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ADR Arbitrator sustained in denying attorney fees An arbitrator did not exceed his authority in denying attorney fees to a prevailing party, notwithstanding a contract provision providing for reasonable fees in the event of a breach, the Indiana Supreme Court ruled on Oct. 31. Natare Corp. v. D.S.I. Duraplastec Systems Inc., No. 49S05-0512-CV-637. Natare Corp. and D.S.I. Duraplastec Systems Inc. settled litigation and agreed that in the future neither party would disparage the other and would resolve any disputes through arbitration. They also agreed that, in the event of a breach, the nonbreaching party would be entitled to reasonable attorney fees incurred pursuing a claim. Later, Natare claimed that D.S.I. had disparaged it to a potential customer, and the parties entered arbitration. The neutral found that D.S.I. had breached the agreement and awarded $5,000 in liquidated damages, but no attorney fees. Natare sued, arguing that the arbitrator had exceeded his authority by not awarding fees. A trial court upheld the arbitration award, but an intermediate appellate court reversed, and the Indiana Supreme Court granted transfer. Affirming the trial court, the Indiana Supreme Court noted the limited bases under which an arbitrator can be held to have exceeded his or her authority and said that none of those reasons applied in this case. “Without indulging in speculation as to any particular reason or reasons, it is enough to say that there are a number of plausible explanations for why the arbitrator could conclude that the reasonable amount of attorney fees in this circumstance was zero,” the court said.   Full text of the decision AGE DISCRIMINATION Disability-retirement benefit facially invalid A state retirement system regulation governing disability benefits constitutes age discrimination on its face, a divided en banc 6th U.S. Circuit Court of Appeals ruled on Oct. 31. Equal Employment Opportunity Commission v. Jefferson County Sheriff’s Department, No. 03-6437. Under the Kentucky Retirement System, hazardous-duty employees may retire at age 55. If they become disabled before that age they are eligible to draw the same benefits they would have received had they worked until the normal retirement age. Workers who stay on the job past age 55 and then get hurt are entitled to no corresponding disability-retirement benefits, however. The Equal Employment Opportunity Commission challenged the policy on behalf of a sheriff’s deputy who worked until he became disabled at 61. A federal district judge in Kentucky disagreed, and a 6th Circuit panel affirmed that ruling in 2005. Both courts said that they were bound by the 6th Circuit precedent in Lyon v. Ohio Education Association and Professional Staff Union, which held that to establish a prima facie violation of the Age Discrimination in Employment Act, the agency must show that the disparate treatment was motivated by age bias. Rehearing the case en banc, the 6th Circuit reversed. The Kentucky plan discriminates on its face because it categorically excludes still-working employees over 55 from a particular benefit because of their age, the court said. Overruling that portion of Lyon, the court declared that discriminatory intent can be inferred. A dissent argued that the system permissibly assesses benefits according to both age and years served, and does not perpetuate stereotypes against older workers. ATTORNEY FEES Whether heads or tails, lawyer would have won A contingency fee agreement requiring immediate payment of an amount based on the estimated value of the lawsuit in the event the lawyer is discharged before the suit’s conclusion violates public policy, a divided Texas Supreme Court ruled on Nov. 3. Hoover Slovacek LLP v. Walton, No. 04-1004. John Walton hired a western Texas law firm to recover unpaid royalties from several oil and gas companies. He became unhappy with attorney Steve Parrott’s handling of the case with regard to one defendant, Bass Enterprises, and fired him. At that point, he had authorized Parrott to settle the claim for $6 million. His new attorney obtained a settlement of $900,000. Their contingency fee agreement required Walton to pay Parrott 28.66% of the “then present value of the Contingent Fee” should Walton fire him. The firm billed Walton for 28.66% of $6 million, or $1.7 million. A state trial court jury concluded the agreement was reasonable and that Walton had discharged the firm for no good cause, and awarded the firm $900,000. An intermediate appellate court reversed, finding that the fee agreement was unconscionable as a matter of law. The Texas Supreme Court affirmed, but on different grounds. Because this arrangement grants the lawyer a proprietary interest in the client’s claim without regard to the results, the agreement is against public policy, the majority ruled. In general, if an attorney with a contingent fee agreement is discharged without cause before the representation is concluded, the attorney may seek compensation under quantum meruit or in a suit to enforce the contract. The “heads lawyer wins, tails client loses” agreement in this case, however, did not distinguish between discharge with or without cause. Furthermore, it dispensed with quantum meruit by requiring payment of a percentage based on the case’s present value. Additionally, the requirement for immediate payment upon discharge “encourages the lawyer to escape the contingency as soon as practicable, and take on other cases, thereby avoiding the demands and consequences of trials and appeals,” the court said. BANKING Scam victims cannot recover against bank A bank is not liable to defrauded beneficiaries of “for the benefit of” accounts if they are not customers of the bank, the Virginia Supreme Court ruled on Nov. 3, in a case involving defrauded visa applicants. Collins v. First Union Nat’l Bank, No. 052647. Fifteen foreign nationals lost more than $1.8 million in a scheme called “Invest in America” that was concocted by two partners in The Interbank Group Inc. Interbank marketed the program to people interested in applying for EB-5 visas, available to foreign investors. In exchange for some up-front money, Interbank opened large accounts with the First Union National Bank “for the benefit of” the individual investors. The scheme was a way to shift money to leverage sham loans that resulted in the investors losing their money. The investors sued First Union for breach of contract and negligence, among other claims. A Virginia trial court ruled against the investors. The Virginia Supreme Court affirmed. The dispositive issues were whether the beneficiaries were “customers” of the bank as defined by the Uniform Commercial Code, or whether the bank had otherwise assumed duties to protect their interests. Here, the individual investors had no direct relationship with First Union with respect to the accounts, had no communication with the bank before Interbank opened the accounts, signed no documents relating to them and had no signatory powers over them. Therefore, they were not bank “customers.” CRIMINAL PROCEDURE Mistrial ruling came too late following verdict A trial court erred in granting a mistrial two months after the case reached a jury verdict because, once the panel had spoken, a mistrial was no longer an available remedy to a prosecutor’s improper closing argument, the Georgia Supreme Court held on Oct. 30. State v. Sumlin, No. S06A1352. During her closing argument in Leroy Sumlin’s felony murder trial, the prosecutor washed her hands with a bleach solution-apparently a technique to remove gunpowder residue-to show that it did not burn her hands. Sumlin moved for a mistrial on the ground that the demonstration introduced new evidence and denied him the opportunity for cross-examination. The judge denied the motion, but gave a curative jury instruction. After the jury convicted Sumlin, he renewed his motion for a mistrial, which the judge granted more than two months after the trial. The state filed a motion to vacate the order, which the trial court denied. The state appealed. Reversing, the Georgia Supreme Court said that a mistrial was not an available remedy once the jury returned its verdict. “A motion for mistrial, by its very nature, seeks to end the trial proceedings before a verdict is rendered in order to ensure that the defendant may receive a fair trial,” the court said. “It is not to be confused with a motion for new trial, which is the appropriate vehicle through which to pursue a retrial after the verdict has been rendered.” FAMILY LAW Disabled Navy retiree still owes his ex-wife Trading retirement for disability benefits does not entitle a retired serviceman to evade a divorce settlement granting his ex-wife a share of his Navy pension, the Rhode Island Supreme Court ruled on Oct. 31, in a case that turned on contract principles. Resare v. Resare, No. 2004-308. Ronald and Susan Resare divorced and signed a property settlement agreement (PSA) granting her 35% of his pension. Eventually, he qualified for disability benefits, with concomitant reductions in his regular pension, and consequently his payments to his ex-wife. A state family law judge ruled that he had impermissibly modified the PSA by unilaterally applying for disability benefits. The judge ordered him to pay her a sum equal to the amount she would otherwise be due. The Rhode Island Supreme Court affirmed. The justices acknowledged U.S. Supreme Court precedent holding that retirement pay waived in favor of disability benefits is not community property to be divided in a divorce. Here, however, the divorce preceded the disability. “In our opinion, the Family Court did not in any way divide Ronald’s disability benefit . . . but simply held Ronald to the terms of the original PSA and ordered payment of an amount calculated in accordance with the agreed upon PSA. The Court refused to allow Ronald unilaterally to amend the PSA,” the justices said. “The Family Court quite properly treated Susan’s claim as one sounding in breach of contract, entitling her to damages,” they concluded. HEALTH LAW Limit on Medicare oversight is rejected Medicare administrators may demand evidence beyond a doctor’s certification that a patient qualifies for a program that provides wheelchairs and other “durable medical equipment,” the 11th U.S. Circuit Court of Appeals ruled on Nov. 3. Gulfcoast Medical Supply v. Dep’t. of Health and Human Services, No. 05-16935. Part B of the Medicare Act covers health care costs including durable equipment when “reasonable and necessary.” Doctors may vouch for their patients by filling out forms called “certificates of medical necessity.” During an audit of Gulfcoast Medical Supply Inc., a Medicare claims administrator reviewed patient records and interviewed beneficiaries. The audit concluded that Gulfcoast had been paid for claims that did not qualify for coverage. A Medicare hearing officer, an administrative law judge and a federal district court in Florida all affirmed. Also affirming, the 11th Circuit rejected Gulfcoast’s argument that the medical certificates are the only evidence of eligibility open to review. The relevant statute doesn’t say that, the court said; in fact, the forms are voluntary and meant as a convenience to doctors. “Moreover, were we to adopt Gulfcoast’s position, the Secretary would effectively lack the discretion to deny any claim so long as a supplier could find a physician-even a dishonest or incompetent one-to sign a [certificate].” IMMIGRATION LAW No need to restate the obvious in asylum case When ruling on the claims of an asylum seeker from a country with well-documented improvements in its political climate, an immigration judge need not recite the specific ways in which the change has manifested itself, the 2d U.S. Circuit Court of Appeals ruled on Oct. 31. Hoxhallari v. Gonzales, No. 04-2922-ag10. Ilir Hoxhallari, an Albanian national, entered the United States illegally in 2001. During removal proceedings in 2002, he sought asylum on the ground that he had been persecuted in Albania for his membership in the Albanian Democratic Party. In denying the withholding-of-removal claim, the immigration judge, without citing specifics, declared that Hoxhallari’s claims of persecution since the 1991 fall of the communist government were not credible. The judge denied the asylum claim, again without citing specific instances of how conditions in Albania had changed. The Board of Immigration Appeals affirmed. The 2d Circuit affirmed, citing a State Department report “that Albania is headed in a democratic direction.” In cases “where (as here) country conditions are sufficiently evident and concern a country that is the subject of an appreciable proportion of asylum claims, an immigration judge need not recite robotic findings when relying under changed country conditions under the [Immigration and Naturalization Act],” the court said. JUDGES Late motion to recuse judge deemed timely A defense motion to recuse a judge was timely even though it came after he had ruled for the plaintiff, because it was only then that the defense learned the true nature of the judge’s close relationship with a key witness, the Louisiana Supreme Court ruled on Nov. 3. Radcliffe 10 LLC v. Zip Tube Systems of Louisiana, No. 06-CC-0128. In a lawsuit over a business deal, Tammany Parish District Judge William Knight voluntarily disclosed during a pretrial status conference that the plaintiff’s expert witness on damages, Michael Burris, had been campaign treasurer during his 2002 race for judge. Finding no reason for recusal, the parties proceeded to trial. Knight, noting that he’d given great weight to Burris’ valuation of the assets at issue, ruled in favor of the plaintiff and awarded damages of more than $3.4 million. Before the judgment was signed, the defendants moved to recuse Knight after discovering that he and Burris had a 20-year relationship as business partners, and that as a practicing attorney Knight had represented Burris in various transactions and lawsuits. Another judge, assigned to consider the motion, ruled that the defense should have checked on the relationship earlier. An intermediate state court of appeal denied the defense writ for supervisory review. Reversing, the Louisiana Supreme Court noted that the state Code of Civil Procedure requires that recusal motions be filed before trial, “unless the party discovers the facts constituting the ground for recusation thereafter . . . but prior to verdict or judgment.” The court added that “the Defendants’ opportunity to file the motion prior to the trial on the merits may have been obstructed by Judge Knight’s partial disclosure of his relationship with Mr. Burris.” The court ordered a hearing on the merits of the plaintiff’s motion. OPEN RECORDS Inmate’s right to files may come with limits Prison officials are obliged by the Freedom of Information Act (FOIA) to provide an inmate with electronic copies of prison records, but not necessarily to unfettered access to the material, the U.S. Circuit Court of Appeals for the District of Columbia ruled on Nov. 3. Sample v. Bureau of Prisons, No. 05-5038. Brandon Sample, a federal inmate, requested records from the Federal Bureau of Prisons (BOP) under FOIA, and specified that the documents should be produced in electronic format. The bureau produced hard copies instead, citing a security policy forbidding inmate access to electronic media. Sample sued in federal district court, arguing that he was entitled to electronic copies pursuant to the 1996 amendments to FOIA. The federal district court granted summary judgment to the bureau, and Sample appealed. Reversing, the D.C. Circuit ruled that the FOIA unambiguously entitles Sample to documents in the format requested. However, the court also noted precedents for allowing prison authorities to control inmates’ opportunities to view FOIA material or keep it in their cells. “Once BOP, in its role as FOIA respondent, has provided the records in electronic format, its FOIA obligation is complete,” the court said. “If BOP-in its role as Sample’s custodian-then decides to limit or prohibit access to the material, any question raised by that decision is not before us.”

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