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BANKRUPTCY La. exemption law holds school bus to be vehicle Under Louisiana’s bankruptcy-exemption statute, a school bus is a motor vehicle and not a tool of trade, the 5th U.S. Circuit Court of Appeals held on Dec. 28. Belsome v. Belsome, No. 05-30311. Tessie Belsome, a school bus driver for the Jefferson Parish School System in Louisiana, filed for Chapter 7 bankruptcy. As part of her bankruptcy filing, she filed an exemption for the school bus she drove as a tool of her trade under La. Rev. Stat. Ann. � 13:3881(A)(2)(a). The school bus had a value of $22,500 and a mortgage debt of $1,514. In response to objections by the Chapter 7 trustee and Belsome’s former husband, the bankruptcy court allowed an exemption of only $7,500, under the motor vehicle exemption. A Louisiana federal court reversed, finding the bus to be completely exempt under the tool of trade exemption. The 5th Circuit vacated and remanded. La. Rev. Stat. Ann. � 13:3881(A)(2) states “[t]he following income or property of a debtor is exempt from seizure . . . . That property necessary to the exercise of a trade calling, or profession by which he earns his livelihood, which shall be limited to the following: (a) Tools . . . .(d) Seven thousand five hundred dollars in equity value for one motor vehicle per household.” Following the canon of statutory construction that allows specific language to trump general language, the 5th Circuit found that “motor vehicle” is a more specific term than “tool” and applies to Belsome’s school bus. In addition, since only one motor vehicle per debtor may be exempt under the statute, construing “tool” to include motor vehicles would allow a debtor to exempt more than one motor vehicle.   Full text of the decision Bankruptcy court erred in student loan discharge A bankruptcy court and a district court erred in discharging a debtor’s student loans in a bankruptcy proceeding because the debtor had failed to avail herself of loan-consolidation programs or to prove future hardship, thus failing to show “undue hardship” under the Bankruptcy Code, the 4th U.S. Circuit Court of Appeals held on Dec. 30. In re Frushour, No. 04-2553. Sandra Frushour obtained federal student loans for classes she took in obtaining her associate degree. She filed a Chapter 7 bankruptcy proceeding in which she sought to discharge the loans. A bankruptcy court granted the discharge, holding that, while federal student loans were ordinarily not dischargable in a bankruptcy proceeding, Frushour had demonstrated “undue hardship” as required under 11 U.S.C. 523(a)(8). A South Carolina federal court affirmed. Reversing, the 4th Circuit held that the lower courts had erred in granting Frushour’s discharge because she had not availed herself of student loan consolidation programs, which could have lowered her payments substantially, and she had failed to demonstrate future undue hardship. However, a dissent argued that the bankruptcy court’s findings of fact should not be disturbed. BUSINESS LAW SOX limitations period doesn’t revive old claims The extended limitations period added to the Sarbanes-Oxley Act in 2002 for filing federal securities fraud actions does not revive claims already extinguished by the earlier statute of limitations, the 3d U.S. Circuit Court of Appeals ruled on Dec. 27. Lieberman v. Cambridge Partners LLC, nos. 04-3079 and -3869. On April 14, 2003, Irvin Lieberman and L-3 Communications Corp. filed a federal securities fraud class action against J.B. Hanauer & Co., alleging that its April 21, 1998, initial public offering was based on intentional misrepresentations, something Lieberman discovered only in March 2003. Hanauer argued that the suit was untimely under Sarbanes-Oxley’s three-year limitations period. Lieberman countered that on July 30, 2002, the three-year limitations period under � 804 of Sarbanes-Oxley was extended to five years; since his case was filed after the amendment’s effective date, he was allowed to take advantage of the new limitations period. A Pennsylvania federal court granted Hanauer’s motion to dismiss. The 3d Circuit affirmed. Lieberman’s claim was already extinguished under the three-year period when he filed suit. There is no evidence that Congress intended Section 804 to revive previously extinguished claims. CIVIL PRACTICE Nev. courts able to hear consumer fax law claims Nevada courts have jurisdiction to hear complaints based on the Federal Telephone Consumer Protection Act of 1991 (TCPA), which prohibits the sending of unsolicited advertising via facsimile, the Nevada Supreme Court determined on Dec. 29 in an issue of first impression. Edwards v. Direct Access LLC, d/b/a Direct Access Partners, No. 42055. Direct Access LLC sent Paul Edwards six one-page unsolicited facsimiles regarding low-interest loans. After Direct Access refused to pay Edwards $3,000 for alleged violations of federal and state law, he filed a complaint in state court that included claims under the TCPA. The state court dismissed the action for failure to state a claim. The Nevada Supreme Court reversed. Claimants under the TCPA may seek $500 for each violation or treble damages for willful or knowing violations. Section 227(b)(3) of the TCPA allows state court actions under the statute “if otherwise permitted by the laws or rules of court . . . in an appropriate court of that State.” As the Nevada Legislature had not expressly excluded TCPA claims, the court concluded that the state courts can hear them so long as they comply with Nevada’s jurisdictional requirements. CONSTITUTIONAL LAW Law curbing access to financial affidavits is OK A law proscribing access to and disclosure of financial affidavits filed in child-support collection actions is largely constitutional, except where it states that the public’s constitutional right to access court records is not a good enough reason for a court to order the release of the document, the New Hampshire Supreme Court ruled on Dec. 30. The Associated Press v. New Hampshire, No. 2004-830. Paragraph I of the law establishes the confidentiality of the records, except for parties, attorneys and some government agencies. Paragraph II states that knowing disclosure of the affidavit-except by court order-to an unauthorized party is a misdemeanor. Paragraph III states that a court can release documents, but only if a petitioner shows clear and convincing evidence of public interest; the paragraph also says that the public’s right of access to court records is not, by itself, sufficient evidence. The Associated Press challenged the law as unconstitutional under both state and federal constitutions. The trial court denied all relief. The New Hampshire Supreme Court affirmed in part and reversed in part. Neither the first nor the second paragraph violates the public’s right of access, constitutes an impermissible prior restraint or violates separation of powers doctrines. The third paragraph does, however, improperly restrict the public’s right of access to court records guaranteed under the state constitution. The court severed the paragraph from the law, leaving the other paragraphs intact. Calif.’s fine for cigarette distribution is excessive The state of California’s fine of more than $14 million against R.J. Reynolds Tobacco Co. for violating a state law prohibiting the distribution of free cigarettes on public property was constitutionally excessive, the California Supreme Court held on Dec. 22. People ex rel. Lockyer v. R.J. Reynolds Tobacco Co., No. S121009. In 1991, the state of California passed a law, codified eventually at Health & Safety Code � 118950, which prohibited the distribution of free cigarettes on public property. After R.J. Reynolds distributed free cigarettes at a public event, the state sued R.J. Reynolds, and a trial court fined it $14,826,200, based on � 118950′s statutory fines of $200 for one act, $500 for two acts and $1,000 for each succeeding act. An intermediate state appellate court affirmed, and R.J. Reynolds appealed to the California Supreme Court, arguing three points: that it fell under a safe harbor in the law because the event was on privately leased property closed to minors, that � 118950 was pre-empted by federal law and that the fine was excessive and violated both the U.S. and California constitutions. Reversing, the California Supreme Court said that all three issues were “close and difficult” ones. It held for the state on the safe harbor and pre-emption issues. However, it held that the fine was constitutionally excessive. Rejecting the argument of the state and the holdings of the trial and intermediate appellate courts, the court held that R.J. Reynolds’ good-faith efforts to comply with the law were relevant in assessing the amount of the fine. The court said that “[a]lthough ignorance of the law is not a defense to a violation of section 118050, a defendant’s good faith or bad faith is relevant to the evaluation of the fine assessed against the defendant.” CRIMINAL PRACTICE Late notice doesn’t stop extension of probation A probation extension can proceed where the probationer was not notified of it until after his original probation period expired, the Utah Supreme Court held on Dec. 30. Utah v. Orr, No. 0001912772. David Orr’s probation was conditioned upon his monthly restitution payments. He skipped a payment just before his probation expiration date, prompting the relevant Utah department to file, on May 9, 2003, a probation violation report and to ask the court to order Orr to show cause why his probation should not be revoked. On May 12, the day Orr’s probation was set to expire, the court issued the order, which was served on Orr on May 19. Orr moved to dismiss, saying the court lost jurisdiction on May 12. The court held that the May 9 filing tolled the probationary period and gave it jurisdiction to extend it, which it did-for the full 10-year term of his suspended prison sentence. The court’s written order did not expressly find Orr to have willfully violated his probation. Orr repeated his notice argument to the appellate court, where he also argued that the trial court’s failure to make a specific factual finding that he willfully violated his probation terms negated jurisdiction. An intermediate appellate court affirmed. The Utah Supreme Court affirmed, holding that Utah has codified a probationer’s right to a hearing in accordance with the minimum requirements of due process. The court said that notice of a probation-extension proceeding is sufficient, even if served after the original probationary term was set to expire, if a probation violation report is filed prior to the original expiration date and the notice complies with due process. The court further held that the court must make written findings that the terms of probation were violated, but a transcript of oral findings may suffice. FAMILY LAW Depreciation isn’t part of child support obligation A court erred in possibly taking into account depreciation in determining a father’s child support obligation, the North Dakota Supreme Court held on Dec. 27. Kobs v. Jacobson, No. 20050165. David Jacobson, a self-employed rancher, divorced Connie Kobs on May 28, 1998. The couple had two children. On Sept. 12, 1998, the trial court issued an amended judgment. On April 20, 2000, the trial court issued a second amended judgment that based Jacobson’s child support on his 1999 monthly income of $1,200. On Feb. 16, 2005, Jacobson filed a third motion to amend judgment based in part on a reduction in income, presenting tax returns from 2000 to 2004 showing a total loss of $5,431. The trial court ordered Jacobson’s child support obligation to remain the same, implying that depreciation deductions taken on the returns meant that he had not satisfied his burden of proof with respect to his reduced income. The North Dakota high court reversed. According to N.D. Cent. Code � 14-09-08.4, a trial court must modify an obligor’s child support obligation to conform to the guidelines when a motion to modify support is made more than one year after the entry of the previous order. For self-employed individuals, N.D. Admin. Code � 75-02-04.1-05(4) mandates the use of an average of the income reported for the most recent five-year period if there are significant annual fluctuations in income. Case law shows that depreciation deductions may not be added back in determining an obligor’s net income under child support guidelines. IMMIGRATION LAW Act favoring Nicaraguans no constitutional breach The Nicaraguan Adjustment and Central American Relief Act, which gives immigrants from Nicaragua preferential treatment, doesn’t violate the equal protection clause of the U.S. Constitution, the 9th U.S. Circuit Court of Appeals held on Dec. 30. Masnaukas v. Gonzales, No. 03-72021. Sylvia Masnaukas, a Lithuanian national, married a Nicaraguan national after arriving in the United States, and filed a derivative claim for political asylum under the federal Nicaraguan Adjustment and Central American Relief Act (NACARA). An immigration judge denied her application, in part, because she was not a Nicaraguan or Cuban national, and the Bureau of Immigration Appeals affirmed. Masnaukas filed a petition for review to the 9th Circuit. Affirming, the 9th Circuit said that Congress had broad powers over immigration laws, thus limiting the court’s review to a rational basis standard. Under a rational basis analysis, the court held that there was no equal protection violation. The court said, “Given the special diplomatic concern for Nicaraguan aliens and others of similar circumstances, and the broad deference afforded to Congress in this field, we must uphold its decision to limit the scope of NACARA � 202(d) to spouses who are themselves Nicaraguan or Cuban nationals.” LEGAL PROFESSION Multiple ERISA punitive claims warrant dismissal Repeated ERISA claims for punitive damages, after court warnings that that the Employee Retirement Income Security Act does not provide for punitives, warrants dismissal with prejudice, the 1st U.S. Circuit Court of Appeals held on Dec. 28. Rivera Diaz v. American Airlines Inc., No. 04-2277. Antonio Rivera Diaz sued under ERISA alleging that after he retired, his employer, American Airlines Inc., gave notice of his right to file for pension benefits to an invalid address. Diaz later filed suit against the ERISA plan for punitive damages. The court dismissed with prejudice, for failure to exhaust administrative remedies and noted that ERISA does not provide for punitive damages. The 1st Circuit affirmed the unavailability of punitive damages, but said dismissal should be without prejudice to refiling after exhaustion of administrative remedies. Diaz submitted an administrative claim with the plan. Five months later, he again sued seeking punitive damages. This suit was dismissed with prejudice for failure to exhaust administrative remedies and his attorney was sanctioned for ignoring the admonition against seeking punitives. The 1st Circuit affirmed, but without prejudice. Diaz died and his estate brought a third suit, again seeking punitives. A Puerto Rico federal court ordered the estate to show cause why the case should not be dropped for failure to heed the warnings against seeking punitives. Following failure to respond in a timely fashion, the court dismissed the case with prejudice and fined the attorney for violating repeated orders to drop the punitives claim. The 1st Circuit affirmed. The estate claimed that the plan mailed the notification to the wrong address, unfairly withheld pension benefits for 12 years until Diaz’s death, and maliciously refused, for four years, to act on Diaz’s administrative complaint, creating extraordinary circumstances that warranted punitives under ERISA. The court said that the dismissal was not based on the merits of the ERISA claim, but on disobedience of a court order. TORTS No bar to minor’s suit for birth negligence Since Wisconsin’s laws do not state a limitations period for disabled children’s suits against health care providers, an 11-year-old’s suit alleging birth-related negligence may proceed, a majority of the Wisconsin Supreme Court held on Dec. 30. Haferman v. St. Clare Healthcare Foundation Inc., No. 2003AP1307. The Haferman family filed suit on Sept. 4, 2002, alleging that their 11-year-old son, Toby, sustained cerebral palsy due to the negligence of his health care provider at the time of his birth. The trial court denied the provider’s motion for summary judgment on statute of limitations grounds, and allowed the suit to proceed. An intermediate appellate court reversed, holding that Wisconsin’s three-year statute of limitations for medical malpractice actions applied to bar the action as untimely, while two other statutes of limitations were inapplicable: One requires children to bring their claims against health care providers by the age of 10 or the time under the general limitations statute, but excepts people with developmental disabilities from its reach; and another tolls the limitations period for people with disabilities under age 18, but excepts “actions against health care providers.” The Wisconsin Supreme Court reversed, holding that Toby’s action is not time-barred because the state Legislature has not provided an applicable statute of limitations for a claim against a health care provider alleging injury to a developmentally disabled child. But the court noted that, even in the absence of a statute of limitations, the doctrine of laches may, in some cases, be a bar. Charitable Immunity Act invalid for public schools The New Jersey Charitable Immunity Act has no applicability to public entities supported entirely by tax dollars and providing services to which the public is entitled as of right, the New Jersey Supreme Court ruled on Dec. 28. Tonelli v. Board of Education of the Township of Wyckoff, No. A-105-04. Virginia Tonelli tripped over a speed bump in the parking lot of the public school where she had gone to watch her granddaughter play in a club soccer game. Tonelli died six weeks later of complications from her injuries. Her husband sued the public school district, which allowed the soccer club and other nonschool-affiliated entities to use the school property to meet community needs. The trial court granted the school board’s motion for partial summary judgment that it was entitled to immunity from suit under the charity act. An intermediate appellate court reversed. The New Jersey Supreme Court affirmed. The board of a public school does not bear any of the characteristics of a private charity, as its sole source of revenue is public funds. Furthermore, it is an instrumentality of the state and is obligated to meet the educational needs of children.

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