California Law: Mobile App Privacy Protections, Benefit Corporations, “Trial by Formula,” Revolutionary Clean Car Standards, & More

For your reference, a roundup of recent commentary on legal developments in The Golden State:

On consumer privacy…

California Attorney General and Mobile Platform Providers Agree to Require Mobile Software Application Developers to Implement Privacy Policies (Kilpatrick Townsend & Stockton LLP)

“On February 22, California Attorney General Kamala Harris announced a privacy agreement concerning mobile software applications with the six largest mobile application platform providers — Apple, Google, Microsoft, Amazon, Hewlett-Packard and Research In Motion. This agreement effectively creates regulatory standards for implementing privacy policies within the mobile software application industry.” Read more»

Agreement with California Attorney General May Set Floor for Privacy Protections for Users of Mobile Applications (Barger & Wolen)

“The six companies have agreed to privacy principles designed to bring the industry in line with California’s Online Privacy Protection Act, most significantly requiring mobile apps that collect personal information to have a privacy policy, and to display it in prominent fashion and in easy to understand language before the app is downloaded.” Read more»

Technology Firms Agree to California AG’s Privacy Rules for Mobile Apps (Chris Rizo)

“Developers that don’t comply with their stated privacy policies can be prosecuted by the attorney general under California consumer protection statutes, including the Unfair Competition Law and the California False Advertising Law.” Read more»

California’s Reader Privacy Act: What Every Bookseller Must Know (Barger & Wolen)

“On January 1, 2012, the California Reader Privacy Act went into effect. The Act requires all ‘book service providers,’ i.e., book sellers, in the State to take certain steps when responding to governmental requests for user information and to make specific reports and disclosures regarding those requests. The Act protects unauthorized disclosure of private information regarding books and book readers.” Read more»

Other legislative and regulatory developments…

California’s New Entities: Benefit Corporations and Flexible Purpose Corporations (Sheppard Mullin Richter & Hampton LLP)

“As of January 1, 2012, two new subtypes of traditional business corporations may be organized under the California Corporations Code – benefit corporations and flexible purpose corporations. Both free their directors from having to manage strictly for the economic benefit of shareholders, enabling them to address social objectives such as preserving the environment, promoting the interests of the underserved and improving human health.” Read more»

California Teams with the U.S. Department of Labor to Combat Worker Misclassification (Hopkins & Carley)

“California employers have one more reason to make sure they are not misclassifying workers as independent contractors… [T]he California Labor Commissioner announced that her agency has entered a new Memorandum of Understanding to partner with the United States Department of Labor to combat what both agencies describe as the growing problem of worker misclassification.” Read more»

Bill Proclaims Intention To Require Reporting Of Compensation By Publicly Traded Corporations (Allen Matkins Leck Gamble Mallory & Natsis LLP)

“In 2002, the California legislature enacted the Corporate Disclosure Act to require publicly traded corporations and publicly traded foreign corporations qualified to transact intrastate business in California to file a statement of information with the California Secretary of State. The Secretary of State has implemented an on-line search tool that allows the public to search and view these filings.” Read more»

California Implements Significant Changes to the Agricultural Labor Relations Act (Littler)

“Effective January 1, 2012, California’s Agricultural Labor Relations Act (ALRA) was amended in ways that will likely help unions to organize agricultural employees in California and obtain favorable labor contracts with agricultural employers… These changes place significant new weapons in the hands of unions seeking to represent agricultural employees.” Read more»

California Corporate Contribution Initiative Cleared For Circulation (Allen Matkins Leck Gamble Mallory & Natsis LLP)

“Opponents of the Supreme Court’s decision in Citizens United v. Federal Election Commission are fighting back in California on numerous fronts. Last month, California State Senator Noreen Evans introduced a bill, SB 982, to require corporations to issue a report on planned political spending as well as expenditures for the previous fiscal year… Even more recently, the California Secretary of State announced that another initiative measure has been cleared for signature collection.” Read more»

Dodd-Frank Does Not Preempt All California’s § 1011(c) Reinsurance Approval Requirements Applicable to Foreign Insurers (Barger & Wolen)

“Prior to the Dodd-Frank Act, California Insurance Code § 1011(c) required all California-admitted insurers to obtain prior approval from the California Department of Insurance for any reinsurance transaction that exceeded a 50% or 75% threshold. In other words, even if each insurer that was a party to the reinsurance agreement was only licensed in California and was domiciled elsewhere, § 1011(c) approval was nonetheless required.” Read more»

In the courts…

Statistical Sampling Inappropriate in Wage and Hour Class Action (Morgan Lewis)

“In an opinion with significant implications for California employment law class actions, the California Court of Appeal in Duran v. U.S. Bank National Association ruled that a trial court’s use of statistical sampling violated the defendant’s due process rights. On February 6, the First Appellate District decertified the Duran class and overturned a $15 million judgment that was entered following a bench trial at which a sampling of class members was used to determine liability and damages for the entire class.” Read more»

“Trial by Formula” Rejected and $15M Overtime Judgment Overturned (Littler)

“In its lengthy and very detailed opinion [on Duran v. U.S. Bank National Association], the court shredded all the major trial management and evidentiary rulings made by the trial court, holding that its use of flawed statistical evidence and refusal to admit relevant testimony in support of USB’s defense of exempt status denied USB its right to due process. In the first California appellate decision to apply the U.S. Supreme Court’s 2011 Wal-Mart Stores v. Dukes decision, the court determined that the trial management plan was a fatally flawed exercise in ‘Trial by Formula.’” Read more»

Ninth Circuit Invalidates Contractual Choice of Law Provision; Holds that California Law Applies to Independent Contractor Determination (Ford & Harrison LLP)

“In a recent case, Ruiz v. Affinity Logistics, the Ninth Circuit refused to enforce a choice of law provision that designated Georgia law, rather than California law, to govern an agreement entered into and performed in California. Affinity Logistics Corporation, a transportation company, entered into written agreements with its drivers upon their hire… [T]he agreements include a choice of law provision, which states that Georgia law will govern any dispute that could arise under the agreements.” Read more»

Ninth Circuit Choice-of-Law Ruling Has Important Employment and Trade Secret Ramifications (Wilson Sonsini Goodrich & Rosati)

“… the [Ruiz] decision may make it more difficult for companies headquartered outside of California to choose non-California law to govern trade secret and other employment-related disputes that involve California-based employees.” Read more»

Ninth Circuit Strikes Down California “Armenian Genocide” Insurance Claims Statute (Barger & Wolen)

“In an 11-0 en banc published decision, the Ninth Circuit Court of Appeals struck down California Code of Civil Procedure section 354.4 which purported to recognize the Armenian Genocide. Section 354.4 revived the statute of limitations for claims made by ‘Armenian Genocide victims’ or their heirs, voided contractual forum-selection clauses, and vested California courts with jurisdiction to hear disputes regarding such claims.” Read more»

California Medicaid Payment Case Remanded to Ninth Circuit (King & Spalding)

“The case originated as multiple challenges by California Medicaid providers and beneficiaries to Medicaid payment cuts passed by the state legislature in 2008 and 2009. The challengers claimed that those California statutes should be void under the Constitution’s Supremacy Clause, because they violated a provision of federal Medicaid statutes which requires a state’s Medicaid state plan to provide payments that ‘are consistent with efficiency, economy, and quality of care and are sufficient to enlist enough providers’ to supply adequate Medicaid services.” Read more»

California Court of Appeal Affirms Ruling That a Mental Disorder Accompanied by Physical Symptoms is Not Subject to a Policy’s Two-Year Limitation for Mental Claims (McKennon Law Group)

“In 2009, the California Court of Appeal in Bosetti v. The United States Life Ins. Co. addressed whether a two-year benefits limitation on disability insurance payments for “mental, nervous or emotional disorder[s]” could properly serve to limit benefits payable to an insured who was disabled from depression and anxiety, but who also complained of interrelated physical impairments…” Read more»

On environmental protections…

California Adopts Revolutionary New Clean Car Standards (Sheppard Mullin Richter & Hampton LLP)

“On January 27, 2012, the California Air Resources Board (‘ARB’) notched a potential victory in the battle against greenhouse gas (‘GhG’) emissions. In a unanimous vote, ARB adopted the Advanced Clean Cars regulatory package, which is a program designed to deliver cleaner air, reduce GhG emissions, and help build the market for fuel cell and battery-electric vehicles.” Read more»

CEQA Categorical Exemptions Defeated by Mere “Fair Argument” of Impact, First District Holds (Miller Starr Regalia)

“In a CEQA challenge to the City of Berkeley’s approvals to demolish an existing single-family home and replace it with a larger one and an attached 10-car garage, Division 4 of the First District Court of Appeal held in an opinion filed February 15, 2012, and certified for publication, that the proposed project was not categorically exempt from CEQA. Applying the ‘fair argument’ standard to its review of the City’s and trial court’s contrary conclusion, the Court held that whenever there is substantial evidence of a fair argument that a significant environmental impact may occur, this automatically satisfies the ‘unusual circumstances’ exception and therefore precludes reliance on a categorical exemption.” Read more»

California to Regulate Chemical Products through Green Chemistry Initiative (Chris Rizo)

“California officials are drafting what are expected to be sweeping regulations that could force product manufacturers to use alternative, safer chemicals or risk their product being banned from sale in the Golden State. The Safer Consumer Products regulations are the bedrock of the California Environmental Protection Agency’s Green Chemistry Initiative, aimed at curbing public exposure to dangerous toxins.” Read more»

Builders Charge New CEQA-Streamlining Laws, Guidelines Unhelpful (Sheppard Mullin Richter & Hampton LLP)

“The building industry contends a 2011 law aiming to jump-start the economy by streamlining the state’s environmental review process for development projects is failing to attract much interest because strict eligibility criteria prevents most projects from qualifying. Most housing, transportation and land-use project proponents say their projects are unable to qualify for the streamlining due to costly, stringent environmental mitigation criteria, sources said.” Read more»

Additional commentary and analysis…

Leveling the Playing Field: Due Process and Trade Secret Misappropriation Cal. Civ. Proc. Code § 2019.210 (Bay Oak Law)

“The Fifth Amendment to the US Constitution guarantees due process of law. One type of due process is knowing the details of the accusations in a court of law against you. But in trade secret misappropriation cases, the trade secret owner has a good reason not to put the details of the trade secret in the complaint: as a public document, anyone can see it.” Read more»

Is A Director An “Official At The Highest Level Of Corporate Management”? (Allen Matkins Leck Gamble Mallory & Natsis LLP)

“Recently, a bank has filed a petition for review with the California Supreme Court that raises the question of whether a director is ‘an official at the highest level of corporate management’ within the meaning of the Liberty Mutual holding. Although this petition involves a bank, the question should be of interest to directors of all corporations.” Read more»


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