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CIVIL PRACTICE Court erred in dismissing P&G Satan-rumor case Procter & Gamble Co.’s lawsuit against an Amway Corp. distributor who allegedly interfered with P&G sales by linking P&G with Satanic church support was revived by the 10th U.S. Circuit Court of Appeals on Oct. 19. Procter & Gamble Co. v. Haugen, No. 03-4234. Procter & Gamble sued Amway distributor Randy Haugen and others, alleging that Haugen disseminated a voice message to thousands of Amway distributors falsely stating that P&G’s president had said that he was associated with the Church of Satan. A P&G financial analyst used market share information obtained from an unrelated company, Information Resources Inc. (IRI), to calculate the extent of its related damages. P&G had contracted with IRI for access to databases on P&G’s products which IRI created from scanner data of consumer purchases. The defendants made a number of requests from P&G for the IRI data in documentary form. In response to discovery motions, P&G argued that it was just an online subscriber to the IRI data, and that its subscription contract didn’t allow it to download all of the information on IRI databases. According to P&G, the defendants could have purchased the archival data from IRI but chose not to do so. A Utah federal court ruled that without access to the IRI data, the defendants would be unable to defend themselves, and dismissed the case. The 10th Circuit reversed, holding that the district court did not have justification for dismissal because P&G’s culpability had not been established since the company did not have the computer capacity to download and archive the data at its own facilities, and would have had to purchase a mainframe computer to do so. In addition, purchasing archival data from IRI was very costly, possibly around $30 million. As asserted by P&G, there is no indication in the record on appeal that the magistrate judge or the district court ever warned P&G that its suit was subject to dismissal if all of the IRI-related data was not made available to the defendants. Full text of the decision Equity court can order restitution for law breach A district court sitting in equity has the authority to order a company that has violated the Food, Drug and Cosmetic Act (FDCA) to pay restitution to consumers, the 3d U.S. Circuit Court of Appeals ruled on Oct. 21. U.S. v. Lane Labs-USA Inc., No. 04-3592. Lane Labs produced several products made from things like shark cartilage and shiitake mushrooms, and promoted them as treatments for diseases such as cancer. The Food and Drug Administration (FDA) warned Lane that such conduct was in violation of the FDCA. The Federal Trade Commission (FTC) and the FDA commenced actions against Lane. The FTC sought monetary relief to redress injury to consumers, including disgorgement of ill-gotten money. The FTC secured a $1 million consent agreement with the company that included an injunction against the specific promotion of shark-cartilage products as a cure for cancer. The FDA obtained an injunction in district court enjoining future sales of the products and ordering Lane Labs to pay restitution to purchasers of the company’s products. The lab contested the district court’s authority to order restitution payments under the FDCA. The 3d Circuit affirmed. Though the FDCA does not specifically authorize restitution, such specificity is not required if the government properly invokes a district court’s equitable jurisdiction under the statute. The court said that the FDCA does grant district courts sitting in equity the authority to order restitution. Like an injunction, the restitution order in this case will deter future violations of the FDCA. CRIMINAL PRACTICE Driving conviction from closed road thrown out A trial court erred in convicting a driver of driving with a suspended license and driving as a habitual offender because the road where he was stopped in a national wildlife refuge was closed due to a hurricane, meaning that it was not a “highway” for purposes of a conviction under Virginia law, the 4th U.S. Circuit Court of Appeals held on Oct. 21. U.S. v. Adams, No. 04-4967. Hurricane Isabel did extensive damage to Jericho Ditch Lane in the Great Dismal Swamp National Wildlife Refuge. Although federal law applied to certain crimes within the national refuge, state law applied to traffic offenses. Jericho Ditch Lane was closed due to damage from Hurricane Isabel when a federal agent stopped Samuel Adams driving on it. After a computer check revealed that Adams’ license had been suspended, he was arrested, and a federal district court, applying Virginia law, convicted him of driving with a suspended license and driving as a habitual offender. Reversing, the 4th Circuit held that the trial court erred in convicting Adams because the road on which he was stopped was closed, and thus, not a “highway,” a requirement for conviction under Virginia law. Rejecting the government’s argument that the road’s temporary closure for safety reasons did not negate the road’s status as a highway, the court said, “While this argument might have some purchase in a case of a partial closure or a closure of definite duration, we do not believe that Virginia law permits us to conclude that a road such as Jericho Ditch Lane, which was completely . . . closed to the public when Adams was stopped, was a highway.” EMPLOYMENT Prehire wage disparity negates equal-pay claim Where a woman and a man were hired for the same position for different salaries, the disparity in their prehire wages was a legitimate factor other than sex in setting their different salaries, the 7th U.S. Circuit Court of Appeals held on Oct. 21. Wernsing v. Department of Human Services, No. 04-2225. When Jenny Wernsing was hired as an Internal Security Investigator II for Illinois’ Department of Human Services, she was paid 30% more than she earned in the job she left behind. Charles Bingaman, however, was hired contemporaneously for a job with the same title, to do the same work, but for a much higher salary than Wernsing, because his prior salary had been higher than Wernsing’s had been. His new salary was 10% more than his old one. Wernsing sued, citing the Equal Pay Act of 1963, 29 U.S.C. 206(d)(1), which says that no employer shall discriminate between employees on the basis of sex by paying different wages for equal work on jobs requiring equal skill effort and responsibility and which are performed under similar working conditions. An Illinois federal court ruled in the department’s favor, finding that the salary differences cited derived from a “factor other than sex.” The 7th Circuit affirmed, rejecting Wernsing’s argument that the department lacks an acceptable business reason for its approach. It also rejected the contention that all pay systems discriminate on account of sex, thus any use of prior pay to set salary must be discriminatory. The court refused to deem the statistical disparity between men’s and women’s wages as proof that those wages are discriminatory. EVIDENCE 911 excited-utterance call avoids hearsay exclusion An anonymous 911 call was nontestimonial and can be treated as proper “excited utterance” evidence, the 1st U.S. Circuit Court of Appeals held on Oct. 20. U.S. v. Brito, No. 04-1755. A woman phoned 911 and reported seeing a man with a gun and described him. Her description contributed in part to the apprehension of Jean Brito, who was charged with a crime and convicted. Over hearsay and confrontation clause objections, a Massachusetts federal court allowed a redacted tape of the 911 call into evidence, citing the “excited utterance” exception. Subsequently, the U.S. Supreme Court in Crawford v. Washington, 541 U.S. 36 (2004), altered the excited-utterance doctrine and barred the admission of “testimonial” hearsay in a criminal case where the accused has not had an opportunity to cross-examine the declarant. The 1st Circuit affirmed, holding that the excited utterance here was nontestimonial and was therefore properly admitted into evidence. The circuit’s new test is first whether the hearsay statement was an excited utterance. If yes, the court must look at attendant circumstances and assess the likelihood that a reasonable person would have either retained or regained the capacity to make a testimonial statement at the time of the utterance. LEGAL PROFESSION Lawyer’s warning note violated ethics rules A lawyer’s letter to a client, in which the lawyer threatened to “make trouble for you while you’re locked up,” violated Indiana’s Rules of Professional Conduct, the Indiana Supreme Court held on Oct. 17. In re Freeman, No. 49S00-03120DI-616. John Freeman, an attorney licensed in Indiana, received a letter from an incarcerated former client, requesting the return of his file and a refund of unearned fees. Without opening the former client’s letter, Freeman responded, “Please do not ever in your life send me another letter. If you do I will have to make trouble for you while you are locked up!” Freeman faced disciplinary charges for this matter and others. A hearing officer ruled that Freeman’s letter did not violate Indiana’s Rules of Professional Conduct, and the Indiana Supreme Court reviewed the matter. Rejecting the hearing officer’s ruling, the Indiana Supreme Court held that Freeman’s letter did violate the state’s ethics rules. Suspending Freeman for 12 months for this and other violations, the court said, “[W]e believe the language of the letter constituted impermissible conduct . . . .Respondent’s letter not only constituted a denial of the client’s right to his file, but also had the effect of hindering the administration of justice by chilling or preventing the client from seeking redress in his underlying criminal case or from seeking a refund of unearned fees.” Grievance confidentiality rule is unconstitutional New Jersey Supreme Court Rule 1:20-9, which requires that ethics grievances filed against attorneys must remain confidential until a formal complaint is filed, is unconstitutional under the First Amendment, the New Jersey Supreme Court ruled on Oct. 19. R.M. v. Supreme Court of New Jersey, No. A-89-04. Stated on the form that a New Jersey woman filled out when she filed a grievance against her former attorney was a warning that she was to keep all communications related to the grievance confidential “until and unless a complaint is issued and served.” The district ethics committee recommended “diversion” for the attorney after she admitted to certain acts of misconduct. The committee informed the client that under N.J. Sup. Ct. Rule 1:20-9(a), the matter was still confidential. The client sued the New Jersey Supreme Court for violations of her free speech rights, saying that she would like to discuss what happened, particularly at a meeting of the public body on which the attorney served. Upon certification from the Supreme Court, the Professional Responsibility Rules Committee recommended that the rule should stand as is. The New Jersey Supreme Court remanded the case to the rules committee to redraft the rule, saying that the current rule isn’t narrowly tailored to serve any of the state’s asserted compelling interests: (1) protecting attorneys’ reputations; (2) encouraging diversion in lieu of full disciplinary action; or (3) maintaining the integrity of pending investigations. There are other ways to serve these interests, such as keeping sensitive investigations confidential by a court order and using a defamation lawsuit to counter public discussion of false information. No retroactive return to bar for suspended lawyer An attorney whose District of Columbia Bar membership was suspended for failure to pay dues was not entitled to have his bar membership reinstated retroactively to the date when it was first suspended once the dues had been paid, the District of Columbia Court of Appeals held on Oct. 20. Sitcov v. District of Columbia Bar, No. 05-BG-258. The District of Columbia Bar suspended Michael Sitcov’s bar membership for failure to pay dues. After Sitcov paid the dues, he asked the bar to make his reinstatement retroactive to the date he was suspended because the suspension was causing him problems with his employer, the U.S. Department of Justice. In a 10-7 vote, the bar’s board of governors rejected Sitcov’s request, and Sitcov sued the bar in District of Columbia federal court. However, the federal district court held that the case involved questions of the rules of the District of Columbia Court of Appeals, the district high court and the court governing the D.C. bar. The district high court then exercised original jurisdiction over the case. The D.C. Court of Appeals held that Sitcov was not entitled to retroactive reinstatement, noting that Sitcov’s suspension was not due to any negligence on the part of the bar. The court said, “Sitcov does not deny that from September 30, 2002 to November 7, 2004, he failed to pay any of his membership dues at all. He was surely aware, or should have been aware, of his obligation to do so. Under the circumstances, we agree with the Bar’s position that this is not an ‘appropriate case’ for reinstatement nunc pro tunc.” TAXATION Country club on annexed land must pay sales tax A golf and country club that has been annexed by a municipality is not exempt from paying municipal sales tax, the Oklahoma Supreme Court held on Oct. 18 in an issue of first impression. Twin Hills Golf & Country Club Inc. v. Town of Forest Park, No. 102265. The town of Forest Park, Okla., annexed the tract of land owned and used by Twin Hills Golf & Country Club Inc. The tract of land was more than 40 acres. After the annexation, Twin Hills objected to the enforcement of Forest Park’s municipal sales tax on its golf and country club, claiming that it was exempt from the obligation to collect, report and remit municipal sales tax under Okla. Stat. tit. 11 � 21-109(A). In a declaratory judgment action filed by Twin Hills, the trial court granted Forest Park’s motion for summary judgment. The Oklahoma Supreme Court affirmed. Okla. Stat. tit. � 21-109(A) provides that “[t]racts of land in excess of forty (40) acres which are annexed to a municipality and used for industrial or commercial purposes shall not be subject to municipal taxes.” The court clarified that the applicable section of the statute, without ambiguity, applies only to the taxation of real property, and not to excise taxes such as municipal sales taxes. The legislative intent behind the statute was to discourage municipalities from annexing large tracts of land used mainly for industry or commerce for the purpose of increasing revenue from property taxes. TORTS Employer not liable over employee’s sex assault The sexual assault of a mentally disabled employee arose out of the victim’s employment, the Nevada Supreme Court ruled on Oct. 20 in an issue of first impression. Wood v. Safeway Inc., No. 40048. Through a special hiring program, Safeway Stores Inc. hired Jane Doe, a mentally disabled female, as a part-time courtesy clerk. While working the swing shift, from 4 p.m. until midnight, Doe was sexually assaulted on three occasions by Emilio Ronquillo-Nino, a nighttime janitor. Ronquillo-Nino was an employee of a cleaning subcontractor hired by an independent contractor to provide cleaning services to the Safeway store. One assault occurred in a cleaning supply room and two others occurred behind a dumpster while Doe was collecting shopping carts from the parking lot. After the sexual assaults, Doe became pregnant and gave birth to a child, who is being cared for by Doe and Alan and Judy Wood. The Woods and Doe’s guardian ad litem brought suit against Safeway for a variety of tort claims and sexual harassment. The trial court granted Safeway’s motion for summary judgment, finding it immune from liability under the Nevada Industrial Insurance Act (NIIA). The trial court denied Doe’s motion for reconsideration. The Nevada Supreme Court affirmed. The NIIA is the exclusive remedy for employees injured on the job and provides immunity to employers from suit by employees, their legal representatives and their dependents for injuries “arising out of and in the course of employment.” The court said that the assault fell within the ambit of the NIIA. The assault arose out of Doe’s employment because her employment contributed to and increased the risk of assault beyond that of the general public. Doe was brought into contact with Ronquillo-Nino through her employment, and Ronquillo-Nino was aware of the store layout as a result of his position as a janitor. Furthermore, the sexual assault was not a result of motivations peculiar to the assailant and the victim that were unrelated to the employment.

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