intentional infliction of emotional distress.  The Court did reject the plaintiff’s claim of negligent dissemination of harmful information. It held that Washington does not impose a duty of care on employers regarding the disclosure of possibly truthful but harmful information to third parties.

The final claim related to an alleged promise by the supervisor that, before taking a management position with his administration, the plaintiff would receive “just cause” termination. Many public employees, such as assistant prosecutors, are covered by civil rules or collective bargaining agreements that provide for “just cause” termination.  Supervisors, however, do not receive the same protection. The plaintiff claimed that she had multiple conversations with her supervisor who promised that she would have such just cause termination. The supervisor disagreed and the county pointed out that there was no corroborating testimony to establish such a promise. The Court held that, because the jury believed the plaintiff, the county lost.

Finally, the Court addressed the county’s argument that it should have been allowed to introduce evidence that the plaintiff had been the subject of prior internal investigations, that her husband had been prosecuted for embezzlement and that post-employment she had filed for bankruptcy and divorce.  At the trial court level, the county sought to introduce this evidence as to the reasonableness of the investigation into the missing money and to rebut her claim that the newspaper article had damaged her reputation - i.e., it was already damaged. Although conceding such evidence was potentially relevant, the Court nonetheless affirmed its exclusion as unfairly prejudicial because this evidence stemmed from her personal life.  The Court found that such evidence did not concern her reputation in the community but about her past personal life.

The takeaways from Corey relate to post-employment publication of reasons for termination. Employers should limit the details they provide to third parties, such as new employers, friends and family, and of course, newspapers. When discussing the reasons for the termination, the employer should reveal only facts that have been substantiated. Opinions should be avoided.

When an employer knowingly publishes facts that are unsubstantiated, it faces a potential claim for defamation, false light and other privacy related claims. Another takeaway from Corey is that employers should not orally agree to alter the at-will employment relationship with an employee. Promises of just cause termination or notice can result in a breach of contract claim that includes recovery of attorneys’ fees and costs of litigation. Although an employee’s claim of just cause termination may be oral and disputed by a supervisor as in Corey, juries do not always believe an employer’s proffered reasons for the termination.  Arguably, since most juries are composed of employees and not supervisors, they may prefer to believe that an employer made a promise of just cause termination. Thus, it is prudent to memorialize the at-will nature of employment in written documents such as an employment handbook, any employment agreement, an offer letter, or even simply in an email. Finally, the Coreydecision acts as cautionary tale for employers that not all “smoking gun” evidence will be admitted at trial and they should instead focus on developing the factual bases for their decisions.

Two Respondents Receive Show Cause Order In Inv. No. 337-TA-763 – International Trade Commission

Chief ALJ Luckern issued an order to show cause why two respondents, Koko Technology Ltd. and Cyclone Toy & Hobby, should not be found in default in Inv. No. 337-TA-763, Certain Radio Control Hobby Transmitters and Receivers and Products Containing Same.  The respondents failed to respond to the complaint by April 4, 2011 and the Chief ALJ has required both respondents to respond to the show cause order by May 12, 2011.