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

1st Circuit

Arbitration

Delay In Requesting Arbitration Results In Waiver

A class-action defendant is not entitled to an order sending some of the plaintiffs’ claims to arbitration, as a delay of more than three years after the filing of the complaint and of 18 months after class certification amounted to a waiver of the defendant’s right to arbitrate.

In Re: Citigroup, Inc., Capital Accumulation Plan Litigation. Docket No. 03-2221. Decided July 16, 2004.

Bankruptcy

Liquidating Supervisor May Settle For Full Amount To Avoid Counsel Fees

A liquidating supervisor in bankruptcy has the authority pursuant to 11 U.S.C. §§363(b) and 704 to settle a disputed claim for the full amount of that claim in order to avoid the expenditure of attorneys’ fees and costs.

In Re: ServiSense.com, Inc. Docket No. 03-2512. Decided Sept. 8, 2004.

Contract

Cruise Ship Personal Injury Case Subject To Forum Selection Clause

A negligence action, filed against a defendant cruise line in Massachusetts federal district court by a plaintiff passenger who suffered a finger injury during a cruise, was properly dismissed in accordance with a forum selection clause in the passenger-ticket contract calling for all lawsuits between the parties to be brought in Dade County, Fla.

Reynolds-Naughton v. Norwegian Cruise Line Limited. Docket No. 04-1183. Decided Sept. 14, 2004.

Surety Bond Beneficiary’s Assignment Renders Bond Unenforceable

An assignee’s complaint for enforcement of a surety bond must be dismissed on the ground that the bond limited the defendant surety’s liability to the original named beneficiaries.

Citibank, et al. v. Grupo Cupey, Inc., et al. Docket No. 03-1974. Decided August 30, 2004.

Corporate

Former CEO’s Resignation Not ‘Caused’ By Alleged ‘Boardroom Coup’

A plaintiff, who resigned as a corporation’s president/CEO and later filed suit alleging that his resignation was caused by a fraudulent report prepared by the defendant consulting firm as part of a “boardroom coup,” is not entitled to relief, as the evidence was insufficient to show that the defendant’s alleged conduct was the “cause” of the plaintiff’s loss of his job.

Trigano v. Bain & Co., Inc. Docket No. 03-1319. Decided August 17, 2004.

Employment

Employee Falls Short Of Proving ADEA And ADA Claims

A plaintiff’s claims against defendant corporations under the Age Discrimination in Employment Act and the Americans with Disabilities Act were rightly rejected where the plaintiff did not prove (1) that she suffered an adverse employment action or (2) that the defendants were aware of her disability when they denied her a requested accommodation.

Estades-Negroni v. The Associates Corporation of North America, et al. Docket No. 02-1852. Decided July 28, 2004.

Insurance

Carrier Barred From Raising At Trial Basis For Denying Benefits Not Stated During Claims Review Process

In a suit arising out of a defendant insurance company’s denial of a plaintiff’s application for long-term disability benefits, the defendant should be held to the basis for denying benefits articulated in its claims review process and should not be permitted to rely on another basis which it failed to raise in the claims review process even though it had the burden, obligation and opportunity to do so.

Glista v. Unum Life Insurance Company of America. Docket No. 03-2494. Aug. 11, 2004.

Trademark

Lanham Act Held Inapplicable In Dispute Between Author And Publisher

Where the plaintiff co-author of a robotics text, unhappy that the defendant publisher had accepted revisions for a second edition from another individual without her approval, filed suit alleging that the defendant had violated the Lanham Act by listing her as the author of the second edition without her consent, a judge properly awarded the defendant summary judgment on this claim, as (1) the plaintiff failed to demonstrate that her name had acquired secondary meaning and therefore (2) the Lanham Act did not apply to her claim.

Flynn v. AK Peters, Ltd. Docket Nos. 03-1676, 03-2294 and 03-2348. Decided July 26, 2004.

Workers’ Compensation

Harassment Leaves Shipyard Employee Disabled And Entitled To LHWCA Benefits

An order awarding a plaintiff shipyard employee workers’ compensation benefits under the Longshore and Harbor Workers’ Compensation Act, based on a finding that workplace harassment aggravated the symptoms of his previously existing neurological condition, should be affirmed because testimony by the plaintiff’s supervisor and by several medical experts, along with the plaintiff’s own contentions, constitute substantial evidence that the plaintiff cannot perform his usual work at the shipyard and thus is totally disabled within the meaning of the Act.

Bath Iron Works Corp. v. Preston, et al. Docket No. 03-2530. Aug. 30, 2004.

2nd Circuit

Banks And Banking

FDIC May Recover Post-Insolvency Interest On Depositors’ Claims From Failed Bank’s Estate

The Federal Deposit Insurance Corporation may, as a subrogee to the claims of a failed bank’s FDIC-insured depositors, collect post-insolvency interest on those claims from the failed bank’s estate.

Golden Pacific Bancorp v. Federal Deposit Insurance Corporation. Docket No. 03-6194. Decided July 14, 2004.

Civil Practice

Federal Court Could Unseal ‘Confidential’ Settlement Documents In Sex Bias Suit

Where (1) an employee and a corporate employer settled a sex discrimination lawsuit, (2) they agreed in the settlement that its terms would be maintained in confidence and (3) they filed with the court a stipulation of dismissal, the U.S. District Court acted within its jurisdiction in later ordering, sua sponte, that certain sealed documents in the matter be unsealed.

Gambale v. Deutsche Bank AG. Docket No. 03-7621. Decided Aug. 2, 2004.

False Claims Act Complaint Barred By ‘Tax Bar’ Provision

A complaint (1) filed against defendant corporations by a plaintiff individual acting on behalf of the U.S. Government and (2) alleging that the defendants violated the False Claims Act by making untrue statements in connection with a “yield burning” scheme involving tax-free municipal bonds, was properly dismissed by a federal judge as falling within the False Claims Act’s “Tax Bar” proviso.

United States, ex rel. Lissack v. Sakura Global Capital Markets, Inc., et al. Docket No. 03-7977. Decided Aug. 3, 2004.

Contract

Dismissal Of Suit For Alleged Breach Of Stock Purchase Agreement Warranted

A judge properly dismissed a suit growing out of the alleged breach of a stock purchase agreement where the plaintiff did not adequately demonstrate a RICO pattern or conspiracy.

First Capital Asset Management v. Satinwood, Inc. Docket Nos. 03-7897 and 03-7956. Decided Sept. 27, 2004.

Employment

Summary Judgment Wrongfully Entered On Hostile Work Environment Claim

Summary judgment should not have been entered rejecting a plaintiff’s claim alleging a gender-hostile work environment where the totality of the evidence would permit a reasonable jury to conclude that the plaintiff was the victim of sexual harassment.

Petrosino v. Bell Atlantic. Docket Nos. 03-7366 and 03-7708. Decided Sept. 29, 2004.

Facially-Neutral ‘Involuntary Reduction In Force’ Policy Violated ADEA

A damage award – made to plaintiff former employees of defendant atomic power companies under the Age Discrimination in Employment Act – must be upheld, where the evidence presented at trial indicated (1) that a facially-neutral “involuntary reduction in force” policy had a discriminatory impact on older employees and (2) that the defendants could have accomplished their legitimate business goals by means of a method not discriminatory in its impact.

Meacham, et al. v. Knolls Atomic Power Laboratory, et al. Docket Nos. 02-7378(L) and 02-7474(XAP). Decided Aug. 23, 2004.

Successor Corporation Bound By Predecessor’s Health Care Benefit ‘Lifetime’ Guarantee

A U.S. District Court judge correctly ruled that a successor corporation was bound by a guarantee – which a predecessor company had given employees in 1976 – that they would retain, for life, the level of health care benefits in place as of April 1, 1976.

LaForest, et al. v. Honeywell International, Inc. Docket Nos. 03-9007(l), 03-9043(CON), 03-9045(CON), 03-9313(CON), 03-9057(CON0 and 04-0104-cv(CON). Decided July 15, 2004.

ERISA

ERISA Preempts Medical Malpractice Claim

In light of the U.S. Supreme Court’s recent decision in Aetna Health Inc. v. Davila, 542 U.S., a 2nd Circuit ruling must be vacated and a new judgment entered stating that the plaintiff’s medical malpractice claim is completely preempted by ERISA.

Cicio v. John Does 1-8, et al. Docket No. 01-9248. Decided Sept. 23, 2004.

‘Unwritten Understandings’ May Not Supersede Valid Benefit Plan Rules And Regulations

Under §515 of ERISA, any unwritten understanding that allegedly limits an employer’s contributions to a multi-employer benefit plan cannot supersede otherwise valid rules and regulations promulgated by the plan.

New York State Teamsters Conference Pension & Retirement Fund, et al. v. United Parcel Service, Inc. Docket Nos. 03-7349 and 04-1366. Decided Aug. 30, 2004.

Evidence

Expert Testimony Needed To Prove Causation In Jones Act Cases

Expert testimony, which must satisfy the Daubert standard of reliability, is necessary in Jones Act cases where a lay juror could not be expected to intuit the causal relationship between the acts in question and the injury.

Wills v. Amerada Hess Corp., et al. Docket No. 02-7913. Decided Aug. 11, 2004.

Insurance

Carrier Required To Pay Benefits For Death By Auterotic Asphyxiation

The holder of an accidental-death-and-dismemberment insurance policy is entitled to coverage for the death of her son as a result of autoerotic asphyxiation, as the son’s actions did not come within the scope of the policy’s “intentionally self-inflicted injuries” exclusion.

Critchlow v. First Unum Life Insurance Company of America. Docket No. 02-7585. Decided Aug. 9, 2004.

Real Property

Federal Law Prohibits ‘Markups’ But Not Overcharges’ For Real Estate Closings

A judgment for the defendants in a class action concerning real estate settlement services should be affirmed in part and reversed in part, as section 8(b) and (d) of the Real Estate Settlement Procedures Act does not prohibit “overcharges” but does prohibit “marking up the cost of another provider’s services without providing additional settlement services.”

Kruse, et al. v. Wells Fargo Home Mortgage, Inc., et al. Docket No. 03-7665. Decided Sept. 10, 2004.

Securities

SEC Disqualification Not Required

The Securities and Exchange Commission was not required to disqualify itself in favor of an independent arbitrator in examining the New York Stock Exchange’s termination of a brokerage’s privileges, where two Commission members had recused themselves because of personal involvement in the matter.

D’Alessio, et al. v. Securities and Exchange Commission. Docket No. 03-4883. Decided Aug. 16, 2004.

Tax

Court Endorses Use Of ‘Firm And Fixed Plan’ Test

In assessing deficiencies for the payment of income tax, the “firm and fixed plan” test is the appropriate method for determining whether two transactions conducted at different times may be integrated for the purposes of I.R.C. §302(b)(3).

Merrill Lynch & Company v. Commissioner of Internal Revenue. Docket No. 03-40676. Decided Sept. 28, 2004.

Delaware Court of Chancery

Fiduciary Duty

Former Disney Exec Did Not Violate Fiduciary Duties

Michael S. Ovitz was entitled to summary judgment on a derivative claim for breach of fiduciary duties in negotiating, arranging and finalizing the terms of his employment contract because, at the time of the contract negotiations, he was not yet a fiduciary of Disney. However, Ovitz must still face trial on the claim of waste and his receipt of “non-fault termination” benefits.

In re The Walt Disney Co. Derivative Litigation. Docket No. CA No. 15452. Decided Sept. 10, 2004.

Litigation

Former Corporate Officer Must Pay Company Legal Fees On Advancement Request

A former corporate officer is not entitled to advancement of legal and consultant fees in connection with an SEC investigation and related litigation. Throughout this litigation, the conduct of the former officer’s representatives has been “frivolous, oppressive and vexatious,” and the company is entitled to an award of its attorney’s fees and costs under the “bad faith” exception to the American Rule on legal fees.

Kaung v. Cole National Corp. Docket No. CA No. 163-N. Decided Aug. 30, 2004.