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ADMINISTRATIVE LAW Fitness standards are necessary for CPA denial Absent established character and fitness standards, the Nebraska State Board of Public Accountancy may not deny anyone a certified public accountant (CPA) certificate because of a prior felony conviction, the Nebraska Supreme Court held on Aug. 5. Troshynski v. Nebraska State Board of Public Accountancy, No. S-04-510. John Troshynski pleaded guilty to felony conspiracy to distribute cocaine and was incarcerated. Following his release, Troshynski received a bachelor’s degree in business administration from Creighton University in Omaha, Neb. He took and passed the CPA examination. Troshynski applied for a CPA certificate, disclosing his felony conviction. The board denied his application for a certificate for no reason. A district court reversed and remanded for a full hearing. After the hearing, the board once again denied Troshynski his certificate, citing his felony conviction. The district court reversed and remanded, instructing the board to grant Troshynski a certificate. The Nebraska Supreme Court affirmed. Section 1-114(2) of the Public Accountancy Act provides that certificates of CPA should be issued to anyone who meets the residency requirements and who passes the CPA examination. The board had enacted no rules or regulations governing character and fitness standards, even though Section 1-112 of the act authorizes the board to “adopt and promulgate rules and regulations of professional conduct appropriate to establish and maintain a high standard of integrity and dignity in the profession of public accountancy.” Full text of the decision ADR Arbitration clause binds McDonald’s game-player A participant in a McDonald’s game is bound by the arbitration clause contained in the posted rules that he or she had failed to read, the 7th U.S. Circuit Court of Appeals held on Aug. 2. James v. McDonald’s Corp., No. 04-2383. Linda James received a game card at a McDonald’s Corp. drive-through window at one of its restaurants in Franklin, Ky., to play “Who Wants to be a Millionaire.” Thinking it was worth $1 million, she sent it to the redemption center, which advised her that she had only won a low-level food or cash prize. Subsequently, James learned that the winning game cards had been stolen. She sued McDonald’s, alleging that it had induced her to buy food, knowing that the odds of winning were less than it claimed, due to the theft. The case became part of the multidistrict proceeding, which an Illinois federal court dismissed for failure to prosecute, after granting McDonald’s motion to compel James to arbitrate her claims, applying Kentucky law. The 7th Circuit affirmed, holding that “a party can be compelled to arbitrate only those matters that she has agreed to submit to arbitration.” Here, though James claims she never read the arbitration clause, it was contained in the official rules, which were posted openly in participating restaurants. Thus, she was bound by the clause. Full text of the decision CIVIL PRACTICE State, federal pleading regimes aren’t the same Delaware’s more restrictive notice-pleading standards are not interchangeable with federal pleading standards, the 3d U.S. Circuit Court of Appeals ruled on Aug. 3. In re Tower Air Inc., No. 04-3633. As the bankruptcy trustee for Tower Air Inc., a Delaware company operating primarily in New York, Charles Stanziale filed suit against Tower Air’s directors and officers, who, Stanziale said, drove the company into insolvency by indifference and egregious decision-making. Stanziale alleged seven counts of breaches of fiduciary and good-faith duties, as well as gross negligence. Stanziale detailed a history that included lack of oversight, money-losing ticket pricing, cannibalization of existing planes to fix other planes and failure to process customer credit card orders. The district court dismissed the case, ruling that the complaint failed to state a claim in light of Delaware’s business judgment rule, Chancery Rule 8, which says that, in the absence of specific facts of self-dealing, the presumption is that directors act in the best interests of the company. The 3d Circuit affirmed in part and reversed in part. The court held that the district court erred in assuming that Delaware’s more restrictive notice-pleading standards are interchangeable with the federal notice-pleading regime of Fed. R. Civ. P. 8. Stanziale’s complaint declared that the business judgment rule does not vitiate any of his claims. Thus, he must ensure that his pleading overcomes the presumption created by that rule: that Tower Air’s directors and officers acted in good faith and on an informed basis. The court held that Stanziale met his burden on four of the counts, but failed to meet his burden on three of them. Full text of the decision Laches bars challenge to airport authority A constitutional challenge to the Indiana statute creating the Fort Wayne-Allen County Airport Authority is barred by the equitable doctrine of laches, the Indiana Supreme Court held on Aug. 2. SMDFund Inc. v. Fort Wayne-Allen County Airport Auth., No. 02S00-0409-CV-410. In 1959, Indiana enacted the Local Airport Authorities Act, Ind. Code � 8-22-3-1 et. seq., which provided for the creation of local airport authorities. Because neither the city of Fort Wayne, nor Allen County, the county in which Fort Wayne is located, had established an airport authority under the statute, Indiana’s Legislature in 1985 passed additional legislation to create airport authorities that would affect only Fort Wayne and Allen County. The Fort Wayne-Allen County Airport Authority was created under the legislation, and it operated Fort Wayne’s Smith Field Airport. When, in 2003, the authority announced plans to close the airport, SMDFund Inc. and others sued, challenging the authority’s ownership of the airport, arguing that the statute creating the authority was unconstitutional special legislation. A trial court rejected the challenge as time-barred, and SMDFund appealed directly to the Indiana Supreme Court. Affirming, the Indiana Supreme Court rejected SMDFund’s argument that for laches purposes, any delay in bringing suit should be based on the date the authority decided to close the airport. The court said, “The time to bring a claim that the Authority was improperly constituted started with the formation of the Authority. The plaintiffs’ contention is that the Authority was created improperly. If the plaintiffs are correct, their claim accrued at the time of the creation of the Authority or at the latest when it began collecting taxes.” Full text of the decision EMPLOYMENT 9th Cir. won’t alter view of arbitration agreement A district court erred in compelling arbitration in the case of a Circuit City Stores employee, because Circuit City’s arbitration agreement was unconscionable and unenforceable under California law, the 9th U.S. Circuit Court of Appeals held on Aug. 3. Circuit City Stores Inc. v Mantor, No. 04-55912. After six years of employment with Circuit City Stores Inc., Paul Mantor, in 1998, executed an arbitration agreement with the company after Circuit City representatives told him that he would have no future with the company unless he did so. Three years later, Mantor sued Circuit City, alleging various employment claims. A federal district court granted Circuit City’s motion to compel arbitration, but the 9th Circuit reversed, holding that the arbitration agreement was unconscionable and unenforceable under California law. After that decision, the 9th Circuit decided EEOC v. Luce, Forward, Hamilton & Scripps in which the court held that employers do not violate the Civil Rights Act of 1991 when they demand that employees execute arbitration agreements as a condition of employment. Citing Luce, Forward, Circuit City moved to compel arbitration again, arguing that the recent 9th Circuit decision had superseded the earlier one. The district court granted Circuit City’s motion to compel arbitration. Reversing, the 9th Circuit held that the district court, once again, erred in dismissing Mantor’s suit. The court held that Luce, Forward did not change the fact that the Circuit City agreement was unconscionable and unenforceable under California law. Full text of the decision Part of claim, prima facie case may be revisited When a trial court has decided, after judgment, that a plaintiff has not proved an element of his claim that is also a component of his prima facie case, the court may revisit that element, the 11th U.S. Circuit Court of Appeals ruled on Aug. 2. Collado v. United Parcel Service Co., No. 04-11297. Willie Collado, an insulin-dependent diabetic working for the United Postal Service as a truck driver, sued UPS under the Americans With Disabilities Act. At trial, UPS made a motion under Fed. R. Civ. P. 50(a) for judgment as a matter of law at the close of Collado’s case-in-chief, asserting that Collado had failed to make a prima facie case of discrimination. A Florida federal court denied the motion. The jury returned a verdict in favor of Collado. UPS again made a motion for judgment as a matter of law under Rule 50(b), arguing that there was insufficient evidence to support the jury verdict. The court granted the motion and entered final judgment in favor of UPS, ruling that Collado had failed to carry the burden of proof on the issue of whether he is disabled, stating that disability was a part of the prima facie case for disability discrimination under the ADA. The 11th Circuit affirmed. The general rule in employment discrimination cases involving circumstantial evidence is that the existence of a prima facie case should not be revisited after the defendant’s Rule 50(a) motion has been denied. However, it is also a well-established rule that judgment should not be entered in favor of the plaintiff if he has failed to prove a necessary element of his case. Here, proving the existence of a disability is both part of the prima facie case and an element of the claim for ADA discrimination. Full text of the decision ENVIRONMENTAL LAW No link between lack of river plan and injuries Three environmental groups did not establish a link between the U.S. Forest Service’s failure to file a comprehensive plan for managing a river corridor and individual assertions of river destruction, the 6th U.S. Circuit Court of Appeals ruled on Aug. 1. Center for Biological Diversity v. Lueckel, No. 03-1139. Under the Wild and Scenic Rivers Act, the U.S. Forest Service was to establish detailed river corridor boundaries and a comprehensive management plan for a number of Michigan river segments within the Ottawa National Forest and the Hiawatha National Forest, but the forest service never did either. Three environmental advocacy groups sued the forest service for violating the act, as well as the National Forest Management Act and the National Environmental Policy Act. In affidavits, several members of each group said that they were injured by the forest service’s inaction because logging hadn’t been curtailed and habitats and “river values” had been destroyed. The district court granted summary judgment for the government, saying that the plaintiffs lacked standing because they alleged only the “theoretical possibility of harm.” Also, the court said injunctive relief was inappropriate because the plaintiffs hadn’t shown there was “actual irreparable harm.” The 6th Circuit affirmed. Though the plaintiffs had shown that they suffered concrete injuries as a result of logging and other activities, the court found that they did not prove that there was a causal link between those injuries and the Forest Service’s failure to perform its statutory duties. Full text of the decision INSURANCE LAW Illness from asbestos isn’t bodily injury by accident An asbestos-related disease is not a “bodily injury by accident,” the 5th U.S. Circuit Court of Appeals held on Aug. 4. Riverwood International Corp. v. Employers Ins. of Wausau, No. 04-30608. Present and former employees of Graphic Packaging International Inc., formerly known as Riverwood International Corp., sued Riverwood for work-related injuries, including asbestosis, that they had allegedly contracted while working at Riverwood’s paperboard manufacturing facility. Riverwood settled 260 claims for $1.513 million. Riverwood notified its multiple workers’ compensation and employers’ liability insurers, including Employers Insurance of Wausau, of the claims. Denying coverage, Wausau cited the provision in its policies for excluding “bodily injury by disease” claims that are not brought within 36 months after the end of the policy period. Riverwood filed an indemnity claim against Wausau. A Louisiana federal court denied Wausau’s partial motion for summary judgment due to ambiguity in the policies’ language regarding whether asbestos-related disease was a “bodily injury by disease” or a “bodily injury by accident.” Wausau filed another motion for summary judgment, which was granted this time by the Louisiana federal court. The 5th Circuit affirmed. The policies at issue provide that “[t]he contraction of disease is not an accident within the meaning of the word ‘accident’ in the term ‘bodily injury by accident’ and only such disease as results directly from a bodily injury by accident is included within the term ‘bodily injury by accident.’ ” Under workers’ compensation law, an “ accident” is defined as “an unexpected or unforeseen actual, identifiable, precipitous event happening suddenly or violently . . . and directly producing at the time objective findings of an injury which is more than simply a gradual deterioration or progressive degeneration.” Because exposure to asbestos isn’t violent and does not produce objective findings of an injury, the 5th Circuit determined that the asbestos-related diseases in this case fell under the “bodily injury by disease” category and the 36-month exclusion applies. Full text of the decision LEGAL PROFESSION 2d Cir. to N.Y. high court: Rule on contingency fees Three questions regarding client ratification of potentially unconscionable contingency fee agreements have been certified to the New York Court of Appeals by the 2d U.S. Circuit Court of Appeals on Aug. 2. King v. Fox, No. 04-0815. Edward King, a former guitarist with Lynyrd Skynyrd who quit the band in May 1975, approached Lawrence Fox to secure artist’s royalties for King. Fox offered King a contingency fee agreement whereby Fox would get one-third of all of King’s past-due and future royalties. Fox eventually settled the case with the band, the band’s manager and the record company, and King used Fox for other legal matters for the next decade. Fox took a cut of both the artist’s and writer’s royalties, even though the writer’s royalties were never in question, a practice he stopped at King’s request in 1987. In the 1990s, prompted by a change-address call by King’s insurer, the royalty checks began coming directly to King. Fox called King to demand his cut. King then sued Fox to recover the royalty fees. A New York federal court granted summary judgment to Fox on the ground that King ratified the fee agreement. The 2d Circuit certified three questions to the New York Court of Appeals, retaining jurisdiction of the case pending that court’s decision. The court asked: (1) whether it is possible for a client to ratify a fee agreement during a period of continuous representation; (2) whether a client can ratify a fee agreement during such a period if attorney misconduct has taken place during that period, and, if so, whether ratification can occur before the misconduct; and (3) whether a client can ratify an unconscionable fee agreement. Full text of the decision MEDIA LAW Media request to unseal warrant affidavits denied A federal magistrate judge didn’t err in refusing to unseal search warrant affidavits in a post-Sept. 11 investigation of individuals and charities because disclosure of the information would harm the government’s interest in continuing its investigation, the 4th U.S. Circuit Court of Appeals held on Aug. 1. Media Gen. Operations Inc. v. Buchanan, No. 02-2287. After the Sept. 11, 2001, attacks, a Virginia U.S. attorney requested search warrants in a criminal investigation of individuals and charities, and accompanied the request with lengthy affidavits. Theresa Buchanan, a U.S. magistrate judge, granted the search warrants as well as a request to seal the supporting affidavits, after prosecutors argued that their disclosure would harm the investigations. The occupants of the premises moved for return of their property and unsealing of the affidavits. Media General Operations Inc., operator of the Tampa Tribune, and The New York Times Co. moved to intervene to have the records unsealed. The magistrate granted the motion to intervene, but denied the motion to unseal the records. The newspapers filed a writ of mandamus, which a district court dismissed. Affirming, the 4th Circuit held that Buchanan had not erred because unsealing the affidavits would have harmed the government’s investigation. The court said, “[T]he documents presented to the court demonstrate that the government’s interest in continuing its ongoing criminal investigation outweighs the petitioners’ interest in having the document opened to the press and the public.” Full text of the decision

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