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The U.S. Supreme Court on June 11 and June 14 issued the following opinions: • The justices ruled unanimously that a lawsuit against Philip Morris could not be removed from state to federal court solely on the ground that the tobacco industry is regulated by the Federal Trade Commission. Watson v. Philip Morris Cos. Inc., No. 05-1284. Lisa Watson and Loretta Lawson filed a state court suit claiming that Philip Morris Cos. Inc. had violated Arkansas’ unfair business practice laws by advertising certain cigarette brands as “light” when, in fact, the cigarettes were designed to register lower levels of tar and nicotine in government-approved testing than would be delivered to consumers. Philip Morris removed the case to an Arkansas federal court under the federal officer removal statute. The court upheld the removal, ruling that the complaint attacked Philip Morris’ use of the government’s method of testing and thus that the petitioners had sued Philip Morris for “acting under” the Federal Trade Commission (FTC). The 8th U.S. Circuit Court of Appeals affirmed, likening the case to others in which courts permitted removal by heavily supervised government contractors. The justices reversed. Writing on behalf of the court, Justice Stephen G. Breyer said that a firm’s compliance with federal regulations does not by itself mean it’s “acting under” a federal “official.” Breyer said, “There is no evidence of any delegation of legal authority from the FTC to the tobacco industry to undertake testing on the Government agency’s behalf, or evidence of any contract, payment, employer/employee relationship . . . .The usual regulator/regulated relationship cannot be construed as bringing Philip Morris within the statute’s terms.” LABOR LAW • The justices ruled unanimously that home health care workers who are employed by outside agencies are not entitled to minimum wages and overtime pay under federal law. Long Island Care at Home v. Coke, No. 06-593. The Fair Labor Standards Amendments of 1974 exempted from the minimum wage and maximum hours rules of the Fair Labor Standards Act of 1938 (FLSA) those “employed in domestic service employment to provide companionship services.” A Department of Labor (DOL) regulation exempted also “companionship” workers “employed by an . . . agency other than the family or household using their services.” Evelyn Coke, a 73-year-old “companionship services” provider to the elderly and infirm, sued her employer, Long Island Care, seeking minimum and overtime wages they allegedly owed her under the FLSA. A New York federal court dismissed her suit, finding the department’s third-party regulation valid and controlling. The 2d Circuit reversed, finding the third-party regulation to be “unenforceable.” The justices reversed. Writing on behalf of the court, Breyer said the FLSA explicitly leaves gaps as to the scope and definition of its “domestic service employment” and “companionship services” terms, and empowers the DOL to fill these gaps through regulations. • The justices ruled unanimously that it is not a violation of the First Amendment for a state to bar a government employees’ labor union from using nonunion workers’ dues for political causes without the workers’ consent. Davenport v. Washington Education Association, No. 05-1589, and Washington v. Washington Education Association, No. 05-1657. The case involved a few thousand teachers and education employees represented by the Washington Education Association, who have chosen not to join the union. A Washington state law compels workers to pay the equivalent of union dues, a portion of which the union uses for political activities. The Washington Supreme Court struck down the provision, saying the union’s offer to reduce fees for any nonmember who registers an objection to the political spending was sufficient. The justices reversed. Writing on behalf of the court, Justice Antonin Scalia said the law does not violate the union’s First Amendment rights. The issue before the court was whether employees must opt in, or affirmatively consent, to having some of their money used in election campaigns. Scalia said that a state could indeed require such consent. Scalia said the state has given the union an extraordinary benefit, allowing it to collect money from workers who are not union members. “The notion that this modest limitation upon an extraordinary benefit violates the First Amendment is, to say the least, counterintuitive.” EMPLOYMNENT • The justices ruled unanimously that a company that sponsors its own pension plan for workers has no duty to consider merging it with another plan as a method of terminating it. Beck v. PACE International Union, No. 05-1448. PACE International Union represents employees covered by single-employer defined-benefit pension plans sponsored and administered by Crown Vantage Inc., a paper company that had filed for bankruptcy. Crown had decided to terminate its pension plans and was considering using the money to buy annuities for plan participants. Crown rejected the union’s proposal to merge the plans with the union’s own multi-employer plan. The union and the plan participants filed an adversary action in a bankruptcy court, alleging that Crown’s directors had breached their fiduciary duties under the Employee Retirement Income Security Act of 1974 (ERISA) by neglecting to consider PACE’s merger proposal. The court ruled for PACE. A California federal court affirmed. The 9th Circuit affirmed, ruling that merger was a permissible termination method and that Crown had a fiduciary obligation to consider PACE’s merger proposal. The justices reversed, holding that there had been no breach of fiduciary duty because merger isn’t a permissible form of plan termination under ERISA. Writing on behalf of the court, Scalia said that plan termination through purchase of annuities “formally severs the applicability of ERISA to plan assets and employer obligations. Upon purchasing annuities, the employer is no longer subject to ERISA’s multitudinous requirements . . . .Merger is fundamentally different: it represents a continuation rather than a cessation of the ERISA regime.” ENVIRONMENTAL LAW • The justices ruled unanimously that a company potentially liable under the Comprehensive Environmental Response, Compensation and Liability Act for cleaning up areas contaminated by hazardous materials may sue other parties under Section 107(a) of the act to recover some of its cleanup costs. U.S. v. Atlantic Research Corp., No. 05-562. Sections 107(a) and 113(f) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) allow private parties to recover expenses incurred in cleaning up contaminated sites. Atlantic Research Corp. leased property at the Shumaker Naval Ammunition Depot, a facility operated by the Department of Defense, where it retrofitted rocket motors for the government. Atlantic Research cleaned the contaminated site and then sought to recover some of its costs under Section 107(a). An Arkansas federal court dismissed the suit, holding that holding that Section 113(f) provided the exclusive remedy for a potentially responsible party to recover costs. The 8th Circuit reversed, holding that Section 113(f)(1) does not provide the exclusive remedy, and that a party that has voluntarily cleaned up a site may seek to recover a portion of its costs from other potentially responsible parties under Section 107(a). The justices affirmed. Writing on behalf of the court, Justice Clarence Thomas said that Section 107(a) authorizes cost-recovery actions by any private party to recover the voluntary cleanup costs incurred by a potentially responsible party in the absence of an enforcement action. INTERNATIONAL LAW • The justices ruled, 7-2, that foreign governments are not immune from suit to force them to pay local property taxes on residences for their diplomats at the United Nations. The Permanent Mission of India v. City of New York, No. 06-134. New York City is trying to collect property taxes from nations that house their employees in the same buildings where they operate diplomatic offices. The countries have tax exemptions for the diplomatic mission section of the properties, but the city says they must pay taxes for the space that houses employees. In 2003, the city sought declaratory judgments to establish the validity of its tax liens. The Permanent Mission of India argued that it was immune from suit under the Foreign Sovereign Immunities Act. A New York federal court said that under, FSIA’s “immovable property” exception, a foreign state isn’t immune from suits involving “rights in immovable property situated in the United States.” The 2d Circuit affirmed. The justices affirmed. Writing on behalf of the court, Thomas said, “Because a lien on real property runs with the land and is enforceable against subsequent purchasers, a tax lien inhibits a quintessential property ownership right � the right to convey. It is thus plain that a suit to establish a tax lien’s validity implicates ‘rights in immovable property.’ “ CRIMINAL PRACTICE • The justices ruled unanimously that a federal court must apply the “substantial and injurious effect” standard of Brecht v. Abrahamson in a federal habeas proceeding when examining the prejudicial effect of constitutional error in a state criminal trial. Fry v. Pliler, No. 06-5427. John Fry was convicted in 1995 of shooting James and Cynthia Bell to death. At trial, Fry sought to offer the testimony of Pamela Maples, who was prepared to testify that she had heard Anthony Hurtz discussing homicides resembling the murder of the Bells. The court excluded her testimony on the ground that there was insufficient evidence to link the incidents described by Hurtz to the Bells’ murder. California state appellate courts denied discretionary review. A California federal court denied habeas relief, concluding that though the trial court erred in excluding Maples’ testimony, there was an insufficient showing that the exclusion had had a “substantial and injurious effect” on the jury’s verdict under Brecht v. Abrahamson, 507 U. S. 619, 631. The 9th Circuit affirmed. The justices affirmed. Writing on behalf of the court, Scalia said that a federal court must apply the “substantial and injurious effect” standard of Brecht in all federal habeas proceedings. • See Page 6 for a story on the 5-4 ruling that federal appeals courts do not have the authority to consider an appeal that was filed after the time for filing a notice of appeal had expired. Bowles v. Russell, No. 06-5306.

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