2nd Circuit

Connecticut, New York, Vermont

Insider trader Rajaratnam’s conviction upheld

The now-infamous insider trader Raj Rajaratnam was convicted in 2011 of conspiracy and securities fraud. Rajaratnam, the founder of former hedge fund management firm Galleon Group, organized the largest hedge fund insider trading scheme ever and got 11 years in prison for it. In U.S. v. Rajaratnam, on June 24, the 2nd Circuit upheld his conviction.

His conviction was due in part to wiretap recordings of Rajaratnam gathering nonpublic information that the judge allowed prosecutors to enter as evidence. The hedge fund manager argued that these wiretaps were inadmissible as evidence, because when prosecutors and Federal Bureau of Investigation agents requested them, they neglected to mention an ongoing Securities and Exchange Commission insider trading investigation.

The 2nd Circuit did not find Rajaratnam’s argument convincing, and a three-judge panel unanimously upheld his conviction.


4th Circuit

Maryland, North Carolina, South Carolina, Virginia, West Virginia

Hostile work environment claim dismissed when victim won’t discuss specifics

During a meeting about Mission Hospital employee Stephanie Crockett’s disciplinary problems, her supervisor, Harry Kemp, allegedly took her to an empty office and asked her to show him her breasts to prove she wasn’t wearing a wire, and to “seal [their meeting] with a kiss.”

After taking several days of leave, Crockett discovered when she returned to work that Kemp had reported her infractions and accused her of flashing him to get him not to report her misbehavior. Crockett said that Kemp was trying to cover up something “horrific,” but refused to give details.

Kemp committed suicide several months later, and Crockett was eventually fired for tape recording patients and co-workers, among other reasons. Crockett then sued Mission, alleging a hostile work environment. The district court granted Mission summary judgment, finding Crockett could not prove she had suffered a tangible employment action, and that by not explaining what happened with Kemp, she had not taken advantage of opportunities presented by Mission to correct the situation. The 4th Circuit affirmed this ruling on May 30 in Crockett v. Mission Hospital Inc.

5th Circuit

Louisiana, Mississippi, Texas

Runny eggs did not violate Medicare/Medicaid cooking guidelines

A Texas nursing home does not have to pay a fine for undercooking eggs that it served its residents, the 5th Circuit ruled on May 17 in Elgin Nursing and Rehabilitation Center v. U.S. Department of Health and Human Services.

When a state inspection revealed that Elgin had served soft-cooked unpasteurized eggs to five residents, both an administrative law judge and the U.S. Department of Health and Human Services Appeals Board upheld a $5,000 fine imposed by the Center for Medicare and Medicaid Services (CMS).

But when the 5th Circuit reviewed the CMS Operations Manual, it found that the two provisions of the egg-cooking rule—one that dealt with temperature and one that dealt with coagulation—operate independently. Thus, the nursing home only had to satisfy one of the two conditions, which the court found that it had.


6th Circuit

Kentucky, Michigan, Ohio, Tennessee

Owner liable for counterfeit products sold at flea market

The 6th Circuit on May 31 ruled for the first time that the owner of a flea market can be liable for contributory trademark infringement. The case, Coach Inc. v. Goodfellow, dealt with counterfeit Coach products.

After sending Frederick Goodfellow, owner of The Southwest Flea Market in Memphis, Tenn., a letter alerting him that counterfeit Coach goods were being sold by some of the flea market’s vendors, Coach Inc. sued him. The local district attorney had also attempted to notify Goodfellow by letter, and law enforcement ended up seizing the fakes from the market in April 2010.

Coach claimed that Goodfellow knew or should have known that the market vendors were selling counterfeit products, and the 6th Circuit unanimously agreed. It relied on Inwood Laboratories v. Ives Laboratories, a 1982 Supreme Court decision that said a party can be held liable for infringement when it knows or should have known that someone else is infringing a trademark, and the party continues to supply its product to the infringer.