“I’m Afraid I Can’t Do That, Dave” and Other Lessons from Mata v. Avianca Airlines

Posted by on Jul 1, 2023 in News, News and Highlights, Newsflash | 0 comments

The chatbots are coming! The chatbots are coming!  And, apparently, they want to practice law. A New York attorney recently discovered the significant risk of relying on ChatGPT to do one’s legal research.  In the case, the plaintiff, Robert Mata, claimed his knee was injured when it was struck by a serving cart during a flight, and he sued the airline, Avianca Airlines.  Avianca’s attorneys filed a motion to throw out the case, arguing the statute of limitations had expired.  In response, Mata’s attorney, Steven Schwartz, submitted a 10-page brief, chock full of legal citations as to why the airlines’ motion should be denied.  Unfortunately, at least six of the cases were bogus – completely fabricated. When Avianca’s lawyers pointed out that they could not find any of those cases, Schwartz admitted that he had used ChatGPT to perform his legal research.  Introduced in November 2022, ChatGPT is an artificial intelligence chatbot that uses natural language processing to create humanlike conversational dialogue. In response to a user’s queries, the program can answer questions and compose various written content, including articles, essays, and – at least Schwartz thought – legal briefs. In a recent hearing on possible sanctions against Schwartz and another lawyer, Schwartz apologized to the court, conceding he had “failed miserably” at vetting the authorities which the bot provided.  He told an angry U.S. District Judge P. Kevin Castel that he was “operating under a misconception … that this website was obtaining these cases from some source I did not have access to.” At the very least, can you trust ChatGPT to tell you if it is making stuff up? Apparently not. In a copy of the exchange submitted to the judge, Schwartz asked ChatGPT: ‘Is varghese a real case’ and ‘Are the other cases you provided fake.’  The bot replied: ‘No, the other cases I provided are real and can be found in reputable legal databases.’ The takeaway for lawyers is clear:  do not rely on ChatGPT for your legal research. More broadly, the case underscores the fact that the ChatGPT platform is still limited and unreliable.  Thus, anyone doing online research which they intend to use in business or academics should not blindly quote from or rely on the results of a chatbot query – or a Google search for that matter.  Verify your sources! The judge has not yet ruled on whether Schwartz will be sanctioned.   “I’m Afraid I Can’t Do That...

read more

Employers: Where’s Your Email Monitoring Policy?!?

Posted by on Jun 1, 2023 in News, News and Highlights, Newsflash | 0 comments

A recent California appellate court case reinforces the need for employers to have a clear and enforceable policy regarding the ability to review employees’ work emails.  In Militello v. VFARM 1509 [1], the plaintiff, Shauneen Militello, sued several fellow co-owners of a cannabis manufacturing and distribution company.  One of the defendants, Ann Lawrence, asked the court to “disqualify” (remove from the case) Militello’s attorney, arguing that Militello had improperly obtained private emails between Lawrence and her husband that were sent on the company’s email network, which Militello then provided to her attorney.  Her attorney, in turn, attempted to use the “private” emails in the litigation in violation of the spousal communications privilege (the privilege against disclosure of private communications between spouses). The trial court disqualified Militello’s attorney and the Court of Appeal agreed.  The Court of Appeal ruled that private emails sent on a company computer network could not be used against the user where the user had a “reasonable expectation of privacy” with respect to personal emails sent over the company network.  Importantly, the court noted that there was “no evidence [the company] had a policy of monitoring individual email accounts—there was no [] company handbook with a policy prohibiting [employee] from using her [company] email account for personal communications or indicating her account would be monitored to ensure compliance with that restriction—let alone that [employee] had agreed to such a policy.” This latest case underscores the need for employers to have a clear, written policy, countersigned or otherwise acknowledged by the employees, concerning electronic asset usage.  At a minimum, the policy should state that the employer can monitor employees’ email communications and all activity on work computers or devices.  The policy should also indicate that the employees have no reasonable expectation of privacy in their email communications or other digital/online activities while using company email, computers or other devices. This is yet another cautionary tale for California employers but one which is fairly easy to address. Employers who have questions about this recent decision or employment laws in general should contact Navigato & Battin. [1] Militello v. VFARM 1509 (2023) 89 Cal.App.5th 602 [306 Cal.Rptr.3d...

read more

Commercial Lease Force Majeure Decisions Continue to Disappoint Tenants

Posted by on Jun 1, 2023 in News, News and Highlights, Newsflash | 0 comments

Force majeure provisions in commercial leases generally allow one or both parties to the lease to delay or wholly excuse their performance of certain lease obligations in the event of unforeseen circumstances (often defined to include “acts of God,” fires, natural disasters, war, and governmental action, among other things).  Prior to March 2020, these provisions were often overlooked in lease reviews and negotiations as more-or-less boilerplate and unimportant.  Since COVID-19 and the slew of government shutdowns, occupancy restrictions, lockdowns, and masking requirements that came along with it, force majeure provisions have been a major point of contention between tenants seeking to avoid paying rent during shutdown periods and landlords seeking to collect it.  For the most part, courts have been relatively unsympathetic to tenants who have attempted to utilize their commercial leases’ force majeure provisions to avoid paying rent otherwise due to their landlords.  A recent case, West Pueblo Partners, LLC v. Stone Brewing Co., LLC, is no exception. In West Pueblo, Stone Brewing entered into a long-term lease for a space which was to be operated as a restaurant and brewery, taking possession of the space in January 2018.  From March 2020 through March 2021, Stone Brewing was required to comply with government shutdown orders and other rules, which virtually eliminated its ability to serve dine-in patrons.  This was devastating to the location’s revenue, and Stone withheld rent from its landlord from December 2020 through March 2021.  As you probably guessed from the title of the article, Stone Brewing relied on its lease’s force majeure provision to excuse its failure to pay.  The force majeure clause in question read: “If either party is delayed, interrupted or prevented from performing any of its obligations under this Lease, and such delay, interruption or prevention is due to fire, act of God, governmental act or failure to act…or any cause outside the reasonable control of that Party, then the time for performance of the affected obligations of the Party shall be extended for a period equivalent to the period of such delay, interruption or prevention.” COVID-19 and the associated governmental shutdown orders seem to fit perfectly into this definition of a force majeure event excusing Stone Brewing’s payment of rent, but the Court read the provision narrowly in ruling against Stone Brewing’s arguments.  Per the Court, Stone Brewing was not actually delayed, interrupted, or prevented from paying rent to its landlord.  True, it may have been prevented from serving customers or generating revenue during some or all of the government shutdown period, but this did not literally prevent Stone Brewing from paying rent.  Rather, it simply made the payment of rent and continuing operations more expensive.  The Court also noted that Stone Brewing did in fact have the money to pay rent on the location even though revenue took a major hit due to COVID restrictions.  Courts have relied on these narrow interpretations in ruling against similar arguments made by tenants suffering from COVID-19-related hardships, driving home the point that the express language chosen for these lease terms matters a great deal. Commercial leases are most often presented as extraordinarily landlord-friendly documents, but reasonable concessions are not impossible to attain.  Your commercial space may be one of the most significant investments made in your business, and it is not uncommon for...

read more

Good Faith Defense for Wage Claims

Posted by on May 1, 2023 in News, News and Highlights, Newsflash | 0 comments

As many employers are aware, California has some of the most employee-friendly laws in the country. Two such employee-friendly laws are Labor Code sections 203 and 226. Section 203 imposes a waiting time penalty on an employer who willfully fails to pay wages owed to a terminated employee on the date of termination. The penalty for violating Section 203 is the payment of daily wages to the employee for up to thirty days following the date of termination, unless the wages owed to the now ex-employee are paid sooner. Section 226 imposes a penalty on an employer who knowingly and intentionally fails to provide accurate wage statements to an employee. The penalty for violating Section 226 is the greater of all actual damages or $50 for the initial pay period in which a violation occurs and $100 per employee for each violation in a subsequent pay period.  The penalty is not to exceed an aggregate penalty of $4,000. A recent California Court of Appeal decision[1] considered whether an employer’s good faith belief that no wages were owed would preclude a finding that the employer “willfully” or “knowingly and intentionally” failed to comply with the statutory requirements of Labor Code Sections 203 and 226. The Court of Appeal ruled that an employer’s good faith belief that no wages were owed to an employee prevented the employer from being penalized under Sections 203 and 226. The plaintiff in Naranjo argued that the good faith defense applied only in labor commissioner hearings and not in lawsuits. The Court disagreed with the plaintiff’s argument and explained that even though the defendant’s defenses to the wage claims ultimately failed, such defenses were reasonable and were not made in bad faith. The Court of Appeal explained that the “knowing and intentional” requirement cannot be satisfied by merely showing the employer’s inadequate wage statement was not an inadvertent error or a clerical mistake. Rather, the Court held that the “knowing and intentional” standard is similar to the “willful” standard under Section 203 and requires that the plaintiff show something more than an inadvertent error or mistake. The Naranjo decision is a win for employers and provides an avenue for employers to avoid additional penalties under Labor Code Sections 203 and 226 if they are found to have violated other wage laws. While this decision is helpful, employers should still be careful to ensure that they are not violating other wage laws by failing to pay minimum wage or overtime wages, among other things. Employers who have questions about this recent decision or employment laws in general should contact Navigato & Battin. [1] Naranjo v. Spectrum Security Services, Inc. (Feb. 27, 2023 Second District, Div. Four No....

read more

Generative AI: Employer Considerations for Permitting Employees to Use ChatGPT

Posted by on May 1, 2023 in News, News and Highlights, Newsflash | 0 comments

Unless you have been living under a rock, you and your employees have used or at least heard of ChatGPT. ChatGPT is an AI-based language model developed by OpenAI. GPT stands for “Generative Pre-trained Transformer,” which refers to the model’s architecture and how it was trained. ChatGPT is designed to generate human-like responses to natural language input. It has been trained on a massive dataset of text from the internet and can generate coherent, contextually relevant text in response to a wide variety of prompts. ChatGPT has achieved impressive results in a range of natural language processing tasks, including text generation, question answering, and language translation. Your employees may use ChatGPT to find answers to simple questions, to write computer codes, or even to help write a newsletter article. In fact, all of the italicized content of this newsletter article was “authored” by ChatGPT. Thus, if you are an employer considering the use of ChatGPT in your organization, there are a few restrictions you may want to consider: Legal compliance: When using ChatGPT in your organization, you must ensure that you are complying with all applicable laws and regulations. For example, if you collect user data using ChatGPT, you may be subject to data privacy regulations such as the General Data Protection Regulation (GDPR) or the California Consumer Privacy Act (CCPA). Ethical considerations: As with any technology, the use of ChatGPT may raise ethical considerations that you need to address. For example, you should ensure that ChatGPT is not being used to manipulate or deceive users, or to promote harmful or discriminatory content. Technical limitations: While ChatGPT is a powerful language model, it is not perfect and may have technical limitations. For example, it may struggle with understanding certain types of language or may have biases based on its training data. You should be aware of these limitations and ensure that they do not impact the quality of service you are providing. Employee training: If you are implementing ChatGPT in your organization, you should ensure that your employees are trained on how to use it effectively and responsibly. This may include training on how to monitor ChatGPT’s performance, how to address inaccuracies or errors, and how to handle sensitive or confidential information. Use case limitations: ChatGPT is best suited for certain types of use cases, such as answering frequently asked questions or providing customer support. It may not be suitable for more complex tasks, such as making important business decisions. You should be aware of its limitations and ensure that it is being used appropriately. In addition to the suggestions by ChatGPT, employers may want to implement additional policies. Employers should consider a policy in which job applicants affirm that they have not used ChatGPT to complete their job application, draft a cover letter, draft a writing sample, or otherwise assist the applicant in applying for the job at hand. In addition, employers should consider a policy in which employees agree that they have not used and will not use ChatGPT for certain tasks. While ChatGPT may be able to answer common questions and provide useful background information, it should not be used for more complex tasks. For example, a medical professional should not ask ChatGPT about dosage or side effects of a medication. However, ChatGPT may be useful...

read more

Spoof Trademark Office Calls

Posted by on Apr 4, 2023 in News, News and Highlights, Newsflash | 0 comments

Obtaining a trademark requires filing a trademark application and paying a fee to the United States Patent and Trademark Office (the “USPTO”). Obtaining a trademark does not, however, require providing information or making payments to USPTO over the phone. Recently, USPTO issued an alert regarding fraudulent “spoof” calls in which the caller purports to be from USPTO itself. A spoof call is one in which the caller uses technology to change the name and number which appear when receiving the call. A spoof call might appear to be from USPTO based on Caller ID, but is actually from an unknown bad actor. The spoof calls purporting to be from USPTO are spam calls in which the caller informs the recipient that their trademark has expired and payment is required to keep the trademark active. The spoof calls also seek sensitive personal information, such as social security numbers. USPTO’s alert stated that USPTO will never ask for personal information or payment over the phone. If you receive a call which appears to be from USPTO, do not provide any personal information or payment over the phone. Instead, you should determine if the call was legitimate by contacting the Trademark Assistance Center (“TAC”) of the USPTO at 1-800-786-9199. In addition to contacting the TAC, you may also search the Trademark Status and Document Retrieval system on the USPTO website to find official communications regarding a trademark or trademark application. Official communications will never involve USPTO seeking personal information or payments via a phone call. It is important to err on the side of caution and verify any communications which seek personal information or payment, as well as any communications which seem unusual or suspicious. With respect to trademark filings, individuals frequently troll the information contained in trademark filing documents for email addresses, mailing addresses, and telephone numbers, among other things, and use such publicly-available information to try to trick unknowing trademark applicants and registrants into paying unnecessary costs and fees.  Do not fall victim to these schemes.  If you have any questions regarding your trademarks or any communications which purport to be from USPTO, please contact Navigato & Battin right...

read more

California’s Ban on Mandatory Arbitration Agreements is Struck Down

Posted by on Apr 4, 2023 in News, News and Highlights, Newsflash | 0 comments

It is common practice for employment agreements to require employees to participate in mandatory arbitration with their employers to resolve any disputes. Among other things, arbitration provisions are favored by employers because arbitration clauses can prevent disputes with employees from being filed as class action lawsuits or in publicly-available court filings. In 2019, California enacted Labor Code §432.6, which made it an unlawful employment practice for employers to require applicants and employees to sign arbitration agreements as a condition of employment. Thus, Labor Code §432.6 banned mandatory arbitration provisions or agreements between an employer and employee. In 2020, as the ban was set to take effect, the U.S. Chamber of Commerce filed suit and sought an injunction which would prevent the enforcement of the new statute. The United States District Court for the Eastern District of California ruled in the Chamber of Commerce’s favor and granted a preliminary injunction which prevented enforcement of the ban. In reaching its decision, the Eastern District explained that the Federal Arbitration Act (“FAA”) preempted California’s ban. In other words, the FAA, which allows mandatory arbitration agreements, supersedes California’s law because it is a federal law specifically governing the same issue. Following the Eastern District’s ruling, California appealed the ruling the United States Court of Appeals for the Ninth Circuit. The Ninth Circuit ruled that the FAA does not entirely preempt Labor Code §432.6 and thus, the ban could be enforced. The Chamber of Commerce then petitioned the Ninth Circuit for a rehearing on its ruling. On February 15, 2023, the Ninth Circuit released its decision on the rehearing. This time, the Ninth Circuit held that “[b]ecause the FAA’s purpose is to further Congress’s policy of encouraging arbitration, and [California’s ban] stands as an obstacle to that purpose, [the ban] is therefore preempted.” As a result of the Ninth Circuit’s new ruling, Labor Code §432.6 no longer bars California employers from requiring mandatory employment arbitration agreements as a condition to employment. California employers can now continue, or begin, to require employees to sign mandatory arbitration provisions or agreements as a condition to employment. Arbitration can be more favorable to employers, and arbitrated disputes are often resolved much faster than a lawsuit would be. Therefore, employers should consider making arbitration agreements part of their standard hiring practices. Any employer who has questions about the impact of the Ninth Circuit’s ruling or how arbitration agreements work should contact Navigato &...

read more

Insurance Coverage for Soft Cost Claims

Posted by on Mar 1, 2023 in Newsflash | 0 comments

Builder’s risk insurance can include coverage for both “hard costs” and “soft costs.” Hard costs are tangible costs which are directly related to building, such as labor and construction materials. Soft costs are indirect costs and are less tangible than hard costs. Soft costs include things such as architecture, inspection, accounting, and engineering fees as well as permits, taxes, loans, and legal fees. Until recently, it was unclear how certain soft costs would be treated under builder’s risk insurance policies in California. However, a 2022 case[1] provided clarity and guidance on how some soft costs would be treated. In that case, the plaintiff’s residential building project was damaged by severe storms and the plaintiff sought coverage for hard costs and soft costs associated with the damage. The plaintiff sought coverage for soft costs which increased as a result of delays caused by the storms. Specifically, coverage was sought for additional real estate taxes, construction loan interest, and advertising and promotional expenses incurred as a result of the delays associated with the insured event. The plaintiff’s insurance company provided coverage for the hard costs but denied coverage for the soft costs, leading to the lawsuit being filed. In ruling on the insurance company’s motion for summary judgment, the court considered several different arguments made by the insurance company. First, it was argued that the soft costs were not covered under the policy because they were only being sought for specific homes in part of the development, rather than for the development as a whole. The court disagreed with this argument and noted that the term “Insured Project” was not defined in the policy and thus, there was no support for the argument that only damages to the development as a whole were covered. The court then addressed the insurance company’s argument that additional interest accrued by the plaintiff was not covered because it was obtained through loans from the plaintiff’s subsidiaries rather than from the plaintiff itself. In response, the court noted that nothing in the policy specified what types of loans and interest were covered by the policy and that the policy failed to define “construction loan.” The court also noted that the plaintiff’s expert opined that the plaintiff incurred increased interest as a direct result of the damage from the storm. Lastly, the insurance company argued that the plaintiff failed to provide evidence of increased real estate taxes and marketing expenses due to the damage from the storm. The court found that testimony from the plaintiff’s employees provided enough evidence of such increased taxes and expenses for the case to move past the summary judgment stage. There are multiple key takeaways from the court’s decision. First, builders can recover for damages to parts of projects even if the whole project is not damaged. Second, soft cost coverage can cover nontraditional loans and interest expenses. Third, it is important to clarify the definitions of key terms in the insurance policy, such as “Insured Project.” Fourth, it is important to maintain detailed records which show how specific damages are attributable to specific issues or instances which cause delay on your projects. Above all, it is generally wise to submit all possible claims to your insurance brokers whether or not coverage (or lack thereof) is obvious, as there is little downside...

read more

Enforceability of Browsewrap Agreements

Posted by on Mar 1, 2023 in Newsflash | 0 comments

Many companies’ websites use clickwrap and browsewrap agreements as a way for website users to assent to certain terms related to use of the website or doing business with the company which operates the website. Both types of agreements are intended to obtain user consent for things such as how the user may be contacted, how the user’s data may be shared or retained, and how a dispute between the user and the website owner will be decided. The average person, especially one in California, likely interacts with clickwrap agreements on a daily basis. Clickwrap requires the user of a website or mobile app to consent to certain terms and conditions by clicking a box or button which says, “I accept” or “I agree.” Because of California’s strict privacy laws, many websites require users to accept or agree to the website’s use of “cookies” and other personal data (among other things). Browsewrap is similar to clickwrap, but it does not require a user to affirmatively assent to terms and conditions by clicking a box or button which signifies the user’s acceptance. Rather, websites using browsewrap will state things such as the user “assents to the terms and conditions by using this website” or will display hyperlinks to the terms and conditions or other policies but will not otherwise make the user aware of such terms or policies. Last year, the United States Court of Appeals for the Ninth Circuit noted that browsewrap agreements are “unenforceable per se” under California law.[1] Despite the Ninth Circuit’s prior ruling, many websites and mobile apps still use browsewrap. Recently, a California court ruled that browsewrap used by Goodyear Tire on its website was unenforceable.[2] In Goodyear, Goodyear argued that the plaintiff had agreed to Goodyear’s forum selection clause, which determines the specific court in which a lawsuit will be heard, via the browsewrap on Goodyear’s website. The website at issue displayed pop-up banners which contained hyperlinks to Goodyear’s terms and conditions but did not require the plaintiff to agree to such terms or click on the hyperlinks in order to use the website or do business with Goodyear. The court held that the forum selection clause was unenforceable because it was browsewrap rather than clickwrap. In reaching its decision, the court used the two-part test created in the Berman case, which stated that a website owner can show constructive notice by demonstrating that: (1) the website provides “reasonably conspicuous notice” of the terms to which the user will be bound; and (2) the user takes some action, such as clicking a button or a box, that unambiguously manifests the user’s assent. Because Goodyear’s website did not provide conspicuous notice or require action by the plaintiff demonstrating that the plaintiff had assented to the browsewrap terms, the forum selection clause was held to be unenforceable. All businesses which have websites or mobile apps used by people in California should evaluate whether their website or app complies with the test in Berman to help ensure their terms and conditions are enforceable. If you have questions about whether the clickwrap, browsewrap, or other functions or policies on your website comply with the law, please contact Navigato & Battin. [1] Berman v. Freedom Financial Network, LLC. [2] Arisha Byars v. The Goodyear Tire and Rubber Co., et...

read more