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CIVIL PRACTICE Published notice OK for failed bank’s depositors Notice by publication to depositors was sufficient in the case of a failed bank that did not have records of depositors, the 11th U.S. Circuit Court of Appeals held on Jan. 26. Acevedo v. First Union National Bank, No. 06-12477. In 1991, the Federal Deposit Insurance Corp. assumed receivership over Southeast Bank in Miami. The FDIC was required to pay Southeast Bank’s insured deposits in cash or make such funds available to depositors in another insured depository institution. The FDIC entered into an assistance agreement with First Union National Bank under which the bank would assume Southeast’s liability for demand deposits and cashier’s checks. In accordance with Section 1822(e) of the Federal Deposit Insurance Act, 12 U.S.C. 1822(e), the FDIC, as receiver, was responsible for notifying Southeast’s depositors that they must claim their deposit. Florida newspapers published notices advising Southeast’s depositors that they could claim their deposits at any time before the FDIC terminated the receivership. On Jan. 16, 2001, John Acevedo, the subsequent holder of five cashier’s checks totaling $450,000 issued by Southeast Bank, presented the checks to First Union for payment after First Union had already returned any unclaimed funds to the FDIC. When First Union refused, Acevedo sued in state court. First Union removed the case to a Georgia federal court, which granted summary judgment to First Union. The 11th Circuit reversed, concluding that nothing in the assistance agreement expressly terminated First Union’s liability to pay the cashier’s checks. It remanded the case for a determination as to whether the FDIC satisfied the notice provision in Section 1822(e). The lower court again granted summary judgment to First Union. Affirming, the 11th Circuit ruled that because the records of Southeast Bank did not contain the names or addresses of any of the payees or subsequent holders of the cashier’s checks, even the most diligent search efforts to locate depositors would prove futile. Consequently, the FDIC was neither able nor required to mail notice under Section 1822(e). Published notices also sufficed to meet the due process clause of the U.S. Constitution.   Full text of the decision CIVIL RIGHTS Adversarial proceeding isn’t part of due process The due process clause of the U.S. Constitution is not violated when a low-security-risk hermaphrodite inmate is segregated and denied an adversarial proceeding to challenge that placement, the 10th U.S. Circuit Court of Appeals held on Jan. 24. DiMarco v. Wyoming Dept. of Corrections, No. 04-8024. Miki Ann DiMarco lived her life as a woman although she was anatomically male. When she violated probation for check fraud, she was sentenced to prison, where officials learned she was a hermaphrodite. The prison placed DiMarco in administrative segregation apart from the rest of the prison population, where she remained for her 14-month incarceration. Prison officials said that though DiMarco was a low security risk, they segregated her mainly for her own safety and also for that of the female inmate population. They also cited the need to tailor programs for her condition. Her confinement met the basic necessities of life, but her segregation denied her certain amenities, including day-to-day contact with other inmates, and access to some educational programs. Following her release from prison, she filed four 42 U.S.C. 1983 claims alleging violation of the Eighth Amendment prohibition on cruel and unusual punishment, of the equal protection clause and of her substantial and procedural due process rights under the 14th Amendment. A Wyoming federal court denied DiMarco’s excessive punishment and equal protection claims. However, the court said that DiMarco’s segregation was such a significant departure from prison life norm that it gave rise to a state-created liberty interest that required due process protection. DiMarco did not receive adequate due process because she was denied an opportunity to challenge the placement and conditions of confinement, such as a hearing. The 10th Circuit reversed. Citing the U.S. Supreme Court’s 2005 opinion, Wilkinson v. Austin, 545 U.S. 209, the circuit court said that due process is satisfied as long as a state allowed (1) a sufficient initial level of process; (2) opportunity for the inmate to receive notice and respond to the decision; and (3) safety and security concerns to be weighed as part of the placement decision. Wyoming met these factors. First, its initial placement decision was appropriate given DiMarco’s unique background. She was aware of, and agreed to, her assignment to administrative segregation. Third, the prison provided periodic reviews of her status, including meetings that DiMarco could attend. Though she was not allowed to present witness testimony, this is not required to satisfy due process. CONSTITUTIONAL LAW N.J.’s DNA database act no constitutional breach New Jersey’s DNA Database and Databank Act, which requires all convicted criminal defendants to give the state a DNA sample, is constitutional, the New Jersey Supreme Court ruled on Jan. 24. State v. O’Hagen, No. A-70-05. In accordance with New Jersey’s DNA Database and Databank Act, John O’Hagen, upon being convicted and sentenced for third-degree possession of a controlled substance, was ordered to submit a DNA sample to the state database. O’Hagen appealed, arguing that submission of the sample amounted to an unreasonable search and seizure under the Fourth Amendment to the U.S. Constitution as well as a violation of the equal protection clause of the 14th Amendment. An intermediate appellate court upheld the trial court’s order and ruled that the DNA Database and Databank Act was constitutional. The court said that the intrusion into a defendant’s privacy was minimal and outweighed by the state’s interest in deterring and detecting recidivist offenders. The New Jersey Supreme Court affirmed. Noting that other states confronting a similar issue have split on what type of test to apply in the search-and-seizure analysis, the court adopted a “special needs” test, which creates an exception to the warrant requirement when normal law enforcement methods would be impractical. The special need here is that it would be impractical to compile a DNA database that first required individualized suspicion before collection of a DNA sample. Also, because the testing is not for the immediate investigation of a specific crime, the state DNA testing program extends beyond ordinary law enforcement and presents a special need that may justify the privacy intrusion. No double jeopardy if first jury was unsworn Jeopardy did not attach, and prosecutors were free to retry a criminal defendant after he was acquitted by a jury that had not been sworn, the Georgia Supreme Court held on Jan. 22. Spencer v. Georgia, No. S06A1179. A trial jury acquitted Thomas Spencer of malice murder, but convicted him of related charges. A trial court granted Spencer a new trial because the court had failed to order the jury take its sworn oath as required by Georgia law. Spencer appealed the trial court’s decision to allow prosecutors to retry him on the malice murder charge, arguing that, while any conviction by an unsworn jury was a nullity, an acquittal determined by the same unsworn body was valid and binding because of the constitutional and statutory prohibitions against double jeopardy. Affirming, the Georgia Supreme Court held that there was no error in the trial court’s decision to allow the retrial because, with the jury being unsworn, jeopardy had not attached. “Spencer’s jury was wholly without authority to pass upon any of the issues at trial, and therefore, to make any determinations whatsoever regarding guilt or innocence . . . . Spencer’s assertion of former jeopardy is also belied by the fact that, in either the context of a constitutional claim or that under the extended state statutory protections, jeopardy does not attach in a jury trial until the jury is both impaneled and sworn.” EMPLOYMENT Non-negligence finding is necessary for suit to end An employer may be liable for negligence under the respondeat superior theory when an employee has been dismissed from suit and there has been no finding of non-negligence on the employee’s part, the Virginia Supreme Court held on Jan. 12. Hughes v. Doe, No. 060684. Sidney Hughes filed a personal injury suit against “Jane Doe” and her employer, Pratt Medical Center, alleging that she was injured by Doe’s negligent performance of a procedure. Hughes claimed that Pratt, as Doe’s employer, was liable for Doe’s negligence under the respondeat superior theory (common law doctrine, according to which an employer is liable for an employee’s actions if they took place during the scope of employment). When Hughes learned that “Jane Doe” was really Melissa Lucas, she amended her pleadings to substitute Lucas. The trial court deemed this to be the addition of another party, ruled that the action against Lucas was untimely and entered an order dismissing Lucas with prejudice. Pratt then filed a motion for summary judgment, arguing that because Pratt’s liability was wholly derivative of Lucas’ negligence, the dismissal of Lucas with prejudice precluded further action against Pratt. The court granted Pratt’s motion. The Virginia Supreme Court reversed, holding that the derivative liability principle on which Pratt relied applies only when a verdict of non-negligence on the part of an employee is the basis of the employer’s exoneration. Moreover, under Virginia law a plaintiff pursuing relief against an employer on a theory of respondeat superior is not required to file an action against the employee alleging that the employee was negligent. The dismissal of the case against Lucas neither exonerated Pratt nor precluded Hughes from pursuing her claim against Pratt on a theory of respondeat superior. GOVERNMENT University lost immunity after PTO proceeding A state governmental entity waives its 11th Amendment immunity from suit if it voluntarily initiates an interference proceeding before the U.S. Patent and Trademark Office (PTO), the U.S. Court of Appeals for the Federal Circuit ruled on Jan. 23. Vas-Cath Inc. v. Curators of the University of Missouri, No. 06-1100. Vas-Cath Inc. and the University of Missouri filed patent applications for similar inventions at the same time. The PTO granted Vas-Cath’s application while the university application was still pending. The university asked the PTO to conduct an interference proceeding to determine which of the two parties came up with the invention first and thus merits priority. Six years later, the PTO awarded priority to the university and denied Vas-Cath the patent. Vas-Cath’s appeal was transferred to a Missouri federal court. The university moved to dismiss, claiming immunity from suit under the 11th Amendment to the U.S. Constitution. The court granted the motion. The Federal Circuit reversed. Interference proceedings bear “strong similarities” to civil litigation: they involve adverse parties, examination, cross-examination, discovery and findings by an impartial adjudicator. The state, through the university, did more than simply get a patent through routine routes; it asked the PTO to conduct litigation-type activity and received a favorable ruling for which the statute authorizes judicial review. “The principles of federalism are not designed for tactical advantage,” the court said. INTELLECTUAL PROPERTY First-sale theory defense applies to audio books The exception to the first-sale doctrine for sound recordings in copyright cases does not extend to audio books, the 6th U.S. Circuit Court of Appeals ruled on Jan. 26 in an issue of first impression for any circuit court. Brilliance Audio Inc. v. Haights Cross Communications Inc., No. 05-1209. Brilliance Audio Inc., which makes both retail and library editions of audio books, claimed Haights Cross Communications Inc. was taking retail editions of Brilliance products and repackaging them as Brilliance’s library editions, then renting, leasing or lending them without Brilliance’s permission. Brilliance also claimed that Haights used the Brilliance mark on the repackaged products, suggesting that it had a relationship with Brilliance and that its activities were authorized. Brilliance filed suit in a Michigan federal court, charging Haights with both copyright and trademark infringement. The court granted Haights’ motion to dismiss both claims. The 6th Circuit reversed on the dismissal of the trademark claim, but affirmed on the copyright one. According to the first-sale doctrine, resale by the first purchaser of the original trademarked item is generally neither trademark infringement nor unfair competition. But in this case, the exception to the first-sale doctrine applied. Haights had repackaged and relabeled Brilliance’s retail editions as library editions and, through inadequate notice of repackaging, created the false impression that Brilliance had authorized this. Brilliance had provided sufficient evidence to warrant the case going forward on the trademark infringement claim. As for the copyright claim, the court said that the exception to the first-sale doctrine applies only to musical recordings, not to audio recordings of literary works. The specific problem Congress sought to address in the Record Rental Amendment of 1984-rampant piracy of popular musical recordings-is not at issue in sound recordings of literary works. No constitutional breach in ‘opt-out’ copyright law There was no constitutional violation in the alleged change of U.S. copyright law from an “opt-in” system to an “opt-out” system, the 9th U.S. Circuit Court of Appeals held on Jan. 22. Kahle v Gonzales, No. 04-17434. Brewster Kahle, operator of the Internet Archive, an Internet library offering free access to digitized audio, books, films, Web sites and software, filed suit in a California federal court, challenging the constitutionality of the Copyright Renewal Act of 1992 and the Sonny Bono Copyright Term Extension Act of 1998. Kahle and his co-plaintiffs argued that the laws essentially changed U.S. copyright law from an “opt-in” system to an “opt-out” system by abolishing the requirement that copyrights be renewed after their initial term. Thus, they argued, the law changed the “traditional contours of copyright,” requiring First Amendment review under the U.S. Supreme Court’s 2003 ruling in Eldred v. Ashcroft. In addition, they argued that the laws violated the U.S. Constitution’s requirement that copyrights be for “limited times.” The court dismissed the suit, holding that Eldred had already upheld the constitutionality of the Copyright Term Extension Act. Affirming, the 9th Circuit rejected Kahle’s argument that Eldred had not answered the plaintiffs’ specific claims, or if it did so, it answered only in dicta. The court said, “Despite Plaintiffs’ attempt to frame the issue in terms of the change from an opt-in to an opt-out system rather than in terms of extension, they make essentially the same argument, in different form, that the Supreme Court rejected in Eldred.” TORTS Scaffolding work is not inherently dangerous A contractor working on makeshift scaffolding was not engaged in an inherently dangerous activity, the Montana Supreme Court held on Jan. 23. Cunnington v. Gaub, No. DA 06-0035. Under a construction contract, Mike Gaub agreed to build a home for Alrick Hale, but there was no provision governing who was responsible for safety on the project. Hale, a manager of a construction company, undertook the excavation, concrete, plumbing and electrical work. In attempting to finish siding the house, Gaub instructed his employee Raymond Cunnington to stand on a stepladder on top of a makeshift scaffold that Gaub erected. Cunnington did so, but the structure collapsed and he fell, severely injuring his right foot and ankle. Cunnington sued Gaub and Hale for negligence. The trial court granted Hale’s motion for summary judgment and denied Cunnington’s motion for summary judgment, concluding that Cunnington was not engaged in an inherently dangerous activity. The Montana Supreme Court affirmed. While a general contractor and owner of a construction project is not liable for the injuries of a subcontractor’s employees, there is an exception where the activity is “inherently or intrinsically dangerous.” In this case, the court said, Cunnington had admitted that no special precautions were needed for the scaffolding work and never contested that admission. Prescription-drug sharing imposes a duty of care A recipient of prescription drugs has a duty of care to others to whom he distributes those drugs and may be liable for negligence if they are injured, the Arizona Supreme Court held on Jan. 22. Gipson v. Kasey, No. CV-06-0100-PR. Larry Kasey was prescribed painkillers containing the narcotic oxycodone for his back pain. Kasey attended a party at which there was alcohol. Kasey gave eight pills to Sandy Watters. She gave them to her boyfriend, Nathan Followill. Followill died of the combined toxicity of alcohol and oxycodone. Followill’s mother sued for wrongful death. An Arizona trial court granted Kasey summary judgment, finding that he owed Followill no duty of care and that his conduct wasn’t the proximate cause of death. An intermediate appellate court reversed. The Arizona Supreme Court affirmed and remanded, holding that a person who is prescribed drugs owes a duty of care, making him potentially liable for negligence, when he improperly gives the drugs to others. The court said, “foreseeability is not a factor to be considered . . . when making determinations of duty.” It is also relevant, the court added, that Arizona’s statutes criminalize distribution of prescription drugs to others.

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