How the Wrong Decision in Schwarzenegger v. EMA Could ...



Some Business Law Cases on the Supreme Court DocketSwarzenegger v. EMAFCC v. AT&TAstra USA v. Santa Clara CountyChase Bank USA v. McCoyBruesewitz v. WyethStaub v. Proctor HospitalCostco v. OmegaSnyder v. PhelpsHenderson v. ShinsekiMatrixx v. SiracusanoMayo v. USNASA v. NelsonJanus Capital v. First Derivative TradersChamber of Commerce v. CandelbriaDuryea v. GuarnieriAT&T v. Concepcion ….and moreCourt will review violent video game law (April 26, 2010)Case Reference:?Schwarzenegger v. EMAThe U.S. Supreme Court has agreed to decide whether a California law prohibiting sales of violent video games to minors represents an unconstitutional infringement on freedom of speech. The case concerns a 2005 bill, signed into law by Gov. Arnold Schwarzenegger, aimed to criminalize the sale of violent video games to minors. The law states that “[a] person may not sell or rent a video game that has been labeled as a violent video to a minor." Before the act took effect, the Entertainment Software Association (ESA), a video game industry trade group, challenged the legislation in the U.S. District Court for the District of California, arguing that it violated the First and Fourteenth Amendments by unconstitutionally restricting freedom of expression on its face based on content regulation and the labeling requirement, is unconstitutionally vague and violates equal protection. Judge Ronald Whyte permanently enjoined enforcement of the act and the state appealed. In February 2009, a three-judge panel of the 9th U.S. Circuit Court of Appeals agreed with the district court that the law was unconstitutional: ?"We hold that the Act, as a presumptively invalid content-based restriction on speech, is subject to strict scrutiny and not the'variable obscenity' standard from Ginsberg v. New York," wrote Judge Consuelo Callahan. "Applying strict scrutiny, we hold that the Act violates rights protected by the First Amendment because the State has not demonstrated a compelling interest, has not tailored the restriction to its alleged compelling interest, and there exist less-restrictive means that would further the State’s expressed interests." Schwarzenegger has defended the act. "I signed this important measure to ensure parents are involved in determining which video games are appropriate for their children," Schwarzenegger said in a statement. "By prohibiting the sale of violent video games to children under the age of 18 and requiring these games to be clearly labeled, this law would allow parents to make better informed decisions for their kids. I will continue to vigorously defend this law and protect the well-being of California's kids." On April 26, the U.S. Supreme Court accepted the case for review and wil hear oral arguments during the fall term. Question presented: Whether the First Amendment permit any limits?on offensive content in violent video games sold to?minors; and (2) whether?a state regulation for displaying offensive,?harmful images to children is invalid if it fails to satisfy?the exacting “strict scrutiny” standard of review. Moot Court Renders Schwarzenegger v. EMA OpinionSeptember 27, 2010 Last month we told you that the Institute of Bill of Rights Law (IBRL) at William & Mary Law School would offer a mock trial of the Schwarzenegger v. Entertainment Merchants Association case, which is scheduled to go before the Supreme Court on November 2.? Well, the Moot Court held its version of the event over the weekend, and gamers will have to hope that the result does not foreshadow the verdict that SCOTUS eventually returns.The mock trial included participants such as USA Today’s Joan Biskupic, The Wall Street Journal’s Jess Bravin, the New York Times’ Adam Liptak, University of California, Irvine School of Law Dean Erwin Chemrinsky, Jeffrey Sutton from the U.S. Court of Appeals for the Sixth Circuit and U.S. Department of Justice Deputy Assistant Attorney General Beth Brinkman.An interested party attended and provided GP with a snapshot of what happened. The attendee is a student, but indicated that he understood the ESRB rating system better than any of the Moot Court participants. The only game brought up during the proceedings was Postal, which was mentioned several times, with an emphasis placed on the game’s ability to let players kill children and pee on corpses, “with the implication that other video games have similar content.”The attendee felt that this negative misperception of games, driven by the lone example of Postal, eventually led the court to its opinion, which was a 6-3 vote in favor of Schwarzenegger and California.Video Games on Trial – The Bill That Started It AllAs many gamers are aware, the Supreme Court of the United States will start hearing oral arguments in the case of Schwarzenegger v. Entertainment Merchants Associations/Entertainment Software Association on November 2. At issue is the constitutionality of a 2005 law prohibiting the sale or rental of violent video games to minors. The EMA and ESA HYPERLINK "" \t "_blank" appealed the law after it was signed by California Governor Arnold Schwarzenegger, which eventually led to a permanent injunction being issued to block the law from taking effect. The state of California then challenged the injunction in the Ninth Circuit Court of Appeals in late 2007, and in 2009, the court ruled the law was unconstitutional, prompting Governor Schwarzenegger and Attorney General Jerry Brown to take the case to the Supreme Court. In part one of our four-part feature on the upcoming Supreme Court case, we will examine the contents of Assembly Bill No. 1179, aka the Act, to see, not only how it defined violent video games, but what it proposed be done to keep them out of the hands of minors.The bill in question was drawn up by then California Assemblyman, and now Democratic State Senator, Leland Yee. Yee has been a longtime opponent of violence in media, especially video games, and made a name for himself by sparking the now infamous “Hot Coffee” incident involving a hidden sex mini-game in Grand Theft Auto: San Andreas.As you'd expect, Yee submitted an HYPERLINK "" \t "_blank" amicus curiae brief (read: a brief filed arguing for a party involved in a case) in support of California in its upcoming Supreme Court case. In his brief, Yee made it quite clear that his position on and perception of video games hasn’t changed:“These violent video games…can contain up to 800 hours of footage with the most atrocious content often reserved for the highest levels and can be accessed only by advanced players after hours upon hours of progressive mastery.”Understanding where Yee is coming from is helpful when looking at the Act at the center of this whole debate. As stated in HYPERLINK "" \t "_blank" Assembly Bill No. 1179, the proposed legislation “would require violent video games to be labeled…and would prohibit the sale or rental of those violent video games, as defined, to minors. The bill would provide that a person who violates the act shall be liable in an amount of up to $1,000 for each violation.”The classification of “violent video game” causes quite a few problems when you try to determine which games it should apply to and which ones it should not. However, to California, a “violent video game” is defined as one in which “the range of options available to a player includes killing, maiming, dismembering, or sexually assaulting an image of a human being.”There are three additional elements that factor into this definition of violent video games, and these elements become especially important when it comes to arguments relating to how the First Amendment applies to video games as a whole. When California is talking about violence being depicted in video games, it is judging it based on whether:A reasonable person, considering the game as a whole, would find appeals to a deviant or morbid interest of minors.It is patently offensive to prevailing standards in the community as to what is suitable for minors.It causes the game, as a whole, to lack serious literary, artistic, political, or scientific value for minors.The Act goes on to define video game violence as that which, “Enables the player to virtually inflict serious injury upon images of human beings or characters with substantially human characteristics in a manner which is especially heinous, cruel, or depraved in that it involves torture or serious physical abuse to the victim.”Unsurprisingly, the Act further describes terms like “heinous” and “depraved” as portrayals of violence that “involve additional acts of torture or serious physical abuse of the victim as set apart from other killings” and that demonstrate that the player “relishes the virtual killing or shows indifference to the suffering of the victim,” respectively. The other definitions laid out in the Act are as follows:“Cruel” - The player intends to virtually inflict a high degree of pain by torture or serious physical abuse of the victim in addition to killing the victim.“Serious physical abuse” - A significant or considerable amount of injury or damage to the victim’s body which involves a substantial risk of death, unconsciousness, extreme physical pain, substantial disfigurement, or substantial impairment of the function of a bodily member, organ, or mental faculty. Serious physical abuse, unlike torture, does not require that the victim be conscious of the abuse at the time it is inflicted. However, the player must specifically intend the abuse apart from the killing.“Torture” - Mental as well as physical abuse of the victim. In either case, the virtual victim must be conscious of the abuse at the time it is inflicted; and the player must specifically intend to virtually inflict severe mental or physical pain or suffering upon the victim, apart from killing the victim.When taken as a whole, these specifications are designed to differentiate between simple virtual killing and that which includes “infliction of gratuitous violence upon the victim beyond that necessary to commit the killing, needless mutilation of the victim’s body, and helplessness of the victim.”From there, the Act goes on to propose that it would be illegal to sell a violent video game to a minor (unless it’s sold to the minor by his/her parent, grandparent, aunt, uncle, or legal guardian). The Act goes a step further and requires “violent video games” to be “labeled with a solid white ‘18’ outlined in black” on the front cover, presumably in addition to the ESRB rating label that all games currently carry. Should a retailer be found selling “violent video games” to a minor, they could be fined up to $1,000, or less depending on what the court decides.And there you have it: The reason why the Supreme Court of the United States will soon, for the first time, address what Constitutional protections should be afforded to video games. Tomorrow, in Part Two of our series, we’ll look at the arguments presented by the state of California to the Supreme Court. Pro tip: If you found yourself clenching your fists reading about the Act and its portrayal of violence in video games, you might want to bite down on a piece of wood before you check out our examination of California's case.Read more: the Wrong Decision in Schwarzenegger v. EMA Could Cripple Video Game InnovationGene Hoffman 9/27/10 In 2005 the Terminator signed a bill to outlaw the sale of “violent” video games to anyone under 18 years of age in California. Granted, he was wearing his off-set persona as the Governor of California, but this irony flows through a case the U.S. Supreme Court is about to hear entitled Schwarzenegger v. EMA.California’s attempt to create a new exception to the First Amendment for supposedly violent speech was promptly enjoined by a federal judge, and the 9th Circuit Court of Appeals quickly concurred that the law was unconstitutional. As such it came as a bit of a shock to the video game industry when the Supreme Court decided to hear the case this fall.There are two significant problems with the law in question. First, the definition of a “violent video game” is very unclear. The law adopts classic definitions for sexual obscenity, but those terms don’t make a lot of sense in the context of a video game. Does killing Nazis on the beaches of Normandy in a WWII game reach a level of violence “offensive to the community?” Troubling also is the State of California defending its law by citing social science research that considers Super Mario Brothers to be a violent video game. (See pages 3 and 28 of the Electronic Frontier Foundation’s amicus brief in Schwarzenegger vs. EMA.)The larger problem with the law is that it is likely to have broad unintended consequences in the development of the video game industry as online business models become more prevalent. The original bill sponsor and the Entertainment Software Association ( HYPERLINK "" ESA) imply that the act was only intended to apply to the retail sales of boxes at local stores. However, the law as written is quite broad. It simply states that a “person may not sell or rent a video game that has been labeled as a violent video game to a minor.”The classic “boxed” video game business is quickly giving way to hybrid channels where a box version of a game available at your local store is also available as a download or even potentially as a freemium offering. The California law, if allowed to go into effect, would destroy the freemium model. Why? Because the core of this business model is to allow millions of gamers to play for free in the hopes that some percentage buy virtual goods.In short, the freemium model requires unfettered initial access to the game by millions. The only sure way to prevent minors from accessing forbidden games online is to require a credit card validation up front. But that’s also a big deterrent for many adults: virtually no one who uses the Internet believes that giving a card number to a game maker would not eventually result in a charge to that card. Destroying the frictionless access that adults have to free-to-play games that might be considered violent would drastically decrease innovation in the online games world, as the base of potential users would no longer be large enough to convince developers to take the risk on new games.Video games are quickly becoming a mainstream phenomenon that breaks new ground in go-to-market strategies and business models. Misguided attempts to limit “under-age playing” come at the expense of creating a vibrant online economy far beyond gaming. For example, innovators like Boxee learn from companies like Atari/Cryptic, Outspark and hi5 to push the boundary of what your television set does. Do we as a society want to limit the economic models that these types of companies can explore, or even inadvertently keep them from creating new and interactive experiences around content like Band of Brothers or political commentary about the war in Afghanistan?At a time when proponents of Sharia law are exercising a heckler’s violent veto over the “Everyone draw Mohammed” meme, we can not stand idly by while legislators and lobbyists make value judgments about content that create significant unintended consequences. For these reasons we at Vindicia filed an amicus brief in the Supreme Court in support of the video game industry. We hope the Supreme Court affirms the lower courts and finds this law unconstitutional.Gene Hoffman, Jr., is chairman and CEO of Vindicia, which provides strategic online billing solutions to merchants selling digital content, including online game publishers such as Activision Blizzard and Atari/Cryptic. will rule on corporate privacy (Sept. 28, 2010)Case Reference:?FCC v. AT&TThe Supreme Court has agreed to decide whether corporations may assert personal privacy interests to prevent the government from releasing documents about pTel, a trade association that represents some of AT&T's competitors, filed a FOIA request with the Federal Communications Commision in 2005, seeking documents related to an FCC probe into whether AT&T had overcharged the agency for work on a technology education project.AT&T fought the request, contending the production of the documents violated Exemption 7(c) of FOIA, which exempts document disclosures in law enforcement records that would constitute an invasion of “personal privacy.”The FCC rejected AT&T's argument, but in September 2009, the 3rd U.S. Circuit Court of Appeals held that the phrase "personal privacy" applied to corporations because other sections of FOIA had defined "person" as a corporation.On Sept. 28, 2010, the U.S. Supreme Court agreed to review the case. Justice Elena Kagan recused herself. As solicitor general, she had written a brief urging the court to take the case.Question presented: Whether Exemption 7(C) of the Freedom of Information Act — which exempts from mandatory disclosure records or information compiled for lawenforcement purposes when such disclosure could reasonably be expected to constitute an unwarranted invasion of “personal privacy” – protects the “privacy” of corporate entities.September 28, 2010Supreme Court Takes Cases on Corporate RightsBy ADAM LIPTAK and DUFF WILSONWASHINGTON — Continuing to explore the limits of corporations’ constitutional rights, the Supreme Court on Tuesday added cases to its docket that will test the scope of companies’ rights to due process and privacy. The new cases follow the court’s decision in January in Citizens United v. Federal Election Commission, which ruled that corporations and unions have a First Amendment right to spend money in candidate elections. In two of the cases, the justices will consider how the state secrets privilege, which can allow the government to shut down litigation by invoking national security, applies in a contract dispute between the Navy and military contractors hired to create a stealth aircraft. In the third case, the justices agreed to decide whether corporations have privacy rights for the purposes of the Freedom of Information Act. The cases were among 14 the court added to its docket. The court’s newest member, Justice Elena Kagan, disqualified herself from four of the new cases, including the one concerning corporate privacy, because she participated in them as United States solicitor general before joining the court in August. She has also recused herself from about half of the roughly 40 cases that had already been on the court’s docket for the new term, which starts Monday, and so will be absent from the bench much of the time in the coming months. The state secrets case arises in a surprising context. The court has turned back appeals from people who say they were sent abroad to be tortured but whose lawsuits were dismissed after the government invoked the privilege. This month, a sharply divided 11-member panel of the United States Court of Appeals for the Ninth Circuit, in San Francisco, dismissed a lawsuit against Jeppesen Dataplan, a Boeing subsidiary accused of arranging flights for the Central Intelligence Agency to transfer prisoners to other countries for imprisonment and interrogation, on state secrets grounds. Boeing, as successor to the McDonnell Douglas Corporation, is one of the parties to the state secrets cases the court agreed to hear on Tuesday, Boeing Company v. United States, No. 09-1302, but now it objects to the government’s invocation of the privilege. Its case has been consolidated with the second one, General Dynamics Corp. v. United States, No. 09-1298. Both arose from a 1988 contract to develop the A-12 Avenger aircraft. Dissatisfied with the contractors’ progress, the Navy terminated the contract three years later and demanded the return of $1.35 billion. The contractors refused to return the money and sued, saying among other things that their work had been frustrated by the government’s failure to share classified technology. The government disputed that assertion but would not explain why, invoking the state secrets privilege. An appeals court repeatedly ruled against the contractors, saying at one point that the Constitution’s due-process clause does not require that they be able to present “a defense that would threaten national security.” The leading Supreme Court case on state secrets, from 1953, also concerned an aircraft. In that case, United States v. Reynolds, the widows of men who died when a B-29 bomber crashed in Waycross, Ga., during a secret mission, sued the government for negligence. The Supreme Court ruled against the widows on state secrets grounds. But the court said things might be different if the government were pressing a claim rather than defending against one. It would be unconscionable to allow the government to pursue a criminal prosecution, Chief Justice Fred M. Vinson wrote for the majority, “and then invoke its governmental privileges to deprive the accused of anything which might be material to his defense.” “Such rationale,” Chief Justice Vinson went on, “has no application in a civil forum where the government is not the moving party.” The new cases are civil rather than criminal, and the parties disagree about which of them is the plaintiff and which the defendant. With interest, the government now seeks about $3 billion. The privacy case, Federal Communications Commission v. AT&T Inc., No. 09-1279, will consider whether a provision of the Freedom of Information Act concerning “personal privacy” applies to corporations. AT&T seeks to block the release of documents it provided to the F.C.C., which conducted an investigation into claims of overcharges by the company in a program to provide equipment and services to schools. The documents were sought under the freedom of information law by a trade association representing some of AT&T’s competitors. AT&T relied on an exemption to the law for law enforcement records that could “constitute an unwarranted invasion of personal privacy.” The United States Court of Appeals for the Third Circuit, in Philadelphia, ruled for the company, relying in part on a definition of “person” in the law that included corporations. “Corporations, like human beings, face public embarrassment, harassment and stigma” because of their involvement in law enforcement investigations, Judge Michael A. Chagares wrote for a unanimous three-judge panel. The federal government, represented by Solicitor General Kagan, urged the Supreme Court to reject the argument that the exemption “protects the so-called ‘privacy’ of inanimate corporate entities.” The court also agreed to hear a case on the exclusionary rule, which sometimes requires the suppression of evidence obtained through police misconduct. The court has cut back on the rule in recent decisions. The new case, Kentucky v. King, No. 09-1272, will consider a ruling from the Kentucky Supreme Court overturning a drug conviction. The case began when police officers pursued a man suspected of dealing drugs into an apartment complex, heard a door slam but were unsure about which unit he had entered. Smelling marijuana outside one unit, they forced their way in without a warrant. The police did not find the suspect but did find several people with drugs. The state court said they should not have entered without a warrant and threw out a defendant’s conviction. The attorneys general of 16 states joined Kentucky in urging the Supreme Court to hear the case. Audio of Arguments The court also took a small step toward allowing greater public access to its proceedings, announcing that it would post audio recordings of arguments at the court on its Web site a few days after they take place. The court does not allow cameras in its courtroom but does release same-day transcripts of arguments. Its general practice has been to delay release of audio recordings until the beginning of the next term. Justices take Calif. county's case against drugmakers (Sept. 28, 2010)Case Reference:?Astra USA v. Santa Clara CountyThe Supreme Court has agreed to decide whether local governments can sue drug makers for overcharging public hospitals for prescription drugs. In 2005, Santa Clara County, Calif., filed a class-action lawsuit based on U.S. Department of Health and Human Services reports, alleging that pharmaceutical companies have systemically overcharged hospitals and clinics, making them pay millions of dollars more than necessary for prescription drugs. The Inspector General's report also argued that the government is ill-equipped to ensure that clinics are being charged correctly.The U.S. District Court for the Northern District of California dismissed the case, but in March 2008, a three-judge panel on the 9th U.S. Circuit Court of Appeals overturned the decision.Attorneys for the drug makers, which include AstraZeneca Pharmaceuticals LP, Aventis Pharmaceuticals Inc., Pfizer Inc., Bristol-Myers Squibb Co. and GlaxoSmithKline PLC, argue that Congress intended HHS to have the sole right to sue for violations of the program.On Sept. 28, 2010, the U.S. Supreme Court agreed to review the case. Justice Elena Kagan recused herself in the cases, presumably because of her role at earlier stages as solicitor general.Question presented: Whether, in the absence of a private right of action to enforce a statute, federal courts have the federal common law authority to confer a private right of action simply because the statutory requirement sought to be enforced is embodied in a contract.Drugmakers Win U.S. High Court Hearing in Bid to Stop SuitsSeptember 28, 2010, 8:25 PM EDTBy Greg Stohr Sept. 28 (Bloomberg) -- The U.S. Supreme Court agreed to hear an appeal by drugmakers seeking to block thousands of public hospitals and community health clinics from suing for violations of a federal program that lets them buy medicines at a discount.The justices today granted review to an appeal by companies including units of Pfizer Inc., Merck & Co. and Sanofi-Aventis SA. The companies are challenging a lower court ruling permitting a suit against the drugmakers filed by the California county of Santa Clara.The dispute centers on the rights of 14,500 health providers that collectively spend about $4 billion a year on outpatient drugs. A 2006 government report found that those providers overpaid by $3.9 million during one month.A San Francisco-based federal appeals court said the providers can sue to enforce a contract between the drugmakers and the federal government. The companies said the federal law governing the discount program doesn’t authorize private suits.The legal issues are similar to those that have led to suits -- and hundreds of millions of dollars in settlements -- over the way drugmakers price their products for Medicaid, the government health care program for the poor.The case is Astra USA v. County of Santa Clara, 09-1273.--Editors: Jim Rubin, Laurie Asseo.To contact the reporter on this story: Greg Stohr in Washington at gstohr@.To contact the editor responsible for this story: Mark Silva at msilva34@.Court grants case about raising interest rates on credit cardholders (June 21, 2010)Case Reference:?Chase Bank USA v. McCoyThe Supreme Court has agreed to decide whether a creditor seeking to raise the interest rate on a credit card where the cardholder defaulted must provide the cardholder with a change in terms notice. James McCoy filed a class-action lawsuit on behalf of himself and others similarly situated against Chase Manhattan Bank, a national bank located in Delaware.McCoy alleged that the bank increased his interest rates retroactively to the beginning of his payment cycle after his account was closed to new transactions as a result of a late payment to Chase or another creditor.McCoy claimed that the rate increase violated the Truth in Lending Act and Delaware law because Chase gave no notice of the increase until the following periodic statement, after it had already taken effect.The U.S. District Court for the Central District of California dismissed McCoy’s complaint with prejudice, holding that because Chase discloses the highest rate that could apply due to McCoy’s default in its cardmember agreement with McCoy no notice was required.But in March 2009, a divided three-judge panel on the 9th U.S. Circuit Court of Appeals held that Regulation Z of the Truth in Lending Act does requires Chase to issue a notice, even though the new rates were based on consumer default.At the request of the U.S. Supreme Court, the Obama administration filed an amicus brief, which urged the justices to review the lower court decision and remand for further review in light of Federal Reserve Board’s authoritative interpretation of the relevant regulations.On June 21, the high court agreed to hear the case.Question presented: When a creditor increases the periodic rate on a credit card account in response to a cardholder default, pursuant to a default rate term that was disclosed in the contract governing the account, does Regulation Z, 12 C.F.R. § 226.9(c), require the creditor to provide the cardholder with a change-in-terms notice even though the contractual terms governing the account have not changed?California Consumer Finance LitigationPosted at 6:00 AM on July 26, 2010 by Daniel O'Rielly One to Watch: Chase Bank USA, NA v. McCoy?The U.S. Supreme Court has granted certiorari in Chase Bank USA, NA v. McCoy, on appeal from the 9th Circuit opinion in which the Court held that a credit card issuer's retroactive rate increase after a default requires contemporaneous notice to the consumer under the Truth in Lending Act, 15 U.S.C. §§ 1601-1615 and Regulation Z, 12 C.F.R. §226.In McCoy, plaintiff alleged that credit card issuer Chase Manhattan Bank, USA, increased the interest rate on his card retroactively, without notice to him, after he made a late payment. Plaintiff sued Chase, alleging that the rate increase violated TILA and Delaware law. The district court dismissed plaintiff's claims with prejudice, holding Chase was not required to give notice because its cardholder agreement discloses the highest rate that could apply in the case of default. Plaintiff appealed.On appeal, the Ninth Circuit reversed in part, affirming only the dismissal of two of plaintiff's state law causes of action. On the notice issue, the Court analyzed the notice requirements in Regulation Z. Chase asserted that Section 226.6 requires notice only of a change in the contractual terms of its cardholder agreement. Plaintiff asserted that Section 226.6 also requires notice of the items specifically identified in Section 226.6(a)(2), including the a change in the interest rate. The Court agreed with plaintiff, relying on its interpretation of the Official Staff Commentary to Regulation Z by the Federal Reserve Board, and concluding that specific contemporaneous notice was required for a rate increase triggered by a consumer default.Justices will address vaccine liability (March 8, 2010)Case Reference:?Bruesewitz v. WyethThe Supreme Court has agreed to rule on the legal right to sue by parents whose children have been injured by vaccines.The case concerns whether the National Childhood Vaccine Injury Act bars parents in Pittsburgh from suing the pharmaceutical company Wyeth over the side effects allegedly caused by its diphtheria, tetanus and pertussis vaccines.Robalee and Russell Bruesewitz claimed their daughter developed a seizure disorder after getting the vaccine when she was six months old. The 3rd U.S. Circuit Court of Appeals dismissed their claims as pre-empted by the act.The federal appeals court decision conflicts with a ruling by the Georgia Supreme Court, which held that the federal law does allow some design defect claims against vaccine manufacturers.Pfizer Inc., which purchased Wyeth last year, had also urged the high court to hear the case in order to set a precedent for future liability.On March 8, 2010, the Supreme Court granted review. Question presented: Whether Section 22(b)(1) of the National Childhood Vaccine Injury Act of 1986 — which expressly preempts certain design defect claims against vaccine manufacturers “if the injury or death resulted from side effects that were unavoidable even though the vaccine was properly prepared and was accompanied by proper directions and warning” — preempts all vaccine design defect claims, regardless whether the vaccine’s side effects were unavoidable.Wall Street Journal OCTOBER 16, 2010A Real Vaccine Scare Lawsuits, autism and the Supreme Court. The Supreme Court waded into one of the great scare campaigns of the past decade this week, considering whether drug manufacturers may be sued for injuries allegedly caused by vaccines. The case will determine whether hundreds of lawsuits blaming vaccines for a child's autism may descend on state courts. In Bruesewitz v. Wyeth, the case was brought by the parents of Hannah Bruesewitz, who say her inoculation to prevent diphtheria, pertussis and tetanus in 1992 created seizures that left her disabled. The vaccine in question was discontinued and replaced in 1998, and the Bruesewitzs argue that Wyeth and the FDA were too slow to make the switch.At the center of the debate is the National Childhood Vaccine Injury Act, which Congress passed in 1986 to prevent vaccine manufacturers from being driven out of business by tort claims. Under that law, vaccine manufacturers could not be held liable for tort claims if the injury in question was "unavoidable, even though the vaccine was properly prepared and accompanied by proper directions and warnings." Congress also created a Vaccine Court within the Court of Federal Claims to manage injury allegations. It is operated as a no-fault system, and those who believe they were injured may receive compensation from a government-managed kitty funded by a tax on vaccine manufacturers. The Vaccine Court ruled that Hannah Bruesewitz's injuries had not been adequately shown to be caused by the vaccine, leading the family to file suit in Pennsylvania. The case was moved to federal district court, which ruled that the family's claim was pre-empted by federal law. The Third Circuit Court of Appeals agreed.While the Bruesewitz's vaccine claim is not autism related, its outcome will have legal implications for the efforts to link vaccinations to autism. Attempts to seek compensation for the diagnosis have persisted despite overwhelming scientific evidence that has found no connection. In February, the British medical journal The Lancet retracted a study that linked the measles-mumps-rubella vaccine to autism and contributed to a rash of parents fleeing the inoculation. In March, special masters in the Vaccine Court likewise ruled against parents claiming the vaccine was responsible for their children's autism.While the 1986 Vaccine Injury Act bars state tort lawsuits alleging defective design, two other kinds of lawsuits go forward all the time in pharmaceutical industry product liability cases. In the first version, plaintiffs may allege that the manufacturer failed to give adequate warnings about the dangers of the product. In the second, plaintiffs may claim that the vaccine itself was not manufactured properly.The Bruesewitz case is of particular interest because it falls into the bucket of so-called express pre-emption cases, in which a law explicitly bars state tort claims. In 2008's Riegel v. Medtronic, the Supreme Court ruled that federal law explicitly pre-empted state product liability for medical device claims. There, as here, the alternative remedy was favored by a horde of trial lawyers hoping for a new state tort jackpot. At oral argument on Tuesday, the Justices seemed to be dubious of plaintiff claims that the 1986 vaccine law left room for debate. Responding to the suggestion that Congress's intent was not to pre-empt all suits, Chief Justice John Roberts responded that "I would have thought the argument would go the other way: That because they set up a compensation scheme, that was a good sign that they didn't want to allow state law claims." Anthony Kennedy, often a swing vote, was skeptical that manufacturers could survive the assault from new tort claims. Vaccinating children against the many diseases that used to afflict them has been one of the most successful public health improvements in modern times. The Obama Administration, which filed an amicus brief in support of Wyeth in the case, has said it is appropriate to recognize pre-emption in cases where the statute makes the pre-emption explicit. That's a shot of good sense.Justices split on childhood-vaccine caseBy Robert BarnesWashington Post Staff WriterWednesday, October 13, 2010; A2 The Supreme Court seemed divided Tuesday on whether allowing lawsuits by people allegedly harmed by the side effects of childhood vaccines would hurt the general public by exposing drug companies to so much risk that they would leave the business. The justices agreed that Congress has gone to great lengths to shield vaccine-makers from suits by the few who have had an adverse reaction to a vaccine approved by the Food and Drug Administration. The issue is whether those hurt by vaccines have a right to sue manufacturers if they can prove that a safer version was available. "We are talking about trying to eliminate some of the most horrifying and horrible incidents of injury to vaccines that we compel children to take," said David C. Frederick, a Washington lawyer. He represents the parents of Hannah Bruesewitz, 18, who began to have seizures as an infant after receiving the third of five scheduled doses of Wyeth's Tri-Immunol diphtheria-pertussis-tetanus vaccine. The company, now owned by Pfizer, has taken the drug off the market. But Russell and Robalee Bruesewitz, whose daughter will require lifelong care, have been unable to scale the obstacles that Congress put in the way of those trying to sue vaccine-makers. The National Childhood Vaccine Injury Act of 1986 said all such claims must first go to a special tribunal commonly called the "Vaccine Court." The tribunal ruled against the Bruesewitzes, saying they had not proved that the vaccine caused Hannah's problems. The couple then sued under Pennsylvania tort law. But federal courts said the suit could not proceed, because federal law prohibits claims against "design defects" in vaccines. The question before the Supreme Court is whether that is correct, or whether Congress left some remedy for those who say injury or death could have been avoided if the manufacturer had offered a safer vaccine. Kathleen Sullivan, representing Wyeth, told the court that Congress's intent was clear and that it acted "against the backdrop of a wave of tort litigation that threatened to drive manufacturers out of the business of providing the vaccine." She said the ruling will be important for the future as well. "There are 5,000 claimants in vaccine court now who claim there is a relationship between the mumps, measles and rubella vaccine and autism," Sullivan said. "They have lost all six test cases, and when the individual cases are resolved, that is 5,000 potential claimants in state court." But Sullivan faced tough and repeated questioning from Justices Sonia Sotomayor and Ruth Bader Ginsburg. Without the prospect of a lawsuit, Sotomayor asked, "what is the motivation for manufacturers to voluntarily remove a drug that is causing harm to the public before the FDA acts?" Sotomayor's repeated questioning indicated that she did not think Sullivan produced an answer. Ginsburg said that if Congress had meant to exempt vaccine manufacturers from all suits, it could have simply done that. "Congress didn't make that statement," she said. Frederick's tough questions came from Chief Justice John G. Roberts Jr. and Justices Antonin Scalia and Samuel A. Alito Jr. When Frederick told the court that the industry was protected by Congress in 99 percent of the cases, Roberts wondered what the payouts might be in the 1 percent not covered and whether that would convince the vaccine makers that it was not worth their investments. "It doesn't take too many $60 million verdicts to make you come out on the other side of your calculus," he said. The government agrees with Wyeth and says Congress wanted to make sure that vaccines remain available. Assistant Solicitor General Benjamin J. Horwich said it is up to the Centers for Disease Control and Prevention to make decisions about whether there is a safer vaccine available than the one currently in use. He said it would be "extraordinary" if Congress had preferred a system in which "juries would effectively be second-guessing decisions like that." Justice Elena Kagan was recused from the case because of her past work on it when she was solicitor general. Roberts sold his holdings in Pfizer in August so that the case would not be heard by only seven justices. The lack of a full court makes it harder for the Bruesewitzes. The justice Kagan replaced, John Paul Stevens, was one of the court's strongest believers in consumers' ability to sue in state courts. And Frederick must persuade five of the eight to overturn the U.S. Court of Appeals for the 3rd Circuit to allow the suit to proceed. If the justices are evenly split, the judgment of the lower court is upheld, but it does not set a national precedent. The case is Bruesewitz v. Wyeth. Justices to rule on scope of 'cat's paw' theory in employment cases (April 19, 2010)Case Reference:?Staub v. Proctor HospitalThe U.S. Supreme Court has agreed to decide whether an employer can be found liable for discrimination when a biased supervisor does not make employment determinations but influences the decision-maker. As a member of the U.S. Army Reserves, Vincent Staub was required to attend occasional weekend training as well as a two-week training program during the summer. Reservists are protected from discrimination by the Uniformed Services Employment and Reemployment Rights Act. Staub was also a lab technician at Proctor Hospital in Peoria, Ill. He was fired in 2004 and later filed a lawsuit claiming that his supervisor was out to get him as a result of disapproval of his military service. He won $57,640 in damages at trial. But a more senior executive, not the supervisor, ultimately decided to fire Staub. A three-judge panel on the 7th U.S. Circuit Court of Appeals reversed, holding that there was no evidence that the decision-maker shared the supervisor's anti-military bias. “Decision makers usually have to rely on others’ opinions to some extent because they are removed from the underlying situation," the appeals court held. "But to be a cat’s paw requires more; true to the fable, it requires a blind reliance, the stuff of 'singular influence.'”The so-called “cat's paw” theory derives from a fable in which a monkey convinces a cat to steal chestnuts from a fire. The cat burns her paw in the attempt, but the monkey ultimately enjoys the fruits of her labors by gobbling up the chestnuts. The Obama administration urged the justices to hear the case, and on April 19, 2010, the U.S. Supreme Court granted review. Question presented: In what circumstances may an employer be held liable based on the unlawful intent of officials who caused or influenced but did not make the ultimate employment decision?Labor: Supreme Court to Address “Cat’s Paw” Theory in Employment Discrimination Case?The Supreme Court’s decision in Staub v. Proctor Hospital will resolve a circuit split on the degree of influence necessary to apply “cat’s paw” theory.By Vincent CinoPublished on?9/13/2010?The U.S. Supreme Court is currently scheduled to examine the “cat’s paw” theory of liability for employment discrimination during its next term. The issue before the Court in a case entitled Staub v. Proctor Hospital is: “In what circumstances may an employer be held liable based on the unlawful intent of officials who caused or influenced but did not make [an] ultimate [negative] employment decision?”?The plaintiff in Staub, an Army reservist, sued his employer under the Uniformed Services Employment and Reemployment Rights Act (USERRA) after the company’s vice president of Human Resources terminated his employment. According to Staub’s theory of the case, the Human Resources V.P. acted as a “cat’s paw” for non-decision makers who allegedly harbored anti-military animus and provided adverse information regarding plaintiff’s professional conduct.???After hearing evidence regarding the discriminatory animus of Staub’s direct supervisors, the jury in an Illinois district court found the employer liable, even though plaintiff presented no evidence of discriminatory animus on the part of the ultimate decision maker—the Human Resources V.P. The district court allowed the jury verdict to stand, but the U.S. Court of Appeals for the Seventh Circuit reversed the lower court’s decision.???As the Seventh Circuit explained, the term “cat’s paw” comes from a 17th century fable authored by French poet Jean de La Fontaine. In the fable, a monkey persuades a cat to snatch chestnuts from a fire. While the cat burns her paw in the fire, the monkey makes off with the chestnuts. Today, the federal appeals court explained, a cat’s paw is “a ‘tool’ or ‘one used by another to accomplish his purposes.’”?According to the Seventh Circuit, Staub could not prevail under the cat’s paw theory. “[T]rue to the fable, [to be a cat’s paw] requires a blind reliance, the stuff of ‘singular influence,’” the court explained.? “[T]he discriminatory animus of a nondecisionmaker is imputed to the decisionmaker [only] where the former has singular influence over the latter and uses that influence to cause the adverse employment action.”The U.S. Supreme Court agreed to review the Seventh Circuit’s decision to resolve a circuit split regarding what degree of influence over the ultimate decision maker is required under the cat’s paw theory. While the Seventh Circuit has adopted something akin to a “functional decisionmaker” standard, in other circuits, an employer may be liable if the bias official’s discriminatory intent in some way caused the result, including by providing adverse information to the ultimate decision maker. Courts in other circuits have allowed evidence regarding discriminatory animus of a non-decision maker if the biased official “influenced” or “played a role” in the final decision.The U.S. Supreme Court is scheduled to hear oral argument in Staub on November 2nd.????Vincent A. Cino is a partner in the Morristown, N.J., office of Jackson Lewis LLP.?He is the firm’s National Director of Litigation.Court takes "first sales" copyright case (April 19, 2010)Case Reference:?Costco v. OmegaThe U.S. Supreme Court has agreed to decide whether the first-sale doctrine applies to imported goods manufactured outside the United States.Watchmaker Omega sued Costco when it bought a shipment of the Swiss-made watches from another importer and sold them for below Omega's suggested retail price. Omega contends that Costco's sale infringes on their copyright of the Omega logo on the back face of the watch. Meanwhile, Costco argues that Omega is precluded from bringing a copyright action after a sale due to the Doctrine of Exhaustion, or "first sale" rule, under which certain rights are "exhausted" after a sale of the copyrighted good. A judge on the U.S. District Court for the Central District of California backed Costco, but the 9th U.S. Circuit Court of Appeals reversed, holding that the first-sale doctrine did not apply to imported goods manufactured abroad."Because there is no genuine dispute that Omega made the copies of the Omega Globe Design in Switzerland, and that Costco sold them in the United States without Omega's authority, the first sale doctrine is unavailable as a defense to Omega's claims," Judge Milan D. Smith, Jr., wrote for the three-judge panel. Solicitor General and Supreme Court nominee Elena Kagan urged the justices to stay out of the case.But on April 19, the U.S. Supreme Court agreed to take on the dispute. Question presented: Whether the first-sale doctrine applies to imported goods manufactured abroad.Patent Litigation Weekly: Costco v. Omega — The Patent AngleBy Joe MullinCorporate CounselSeptember 13, 2010In November, the Supreme Court will hear arguments in Costco Wholesale Corp. v. Omega S.A., the next intellectual property case on the high court's docket. On the surface, Costco seems to be all about copyright, specifically whether luxury watchmaker Omega can use copyright law to control the importation and resale of its products, even if it has already sold them abroad at a (relatively) low price. But the outcome of this copyright case is going to reverberate among patent lawyers as well. Here's why: In issuing its ruling in the case, the U.S. Court of Appeals for the Ninth Circuit ruled that the "first sale" doctrine—which bars copyright owners from using infringement lawsuits to stifle secondary markets, such as used book stores or other re-sellers—doesn't apply if that "first sale" occurred abroad. Now, Costco and other big retailers—together with Internet retailers, libraries, and public interest groups are complaining that if the Supreme Court allows the Ninth Circuit ruling to stand, secondary markets of all types—retailers who buy internationally, libraries, video-game stores—might be held hostage by copyright holders. As an amicus brief filed last month by Intel Corp. points out, a similar battle is taking place at the U.S. Court of Appeals for the Federal Circuit. That court has refused to apply patent exhaustion (essentially the "first sale" doctrine in a patent context) to sales abroad. Intel, the world's largest chipmaker, objects to that position, asking the Supreme Court in its amicus brief to clarify that copyright and patent rights both end after a legitimate sale—whether that sale occurs abroad or within the U.S. Intel—which the company's brief notes owns a "vast array" of patents—is eager to see those patent rights limited by exhaustion. To understand why, one need look no further than the case of Quanta Computer v. LG Electronics. In that case, LG sued Quanta for patent infringement because it was putting Intel chipsets inside computers that Quanta assembled—even though Intel had already purchased a worldwide license to the relevant LG patents. That case went to the Supreme Court, which showed no sympathy for LG's attempt to wring a second royalty payment out of its patents. The high court ruled 9-0 in favor of Quanta in 2008. For Intel, it was an important win. The company frequently negotiates rights with patent-holders like LG on a worldwide basis—and it doesn't want those patent-holders to be able to sue the computer manufacturers who are Intel's customers. But even after Quanta, the Federal Circuit has refused to apply the patent exhaustion principle to sales abroad, says Matthew McGill, one of the Gibson Dunn & Crutcher lawyers who wrote the amicus brief for Intel in Costco v. Omega. In Fujifilm v. Benun, decided in June, a Federal Circuit panel found that Quanta shouldn't influence the court's own precedent. "What makes the Benun case newsworthy is that the court there adheres to its view that the exhaustion doctrine does not apply to sales made abroad," said McGill. The reasoning adopted in Benun by the Federal Circuit has its origins in a long-running dispute between Fujifilm and a company called Jazz Photo. Jazz Photo acquired disposable cameras made by Fujifilm that had been used and disposed of, then refurbished them and imported them into the United States. The Federal Circuit ruled in 2001, and again in 2005, that Jazz wasn't protected from infringement allegiations; the court wouldn't apply "patent exhaustion" to a sale abroad because, it said, that would violate extraterritoriality rules. With its Benun decision in June, the Federal Circuit upheld that line of reasoning despite Quanta, saying Quanta's patent exhaustion rules simply didn't apply to international sales because of territoriality concerns—the same reason the Ninth Circuit cited when it refused to apply first sale abroad in Costco. In its brief, Intel argues that allowing those rules to stand would amount to an "end-run" around patent exhaustion—a legal doctrine that is essential for the company to protect its customers, because so many sales of its chipsets do occur abroad. "If the rightsholder can hold that the patent rights can spring back to life, with each new international boundary that the technology crosses," McGill said, "that changes the dynamic significantly."? Omega filed its brief responding to the Supreme Court challenge last week, and this week, in the final round of briefs, was joined by several amicii, including the American Bar Association and the software industry. While Intel is concerned with large sales, the rules at issue also apply to individual consumers, notes McGill. A consumer who buys a computer in Canada—a sale that would pay off all the relevant IP rightsholders—could fly back to the U.S. and still be liable for patent infringement for importing the computer. In its brief, Omega argues that Congress deliberately authorized copyright owners to engage in "market segmentation" that allows it to control pricing in various markets. But McGill argues that Omega's interest in price control is a policy argument not addressed in the copyright law. "In the copyright laws, nothing indicates that Congress had 'international market segmentation' in mind," he said. In arguing that the Federal Circuit has misapplied Supreme Court rules, McGill may find the justices to be a receptive audience. In its recent patent decisions—including the landmark eBay v. MercExchange case from 2006 and the 2007 Microsoft v. AT&T—for which McGill was a member of Microsoft's legal team—the Court has not hesitated to reverse the Federal Circuit, even when it comes to that court's longstanding practices.Court takes funeral protest case (March 8, 2010)Case Reference:?Snyder v. PhelpsThe Supreme Court has agreed to decide whether the First Amendment protects picketing the funerals of soldiers killed in combat.The case concerns a lawsuit filed by the family of a Marine, Matthew Snyder, after members of the Westboro Baptist Church picketed his funeral.The family accused the Westboro Baptist Church and its founders of defamation, invasion of privacy and the intentional infliction of emotional distress for displaying signs that said, "Thank God for dead soldiers" and "Fag troops" at Snyder's funeral.U.S. District Judge Richard Bennett awarded the family $5 million in damages, but a three-judge panel on the 4th U.S. Circuit Court of Appeals held that the judgment violated the First Amendment's protections on religious expression. The church members' speech is protected, "notwithstanding the distasteful and repugnant nature of the words," according to the court.On March 8, 2010, the U.S. Supreme Court agreed to hear the case.Question presented: (1) Whether the prohibition of awarding damages to public figures to compensate for the intentional infliction of emotional distress, under the Supreme Court’s First Amendment precedents, applies to a case involving two private persons regarding a private matter; (2) whether the freedom of speech guaranteed by the First Amendment trumps its freedom of religion and peaceful assembly; and (3) whether an individual attending a family member’s funeral constitutes a “captive audience” who is entitled to state protection from unwanted communication.October 6, 2010Justices Take Up Funeral-Protest CaseBy ADAM LIPTAKWASHINGTON — The Supreme Court heard arguments on Wednesday in a highly charged case involving protesters objecting to homosexuality who picketed a military funeral.The father of a fallen Marine sued members of a Kansas church who had used his son’s funeral to spread their message that God is punishing the United States for its tolerance of homosexuality by killing its soldiers.“We’re talking about a funeral,” Sean E. Summers, a lawyer for the father, Albert Snyder, told the justices. “Mr. Snyder simply wanted to bury his son in a private, dignified manner.”The lawyer on the other side, Margie J. Phelps, said the First Amendment protected the protest, where seven pickets at some distance from the funeral carried signs with messages like “Thank God for dead soldiers” and “God hates you.”Ms. Phelps is a daughter of the pastor of the church, Westboro Baptist Church of Topeka, Kan. Her argument alternated between smooth exposition of First Amendment doctrine and support for the church’s message.“Nation, hear this little church,” she said. “If you want them to stop dying, stop sinning.”Justice Ruth Bader Ginsburg noted that state and local governments had enacted laws creating content-neutral buffer zones around funerals. She suggested that those sorts of laws were a better response to protests than allowing private-injury suits.Justice Samuel A. Alito Jr. said the existence of a buffer zone imposed by law did not necessarily pre-empt other remedies.Mr. Snyder won an $11 million jury verdict against the pastor, Fred W. Phelps Sr., and his church, for intentional infliction of emotional distress, which required proof of outrageous conduct, and for invasion of privacy. But a federal appeals court overturned the verdict on First Amendment grounds.The argument on Wednesday featured disputes about the facts and a parade of hypothetical alternatives.Mr. Summers said that some of the signs made the fallen Marine, Lance Cpl. Matthew A. Snyder, and his family their targets, including one that said, “You’re going to hell.”Justice Ginsburg noted that the church used those signs at many protests. “It sounds like the ‘you’ was the whole society, the whole rotten society in their view,” she said.Mr. Summers then made a concession that some justices seemed to view as problematic, saying that his client would have had no case if the signs were purely political protests against, say, the war in Iraq.“So the intrusion upon the privacy of the funeral is out of the case,” Justice Antonin Scalia mused.Mr. Summers tried to distinguish his case from the leading decision in this area, Hustler Magazine v. Falwell in 1988, which overturned a jury award in favor of the Rev. Jerry Falwell for intentional infliction of emotional distress. That case involved a public figure, Mr. Summers said, while Mr. Snyder was a private one.Justice Elena Kagan responded with a quotation from the Falwell decision.“?‘Outrageousness’ in the area of political and social discourse has an inherent subjectiveness about it which would allow a jury to impose liability on the basis of the jurors’ tastes or views, or perhaps on the basis of their dislike of a particular expression,” she said, quoting Chief Justice William H. Rehnquist’s majority opinion.“How is that sentence less implicated,” Justice Kagan asked, “in a case about a private figure than a case about a public figure?”Mr. Summers said private grief raised different issues.Justices Kagan and Alito asked Ms. Phelps questions about other sorts of potentially hurtful conduct, like following a wounded soldier around or accosting a grandmother after a visit to a soldier’s grave. Ms. Phelps for the most part parried the questions, saying that antistalking laws and the “fighting words” exception to the First Amendment could address those situations.The Reporters Committee for Freedom of the Press and 21 news organizations, including The New York Times Company, filed a brief supporting the Kansas church. It said the First Amendment protects even hateful speech on matters of public concern.Before the argument in the case, Snyder v. Phelps, No., 09-751, members of the church protested outside the Supreme Court. Abigail Phelps, another of Mr. Phelps’s daughters, carried a sign that said “America is doomed.”Ms. Phelps said she expected the court to rule in favor of the church. “They’re going to uphold the law of the land that you may express a contrary view in a public forum without being sued,” she said.Court takes veteran's disability case (June 28, 2010)Case Reference:?Henderson v. ShinsekiThe Supreme Court has agreed to decide whether a veteran's notice of appeal can be filed late if there is sufficient reason.Korean War veteran David Henderson was discharged from the military in 1952 after receiving a diagnosis of paranoid schizophrenia. The government denied his benefits claim in 2004 and dismissed his appeal because he missed a filing deadline by 15 days. Henderson asked the Veterans Court to excuse his late filing because it was caused by his service-related disability, a claim his psychiatrist supported under oath. The Veterans Court refused to do so. In December, 2009, a divided U.S. Court of Appeals for the Federal Circuit affirmed the Veterans Court's decision. On June 28, 2010, the Supreme Court agreed to review the case. Question presented: Whether the time limit in 38 U.S.C. § 7266(a) constitutes a statute of limitations subject to the doctrine of equitable tolling, or whether the time limit is instead jurisdictional and therefore bars application of that doctrine.Copyright 2010. ALM Media Properties, LLC. All rights reserved. National Law Journal OnlinePage printed from: to ArticleBrief of the Week: In veterans' fight, a question of timeTony Mauro September 29, 2010?It took the medical community decades, if not centuries, to recognize post-traumatic stress disorder as more than vaguely defined "shell shock" among war veterans. The Supreme Court gave recognition to it as well in a little-noticed decision last fall, and now a brief filed in a case that will be argued Dec. 6 is seeking to build on that decision to help veterans who are late in seeking benefits. Paul Smith, chair of the appellate section at Jenner & Block, authored the friend-of-the-court brief on behalf of the American Legion in Henderson v. Shinseki. The case asks whether the time limit set by law for filing veterans' benefit appeals is jurisdictional and cannot be waived, or can be tolled or delayed in some circumstances. Korean War veteran David Henderson filed the suit after his appeal of the denial of benefits was rejected for missing the deadline by 15 days. The U.S. Court of Appeals for the Federal Circuit, invoking the recent Bowles v. Russell Supreme Court decision, said the deadline was a jurisdictional matter – meaning that the courts do not even have jurisdiction to reconsider an appeal that is filed past the deadline. Henderson's lawyer before the Court, Arnold & Porter appellate and Supreme Court practice head Lisa Blatt, told the Court in her petition, "Congress did not intend to deny any court access to petitioner and countless other veterans who have made untold sacrifices to the Nation." In reply, acting solicitor general Neal Katyal wrote that strict enforcement of time limits on veterans' appeals "will undoubtedly produce painful results in particular cases." But he added, "It is ultimately up to Congress, however, to strike what it views as the appropriate balance between the protection of deserving litigants' access to appellate review, on the one hand, and countervailing systemic interests in finality and efficient administration on the other." Blatt asked Smith to write a brief making the point that post-traumatic stress disorder makes it uniquely difficult for victims to comprehend and act on deadlines. Smith said it was wthe first time his firm has worked with the American Legion. "It was a very pleasant experience." Smith wrote, "Veterans suffer from PTSD at an alarmingly high rate." He cited estimates that as many as 770,000 veterans have been diagnosed with it since 2001. Strict enforcement of the 120-day deadline, Smith added, "would turn a blind eye to the fact that the same disability for which a veteran seeks federal assistance might also prevent him or her from filing within 120 days of the benefit's denial." Jenner & Block already had familiarity with PTSD, Smith said, from a 2009 death penalty case Cone v. Bell, in which the defendant's mental condition was an issue. In an amicus brief, then-partner Donald Verrilli sketched some of the same history of the disorder that Smith outlined in the Henderson brief. Verrilli is now deputy White House counsel after a stint in the Justice Department Smith invoked a November 2009 per curiam decision in Porter v. McCollum, another death penalty case in which the trial lawyer at sentencing failed to present mitigating evidence that the defendant – also a Korean War veteran – suffered from PTSD. We wrote about the case here. "Our nation has a long tradition of according leniency to veterans in recognition of their service, especially for those who fought on the front lines," the Court wrote. "The somber and sobering reality is that hundreds of thousands of veterans return form service bearing the emotional and psychological scars of their combat experiences," Smith wrote. "Unless the Court overturns the Federal Circuit's unbending ruling, those veterans with the most debilitating service-related disabilities wil be at greatest risk of losing judicial review of their federal benefits." Tony Mauro can be contacted at tmauro@.Justices take investors case against drug company (June 14, 2010)Case Reference:?Matrixx v. SiracusanoThe Supreme Court has agreed to decide whether the Securities Exchange Act requires a drug company to disclose all reports of "adverse events" linked to a particular drug to its shareholders.In 2004, shareholders filed a class-action lawsuit against Matrixx Initiatives Inc., contending that the publicly traded company violated SEC Rule 10b-5 by failing to let investors know of consumer complaints linking the cold medication Zicam to loss of smell. Federal Judge Mary Murguia of the U.S. District Court for the District of Arizona dismissed the shareholders' lawsuit in 2005. Last year, a three-judge panel on the 9th U.S. Circuit Court of Appeals reversed, reinstating the lawsuit.“The inference that appellees withheld the information intentionally or with deliberate recklessness is at least as compelling as the inference that appellees withheld the information innocently,” the appeals court said.In contrast, the U.S. Courts of Appeals for the First, Second and Third Circuits have held that drug companies have no duty to disclose adverse event reports until the reports provide statistically significant evidence that the adverse events may be caused by, and are not simply randomly associated with, a drug's use. “Expressly disagreeing with those decisions, the Ninth Circuit below rejected a statistical significance standard and allowed the case to proceed despite the lack of any allegation that the undisclosed adverse event reports were statistically significant,” Matrixx argued in asking the U.S. Supreme Court to review the case.On June 14, 2010, the high court agreed to hear the case. Question presented: Whether a plaintiff can state a claim under § 10(b) of the Securities Exchange Act and SEC Rule 10b-5 based on a pharmaceutical company’s nondisclosure of “adverse event” reports even though the reports are not alleged to be statistically significant.Supremes Smell A Live Issue in Zicam CaseJun. 15 2010 - 8:06 am | 70 views | 0 recommendations | 2 commentsposted by DANIEL FISHER of Forbes magazineThe U.S. Supreme Court has agreed to take up the tricky question of how just how much a company must disclose to investors — even when the information appears significant only in hindsight. The issue is in the news right now as BP flacks have determined that everything about the Gulf of Mexico oil spill is potentially stock-moving information and therefore can’t be disclosed to reporters on an individual basis.In the Matrixx Initiatives securities litigation, plaintiffs argued that the company should have disclosed less than 100 reports from doctors around the country that the company’s popular Zicam Cold Remedy could cause anosmia, or loss of smell. Displaying their usual flair for dogged investigation, the securities lawyers pounced on Matrixx after a 2004 report on Good Morning America about the anosmia complaints and subsequent plunge in the company’s stock price. The FDA warned consumers not to use zinc-based cold remedies in 2009.A district court threw out the securities lawsuit, saying the medical complaints were statistically insignificant at the time Matrixx failed to disclose them. The Ninth Circuit reversed, seeing an issue the “trier of fact” — read: jury — must decide. That put the Ninth in the familiar position of being in conflict with the First, Second and Third Circuits, according to Mayer, Brown attorney Dan Himmelfarb. Perfect time for the Supreme Court to step in and settle the law.Plaintiff lawyers argue practically everything is significant, but of course they view that through the optically perfect lens of hindsight. The question for the court is how much information is too much, especially in the area of pharmaceuticals litigation. Can investors make an informed judgment about whether to buy or sell Merck based on statistically insignificant reports of drug reactions that, in scientific terms, don’t rise above the level of noise? The Ninth Circuit has determined that a lay jury can sort through all this and deliver an informed decision. Of course that’s mere theory, since securities cases don’t actually make it to juries. Companies settle them rather than subject their shareholders to the risk of a game-over verdict.So the question before the Supreme Court is really whether securities lawyers can extract settlements from companies over information that was statistically insignificant at the time, or if companies must be guilty of withholding more important facts before they can be sued. Should BP be worried that its undersea cameras aren’t covering the entire blowout scene?Court takes on FICA medical resident dispute (June 1, 2010)Case Reference:?Mayo v. U.S.The Supreme Court has agreed to decide whether the services of a medical resident fall within the student exception of the Federal Insurance Contribution Act.The Mayo Foundation and the University of Minnesota file a lawsuit against the Internal Revenue Service in 2005 to fight the government's claim that they owed FICA taxes on their wage payments to full-time medical residents.The U.S. District Court for the District of Minnesota found that IRS regulations limiting the student FICA exception to students who are not full-time employees is not a permissible interpretation of the statute.In June 2009, a three-judge panel on the 8th U.S. Circuit Court of Appeals reversed, noting: "we must defer to the regulation limiting this exception to students who are not full-time employees because it is a permissible interpretation of the statute."On June 1, 2010, the U.S. Supreme Court accepted the case for review. Question presented: Whether the Treasury Department can categorically exclude all medical residents and other full-time employees from the definition of “student” in 26 U.S.C. § 3121(b)(10), which exempts from Social Security taxes “service performed in the employ of a school, college, or university” by a “student who is enrolled and regularly attending classes at such school, college, or university.”Medical Residents Could Win Big in Supreme Court Tax CaseBY MICHAEL COHN SEPTEMBER 22, 2010Attorneys are readying their arguments for a Supreme Court case that will determine whether universities have to pay Social Security taxes for students they employ as medical residents at their teaching hospitals.The Supreme Court agreed to hear the case next term. The case, Mayo Foundation for Medical Education and Research v. United States, involves a rule change by the Treasury Department in 2005 that said medical residents are full-time employees who do not qualify for a student exemption from the taxes. The Treasury removed the exemption five years ago for students who work over 40 hours per week, and said hospitals need to withhold FICA taxes from their paychecks.The Mayo Clinic and the University of Minnesota have challenged the regulation and requested refunds of the FICA taxes they have paid on behalf of residents since the rule change, arguing that the residents qualified for the student exemption I talked with John W. Windhorst Jr. of Dorsey & Whitney LLP in Minneapolis, one of the attorneys who filed the Supreme Court petition on behalf of the Mayo Foundation, to find out how the lawyers are preparing for the case, which is scheduled for oral argument on Nov. 8. He noted that a number of institutions and groups have filed amicus briefs in support of their position. They include Loyola University Medical Center, the American Hospital Association, the University of Texas System, and the Association of American Medical Colleges, among others.The actual argument before the Supreme Court will be made by Ted Olson, a lawyer with Gibson Dunn & Crutcher in Washington, D.C., who as a former Solicitor General is an experienced hand at arguing cases before the justices.Medical residents and medical schools could win a substantial sum if the High Court decides in their favor.“If we win the case, then the various institutions that have been filing refund claims for periods since April 1, 2005, will be entitled to receive refunds, and generally half of the refunds will go to the employer institutions and the other half will go to the residents,” said Windhorst.He doesn’t know how much money that will be, but expect a decision from the Supreme Court by late June, when the term generally ends. If the Mayo Foundation wins the case, the medical residents should not have to wait long to receive their withheld taxes after that point.“These refund claims have already been filed, and what would happen if we win is that the IRS would begin processing them, and they would be paid out over a period of months, I would guess,” said Windhorst.Accountants and tax preparers may be able to help with the process, though. “I think probably many of the institutions that have filed clams have consulted with lawyers and accountants in preparing them and they would be involved with processing them, I expect,” said Windhorst.? will rule on informational privacy question (March 8, 2010)Case Reference:?NASA v. NelsonThe Supreme Court has agreed to decide whether background checks of federal contractors at a NASA lab violate privacy rights or serve an imperative national security interest.The case concerns 2004 Bush administration antiterrorism initiative that extended background checks required for many government jobs to contract employees, including scientists and engineers at the Jet Propulsion Laboratory, a research facility operated by the California Institute of Technology under a contract with NASA. Twenty-eight lab employees, who do not have security clearances and are not involved in classified or military activities, filed suit over what they considered to be overly intrusive background checks.A three-judge panel on the 9th U.S. Circuit Court of Appeals ordered the background checks halted while the case continued. A divided court declined an en banc review. In dissent, Judge Andrew Kleinfeld wrote that the court’s decision was “likely to impair national security” by forbidding the government “from doing what any sensible private employer would do.”Chief Judge Alex Kozinski urged the high court to take the case.On March 8, 2010, the U.S. Supreme Court agreed to grant review.Question presented: Whether the government violates a federal contract employee’s constitutional right to informational privacy by (1) asking in the course of a background investigation whether the employee has received counseling or treatment for illegal drug use that has occurred within the past year and/or (2) asking the employee’s designated references for any adverse information that may have a bearing on the employee’s suitability for employment at a federal facility — when the employee’s and reference’s responses are used only for employment purposes, and the information obtained is protected under the Privacy Act, 5 U.S.C. § 552a.LAW POLITICS SPACE SUPREME COURT -- October 5, 2010 at 5:08 PM EDTInside the Supreme Court: Marcia Coyle on NASA Background Checks CaseBY: BETH SUMMERSCourtroom sketch courtesy William HennessyHow much personal information should a job applicant have to give up to a prospective employer? That's the question the Supreme Court wrestled with Tuesday as it heard arguments in the privacy case NASA v. Nelson. Marcia Coyle of The National Law Journal was in the courtroom.Set the stage for us. What was it like inside the court?MARCIA COYLE: The first argument of day involved the National Aeronautics and Space Administration, or NASA, which had been sued by a group of scientists from the California Institute of Technology. Those scientists were working as contract employees in one of NASA's research labs in California. The court was full, as usual, with a large group of spectators, which the court will continue to see likely until the weather gets colder.The arguments in the NASA case were really quite spirited. The case involves an issue which on its face really applies to government employees, but can have implications for employees in private companies as well. The case really asks how much information the government can demand in background investigations of potential employees before violating what's come to be called a constitutional right to informational privacy.What is the background of the case? How did NASA v. Nelson reach the Supreme Court?MARCIA COYLE: In 2005, NASA implemented a new background investigation of contract workers, and that would include the scientists involved in this case. In doing those investigations, there are very extensive questionnaires. The scientists didn't object to most of the questions, but they had problems with essentially two of the questions on two different forms. They did not object to being asked whether they had used, possessed or supplied illegal drugs in the past year, but they did object to information requests about any treatment or counseling they had received. On another form, they objected to the open-ended question by the government which asked references if they had any information bearing on the person's suitability for employment -- derogatory as well as positive information.They sued NASA, claiming their privacy right was violated, and a federal appellate court agreed that those particular questions were too broad or not narrowly tailored to achieve what the government was trying to accomplish with the background checks. The appellate court issued what is known as a preliminary injunction, barring the government from asking those particular questions.How did the lawyers for each side interact with the justices on the bench?MARCIA COYLE: During the arguments today, there was a lot of lively questioning, and some of the justices themselves appeared to have conflicting concerns about the background investigations. For example, Justice Sotomayor asked Solicitor General Neal Katyal, who is representing NASA, "Are there any limits on what the government can ask? Can the government ask someone about his genetic makeup because we don't want someone prone to cancer?" And Justice Alito asked the scientists' lawyer, "Does NASA have a right to know that an employee has a sign on his front lawn saying, 'I hope the space shuttle blows up'?"In answering questions from Justice Sotomayor and the other justices, the government's lawyer stressed that there is no constitutional limit on the government's collection of information in the employment context, as long as there are adequate privacy safeguards. And here, he said, the Federal Privacy Act provides the necessary protections against disclosure. He warned that if the appellate court's reasoning is upheld, it could preclude the government from asking for all kinds of information.The scientists' lawyer also faced skeptical questioning. In answering Justice Alito's question about the sign in the front yard, the scientists' lawyer said, "NASA had a right to know about that sign." But Justice Alito then said, "I don't see how to do that without open-ended questions. You would have to have a question on the form asking, 'Does the person have a sign on their front lawn saying I hope the space shuttle blows up?'" Justice Alito said it was unpractical to have a list of everything that makes an employee unsuitable for employment and put that on a questionnaire.Justice Scalia challenged the existence of a right to informational privacy. He said that legislatures, including Congress, have acted to protect private information. "Maybe you don't need us," he told the scientists' lawyer.What exactly is informational privacy?MARCIA COYLE: The Supreme Court has never used the term "right to informational privacy," but in two cases from the 1970s, the justices have said that the right to privacy contains an individual interest in avoiding disclosure of personal matters. As the lower courts have dealt with issues related to information and privacy, that individual interest has come to be known as the right to informational privacy.Justice Elena Kagan recused herself from this case due to her involvement with it as Solicitor General. Were there any clues as to which way the other eight justices were leaning?MARCIA COYLE: I don't usually predict outcomes of cases based on the arguments, because the justices are so good at playing devil's advocate on both sides. But I did have a sense that the scientists faced an uphill battle here. Since eight justices will decide the case, there is always the potential of a 4-4 split. If the court decides to say more about the scope of the right to informational privacy, their ultimate decision could have implications beyond employment with the government.What are the potential impacts of this decision? Who would be affected?MARCIA COYLE: The case has drawn a lot of attention from civil-rights groups and groups involved with electronic information, as well as groups that represent private employees and employers. They all will be watching to see if the court gives any guidance on the kind of information that potential employees may be required to give up if they want a particular job. to weigh third-party liability under Securities Exchange Act (June 28, 2010)Case Reference:?Janus Capital v. First Derivative TradersThe Supreme Court has agreed to decide whether a service provider can be held primarily liable in a private securities fraud suit for aiding and participating in another company's misstatements. Section 10(b) of the Securities and Exchange Act prohibits any manipulation or deception in connection with the purchase or sale of securities, but it is unclear whether the liability associated with the act extends to service providers who aided in the selling of securities where misinformation was involved.First Derivatives Traders filed a private securities lawsuit alleging Janus Capital Group was responsible for misleading statements in prospectuses for a number of its mutual funds. The U.S. District Court for the District of Maryland dismissed the complaint, holding that Janus had not prepared the prospectuses nor directly made the allegedly misleading statement.In May 2009, the 4th U.S. Circuit Court of Appeals overruled and allowed a class action lawsuit to proceed, holding that a service provider may be liable for securities fraud. The issue has created a split among the circuit courts, but the Obama administration filed an amicus brief that asked the high court not to take the case.Nonetheless, on June 28, 2010, the U.S. Supreme Court agreed to weigh in on the matter.Question presented: (1) Whether a service provider can be held primarily liable in a private securities-fraud action for “help[ing]” or “participating in” another company’s misstatements; and (2) whether a service provider can be held primarily liable in a private securities-fraud action for statements that were not directly and contemporaneously attributed to the service provider.High Court To Review Janus Capital Fraud SuitBy Jesse GreenspanLaw360, New York (June 28, 2010) -- The U.S. Supreme Court on Monday agreed to review an appeals court decision that revived a class action accusing derivative trader Janus Capital Group Inc. and a subsidiary of making misleading statements about the funds they managed.As is customary, the high court granted Janus' certiorari petition without comment. In January it had asked the the U.S. Office of the Solicitor General to prepare a brief outlining the government's opinion on whether the complaint — filed by a group called First Derivatives Traders — pled a viable claim of primary liability against Janus Capital Management LLC, which advised a group of mutual funds, and if Janus Capital Group may be liable as a control person of JCM.“This case raises important issues about when lawsuits can be brought against nonissuers under securities laws,” said James Aber, a spokesman for Janus. “The issues presented go well beyond our particular industry, and we're pleased that the Supreme Court has decided to resolve this important matter.”An attorney for First Derivatives Traders did not immediately return a call seeking comment Monday.Mark David McPherson, a partner in the securities litigation group at Morrison & Foerster LLP who is not directly involved in the matter, said the important question here was whether investment advisers could be held liable for participating in the preparation of a prospectus when the prospectus wasn't attributed to them.There is a split in the circuits between the U.S. Court of Appeals for the Fourth Circuit on one side and the Second, Tenth and Eleventh circuits on the other, he pointed out.“If the case had been brought in the Second Circuit, for example, there's no way the plaintiffs could have had a case,” McPherson said.He added that this was another instance in which plaintiffs were seeking to overcome the Supreme Court's ruling in Central Bank of Denver NA v. First Interstate Bank of Denver NA.Affirming the Fourth Circuit's point of view would open the door to more securities claims, whereas rejecting the Fourth Circuit's point of view would mean the reasonable inference theory could not be used to get around the Central Bank case, which rejected a private action for aiding and abetting liability under the federal securities laws, according to McPherson.In May 2009 the U.S. Court of Appeals for the Fourth Circuit reversed and remanded the U.S. District Court for the District of Maryland's dismissal of the complaint, prompting Janus to file a petition for a writ of certiorari.The complaint alleged that Janus was responsible for misleading statements in prospectuses for a number of its mutual funds during the class period.Specifically, the complaint claimed that the prospectuses said the fund managers did not permit market timing, or rapidly trading in and out of a mutual fund to take advantage of inefficiencies, in how the fund values its shares.The class members purchased JCG shares at inflated prices and then lost money when the market timing practices became known to the public, share prices dropped, JCG was forced to pay fines and penalties, and the assets it managed decreased substantially, the complaint said.The Fourth Circuit ruled that interested investors would clearly infer that JCM played a role in preparing the prospectuses that contained allegedly fraudulent information.Although the complaint did not plead an adequate claim of primary liability against JCG, the plaintiffs' allegations that JCM was owned by JCG, as well as the overlapping of management between JCM and JCG and control of JCM by JCG executives, are sufficient for them to plead a prima facie case of control-person liability, the appeals court said.It further ruled that the plaintiffs had made sufficiently specific allegations to establish that the allegedly misleading statements in the prospectuses “were a substantial cause of the decrease in JCG's share price when the fraud was publicly revealed.”First Derivative Traders is represented in the matter by Kirby McInerney LLP.Janus is represented by Gibson Dunn & Crutcher LLP.The case is Janus Capital Group et al. v. First Derivative Traders, case number 09-525, in the U.S. Supreme Court.--Additional reporting by Evan WeinbergerJustices to hear appeal of employer sanctions law (June 28, 2010)Case Reference:?Chamber of Commerce v. CandelariaThe Supreme Court has agreed to weigh in on a challenge to an Arizona law penalizing employers who hire undocumented migrants. Under the Legal Arizona Workers Act, Arizona employers are required to use a federal electronic system to verify their workers are eligible for employment. The U.S. Chamber of Commerce and immigration activists filed a lawsuit to block enforcement of the law, contending that a state does not have the right to enforce immigration law.The lower federal court upheld the law, ruling that the state had the power and duty to protect its citizens.The 9th U.S. Circuit Court of Appeals affirmed the lower court order, holding that the act is neither expressly nor impliedly preempted by federal law, and does not violate due process.On June 28, the Supreme Court agreed to review the case.Question presented: Whether an Arizona statute that imposes sanctions on employers who hire unauthorized aliens is invalid under a federal statute that expressly “preempt[s] any State or local law imposing civil or criminal sanctions (other than through licensing and similar laws) upon those who employ, or recruit or refer for a fee for employment, unauthorized aliens”; whether the Arizona statute, which requires all employers to participate in a federal electronic employment verification system, is preempted by a federal law that specifically makes that system voluntary; and whether the Arizona statute is impliedly preempted because it undermines the “comprehensive scheme” that Congress created to regulate the employment of aliens.Court takes case on petition clause of First Amendment (Oct. 12, 2010)Case Reference:?Duryea v. Guarnieri The Supreme Court has agreed to decide whether state and local government employees may sue their employers for retaliation under the Petition Clause of the First Amendment when they petitioned the government on matters of private concern. In 2005, Duryea police chief Charles Guarnieri filed a discrimination lawsuit against the Pennsylvania borough, alleging that council members retaliated against him because he had successfully challenged a 2003 decision to fire him. Guarnieri had challenged his firing through arbitration and was reinstated to his position as chief in 2005. His suit alleged that council then issued 11 employment directives, which he claimed placed humiliating restrictions on him, to retaliate against him. He further alleged the borough improperly withheld overtime pay from him and had improperly delayed issuing health insurance benefits.A jury heard the case in April 2008 and awarded Guarnieri $45,358 in compensatory damages and $52,000 in punitive damages. The borough appealed, arguing the evidence did not support the verdict. In February 2010, a three-judge panel on the 3rd U.S. Circuit Court of Appeals upheld the overall verdict entered by a federal jury, but it overturned the panel's award of $52,000 in punitive damages.The ruling differs from decisions by all 10 other federal circuits and four state supreme courts.On Oct. 12, 2010, the Supreme Court agreed to review the case. Question presented: Whether state and local government employees may sue their employers for retaliation under the First Amendment’s Petition Clause when they petitioned the government on matters of private concern.Justices take class arbitration waiver case (May 24, 2010)Case Reference:?AT&T Mobility v. ConcepcionThe U.S. Supreme Court has agreed to decide whether the Federal Arbitration Act preempts state unconscionability law.Vincent and Liza Concepcion brought a class action claim, which alleged that AT&T Mobility’s offer of a “free” phone to anyone who signs up for its service is fraudulent to the extent the phone company charges the new subscriber sales tax on the retail value of each “free” phone. In September 2006, the U.S. District Court for the Southern District of California consolidated the Concepcions’ case with a putative class action addressing the same issues.AT&T filed a motion to order the claims be submitted to individual arbitration, pointing to the arbitration clause of the written agreement, which arbitration clause requires arbitration, but bars class actions.The district court denied the motion. It held that the class waiver provision of the arbitration agreement is unconscionable under California law and that California unconscionability law is not preempted by the Federal Arbitration Act. In October 2009, a three-judge panel on the 9th U.S. Circuit Court of Appeals affirmed. On May 24, 2010, the U.S. Supreme Court agreed to review the case.Question presented: Whether the Federal Arbitration Act preempts States from conditioning the enforcement of an arbitration agreement on the availability of particular procedures -- here, class-wide arbitration -- when those procedures are not necessary to ensure that the parties to the arbitration agreement are able to vindicate their claims.Court to review 'deliberate indifference' standard for patent infringement (Oct. 12, 2010)Case Reference:?Global-Tech Appliances v. SEBThe Supreme Court has agreed to decide whether the legal standard for the state of mind element of a claim for actively inducing patent infringement is "deliberate indifference of a known risk" to encourage an infringement. SEB filed a lawsuit in the U.S. District Court for the Southern District of New York against Montgomery Ward & Co, Inc., Global-Tech Appliances, Inc. and Pentalpha Enterprises, Ltd. for alleged infringement of the '312 patent directed toward construction of a deep fryer with a well-insulated outer skirt. A jury returned a verdict and found that Pentalpha both willfully infringed and induced infringement of claim 1 of the '312 patent. SEB was awarded royalty damages of $4.65 million, an amount that later was reduced by the district court by $2 million. Pentalpha appealed asserting errors by the district court that relate to the jury verdict and several post-trial rulings. SEB cross-appealed and sought enhanced damages.In February 2010, the U.S. Court of Appeals for the Federal Circuit affirmed the district court decision and further held that "deliberate indifference" to potential patent rights satisfies the knowledge requirement for induced infringement.On Oct. 12, 2010, the Supreme Court agreed to review the case.Question presented: Whether the legal standard for the "state of mind" element of a claim for actively inducing infringement under 35 U.S.C. § 271(b) is "deliberate indifference of a known risk" that an infringement may occur or instead "purposeful, culpable expression and conduct" to encourage an infringement.Justices to review personal jurisdiction cases (Sept. 28, 2010)Case Reference:?Goodyear v. BrownThe Supreme Court has agreed to decide whether a lawsuit can be filed in state court against a foreign company for introducing a potentially dangerous product into the stream of commerce that injured residents of that state.The court will hear a pair of cases that address when a plaintiff has jurisdiction to file a lawsuit. In one, an accident severed four fingers off the right hand of a man operating a recycling machine used to cut metal. A British company manufactured the machine and sold it through its exclusive U.S. distributor. The plaintiff sued the British company and its U.S. distributor in New Jersey state court for product liability.The state supreme court reversed a trial court's dismissal, finding that the foreign company had sufficient contacts with the state.In the second case, the families of two North Carolina teenagers killed in a bus crash in France brought suit in North Carolina state court, alleging faulty tires. The tires were made in Turkey, and the plaintiffs sued Goodyear's Luxembourg affiliate and its branches in Turkey and France. A state appeals court held that the foreign defendants had sufficient contacts in the state to support general personal jurisdiction.On Sept. 28, the Supreme Court granted review in Goodyear Luxembourg Tires v. Brown and McIntyre Machinery v. Nicastro.Question presented: Whether a foreign corporation is subject to general personal jurisdiction, on causes of action not arising out of or related to any contacts between it and the forum state, merely because other entities distribute in the forum state products placed in the stream of commerce by the defendant.Justices take dispute over Alabama's tax on railroads? (June 14, 2010)Case Reference:?CSX Transportation v. ADRThe U.S. Supreme Court has agreed to decide whether a state's exemption of railroad competitors, but not railroads, from a generally applicable sales and use tax is subject to challenge under the Railroad Revitalization and Regulatory Reform Act.In 2008, CSX Transportation filed a lawsuit against the Alabama Department of Revenue, claiming tax discrimination under the act.In July 2008, the U.S. District Court for the Northern District of Alabama granted CSX injunctive relief, noting that "[b]ecause the direct competitors of the railroads do not pay diesel fuel taxes under Alabama law, it follows that there is reasonable cause to believe that the [4-R] Act has been violated."The district court later granted the state’s motion to stay further proceedings pending the appeals court’s decision in Norfolk Southern Railway Co. v. Alabama Department of Revenue, in which a different rail carrier had brought a materially identical challenge to Alabama’s sales and use taxes.The railroad company appealed and, acknowledging that Norfolk Southern was controlling,sought initial hearing by the full court of appeals. The appeals court denied initial hearing en banc, and a panel subsequently affirmed the district court’s order. On June 14, 2010, the U.S. Supreme Court agreed to hear the case, limited to the question posed by the Solicitor General's Office.The justices had asked acting Solicitor General Neal Kumar Katyal to weigh in on the dispute. Katyal recommended the court hear the case, citing a "clear split" at the appellate level. The brief urged the justices to focus on the narrow question of whether the tax may be challenged in a lower court because no discovery has taken place yet in the CSX case.Question presented by the Solicitor General: Whether a state’s exemptions of rail carrier competitors, but not rail carriers, from generally applicable sales and use taxes on fuel subject the taxes to challenge under 49 U.S.C. 11501(b)(4) as “another tax that discriminates against a rail carrier.”Court agrees to hear Oneida Indian Nation foreclosure case (Oct. 12, 2010)Case Reference:?Madison County v. Oneida Indian Nation The Supreme Court has agreed to decide whether tribal sovereign immunity from suit bars taxing authorities from foreclosing to collect lawfully imposed property taxes and whether the ancient Oneida reservation in New York was disestablished or diminished.In 2005, U.S. District Judge David Hurd barred Oneida and Madison counties from foreclosing on Oneida Indian Nation-owned properties on which taxes haven’t been paid. The 2nd U.S. Circuit Court of Appeals affirmed, noting that the counties don’t have the right to sue an Indian tribe unless Congress has authorized the lawsuit or the tribe has waived its legal immunity.On Oct. 12, 2010, the Supreme Court agreed to review the case.Question presented: Whether tribal sovereign immunity from suit bars taxing authorities from foreclosing to collect lawfully imposed property taxes; and (2) whether the ancient Oneida reservation in New York was disestablished or diminished.Justices take sovereign immunity dispute (June 21, 2010)Case Reference:?VOPA v. ReinhardThe Supreme Court has agreed to decide whether the 11th Amendment prohibits a state agency from going to federal court to sue officials of the same state.The state of Virginia participates in a federal program designed to detect abuse and neglect at state-run medical facilities.The Virginia Office for Protection and Advocacy, which was given oversight over the medical facilities, sought access to records relevant to the deaths of individuals who were residents of the state-run facilities.VOPA sought declaratory and injunctive relief providing. State officials moved to dismiss VOPA's complaint, but the U.S. District Court for the Eastern District of Virginia denied their motion, finding that sovereign immunity did not bar the lawsuit.But in June 2009, a three-judge panel on the 4th U.S. Circuit Court of Appeals reversed, finding VOPA’s lawsuit was barred under the 11th Amendment and did not fall within the Ex parte Young doctrine.“VOPA may pursue its claims in state court, but it would be inconsistent with our system of dual sovereignty for a federal court to rely on Ex parte Young to adjudicate an intramural state dispute like this one,” the court held.The Obama administration filed an amicus brief asking the high court to review the lower court’s decision, which it argued “threatens to undermine the enforcement of federal laws that Congress designed to protect especially vulnerable individuals from the abusive and neglectful practices that can result in injury and death.”On June 21, 2010, the U.S. Supreme Court agreed to hear the case.Question presented: Whether the Eleventh Amendment categorically precludes an independent state agency from bringing an action in federal court against state officials for prospective injunctive relief to remedy a violation of federal law.Justices take class certification dispute (Sept. 28, 2010)Case Reference:?Smith v. Bayer The Supreme Court will decide whether a lower court erred when it barred a group of plaintiffs from proceeding with a class-action lawsuit over a cholesterol-lowering drug that was removed from the market in 2001.Bayer Corp. withdrew the drug, Baycol, from the market in August 2001 because of its alleged role in serious side effects and the deaths of some patients using the drug.Keith Smith and Shirley Sperlazza filed a lawsuit in West Virginia state court in 2001, seeking class certification for Baycol users throughout the state. Meanwhile, a separate putative West Virginia class action, filed was removed to federal court and consolidated as part of a multidistrict litigation in the U.S. District Court for the District of Minnesota. In August 2008, the court denied certification on grounds that plaintiffs could not litigate economic loss claims as a class.Counsel for Smith and Sperlazza later received a notice declaring that their case in West Virginia state court was bound by that ruling. They appealed to the 8th U.S. Circuit Court of Appeals, which affirmed the lower court order in January 2010.On Sept. 28, 2010, the U.S. Supreme Court agreed to hear the case. Question presented: 1. Whether, under the re-litigation exception of the Anti-Injunction Act, a district court can enjoin parties from seeking class certification in state court under state procedural rules when the district court had previously denied certification of a similar class under federal procedural rules but neither the parties sought to be estopped nor the issues to be presented in state court are identical as those presented to the district court. 2. Whether a district court that previously denied class certification nonetheless has personal jurisdiction over the absent putative class members such that it may enjoin them from seeking class certification in state court.Court reconsiders Anna Nicole Smith estate case (Sept. 28, 2010)Case Reference:?Stern v. MarshallThe Supreme Court has agreed to take a second pass at a long-running inheritance dispute over the estate of a deceased Texas billionare.The new case concerns the estate of the late Anna Nicole Smith (aka Vickie Lynn Marshall), who was married to J. Howard Marshall at the time of his death. Marshall's will left nearly all his money to his son, E. Pierce Marshall, and nothing to Smith. The younger Marshall died in 2006 and Smith died of a drug overdose in 2007.Smith had previously disputed the will, claiming that her husband promised to leave her more than $300 million.But the 9th U.S. Circuit Court of Appeals ruled that Marshall was mentally fit and under no undue pressure when he wrote a will leaving nearly all of his $1.6 billion estate to his son and nothing to Smith.On Sept. 28, 2010, the U.S. Supreme Court agreed to revisit the case. Four years earlier, the justices only addressed whether federal courts can decide the Smith's claims.Question presented: (1) Whether the Ninth Circuit’s interpretation of 28 U.S.C. § 157(b)(2)(C) contravenes congressional intent; (2) whether Congress may authorize core jurisdiction over debtors’ compulsory counterclaims to proofs of claim; and (3) whether the Ninth Circuit contravened Supreme Court precedent and created a circuit split by holding that Congress cannot constitutionally authorize non-Article III bankruptcy judges to enter final judgment on all compulsory counterclaims to proofs of claim.Court takes new ERISA case (June 28, 2010)Case Reference:?Amara v. CIGNA; CIGNA v. AmaraThe Supreme Court has agreed to weigh in on what "showing" is required to entitle participants of the Employee Retirement Income Security Act (ERISA) to recover benefits where there has been an alleged inconsistency between the explanation of benefits and the terms of the plan.Under ERISA, plan administrators must provide all plan participants with a “summary plan description” (SPD), as well as a “summary of material modifications” when material changes are made to the plan.After CIGNA converted its traditional defined benefit pension plan to a cash balance plan, it issued a summary plan description to plan participants.In 2001, Janice Amara, one of the participants, filed a class-action lawsuit, claiming that CIGNA failed to comply with ERISA's notice requirements and SPD provisions.The U.S. District Court for the District Connecticut found for Amara, and the 2nd U.S. Circuit Court of Appeals affirmed, finding that the SPD misrepresented the terms of the plan itself.On June 28, 2010, the Supreme Court agreed to hear the case.Question presented: (1) Whether a district court, after finding violations of the “advance notice of reduction requirement” in Section 204(h) of the Employee Retirement Income Security Act (ERISA), lacks the authority to require the prior benefit provisions to be reinstated; and (2) whether a district court, after finding that participants were promised “comparable” or “larger” future retirement benefits in a summary of material modification errs in concluding that it lacks the authority to require at least “comparable” future benefits to be provided.Justices take bankruptcy case on dispute over vehicle ownership costs (April 19, 2010)Case Reference:?Ransom v. MBNA, America BankThe U.S. Supreme Court has agreed to decide whether, in calculating a debtor's "projected disposable income" during the plan period, a bankruptcy court may allow an ownership cost deduction for vehicles only if the debtor is actually making payments on the vehicles.Jason Ransom filed for chapter 13 bankruptcy relief. Among his assets, he noted a 2004 Toyota Camry he owns free and clear of any loans or other encumbrances. In his liabilities, he noted a total of $82,542.93 in general unsecured claims, including a claim held by MBNA America Bank in the amount of $32,896.73. On his Statement of Current Monthly Income, Ransom reported a current monthly income of$4,248.56, and an annualized income of $50,982.72, which put him above the median income for his household size in his state of residence, Nevada. He claimed monthly expense deductions — including the vehicle “ownership cost” deduction at issue in this case — in the amount of $4,038.01, and a resulting monthly disposable income of $210.55. In his chapter 13 plan, Ransom proposed paying $500.00 per month over sixty months, providing approximately a 25 percent distribution on general unsecured claims. MBNA objected to confirmation of the plan, arguing Ransom was not devoting all of his projected disposable income to fund the plan as required under 11 U.S.C. § 1325(b)(1)(B). Specifically, MBNA argued that Ransom could deduct a vehicle ownership cost only if he actually was making lease or loan payments on the vehicle and, because Ransom owned his vehicle free and clear of encumbrances and lease obligations, he was not entitled to the vehicle ownership cost deduction. Thus, MBNA argued, Ransom’s projected disposable income should be $681.55 (the $210.55 he reported in disposable income plus $471.00, the amount of the vehicle ownership cost deduction to which MBNA objected).The bankruptcy court agreed with MBNA, holding that Ransom could deduct a vehicle ownership cost only if he currently was making loan or lease payments on the vehicle. Thebankruptcy court therefore entered an order denying without prejudice confirmation of the plan. Ransom sought and obtained leave to appeal the bankruptcy court’s interlocutory order to our BAP. BAP affirmed the bankruptcy court. Concurrently with its opinion affirming the bankruptcy court, BAP certified its disposition of the case to this circuit for possible review of a non-final order. In August 2009, a three-judge panel on the 9th U.S. Circuit Court of Appeals restricted Ransom from taking an ownership-costs deduction for a vehicle he owned outright."The statute is only concerned about protecting the debtor's ability to continue owning a car, and if the debtor already owns the car, the debtor is adequately protected," Judge Stephen S. Trott wrote. "When the debtor has no monthly ownership expenses, it makes no sense to deduct an ownership expense to shield it from creditors."On April 19, the U.S. Supreme Court agreed to review the case.Question presented: Whether, in calculating the debtor’s “projected disposable income” during the plan period, the bankruptcy court may allow an ownership cost deduction for vehicles only if the debtor is actually making payments on the vehicles.Court will rule on procedure in American Indian trust cases (April 19, 2010)Case Reference:?U.S. v. Tohono O’odham NationThe U.S. Supreme Court has agreed to decide whether 28 U.S.C. § 1500 precludes jurisdiction in the Court of Federal Claims when an Indian tribe has also filed an action in federal District Court seeking different relief.28 USC § 1500 provides that the CFC lacks jurisdiction over “any claim for or in respect to which the plaintiff has any suit or process against the United States” or its agents “pending in any other court.” In 2006, the Tohono O’odham Nation filed a complaint against the United States in the U.S. District Court for the District of Columbia, alleging that the United States had breached certain fiduciary duties in connection with its management of the Nation’s trust assets. One day later, it filed a similar complaint against the United States in the CFC. In March 2009, a three-judge panel on the U.S. Court of Appeals for the Federal Circuit reversed the CFC’s dismissal of the case, concluding “that the Nation’s complaint in the Court of Federal Claims seeks relief that is different from the relief sought in its earlier-filed district court action."On April 19, 2010, the U.S. Supreme Court accepted the case for review. Question presented:Whether 28 U.S.C. § 1500 — which precludes jurisdiction by the Court of Federal Claims (CFC) over ”any claim for or in respect to which the plaintiff has any suit or process against the United States” or its agents “pending in any other court” – deprives the CFC of jurisdiction over a claim seeking monetary relief for the government’s alleged violation of fiduciary obligations if the plaintiff has another suit pending in federal district court based on substantially the same operative facts, especially when the plaintiff seeks monetary relief or other overlapping relief in the two suits. ................
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