Mr. Cub and the Presumptively Void Transfers Act: What if?

Ernie Banks, “Mr. Cub” passed away in January of an apparent heart attack.  Only three months prior to his death, Banks executed a new Will cutting out his family and leaving his estate to his longtime caregiver, Regina Rice.  Within weeks of Banks’ funeral, his family accused Rice of taking advantage of the Hall of Famer when his health had deteriorated by forcing him to execute the new Will in her favor.

A Cook County judge subsequently confirmed the Banks’ Will over the family’s objections.  Attorneys for the Banks’ family have reportedly said they will appeal.  Had Banks executed the Will on or after January 1, 2015, however, Illinois’ new Presumptively Void Transfers Act (“the Act”)  (Public Act 098-1093) would have applied to the dispute, potentially voiding the transfer to Rice.

Essentially, the Act adds provisions to the Probate Act of 1975 to facilitate family challenges to testamentary gifts made to a “caregiver” by means of a will, trust, deed, contract, or beneficiary designation form.  A caregiver under the Act is a non-family member who has assumed reasonability for all or a portion of the care of an individual making the testamentary transfer who needs assistance with daily living activities.  If the validity of the testamentary gift is challenged (as in Banks’ case), then there is a statutory presumption that the transfer to the caregiver is void if the fair market value of the transferred property exceeds $20,000.

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“Double Dipping Doctor” Defamation Dispute Dismissed

An Illinois appellate court affirmed the dismissal of the former Chief of Osteopathic Surgery at Stroger Hospital’s complaint against various media outlets for reporting that the hospital overpaid him tens of thousands of dollars via direct deposit while he was on an unpaid leave and working in a private clinic elsewhere.  See Kapotas v Better Government Association et al. The plaintiff claimed that he never noticed the County’s deposits in his checking account, which approximated $80,000 over several months, and that he repaid the hospital upon request.

FVLD represented Sun-Times Media, LLC, which reported the overpayments in its Chicago Sun-Times newspaper.

The appellate court held that the plaintiff was not defamed because the news reports were properly construed as blaming the County for payroll errors.  The court rejected the plaintiff’s contentions that references to an ongoing investigation by the Inspector General implied criminality or that referring to him as the  “double dipping doctor” imputed embezzlement (as opposed to the undisputed fact that he was paid by the County while practicing elsewhere).  Indeed, the court recognized the plaintiff could not prove falsity in light of his fundamental admission to receiving the payments. Significantly, the court protected the right to publish condensed or even sensationalist headlines so long as the accompanying article, read in conjunction with the headline, is substantially true.

The court also rejected related tort claims, including that the defendants interfered with the plaintiff’s relationship with a job recruiter and invaded his privacy by publishing his compensation.  Ultimately, the court recognized that the public’s interest in overpayments to public employees outweighed plaintiff’s personal privacy.

While the court found these news reports were factually correct, sometimes published statements simply lack enough factual content to support a defamation claim. In an earlier defamation case in which FVLD represented a successful defendant, the Illinois Supreme Court explained that the distinction between fact and opinion depends on whether the statement is an “objectively verifiable assertion.”  See Imperial Apparel v. Cosmo’s Designer Direct, et al. Statements presented as opinions that contain or allude to false facts may rise to defamation, but the Court held that a retailer’s ad disparaging its competitor did not cross the line.

Interestingly, the United States Supreme Court recently extended an analogous defense to the securities laws by holding that an opinion expressed in a company’s registration statement did not constitute an untrue statement of material fact under the Securities and Exchange Act.  The Court found that a statement by pharmacy-services company Omnicare that “[w]e believe our contract arrangements with other healthcare providers, our pharmaceutical suppliers and our pharmacy practices are in compliance with applicable federal and state laws,” was not a “fact”, although it could become actionable if the registration statement omitted known facts contrary to those implied by management’s opinion.  Accordingly, we foresee that metaphysical debates over the opinion/fact dichotomy will increasingly permeate legal disputes.

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New Facebook Message: You’ve Been Served

In a recent case, a New York judge authorized the use of Facebook as the only required means to deliver a summons to the defendant.

The plaintiff brought a divorce action against her husband, but (a) the only address she had was not current and he left no forwarding address, (b) the department of motor vehicles did not have his address, (c) he had no known regular place of business, (d) his pre-paid cell phone had no address attached to it, (e) he stated to the plaintiff that he had no regular residence and no regular employment, and (f) the private investigation firms hired by the plaintiff could not find him.  Despite all these efforts to disappear, the overwhelmingly powerful lure of social media caused him to maintain his Facebook account on which he posted regularly and which he used to communicate with the plaintiff.  He also communicated with her by texting.

The plaintiff therefore asked the judge to approve alternative service through a Facebook private message.  Judge Matthew F. Cooper reviewed the plaintiff’s submissions to ensure, among other things, that other service was not possible and service by Facebook complied with due process.  Judge Cooper found that no other New York methods of service were possible other than newspaper publication, which was less likely to reach the defendant.  Also finding the evidence supported that the Facebook account belonged to the defendant (as opposed to an imposter or the plaintiff herself) and that he regularly used it, Judge Cooper authorized service to be made as follows: once a week for three consecutive weeks, the plaintiff’s attorney (since litigants cannot serve another litigant under New York Law) had to log into the plaintiff’s Facebook account and send a private message to the defendant; the attorney would identify himself as an attorney, notify the defendant of the suit, and include a link or image of the summons; and, after the first message, the attorney and the plaintiff had to call and text the defendant and inform him that a summons had been served on him through Facebook.

The increasing prevalence of technology and social media should result in more examples of online service because many other states have statutes that allow judges to craft remedies for service when customary methods are insufficient.  Federal courts and many state courts allow electronic service of non-case initiating documents and, in our experience, judges have become more amenable to allowing complaints to be served electronically as long as it appears that the defendant’s email address or other account is current. As Judge Cooper noted, “In this age of technological enlightenment, what is for the moment unorthodox and unusual stands a good chance of sooner or later being accepted and standard, or even outdated and passé.”

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Another Business Learns The Power of Social Media

Recently, Indiana passed a law called the “Religious Freedom Restoration Act”.  Regardless of your views on that law, its propriety, and its purpose, its enactment empowered business owners to publicly express their religious beliefs.  One such business was Memories Pizza.  After the law was enacted, the owners of Memories Pizza made statements indicating that their business would refuse business from homosexual couples for weddings.  As soon as they made their statement, a social media firestorm erupted.

The attacks occurred on virtually every venue on social media.  Numerous negative and parody posts and pictures appeared on Memories Pizza’s Facebook page, a few Facebook users created fake and commentary Facebook pages, Memories Pizza’s Google Maps listing was changed to “Gay Memories Pizza”, hundreds to thousands of Yelp! Users posted negative, critical and parody comments, and someone even purchased the domain name “memoriespizza.com” (which apparently was not owned by the business) to post pictures and make commentary.  According to various reports, the business was also inundated with threatening messages and phone calls, including at least one specific threat of violence posted on Twitter (the poster, a high school coach, was identified and suspended from his job).  In fact, so great was the wave of criticism that Memories Pizza decided to close its doors.

This incident does not mean that people and businesses should be afraid to express their views, after all this is the United States.  But businesses that weigh in on hotly contested, debated and emotional issues must take care to be prepared for any potential backlash.  When considering weighing or getting involved in such issues, businesses should account for (a) how they will be utilizing social media in making comments, (b) how they will deal with negative reactions and reviews on social media as a result of their commentary, and (c) how to protect their brand reputation and image (both proactively and defensively).  Having legal guidance in these areas ahead of time can help, and any business that is using, or plans to use, social media and the web for business purposes should take time to examine the legal and other protections and risks that exist.

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SEC Proposes Increased Regulation of High Frequency Trading

The SEC has proposed a rule that would require high frequency computer-driven trading firms to register with the Financial Industry Regulatory Authority.   Such firms have previously been treated as proprietary traders not required to register with FINRA because they trade from their own accounts rather than customer accounts.

Although several more steps need to be completed for the change to take effect, the move would significantly increase oversight of high frequency firms.   The proposed rule is intended to update the financial industry’s regulatory framework to keep pace with today’s trading methods.  SEC Chairwoman Mary Jo White commented:

[Current rules were] implemented at a time when our equity market structure was dominated by floor-based exchanges that could readily regulate all of their members’ trading activity.  It was designed to accommodate exchange specialists and floor brokers that focused their trading on the floor of an individual exchange who might need to conduct limited hedging or other off-exchange activities ancillary to their floor-based business.

That is not our market today.  Trading is now dominated by computer algorithms and active cross-market proprietary trading firms have emerged as significant market participants.  These firms represent a significant portion of off-exchange trading, accounting for nearly half of all orders sent to alternative trading systems.  The business of these firms is not focused on an exchange floor, and their off-exchange activity is far from ancillary. 

Some have speculated that the SEC is responding to pressure to increase regulation of high-frequency trading in light of incidents like the 2010 “Flash Crash,” which caused the Dow to plummet almost 1,000 points.  Previously, the SEC implemented “circuit breaker” rules that stop trading when stock prices experience wild swings in short periods of time.

A lawsuit pending in federal court in Chicago against the CME Group, the Board of Trade of the City of Chicago, and related parties claims the defendants violate the Commodities Exchange Act by providing high frequency traders with preferential access to futures markets. A motion to dismiss the complaint is pending.

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Mo’ Money, Mo’ Problems for Moazzam “Mark” Malik

Moazzam “Mark” Malik, a 33-year-old New Yorker, allegedly convinced at least 16 investors to invest approximately $840,000 in his so-called hedge fund.  Malik is charged with using most of his investors’ funds to finance his lavish lifestyle.

According to the SEC’s complaint against Malik, investors reported him to the agency after Malik ignored repeated demands for the returns of their funds (and tried to fake his own death). The SEC alleges that he claimed to be a “professional money manager” for the past eleven years who had degrees in marketing and finance and was educated at Harvard.  According to the SEC, however, Malik had only attended high school and worked as a stock broker trainee for less than two years. The allegations against Malik parallel a contemporaneous report that a “dashing” young financier employed a contrived CV to rapidly build up and then bust out Southport Lane Management before checking himself into Bellevue Hospital.  Apparently, the economy is sufficiently restored to allow such schemes to prosper again.

The SEC alleges that Malik generated publicity for his fraudulent fund by providing reputable news and information service outlets with false information that grossly overstated assets and performance.  For example, Malik sent Barclay Hedge a statement indicating that his fund held over $100 million of assets under management when the SEC believes Malik’s brokerage account held only $269.52.  Malik has pleaded not guilty.

Malik allegedly attracted investors to his fund due to the accolades reported on Bloomberg and Barclay Hedge.  Bloomberg had identified Malik as a rising fund manager, reporting that his fund had a whopping 92.73% return on investments.  Barclay Hedge had also awarded Malik a “gold star” as a high performing fund manager. Neither service independently verified Malik’s information.

Services such as Barclay Hedge and Bloomberg, which provide information to investors regarding hedge funds’ rankings and data, are not regulated or required to verify information submitted by fund managers.  Bloomberg does not guarantee the accuracy or completeness of its services and disclaims liability under any circumstances arising from use of its services. In the wake of Malik’s arrest, Bloomberg asserted that its practices are consistent with industry standards.  Similarly, Barclay Hedge has stated the main takeaway should be: “let the buyer beware.”  Its Terms of Use include numerous disclaimers warning users that information on its site may include inaccuracies, is provided “as is,” and that it makes no representations about the completeness, reliability, legality, or accuracy of the information.

Jeff Kopiwoda, a member of FVLD who regularly advises clients in the financial services industry, tells us:  “Prudent investors should perform their own due diligence prior to selecting an investment manager.  Even a basic due diligence should include an independent background investigation, as well a review of reports prepared by third-party service providers to confirm that assets under management and performance figures are accurate.”

The SEC is seeking a disgorgement of Malik’s ill-gotten gains but investors may recover only a fraction of their losses.  For example, Irving Picard, the trustee handling the bankruptcy of Bernie Madoff’s firm, has returned to investors just $5.3 billion of the $17.3 billion stolen in Madoff’s Ponzi scheme.  The problems with recovery include delays which allow a fraudster to dissipate funds or transfer them to family members and offshore accounts.  Only time will tell whether investors will be able to recover their money from Mark Malik.

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Court: First Amendment Unleashes “Raging Bitch” Beer

Following a recent decision from the Sixth Circuit Court of Appeals, the craft brewery Flying Dog will be able to pursue First Amendment claims against the state liquor commissioners who barred it from selling its “Raging Bitch” Belgian Style IPA without considering the First Amendment implications of the ban.

While some craft beer labels may seem deliberately provocative, FVLD member Glenn Rice, who represents many such brewers as well as the Illinois Craft Brewers Guild, pointed out that “craft breweries take great pride in distinguishing their unique products with creative and expressive trademarks and logos, and it is important that courts continue to protect their First Amendment rights.”

The Michigan Liquor Control Commission nevertheless curbed the “Raging Bitch” label, refusing to register it in the state because it was detrimental to public welfare.  Flying Dog sued, claiming the commissioners violated its free speech rights by refusing to let the dogs out.   Although the Commission eventually rescinded its ruling due to intervening Supreme Court precedent emphasizing constitutional protections for commercial speech, Flying Dog continued to seek damages from the commissioners for lost sales suffered during the ban.

The commissioners claimed they were entitled to immunity from damages, in part because Flying Dog’s First Amendment right to market the Raging Bitch label on Michigan’s supermarket shelves was not clearly established.  The Sixth Circuit disagreed, finding that, even in 2009, “any reasonable state liquor commissioner” was on notice that a content based ban on the label must conform to the First Amendment, and cited a 1995 Supreme Court case, Rubin v. Coors, which invalidated a ban on including alcohol contents on beer labels.  The Court held that the commissioners should have applied the “Central Hudson test,” from the 1980 Supreme Court case, which bars restrictions on truthful commercial speech regarding lawful activities unless (1) the government has a substantial interest in regulating the speech, (2) the proposed restriction directly advances the government’s substantial interest, and (3) the proposed restriction is no more extensive than necessary to further the government’s interest.

Flying Dog’s range may extend beyond craft beer.  For example, the case may lend support to the Washington Redskins’ position in the team’s dispute with the US Patent and Trademark Office over its decision to strip the team of several trademarks (although, unlike the liquor commission ruling in Flying Dog, the USPTO’s decision does not bar the Redskins from selling products bearing the team’s name and logos).

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Plug or Perish

FVLD attorney Seth Stern recently made a presentation to the Chicago Bar Association comparing the European Union’s “Right to be Forgotten” to United States privacy law.  Seth explained that any Right to be Forgotten legislation in the USA faces significant obstacles including the First Amendment, Section 230 of the Communications Decency Act, and the limited scope of American privacy law.  CBA members can view the presentation here.

Seth cited a recent survey indicating that, even though the Right to be Forgotten conflicts with the First Amendment, over 60% of Americans favor a right to have content about oneself removed from the Internet.  The Social Science Research Network posted another recent paper indicating that Americans are concerned about their current lack of options for seeking removal of damaging information that is available online.

The notion that First Amendment speech rights trump personal privacy was a relatively easy sell back when only celebrities and politicians had to worry about their dirty laundry being aired by the press.  These studies, however, may indicate a shift in public opinion now that everyone is a celebrity in their own social media universe, where the people publishing posts may lack the restraints often exercised by professional journalists.  Courts will need to resist chipping away at First Amendment freedoms when sympathetic plaintiffs ask them to assume a censorship role.

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Court: Biting Criticism of Dentist was Fair Use

A federal court in New York rejected a dentist’s attempt to take the teeth out of her patients’ Yelp reviews by requiring them to sign contracts prospectively assigning her the copyrights to any future social media postings about her services.

The court held that patient Robert Allen Lee’s Yelp review of dentist Stacey Makhnevich was a “fair use” of any copyright that Makhnevich held in the posting. The fair use doctrine permits the limited use of otherwise protectable copyrighted material for purposes including criticism and commentary.

Fair use aside, the court also held that by requiring patients to execute assignment of copyrights as well as a covenant not to publish criticism of her services, Makhnevich breached her fiduciary duties to her patients, and that efforts to enforce the restrictions would be barred by her “unclean hands.” The court also awarded a default judgment to Lee on his unrelated contract claims.

It is questionable whether a prospective copyright assignment of unspecified hypothetical postings could be enforced outside of, for example, a “work for hire” context. Following backlash including the Lee litigation, Medical Justice Corp. – the organization that supplied form copyright assignment contracts to doctors and dentists including Makhnevich – announced in 2011 that it has discontinued its form and no longer recommends using it.

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Another Day, Another Dollar? Exotic Dancers Bringing and Winning Wage Disputes Against Strip Clubs

Misclassification of independent contractors has come under scrutiny across multiple industries of late to include even strip clubs, which have long categorized performers as independent contractors outside the reach of federal and state minimum wage and overtime protections. Even a muse of Terpsichore may qualify as an employee, however, and now they are bringing wage-and-hour lawsuits (see here and here), under the Fair Labor Standards Act (FLSA), with retroactive paydays amounting to millions of dollars. These cases (examples below) are challenging the long-held business model of treating exotic dancers as independent contractors.

  • New York:  In November 2014, a federal district court awarded $10.8 million to exotic dancers in Hart v. Rick’s Cabaret Int’l, Inc. The court concluded that the dancers were employees of Rick’s and therefore entitled to a minimum wage under the FLSA and New York state law. The court explained that the “performance fees” dancers received from customers for personal dances or time in private rooms did not offset Rick’s duty to pay a minimum wage, and furthermore would not be applied to reduce the minimum wage obligations.
  • Texas:  In December 2014, a federal district court in Texas approved a $2.3 million settlement of FLSA claims brought by exotic dancers who worked at Jaguar Gold Clubs. The dancers in Jones v. JGC Dallas, LLC alleged not only that they were misclassified as independent contractors but also that the Clubs did not keep adequate records and retaliated against them for filing the lawsuit. Adding to the indignity, dancers testified they had to share tips with DJs, house moms, and managers (although the dancers’ lawyer asked 40% of the settlement ($920,000) and will receive 33.33%).
  • Arkansas:  In September 2014, a federal district court in Whitworth v. French Quarter Partners, LLC awarded more than $28,000 to three dancers who were misclassified as independent contractors by the club, French Quarter, in Hot Springs, Arkansas.
  • Nevada:  In October 2014, the Nevada Supreme Court ruled in Terry v. Sapphire/Sapphire Gentlemen’s Club that performers at the semi-nude Sapphire Gentlemen’s Club were employees. The court rejected the Club’s argument that they had agreed to be independent contractors after finding the Club for gentlemen voyeurs heavily monitored its performers, including dictating their appearance, interactions with customers, work schedules, and minute-to-minute movements when working.

Misclassification can be a latent and expensive problem for any employer under the FLSA, which sets federal standards for minimum wage and overtime pay, but it also can trigger tax liability by the IRS, healthcare compliance consequences, and workers’ compensation issues (although the factors distinguishing employees from independent contractors may vary by agency). In light of the IRS’s scrutiny of employee classifications this year, employers should carefully review their worker classifications, even if they lack terpsichorean aspects.

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Circuit Court Affirms That Charter School Operator Must Comply with FOIA

A scandal ridden Chicago charter school operator must produce documents under the Illinois Freedom of Information Act (the “FOIA”).  The Circuit Court of Cook County ruled against UNO Charter School Network, Inc. (“UCSN”) and United Neighborhood Organization of Chicago (“UNO”), the private company that UCSN hired to manage its charter schools, and in favor of Chicago Sun-Times news reporter Dan Mihalopoulos, represented by FVLD.

The Chicago Sun-Times had published a series of investigative reports revealing politically connected UNO’s misuse of state funds to construct and manage local charter schools under a grant of $98 million awarded by the Illinois Department of Commerce and Economic Opportunity (“DCEO”) for charter school development.  The Chicago Sun-Times reporting led the President of UCSN and UNO to resign from both Boards and triggered an investigation by the United States Securities and Exchange Commission, which ultimately charged both organizations with misleading investors by concealing conflicts of interest.

UCSN had denied having responsive documents in its possession while UNO contended that it was a “private entity” beyond the FOIA’s reach.  The Attorney General’s Public Access Counselor disagreed, however, and issued a binding opinion that both entities are subject to the FOIA. Among other factors, the Attorney General found that UCSN’s delegations of responsibility to UNO under their management services agreement encompassed “virtually all of the governance of the charter school” and that records concerning “the use of public funds to design and build charter schools are public records” subject to the FOIA.

UCSN sued for administrative review but the court found that financial experts and even the DCEO had treated UCSN and UNO as a single entity, further noting that both entities had common Boards, offices, and record-keeping systems.  The decision, which favors transparency and accountability where local government delegate functions to private entities, should facilitate the public’s oversight of charter school operators.

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Litigation Regarding the Late Robin Williams’ Estate Highlights the Importance of Specificity in Estate Planning

Actor Robin Williams’ sudden death on August 11, 2014 shocked the world and left his family heartbroken.  Yet even heartbroken families may dispute a latent ambiguity in an estate plan when the stakes are high enough.  Williams left an estate of approximately $45 million to be divided among his heirs, who include his third wife, Susan Schneider Williams, and Williams’ three adult children from his two previous marriages.

Currently, Susan and the Williams children are embroiled in a legal battle over the interpretation of the several provisions of the Robin Williams Trust that have become equivocal in context.  In his Trust, Williams provided that his children are to receive all of his “clothing, jewelry, personal photos taken prior to his marriage to Susan” and his “memorabilia and awards in the entertainment industry.”  The Trust provides that Susan will be allowed to reside in the marital home in Tiburon, California for the rest of her life, and should receive the furniture, furnishings, some of the contents of the home, and a trust to pay for all expenses of the residence.  Seemingly clear directives, however, were muddied in this particular context by Williams’ penchant for storing his collections of Japanese anime figurines, watches, bicycles, books, coins, and other effects in the Tiburon home.

Although ordinarily interpretation of a trust would be handled by the trustee, Susan allegedly felt compelled to seek court intervention when the trustee requested access to the Tiburon house.  Susan believes that “memorabilia” should include only items related to Williams’ acting career, and that “memorabilia,” “clothing,” and “jewelry” should automatically exclude all items in the Tiburon house.  Her attorneys claim that “any other interpretation would lead to Mrs. Williams’ home being stripped while Mrs. Williams still lives there.” Viewing “memorabilia” as distinct from “awards in the entertainment industry” the Williams children claim that Williams’ collections in the Tiburon home qualify as “memorabilia” given to them under the terms of the Robin Williams Trust.  In their mind, Susan is trying to ignore the “plain language of his will and trust” after being married to the actor for “less than three years.”  Unfortunately, despite Williams’ efforts to create a clear estate plan, this decision will now be left to the courts.

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The New Miami Vice

Slate reports on a recent appellate case from Florida holding that the state’s anti-teen sexting statute is unworkable on its face.   Apparently, the law makes a teen’s first sexting offense a civil offense, but juveniles cannot be prosecuted for civil offenses under Florida law.  That means there can be no second-time offenders who, theoretically, would be prosecutable for criminal offenses and subject to harsher penalties.  Florida teens, of course, should still be careful to avoid sexting in the state’s already lawless movie theaters.

Illinois’ own anti-sexting law took effect in 2011 and, among other provisions, permits adjudication of teens who sext as minors in need of supervision.  Sexters may be subject to prosecution for other crimes in addition to violations of state anti-sexting statutes.

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The Tao of the Internet: FCC and FTC Getting Aggressive

Two federal government agencies issued consumer protection warnings last week in connection with trending Internet practices.  While the Federal Communications Commission (FCC) sought to facilitate personal connectivity, the Federal Trade Commission (FTC) expressed concerns over the risks of consumers meshing too deeply with the Internet.

First, the FCC issued an Enforcement Advisory stating that businesses cannot block consumers from using their own personal Wi-Fi hot spots on the businesses’ premises in order to force consumers to pay for Wi-Fi services.  The FCC noted that this was a “disturbing trend” and warned that it will be “protecting consumers by aggressively investigating and acting against such unlawful intentional interference.”

In October 2014, the FCC had investigated the Marriott for blocking hotel guests’ personal Wi-Fi hot spots.  Marriott eventually agreed to pay a $600,000 penalty to settle the case.  Although Marriott paid the fine, it subsequently petitioned the FCC to change its policy, arguing that Wi-Fi blocking was necessary to protect the reliability and security of its own networks.

The FCC’s new Enforcement Advisory rejects Marriott’s argument: “No hotel, convention center, or other commercial establishment or the network operator providing services at such establishments may intentionally block or disrupt personal Wi-Fi hot spots on such premises, including as part of an effort to force consumers to purchase access to the property owner’s Wi-Fi network.  Such action is illegal and violations could lead to the assessment of substantial monetary penalties.”

Second, the FTC released a report on the Internet of Things (IoT), which emphasizes protections for consumer privacy and security.  IoT is the ability of everyday objects to connect to the Internet and to send and receive data, e.g., Internet-connected cameras, health or fitness monitor bracelets, home security devices, connected cars, and home automation systems.  The FTC warned that IoT raises numerous risks, such as the unauthorized access and misuse of personal information, attacks on other systems, and risks to personal safety.

The detailed report outlines the FTC’s recommended best practices, including that companies should build security into devices at the outset by conducting a privacy or security risk assessment, minimizing the data they collect and retain, and testing security measures before launching their products.  The FTC also recommended that companies examine their data practices and business needs to develop policies and practices that impose reasonable limits on the collection of consumer data or obtain consumers’ consent for collecting additional categories of data.

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Small BREW Act – Potential Tax Breaks for Craft Breweries

Craft breweries have enjoyed growth in popularity in America over recent years, and Chicago features some of the finest.  Too often the very existence of craft breweries does not depend on quality hops and barley, rather it depends on whether a particular brewery can generate sufficient revenue to pay high federal excise taxes.

On January 8, 2015, Congressmen Erik Paulsen (MN-03) and Richard Neal (MA-01) re-introduced bipartisan legislation to reduce the tax burden on America’s craft breweries.  The “Small Brewer Reinvestment and Expanding Workforce Act” (Small BREW Act) would impose an excise tax rate of $3.50 per barrel on the first 60,000 barrels (half of the current excise tax) and $16 per barrel on the next 1,940,000 barrels (down a few dollars a barrel).

Glenn Rice, a member of our firm who represents the Illinois Craft Brewers Guild as well as several prominent brewers, tells us:  “Small brewers face significantly greater production costs than multi-national brewing conglomerates due to vast differences in economies of scale.  Passage of the Small BREW Act will both level the playing field for small craft brewers and enable them to add jobs and grow their businesses.”

Only time will tell whether the Small BREW Act gains traction in Congress.

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