Hunton Retail Law Resource

It’s probably painfully obvious to companies in the retail industry and beyond that the old paradigm of the retail shopping center is being permanently altered by e-commerce, as well as changing consumer preferences. As the old-guard stalwarts of retail begin to shutter stores or fold completely, it is up to both landlords and existing anchor tenants to adapt to the changing landscape, or risk prolonged periods of high vacancy.

One of the areas which can hamper efforts to re-tenant spaces are the restrictive covenants contained in both declarations governing shopping centers and ...

This past week, several consumer actions made headlines that affect the retail industry.

Dona J. Fraser Appointed Director of CARU

The Advertising Self-Regulatory Council and Council of Better Business Bureaus announced that Dona J. Fraser was appointed as Director of the Children’s Advertising Review Unit (“CARU”). Fraser is a leading privacy expert who previously worked for the Entertainment Software Rating Board, a self-regulatory program for the video game industry. CARU is an ASRC program dedicated to monitoring child-directed advertising since 1974.

An insured seeking coverage for credit card fees assessed against its third-party payment processor following a data breach recently filed an appeal in the Fifth Circuit Court of Appeals. Spec’s, a liquor store chain with over 160 locations throughout Texas, suffered two major data breaches of its credit card payment system, resulting in the loss of customer information and credit card numbers. Spec’s accepts Visa and MasterCard payments from its customers through a third-party processor, First Data. As a result of the breach, First Data incurred liability assessments from ...

Coastal areas in Texas have already begun evacuating as Hurricane Harvey heads for the Gulf Coast. Weather experts anticipate that the windstorm will reach Category 3 or Category 4 status by the time it makes landfall on the Texas coast late Friday night or early Saturday morning, making it the first Category 3+ storm to make landfall in the United States since Hurricane Wilma hit South Florida in October 2005.

On August 15, 2017, the FTC announced that it had reached a settlement with Uber, Inc., over allegations that the ride-sharing company had made deceptive data privacy and security representations to its consumers. Under the terms of the settlement, Uber has agreed to implement a comprehensive privacy program and undergo regular, independent privacy audits for the next 20 years.

Development International, an NGO with affiliates around the world, recently published its third annual report (the “Report”) summarizing U.S. public company Conflict Minerals Reports ("CMRs") filed on Form SD for reporting year 2016. Although the Report advances a very narrow reading of the recent D.C. Circuit case striking down part of the SEC conflict minerals rule, it otherwise provides a wealth of statistical information about the most recent round of Form SD filings. This information can be useful to retailers benchmarking their own Form SD reporting as well as the Form SD reporting of key suppliers.

Liability insurance policies generally have an exclusion barring coverage for claims brought by the insured’s own employees. These exclusions usually do not bar coverage, however, when claims are brought by an employee of one insured against another insured. This scenario occurs frequently, especially for companies in the retail industry, who are usually one of multiple insureds under a single policy and are susceptible to being sued by another insured’s employees.

It is no secret that California has had appliance efficiency standards in place for some time now. And it is no secret that the California Energy Commission (“CEC”) has been responsible for crafting those standards. According to the CEC and the California State Legislature, however, compliance with those standards has been hit-or-miss. In 2011, the Legislature found that “significant quantities of appliances are sold and offered for sale in California that do not meet the state’s energy efficiency standards,” and the CEC itself has stated that nearly half of all regulated appliances are non-compliant, and that certain product categories are entirely non-compliant. The broad range of products covered by the CEC’s efficiency standards may be partly to blame for the lack of compliance, as manufacturers may not even realize their product must comply. For example, the efficiency standards encompass nearly every device with a rechargeable battery and that rechargeable battery system, meaning everything from cell phones to laptops to tablets to golf carts must be tested, certified and listed in the CEC’s database before being offered for sale in California. 

On August 2, 2017, the U.S. Senate confirmed one of President Trump’s two management-side appointees, Marvin Kaplan, to the National Labor Relations Board (“NLRB”) in a contentious vote along party lines. Kaplan was sworn in on August 10, 2017, for a term ending on August 27, 2020. 

The Santa Barbara City Council, in an effort to combat the retail malaise on State Street in Downtown Santa Barbara, has approved a pilot program that would streamline the permit and review process for potential commercial tenants.

This past week, several consumer actions made headlines that affect the retail industry.

FTC Extends Comment Period for Paint Claims

On August 7, 2017, the FTC extended the public comment period related to four proposed settlements with paint companies. According to the original complaints from June 2017, Benjamin Moore, Imperial Paints, ICP Construction and YOLO Colorhouse deceptively claimed that their paint products were either emission-free or contained zero volatile organic compounds, including during and immediately after application. 

On August 7, 2017, the FTC announced that it obtained a court order temporarily halting an online marketing scheme that deceptively lured shoppers into expensive negative option plans. The FTC alleged in its complaint that defendants used initial low-cost “trial” offers to hook consumers into expensive monthly shipments for tooth-whitening products without properly disclosing the terms and conditions of the deal or properly obtaining their consent.

As an update to our Recall Roundup’s focus on the fidget spinning craze from June and July, the Consumer Product Safety Commission (“CPSC”) has released spinner safety tips. Although the CPSC still reports no fidget spinner recalls, Acting Chairman Ann Marie Buerkle used the CPSC’s bully pulpit to warn of the choking dangers that result when fidget spinners break and release small pieces. In addition, she references “reports of fires involving battery-operated fidget spinners.” 

The Ninth Circuit will decide whether Great Lakes Reinsurance must defend clothing company, In and Out, against a trademark infringement suit by Forever 21. The dispute focuses on exclusionary language in the general liability policy issued by Great Lakes to In and Out, which broadly bars coverage for claims stemming from violations of intellectual property rights, but which also excepts from the exclusion claims for copyright, trade dress and slogan infringement occurring in the company's advertisements. The appeal concerns last year’s ruling by a California federal judge that Great Lakes owed a defense because the underlying complaint raised a potential that In and Out’s advertising infringed Forever 21’s trade dress.

In late May 2017, the American Law Institute met to approve the Proposed Final Draft of the first ever Restatement of the Law, Liability Insurance—the culmination of over seven years of work on this project. Not surprisingly, many of the issues discussed in the Restatement have been hotly contested by insurers. The proposed Restatement is important for retail industry insureds because courts around the country may look to this new Restatement in ruling on common insurance coverage disputes arising out of product liability actions, recalls and environmental contamination. For example, some of the most hotly debated sections of the proposed Restatement include, (1) policy interpretation principles, such as when a term is deemed ambiguous; (2) the standard for determining the insurer’s duty to defend; (3) the insurer’s duty to make reasonable settlement decisions; and (4) the allocation of liability in long-tail environmental claims.

In a video roundtable series, Hunton & Williams LLP partners Lisa J. Sotto and Steven M. Haas and special counsel Allen C. Goolsby, along with Stroz Friedberg’s co-president Eric M. Friedberg and Lee Pacchia of Mimesis Law, discuss the special consideration that should be given to privacy and cybersecurity risks in corporate transactions.

Many retailers today face an increasing risk related to product recalls, which can result in extensive losses and a variety of liability claims. For example, a major supplier of meats was recently forced to recall more than seven million pounds of its product after customers found bone fragments and pieces of cartilage in their hot dogs and sausages. The large scope of this recall, and the associated challenges, is by no means unique to this company. Specialized insurance policies should provide protection to minimize most recall losses and exposure from liability claims. However, insurers often seek to rescind recall policies by asking courts to void the policies from their inception, meaning that the polices would not provide any coverage for any pending or future claims. A large number of these recall claims are being brought under New York law.

On July 26, 2017, an amusement ride named “Fire Ball” at the Ohio State Fair broke apart, killing one passenger and injuring seven others. This deadly incident may trigger a CPSC investigation into the matter.

Prior to 1981, the CPSC exercised jurisdiction over all amusement rides. But after several high-profile cases challenged the CPSC’s jurisdiction over amusement rides with mixed results, an amusement parks trade group successfully lobbied Congress to exempt stationary amusement rides from the CPSC’s jurisdiction. In 1981, Congress passed the Consumer Product Safety Amendments, which amended the definition of “consumer product” to explicitly exempt stationary amusement rides.

Retail developers continue to experiment with new concept designs for creating a shopping environment that will bring consumers back to brick and mortar. Along this pursuit to deliver a more attractive retail experience, developers of open-air shopping centers have started lobbying for relaxed open-container ordinances that would enable patrons to explore their retail districts with an alcoholic drink in tow. 

Recently, the United States Court of Appeals for the Second Circuit affirmed the district court’s finding in Reyes v. Lincoln Automotive Financial Services that a customer could not revoke prior express consent for purposes of the Telephone Consumer Protection Act ("TCPA") if that consent was provided as consideration in a binding contract. In a ruling that departs from two other circuit decisions, Gager v. Dell Fin. Servs., LLC, 727 F.3d 265 (3d Cir. 2013) and Osorio v. State Farm Bank F.S.B., 746 F.3d 1242 (11th Cir. 2014), the Second Circuit held that bargained-for written ...

Recently, it was reported that the UK Financial Conduct Authority will discontinue the London interbank offered rate ("LIBOR"), at the end of 2021. LIBOR is an interest rate index used in calculating floating or adjustable rates on trillions of dollars in loans, bonds, derivatives and other financial contracts. What happens under derivatives transaction documents when LIBOR is discontinued?

Read the full alert.