Court Decisions

ANTITRUST Indirect buyers can sue under N.H. consumer law Indirect purchasers of smokeless tobacco products can bring antitrust-type claims against the products’ distributors under New Hampshire’s consumer-protection law, the New Hampshire Supreme Court ruled on Aug. 24. LaChance v. United States Smokeless Tobacco Co., No. 2006-564. James LaChance sought to be one of two named plaintiffs in a class action against three distributors of smokeless tobacco products in New Hampshire. LaChance argued that the defendants engaged in anti-competitive conduct by excluding competitors, limiting customer choice and negatively affecting other brands’ advertising and display, which resulted in class members’ suffering actual damages and noneconomic damages because they were deprived of product and price choice. The trial court granted the distributors’ motion for judgment on the pleadings, holding that the state high court’s 2002 ruling, Minuteman LLC v. Microsoft Corp., 147 N.H. 634, which bars indirect purchasers from suing under state antitrust statutes, also bars the plaintiffs’ claims under the consumer-protection statute. The New Hampshire Supreme Court reversed. The consumer protection law allows “any person injured” to bring suit and so does not require a distinction between direct and indirect purchasers. Also, the law makes it unlawful to use unfair competition, or deceptive acts, to conduct any trade or commerce in the state, which is exactly what LaChance had alleged. To adopt the distributors’ position would be to prevent “the real victims � those who purchase goods at higher prices � from recovering damages for the injuries caused by an alleged violation” of the consumer protection statute.   Full text of the decision CIVIL PRACTICE Pa. courts can’t hear suit against Kansas school A Pennsylvania man cannot establish jurisdiction over a Kansas-based pharmacy school for allegedly defamatory statements because he cannot show that the defendants specifically directed their conduct toward Pennsylvania, the 3d U.S. Circuit Court of Appeals ruled on Aug. 22. Marten v. Godwin, No. 05-5520. The University of Kansas School of Pharmacy offers a “Non-Traditional Pharm.D. (NTPD) Program,” in which licensed pharmacists can pursue advanced degrees. The course work for the program is completed online. Students communicate with their professors, who are primarily located in Kansas, by phone and e-mail. Pennsylvania resident Craig Marten signed up to take these classes. A year into the program, however, the school expelled Marten because he had plagiarized two separate assignments. Marten sued the school in a Pennsylvania federal court, claiming that several of the administrators had defamed him and had retaliated against him for complaining about one of them. The court granted the school’s motion for summary judgment based on lack of personal jurisdiction. The 3d Circuit affirmed. Marten had alleged only that the defendants harmed him while he happened to be residing in Pennsylvania; he had not shown that the school or the administrators expressly aimed their conduct at Pennsylvania. There is nothing in the record to show that the defendants made or sent defamatory statements to anyone in Pennsylvania and, even if Marten felt the brunt of the harm in Pennsylvania, he still had not shown how any of the facts show a deliberate targeting of the commonwealth. CONSTITUTIONAL LAW Colorado election finance limits unconstitutional Sections of the Colorado Constitution designed to limit the influence of certain corporations’ funds on elections are unconstitutional as applied to a right-to-life group, the 10th U.S. Circuit Court of Appeals held on Aug. 21. Colorado Right to Life Committee Inc. v. Coffman, No. 05-1519. Article XXVIII of the Colorado Constitution is a citizen-passed campaign finance reform amendment designed to limit the influence of certain types of corporations’ general funds on state elections. Colorado Right to Life Committee, a nonprofit ideological corporation, sought declaratory and injunctive relief against the Colorado secretary of state, arguing that the article contained provisions that interfered with its traditional communications and activities and thus violated its First and 14th amendment rights under the U.S. Constitution. A Colorado federal court granted summary judgment in part to the right-to-life committee and in part to the secretary. Affirming, the 10th Circuit held that the challenged sections regulating corporate expenditures and electioneering communications are unconstitutional as applied to the right-to-life group because the group meets U.S. Supreme Court-approved exemption requirements for a voluntary ideological corporation that seeks to engage in political speech. Further, the court held that Article XXVIII’s definition of a political committee is unconstitutional as applied to the right-to-life group because it fails to incorporate the U.S. Supreme Court’s “major purpose” test, which analyzes the “major purpose” of a particular expenditure at issue, rather than the “major purpose” of the organization. Denial of official status to Christians-only club OK A school district violated neither the First Amendment to the U.S. Constitution nor the federal Equal Access Act by denying official school status to a student club that limited its membership to those who practiced Christian values, the 9th U.S. Circuit Court of Appeals held on Aug. 24. Truth v. Kent Sch. Dist., No. 04-35876. Truth, a student organization that limited its membership to students exhibiting “Christian character, Christian speech, Christian behavior and Christian conduct as generally described in the Bible” applied for official recognition as a student organization at Kentridge High School in Washington state’s Kent School District. Truth sued the school district, arguing that its denial violated both the First Amendment and the federal Equal Access Act. A Washington federal court granted summary judgment to the district. Affirming, the 9th Circuit held that the district committed no violation because Truth’s restrictive membership violated school policy. Quoting the U.S. Supreme Court’s decision on higher education restrictions in Healy v. James, 408 U.S. 169 (1972), the court said, “Just as in the community at large, reasonable regulations with respect to the time, the place, and the manner in which student groups conduct their speech-related activities must be respected. A college administration may impose a requirement, such as may have been imposed in this case, that a group seeking official recognition affirm in advance its willingness to adhere to reasonable campus law.” CRIMINAL PRACTICE Forcing man to proceed pro se is unconstitutional By ordering A man to represent himself at trial, a Georgia judge had violated the Sixth Amendment right of a man convicted of murdering his 3-month-old child, the 11th U.S. Circuit Court of Appeals held on Aug. 22, granting the man’s habeas petition and ordering a new trial. Jones v. Walker, No. 04-13562. Melvin C. Jones was indicted on felony murder and child cruelty charges involving his 3-month-old daughter. He was alleged to have deliberately dropped her head first. The baby died from a subdural hematoma. Though he was assigned a court-appointed attorney, Jones asked for a private attorney. The judge held two hearings on the matter. At the second hearing, the judge gave the defendant the choice of keeping the public defender or representing himself. Jones rejected both options and told the court he was not waiving the right to counsel. The judge dismissed the lawyer, then ruled that since Jones had fired his defense counsel he had in effect agreed to proceed pro se. At trial, Jones represented himself and a jury convicted him on all counts. He was sentenced to life imprisonment. The Georgia Supreme Court and a Georgia federal judge rejected his habeas corpus petitions. The 11th Circuit reversed. Appellate review of habeas petitions are governed by the Antiterrorism and Effective Death Penalty Act of 1996, 28 U.S.C. 2254(d), which says that a federal court may grant a writ of habeas corpus if the state denial of the writ was based on clear and convincing evidence of an “unreasonable determination” of the facts. The 11th Circuit said there was no evidence that Jones was made aware of the dangers of self-representation. The court also found that Jones did not “clearly and unequivocally” assert his desire to waive counsel and proceed pro se. His rejection of court-appointed counsel does not equate to a “clear” and “unequivocal” request to proceed pro se. EVIDENCE Lab test results are not statements of technicians Laboratory test results used in the conviction of a motorist for driving under the influence were not statements of the test machine operators. Thus, a toxicologist’s testimony about the results was not inadmissible hearsay, the 4th U.S. Circuit Court of Appeals held on Aug. 22. U.S. v. Washington, No. 05-4883. Federal prosecutors charged Dwonne Washington with driving under the influence of alcohol or drugs. At Washington’s trial, the government � over Washington’s objection � presented testimony from Dr. Barry Levine, the director of the Forensic Toxicology Laboratory of the Armed Forces Institute of Pathology. While Levine had not seen Washington’s blood sample and did not conduct any of the tests himself, three lab technicians operating under his supervision conducted the tests and presented the raw data from the tests to him. Levine testified that based on the test results, Washington was under the influence of phencyclidine or PCP at the time of his arrest. Washington appealed, arguing that the test results constituted out of court statements by the technicians operating the machines that were inadmissible hearsay. Affirming, the 4th Circuit held that the test results were not statements of the machine operators and were, thus, not hearsay. The court said, “The raw data generated by the diagnostic machines are the ‘statements’ of the machines themselves, not their operators. But ‘statements’ made by machines are not out-of-court statements made by declarants that are subject to the Confrontation Clause.” The supposed “hearsay statements” made by the machines were not “testimonial” in that they did not involve the relation of a past fact of history as would be done by a witness. To the extent that reports generated by the machines contain assertions of fact, they say simply that “this blood sample that has been put into the machine tests positive for PCP and alcohol.” The machine’s “statement” relates solely to the present condition of the blood, without making any links to the past. INSURANCE LAW Policy limit accords with uninsured motorist law An insurance policy that defines “use” to mean “operation and maintenance” of a vehicle is not contrary to the public policy behind the Uninsured and Underinsured Motorist Insurance Coverage Act, the Nebraska Supreme Court held on Aug. 24. Jones v. Shelter Mutual Ins. Cos., No. S-06-310. While sitting in the front passenger seat of a car driven by Amanda Stastny, Kevin M. Jones was injured when an uninsured motorist hit the vehicle. Stastny had automobile insurance with Shelter Mutual Insurance Co. that included uninsured motorist coverage. Jones’ parents had automobile insurance with American Family Mutual Insurance Co., with Jones as an additional insured for purposes of uninsured motorist coverage. Shelter paid Stastny $25,000 in benefits but denied benefits to Jones, while American Family paid Jones $60,000 of its $100,000 policy limit. Jones assigned all rights he had against Shelter to American Family. Jones and American Family sued Shelter for uninsured motorist benefits under the Shelter policy. The trial court granted Shelter’s motion for summary judgment, finding that Jones was not an insured under the policy. The Nebraska Supreme Court affirmed. Shelter’s policy defines insured to include “any individual who has permission . . . to use the described auto.” The court said that the policy behind the Uninsured and Underinsured Motorist Insurance Coverage Act � to give a person injured by an uninsured or underinsured motorist the same protection as a person injured by an insured motorist � was not violated by limiting both liability and uninsured coverage to those who actually operated and maintained the vehicle. LANDLORD/TENANT LAW Federal law pre-empts ‘innocent tenant defense’ Massachusetts’ “innocent tenant defense” � a doctrine providing that housing project tenants’ leases not be terminated due to the actions of family members of which the tenant had no knowledge or control � is pre-empted by federal housing law, the Massachusetts Supreme Judicial Court held on Aug. 17. Boston Hous. Auth. V. Garcia, No. SJC-09753. Doris Garcia had resided in a federal housing project since 1993. Her lease with Boston Housing Authority lists her adult sons as residents in the home. In 2004, two of Garcia’s sons were arrested for marijuana possession in separate incidents away from the home. The housing authority filed suit in housing court seeking to evict Garcia on the ground of her sons’ convictions. Garcia countered that, under Massachusetts’ innocent tenant defense, she should not be evicted for the actions of her sons because she had no control over, and no reason to know of, her sons’ actions. A trial court held that federal law pre-empts the innocent tenant defense, and that because Garcia’s sons were residents of the household, the authority had the right to terminate her lease. Affirming, the Massachusetts Supreme Judicial Court, the state’s highest court, said the U.S. Supreme Court, in Department of Hous. & Urban Dev. v. Rucker, 535 U.S. 125, 130 (2002), has ruled that federal housing law, 42 U.S.C. 1437d, unambiguously requires lease terms “that vest local public housing authorities with the discretion to evict tenants for the drug-related activity of household members and guests whether or not the tenant knew, or should have known, about the activity.” This pre-empts the innocent tenant defense, the court said. “Congress . . . required that housing authorities use clauses in their leases that permit the termination of a tenant’s lease for crimes committed by household members, even where a tenant had no knowledge of and was not at fault for a household member’s criminal activity. As the Rucker Court noted, the lodging of such discretionary authority with the housing authorities is integral to the accomplishment of the congressional objective because ‘[s]trict liability maximizes deterrence and eases enforcement difficulties.’ ” LEGAL PROFESSION Litigation privilege valid for pre-suit solicitations The litigation privilege for lawyer communications applies to solicitations for business prior to the filing of a lawsuit, the Tennessee Supreme Court ruled Aug. 20 on certified question from a Tennessee federal district court. Simpson Strong-Tie Co. Inc. v. Stewart, Estes & Donnell, No. M2006-02407-R23-CQ. A Nashville, Tenn., law firm placed advertisements in state newspapers and on the Internet stating that the firm was investigating the wood-deck screws and fasteners made by California-based Simpson Strong-Tie for possible defects. The ads encouraged consumers to call the firm to discuss whether they had a claim for compensation against Simpson. Simpson sued the firm for defamation in a Tennessee federal court. The firm argued that its statements were privileged, but Simpson claimed that any privilege does not extend to attorney comments that constitute “trolling for business.” The federal court certified the question to the Tennessee Supreme Court: Does the absolute litigation privilege apply to communications made preliminary to a proposed judicial proceeding, if such communications are directed at recipients unconnected with the proceeding in hopes of soliciting them to become parties to it? The Tennessee Supreme Court answered yes. Simpson’s interpretation of the privilege would inhibit parties or witnesses and impede investigatory abilities of litigants or potential litigants. For the privilege to apply, the communication must be made by an attorney acting as counsel; the communication must be related to the subject matter of the proposed litigation; the proposed proceeding must be under serious consideration by the attorney acting in good faith; and the attorney must have a client or identifiable prospective client at the time the communication is published. TAXATION Dishonest conduct isn’t ‘error’ in tax statute Healthsouth Corp., whose officials intentionally misrepresented company assets as part of a large-scale accounting fraud scheme, is not due a refund of county taxes paid on nonexistent property described on company tax returns, the Alabama Supreme Court held on Aug. 24. HealthSouth Corp. v. Jefferson County Tax Assessor, No. 1060296. For 2001, 2002 and 2003, HealthSouth submitted to the Jefferson Co., Ala., tax assessor returns on which it intentionally listed numerous fabricated items of personal property. HealthSouth paid taxes for 2001 and 2002, but before paying the amount due for 2003, it amended its tax return to remove the fictitious assets. The company then amended its 2001 and 2002 returns and sought a refund of the taxes paid on the fictitious property. Armed with an opinion from the state attorney general, the tax collector denied the petition. HealthSouth filed a challenge in probate court, which denied the refund petition. An intermediate appellate court affirmed, noting that Ala. Code � 40-10-160 provides for tax refunds only for mistake or error, not intentional fabrications. The Alabama Supreme Court affirmed, addressing two questions of first impression, including whether the meaning of “error” in the refund statute also could encompass intentional dishonest conduct. Also at issue was whether “error” has a meaning different from “mistake” under the statute. Tax officials, joined by the state, argued that neither “error” nor “mistake” includes the deliberate fraud committed by HealthSouth. The court said that “[t]he settled meaning of the terms ‘error’ and ‘mistake’ is not consistent with intentional dishonest acts.” The court also rejected HealthSouth’s argument that tax authorities had no right to collect taxes on falsified assets. “HealthSouth cannot be permitted to take advantage of its own wrong by receiving a refund based on its own inequitable conduct,” the court wrote. “There is no equity in allowing HealthSouth to obtain relief from its own fraudulent scheme.” TORTS Clean environment right is no basis for tort action The constitutional right to a clean and healthy environment doesn’t permit recovery of money damages in a tort action between private parties, the Montana Supreme Court ruled on Aug. 20. Shammel v. Canyon Resources Corp., No. 05-206. C.R. Kendall Corp., which is owned by Canyon Resources Corp., operated a cyanide heap-leach mine from the late 1980s through the mid-1990s. Members of the Shammel, Ruckman and Harrell families owned properties that were downstream from the former mine. The families sued Canyon and Kendall for trespass, negligence and nuisance. The suit alleged that pollutants from the mine contaminated their properties and that the defendants reduced stream flows and depleted a nearby aquifer. The families brought up the idea of recovering for a constitutional tort based on the right to a clean and healthful environment under Mont. Const., art. II, � 3, and art. IX, � 1. The trial court concluded that the Montana Constitution did not authorize such a tort between two private parties in an action for money damages. The Montana Supreme Court affirmed. The court said that the plaintiffs had not shown that traditional tort remedies, plus restoration damages that are now available for land suffering from environmental pollution, were inadequate to address their injury.