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ADMINISTRATIVE LAW Board can’t overrule a rule by adjudication The Merit Systems Protection Board cannot overrule a rule by adjudication, a divided U.S. Court of Appeals for the Federal Circuit found on May 11. Tunik v. Merit Systems Protection Bd., nos. 03-3286, -3330 and -3331. Various administrative law judges filed complaints against agency heads who, they felt, interfered with their judicial independence, amounting to constructive removal of the ALJs. In all, the cases were dismissed for lack of jurisdiction by the Merit Systems Protection Board. By so ruling, the board overruled administrative rule 5 U.S.C. 7521, which says that an ALJ who alleges that an agency interfered with his or her qualified decisional independence may file a complaint with the board. The board also overruled a previous board finding that interpreted the rule as applying to both actual and constructive job separation. The Federal Circuit reversed, finding that the board “misunderstood its role as an administrative agency and failed to consider the question of whether and under what circumstances the Board, by adjudication, could overturn its regulation.” The usual procedure would include soliciting public comment on the proposed rule change.   Full text of the decision BUSINESS LAW Frequent flyers’ suit over program change fails Frequent flyers are not entitled to more than $1 billion in damages for an airline’s change in its treatment of previously earned miles, the Alaska Supreme Court held on May 6. Monzingo v. Alaska Air Group Inc., No. S-11240. A frequent flyer customer brought a class action on behalf of 3.9 million class members against Alaska Airlines seeking damages for changes in the frequent flyer program that affected the value of previously earned miles by increasing the number of miles necessary to redeem certain awards. The airline implemented the changes on Sept. 1, 2001. Plan members were first told of the changes on March 30, 2001, and were given additional notices. Miles could be redeemed under the old award structure if booked by Sept. 1, 2001, for travel before Aug. 1, 2002. The mileage plan contained a reservation of the right to change the terms and conditions. A superior court granted summary judgment and attorney fees to Alaska Airlines. The Alaska Supreme Court affirmed, holding that the claim isn’t pre-empted by the Airline Deregulation Act, that the plan’s plain language and the parties’ reasonable expectations indicate the intent to allow changes with reasonable notice, and that the parties’ course of dealing supports the understanding that the airline has the ability to make changes it deems necessary. The state high court reversed the attorney fee award.   Full text of the decision CIVIL PRACTICE Continuing violations doctrine is overruled The “continuing violations” doctrine, which can extend a statute of limitations period for civil rights cases, is not part of the Michigan statute, the Michigan Supreme Court held on May 11. Garg v. Macomb County Community Mental Health Svcs., No. 121361. During the 1980s, Sharda Garg, a psychologist of Asian-Indian descent with Macomb County Community Mental Health Services, saw a co-worker sexually harass other co-workers. Garg filed a grievance, after which she said she received bad performance reviews and was passed over 18 times for promotions. Garg filed the second of two grievances in 1989, and said she was denied promotions after filing. Transferred in 1995, she claimed that her new supervisor degraded and humiliated her. Garg brought a civil rights suit against the health facility that year. A state jury found that Garg had been retaliated against. The appeals court affirmed. The Michigan Supreme Court reversed, overruling the 1986 case, Sumner v. Goodyear Tire & Rubber Co., which first adopted the continuing violations doctrine to allow civil rights plaintiffs to file claims after the three-year statute of limitations had expired, provided that the conduct the lawsuit complained of was part of a continuing civil rights violation. Declaring that the statute allowed for no exemptions, the court strictly applied the three-year limitation period, ruling that Garg’s suit should have been filed no later than 1992. Once the events occurring after the three-year statute of limitations period were removed from consideration, there was not enough evidence to support the jury’s finding.   Full text of the decision Derivative of shareholder suit is rightly dismissed An action that is derivative of a shareholder derivative suit is barred by res judicata, which prevents the relitigation of claims that have already been finally adjudicated, the 5th U.S. Circuit Court of Appeals determined on May 12. Smith v. Waste Management Inc., No. 04-20380. Robert Smith, a former officer and director of USA Waste Services Inc., held a number of USA Waste shares. After USA Waste merged with Waste Management Inc., Smith’s USA Waste shares were converted into Waste Management shares. Smith used his shares as collateral for business loans. On May 6, 1999, Waste Management stated in a press release that its first-quarter net income and earnings per share had increased, and that it predicted more increases next year. Relying on these statements, Smith did not sell his shares. On July 6, 1999, Waste Management announced that its second-quarter earnings would fall $250 million below the levels it had previously predicted. Waste Management shares dropped by more than $20 per share. The value of Waste Management shares continued to drop after the company made another negative adjustment to its second-quarter earnings. As a result, Smith was forced to file for bankruptcy after the banks foreclosed upon their loans to him. Two consolidated shareholder derivative actions were brought on behalf of all Waste Management shareholders in Delaware. On Sept. 20, 2001, the consolidated actions settled and a final judgment was entered. Smith then brought a suit against Waste Management in Illinois federal court for fraud and negligent misrepresentation. The case was transferred to Texas federal court, which dismissed the suit as derivative and barred by res judicata. The 5th Circuit affirmed. To decide if a harm is to the corporation or to an individual stockholder, the most relevant question is whether the stockholder can prevail without showing injury to the corporation. The stockholder has to demonstrate that the duty breached was owed to the stockholder, and that he can prevail without showing a corresponding injury to the corporation. Smith’s injury -the drop in share price caused by the disclosure of unfavorable financial information-was suffered by the corporation as a whole. Smith’s claims were derivative, and thus barred by res judicata, which prevents the relitigation of claims that have already been finally adjudicated or that should have been litigated in the prior lawsuit.   Full text of the decision CONSTITUTIONAL LAW ‘In God We Trust’ is no First Amendment breach The inscription of the phrase, “In God We Trust,” on the fa�ade of a North Carolina county government center did not violate the First Amendment’s establishment clause, the 4th U.S. Circuit Court of Appeals held on May 13. Lambeth v. Board of Commissioners, No. 04-1753. Attorneys Charles Lambeth and Michael Lea practiced in a county government center in Lexington, N.C. When the county inscribed the fa�ade of the center with the words, “In God We Trust,” in 18-inch block letters, the attorneys sued under 42 U.S.C. 1983, arguing that the inscription violated the establishment clause of the First Amendment to the U.S. Constitution. A district court dismissed the complaint. Affirming, the 4th Circuit held that the inscription did not violate the establishment clause, applying the three-pronged test articulated by the U.S. Supreme Court in Lemon v. Kurtzman. The court held that, as a national motto, the inscription had a secular purpose, and that its primary effect was neither to advance nor endorse religion. The court said, “We have heretofore characterized the phrase, ‘In God We Trust,’ when used as the national motto on coins and currency, as a ‘patriotic and ceremonial motto’ with ‘no theological or ritualistic impact.’ The use of the challenged phrase as the national motto is long-standing, and it has been used extensively over the years by the federal government.”   Full text of the decision CRIMINAL PRACTICE One jury decides capital defendant’s guilt, penalty The Federal Death Penalty Act (FDPA) doesn’t entitle capital defendants to separate juries for the verdict and penalty phases, the 1st U.S. Circuit Court of Appeals held on May 12. USA v. Green, No. 05-1014. In a multicount, multidefendant capital case arising from alleged racketeering, conspiracy and murder, a Massachusetts federal court issued an unprecedented pretrial order. It called for the empanelment of two separate juries: one to determine guilt and the other to say whether to impose the death penalty or not. The government objected, claiming that the FDPA forbids this. The defendants argued that a jury would be more prone to convict if there is a single, “death-qualified” jury (i.e., one that consists solely of persons who are not personally opposed to the death penalty to an extent that would interfere with their ability to apply the law). The 1st Circuit granted the government’s petition for advisory mandamus, and reversed the district court’s ruling. The law provides that the sentencing hearing shall be conducted before the jury that determined the defendant’s guilt, unless one of a series of enumerated exceptions applies. The exception relied upon by the district court was Section 3593(b)(2)(C), which excepts cases where the jury that determined the defendant’s guilt was discharged for good cause. The court held that this exception “requires that there be a dismissal of the jury for good cause after it has returned a verdict in the guilt phase of the trial.”   Full text of the decision EMPLOYMENT Employer lacks insurable interest in worker’s life Under Oklahoma law, an employer cannot recover life insurance proceeds on a rank-and-file employee, due to lack of an insurable interest, the 10th U.S. Circuit Court of Appeals held on May 11. Tillman v. Camelot Music Inc., No. 0-5172. Camelot Music purchased life insurance on all of its full-time employees, including Filipe Tillman, a “rank-and-file” employee. When Tillman died and his estate learned that Camelot received $340,000 from the policy, the estate sued pursuant to Oklahoma’s insurance code, asserting that Camelot had no insurable interest and was unjustly enriched. An Oklahoma federal court granted Camelot’s motion for summary judgment. The 10th Circuit affirmed in part, reversed in part and remanded. The circuit court said that Oklahoma courts could hold, as a matter of law, that Camelot had failed to present sufficient evidence that it had a lawful and substantial economic, and thus insurable, interest in Tillman’s continued life, although the circuit court acknowledged it is widely accepted that corporations have an insurable interest in certain key employees.   Full text of the decision MILITARY LAW DoD’s stop-loss order is no due process breach A “stop-loss” order, which extended involuntarily the term of enlistment of a member of the Army National Guard, violated neither the guardsman’s enlistment agreement nor his due process rights, the 9th U.S. Circuit Court of Appeals held on May 13. Santiago v. Rumsfeld, No. 05-35005. Emiliano Santiago, a member of the Oregon Army National Guard, enlisted in 1996 for an eight-year term of service. Less that three weeks before his term of service was due to expire in 2004, Santiago was informed that his enlistment was being extended involuntarily pursuant to the Pentagon’s stop-loss policy, instituted because of troop shortages arising from the wars in Iraq and Afghanistan. Santiago filed a petition for a writ of habeas corpus to prevent involuntary extension of his enlistment. A federal district court dismissed his petition. Affirming, the 9th Circuit held that the president was authorized to extend Santiago’s enlistment pursuant to 10 U.S.C. 12305(a). The court rejected Santiago’s argument that the extension violated Section 12305(a) because he was not on active duty at the time, holding that, under the president’s September 2001 declaration of national emergency, all National Guard units were on active duty as of October 2001. The court also rejected Santiago’s due process argument that the government failed to give him adequate notice that his enlistment could be extended, holding that his enlistment contract provided that it could be affected by subsequent laws.   Full text of the decision TORTS Mother cannot sue over injury to fetus born alive An expectant mother may not recover damages for emotional harm where medical malpractice caused in-utero injury to her fetus born alive, the New York Court of Appeals ruled on May 10. Sheppard-Mobley v. King, No. 49. After becoming pregnant, two doctors advised Karen Sheppard that, due to the fibroid tumors in her uterus, she should terminate the pregnancy to avoid harming the baby. Sheppard agreed to abort the pregnancy chemically. Twenty-one weeks later, however, Sheppard realized that she was still pregnant. The baby was born with serious congenital impairments. Among the causes of action Sheppard asserted in a medical malpractice suit against her doctors was one for emotional injuries due to the in-utero injuries her baby suffered from the improperly administered chemicals. The trial court granted the doctors’ summary judgment motion, but the intermediate appellate court reversed, saying a prior holding allowing for similar recovery in stillbirth and miscarriage cases applied. The New York Court of Appeals reversed a portion of the intermediate court ruling, saying that the lower court had improperly extended the precedent on miscarriages and stillbirths. The ruling in the earlier case does not apply to a situation where the child was injured while in the womb, but was nonetheless carried to term and born alive. The child may bring such a claim for injury, but not the mother. The court affirmed the rest of the appeals court decision, which reinstated many of Sheppard’s causes of action.   Full text of the decision

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