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Keywords: Procedural rulings, denial of sanctions, appealability
Panel: Cabranes, Pooler, and Lynch
Opinion by: Lynch
Appeal from: NDNY (Sharpe, USDJ)
Result below: Recusal and sanctions denied
Result: Dismissed for lack of jurisdiction
Appealability of Denial of Sanctions
The district court declined to enter sanctions against the appellant, an attorney on a matter before that court. Although it commented upon the attorney’s “troubling” behavior and questionable “candor and honesty”, it made not findings of act concerning improper conduct. The Second Circuit holds that denials of sanctions are appealable unless accompanied by findings that an attorney is guilty of specific misconduct. “Routine judicial commentary or criticism” such as that in the appealed order are not appealable.
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Keywords: Restitution, VWPA, MVRA, resentencing
Panel: Kearse, Calabresi, and Straub
Opinion by: Per Curiam
Appeal from: SDNY (Cote, USDJ)
Result below: Restitution ordered on resentencing
Result: Affirmed
The question on appeal is whether the district court had jurisdiction to enter a restitution order after two prior orders were vacated, when time delays caused the resentencing to occur after defendant had finished serving her sentence and supervised release. Defendant contends that the district court lacked jurisdiction to enter the restitution order under the VWPA, which requires that restitution be ordered “at the time of sentence”. The panel interprets this requirement to apply both to the original sentencing and any resentencing ordered by the court of appeal, and that defendant has not shown that her substantial rights were affected by the delay in resentencing. In addition, the amount of restitution was not an abuse of discretion.
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Keywords: Habeas Corpus, Mental Illness, Equitable Tolling
Panel: Katzmann, Livingston, and Stanton (USDJ, SDNY)
Opinion by: Katzmann
Appeal from: NDNY (Kahn, USDJ)
Result below: Dismissed habeas petition as time barred
Result: Vacated and remanded
Habeas Equitable Tolling - Mental Illness
Under the Antiterrorism and Effective Death Penalty Act, habeas petitions must be filed within one year unless equitably tolled. The district court dismissed the petition as outside AEDPA’s statute of limitations. The Second Circuit holds that mental illness may serve as a ground for equitable tolling of the one-year statute of limitations, and remands to the district court to consider petitioner’s evidence in support of equitable tolling, a “highly case-specific” inquiry that should be conducted by the district court in the first instance. .
Fraudulent Joinder
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Keywords: Fraudulent joinder
Panel: Miner, Pooler, and Katzmann
Opinion by: Miner
Appeal from: EDNY (Weinstein, USDJ)
Result: Reversed with instructions to remand to Mississippi state court
Plaintiff, a citizen of Mississippi, brought a negligence and malpractice claim against a hospital and group of doctors, also Mississippi citizens (the “Mississippi defendants), and a products liability claim against Eli Lilly, an Indiana corporation, in Mississippi state court. Lilly removed the case to federal court in Mississippi, alleging that the claims against the Mississippi defendants could not be maintained because plaintiff failed to comply with the notice requirements of the Mississippi Tort Claims Act. The Mississippi district court agreed that plaintiff could not prevail against the Mississippi defendants, so that joinder of the Mississippi Citizen Defendants was improper. Plaintiff moved for reconsideration. While the motion was pending, the case was transferred to the Eastern District, which then denied the motion.
The Second Circuit reverses. The doctrine of fraudulent joinder “is meant to prevent plaintiffs from joining non-diverse parties in an effort to defeat federal jurisdiction.” However, “the defendant bears the burden of proving [fraudulent joinder] by clear and convincing evidence” and “all factual and legal ambiguities [are] resolved in favor of plaintiff.” Slip Op. at 20 (quotation citation omitted). Here, the evidence suggests that plaintiff’s notice was sufficient under the Mississippi Tort Claims Act, that complete diversity is lacking, and that removal to federal court was improper. Therefore, the case should be remanded to the Circuit Court of Forrest County, Mississippi.
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Keywords: First Amendment, “official duties”, Garcetti v. Ceballos
Panel: Jacobs, CJ, Walker, and Calabresi
Opinion by: Walker, Dissent by: Calaberesi
Appeal from: EDNY (Glasser, USDJ)
Result below: SJ Granted
Result: Affirmed
"Official Duties" exemption from First Amendment protection
Plaintiff, a former fifth grade teacher in the New York City public school system, claims that he was subject to “acts of intimidation, harassment, workplace abuse, and deliberate attempts to undermine [his] authority” in retaliation for his union grievance that challenged the school assistant principal’s decision not to discipline a student who had thrown a book at plaintiff during class. The district court dismissed the claim, holding that Weintraub’s grievance was filed “pursuant to official duties” and therefore exempt from First Amendment protection under the Supreme Court’s decision in Garcetti v. Ceballos, 547 U.S. 410 (2006), a 5-4 decision by the court’s right-wing block, that held that “when public employees make statements pursuant to their official duties, the employees are not speaking as citizens for First Amendment purposes, and the Constitution does not insulate their communications from employer discipline.”
The panel majority holds that plaintiff, “by filing a grievance with his union to complain about his supervisor’s failure to discipline a child in his classroom, was speaking pursuant to his official duties and thus not as a citizen. Accordingly, [plaintiff's] speech was not protected by the First Amendment.”
Judge Calabresi dissents, noting that Garcetti “lends itself to multiple interpretations” and that the majority’s decision to construe it broadly is not compelled by the opinion itself. Judge Calabresi would hold that an employee’s speech is “pursuant to official duties” only when the employee “is required to make such speech in the course of fulfilling his job duties.” Here, there is nothing in the record to indicate that plaintiff was required to bring the grievance.
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Keywords: First Amendment, Vagueness, Preliminary Injunction
Panel: Miner, Straub, and Wesley
Opinion by: Straub, Dissent by: Miner
Appeal from: D. Conn. (Underhill, USDJ)
Result below: Granted injunction against enforcement of ordinance regulating sexually oriented business
Result: Vacated
How much is "substantial portion" of smutty products?
Berlin, CT, “the geographic center of Connecticut,” apparently doesn’t like smutty stores. Section 14-242 of the Berlin Code of Ordinances prohibits any “Adult Oriented Store” from operating within 250 feet of any residentially zoned land. An Adult Oriented Store is one that derives “a substantial or significant portion of its stock and trade in Adult Books, Adult Videos, or Adult Novelties, or any combination thereof.” Plaintiff VIP of Berlin, Inc. (”VIP”) admittedly sells adult products, but they account for only 12% of its stock in trade (8,242 of 67,237 products). VIP contends that the ordinance is unconstitutionally vague and restricts expression sheltered by the First Amendment.
The majority of the panel holds that a “substantial or significant portion” is equivalent to “considerable quantity” or “a noticeable or measurably large amount” and therefore clearly applies to VIP, and that the discretion given to the town manager (who was generally unable to articulate any clear standard) did not constitute improperly “unfettered latitude” such as to void the ordinance. Accordingly, the district court erred in granting an injunction against enforcement of the ordinance.
Judge Miner dissents on the ground that the ordinance, while not unconstitutionally vague on its face, is applied by the town manager in an idiosyncratic, subjective manner that does not give fair notice to zoning permit applicants. “Under the test applied by the Town Manager, what is required is unknowable” and the ordinance “has been applied in an arbitrary way, without explicit and knowable standards”.
In our view, the dissent has the stronger argument.
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Keywords:
Panel: McLaughlin, Wesley, and Kahn (NDNY)
Opinion by: Wesley
Appeal from: SDNY (Jones, USDJ)
Result below: 12(b)(6) Dismissal
Result: Affirmed
Form N-1A Disclosure Obligations
Plaintiffs’ class action complaint alleges that Morgan Stanley had wrongfully failed to disclose conflicts of interest concerning the subject mutual funds that could possibly taint the objectively of its stock research. The conflict arose because Morgan Stanley allegedly dismantled the “information barrier” — the Court’s preferred phrase for what used to be called a “Chinese Wall” — between its investment banking and research functions during the class period, and because the compensation of Morgan Stanley’s research analysts was tied to investment banking revenues. (Morgan Stanley did, in fact, settle with the SEC claims of improper commingling of research and investment banking functions, disgorging $25 million, and paying $100 million in fines and remedial action). Plaintiffs claims are brought under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933.
The precise question on appeal is whether Morgan Stanley was obligated to disclose the alleged conflicts of interest in its registration statements and prospectuses under Form N-1A of the Securities Act. On request of the Court, the SEC submitted an amicus brief concerning duties to disclose under Form N-1A. The SEC opined that Form N-1A was “not an independent source of disclosure obligations,” and this conclusion is entitled to deference “in light of the SEC’s expertise in administering the securities laws, its ability to seek input form the public when crafting regulatory policy, and its relative political accountability.” Slip Op. at 31 (citation omitted). Because plaintiffs “failed to identify a legal basis requiring disclosure of the allegedly omitted information”, the Court holds that the district court properly dismissed the complaint.
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Keywords:
Panel: Jacobs, Kearse, and Sack
Opinion by: Jacobs
Appeal from: On remand from Supreme Court
Result: Prior decision vacated and appeal dismissed
§ 363 Asset Sale
By decision dated August 5, 2009, discussed here, the Second Circuit approved the §363 asset sale of Chrysler and rejecting the claims of a group of pension funds and tort plaintiffs that the asset-sale was a disguised (”sub rosa”) plan of reorganization that short circuits the requirements of Chapter 11. By order dated December 14, 2009, State Police Pension Trust, et al. v. Chrysler LLC et al., 09-285, 2009 WL 2844364, 558 U.S. ___ (December 14, 2009), the Supreme Curt vacated the decision and ordered the appeal dismissed as moot.
The Washington Legal Foundation, a conservative advocacy group that purports to “champion[] free market principles, limited and accountable government, individual rights, business civil liberties, and legal ethics”, has this to say about the vacated Second Circuit decision:
The Second Circuit’s opinion marked the most egregious endorsement yet of troubled firms’ use of the “quick sale” option of Section 363 of the Bankruptcy Code to avoid Chapter 11’s creditor-protective provisions. The Indiana pensioners’ appeal had sought to prevent this end-run by forcing the United Auto Workers (and others) to return to the bankruptcy estate the $4.6 billion they received as part of the sale, whereby senior secured creditors could at last be made whole. The Supreme Court’s order ended the year-long Chrysler bankruptcy battle without squarely deciding the important issues raised–but setting aside what had been an unfortunate precedent from an important court.
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Keywords: non-joinder dismissal, res judicata
Panel: Parker, Hall, and Lynch
Opinion by: Lynch
Appeal from: EDNY
Result below: Dismissed
Result: Vacated and remanded
non-joinder and res judicata
The question on appeal is whether dismissal for failure to join a party is an on-the-merits adjudication entitled to preclusive effect under New York law. Because non-joinder dismissal is without prejudice unless the dismissing court specifically states otherwise, CPLR § 1003; Nems Enter., Ltd. v. Seltaeb, Inc., 263 NYS 2d 525, 526 (1st Dept 1965), the district court erred in dismissing the federal complaint.
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Keywords: Bankruptcy Code §522(d)(11)(E) exemption, “future earnings”
Panel: Kearse, Sack, and Katzmann
Opinion by: Kearse
Appeal from: D. Conn. (Bryant, USDJ)
Result below: Affirmed Bankruptcy Court
Result: Affirmed
§522(d)(11)(E) future earnings exemption
The question on appeal is whether the Bankruptcy and District Courts correctly decided that earnings related to the period after the filing of the bankrtuptcy petition are exempted under Bankruptcy Code §522(d)(11)(E), which permits exemption from the bankruptcy estate of “a payment in compensation of loss of future earnings of the debtor … to the extent reasonably necessary for the support of the debtor and any dependent of the debtor.” The section is designed “to permit an individual debtor to take out of the estate that property that is necessary for a fresh start and for the support of himself and his dependents.” Slip Op. at 12 (quotation citation omitted).
The Court holds that the Bankruptcy and District Courts “properly interpreted ‘future’ in §522(d)(11)(E) as looking forward from the date of the bankruptcy filing, and therefore “allows an exemption for a loss of any future earnings after creation of th[e bankruptcy] estate.”
