Welcome back for another week of What's Next, where we report on the intersection of law and technology. Here's what we've got for you today.

>> The Northern District of California's chief district judge must decide unprecedented cryptocurrency questions.

>> Gilead seeks to fend off collusion claims.

>> Tesla stares down sanctions in "Jim Crow era" employee discrimination case.

Let's chat: Email me at [email protected] and follow me on Twitter at @a_lancaster3.

Cryptocurrency's Precedent Problem

Chief District Judge Phyllis Hamilton of the Northern District of California had a somewhat unprecedented cryptocurrency case before her last week. The judge heard arguments over Ripple Labs' motion to dismiss a class action from investors who allege the company deceived them into buying an unregistered security.

Boies Schiller Flexner's Damien Marshall, who argued for Ripple Lab, said the U.S. Court of Appeals for the Ninth Circuit has not handed down any precedential authority in the company's defense of federal securities claims and those asserted under California's Unfair Competition Law (UCL) and False Advertising Law (FAL).

Ripple asserts the complaint is untimely because it fell outside the three-year deadline for the Securities Act's statute of repose. As for the state claims, Ripple contended the UCL and FAL cannot be applied to securities, even though the company has classified its XRP virtual currency as a commodity in the past, similar to Bitcoin or Ethereum.

Although the parties did not have any in-circuit authority to defer to, they did cite a couple fascinating—yet dated—district and non-binding circuit court decisions.

>>P. Stolz Fam. P'ship, L.P. v. Daum The Gist: The Securities and Exchange Commission wrote an amicus brief for this case back in 2003 at the request of the Second Circuit. Stolz sought to interpret the definition of a bona fide public offering, and when the three-year period begins under the statute of repose. The case centered on "membership shares" from Smart World Technologies, a millennium-era tech company promising free internet access that did not escape the tech bubble. In January 2004, the court rejected plaintiffs' arguments that unregistered securities could never be subject to the three-year repose period simply because, by definition, they would never be registered. The court ruled such a scenario would be an "absurd result" and that the statute of repose counts down from the first bona fide offer.

The Arguments: Marshall said Stolz presented a "very thoughtful" case law supporting Ripple's arguments that plaintiffs' claims trigger the statute of repose under the timeline laid out in the August complaint. Since the filing alleges that all XRP was created in 2013 and sold to the general public during the time of Ripple's 2015 settlement with the The Financial Crimes Enforcement Network, the lawsuit falls outside the three-year deadline, Ripple contends.

Oleg Elkhunovich, a Los Angeles Susman Godfrey partner representing the class, argued that this case differs from Stolz. This case, he said, raises questions over whether there were multiple public offerings of a different security, since Ripple changed the way it sold and released XRP starting in 2017.

>>Hudson v. Capital Management Intern., Inc. The Gist: The Northern District of California decided Hudson back in 1983, around 15 years before Bitcoin was born. Investors in a limited partnership allege they were mislead to take part in a fraudulent scheme marketed as a tax shelter. The court ruled that the multiple offerings at issue in the case were separate, as opposed to one continuous offering.

The Arguments: Plaintiffs assert that defendants ignored Hudson and an earlier line of cases that held the relevant offering for computing the statute of repose "is the last offering of the security," according to their opposition to the motion to dismiss. Elkhunovich said Hudson and other district court cases adopted the lost offer rule and that "repose raises issues that cannot be decided at motion to dismiss case."

Anticompetitive or Ancillary: Noncompetes in the Biotech Industry

Readers plugged into the patent world have probably heard about Gilead Sciences' legal tussle over agreements it made with other pharmaceutical companies to not compete with its HIV medication.

On Thursday, U.S. District Judge Edward Chen of the Northern District of California heard arguments to dismiss a consolidated class action complaint filed in August against Gilead, Bristol-Myers Squibb, Japan Tobacco, and Johnson & Johnson subsidiary Janssen R&D Ireland.

At the hearing, Gilead's White & Case attorneys insisted the agreements were ancillary and promoted competition.

When Chen asked Christopher Curran, a Washington, D.C.-based White & Case attorney, to come up with an analogy for the type of agreements the company made with fellow defendants, Curran pointed to his own industry.

"As a lawyer, you agree to not compete against the other lawyers in the law firm over clients," Curran said. "Every joint venture and business combination has to make sure the collaborators don't directly compete."

Mark Lemley, a Durie Tangri attorney representing the plaintiffs, did not take too kindly to the association, calling it "remarkable."

"A law firm is a single integrated enterprise that acts like a single firm," said Lemley, who is also a professor at Stanford Law School. "If instead what happened was lawyers, who were all part of the San Francisco Bar but worked for different firms, agreed they would not compete with each other, that would be illegal."

When Chen said the agreements did not seem "unusual," Lemley retorted that the difference in this case is that the defendants are horizontal competitors.

"It's not Apple making an agreement with an iPhone distributor," Lemley said. "It's Apple and Samsung saying, 'Let's enter into an agreement where we don't compete with each other anymore.'"

Tesla factory in Fremont, California. Credit: Michael Vi/Shutterstock.com

Tesla Faces Sanctions

Tesla could face sanctions for allegedly withholding discovery information in a case where workers from the company's Fremont, California, plant claim they were called racial slurs, including the n-word.

The motion for sanctions filed last week claims Tesla and its Sheppard, Mullin, Richter & Hampton counsel failed to comply with a court order to release the names and contact information of plaintiffs' co-workers.

The California Civil Rights Law Group's Larry Organ, who is representing the plaintiffs, said Tesla released five names, some with incomplete contact information, after debating the issue for nearly 10 months. Organ said his team is asking for sanctions because Tesla clearly believes it's above the law.

"It's clear they don't want us to get in touch with people, because presumably these people might help their case," he said. "This is an important civil rights case, and I think this dispute highlights the fact that getting information in these kinds of cases is difficult. And when you have a petulant opponent such as Tesla, it's even more difficult."

Now, Organ said his team is just trying to prepare for the May 11 trial date.

Tesla and its counsel, which includes Sheppard Mullin's Tracey Kennedy in Los Angeles, and Patricia Jeng and Reanne Swafford-Harris in San Francisco, did not reply to a request for comment.

On the Radar

AI to Fill in Court Reporter Shortage Verbit, a transcription technology powered by artificial intelligence, has pulled in $31 million during its Series B funding round. CEO Tom Livne said he plans to reengineer the product to better detect the voices of different speakers in order to address court reporter shortages. "Part of the role of those court reporting agencies, they want to be able to provide an accurate record of the depositions, they're trying to streamline the process and see how they can improve the process from their side and to go digital," he said. Read more from Victoria Hudgins here.

Section 230 Empowers Facebook to Boot Russian News Site Facebook is free to delete the account and content of a Russian news service whose CEO faced an indictment from Special Counsel Robert Mueller's investigation into Russian interference in the 2016 presidential election, according to a federal judge. U.S. District Judge Lucy Koh of the Northern District of California ruled that Section 230 protects Facebook from removing the Federal Agency of News from its platform. "Simply because Facebook has many users that create or share content, it does not mean that Facebook, a private social media company by Plaintiffs' own admission in the complaint, becomes a public forum," Koh wrote. Read more from Ross Todd here.

Discovery's Privacy Concerns Retired federal Judge Andrew Peck has helped introduce new technologies into the discovery process, however, the former Southern District of New York magistrate judge said there's still a long way to go, particularly when it comes to privacy. Peck said legal experts ought to keep an eye on how the law treats discovery of biometric data. Read more from Zach Warren here.

Thanks for reading. We will be back next week with more What's Next.