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ANTITRUST No Sherman Act breach in insurer-pharmacy deal Rulings favoring the defense were affirmed by the 1st U.S. Circuit Court of Appeals on June 24 in a suit alleging that Blue Cross’ closed network contracts with pharmacies violated the Sherman Act. Stop & Shop Supermarket Co. v. Blue Cross & Blue Shield of R.I., No. 03-2061. Blue Cross & Blue Shield of Rhode Island, the major health insurer in the state, entered into a closed network prescription drug contract with PharmaCare as its manager, including CVS pharmacies and most independent pharmacies in the state. In a subsequent contract, Provider Health Services/United pharmacies were added to the closed network, but Stop & Shop and Walgreens were still excluded. Stop & Shop and Walgreens brought a Sherman Act suit against Blue Cross. On motions for summary judgment, the Rhode Island federal court rejected the plaintiffs’ claims of per se violations of the antitrust laws. After trial, the court granted a defense motion for judgment as a matter of law, holding that, absent adequate market definition, the plaintiffs could not make out a rule-of-reason claim under the antitrust laws. The circuit court affirmed, holding that the closed network is simply an exclusive dealing arrangement and not a per se violation of the antitrust laws, nor are the horizontal agreements that let Blue Cross and United pharmacies serve in each other’s closed networks, although they might still be unlawful. Full text of the decision CIVIL PRACTICE No bar on affection-loss claim against therapist When a therapist who separately counseled both husband and wife ultimately began dating the husband, the wife’s claim of alienation of affection is not barred by the limitations period that applies to malpractice, the Utah Supreme Court held on June 22. Dowling v. Bullen, No. 20021008. A couple in a faltering marriage began counseling with a licensed clinical social worker, Kathleen Bullen. The couple met with the therapist individually. Unbeknownst to the wife, Bullen initiated an intimate relationship with the husband. Later, the husband filed for divorce. He continued to date Bullen through September 1996, at which time the divorce became final and the wife learned of the affair. In September 2000, the wife filed suit against Bullen, alleging five causes of action. The wife conceded that all of her causes of action were barred by the Utah Health Care Malpractice Act, except for the claim of alienation of affection. She alleged that by divulging the wife’s confidences, Bullen had used her position to seduce her husband and to inspire him to file for divorce. The trial court granted summary judgment to Bullen, finding that the claims fell within the health care act’s bar against malpractice actions brought more than two years after the discovery of the injury. The appellate court reversed. The Utah Supreme Court affirmed. The claims to which the two-year limitations period apply, the court said, are those arising from treatment provided to “a patient during the patient’s medical care.” While the secrets divulged by Bullen are ones she had learned when the wife was a patient, the claim really arises from acts Bullen performed when the husband was the patient, and these fall outside of the statute’s time bar. Full text of the decision Failure to turn over letter properly led to dismissal Dismissal is the appropriate sanction for a plaintiff’s willful nondisclosure of a letter, where the court’s finding of willfulness is supported by clear and convincing evidence, the 7th U.S. Circuit Court of Appeals held on June 22. Maynard v. Nygren, No. 03-3436. Harry Maynard brought suit against his employer, Sheriff Nygren, for alleged violation of the Americans With Disabilities Act. Before trial, Maynard claimed that he had not received a certain letter, which would have been discoverable. But an Illinois federal court found that Maynard had picked up the letter from a doctor’s office, but that it was never turned over to opposing counsel. Learning of this discovery violation shortly before trial, the court granted the sheriff’s motion to dismiss and assessed monetary sanctions against Maynard and his counsel. In a prior appeal, the 7th Circuit held, as a matter of first impression, that the court “must have clear and convincing evidence of willfulness, bad faith or fault before dismissing a case” on the basis of a discovery violation. After remand, the district court found that Maynard had willfully violated the discovery rule; it concluded that the appropriate sanction was dismissal with prejudice. The 7th Circuit affirmed, holding that the district court’s finding that Maynard had intentionally and willfully withheld the letter from opposing counsel was supported by clear and convincing evidence. Full text of the decision CONSTITUTIONAL LAW Vending machine food as restaurant fare is taxable Affirming the decision of the court of appeals, the Minnesota Supreme Court found on June 24 that the taxation of sales of food through vending machines does not violate the equal protection clause of the U.S. Constitution. Minnesota Automatic Merchandising Council v. Salomone, No. C0-03-65. The Minnesota Automatic Merchandising Council, a nonprofit membership organization whose members sell food through vending machines in Minnesota, and one of its members filed a declaratory judgment action against the state challenging the constitutionality of a sales tax on food sold through vending machines. The plaintiffs argued that imposing a sales tax on vending machine food sales while exempting sales of food by other retailers violated equal protection. The trial court granted summary judgment for the state. The court of appeals affirmed. The Minnesota Supreme Court affirmed, holding that food sold through vending machines is akin to restaurant-type food, and that the tax on vending machine food is thus based on a genuine distinction that has a rational basis. Full text of the decision CONSUMER PROTECTION Sending of demand letter may go with filing of lien In a question of first impression, the 11th U.S. Circuit Court of Appeals held on June 22 that a debt collector’s simultaneous filing of a lien and sending of a demand letter to a consumer before the consumer requests verification of that debt does not violate the Fair Debt Collection Practices Act. Shimek v. Forbes, No. 03-14428. A homeowners’ association hired a law firm to collect members’ past due fees and assessments. The law firm sent an equitable lien to the Cobb County court clerk regarding the $260 unpaid debt of Paul Shimek, a member of the association. At the same time, the law firm sent Shimek a dun letter notifying him of the debt, the equitable lien and his right to dispute the debt within 30 days. Shimek paid the money but requested verification of the debt. A few days after that, the lien was recorded by the court clerk. A month later, Shimek received verification of the debt. The law firm then sent cancellation of the lien to the court clerk, who recorded the cancellation. Shimek sued the law firm, but a Georgia federal court found that its actions did not violate the fair debt act. The 11th Circuit affirmed. 15 U.S.C. 1692f of the fair debt act provides that a “debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt.” Since under Georgia law the filing of a lien by a creditor is a necessary step for securing payment of a debt, the court determined that it was not an unfair or unconscionable practice absent any evidence of deception. Full text of the decision EMPLOYMENT Overtime terms of law apply to retroactive pay Washington’s minimum Wage Act applies to a collective bargaining agreement (CBA) containing a one-time retroactive payment based on an hourly wage of actual hours worked, the Washington Supreme Court held on June 24, in an issue of first impression. Hisle v. Todd Pacific Shipyards Corp., No. 73357-1. Employees of Todd Pacific Shipyards Corp., which constructs and repairs marine vessels, were represented by Todd and Puget Sound Metal Trades Council. Puget Sound entered into a CBA covering work at the Seattle facility. Negotiations began for a new CBA when the old one was about to expire. Because the parties could not agree, an arbitrator was brought in. The arbitrator authorized an agreement that contained a wage increase consisting of a one-time retroactive payment based on an hourly wage of actual hours worked, without regard to whether the hours were regular or overtime. The employees sued Todd and Puget Sound, seeking to nullify the CBA. The parties signed a settlement agreement and release. Jerry Hisle, a Todd employee, brought an action alleging that Todd’s failure to pay time-and-a-half for overtime hours violated the minimum wage act. The trial court granted Todd’s motion for summary judgment. The court of appeals reversed. The Supreme Court affirmed. The minimum wage act provides that “no employer shall employ any of his employees for a work week longer than forty hours unless such employee receives compensation for his employment in excess of the hours above specified at a rate not less than one and one-half times the regular rate at which he is employed.” Because the retroactive payment in the CBA is tied to hours worked, the court agreed that it is subject to the overtime provisions of the minimum wage act. Full text of the decision INSURANCE LAW Undiagnosed sickness is no pre-existing condition Treatment for symptoms that have yet to be diagnosed as a specific condition cannot be characterized as a pre-existing condition for insurance coverage purposes, the 3d U.S. Circuit Court of Appeals ruled on June 22. McLeod v. Hartford Life & Accident Ins. Co., No. 03-1744. In February 1999, prior to the coverage period under her health insurance plan, Shirley McLeod sought medical treatment for numbness in her arm. Though she had also been treated for heart problems, bulging discs, hypertension and panic attacks, no diagnosis had been made. McLeod was finally diagnosed with multiple sclerosis in August 1999. Her insurer denied her long-term disability benefits, saying she had a preexisting condition. The district court granted the insurer summary judgment. The 3d Circuit reversed, finding that McLeod had not received treatment for her pre-existing condition prior to coverage because neither she nor her physicians knew that the symptoms were in any way connected to multiple sclerosis. There must be some intention on the part of the physician or patient to treat or uncover the underlying condition that is causing the symptom for it to be considered a pre-existing condition. Full text of the decision INTELLECTUAL PROPERTY No copyright breach by ISPs in posting photos The automatic copying, storage and transmission of copyrighted materials, when instigated by others, does not render an Internet service provider (ISP) strictly liable for copyright infringement under the Digital Millennium Computer Act (DMCA), the 4th U.S. Circuit Court of Appeals ruled on June 21. CoStar Group Inc. v. LoopNet Inc., No. 03-1911. CoStar, a provider of commercial real estate information in the United States and the United Kingdom, sued LoopNet, an ISP, for copyright infringement after many of CoStar’s copyrighted photos were posted on LoopNet’s Web site. CoStar argued that because LoopNet cursorily reviewed the photos for obvious copyright notices, it was liable for the infringement. A Maryland district court ruled for LoopNet, finding that the company did not directly infringe CoStar’s copyright. The 4th Circuit affirmed. ISPs, when passively storing material at the direction of users in order to make that material available to other users upon their request, do not “copy” the material in violation of the DMCA. LoopNet’s cursory review of the photos before posting them is simply gatekeeping, not unauthorized copying. Full text of the decision TRANSPORTATION Dangerous scenic byway rebuilding goes forward Challengers to the multimillion-dollar reconstruction of a 37.5 mile scenic highway are not entitled to an injunction, the 10th U.S. Circuit Court of Appeals held on June 23. Valley Community Preservation Commission v. Mineta, No. 03-2016. A 37.5-mile segment of U.S. Route 70 in New Mexico is designated the “Billy the Kid National Scenic Byway” by the federal Highway Administration (FHWA) and is known for its “rich historic associations and its exceptionally striking scenery.” However, the byway has a high accident rate and a fatality rate more than double the national average. The FHWA approved plans to reconstruct it. The Valley Community Preservation Commission and others moved for a preliminary injunction challenging the plans. They contend the FHWA failed to conduct the necessary investigations to determine whether the project will entail a “use” of historic properties protected under Department of Transportation Act � 4(f). A New Mexico federal court denied the motion. The 10th Circuit affirmed, holding that while the plaintiffs may suffer some harm as a result of the denial of the injunction, the balance of harms and the public interest weigh in favor of the FHWA. The high accident rate on the highway establishes that the public interest benefits more from the project than from any environmental and cultural protection afforded by an injunction. Full text of the decision

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