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ATTORNEY FEES Prevailing party’s fees limit is contractor’s bond In a breach of contract action, a prevailing party’s attorney fees are limited to the amount of the contractor’s bond, the Washington Supreme Court ruled on Dec. 28. Cosmopolitan Engineering Group Inc. v. Ondeo Degremont Inc., No. 77661-0. Cosmopolitan Engineering Group Inc. sued Ondeo Degremont Inc. for breach of contract and equitable claims after Cosmopolitan was not paid in full for engineering services it had provided under a subcontract. Cosmopolitan also sought recovery from National Fire Insurance Co. under Ondeo’s surety bond. The trial court jury found in favor of Cosmopolitan and awarded $100,420. The court denied Cosmopolitan’s motion for prevailing party attorney fees against Ondeo but entered judgment for $3,000 against the bond. An intermediate appellate court reversed, finding that a prevailing party is entitled to attorney fees against both the contractor and its bond. The Washington Supreme Court reversed. Wash. Rev. Code � 18.27.040(6) provides that “[t]he prevailing party in an action filed under this section against the contractor and contractor’s bond or deposit, for breach of contract by a party to a construction contract, is entitled to costs, interest, and reasonable attorneys’ fees. The surety upon the bond is not liable in an aggregate amount in excess of the amount named in the bond.” The state high court said that principles of statutory construction and legislative history confirm that the statute authorizes attorney fees only against a contractor’s bond, not against the contractor itself.   Full text of the decision CIVIL RIGHTS Vermont disabilities law applies to state prisons Prisoners in Vermont correctional institutions can use the state Fair Housing and Public Accommodations Act to challenge alleged discrimination, the Vermont Supreme Court ruled on Dec. 29. Department of Corrections v. Human Rights Commission, No. 2004-503. A state jail inmate filed a complaint with the Vermont Human Rights Commission, which has jurisdiction to investigate and enforce complaints of unlawful discrimination in public accommodations. The complaint charged that the jail had discriminated against him on the basis of a disability. The commission then served a subpoena on the Department of Corrections to investigate the complaint. The department tried to quash the subpoena on the ground that the jail was not a “place of public accommodation” under the Vermont statute, but a state trial court denied the request. The department appealed, arguing that prisons do not offer services or benefits to the “general public” and so are not “places of public accommodation.” The Vermont Supreme Court affirmed. A 1992 amendment to the statute made clear that the law was to work in conjunction with the Americans With Disabilities Act. Thus, consistent with the ADA, which allows prisoners to bring disability discrimination suits, governmental entities are places of public accommodation. “In light of the evolving scope of public accommodations law, the complicated history of our statute, and its arguably redundant provisions, the statutory language is not so clear that we can rely exclusively on the commonly understood meaning of two isolated words to determine the Legislature’s intent,” the court wrote. CONSTITUTIONAL LAW No cause of action over police raid on gay club A corporation that operated a gay adult club has no cause of action of its own and no standing to sue on behalf of its members for alleged privacy rights violations when authorities raided the club, the 9th U.S. Circuit Court of Appeals held on Dec. 22. Fleck and Assocs. v. City of Phoenix, No. 05-01118. Fleck and Associates Inc. operated Flex, a gay men’s social club in Phoenix where sexual acts took place in dressing rooms and other areas of the establishment. After the city of Phoenix banned “live sex act” businesses, police raided Flex and detained some of its employees overnight. Facing additional raids, Fleck sued the city in an Arizona federal court, arguing the raid violated the due process privacy rights of the corporation and its customers in violation of Fifth and 14th amendments. The district court dismissed Fleck’s suit with prejudice, holding that it did not have standing to sue on behalf of its customers. In addition, the court held that Fleck’s customers could not state a claim for relief under any conceivable set of facts. Vacating and remanding, the 9th Circuit agreed with the district court that the corporation had no standing to sue on behalf of the club’s members. However, the court held that because Fleck lacked standing to assert either its own privacy rights or the interests of its customers, the district court lacked subject- matter jurisdiction and erred by reaching the merits of the complaint. Distinguishing the corporation’s case with the U.S. Supreme Court’s decision in Lawrence v. Texas, the court said, “Corporations are not self-defining autonomous creatures worthy of respect and dignity in the relevant sense. Neither do they have private lives, let alone ‘private lives in matters pertaining to sex’ as Fleck would have it. Because the right to privacy described in Lawrence is purely personal and unavailable to a corporation, Fleck failed to allege an injury in fact sufficient to make out a case or controversy under Article III.” ‘Crimes against unborn’ law is constitutional Pennsylvania’s Crimes Against the Unborn Child Act does not violate equal protection principles by treating pregnant women differently from other male or female crime victims, the Pennsylvania Supreme Court ruled on Dec. 27. Commonwealth v. Bullock, No. J-43-2006. Matthew Bullock strangled his pregnant girlfriend to death on New Year’s Eve 2002 when she complained about his cocaine use. Besides being charged with his girlfriend’s murder, Bullock was charged with criminal homicide of her unborn child under the Pennsylvania statute, which makes it unlawful to intentionally, knowingly, recklessly or negligently cause the death of an unborn child, no matter the child’s gestational age. A jury found Bullock guilty-but-mentally-ill of third-degree murder of the girlfriend, and guilty-but-mentally-ill of voluntary manslaughter of an unborn child. An intermediate appellate court affirmed. On appeal, Bullock challenged the constitutionality of the Pennsylvania statute. The Pennsylvania Supreme Court affirmed. The statute is not void-for-vagueness for its lack of distinction between babies that are viable outside the womb at the time of death and those that are not; a person of ordinary intelligence would know what conduct the act prohibits. Enforcement of the act does not deprive Bullock of substantive due process: His right to remain free from confinement would still be intact if he complied with the act, and he does not have a right to “unilaterally kill the unborn child carried by another person.” Finally, Bullock’s equal protection rights are not violated because, under a rational-basis review, the legislature had a legitimate basis for treating mothers-to-be differently from other crime victims. “Simply put, the mother is not similarly situated to everyone else.” EMPLOYMENT All time worked counts toward FMLA eligibility The 12-month employment minimum for eligibility to take medical leave under the Family Medical Leave Act (FMLA) applies if the 12 months are nonconsecutive, the 1st U.S. Circuit Court of Appeals held on Dec. 18 in a matter of first impression in all federal circuit courts of appeals. Rucker v. Lee Holding Co., No. 06-1633. Kenneth Rucker worked for Lee Auto Malls for five years, then left for five years, then rejoined Lee. Seven months later, he took medical leave and was later terminated. Rucker filed suit, claiming the firing violated the federal FMLA. A Maine federal court granted Lee’s motion to dismiss, because the FMLA only protects employees who have worked for 12 months and the court refused to count Rucker’s initial five-year employment with Lee in that calculation. The 1st Circuit reversed, holding that, though the FMLA itself is ambiguous as to whether previous periods of employment count toward the 12-month requirement, regulations promulgated by the U.S. Department of Labor establish that previous periods of employment do count. Under the FMLA, an “eligible employee” is one who has been employed “for at least 12 months by the employer.” Eligible employees may take leave for a serious health condition that makes them unable to perform their job functions, without repercussions. INSURANCE LAW Employee-fraud policy covers fraud-based losses The term “direct loss” in a business owner’s liability policy includes consequential damages proximately caused by an employee’s dishonesty, the Montana Supreme Court held on Dec. 27. Frontline Processing Corp. v. American Economy Ins. Co., No. 05-579. Frontline Processing Corp., a credit card processing company, had a special business owner’s policy through American Economy Insurance Co. with an extra $250,000 in optional coverage for employee dishonesty. Frontline sought coverage under the policy for expenses associated with the alleged dishonest acts of Ron Reavis, its chief financial officer. Frontline alleged that Reavis forged the owner’s signature on checks, made personal use of the company credit card, and failed to file Frontline’s payroll taxes and corporate income taxes. Frontline incurred costs through its investigation of Reavis. After American Economy rejected coverage, Frontline sued for breach of contract and violation of Montana’s Unfair Trade Practices Act. A Montana federal court denied American Economy’s motion for partial summary judgment and certified the question of whether the term “direct loss” in the policy included consequential damages proximately caused by the alleged dishonesty. The Montana Supreme Court answered the question in the affirmative, holding that the term “direct loss,” when used in the context of employee dishonesty coverage afforded under a business owner’s liability policy, applies to consequential damages incurred by the insured that were proximately caused by the alleged dishonesty. LEGAL PROFESSION Recusal laws’ application may be disputed in court A prominent trial lawyer with a publicly antagonistic relationship with the Michigan Supreme Court may not challenge the court’s past recusal decisions, but may challenge the mechanism used to make future decisions, the 6th U.S. Circuit Court of Appeals ruled on Dec. 26. Fieger v. Ferry, No. 05-1295. Geoffrey Fieger, a prominent trial lawyer and a former Michigan gubernatorial candidate, engaged in a war of words with the state Supreme Court while two cases he had worked on were pending before that court. Fieger filed a motion to recuse four of the justices from hearing the appeals, then filed a petition in a Michigan federal court seeking an impartial tribunal to hear the recusal motions. The district court dismissed Fieger’s case. The 6th Circuit reversed, citing a misapplication of the Rooker-Feldman doctrine, which holds that federal courts have no subject-matter jurisdiction to review state court decisions unless Congress has enacted legislation specifically authorizing such relief. When the justices later refused to recuse themselves, Fieger filed another petition in federal court complaining of the justices’ public comments about him and their refusal to recuse themselves. The district court again dismissed under Rooker-Feldman, saying that it could not issue the relief requested without reviewing the justices’ implicit judgment in their decision not to recuse themselves. The district court also rejected Fieger’s constitutional challenge to Michigan’s recusal laws as they are applied. The 6th Circuit affirmed in part and reversed in part. The court affirmed the ruling on the Michigan Supreme Court’s recusal decisions, agreeing that Fieger’s complaint could be construed as a request for a declaration regarding past actions (the justices’ refusal to recuse themselves, so Rooker-Feldman was appropriately applied). The circuit court reversed on the as-applied challenge to the recusal laws. The court said that to the extent that Fieger challenges the constitutionality of Michigan’s recusal rules by alleging that “[t]he threat that the Plaintiff cannot, and will not, receive a fair hearing before an impartial and independent tribunal is real, immediate, and continuing,” Rooker-Feldman does not bar his action. Here the source of Fieger’s alleged injury is not the past state-court judgments; it is the purported unconstitutionality of Michigan’s recusal rule as applied in future cases. Public reprimand over jail release error suffices A public reprimand was an appropriate sanction for a judge who had failed to sign an order that resulted in a man remaining imprisoned for more than a year after his proper release date, the Indiana Supreme Court held on Dec. 19. In re Newman, No. 48S00-0607-JD-274. Thomas Newman, an Indiana trial court judge, ruled that defendant Lance Dawson had violated his probation and that he should return to prison to serve the remainder of a six-year term. Dawson appealed. An intermediate Indiana appellate court reversed, concluding that the judge had erred in revoking Dawson’s probation: Newman instructed his court reporter to arrange for Dawson’s release, but did not specifically instruct her to prepare an order. Dawson remained imprisoned for more than a year after the appellate opinion, being released only at the conclusion of the original term. The Indiana Commission on Judicial Qualifications brought a disciplinary action against Newman. Subsequently, Newman and the commission entered into a stipulation in which Newman admitted that he had violated the state’s Canons of Judicial Conduct, and the commission agreed to a public reprimand as a sanction. The Indiana Supreme Court reviewed the matter. Accepting the agreement and reprimanding Newman, the Indiana Supreme Court said, “A public reprimand is a blemish on a sitting judge’s reputation, adversely affecting the public’s evaluation of the judge’s performance in office. It is not the severest sanction we could impose, and we would have been inclined to impose a harsher penalty had there not been an agreement with the Commission. Because Respondent has (albeit belatedly) accepted responsibility for his actions, has apologized to Dawson and his family specifically and to the judicial community generally, and has agreed to accept, with the Commission’s consent, a public censure in lieu of a further proceedings, we accept the parties’ Conditional Agreement for Discipline.” Nigerian law degree is enough for bar exam A law degree from a Nigerian university constitutes a legal education equivalent to that provided by law schools approved by the American Bar Association (ABA), thus making an applicant with a Nigerian degree and an American LL.M. eligible to sit for the Massachusetts bar exam, the Massachusetts Supreme Judicial Court held on Dec. 22. Osakwe v. Board of Bar Examiners, No. SJC-09642. Gregory Osakwe held a bachelor of laws degree (LL.B.) from the University of Nigeria and an LL.M. from the University of Connecticut, and he was admitted to the bars of New York and Connecticut. When he applied to the bar in Massachusetts, the commonwealth’s Board of Bar Examiners rejected his application, informing him that he would have to complete a juris doctor degree from an ABA-approved law school before being allowed to sit for the bar exam. Osakwe filed a petition challenging the board’s decision, arguing that his Nigerian education qualified him to sit for the exam under a Massachusetts exception to the ABA juris doctor requirement for foreign-trained lawyers. Rejecting the board’s opinion and ordering that Osakwe be allowed to sit for the bar exam, the Massachusetts Supreme Judicial Court, Massachusetts’ highest court, distinguished Osakwe’s case from that of a Chinese applicant whose LL.M. program at Tulane University Law School did not contain the bar-exam courses Osakwe had taken in his program at Connecticut. Noting also that Nigeria was a common law jurisdiction, the court said, “Nigeria, like Massachusetts, has a legal system derived from the English common-law tradition. Students who train in Nigerian law schools are educated in that tradition. A review of Osakwe’s transcripts reveals that he has taken a wide array of courses, many of them offered as part of the core curriculum at ABA-approved law schools.” TORTS Immunity may apply to selection of parole terms The selection of conditions of parole is an activity that may be entitled to immunity, the Alaska Supreme Court held on Dec. 15. State of Alaska Dept of Corrections v. Cowles, No. S-11352. An Alaska man on parole murdered his former girlfriend. Her estate sued the Alaska Department of Corrections, alleging that the state had negligently failed to implement an appropriate parole plan and to supervise the parolee properly. The Alaska trial court denied the state’s motions for summary judgment based on immunity and lack of duty. The Alaska Supreme Court reversed in part and affirmed in part, holding that immunity may apply to the selection of parole conditions. The court said that the alleged acts of negligence are shielded by discretionary function immunity, and remanded for a ruling on causation. However, the court ruled that the state does owe a duty of care to the victims of parolees under its supervision. The court emphasized “that this duty should be narrowly construed.” TRUSTS AND ESTATES No jurisdiction in N.C. over nonresident trust A North Carolina court lacks personal jurisdiction over a nonresident trust that holds notes secured by deeds of trust on North Carolina real property, the North Carolina Supreme Court held on Dec. 20 on a matter of first impression. Skinner v. Preferred Credit, No. 525A05. Garry Lee Skinner and wife Judy Cooper Skinner obtained a mortgage from Preferred Credit Corp., secured by a deed of trust on their home. After the Skinners’ loan originated, the “1997-1 Trust” was created as a mechanism for holding notes, receiving income and issuing related certificates. The Skinners’ loan was one of 3,537 deposited into the 1997-1 Trust at its inception. Only about 3% of those loans relate to North Carolina indebtedness. Ultimately, the Skinners filed suit in North Carolina state court against several defendants, alleging that Preferred Credit had charged excessive loan-origination fees and usurious interest rates and violated the Unfair and Deceptive Trade Practices Act. A state trial court dismissed the complaint against the trustee of the 1997-1 Trust, i.e., DB Trust Co., among others. An intermediate appellate court affirmed. The North Carolina Supreme Court affirmed, and held that a North Carolina trial court may not exercise personal jurisdiction over a nonresident trust that holds notes secured by deeds of trust on North Carolina real property. The court said that two steps are involved in determining whether a nonresident defendant is subject to personal jurisdiction in North Carolina. First, jurisdiction over the action must be authorized by the state’s long-arm statute. Second, if the long-arm statute does permit consideration of the action, then exercise of jurisdiction must not violate the due process clause of the 14th Amendment to the U.S. Constitution. Here, the court said, even assuming that North Carolina’s long-arm statute authorizes jurisdiction over the 1997-1 Trust, exercise of that jurisdiction would violate due process requirements. To satisfy the due process prong of the personal-jurisdiction analysis, there must be sufficient minimum contacts between the nonresident defendant and the state so that the suit does not offend “traditional notions of fair play and substantial justice.” However, the 1997-1 trust lacks those minimum contacts.

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