BENNETT V. ISAGENIX INTERNATIONAL LLC

Docket: 23-16082

Opinion Date: September 30, 2024

Judge: Collins

Areas of Law: Business Law, Civil Procedure, Contracts

Plaintiffs Jay and Siv Bennett, along with their corporation Kesha Marketing, Inc., were long-time associates of Isagenix International LLC, a multi-level marketing company. In May 2023, Isagenix informed the Bennetts that it would not renew their accounts, which were set to expire in June 2023. The Bennetts, whose sole income came from Isagenix commissions, sued the company and obtained a preliminary injunction to prevent the termination of their business relationship.

The United States District Court for the District of Arizona granted the preliminary injunction, finding that the Bennetts were likely to succeed on the merits of their claims. The court concluded that the contracts between the Bennetts and Isagenix were likely bilateral and that the modifications allowing Isagenix to terminate the contracts at will were not valid under Arizona law. The district court also found that the Bennetts would suffer irreparable harm due to the contractual limitation on consequential damages.

The United States Court of Appeals for the Ninth Circuit reviewed the case and agreed with the district court that the Bennetts had shown a likelihood of success on the merits. The Ninth Circuit held that the contracts were likely bilateral and that the modifications were not validly executed under Arizona law. However, the Ninth Circuit found that the district court erred in its analysis of irreparable harm. The appellate court held that a contractual limitation on consequential damages does not constitute irreparable harm for purposes of equity. Consequently, the Ninth Circuit vacated the preliminary injunction and remanded the case for further proceedings to address the Bennetts' other theories of irreparable injury.

TERPIN V. AT&T MOBILITY LLC

Docket: 23-55375

Opinion Date: September 30, 2024

Judge: Desai

Areas of Law: Communications Law, Consumer Law, Contracts

Michael Terpin, a cryptocurrency investor, sued AT&T Mobility, LLC after hackers gained control over his phone number through a fraudulent "SIM swap," received password reset messages for his online accounts, and stole $24,000,000 of his cryptocurrency. Terpin alleged that AT&T failed to adequately secure his account, leading to the theft.

The United States District Court for the Central District of California dismissed some of Terpin's claims for failure to state a claim and later granted summary judgment against him on his remaining claims. The court dismissed Terpin's fraud claims and punitive damages claim, holding that he failed to allege that AT&T had a duty to disclose or made a promise with no intent to perform. The court also held that Terpin failed to allege facts sufficient to support punitive damages. On summary judgment, the court ruled that Terpin's negligence claims were barred by the economic loss rule, his breach of contract claim was barred by the limitation of liability clause in the parties' agreement, and his claim under Section 222 of the Federal Communications Act (FCA) failed because the SIM swap did not disclose any information protected under the Act.

The United States Court of Appeals for the Ninth Circuit affirmed the district court's dismissal of Terpin's fraud claims and punitive damages claim, agreeing that Terpin failed to allege a duty to disclose or an intent not to perform. The court also affirmed the summary judgment on Terpin's breach of contract claim, holding that consequential damages were barred by the limitation of liability clause. The court affirmed the summary judgment on Terpin's negligence claims, finding them foreclosed by the economic loss rule. However, the Ninth Circuit reversed the summary judgment on Terpin's claim under Section 222 of the FCA, holding that Terpin created a triable issue over whether the fraudulent SIM swap gave hackers access to information protected under the Act. The case was remanded for further proceedings on this claim.

MOONEY V. FIFE

Docket: 22-16328

Opinion Date: September 30, 2024

Judge: Bennett

Areas of Law: Contracts, Labor & Employment Law

Thomas Mooney, the plaintiff, was employed as the Chief Operating Officer (COO) for Dr. Douglas Fife, Heather Fife, and Fife Dermatology, PC, doing business as Vivida Dermatology. Mooney raised concerns about improper billing practices at Vivida. After a conversation with Dr. Ken Landow, a dermatologist from another practice, Vivida terminated Mooney's employment, citing unauthorized disclosure of confidential information in violation of his employment agreement.

The United States District Court for the District of Nevada granted summary judgment in favor of Vivida on all three of Mooney's claims: False Claims Act (FCA) retaliation, breach of contract, and breach of the implied covenant of good faith and fair dealing. The district court concluded that Mooney's reporting of billing irregularities did not put Vivida on notice of potentially protected conduct under the FCA. It also found that Mooney had violated the confidentiality provision of his employment agreement and that his claim for breach of the implied covenant of good faith and fair dealing failed because he did not argue that Vivida literally complied with the contract.

The United States Court of Appeals for the Ninth Circuit reversed the district court's summary judgment. The appellate court held that the district court erred in applying the relevant substantive law for Mooney's FCA retaliation claim and failed to view the evidence in the light most favorable to Mooney for his breach of contract and breach of the covenant of good faith and fair dealing claims. The Ninth Circuit clarified that the McDonnell Douglas burden-shifting framework applies to FCA retaliation claims and that the Moore test for protected conduct continues to apply following the 2009 amendment to the FCA. The court concluded that Mooney engaged in protected conduct, satisfied the notice requirement, and established genuine issues of material fact regarding whether Vivida's reasons for his termination were pretextual. The court reversed and remanded the case for further proceedings.

USA V. SOLAKYAN

Docket: 22-50023

Opinion Date: September 30, 2024

Judge: Sanchez

Areas of Law: Criminal Law, Health Law, White Collar Crime

The case involves Sam Sarkis Solakyan, who owned multiple medical-imaging companies. Solakyan conspired with physicians and medical schedulers to route unsuspecting patients to his companies for unnecessary MRI scans and other medical services, generating $263 million in claims. The scheme involved bribery and kickbacks to physicians who referred patients to Solakyan’s companies, violating California’s anti-kickback statutes.

The United States District Court for the Southern District of California presided over the initial trial. Solakyan was charged with conspiracy to commit honest-services mail fraud and health-care fraud, as well as substantive counts of honest-services mail fraud and aiding and abetting. After a seven-day trial, the jury found Solakyan guilty on all counts. The district court sentenced him to 60 months in prison and ordered him to pay $27,937,175 in restitution to the affected insurers.

The United States Court of Appeals for the Ninth Circuit reviewed the case. The court affirmed Solakyan’s conviction, holding that honest-services mail fraud under 18 U.S.C. §§ 1341 and 1346 includes bribery and kickback schemes that deprive patients of their right to honest services from their physicians. The court also held that actual or intended tangible harm is not an element of honest-services fraud. The indictment was found sufficient in alleging willful misconduct for health-care fraud. The court did not find any abuse of discretion in the jury instructions regarding the mens rea for the conspiracy charges or the use of mails in the fraud scheme. However, the court vacated the restitution order, remanding the case for further proceedings to determine if the restitution amount should be reduced by the cost of medically necessary MRIs that insurers would have paid for absent the fraud.