New England Biz Law Update
U.S. Supreme Court
Civil Procedure
Removal Not Improper Even if Potential Co-Defendant Could Defeat Diversity Jurisdiction
When a defendant validly removes a case to federal court, it s not required to negate the existence of a potential co-defendant whose presence in the action would defeat the diversity requirement.
Lincoln Property Co. v. Roche. Docket No. 04-712. Decided Nov. 29, 2005.
Attorneys’ Fees Not Awarded Despite Improper Removal
Absent unusual circumstances, attorneys’ fees should not be awarded for a case wrongfully removed to federal court and subsequently remanded to state court, where the removing party had an objectively reasonable basis for removal.
Martin v. Franklin Capital Corp. Docket No. 04-1140. Decided Dec. 7, 2005.
Employment
Food Processing Workers Entitled to More Pay
Food processing workers must be paid for the time walking between changing and production areas, but not for the time spent waiting to change into their gear.
IBP, Inc. v. Alvarez. Docket No. 03-1238. Decided Nov. 8, 2005.
1st Circuit
Arbitration
Arbitration Award Confirmed Despite Discovery Violation
An arbitration award in favor of a defendant was properly confirmed despite the fact that the defendant refused to comply with an order by the arbitration panel to produce certain documents.
National Casualty Co. v. First State Insurance Group. Docket No. 05-1505. Decided Dec. 2, 2005.
Bankruptcy
Foreclosure Didn’t Violate Automatic Stay
A realty corporation did not violate the automatic stay by foreclosing on certain debtors’ house while their Chapter 13 petition dismissal was on appeal.
In Re Lomagno, Vito, et al. Docket No. 05-9003. Decided Nov. 14, 2005.
Civil Practice
Noncompliance With Court Order Results in Dismissal
A judge acted permissibly in dismissing an ERISA complaint as a sanction for the plaintiffs’ “repeated and unexplained recalcitrance” in demanding punitive damages in defiance of a court admonition that such damages are unavailable under ERISA.
Rivera Diaz, et al. v. American Airlines, Inc., et al. Docket No. 04-2277. Decided Dec. 28, 2005.
SOX Whistleblower Provision Doesn’t Apply Extraterritorially
A foreign employee, who complains of misconduct abroad by the overseas subsidiaries of a U.S. parent company, may not sue the parent company under the whistleblower provisions of Sarbanes-Oxley because the Act has no extraterritorial effect.
Carnero v. Boston Scientific Corporation. Docket No. 04-1801. Decided Jan. 5, 2006.
Constitutional
Unfair Prescription Drug Practices Act Valid
A state statute – which mandates disclosure of information concerning pharmacy benefit managers’ contracts with drug manufacturers and pharmacies – is constitutionally valid and not preempted by ERISA.
Pharmaceutical Care Management Association v. Rowe. Docket No. 05-1606. Decided Nov. 8, 2005.
Maine Law Regarding Wholesale Auto Prices Ruled Constitutional
Neither the Commerce Clause nor the Contracts Clause of the U.S. Constitution is violated by a Maine law that prohibits auto manufacturers from adding state-specific surcharges to wholesale motor vehicle prices in order to recoup the costs of their compliance with retail-rate reimbursement laws.
Alliance of Automobile Manufacturers v. Gwadoski, et al. Docket No. 05-1259. Decided Nov. 18, 2005.
Employment
Issue as to ‘Reasonable Accommodation’ of Bipolar Disorder Precludes Summary Judgment
A judge acted impermissibly in granting a defendant employer summary judgment on all portions of a disability discrimination complaint filed by a plaintiff former employee suffering from bipolar disorder, where questions requiring trial remained on the plaintiff’s “failure to accommodate” claim.
Tobin v. Liberty Mutual Insurance Company. Docket No. 04-2391. Decided Nov. 3, 2005.
ERISA
Tainted Review Process Leads to Reversal in Disability Benefits Case
Summary judgment – granted to a defendant employer and codefendant insurance company in a case filed by a former employee denied long-term disability benefits – must be reversed and the case remanded, as evidence indicates the defendants’ process for reviewing the plaintiff’s benefit application was tainted.
Buffonge v. The Prudential Insurance Company of America, et al. Docket No. 05-1416. Decided Oct. 14, 2005.
Labor
Employer Waived Objections by Not Raising Them Before NLRB
An employer’s challenge to the remedial portion of a National Labor Relations Board order must be rejected because the employer’s objections were not specifically raised before the NLRB.
National Labor Relations Board, et al. v. Saint-Gobain Abrasives, Inc. Docket No. 05-1061. Decided Oct. 19, 2005.
Negligence
Airline Not Liable for Passenger Injury
An airline had no duty to warn a passenger of the open and obvious danger of walking on top of stacked luggage and therefore could not be held liable when he injured himself while doing so.
Gorfinkle, et al. v. U.S. Airways, Inc., et al. Docket No. 04-1837. Decided Dec. 7, 2005.
Products Liability
No Liability in ‘Fire Blanket’ Suit
Where (1) a fire occurred during a torch-cutting operation as part of a construction project in Maine and (2) the general contractor filed a claim against the manufacturer and distributor of a fire blanket used in the project, a judgment rejecting that claim must be affirmed, as “the evidence was insufficient to allow a reasonable jury to find that any breach of the duty to warn proximately caused the injury” and there was no evidence “that would support a finding that the fire blanket was unfit for its ordinary purposes.”
Koken v. Black & Veatch Construction, Inc., et al. Docket No. 04-2552. Decided Oct. 14, 2005.
Securities
Suit Dismissed for Inadequate Pleading of Subjective Falsity
A suit – filed by plaintiffs alleging damages because of false and misleading statements made by analysts concerning a corporation’s stock – must be dismissed because the plaintiffs did not sufficiently plead subjective falsity.
In Re Credit Suisse First Boston Corporation (Agilent Technologies, Inc.) Analysts Reports Securities Litigation. Docket No. 05-1646. Decided Dec. 12, 2005.
Requirement Established for ‘Fraud-On-The- Market’ Complaints
In order to benefit from the fraud-on-the-market presumption of investor reliance, a plaintiff in a securities fraud case must show that “the market price of the stock fully reflects all publicly available information.”
In Re PolyMedica Corp. Securities Litigation. Docket No. 05-1220. Decided Dec. 13, 2005.
2nd Circuit
Civil Practice
Settlement of Class Action Vacated for Lack of Standing
A U.S. District Court judgment – approving a settlement agreement in an ERISA class action affecting more than 800,000 health benefit plans and 51 million Americans – must be vacated because of questions regarding the Article III standing of some of the plaintiffs.
Gruer v. Merck-Medco Managed Care, L.L.C. Docket No. 04-3300. Decided Dec. 8, 2005.
Federal Question Presented by Counsel Fee Dispute
Where a plaintiff alleged that Title VII allows a party who successfully litigates an employment discrimination case before a state agency to obtain counsel fees, the plaintiff presented a federal question which a federal court had proper jurisdiction to hear.
Aurecchione v. Schoolman Transportation. Docket No. 04-0561. Decided Oct. 19, 2005.
Commercial
Planning Board’s Denial of Cell Tower Permit Upheld
A city planning board did not violate the Federal Telecommunications Act by refusing to grant a corporation a permit for construction of communications tower on a golf course, where evidence indicated (1) that no “public necessity” existed for such construction and (2) that the subject tower would have an adverse visual impact on the neighborhood and result in the diminution of property values there.
Omnipoint Communications Inc. v. City of White Plains. Docket No. 04-3286. Decided Dec. 2, 2005.
ERISA
‘Phantom Account’ Violates ERISA
Defendants, in instituting a “phantom account” offset – through which the hypothetical growth of an employee’s previous lump sum retirement benefits distribution is factored into his current benefits calculation – violated ERISA’s anti-cutback provision by impermissibly reducing benefits.
Frommert v. Conkright. Docket No. 04-4609. Decided Jan. 6, 2006.
Insurance
Assignment of Indemnification May Be Permissible Despite Policy’s ‘No-Transfer’ Clause
Under New York law, an insured may, at least for some purposes and in some circumstances, make over to an assignee the indemnification that is owed under an insurance contract, notwithstanding a no-transfer clause in the insurance policy.
Globecon Group, LLC v. Hartford Fire Insurance Co. Docket No. 04-4399. Decided Jan. 9, 2006.
Delaware Supreme Court
Corporations
Preferred Stock Needn’t Include Right to Dividends
A corporation’s preferred stock wasn’t void under Delaware law because it failed to include a right to dividends.
Shintom Co., Ltd. v. Audiovox Corp. Docket No. 214, 2005. Decided Oct. 31, 2005.
Delaware Chancery Court
Corporations
Shareholders Can Sue Over Conflict in Merger
A shareholder class action alleging that directors of a company breached their fiduciary duties when they allowed a purportedly conflicted controlling shareholder to negotiate a merger could proceed under an “entire fairness” standard of liability.
In re: LNR Property Corp. Shareholders Litigation. Docket No. 674-N. Decided Nov. 4, 2005.
Minority Shareholders Suit Over Sale of Company Dismissed
Minority shareholders could not sue for breach of fiduciary duty based on an allegation that their company was sold at an inadequate price in order to satisfy the majority shareholder’s need for cash.
In re CompuCom Systems, Inc. Shareholder Litigation. Docket No. 499-N. Decided Sept. 29, 2005.
