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ADR No arbitration of dispute, according to agreement Vacating a trial court decision to compel arbitration, the 6th U.S. Circuit Court of Appeals on July 31 said that while the lower court rightly ruled that the parties had agreed to arbitrate certain claims, it erred when it applied that provision to the parties’ entire dispute. Bratt Enterprises Inc. v. Noble Int’l Ltd., No. 01-4244. When Bratt sold its steel business to Noble, the parties signed an agreement that contained an arbitration clause covering disagreements “with any of the amounts included in the Closing Balance Sheet.” Noble had agreed to assume liability for accounts payable, subject to a provision capping its liability at $1.2 million. When a dispute arose over a $600,000 difference between the amount of accounts payable on the balance sheet and the liability limit, Bratt filed suit in an Ohio federal court seeking reformation. Noble countersued for the difference between the sums. On Bratt’s motion, the trial court submitted the claim to an arbitrator who ruled in Noble’s favor. Finding the lower court’s arbitration mandate was overbroad, the 6th Circuit said that while the parties had expressly agreed to arbitrate the balance sheet issue, the other issues reached by the arbitrator involved the validity of the liability limitation provision and were outside the arbitration agreement.   Full text of the decision CONSTITUTIONAL LAW Racist’s firing violates equal protection clause In a combined order and judgment on July 28, the 10th U.S. Circuit Court of Appeals held that an airline employee who was fired for writing a white supremacist pamphlet and for wearing a provocative T-shirt had pleaded a cause of action under the equal protection clause. Mahon v. American Airlines Inc., No. 01-5092. Daniel Mahon attended a diversity workshop sponsored by his employer, American Airlines, as a member of the Caucasian Employee Resource Group. He wore a T-shirt with a copy of the book cover for The Turner Diaries, a racist tract, on one side and the statement “What will you do if they come and take your guns? Warning: The FBI has labeled this the most dangerous book in America” on the back. Mahon also handed out a pamphlet he had created that allegedly contained white supremacist rhetoric. After American fired Mahon for violating work rules prohibiting threatening and intimidating behavior toward other employees, he filed several claims against the carrier but an Oklahoma federal court granted American’s motion to dismiss for failure to state a claim. Affirming in part and reversing in part, the 10th Circuit said that Mahon’s equal protection claim should not have been dismissed. Mahon had alleged American did not discipline or terminate other employees who wore Turner Diaries T-shirts or distributed the pamphlet. These facts suggest that he was treated differently from those similarly situated, the court said.   Full text of the decision Special-issue license tag no basis for a traffic stop A Minnesota law allowing suspicionless stops of vehicles with special license plates issued to households with a driver with a revoked license was unconstitutional, the Minnesota Supreme Court held on July 31. State v. Henning, No. C9-01-1985. After two driving under the influence convictions, the state of Minnesota revoked Joel Henning’s driver’s license. Henning’s car was owned by his father, so the state issued special registration plates with the letters, “WZ.” Such plates are issued where at least one member of a violator’s household has a valid license. Police stopped Joel Henning solely on the basis of his WZ plates, and Henning was convicted of driving after revocation. An intermediate appellate court held that the law providing for suspicionless stops of drivers was constitutional and that, by accepting the WZ plates, Henning consented to such stops. Henning appealed. Reversing, the high court held that the law providing for stops, Minn. Stat. � 168.0422, was unconstitutional under both the U.S. and Minnesota constitutions. Also, noting that the operator of a vehicle with special plates might not be the violator, the court held that the mere presence of WZ plates did not create the reasonable suspicion required for a stop.   Full text of the decision ELECTION LAW Term limits can’t apply to Oregon sitting members The term-limit ballot initiative proposed by the Oregon attorney general must be modified to delete language that would immediately apply the limits to sitting members of the Oregon Legislature, the Oregon Supreme Court ruled on July 31. Nesbitt v. Myers, No. S50479. The attorney general certified Initiative Petition 39, captioned “LIMITS TOTAL YEARS OF SERVICE BY CURRENT, FUTURE LEGISLATORS; INCLUDES PRIOR LEGISLATIVE SERVICE.” The initiative states that a “yes” vote would limit a member of the Legislature from serving more than six years in the House of Representatives, eight years in the Senate or 12 years, combined, in both. The summary of the initiative states that “no legislator sitting at time of measure’s effective date shall remain in office if it will cause that person to exceed the limits.” Tim Nesbitt, an authorized elector, sought review of the caption, the “yes” portion and the summary. Returning the ballot title for modification, the high court agreed with Nesbitt that the caption does not fully explain that the measure will prevent elected legislators from taking office or from finishing their terms if doing so would violate term limits. The measure is significant enough that it should be fully described in the caption, the court ruled.   Full text of the decision EMPLOYMENT LAW Xerox’s early pay pension plan violates ERISA Upholding most of a $300 million class action judgment, the 7th U.S. Circuit Court of Appeals on Aug. 1 held that provisions of Xerox Corp.’s cash-balance pension plan providing for reduced payments to employees who elected early lump-sum distributions violated the Employee Retirement Income Security Act (ERISA). Berger v. Xerox Corp. Retirement Income Guarantee Plan, No. 02-3674. A class of former Xerox workers who left the company between 1990 and 2000-and who chose to take lump-sum payments instead of waiting to begin receiving payments from the company’s cash-balance pension plan when they turned 65-sued. They argued that, even though they elected to take the lump sums upon leaving the company, the plan violated ERISA by not paying them the amount equivalent to what their estimated payout would have been had they waited until they turned 65. ERISA requires that any lump-sum substitute for an accrued pension benefit be the actuarial equivalent of that benefit. A district court entered a judgment for the class totaling approximately $300 million-the difference between what the class members received and what they would have received had the future value been calculated the way they were for employees who didn’t take the early lump sum. Xerox appealed. Affirming, the court held that Xerox’s method of calculating future value violated ERISA. The court differentiated between Xerox’s cash-balance pension plan and a defined contribution plan-where the employee’s only entitlement is to the amount in the employee’s account when he or she leaves or retires. The court said, “a cash balance plan is not a defined contribution plan; it is a defined benefit plan, and so triggers the congressional policy of requiring that a lump-sum distribution of pension benefits equal the value of the benefits if the employee decides to wait to the normal retirement age and take them then in the form of a pension.”   Full text of the decision State must show firing is not for maternity leave Vermont is not entitled to summary judgment in a suit filed by a woman fired during her maternity leave, the Vermont Supreme Court held on Aug. 1. Woolaver v. State of Vermont, No. 2003 VT 71. With written approval from her supervisor to take leave pursuant to Vermont’s Parental and Family Leave Act, Kimberly Woolaver, who was on probation due to performance problems, took leave following her son’s birth. During her leave, the state fired her. She sued, alleging violations of Vermont’s act and estoppel. Vermont’s Superior Court granted summary judgment to the state. On appeal, the Vermont Supreme Court reversed the summary judgment order and remanded for further proceedings. The high court found that, in light of Woolaver’s prima facie evidence that she was fired in retaliation for taking leave, the burden shifted to the state to show with clear and convincing evidence that, notwithstanding the leave, the employee would have been terminated anyway.   Full text of the decision FAMILY LAW Father who kept child in day care denied custody Even though he had had sole weekday custody of his daughter for more than a year, the Massachusetts Supreme Judicial Court on Aug. 1 ruled that the girl’s father was not entitled to legal custody, even as it questioned the rigid applicability of the “best interests of the child” standard that produced the result. In re Custody of Kali, No. SJC-08940. By agreement between Kali’s parents, after the mother moved out of state for a job, the child lived with her father and spent weekends with her mother. Subsequently, a probate and family court judge awarded joint temporary legal and physical custody of Kali, with each having physical custody of her on alternating weeks. During the weeks that the girl was with her dad she would spend 11 hours a day in day care; during the weeks she was with her mom, nine hours a day in day care. Then, finding that the mother was more concerned with Kali’s physical and medical needs than the father, the judge awarded legal custody to the mother and divided physical custody between the parents. Kali was to reside principally with her mother, while the father would have custody three weekends a month. On appeal, the state’s highest court affirmed the judgment. Acknowledging that the “best interests” standard has been criticized for leading to “the systematic imposition by courts of unnamed prejudices,” the court cited to G.L. c. 209C � 10, a state statute requiring judges to consider maintaining the bonds between a child and her caregiver. It concluded that the lower court’s order, despite shifting primary physical custody to the mother, had done so.   Full text of the decision INTERNATIONAL TRADE Festive costumes entitled to duty-free treatment “Pirate Boy,” “Witch”and the “Abdul Sheik of Arabia”-three of the Halloween costumes made by Rubie’s Costume Co.-are properly classifiable as “festive articles” that are entitled to duty-free treatment, the U.S. Court of Appeals for the Federal Circuit ruled on Aug. 1. Rubie’s Costume Co. v. United States, No. 02-1373. Responding to a request for classification, the U.S. Customs Service issued a directive that certain flimsy textile costumes not designed for normal wear are classifiable as “festive articles,” which, unlike fancy dress costumes, are entitled to duty-free treatment. In the Court of International Trade, Rubie’s challenged the directive as it pertained to costumes imported by its competitors, arguing that durability is irrelevant to the determination of whether a costume is an item of apparel or not. The court granted Rubie’s motion for summary judgment. Reversing, the Federal Circuit said the imports were plainly of a flimsy nature, lacked durability and were not normal articles of clothing. Unlike fancy dress costumes, they were intended solely for one-time festive occasion use and only incidentally afforded an element of covering for decency or comfort.   Full text of the decision LABOR LAW Worker should choose his union representative Actions taken against union members by management at an upstate New York Anheuser-Busch brewery violated the National Labor Relations Act, the 4th U.S. Circuit Court of Appeals held on Aug. 1. Anheuser-Busch Inc. v. NLRB, nos. 02-1740; 02-1897. An employee at the Baldwinsville, N.Y., facility was confronted by management about allegedly obstructing an independent contractor’s work for the company. He twice requested that his preferred shop steward represent him while he addressed the allegations, but management twice refused, and told him that he would be disciplined for his alleged act. When the Teamsters’ Union filed a grievance on the worker’s behalf, an administrative law judge concluded that Busch had violated the NLRA. Busch filed exceptions to the order. On review, the National Labor Relations Board (NLRB) affirmed the judge’s order. Busch petitioned for review of the order and the NLRB cross-applied for enforcement of its order. Denying the brewery’s petition and and granting the NLRB’s application, the 4th Circuit said that an employee is entitled, absent extenuating circumstances, to the union representative of his choice and it was not proper for Busch to insist that the employee be represented by the shop steward of the managers’ choice.   Full text of the decision TORTS Whistleblowers can sue ‘nursing home district’ Reversing a trial court decision, the Missouri Supreme Court held on July 29 that the waiver of sovereign immunity provided under the Omnibus Nursing Home Act applies to state government-run nursing home districts. Bachtel v. Miller County Nursing Home District, No. SC84835. Two at-will employees of a Missouri district told the staff at one nursing home there not to give anti-diarrhetic medication to residents infected with a highly infectious disease. An employee disregarded their warnings and ordered a nurse to administer the medication, causing one resident to fall ill and be hospitalized. After the at-will employees told the district board of directors of the abuse and filed a formal complaint with the Missouri Division of Aging, they were fired. The trial court dismissed their consolidated claim for wrongful discharge. After transferring the case from the intermediate-level Court of Appeals, the high court held that the omnibus act provides that nursing home employees, whether employed by private nursing homes or public districts, may not be retaliated against for reporting suspected incidents of patient abuse or neglect. The court concluded that the language allowing employees of nursing home districts to sue for retaliation constituted the express showing of legislative intent required to waive sovereign immunity.   Full text of the decision

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