Gibbons Law Alert

Gibbons Law Alert

Tagged: New Jersey Law

Beyond Force Majeure: Government Quarantine Orders May Themselves Excuse Contract Non-Performance

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Posted in General Litigation

On April 27, 2020

The coronavirus pandemic is reverberating throughout commercial sectors, and countless contract obligations are going unperformed—shipments are not being made or accepted, payments are being missed, and contract milestone dates are lapsing every week that the pandemic and business shutdown continues. Those typically rare force majeure provisions are now being scrutinized. (For more on those topics, see previous entries in our COVID-19 “The Coronavirus Pandemic and Your Business: How We Can Help” client alert series, including “Litigation Issues That May Arise.”) And, in New Jersey, the precise language of such a clause is key, as courts in this state have held that they should be “narrowly interpreted as contemplating only events or things of the same general nature or class as those specifically enumerated.” Seitz v. Mark-O-Lite Sign Contractors, Inc., 210 N.J. Super. 646 (N.J. Sup. Ct. Law Div. 1986). With only some force majeure clauses including explicit references to pandemics, or broadly-worded “catch-alls,” the success of a force majeure defense is not necessarily certain. But before (or in addition to) attempting to invoke that force majeure provision, consider whether a court would ultimately determine that contractual non-performance is due to an “Act of God” or rather is being caused by the governmental orders quarantining segments of the population and/or shutting down whole swaths of the...

Redacted Use of Force Report in Which the Subject of the Force Is a Minor Must Be Disclosed, Appellate Division Holds

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Posted in Appellate

On March 27, 2020

A recent Appellate Division decision provides for increased transparency into the activities of law enforcement, ruling that a use of force report (“UFR”) involving a minor should not have been withheld under New Jersey’s Open Public Records Act of 2001 (“OPRA”). A UFR is a one-page report required by a New Jersey Attorney General directive to be filed in all circumstances in which law enforcement personnel use physical, mechanical, or deadly force against a civilian. In January 2018, a Trentonian reporter received a tip that Ewing Township law enforcement used excessive force against a minor. The reporter filed a public records request for any UFRs generated as a result of the encounter. Ewing denied the request, citing OPRA, which provides that “records of law enforcement agencies, pertaining to juveniles charged as delinquent or found to be part of a juvenile-family crisis, shall be strictly safeguarded from public inspection.” The Trentonian sued Ewing and its municipal clerk for release of the UFR, arguing that the UFR should be released in redacted form, removing the identifying information about the minor but leaving the information about the police officer’s use of force. The trial court upheld Ewing’s denial of access, finding that the UFR was a juvenile record protected from disclosure under OPRA. The Trentonian appealed, joined by...

Does the SHIELD Act Cover Your Business and Are You Ready?

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Posted in General Litigation

On March 26, 2020

As we have previously written, the privacy and security requirements of the New York Stop Hacks and Improve Electronic Data Security Act (“SHIELD Act”) are effective as of March 21, 2020. The SHIELD Act implements broad new data security requirements for all businesses that have the private information of New York residents, and reaches beyond New York’s own borders to compel companies – including companies that do not do business in New York – to take affirmative steps to protect the personal and private information of New York residents that the company may be collecting or storing. Initially, the SHIELD Act expands the definition of “private information” that must be safeguarded to include any information that can be used to identify a person, in combination with a social security number, a driver’s license number, a financial account number, or biometric information. Separate and apart from these “data elements,” the definition of “private information” also now includes “a user name or e-mail address in combination with a password or security question and answer that would permit access to an online account.” Second, the SHIELD Act applies to any company that possesses the private information of even a single New York resident – even if the company does not conduct business in New York. All companies must...

NJ Assembly Initiates (Then Withdraws) Proposal to Ensure COVID-19 Coverage

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Posted in Insurance

On March 23, 2020

Last week, legislation was introduced in the New Jersey Assembly that would require property insurers to cover business interruption losses arising from the COVID-19 pandemic suffered by small businesses (i.e., businesses with less than 100 full-time employees who work 25 or more hours per week). The bill would require coverage for any loss of business or business interruption “due to global virus transmission or pandemic” that is suffered for the duration of the State of Emergency declared by Governor Murphy on March 9, 2020. It appears that such coverage must be provided regardless of existing policy requirements (e.g., direct “physical loss” or “damage”) or potentially applicable exclusions (e.g., the “Virus or Bacteria” exclusion in many policy forms). After an initial favorable vote by the NJ Assembly Homeland Security and State Preparedness Committee, the bill was reportedly withdrawn by its sponsors, but may be amended and reintroduced in the short-term. The bill as initially drafted would provide significant relief to policyholders with small- to medium-sized businesses that may be the hardest hit in what is rapidly developing into a global economic crisis. This would certainly be welcome relief. However, that proposed relief comes with a potential backend cost to all policyholders in New Jersey. While insurers would have the obligation to indemnify policyholders for qualifying loss,...

States Step Up Data Privacy and Security Regulation

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Posted in General Litigation / Privacy and Data Security

On November 5, 2019

State legislatures from California and New York have taken action to respond to rising privacy concerns by enacting legislation to protect consumers and their personal information, and the New Jersey legislature is actively working to pass similar legislation to enhance the privacy and security obligations applicable to personal information obtained from New Jersey consumers. This legislation typically requires businesses to inform residents of certain rights regarding the collection or sale of their personal information and to provide notice to residents if a security incident at the company involves their personal information. As deadlines quickly approach for the enforcement of these laws, it is important for businesses to take action now and revisit privacy, security, and storage practices, as well as the associated policies for maintaining appropriate data privacy and security throughout the organization. The California Consumer Privacy Act (CCPA), which takes effect January 1, 2020, accords significant new privacy rights to consumers and imposes corresponding new requirements on businesses. In general, the CCPA mandates businesses to implement procedures to provide notice to consumers at or before the collection of personal information, to respond to consumers’ requests for the production or deletion of their collected information or to opt-out from its sale, and to create privacy policies detailing their processes for selling or distributing consumer data....

Third Circuit Permits Extra-Strong Restrictive Covenants for Extra-Good Employees

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Posted in General Litigation

On May 6, 2019

In a recent “precedential” opinion, the Third Circuit, applying New Jersey law, approved an employer’s use of an additional, extra-stringent restrictive covenant for its high-performing salespeople, subject to careful blue lining by the court to ensure that the covenant does not create an unreasonable burden for the employees. ADP, LLC, the well-known provider of payroll and other human resources services, required its new sales employees, as a condition of employment, to sign a Sales Representative Agreement and a Non-Disclosure Agreement. Together, the two agreements essentially prohibited the employee, for one year after the termination of employment, from soliciting ADP customers “with which the Employee was involved or exposed” while employed at ADP. Once employed, ADP’s sales staff could earn stock awards by meeting certain sales targets. But to receive an award, the employee had to sign a third agreement, a Restrictive Covenant Agreement, which imposed still more post-employment restrictions on the employee. Among other things, the Restrictive Covenant Agreement essentially prohibited the employee for two years after termination from soliciting all current and prospective ADP customers, whether or not the employee was “involved or exposed” to the customer while employed by ADP. The Restrictive Covenant Agreement also contained a geographic restriction, which essentially prohibited the employee from competing against ADP in the same geographic area...

Third Circuit Considers Whether Employer May Access Employee’s Password-Protected Information from Work Computer

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Posted in General Litigation

On March 18, 2019

In a recent “Not Precedential” opinion, a divided Third Circuit panel engaged in an instructive and interesting debate about whether, under New Jersey law, an employer may access and monitor a former employee’s password-protected accounts using information the employee left on his work computer. The case involved a group of employees who left an employer en masse to join a competing enterprise. One of the departing employees failed to log out of his Facebook account before he returned his computer to the employer. The employer was thus able to—and did—monitor for more than a month the employee’s password-protected Facebook activity, which included Facebook Messenger exchanges among the other former employees in which the employees admitted to improperly sending the employer’s confidential information to their new employer. When the employer sought a preliminary injunction against the former employees, the employees claimed that the old employer had unclean hands—and thus was not entitled to an injunction—because of its post-termination monitoring of the employee’s password-protected Facebook activity and other password-protected accounts. The district court rejected the unclean hands defense and entered an injunction. On appeal the majority held that the employer’s monitoring of the employee’s accounts was not sufficiently related to the employees’ wrongful conduct to support an unclean hands defense. But the majority did not stop there....

District of New Jersey’s Dismissal of Securities Class Action Reiterates Significant Hurdles to Sufficiently Pleading Scienter

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Posted in Securities

On February 8, 2019

A decision last week from the District of New Jersey is the latest of several recent decisions from the District and the Third Circuit making clear that securities fraud plaintiffs face a high bar in pleading an inference of scienter strong enough to withstand a motion to dismiss. In In re Electronics For Imaging, Inc. Securities Litigation, Plaintiffs brought a securities fraud class action alleging that Electronics For Imaging, Inc. (EFI), and two of its executives, violated sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5. According to Plaintiffs, Defendants falsely assured investors in a Form 10-K and Form 10-Q (and accompanying Sarbanes Oxley certifications) that EFI’s internal controls over financial reporting were functional and effective—including by asserting that those controls had been reviewed, evaluated, and improved. A subsequent press release and amendments to the Form 10-K and Form 10-Q identified material weaknesses in EFI’s internal controls. Plaintiffs filed suit in the wake of a drop in EFI stock price that occurred after the press release was issued. Defendants moved to dismiss for failure to sufficiently plead scienter. In support of scienter, Plaintiffs alleged that Defendants’ record keeping practices so egregiously violated generally accepted accounting principles that Defendants either: (i) lied when they asserted they had previously reviewed and evaluated...

New Jersey Supreme Court Expands Reach of the Consumer Fraud Act to Include Customized Merchandise

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Posted in General Litigation

On February 6, 2019

Relying on the remedial purpose of the Consumer Fraud Act (CFA), the New Jersey Supreme Court recently held that customized merchandise falls within the reach of the CFA. In All the Way Towing, LLC v. Bucks County International, Inc., plaintiffs, an individual and his limited liability towing company, entered into a contract with defendants for the purchase of a medium-duty 4×4 truck to be customized with an autoloader tow unit to meet plaintiffs’ particular needs. After the manufacturer attempted delivery on four occasions of a tow truck with significant problems, plaintiffs believed the situation to be “hopeless,” rejected delivery and demanded return of a $10,000.00 deposit. The manufacturer refused return of the deposit. Plaintiffs then brought suit for, among other things, violation of the CFA. The trial court granted summary judgment to the manufacturer on all claims, holding in pertinent part that a customized “tow truck was not something available ‘to the public for sale’” under the CFA. The Appellate Division reversed, holding that the line of cases that excluded “complex” goods or services from CFA claims was not applicable here because there was no showing that the tow truck at issue was any more “complex” than any other tow truck. Defendants then appealed, arguing that the CFA does not apply to transactions concerning custom-made...

In Affirming Dismissal of Putative Securities Class Action, Third Circuit Provides Important Guidance for Evaluating Sufficiency of Scienter Allegations

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Posted in Securities

On October 4, 2018

A recent precedential decision from the Third Circuit may make it more difficult for putative securities class actions to withstand motions to dismiss and provides useful guidance for district courts in making the often difficult determination whether a complaint adequately pleads the strong inference of scienter necessary to sustain a federal securities fraud claim. In In re Hertz Global Holdings, Inc., certain pension funds brought a securities fraud class action alleging that Hertz Global Holdings, Inc. and certain of its current and former executives violated sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5. Plaintiffs’ complaint relied heavily on a financial restatement Hertz issued with its fiscal year 2014 Form 10-K, which corrected errors to Hertz’s 2011, 2012, and 2013 financial statements. According to the restatement, Hertz had overstated its pre-tax income by a total of $215 million and its net income by a total of $132 million during the three-year period. The restatement explained that “an inconsistent and sometimes inappropriate tone at the top was present under then existing senior management” which “resulted in an environment which in some instances may have led to inappropriate accounting decisions and the failure to disclose information critical to . . . effective review.”  Plaintiffs alleged that the restatement constituted an admission that...

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