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ATTORNEY FEES Disability payments not in contingency-fee deal The phrase ‘gross proceeds of recovery” in a standard contingency fee contract doesn’t include future post-judgment disability payments, the 5th U.S. Circuit Court of Appeals held on March 1. Wampold v. E. Eric Guirard & Associates, No. 04-31000. In 1998, Mervin Wampold was seriously injured in a car accident. His insurance policy with Paul Revere Life Insurance Co. provided for $5,100 monthly disability payments. After Paul Revere denied coverage, Wampold sued in state court. He was represented by Thomas Pittenger, whose contingency agreements entitled him to “an undivided vested interest in [Wampold's] claim, to be paid from the gross proceeds of recovery.” The jury returned a verdict in Wampold’s favor, and he received almost $400,000. Pittenger received one-third of the award. Wampold then sued Paul Revere again to recover disability benefits, penalties and attorney fees for the two-month period between the jury verdict and the entry of the court’s judgment. After that case was settled in January 2003, Wampold signed a statement stating that “[t]his constitutes a full and final settlement of all amounts due me [Wampold] arising out of this matter.” However, in March 2003, Pittenger sued Wampold for either a percentage of each post-judgment monthly disability benefit check that he continued to receive from Paul Revere or a lump sum representing the present value of that future benefit. A Louisiana federal court granted summary judgment in favor of Wampold. The 5th Circuit affirmed. Because the judgment accepted the jury’s verdict ordering Paul Revere to pay monthly disability benefits from Oct. 30, 1998, through the date of judgment, the court held that Pittenger had already received his portion of attorney fees for those payments. There was no mention of post-judgment disability payments in the contingency-fee agreements, either lawsuit or the disbursement documents. Full text of the decision CIVIL RIGHTS Ex-mayor deprived two minors of their rights Upholding the conviction of the former mayor of Waterbury, Conn., on charges related to the sexual abuse of two minors, the 2d U.S. Circuit Court of Appeals ruled on March 3 that the mayor violated the minors’ civil rights acting under color of law. United States v. Giordano, No. 03-1394. Authorities intercepted 151 calls between Mayor Philip Giordano and a prostitute, Guitana Jones, some of which discussed Jones bringing her 9-year-old daughter and 11-year-old niece to have sex with Giordano. Giordano was charged with violating the children’s civil rights under color of law, conspiring to transmit the children’s names using interstate commerce and 11 counts of using interstate commerce to solicit illegal sexual activity. At trial, Jones told of numerous occasions when she brought the girls to Giordano’s law office, apartment and city hall to engage in sexual conduct. Giordano was convicted as charged. The 2d Circuit affirmed, rejecting Giordano’s claim that he couldn’t have violated the girls’ civil rights under color of law because his relationship with them was purely personal. Giordano actively and deliberately used his apparent authority as mayor to ensure that the girls did not resist or report the ongoing abuse. COMMUNICATIONS Satellite system may be regulated as cable system A satellite master antenna system providing cable programming to residents in a Jersey City, N.J., building complex is a cable system under the Federal Cable Act (FCA) and subject to regulation by the New Jersey Board of Public Utilities, the New Jersey Supreme Court ruled on March 1. In the Matter of Alleged Noncompliance by RCN of N.Y., No. A-138-04. RCN New York received a satellite signal at its own facility, then distributed the signal to the building complex through coaxial cables that ran underneath the complex’s public streets. In 2003, the public utilities board sent an order to RCN saying that the system was a cable system under the FCA and therefore subject to board regulation. RCN said that it was not a cable system because it did not “use” the public right-of-way to distribute its programming signal. The board disagreed, but an intermediate appellate court reversed. The New Jersey Supreme Court reversed. The FCA says that providers who use private facilities, i.e., not the public right-of-way, are not cable systems. However, the term “use” is undefined and ambiguous. The Federal Communications Commission has said that when a closed transmission path, such as a cable, crosses the right-of-way, it is “using” the right-of-way. This interpretation is reasonable, the court held, and if Congress had intended to carve out an exception for only minimal use of the public right-of-way, it could have done so. CONSTITUTIONAL LAW Sex convict law violates equal protection clause A California state law requiring mandatory sex offender registration for those convicted of oral copulation with 16- or 17-year-olds was unconstitutional because the law did not also require registration for those convicted of sexual intercourse with 16- or 17-year-olds, the California Supreme Court held on March 3. People v. Hofsheier, No. S12463. Vincent Hofsheier, 22, pleaded guilty to oral copulation with a 16-year-old girl in violation of California law. Under Section 290 of the California Penal Code, Hofsheier was required to register as a sex offender for life. Hofsheier appealed the mandatory registration, arguing that, because Section 290 required those convicted of oral copulation to register but not those convicted of sexual intercourse, the law violated the equal protection clause of both the U.S. and California constitutions. An intermediate state appellate reversed the registration order. Affirming, the California Supreme Court held that Section 290 violated the equal protection clause. The court said, “We perceive no reason why the Legislature would conclude that persons who are convicted of voluntary oral copulation with adolescents 16 to 17 years old, as opposed to those who are convicted of voluntary intercourse with adolescents in that same age group, constitute a class of ‘particularly incorrigible offenders’ who require lifetime surveillance as sex offenders. We therefore conclude that the statutory distinction in section 290 . . . violates the equal protection clauses of the federal and state Constitutions.” EVIDENCE Inadmissible confession is usable in sentencing Although inadmissible in the guilt phase of a trial, a trial court could consider a defendant’s confession taken without Miranda warnings in the penalty phase of the proceedings, the 4th U.S. Circuit Court of Appeals held on Feb. 28. United States v. McCullough, No. 04-5020. After his father called the police, James Nichols admitted to them that he had used a gun to rob a bank. Nichols twice asked for an attorney, but eventually admitted to the crime without a lawyer being present. A North Carolina federal court granted Nichols’ motion to suppress the confession. Firearm and armed robbery charges were dropped, and Nichols pleaded guilty to bank robbery. During the sentencing phase, prosecutors urged a firearm enhancement because Nichols had admitted to possessing a firearm during the robbery and this statement, though suppressed for purposes of conviction, could be considered at sentencing. The court disagreed and sentenced Nichols to 46 months’ imprisonment. The government appealed. Reversing, the 4th Circuit held that despite being inadmissible in the guilt phase, Nichols’ confession could be considered for sentencing purposes. The court said, “[I]n cases such as this one-where there is no evidence that an illegally obtained statement was actually coerced or otherwise involuntary-the substantial burden on the sentencing process resulting from exclusion of that statement outweighs any countervailing concerns about police deterrence or unreliable evidence.” GOVERNMENT No fee reimbursement in Clinton travel office case A Clinton administration official was not entitled to reimbursement of her attorney fees stemming from the independent counsel’s investigation of the White House travel office firings because the investigation would have occurred whether an independent counsel had been appointed or not, the U.S. Circuit Court of Appeals for the District of Columbia held on March 3. In re Madison Guaranty Savings & Loan, No. 03-3066. After the Clinton administration produced documents allegedly contradicting First Lady Hillary Clinton and White House official William Watkins, the U.S. attorney general requested that the investigation by the independent counsel investigating the Madison Guaranty Savings & Loan matter be expanded to cover any possible wrongdoing by Watkins and Clinton in the travel office firings. Watkins’ deputy, Patsy Thomasson, a subject of the investigation, retained counsel, and claimed over $31,000 in legal fees. Thomasson sought reimbursement of the fees under Section 593(f) of the Ethics in Government Act. Denying Thomasson’s request for fee reimbursement, the D.C. Circuit held that she had failed to satisfy the “but for” prong of the four-pronged test to determine whether fees were reimbursable. The court held that the Justice Department would have investigated the matter even if no independent counsel had been appointed. Thus, the court held, Thomasson had failed to establish that she would not have incurred the fees “but for” the independent counsel’s investigation. The court said, “[T]he allegations here of obstruction of justice and perjury would have been investigated with or without the Independent Counsel statute.” IMMIGRATION LAW Removal order may be reinstated without trial The U.S. Attorney General didn’t exceed his authority in promulgating 8 C.F.R. 241.8, which allows an immigration officer to reinstate an illegal re-entrant’s removal order without a hearing before an immigration judge, the 11th U.S. Circuit Court of Appeals held on Feb. 27 in an issue of first impression. De Sandoval v. U.S. Attorney General, No. 04-12223. M. Fatima Guijosa De Sandoval first entered the United States illegally around June 1995. Her husband was a legal permanent resident, and on Sept. 18, 1995, he filed a visa petition for her along with an application for adjustment of status. The visa petition was granted, but the application for adjustment of status was denied because her priority date was not yet current. In 1999, she returned to Mexico but tried to re-enter the United States on Aug. 6, 1999, with a counterfeit parole stamp on her arrival/departure form. She was ordered removed pursuant to expedited removal proceedings. On Aug. 8, 1999, she illegally re-entered the United States in violation of her removal order. After her husband became a naturalized U.S. citizen in 2002, she filed another application for adjustment of status. At her interview with the U.S. Bureau of Customs and Immigration Services, she was arrested and told that her Aug. 7, 1999, removal order was being reinstated. The 11th Circuit affirmed. 8 C.F.R. 241.8 was promulgated under 8 U.S.C. 1231(a)(5) of the Illegal Immigration Reform and Immigrant Responsibility Act of 1996, which provides that “[i]f the Attorney General finds that an alien has reentered the United States illegally after having been removed or having departed voluntarily, under an order of removal, the prior order of removal is reinstated from its original date and is not subject to being reopened or reviewed.” Though there is ambiguity as to whether illegal re-entrants are to be deprived of a hearing before an immigration judge, the court found that the attorney general’s decision to allow immigration officers to reinstate existing removal orders is a permissible construction of the statute. INSURANCE LAW Federal payments offset 9/11 business interruption Federal air transportation stabilization payments to U.S. Airways offset the airline’s insurer’s liability for business-interruption claims arising from the airspace closures following the Sept. 11, 2001, terrorist attacks, the Virginia Supreme Court held on March 3. PMA Capital Ins. Co. v. U.S. Airways Inc., No. 051179. U.S. Airways Inc. had a subscription insurance contract with six insurers, including PMA Capital Ins. Co. On Sept. 11, 2001, the Federal Aviation Administration (FAA) ordered all civilian aircraft to stay on the ground following the terrorist attacks. The FAA also closed airspace around Ronald Reagan Washington National Airport for two weeks, preventing U.S. Airways from conducting commercial flights through that airport. U.S. Airways made a claim for business-interruption losses, but PMA denied coverage. A Virginia state court granted summary judgment to PMA on certain claims, but granted U.S. Airways summary judgment on its claim that when Congress enacted the Air Transportation Safety and System Stabilization Act, it did not intend payments to airlines under the act to offset insurance proceeds. PMA appealed. The Virginia Supreme Court reversed, holding that the approximately $310 million in payments received by U.S. Airways from the federal government pursuant to the stabilization act were required to reduce losses claimed under the policy. PMA’s maximum liability exposure as a subscriber to the policy was only $2.5 million, with policy limits of $25 million. LEGAL PROFESSION Lawyer to be deposed in fraudulent-transfer case A litigant can take the deposition of the lawyer who represented the companies on the receiving end of allegedly fraudulent transfers, but who was not a party to the fraudulent transfer litigation, the 6th U.S. Circuit Court of Appeals ruled on March 2. In re Powerhouse Licensing LLC, No. 05-2327. In November 2001, a California state court entered a $1 million judgment for the landlord in a landlord/tenant dispute. In 2003, the landlord filed another suit against the tenant in a Michigan federal court, alleging that the tenant had fraudulently transferred certain assets to three newly created companies to hinder collection of the California judgment. Philip Shefferly, now a Michigan federal bankruptcy judge, represented the newly created companies. The tenant included Shefferly’s affidavit in its answer to the landlord’s suit, saying he was unaware of any attempts fraudulently to transfer the tenant’s assets, and noting that an independent advisor had come up with a fair market value for the transferred assets. The court granted the landlord’s request to take Shefferly’s deposition and get documents from him. The tenant filed for a writ of mandamus to prevent the deposition and the production of documents. The 6th Circuit denied the petition. Shefferly represented the new companies, who are not part of this proceeding. The documents sought were not, thus, prepared with an eye toward litigation. Also, because it was the tenant who interjected Shefferly into the process by including his affidavit in its answer, attorney-client or work-product privileges were waived. TORTS Police pranksters not entitled to immunity The city of Albuquerque, N.M., was not entitled to qualified immunity from a lawsuit prompted by an airline worker suffering trauma following a hoax arrest at the hands of real police officers, the 10th U.S. Circuit Court of Appeals held on Feb. 28. Fuerschbach v. Southwest Airlines Co., No. 04-2117. Celebrating a new hire’s conclusion of her probationary period with a prank, several Southwest Airlines supervisors at Albuquerque’s Sunport Airport convinced two police officers to stage an arrest of Marcie Fuerschbach, a Southwest employee. After being handcuffed and believing she was arrested, Fuerschbach allegedly suffered serious psychological injuries. She filed suit under 42 U.S.C. 1983 and raised Fourth Amendment and state tort claims the city, her supervisors and Southwest. A New Mexico federal court found that qualified immunity shielded the police from the constitutional claims and granted summary judgment to all defendants on all claims. The 10th Circuit affirmed in part, but reversed on the summary judgment and other tort claims. The defendants were not entitled to qualified immunity because the seizure did not implement an official policy of the city. Whether the characterization of the incident as a prank permits the officers to escape liability is a question for a jury to decide. The Fourth Amendment claim also survived because an otherwise unreasonable seizure doesn’t become reasonable when the officers intend it as a prank. ‘Law of the place’ is law of state where tort arose Under the federal Tort Claims Act (FTCA), “the law of the place” means the law of the state where the tortious act or omission occurs, even if it is within the territorial boundaries of a tribal reservation, the 8th U.S. Circuit Court of Appeals ruled on March 2. LaFramboise v. Leavitt, No. 04-3245. Alleging that her son had been the victim of medical malpractice at the Quentin N. Burdick Memorial Comprehensive Health Care Facility, Sandy LaFramboise, individually and on behalf of her son, sued the United States under the FTCA. The facility is an Indian Health Service facility located on the Turtle Mountain Indian Reservation in Belcourt, N.D. The FTCA gives federal district courts jurisdiction over injuries caused by the negligent or wrongful act of any U.S. government employee while acting within the scope of his employment in accordance with the law of the place where the act occurred. A North Dakota federal court dismissed the action for failure to file an expert affidavit within three months of filing suit, a requirement under North Dakota law in medical malpractice cases. Tribal law does not have such a requirement. The 8th Circuit affirmed, holding that state law applies when a negligent act occurs on land that is within the territorial boundaries of a state but may also be governed by a different political entity. The court said that allowing the laws of 550 different tribal entities to govern liability of the United States would subject it to uncertainty and potentially expanded liability.

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