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BUSINESS LAW Disgorgement of profits for FDCA breaches OK Disgorgement of profits is a permissible remedy for violations of the FDCA, the 10th U.S. Circuit Court of Appeals held on Feb. 22 in an issue of first impression. USA v. Rx Depot Inc., No. 05-5003. Rx Depot Inc. and others facilitated the sale of prescription drugs from Canada to customers in the United States. The U.S. government sued Rx Depot, alleging that its business practices violated provisions of the Federal Food, Drug and Cosmetic Act (FDCA) by reimporting prescription drugs originally manufactured in the United States and by introducing new drugs into interstate commerce without Food and Drug Administration approval. Rx Depot admitted to violating the act and entered into a consent decree of permanent injunction. Subsequently, the U.S. sought disgorgement of Rx Depot’s profits. An Oklahoma federal court concluded disgorgement was not an available remedy under the FDCA. The10th Circuit reversed, holding that disgorgement is authorized because the FDCA gives district courts jurisdiction to restrain violations of the statute. The court said that “Because the FDCA does not contain a clear legislative command or compel a necessary and inescapable inference precluding disgorgement, an order of disgorgement is permitted if it furthers the purposes of the FDCA.”   Full text of the decision CONSTITUTIONAL LAW City’s policy violates fundamentalist’s rights An ordinance of the city of Portland, Ore., allowing permit holders who sponsor public events in a public park to exclude other individuals from the property violated the First Amendment rights of a fundamentalist Christian who called women at the events “whores,” “sluts,” “Jezebels” and “daughters of Babylon,” the 9th U.S. Circuit Court of Appeals held on Feb. 24. Gathright v. City of Portland, No. 04-35402. Edward Gathright, a fundamentalist Christian, made speeches at Pioneer Courthouse Square and Waterfront Park, a public park owned by the city of Portland. He often made his speeches at privately sponsored, city-permitted events open to the public. Because Gathright would call women “whores” and “sluts,” and wear a shirt reading, “Got AIDS Yet?” at a gay rights rally, event permit holders had Gathright removed from the park under a city ordinance that allows a permittee to order a person to leave an open event when that person “unreasonably” interferes with the permittee’s use of the licensed space. An Oregon federal court enjoined the city from enforcing the law, holding that it violated Gathright’s First Amendment free speech rights. Affirming as to the First Amendment claim, the 9th Circuit held that enforcement of the law as it existed at the time violated Gathright’s free speech rights. Holding that the policy of allowing permittees unfettered discretion to exclude private citizens on any basis was not narrowly tailored to the city’s legitimate interest in protecting its permittees’ rights, the court said, “Gathright may be a gadfly to those with views contrary to his own, but First Amendment jurisprudence is clear that the way to oppose offensive speech is by more speech, not censorship, enforced silence or eviction from legitimately occupied public space.” University system of Nevada is state entity The University and Community College System of Nevada (UCCSN) is not subject to liability under Nevada’s False Claims Act (FCA) because it is a state entity, the Nevada Supreme Court held on Feb. 23. Simonian v. University and Community College System of Nevada, No. 39292. Lane Simonian was a part-time instructor at Truckee Meadows Community College. He filed actions against UCCSN on four occasions. In 1999, Simonian asked for extraordinary relief for UCCSN’s alleged refusal to pay part-time instructors their entire salary amounts as determined by legislative appropriations. He voluntarily dismissed this petition. Later that same year, Simonian claimed that the community college refused to renew his teaching contract in retaliation for sending letters asserting that UCCSN misappropriated state funds by submitting incorrect part-time instructor salaries in budget requests to the Legislature. A hearing officer found that he did not prove his claim because he could not prove the success of his underlying misappropriation allegations. In 2000, Simonian filed another similar retaliation claim, which was dismissed as untimely. On a final occasion in 2001, Simonian filed a false claims action against UCCSN, contending that it had presented to the Nevada Legislature claims for $16 million in unpaid salaries for part-time instructors. The attorney general declined to intervene. The trial court dismissed, determining that UCCSN is not a person for FCA liability purposes. The Nevada Supreme Court affirmed in part and reversed in part. Under Nevada’s FCA, a private plaintiff may bring an action for treble damages against “a person” who brings a false claim for payment or approval. While Nevada’s FCA does not define the term “person,” it is modeled after the federal FCA, which the U.S. Supreme Court interpreted as excluding states and state entities from the definition of “person.” Under Nevada case law, UCCSN is a state entity because it is subject to the approval and control of the state government, is treated at least in some respect as a state entity by the Nevada Revised Statutes, and is in possession of some sovereign powers through its Board of Regents. CRIMINAL PRACTICE Policeman taking money from FBI agent was OK A police detective’s acceptance of money to check license plate and warrant records did not violate a federal anti-gratuity statute, the U.S. Circuit Court of Appeals for the District of Columbia held on Feb. 23. U.S. v. Valdes, No. 03-3066. Nelson Valdes was a detective with the District of Columbia Metropolitan Police Department. An FBI agent, posing as a judge, paid Valdes money to check license plate and warrant records on the department’s computer system. A D.C. federal district court jury convicted Valdes of violating 18 U.S.C. 201(c)(1)(B) by receiving illegal gratuities for or because of an official act. Valdes appealed his conviction, arguing that he did not violate the law because the collection of the information was not an official act. Reversing, the D.C. Circuit agreed with Valdes and held that providing the information was not an official act related to a “question, matter, cause, suit, proceeding or controversy,” and thus, was not unlawful under the statute. However, a dissent argued, “In Mexico, they call it ‘la mordida’ (literally, ‘the bite’); in Iran, ‘bakhshish’; and in France, ‘pot-de-vin.’ Here in America, we call it a ‘payoff’ and, today, the majority calls it lawful.” IMMIGRATION LAW Undocumented workers may sue for lost wages Workers illegally in this country can recover lost-wages damages in a suit alleging violations of the state labor code, a divided New York Court of Appeals ruled on Feb. 21. Balbuena v. IDR Realty LLC, No. 19; and Stanislaw Majlinger v. Cassino Contracting Corp., No. 49 SSM 1. Gorgonio Balbuena entered the United States illegally and worked for a construction company when he suffered a debilitating on-the-job injury. He sued his employer for negligence and violations of the state labor law, and sought past wages. The trial court denied a motion to dismiss, but an intermediate appellate court reversed. Stanislaw Majlinger stayed in this country after his visa expired. He, too, was injured at work and sued his employer for labor code violations, seeking lost wages. The trial court granted the employer’s motion to dismiss, but an intermediate appellate court reversed and reinstated the claim. The New York Court of Appeals, the state high court, reversed in the Balbuena case, and affirmed in the Majlinger case, holding for both that an undocumented alien injured at a work site as a result of labor law violations may recover lost wages, regardless of his or her immigration status. Federal immigration law does not pre-empt such a claim, and allowing a jury to consider immigration status in determining how much, if any, lost wages the plaintiff is to receive may alleviate any conflict with federal law purposes. INSURANCE LAW Airline can’t recover for lost business after 9/11 United Air Lines’ business-interruption insurance policy does not cover its lost gross earnings attributable to the Sept. 11 terrorist attacks, the 2d U.S. Circuit Court of Appeals ruled on Feb. 22. United Air Lines Inc. v. Insurance Company of the State of Pennsylvania, No. 05-2144. United Air Lines Inc. filed for a declaration that its “Property Terrorism and Sabotage” policy covered the lost revenues from the national flight-service reduction after the 9/11 attacks, as well as the government’s temporary airspace shutdown. The district court ruled that United could recover for the loss of business at its ticket office at the World Trade Center, but not for its lost business. The 2d Circuit affirmed. The policy requires compensation only for physical loss of property, such as the ticket office, and does not require the insurer to indemnify United for any and all damages of any kind that result from the government’s efforts to suppress terrorism. Nor can it recover for the loss of business during the government’s shutdown of Reagan International Airport. Before the Pentagon was attacked, the airport shut down because of the knowledge that the WTC had been attacked. Therefore, United’s services were interrupted based on fear of future attacks, not as a “direct result” of damage to adjacent premises, i.e., the Pentagon. LAND USE AND PLANNING Land-use regulation payment measure is OK A state ballot initiative requiring the government to compensate certain landowners when land-use regulations diminish their property’s fair market value is constitutional, the Oregon Supreme Court ruled on Feb. 21. MacPherson v. Department of Administrative Services, No. S52875. Passed in 2004, Measure 37 requires government to either compensate landowners for reduction in the fair market value of real property due to certain land-use regulations, or to modify, remove or refuse to apply such regulations. The measure limits compensation and relief from land-use regulations to property owners who acquired their property before the particular regulation was enacted. In a challenge to the measure, the trial court said it usurped the Legislature’s plenary power, violated Oregon’s privileges and immunities protections and the separation of powers doctrine, impermissibly waived sovereign immunity, and violated federal guarantees of due process. The Oregon Supreme Court reversed. Nothing in Measure 37 forbids the Legislature from enacting new land-use laws. Even “closed” classes, like the limited class of landowners who could take advantage of the measure, are permissible under the privileges and immunities clause of the Oregon Constitution. Separation of powers is not violated because it does not improperly delegate executive power to legislative bodies and because there are opportunities for judicial review. The state may decide when it wants to waive sovereign immunity. And there is no federal due process violation because the measure is reasonably related to a legitimate state interest. LEGAL PROFESSION Suspension right penalty for trust-account breach Due to a lack of requisite intent, a multiyear suspension rather than disbarment was the appropriate sanction for an attorney who commingled funds and used client trust funds in his operating account, the Florida Supreme Court held on Feb. 23. Florida Bar v. Wolf, No. SC04-1374. Florida attorney Michael Wolf admitted to depositing client trust funds into his law firm’s operating account and commingling funds in violation of the rules regulating the Florida Bar. As a result of these deposits, Wolf used some client trust money for personal expenses. Citing Wolf’s prompt repayment of a bounced operating account check to a client and his cooperation with the bar, as well as some aggravating factors, a bar referee recommended a three-year suspension. The Florida Supreme Court reviewed the matter. The Florida Supreme Court affirmed. The Florida Bar agreed that Wolf did not have the requisite intent to misappropriate funds, and that suspension was the appropriate discipline instead of disbarment. However, the state’s high court reduced the discipline from a three-year suspension to a two-year suspension with an additional year of probation. The court said, “We conclude the record supports the referee’s finding that Wolf did not have the requisite intent. Because Wolf’s misconduct was due to negligence, and he did not intentionally use the funds for personal purposes, suspension is the appropriate sanction.”

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