The Lawletter Vol 42 No 6

Nicole Prysby, Senior Attorney, National Legal Research Group

            In interpreting the coverage of Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e, appellate courts have held that the prohibition against discrimination based on sex does not encompass discrimination based on sexual orientation. E.g., Simonton v. Runyon, 232 F.3d 33 (2d Cir. 2000); Blum v. Gulf Oil Corp., 597 F.2d 936 (5th Cir. 1979). In December 2012, however, the Equal Employment Opportunity Commission ("EEOC") took the opposite position in a Strategic Enforcement Plan that prioritized enforcement of discrimination against lesbian, gay, bisexual, and transgender employees under the sex discrimination provisions of Title VII. Since that time, the EEOC has filed a number of lawsuits alleging discrimination against gay and lesbian employees and has consistently maintained that Title VII's prohibition of discrimination based on sex protects employees against discrimination based on sexual orientation. See, e.g., Complainant v. Anthony Foxx, Secretary, Dep’t of Transp. (Fed. Aviation Admin.), Agency, EEOC DOC 0120133080, 2015 WL 4397641 (July 15, 2016).

The Lawletter Vol 42 No 6

Jason Holder, Senior Attorney, National Legal Research Group

            The Individuals with Disabilities Education Act ("IDEA"), 20 U.S.C. §§ 1400 et seq., is designed "to ensure that all children with disabilities have available to them a free appropriate public education ["FAPE"]."  20 U.S.C. § 1400(d)(1)(A).  In Fry v. Napoleon Community School, 137 S. Ct. 743 (2017), the Supreme Court examined an IDEA provision which "addresses the Act's relationship with other laws protecting those children." Id. at 748. While the provision does not limit rights under other federal laws, it provides that "if a suit brought under such a law 'seek[s] relief that is also available under' the IDEA, the plaintiff must first exhaust the IDEA's administrative procedures." Id. (citing 20 U.S.C. § 1415(l)).

            Under the IDEA, an individualized education program ("IEP") serves as the primary vehicle for providing a child with a FAPE.  Id. at 749 (citing Honig v. Doe, 484 U.S. 305, 311 (1988)). If parents are unsatisfied with an IEP, they can file a complaint with the local or state educational agency (as provided by state law) or "may instead (or also) pursue a full-fledged mediation process." Id. Next, the parents may seek a due process hearing appealable to a state agency (if originally conducted at the local level).  Id.  Only after these steps are completed may a parent seek judicial review with a civil action in state or federal court.  Id.

The Lawletter Vol 42 No 6

Emily Abel, Research Attorney, National Legal Research Group

            On March 17, 2017, in Heneberry v. Pharoan, 232 Md. App. 468, 158 A.3d 1087 (2017), the Maryland Court of Special Appeals addressed the issue of what is required to prevail on a breach-of-contract claim in a medical malpractice action. The plaintiff, Valerie Heneberry ("Heneberry") who was suffering from acute appendicitis, received an appendectomy from Dr. Bashar Pharoan ("Dr. Pharoan"). During the surgery, Dr. Pharoan removed most of Heneberry's appendix, but left the "stump" of the appendix. Heneberry alleged that because of Dr. Pharoan's failure to remove her entire appendix, she experienced severe pain and was forced to undergo an additional surgical procedure to remove the remainder of her appendix.

            In addition to bringing claims for negligence and loss of consortium, Heneberry included in her medical malpractice complaint a count alleging that Dr. Pharoan had breached their contract. Specifically, Heneberry alleged that Dr. Pharoan had a "contractual obligation to perform an appendectomy, which is the removal of the appendix, not a portion of the appendix, and [there was] no testimony that he intended to leave a portion behind." Id. at ___, 158 A.3d at 1094.

The Lawletter Vol 42 No 5

Steven Friedman, Senior Attorney,National Legal Research Group

            The Federal Tort Claims Act ("FTCA"), 28 U.S.C. §§ 2671–2680, "was designed primarily to remove the sovereign immunity of the United States from suits in tort and, with certain specific exceptions, to render the Government liable in tort as a private individual would be under like circumstances." Richards v. United States, 369 U.S. 1, 6 (1962). Absent a waiver of immunity, the district courts are deprived of subject-matter jurisdiction for tort claims against the United States. See 28 U.S.C. § 1346(b)(1).

            The FTCA's foreign-country exception provides that there is no waiver of immunity for "[a]ny claim arising in a foreign country." 28 U.S.C. § 2680(k). In Sosa v. Alvarez-Machain, 542 U.S. 692 (2004), the Supreme Court held that the foreign-country exception "bars all claims based on any injury suffered in a foreign country." Id. at 712. Yet the Sosa Court left unanswered the question of how to determine where an injury is "suffered" for purposes of the foreign-country exception. See S.H. ex rel. Holt v. United States, 853 F.3d 1056, 1057–58 (9th Cir. 2017).  

            This question was directly addressed in a recently published decision by a unanimous panel of the Ninth Circuit. See id. at 1060. In S.H., the Holts' daughter was born prematurely while the family was stationed at a United States Air Force ("USAF") base in Spain. See id. at 1058. As a consequence of her premature birth, S.H. sustained a permanent injury to the white matter of her brain but was not diagnosed as suffering from cerebral palsy until after the family had returned to the United States. See id.

The Lawletter Vol 42 No 5

Anne Hemenway, Senior Attorney, National Legal Research Group

            In SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC, 137 S. Ct. 954 (2017), the United States Supreme Court held that the defense of laches is not proper in a patent infringement case when suit is brought within the six-year statute of limitations period for patent infringement cases, set forth in 35 U.S.C. § 286. This decision abrogated decisions in numerous federal circuit courts which allowed the laches defense.

            Under federal law, damages are limited in patent infringement cases by the statute of limitations set forth in § 286 to cover only infringement that occurred within the six-year period prior to the filing of the complaint. This six-year period is counted backward from the filing of the complaint, not forward to the time of the patent infringement event.

The Lawletter Vol 42 No 5

Matthew McDavitt, Senior Attorney,National Legal Research Group

        By an appeal published July 13, 2016, a British appellate court affirmed an intermediate appellate decision dated October 24, 2014, that had held that vessel fuel stores (colloquially known as "bunkers") expended while a hijacked ship is under the control of pirates during ransom negotiations constitute an allowable general average "additional expense" under Rule F of the York-Antwerp Rules, the industry codification of traditional general average law. Mitsui & Co. v. Beteiligungsgesellschaft LPG (The Longchamp) [2016] EWCA Civ 708, aff'g EWHC 3445 (Comm). This opinion surprised many industry analysts, as it fundamentally expands the scope of the traditional general average law, broadening its scope so as to modernize this legal regime made less applicable as technology has rendered Aclassical@ general average events a rarity.

The Lawletter Vol 42 No 5

Suzanne Bailey, Senior Attorney, National Legal Research Group

            Following the exhilaration accompanying a reversal of a criminal conviction, the former defendant must begin efforts to mitigate the damage, not the least of which may be repairing the financial harm of participating in the criminal justice system. In a seven to one decision (Justice Gorsuch did not participate), the U.S. Supreme Court addressed the Colorado statutory scheme for the refund of costs, fees, and restitution paid pursuant to the invalid conviction and concluded that the Compensation for Certain Exonerated Persons Act (Exoneration Act), Colo. Rev. Stat. §§ 13-65-101 to -103 (2016), violated due process by requiring defendants whose convictions have been reversed or vacated to prove their innocence by clear and convincing evidence in order to obtain a refund.  Nelson v. Colorado, 137 S. Ct. 1249 (2017).

            There were two petitioners in Nelson: (1) Shannon Nelson sought a refund of $702.10 withheld from her inmate account with the Colorado Department of Corrections toward an assessment of $8,192.50 in court costs, fees, and restitution following a reversal of her conviction for sexual and physical abuse of her four children and acquittal after retrial; and (2) Louis Alonzo Madden asked for a refund of $1,977.75 he paid toward assessed court costs, fees, and restitution totaling $4,413 after his conviction for patronizing a prostituted child was reversed on direct appeal, his conviction for attempted third-degree sexual assault by force was vacated on postconviction relief, and the State elected not to appeal or retry the case. Neither petitioner proceeded under the Exoneration Act. The Colorado Supreme Court held that the Exoneration Act was the sole means of seeking a refund, and, thus, the courts were without authority to refund the money paid. Moreover, the Colorado court found no due process problem because the Act provided sufficient process to defendants seeking refunds. Justice Ginsberg, writing for the U.S. Supreme Court, disagreed.

The Lawletter Vol 42 No 5

Charlene Hicks, Senior Attorney, National Legal Research Group

            Despite the federal policy favoring arbitration, prospective plaintiffs continue to push courts to reexamine the enforceability parameters of arbitration agreements. These efforts have met with some success in cases where the arbitration agreement designates a particular arbitral institution to resolve a dispute between the parties, and the designated institution no longer exists at the time an actual dispute arises.

            This factual scenario has unveiled a degree of uncertainty in the meaning of the Federal Arbitration Act ("FAA"). The FAA provides that if "there shall be a lapse in the naming of an arbitrator . . . or in filling a vacancy, then upon the application of either party to the controversy the court shall designate and appoint an arbitrator[.]" 9 U.S.C. § 5. It is unclear from the statute whether the nonexistence of an arbitral institution designated in an arbitration agreement to resolve disputes between the parties constitutes a "lapse in the naming of an arbitrator" such that the court is authorized to appoint a substitute arbitrator. If the designated institution's nonexistence does not fall within the dictates of 9 U.S.C. § 5, then the court does not have the power to appoint a substitute. To do so would violate the long-established contractual principle that a party cannot be compelled to arbitrate a dispute that he or she has not agreed to submit to arbitration.

The Lawletter Vol 42 No 4

Mark Rieber, Senior Attorney, National Legal Research Group

            Generally, a lawful search warrant may not be procured by the use of illegally obtained information.  E.g., State v. Cuong Phu Le, 463 S.W.3d 872, 877 (Tex. Crim. App. 2015), cert. denied, 136 S. Ct. 819 (2016).  As a matter of first impression, however, the Texas Court of Criminal Appeals held that the Texas good-faith exception to the statutory exclusionary rule applied to a search executed pursuant to a search warrant that was based on information obtained from an illegal drug sniff.  McClintock v. State, No. PD-1641-15, 2017 WL 1076289 (2Tex. Crim. App. Mar. 22, 2017).  The drug-sniffing dog had been brought by police to the door of the defendant's upstairs residence, where the dog alerted police to the presence of drugs.  This information was used as the basis for a search warrant for the residence, and there would have been no probable cause without the information.  Execution of the warrant resulted in the seizure of marijuana.  While the case was pending on appeal, the United States Supreme Court held that such dog sniffs constituted an unconstitutional search under the Fourth Amendment.  See Florida v. Jardines, 133 S. Ct. 1409 (2013).  Prior to the holding in Jardines, according to McClintock, it was not clear that the dog sniff used in McClintock was illegal. 

The Lawletter Vol 42 No 4

Jim Witt, Senior Attorney, National Legal Research Group

            The one area of taxation that is recognized on both sides of the political aisle as badly needing reform is the federal corporate income tax.  One fact that signals the need for reform is that the maximum tax rate for the ordinary income of U.S. corporations is at 35% on taxable income exceeding $10 million (Internal Revenue Code of 1986, § 11(b)(1)(D)), among the highest marginal rates in the world (e.g., Ireland 12.5%; Germany 29.65%). As a result, and as prominently reported in recent months, a number of U.S. corporations (notably Apple and Alphabet (Google)) have shifted the locus of intangible assets and/or corporate headquarters to countries with favorable tax rates (a procedure known as a "corporate inversion"). United States corporations are subject to federal income tax on their global profits, but by not repatriating their profits attributable to a foreign situs, those corporations avoid paying taxes by simply not bringing those profits back to the United States.

            The central feature of the current proposals for corporate income tax reform is to change the incidence of the tax from one on the corporation's profits to a tax on the corporation's cash flow, regardless of the location of the corporation's headquarters or intangible assets. The tax, characterized as a "destination cash flow tax with border adjustment" or a "border adjustment tax" (“BAT”), would eliminate any benefit now gained by a corporation's parking its profits in a favorable tax jurisdiction (the tax would be imposed in the year of the sale, not in the year of the repatriation of profits). It is the border adjustment feature of the tax that becomes the key. The determining factor becomes where the corporation's products are sold.