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ADR E-mail on new policy doesn’t bind employees A companywide e-mail linked to a new dispute resolution policy was not sufficient notice to compel employees to submit to arbitration, the 1st U.S. Circuit Court of Appeals held on May 23. Campbell v. General Dynamics Gov’t Systems Corp., No. 04-1828. General Dynamics e-mailed its employees an announcement about a new dispute resolution policy. The actual policy wording was linked to the e-mail but not quoted in it. The policy contained a mandatory arbitration agreement, which was to be effective the next day. Subsequently, a discharged employee, Roderick Campbell, brought an employment discrimination claim against the company under the Americans With Disabilities Act. A Massachusetts federal court denied General Dynamics’ motion to stay the proceedings and compel Campbell to submit his claim to arbitration. The 1st Circuit affirmed, holding that General Dynamics did not provide “minimally sufficient notice” of the contractual nature of the e-mailed policy and of the concomitant waiver of an employee’s right to access a judicial forum. There was no mention of whether the policy would affect an employee’s right to access a judicial forum with respect to workplace disputes, nor did it specify that the new policy contained an agreement to arbitrate that would become binding upon continued employment. Full text of the decision Medicare reimbursement is interstate commerce A widow’s wrongful death lawsuit against a hospital must be arbitrated under the Federal Arbitration Act (FAA) because the hospital was reimbursed by the Medicare program for the services rendered to the decedent, the Texas Supreme Court ruled on May 27. In re Nexion Health at Humble Inc., No. 04-0360. Marjorie Lyman filed a wrongful death suit after her husband died while he was a patient at Humble Healthcare Center. The trial court denied the hospital’s motion to compel arbitration under the Texas Arbitration Act. The trial court also denied the hospital’s subsequent motion to compel under the FAA. Humble appealed the first order to an appellate court, which is still pending, and filed for a writ of mandamus on the second order with the Texas Supreme Court. The hospital argues that the FAA applies because it provided services to Lyman’s husband that were reimbursed by Medicare. The Texas Supreme Court conditionally granted the writ, directing it to be issued only if the trial court fails to order the case to proceed to arbitration under the FAA. The FAA pre-empts the Texas act here, concluding that the payment of Medicare benefits across state lines constitutes interstate commerce. The FAA is the sole arbitration mechanism for disputes related to interstate commerce. Full text of the decision BUSINESS LAW Bid acceptance isn’t a ‘contract’ before signing A school district’s acceptance of a low bid and the scheduling of a contract-signing meeting with a contractor did not create an enforceable contract, a majority of the Arizona Supreme Court held on May 25. Ry-Tan Construction Inc. v. Washington Elementary School District No. 6., No. CV-04-0300-PR. Ry-Tan Construction was the lowest bidder on a project for an Arizona school district. The district’s governing board voted to accept the bid, and on March 11, 1999, the board’s executive director signed a notice to proceed. The board scheduled a meeting with Ry-Tan for the contract signing and for the exchange of the notice to proceed and the required bonds. On the evening of March 11, 1999, Ry-Tan began work at the site. However, the district refused to sign the contract and canceled Ry-Tan’s bid. Ry-Tan went to state court, claiming that it had a binding contract. A jury agreed and the appellate court affirmed. The Arizona Supreme Court, en banc, reversed, relying on a 1951 case, Covington v. Basich Bros. Const. Co., 72 Ariz. 280. The court held that Covington created a “bright-line” rule that a public agency that accepts a bid on a contract is not bound until a formal contract exists. The court said that “nothing in the [Arizona Administrative] Code expressly prohibits a public entity from withdrawing a bid after acceptance of the bid but prior to the award of a contract.” Full text of the decision CRIMINAL PRACTICE Injurious-devices list not unconstitutionally vague A federal law prohibiting the use of “hazardous or injurious devices” was not unconstitutionally vague as applied to two environmentalists’ protests, the 9th U.S. Circuit Court of Appeals held on May 26. U.S. v. Wyatt, No. 04-30316. Joel Wyatt and Rebecca Smith, members of the environmental group, “Wild Rockies Earth First!,” staged a protest and attempted to interfere with logging operations in Montana’s Bitterroot National Forest by ascending to raised platforms and stringing ropes from their platforms to trees, thus obstructing the operations of logging helicopters. Federal prosecutors charged Wyatt and Smith with violating 18 U.S.C. 1864(a), which prohibits the use of hazardous or injurious devices on federal land with intent to obstruct or harass the harvesting of timber. A jury convicted the protesters, who appealed, arguing that Section 1864(a) did not supply adequate notice that it was a crime to hang unmodified and highly visible ropes between trees because these did not fall within the statute’s definition of a “hazardous or injurious device.” Affirming, the 9th Circuit rejected the protesters’ argument that the statute’s list of “hazardous or injurious devices” was all-inclusive and thus did not cover their ropes. The court noted that such ropes would likely cause a helicopter to crash, and held that Section 1864(a) provided “fair warning to persons of common intelligence” that it was a crime to hang ropes above a helicopter landing site with the intent to obstruct or harass the harvesting of timber. Full text of the decision CONSTITUTIONAL LAW Sex-business ordinance unconstitutionally vague A Georgia state trial court erred in upholding a county ordinance regulating businesses with a “substantial business purpose” of selling sexually oriented merchandise because the ordinance was unconstitutionally vague, the Georgia Supreme Court held on May 23. 105 Floyd Road Inc. v. Crisp County, No. S0A0373. 105 Floyd Road Inc. owned a store operating under the name, “Love Stuff,” in Crisp County, Ga. The store carried both sexually explicit merchandise as well as items that were not. The county sued for injunctive relief, arguing that Love Stuff was required to have a special use permit under Section 3.01.02 of the county’s Unified Land Development Code and could operate only in certain areas because Love Stuff’s “substantial business purpose” was the selling of sexually explicit merchandise. 105 Floyd Road countered that the ordinance was unconstitutionally vague both facially and as applied to Love Stuff. A trial court rejected the constitutional challenge and permanently enjoined the business from operating. Reversing, the Georgia Supreme Court held the ordinance to be unconstitutionally vague. While the court recognized that local governments had the power to place time, place and manner restrictions on sexually oriented businesses, it held that the ordinance unconstitutionally failed to define “substantial business purpose.” The court said, “The ordinance provides no guidelines to enable a reasonable person to determine at what point the offering of sexually-explicit material to the public becomes a substantial purpose of its business.” Full text of the decision HEALTH LAW No automatic detention in commitment process Under the state’s “mental hygiene” laws, individuals who have not been subject to a probable cause determination may not be automatically sent to state psychiatric hospitals by virtue of a blanket court order, the West Virginia Supreme Court of Appeals ruled on May 27. State of West Virginia ex rel. Walker, No. 32514. After a mental hygiene petition has been filed against an individual with mental illness or addictions, a probable cause hearing is held by a county mental hygiene commissioner to determine if the individual meets the standard allowing for civil commitment to a hospital. The law allows the individual to be taken into custody pending the hearing. The secretary of the Department of Health and Human Services and administrators of two public psychiatric hospitals filed for writs of prohibition against hygiene commissioners from 12 counties who had been ordering prehearing detentions to be in one of two state hospitals. The hospitals objected because they are not within those counties’ jurisdiction and they are operating at capacity. The West Virginia high court granted the writ. If no probable cause is found, an individual should be let go as soon as possible. Conversely, if there is probable cause, treatment also should be as soon as possible. All procedures, from videoconferencing to cross-jurisdiction proceedings, should be used to minimize delay in either case. A blanket order automatically transferring individuals to a public hospital can be issued only after consultation with local department officials, law enforcement and community mental health centers. Full text of the decision LEGAL PROFESSION Breach of fiduciary duty to Rwanda by lawyer A Washington attorney who was retained and paid by Rwanda’s ambassador to the United States in 1994 was liable for conversion and breach of fiduciary duty to the government of Rwanda when he refused to return his fees to Rwanda’s new government, the U.S. Circuit Court for the District of Columbia held on May 27. Government of Rwanda v. Johnson, nos. 04-7044 and 04-7067. In July 1994, following civil war between the majority Hutus and the minority Tutsis, and shortly before Tutsi rebels captured Kigali, Rwanda’s capital, Rwanda’s ambassador to the United States, Aloys Uwimana, representing the Hutu-dominated government, executed an agreement with attorney Robert Johnson II and others for representation of the Rwandan government in lobbying efforts. Within a week of the agreement and Rwanda’s payment of $28,000 to Johnson, the U.S. government ordered the Rwandan mission closed, directing that its staff and their families leave the United States. On the day the embassy closed, Uwimana authorized payment of another $55,000 to Johnson for asylum work. The United States recognized the new rebel government, which demanded return of the fees. Johnson, who had distributed most of the funds to others, refused, arguing that only Uwimana could demand return of the money. A federal district court held that Johnson was liable for conversion and breach of fiduciary duty. Affirming most of the judgment, the D.C. Circuit held that Johnson’s fiduciary duty was to the government of Rwanda, and not Uwimana. The court said, “[a]lthough Johnson should have been circumspect from the start about Uwimana’s authority, he instead took the view, convenient for his own interest, that Uwimana could use state money to buy himself tens of thousands of dollars in immigration services.” Full text of the decision REAL PROPERTY Intracompany transfer isn’t a bona fide offer The conveyance of real property between two subsidiary corporations, each wholly owned by the same parent, is not a bona fide offer to purchase that would trigger the right of first refusal on the property, the 3d U.S. Circuit Court of Appeals ruled on May 24. Creque v. Texaco Antilles Ltd., No. 03-3463. In 1963, Margaret Creque sold the northern portion of her land in St. Thomas, U.S. Virgin Islands, to Canada-based Texaco Antilles Ltd., a wholly owned subsidiary of Texaco. Texaco granted Creque the right of first refusal to purchase on the lot on the same terms as a bona fide purchase offer. Due to a change in Canadian tax laws, Texaco Antilles transferred its assets to another wholly owned subsidiary of Texaco, Texaco Caribbean Inc. Creque found out about the transfer in 1995 and sued, arguing that she should have been given the right of first refusal to purchase the lot. A Virgin Islands court denied summary judgment to the two Texas subsidiaries, and a jury ruled for Creque. A district court vacated the jury verdict and said that the summary judgment should have been granted. The 3d Circuit affirmed. Where a corporation conveys property from one of its wholly owned subsidiaries to another in good faith for a legitimate business purpose, no bona fide third-party offer sufficient to trigger the right of first refusal on the property has taken place. Creque’s right of first refusal does run with the land, however, so she retains the right should Texaco Caribbean attempt to sell the property. Full text of the decision TORTS Day-care center assault renders employer liable An assault against a child by a caregiver at a child day-care facility was within the scope of employment, thus rendering the employer liable, the Oklahoma Supreme Court ruled on May 24. Baker v. St. Francis Hospital, No. 100713. Stella Baker, an employee of Laureate Psychiatric Clinic and Hospital, an affiliate of Saint Francis Hospital, left her 2-month-old daughter, Summer, at Ave Maria Child Care, a day-care facility for the children of employees at Saint Francis Hospital and its affiliates. During the course of the day, Amy Davis, a caregiver at the facility, hit Summer’s head against the corner of a shelf when the baby wouldn’t stop crying. Summer suffered two bilateral depressed skull fractures and traumatic brain injury. Davis pleaded guilty to injury to a minor child and received a sentence of 10 years. Baker sued Saint Francis Hospital under respondeat superior liability. The trial court granted the hospital’s motion for summary judgment. An intermediate appellate court affirmed. The Oklahoma Supreme Court reversed and remanded. In order to hold an employer liable under a theory of respondeat superior, an employee must commit a tortious act in the course of employment and within the scope of the employee’s authority. While an assault by an employee is normally not within the scope of employment, the court found that this case fell within the exception to the rule because Davis’ loss of temper over a crying child and the resulting injury to that child arose out of an emotional response to actions being taken for the employer. Full text of the decision

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