Displaying 10 category results for June 2008.x

U.S. Supreme Court limits tribal court jurisdicition

By Rob Roy Smith
June 26, 2008

The U.S. Supreme Court yesterday issued an important 5-4 decision addressing the scope of tribal court jurisdiction.  At issue in Plains Commerce Bank v. Long Family Land and Title Co. was whether a tribal court could exercise jurisdiction over a non-Indian-owned bank for discrimination claims arising from the foreclosure and subsequent sale of fee land on a tribal reservation by the bank to non-Indian individuals. 

Writing for the majority, Chief Justice Roberts, in his first Indian law opinion, concluded that Indian tribes cannot "regulate the sale of non-Indian fee land."  The Court construed its prior cases on the subject narrowly as allowing only "tribal regulation of nonmember conduct inside the reservation that implicates the tribe's sovereign interests."  The Court also held that the non-Indian bank's mere conduct of business on the reservation did not mean that it had consented to either broad tribal regulation of its lending practices and land sales, or to the tribal court's jurisdiction.

The Court's opinion has narrowed the scope of tribal jurisdiction and appears to have insulated non-Indian businesses operating on non-Indian land within a reservation from certain real property and tort claims.  Before entering into any business dealings on reservation lands, it is in both an Indian tribe's and a business's best interests to understand the scope of tribal regulations affecting a commercial project, and to carefully draft the relevant transaction documents to address tribal court jurisdiction.

See our earlier post about the Plains Commerce Bank case here.

US Supreme Court addresses conflicts of interest in ERISA plans

By John Walch
June 23, 2008

ERISA provides that an individual denied benefits under an employer benefit plan may challenge the denial in federal court.  Last week, the US Supreme Court addressed the standards for review when the entity that administers the plan -- usually an employer or insurance company -- both decides eligibility for benefits and pays the benefits out of its own pocket. 

The Court has earlier signalled that federal courts must give considerable deference to a plan administrator's decision.  In the 1989 Firestone case, the Court held that, if the plan document gives the fiduciary discretionary authority, courts reviewing a denial should focus on the fairness of the claim denial process and not on whether the outcome was correct.  The reviewing court must defer to the fiduciary's decision, reversing it only if there was no evidence upon which to base the decision.

The Firestone opinion raised, but did not resolve, the issue of how a plan administrator's conflict of interest factors into the reviewing court's decision.  For example, if a self-insured employer denies a claim, thereby increasing its profits, should the reviewing court automatically conduct a more searching review, or is the plaintiff first required to prove that the conflict affected the fiduciary's decision?  In the 20 years since Firestone, Circuit Courts have developed various strategies for determining what to do when a fiduciary has a conflict.

Last week in Metropolitan Insurance Co. v. Glenn, the Supreme Court said there is no one-size-fits-all rule for reviewing a decision by a fiduciary having a conflict of interest:  "a reviewing court should consider that conflict as a factor in determining whether the plan administrator has abused its discretion in denying benefits; and that the significance of the factor will depend upon the circumstances of the particular case." 

This directive from the Court fails to show what a plan fiduciary can do to avoid a conflict, or how either the plan or participant should prove the presence or absence of one.  Plan fiduciaries may be protected by taking procedural actions, such as isolating claims administrators from management or employer influence, to prevent any possible conflict from tainting the claim review process, according to the Court.  But the Court refused to create a bright-line test for reviewing claims decisions even when such protections are in place. 

Employers face additional burden in defending age claims

By Stacey Mark
June 19, 2008

Today the U.S. Supreme Court made it harder for employers to defend themselves against a claim of age discrimination in Meacham v. Knolls Atomic Power Laboratory.  Knolls, a government contractor that contracted with the Navy and Department of Energy, was forced to reduce its workforce in the mid 1990s when the end of the Cold War reduced the government’s demand for nuclear reactors.  After eliminating over 100 jobs, Knolls had 31 left to cut.  Of the 31 salaried employees that Knolls laid off, 30 were at least 40 years old and, of that 30, 28 sued Knolls for age discrimination under two theories: disparate treatment (intentional discrimination) and disparate impact (discriminatory effect of a facially neutral policy).   The question before the Supreme Court was which party must allege and prove that a termination having a disparate impact on older workers was based on reasonable factors other than age.  The Supreme Court held that this burden falls on employers in both instances.

Oregon Court of Appeals: Party who claims no contract existed can't recover attorney fees

By Lori Irish Bauman
June 17, 2008

Contracts often provide for an award of attorney fees to one of the parties in the event of litigation relating to the contract.  Under Oregon statutory law, a prevailing party in such a lawsuit is entitled to recover its attorney fees even if "the party prevails by reason of a claim or defense asserting that the contract is . . . void or unenforceable."  ORS 20.083. 

The Oregon Court of Appeals addressed last week whether this statute applies when the prevailing party convinces the court that the contract was never finalized.  In Dess Properties, LLC v. Sheridan Truck & Heavy Equipment, LLC, the parties negotiated a contract to sell real property.  Plaintiff later sued to enforce the contract, but defendant succeeded in arguing that the parties did not complete the deal.  Defendant sought to recover its attorney fees under ORS 20.083, claiming that a never-finalized contract is the same as a "void" contract.  The court refused to award fees, holding that the phrase "void contract" is a legal term of art meaning an agreement "actually entered into [but] unenforceable" due to failure to comply with some other legal requirement.  In this case, the contract was nonexistent rather than void, and the prevailing party was not entitled to recover fees.

No "class of one" constitutional protection for government employees

By Matt Hedberg
June 16, 2008

On June 9, in a case involving a former State of Oregon employee, the U.S. Supreme Court ruled that "class of one" equal protection under the 14th Amendment does not protect state government employees against firings for arbitrary reasons.  Chief Justice John Roberts, writing for the Court, rejected the plaintiff's argument that a public employee should be able to establish a violation of equal protection by showing, regardless of membership in any class or group, that the employee was treated less favorably than similarly situated workers.  Typically, for the Equal Protection Clause to apply, the plaintiff must be a member of a protected class that was subject to unlawful discrimination.

In distinguishing an earlier case, the Court acknowledged that it has recognized "class of one" protection where an arbitrary zoning decision affected one plaintiff.  However, that case involved a clear standard against which departures, even for a single plaintiff, could be "readily assessed," whereas employment decisions by public employers are "quite often subjective and individualized, resting on a wide array of factors that are difficult to articulate and quantify."  As the Court observed, public employees do not lose their constitutional rights by accepting public employment, but "those rights must be balanced against the realities of the employment context."  You may read the text of the Court's decision in Engquist v. Oregon Department of Agriculture here.

U.S. Supreme Court gives expansive reading to civil RICO liability

By Heidee Stoller
June 15, 2008

In Bridge v. Phoenix Bond & Indemnity Co., the United States Supreme Court last week held that a plaintiff bringing a civil RICO claim predicated on mail fraud may recover for injury from the mail fraud, even if plaintiff did not rely on the defendant’s alleged misrepresentations.

The civil RICO statute was enacted to address mob-related activities but written broadly enough that other criminal activities fall within its reach. It establishes treble damages when a person “employed by or associated with” an enterprise engaged in interstate commerce engages in a “pattern of racketeering activity.” “Racketeering activity” is defined to include certain predicate acts, one of which is “any act indictable under” a federal statute dealing with mail fraud.

Previous case law has established that the mail fraud statute does not have a reliance requirement – in other words, the use of “the mail to execute or attempt to execute a scheme to defraud” was a predicate act of racketeering under RICO “even if no one relied on any misrepresentation.” Therefore a reliance requirement, if one existed, had to be found in the RICO statute in question, which enables “[a]ny person injured in his business or property by reason of” a pattern of racketeering activity to sue for treble damages.

Justice Clarence Thomas, writing for a unanimous court, noted that the statute lacks an express reliance requirement, and held that the broad language in the statute indicated that there was no such implicit requirement: “The statute provides a right of action to ‘[a]ny person’ injured by the violation, suggesting a breadth of coverage not easily reconciled with an implicit requirement that the plaintiff show reliance in addition to injury in his business or property.”

The Court also noted that the causation requirement of RICO, which requires that a person be injured “by reason of” a pattern of racketeering activity, indicates that the activity in question must be the proximate cause of the injury. It held that first-party reliance is not “necessary to ensure that there is a sufficiently direct relationship between the defendant’s wrongful conduct and the plaintiff’s injury to satisfy . . . proximate cause principles.” Instead it is sufficient to allege that a plaintiff was harmed because someone else relied on a misrepresentation.

The Court rejected petitioners' claims that an overly broad reading of RICO would result in the “over-federalization” of traditional state law claims, stating that “[w]hatever the merits of petitioners' arguments as a policy matter, we are not at liberty to rewrite RICO to reflect their—or our—views of good policy.”

U.S. Supreme Court extends patent exhaustion to method patents

By James Stewart
June 11, 2008

The U.S. Supreme Court on Monday addressed the scope of the patent exhaustion doctrine, holding that it applies to method patents. It has long been recognized that the holder of a patent in an apparatus cannot claim patent rights in an article embodying the patentee's invention once it has been sold by an authorized licensee.  But the Supreme Court in the past has not squarely articulated that method patents -- which describe an operation or process -- are also subject to the patent exhaustion doctrine.

In Quanta Computer v. LG Electronics, the method patents at issue are held by LG Electronics ("LGE").  Quanta makes and sells computers with purchased Intel chipsets inside.  The Intel chipsets embody many of the claimed method steps of patents licensed by LGE to Intel.  LGE's claims require "glue" elements such as memory devices and busses to make the chips work to certain advantage in a high-speed caching scheme.  LGE sued Quanta for infringement of its patents, and Quanta moved for summary judgment of non-infringement based on the patent exhaustion doctrine.  Quanta argued that LGE's patents were exhausted upon purchase by Quanta from Intel of chips covered by the patents.  The District Court granted the motion, but upon reconsideration, denied it because some of the claims were method claims.  The Federal Circuit affirmed in pertinent part that patent exhaustion does not apply to method patents.

A unanimous opinion authored by Justice Clarence Thomas reversed the Federal Circuit.  Its holding:  a method patent is subject to the patent exhaustion doctrine if the patented parts sold "substantially embody" the invention and include the novel elements thereof.  "Intel's microprocessors and chipsets substantially embodied the LGE Patents because they had no reasonable noninfringing use and included all the inventive aspects of the patented methods."

The Court did not decide whether a particular license agreement between a patentee and a licensee could expose a third-party purchaser to contract liability for using patented chipsets in certain ways.

See the SCOTUS blog's discussion of the case here.

Deferred compensation plans must comply with new law by year end

By John Walch
June 10, 2008

By the end of this year, the IRS requires every "deferred compensation plan" to comply with Internal Revenue Code Section 409A.  What is a deferred compensation plan?  The definition covers a number of employment arrangements, such as severance agreements, stock options, and change-in-control agreements.  A recent article in the Portland Business Journal by Northwest Business Litigation Blog contributor John Walch addresses the treatment of severance agreements under Section 409A. See our earlier posts about the new law here, here, and here

Every employer we have worked with has had at least one deferred compensation arrangement that needed to be brought in line with Section 409A.  To avoid the year-end rush, employers should now review any existing agreements with employees, directors and consultants, and discuss those agreements with their benefits attorney.

$79.5 million punitive damage award against Philip Morris returns to the U.S. Supreme Court

By Lori Irish Bauman
June 9, 2008

The U.S. Supreme Court has agreed to review for the third time the $79.5 million in punitive damages that a Multnomah County jury awarded in a tobacco products liability case.  The court today accepted review in Williams v. Philip Morris USA, following the Oregon Supreme Court's decision earlier this year to affirm the punitives award of 97 times compensatory damages.  The state court reached that result by citing a state law defect in a proposed jury instruction on punitive damages, thereby avoiding the question of the instruction's compliance with the federal constitutional standards for due process. 

The U.S. Supreme Court today agreed to review only whether the state court was prohibited from, in effect, ignoring its directive to apply the federal constitutional standard.  It will not address whether the punitive damages are excessive under the Due Process Clause.

See the petition for writ of certiorari here , our coverage of the most recent state court ruling here, and the SCOTUS Blog report on the case here.

Genetic Information Non-Discrimination Act signed into law

By Kathy Feldman
June 3, 2008

On May 21, 2008, President Bush signed into law the Genetic Information Non-Discrimination Act ("GINA").  GINA prohibits employers from discharging, refusing to hire, or otherwise discriminating against employees on the basis of genetic information.  It also applies to employment agencies and labor unions. 

In addition, GINA precludes discrimination by group health plans and health insurers against individuals based on genetic information, and prohibits insurers from requiring genetic tests.  Insurance companies also cannot request, require, or purchase the results of genetic tests, and they are prohibited from disclosing personal genetic information.