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CONSTITUTIONAL LAW Alaska can’t secede, so initiative is off the ballot Alaska’s ballot can’t include an initiative calling for secession from the union or for law changes making secession possible, the Alaska Supreme Court held on Nov. 17. Kohlhaas v. State, No. sp-6072. Scott Kohlhaas drafted a ballot initiative calling for Alaska’s secession from the United States, and submitted the initiative to the lieutenant governor. The attorney general advised that the initiative was improper, so the lieutenant governor declined to certify it for circulation. An Alaska trial court affirmed the lieutenant governor’s actions. The Alaska Supreme Court affirmed, saying that the initiative sought an unconstitutional end, and thus could not be certified. The court said that U.S. Supreme Court decisions addressing secession indicate that it is clearly unconstitutional. “When the forty-nine-star flag was first raised at Juneau, we Alaskans committed ourselves to that indestructible Union, for good or ill, in perpetuity,” the court said.   Full text of the decision Motorist has no right to lawyer before breath test A motorist arrested for driving under the influence of alcohol had no Sixth Amendment right to consult counsel before deciding whether to submit to a breath test, the Georgia Supreme Court held on Nov. 20. Rackoff v. Georgia, No. S06G0357. After Daniel Rackoff was arrested for driving under the influence, he asked the arresting officer to be allowed to call an attorney before deciding whether to submit to a breath test. The officer said he couldn’t consult counsel until after he was tested and processed. Rackoff submitted to the breath test, which indicated an unlawful blood alcohol level. Rackoff moved to exclude the breath test data based on the denial of his right to counsel. The trial court denied the motion and an intermediate appellate court affirmed. Affirming, the Georgia Supreme Court held that a driver was not entitled to consult an attorney before deciding whether to take a breath test because the administration of the breath test was not a critical stage in a criminal proceeding triggering a right to counsel under the Georgia Constitution or the Sixth Amendment to the U.S. Constitution. “[T]he right to counsel does not attach automatically upon arrest. In fact, the Sixth Amendment right to counsel does not come into play until the criminal process has progressed to a ‘critical stage’ after the initiation of adversary judicial proceedings,” the court said. CRIMINAL PRACTICE Disparities in sentencing OK under Protect Act Fast-track sentencing in some jurisdictions does not prejudice those in non-fast-track jurisdictions where the disparity is authorized by the Prosecutorial Remedies and Other Tools to End the Exploitation of Children Today Act of 2003 (Protect Act), the 10th U.S. Circuit Court of Appeals held on Nov. 20. USA v. Martinez-Trujillo, No. 05-4122. To expedite the handling of cases involving immigration offenses, certain judicial districts use “fast-track programs,” whereby defendants can get a downward departure in their sentencing offense level in exchange for a guilty plea and a waiver of rights to file certain motions and to appeal. Congress authorized fast-tracking in the Protect Act. Josafat Martinez-Trujillo pleaded guilty in a Utah federal court to illegal re-entry of a previously deported alien. He filed a memorandum arguing that, under 18 U.S.C. 3553(a)(6), the sentencing court must avoid unwarranted sentence disparities between similarly situated defendants by adjusting his sentence to correspond with sentences imposed in districts with fast-track programs. The district court rejected the argument, declaring that the sentence it pronounced was consistent with “the goals of providing just punishment for the offense.” The 10th Circuit affirmed, saying that Martinez-Trujillo had already exercised one of the rights that defendants waive when they go through the fast-track process-the right to appeal. Also, the decision that a defendant be “fast-tracked” is not made by the defendant but by a U.S. attorney. “Martinez-Trujillo does not contend that the United States Attorney in this case would now offer him the opportunity to go through fast-track procedures if this case were remanded to the district court,” the court said. EMPLOYMENT Probation officer wrong to take probationer’s gift A probation officer’s failure to discover and disclose to his employer that he was a devisee in a probationer’s will was misconduct, the Montana Supreme Court held on Nov. 21. Montana Dep’t of Corrections v. State, No. DA 06-0053. In September 2003, Richard Morrow, a probation officer with the Montana Department of Corrections, was given an envelope by Henry Denison, one of his probationers, marked “open in the event of my death.” Morrow did not open the envelope at that time. Denison was discharged from probation the following month but was killed shortly thereafter in an accident. Upon learning of Denison’s death, Morrow opened the envelope and found it contained a will naming Morrow as personal representative as well as a devisee. He agreed to serve as personal representative and began the probate process. In response, the corrections department terminated Morrow for misconduct. His application for unemployment benefits was denied because his discharge for misconduct made him ineligible. A hearing referee for the Department of Labor Hearings Bureau upheld the denial. The Board of Labor Appeals reversed. The Montana trial court reversed, reinstating the hearing referee’s denial of benefits. Affirming, the Montana Supreme Court said that Mont. Admin. R. 24.11.460(1) defines misconduct to include “carelessness or negligence of such degree or recurrence to show an intentional or substantial disregard of the employer’s interest.” Morrow’s failure to open the envelope was a negligent act that disregarded his employer’s interest in supervising a probationer, and his acceptance of the devise violated Montana law and the department’s code of ethics forbidding public employees from accepting gifts that are meant to influence. Constructive-discharge test decides if exit is free The constructive-discharge test is the appropriate legal standard when determining whether, under the employee-choice doctrine, an employee voluntarily or involuntarily left his employment, the New York Court of Appeals ruled on Nov. 21, answering a question certified to it by the 2d U.S. Circuit Court of Appeals. Morris v. Schroder Capital Management International, No. 137. As an investment banker for Schroder Capital Management, Paul Morris received deferred-compensation bonuses that were to vest three years after they were awarded, provided Morris did not resign or take employment with a competitor. Morris left Schroder to start his own hedge fund, then sued in a New York federal court when Schroder refused to pay him his bonuses. Morris claimed Schroder altered his job so much that he was forced to quit. The court dismissed the case, saying that under the “employee choice” doctrine, Morris had quit voluntarily. Thus the noncompete clause built into his deferred compensation plan kicked in and he was not entitled to the bonuses. On appeal, the 2d Circuit certified a question to the New York Court of Appeals: “Is the factual determination of ‘involuntary termination’ . . . under the New York common law employee choice doctrine governed by the ‘constructive discharge’ test from federal employment discrimination law?” The New York Court of Appeals, New York’s highest court, answered yes. In cases in which an employer intentionally makes an employee’s work environment “so intolerable that it compels him to leave,” an employer should not be allowed both to enforce an unreasonable noncompete clause and to deny the employee his benefits “under the guise of the employee choice doctrine.” Under Idaho labor law, stock options not wages Employee stock options are not wages for purposes of Idaho labor law, the Idaho Supreme Court held on Nov. 22, answering a certified question from the 9th U.S. Circuit Court of Appeals. Paolini v. Albertson’s Inc., No. 32495. Bruce Paolini was an employee of Albertson’s Inc. for several years, during which time he received options to buy several thousand shares of Albertson’s stock under the company’s stock incentive plan. Claiming that Albertson’s terminated his employment in retaliation for his attempts to exercise the stock options, Paolini sued the firm and the plan administrator in an Idaho federal court, alleging among other things that his firing was a retaliatory discharge for demanding wages in violation of Idaho wage laws. The court granted summary judgment to Albertson’s and the plan administrator. Paolini appealed to the 9th Circuit, which certified the question of whether employee stock options were wages under Idaho law. Answering in the negative, the Idaho Supreme Court held that employee stock options were not wages under Idaho law, meaning that Paolini could not prevail on his claim that he was terminated for demanding wages. The court said, “If all wages due must be paid in cash, with a check, or by deposit into the employee’s account, then the word wages can only refer to monetary compensation. Nonmonetary compensation such as stock options cannot be wages.” GOVERNMENT D.C. gambling initiative would breach federal law A proposed District of Columbia ballot initiative to allow video lottery terminals in the district would violate federal law governing the district and would exceed the powers granted to D.C.’s local government and its citizens by the U.S. Congress, the District of Columbia Court of Appeals held on Nov. 22. Brazill v. Board of Elections and Ethics, No. 06-CV-686. The District of Columbia Board of Elections and Ethics approved the placing of an initiative on the ballot to allow video lottery terminals (VLT) in the district. A group of community activists sued the board in a District of Columbia trial court, arguing among other things that the placing of the initiative on the ballot would violate the Johnson Act, 15 U.S.C. 1171-1178, a federal law prohibiting the transportation, manufacture, possession or use of gambling devices in the District of Columbia and certain other jurisdictions. The court dismissed the complaint. Reversing, the District of Columbia Court of Appeals, D.C.’s highest court, held that the ballot initiative went beyond the scope of the powers Congress granted to the District of Columbia under the Home Rule Act. Noting that the Johnson Act also prohibited gambling devices in U.S. possessions outside the District of Columbia and that the Home Rule Act gave the district the power to repeal only laws pertaining exclusively to the District of Columbia, the court said, “The VLT Gambling Initiative is not a proper subject of initiative because its adoption would be an attempt to repeal or amend an Act of Congress which does not apply exclusively to the District.” TAXATION IRS miscalculates income from debt-equity swap The Internal Revenue Service (IRS) failed to value appropriately the “income” that it alleges a manufacturer of plumbing products made in a debt-equity swap with Mexico, the 7th U.S. Circuit Court of Appeals held on Nov. 20. Kohler Co. v. USA, No. 05-4472. Kohler Co. needed pesos to build a plant in Mexico. Mexico, which had defaulted on its foreign debt, had adopted a debt-equity swap program, whereby a foreign company could buy defaulted Mexican dollar-denominated debt on the open market, then swap it with the Mexican government for pesos that could be spent only in Mexico and not exchanged for dollars. Paying only $11.1 million, Kohler bought $22.4 million face-amount of debt from Bankers Trust, which owned that much Mexican debt. The Mexican government would then swap the $11.1 million debt for $19.5 million worth of pesos based on the then-current market exchange rate. On its federal income tax return, Kohler treated the purchase of the debt and its sale to the Mexican government as a wash. The IRS disagreed, and added to Kohler’s taxable income the $8.4 million difference between the price Kohler paid and the $19.5 million. A Wisconsin federal court ruled in Kohler’s favor. The 7th Circuit affirmed. To permit the IRS to place an arbitrary value on difficult-to-value property obtained in a transaction and require the taxpayer to prove how much less it was worth would place an unreasonable burden on taxpayers. The government’s $19.5 million figure was undeniably excessive because it took no account of the restrictions that the seller of the pesos had placed on them. The IRS had thus failed to prove that its assessment was correct or to pick a number that was prima facie plausible-between $11.1 million and $19.5 million. Since the IRS was “clinging stubbornly to its untenable valuation” and suggested no alternative, the IRS “played all or nothing, lost all, so gets nothing.”

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