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ADMINISTRATIVE LAW IRS claim must precede suit for immunity waiver A law firm’s attempt to sue the federal government to obtain attorney fees seized by the government to satisfy a client’s tax obligation was barred by the doctrine of sovereign immunity because the firm had failed to make an administrative claim with the Internal Revenue Service, the 9th U.S. Circuit Court of Appeals held on July 11. Dunn & Black O.S. v. U.S., No. 05-35766. Dunn & Black, a Spokane, Wash., law firm, represented Environmental Reclamation Inc. in litigation against the Federal Highway Administration. When the parties settled the litigation, the Court of Federal Claims entered a $450,000 judgment in favor of Environmental Reclamation. The Internal Revenue Service (IRS) asked the Department of the Treasury to withhold payment in order to pay off Environmental Reclamation’s tax liabilities. Dunn & Black filed suit against the government and Environmental Reclamation, seeking payment of its attorney fees. A Washington state federal court denied Dunn & Black’s motion for summary judgment, holding that the government setoff for the tax liability was appropriate. The 9th Circuit affirmed. Dunn & Black claimed that the government had waived sovereign immunity, in accordance with 28 U.S.C. 1346(a)(1), which authorizes federal courts to hear civil suits seeking recovery of tax “alleged to have been erroneously or illegally assessed or collected.” However, 26 U.S.C. 7422(a) provides that, prior to the filing of a tax-recovery suit, “a claim for refund or credit” must be “duly filed with the Secretary.” Failure to file an administrative claim means failure to satisfy a necessary condition of the waiver of sovereign immunity. Dunn & Black had not filed an administrative claim with the IRS before filing its suit. Accordingly, the court said, Dunn & Black “is barred from relying on that section as a basis of waiver of sovereign immunity.” Full text of the decision ANTITRUST Drug price-fixing suit against Bayer to proceed A trial judge was wrong to dismiss claims against Bayer A.G. and generic drug companies alleging price-fixing, the Wisconsin Supreme Court held on July 13. Meyers v. Bayer A.G., No. 2003AP2840. A putative class of Wisconsin residents who purchased the antibiotic Cipro alleged that consumers had paid inflated prices for the drug because of an unlawful agreement between Bayer and generic drug manufacturers. Bayer patented the drug and obtained Food and Drug Administration approval in 1987. In 1991, Barr Laboratories Inc. sought FDA approval to sell generic Cipro and asserted that Bayer’s patent was invalid. Bayer filed a patent infringement suit against Barr. While the infringement suit was pending, the FDA gave tentative approval to Barr’s application. Bayer then entered into an agreement with Barr and other generic manufacturers, settling the infringement litigation and establishing conditions for sales of the drug. The agreement allegedly provided payments to the generic companies for staying out of the Cipro market. The agreement also enabled the generic companies to sell Cipro at a price determined by Bayer. Filed in 2000, the antitrust suit alleged that the agreement gave Bayer a monopoly in the United States for Cipro and generic equivalents. The suit alleged violations of the Wisconsin Unfair Competition statute, Wis. Stat. � 100.20(1), and the Wisconsin Antitrust Act, Wis. Stat. � 133.03(1). A trial judge dismissed the suit, concluding that the antitrust act applied only to intrastate commerce. An intermediate appellate court reversed, holding that the state antitrust act may apply to cases involving interstate conduct if the alleged conduct “substantially affects” the people of Wisconsin, even if the illegal activity occurred elsewhere. The Wisconsin Supreme Court affirmed, saying that the complaint “alleges illegal conduct that, if true, substantially affected the people of Wisconsin and had impacts in this state.” BUSINESS LAW Control premium is part of proper stock valuation The proper valuation of minority shareholders’ stock may include a control premium if supported by the evidence, the Iowa Supreme Court ruled on July 13. Northwest Investment Corp. v. Wallace, No. 17/05-0340. The shareholders of a corporation amended the articles of incorporation to provide for a reverse stock split by limiting the aggregate number of shares the corporation could issue to 200 shares of common stock. This amendment effectively forced the minority shareholders to sell their shares back to the corporation. Based on an appraisal, the board of directors concluded the fair value of the old stock was $33.23 per share right before the reverse stock split, which was paid to the minority shareholders with interest in a timely fashion. The minority shareholders demanded $64 per share for their old stock based on a separate appraisal that included a premium for control. Following a second appraisal, the board of directors decided the fair value of the old stock was actually $48 per share and paid the minority shareholders the difference plus interest. The minority shareholders sued, and the trial court adopted the $64 per share appraisal. The Iowa Supreme Court affirmed. A control premium is the additional consideration an investor would pay above the value of a minority interest in order to own a controlling interest in the common stock of a company. Under Iowa Code � 490.1301(4), “fair value” is determined “[w]ithout discounting for lack of marketability or minority status.” The court said that the fact that fair value may not include discounts for lack of marketability or minority status means that a corporation’s value must be evaluated on a “marketable, control interest basis,” which might include a control premium. CONSTITUTIONAL LAW Safety concerns trump ‘Miranda’ requirement Police were not required to give a “Miranda” warning before asking a juvenile suspect whether he had a gun, the Massachusetts Supreme Judicial Court held on July 13. Commonwealth v. Guthrie G., No. SJC-09805. Without reading Guthrie G., a juvenile, his “Miranda” rights, police asked him whether he had a gun. They asked him to produce the gun, and G. complied. A juvenile court judge granted G.’s motion to suppress the evidence, but an intermediate appellate court reversed. Affirming, the Massachusetts Supreme Judicial Court, the state’s highest court, held that the juvenile court was wrong to suppress the evidence. The court said, “Given the exigency and safety concerns, the officers were justified both in their initial questioning of the juvenile at his home and in following him to his bedroom when he went to get the gun.” GOVERNMENT Government immune to suit over building design The public building exception to governmental immunity does not allow a cause of action based on design defect, the Michigan Supreme Court ruled on July 11. Renny v. Michigan Department of Transportation, No. 131086. Karen Renny injured her wrist when she slipped and fell on a patch of ice in front of a public rest area in Michigan. She sued the Michigan Department of Transportation, alleging that it had negligently designed the building by not installing gutters and downspouts. She also alleged that the department was negligent in failing to maintain the building properly. The trial court granted the department’s motion for summary disposition of both claims on the basis of governmental immunity. An intermediate appellate court reversed, holding that Renny could maintain a suit for design defect against the government and that her wrist injury was directly attributable to the negligent design, despite the fact that the injury occurred outside the building. The Michigan Supreme Court reversed the ruling on design defect, but affirmed on the negligent maintenance claim. While suits against government are usually barred, those alleging dangerous or defective conditions at a building can proceed. The plain language of the public-building exception to governmental immunity imposes a duty only to “repair and maintain” a building. Lacking any additional language addressing design defects, the exception does not permit a cause of action alleging a design defect. IMMIGRATION LAW Woman’s nephew can’t enter as if he were son The board of Immigration Appeals properly excluded an immigrant from entering the country with her nephew, even if the boy was the functional equivalent of the immigrant’s son, the 2d U.S. Circuit Court of Appeals ruled on July 10. Batista v. Gonzales, No. 06-3717. Damalis Perez Suriel De Batista, a lawful permanent resident from the Dominican Republic since 1997, returned from a two-week trip to her native country with a 12-year-old child named Jos� Miguel Fuentes. Perez claimed the boy was her son, but he was really her nephew, named Robinson Rafael Valdez Perez. Immigration officials placed Perez in removal proceedings as an inadmissible alien because she tried to smuggle in an alien who was not her “spouse, parent, son, or daughter.” 8 U.S.C. 1182(d)(11). Perez protested that her nephew was the functional equivalent of her son because she had been taking care of him � either physically or financially � since his birth to Perez’s 14-year-old sister. The immigration judge ruled that Perez was eligible for a waiver, but the Board of Immigration Appeals vacated the ruling, saying the statute did not allow for a functional reading of the term “son.” The 2d Circuit affirmed. The explicit limitation of Section 1182(d)(11)’s reach to a specifically enumerated list of qualifying relationships � “spouse, parent, son, or daughter (and no other individual)” � supports the board’s interpretation of “son” to exclude an “other individual” like a nephew. Moreover, the U.S. Supreme Court in INS v. Hector, 479 U.S. 85 (1986), had said that “even if [the alien's] relationship with her nieces closely resembles a parent-child relationship, . . . Congress, through the plain language of the statute, precluded this functional approach to defining the term ‘child.’ “ INTELLECTUAL PROPERTY No infringement if mark wasn’t used in commerce Although another company had already registered the “Stealth” mark for sporting goods, the use of the mark in commerce by a baseball player’s company for a baseball bat entitles the company to use the mark, the 7th U.S. Circuit Court of Appeals held on July 9. Central Manufacturing Inc. v. George Brett, No. 06-2083. In 2001, George Brett, a former Major League Baseball player, joined Tridiamond Sports Inc., a manufacturer of baseballs, baseball bats and related accessories, to form Brett Brothers Sports International Inc. The company developed a durable wooden baseball bat called the “Stealth bat.” The first recorded sale of the Stealth bat occurred on July 13, 1999. Leo Stoller, president and sole shareholder of Central Manufacturing Inc. and Stealth Industries, alleged that, since 1982, his companies have been using the “Stealth” trade name and mark for a wide range of products, including boats, motorcycles, lawn sprinklers and window locks. Stoller had filed a trademark registration claiming ownership of the Stealth mark, which the U.S. Patent and Trademark Office (PTO) awarded in 1985. In 2001, Central filed a mark application for use of the Stealth mark on baseball bats, which the PTO granted in 2004. Central filed suit against Brett Brothers in an Illinois federal court, alleging violations of the Lanham Act and the Illinois Deceptive Trade Practices Act. The court ruled that Brett Brothers’ use of the “Stealth” mark on its baseball bats since 1999 precluded any infringement given Central’s 2004 registration. Affirming, the 7th Circuit said that “it is not the fact of registration that matters so much as the use of the mark in commerce.” The term “use in commerce” means the bona fide use of a mark in the ordinary course of trade, and not reservation of the right to a mark. Though Central was the first to register the Stealth mark for baseballs and other sporting goods, “there is absolutely nothing in the record upon which any reasonable person could conclude that Central and its predecessors actually sold ‘Stealth’ baseballs prior to Brett Brothers first use of the mark in 1999.” JUVENILE LAW Juvenile restitution order is a dischargeable debt A restitution order against a juvenile delinquent creates a debt that is dischargeable in an adult bankruptcy proceeding, the 10th U.S. Circuit Court of Appeals held on July 11 in an issue of first impression. Colorado Judicial Dept. v. Sweeney, No. 06-1224. Shea Sweeney was adjudicated a juvenile delinquent for committing arson. As part of his sentence, he was ordered to pay more than $89,000 in restitution. Later as an adult, Sweeney filed for Chapter 13 bankruptcy and listed the roughly $85,000 outstanding restitution balance as a potentially dischargeable debt. The Colorado Judicial Department filed an adversary proceeding challenging the inclusion of the restitution award in the Chapter 13 petition. The bankruptcy court awarded summary judgment to the department, concluding the award was not dischargeable under Colorado state law. The Bankruptcy Appellate Panel of the 10th Circuit reversed. Affirming, the 10th Circuit noted that Section 1328(a)(3) of the Bankruptcy Code precludes dischargeability of restitution that was “included in a sentence on the debtor’s conviction of a crime.” However, juvenile delinquency is “an adjudication of status � not a criminal conviction.” Under Colorado law, too, juvenile delinquency is distinguishable from criminal conviction. LEGAL PROFESSION Tax-evasion disbarment lifted without IRS plan An attorney who has been disbarred for tax evasion is fit to be readmitted if he accepts responsibility for his actions and makes substantial progress to making restitution, the District of Columbia Court of Appeals held on July 12. In re Courtois, No. 06-BG-1498. Gary Courtois, an attorney licensed in the District of Columbia, was disbarred for tax evasion in 1998. After accepting responsibility for his actions, working as a paralegal for several years, paying his taxes each year and making substantial progress in making restitution to the Internal Revenue Service (IRS), Courtois applied for readmission to the bar. Both the district’s Board of Professional Responsibility and its Hearing Committee ruled that Courtois was eligible for reinstatement. However, the Office of Bar Counsel argued that Courtois was not eligible for readmission because there is no formal agreement in place with the Internal Revenue Service regarding his restitution obligations. The District of Columbia Court of Appeals, the district’s highest court, accepting the board’s recommendation and readmitting Courtois to the bar with conditions. According to court precedent, “the restitution requirement was met where the petitioner: (1) acknowledged the financial harm that resulted from his misconduct, and (2) took reasonable steps to make restitution. Here, although no restitution plan is in place at present, the record demonstrates, and the Board found, that petitioner has made significant efforts over the past several years to reach an agreement with the IRS.”

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