Below are summaries of important opinions affecting in-house attorneys issued by the U.S. Supreme Court, 1st and 2nd Circuits and Delaware Court of Chancery from late April 2004 through early July 2004. Readers can access the full text of the opinions at www.newenglandbizlawupdate.com.

U.S. Supreme Court

Antitrust

Sherman Act Doesn’t Apply To ‘Foreign’ Claims

The Sherman Act does not apply to a claim by vitamin purchasers that manufacturers engaged in a price-fixing conspiracy where the adverse foreign effect was independent of any adverse domestic effect.

Hoffman-La Roche Ltd. v. Empagran S.A. Docket No. 03-724. Decided June 14, 2004.

Bankruptcy

Debtor Must Pay ‘Prime-Plus’ Interest Rate On Retained Property

A debtor should pay a "prime-plus" interest rate for collateral that he or she keeps after declaring bankruptcy.

Till v. SCS Credit Corp. Docket No. 02-1016. Decided May 17, 2004.

Civil Practice

Federal Court Can Order Production Of Materials For Use In Foreign Tribunal

A U.S. District Court has the discretion to order the production of materials for use in a foreign or international tribunal.

Intel Corp. v. Advanced Micro Devices, Inc. Docket No. 02-572. Decided June 21, 2004.

Diversity Jurisdiction

Lack Of Subject Matter Jurisdiction Not ‘Cured’ By Time Of Trial

Where parties were non-diverse at the time a complaint was filed but diverse by trial, this is not sufficient for federal subject matter jurisdiction.

Grupo DataFlux v. Atlas Global Group, L.P. Docket No. 02-1689. Decided May 17, 2004.

Employment Law

Title VII Plaintiff Can Sue For ‘Constructive Discharge’

A Title VII plaintiff who claimed she was constructively discharged from her job as a result of sexual harassment may be able show she suffered a "tangible employment action," and thereby prevent her employer from asserting an affirmative defense.

Pennsylvania State Police v. Suders. Docket No. 03-95. Decided June 14, 2004.

Environmental Law

Clean Air Act Preempts Local Emissions Standards

The Clean Air Act may preempt local government regulations prohibiting the purchase of motor vehicles with specified emission characteristics.

Engine Manufacturers Association v. South Coast Air Quality Management District. Docket No. 02-1343. Decided April 28, 2004.

ERISA

Pension Plan Amendment Violates ‘Anti-Cutback’ Rule

A pension plan amendment violates ERISA’s "anti-cutback" rule where it expands the categories of post-retirement employment that trigger suspension of payment of early retirement benefits that have already accrued.

Central Laborers’ Pension Fund v. Heinz. Docket No. 02-891. Decided June 7, 2004.

HMOS

Patient Can’t Sue HMO In State Court

A patient can’t sue an HMO under state malpractice law for refusing to pay for treatment because the suit is preempted by ERISA.

Aetna Health Inc. v Davila. Docket No. 02-1845. Decided June 21, 2004.

Statute Of Limitations

Four-Year Statute Of Limitations Period Applies To Section 1981 Race Bias Suit

A federal law establishing a four-year statute of limitations for claims arising under statutes "enacted" after 1990 governs a §1981 race discrimination suit.

Jones v. R.R. Donnelley & Sons Co. Docket No. 02-1205. Decided May 3, 2004.

Truth In Lending

‘Over-Limit’ Fee Imposed On Credit Cardholder Not A Violation Of Truth In Lending Act

A credit card company that imposed an “over-limit” fee on a cardholder who exceeded her credit limit but didn’t include the fee in calculating her finance charge didn’t violate the Truth in Lending Act.

Household Credit Services, Inc. v. Pfennig. Docket No. 02-857. Decided April 21, 2004.

1st U.S. Circuit Court of Appeals

Antitrust

Blue Cross’s Pharmacy Network Not An Antitrust Violation

A judgment was properly entered in favor of a defendant health insurer with respect to the plaintiff drug store chains’ antitrust complaint arising out of the defendant’s establishment and operation of a “closed” pharmacy network, as the plaintiffs have proven no per se violation and the judge below did not err in excluding the plaintiffs’ “relevant market” expert evidence.

The Stop & Shop Supermarket Co., et al. v. Blue Cross & Blue Shield of Rhode Island, et al. Docket No. 03-2061. Decided June 24, 2004.

Court Establishes Evidentiary Requirements For Claim For Vertical Restraint Of Trade

To make out a claim for a vertical restraint of trade in violation of §1 of the Sherman Act, a plaintiff must introduce evidence showing both concerted action and harm to the competitive process.

Euromodas, Inc. v. Zanella, Ltd., et al. Docket No. 03-1712. Decided May 17, 2004.

Attorneys

Computer Legal Research Costs Recoverable In Copyright Case

In awarding counsel fees to the defendant who prevailed in a copyright infringement case, a judge acted permissibly in including the cost of computer-assisted legal research performed by defense counsel.

InvesSys, Inc. v. The McGraw-Hill Companies, Ltd., et al. Docket No. 03-1954. Decided May 21, 2004.

Banks And Banking

Bank Liable For Not Disclosing Effective Date Of Changes To Fees And Minimum Balance Requirements

Where a defendant bank did not clearly and conspicuously disclose to a plaintiff the effective date of changes to fees and minimum balance requirements applicable to the plaintiff’s accounts, the defendant will be held liable under the Truth in Savings Act, its implementing regulations and the Massachusetts consumer protection statute.

Barnes v. Fleet National Bank, N.A., et al. Docket No. 03-1027. Decided June 2, 2004.

Bankruptcy

Subordination Agreement Not Affected by ‘Rule Of Explicitness’

The fact that a subordination agreement does not satisfy New York’s “Rule of Explicitness” does not prevent it from being enforced, as “states are not free to adopt rules of contract interpretation that apply only in bankruptcy.”

In re Bank of New England Corp. Docket No. 03-1321. Decided April 13, 2004.

Amounts Owed By Hospital’s To ‘Uncompensated Care Pool’ Constitute Priority Claim

Amounts owed by a debtor hospital to a state “Uncompensated Care Pool” are properly considered to be “excise taxes” enjoying priority in bankruptcy under 11 U.S.C. §507(a)(8)(e).

In re Boston Regional Medical Center, Inc. Docket No. 03-1527. Decided April 14, 2004.

Recoupment Of Debtor’s Medicaid Overpayments Not A Violation Of Automatic Stay

The Health Care Financing Administration did not violate the automatic stay by collecting Medicaid overpayments from a Chapter 11 debtor, as the collections constituted recoupment rather than a setoff.

In Re: Holyoke Nursing Home, Inc. Docket No. 03-1933. Decided June 8, 2004.

Civil Practice

Federal Aviation Act Does Nor Provide A Private Right Of Action

A plaintiff’s suit – alleging that a defendant airline had defaulted on certain contractual obligations to him in violation of the Federal Aviation Act – must result in a summary judgment for the defendant, as no private right of action exists under the Federal Aviation Act.

Bonano v. East Caribbean Airline Corporation, et al. Docket No. 03-1843. Decided April 22, 2004.

Fiduciary Duty Case Improperly Dismissed

A district court judge improperly dismissed breach of fiduciary duty claims without taking into account allegations that an employer artificially inflated the price of its stock by concealing internal problems.

LaLonde v. Textron, Inc. Docket No. 03-2033. Decided May 7, 2004.

Commercial

Dragnet Clause Ruled Valid Under U.C.C. Article 9

A judgment for a defendant lender should be affirmed – in a corporate plaintiff’s suit alleging breach of contract and violation of the Massachusetts consumer protection statute in connection with a dragnet clause – as the dragnet clause was not invalid under Article 9 of the Uniform Commercial Code.

Pride Hyundai, Inc., et al. v. Chrysler Financial Company, L.L.C. Docket No. 03-1905. Decided May 27, 2004.

Complaint Against Wind Farm Developer Preempted By Federal Law

A complaint – charging that a defendant wind energy farm developer’s construction of a data collection tower in Nantucket Sound was impermissible in the absence of a state permit – is barred by federal preemption principles.

Ten Taxpayer Citizens Group, et al. v. Cape Wind Associates, LLC. Docket No. 03-2323. Decided June 28, 2004.

Employment

Damages Unaffected By Subsequent Termination For Misconduct

It is error to cut off, as a matter of law, the ability of a successful Title VII discrimination plaintiff to receive further back pay or front pay once he is fired for misconduct from a position he takes after leaving the discriminatory employer.

Johnson v. Spencer Press of Maine, Inc. Docket Nos. 03-1999 and 03-2069. Decided April 16, 2004.

Trademark

Foreign Corporation Could Not Sue In U.S.

Plaintiff British corporation could not succeed in an action against a defendant American corporation claiming ownership of a trademark because the plaintiff never used the trademark in commerce in the United States.

General Healthcare International Ltd. v. Qashat, et al. Docket No. 03-1968. Decided April 13, 2004.

Improperly Strict Standard Rejected In Trademark Infringement Suit

A summary judgment awarded to the defendant in a trademark infringement action must be vacated and the case remanded, where a U.S. District Court judge held the plaintiff to an improperly strict “likelihood of confusion” standard.

The Beacon Mutual Insurance Company v. OneBeacon Insurance Group. Docket No. 03-2671. Decided July 12, 2004.

2nd U.S. Circuit Court Of Appeals

Administrative

Mines Subject To Federal Regulation Even If Products Sold In-State

Congress’s power under the Commerce Clause includes the power to regulate mines whose products are sold entirely intrastate.

D.A.S. Sand & Gravel, Inc. v. Chao, et al. Docket No. 03-40668. Decided May 26, 2004.

Antitrust

Proof Of ‘Competitive Injury’ Not Required In Suit Under §2(c) Of Robinson-Patman Act

A litigant seeking to demonstrate a prima facie violation of §2(c) of the Robinson-Patman Act need not prove competitive injury.

Blue Tree Hotels Investment (Canada) Limited, et al. v. Starwood Hotels & Resorts Worldwide, Inc., et al. Docket No. 02-9312. Decided May 20, 2004.

Arbitration

Title VII Claims Are Subject To Mandatory Arbitration Under NASD Form U-4

A plaintiff was properly ordered to arbitrate his sexual harassment claim under Form U-4 of the National Association of Securities Dealers, as there is no legal basis for “a rule that would allow a party to avoid his legal obligation to read a document carefully before signing it just because the document is an arbitration agreement under which Title VII claims could be arbitrated.”

Gold v. Deutsche Aktiengesellschaft, et al. Docket No. 03-7283. Decided April 21, 2004.

Brokerage Can Be Sued For Fraud At Arbitration; Claim Not Barred By Collateral Estoppel

A plaintiff should be permitted to proceed with a suit charging a defendant with presenting fraudulent evidence in an arbitration proceeding, as the suit is not barred by the collateral estoppel doctrine.

PenneCom B.V. v. Merrill Lynch & Co., Inc., et al. Docket No. 03-7774. Decided June 28, 2004.

Bankruptcy

Bankruptcy Jurisdiction May Be Asserted Despite Securities Act ‘Anti-Removal’ Provision

The anti-removal provision of Securities Act §22(a) does not preclude removal of individual actions that are “related to” a bankruptcy case under the bankruptcy removal statute, 28 U.S.C. §1452(a).

California Public Employees’ Retirement System v. WorldCom, Inc., et al. Docket No. 04-0219. Decided May 11, 2004.

Copyright

Question Certified Regarding Copyright Law

The New York Court of Appeals has been asked to answer the certified question: “Does a common law copyright under New York law expire when the subject work enters the public domain in its country of origin?”

Capitol Records, Inc. v. Naxos of America, Inc. Docket No. 03-7859. Decided June 21, 2004.

Corporate

Inclusion Of Proxy Card Duplicate Constitutes Revocation

In the context of a proxy vote to authorize a proposed merger, a duplicate of management’s proxy card, when included in a mailing opposing a proposed merger, is a “form of revocation” under 17 C.F.R. §240.14a-2(b)(1).

MONY Group, Inc. v. Highfields Capital Mgmt., L.P. Docket No. 04-0678. May 13, 2004.

Employment

Failure To Prove Any Adverse ‘Tangible Employment Action’ Defeats Title VII Harassment Claim

A corporate employer was properly granted summary judgment on an employee’s claims of “quid pro quo” and “hostile work environment” sexual harassment in violation of Title VII where the employee failed to show that she suffered any “tangible employment action” as a result of the alleged harassment.

Mormol v. Costco Wholesale Corporation, et al. Docket No. 03-7409. Decided April 6, 2004.

Environmental

Private Litigants May Bring Clean Air Act Challenges To State Permitting Decisions

Where a state environmental agency has ruled that a corporation may proceed with construction of a factory without obtaining a permit, private litigants may sue in federal court under §304(a)(3) of the Clean Air Act to challenge that determination.

Weiler, et al. v. Chatham Forest Products, Inc. Docket No. 02-9500. Decided June 4, 2004.

RICO

Allegations Of Misconduct Involving State Sales Taxes Result In Actionable RICO Claim

A plaintiff corporation stated an actionable RICO claim by alleging that it lost sales due to a defendant competitor’s pattern of offering customers lower bottom-line cost by unlawfully omitting state sales taxes and concealing those omissions by means of mail and wire fraud.

Ideal Steel Supply Corporation v. Anza, et al. Docket No. 03-7381. Decided July 2, 2004.

Securities

‘Standing’ Question Under Securities Exchange Act §10(b) Resolved

Stockholders do not have standing to sue under §10(b) of the Securities Exchange Act of 1934 or under Rule 10b-5 where a company whose stock they purchased was negatively impacted by the material misstatement of another company whose stock they did not purchase.

Ontario Public Service Employees Union Pension Trust Fund, et al. v. Nortel Networks Corporation, et al. Docket No. 03-7608. Decided May 19, 2004.

Investment In Bogus Money Market Funds Results In SIPA ‘Claims For Securities’

Parties that were induced to invest in bogus money market funds possess “claims for securities” under the Securities Investor Protection Act, not “claims for cash” (which are subject to a $100,000 reimbursement limit).

In Re: New Times Securities Services, Inc. Docket No. 02-6166. Decided June 8, 2004.

Tort

Faulty Jury Instructions Require Vacating Defamation And Breach Of Implied Contract Verdicts

Verdicts in which a defendant corporation was found liable for defamation and breach of implied contract must be vacated, because the jury instructions framed by the judge were faulty (1) in permitting the jury to consider a “compelled self-publication” cause of action for defamation (which is not recognized in the forum state of Connecticut) and (2) in informing the jury that, with respect to the “breach of implied contract” claim, disclaimers in the defendant’s employment manuals must be completely disregarded.

Cweklinsky v. Mobil Chemical Company. Docket Nos. 01-7848(L) and 01-7944(XAP). Decided April 13, 2004.

Delaware Court of Chancery

Civil Practice

For Voluntary Dismissal, Plaintiffs Must Pay Defense Legal Fees

A court will grant a voluntary dismissal of two actions seeking interpretation of a Delaware partnership agreement, issues related to litigation already in progress in Texas, on the condition that plaintiffs pay reasonable attorneys’ fees and expenses to two law firms who represented defendants in the Delaware actions.

Richmond Capital Partners I v. J.R. Investments Corp., Docket No. C.A. No. 20281, Decided May 24, 2004.

Corporate

Silence On Sales Talks May Violate Disclosure Duty

The Earthgrains bakery company’s offer of a break on brokerage fees for shareholders with less than 100 shares may have violated a fiduciary duty of disclosure when the board of directors failed to tell those shareholders that the company was in intense negotiations with the Sara Lee company, and a shareholder who sold her shares just before the shares doubled in price after the sale was announced, may sue the bakery company’s board of directors.

Alessi v. Beracha. Docket No. C.A. 18993-NC. Decided May 11, 2004.