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• BANKING National bank law bars N.Y. AG’s housing probe The visitorial powers provisions of the National Bank Act (NBA) pre-empts state laws that interfere with banks’ federally authorized activities, the 2d U.S. Circuit Court of Appeals ruled on Dec. 4. The Clearing House Association v. Cuomo, nos. 05-5996 and -6001. Suspecting racial discrimination in the home mortgage industry in New York, the state’s attorney general sent letters to several mortgage lenders advising them that their conduct may be in violation of the Equal Credit Opportunity Act, the Fair Housing Act (FHA) and N.Y. Exec. Law � 296-a. The Office of the Comptroller of the Currency and a consortium of letter-receiving banks sued to enjoin the AG from investigating the banks, arguing that a recent OCC regulation interpreting the NBA’s “visitorial powers provision” prohibits states from enforcing national banks’ compliance with state or federal laws concerning federally authorized activities. Section 484 of the NBA provides that “[n]o national bank shall be subject to any visitorial powers except as authorized by Federal law [or] vested in the courts of justice.” A New York federal court deferred to the OCC’s interpretation, ruling that the AG’s investigation was prohibited and that he could not force the banks to comply with the state and federal laws. The court also ruled that the FHA did not create an exception to the visitorial powers provision. The 2d Circuit affirmed on the federal equal credit law and the state law, but ruled that the district court had erred in granting an injunction on the FHA claim. The visitorial powers provision extends even to state laws that are not specifically pre-empted, like New York’s discrimination-in-lending law, whenever those laws concern the federally authorized activities of national banks, such as real estate lending. As to the FHA ruling, however, because the banks do not challenge the validity of the FHA itself, or its applicability to national banks, “there is no risk that the threat of enforcement would chill conduct in which the banks could otherwise legally engage.”   Full text of the decision • CONSTITUTIONAL LAW Consent to search is not assent to genital scrutiny A police officer’s flashlight search for drugs inside a suspect’s underwear violates his rights under Fourth Amendment, even if the suspect gives general consent to the search, the North Carolina Supreme Court held on Dec. 7. North Carolina v. Stone, No. 505A06. On Oct. 7, 2002, Charlotte-Mecklenburg, N.C., Police Officer R.E. Correa noticed a speeding car. The officer pulled in behind the car at an apartment complex parking lot and recognized the passenger in the car as Timothy Stone, who was the subject of anonymous tips about alleged drug dealing. Stone denied having any drugs or weapons and consented to a search. The officer found $552 in a pocket of Stone’s sweatpants. The officer continued searching the waistband of Stone’s pants, then pulled open the waistband and shined his flashlight onto Stone’s genitals. Stone objected but not before the officer saw a partially hidden white cap of a pill bottle containing cocaine. Stone was charged with possession with intent to distribute cocaine. The trial judge denied Stone’s motion to suppress, finding that the search was intrusive but reasonable under the circumstances. Stone was convicted. An intermediate appellate court reversed, finding that the flashlight search was unconstitutional because it exceeded the scope of the defendant’s consent. Affirming and ordering a new trial, the North Carolina Supreme Court noted that this was the first time it was considering whether a general-consent search would include consent to an officer moving clothing and observing directly the genitals of a clothed suspect. “To determine whether defendant’s general consent to be searched for weapons or drugs encompassed having his pants and underwear pulled away from his body so that his genital area could be examined with a flashlight, we consider whether a reasonable person would have understood his consent to include such an examination,” the court said. “We conclude here that a reasonable person in defendant’s circumstances would not have understood that his general consent to search included allowing the law enforcement officer to pull his pants and underwear away from his body and shine a flashlight on his genitals.” • CRIMINAL PRACTICE Murder victim’s 911 call is inadmissible evidence Evidence of a murder victim’s 911 call and her ensuing discussion with a police officer about her estranged husband’s alleged attempt to kill her were testimonial in nature, and the failure of the husband’s appellate attorney to argue that their admission into evidence violated the Sixth Amendment’s confrontation clause, the Massachusetts Supreme Judicial Court held on Dec. 10. Commonwealth v. Lao, No. SJC-09947. Alicia Lao called 911 and reported that her estranged husband, Agapito Lao, had tried to kill her by attempting to strike her with his automobile after she informed him she planned to file for divorce and live with her boyfriend. She repeated the allegations to a police officer dispatched to her home. Two days later, her boyfriend found Alicia Lao in her apartment lying unconscious across the bed surrounded by blood. She was taken to hospital, and a little more than two weeks later she was dead. Agapito Lao was tried and convicted for her murder. The conviction was affirmed by the Massachusetts Supreme Judicial Court. Represented by new counsel, Lao moved for a new trial on the ground that his appellate attorney had been ineffective in failing to raise the argument that the admission of Alicia Lao’s 911 call and her conversation with the police officer under the “excited utterances” exception to the hearsay rule violated his constitutional right to confrontation as stipulated by the U.S. Supreme Court in Crawford v. Washington, 541 U.S. 36 (2004). The trial court denied the motion. The Massachusetts Supreme Judicial Court reversed. Applying Crawford, the court said that the 911 call and the discussion with the police officer were testimonial in nature. This made their admission a violation of Agapito Lao’s constitutional rights because he did not have the opportunity to confront the witness. Noting that without that evidence, there would be no motive evidence, the court said, “Whether the jury’s verdict would have been the same absent the motive evidence, a significant part of the Commonwealth’s case, cannot be determined with certainty. Accordingly, we conclude that there has been a substantial risk of a miscarriage of justice.” Death sentence stands despite trial judge’s error A Florida trial judge wrongly allowed a prosecutor to make an improper “mercy argument” during sentencing in a death penalty case, but the error was insufficient to undermine the fairness of the proceeding, the Florida Supreme Court held on Dec. 6. Merck v. Florida, No. SC04-1902. Troy Merck Jr. appealed the death sentence imposed during a third sentencing in 2004 after two previous death sentences were reversed. Among Merck’s arguments was a claim that the assistant state attorney’s closing argument included numerous improper remarks, rendering the penalty phase fundamentally unfair. The defense objected and was overruled when the prosecutor made an impermissible mercy argument, asking the jury to give the defendant the same amount of mercy as the defendant gave his victim. The prosecutor again made a mercy argument at the end of closings, asking the jury to impose a sentence of death by saying, “there should be no mercy for a merciless crime.” The defense did not object to this comment or to comments that mocked the defense’s mitigating evidence. Affirming the sentence, the Florida Supreme Court said it has repeatedly condemned mercy arguments. The trial judge should have sustained the defense objection and erred in allowing this argument. However, the error is not reversible because the mercy comments were not dwelled upon or emphasized in the context of the entire closing, the court said. “Regarding the prosecutor’s closing statement, we are deeply troubled by this prosecutor’s failure to abide by this Court’s prior rulings,” the court said. “However, we do not find that the cumulative effect of the objected-to and unobjected-to comments rise to the level of fundamental error.” • GOVERNMENT U.S. can’t be sued under Fair Debt Collection Act A Texas federal judge correctly granted the U.S. Department of Education summary judgment in a tort suit alleging that the U.S. Congress had waived the United States’ sovereign immunity in passing the Fair Debt Collection Practices Act, the 5th U.S. Circuit Court of Appeals held on Dec. 4. in a first-impression decision. Wagstaff v. U.S. Department of Education, No. 07-50327. Between 1991 and 1993, Audrey Wagstaff took out student loans to attend Our Lady of the Lake University in San Antonio. She signed six promissory notes payable to various lenders. She graduated in May 1993 and got a job, but never made a voluntary payment on the loans. The Texas Guaranteed Student Loan Corp. guaranteed the loans, which the Department of Education (DOE) reinsured using federal funds. When Wagstaff defaulted, Texas Guaranteed paid the lenders’ claims, was reimbursed by the DOE and assigned its rights to the DOE for collection purposes. After unsuccessfully attempting to collect on the debt, the DOE filed suit in a Texas federal court seeking judgment on the unpaid loans. Wagstaff challenged the validity of the notes, and the suits were dismissed without prejudice for the DOE to establish their validity. In 2004, the DOE resumed its efforts to collect the debt administratively by offsetting Wagstaff’s tax refunds in 2005 and 2006. Garnishment of her wages began in November 2005. Wagstaff filed suit in a Texas federal court alleging a claim under the Fair Debt Collection Practices Act (FDCPA). The DOE sought summary judgment, which the trial court granted. Affirming, the 5th Circuit said the case presents an issue of first impression as to whether Congress waived the sovereign immunity of the United States in enacting the FDCPA. The law subjects a debt collector to civil liability for failure to comply with its provisions. In order to be able to sue the federal government, a plaintiff must show a valid waiver of sovereign immunity. However the plaintiff in this case “is unable to cite a single provision in the FDCPA unequivocally and expressly waiving the Federal Government’s sovereign immunity,” the court said. Wagstaff argued that the DOE waived sovereign immunity by acting through a third party to collect on her student loan debt. The court rejected the claim on the long-standing principle that only Congress can waive an executive agency’s sovereign immunity. • INSURANCE LAW Language of policy can’t be changed retroactively A federal district court erred in granting summary judgment to an insurance company that denied coverage based on an alleged clerical error in the policy documents because neither the policy’s clerical-errors provision nor the doctrine of equitable reformation provided a basis for changing the clear and unambiguous language of the policy documents, the 4th U.S. Circuit Court of Appeals held on Dec. 7. Blackshear v. Reliance Standard Life Ins. Co., No. 06-2126. Verdelle Blackshear, a nurse who was classified as a nonexempt employee, died less than 180 days after being employed by Duplin General Hospital in Kenansville, N.C. At the time, Duplin had an employee benefit plan with a life insurance policy for employees issued by Reliance Standard Life Insurance Co. and governed by the provisions of the Employee Retirement Income Security Act. The policy documents provided for a waiting period of 180 days after employment before coverage began for exempt employees, but no waiting period for nonexempt employees. After Blackshear made a claim for benefits, the hospital informed Reliance that its intent was that all employees be subject to the waiting period. Reliance amended the policy and denied Blackshear’s claim based on the waiting period in the amended policy. Blackshear sued, but a North Carolina federal district court granted summary judgment to Reliance, holding that the insurer had not abused its discretion in applying the policy’s “clerical error” provision. Blackshear appealed, arguing that the clear and unambiguous policy language controlled. Reversing, the 4th Circuit held that neither the policy’s clerical-error provision nor the doctrine of equitable reformation, which permits a policy to be corrected retroactively to reflect the actual intent of the contracting parties, warranted denial of the claim. Regarding the clerical-error provision, the court said, “Assuming such an omission would even qualify as a ‘clerical error,’ and assuming that this provision relates in some way to the sponsor’s general right to amend or eliminate the policy at anytime (which it does not), we believe the language still in no way authorizes the administrator to divest benefits that are already due by amending, modifying or correcting the language of the policy itself.”

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