Arguing that an online business should be allowed to enforce its mandatory arbitration policy and class action waiver against a customer, when those contract terms are viewable by clicking on a clearly marked hyperlink to the business’s “terms and conditions,” and the business has clearly provided that the customer is deemed to accept those terms once she has created an account.
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On October 2, the First Circuit heard oral argument in this case, which raises an important issue of online contract formation that arises from a large and growing category of online standardized consumer agreements.  At issue is whether a business has provided the online customer with sufficient notice of its mandatory arbitration policy and class action waiver, and whether the customer has consented to those terms, when the arbitration provisions are viewable only by clicking on a hyperlink to the agreement’s terms and conditions, and the customer is not required to check an online box indicating that she has accepted those terms.  Instead, the business has clearly provided that the customer will be deemed to have accepted all of the contract terms once she has created an online account.
 
The defendant business in this case is Uber Technologies, Inc., the online ride-sharing service.  When a customer creates an online account with Uber, Uber clearly states that “[b]y creating an Uber account, you agree to the Terms of Service & Privacy Policy.” (Emphasis in original.)  The words “Terms of Service” appear as a highlighted button with a hyperlink that, if clicked, opens a ten-page agreement containing a mandatory arbitration clause and a class action waiver, under the bold-faced heading, “Dispute Resolution.”
 
The plaintiff and putative lead class representative, Rachel Cullinane, argues, so far without success, that she had inadequate notice of Uber’s arbitration provisions because they were viewable only in a separate document, and because Uber did not require her to state affirmatively that she had accepted those terms.  In essence, she argues that Uber structured the online sign-up process to discourage her from finding out about Uber’s arbitration policy.  Consequently, Cullinane filed a putative class action in court, rather than submit her underlying claim to individual arbitration.  (In her underlying claim, she alleges that Uber imposed fictitious fees that were hidden in charges for legitimate local tolls to and from Logan Airport, in violation of Mass. G. L. c. 93A.)
 
NELF filed an amicus brief in support of Uber, arguing that, under well-established principles of Massachusetts contract law, a customer has indeed consented to a business’s arbitration policy once the customer has indicated her consent to all of the terms contained in the agreement, in the manner of acceptance defined by the business.  It is well settled in Massachusetts that a party who enters into a contract is bound by all of its terms, whether she has read them or not.  That is, the contracting party is presumed to know all of the agreement’s terms and has a duty to read them.  This duty applies equally to contract terms that are incorporated by reference in that agreement, such as Uber’s arbitration provisions that are viewable through a hyperlink in this case.  It is also well settled in Massachusetts that the offeror, here Uber, controls the manner of acceptance.  Accordingly, Cullinane accepted Uber’s arbitration policy once she completed the online registration process, because Uber clearly stated that completion of that process would indicate her acceptance of Uber’s contract terms.
 
In short, NELF argues that Massachusetts law treats contract formation as an objective process, in which the contracting party’s actual state of mind is irrelevant once that party has manifested her consent to the terms of an agreement, in the manner of acceptance prescribed by the offeror.  NELF points out that a decision in Cullinane’s favor would contravene these bedrock principles of contract formation.  Such a decision would allow a consumer to evade her contractual responsibility to read and understand the agreement’s terms before she accepts them.  She would then be free to attempt to undo the countless transactions that occur over the internet every day, by pleading ignorance of contract terms that she does not like.  This, in turn, would disrupt and undermine free enterprise on the internet, to the financial detriment of the business community.  

Fighting to Maintain the Massachusetts Supreme Judicial Court’s Requirements for Medical Monitoring

In this case some former employees of Raytheon and their family members sought to impose on the company the costs of their being monitored for possible future chronic beryllium disease. The plaintiffs claim that the employee plaintiffs were exposed to beryllium at a Raytheon plant and that their family members were exposed to it secondhand, on the persons of the employees.

In Donovan v. Philip Morris USA, Inc., 455 Mass. 215 (2009) (“Donovan I”), the Supreme Judicial Court held that when a defendant negligently exposes a plaintiff to a substance capable of causing a disease, the plaintiff may have a cause of action in tort even though he does not suffer from the disease. Under Donovan I, the plaintiff’s relief would be that the defendant must bear the medical costs of monitoring the plaintiff for signs of the disease’s possible future advent. But before a defendant can be held liable for these costs, the plaintiff must prove that he presently exhibits at least subclinical, or subcellular changes that serve as medical “warning signs” of a substantially increased risk of developing disease in the future. A plaintiff must be able to prove the existence of these changes, in order to satisfy the tort element of actual injury.

On June 23, 2013, U.S. District Court Judge Mark Wolf granted Raytheon summary judgment, ruling that the plaintiffs could not come forth with admissible evidence of the required subcellular changes (i.e., for each of them, two positive tests for beryllium sensitivity, a “warning sign” of possible future beryllium disease). The plaintiffs appealed to the First Circuit, arguing that the trial court misunderstood Donovan and the relevant medical science.

NELF, together with Associated Industries of Massachusetts, filed an amicus brief in support of Raytheon. In it NELF explained that the plaintiffs’ case depends on weakening and obfuscating, in a variety of ways, the standard set out in Donovan I. Their claim requires proof of a present, actual physical “impact,” which in this case would mean that they each have suffered subcellular changes connected to beryllium sensitivity, the very thing the plaintiffs cannot show. NELF then explained how, under the erroneous standard advanced by the plaintiffs, a mere risk of a risk of future disease would give rise to a Donovan claim. NELF rebutted in detail the use the plaintiffs make of Donovan I’s successor case, Donovan v. Philip Morris USA, Inc., 268 F.R.D. 1, 16 (D. Mass. 2010) (“Donovan II”), showing, for example, that the Donovan requirements are not limited to tobacco class actions and that the plaintiffs hold numerous erroneous views of the facts of Donovan II. Finally, NELF explained that amendment of their complaint, in order to seek refuge for their claims under an issue of law left undecided in Donovan I, should not be allowed because it would be futile.

In its June 10, 2014 decision, the Court upheld summary judgment, chastising the plaintiffs for trying to alter their appeal to encompass the issue left undecided in Donovan I.

Supporting a Property Owner’s Right to Seek Redress in Federal Court for an Alleged Unconstitutional Taking of Property

Each of these petitions for certiorari raised the same issue in a different factual context.  Each challenged the so-called Williamson County state litigation requirement for takings claims under the Fifth Amendment. In Colony Cove Supreme Court review was sought of a decision by the Ninth Circuit; in Downing/Salt Pond Partners a decision by the First Circuit is at issue.  In each case the Federal Court of Appeals affirmed the dismissal of the petitioner’s takings claims on the ground that Williamson County requires the matter to be litigated in state court. In Williamson County Planning Comm’n v. Hamilton Bank, 473 U.S. 172 (1985), the Supreme Court ruled that, when asserted against a state authority, a takings claim under the Fifth Amendment is not ripe to be heard in federal court until there has been a final decision denying just compensation to the complaining property owner.  (As the Supreme Court pointed out in Williamson County the Fifth Amendment does not forbid the government from taking private property for a public purpose; it only forbids the taking of private property without the payment of just compensation.  Therefore, the Williamson County majority concluded, there can be no federal claim until there has been a final state decision on compensation.) 

The ripeness requirement of Williamson County has led to the following anomalous result.  Under Williamson County no state takings claim could be ripe for federal adjudication until it has been fully litigated in state court.  (This is the so-called “state litigation requirement.”)  But, as the Supreme Court expressly recognized in San Remo Hotel L.P. v. City and County of San Francisco, California,545 U.S. 323 (2005), once a state-based takings claim has been fully litigated in state court, it cannot be re-litigated in federal court.  See, e.g., the federal full faith and credit statute, 28 U.S.C. § 1738.)   The upshot has been that, unlike any other federal or constitutional right, a property owner’s rights under the Takings Clause of the Fifth Amendment can never be litigated in federal court against a state defendant.  The only chance for federal review of a state taking of private property—either pursuant to eminent domain or a regulatory taking—is via a petition for certiorari to the United States Supreme Court.

In San Remo, former Chief Justice Rehnquist wrote a concurring opinion, in which three other justices joined. The four justices called for a reexamination of the Williamson County state litigation requirement.  These two petitions for certiorari presented the issue in a relatively pure form, and NELF, joined by other amici, urged the Court, in each case, to heed Chief Justice Rehnquist’s suggestion and seize the opportunity these cases present to look once again at its holding in Williamson County and its, perhaps unintended, denial of access to federal courts for one of the most fundamental federal rights, that forbidding a governmental body to take property for a pubic purpose without just compensation.

Despite NELF’s arguments, and the fact that this issue has continued to present problems for property owners in New England and throughout the United States, the Supreme Court denied certiorari in both cases.  This indicates that, despite the former  Chief Justice’s suggestion in San Remo, the Court has no present intention of revisiting the Williamson County rule.  

Opposing Class Arbitration Where the Arbitration Agreement is Entirely Silent on the Issue

This was an appeal from a federal District Court decision upholding an arbitrator’s ruling that a pre-dispute arbitration agreement permitted class arbitration, even though the agreement was undisputedly silent with respect to class proceedings.

The United States Supreme Court’s held in Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 130 S.Ct. 1758 (2010), that “a party may not be compelled under the [Federal Arbitration Act (“FAA”)] to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so.” (Emphasis in original.)  The issue on appeal therefore was whether an arbitration agreement that makes no reference whatsoever to class arbitration can ever be interpreted as authorizing class arbitration.

In the case four servers at a Smith & Wollensky (“S&W”) restaurant, who were parties to an S&W arbitration agreement, asked the arbitrator (retired Massachusetts Superior Court judge Allan van Gestel), to allow them to proceed on a class basis.  Deciding the issue in 2008 (before the Stolt-Nielsen decision by the Supreme Court),  Judge van Gestel, while acknowledging that the arbitration provision was silent on the issue of class arbitration, nonetheless concluded that the agreement allowed a class proceeding. He imposed a purported default rule of contract construction, which NELF argued had been subsequently invalidated by the Stolt-Nielsen decision, that the right to class action is an implied term in an arbitration agreement because, in his view, the term is essential to a determination of the parties’ rights.   Further, again taking a position firmly rejected by Stolt-Nielsen, Judge van Gestel espoused the view that the implied right to class arbitration could only be overcome by an express class-action waiver. 

After Stolt-Nielsen, S&W moved for reconsideration of the arbitrator’s 2008 decision.  Judge van Gestel, while paying lip-service to Stolt-Nielsen, affirmed his earlier ruling, purporting to find consent to class arbitration in the facts that, first, the scope of the arbitration provision embraced all claims, including claims for wages, compensation, or benefits and, second, that the provision gave the arbitrator the power to award “any remedy and relieve” available to a court under the same claim.

S&W moved to vacate the arbitrator’s revised class arbitration decision in federal District Court. The District Court (Harrington, J.) upheld the arbitrator’s decision, distinguishing the case from Stolt-Nielsen on the ground that in Stolt-Nielsen, in addition to the arbitration agreement silence on the class-action question the parties to that case had also stipulated that they had not agreed to a class proceeding.  Because there was no such stipulation in this case, the District Court took the position that the arbitrator was free to interpret the agreement, despite its silence, to determine whether there was a “contractual basis” supporting class arbitration. The arbitrator “reasoned” that these two contract provisions incorporated by reference the broad statutory class action provisions contained in both the FLSA and Massachusetts wage-hour laws, and that class actions are a form of a “remedy or relief.”.

S&W appealed the District Court’s decision to the First Circuit and NELF filed an amicus brief in support of S&W on the important question of whether, in the absence of a stipulation by the parties, Stolt-Nielsen nevertheless precluded class arbitration where there was no express agreement to proceed on that basis in the arbitration agreement. NELF argued, inter alia, that, as the Supreme Court has described in subsequent decisions (e.g., AT&T Mobility LLC v. Concepcion, 131 S.Ct 1740 (2011), proceeding on a class basis so fundamentally changes the nature of arbitration as originally envisioned by the FAA that some indication of an express agreement by the parties should be required under Stolt-Nielsen before a class proceeding can be imposed on the parties.

Shortly after NELF filed its brief, we were informed that the parties had settled their dispute.  Apparently the settlement followed Judge van Gestel’s refusal to stay the class arbitration pending the First Circuit’s decision on S&W’s appeal.  Apparently, in the arbitral as well as the judicial forum, class certification increases the pressure on the defendant to settle.  The upshot is that the important question that NELF addressed in its brief remains undecided.

Arguing Against an Expansive Definition of “Oppression” Under Maine’s Business Corporation Act

This was an appeal to the First Circuit of a decision by the federal District Court in Maine.  The plaintiff, who prevailed below, had sued First Hartford Corp. (a small, publicly-held Maine Corporation) under the provisions of Maine’s Business Corporation Act (“MBCA”) that permit an “oppressed” shareholder to bring a direct action against the corporation to obtain, inter alia, a buyout of his shares, the relief ordered in this case. 

The issue on appeal was whether the plaintiff had the right to bring an oppression claim in the first place when virtually all of his claims concern alleged injuries to the corporation’s assets, and not to him personally. In other words, the plaintiff’s claims were indistinguishable from classic shareholder derivative claims, yet they had been brought under a different section of the MBCA, the oppression provisions.

Because the distinction between a shareholder derivative claim and a shareholder direct oppression claim is of great importance to principles of corporate governance, and most courts have firmly upheld that distinction, NELF filed an amicus brief in support of First Harford, arguing that a shareholder who alleges only harm to the corporation should be restricted to the MBCA’s derivative action requirements and should not be permitted to evade these requirements by invoking the oppression provision.  NELF argued that the oppression provision should only be available to the shareholder who has alleged direct harm, i.e., a loss separate and distinct from that of the corporation and, indirectly, all of its shareholders.  Where, as here, the claim actually relates entirely to the corporation, the corporation’s board of directors, and not the complaining shareholder, should have the opportunity and autonomy to decide in good faith whether pursuing the claim is in the corporation’s best interests.  Moreover, even assuming a meritorious claim, any relief awarded should go the corporation, which is the injured party, and not to the complaining shareholder.

Disappointingly, on August 17, 2011, the First Circuit summarily affirmed the District Court’s decision in this case, without an opinion.

Seeking Reversal of an Erroneous Narrowing of the Work Product Doctrine 

This petition for certiorari sought review of an en banc decision by the First Circuit, which held that a corporation's tax reserve litigation assessment documents were not protected work-product because the documents were not prepared for trial and had been disclosed to an auditor pursuant to independent legal requirements. The majority opinion, written by Judge Boudin, is accompanied by a vigorous dissent authored by Judge Torruella (speaking for himself and Judge Lipez). In holding that the work-product doctrine only protects documents prepared for use in litigation, the en banc decision appears to read out of Fed. R. Civ. P. 26(b)(3)(A) the protection afforded documents prepared "in anticipation of litigation." Not only does this appear to be a blatant misreading of the rule, it also promises to have an adverse effect for business on the application of the work-product doctrine in a range of contexts.  With respect to the particular circumstances at issue in the Textron case itself, the new interpretation of work-product protection will, at the very least, chill issuer-auditor communications. Furthermore, the Textron holding deepens a circuit split on the application of work-product protection in circumstances like those in Textron.  For example, the Second Circuit has found work-product protection in circumstances analogous to those in Textron (as has the Massachusetts Supreme Judicial Court in a decision that notes favorably the First Circuit’s initial decision in Textron, which the en banc decision reversed (see Commissioner of Revenue v. Comcast Corp., 901 N.E. 2d 1185 (Mass. 2009)). As a result, companies with operations in more than one New England state will have a different federal work-product rule apply depending on whether they are with the jurisdiction of the First or Second Circuit.   

NELF filed an amicus brief in support of Textron urging the Supreme Court to review this en banc decision of the First Circuit. NELF argument supplemented Textron’s filing by asking the Supreme Court to consider:  (1) the unworkable implications of the Circuit split especially for businesses in the New England states; and (2) the en banc opinion’s flawed application of Rule 26(b)(3)(A). 

Despite the arguments made by Textron, NELF, and numerous other amici, the Supreme Court denied certiorari on May 24, 2010.

Opposing Judicial Expansion of Primary Liability for Securities Fraud

NELF filed a brief in this case supporting a petition for en banc review of a panel decision which held that primary liability for securities fraud under SEC Rule 10b-5(b) may be based on “implied statements” derived from a defendant’s non-verbal conduct.  The case involves an SEC enforcement action against two mutual fund executives who allegedly made knowing use of inaccurate prospectuses to market mutual funds.  Reversing the trial court’s dismissal of the Rule 10b-5(b) claims, a three-judge panel of the First Circuit (in a 2-to-1 split) held that the SEC stated a claim under Rule 10b-5(b) for primary liability for “mak[ing an] untrue statement” in connection with the sale of securities because the defendants allegedly had a duty to ensure the accuracy of the prospectuses and therefore, by merely using the prospectuses, had allegedly made untrue “implied statements” that the prospectuses were accurate.  

NELF’s brief, filed on behalf of both itself and the Associated Industries of Massachusetts, focused largely on a plain-language approach to the regulation, arguing that the panel majority’s opinion was clearly inconsistent with the language of the rule as well as with Supreme Court precedent.  NELF also argued that the opinion dramatically expands the scope of primary liability for securities fraud beyond anything permitted by other circuits and would undermine the distinction between primary liability and liability for aiding and abetting (a highly significant distinction because the SEC’s burden of proof of scienter is lighter in primary liability actions).  NELF explained that, if allowed to stand, the panel majority’s novel view of Rule 10b-5(b) would presumably affect any officer, director, or other executive who has a duty to investigate the accuracy of documents used in the purchase or sale of securities.  

On June 22, 2009 the full Court withdrew the panel majority opinion and granted en banc review.  In response to the Court’s solicitation for supplemental briefs, NELF filed a second brief and developed further its plain-language argument.  On March 10, 2010, the Court issued an en banc decision rejecting the SEC’s theory and affirming the dismissal of the claims.  As NELF had argued, in its 4-2 decision, the Court decided the issue on the basis of the plain language and structure of the rule, in conjunction with an examination of the statutory framework and Supreme Court precedent.

Arguing that a Class-Action Waiver in an Employer’s ADR Program Requiring Arbitration of Claims under the Fair Labor Standards Act Cannot be Held Per Se Unconscionable

NELF filed an amicus brief on behalf of itself and the Associated Industries of Massachusetts in this class-action lawsuit before the U.S. Court of Appeals for the First Circuit.  NELF asserted that the U.S. District Court for the District of Massachusetts erred by effectively adopting a per se rule that, under Massachusetts law, a class-action waiver in an employer’s ADR program for claims under the Fair Labor Standards Act, 29 U.S.C. §§ 201 et seq., (“FLSA”) is unconscionable.  NELF argued, inter alia, that the District Court’s decision undermined the desirability and utility of ADR programs for the resolution of employment disputes and might, if affirmed, discourage employers from adopting such programs to the detriment of employers, employees, and the courts.  

In its November 19, 2007 decision in the case the First Circuit agreed with NELF that, under Massachusetts contract law, there must be a case-specific factual inquiry to invalidate as unconscionable a class-action waiver in an employer’s arbitration policy for FLSA claims.  Based on the particular facts presented, the First Circuit upheld the decision of the lower court striking the class-action waiver at issue as unconscionable.  The Court expressly declined to reach the employees’ argument that all waivers of class actions for FLSA claims are per se invalid as violative of the FLSA or public policy.

Opposing The Unwarranted Extension Of The Army Corps of Engineers’ Jurisdiction Over Inland Wetlands

NELF’s participation as an amicus curiae in this appeal to the United States Court of Appeals for the First Circuit follows naturally from NELF’s representation of the defendant in this civil case, Charles Johnson, as an amicus curiae in connection with the petition for certiorari to the United States Supreme court in Rapanos v. United States. 

Mr. Johnson, members of his family and the family business were sued in 1999 by the Environmental Protection Agency (“EPA”) (which enforces Army Corps of Engineers regulatory authority over wetlands) in the United States District Court for the District of Massachusetts. The EPA based its complaint on alleged filling activity in wetlands associated with the creation and maintenance of cranberry bogs located in Carver, Massachusetts that are used in the family business. Mr. Johnson is a 73 year-old cranberry farmer who purchased his first cranberry bog in 1958 and currently farms, with his son, approximately 140 acres of cranberry bogs. Using standard techniques in the industry, Mr. Johnson has created substantial new wetland acreage out of former uplands since the 1950s. The activities about which the EPA complains occurred largely in the early 1980s and include Mr. Johnson’s impoundment of a stream to create an artificial pond to control water levels in the bogs. The EPA alleges that these activities occurred in areas that were “formerly marshy.” Although the Johnsons’ property is not adjacent to navigable waters, the District Court granted partial summary judgment against the defendants on liability based on the EPA’s arguments for the “Hydrological Connection Rule” which is described in the Rapanos summary, and granted summary judgment on remedy, requiring the Johnsons to pay a $75,000 civil penalty. 

In its amicus brief, which was filed on June 30, 2005, NELF urged the First Circuit to adopt the Fifth Circuit’s interpretation of the Clean Water Act, which limits Army Corps’ regulatory authority to wetlands actually adjacent to national navigable waterways. The First Circuit issued a sharply divided decision on February 13, 2006, affirming the lower court’s judgment against the Johnsons.  The First Circuit has stayed en banc review until after the Supreme Court has issued its decision in Rapanos.

Responding To NELF’s Arguments, The First Circuit Clarifies That An Employer Is Not Required To Modify A Salesperson’s Essential Function Of Generating New Business As A Reasonable Accommodation To His Disability 

The issue in this case was whether an employer may be required under anti-discrimination law to modify a salesperson’s essential job function of generating new business as a reasonable accommodation to his or her disability.  A three-judge panel of the First Circuit held that an underperforming salesperson with bi-polar disorder was entitled to a jury trial on his claim that his former employer, Liberty Mutual Insurance Co. (“Liberty”), failed to make a reasonable accommodation for his disability when it refused his request to service highly coveted mass marketing (“MM”) accounts, which would have substantially reduced his essential function of seeking out and securing new accounts.  Liberty moved for a rehearing or hearing en banc before the First Circuit, asking the Court to reinstate the District Court’s grant of summary judgment to Liberty on this claim.  

NELF filed an amicus brief in support of Liberty’s en banc petition, arguing that the panel’s decision erodes the established bright-line rule that a reasonable accommodation does not require modifying the essential functions of a job.  NELF argued that the First Circuit’s opinion weakened this established rule in two ways.  First, the opinion failed altogether to invoke the rule as a clear limit on Liberty’s affirmative duties when making a reasonable accommodation for Tobin’s alleged disability.  Secondly, the opinion failed to recognize that the selection criteria for assignment to the coveted MM accounts, which Tobin requested as a reasonable accommodation, serve to define the essential functions of a salesperson’s job.  In particular, Liberty had argued on summary judgment that a salesperson must perform the essential function of generating new business to Liberty’s satisfaction before being considered for assignment to MM accounts.  The opinion failed to recognize that requiring Liberty to assign MM accounts to an underperforming salesperson like Tobin would eliminate the essential function of generating new business, contrary to well-settled law.  The panel’s decision suggested that, despite a company’s legitimate business need for an employee to perform certain essential tasks such as generating new business, the ADA may nevertheless require the employer to alter or waive these tasks with respect to certain employees even though they were hired expressly to perform them.  The panel’s opinion thereby appeared to remove the employer’s prerogative to define the essential functions of a job. The specter of potential and uncertain liability arising from such a change in the law would be harmful to businesses and, by extension, to their employees.  NELF argued that if it were not corrected, the panel’s decision could lead to confusion concerning an employer’s affirmative duties under reasonable accommodation law. The decision as written could impede an employer’s ability to make routine business decisions regarding the discharge of underperforming employees and could encourage courts to assume the inappropriate role of super-managers of a company’s human relations department.  

On December 23, 2005, the First Circuit granted Liberty’s motion for a rehearing and reissued its decision.  Although the First Circuit did not alter its conclusion on the merits, it addressed NELF’s request for clarification by clearly stating in the reissued decision that (a) Liberty was not required to accommodate Tobin in a way that would have altered his job functions and (b) that Liberty will prevail at trial if it proves that Tobin’s failure to make sales outside of MM accounts constituted a failure to fulfill an essential function of the job.

Whether a Law that Protects an Interest Group from Competition Violates the Substantive Due Process Clause

This case raised the issue whether a Puerto Rican licensing regime for new retail pharmacies violated the U.S. Constitution.  Under the regime, regulatory review was effectively triggered when existing pharmacies objected to a new pharmacy’s application to locate in a competitive area.  The record established that Puerto Rico had denied applications only when existing pharmacies opposed them.  Thus, the statute was selectively invoked to shield existing pharmacies from competition.  Walgreen brought an action under 42 U.S.C. § 1983 against Puerto Rico’s Secretary of Health, alleging that, inter alia, the licensing regime violated the Commerce Clause.  The lower court held that the regulatory regime was constitutional because it was rationally related to the legitimate purpose of encouraging new pharmacies to locate in remote, “underserved” areas, even though the legislation did not provide pharmacies with any financial incentive or any other reason to locate in these economically undesirable areas.  Walgreen appealed this ruling to the First Circuit.  

NELF filed a brief in support of Walgreen, arguing, as an alternative to the Commerce Clause objection, the licensing regime also violated substantive due process under the Fourteenth Amendment. Although substantive due process challenges to economic legislation have been disfavored since the late 1930s, when the Supreme Court became highly deferential to the states’ exercise of their police powers and allowed them to control their own economic affairs with minimal judicial oversight, NELF argued that, even so, substantive due process review should not be “toothless.”  Where, as here, a statute insulates a special interest group from economic competition without serving any discernible public purpose, a court should be on its guard to determine whether or not the government’s articulated purposes are a mere pretext.  NELF asserted that the selective enforcement of the law, triggered exclusively by the members of the interest group protected by its provisions, exposes the law’s articulated purposes as a pretext for economic protectionism.  The law puts the fox in charge of the hen house.  NELF also argued that lower federal courts in recent decisions have invalidated similar protectionist laws that serve no discernible public purpose.  NELF asserted that the framers of the Constitution contemplated that the judiciary would serve as the necessary check on legislative action that serves only the narrow interests of the few.  Judicial deference to protectionist, special-interest legislation such as the Puerto Rico statute is inconsistent with the role of the courts that the framers envisioned. 

On April 22, 2005, the First Circuit held that Puerto Rico’s licensing regime was unconstitutional because it impermissibly discriminated against interstate commerce in violation of the dormant Commerce Clause.  Having decided the case on that basis, the Court did deal with the alternative, substantive due process argument advanced by NELF.   

Upholding E-mail As a Potentially Effective Method for Notifying Employees of Employment Terms 

Roderick Campbell was employed at-will as an engineer by General Dynamics Government System Corporation (“GDGS”) from February 18, 2000 until he was fired on December 30, 2002. During his employment, Campbell’s workplace was virtually paper-free and he did his work via email, using that medium to receive and review nearly all of his technical and administrative communications.  On May 1, 2001, approximately twenty months before Campbell’s discharge, GDGS implemented a Dispute Resolution Policy (“DRP”), which, inter alia, required that employees arbitrate any discrimination claims relating to their employment.  The DRP was first announced by a letter from the President of GDGS that was sent via company-wide email on April 30, 2001.  Subsequent to his discharge, Campbell brought this action, claiming that GDGS discriminated against him because of an alleged disability, i.e. sleep apnea.  GDGS moved, pursuant to the Federal Arbitration Act, for a stay of the action and an order requiring Campbell to submit his claim to arbitration in accordance with the DRP. 

On June 3, 2004, the Massachusetts Federal District Court denied GDGS’ motion and struck GDGS’s affirmative defense based on the DRP, primarily on the ground that email was an insufficient method for giving notice under the FAA, despite the facts that (a) GDGS’s IT log showed that Campbell had received and opened the email and (b) Campbell conceded that the company routinely used the intranet to communicate policies.  The District Court based its decision on its own view (with no citation to the record or to any competent authority) of how email users behave in general (i.e., that most people reflexively open and delete mass emails without reading them), essentially taking judicial notice of these “facts” and applying them to invalidate the arbitration policy and strike GDGS’s affirmative defense based on it.  

GDGS appealed the District Court’s decision to the First Circuit and, on November 2, 2004, NELF filed an amicus brief arguing for reversal of the District Court’s decision on the ground that the District Court improperly took judicial notice, in violation of Rule 201 of the Federal Rules of Evidence, of its own anecdotal and unsupported views concerning the general behavior of email users.  Rule 201 requires the Court to notify the parties of its intention to take judicial notice and provide an opportunity for evidence to be presented on the issues. It also permits judicial notice to be taken of only certain types of “facts,” which, NELF argued, do not include a court’s personal views on how email users behave. NELF argued that once the improperly judicially noticed “facts” are removed, no factual basis remains for the District Court’s decision in this case.  

On May 23, 2005, the First Circuit issued its decision, upholding the District Court’s refusal to stay or dismiss the action to permit arbitration. However, unlike the District Court, the First Circuit based its decision not on the use of e-mail per se, but on the substantive inadequacy of the email notice in this particular case. With respect to the issue that had concerned NELF, the Court specifically noted that it did not share the District Court’s skepticism of the use of email notice and, to the contrary, found that, especially in light of Electronic Signatures in Global and national Commerce Act of 2000, 15 U.S.C. §§ 7001-7031, proper email notice would satisfy the Federal Arbitration Act’s “written provision” requirement and that “the choice of mass e-mail is not determinative of the appropriateness of the notice” at issue. Further, noting that this was a close case, the Court cautioned that its holding “should not be read as a general denunciation of e-mail as a medium for contract formation in the workplace.”  It noted that “an e-mail, properly couched, can be an appropriate medium for forming an arbitration agreement.”

Urging Consistency in Rhode Island Employment Statutes of Limitation


Rejecting NELF’s call for consistency in Rhode Island employment discrimination cases, the First Circuit applied a three-year personal injury statute of limitations to employment discrimination claims under the Rhode Island Civil Rights Act, rather than the one-year statute under the Rhode Island Fair Employment Practices Act. Plaintiff Betsey Rathbun was an employee of AutoZone, which promoted three men to a management position before promoting her and hired or promoted three other men to higher management positions. AutoZone asserted that all six men had superior qualifications to Rathbun. She sued for employment discrimination under the Civil Rights Act, which has no specific statute of limitations, and the Fair Employment Act, which has a one-year statute. 

NELF submitted a brief supporting AutoZone, arguing that the Civil Rights Act claim primarily supplemented the employment discrimination case under the Fair Employment Act and thus the Fair Employment Act one-year statue should apply to employment-based Civil Rights Act claims. While the First Circuit considered NELF’s arguments carefully, the Court was ultimately persuaded that the federal model for the Civil Rights Act, 42 U.S.C. § 1981, utilizes the general personal injury statute of limitations and that uniform interpretation of the Civil Rights Act required a single limitations period, not variable periods depending on whether alleged discrimination occurred in the employment context or elsewhere, as in education or housing.