‘Spirit of the law’ returns to US courts

A curious trend in litigation has seemingly linked President Donald Trump’s attempts to impose travel bans by executive order with disputes over internet radio royalty payments, the individual’s right to selection of more favourable jurisdictions for pursuing claims, and the right to criticise your employer on job review websites.

In disparate legal areas covering immigration, intellectual property, product liability and freedom of speech, a handful of innovative litigators have turned conventional thinking on its head and dragged that oft-evoked, yet rarely truly encountered, “spirit of the law” into courtrooms across the US.

In one case that has severely curbed the scope for so-called forum shopping, the outcome may not sound immediately positive for individual rights. Its defenders insist, however, that it promotes fairness and certainty for all. The Supreme Court in June ruled in Bristol-Myers Squibb v Superior Court that, in product liability and mass tort cases, plaintiffs can only sue companies in states where they purchase or use the product.

The ruling — an eight-to-one decision that broadly united both liberal and conservative judges — stops plaintiffs choosing jurisdictions based on where they think they will have the most favourable outcome.

Hogan Lovells partner Neal Katyal, who argued seven of the 62 cases brought to the Supreme Court last year — including representing the State of Hawaii against President Trump’s travel ban on visitors from some Muslim-majority countries — says the decision gives litigants of all stripes more certainty in where lawsuits will be heard.

Rather than curtailing individual rights, Mr Katyal’s belief is that at its heart, limiting venue shopping is about fairness, the spirit of the law as it was intended, and federalism — the proper relationship between the national government and the states.

Mr Katyal sees strong links between his work for Bristol-Myers Squibb and his Supreme Court arguments against the US travel ban — a policy which remains controversial and subject to further legal dispute.

“Both cases showed a distinct departure from earlier points in American history, when laws were more uniform without expansive jurisdictions,” says Mr Katyal.

“In both instances we were aiming for a return to the way the law had always been intended.”

Arguments of fairness and spirit of the law aside, the casual observer of the Supreme Court still may have expected those of its judges perceived to be on the political left — the Democratic nominees — to be deaf to an argument curbing the rights of individuals to bring suit against corporate America. Yet all but one — associate justice Sonia Sotomayor — were persuaded by Mr Katyal’s reasoning.

“In this age where people think everything is politicised in America, eight out of the nine justices agreed with our position,” says Mr Katyal, who before joining Hogan Lovells served as acting solicitor general of the United States.

Rather than take the tried and tested path of approaching the current laws and explaining why his case did not fit, Mr Katyal’s strategy was to strip away decades of precedent and tell the court that the law — as it currently stood — was being incorrectly applied.

“That was our whole argument in the travel ban case as well; courts have made incremental steps in giving the president deference, but the latest step is in tension with the founding documents of our country,” says Mr Katyal, who clerked for Supreme Court associate justice Stephen Breyer.

Ronald Mann, a professor at the Columbia Law School in New York, thinks Mr Katyal’s success was in persuading the court to see the case as an effort to work around the decision of previous cases.

“The groundwork for this case was set in two previous cases — Daimler AG v Bauman and BNSF Railway Co. v Tyrrell — in which the Supreme Court put limitations on the jurisdictions of state courts,” says Mr Mann. “These cases have shown that the system doesn’t need to tolerate jurisdiction shopping. The Supreme Court justices have a strong sense that it’s not fair that plaintiffs can choose courts they think are more favourable when defendants never get to choose.”

A few blocks over from Mr Katyal’s offices in Washington DC, Latham & Watkins partner Andrew Gass has been using similar litigation strategies to upend the status quo in an entirely different area of law. Defending multiple lawsuits in courtrooms across the US, Mr Gass has led a revolution in the way the law deals with music copyright and royalties. Like Mr Katyal, Mr Gass has challenged convention and convinced the courts that the law as it has been applied for decades has strayed considerably from its original intent.

In the age of online streaming, disputes over intellectual property in the music industry have become ripe for litigation. In particular, legal battles have arisen over whether individual states can force streaming services to pay royalties for playing pre-1972 recordings. Such older recordings are not protected by federal copyright law.

Musical acts including The Turtles — famous for the 1967 hit “Happy Together” — and the owners of master recordings for several artists including Jimmy Reed, T-Bone Walker, the Flamingos and the Moonglows, are among those who have brought actions.

Suits have been brought in a number of states, including California, Florida, Georgia, Illinois and New York. Strategies have included going after streaming services for transferring sound recordings without the owner’s consent and infringement of the artists’ state copyright protection.

Mr Gass’s team had been defending radio and streaming services iHeartMedia and Pandora in cases against the owners of master recording rights from the 1950s and 1960s, who were suing for payment of royalties. In June they won a significant battle.

“We argued that state copyright laws are pretty much limited to protecting unpublished works — they don’t cover sound recordings which have been broadly sold with the authors’ permission,” says Mr Gass. “Even though conventional wisdom had held for years that such recordings were protected to some degree, when you actually peeled back the layers of time and cases, you found that the protections simply weren’t there.”

Mr Gass says it was natural for lawyers to bring all their knowledge of past cases in federal jurisdictions and assume the states work the same way.

“When there’s a large body of law seemingly already established, it’s not always easy — or obvious — to go all the way back to the original intent,” he says. Previously it had been a complex question that defence teams had tried to tackle: what specific rights did state laws afford these recordings? “But no one had yet asked the question: did these laws protect them at all?”

When working on the defence for cases in Illinois and California, Mr Gass’s Latham & Watkins team developed a more aggressive argument which let them sidestep the question of which particular rights states granted these old recordings. Instead, Mr Gass argued that states grant them no copyright protection. The result has been a seismic shift in copy­right law.

Opposing counsel in the California case found the idea to be so radical that they issued a threat of sanctions. The case is on appeal before the California Supreme Court. At the time of the Illinois decision, opposing counsel John DeStefano, of Hagens Berman Sobol Shapiro, told Bloomberg the ruling had “failed to recognise the importance of protecting artists’ rights in their creative efforts as technology evolves”.

Yet state courts have found the argument convincing, and Mr Gass is adamant that a return to the original intent of the law promotes fairness and certainty for all parties.

Charles Cronin, a music law lecturer at the University of Southern California Gould School of Law, agrees that, without such rulings, there is potential for disarray in the laws concerning what music can be protected.

“A number of these types of plaintiffs have been seeking in state courts quasi-copyright protection for broadcast and streaming performances of sound recordings, based on common law torts like unfair competition and misappropriation,” says Mr Cronin. “But these laws, and their application, vary greatly among the 50 states.

“Without federal law governing copyright protection for pre-1972 sound recordings, there is a potential for complete disarray and unpredictability in this area of the law as state courts apply the law of their jurisdiction,” he says, echoing agreement that a return to the spirit of the law — and greater clarity — may be helpful for many practice areas.

Glassdoor: open-and-shut case

Few rights in the US are as venerated as the First Amendment guarding freedom of expression — yet fewer rights are as regularly assailed.

While defenders of free speech are more likely to be human rights lawyers than corporate attorneys, when you are general counsel at a website offering employees the chance anonymously to review their employers, you might find yourself aggressively defending free speech.

The right to speak freely — and anonymously — is central to the business model of Glassdoor, the jobs website. The company gives people a forum to speak candidly about their work experiences and find a better job.

“Fighting for our users — making sure their rights aren’t suppressed by employers who want to take down legitimate reviews — isn’t only important to our success, it has wider repercussions for society,” says Tom O’Brien, the company’s deputy general counsel.

In Glassdoor v Superior Court of Santa Clara County in California, Glassdoor successfully argued that an employer could not compel it to disclose a reviewer’s identity just by claiming the worker had breached some nondisclosure agreement, unless they could truly prove there had been an actual breach.

The case was originally brought by Machine Zone, the computer games developer now known as MZ.

Glassdoor’s argument was so successful it forms the basis of a new legal standard for protecting anonymous freedom of speech on the internet.

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