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The U.S. Supreme Court on May 15 rendered the following decisions: The justices ruled unanimously that it is within the discretion of a federal court whether to issue a permanent injunction after a finding that there has been patent infringement. eBay Inc. v. MercExchange LLC, No. 05-130. In 2003, a Virginia federal jury found that eBay Inc. and Half.com Inc. had willfully infringed MercExchange patents, including software that facilitates online collectibles trading. However, the court did not grant a permanent injunction, holding that a company that licenses, but does not practice, its patents, would not suffer irreparable harm without an injunction. The U.S. Court of Appeals for the Federal Circuit reversed, holding that absent exceptional circumstances, a district court must issue a permanent injunction after finding that a patent has been infringed. The justices reversed. Writing on behalf of the court, Justice Clarence Thomas said that the traditional four-factor test must be used to decide whether a prevailing plaintiff is entitled to permanent injunctive relief. It must demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law are inadequate to compensate for that injury; (3) that considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction. “The decision to grant or deny such relief rests within the equitable discretion of the district courts, and . . . such discretion must be exercised consistent with traditional principles of equity, in patent disputes no less than in other cases governed by such standards,” Thomas wrote. CIVIL PRACTICE The justices ruled unanimously that Ohio taxpayers have no standing to challenge a tax-incentive program that encouraged DaimlerChrysler Corp. to build a new facility in Toledo. DaimlerChrysler Corp. v. Cuno, No. 04-1704, and Wilkins v. Cuno, No. 04-1724. To lure a $1.2 billion Jeep assembly plant to the area, the city of Toledo gave the company a 10-year exemption from property taxes, as well as investment tax credits against the state’s corporate franchise tax. Toledo taxpayers sued, alleging that the tax breaks violated the U.S. Constitution’s commerce clause, and that they had suffered injury by being subjected to additional tax burdens to make up for the shortfall in tax revenues. An Ohio federal court ruled that the tax benefit didn’t violate the commerce clause. The 6th Circuit reversed. The justices reversed. Without reaching the commerce clause issue, the justices said that the plaintiffs lacked standing to challenge the state franchise tax credit. Writing on behalf of the court, Chief Justice John G. Roberts Jr. said that because state budgets frequently have an array of tax and spending provisions that may be challenged on various grounds, “affording state taxpayers standing to press such challenges simply because their tax burden gives them an interest in the state treasury would interpose the federal courts as virtually continuing monitors of the wisdom and soundness of state fiscal administration, contrary to the more modest role Article III envisions for federal courts.” In addition, the Ohio taxpayers’ alleged injury was largely “conjectural or hypothetical.” Establishing injury requires speculation that elected officials will increase a taxpayer-plaintiff’s tax bill to make up a deficit; establishing redressability requires speculation that abolishing the challenged credit will redound to the benefit of the taxpayer because legislators will pass along the supposed increased revenue in the form of tax reductions. Neither speculation suffices to support standing. CONTRACTS The justices ruled unanimously that an employee benefit plan may sue to recover benefits that it had paid a plan participant from money he had received from another source for the same injury. Sereboff v. MidAtlantic Medical Services, No. 05-260. Marlene and Joel Sereboff were beneficiaries of a health insurance plan administered by Mid Atlantic Medical Services Inc. The plan had an “Acts of Third Parties” provision, which requires a beneficiary who is injured as a result of an act of a third party to reimburse Mid Atlantic for benefits that it had paid if the beneficiary has recovered for those injuries from the third party. The Sereboffs sustained injuries in an auto accident, and Mid Atlantic paid their medical expenses. The Sereboffs filed a state tort action against several third parties, seeking compensatory damages. Mid Atlantic sent the Sereboffs a letter asserting a lien on the anticipated proceeds from the suit as reimbursement for the money that it had paid in medical expenses. The tort suit eventually settled for $750,000. Having paid $74,869.37 for the Sereboffs’ medical expenses, Mid Atlantic filed suit in a Maryland federal court under Section 502(a)(3) of the Employee Retirement Income Security Act (ERISA), seeking to collect the money it had paid in medical expenses. The Sereboffs agreed to set aside from their tort recovery an amount equal to the sum Mid Atlantic claimed, and keep it in an investment account pending the outcome of the suit. The court found in Mid Atlantic’s favor, and the 4th Circuit affirmed. The justices affirmed, holding that Mid Atlantic had properly sought “equitable relief” under Section 502(a)(3) of ERISA, because its action was like any action to enforce an equitable lien established by agreement. Writing on behalf of the court, Roberts said that the “Acts of Third Parties” provision specifically identified a particular fund, distinct from the Sereboffs’ general assets, to which Mid Atlantic was entitled. Though Mid Atlantic alleged a breach of contract, it sought its recovery through an equitable lien on a specifically identified fund, not from the Sereboffs’ assets generally, as would be the case with a contract action at law. ENVIRONMENTAL LAW The justices ruled unanimously that state certification is required under the Clean Water Act when water is drawn from a river for use in a dam that serves a power-generating plant and is then returned, without adding pollutants. S.D. Warren Co. v. Maine, No. 04-1527. In 1999, S.D. Warren Co., a Maine river operator of several hydropower dams to generate electricity for its paper mill, asked the Federal Energy Regulatory Commission (FERC) to renew federal licenses for five of its dams. Each dam impounds water, which is then run through turbines and returned to the riverbed. Warren applied to the Maine Department of Environmental Protection for water-quality certifications, pursuant to Section 401 of the Clean Water Act, which requires state approval of any activity that “may result in any discharge into the [nation's] navigable waters.” Warren filed its application under protest, claiming that its dams do not result in any “discharge” into the river that would trigger application of Section 401. FERC licensed Warren’s dams, subject to their compliance with Maine’s certifications, which require Warren to maintain a minimum stream flow and to allow passage for certain fish and eels. Warren filed a suit in a Maine state court claiming that it needed no Section 401 state certification because its dams do not result in discharges. The court ruled against Warren, and Maine’s Supreme Judicial Court, the state high court, affirmed. The justices affirmed. Writing on behalf of the court, Justice David H. Souter said that the dispute turns on the meaning of the word “discharge.” Warren claimed that “discharge” should be read in the narrow sense of the Clean Water Act as “a discharge of a pollutant.” Since the release of water from the dams adds nothing to the river that was not there above the dams, water flowing out of the turbines cannot be called a discharge into the river. But Souter said that the word “discharge” means a “flowing or issuing out.” “Because the alteration of water quality as thus defined is a risk inherent in limiting river flow and releasing water through turbines, changes in the river’s flow, movement, and circulation fall within a State’s legitimate legislative business. State certifications under � 401 are essential . . . to preserve state authority to address the broad range of pollution. Reading � 401 to give ‘discharge’ its common and ordinary meaning preserves the state authority apparently intended,” he wrote.

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