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ATTORNEY FEES Defendant, vindicated, can get fees as damages The Federal Tort Claims Act (FTCA) allows for the recovery of attorney fees as damages for abuse of process and malicious prosecution if “the law of the place” where the tort occurred so provides, the U.S. Circuit Court for the District of Columbia said on Sept. 2. Tri-State Hospital Supply Corp. v. U.S., No. 02-5045. The U.S. Department of Justice sued Tri-State, a company that imported surgical instruments from Pakistan, for allegedly falsifying customs forms. After the DOJ dropped its fraud claim, the jury returned a verdict in Tri-State’s favor on the remaining negligence claim. Tri-State then sued the DOJ under the FTCA, alleging malicious prosecution and abuse of process and seeking $3.2 million in compensation for the attorney fees it spent defending itself. But ruling that it lacked subject-matter jurisdiction, a D.C. federal court dismissed the case. Reversing, the circuit court noted that the FTCA grants exclusive jurisdiction to the district courts over civil actions against the U.S. seeking money damages for injury or loss of property under circumstances where the country, if it was a private person, would be liable to the claimant “in accordance with the law of the place where the act or omission occurred.” It ruled that damages incurred in defending a suit later found to be malicious or abusive may be characterized as damages for “injury of loss of property.” Full text of the decision BANKRUPTCY LAW Disposable income find undoes discharge order In a case where a Chapter 13 trustee accused a debtor couple of hiding disposable income by subjecting themselves to excessive tax withholdings, the 10th U.S. Circuit Court of Appeals upheld on Sept. 4 a Wyoming bankruptcy court’s decision to vacate its discharge order. Midkiff v. Stewart, No. 02-8004. Dale and Anita Midkiff filed for Chapter 13 protection and were approved for a plan that deemed any tax refunds for the first 36 months to be disposable income. Thirty-four months later, they prepaid their remaining obligations, then filed their federal tax return. The bankruptcy court soon entered the Midkiffs’ discharge. On that same day, the trustee received their $4,974 tax refund, which she had not contemplated when she certified completion of the plan. At the trustee’s request, the bankruptcy court vacated the discharge under a bankruptcy rule allowing relief from orders entered pursuant to mistake, surprise or newly discovered evidence. A 10th Circuit bankruptcy appellate panel affirmed. Agreeing, the 10th Circuit acknowledged that the bankruptcy code only allows “revocation” of final orders when there has been unknown fraud, but it distinguished “revoking” from “vacating,” which simply alters the order to provide limited relief as appropriate. The trustee’s lack of knowledge of the refund was the type of mistake contemplated by Fed. R. Civ. P. 60(b), even though she could have anticipated that the debtors would file for and receive a tax refund for that year. Full text of the decision CONSTITUTIONAL LAW 6th Circuit invalidates Michigan wine-sale rule A Michigan regulatory scheme barring out-of-state wineries from shipping wine to Michigan residents, but letting in-state wineries do so, is an unconstitutional burden on interstate commerce and is not justified as advancing the traditional core concerns of the 21st Amendment, the 6th U.S. Circuit Court of Appeals said on Aug. 28. Heald v. Engler, No. 01-2720. Under the Michigan program, out-of-state wine makers may be granted a license in Michigan, but they can only ship their products to wholesalers within the state. When wine journalists, connoisseurs and a California winery challenged the measure, a federal court denied their summary judgment motion and instead granted summary judgment for the state. The 6th Circuit reversed. Following a string of U.S. Supreme Court cases, the court said that the scheme must first be judged under the dormant commerce clause; if it violates that clause, then the court will look to the 21st Amendment to determine if the state has a reasonable nondiscriminatory means of advancing that amendment’s “core concerns”- i.e., the exercise of control over importation or sale of liquor and the organization of the liquor distribution system. The court concluded that the regulations treat out-of-state and in-state wineries differently, benefiting the in-state wineries and burdening those from out of state, while not promoting temperance, ensuring orderly market conditions or raising revenue. Full text of the decision EMPLOYMENT Clothes maker liable in age discrimination suit Reversing a Texas federal court ruling, the 5th U.S. Circuit Court of Appeals said on Sept. 3 that an apparel company employee need not show that a younger employee was given preferential treatment in nearly identical circumstances in order to prove age discrimination. Palasota v. Haggar Clothing Co., No. 02-10844. Haggar Clothing fired 51-year-old Jimmy Palasota, a 28-year employee, after he refused to accept a severance package. During a “reconfiguration” of its sales force, the company had hired several new sales people, the majority of whom were under the age of 40, and fired a number of associates, all but one of whom were older than 40. In addition, severance packages were offered to 14 associates who were older than 50. When Palasota sued, a jury found the company liable for discrimination under the Age Discrimination in Employment Act. The trial court, however, granted Haggar’s motion for judgment, stating that there was no proof that it had given preferential treatment to a younger worker. But the 5th Circuit found that Palasota had produced sufficient evidence from which a jury could find that he was fired because of his age, noting that Haggar offered no explanation as to why only older employees were targeted for severance or why only younger employees were hired in their place. Full text of the decision GOVERNMENT Georgia AG entitled to override the governor Wading into a power struggle between the state’s Republican governor, Sonny Perdue, and its Democratic attorney general, Thurbert Baker, the Georgia Supreme Court said on Sept. 4 that, because Baker was within his rights under Georgia’s constitution in appealing a voting rights decision to the U.S. Supreme Court, Perdue did not have a legal right to force him to drop the appeal. Perdue v. Baker, No. S03A1154. Under the administration of former Gov. Roy Barnes, a Democrat, the state had appealed a federal court decision holding that Georgia’s congressional reapportionment plan violated the Voting Rights Act. The plan, considered favorable to Democrats, spread black voters into multiple congressional districts. Upon Perdue’s inauguration as governor in January 2002, he asked Baker to drop the appeal. Baker refused, arguing that the Georgia Constitution gave the attorney general exclusive authority for all legal matters pertaining to the executive branch of government. After unsuccessfully petitioning for a writ of mandamus to force the issue, Perdue appealed. Affirming, the state Supreme Court cited 1975 amendments to the Georgia Code that deleted the phrases, “when required to do so by the Governor” and “when required by the Governor” in the section pertaining to the AG’s duty to “represent the State in all civil cases in any court.” It concluded that the more narrowly drawn statute provides authority for the attorney general to continue the voting rights litigation despite the governor’s order to dismiss the appeal. Full text of the decision INSURANCE Carrier must defend Nissan against Nissan An insurance company must defend the operator of a North Carolina Web site that was sued for the unauthorized use of a Japanese automaker’s trademark, because the claim qualifies as an “advertising injury” under the operator’s insurance policy, the 4th U.S. Circuit Court of Appeals ruled on Sept. 4. State Auto Property & Casualty v. Travelers Indemnity Co. of Am., No. 02-2069. Nissan Motor Co. sued the Nissan Computer Corp. (NCC)-a sales and service company owned by a man named “Nissan”-alleging trademark infringement. The automaker claimed that in 1996 NCC violated its trademark by registering the Internet domain names www.nissan.net and www.nissan.com. The car company also alleged that in 2000 NCC started selling ad space on its Web sites to automobile and other merchandising companies, using a logo similar to Nissan’s. NCC was insured during part of this time by State Auto Property, and later by Travelers. When State Auto sued Travelers to compel it to participate in NCC’s defense to the underlying suit, Travelers successfully moved for summary judgment, arguing that the automaker’s claim did not allege an “advertising injury” covered by its policy. Vacating and remanding, the 4th Circuit said that Travelers’ policy defines “advertising injury” as including the “[m]isappropriation of advertising ideas or style of doing business.” The court ruled that a trademark constitutes an advertising idea or a style of doing business. Therefore, Nissan’s suit alleged an advertising injury. The court said that the injury occurred “in the course of advertising [NCC's] goods, products or services” and that none of the policy exclusions vitiated Travelers’ duty to defend. Full text of the decision LAND USE AND PLANNING Restrictive covenant tops church parking plan Ruling in favor of a homeowners’ association, the Missouri Supreme Court upheld on Sept. 2 the trial court order permanently enjoining a church from building parking lots on property encumbered by a restrictive covenant. Country Club District Homes Ass’n v. Country Club Christian Church, No. WD61418. A Kansas City, Mo., subdivision was controlled by restrictive covenant stating that “[n]one of said lots shall be improved, used nor occupied for other than private residence purposes.” A church that owned several parcels in the subdivision wanted to turn three of them into parking lots. The association petitioned to enjoin the church permanently from doing so, claiming that it would violate the covenant. When a trial court granted the petition, the church appealed, arguing that prior precedent had exempted church lots from such covenants. Affirming, the high court said that the phrase “private residence purposes” was unambiguous. Although “residential purposes” means not for commercial or business purposes and a church does not have a commercial or business purpose, “private residence purposes” excludes any nonresidential uses, including any by a church, it said. Full text of the decision MEDICAL MALPRACTICE Juror’s personal tale no cause for misconduct In medical malpractice jury deliberations, a juror’s discussion of his wife’s medical experiences do not constitute misconduct justifying a new trial, the Washington Supreme Court held on Sept. 4. Breckenridge v. Valley General Hospital, No. 73481-0. Dr. Tomas Nowak examined Lynda Breckenridge in a hospital emergency room for a severe headache. Based on her appearance, responses to tests and her statements about previous similar migraines, he diagnosed her with a severe migraine, which he treated. About a week later, she suffered a massive aneurysm. She and her family sued, claiming the failure to perform a computer tomography (or CT) scan was malpractice because such scans can reveal a sentinel bleed, which often precedes such a rupture. After the jury unanimously found there was no malpractice, Breckenridge learned that one juror had argued during deliberations that his wife had been been hospitalized with similar symptoms, but that the wife’s doctors had never considered a CT scan. The trial court granted Breckenridge’s new trial motion, finding it was misconduct for the juror to share “extrinsic evidence” regarding his wife’s experiences. An intermediate appeals court reversed. Affirming, the state Supreme Court said that a trial court had abused its discretion. A trial court cannot grant a new trial based on post-verdict juror statements that “inhere” in the verdict, the high court said. It explained that the individual juror’s mental processes, motives, intentions and beliefs, as well as the weight a juror gives to particular evidence, are all such inherent factors. Full text of the decision SECURITIES LAW Broker misconduct suit returns to state court A complaint alleging brokerage firm misconduct in the sales and marketing of callable certificates of deposit should be remanded to California state court, the 9th U.S. Circuit Court of Appeals said on Sept. 5. Lippitt v. Raymond James Financial Servs. Inc., No. 01-17049. Acting under California’s private attorney general law, John Lippitt filed a suit in a California court challenging the sales and marketing of the CDs by several national brokerage firms, including Raymond James, Morgan Stanley and Salomon Smith Barney. He asked for relief under California’s Unfair Competition Law. But the misconduct he alleged overlapped with conduct barred by New York Stock Exchange (NYSE) rules, the enforcement of which is exclusively delegated to the exchange and the Securities and Exchange Commission. The defendants removed the case to a California federal court, which denied Lippitt’s remand motion. Lippitt voluntarily dismissed the suit with prejudice, obtaining an appealable final order. Remanding, the 9th Circuit said that the Securities Exchange Act of 1934 expressly denies a remedy in an action brought by a private class representative to enforce NYSE rules, which can only be enforced by federal courts. But it concluded that Lippitt’s suit belongs in state court because the act does not bar claims under California law for the kind of misconduct he alleges. The court rejected defense claims that Lippitt’s allegations made the suit one that “arises” under federal law and that he had “artfully phrased a federal claim by dressing it in state law attire.” Full text of the decision TORTS Bar owner not liable for patron’s off-site murder A Wilmington, Del., bar was not liable for the robbery and murder of a patron in a public parking lot it did not own, even though it promoted the lot as free parking for its patrons, the Delaware Supreme Court said on Aug. 25. Rhudy v. Bottlecaps Inc., nos. 17/18, 2003. Denise Rhudy and Stephanie Krueck parked in the lot before they went to hear a band at Bottlecaps, a bar and restaurant. While the women were in the lot, a robber shot and killed Rhudy and tried to shoot Krueck. Rhudy’s estate and Krueck sued Bottlecaps, arguing it was liable because it controlled the lot and because the women had decided to park there based on Bottlecaps’ ads. A trial court granted the restaurant’s summary judgment motion, holding that it was not liable because it did not own or have possessory rights to the lot. The estate and Krueck appealed. While it affirmed, the high court rejected the trial court’s analysis that Bottlecaps’ lack of control or possession of the lot freed it from liability. Although an important factor, the court said such control, along with the issue of whether the bar’s economic activities increased the risk, had to be considered. Nonetheless, it concluded, “Bottlecaps’ business activities did not increase the risk of crime on the Lot. Nor could it have been expected to prevent criminal occurrences there.” Full text of the decision

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