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The Lawletter Blog

CIVIL PROCEDURE: What Happens to a Derivative Action When the Company Settles a Parallel Lawsuit?

Posted by Charlene J. Hicks on Mon, Feb 22, 2021 @ 09:02 AM

The Lawletter Vol 46 No 2

Charlene Hicks—Senior Attorney, National Legal Research Group

            Corporate shareholders, individual members of a limited liability company, or residents of a homeowners' association often file derivative complaints on behalf of the entity to assert rights that the entity itself has failed to raise against third parties. Sometimes these derivative actions prompt the entity to file its own lawsuit against the same third parties, resulting in parallel proceedings.

            In Star v. TI Oldfield Development, LLC, 962 F.3d 117, 131 (4th Cir. 2020), the Fourth Circuit considered for the first time the issue of "whether a plaintiff's derivative action on behalf of an entity is rendered moot by the entity's settlement of the same or similar claims in another action." As a matter of first impression, the court held that it may.

            The evidence showed that the Board of Directors of Oldfield, a residential community in South Carolina, filed lawsuits related to Oldfield's development. Rob Star, an Oldfield resident, later filed a derivative action on Oldfield's behalf, alleging similar claims against the same defendants. After the Board settled the lawsuits that it brought, the defendants moved to dismiss Star's derivative action on the ground that the settlements rendered the derivative lawsuit moot, and, therefore, the court lacked jurisdiction. In opposition, Star alleged that the settlement agreement was invalid due to a conflict of interest by certain board members and that the derivative action alleged claims not included in the Board's lawsuits.

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Topics: civil procedure, Charlene J. Hicks, derivative action, parallel lawsuit, settlement of similar claim, release provision

TAXATION: Taxation of Early Withdrawal from Retirement Account; COVID Exception

Posted by D. Bradley Pettit on Thu, Feb 18, 2021 @ 11:02 AM

The Lawletter Vol 46 No 2

Brad Pettit—Senior Attorney, National Legal Research Group

            A recent decision by the U.S. Tax Court serves as a reminder that if an individual elects to take funds from his or her tax-favored retirement account before he or she attains the age of 59½, the distribution from the account to him or her is not only subject to federal income tax, as are all distributions from retirement accounts, but is also subject to the 10% additional tax that is imposed upon early withdrawals from retirement accounts, such as individual retirement accounts ("IRAs"). In Lashua v. Commissioner, T.C. Memo. 2020-151, 2020 WL 6559172 (Nov. 9, 2020), the Tax Court reminded us that if we decide to withdraw funds from an otherwise tax-deferred retirement account before we reach the age of 59½, we should be prepared, under 26 U.S.C. § 61(a), to report the distribution as "gross income" on our individual or joint federal income tax return and, pursuant to 26 U.S.C. § 72(t)(1), to pay an "additional tax" equal to 10% of the funds that were withdrawn.

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Topics: D. Bradley Pettit, early distribution of retirement funds, exceptions to additional 10% tax, COVID exception, qualified retirement account

ADMINISTRATIVE/IMMIGRATION LAW: Chevron Deference Does Not Always Result in Support for the Government's Position

Posted by Suzanne L. Bailey on Thu, Feb 18, 2021 @ 10:02 AM

The Lawletter Vol 46 No 2

Suzanne Bailey—Senior Attorney, National Legal Research Group

            It is well-established law that when a federal court reviews a federal agency's construction of a statute it administers, the court will look to whether Congress has addressed the precise question at issue. If the court determines that Congress has not directly addressed the issue, rather than imposing its own construction of the statute, the court will defer to the administrative agency's permissible construction of the statute. This standard of review is called Chevron deference, after the U.S. Supreme Court decision that articulated it. See Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842 (1984). While application of Chevron deference frequently results in a decision upholding the agency's interpretation of its own statute, a recent decision from the Fourth Circuit Court of Appeals demonstrates that when the agency's interpretation is unreasonable, its interpretation will not prevail.

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Topics: Suzanne Bailey, Chevron deference, Amaya v. Rosen, administrative law, unreasonable statutory construction

CIVIL PROCEDURE: COVID-19 Venue Issues and Relevant Practical Problems

Posted by Anne B. Hemenway on Thu, Feb 18, 2021 @ 09:02 AM

The Lawletter Vol 46 No 2         

Anne B. Hemenway—Senior Attorney, National Legal Research Group

            The COVID-19 pandemic has caused many state courts around the country to either close down during parts of 2020 and 2021 or dramatically curtail operations. In many jurisdictions, jury trials have been canceled or postponed for months. The pandemic has resulted in a plethora of federal court cases regarding requests by federal inmates to be released from federal custody and other court-related issues. See Fern L. Kletter, COVID-19 Related Litigation: Effect of Pandemic on Release from Federal Custody, 54 A.L.R. Fed. 3d art. 1 (2020 & Westlaw updated weekly).

            In a case of first impression in the Commonwealth of Virginia, Clarke v. Medical Facilities of America, Inc. , No. CL20-4379, 2020 Va. Cir. LEXIS 493 (Va. Cir. Ct. City of Norfolk Dec. 30, 2020), the court reviewed whether pandemic-related issues were material to a venue dispute. In that case, defendants in a wrongful death action sought to transfer venue from the circuit court in the City of Norfolk, one of the largest cities in Virginia, to a small rural circuit court closer to the rehabilitation center where the plaintiff decedent had been treated.

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Topics: Anne B. Hemenway, COVID-19, court venue issues, too speculative, pandemic's disparate impact, relevant practical problems

ESTATES: Multiple Wills—Reconciliation—Choice of Personal Representative

Posted by James P. Witt on Tue, Feb 2, 2021 @ 11:02 AM

The Lawletter Vol 46 No 1

Jim Witt—Senior Attorney, National Legal Research Group

            Once in a while, the estate planning steps taken by a decedent make you wonder if he or she was intentionally leaving a mess. When Aretha Franklin, the Queen of Soul, died as a result of pancreatic cancer at age 76 on August 16, 2018, no will was filed. Her family believed that she had died intestate. If that had been the case, her net estate would have simply been divided under Michigan law into four equal shares, one for each of her sons, Clarence, Edward, Ted, and Kecalf. In May 2019, however, the family discovered three wills written by Franklin, two from 2010 were found in a locked cabinet, and one from 2014 was found in a spiral notebook left under a couch cushion. The wills seemed fairly evenhanded as among the four sons, but there were questions raised as to the documents' validity by a number of contradictory provisions and the problem with deciphering some of the writing, not to mention numerous underlinings, strikeouts, and marginal notes; much of the writing seemed to be in a stream of consciousness mode.

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Topics: James P. Witt, estate planning, multiple wills, reconciliation, personal representative

EMPLOYMENT: Gay and Transgender Employees Are Protected by Federal Antidiscrimination Statute, Supreme Court Holds

Posted by Nadine Roddy on Tue, Feb 2, 2021 @ 11:02 AM

The Lawletter Vol 46 No 1

Nadine Roddy—Senior Attorney, National Legal Research Group

            An employer that discharges an individual for being homosexual or transgender violates Title VII of the Civil Rights Act of 1964, the Supreme Court held 6-3 in one of the last decisions of its October 2019 term. Bostock v. Clayton County, Georgia, 140 S. Ct. 1731 (2020). Title VII contains the well-known prohibition of discrimination in employment against an individual “because of” the individual's “race, color, religion, sex, or national origin.” 42 U.S.C. § 2000e-2(a)(1). Writing for the majority, Justice Gorsuch explained that an employer who fires an individual for being homosexual or transgender fires that person for traits or actions it would not have questioned in members of a different sex. Thus, sex plays a “necessary and undisguisable role” in such decisions—precisely what Title VII forbids.

            Three cases were consolidated for this appeal. Each one started with an employer discharging a long-term employee soon after the employee revealed that he was homosexual or gender-transitioning—and allegedly for no other reason.

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Topics: employment law, Title VII, sexual orientation, Nadine Roddy, gender status

CRIMINAL LAW: Insanity Defense

Posted by Mark V. Rieber on Tue, Feb 2, 2021 @ 10:02 AM

The Lawletter Vol 46 No 1

Mark Rieber—Senior Attorney, National Legal Research Group

            In Kahler v. Kansas, 140 S. Ct. 1021 (2020), the U.S. Supreme Court recently held that the Due Process Clause of the U.S. Constitution does not require a state to adopt a particular formulation of the insanity defense. The ruling came in a case out of Kansas where the state had adopted the "cognitive incapacity" test, which examines whether a defendant was able to understand what he was doing when he committed the crime. The Kansas statute does not incorporate the "moral incapacity" test, which is the inquiry into whether a defendant could not distinguish right from wrong when committing the crime. The defendant contended that the state's failure to allow a defendant to raise a defense based on "moral incapacity" violated due process. The Court rejected such argument, holding that a state's insanity rule was substantially open to state choice.

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Topics: Due Process Clause, criminal law, Mark V. Rieber, Kansas, insanity defense, cognitive incapacity test

CIVIL PROCEDURE: Maritime Law—Could COVID-19 Cruise Ship Passenger Litigation Sink the Cruise Line Industry?

Posted by Charlene J. Hicks on Tue, Feb 2, 2021 @ 10:02 AM

The Lawletter Vol 46 No 1

Charlene Hicks—Senior Attorney, National Legal Research Group

            The COVID-19 pandemic has proven disastrous for cruise lines and passengers alike, with multiple coronavirus outbreaks and lengthy quarantine periods imposed. The resulting lawsuits have met with mixed results.

            In Weissberger v. Princess Cruise Lines, Ltd., No. 2:20-CV-02328-RGK-SK, 2020 WL 3977938 (C.D. Cal. July 14, 2020), plaintiffs claimed that Princess Cruise Lines was negligent and/or grossly negligent because it had knowledge that a disembarking passenger had symptoms of COVID-19 but it made the conscious decision to continue sailing with 3,000 passengers aboard. The Weissbergers claimed emotional distress damages arising from the ship's quarantine and the associated trauma from fear of developing the virus.

            The court recharacterized the negligence counts as claims for the negligent infliction of emotional distress. Id. at *2. From there, the court invoked the "zone of danger" test applicable to maritime cases, which "limits recovery for emotional injury to two categories of plaintiffs: (1) 'plaintiffs who sustain a physical impact as a result of a defendant's negligent conduct'[;] and (2) plaintiffs 'who are placed in immediate risk of physical harm by that conduct.'" Id. (quoting Consol. Rail Corp. v. Gottshall, 512 U.S. 532, 547-48 (1994)) (Weissberger court's emphasis).

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Topics: emotional distress, damages, Charlene J. Hicks, maritime law, COVID-19, liability of cruise line

PROPERTY: Landlord Liability for Wrongful Death

Posted by D. Bradley Pettit on Fri, Dec 18, 2020 @ 11:12 AM

The Lawletter Vol 45 No 6

Brad Pettit—Senior Attorney, National Legal Research Group

            In a very recent ruling that was consistent with prior Virginia state court decisions that favor residential landlords in cases involving personal injury suits by tenants against landlords, a federal district court sitting in Virginia dismissed wrongful death and intentional infliction of emotional distress ("IIED") actions by the plaintiff, a mobile home owner, against a mobile home park lot owner that arose when a decaying tree fell on the plaintiff's mobile home and crushed her son to death. Darlington v. Harbour E. Vill. LLC, No. 3:20cv157-HEH, 2020 WL 3979664 (E.D. Va. July 14, 2020) (slip copy) (only the Westlaw citation is currently available), appeal filed (4th Cir. Aug. 11, 2020). Even though there was evidence that prior residents in the mobile home park had warned the lot owner at least three times about the decaying tree and the dangers that it posed, the Darlington court ruled that, in the absence of a statutory or common-law duty on the part of the mobile home park lot owner/lessor to the mobile homeowner/lot lessee to maintain a safe condition of the lot, the plaintiff could not bring a wrongful death claim against the lot lessor:

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Topics: wrongful death, property, landlord liability, D. Bradley Pettit, statutory or common-law law duty, IIED claim

CIVIL PROCEDURE: Bid to Recover Picasso Painting Foiled in Rare Case Where Laches Defense Overcomes Express Statute of Limitations

Posted by Paul A. Ferrer on Fri, Dec 18, 2020 @ 11:12 AM

The Lawletter Vol 45 No 6

Paul Ferrer—Senior Attorney, National Legal Research Group

            Laches is "a defense developed by courts of equity to protect defendants against unreasonable, prejudicial delay in commencing suit." SCA Hygiene Prods. Aktiebolag v. First Quality Baby Prods., LLC, 137 S. Ct. 954, 960 (2017) (internal quotation marks omitted). It is frequently said, however, that laches cannot be invoked to bar legal relief in the face of an express statute of limitations enacted by Congress. Id. at 959. But that is exactly what happened in Zuckerman v. Metropolitan Museum of Art, 928 F.3d 186 (2d Cir. 2019), cert. denied, 140 S. Ct. 1269 (2020).

            In Zuckerman, the plaintiff, Laurel Zuckerman, brought suit to recover a painting—"The Actor" by Pablo Picasso—that had been owned by her great-granduncle and aunt, the Leffmanns. The Leffmanns were German Jews who were forced to flee the country in 1937. They arranged for the painting to be held by a Swiss acquaintance, who sold the painting in 1938 to raise funds for the Leffmanns to relocate to Brazil.

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Topics: Paul A. Ferrer, statute of limitations, laches defense, Picasso painting, Zuckerman v. MOMA

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