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COMMERCIAL LAW Honest buyer prevails over defrauded owner A state law allowing people to recover their stolen property from subsequent purchasers does not apply when the rightful owner voluntarily relinquishes possession, even when he is the victim of fraud, the Colorado Supreme Court ruled on Oct. 10. West v. Roberts, No. 05SC358. Kenneth James West sold his 1977 Corvette to Robert Wilson in exchange for a cashier’s check that turned out to be forged. He tracked the car down more than two years later, in the possession of Tammy Roberts. She’d bought it from her brother, who had purchased it through a newspaper ad. West sued Roberts to recover possession under Colorado’s stolen property statute. However, the state trial judge ruled that as a good-faith purchaser she was entitled to keep the car under the state Uniform Commercial Code (UCC). The Colorado Supreme Court took the appeal to reconcile the statutes and affirmed the lower court. The justices argued that the UCC, passed in 1965, is more recent and specific than the 1861 stolen property statute, and therefore deserves to prevail. Additionally, the court noted that the owner is “better positioned to take precautions to prevent loss than a [good-faith purchaser].” A dissent argued that the majority was in effect making a policy judgment that rightly was the legislature’s province.   Full text of the decision CONSTITUTIONAL LAW ‘Adult’ store may rebut rationale for regulation A store selling “adult” products for home consumption is entitled to try to prove that it would not cause the public nuisance and crime often associated with businesses that allow customers to view sexually explicit material on site, the 10th U.S. Circuit Court of Appeals ruled on Oct. 10. Doctor John’s Inc. v. City of Roy, No. 04-4270. Doctor John’s challenged a Roy, Utah, ordinance requiring “sexually oriented businesses” to secure special licenses. A Utah federal district judge rejected numerous constitutional arguments raised by the store, including that the ordinance was vague. The 10th Circuit affirmed most of the findings, noting that the ordinance is generally permissive, allowing sexually oriented businesses to continue to operate pending processing of their operating licenses. But the court found insufficient evidence in the record that the lower court had considered whether the secondary nuisances attributed to sex shops apply when the business doesn’t allow explicit material to be viewed on premises. The court said it was clarifying its own precedent on the point in light of the U.S. Supreme Court ruling in City of Los Angeles v. Alameda Books Inc., which allows parties to challenge the justifications for such regulations. Congressional diversion of patent fees sustained Congress is within its authority to spend patent application fees for programs other than the direct funding of the U.S. Patent and Trademark Office (PTO), the U.S. Court of Appeals for the Federal Circuit ruled on Oct. 11. Figueroa v. U.S., No. 05-5144. The PTO finances its operations by charging fees for the filing and maintenance of patent claims, with the money going into the Patent and Trademark Appropriation Account. Since 1992, Congress has diverted at least $422.5 million from the account for nonpatent-related purposes, including deficit reduction. An inventor who had paid a patent fee in 2001 filed a complaint in the Court of Federal Claims, arguing that such diversions violated congressional authority under the U.S. Constitution’s patent clause and amounted to an unapportioned, direct tax on intellectual property in violation of the takings clause of the Fifth Amendment. The lower court ruled that the fees were a condition of getting a patent, not a tax on existing property. It found merit in the contention that the funds could not be diverted outside the PTO, but said that the inventor had failed to demonstrate there was no rational relationship between Congress’ use of the revenue and promoting the development of intellectual property. The Federal Circuit affirmed, ruling that the patent clause allows Congress to advance other public policy goals related to the clause’s objectives. Furthermore, a rational relationship exists between the fees established and the operation of the patent system; for example, increasing fees could discourage the filing of frivolous applications. A concurring opinion by Judge Pauline Newman found the plaintiff’s petition “not without merit,” noting that “it is not pretended” that recipients of the diverted funds, including homeland security programs, have “a rational relationship to the constitutional charge to promote the progress of the useful arts.” However, Newman said, the inventor “has not met the extremely heavy burden of establishing that congressional actions violate the Constitution.” No speedy appeal on speedy-trial claim Despite trial delays allegedly caused by prosecutors, a criminal defendant was not entitled to interlocutory review of his claim that he was deprived of his constitutional right to a speedy trial, the Massachusetts Supreme Judicial Court held on Oct. 11. Marrero v. Massachusetts, No. SJC-09812. After being indicted for first-degree murder, Jose Marrero claimed that several continuances by prosecutors violated his right to a speedy trial, and he moved to dismiss the charges against him. A state trial court denied the motion, and Marrero sought interlocutory review. He argued that dismissal of the charges was the only appropriate remedy because the prosecutors’ delay enabled them to gather additional evidence that they would not have obtained otherwise. In addition, he argued that waiting for a post-conviction appeal would require him to endure a trial and potentially incarceration. Affirming, Massachusetts’ highest court said it found ample precedent that there exists no right to an interlocutory appeal of a speedy-trial claim. “[T]here is no reason why the petitioner here cannot adequately pursue his speedy trial claims on appeal, in the event he is convicted,” the court said. CONSUMER PROTECTION Fen-phen doctor didn’t break anti-kickback law To apply an anti-kickback statute to a doctor who sold prescription diet drugs to his patients at a profit, absent any involvement by a third party, would lead to “absurd” results, the Washington Supreme Court ruled on Oct. 12 in a case that attracted amicus briefs from a wide range of medical groups. Wright v. Jeckle, No. 78635-6. In side litigation to the national “fen-phen” class action, patients of Dr. Milan Jeckle of Spokane, Wash., accused him of violating Washington’s Consumer Protection Act by selling them the drug. They alleged deceptive trade acts and breach of fiduciary duty under a provision barring anyone from paying, or a medical provider from deriving, “profit” from referrals or patient care. A trial court dismissed the case but was reversed by an intermediate state court of appeal. The trial court subsequently ruled that the doctor had violated the law and certified the case for appellate review. Reversing, the Washington Supreme Court said that the 1949 law in question was a reply to a medical kickback scandal but “does not prevent a patient from paying a health care provider for services rendered or prescriptions received. Nor does it prevent a health care provider from making a profit on furnishing goods or care to patients.” In fact, by paying the doctor for the pharmaceutical, the patients themselves might be criminally liable under their theory. “If the legislature contemplated such a result, we believe it would have spoken up by now,” the court said. DEFAMATION Litigator’s criticism of doctor within bounds A litigator didn’t defame the defendant in a medical malpractice case via post-verdict comments about the doctor’s lack of medical qualification to perform the liposuction surgery in question, the Oregon Supreme Court ruled on Oct. 12. Brown v. Gatti, No. S51981. Daniel Gatti secured a jury verdict of more than $180,000 against Dr. Timothy Brown on behalf of a client whose liposuction procedure he had botched. Later, a newspaper quoted Gatti criticizing doctors who perform in specialties in which they are not board certified, adding that in doing so Brown had betrayed his patient. Additionally, a television station broadcast his criticism of the local Yellow Pages for allowing doctors to advertise procedures they were not qualified to perform. Brown, who was board certified in dermatology, clinical pathology and anatomic pathology but not plastic surgery, sued Gatti and his law firm for defamation. The state trial court granted summary judgment for Gatti. An intermediate court of appeals reversed, agreeing with Brown that Gatti’s quotes might constitute defamation. The Oregon Supreme Court reversed the appeals court. When taken in context, Gatti’s statement that doctors should inform patients about their board certification clearly referred to certification in plastic surgery, not other areas of medicine, the court said. “On this record, it appears the implied fact-that Brown was not a board certified plastic surgeon-is true. And, because it is true, Gatti’s statement loses its defamatory content,” the court said. INTELLECTUAL PROPERTY Trademark claim barred under laches doctrine A creamery’s claims of “progressive encroachment” on its federally registered trademark were barred by the doctrine of laches due to the owner’s failure to enforce its rights, the 9th U.S. Circuit Court of Appeals held on Oct. 11. Tillamook Country Smoker Inc. v. Tillamook County Creamery Ass’n., No. 04-35843. Tillamook County Creamery Association, an Oregon cooperative, began using the “Tillamook” mark for its cheese and butter products as early as 1918, and registered the mark with the U.S. Patent and Trademark Office (PTO) in 1921 and 1950. In 1975, a member of the association requested permission to use the name, “Tillamook Country Smoker,” in the marketing of meat products. The creamery said it did not object as long as the other company did not market cheese products. The meat packager applied for a trademark for its name in 1985, but the PTO refused on the ground of a likelihood of confusion with the creamery’s mark. The meat packaging company ended up using the mark with no objection from the creamery for some 25 years; the creamery even sold some of the meat products in its retail store. But when the meat packager began selling its products in grocery stores, the creamery sued for infringement. A federal district court in Oregon held the claim was barred by the doctrine of laches, and the creamery appealed. Affirming, the 9th Circuit rejected the creamery’s argument that the laches period did not begin until the meat packager began grocery store sales under a theory of “progressive encroachment” on the mark. “Even though Creamery and Smoker may not have operated in the identical commercial channels at the time, the two companies were using similar marks on complementary products in the same geographical area, creating the prospect of confusion,” the 9th Circuit said. “Creamery had actual notice of Smoker’s allegedly infringing mark soon after Smoker’s inception, thereby starting the laches period.” PROBATE Challenge to sibling’s parentage is not allowed In an issue of first impression, the Minnesota Supreme Court held on Oct. 12 that the statute of limitations in the state Parentage Act applied to a party in a probate proceeding who was attempting to rebut a presumption of paternity for intestacy purposes. In re Estate of Jotham, No. A05-438. While they were married, Leonard and Margaret Jotham became the parents of Diann Nelson in 1942. The Jothams split in 1947 and Margaret Jotham gave birth to Sandra Barnett 279 days after the entry of their judgment of divorce. While Barnett’s birth certificate identified Leonard Jotham as her father, there was never a judicial determination of her paternity. Leonard Jotham eventually remarried and died intestate in 2004. Nelson objected to a petition filed by his widow in probate that named Nelson and Barnett as Leonard Jotham’s children; she asserted that Jotham was not Barnett’s father. A state trial court cited a presumption in the law that a man is the father of a child born within 280 days of his divorce in ruling that Barnett was entitled to inherit from his estate. An intermediate court of appeals reversed. The Minnesota Supreme Court reversed the lower court, distinguishing between parties seeking to establish paternity and those challenging the presumed paternity of others. The state legislature intentionally granted more leeway to confirm than to challenge a presumed parent-child relationship, by establishing a three-year deadline following the child’s birth for filing such challenges. “We do not believe that the legislature, which has unmistakably expressed its desire to foster and protect a child’s legitimacy, meant . . . to permit an individual to challenge a sibling’s parentage more than 50 years after her birth,” the court said. A dissent argued that the majority improperly imported Parentage Act interpretation into a probate matter. SPECIAL EDUCATION No hard deadline for individualized plans Federal law requires public schools to provide disabled students with a free appropriate education “as soon as possible” after development of their Individualized Education Programs (IEPs), but not within a specific time thereafter, the 2d U.S. Circuit Court of Appeals ruled on Oct. 12. D.D. v. New York City Board of Education, No. 04-2542. Three kindergarten-age disabled children received IEPs from the New York City Department of Education, as required under the Individuals with Disabilities Education Act. They then had to wait for months-in one case for as long as six months-for their plans to be fully implemented. The children’s parents brought a class action against the city and state, arguing that the delays violated their children’s rights to an education. A federal district judge in New York declined to grant a preliminary injunction, citing the unlikelihood that the parents could show the city was not in “substantial compliance” with the law. The judge noted that the city had provided services in a timely fashion to at least 97% of children with IEPs. The 2d Circuit vacated the lower court’s ruling on the ground that students have an absolute right to the services the law promises. “Substantial compliance can therefore serve as no defense here,” the court said. However, the law imposes no hard deadline, requiring implementation of individual plans “as soon as possible.” The court remanded the case for an inquiry into the length of any delay, the reasons for it and any steps taken to overcome any obstacles. TRUSTS AND ESTATES No-contest provision upheld by D.C. court Rejecting a trust beneficiary’s argument that the District of Columbia should follow a number of state supreme courts in disfavoring in terrorem clauses, the District of Columbia Court of Appeals ruled on Oct. 12 that a trust’s “no contest” clause was valid, and that the beneficiary had lost all interest he had in the trust because he contested its provisions. Ackerman v. Genevieve Ackerman Family Trust, No. 05-CV-652. Genevieve Ackerman placed most of her assets, including her share of a Delaware condominium, into a revocable trust containing a clause providing that any beneficiary contesting any provision of the trust would lose any interest in the trust. Although it was undisputed that Genevieve Ackerman intended to leave her interest in the condominium to her son, Stephen Ackerman, the trust provided that her interest in it would be divided between him and his sister. Stephen Ackerman filed suit, seeking reformation of the trust, and his sister counterclaimed, arguing that Ackerman should lose his interest in the trust assets because he contested the trust provisions. A trial court held that in terrorem clauses were “perfectly valid and enforceable” in the District of Columbia, and held for the sister, stripping Stephen Ackerman of his interest. Ackerman appealed. Affirming, the D.C. Court of Appeals, the district’s highest tribunal, rejected Stephen Ackerman’s argument that, because the court had not addressed the issue of in terrorem clauses for many years, it should follow other jurisdictions in disfavoring them. “The rule we are bound to apply might have unfair consequences in some situations, but, on the whole, we do not believe that this is one of them . . . .The ‘no contest’ provision in the trust is valid and enforceable, and appellant’s lawsuit to ‘reform’ the trust clearly violated it,” the court said.

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