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CIVIL RIGHTS Court erred in dismissing Muslim jail attack suit A federal district court erred in dismissing a Muslim inmate’s Section 1983 suit against California prison officials, the 9th U.S. Circuit Court of Appeals held on June 30, because the inmate at least raised an inference that a prison chaplain knew that other Muslim inmates would attack the inmate in a religious dispute, and officials failed to try to abate the risk. Hearns v. Terhune, No. 02-56302. Leonard Hearns Jr., a Muslim inmate in a California state prison, attempted to mediate a dispute between Muslim inmates at the prison by smuggling Islamic prayer oil to one Muslim inmate without the knowledge of a “ruling” Muslim prison gang. Hearns alleged that he delivered the prayer oil with the knowledge and consent of the prison chaplain, Alan Kahn. Hearns alleged that, due to Kahn’s disclosures to the Muslim gang of Hearns’ delivery of the prayer oil and Kahn’s statements to the gang about Hearns’ method of practicing Islam, the gang attacked Hearns, injuring him. Hearns sued California prison officials under 42 U.S.C. 1983, arguing they violated his Eighth Amendment rights in causing and failing to take reasonable measures to prevent the attack. A district court dismissed Hearns’ suit, and he appealed. Reversing, the 9th Circuit held that the district court erred in dismissing the suit because he showed that he may have been entitled to relief under his failure-to-protect claim. The court said, “The allegations in Hearns’ pro se amended complaint were sufficient to raise an inference that the prison officials acted with deliberate indifference, or knew that Hearns faced a substantial risk of serious harm and disregard[ed] that risk by failing to take reasonable measures to abate it.” Full text of the decision CONTRACTS No contract of adhesion found for standard form A standard form contract in small print containing an arbitration agreement was not a contract of adhesion, declared the Louisiana Supreme Court on June 29. Aguillard v. Auction Management Corp., No. 04-C-2804 consolidated with No. 04-C-2857. Dave F. Aguillard attended a public auction of real estate property in Sulphur, La. Gilmore Auction & Realty Co., the auctioneer, and Auction Management Corp., the closing coordinator, required all bidders to sign the “Auction Terms & Conditions” contract before bidding. The document was in nine-point type and contained an arbitration clause. During the auction, Aguillard submitted the highest bid on a residential dwelling and had to sign an “Auction Real Estate Sales Agreement.” The seller, Bank of New York, rejected Aguillard’s bid of $42,900 and refused to close on the sale or to execute the agreement. The seller submitted a counteroffer of $53,000, which was rejected by Aguillard. Aguillard sued Gilmore Auction, Auction Management and the seller to enforce the agreement. The defendants filed a joint motion to stay proceedings pending arbitration. The trial court denied the motion. The court of appeal affirmed. Ruling that the lower court erred in declaring the entire contract adhesionary, the Louisiana Supreme Court determined that only the arbitration clause was before the court and not the entire contract. While the arbitration clause may have been in small print, it was not any smaller than the rest of the contract and was not concealed in any way. Furthermore, there was no evidence of a lack of mutuality or a difference in bargaining power. The arbitration clause bound both sides to the same limitations on litigation, and Aguillard could have decided not to sign the contract. Full text of the decision CREDITORS No cause of action for creditor fraud in N.J. There is no such cause of action as creditor fraud in New Jersey, the New Jersey Supreme Court ruled on June 27. Banco Popular North America v. Gandi, No. A-5/6-03. Suresh Gandi executed a personal guaranty to secure a $500,000 loan from Banco Popular in connection with his many fast-food franchise operations. Gandi retained Richard P. Freedman to deal with problems he was having with one of the franchisors. Freedman advised Gandi to transfer his interests in two homes and some securities to his wife to put his assets out of reach of the franchisor. Gandi secured two more loans from Banco. A $15,000 loan was premised on Gandi’s promise that he would not transfer the security interest used to secure the loan, and that nothing had happened to otherwise jeopardize the security. A subsequent $750,000 loan was premised on similar assurances made by Freedman. When Gandi defaulted on his loans, Banco initiated an action under the Uniform Fraudulent Transfer Act to get back the $1.25 million debt. Freedman was later joined as a defendant, where Banco alleged common law fraud, ethical violations and creditor fraud. The trial court dismissed the claims against Freedman, but the appeals court reinstated the creditor fraud claim. The New Jersey Supreme Court reversed, holding there is no cause of action for creditor fraud. Creditor fraud does not require the plaintiff to prove either reliance or misrepresentation, both hallmarks of any fraud claim. The court noted that creditor fraud does not exist anywhere else in the country and there was no reason to acknowledge its existence in New Jersey. The court added that Freedman may be liable for conspiracy to violate the fraudulent transfer act. Full text of the decision CRIMINAL LAW Circuit criticizes double jeopardy precedent On July 1, while upholding a district court’s decision not to suppress seized evidence, the 3d U.S. Circuit Court of Appeals simultaneously criticized U.S. Supreme Court precedent on federal and state double jeopardy principles, as well as the Department of Justice’s failure to follow its own policy manual in this case. U.S. v. Wilson, No. 04-1918. Esco Wilson was stopped while driving on the Pennsylvania Turnpike for a traffic violation. Though the officer who stopped Wilson was about to let him go, the officer began questioning him and his passengers further, which led to a search of everyone’s bags. The officer found a brick of cocaine in Wilson’s bag. Wilson later admitted, without a lawyer present, that the cocaine belonged to him. He was charged under Pennsylvania law for possession of a controlled substance with intent to deliver, and for speeding. The trial court granted Wilson’s motion to suppress evidence as the fruit of an illegal detention. The federal government then charged Wilson based on the state indictment. Wilson raised the same motion, but the district court denied it, and Wilson was convicted. The 3d Circuit affirmed, 2-1, agreeing that Wilson consented to the officer’s subsequent questioning, but reiterating its dissatisfaction with the U.S. Supreme Court’s application of the dual sovereignty principle to hold that prosecution of the same crime in both the federal and state systems does not violate the double jeopardy clause. Further, the majority expressed shared concern with the dissent over the Justice Department’s inability to confirm that it had followed department guidelines for determining whether cases in which suppression motions were granted in state courts should be re-prosecuted in federal court. Full text of the decision NATURAL RESOURCES State allowed to review energy contracts Federal law does not pre-empt North Carolina from reviewing energy contracts in interstate commerce, a majority of the North Carolina Supreme Court held on July 1. State of North Carolina v. Carolina Power & Light Co., No. 649A03. Carolina Power & Light Co. (CP&L) applied to the North Carolina Utilities Commission (NCUC) for permission to construct additional generating capacity. One purpose was to enable CP&L to enter into contracts to sell electric power to two wholesale customers, including the out-of-state South Carolina Public Service Authority. CP&L proposed to grant “native load priority” to wholesale customers, so that in a power shortage, these customers’ power would not be interrupted any sooner than that of native customers. Ultimately, CP&L and others moved NCUC to clearly state that NCUC has no jurisdiction to either prohibit a North Carolina utility from entering into a wholesale contract or to delay such utility from entering into a wholesale sale contract. NCUC denied the motion. On appeal, the North Carolina Court of Appeals found that under the Federal Power Act (FPA), the Federal Energy Regulatory Commission had exclusive jurisdiction over the regulation of the wholesale sale of electric energy in interstate commerce. A state supreme court majority reversed, holding that “federal law does not preempt NCUC’s authority to conduct a pre-sale review of a utility’s proposed grant of native load priority to a wholesale customer that will be supplied from the same generating plants as retail customers.” The “FPA expressly preserves NCUC’s jurisdiction over utilities’ generating plants,” wrote the majority. The dissenter said the majority has “obscured the boundaries of clear and unambiguous federal preemption doctrine.” Full text of the decision Mineral royalties are not an interest in land Applying a three-year statute of limitations, the Mississippi Supreme Court held on June 30 that accrued mineral royalties are an interest in personalty and not an interest in land. Nygaard v. Getty Oil Co., No. 2004-CA-01614-SCT, consolidated with No. 2003-CA-01605-SCT. In 1972, the Daisy Keith Trust acquired title to an overriding royalty interest in certain oil and gas wells in the Greens Creek Field in Marion County, Miss. Over the next three decades, the interest in the wells passed from the Getty Oil Co. to Chevron Texaco Corp. and finally to J.R. Pounds Inc. In 1993, Texaco sent Thomas Max Nygaard, trustee for the trust, a letter informing him that there were royalties due to the Trust and that Texaco had sold its interest in the wells to Pounds. Texaco sent Nygaard a check for the royalties. In 1996, Nygaard claimed that there were additional royalties due. Nygaard filed suit against Getty, Chevron, and Pounds in 2002 for the unpaid royalties. The trial court granted the defendants’ motions for summary judgment, which asserted that Nygaard’s claims were barred by the statute of limitations. Miss. Code Ann. �� 15-1-7 and/or 15-1-9 prescribe a 10-year statute of limitations for interests in land. While a right to a future royalty payment in underlying mineral deposits is considered an interest in land, the Mississippi Supreme Court determined that a claim for unpaid royalties for oil and gas brought to the surface is an interest in personalty. As such, the general three-year statute of limitations applies to it, and Nygaard’s suit was barred. ERISA Independent trader can recover for disability An independent trader can be covered by a disability insurance plan that contains ambiguous requirements relating to “employees” who are “full-time,” the 7th U.S. Circuit Court of Appeals held on June 30. Ruttenberg v. U.S. Life Ins. Co., No. 04-1653. Andrew Ruttenberg worked as an independent commodity trader at the Chicago Board of Trade, which is open for 35 hours per week. Ruttenberg kept irregular hours and sometimes worked away from the floor preparing for trades or reconciling accounts. He cleared his trades through SMW Trading Co., which contracted through U.S. Life Insurance Co. to provide disability insurance to independent traders. Ruttenberg paid premiums on one of these policies. When he became hoarse, possibly due to asthma or vocal chord dysfunction, he made a claim for total disability, as he could no longer scream on the floor. The U.S. District Court for the Northern District of Illinois granted U.S. Life summary judgment on Ruttenberg’s claim, pursuant to the Employee Retirement Income Security Act (ERISA), holding that Ruttenberg was not a “full-time employee” under the terms of the plan. The 7th Circuit here joined the “weight of authority” and held that an ERISA “beneficiary” may be a person designated to receive benefits under the terms of the plan itself, even if not designated “by a participant” to receive benefits. This meant federal law pre-empted Ruttenberg’s state claims. The circuit court found that the term “employee” in the contract was ambiguous and should be construed against its drafter, U.S. Life, and include Ruttenberg. Finding the contract’s “full-time” requirement also ambiguous, the 7th Circuit said that Ruttenberg’s interpretation of it as not applying to his class of eligible employees is at least as plausible as U.S. Life’s, so the district court erred on that point. Full text of the decision LABOR AND EMPLOYMENT No NLRA pre-emption for wrongful discharge State wrongful discharge claims were not subject to complete pre-emption by the National Labor Relations Act, the 4th U.S. Circuit Court of Appeals held on July 1. Lontz v. Tharp, No. 04-1967. Grace Lontz and Beverly Pettit sued their former employer, Monica LLC, for wrongful discharge and constructive discharge, alleging that Monica-the owner of a Holiday Inn Express motel-acted unlawfully in its efforts to stop the unionization of the motel’s workers. Lontz and Pettit sued in West Virginia state court, alleging only violations of state law. After Monica removed the case to federal district court, the court held that the removal was proper because, although Lontz and Pettit had made no federal claims, their state discharge claims were completely pre-empted by sections 7 and 8 of the National Labor Relations Act, 29 U.S.C. 157, 158. Holding that sections 7 and 8 claims must be brought to the National Labor Relations Board, a West Virginia district court dismissed the claims, and Lontz and Pettit appealed. Reversing, the 4th Circuit noted that complete pre-emption applied only to a “small category of statutes,” and distinguished sections 7 and 8 from federal statutes having complete pre-emption of state law because those statutes provided for a federal cause of action. The court said, “In this case, we cannot find complete preemption if for no other reason than that Congress has not chosen to create a cause of action.” Full text of the decision Physician not bound by noncompete covenant But for exceptions specifically prescribed by statute, a physician cannot be bound by a covenant not to compete, the Tennessee Supreme Court ruled on June 29. Murfreesboro Medical Clinic v. Udom, No. M2003-00313-SC-S09-CV. Dr. David Udom signed an employment contract with the Murfreesboro Medical Clinic that included a covenant not to compete within a 25-mile radius of the clinic for 18 months after leaving MMC. At the completion of contract term, Udom informed MMC that he was taking a job at a nearby hospital. MMC said they would enforce the noncompete clause against this or any other employment Udom took with an area hospital, so Udom later attempted to open his own practice. MMC sued to enjoin him. The trial court granted a temporary injunction. The intermediate appeals court found the covenant enforceable. A divided Tennessee Supreme Court reversed. Due to public policy considerations-such as freedom to choose one’s own physician-along with the American Medical Association’s characterization of such covenants as unethical, plus the Tennessee Legislature’s decision not to validate all such covenants by statute, the court said that noncompete agreements such as this one are unenforceable. Full text of the decision TORTS No legal duty found in providing bouncers Resolving a split between two state intermediate appellate courts, the California Supreme Court held on June 30 that providing security guards at a bar did not automatically create a general duty for the bar owner to protect the bar’s patrons from criminal assault. Delgado v. Trax Bar & Grill, No. S 117287. Michael Delgado was a patron at Trax Bar & Grill in Turlock, Calif., when he was attacked and wounded by other bar patrons. Trax provided security guards or “bouncers,” one of whom had asked Delgado to leave the bar because he suspected that violence might ensue between Delgado and the assailants who later attacked him in the bar’s parking lot. Delgado sued Trax and others, but the case proceeded to trial against Trax. A jury awarded Delgado about $81,000 in damages, and Trax appealed. While the appeal was pending in California’s 5th District Court of Appeal, the state’s 4th District Court of Appeal held in Mata v. Mata that where a bar proprietor employed a guard on its premises, the proprietor had assumed a duty to protect its patrons from criminal assault, making foreseeability irrelevant. Rejecting Mata, the 5th District held that Trax had no duty to Delgado and invalidated the jury’s verdict. Delgado appealed. Although the California Supreme Court held in favor of Delgado, reversing the 5th District’s decision, it also rejected the Mata holding that providing bouncers created an automatic duty to patrons. “[T]he scope of any duty assumed depends upon the nature of the undertaking. Merely because a supermarket or other similar enterprise chooses to have a security program that includes provision of a roving security guard does not signify that the proprietor has assumed a duty to protect invitees from third-party violence.” Full text of the decision No recreational purpose in spectating at game Finding the city not immune from liability in a car accident on city property, the Nebraska Supreme Court held on July 1 that being a spectator at a youth football game did not constitute entering or using land for a recreational purpose. Iodence v. City of Alliance, No. S-03-528. While parking her car at a softball complex in order to watch her son play a YMCA junior football league game, Carol Louise Iodence was injured when her car struck a tree stump hidden in tall grass. The softball complex was located on land owned by the city of Alliance, Neb. Iodence and her husband sued the city for negligence under the Political Subdivisions Tort Claims Act. The trial court found the city immune from liability under the Recreation Liability Act. The recreation act generally states that a landowner owes no duty of care to keep the premises safe for entry or use by others for recreational purposes or to give warning of dangerous conditions on such premises to persons entering for such purposes. “Recreational purposes” is defined to include “[h]unting, fishing, swimming, boating, camping, picnicking, hiking, pleasure driving, nature study, waterskiing, winter sports, and visiting, viewing, or enjoying historical, archaeological, scenic, or scientific sites, or otherwise using land for purposes of the user.” The Nebraska high court concluded that unlike the activities listed in the statute, spectating was not a physical activity and required no “active involvement.” Full text of the decision

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