With the start of the holiday shopping rush just a week away, retailers should be mindful of their responsibility to keep customers safe when large crowds gather to take advantage of well-advertised and highly-anticipated sales. Customers, drawn by the promise of “doorbuster savings” and warned of limited quantities, do not always act in the most courteous manner when rushing to enter the store and running toward the products they desire.  Sadly, it has become all too common for injury, whether accidental or intentional, to occur as customers dash into and through stores during these special sales, and when a customer is injured during the clamor, a retailer can be held liable.

Retailers providing consumers with electronics on a rent-to-own basis face many challenges in ensuring that they are paid for the electronics that they rent.  In particular, computers are small and easy to hide if a retailer seeks to repossess the computer from a non-paying customer.  The temptation to use software that allows the retailer to view where the computer is located and what the renter is doing with the computer is strong, however, the consequences of doing so can be high.  Obtaining information from the computer without the renter’s knowledge or consent not only erodes the renter’s trust and confidence in the retailer, but also opens the retailer up to possible civil and criminal liability.

With the preseason underway and the regular season right around the corner, football fans are gathering in front of their TVs and crowding stadiums across the country with copious amounts of food and drink watching the big game.  Legal observers will have their own action to watch although this is likely to last several seasons.    

As a recent post on PointofLaw.com noted, the Tenth Circuit recently affirmed the convictions of Howard O. Kieffer.  Kieffer, who for several years practiced criminal defense law, had a problem - he never went to law school and had no license to practice law.  A California resident, Kieffer held himself out as a criminal defense attorney via a domain name with a Virginia company, which also hosted the web site.  The government argued that the web site he maintained, which was accessed by two of his victims, in Colorado and Tennessee, was a “wire communication in interstate commerce” sufficient to establish jurisdiction under the federal wire fraud statute.

One aspect, in particular, of the Tenth Circuit decision raises eyebrows.  The issue is what constitutes an interstate wire for the purpose of the wire fraud statute.  The White Collar Crime Professor Blog identified this as a particularly important issue in the cyber-connected world we now live in.  This issue has been evolving for some time, as shown in United States v. Phillips, 376 F. Supp2d 6 (D. Mass. 2005).  There, the court rejected the government argument that “in order to satisfy the elements of the wire fraud offense, it was not necessary to present evidence that the pertinent wire communications themselves actually crossed state lines, as long as the communications (whether interstate or intrastate) traveled via an ‘instrument of an integrated system of interstate commerce,’ such as the interstate phone system.”  More recently, the Tenth Circuit, in United States v. Schaefer, 501 F.3d 1197 (10th Cir. 2007), held that one person’s use of the internet, “standing alone” was insufficient evidence that the item “traveled across state lines in interstate commerce.”

Therefore, it is now somewhat surprising to read in Kieffer that the Tenth Circuit changed its position.  The court noted that before the website could reach the local host server, it had been uploaded by Kieffer to the Virginia company, and then transmitted from Virginia to Colorado and Tennessee. Based on those facts, the court held that "[t]he presence of end users in different states, coupled with the very character of the internet” permitted the jury to infer transmission across state lines.  Now, under Kieffer, an allegation that a web site was used to perpetrate fraud would give rise to federal wire fraud jurisdiction in nearly every case.  Stated differently, given the “the very character of the internet,” it is unlikely that a defendant will reside in the same state as his web site host and victims. 

Now, as Paul F. Enzinna noted, unless other courts reject Kieffer, the potential exists for a surge in federal wire fraud prosecutions.  With Kieffer seemingly establishing such minimal interstate contact requirements, it would seem that virtually any viewing or use of a web site could be used to trigger federal jurisdiction.

In the upcoming Annual Meeting of the ABA, the Commission of Ethics 20/20 will consider amending Model Rule 5.5, which addresses unauthorized practice of law issues.  Of particular concern is the issue of whether the Rule needs to be amended to address whether the proliferation of lawyers' use of technology allows them to maintain a "virtual practice" in a jurisdiction in which they are otherwise not licensed to practice.  The key issue centers around the question of how much "virtual practice" is sufficiently "systematic and continuous" to require an attorney to become licensed in a particular jurisdiction.

If you have seen the draft proposal to amend Model Rule 5.5, which was circulated in September 2011, but sent back to the drawing board because of feedback suggesting that it did more to cloud the issues than to clarify the issues, you probably felt the same way. 

In my humble opinion, at least for the time being, it may be much ado about nothing.  The rule as it stands appears to address most issues, and there probably needs to be considerably more in-depth analysis and study before any tweeking to the Rule occurs.  We've all dealt with pro hac vice issue, serving as and locating "local" counsel when necessary, and electronic filing hasn't really changed the process of being admitted, even if just temporarily, to a particular jurisdiction. Nonetheless, we have all seen how the practice of law has changed over the past ten to fifteen years, particularly as our dependence on electronic communication has multiplied exponentially, and this opinion could change as that dependence grows more and more.

Last week, the Wall Street Journal Law Blog wrote about a recent New York ethics opinion approving legal advertising on Groupon and other group coupon sites.  These services allow consumers to pay one price up front for a service that is more valuable. A restaurant, for example, may offer a $50 meal for $25 that is paid immediately. An attorney, like this one, for example, may offer to provide a will for $99.  New York wasn’t the first state to weigh in on the issue--South Carolina has, too--and it probably won’t be the last. 

Listen up, all you internet users (which is basically everybody but my mother, who still views the Internet as the work of the devil, and will quote from the book of Revelation in support of her theory).  Three bills you need to be aware of, because they may change the way you view (or more correctly, the way you are allowed to view) the Internet.  and from what I’m reading, there are some pretty darned big sites and companies that are ready to either “go dark” in protest (Wikipedia, for example, which is where I do most of my legal research) or lend a big supporting hand to the protests of the current bills being considered (Google is one – who can live a day without Googling something?  I mean for cryin’ out loud the Company has made itself into a verb!!).  Those bills are:

In the wild, wild west of the internet, it looks like the Federal Trade Commission is saddling up to play the role of sheriff. On November 29, 2011, the FTC announced its proposed settlement of claims against the social networking goliath, Facebook. (By the way, you can read about it on the Commission’s Facebook page. http://www.facebook.com/federaltradecommission?v=wall.) The settlement resolves an eight-count administrative complaint charging Facebook with misleading their users by telling them they would protect the privacy of personal information, but repeatedly allowing that information to be shared with third parties or made public without the users’ knowledge or consent.  (In the matter of Facebook, Inc., File no. 092 3188.) Coming on the heels of the FTC’s March 2011 settlement of charges that Google, Inc. violated its own privacy promises to consumers when it rolled out its social network site, Google Buzz (In the Matter of Google, Inc., File no. 102 3136), the Facebook case demonstrates the agency is willing to use consumer protection laws to “make sure companies live up to the privacy promises they make to American consumers.” http://ftc.gov/opa/2011/11/privacysettlement.shtm.)

This week, the FDIC and SEC approved the Volcker Rule and released a draft for public comments.  Bank regulators will have to solidify the Rule in the coming months, as the Rule is set to take effect in July, 2012 – although banks would have three years to comply with the Rule. 

California Insurance Commissioner Dave Jones announced August 19, 2011 that Susana Ragos Chung, 60, a Los Angeles area based attorney has been sentenced in Alameda Superior Court for Insurance Fraud. Chung entered pleas of no contest on two felony counts for violations of Section 549 of the Penal Code, recklessly submitting fraudulent insurance claims. She was sentenced to five years formal probation and to also pay $117,561 in restitution to insurance companies for 15 separate fraudulent claims. In addition, she was ordered to pay $235,123 to the state restitution fund. Chung agreed to place herself on inactive status with the California State Bar pending its mandatory investigation into her criminal conduct, which may result in her disbarment.

In August 2003, the California Department of Insurance (CDI), Benicia Regional Office, Fraud Division, Urban Auto Fraud Task Force initiated an investigation known as "Phantom Menace" into organized automobile insurance fraud in the Bay Area. The Task Force included Investigators from the California Highway Patrol, and Alameda and San Francisco County District Attorney's Offices. As a result of the information and evidence gathered by the Task Force CDI began an undercover investigation in July 2004, which included contacting numerous auto body shops, medical offices and law offices.

Task force members were able to infiltrate a sophisticated auto fraud organized crime ring operating in the Bay Area. This ring was working with law offices in the Los Angeles area. One of these law offices was owned and operated by Chung. In November 2004, task force members acting in undercover capacities were solicited to participate in staged collisions. Numerous collisions were staged and undercover officers were referred to auto body repair shops, medical offices and law offices in an effort to file false automobile insurance claims and secure substantial bodily injury claim settlements.

Between 2003 and 2007, Chung participated in this fraud ring by submitting insurance claims for suspects who staged these collisions for profit. Chung represented the claimants who were allegedly "injured" in these fake collisions. The majority of the people she represented never met her, and many did not even know they had an attorney. Nearly 100 people have been convicted in Alameda County over the last several years as part of this conspiracy, including more than 90 staged collision participants, and three chiropractors. The majority of the participants in these staged collisions readily admitted to law enforcement that no accident had ever occurred.

I understand that California jails are crowded and criminals are being let loose to ease the crowding but running a major fraud ring, in the opinion of ZIFL, requires some real jail time and seizure of the guilty lawyer’s assets. Mr. Jones should not be bragging about this result he should be complaining that the court is being too kind.

From Zalma's Insurance Fraud Letter, September 1, 2011 available free at – http://www.zalma.com/ZIFL-CURRENT.htm.