Media Alerts

Caronia v. Philip Morris USA - Second Circuit

Elyse Moskowitz — 2013-05-01T19:06:47 -06.00

Headline: Second Circuit Certifies Question of Whether New York Recognizes Independent Equitable Cause of Action for Medical Monitoring to Court of Appeals in Lawsuit by Long-Time Smokers Against Philip Morris.

Area of Law: Equitable Claims

Issue(s) Presented: Whether current and former heavy Marlboro brand cigarette smokers, not currently diagnosed with or under medical care for any smoking-related disease, may assert an independent equitable cause of action for medical monitoring against the Philip Morris tobacco company under New York law?

Brief Summary: Plaintiffs, New York state residents who are current or former heavy smokers of Marlboro brand cigarettes, brought this action against the brand's manufacturer, Philip Morris USA, Inc., for negligence, strict liability, and breach of implied warranty, on the grounds that the company designed, manufactured and sold Marlboro cigarettes "to deliver an excessive amount of carcinogens when smoked" despite "knowing that it was feasible to lower the carcinogenic content of its cigarettes." Plaintiffs also brought an independent equitable claim to require Philip Morris to fund medical monitoring of long-time Marlboro smokers, who faced an increased risk of lung cancer but were neither diagnosed with, nor under medical care for, a smoking-related disease. The United States District Court for the Eastern District of New York dismissed the negligence, strict liability, and some of the breach of implied warranty claims as time-barred and remaining breach of warranty claims for insufficient evidence of breach. Lastly, the district court dismissed the equitable cause of action for medical monitoring, finding Plaintiffs' failed to adequately allege that their injury - an increased risk of cancer - was proximately caused by Philip Morris' actions.

The United States Court of Appeals for the Second Circuit affirmed the dismissal of the negligence and strict liability claims as time-barred, holding these actions accrued when the harmful exposure occurred - here, when Plaintiffs developed an increased risk of lung cancer - and not continually with each new inhalation, and held such accrual is not stalled until a particular remedy the injured party prefers - here, a new medical monitoring procedure - becomes available. The Court also affirmed dismissal of the breach of implied warranty claims because the cigarettes were "minimally safe when used in the customary, usual, and reasonably foreseeable manner." The Second Circuit vacated the dismissal of the equitable claim for medical monitoring, however, and certified the question of whether New York recognizes such a cause of action and, if so, what the elements of such a cause of action are, what statute of limitations applied, and when such a cause of action accrues, to the New York State Court of Appeals.

To read the full opinion, please go to:
http://www.ca2.uscourts.gov/de...dae37da35f3/3/hilite/

Panel: Circuit Judges Kearse, Lohier, and Droney

Argument (if known): 03/01/2012

Date of Issued Opinion: 05/01/2013
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Docket Number: 11-0316-cv

Decided: Affirmed in part; Certified in part to the Court of Appeals for the State of New York.

Case Alert Author: Elyse Diamond Moskowitz

Counsel: VICTORIA E. PHILLIPS, New York, New York (Steven J. Phillips, Stanley J. Levy, Jerome H. Block, Amber R. Long, Lisa W. Davis, Levy Phillips & Konigsberg, New York, New York, on the brief), for Plaintiffs-Appellants. SHEILA BIRNBAUM, New York, New York (John H. Beisner, Jessica D. Miller, Geoffrey M. Wyatt, Skadden, Arps, Slate, Meagher & Flom Washington, D.C.; Gary R. Long, John K. Sherk, III, Shook, Hardy & Bacon, Kansas City, Missouri; Tammy B. Webb, Shook, Hardy & Bacon, San Francisco, California, on the brief), for Defendant-Appellee.

Author of Opinion: Judge Kearse

Patrick Cariou v. Richard Prince, et al. - Second Circuit

Emily Waldman — 2013-04-25T18:45:03 -06.00

Headline: Second Circuit Reverses Copyright Victory for Photographer Patrick Cariou, Holding That Most of Richard Prince's Works Made "Fair Use" of Cariou's Photographs

Area of Law: Copyright

Issue(s) Presented: Whether artwork that incorporated copyrighted photographs qualified as transformative, and thus met the "fair use" standard, even though the works did not comment on the original photographs.

Brief Summary: Plaintiff Patrick Cariou ("Plaintiff") is an artist of classical portraits and landscape photographs who brought a copyright infringement suit against Richard Prince, Gagosian Gallery Inc., and Lawrence Gagosian ("Defendants"), alleging that Prince's works - published and sold by Gagosian - had impermissibly altered, published, and sold Cariou's photographs without his permission. The Defendants raised a fair use defense. The United States District Court for the Southern District of New York found that Defendants had violated Plaintiff's copyrights, reasoning that to qualify as "fair use," Prince's works would have needed to comment on Cariou or his photos. The Second Circuit reversed, holding that the fair use defense does not require the alleged infringer's works to have commented on the original works; rather, the fair use defense can be satisfied as long as the new work is transformative - i.e., as long as it alters the original work with new expression, meaning, or message. Here, the court held that 25 of the 30 challenged works qualified as transformative. The remaining five works presented "closer questions," and the Second Circuit remanded the case to the district court for further consideration of those five works.

To read the full opinion, please go to: http://www.ca2.uscourts.gov/de...068be065092/1/hilite/

Extended Summary: Plaintiff Patrick Cariou is a professional photographer who, over the course of six years, worked with Rastafarians in Jamaica. He created a book of portrait and landscape photographs from his experiences with the Rastafarian community, which was published in 2000. The publication is currently out of print but sold approximately 5,791 copies. Defendant Richard Prince ("Prince") is a well-known appropriation artist, and his work - including taking photographs that others have produced and incorporating them into his own collages and paintings - has been displayed in many prominent art museums globally. Prince saw Cariou's book in 2005 and incorporated photographs from the book to create artwork. Prince's artwork was subsequently featured in Defendant Gagosian's ("Gagosian") art gallery. Cariou learned of Prince's exhibit from an art gallery owner in December 2008 and brought claims of copyright infringement against Defendants in the same month in the United States District Court for the Southern District of New York. The defendants raised a fair use defense, and both sides cross-moved for summary judgment.

Under the Copyright Act of 1976, the "fair use of a copyrighted work" is not considered copyright infringement. To determine whether a secondary use qualifies as "fair use," a key factor is "the purpose and character of the use." The district court interpreted this to mean that to qualify for a fair use defense, the secondary use must "comment on, relate to the historical context of, or critically refer back to the original works." On this basis, the district court ruled against the Defendants, holding that Prince's work failed to comment on Cariou's photographs. The Defendants appealed, arguing that the court had misapplied the fair use standard.

The Second Circuit agreed with the Defendants, holding that that the district court had interpreted "fair use" too narrowly. The court explained, citing Supreme Court precedent, that copyright is not an absolute protective shield for authors but rather is designed to stimulate the public's intellectual enrichment, and that the fair use defense is necessary to meet that goal. Explaining that the most important factor in a fair use analysis is "the purpose and character of the [secondary] use," the Second Circuit rejected the district court's view that this factor means that the secondary use must comment on the original work. "The law imposes no requirement that a work comment on the original or its author in order to be considered transformative," the court wrote. "Instead,...to qualify as fair use, a new work must generally alter the original with 'new expression, meaning, or message.'" The court studied Prince's works and concluded that 25 of the 30 challenged works were transformative, noting that they "manifest an entirely different aesthetic from Cariou's photographs."

The Second Circuit also considered the remaining factors for assessing fair use - namely, the effect of the secondary use on the potential market for the value of the copyrighted work; the nature of the copyrighted work itself; and the "amount and substantiality of the portion used in relation to the copyrighted work as a whole." It found that the audiences varied significantly from Cariou to Defendants, and that Defendants' actions did not usurp Cariou's market for selling his photographs. It also acknowledged that Cariou's original work had been both creative and published - placing it near the core of intended copyright protection - but concluded that because it was being used for a transformative purpose here, this factor's utility was limited. Finally, the Second Circuit considered the proportion of Cariou's work used by Prince. Here, it acknowledged that "Prince used key portions of Cariou's photographs," but again concluded that Prince did so in a transformative manner for 25 of the 30 works.

The Second Circuit concluded that the five remaining works presented closer questions, noting that they involved alterations to Cariou's work that were "relatively minimal." It thus remanded that portion of the case to the district court for further analysis, expressing no view as to how it should come out. Judge Wallace concurred in part and dissented in part, arguing that the entire case should have been remanded to the district court for reconsideration under the the Second Circuit's articulation of the fair use standard.

To read the full opinion, please go to: http://www.ca2.uscourts.gov/de...9068be065092/1/hilite/

Panel: Second Circuit Judges B.D. Parker and Hall; Ninth Circuit Judge Wallace (sitting by designation)

Argument (if known): 05/21/2012

Date of Issued Opinion: 04/25/2013
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Docket Number: 11-1197-cv

Decided: Reversed in part, vacated in part, and remanded

Case Alert Author: Sarah Wegmueller

Counsel : JOSHUA I. SCHILLER (Jonathan D. Schiller, George F. Carpinello, on the brief), Boies, Schiller & Flexner LLP, New York, NY, for Defendant-Appellant Richard Prince; HOLLIS ANNE GONERKA BART, CHAYA WEINBERG- BRODT, DARA G. HAMMERMAN, AZMINA N. JASANI, Withers Bergman LLP, New York, NY, for Defendants-Appellants Gagosian Gallery, Inc. and Lawrence Gagosian; DANIEL J. BROOKS (Seth E. Spitzer, Eric A. Boden, on the brief), Schnader Harrison Segal & Lewis LLP, New York, NY, for Plaintiff-Appellee Patrick Cariou. ANTHONY T. FALZONE, JULIE A. AHRENS, DANIEL K. NAZER, Stanford Law School Center for Internet and Society, Stanford, CA; VIRGINIA RUTLEDGE, New York, NY; ZACHARY J. ALINDER, JOHN A. POLITO, Bingham McCutchen LLP, San Francisco, CA, for Amicus The Andy Warhol Foundation for the Visual Arts; JOSEPH C. GRATZ, Durie Tangri, LLP, San Francisco, CA; OLIVER METZGER, Google Inc., Mountain View, CA, for Amicus Google Inc. CLIFFORD M. SLOAN, BRADLEY A. KLEIN, Skadden, Arps, Slate, Meagher & Flom LLP, Washington, DC, for Amici The Association of Art Museum Directors, The Art Institute of Chicago, The Indianapolis Museum of Art, The Metropolitan Museum of Art, The Museum of Modern Art, Museum Associates d.b.a. Los Angeles County Museum of Art, The New Museum, The Solomon R. Guggenheim Foundation, The Walker Art Center, and The Whitney Museum of American Art. MICHAEL WILLIAMS, DALE M. CENDALI, CLAUDIA RAY, Kirkland & Ellis LLP, Washington, DC, for Amici American Society of Media Photographers, Inc., and Picture Archive Council of America.

Author of Opinion: Judge B.D. Parker

Supervisor: Emily Gold Waldman

National Organization for Marriage, Inc. v. Walsh - Second Circuit

Emily Waldman — 2013-04-22T20:15:41 -06.00

Headline: Second Circuit Allows "National Organization for Marriage," a nonprofit advocacy organization opposing same-sex marriage, to Proceed with Challenge to New York Election Law

Area of Law: Constitutional Law

Issue(s) Presented: Whether National Organization for Marriage's ("NOM") pre-enforcement challenge to New York Election Law § 14-100.1 was ripe and non-moot.

Brief Summary: The National Organization for Marriage, Inc. ("NOM") is a nonprofit organization dedicated to opposing same-sex marriage. In the fall of 2010, NOM sued the co-chairs and commissioners of the New York State Board of Elections ("BOE"), explaining that it sought to advocate for certain candidates for statewide office in the November 2010 election, but feared that doing so would render it a "political committee" under New York law, thus subjecting it to various statutory requirements. NOM's lawsuit alleged that these requirements had a chilling effect on its protected speech and thus violated the First Amendment. The District Court for the Western District of New York granted Defendants' Motion to Dismiss on ripeness grounds, explaining that NOM had not yet tried to ascertain its status with the BOE, nor had the BOE tried to enforce the "political committee" requirements against NOM. The Second Circuit vacated and remanded, holding that NOM's claim was ripe and that it was not moot even though the 2010 election cycle was over. To read the full opinion, please go to: http://www.ca2.uscourts.gov/de...0a93a511e5/1/hilite/.

Extended Summary: The National Organization for Marriage, Inc. ("NOM"), a nonprofit advocacy organization dedicated to opposing same-sex marriage, filed a First Amendment lawsuit against the chairs and commissioners of the New York State Board of Elections ("BOE") in the United States District Court for the Western District of New York. The claim centered on allegations that NOM wanted to engage in advocacy connected to the November 2010 elections in New York State, but was chilled from doing so for fear that BOE would determine that NOM is a "political committee" under N.Y. Elec. Law § 14-100(1) and thus subject NOM to the regulations found in the remainder of N.Y. Elec. Law Art. 14. The district court granted Defendants' Motion to Dismiss for lack of subject matter jurisdiction, as the court found that NOM's fears were not well founded and that NOM had a chance of qualifying for an exception to § 14-100(1).

The Second Circuit, by a 2-1 vote, vacated and remanded. The majority held that NOM's claim satisfied both the constitutional and prudential standards for ripeness. The constitutional ripeness standard requires that a plaintiff's injury be actual or imminent. Here, NOM's fear of enforcement was justified in that NOM pled detailed facts regarding what it planned to do in future elections. These pleadings included examples of print and radio advertising NOM would run were it not for the chilling effect of the relevant N.Y. Elec. Law regulations, such as a radio advertisement stating "tell your family and friends to vote for Carl Paladino. He'll stand up for marriage between one man and one woman." These pleadings were sufficient to establish that NOM would have been a "political committee." Furthermore, the district court's reliance on the exception to § 14-100(1) was misplaced, because the nature of the above-mentioned advertisements indicated that NOM would not qualify for that exception.

In dealing with the issues of prudential ripeness and mootness, the majority quickly dispatched any remaining obstacles to moving forward with the case at trial. Prudential ripeness was not an obstacle because the court found no precedent supporting the assertion that BOE had to undertake a specific effort to regulate NOM before a challenge was proper. Indeed, BOE could regulate NOM as a political committee as soon as NOM acted in a qualifying manner. Finally, the majority found that there were no mootness issues, even though NOM's claims were brought in the context of the 2010 elections. Because these claims were "capable of repetition, yet evading review," as is often the case with election law-related claims, the court found it proper to allow the claims to proceed. Thus, the case was remanded to the district court for further consideration of the merits of NOM's claim.

In dissent, Judge Newman seized on an administrative mechanism that allowed NOM to request, from BOE, a determination as to whether its activities would qualify the organization as a "political committee." Furthermore, once an applicant uses such a mechanism and receives a negative answer, BOE must alert the applicant before acting contrary to its prior response. As such, Judge Newman found NOM's claim to be not yet ripe, as NOM had not requested such advice from BOE. For NOM's claim to be ripe in the pre-enforcement context, Judge Newman would require NOM first to apply for such advice.

To read the full opinion, please go to: http://www.ca2.uscourts.gov/de...0a93a511e5/1/hilite/.

Panel: Circuit Judges Newman and Hall; Chief District Judge Preska (sitting by designation).

Argument: 08/24/2011

Date of Issued Opinion: 04/22/2013

Docket Number: No. 10-4572-cv

Decided: Vacated and Remanded to the United States District Court for the Western District of New York for further proceedings.

Case Alert Author: Joseph E. Fornadel III

Counsel (if known): RANDY ELF (James Bopp, Jr., Jeffrey P. Gallant, Austin J. Hepworth, James Madison Center for Free Speech, and Laurence Behr, Barth Sullivan Behr, Buffalo, NY, on the brief), James Madison Center for Free Speech, Terre Haute, IN, and as substitute counsel Kaylan L. Phillips, ActRight Legal Foundation, Washington, DC, and John C. Eastman, Center for Constitutional Jurisprudence, Orange, CA, for Plaintiff-Appellant. KENNETH A. MANNING (Michael B. Powers, Craig R. Bucki, on the brief) Phillips Lytle LLP, Buffalo, NY, for Defendants-Appellees Douglas Kellner and Evelyn Aquila. Justin E. Driscoll, Brown & Weinraub, PLLC, Albany, NY, for Defendants-Appellees James Walsh and Gregory Peterson.

Author of Opinion: Judge Hall (majority); Judge Newman (dissent).

Case Alert Circuit Supervisor: Emily Gold Waldman

Poventud v. City of New York - Second Circuit

Elyse Moskowitz — 2013-04-20T13:32:08 -06.00

Headline: Second Circuit Holds § 1983 Claim is Not Barred by Heck v. Humphrey Because Petitioner is no Longer Incarcerated and Has No Other Available Federal Remedy.

Areas of Law: Constitutional Law; Habeas; § 1983 Remedies

Issue(s) Presented: Whether Heck v. Humphrey barred petitioner's § 1983 claim alleging constitutional violations committed by officials who conducted his criminal investigation and prosecution, when petitioner was no longer in custody for the conviction or imprisonment being challenged and had subsequently plead guilty to a lesser charge.

Brief Summary: Plaintiff-appellant Marcos Poventud challenges here the United States District Court for the Southern District of New York's summary judgment dismissal of his 42 U.S.C. § 1983 claim that officials had violated Brady v. Maryland in the course of investigating and prosecuting Poventud for attempted murder, robbery, assault, and criminal possession of a weapon. Poventud had been convicted following a trial on those charges and sentenced to 10 to 20 years but, after Poventud had served 9 years, a state court had vacated the conviction upon Poventud's motion contending that he had just learned of allegedly exculpatory evidence that was withheld by prosecuting officials during the original trial. Pending the government's appeal and a possible new trial while remaining in custody, Poventud accepted a government's offer of immediate release in exchange for a guilty plea to a lesser offense. Poventud then filed this § 1983 action.

The United States District Court for the Southern District of New York dismissed the § 1983 claim relying upon the Supreme Court's decision in Heck v. Humphrey which it held barred § 1983 actions by individuals challenging their conviction or imprisonment unless the challenged conviction was expunged, vacated or reversed.

The Second Circuit vacates the dismissal and remands, holding that, because plaintiff was no longer incarcerated and thus did not have access to habeas relief, his action under § 1983 should proceed. The majority reasons that Second Circuit precedent in the years following Heck dictate that petitioner's asserting civil rights claims in connection with a conviction or incarceration must have access to a federal remedy, either under habeas corpus or § 1983, and, as Poventud could no longer avail himself of habeas relief due to his release, he must be allowed to pursue his claims under § 1983, despite pleading to a lesser charge. Chief Judge Jacobs vehemently dissents, finding the majority's reasoning improperly focused on non-binding dicta, instead of what he considers clear Supreme Court and Second Circuit precedent prohibiting this §1983 claim in light of Poventud's admission of guilt. He also criticizes the majority for the broad implications of their decision.

To read the full opinion, please go to:
http://www.ca2.uscourts.gov/de...43e11d0dde2/2/hilite/

Extended Summary: In 1998, plaintiff-appellant Marcos Poventud was convicted of attempted second degree murder, attempted first degree robbery, first degree assault, and criminal possession of a weapon in the second degree, in connection with the assault and robbery of a New York City taxi cab driver in the Bronx. He was sentenced to a maximum of twenty-years in prison. In 2003, Poventud discovered that, during the initial investigation of the crime, the police had found in the victim's taxicab, a wallet containing photo I.D. cards depicting Poventud's brother. The detectives had shown the I.D. photos to the victim, who then positively identified Poventud's brother, who looked nothing like Poventud, as his assailant. However, at the time of the assault, the brother was incarcerated and could not have committed any crime. The victim identified Poventud as the perpetrator only after being shown Poventud's photo for the fourth time. None of this information surrounding the I.D. photos and the victim's identifications was disclosed to Poventud during the original prosecution.

The New York Supreme Court for Bronx County vacated the original conviction on Poventud's motion that the prosecution's failed to disclose the allegedly exculpatory information. The prosecution appealed, but also offered Poventud his immediate release in exchange for a guilty plea. Poventud accepted the offer and then instituted the instant suit under 42 U.S.C. § 1983, alleging that the prosecution had violated his federal due process and fair trial rights under Brady v. Maryland.

The United States District Court for the Southern District of New York granted the defendants' motion for summary judgment, however, holding that Poventud's § 1983 claim was barred by the Supreme Court's decision in Heck v. Humphrey. Heck held that plaintiffs asserting § 1983 claims in connection with a conviction or incarceration must show "that the challenged conviction has been reversed, expunged, invalidated, or called into question" before the underlying claim will be allowed to proceed. The district court held, therefore, that the plaintiff's guilty plea to the lesser charge prevented the plaintiff from meeting this burden.

In today's opinion, a majority of the United States Court of Appeals for the Second Circuit disagrees, vacating and remanding the district court's order and holding that the bar on § 1983 claims under Heck does not apply to Poventud because he is no longer incarcerated. The majority explains that, while an imprisoned petitioner may challenge conviction or incarceration habeas corpus and thus does not need access to § 1983, Poventud, having been released, can no longer bring a habeas challenge and must therefore have access to the only remaining federal remedy under § 1983. The majority acknowledges that a footnote in Heck suggested that the case's prohibition of § 1983 claims applies regardless of whether the petitioner was incarcerated or not, but reads the footnote as mere dicta. The majority points to Justice Souter's concurring opinion in Heck, and a later case, in which fit contends five justices express a preference for the theory that Heck's prohibition on § 1983 suits is inapplicable to petitioners no longer incarcerated without access to habeas remedies. The majority also reviews Second Circuit case law following Heck, contending it supports the court's interpretation that Heck's bar on § 1983 actions only applies to petitioners still in custody. The majority posits that Poventud's subsequent guilty plea to a lesser charge may be used by the City as a defense to the § 1983 claim, but does not support summary judgment under Heck.

The majority opinion also criticizes Chief Judge Jacobs's dissenting opinion for its "apocalyptic tone" and "flaws" in reasoning. The court asserts that its reliance on prior Second Circuit case law is sound, finding that in the course of two years, four unanimous panels of the Second Circuit affirmed the position that Heck only applies to bar § 1983 relief when a petitioner could seek habeas relief. Second, the majority insists that the dissent's reading of Heck relies on dicta no longer supported by a majority of the Supreme Court justices as indicated in more recent decisions. The court also challenges the dissent's assumption that Poventud's § 1983 suit is improper because it calls into question his second conviction, which had not been invalidated, contending that the Brady violation posited by Poventud undercuts only the vacated conviction on the original charges. Finally, the court criticizes the dissent's argument that Poventud's inability bring a § 1983 action may be sufficient to support a post-release habeas petition, and thereby providing a remedy, as "Ptolemaic in the uselessness of its epicycles."

Chief Circuit Judge Jacobs's dissenting opinion sharply criticizes the majority's decision for disregarding what he believes to be the clear holding of Heck and Second Circuit precedent, and for relying excessively on dicta. Chief Judge Jacobs contends the majority's decision takes a narrow exception adopted by some of the Circuit courts and expands it beyond the contemplation of those previous decisions. The dissent also finds that the Brady violation alleged by the plaintiff "necessarily implies the invalidity of the unchallenged ... conviction that was entered on [Poventud's] plea of guilty to that crime." This is, to the dissent, precisely the situation where Heck serves to bar claims under § 1983. Chief Judge Jacobs also cites prior circuit precedent that barred § 1983 claims even in situations where the plaintiff was no longer in custody. He concludes that the court should follow Heck, the case that directly controls, leaving it to the Supreme Court to handle the dicta applied by the majority in its decision.

To read the full opinion, please go to:
http://www.ca2.uscourts.gov/de...43e11d0dde2/2/hilite/

Panel: Chief Circuit Judge Jacobs, and Circuit Judges Calabresi and Sack.

Argument: 12/20/2012

Date of Issued Opinion: 04/19/2013

Docket Number: 12-1011-cv

Decided: Vacated and Remanded to the United States District Court for the Southern District of New York for further proceedings.

Case Alert Author: Benjamin F. Krolikowski

Counsel: Joel B. Rudin, Esq., Law Offices of Joel B. Rudin, New York, NY, and Julia P. Kuan, Romano & Kuan, New York, NY, for Plaintiff-Appellant. Mordecai Newman, Larry A. Sonnenshein, and Rachel Seligman Weiss, of counsel, for Michael A. Cardozo, Corporation Counsel of the City of New York, for Defendants-Appellees.

Author of Opinion: Circuit Judge Calabresi (majority); Chief Circuit Judge Jacobs (dissent).

Supervisor: Professor Elyse Diamond Moskowitz

Second Circuit: In re Terrorist Attacks on September 11, 2001 (Asat Trust Reg. et al.)

Elyse Moskowitz — 2013-04-16T20:33:36 -06.00

Headline: In Three Related Decisions, Second Circuit Affirms Dismissal of Claims Arising out of 9/11 Terrorist Attack Against Sixty-Four Defendants Alleged to Have Provided Support to Osama Bin Laden and Al Qaeda, But Vacates Dismissal of Claims Against Twelve Defendants Ordering Discovery on Question of Jurisdiction

Area of Law: Civil Procedure

Issue(s) Presented: Whether the District Court properly dismissed these 9/11 claims on various grounds including lack of personal jurisdiction, failure to state a claim, and certain defendants' immunity from suit under the Foreign Sovereign Immunities Act.

Brief Summary: In three separate but related opinions, the Second Circuit addressed appeals arising from claims brought by the plaintiffs - numerous victims, their families and estates, and commercial entities who were injured or suffered losses as a result of the September 11, 2001 terrorist attack - against seventy-six individuals, financial institutions, charitable groups, and other entities alleged to have provided financial support and resources to Osama Bin Laden and al Qaeda.

The United States District Court for the Southern District of New York dismissed plaintiffs' claims for damages under common law tort theories and the Anti-Terrorism Act ("ATA"), the Alien Tort Statute ("ATS") and the Torture Victim Protection Act ("TVPA") on various grounds including: (1) a lack of personal jurisdiction over thirty-seven defendants; (2) plaintiffs' failure to state a claim against five of the defendants; and (3) two defendants' immunity from suit under the Foreign Sovereign Immunities Act ("FSIA").

In one opinion, the Second Circuit affirmed, although on different grounds, the district court's dismissal of claims against two purported Saudi Arabia-sponsored humanitarian relief organizations. The Court reasoned that, as instrumentalities of Saudi Arabia, these entities were immune from suit under the FSIA and any alleged torts they committed occurred outside the United States and, thus, could not support an application of the FSIA's noncommercial tort exception.

In a second opinion the Second Circuit also affirmed the dismissal of claims against one individual and four institutional defendants alleged to have provided financial and banking services to front and support charitable entities that also supported al Qaeda. The court found various deficiencies under prior case law including a failure to adequately allege these defendants proximately caused plaintiffs' injuries, among other grounds.

Finally, in its longest opinion, the Second Circuit affirmed the dismissal of claims against most of the thirty-seven defendants for lack of personal jurisdiction due to plaintiffs' failure to plead sufficient facts demonstrating that certain defendants "expressly aimed their allegedly tortious conduct at the United States," and failed to plead sufficient facts demonstrating that other defendants provided support to Osama Bin Laden or al Qaeda. However, the court vacated the dismissal as to twelve defendants - the nine "charity defendants" and three individuals - and remanded for jurisdictional discovery as to those defendants because "those defendants' alleged support of al Qaeda is more direct."

To read the full opinions, please visit: ">http://www.ca2.uscourt.../de.....6/1/hilite/

">http://www.ca2.uscourts.g...c6156/2/hilite/

">http://www.ca2.uscourt.../de.....6/3/hilite/

Panel: Circuit Judges Cabranes, Raggi and District Judge Rakoff

Argument Date: 12/04/2012

Date of Issued Opinions: 04/16/2013

Docket Numbers: 11-3294-cv(L), et al.

Decided: Affirmed as to Dismissal for Failure to State a Claim; Affirmed as to Dismissal for Immunity under Foreign Sovereign Immunities Act: Affirmed as to Dismissal of Personal Jurisdiction as to 25 Defendants, Vacated and Remanded for Jurisdictional Discovery as to 12 Defendants

Counsel: RICHARD KLINGLER (Sean P. Carter, Stephen A. Cozen, Elliott R. Feldman, Cozen O'Connor, Philadelphia, PA; Ronald L. Motley, Robert T. Haefele, Motley Rice, LLC, Mount Pleasant, SC; Carter G. Phillips, Sidley Austin, LLP, Washington, DC; Andrea Bierstein, Hanly Conroy Bierstein Sheridan Fisher & Hayes, LLP, New York, NY; Robert M. Kaplan, Ferber Chan Essner & Coller, LLP, New York, NY; James P. Kreindler, Justin T. Green, Andrew J. Maloney, III, Kreindler & Kreindler LLP, New York, NY; Jerry S. Goldman, Anderson Kill & Olick, P.C., New York, NY; Chris Leonardo, Adams Holcomb LLP, Washington, DC, on the brief), Sidley Austin, LLP, Washington, DC, for Plaintiff-Appellants on Personal Jurisdiction Issues. JAMES E. GAUCH (Mary Ellen Powers, Stephen J. Brogan, Timothy J. Finn, on the brief), Jones Day, Washington, DC, for Defendants-Appellees Saudi Binladin Group, Abdullah Bin Laden, Bakr M. Bin Laden, Omar M. Bin Laden, Tarek M. Bin Laden, Yeslam M. Bin Laden, and Khaled Bin Mahfouz. Barry Coburn, Coburn & Greenbaum, PLLC, Washington, DC, for Defendants-Appellees Asat Trust Reg., Martin Watcher, Erwin Watcher, and Secor Treuhand Anstalt. Martin F. McMahon, Martin F. McMahon & Associates, Washington, DC, for Defendants- Appellees Al Shamal Islamic Bank, Tadamon Islamic Bank, and Dallah Avco Trans Arabia Co. Ltd. John N. Scholnick, Ayad P. Jacob, Schiff Hardin LLP, Chicago, IL, for Defendants-Appellees Schreiber & Zindel Treuhand Anstalt, Frank Zindel, Engelbert Schreiber, Sr., and Engelbert Schreiber, Jr. Daniel L. Brown, David Geneson, Sheppard Mullin Richter & Hampton LLP, New York, NY, for Defendant-Appellee Yassin Abdullah Al Kadi. Lawrence H. Schoenbach, Law Offices of Lawrence H. Schoenbach, PLLC, New York, NY, for Defendant-Appellee Yeslam M. Bin Laden. Mitchell R. Berger, Alan T. Dickey, Patton Boggs, LLP, Washington, DC, for Defendant-Appellee National Commercial Bank. John F. Lauro, Lauro Law Firm, Tampa, FL and New York, NY, for Defendant-Appellee Faisal Islamic Bank.Lynne Bernabei, Alan R. Kabat, Bernabei & Wachtel, PLLC, Washington, DC, for Defendants-Appellees Abdul Rahman Al Swailem, Abdullah Muhsen Al Turki, Abdullah Bin Saleh Al Obaid, Saleh Al-Hussayen, Soliman H.S. Al Buthe, Adnan Basha, and Abdullah Omar Naseef. Peter J. Kahn, Edward C. Reddington, David S. Kurtzer-Ellenbogen, Williams & Connolly LLP, Washington, DC, for Defendant-Appellee Abdulrahman Bin Mahfouz. V. Thomas Lankford, Terrance G. Reed, Lankford & Reed, PLLC, Alexandria, VA, for Defendants- Appellees Sulaiman Bin Abdul Aziz Al Rajhi, and Abdullah Salaiman Al Rajhi. David R. Francescani, Thomas M. Melsheimer, Fish & Richardson P.C., New York, NY, for Defendant-Appellee Saleh Abdul Aziz Al Rajhi.Kenneth A. Caruso, White & Case LLP, New York, NY; Viet D. Dinh, Lizette Benedi, D. Zachary Hudson, Bancroft PLLC, Washington, DC, for Defendant-Appellee Yousef Jameel. James J. McGuire, Timothy J. McCarthy, Aimee R. Kahn, Daniel A. Mandell, Mishcon de Reya New York LLP, New York, NY, for Defendant- Appellee DMI Administrative Services S.A.

SEAN P. CARTER (Stephen A. Cozen, Elliott R. Feldman, Cozen O'Connor, Philadelphia, PA; Ronald L. Motley, Robert T. Haefele, Motley Rice, LLC, Mount Pleasant, SC; Carter G. Phillips, Richard Klingler, Sidley Austin, LLP, Washington, DC; Andrea Bierstein, Hanly Conroy Bierstein Sheridan Fisher & Hayes, LLP, New York, NY; Robert M. Kaplan, Ferber Chan Essner & Coller, LLP, New York, NY; James P. Kreindler, Justin T. Green, Andrew J. Maloney, III, Kreindler & Kreindler LLP, New York, NY; Jerry S. Goldman, Anderson Kill & Olick, P.C., New York, NY; Chris Leonardo, Adams Holcomb LLP, Washington, DC, on the brief), Cozen O'Connor, Philadelphia, PA, for Plaintiffs- Appellants on Foreign Sovereign Immunities Act Issues. MICHAEL K. KELLOGG (Gregory G. Rapawy, Brendan Crimmins, William J. Rinner, on the brief), Kellogg, Huber, Hansen, Todd, Evans & Figel, PLLC, Washington, DC, for Defendant- Appellee Saudi Joint Relief Committee. Lynne Bernabei, Alan R. Kabat, Bernabei & Wachtel, PLLC, Washington, DC, for Defendant-Appellee Saudi Red Crescent Society.

SEAN P. CARTER (Stephen A. Cozen, Elliott R. Feldman, Cozen O'Connor, Philadelphia, PA; Ronald L. Motley, Robert T. Haefele, Motley Rice, LLC, Mount Pleasant, SC; Carter G. Phillips, Richard Klingler, Sidley Austin, LLP, Washington, DC; Andrea Bierstein, Hanly Conroy Bierstein Sheridan Fisher & Hayes, LLP, New York, NY; Robert M. Kaplan, Ferber Chan Essner & Coller, LLP, New York, NY; James P. Kreindler, Justin T. Green, Andrew J. Maloney, III, Kreindler & Kreindler LLP, New York, NY; Jerry S. Goldman, Anderson Kill & Olick, P.C., New York, NY; Chris Leonardo, Adams Holcomb LLP, Washington, DC, on the brief), Cozen O'Connor, Philadelphia, PA, for Plaintiffs- Appellants on Rule 12(b)(6) Issues.
CHRISTOPHER M. CURRAN (Nicole Erb, Matthew S. Leddicotte, on the brief), White & Case LLP, Washington, DC, for Defendant-Appellee Al Rajhi Bank. Henry Weisburg, Brian H. Polovoy, Shearman & Sterling LLP, New York, NY, for Defendant- Appellee Saudi American Bank. James J. McGuire, Timothy J. McCarthy, Aimee R. Kahn, Daniel A. Mandell, Mishcon de Reya New York LLP, New York, NY, for Defendant- Appellee Dar Al-Maal Al-Islami Trust. Martin F. McMahon, Martin F. McMahon & Associates, Washington, DC, for Defendants-Appellees Dallah Al Baraka Group LLC & Saleh Abdullah Kamel.

Author of Opinions: Cabranes

Circuit: Second Circuit

Case Alert Supervisor: Elyse Diamond Moskowitz

Molchatsky, et al. v. United States - Second Circuit

Emily Waldman — 2013-04-10T17:01:24 -06.00

Headline: Second Circuit Affirms That SEC Cannot Be Sued for Its Failure to Investigate the Madoff Ponzi Scheme

Area of Law: Administrative Law

Issue(s) Presented: Whether Defendant is liable under the Federal Tort Claims Act for neglecting to address complaints against Bernard Madoff over a sixteen-year period, eventually resulting in lost investments for Plaintiffs when Madoff's Ponzi scheme collapsed.

Brief Summary: Plaintiffs filed a complaint against the United States Securities and Exchange Commission (the "SEC") in the United States District Court for the Southern District of New York, claiming that the SEC is liable for negligence under the Federal Tort Claims Act ("FTCA") because it failed to uncover Bernard Madoff's ("Madoff") fraud, despite receiving several complaints about Madoff during a sixteen-year period. Plaintiffs had invested with Bernard I. Madoff Investment Securities LLC, and lost their money after Madoff's Ponzi scheme collapsed and was exposed in 2008. The district court granted the United States' motion to dismiss the complaints. The Second Circuit affirmed, agreeing that the SEC is shielded from liability under the FTCA by the statute's Discretionary Function Exception, pursuant to which government agencies cannot be sued for the performance (or non-performance) of their discretionary duties. To read the full opinion, please go to: http://www.ca2.uscourts.gov/de...734edc6fd45/2/hilite/

Extended Summary: Plaintiffs filed a complaint against the United States Securities and Exchange Commission (the "SEC") in the United States District Court for the Southern District of New York claiming that the SEC is liable for negligence under the Federal Tort Claims Act ("FTCA") because they failed to uncover Bernard Madoff's fraud. Their claim centered on an extensive report from the SEC's Office of the Inspector General pointing out approximately eight complaints received by the SEC about Madoff during a sixteen-year period, none of which resulted in a response by the SEC. They asserted that the SEC's failure to act on complaints made against Madoff resulted in missed opportunities for the SEC to uncover Madoff's fraudulent Ponzi scheme, which eventually resulted in Plaintiffs losing their investments made with Madoff after the scheme collapsed in 2008.

The FTCA provides an exception to the rule that the United States is generally immune from suit. The FTCA states that federal courts "shall have exclusive jurisdiction of civil actions on claims against the United States, for money damages, accruing on and after January 1, 1945, for injury or loss of property, or personal injury or death caused by the negligent or wrongful act or omission of any employee of the Government while acting within the scope of his office or employment, under circumstances where the United States, if a private person, would be liable to the claimant in accordance with the law of the place where the act or omission occurred." However, the FTCA also includes a Discretionary Function Exception ("DFE"), which provides that "[a]ny claim based upon an act or omission of an employee of the Government, exercising due care, in the execution of a statute or regulation, whether or not such statute or regulation be valid, or based upon the exercise or performance or the failure to exercise or perform a discretionary function or duty on the part of a federal agency or an employee of the Government, whether or not the discretion involved be abused." The district court dismissed the plaintiffs' complaint on this basis, and the Second Circuit affirmed.

Citing its own precedent, the Second Circuit emphasized that "the DFE bars suit only if two conditions are met: (1) the acts alleged to be negligent must be discretionary, in that they involve an 'element of judgment or choice' and are not compelled by statute or regulation and (2) the judgment or choice in question must be grounded in 'considerations of public policy' or susceptible to policy analysis." Here, the court found that the SEC's failure to uncover Madoff's Ponzi scheme was intertwined with discretionary decisions which Congress intended to shield from liability. It explained that the SEC has the discretion to determine whether to investigate an individual or entity, regardless of whether complaints have been lodged against that party, because decisions related to the allocation of resources and SEC staff's time is "sufficiently grounded in economic, social and policy considerations."

To read the full opinion, please go to: http://www.ca2.uscourts.gov/de...734edc6fd45/2/hilite/

Panel: Circuit Judges Wesley and Droney; District Judge Nathan

Argument: 03/14/2013

Date of Issued Opinion: 04/10/2013

Docket Number: 11-2510-cv(L)

Decided: Affirmed

Case Alert Author: Jesse Glickstein

Counsel : PATRICIA M. GRAHAM (Howard Elisofon, David R.King, on the brief), Herrick, Feinstein LLP, New York, NY, for Plaintiff-Appellant Phyllis Molchatsky; DR. GAYTRI D. KACHROO, Kachroo Legal Services, P.C., Cambridge, MA, for Plaintiff-Appellant Charles Mederrick; Howard Kleinhendler, Sara Spiegelman, Wachtel Masyr & Missry LLP, New York, NY, for Plaintiff-Appellant Allan H. Applestein. SARAH S. NORMAND, Assistant United States Attorney (Neil M. Corwin, Assistant United States Attorney, on the brief), for Preet Bharara, United States Attorney for the Southern District of New York, New York, NY, for Defendants-Appellees; Lawrence R. Velvel, Massachusetts School of Law, Andover, MA; David Bernfeld, Bernfeld, DeMatteo & Bernfeld LLP, New York, NY, for Amicus Curiae Network for Investor Action and Protection.

Author of Opinion: Per Curiam

Supervisor: Professor Emily Gold Waldman

United States v. Westchester County, New York - Second Circuit

Elyse Moskowitz — 2013-04-06T12:13:02 -06.00

Headline: Second Circuit Finds Westchester County Violated Consent Decree Stipulating Duty to Promote Source-of-Income Legislation

Area of Law: False Claims Act; Housing and Urban Development

Issue(s) Presented: Whether Westchester County violated the terms of a consent decree entered with the United States to resolve qui tam action initially brought by relator, Anti-Discrimination Center of New York, Inc., and whether the district court had jurisdiction to review the decision of the reviewing magistrate judge under the consent decree.

Brief Summary: The Anti-Discrimination Center of New York brought an action as a relator and the United States intervened in a suit against Westchester County ("the County") in the United States District Court for the Southern District of New York, alleging that the County presented false claims to the United States Department of Housing and Urban Development ("HUD") in order to obtain federal grants for fair housing. Following the parties' entry to a consent decree resolving the claims, a Monitor appointed to oversee the County's compliance found that the County was not in compliance with the decree's requirement to promote the ban of source-of-income discrimination in housing. The County sought review of the Monitor's findings from a Magistrate Judge for the Southern District of New York. The Magistrate Judge found that the County was in compliance with the consent decree and the United States filed an objection in the United States District Court for the Southern District of New York. The District Court found that the County had violated the terms of duty of the consent decree. The Second Circuit held that the District Court did have jurisdiction to review the Magistrate Judge's opinion and affirmed the District Court's finding that the County violated terms of the consent decree.

To read the full opinion, please go to: http://www.ca2.uscourts.gov/de...bcbbd599d82/2/hilite/

Extended Summary:
The Anti-Discrimination Center of New York, Inc. ("ADC") brought a qui tam action against Westchester County ("the County") relating to millions of dollars in funds that the County obtained from 2000 to 2006 that were to be used to "affirmatively further fair housing" under Housing and Urban Development ("HUD") regulations. The ADC charged under the False Claims Act that the County's claims for the funds were falsified and that the County had falsely certified to HUD its compliance with grant requirements including that it consider the existence and impact of racial discrimination. The United States intervened and presented the Federal District Court for the Southern District of New York with a consent decree for all parties.

The consent decree obliged the County to pay the United States $30 million, of which $21.6 million would be credited to the County's HUD account to fund fair housing, and to pay $2.5 million to the ADC as relator. It also contained a clause requiring the County to "promote, through the County Executive, legislation currently before the Board of Legislators to ban 'source-of-income' discrimination in housing." Source-of-income legislation bans housing discrimination stemming from a person's source of income, for example, income in the form of Social Security benefits or state or federal public assistance. Following its commitment to the consent decree, the County and its representatives sent letters to advocacy organizations and the Board of Legislators encouraging the enactment and implementation of the source-of-income legislation. Approximately one year after these actions, however, a newly elected County Executive vetoed the source-of-income legislation.
Before the veto, the district court had appointed a Monitor to review the County's actions and compliance with the consent decree. The Monitor found that the County was in violation of the consent decree in that the County no longer promoted the source-of-income legislation in furtherance of fair housing. The County challenged the Monitor's determination and sought review from the Magistrate Judge. The Magistrate Judge sustained the County's objection and concluded that the County did not violate its duty to promote source-of-income legislation. The United States filed an objection with the district court seeking review of the Magistrate's opinion regarding the source-of-income violation. The district court found that, under the terms of the consent decree, it did have jurisdiction to review the Magistrate Judge's opinion and that the County did violate its duty to promote the source-of-income legislation.

The County appealed, arguing that the consent decree authorized the Magistrate Judge to make binding decisions and that the district court did not have jurisdiction to review the Magistrate Judge's decision. Reviewing the consent decree de novo, the Second Circuit determined that the decree that the decree would clearly invoke federal rules of civil procedure. Specifically, the Court found that Federal Rule of Civil Procedure 72(b)(3) explicitly allows a district court to review a magistrate's decision. The Second Circuit further found that the County did violate its duty to "promote, through the County Executive, legislation currently before the Board of Legislators to ban 'source-of-income' legislation." The Second Circuit first considered the meaning of the phrase "to promote" and found that the County did not take action or took action to detract from the furtherance of the goal to ban source-of-income legislation. The Court then found that the term "currently" in the consent decree stipulation did not limit the time for promoting the legislation. Rather, the term referred only to the legislation pending before the Board when the parties agreed to the consent decree and was not temporally limited to the legislative session. Finally, the Court found that the County breached its duty because it took only two actions to promote the legislation. The County acted only by sending a single letter to the Board of Supervisors and five identical letters to community organizations thanking them for their advocacy efforts, and then vetoing the source-of-income legislation passed by the board. The Court found that the County Executive's action to veto the legislation was "wholly inconsistent" with the duty to promote.

The Second Circuit was not persuaded by the County's argument that the County Executive and members of the Board are subject to term limits and thus do not bind their successors to consent decrees unpersuasive. The Court reasoned that consent decrees are binding on elected officials and that a local government would not be relieved of a consent decree agreed upon by a previous administration simply because new officials take office.

To read the full opinion, please go to: http://www.ca2.uscourts.gov/de...bcbbd599d82/2/hilite/

Panel: Circuit Judges Pooler, Hall, and Chin.

Argument (if known): 12/12/2012

Date of Issued Opinion: 04/05/2013
.
Docket Number: 12-2047-cv

Decided: Affirmed

Case Alert Author: Sarah Wegmueller

Counsel : ROBERT F. MEEHAN, Westchester County Attorney (Linda M. Trentacoste, Associate County Attorney, Adam Rodriguez, Senior Assistant County Attorney, Justin R. Adin, Assistant County Attorney, on the brief), White Plains, NY, for Defendant- Appellant; DAVID J. KENNEDY, Assistant United States Attorney, Southern District of New York (Preet Bharara, United States Attorney, Sarah S. Normand, Benjamin H. Torrance, Assistant United States Attorneys, on the brief), New York, NY, for Plaintiff-Appellee.
Martin Sander Kaufman, Atlantic Legal Foundation, Larchmont, NY, for Amicus Curiae Building & Realty Institute of Westchester County, in support of Defendant-Appellant.

Author of Opinion: Judge Pooler.

Supervisor: Professor Elyse Diamond Moskowitz

Federal Housing Fin. Agency v. UBS Americas Inc. - Second Circuit

Emily Waldman — 2013-04-05T16:32:35 -06.00

Heading: Second Circuit Holds That Fraud Lawsuit Can Proceed Against UBS Regarding the Sale and Marketing of Mortgage-Backed Securities to Fannie Mae and Freddie Mac

Area of Law: Securities; Administrative Law

Issue(s) Presented: Whether the Housing and Economic Recovery Act of 2008 established the statute of limitations for the Federal Housing Finance Agency ("FHFA") to file securities fraud claims against UBS Americas Inc, and whether FHFA had standing to bring such claims.

Brief Summary: On July 27, 2011, the Federal Housing Finance Agency ("FHFA"), as conservator of the Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac"), sued UBS Americas Inc., certain affiliated entities, and several officers (collectively, "UBS") in the United States District Court for the Southern District of New York for fraud and misrepresentation in connection with the marketing and sale of mortgage-backed securities. UBS filed motions to dismiss the case on grounds that (1) the action was untimely, since all the sales were completed more than three years before FHFA filed the lawsuit, and (2) the FHFA lacked legal standing to bring suit. The district court denied the motions and the Second Circuit affirmed. To read the full opinion, please visit: http://www.ca2.uscourts.gov/de...723691363d9/1/hilite/

Extended Summary: On July 30, 2008, the Housing and Economic Recovery Act of 2008 ("HERA") was signed into law. Congress enacted HERA because it was concerned about the financial condition of the Federal National Mortgage Association ("Fannie Mae"), the Federal Home Loan Mortgage Corporation ("Freddie Mac"), and other government-sponsored entities ("GSEs"). Congress conferred upon FHFA broad power to appoint itself conservator or receiver of GSEs, to "take such action as may be . . . necessary to put the [GSEs] in a sound and solvent condition, and to "collect all obligations and money due the [GSEs]."

On July 27, 2011, FHFA, acting as conservator of Fannie Mae and Freddie Mac, filed a lawsuit against UBS Americas Inc., certain affiliated entities, and several officers (collectively, "UBS") in the United States District Court for the Southern District of New York for fraud and misrepresentation in connection with the marketing and sale of $6.4 billion in residential mortgage-backed securities sponsored or underwritten by UBS. The lawsuit was filed more than three years after the last securities offering in question, but within three years of FHFA's appointment as conservator.

In the lawsuit, FHFA claimed that UBS falsely represented that the mortgage loans serving as collateral for the securitizations were underwritten in accordance with established guidelines to ensure that borrowers could meet their payment obligations. As a consequence of their reliance on these false representations, Fannie Mae and Freddie Mac purchased the securities and subsequently sustained massive losses. FHFA has filed seventeen similar actions against other financial institutions involved in the mortgage-backed securities industry. In the district court, UBS filed motions to dismiss the case on the grounds that the action was untimely, and because the FHFA lacked legal standing to bring the suit. The district court denied these motions and the Second Circuit affirmed.

On the issue of timeliness, the Second Circuit held that the Housing and Economic Recovery Act of 2008 ("HERA") established the statutes of limitations for FHFA to file actions as a conservator or receiver, and therefore the lawsuit was timely. The HERA statute provides in part that "the date on which the statute of limitations begins to run . . . shall be the later of -- (i) the date of the appointment of the Agency as conservator or receiver; or (ii) the date on which the cause of action accrues." UBS argued that the timeliness of securities fraud lawsuits are governed by "statutes of repose," which run without interruption once a triggering event such as the sale of a security occurs, rather than "statutes of limitations," which may be tolled or suspended for equitable reasons. As a result, UBS claimed that the extended statutes of limitations in HERA were not applicable to FHFA's securities fraud claims, and thus they were time-barred.

However, in examining the words and intent of HERA, the Second Circuit concluded that a reasonable reader could only understand the HERA statutes of limitations provisions to apply to both the federal and state claims in this case. While acknowledging that statues of "limitations" and "repose" may be theoretically distinct, the Second Circuit noted several examples where the Supreme Court, the Second Circuit, and Congress have used the term statutes of limitations to refer to the limitations period for the exact type of securities fraud alleged by FHFA. Accordingly, the Second Circuit held that HERA applied, and since FHFA filed its case within three years of its appointment as conservator, the case was not time-barred.

Regarding the issue of standing, UBS argued the FHFA lacked legal standing because the appointments of James B. Lockhart III and Edward DeMarco as Acting Directors of FHFA were unconstitutional, as Lockhart was appointed by Congress without being nominated by the President and DeMarco was appointed by the President without Senate confirmation. In upholding FHFA's legal standing, the Second Circuit found that the functions assigned to Lockhart by Congress as Acting Director of FHFA were "germane" to the functions he had previously served as Director of the Office of Federal Housing Enterprise Oversight ("OFHEO"). Therefore, since Congress essentially converted OFHEO into FHFA and transferred OFHEO's functions to FHFA, Lockhart's FHFA appointment was permissible. Further, since Lockhart was legally the FHFA Director, HERA authorized the President to appoint Deputy Director DeMarco Acting Director upon Lockhart's resignation. Accordingly, the Second Circuit held that FHFA has legal standing to pursue its case.

To read the full opinion, please visit:
http://www.ca2.uscourts.gov/de...723691363d9/1/hilite/

Panel: Circuit Judges Chin and Lohier; District Judge Gardephe

Argument Date: 11/26/12

Date of Issued Opinion: 04/05/13

Docket Number: No. 12-3207

Decided: Affirmed

Case Alert Author: Matthew Auten

Counsel: KATHLEEN M. SULLIVAN (Philippe Z. Selendy, Christine H. Chung, Adam M. Abensohn, William B. Adams, on the brief), Quinn Emanuel Urquhart & Sullivan, LLP, New York, New York, for Plaintiff-Appellee.

JAY B. KASNER (Scott D. Musoff, Joseph N.Sacca, Robert A. Fumerton, Alexander C. Drylewski, on the brief),Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York, for
Defendants-Appellants.

Author: Circuit Judge Chin

Case Alert Circuit Supervisor: Professor Emily Gold Waldman

Cohen v. Cohen - Second Circuit

Elyse Moskowitz — 2013-04-03T16:14:05 -06.00

Headings: Second Circuit Reinstates Ex-Wife's Fraud and Breach of Fiduciary Duty Claims Against Steven A. Cohen, Donald Cohen and S.A.C. Trading Corporation

Area of Law: RICO; Fraud

Issue(s) Presented: Whether claims against former S.A.C. Trading Corporation President Steven Cohen and others brought by Cohen's ex-wife for fraud, breach of fiduciary duty and unjust enrichment were timely and stated claims upon which relief may be granted.

Brief Summary: Patricia Cohen, ex-wife of Steven Cohen, the former President of S.A.C. Trading Corporation, alleges in this action that prior to and during the negotiations over their 1989 marital separation agreement, and in 1991 court filings in her action to set aside that agreement's financial provisions, her ex-husband and others failed to disclose a $5.5 million payment that Steven Cohen had received from a real estate development project investment made during their marriage. Patricia Cohen asserts that she uncovered this fraud in 2006 and, as a result, filed this action alleging Steven Cohen's conduct constituted RICO-based and common law fraud and a violation of fiduciary duties and resulted in Steven Cohen's unjustly enrichment. The United States District Court for the Southern District of New York dismissed Patricia Cohen's complaint in full as untimely, and for failing to state a claim.

The Second Circuit reversed the District Court's dismissal of the fraud and breach of fiduciary duty claims finding the complaint sufficiently alleged plausible and timely claims, but affirmed dismissal of the unjust enrichment claim as untimely. The Second Circuit reasoned that the fraud and fiduciary duty breach claims were not, on their face, untimely, because Patricia Cohen did not have sufficient notice of the alleged fraud in 1991 to trigger a duty to undertake further investigation at that time and there was no evidence that a reasonable investigation in 1991 would have uncovered the fraud. Additionally, the court held that several statements by Steven Cohen and his lawyer, asserting that the real estate investment was worthless and had been written-off, created a plausible inference of fraud sufficient to state a claim upon which relief may be granted.

To read the full opinion, please visit:
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Extended Summary:
Patricia and Steven Cohen were married in 1979. In January 1986, Steven created S.A.C. Trading Corporation ("SAC"). Steven Cohen served as President, his brother Donald as Treasurer, and Brett Lurie as Secretary. Donald Cohen also served as Patricia's personal accountant and financial advisor, and Lurie as her attorney. In early 1986 Steven, through SAC, invested $9 million in a co-op conversion project. Later that year, Steven and Donald allegedly told Patricia the entire investment had been lost, when in fact $5.5 million had been returned to Steven Cohen in settlement of a claim he had brought against Brett Lurie. The investment remained on SAC's books, but Steven and Donald maintained that it was worthless and would be written off once the properties entered bankruptcy or foreclosure.

Steven and Patricia Cohen separated in 1988 and eventually divorced. In a 1989 separation agreement, Steven made "no representation as to the value of the interest in a second and third mortgage on various properties involved in cooperative conversions in Queens, New York in which the investment was listed on his statement of financial condition dated as of July 1, 1988 at a value of $8,745,169." However, during negotiations leading to a separation agreement, Steven's lawyer allegedly told Patricia that the real estate investment money was "lost." During a 1991 action brought by Patricia to increase maintenance, child support, and other relief from the 1989 separation agreement, Steven stated in an affidavit that he was writing-off the real estate deal as "totally worthless."

In 2006, after reading an article about the fraud conviction of an individual who worked at Steven's former employer, Patricia decided to investigate the representations Steven made during the 1989 and 1991 separation proceedings. As a result, Patricia claims she discovered the lawsuit brought by Steven against Brett Laurie, where she found reference to the $5.5 million payment. Thereafter, Patricia filed suit in the United States District Court for the Southern District of New York alleging defendants conspired to hide the payment in violation of RICO, committed common law fraud, and breached fiduciary duties, and that Steven was unjustly enriched. On March 30, 2011, the district court granted a motion to dismiss all Patricia's claims, ruling that the complaint did not adequately allege fraud and that the claims were time-barred.

The Second Circuit reversed the district court's decision to dismiss Patricia's claims, except for the dismissal of the unjust enrichment claim, which was affirmed. The Second Circuit held that the district court's reasons for finding the following three statements by Cohen and his attorney were insufficient to state a claim for relief were legally insufficient: (1) the statement of Steven and his attorney during the negotiations surrounding the 1989 Separation Agreement that investment was "lost" but continued to be carried on the books because it could not be written off until there was a bankruptcy or foreclosure; (2) Steven's statement in the 1989 Separation Agreement that he had provided wife with his net worth statement; and (3) Steven's statement in his 1991 affidavit that he was writing off the Lurie Investment as worthless. Rather, according to the Second Circuit, these allegations created a plausible inference that Steven Cohen concealed the $5.5 million settlement payment and that he continued to conceal that money in his financial statement that was incorporated into the separation agreement.

Emphasizing that both the four year statute of limitations for civil RICO claims and the six year statute of limitations for fraud and breach of fiduciary duty under New York law begin to run only once a plaintiff has actual or inquiry notice of the injury, the Second Circuit also disagreed with the district court's dismissal of the fraud and fiduciary duty claims as untimely. The district court found that Patricia had inquiry notice in 1991 when she sought increased support payments, suspected Steven of income concealment, had suspicions regarding the real estate investment, and found he was owed some income that he had not revealed. Disagreeing with the district court, however, the Second Circuit found no basis to conclude that Patricia's suspicions necessarily triggered a duty to investigate the possible fraud earlier than she did nor any basis for concluding that the investigation Patricia made in 1991 was not reasonable, despite her failure to uncover the $5.5 million payment. Finally, the Second Circuit found no evidence indicating that a reasonable investigation would have uncovered the $5.5 million payment, since the information available to Patricia in 1991 did not suggest in any way that Steven had sued Lurie, much less that he received a concealed payment in settlement of the suit. The court upheld the dismissal of the unjust enrichment claims, however, on the grounds that the statue of limitations for those claims begins at the moment an injury occurs. Accordingly, the Second Circuit reinstated and remanded to the district court Patricia's fraud-based and breach of fiduciary duty claims, while affirming dismissal of her unjust enrichment claim as untimely.

To read the full opinion, please visit:
"><br ">http://...../de...6/1/hilite/

Panel: Circuit Judges Leval, Sack and Hall.

Argument Date: 02/22/2013

Date of Issued Opinion: 04/03/2013

Docket Number: No. 11-1390

Decided: Affirmed in Part, Vacated and Remanded in Part

Case Alert Author: Matthew Auten

Counsel: Howard W. Foster, Foster PC, Chicago, IL, for Appellant. Martin Klotz (John R. Oller, Jeffrey B. Korn, on the brief), Willkie Farr & Gallagher LLP, New York, NY, for Appellees

Author: Circuit Judge Leval

Case Alert Circuit Supervisor: Professor Elyse Diamond Moskowitz

WNET, Thirteen v. Aereo, Inc.; Am. Broad. Cos., Inc. v. Aereo, Inc.

Emily Waldman — 2013-04-01T18:28:28 -06.00

Headline: Second Circuit Refuses to Bar Aereo's Transmission of Recorded Broadcast Television Programs

Area of Law: Copyright Infringement
Issue(s) Presented: Whether the District Court abused its discretion by not enjoining Defendant Aereo from transmitting recorded broadcast television programs to its subscribers while the programs are still airing on broadcast television.

Brief Summary: Aereo, Inc. enables subscribes who pay a monthly fee to watch broadcast television programs over the internet. Plaintiffs including ABC, CBS, NBC, Disney and WNET brought copyright infringement suits against Aereo, and moved for a preliminary injunction barring it from transmitting recorded broadcast television programs to its subscribers while the programs are still airing on broadcast television. The district court refused to grant the injunction, finding that the plaintiffs were unlikely to prevail at trial, and the Second Circuit affirmed.

To read the full opinion, please go to: http://www.ca2.uscourts.gov/de...625d52fa90d/1/hilite/

Extended Summary: Defendant Aereo's recording and subscription programs allow subscribers to record or watch television programs as the program is being aired, or after the program has been aired, via a computer or other internet-connected mobile device. Aereo's system operates with individual antennae for each subscriber: thus, each subscriber has a unique antenna that either records or directly transmits television programs.

Multiple plaintiffs, including ABC, CBS, NBC, Disney, WNET, and other holders of copyrights in programs that are broadcast on network television, sued Aereo in the United States District Court for the Southern District of New York, arguing that its transmissions infringed their exclusive right to publicly perform their works. They moved for a preliminary injunction barring Aereo from transmitting programs to its subscribers while the programs were still airing. The district court, however, denied the motion on grounds that the plaintiffs were unlikely to prevail at trial, given the Second Circuit's previous ruling in a similar case involving Cablevision's Digital Video Recorder (DVR) system.

The Second Circuit affirmed. The 1976 Copyright Act gives copyright owners several exclusive rights, including the exclusive right to "perform the copyright work publicly." The Act also states, in what is known as the "Transmit Clause," that to perform or display a work "publicly" means to "transmit or otherwise communicate a performance or display of work...to the public, by means of any device or process." In 2008, the Second Circuit concluded that Cablevision's DVR system did not violate the Transmit Clause because Cablevision's transmission of a recorded program to an individual subscriber was not a public performance.

The court concluded that this reasoning applied to the present case as well. "Cablevision's holding that Cablevision's transmissions of program recorded with its RS-DVR system were not public performances rested on two essential facts," the court explained. "First, the RS-DVR system created unique copies of every program a Cablevision customer wished to record. Second, the RS-DVR's transmission of the recorded program to a particular customer was generated from that unique copy...The same two features are present in Aereo's system." The court rejected the plaintiffs' attempts to distinguish Aereo's system from the DVR system, and said that it could not overrule Cablevision.

Judge Chin dissented from the Second Circuit's decision. He identified various differences between Aereo's system and Cablevision's systems, noting that Cablevision had promoted the DVR system as a way of recording and playing back programs, while Aereo promoted its service as a means for watching "live" broadcast television on the internet, despite its lack of a license to retransmit broadcast television.

To read the full opinion, please go to: http://www.ca2.uscourts.gov/de...625d52fa90d/1/hilite/

Panel: Circuit Judges Chin and Droney; District Judge Gleeson.

Argument (if known): 11/30/2012

Date of Issued Opinion: 04/01/2013
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Docket Number: 12-2786-cv, 12-2807-cv

Decided: Affirmed

Case Alert Author: Sarah Wegmueller

Counsel: PAUL M. SMITH, Steven B. Fabrizio, Scott B. Wilkens, Matthew E. Price, Jenner & Block LLP, Washington, DC; Richard L. Stone, Amy M. Gallegos, Jenner & Block LLP, Los Angeles, CA, for Plaintiffs-Appellants WNET, Thirteen, et al.; BRUCE P. KELLER, Jeffrey P. Cunard, Michael R. Potenza, Debevoise & Plimpton LLP, New York, NY, for Plaintiffs-Appellants Am. Broad. Cos., Inc., et al.; R. DAVID HOSP, John C. Englander, Mark S. Puzella,
Yvonne W. Chan, Erin M. Michael, Goodwin Procter LLP , Boston, MA; Michael S. Elkin, Thomas P. Lane, Winston & Strawn LLP, New York, NY; Seth D. Greenstein, Constantine Cannon LLP, Washington, DC; Jennifer A. Golinveaux, Winston & Strawn LLP, San Francisco, CA, for Defendant-Appellee.

Author of Opinion: Judge Droney

Supervisor: Emily Gold Waldman