Recent notable developments include:

Anaheim, CA Non-Franchise for AT&T Project Lightspeed: The Anaheim City Council authorized on March 7, 2006 a primitive Agreement with AT&T California (formerly Pacific Bell/SBC), under which AT&T’s Project Lightspeed cable television may be delivered in Anaheim without a cable franchise. The Agreement approved by the City does not actually define or identify Project Lightspeed, but appears to contemplate that AT&T’s local telephone lines will be upgraded for the transport of data such as video and broadband signals for marketing to Anaheim customers in competition to established cable service. Notable features of the Agreement include: (a) Project Lightspeed service is referred to as “IP-enabled”, apparently the fig leaf for not treating it as cable service and not requiring a cable franchise; (b) the Agreement carries no franchise fee, nor any other fee or payment to the City; (c) the Agreement has no term of years, and AT&T can abandon or terminate its service or the Agreement at will; (d) AT&T “will work with Anaheim to . . . provide access to City Channel 3 (PEG channel)”, apparently as an analog signal outside the IP-enabled service; (e) AT&T can cover its video service territory through technology of its choosing, including direct to the home satellite services, thus enabling it to draw its own boundaries for areas which will actually receive plant upgrades and investments.

Ninth Circuit Defines LLC Citizenship for Federal Court Diversity Jurisdiction: Filing a case in federal rather than state court, or removing a state case to federal court, requires federal jurisdiction based generally on either federal-law subject matter in the case, or “diversity of citizenship” meaning the parties to the case are not considered citizens of the same state. The Ninth Circuit Court of Appeal has now ruled as a matter of first impression, that “like a partnership, an LLC is a citizen of every state of which its owners/members are citizens” (Johnson v. Columbia Properties Anchorage, LP, 9th Cir. No. 04-35671, February 10, 2006). The Ninth Circuit ruling is consistent with rulings from several other federal circuits, and with a U.S. Supreme Court decision treating a limited partnership as having the citizenship of all its members. The court’s rationale is questionable, however, in finding LLCs to be similar to an unincorporated association, although an LLC is a distinct legal entity comparable to a corporation (which would be treated as a citizen only of the state where it was formed, and where its principal place of business is located). Notably, in corporate structures involving combinations of LLCs and limited partnerships, as in this case, the citizenship of a party may include all of the states where any of its constituent LLCs and LPs were formed, and also those of any corporate and individual owners thereof, making diversity harder to establish.

Mass Anti-Piracy Demand Letters Dodge RICO: The Ninth Circuit also found that based on the facts of the particular case, a mass pre-litigation demand letter program by DirecTV against unauthorized receivers of satellite signals (signal pirates), is immune from RICO challenge by the consumer recipients, based on the Noerr-Pennington doctrine and the sender’s First Amendment right to petition the government for redress of claims. The court finds that even though litigation had not been filed – a traditional prerequisite to this type of Noerr-Pennington First Amendment immunity – the purpose of the law requires a “breathing space” for First Amendment petition rights, which will protect pre-litigation claim letters and settlement demands so long as the claims are not “sham” claims made without legal basis for improper purposes. (Sosa v. DirecTV, Inc., Ninth Cir. No. 04-55036, February 15, 2006)

California Supreme Court to Review Wage Cases: The state Supreme Court has granted review in two cases involving employer-employee wage disputes:

(a)   Under state labor law, may an employer pay increased salaries or commissions, in lieu of reimbursing the employee for specific actual expenses incurred? (Gattuso v. Harte-Hanks Shoppers, Inc., previously reported here, in which the employer topped up the salary of salespeople on the road, rather than specifically reimbursing them for each expense item, which employees are now claiming they are nevertheless owed.)

(b)   When employees do not have the full daily lunch and break period required by California law, are their Labor Code Section 226.7 claims considered wages, or penalties having different consequences and statutes of limitation? (Murphy v. Kenneth Cole Productions, Inc., also previously reported here).

Punitive Damages for Sexual Harassment Capped at 6:1 Ratio with Actual Damages: The U.S. Supreme Court has determined in recent years that punitive damages awards which are too disproportionate to a plaintiff’s actual damages, may be constitutionally excessive punishment, and suggested that the ratio of punitive damages to compensatory damages should generally be no higher than 4 to 1, and almost never more than 9 to 1 (State Farm Mutual Auto Insurance Co. v. Campbell, 538 U.S. 408 (2003)). In light of the Supreme Court’s decision and related state court decision s, a California Court of Appeal ruled last week that in an employee sexual harassment case, the particular facts and circumstances at issue would permit a maximum punitive damage amount of no more than six times the amount of actual compensatory damages awarded by the same jury. While the recognition of some proportionate cap on punitive damages is appropriate, there is no mathematical rationale for the 6:1 ratio in this case, in which different juries have twice awarded substantial punitive damages after the defendant grocery chain moved an abusive manager from one store to another before ultimately conducting a more thorough investigation and invoking stronger discipline. (Gober v. Ralph’s Grocery Company, California Court of Appeal No. D040473, March 1, 2006)

Universal Service Fund Overhaul Considered: Senator Conrad Burns (R-Montana), a longtime defender of universal public services in rural areas, and other legislators are reported to be continuing work on proposed legislation to review and update the federal Universal Service Fund which extracts money from interstate and international telephone revenues to subsidize local telephone service in largely rural areas. Among other things, the growth of Internet and broadband services, and the eroding revenue and growing irrelevance of “long distance” services, means that the USF may need new sources of funding, as well as a broader scope to include support for broadband services in rural areas. While new legislation has not yet been adopted, Senator Burns and other have stated that the USF should also be excluded from the federal Anti-Deficiency Act which has threatened to interrupt USF cash flow due to the arcana of government accounting.

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