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Eleventh Amendment no bar to suit for fund return

The 11th Amendment does not bar a class action seeking return of funds that the state of California attempted to escheat to itself because the class was not seeking damages, but the return of monies allegedly taken in an unconstitutional manner, the 9th U.S. Circuit Court of Appeals held on March 14. Suever v. Connell, No. 04-15555.

Agnes Suever and a class of those similarly situated sued California state officials in federal court, seeking money the state was attempting to escheat to itself as abandoned. The class alleged that California, to alleviate a state budget shortfall, had seized the funds in a manner that was unconstitutional and beyond its powers. A district court held that the 11th Amendment barred the claim because the class was seeking monetary damages, rather than remedying on ongoing constitutional violation.

Reversing, the 9th Circuit held that the 11th Amendment did not bar the suit because the class was seeking return of its own money. The court said, “[A]lthough the Eleventh Amendment ordinarily bars claims primarily requesting funds held in the State’s coffers, sovereign immunity does not apply to claims alleging such funds are individuals’ property that the State improperly seized through ultra vires or unconstitutional acts.”

Full text of the decision

No constitutional breach without federal charges

Although a criminal defendant had been charged in state court and had counsel in his state court proceeding, federal agents didn’t violate his Sixth Amendment rights by questioning him about the same incident without the presence of counsel because he hadn’t yet been charged in federal court, the 4th U.S. Circuit Court of Appeals held on March 13. United States v. Alvarado, No. 04-4969.

The Commonwealth of Virginia charged Samuel Alvarado with possession of cocaine with intent to distribute. Virginia provided counsel for Alvarado, and the commonwealth eventually dropped its charges. Before doing so, federal authorities filed a criminal complaint against Alvarado stemming from the same incident. After the federal complaint had been filed-but before Alvarado had been charged formally-federal agents questioned Alvarado. He was later convicted of drug offenses in federal court. Alvarado appealed, arguing that federal agents had violated his Sixth Amendment rights by questioning him without his commonwealth-appointed lawyer being present.

Affirming on the Sixth Amendment question, the 4th Circuit held that despite Alvarado’s having been charged and having counsel in the Virginia state proceedings, he had no Sixth Amendment right to counsel in the federal proceedings because-unlike the Fifth Amendment right to counsel-the Sixth Amendment right to counsel was not triggered until Alvarado had been charged formally. Alvarado had not yet been formally charged. The court said, “By its own terms, the Sixth Amendment applies to ‘criminal prosecutions’ as opposed to criminal investigations. The Supreme Court has thus repeatedly held that the Sixth Amendment right to counsel ‘attaches only at or after the initiation of adversary judicial proceedings against the defendant.’ “


Lessees not protected by federal Warranty Act

A vehicle’s lessee may not recover under the federal Warranty Act or the Arizona state Lemon Law, the Arizona Supreme Court held on March 15 in a matter of first impression. Parrot v. DaimlerChrysler Corp., No. CV-05-0104-PR.

Bill Parrot leased an automobile from a Chrysler dealer in Scottsdale, Ariz. He claimed that he had to bring it in for repairs at least 13 times. Dissatisfied with the repair work, Parrot sued DaimlerChrysler in Arizona state court pursuant to the federal Magnuson-Moss Warranty Act and the Arizona Motor Vehicle Warranties Act (“Lemon Law”). The trial court granted DaimlerChrysler’s motion for summary judgment. An intermediate appellate court reversed, allowing recovery under both statutes.

The Arizona Supreme Court reversed, holding that, under the circumstances of this case, a lessee cannot sue under the Warranty Act or the Lemon Law. The court rejected the reasoning of other courts that have held that if state law permits enforcement of a written warranty, then the Warranty Act governs that warranty even if the written warranty does not otherwise meet the requirements of the Warranty Act.


Rent-to-own contracts subject to state law

Rent-to-own contracts are subject to state laws on installment sales, usury limitations and consumer fraud, the New Jersey Supreme Court ruled on March 15. Perez v. Rent-A-Center Inc., No. A-124-04.

Over a 14-month period, Hilda Perez entered into five rent-to-own contracts with Rent-A-Center Inc. for home furnishings and electronics totaling $9,301. The contracts required Perez to make weekly “rental” payments on the items, a portion of which would go to the purchase price if she decided to buy the items. It would have cost Perez $18,613 to buy the items under this method. Perez stopped payments after she had spent $8,156. Rent-a-Center sued for money damages and a return of the rented items. Perez filed her own suit, alleging that the Rent-a-Center contracts violated the state Retail Installment Sales Act (RISA), the Consumer Fraud Act (CFA) and the criminal usury statute. The trial court granted Rent-a-Center’s motion to dismiss Perez’s suit. An intermediate appellate court affirmed.

The New Jersey Supreme Court reversed. Though not pure installment contracts, the agreements in this case fall within the RISA’s reference to “similar instruments.” Furthermore, RISA incorporates the criminal usury statute’s interest cap of 30% per year on retail sales agreements, which these contracts exceed. Finally, CFA and RISA can be read in conjunction with one another; they are not mutually exclusive.


Municipal court may not expunge criminal record

An Alabama municipal court does not have the authority to expunge criminal records, the Alabama Supreme Court ruled on March 10 in an issue of first impression. Mobile Press Register Inc. v. Lackey, No. 1041260.

The Mobile Press Register Inc. (MPR) of Alabama requested from the Mobile Municipal Court records related to criminal charges filed against a public official. The court informed MPR that the records had been expunged. The court also refused a request from MPR for access to all criminal records that the court had expunged since 1988. MPR sought a preliminary and permanent injunction preventing the municipal court from expunging its records and granting MPR access to all records that had been expunged since 1988. An Alabama trial court permanently enjoined the municipal court from expunging its records in the future but denied MPR access to previously expunged files.

The Alabama Supreme Court affirmed the permanent injunction against future expungement, but reversed on the denial of access to MPR of previously expunged records. Under Section 41-9-625 of the Alabama Criminal Justice Information Center Act, fingerprints and other identifying data of arrestees are recorded. But if arrestees are then released, “all such information shall be eliminated and removed.” As only identifying information may be “eliminated and removed,” the statute does not authorize the municipal court to expunge entire court files.


Judge can’t hear case handled by former firm

An appellate judge must be disqualified from hearing a case that was handled by members of the judge’s former firm, even though the judge had no knowledge of the colleague’s involvement, the Texas Supreme Court ruled on March 17. Tesco American Inc. v. Strong Industries Inc., No. 04-0269.

In litigation between Strong Industries Inc. and Tesco American Inc. and F.S. New Products Inc., the state trial judge ruled for Strong on all counts. An intermediate appellate court affirmed as to Tesco but reversed as to F.S. New Products. Tesco filed for rehearing, arguing that the author of the majority opinion, Justice Laura C. Higley, should be disqualified. Before becoming a judge, Higley had been an attorney with Baker Botts of Houston, and another attorney in the firm, unbeknownst to Higley at the time, appeared as lead counsel for Strong before withdrawing a year before Higley took the bench. The appellate court denied the motion and reissued an opinion substantially similar to Higley’s.

The Texas Supreme Court reversed, holding that Higley should have been disqualified. The same “vicarious disqualification” of trial judges whose former law firm colleagues worked for one of the parties to a case should be extended under the state constitution to cover appellate judges.


Lawyer’s failure to meet deadline wasn’t negligent

An immigration lawyer’s failure to file a motion for reconsideration within the specified time limit-resulting in a denial of her clients’ motion-was not negligence as a matter of law, the District of Columbia Court of Appeals held on March 16. Liu v. Allen, No. 03-CV-263.

Shi Mui Liu and her husband, Tung Hoi Wong, both foreign nationals, applied for resident alien status in the United States after having come to the country under the sponsorship of a textile company wishing to employ Liu. After federal authorities had denied their application, the applicants’ attorney, Susan Allen, noticed that the denial was based on the Immigration and Naturalization Service’s misunderstanding of the facts of the case. Rather than filing a motion for reconsideration, Allen wrote a letter to the INS explaining the situation. The INS responded by telling Allen that she should file a motion for reconsideration. However, the deadline had passed. Liu and Wong sued for legal malpractice, alleging that Allen had breached the standard of care. Allen countered that her approach of writing the letter was often effective with the INS. A D.C. trial jury found for Allen. Liu and Wong appealed.

Affirming, the D.C. Court of Appeals held that Wong’s failure to meet the deadline was not negligence as a matter of law. The court said, “Allen and her expert witness plausibly testified that her informal submission constituted an equally valid, equally efficacious (if not superior) alternative to a motion for reconsideration. Even if that assessment may not have been borne out by subsequent events, the conflict between qualified and competent experts on this central point was substantial enough to preclude a determination that Allen was negligent as a matter of law.”


Risk of harm does not shape economic loss rule

The “economic loss rule” bars tort actions whether or not a defect poses a risk of harm to people or property, under New Hampshire law, the 1st U.S. Circuit Court of Appeals held on March 17. Lockheed Martin Corp. v. RFI Supply Inc., No. 05-1737.

Lockheed Martin Corp. and Rantec Power Systems Inc. entered into a contract in which Rantec agreed to design and construct fire detection and sprinkler systems for Lockheed. Anechoic chambers at two of Lockheed’s facilities suffered water damage as a result of malfunctions of the sprinkler systems. Lockheed sued Rantec, alleging negligence, strict liability and implied warranties. A Massachusetts federal court granted summary judgment to Rantec, finding that the economic loss doctrine barred Lockheed’s tort claims, and that the implied warranties’ claims were barred by the statute of limitations.

The 1st Circuit affirmed, applying New Hampshire law. Under the economic loss rule, a party generally may not recover in tort for economic loss, which New Hampshire calls “the diminution in the value of a product because it is inferior in quality.” Lockheed had argued that, under New Hampshire law, the economic loss rule does not bar tort actions where a defect “actually poses an affirmative risk of harm to persons or property.” The court held that New Hampshire law would not support that interpretation of the doctrine.


Wife to get lawful share of decedent’s assets

Assets in a decedent’s revocable trust created during his lifetime are included in his surviving spouse’s statutory share following an election against his will, the Iowa Supreme Court ruled on March 17 in an issue of first impression. Sieh v. Sieh, No. 06/04-1219.

On May 19, 1992, Edward A. Sieh, who was then unmarried, created a revocable living trust, transferring all of his personal effects, furniture and vehicles to the trust. On Dec. 23, 1992, he transferred a large amount of farmland to the trust. The beneficiaries of the trust were his children, Rodger Alan Sieh and Carene Ellen Larsen. On June 21, 1998, Edward Sieh married. When Sieh died on Sept. 25, 2003, his widow, Mary Jane Sieh, was appointed executrix of his estate and filed an election to take against his will. She sought a declaratory judgment that the assets in the revocable trust should be included in the statutory share she would receive as a result of her election against the will. The Iowa probate court denied her motion for summary judgment.

The Iowa Supreme Court reversed and remanded. Under Iowa Code § 633.238, a surviving spouse that elects against the will is entitled to her statutory share of the deceased spouse’s assets. The court determined that the deceased had complete control over the trust assets at all times prior to his death, and that he should not be allowed to retain the benefits of ownership without the burdens.

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