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• BANKRUPTCY Evidence of lying suffices for removal of trustee A Florida federal court judge correctly upheld a bankruptcy judge’s removal of a trustee for lying under oath, the 11th U.S. Circuit Court of Appeals held on Jan. 31 on an issue of first impression. In re James F. Walker, No. 06-11743. James F. Walker filed for Chapter 7 bankruptcy. Creditors elected as trustee Linda J. Walden, who submitted a statement saying, under penalty of perjury, that she had no connections with any of the creditors except that she was the receiver in a related matter in state court. The debtor sought to disqualify Walden, arguing that she had a conflict of interest stemming from a relationship with the second-largest creditor, Carl Shuhi, the president of Florida Caliper Manufacturers. At a hearing, Walden denied having any relationship with Shuhi and the court ratified her as trustee. Walker filed an emergency motion to remove Walden, alleging that she had lied about her conflict of interest on her verified statement and during the hearing. The debtor alleged that Walden had performed accounting services for Shuhi and/or his corporate entities. The bankruptcy judge granted the motion to remove Walden orally and requested Walker’s attorney to prepare the written order. The judge issued a one-page order so a new trustee could be appointed immediately. A Florida federal court affirmed. The 11th Circuit affirmed. Walden had argued that there was insufficient legal cause warranting her removal because all of the elements of criminal perjury had not been proven. The bankruptcy judge had found Walden’s testimony contradictory and false. The court said, “After reading the record, we see no reason to believe otherwise. Ample evidence exists to support the judge’s finding . . . .She was not convicted of criminal perjury. The bankruptcy judge found that Walden lied. Walden’s contentions, therefore, regarding whether the elements of criminal perjury were proven are irrelevant.”   Full text of the decision • CONSTITUTIONAL LAW Federal agency doesn’t have sovereign immunity Neither the discretionary function doctrine nor the supremacy clause to the U.S. Constitution bars a civil suit by the state of North Carolina against the Tennessee Valley Authority seeking injunctive relief to stop alleged pollution from the authority’s plants, the 4th U.S. Circuit Court of Appeals held on Jan. 31. North Carolina v. Tennessee Valley Auth., No. 06-2131. The Tennessee Valley Authority, created by the U.S. Congress in the 1930s, operates coal-fired power plants in Alabama, Kentucky and Tennessee. The state of North Carolina filed a common law nuisance action against TVA seeking injunctive relief, claiming that pollution from the TVA plants was entering North Carolina and causing environmental damage. TVA moved to dismiss the suit, arguing, inter alia, that North Carolina’s suit was barred by the discretionary function doctrine and the supremacy clause of the U.S. Constitution. A North Carolina federal district court denied the motion. Affirming, the 4th Circuit held that neither the discretionary function doctrine nor the supremacy clause bars the suit. On the issue of the supremacy clause, the court held that the federal government’s waiver of sovereign immunity in the Clean Air Act (CAA) covered the TVA’s alleged actions, rejecting the TVA’s argument that a state law nuisance action did not fall under the CAA’s waiver of sovereign immunity. Likewise, on the issue of the discretionary function doctrine, the court held that the TVA’s congressional enabling language allowing it to sue and to be sued must be construed liberally, creating a broad waiver of sovereign immunity. Quoting the U.S. Supreme Court’s decision, Loeffler v. Frank, 486 U.S. 549 (1986), the court said, “[I]t must be presumed that when Congress launched a governmental agency into the commercial world and endowed it with authority to ‘sue or be sued,’ that agency is not less amenable to judicial process than a private enterprise under like circumstances would be.” • CRIMINAL PRACTICE Life without parole, not death for mentally ill man A Florida trial judge wrongly imposed a death sentence on an obviously mentally ill man, the Florida Supreme Court held on Jan. 31. Green v. Florida, No. SC06-211. Ryan Thomas Green stole a gun, took a car, shot two men in the head and shot a bull in a pasture. One man survived the shooting. Green was convicted of first-degree murder and attempted first-degree murder. After returning to his mother’s apartment where he lived, Green showed his brother the car and gun and said he had killed two people. He was arrested and charged and, after being found incompetent to stand trial, was committed to a mental health facility. Ultimately he was found competent to stand trial and presented an insanity defense. Family members and mental health experts testified that Green suffered from mental illness from the age of 13 and had been involuntary commitment at a mental facility four months before the shootings. The jury rejected Green’s insanity defense, found him guilty on all counts and recommended a death sentence. The judge found four mitigating factors, including a finding that Green was under the influence of extreme mental and emotional disturbance and that his capacity to conform to the requirements of the law was substantially impaired. The judge described Green’s life as “a psychological, emotional, and antisocial free fall into an abyss of aberrational, delusional and psychotic behavior.” Nevertheless, the court imposed the death penalty. Reversing, the Florida Supreme Court found the death sentence to be disproportionate. “Based on the substantial mental health mitigation presented � including evidence that for years Green has suffered from schizophrenic disorders, we vacate the death sentence and remand the case for the imposition of a sentence of life imprisonment without the possibility of parole,” the court said. A death sentence is inappropriate when there is substantial and uncontroverted evidence of the defendant’s mental illness. The court said that, in reversing, it was not minimizing the seriousness of Green’s crimes. “Our holding recognizes that, while Green clearly has committed a crime that is by definition heinous, and therefore must spend the rest of his life in prison, because of the substantial mental health mitigation involved when compared to other cases of murder, his case does not constitute one of the most aggravating and least mitigated so as to deserve a sentence of death.” • EMPLOYMENT State minimum wage law not federally pre-empted The Federal Fair Labor Standards Act does not pre-empt the Nevada Wage and Hour Law because the state statute provides a higher minimum wage, the Nevada Supreme Court ruled on Jan. 31. Dancer v. Golden Coin Ltd., No. 44313. Dancers working at Girls of Glitter Gulch brought suit against their employer for unpaid wages and benefits. The trial court initially certified the class action under the Nevada Wage and Hour Law. Glitter Gulch then filed a motion to decertify the class or to treat the case as a federal Fair Labor Standards Act proceeding, arguing that the FLSA pre-empted the Nevada law. The trial court granted Glitter Gulch’s motion to proceed with the class action under the FLSA. The Nevada Supreme Court reversed. The FLSA provides that “[n]o provision of this chapter or of any order thereunder shall excuse noncompliance with any Federal or State law or municipal ordinance establishing a minimum wage higher than the minimum wage established under this chapter.” The FLSA permits an employer to credit an employee’s tips against the federal minimum wage, while the Nevada law does not allow such offsets against the state minimum wage. The court found that the class action should have proceeded under the Nevada law, as its disallowance of tip credits results in a higher minimum wage. • INTELLECTUAL PROPERTY Contractor harmed by price information release A District Of Columbia trial judge correctly issued an injunction against the Air Force, blocking the release, under the Freedom of Information Act, of a contractor’s pricing information, the U.S. Circuit Court of Appeals for the District of Columbia held on Jan. 29. Canadian Commercial Corp. v. Dept. of the Air Force, No. 06-5310. Canadian Commercial Corp. filed a so-called “reverse Freedom of Information Act” suit to prevent the U.S. Air Force from releasing line-item pricing information in its government contract under which it repaired J85 turbojet engines for the Air Force. An unsuccessful bidder, Sabreliner Corp., filed a FOIA request for a copy of the contract. Canadian Commercial objected, contending that the line-item prices constituted trade secrets. The Air Force rejected the argument, and the company filed suit in a District of Columbia federal court to enjoin disclosure of the information. A D.C. trial judge granted summary judgment to the contractor, blocking the release of the line-item prices as trade secrets. Affirming, the D.C. Circuit said that an exemption under FOIA, 5 U.S.C. 552(b)(4), protects trade secrets and commercial or financial information that is privileged or confidential. Information is confidential if disclosure would cause substantial harm to the competitive position of the person from whom the information is obtained. A person whose information is about to be disclosed pursuant to a FOIA request may file a “reverse-FOIA” suit seeking to enjoin the government from disclosure. The D.C. Circuit pointed out that it had already ruled in two previous cases that the Air Force is wrong to conclude that disclosure of line-item pricing would not harm a contractor. McDonnell Douglas Corp. v. Air Force, 375 F.3d 1182 (2004); McDonnell Douglas Corp. v. NASA, 180 F.3d 303 (1999). • PRODUCTS LIABILTY Class action over future possible injury dismissed A trial court lacks jurisdiction over a class action involving alleged injuries that might happen sometime in the future, the Texas Supreme Court ruled on Feb. 1. DaimlerChrysler Corp. v. Inman, No. 03-1189. Three Texas residents bought Dodge vehicles manufactured by DaimlerChrysler Corp. that used Gen-3 seat belt buckles. They sued DaimlerChrysler, alleging that it was too easy to press the release button on the buckle and unlatch it without intending to do so. The plaintiffs did not contend that this was unavoidable or even probable, only that it was possible. They sought to certify a nationwide class of all purchasers of DaimlerChrysler vehicles equipped with the Gen-3 buckles. DaimlerChrysler moved for summary judgment on the ground that the plaintiffs’ pleadings failed to state a viable cause of action. The trial court denied the motion and certified two classes. On appeal, DaimlerChrysler argued that the case should be dismissed because the plaintiffs had not sustained any legally cognizable injury and therefore lacked standing to assert their claims. Alternatively, DaimlerChrysler argued that the class should be decertified because the trial plan adopted by the trial court was flawed and incomplete. An intermediate appellate court rejected DaimlerChrysler’s argument that the plaintiffs’ fear of possible injury from an accidental release of a seat belt is so remote that they lack standing to assert their claims. But it agreed with DaimlerChrysler that the trial court had not fully examined what law should govern the class claims. The Texas Supreme Court reversed, dismissing the plaintiffs’ claims for lack of jurisdiction. The court said, “A court has no jurisdiction over a claim made by a plaintiff without standing to assert it. For standing, a plaintiff must be personally aggrieved; his alleged injury must be concrete and particularized, actual or imminent, not hypothetical. A plaintiff does not lack standing simply because he cannot prevail on the merits of his claim; he lacks standing because his claim of injury is too slight for a court to afford redress . . . .We do not rule out the possibility that somewhere there may be owners or lessees of vehicles with Gen-3 seatbelt buckles that can allege concrete injury. Our focus is on [the three plaintiffs], and they have not shown that they can.” • REAL PROPERTY Private gain fits in with eminent domain taking A challenge to an eminent domain proceeding on the ground that it is a pretext for private gain will fail if a “classic public use” has been established, the 2d U.S. Circuit Court of Appeals ruled on Feb. 1. Goldstein v. Pataki, No. 07-2537. The Atlantic Yards Arena and Redevelopment Project is a publicly subsidized development project in and around a passenger railroad hub and railyard adjacent to a Brooklyn, N.Y., residential neighborhood. The plan for the project includes the construction of a sports arena that will be home to the New Jersey Nets National Basketball Association franchise, 16 high-rise apartment towers and several office towers. The project is being carried out through the assistance of the Empire State Development Corp., a political subdivision of New York state. Empire State sought to acquire privately held land through the use of eminent domain. Fifteen landowners opposed to the taking filed suit in a New York federal court, claiming that the development violated the public use clause of the Fifth Amendment to the U.S. Constitution. The plaintiffs alleged that project is not driven by legitimate concern for the public benefit; instead, the motivation of the state and local government officials who approved of the project has been to benefit Bruce Ratner, the project’s primary developer and also principal owner of the New Jersey Nets. The “public use” is a pretext for a private taking. The district court dismissed the case. The 2d Circuit affirmed, saying that the redevelopment of a “blighted” area, even standing alone, represents a “classic example of a taking for a public use.” It does not matter that the state of New York has enlisted the services of a private developer for this purpose. Once the court discerns a valid public use to which the project is rationally related, it “makes no difference that the property will be transferred to private developers, for the power of eminent domain is merely the means to the end.” Citing the U.S. Supreme Court’s Kelo v. City of New London, 545 U.S. 484 (2005), the circuit court said, “The public-use requirement will be satisfied as long as the purpose involves ‘developing [a blighted] area to create conditions that would prevent a reversion to blight in the future’….And as Kelo reaffirmed, the mere fact that a private party stands to benefit from a proposed taking does not suggest its purpose is invalid because ‘[q]uite simply, the government’s pursuit of a public purpose will often benefit individual private parties.’ ” • TORTS No gratuitous duty to take care of guests’ son Homeowners did not assume gratuitous duty to be responsible for the care of their guests’ infant son who injured himself in the homeowners’ bathtub, the South Dakota Supreme Court ruled on Jan. 30. Andrushchenko v. Silchuk, No. 24464. Alex and Nataliya Andrushchenko were visiting their friends, Ivan and Lyuba Silchuk. The Silchuk children and the Andrushchenkos’ 3-year-old child, D.A., went upstairs to play. Lyuba Silchuk went upstairs and saw that D.A. was not playing with the other children. When she returned downstairs, she didn’t inform D.A.’s parents that he was playing alone upstairs. Shortly afterward, D.A. wandered into the master bedroom, turned on the faucets to the whirlpool tub and was scalded by the hot water. Though the company that installed the home’s water heater said it had set the thermostat to 125 degrees Fahrenheit, the temperature of the water in the tub was 160 degrees Fahrenheit. The Andrushchenkos sued the Silchuks, claiming that they owed D.A. the duty of ordinary and reasonable care because of his status as an invitee and because of a gratuitous duty undertaken by Lyuba Silchuk to protect D.A. The Andrushchenkos also sued the water heater company, claiming that it had a duty to set the water heater at 120 degrees. The trial court ruled for the defendants, holding that the Andrushchenkos had not established that the defendants owed a duty to the injured child. The court said the Silchuks only owed a duty to warn of, or make safe, concealed dangerous conditions known to them at the time D.A. sustained his injuries. The South Dakota Supreme Court affirmed. The Andrushchenkos failed to offer any affirmative evidence that the Silchuks knew the water temperature was excessively hot or presented a danger of scalding. Nor did the Andrushchenkos establish that they either expressly or impliedly relinquished their obligation to supervise their son, which would be necessary to impose on homeowners a gratuitous duty. Furthermore, the plaintiffs could not show that there was a statutory or common law duty for the water heater company to set thermostats at or below 120 degrees. Report circulated within firm may be defamatory A trial court erred in dismissing a civil defamation suit against a corporation because � although the alleged defamatory statements were not published outside the corporation � the statements were allegedly communicated to employees of the corporation who had no reason to receive the information based on their duties or authority, the Georgia Supreme Court held on Jan. 28. Scouten v. Amerisave Mortgage Corp., No. S07G1103. Stephen Scouten claimed that employees of his former employer, Amerisave Mortgage Corp., defamed him by saying that he had been fired for theft. Scouten sued Amerisave and several employees alleging defamation, intentional infliction of emotional distress and violations of the Georgia Racketeer Influenced and Corrupt Organizations Act. A trial court dismissed Scouten’s suit, holding that he had no cause of action because the alleged defamatory statements had not been published anywhere outside the corporation. An intermediate state appellate court affirmed. Reversing, the Georgia Supreme Court held that the lower courts erred because, although there was a defamation law exception for “intracorporate” communications, that exception applied only to communications to those within the corporation whose duty or authority created a reason to receive the information. The court said, “Construing these allegations most favorably to Scouten, it is possible that he could introduce evidence within the framework of the complaint establishing that defamatory statements were disseminated to Amerisave employees who had no duty or authority giving them reason to receive the information. Accordingly, the complaint sufficiently states a claim for relief based on defamation, including the required element of publication, and it was error to dismiss this claim.”

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