Canada: BLG Monthly Update - October 2011

Last Updated: October 20 2011
Article by Neil Guthrie

Most Read Contributor in Canada, November 2017

The BLG Monthly Update is a digest of recent developments in the law which Neil Guthrie, our National Director of Research, thinks you will find interesting or relevant – or both.


  • Advertising and marketing: still getting robocalls?
  • Art law/equity/personal property: the murky world of art restitution claims
  • Banking: bank not liable for negotiating cheques with missing signature; customer agreement a complete defence
  • Banking: bank not liable for unauthorised e-transfers where security measures 'commercially reasonable'
  • Banking/civil procedure: bank seeks direction on dealing with funds in Libyan embassy account
  • Banking/contracts/torts: economic duress claim fails against lender reasonably exercising contractual rights
  • Civil procedure/torts: spoliation of evidence still not an independent cause of action
  • Class actions: settlement sent back; proceedings should never have been certified because of conflicts within class
  • Commercial law: sale of cheesecake containing nuts not reasonably fit for purpose disclosed by allergic consumer
  • Conflict of laws: Newfoundland and Labrador CA weighs in on 'real and substantial connection'
  • Constitutional: Québec CA affirms federal jurisdiction over navigable waterways
  • Contracts/conflict of laws: jurisdiction by hyperlink
  • Contracts/torts: entire agreement clause and unreasonable reliance defeat misrep claim
  • Damages: you can't have both – double recovery and election of remedies
  • Employment law/torts: standard for malicious prosecution is lower where defendant is private individual
  • Health/privacy: notice to non-parties of disclosure of personal health info
  • Insurance: assault while operating car is an 'accident' for statutory benefits purposes, says Ontario SCJ
  • Intellectual property: battle of the Italian eateries – both having created name confusion, neither gets trademark
  • Intellectual property: music video violates photographer's copyright, partially
  • Intellectual property: trade-mark confusion over 1980s band name?
  • Partnership: this just in – partnership requires more than one party
  • Pensions/trusts: actual knowledge, constructive knowledge and just plain forgetting
  • Police/privacy: right to film police in public upheld by 1st Circuit
  • Privacy: unsolicited communications not 'collected' by municipality; consent to use not required
  • Real property: sex offender across the street could be a latent defect that needs to be disclosed to a purchaser
  • Securities: some but not all misrepresentation claims against Lehman defendants given green light
  • Torts: kids' claim against mother for infliction of emotional distress fails; conduct not 'extreme and outrageous'
  • Torts: 'no such thing as an entirely safe tree', says English High Court


Still getting robocalls?

Robocalls are those annoying, recorded or synthesised telemarketing pitches made with automatic dialling-announcing devices (ADADs). Making ADAD calls without customer consent violates the CRTC's Unsolicited Telecommunications Rules, but the practice continues [Link available here].

A recent settlement between the CRTC and GoodLife Fitness may help to deter ADAD telemarketing: the company has agreed to stop making these calls to its customers without their consent, pay a $300,000 penalty, publish corrective notices and host a business education seminar with the CRTC on telemarketing compliance [Link available here].


The murky world of art restitution claims

Fritz Grunbaum, a prominent Austrian Jewish collector in the 1930s, owned the drawing by Egon Schiele that is at issue in Bakalar v Vavra (SDNY, 17 August 2011) [Link available here].

Precisely what happened to the drawing between 1938 and 1964, when David Bakalar bought it, is unclear. It was not included in an inventory drawn up by a Nazi appraiser before Grunbaum's death in the Dachau concentration camp, so it may not have been looted when the Nazis subsequently seized the bulk of his collection. Grunbaum's sister-in-law Mathilde Lukacs sold the drawing to a Swiss gallery in 1956; it was then bought by the New York gallery from which Bakalar acquired it in 1964.

Grunbaum's heirs, Milos Vavra and Leon Fischer, became aware of the drawing in 2005 and sought its restitution in the New York courts. In dealing with the question of Bakalar's title, the district court initially applied Swiss law, which allows title to pass even where the seller has no right to sell the property. On appeal, it was held that New York law applied, under which a thief cannot pass good title. The case was sent back to the district court, where the onus was on Bakalar to establish that the work was not stolen; if he could not, the original owner's heirs were entitled to it.

Bakalar could not establish that Mathilde Lukacs ever had title to the drawing, whether through gift, bailment or intestacy, nor could it be established that she had acquired it through duress (which would avoid her title altogether); the evidence was simply inconclusive. Advantage claimants, one would have thought; but Vavra and Fischer had sat on their rights and lost out as a result of laches. Even though they were unaware of the drawing specifically until 2005, they and earlier family members had been generally aware that Grunbaum had a valuable collection which had been looted or otherwise alienated. Even making allowances for the turmoil in Europe after the War, the Grunbaum heirs had put Bakalar in a position where he could not gather evidence to support his case. As a non-merchant purchaser of art, he was under no duty to investigate the provenance of the piece.


Bank not liable for negotiating cheques with missing signature; customer agreement a complete defence

Sally Styles was the trusted book-keeper at Manor Windsor Realty (MWR). Trusted, but, as it turned out, dishonest: she defrauded the company of over $400,000 by paying to her own account cheques that had been signed in advance by one of the two required MWR signatories. The fraud was eventually detected and Styles convicted, but she had declared bankruptcy and MWR could recover nothing from her. MWR sued its bank, alleging that it should never have negotiated the fraudulent cheques: Manor Windsor Realty Ltd v The Bank of Nova Scotia, 2011 ONSC 4515 [Link available here].

The bank countered with the customer agreement that MWR had signed, pointing to the clauses requiring MWR to have fraud controls in place (which it really didn't), verify monthly statements and report any discrepancies or errors (which it also failed to do, except towards the end of the fraudster's career). Another clause specifically excluded the bank's liability for fraudulent cheques, even where it failed to verify signatures.

MWR was bound by its agreement. While its principals had not actually read the agreement, they were men of business and did not need to have onerous terms brought specifically to their attention. The agreement was not ambiguous. Even had the bank been at fault, MWR's claim was to a large extent statute-barred. Its recovery was limited to $7,800 arising from cheques which MWR had promptly reported to the bank as fraudulent.

Marty Sclisizzi and Dan Zacks of the Toronto office of BLG acted for The Bank of Nova Scotia.

Bank not liable for unauthorised e-transfers where security measures 'commercially reasonable'

Patco Construction used Ocean Bank's online banking to make payroll transactions and other transfers. In May 2009, it appeared that unknown third parties had made $588,000 in unauthorised withdrawals. The bank managed to block $288,000 of these. Patco sued to recover the rest.

There were some obstacles to overcome, including clauses in Patco's customer agreement making e-banking at the risk of the customer, requiring the customer to monitor transfers daily and making the customer liable for all transfers 'purportedly' made by it. The real question for the US magistrate in Maine was, however, whether Ocean Bank had adopted 'commercially reasonable' security measures; where this is the case, article 4A of the Uniform Commercial Code (on funds transfers) will absolve a bank of liability, provided it also acted in good faith and in compliance with those measures and the relevant agreements with the customer.

The magistrate concluded that while the bank's security measures did not include everything available at the time and were therefore 'not optimal', they were nevertheless OK. The US District Court agreed on appeal in a two-page order: Patco Construction Co v Peoples United Bank dba Ocean Bank (D Me, 27 May 2011; aff'd D Me, 4 August 2011).


Bank seeks direction on dealing with funds in Libyan embassy account

One of the customers of British Arab Commercial Bank (BACB) is the Libyan embassy in London, which has large amounts on deposit with the bank. Until the summer of 2011, BACB made regular payments from the account to Libyan students studying in the UK (₤2.5 to 3.5 million in grants per month). Then came the revolution and conflicting instructions to the bank: from Libyan Foreign Bank, BACB's majority shareholder and a Libyan state-owned entity, a direction to freeze the payments; from the London diplomatic representative of the National Transitional Council (NTC), the direction to make the payments as usual.

BACB sought the High Court's intervention in British Arab Commercial Bank plc v National Transitional Council of the State of Libya, [2011] EWHC 2274 [Link available here]. The UK government and the NTC were represented at the hearing, as was BACB. The bank also attempted service on representatives of the Gaddhafi régime, but they were unavailable. English counsel to the Gaddhafi régime sought an adjournment until instructions could be obtained from his clients.

Blair J concluded that in light of the UK government's recognition of the NTC as the legitimate government of Libya (as certified by the Foreign Secretary for these proceedings), its duly accredited representative in the UK could properly instruct the bank. The Gaddhafi régime, as an unrecognised government, had no standing to seek an adjournment or to challenge the NTC's claim to the account. A final declaration was granted, allowing disbursement of the student grants.


Economic duress claim fails against lender reasonably exercising contractual rights

Wells Fargo Bank (WFB) extended a revolving line of credit to Interpharm. Under the credit agreement, WFB could exercise 'commercially reasonable discretion' to make adjustments to the borrowing base of the loan. Interpharm defaulted in 2007 but WFB chose not to exercise its default remedies, instead entering into a forbearance agreement under which Interpharm agreed to tighter terms (which could be further tightened in WFB's discretion) and to release prior claims against the lender. Four further defaults and four further forbearance agreements ensued over the course of 2007-08, each containing a release. Interpharm sold all of its assets in mid 2008, paid off WFB, repudiated the forbearance agreements (and releases) and sued WFB. Among its allegations was a claim that the lender had procured the agreements through economic duress and had exercised its contractual discretion abusively.

Two levels of court wouldn't buy it. The trial court held that there was nothing wrong in a lender increasing its level of security as a borrower became less creditworthy. The 2d Circuit agreed, finding that the crucial element of wrongful conduct was missing for the duress claim; while WFB had driven a hard bargain, it was merely invoking its legal rights and its actions were within the realm of commercially reasonable discretion: Interpharm Inc v Wells Fargo Bank, National Association (2d Cir, 26 August 2011) [Link available here].


Spoliation of evidence: still not an independent cause of action

Ah, J.W. Quinn J of the Ontario Superior Court of Justice, what we do without you?

In Blais v Toronto Area Transit Operating Authority, 2011 ONSC 1880 [Link available here], he concluded that the (misnamed) Toronto Transit Commission had, in the course of its normal practice of purging records, destroyed documents relevant to Blais's slip-and-fall case against it. Justice Quinn also confirmed the current position in Ontario that spoliation is an evidentiary rule allowing the drawing of an adverse inference, not (yet, anyway) an independent cause of action. On the facts, no such inference was drawn because there was nothing to suggest that there had been a deliberate attempt to gain an advantage in the litigation.

But the decision is worth reading more for Justice Quinn's sardonic asides, mostly in the footnotes, on a straightforward case dragged out and rendered 'uniquely and unnecessarily convoluted' by the plaintiff's counsel, who 'prosecuted it with the enthusiasm of invitees at a tax audit'.


Settlement with freelance authors sent back; proceedings should never have been certified because of conflicts within class

Individual freelance writers and writers groups sued the big online publishers for copyright infringement, on the grounds that material originally provided for a limited use had been made available in the publishers' databases without permission: In re Literary Works in Electronic Databases Copyright Litigation (2d Cir. 17 August 2011) [Link available here].

Mediation ordered by the US district court arrived at a settlement, which divided the plaintiffs into three classes: categories A (holders of registered copyright, eligible for statutory damages under the Copyright Act), B (registered but too late to be eligible for statutory damages) and C (eligible for statutory damages if registered, otherwise able to seek common-law remedies against infringers). Writers could have works putting them in multiple categories. Category C comprised about 99% of the proposed class.

The settlement also imposed a formula to ensure that total damages never exceeded $18 million. If the figure was heading north of that, damages payable to category C members (and, if necessary, A and B members) would be reduced pro rata. There was also to be a release of all future claims unless a class member opted out altogether or exercised a right to bar future use.

Ten class members objected to the settlement on a number of grounds. The Second Circuit held that the proposed release was fine and that the objectors were taking too narrow a view if they thought it could not apply to future claims of infringement or extend to sub-licensors of the publishers. The majority of the court did think, however, that the class should never have been certified in the first place because of the fundamental conflict between holders of category C rights only and class members in one or more of categories A, B and C. Even though there was overlap between categories, the settlement permitted members only in category C to be sold out by members in other categories; the latter could sacrifice their category C rights in favour of more valuable A or B claims. The damages-reduction formula also affected those in C disproportionately. Straub DJ dissented on the conflict point: he thought the settlement mitigated the conflicts and was preferable to creating needlessly complex sub-classes with separate counsel.


Cheesecake containing nuts not reasonably fit for purpose disclosed by allergic consumer

Brian Martin ordered a piece of cheesecake at the Travelodge in Melfort, Sask. Being allergic to nuts, he asked if the apple caramel cheesecake contained any. No, replied Georgina Geddes, the waitress. As it turned out, there was a walnut in the cheesecake, Martin went into anaphylactic shock and he had to be rushed to hospital.

Currie J of the Sask. QB concluded that Geddes (and by extension the owner of the motel) were liable in negligence and negligent misrepresentation: Martin v Interbooks Ltd, 2011 SKQB 251 [Link available here].

The defendants were also liable for injuries sustained through breach of warranties of fitness for purpose under the Consumer Protection Act and the Sale of Goods Act. Martin had communicated his purpose to consume nut-free cheesecake; Geddes and the motel-owner therefore supplied the cheesecake on the basis that it would be reasonably fit for that purpose, which it wasn't. Martin got $25K for pain and suffering, $1.5K for medical expenses and pre-judgment interest.


NLCA weighs in on real and substantial connection

Sikorsky, a Connecticut-based manufacturer of helicopters had no physical presence in Newfoundland and Labrador. A helicopter manufactured by Sikorsky and operated by Cougar Helicopters crashed on its way to an offshore oil rig, killing 17 but leaving one survivor. Cougar sued Sikorsky in Newfoundland, alleging negligent design and manufacture, as well as fraudulent and negligent misrepresentation as to the safety of the aircraft. Sikorsky argued that the Newfoundland court lacked territorial jurisdiction to hear the case and that Connecticut was the more convenient forum [Link available here]. Both the NL trial and appeal courts disagreed. The trial judge found that although Sikorsky's connection to the province was 'somewhat minimal' it was nevertheless real and substantial. He based his analysis on that of the Ontario CA in Van Breda v Village Resorts Ltd, 2010 ONCA 84 [Link available here] – as the NLCA noted, in spite of the fact that Van Breda is under appeal and was 'not entirely endorsed' by the NLCA itself in Fewer v Ellis, 2011 NLCA 17 [Link available here]. For both courts, the 'strong connection' of Cougar and the underlying issues to Newfoundland (in part as a result of Sikorsky's having placed its product in the jurisdiction through the 'stream of commerce') overcame Sikorsky's minimal contacts. Connecticut law governed the contract of sale for the crashed helicopter, but given that there was no direct contract between Cougar and Sikorsky, this might not be relevant – and in any event the NL courts can apply foreign law.

Sikorsky's arguments on forum non conveniens did not prevail: it was not clear that Connecticut law governed, Cougar wasn't forum-shopping just because Connecticut law wouldn't recognise its pure economic loss claim, and the Connecticut court had earlier declined jurisdiction.

The NLCA did suggest in obiter that the trial judge might have been wrong about Sikorsky's attornment through having contested more than procedural matters; equity might demand recognition of the 'untenable position' of a litigant in having to 'choose whether to abandon its jurisdictional challenge or take action it deems necessary in the event the jurisdictional challenge proves to be unsuccessful'.

Rob Bell of the Toronto office of BLG acted for Sikorsky.

Stay tuned for the SCC's disposition of Van Breda.


Québec CA affirms federal jurisdiction over navigable waterways

The municipality of St-Adolphe d'Howard enacted a by-law which restricted access to two lakes to residents of the municipality, required all owners to clean the hulls of their motorised boats and relaunch them from the municipal boat launches, and prohibited the use of private boat launches. The plaintiffs in Chalets St-Adolphe inc. c St-Adolphe d'Howard (Municipalité), 2011 QCCA 1491 [Link available here], owned a cottage-rental business on one of the lakes and challenged the by-law as an intrusion on federal jurisdiction over navigation and shipping.

The Québec Superior Court upheld the by-law as a valid exercise of municipal power, necessary to preserve the shoreline and protect water quality, with only incidental effect on federal jurisdiction; the by-law's discriminatory effect on non-residents was necessary to achieve its environmental purpose and did not impair vital elements of federal jurisdiction. The majority of the Québec CA reversed this ruling: by restricting access to the lakes, the by-law impaired exclusive federal jurisdiction over navigation and shipping, and infringed the ancient common-law right of navigation. Some of the by-law's environmental measures were found to be legitimate and severable. Léger JA dissented, agreeing with the court below that the by-law was environmental in pith and substance, so within the municipality's competence.

In light of the dissent, this one may go to the SCC.


Jurisdiction by hyperlink

Patrice St-Arnaud got upset when Facebook changed its privacy settings to allow it to disclose users' personal information to third parties. So upset that he instituted class proceedings on behalf of other users, alleging violation of privacy and misappropriation of personal information.

St-Arnaud's application was dismissed: St-Arnaud v Facebook Inc., 2011 QCCS 1506 [Link available here]. By clicking on the 'sign up' icon on the Facebook site (which included a warning that doing so indicated that he had read and agreed to Facebook's terms of use and privacy policy) St-Arnaud had also agreed that California law governed any disputes, which had to be adjudicated in the courts of Santa Clara county in that state. The clause was not an external clause under the Civil Code and had been brought to the attention of the user. A Facebook user isn't, in any event, a 'consumer' (because no consideration is involved in joining the site), so the Civil Code's protections with respect to consumer contracts didn't apply. Even if the Québec court had jurisdiction, it was not the most convenient forum to hear the dispute.


Entire agreement clause and unreasonable reliance defeat misrep claim

The plaintiff in Fortier Beverages Ltd v Kapuskasing Plumbing & Heating Ltd, 2011 ONCA 558 [Link available here], bought the defendant's bottled water business. Both were Culligan franchisees. In their preliminary negotiations, Villeneuve, the principal of Kapuskasing Plumbing (KP), had given an off-the-cuff estimate of annual sales of 200,000 bottles, subsequently recorded in a memo to Fortier Beverages (FB). Later, KP's lawyer said the deal was 'not dependent on the number of bottles sold' (emphasis in original), but KP disclosed the dollar value of annual sales. The purchase agreement that was signed included an entire agreement clause stating that there were no reps and warranties other than those found in the actual document. As things turned out, KP's annual sales were just over 100,000 bottles. FB sued for breach of the oral warranty and negligent misrepresentation.

At trial, the judge focused on the preliminary discussions where the 200,000 figure came up. Incorrectly, said the Ontario Court of Appeal. The memo was collateral to the actual agreement (and ousted by it) and, while Villeneuve had certainly been negligent in representing annual sales at 200,000 bottles, it was unreasonable to rely on that given the absence of a warranty in the agreement and given that it would have been easy to figure out the number of bottles actually sold from the dollar figure for sales that had been provided before closing.


You can't have both: double recovery and election of remedies

Ausman Ramzan and his father operated a curry house at 125 Alcester Road in Birmingham, with a restaurant on the ground floor and a private room for functions upstairs. Adjoining the private room but in the neighbouring premises at no. 123 was a storeroom. The owners of 123 Alcester Road had conveyed the storeroom to Ramzan senior in 1992, retaining the rest of the property. In 1999, the owners of no. 123 sent in builders who bricked up the doorway connecting the storeroom to no. 125 and proceeded to covert it into flats. They also removed a fire escape which prevented continued use of the function room. Ramzan was awarded damages for trespass, breach of trust and denial of the equitable right to the transfer of the freehold of the storeroom, as well as an amount for repairing the fire escape, damages representing the defendant's profits and exemplary damages. The defendant appealed most of the awards made against it: Ramzan v Brookwide Ltd, [2011] EWCA Civ 985 [Link available here].

The English Court of Appeal observed that while the trial judge had considered the possibility of double recovery and was not wrong to examine various heads of damage separately rather than globally, she had fallen into error on a number of points. Her calculation of lost profits based on past receipts less a discount factor was largely reasonable but adjusted downwards a bit. There was more serious error in the awards for mesne profits (damages for loss of use of land) and breach of trust, which essentially compensated the claimants for the same injury arising from the same wrong: this was double recovery. Sometimes remedies may be cumulative, for example having a fraudulently-induced contract set aside and also suing for damages. But remedies may also be alternative and inconsistent, the classic example being damages for loss occasioned by breach and an accounting of profits derived from that breach, in which case the plaintiff must elect which of the two remedies to pursue. This was clearly a case of alternative remedies; Ramzan couldn't get damages for breach of trust and lost profits, so was treated as having elected for the latter as the larger measure (although the court reduced the award to equal the value of the benefit received by the defendant). Damages for the cost of restoring the fire escape were also duplicative, in light of an agreed award (not under appeal) for loss of use of the land. The exemplary damages were adjusted down from ₤60,000 to ₤20,000.


Standard for malicious prosecution lower where defendant is private individual

John Pate was dismissed without notice from his job as chief building official with the Township of Galway and Cavendish. The Township told him they had evidence he had kept building fees for his own account but that this would not be reported to the police if he resigned. Pate refused and the matter was reported to the police. Pate was acquitted of all charges and sued his former employer for wrongful dismissal and malicious prosecution. The employer conceded that Pate had been wrongfully dismissed. At the trial of the remaining issues, the judge awarded general, aggravated, special, punitive and Wallace damages but dismissed the claim for malicious prosecution. Pate appealed that finding and the quantum of punitives ($25,000).

Appeal allowed and new trial ordered, said Simmons JA: Pate v Galway-Cavendish (Township), 2011 ONCA 329 [Link available here]. The trial judge set the bar for proving malicious prosecution too high in not allowing malice to be inferred, in the case of a private party, from the absence of reasonable and probable grounds. The high standard required in establishing malice on the part of the Crown 'simply [does] not apply where the action is against a private individual'. The judge also erred in requiring Pate to prove that the defendant actually initiated the prosecution; if the Township withheld exculpatory evidence from the police, that would be enough. The trial judge's findings on malice with respect to the prosecution were also inconsistent with those on wrongful dismissal. The punitive damages award could have been higher but, like the wrongful prosecution claim, needed to be considered in a new trial.


Notice to non-parties of disclosure of their personal health info

ML was admitted to a psychiatric facility, where she alleges that she was assaulted by two other patients. In her action against the the facility for failing to ensure her safety, she sought unusual occurrence reports (UORs) related to the alleged incidents and the medical records of the two other patients (who were not parties to the litigation): ML v Homewood Health Centre Inc., 2011 ONSC 4790 [Link available here].

Ricchetti J agreed that the records were necessary to advance the litigation, ordering disclosure of redacted copies of the UORs. The medical records were more of a problem: disclosure would breach the privacy rights of the alleged assailants (who were unaware of ML's claim), but simply redacting their names offered insufficient protection of those rights and posed practical problems. The judge had no choice but to order disclosure on notice to the two other patients. Further problem, though: ML did not know their identities. Given that ML did not appear to be using the claim primarily to obtain third-party health information, the facility was ordered to disclose the names to her so that the non-parties could be put on notice, subject to conditions. To have the facility serve the notice would be cumbersome and could create a conflict between the facility and its patients.


Assault while operating car is an 'accident' for purposes of statutory accident benefits, says Ontario SCJ

Michael Downer pulled into a gas station but needed to count his money before filling up. While the engine was still running, he was assaulted by a group of young men, who presumably intended to steal his car. Downer was injured but managed to drive away, reaching a nearby police station.

Downer claimed – and initially received – $73,000 in accident benefits as a result of depression, anxiety, post-traumatic stress, chronic low back pain, migraine and other ailments resulting from the incident. The insurer later informed Downer that he would receive no further payments and that he would be required to repay the moneys already paid because his injuries did not result from an 'accident' as defined in the Statutory Accidents Benefits Schedule (SABS).

The SABS defines an 'accident' as 'an incident in which use or operation of an automobile directly causes impairment'. Murray J concluded that Downer's injuries resulted from 'ordinary and well-known activities to which automobiles are put' (pulling into a gas station); his injuries were directly caused by 'ownership, use or operation' of his vehicle; and the intervening act (the assault) did not diminish the fact that the injuries resulted from 'use' of the car (trying to get away from his attackers). Downer was therefore involved in an 'accident' for which he could receive benefits under the SABS: Downer v Personal Insurance Co, 2011 ONSC 4980 [Link available here].


Battle of the Italian eateries: both having created name confusion, neither gets trademark

Patsy's Pizzeria (PP) opened its first outlet on East 118th Street in New York in 1933. There are now seven locations in Manhattan, one on Staten Island and one in Syosset, NY. In 1944, Patsy's Italian Restaurant (PIR) – unconnected with PP – opened on West 56th. PP and PIR co-existed without litigation until 1998, when the great sauce dispute erupted: both wished to market a bottled sauce with the brand name Patsy's. PP won round one. Round 2 began in 2006, when PIR accused PP of trademark infringement in connection with its Staten Island and Syosset locations, resulting in PP having to issue a disclaimer that there was no affiliation with PIR.

The fight over the Patsy's name was also revived. The district court, clearly fed up, said that neither party could use the name on its own. PIR's registration of the name was cancelled and PP's request for reinstatement of its registration was refused. The Second Circuit affirmed this on appeal, also weary of 'rehashes of years of arguments that need to come to an end': Patsy's Italian Restaurant Inc v Banas (2d Cir. 24 August 2011) [Link available here].

Music video violates photographer's copyright, partially

The singer Rihanna released a video for a song entitled 'S&M' in early 2011. Certain scenes from the video bore similarities to specific works by photographer David LaChapelle, who is noted for compositions involving fashion models, elaborate costumes and sets, and distinctive poses and lighting. LaChapelle alleged that the producers of the video had violated his copyright in certain of his photographs.

He was partially successful in US District Court: LaChapelle v Fenty (SDNY, 19 July 2011) [Link available here]. Unhelpful for Rihanna was evidence that her people had proposed a 'LaChapelle-esque music video' to a number of possible directors, and that some of the video's storyboards consisted of the very photographs at the heart of the artist's complaint. The fact that the video did not reproduce every detail of the original works didn't matter: the 'total concept and feel' were clearly derived from the photos. Rihanna's bogus-sounding fair-use defence that the borrowed material was a necessary part of the video's commentary on her relationship with the media was rejected; that commentary was unrelated to the photographs and did not require use of them. Not all of Rihanna's defences failed, however. The video's generic S&M imagery was not a violation of LaChapelle's copyright to the extent that it flowed naturally from the video's choice of subject and did not reproduce specific elements in the photos. LaChapelle's trademark and unfair competition claims also failed.

The exhibits attached to the decision are a bit racier than what one normally sees in the law reports.

Trade-mark confusion over 1980s band name?

Bucks Fizz: remember them? Britons of a certain age sure do, if only because they are so far the penultimate British winners of that dubious honour, the Eurovision song contest. Members of the band have continued to tour (you can imagine the kinds of venues), but in rival factions.

The issue for the UK Intellectual Property Office (IPO) was who owned the rights to the band's name. Robert Gubby, one of the original members, has been touring under the name Bucks Fizz with Heidi Manton, a member who joined the group in 1993 when one of the original members left to pursue a solo career (whatever happened to her?). The other three original members have been touring under name The Original Bucks Fizz (and a bunch of other names) since 2004. Gubby and Manton registered the trade mark BUCKS FIZZ in 2001, not without opposition from The Original Bucks Fizz. Gubby and Manton in turn opposed registration of that moniker.

Things came to a head, with the IPO ultimately ruling in Gubby and Manton's favour. Any confusion about which faction was the real/original Bucks Fizz arose solely when The Original Bucks Fizz started performing. No member of the public would expect the group calling itself Bucks Fizz to consist of the original members, given that they hadn't performed together since 1985 and in light of 15 subsequent line-up changes even before the name became controversial [Link available here].


This just in: partnership requires more than one party

California's Revised Uniform Partnership Act has, since its adoption in 1996, permitted a partner to 'dissociate' himself or herself from the partnership – that is, to withdraw without causing the automatic dissolution of the partnership, which would otherwise occur (unless the partnership agreement provided for continuance on the withdrawal, expulsion or death of a partner).

Rudy Corrales and his brother Richard formed a partnership in 1989, from which Richard 'dissociated' himself in 2006. In the resulting lawsuit over partnership assets, a major issue was the valuation of the business for buy-out purposes under the state corporations code.

That's where the trial judge went wrong, said the California appeal court: Corrales v Corrales (Cal. App. 4th Dist., 10 August 2011) [Link available here]. There was no business to value after 2006, the partnership having been automatically dissolved by Richard's withdrawal. Had two or more partners been left, the partnership would have continued; as for a one-person partnership, 'no such animal exists' – not even in California.


Actual knowledge, constructive knowledge and just plain forgetting

MCP Pension Trustees, trustees of the Maxwell Communications pension scheme, sued AON Pension Trustees, the administrators of the scheme, for negligence in failing to record the transfer of 32 employees from one pension fund to another (thereby disentitling the 32 to a share of a ₤2.67 million surplus and triggering an insurance claim by MCP). MCP conceded that while it had known that the 32 employees should have been transferred, it had simply forgotten about them.

The trial judge found that MCP was liable because it had known about the 32; the negligence claim of MCP (and its insurer) against AON could therefore proceed. AON appealed, making the preliminary issue for the English CA whether MCP had had actual or constructive notice of the existence of the 32 beneficiaries: AON Pension Trustees Ltd v MCP Pension Trustees Ltd, [2011] 3 WLR 455 (CA). [Link available here].

In the Court of Appeal, Elias LJ referred to the fivefold classification of 'knowledge' set out in Baden v Société Générale [1993] 1 WLR 509 (Ch D): (i) actual knowledge, (ii) wilfully shutting one's eyes to the obvious, (iii) wilfully and recklessly failing to make such inquiries as an honest and reasonable person would make, (iv) knowledge of circumstances which would indicate the facts to an honest and reasonable person and (v) knowledge of circumstances which would put an honest and reasonable person on inquiry. MCP argued that satisfying any of these criteria would establish that it had notice of the 32 claims; AON argued that only (i) to (iii) would do it. Lord Justice Elias didn't think, in the end, that constructive notice and the unnecessarily complicated Baden framework were helpful, given that MCP clearly did have actual notice of the 32 claims. AON's argument that notice ceases when knowledge ceases had to be rejected; it is 'quite impossible to say that notice lapses with memory'. AON's appeal failed and the case was remitted for trial on the issue of its alleged negligence.


Right to film police activity in public upheld by 1st Circuit

When Simon Glik was walking past Boston Common one night in 2007, he saw three police officers arresting a young man. Another bystander called out for the officers to stop because they were hurting the suspect. Glik began recording the arrest using the video camera on his phone. When asked to stop recording Glik said no, saying that he saw one of the officers punch the young man. The officer also asked if Glik's phone had audio recording. Yes, Glik replied, whereupon he was arrested for making an unlawful audio recording under state wiretap legislation, disturbing the peace and aiding in the escape of a prisoner (the last charge was subsequently dropped). The Boston municipal court acquitted Glik: he had a First Amendment right to record the arrest and the wiretap statute prohibits only secret recordings; Glik had filmed the police openly.

Glik brought a civil action against the police, which they moved to dismiss on the grounds that Glik's constitutional right to film was unclear and they enjoyed qualified immunity from personal liability in the exercise of their functions. The district court denied the motion. Glik's First Amendment right was clearly established, which meant that the police could not plead immunity for violation of it. The First Circuit agreed on appeal: Glik v Cunliffe (1st Cir, 26 Aug. 2011) [Link available here]. Glik's acts were clearly protected by First Amendment guarantees of free speech and a free press, which extend to promoting free discussion (and public filming) of government acts. Glik's Fourth Amendment right to protection from arrest without probable cause was also violated.


Unsolicited communications not 'collected' by municipality for purposes of privacy legislation; consent to use not required

The two complainants in Re City of Vaughan, MC08-91 and MC08-92 (Privacy Commissioner) sent numerous e-mail messages, requests for information and letters to staff at the City of Vaughan, as well as to former staff, members of city council and the mayor. Staff at the city took the view that the barrage of communications constituted harassment. The complainants had also been defendants in a lawsuit brought by the city, which resulted in a settlement under which the complainants agreed not to send further communications – but they continued anyway. Staff sent copies of the communications to in-house and external counsel. The complainants took this to the Privacy Commission, alleging that in failing to obtain the complainants' consent to disclosure city staff had not 'collected, used and disclosed' their personal information in accordance with the municipal privacy statute.

The Commissioner disagreed: unsolicited personal information is not 'collected' by a municipality but merely received; compare and contrast another provision in the legislation which uses the broader formulation 'obtained or compiled'. As a result, the city's use of the personal information was OK; the individual's consent is required only where that information is actually 'collected' by the municipality. [Link available here].


Sex offender across the street could be a latent defect that needs to be disclosed to a purchaser

Jason Dennis and Rebecca Bound, the parents of two young children, bought a house in Bracebridge, Ont. from William and Helen Gray. The Grays did not disclose what was common knowledge in the area, that a person convicted of child pornography offences lived across the street. The purchasers discovered this after the sale closed, refused to move in and sued the vendors. The vendors relied on caveat emptor and moved to dismiss on the grounds that there was no reasonable cause of action.

Hoy J of the Ontario Superior Court concluded that the plaintiffs' case, while novel, was not doomed to fail: Dennis v Gray, 2011 ONSC 1567 [Link available here]. The principle of caveat emptor generally governs sales of land, except where there is a latent defect known to (and sometimes concealed by) the vendor that the purchaser's reasonable inspection would not reveal. The cases on latent defects are not always easy to reconcile but did not clearly preclude recovery on the facts at issue here, which also raised difficult policy considerations related to the protection of children and the reintegration of offenders into society. The plaintiffs' case could proceed.


Some but not all misrepresentation claims against Lehman defendants given green light

In 2006, Lehman Brothers Holdings Inc. issued $30 billion in debt and equity securities under offering documents (ODs) that incorporated by reference Lehman's SEC filings. The plaintiffs – pension funds, companies and individuals – alleged that they had suffered losses attributable to material misrepresentations and omissions in Lehman's financial statements, which were included in the SEC filings. They sued Lehman's directors, officers, auditors and underwriters; the defendants moved to dismiss the claim.

Kaplan DJ found that some of the claims would not fly, but was prepared to allow the claims that the ODs contained false statements about the effect of certain repo transactions on the company's finances, the fact that its risk-management practices were 'strong', and the extent of stress-testing and concentration of credit risk. A reasonable inference could be drawn that Lehman's directors and officers knew or were reckless in not knowing that a misleading picture of things had been painted (but why, oh, why must US lawyers use the Latin adverb scienter as a noun?); these defendants' exercise of due diligence was not clearly established. Certain of the claims against the auditors were viable. The plaintiffs had shown, with respect to the claims that could proceed, that at least an ascertainable part of their losses were 'attributable to the allegedly false picture of relative security' at Lehman.

In re Lehman Brothers Securities and ERISA Litigation (SDNY, 27 July 2011) [Link available here].


Kids' claim against mother for infliction of emotional distress fails; conduct not 'extreme and outrageous'

Steven Miner and Kathryn Garrity divorced, messily, in 1995. Their adult children brought a claim against their mother, seeking damages for intentional and negligent infliction of emotional distress during the time after the divorce.

The Illinois trial court dismissed the 'bad mothering' claim, which the state's appellate court upheld: Miner v Garrity (Ill App (1st), 29 July 2011) [Link available here].

Both courts rejected the idea that Garrity's 'use of the psychological influence of a parent over the behavior of her offspring' had been so 'extreme and outrageous' as to found a complaint for infliction of emotional distress. The appeal court suggested that while Garrity may not have been very nice in showing favouritism between siblings and in making remarks that were 'unpleasant and perhaps insensitive', there was nothing so 'abusive and atrocious' as to amount to the intentional or negligent infliction of emotional distress.

Adducing the fact that their mother's birthday cards to them did not include cash or a cheque was probably not a winner strategy on the plaintiffs' part; having their father as one of their counsel might also have struck the wrong tone.

'No such thing as an entirely safe tree', says English High Court

Felbrigg Hall is an English stately home administered by the National Trust (NT). The estate attached to the house includes the Great Wood, a forest of some 250,000 trees, many of them ancient. During the course of a school outing in 2007, a branch of a large beech tree, nearly two centuries old, fell 'entirely without warning' (as tree-branches tend to do) on four young boys, killing one and seriously injuring the others.

The parents of the boys sued the NT. Potentially damaging was a 1997 assessment by the NT's head of forestry of safety risks associated with old trees, which the plaintiffs argued the NT had ignored. Mackay J concluded, after hearing expert evidence on old trees, that 'judging the integrity of a tree is art not science' and that, while the accident was 'the cruellest coincidence', the NT and its arborists had satisfied their duty of care in seeing that children using the Great Wood were reasonably safe to do so [Links are available here and here].

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