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BUSINESS LAW Shareholders can inspect records of subsidiary Shareholders have the right to inspect the records of a wholly owned subsidiary of the company in which they own stock, the Ohio Supreme Court held on Oct. 13 in an issue of first impression. Danziger v. Luse, No. 2002-1880. Shareholders of a company asked to review the corporate minutes of both the company and its wholly owned subsidiary, a bank. After the company failed to respond and the shareholders filed a complaint with the trial court, the company agreed to have the shareholders examine its corporate minutes but not the corporate minutes of the bank because they were not shareholders of the bank. The trial court granted the company’s motion for summary judgment. The court of appeals affirmed. The Ohio Supreme Court reversed, explaining that the separate corporate existence of the subsidiary should be disregarded in this case because the company owns all of the stock in the bank and has no assets other than the bank; the parent and the subsidiary share the same directors, officers and shareholders’ meetings; and all of the company’s income is from dividends paid by the bank. Full text of the decision CIVIL RIGHTS Anti-discrimination law deems amputee disabled An amputee who needed a prosthesis to walk was disabled for purposes of the Texas Commission on Human Rights Act, the Texas Supreme Court ruled on Oct. 15. Little v. Texas Dep’t of Criminal Justice, No. 03-0498. Evelyn Little was not hired for any of the more than 20 food service positions at the Texas Department of Criminal Justice. Little, whose left leg was amputated at the knee and who walked with a slight limp, sued the department under the Texas equivalent of the Americans With Disabilities Act for job discrimination based on disability. The department said that Little was not disabled. In affidavits in defense of a summary judgment motion, Little explained that though she was able to “get around,” she was unable to walk quickly, run or sit on the floor. The trial court granted the department’s motion, and the court of appeals affirmed, finding that Little could walk well with her prosthesis and was not disabled. The Texas Supreme Court reversed, finding that Little was physically impaired in a way that substantially limited at least one major life activity: walking. At the time she was denied employment, Little’s ability to walk was significantly restricted. The use of a corrective device did not erase the fact of disability. Full text of the decision COMMERCIAL LAW No tortious interference if intent is self-interest Carvel Ice Cream store franchisees have not stated a valid tort claim for interference with prospective economic relations, the New York Court of Appeals ruled on Oct. 14 on a certified question from the 2d U.S. Circuit Court of Appeals. Carvel Corp. v. Noonan, No. 116. Despite earlier assurances to Carvel franchisees to the contrary, Carvel Corp. began distributing its products in supermarkets in 1993. Several franchisees lost business, and some closed. The franchisees sued Carvel, saying the supermarket program was harmful in itself, but was made worse by such actions as Carvel selling to supermarkets at bargain prices and issuing coupons that customers could redeem at supermarkets but not at franchise stores. A federal district court jury ruled in favor of the franchisees. On appeal, the 2d Circuit certified a question to the New York Court of Appeals to decide if the franchisees had a valid claim for “interference with prospective economic relations.” The state high court answered that if the franchisees lost business, is was not because of Carvel’s conduct, which did not constitute a crime or an independent tort, and was not aimed at harming franchisees. Carvel’s motive for interfering with the franchisees’ relationships with their customers was normal economic self-interest. Full text of the decision CONSTITUTIONAL LAW No immunity from suit for self-sufficient agency The Georgia ports Authority’s financial self-sufficiency meant that it was not an “arm of the state” for 11th Amendment immunity purposes, the Georgia Supreme Court held on Oct. 12. Hines v. Georgia Ports Auth., nos. S03G1813, S03G1821, S03G1820 and S03G1848. After longshoreman Johnny Hines was injured while working on a container ship docked at a Georgia Ports Authority terminal, he sued the authority, alleging negligence. A trial court denied the Ports Authority’s motion to dismiss, but an intermediate state appellate court reversed, holding that the Ports Authority was entitled to immunity under the 11th Amendment. Hines appealed. Reversing and applying a three-pronged test for determining 11th Amendment immunity articulated by the 11th Circuit, the Georgia Supreme Court held that the Ports Authority was not entitled to 11th Amendment immunity because it was financially independent from the state and hence “not an arm of the state.” Full text of the decision CONTRACTS Void-as-applied contract not void for attorney fees A contract found void as applied to the defendant in a breach action is not wholly void precluding an attorney fee award pursuant to that contract, the 7th U.S. Circuit Court of Appeals held on Oct. 13. Osler Institute Inc. v. Forde, No. 03-4107. Lois Forde’s employment with the Osler Institute was subject to an employment contract which contained noncompetition, attorney fees and severability clauses. When Forde left Osler to work for another company, Osler sued her, alleging four causes of action including breach of the noncompetition clause. An Indiana federal court granted summary judgment to Forde, finding the noncompetition clause to be void. The court also granted Forde attorney fees of almost $55,000, pursuant to the attorney fees clause of the contract. Osler appealed, arguing that it was inconsistent to enforce the contract’s attorney fees clause when the contract was held to be void. The 7th Circuit affirmed, holding that a partially illegal contract is wholly unenforceable unless the illegal provisions can be eliminated without frustrating the contract’s basic purpose. Here, the 7th Circuit concluded, although the noncompetition clause was void as applied to Forde, it was not necessarily illegal. The court further found that the contract contained several significant provisions besides the noncompetition ones, indicating that noncompetition was not the contract’s basic purpose. Full text of the decision ELECTION LAW Mass. party loyalty statute is constitutional Massachusetts’ “party loyalty” statute, which disqualified potential candidates who had changed their party registrations in the 90 days preceding election filing deadlines, is constitutional, the Massachusetts Supreme Judicial Court held on Oct. 15. Del Gallo v. Secretary of the Commonwealth, No. SJC-09348. Desiring to run as a Republican to avoid a crowded Democratic field in a district attorney’s race, attorney Rinaldo Del Gallo alleged that a Pittsfield, Mass., city clerk told him that he could change his party affiliation from Democratic to Republican. Del Gallo changed his party affiliation, and submitted papers to run as a Republican. A few days later, the city clerk’s office informed Del Gallo that pursuant to the Massachusetts party loyalty statute, Mass. Gen. Laws ch. 53, � 48, he was ineligible to run as either a Democrat or a Republican, because he had changed his registered party affiliation within 90 days of the filing deadline. Under the commonwealth’s “disaffiliation statute,” Mass. Gen. Laws ch. 53, � 6, Del Gallo was prohibited from running as an independent because of his party registration. Del Gallo sued, arguing that the statutes unconstitutionally denied him access to the ballot, and that the commonwealth should be estopped from keeping him off the ballot because of the clerk’s faulty advice. A single justice of the Massachusetts Supreme Judicial Court upheld the laws, and Del Gallo appealed to the full court. Affirming, the full court followed precedent in holding the statutes to be constitutional. The court also rejected Del Gallo’s estoppel argument, declining to use estoppel against enforcement of the statute on account of a city clerk’s allegedly incorrect advice. Citing equity considerations, the court said, “Del Gallo’s reasons for switching parties go to the very heart of the statutes. Del Gallo attempted to run as a Republican to gain a tactical advantage in the election, specifically, to face a smaller field of opponents. This manipulation is precisely what the party loyalty and disaffiliation statutes are intended to prevent.” Full text of the decision IMMIGRATION LAW Chinese victim of Muslim attacks is asylum-eligible The board of Immigration Appeals (BIA) erred in reversing an immigration judge’s grant of political asylum to an Indonesian woman of Chinese descent because the woman had established a well-founded fear of future persecution based on attacks by members of Indonesia’s Muslim majority against her and members of the nation’s ethnic Chinese Christian minority, the 9th U.S. Circuit Court of Appeals held on Oct. 14. Sael v. Ashcroft, No. 02-71872. Taty Sael, a member of Indonesia’s ethnic Chinese minority, fled the country after she was attacked by anti-Chinese mobs. Sael applied for political asylum, based on fear of future persecution. An immigration judge granted relief, but the BIA reversed, relying on the 1999 State Department country report on Indonesia, which reported a decline in attacks against ethnic Chinese. Sael filed a petition for review of the BIA order. Granting the petition for review and remanding the matter to the attorney general, the 9th Circuit held that Sael had established a well-founded fear of future persecution. Noting that there had been previous one-year declines in violence during Indonesia’s long history of oppression of ethnic Chinese, the court held that the report’s findings did not outweigh Sael’s evidence indicating a fear of future persecution. The court said, “Compared with this evidence, the statements relied on by the BIA have little relevance to Sael’s claim. Official discrimination continues, and hundreds of pages of news articles and human rights reports document a centuries-old anti-Chinese sentiment that continues to erupt in violence during periods of social, political or economic difficulty.” Full text of the decision INTELLECTUAL PROPERTY ‘Unclean hands’ prevents mark-breach recovery A trademark holder may not recover against an infringer if he has “unclean hands” due to failure to perform duties under the same arbitration decisions that resulted in transfer of the trademark, the 10th U.S. Circuit Court of Appeals held on Oct. 13. Worthington v. Anderson, No. 03-4233. The Worthingtons and the Andersons operated bakeries/cafes together under the name “Kneaders.” After their relationship deteriorated, they had the assets and liabilities of the Kneaders business divided by arbitration. The arbitrator assigned the name Kneaders to the Worthingtons and directed the Andersons to relinquish their trademark rights to the name. The arbitrator also required the Worthingtons to pay certain loans on which the Andersons were guarantors. Following their registration of the Kneaders trademark, the Worthingtons sued the Andersons for continuing to use the Kneaders name. A Utah federal court ruled that the Worthingtons had established a case of trademark infringement. But it barred them from receiving relief because they had “unclean hands” due to their failure to cooperate in an arbitrator-ordered division of property and to pay outstanding debts. The 10th Circuit affirmed, holding the Worthingtons’ inequitable conduct to be sufficiently related to the substance of their trademark claim to give rise to an “unclean hands” defense, which is “significant” because the doctrine “does not empower a court of equity to deny relief for any and all inequitable conduct on the part of the plaintiff,” unless the inequitable conduct is “related to the plaintiff’s cause of action.” The court held that the Worthingtons’ failure to perform their duties under the arbitration award precluded the Andersons from bearing the costs that trademark divestment would involve. Full text of the decision TORTS National flood insurance pre-empts state claims The national Flood Insurance Program pre-empts state law tort claims arising from the program’s administration, the 3d U.S. Circuit Court of Appeals ruled on Oct. 12. C.E.R. 1988 Inc. v. The Aetna Casualty and Surety Co., No. 03-2833. C.E.R. Inc., which owned property called Hamilton House in St. Croix, U.S. Virgin Islands, filed a claim for flood damage caused by Hurricane Marilyn in 1995. Aetna, which is authorized to write flood insurance policies on behalf of the program, settled C.E.R.’s claim for $200,000. C.E.R. filed another claim in 1996 after Hurricane Hortense, seeking $716,916. Aetna ignored a cost estimate provided by C.E.R. and offered only $20,000, which C.E.R. refused. In 1997, C.E.R. sued Aetna for contract and tort violations. Aetna settled for $278,392 on the contract claims, then moved for summary judgment on the tort claims, which the district court denied. The 3d Circuit reversed and remanded with instructions to dismiss with prejudice. The court ruled that C.E.R.’s claims are incompatible with the objectives of the National Flood Insurance Act, which is to provide uniform, affordable flood insurance in high-risk areas in order to reduce pressures on the federal fisc. Full text of the decision

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