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BUSINESS LAW Federal law pre-empts state securities claims The Securities Litigation Uniform Standards Act of 1998 pre-empts state law claims alleging a purchase or sale of covered securities made by the plaintiff or members of the alleged class, the 2d U.S. Circuit Court of Appeals ruled on Jan. 11. Dabit v. Merrill Lynch, Pierce, Fenner & Smith Inc., nos. 03-7499 and 03-7458. In two separate actions, plaintiffs filed class actions against two Merrill Lynch-related entities. Seeking relief under state law, the suits alleged that Merrill Lynch issued biased research to garner investment banking business. Upon consolidation, the district court dismissed the actions as being pre-empted by the statute because they were “in connection with the purchase or sale of a . . . security.” The plaintiffs argued that their cases were not “in connection with” because, in part, the damages they suffered are from holding stock based on the biased research and for commissions he lost for recommending stocks touted by Merrill Lynch. The 2d Circuit affirmed the dismissal of the plaintiffs’ “holding” claims because they contain implicit allegations of past purchases made. But the court reversed the dismissal of the lost commission claims for further examination of whether they contain both allowable and preempted state law claims. The court found the “in connection with” language of the statute to be similar to the phrase used in the Securities Exchange Act. And to be pre-empted, an action must allege a purchase or sale of covered securities made by the plaintiff or members of the alleged class. Full text of the decision CIVIL PRACTICE Court has no jurisdiction over dispute as to pastor A Georgia state court had no jurisdiction over an action seeking declaratory and injunctive relief to determine who should serve as pastor of a church because the suit concerned an ecclesiastical rather than a civil matter, the Georgia Supreme Court held on Jan. 10. Bolden v. Barton, No. S04A1712. Robert Barton, deacon of the Georgia’s Bethlehem Missionary Baptist Church, and his supporters filed suit in a Georgia county court against the church’s pastor, Willie Bolden and his supporters, seeking an injunction ordering an election to determine whether Bolden should continue as pastor. The trial court issued an order regarding the election, and Bolden and his supporters appealed to the Georgia Supreme Court, arguing that the court lacked jurisdiction to address the dispute. Reversing, the Georgia Supreme Court held that the trial court had no jurisdiction to hear the case because it was not a dispute over a civil matter such as church funds or property, but was instead a church ecclesiastical matter over which Georgia courts had no jurisdiction. The state’s high court rejected the trial court’s reasoning that the election of the pastor implicitly implicates control over church property. The court said, “an allegation of the existence of a dispute over who should be the pastor, without more, does not confer jurisdiction on the courts to address and rule on the matter.” Full text of the decision Post-verdict statements can’t vacate jury verdict Post-verdict, out-of-court statements may not be used to impeach a jury verdict, the Colorado Supreme Court held on Jan. 10. Hall v. Levine, No. 04SA179. In a medical negligence case, a six-person jury returned a verdict in favor of the petitioner, with the jury foreperson stating that the verdict was unanimous. After the judge discharged the jury, he spent a few minutes answering their questions and thanking them for their service. At this time, the jury told him that the verdict had, in fact, not been unanimous but had only been entered because they could not agree. The judge notified the attorneys about what had happened but dismissed the jury because he believed that the jury could not be sent back for deliberations after they had been discharged. The respondent filed a motion for new trial, which was granted by the trial court. The Colorado Supreme Court reversed. Colo. Rev. Stat. � 606(b) states that “[u]pon an inquiry into the validity of a verdict or indictment, a juror may not testify as to any matter or statement occurring during the course of the jury’s deliberations or to the effect of anything upon his or any other juror’s mind or emotions as influencing him to assent to or dissent from the verdict or indictment or concerning his mental processes in connection therewith.” Making the rule in Section 606(b) absolute, the high court found that the case that the lower court relied on, which involved a mistakenly filled out verdict form, did not apply here. Full text of the decision CONSTITUTIONAL LAW Va.’s anti-fornication law breaches due process Virginia’s statutory ban on sex between unmarried partners violates due process, so a tort claim arising from fornication does not arise from “illegal activity,” and may therefore proceed, the Virginia Supreme Court held on Jan. 14. Martin v. Ziherl, No. 040804. Muguet Martin and Kristopher Ziherl were unmarried adults who had consensual sex. After Martin was diagnosed with vaginal herpes, she asserted claims against Ziherl for negligence, intentional battery and intentional infliction of emotional distress. Ziherl filed a demurrer relying on the Virginia Supreme Court ruling in Zysk v. Zysk, 239 Va. 32 (1990), which disallows tort recovery for injuries suffered while participating in an illegal activity. The trial court granted the demurrer, finding that Martin had failed to state a claim for which relief could be granted, because fornication had been criminalized by a Virginia statute. The Virginia Supreme Court reversed. Based on the U.S. Supreme Court’s ruling in Lawrence v. Texas, 539 U.S. 558 (2003), which held a Texas penal statute prohibiting certain sex acts to be unconstitutional, the court declared Virginia’s anti-fornication statute to be likewise unconstitutional, violating the due process clause of the 14th Amendment of the U.S. Constitution. Virginia’s high court rejected the trial court’s holding that valid reasons such as protecting public health and encouraging marriage for the procreation of children are rationally related to the objective of the statute, stating that “the Commonwealth’s interests do not warrant such encroachment on personal liberty.” Full text of the decision CRIMINAL PRACTICE Officer’s verbal order to priest is sufficient notice A federal protective service officer’s warning to a priest who was protesting the Iraq war by chaining himself to a courthouse door constituted adequate notice, despite the lack of conspicuous posting as required by federal statute, the 9th U.S. Circuit Court of Appeals held on Jan. 13 in an apparent case of first impression. United States v. Bichsel, No. 04-30126. To protest the imminent Iraq war, William Bichsel, a Jesuit priest, chained himself to the doors of a federal courthouse in Tacoma, Wash. Ordinarily, there is a “sandwich board” sign in front of the courthouse to advise the public that this was federal property and to list courthouses rules and regulations. Because Bichsel arrived before opening hours, the sign was not yet posted. Richard Reilley, an officer of the Federal Protective Service, ordered Bichsel to unchain himself, informing him that if he failed to do so, he would be arrested. Bichsel refused to do so, and Reilley cut the chains and arrested Bichsel for failure to comply with his order, pursuant to 41 C.F.R. 102-74.385. Bichsel was convicted before a U.S. magistrate judge. A district court affirmed, and Bichsel was sentenced to five days in jail. Bichsel appealed, arguing that the warning that he had to comply with Reilley’s order was not posted in a conspicuous place as required by federal law. Affirming, the 9th Circuit held that the actual notice supplied by Reilley’s warning was sufficient to satisfy the conspicuous-posting requirement of 40 U.S.C. 1315. The court said, “[T]he district court’s appeal to common sense makes good sense. As Judge Leighton stated, ‘Father Bichsel could not have reasonably believed it was lawful to chain himself to the courthouse doors.’ “ Full text of the decision GOVERNMENT Lien law targeting public employees is retroactive A lien against corrupt public employees’ retirement benefits is retroactive and may be for an amount greater than any restitution ordered to be paid, a divided South Carolina Supreme Court ruled on Jan. 10. McMaster v. The S.C. Retirement Sys., No. 25922. In 1999 and 2000, three former employees of the Sumter County School District No. 17 were convicted of embezzlement. All were ordered to pay restitution, ranging from $45,000 to $180,000. During its 2001 session, legislation was enacted that created a general lien on the public retirement or pension plan, not governed by the Employee Retirement Income Security Act, of a public employee convicted of embezzlement. The bill provided for retroactive application. Consequently, the attorney general sought enforcement of liens against the three employees to secure payment of the restitution orders. Each lien was for more than the original restitution order. The trial court held that the amount of the lien was limited to what was originally imposed at the time of sentencing. The attorney general appealed. The South Carolina Supreme Court reversed, holding that the Legislature had clearly intended for the lien statute to be remedial, not simply a mechanism to secure the criminal sanction of restitution. Also, because the statute is remedial in nature, the fact that the lien can be for a larger amount than the original order does not violate double jeopardy of ex post facto provisions of the U.S. Constitution. Full text of the decision Privacy Act applies only to federal government The Federal Privacy Act applies to federal agencies only, not state or local agencies, the 6th U.S. Circuit Court of Appeals ruled on Jan. 14. Schmitt v. The City of Detroit, No. 03-1884. The city of Detroit hired an outside vendor to print up the city’s income tax mailing to its residents. The company mistakenly printed the recipients’ Social Security numbers on the address label. Though Detroit’s mayor immediately apologized for the mistake, 10 months later, Detroit resident Daniel Schmitt filed a class action against Detroit, arguing that the public disclosure of the Social Security numbers was a violation of the Privacy Act. After the city agreed to make modifications to future requests for Social Security numbers, the district court granted Schmitt declaratory relief and then dismissed the rest of his claims. On appeal, Schmitt claimed that he should have been awarded monetary damages, too. The 6th Circuit reversed, holding that the Privacy Act applies only to federal agencies and cannot be invoked against a city. The Privacy Act defines the term “agency” with reference to the Freedom of Information Act, which applies only to federal entities, and the legislative history indicates that Congress considered extending the act beyond federal entities, but eventually decided to study the idea further. Full text of the decision IMMIGRATION LAW Law applies to aliens in U.S. before effective date Congress did not intend for the Immigration and Nationality Act’s “reinstatement statute” to exempt an alien who re-entered the U.S. prior to the statute’s effective date from its bar against applying for relief, the 10th U.S. Circuit Court of Appeals held on Jan. 12. Fernandez-Vargas v. Ashcroft, No. 03-9610. Humberto Fernandez-Vargas, a Mexican citizen, was deported from the U.S. in 1981. Soon thereafter, he re-entered without inspection and stayed, eventually marrying a U.S. citizen after the effective date of the Immigration and Nationality Act � 241(a)(5), the “reinstatement statute” codified at 8 U.S.C. 1231(a)(5). The statute provides that a prior order of removal may be reinstated against an alien who has illegally re-entered, and, unlike its predecessor statute, bars that alien from applying for any form of relief under U.S.C. Title 8, ch. 12. Fernandez applied for permission to reapply for admission to the United States and for adjustment of status to that of legal permanent resident. Later, he was arrested for being in the United States illegally. The 1981 deportation order was reinstated. Fernandez petitioned for review in the 10th Circuit, which had to interpret the reinstatement statute as well as Section 245(i) of the Immigration and Nationality Act, which allows an alien who entered without inspection to apply to become an alien lawfully admitted for permanent residence, if a petition for the classification was filed before April 30, 2001. The 10th Circuit sided with the majority of circuits in holding that Congress’ failure to state expressly that the reinstatement statute applied to aliens who re-entered the country prior to its effective date does not mean that it had therefore intended for the statute not to apply to these aliens. The circuit court looked at congressional intent regarding temporal reach because Section 241(a)(5) contains no explicit provision as to temporal reach. It decided that the statute’s bar on Fernandez’s adjustment application was not impermissibly retroactive. Full text of the decision LABOR LAW Union officer’s comments aren’t covered by NLRA An employee union officer’s expletive-filled comments to a supervisor were not protected “concerted activity” under the National Labor Relations Act (NLRA), the 4th U.S. Circuit Court of Appeals held on Jan. 10. Media General Operations Inc. v. NLRB, No. 04-1222. John Mankins was a 16-year employee of Media General Operations Inc., operators of the Winston-Salem Journal, and a vice president of Graphic Communications International Union, which represented press employees at the newspaper. Employees at the newspaper believed that supervisor Danny Leonard showed favoritism toward one employee. During and after a meeting where Leonard was critical of the work performance of press department employees, Mankins called him a “racist,” a “bastard” and a “redneck son-of-a-bitch.” After having initially suspended Mankins, Media General terminated him for insubordination. Mankins filed a complaint with the National Labor Relations Board, and the NLRB general counsel issued a complaint alleging that Media General had suspended Mankins for engaging in protected union activity, and had terminated him for continuing that protected activity. An administrative law judge held that the action taken against Mankins had not been retaliatory in nature, rather it was in response to his disruptive behavior. The NLRB overturned the decision, and Media General petitioned the 4th Circuit for review. The 4th Circuit reversed, holding that Mankins’ comments were not protected “concerted activity” under Section 7 of the NLRA. Holding that there was no nexus between Mankins’ comments and his union office, the court said, “A reflection of Mankins’s words and actions could only lead to one conclusion: his derogatory attacks were merely a manifestation of his personal sentiments towards his supervisor, not an expression of Union opinion. Such personal missions are not the sort of concerted activity which the statute protects.” Full text of the decision

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