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ADMIRALTY LAW Oil rig worker is seaman for arbitration purposes In a case of first impression, the 5th U.S. Circuit Court of Appeals held on Aug. 6 that a laborer on an offshore oil and gas rig was a seaman, and thus not subject to the provisions of the Federal Arbitration Act (FAA), regardless of whether his work pertained to interstate commerce. Brown v. Nabors Offshore Corp., No. 02-31138. After Stephen Brown, a laborer on an offshore oil and gas rig and an employee of Nabors Offshore Corp., was injured on the rig, he sued Nabors. Nabors, having previously informed Brown that, as a condition of his continued employment, he had to agree to settle disputes through binding arbitration, moved to dismiss the suit. Brown countered that, as a seaman, he was not subject to binding arbitration because he fell under a provision of the FAA, which exempted “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” After a district court held for Brown, Nabors appealed, arguing that, under the language of the FAA exclusion, Brown had to be involved in interstate commerce for the exclusion to apply. In affirming, the 5th Circuit rejected Nabors’ reading of the law. Holding that it was reasonable to assume that Congress specifically excluded seamen and railroad workers, the court said, “our analysis supports Brown’s argument that the limiting phrase ‘engaged in foreign or interstate commerce’ only applies to ‘any other class of workers’ and not to the specific categories of workers enumerated, seamen and railroad employees.” Full text of the decision ADR Retroactive arbitration provision is enforceable A fraternal benefit society that added a mandatory arbitration provision to insurance policies it had previously issued to its members has a right to compel arbitration, the 7th U.S. Circuit Court of Appeals held on Aug. 5. Hawkins v. Aid Association for Lutherans, nos. 01-4124; 01-4147; 01-4148. Three groups of policyholders filed putative class actions alleging that the Aid Association for Lutherans (AAL) engaged in fraudulent sales practices when it marketed insurance policies to them. AAL is a fraternal benefit society located in Wisconsin, which governs such organizations with a regulatory scheme based on a Model Fraternal Code. After the plaintiffs bought their policies, the bylaws were amended to include a mandatory arbitration provision, making binding arbitration the sole means of resolving any dispute with AAL. The three class actions were filed in state courts in three states, and AAL moved to compel arbitration in all cases. The suits were ultimately consolidated in a Wisconsin federal court, which granted AAL’s petitions to compel arbitration. The policyholders appealed. Applying Wisconsin law, the 7th Circuit affirmed the order to compel arbitration, agreeing with AAL that the mandatory arbitration provision was binding on the policyholders, despite its being retroactively added to the policies by way of the amendment to the society’s bylaws. The 7th Circuit found that the arbitration clause was not unconscionable, and that proper notice of it had been given to the policyholders. Full text of the decision CIVIL PRACTICE Law banning gun-maker suits is constitutional The Michigan statute prohibiting localities from suing gun manufacturers and dealers is constitutional, the Michigan Supreme Court ruled on Aug. 7. Mayor of Detroit v. Arms Technology Inc., nos. 227669 and 233688. In April 1999, the city of Detroit and its surrounding county, Wayne, filed suit against multiple firearms manufacturers, arguing that they were directly and indirectly responsible for local gun violence. By the time the trial court was set to review the defendants’ second motion for summary disposition, the state Legislature had passed what became � 28.435. The trial court agreed with the plaintiffs that the statute was unconstitutional because it violated due process by being retroactive; it violated the separation of powers by imposing a rule of decision on the trial court; and it violated the Title-Object clause of the Michigan Constitution pertaining to the way statutes are broken down and titled. The Supreme Court reversed. The court ruled that the plaintiffs, as localities, did not have standing to raise a due process claim, noting that there is no exception to this procedural rule even when the locality is asserting a claim of great public importance. The statute does not violate separation of powers because it does not directly interfere with judicial decision-making since the judiciary isn’t being directed to make a specific finding of fact or to apply relevant facts to the law in a particular way. Finally, the statute, which also includes provisions on trigger locks, comports with the Title-Object clause. Full text of the decision Failing to confer, lawyer can’t then sanction rival Ruling that zealous advocacy on behalf of a client does not excuse an attorney’s belligerence during discovery, the 3d U.S. Circuit Court of Appeals reversed on Aug. 8 the imposition of sanctions against a defense attorney on the ground that the plaintiff’s counsel had made no attempt to confer in good faith prior to his motion to compel discovery. Naviant Marketing Solutions Inc. v. Larry Tucker Inc., No. 02-3201. Naviant Marketing Solutions sold a mailing list to Larry Tucker Inc., a direct- mail advertising business. In November 2000, Naviant sued Tucker for $150,000 in a Pennsylvania federal court, alleging breach of contract. In May 2001, Tucker answered two sets of interrogatories from Naviant. Naviant then demanded more complete answers, and the court directed counsel for both parties to resolve in good faith the discovery requests. Trial was set for Oct. 1, 2001, and a deposition for Tucker was scheduled. Though Tucker’s attorney had asked that the deposition be rescheduled, the plaintiff’s attorney went ahead with the deposition without the defendant being there. Naviant then filed a motion for contempt on the ground of the defendant’s failure to attend the deposition. The case went to trial, and the court awarded Naviant $165,203.66 and imposed sanctions against both Tucker and the defense attorney. The 3d Circuit reversed the sanctions order against the attorney. According to the court, an attorney may only be sanctioned if he violates a discovery order or advises a client to do so. There was no evidence that this had taken place. Moreover, the court argued, according to Fed. R. Civ. P. 37(a)(2)(A), a party moving to compel discovery sanctions must submit to the court “a certification that the movant has in good faith conferred or attempted to confer with the party not making the disclosure in an effort to secure the disclosure without court action.” Naviant’s counsel had not made a good-faith effort to resolve discovery disputes prior to seeking court intervention. Full text of the decision CONSTITUTIONAL LAW N.J. welfare law doesn’t violate state constitution Provisions of new Jersey’s welfare reform law, the Work First New Jersey Act, which ended the state’s practice of increasing welfare assistance when a recipient had additional children, did not violate the New Jersey Constitution’s equal protection and due process guarantees, the New Jersey Supreme Court held on Aug. 4. Sojourner A. v. New Jersey Dep’t of Human Servs., No. A-160-01. Sojourner A. and Angela B., women who received welfare benefits in New Jersey, sued the state’s Department of Human Services in a class action, alleging that the welfare reform law violated the New Jersey Constitution. The lawcapped the amount of aid a mother received at the amount she received when she first became a welfare beneficiary, which was based on the number of children she had at the time. The mothers alleged that the law was unconstitutional because it penalized them for exercising their fundamental right to bear children. Trial and intermediate courts held for the state, and the recipients appealed. Holding that the law did not violate New Jersey’s Constitution, the high court declared that even if the law’s benefit caps influenced a recipient’s procreative decisions, there was no unconstitutional burden placed on that decision. Noting that “working families do not receive automatic wage increases when additional children are born,” the court said the law merely put recipient families on even footing with working families, adding, “This case is not about a woman’s right to choose whether and when to bear children, but rather, about whether the State must subsidize that choice.” Full text of the decision CONTRACTS Landlord can destroy old store site to limit losses A landlord’s destruction of the vacated premises of a tenant may be considered part of its duty to mitigate damages from the tenant’s breach, the Maryland Court of Appeals ruled on Aug. 1. Circuit City Stores Inc. v. Rockville Pike Joint Venture L.P., No. 122. When Circuit City decided to leave the shopping center owned by Rockville Pike, it proposed subletting the space to a musical instrument store. The developer rejected the offer and sued for breach of contract. That case ended in 1999 with the judge entering an order against Circuit City on two liability and three damages issues. The court reserved jurisdiction to weigh issues that might arise as to any credits Circuit City might be entitled to apply to its obligations under the contract. Several months earlier, Rockville Pike entered into an agreement with the Food Lion grocery chain that required destruction of the old Circuit City store. In 2001, Circuit City went back to court to modify the judgment concerning credits it should receive once Food Lion opened. The court granted Circuit City’s motion and ordered Rockville to refund Circuit City payments it had made after demolition of the old building. The Court of Appeals reversed and remanded. It held that, while the 1999 judgment was final, Circuit City can get a separate judicial determination about possible credits. The court noted Rockville had a duty to mitigate its damages, so if its agreement with Food Lion was reasonable, then the trial court would need to determine how much Food Lion’s rent offset Circuit City’s. If the agreement with Food Lion was not reasonable, Rockville had breached its contractual obligation to mitigate and Circuit City’s obligations cease. Full text of the decision CRIMINAL LAW ‘Miranda’ must precede a police custody interview Finding that the admission of a defendant’s police-interview statements in a trial helped convict her of murder, the Maine Supreme Judicial Court stated on Aug. 6 that the woman’s statements should have been suppressed because she made them in police custody and had not been given the Miranda warning. State v. Bridges, No. Was-02-38. Following the death of her boyfriend, a young woman was interviewed by police twice at a fire station. She recounted how two men had broken into their home, shot her boyfriend and kidnapped her and her baby. After finding the boyfriend’s lifeless body in their home, the police conducted a third interview at the fire station. The detectives told her she was free to leave prior to the interview and did not read her Miranda rights to her. During the course of the interview, the detective repeated that he didn’t believe her story and that he would take her socks and match them up to prints found at the crime scene, even though such prints had not been found. The woman changed her story and stated that she had put the gun to her boyfriend’s head and pulled the trigger thinking that the safety was on. She was convicted of murder and sentenced to 45 years. Prior to trial, she sought to suppress the statements made during the third interview, arguing that they were obtained in violation of her Miranda rights. The motion court denied the motion, arguing that she was not in “custody” for purposes of Miranda. The Supreme Judicial Court reversed, holding that the statements should have been suppressed. A reasonable person in the defendant’s position, the court argued, would have felt that she was not free to leave the interview. The interview was the third of three that day, conducted in a small, dark bedroom of a fire station. The police asked leading questions and made misleading statements about supposed evidence they had uncovered. She should therefore have been given the Miranda warning. Full text of the decision TAXATION U.S. law prevails over U.S.-Canada tax treaty Applying the last-in-time rule, the U.S. Circuit Court for the District of Columbia held on Aug. 8 that a tax statute prevails over a tax treaty. Kappus v. Commissioner of Internal Revenue, No. 02-1145. A married couple who are United States citizens living in Canada reduced their $69,410 income tax liability for 1997 to zero by applying a foreign tax credit based on their payment of Canadian income taxes. They also reduced their alternative minimum tax (AMT) liability to zero by applying an AMT foreign tax credit. They claimed that a tax treaty between the United States and Canada exempted them from 26 U.S.C. 59(a)(2), which states that the AMT foreign tax credit may not exceed 90% of a taxpayer’s precredit tentative minimum tax. The Commissioner of Internal Revenue notified the couple that they owed $6,152 in income tax, equal to 10% of their precredit tentative minimum tax as based on the statute. In response to a petition filed by the couple, the Tax Court ruled in favor of the commissioner. Article XXIV of the U.S.-Canada Tax Treaty allows a credit against U.S. income tax based on income tax paid to Canada “subject to the limitations of the law of the United States.” Although there is a question as to whether the treaty and the statute can be harmonized, the D.C. Circuit found the answer unnecessary. Because the statute was enacted after the treaty, it prevails and the taxpayers owe a deficiency. Full text of the decision TORTS Swim program rival may be trade secret theft Former instructors of an infant drowning prevention program, who later founded a similar program, are not entitled to summary judgment on most of the original program creator’s claims against them, the 10th U.S. Circuit Court of Appeals held on Aug. 6. Barnett v. Shidler, No. 02-1047. Infant Swimming Research Inc. developed a scientific approach to infant drowning prevention, using nearly 2,000 prompts and procedures for teaching infants how to survive in water. Its employees were required to sign a nondisclosure agreement as well as a covenant not to compete. Three of the company’s instructors left to start a company called Infant Aquatic Survival. Infant Swimming filed a complaint against the former employees alleging Colorado state law claims of misappropriation of trade secrets, breach of contract and deceptive trade practices, as well as violations of the federal Lanham Act. A Colorado federal court granted summary judgment to the former employees. On appeal, the 10th Circuit affirmed summary judgment on the Lanham Act and the Colorado deceptive trade practices claims, finding that there was no evidence of confusion resulting from Infant Aquatic’s marketing of its program. However, the court reversed as to the remaining claims, finding that the district court’s trade secret analysis looked at the components of the Infant Swimming’s program in isolation rather than as a whole, and that there was sufficient evidence that the program was a trade secret to preclude summary judgment. Full text of the decision

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