August 28, 2012

Fred Shackelford, Senior Attorney, National Legal Research Group

If an individual unsuccessfully attempts to monitor another's private activities, can he or she be held liable for invasion of privacy?  The Iowa Supreme Court decided this issue in the case of Koeppel v. Speirs 808 N.W.2d 177 (Iowa 2011).  In Koeppel, an employee, Koeppel, discovered a video camera in a bathroom at her workplace.  An investigation revealed that her employer, Speirs, had hidden the camera there in an effort to monitor another employee's activity, allegedly because he suspected that she was abusing drugs or engaging in other conduct detrimental to his business.

The camera, which was pointed toward a toilet, was designed to transmit a signal to a receiver located in Speirs's office, where it could be monitored.  The camera's battery had a useful life of only a few hours, and at the time it was discovered, its battery was dead.  However, when police replaced the battery, the camera operated, and the monitor briefly displayed a "snowy, grainy, foggy" image before its screen displayed a "no signal" message.  Speirs claimed that he had not been able to detect an identifiable picture on the monitor and had planned to remove the camera from the bathroom.

Koeppel sued in tort for invasion of privacy—specifically, for the branch of this tort known as "unreasonable intrusion upon the seclusion of another."  The trial court granted summary judgment for Speirs, holding that the tort required an actual, rather than an attempted, intrusion.

On appeal, the Iowa Supreme Court first analyzed the general nature of the tort at issue.  The court observed that the cause of action is based upon the particular method that is used to obtain information, not the content of whatever information is obtained or how the information may be used or disseminated.  The court recited the two elements of the tort:  (1) that there be an intentional intrusion into a matter in which a plaintiff has a right to expect privacy, and (2) that the intrusion be highly offensive to a reasonable person.  The court noted that although Restatement (Second) of Torts § 652B does not specifically define "intrusion," that section's illustrations include examples such as taking photographs of a sick patient in a hospital or of activities in a neighbor's bedroom, or installing a recording device on another's telephone.

Speirs conceded that placing a camera in a bathroom would be highly objectionable to a reasonable person, but the parties disagreed about what proof is required to establish that an intrusion occurred.  The Koeppel court reviewed case law from various other jurisdictions, noting that other courts are divided on the question of whether a person can intrude without actually viewing or recording the victim.  The court agreed with the approach taken by the  New Hampshire Supreme Court in Hamberger v. Eastman, 206 A.2d 239 (N.H. 1964), in which the court held that plaintiffs whose bedroom was bugged were not required to prove that the defendant landlord actually overheard or viewed activities in a secluded place.  Instead, the Hamberger court found that an intrusion occurs when the defendant performs an act that has the potential to impair a person's peace of mind and comfort associated with an expectation of privacy.  The Koeppel court reasoned as follows:

[W]e find the approach taken in Hamberger and its progeny is more consistent with the spirit and purpose of the protection of privacy. The secret use of an electronic listening or recording device is abhorrent to the interests sought to be protected by the tort. Amati, 829 F.Supp. at 1010. The approach is also consistent with the path we have started to follow. See Tigges, 758 N.W.2d at 829 (finding the installation of equipment, recording activities with the equipment, and attempting to view the activities recorded established an intentional intrusion). Additionally, the comments and illustrations contained in the Restatement (Second) of Torts make no suggestion that the intrusion into solitude or seclusion requires someone to actually see or hear the private information. See Restatement (Second) of Torts § 652B illus. 3, at 379. Finally, the minority rule fails to provide full protection to a victim, while giving too much protection to people who secretly place recording devices in private places. Direct evidence that an actual viewing occurred can be difficult to establish, and a person who is inclined to secretly place a camera in a private area can easily incapacitate the camera when it is not in use so as to minimize any responsibility upon discovery. A plaintiff who learns a camera was placed in a private place should not be forced to live with the uncertainty of whether an actual viewing occurred. Such an approach would leave those victims with a reasonable belief that someone could have listened to or seen a private moment without a remedy simply because the device was unable to actually operate to invade privacy at the time it was discovered.

August 21, 2012

John Stone, Senior Attorney, National Legal Research Group

Among the less frequently litigated federal civil rights statutes is 42 U.S.C. § 1981, which prohibits race discrimination related to making and enforcing contracts. The term "make and enforce contracts" in the statute means "the making, performance, modification, and termination of contracts, and the enjoyment of all benefits, privileges, terms, and conditions of the contractual relationship."  42 U.S.C. § 1981(b).  Within the category of cases deciding claims under this provision, there are fewer still that involve actions brought by customers against retail businesses.  In a recent case, the Eleventh Circuit had to decide whether a customer could succeed on his § 1981 cause of action, where he had been subjected to racially motivated treatment that delayed and obstructed his shopping but that did not, in the end, prevent him from completing the transaction.  The court answered this question in favor of the defendant store, affirming dismissal of the § 1981 claim.  Lopez v. Target Corp., 676 F.3d 1230 (11th Cir. 2012).

The Hispanic plaintiff in Lopez had selected some items to purchase at a big-box store and stood in a checkout line.  When he reached the register, the white female cashier "rudely" told him that her register was closed, then proceeded to help the next customer, who was white, after Lopez had walked away.  As she did this, the cashier laughed at, and gestured toward, Lopez.  When Lopez headed toward a different line, a supervisor, who had apparently witnessed Lopez's first attempt to check out, told Lopez to go back to the same line, where the same cashier would accept his payment.  Given a second chance to get it right, the cashier squandered the opportunity and instead revealed her bias more plainly.  The cashier did not use any racial terms, but when Lopez reached her, she very loudly said, "Don't you listen? I'm closed!"  Id. at 1232.  When Lopez explained that a supervisor had sent him back to her, she said, even more loudly, "Don't you understand? I'm closed to YOU!"  Id.  Again Lopez left the line, and again the cashier gestured at him and laughed as he went.  At that point, Lopez was finally able to buy his items from a different cashier, who heard his story and summoned a supervisor, who apologized profusely.  The opinion does not indicate the fate of the rude cashier, but Lopez, "in a state of shock" and still distraught, finally left the store with his purchased items and $9 worth of coupons from the apologetic supervisor.

Lopez brought suit in state court against the store and the cashier, and the presence of the federal claim under § 1981 allowed the case to be removed to federal court.  When Lopez's claims were dismissed by the district court, the Eleventh Circuit had before it the ' 1981 claim and the state law tort claim for intentional infliction of emotional distress ("IIED").  It affirmed the lower court's rulings.

The Lawletter Vol 37 No 4

Brett Turner, Senior Attorney, National Legal Research Group

Can state courts order divorcing parties to file joint federal income tax returns?  Joint returns can be filed for any tax year, so long as the taxpayers were married, and not divorced or legally separated, on the last day of that year.  See generally 13 William H. Byrnes et al., Mertens Law of Federal Income Taxation § 47:19 (Westlaw database updated July 2012).  Ordinarily, a joint tax return will result in a significantly smaller amount of tax due than will two separate tax returns.  But some divorcing spouses, often for selfish reasons, will refuse to sign such a return.

State court case law is split on whether the divorce court can actually order a party, under penalty of contempt, to sign a joint tax return.  A typical case permitting such an order is the New Jersey decision in Bursztyn v. Bursztyn, 879 A.2d 129 (N.J. Super. Ct. App. Div. 2005):

We do not find persuasive the argument that individuals have a federal statutory right to choose whether to file joint or separate income tax returns which may not be abridged by state courts.  In matrimonial actions, courts routinely issue orders which have significant effects on individuals' rights.  For example, courts may infringe upon a parent's right to relocate from one state to another.  Baures v. Lewis, 167 N.J. 91, 770 A.2d 214 (2001).  By contrast, limiting an individual's statutory right to choose between filing a joint or individual federal income tax return seems a minor intrusion.

Id. at 136.

Typical of those cases reaching a contrary result is the very recent Nebraska decision in Bock v. Dalbey, 815 N.W.2d 530 (Neb. 2012).  Bock identified four separate reasons for its holding.

"First, the U.S. Tax Court is not bound by orders compelling the parties to sign a joint return. It will look to the husband and wife's intent, and if one of them signed only because a state court ordered him or her to do so, the return may or may not be treated as a joint return."  Id. at 535.

"Second, an order compelling the parties to file joint tax returns is a mandatory injunction. A mandatory injunction . . . is considered an extreme or harsh remedy that should be exercised sparingly and cautiously."  Id. at 536.

"Third, a resisting spouse's exposure to liability under the federal tax code is too difficult to predict if compelled to file a joint return."  Id. at 537.

"Fourth, the rules related to filing deadlines under the federal tax code create practical hurdles to allowing a trial court to compel the parties to file joint returns."  Id.  A decision to file a joint tax return cannot be revoked after the yearly tax filing deadline has passed, so that a spouse has no effective remedy if an order to file a joint tax return is reversed on appeal.

The Lawletter Vol 37 No 4

Jim Witt, Senior Attorney, National Legal Research Group

It generally recognized that whether an individual dies intestate, or especially if he or she dies testate, escheat of the decedent's assets to the State is viewed as an absolutely last resort for the distribution of an estate.  See 27A Am. Jur. 2d Escheat § 12 "Generally; escheat disfavored."  Yet, in the recent Nevada case, In re Estate of Melton, 272 P.3d 668 (Nev. 2012), the result was escheat despite the fact that the testator, William Melton ("Bill"), left two wills.

Bill executed a formal will in 1975 under which he devised most of his estate to his parents, with small portions of the estate going to his brother, Larry J. Melton, and to two of his cousins.  He indicated in this will that his daughter, Vicki Palm ("Vicki"), was to receive nothing.  Bill also left the following handwritten letter, which he had sent to his friend, Alberta Kelleher ("Susie"), in 1995:

5-15-95

5:00 AM

Dear Susie

I am on the way home from Mom's funeral.  Mom died from an auto accident so I thought I had better leave something in writing so that you Alberta Kelleher will receive my entire estate.  I do not want my brother Larry J. Melton or Vicki Palm or any of my other relatives to have one penny of my estate.  I plan on making a revocable trust at a later date.  I think it is the 15 of [M]ay, no calendar, I think it[']s 5:00 AM could be 7:AM in the City of Clinton Oklahoma.

Lots of Love

Bill

/s/ William E. Melton

AKA Bill Melton

[Social security number]

Id. at 671-72.

Susie died in 2002, thus predeceasing Bill, who died in 2008.  During the administration of Bill's estate, the existence of his daughter (and only known child), Vicki, was discovered.  Prior to the discovery of the 1975 will, Vicki had argued that the 1995 letter did not qualify as a holographic will and that the estate therefore passed to her by intestate succession.  After the 1975 will was found, Vicki argued that the 1995 letter was a valid will (but that it was ineffective because Susie had predeceased Bill) and that it revoked the 1975 will, thereby giving Vicki the entire estate as Bill's sole heir at law.

Bill's half sisters, seeking to uphold the 1975 will, argued that the 1995 letter was not a valid will but that if it was valid, it did not revoke the 1975 will.  They further argued that even assuming that the 1995 letter was a valid will that revoked the 1975 will, the revocation had to be disregarded under the doctrine of dependent relative revocation, by which a subsequent will, which has no testamentary effect, does not revoke a prior will if it is shown that the testator intended that such revocation be conditioned on the effectiveness of the later will.

August 1, 2012

Brad Pettit, Senior Attorney, National Legal Research Group

As part of the Health Care and Education Reconciliation Act of 2010, Congress codified the long‑standing common‑law doctrine of "economic substance," which is applied in federal income tax cases to prevent taxpayers from trying to claim tax benefits from transactions that have no bona fide nontax purpose.  Pub. L. No. 111‑152, § 1409(a), 124 Stat. 1029, 1067‑68 (effective with respect to transactions entered into on or after March 31, 2010) (adding subsection (o) to 26 U.S.C. § 7701 and redesignating former subsection (o) as subsection (p)).  The Internal Revenue Code now expressly provides that

[i]n the case of any transaction to which the economic substance doctrine is relevant, such transaction shall be treated as having economic substance only if—

(A)       the transaction changes in a meaningful way (apart from Federal income tax effects) the taxpayer's economic position, and

(B)       the taxpayer has a substantial purpose (apart from Federal income tax effects) for entering into such transaction.

26 U.S.C. § 7701(o)(1) (Westlaw current through P.L. 112‑90 approved 1‑3‑12).  Section 7701(o) goes on to explain that the term "economic substance doctrine" means the common‑law doctrine under which income tax benefits with respect to a transaction are not allowable if the transaction or series of transactions do not have "economic substance or lack[] a business purpose."  Id. § 7701(o)(5)(A), (D).  It is critical to note that under § 7701(o), there is an "[e]xception for personal transactions of individuals" because Congress expressly provided that the economic substance doctrine is applicable "only to transactions entered into in connection with a trade or business or an activity engaged in for the production of income."  Id. § 7701(o)(5)(B).

The Code also makes it clear that a taxpayer can be subjected to "accuracy‑related penalties" if he or she tries to claim tax benefits from a transaction or series of transactions that lack economic substance.  Id. § 6662(b)(6) (subsection (6) added to § 6662(b) by Pub. L. No. 111‑152, § 1409(b)(1), 124 Stat. at 1069).  Specifically, the Code now expressly provides that accuracy‑related penalties

apply to the portion of any underpayment which is attributable to . . . :

 . . . .

(6)        Any disallowance of claimed tax benefits by reason of a transaction lacking economic substance (within the meaning of section 7701(o)) or failing to meet the requirements of any similar rule of law.

Id.

On at least three occasions, the U.S. Tax Court has noted that the above‑described provisions of § 7701(o) essentially represent the adoption by Congress of the common‑law doctrine of economic substance as articulated by the U.S. Court of Appeals for the Third Circuit in the case of ACM Partnership v. Commissioner, 157 F.3d 231, 247‑48 (3d Cir. 1998), cert. denied, 526 U.S. 1017 (1999).  Crispin v. Comm'r, T.C. Memo. 2012‑70, T.C.M. (RIA) ¶ 2012‑070, 2012 WL 858406, at *6 n.14; Blum v. Comm'r, T.C. Memo. 2012‑16, T.C.M. (RIA) ¶ 2012‑016, 2012 WL 129801, at *17 n.21; Rovakat, LLC v. Comm'r, T.C. Memo. 2011‑225, T.C.M. (RIA) ¶ 2011‑225, 2011 WL 4374589, at *27 n.11. 

August 14, 2012

Doug Plank, Senior Attorney, National Legal Research Group

It is well established that the Sixth Amendment to the U.S. Constitution provides to a criminal defendant the constitutional right to counsel and that this right encompasses the right to effective assistance of counsel.  Strickland v. Washington, 466 U.S. 668 (1984).  Because a determination of whether a defendant's trial counsel has provided effective assistance at trial can rarely be made prior to the end of the trial or prior to the issuance of the judgment of the court, a defendant's first opportunity to raise the issue of ineffective assistance of counsel is on appeal.  However, most States prohibit the litigation of ineffective-assistance-of-counsel claims on direct appeal and, instead, require defendants to bring such claims in a collateral habeas corpus proceeding, usually following the termination of the appeal process.  Such collateral proceedings have their own limiting rules, as most States require all issues that can be raised in postconviction proceedings to be brought in one proceeding and hold that issues not raised in the initial proceeding will be forever barred unless the defendant can show both good cause for the failure to have raised them and actual prejudice from that failure.  Moreover, the U.S. Supreme Court squarely held in Coleman v. Thompson, 501 U.S. 722, 753-54 (1991), that an attorney's errors in a postconviction proceeding do not qualify as cause for a default, and the Court refused to find that a defendant has a constitutional right to counsel in postconviction relief actions, thus barring ineffective-assistance-of-counsel claims for attorney errors in those proceedings.  Under 28 U.S.C. § 2254, the federal statute governing the procedures for bringing a federal habeas corpus action to contest a judgment in a state court criminal proceeding, a defendant is entitled to bring only one proceeding and can only raise issues in that proceeding that were previously raised either in the state trial or in state postconviction relief proceedings.

These limitations have created a situation in which a defendant has no remedy when he has plainly been denied his constitutional right to effective assistance of counsel at trial and yet his attorney has also failed to raise that issue in his initial state postconviction relief action.  Under the principles discussed above, the defendant would simply be unable to get relief for his deprivation of the right to counsel, because he would be foreclosed from bringing up the issue in a successive habeas corpus action and could not raise the issue in a federal proceeding under § 2254 because it had not been raised at the state level.

The Supreme Court recently addressed this problem and decided in Martinez v. Ryan, 132 S. Ct. 1309 (2012), a fiercely contested 7-2 decision, that a federal habeas corpus action was indeed available to remedy ineffective assistance of counsel at a state court trial, even where that issue had not been properly raised in the defendant's state postconviction actions.  The reasoning of the Court in Martinez would appear to open the door to many more successful federal habeas corpus proceedings for criminal defendants alleging ineffective assistance of counsel.

The Lawletter Vol 37 No 3

Fred Shackelford, Senior Attorney, National Legal Research Group

Proving that the common law continues to evolve, the Virginia Supreme Court has recognized a new cause of action for tortious interference with parental rights.  In Wyatt v. McDermott, ___ Va. ___, 725 S.E.2d 555 (2012), an unmarried woman allegedly conspired with attorneys, an adoption agency, and a Utah couple to place her newborn child up for adoption without the knowledge or consent of the child's father.  The father sued the couple, the attorneys, and the agency for tortiously interfering with his parental rights, and the Wyatt court was called upon to decide whether this tort exists in Virginia.  Noting that no statute provided the answer, the court recognized that the parent-child relationship is a constitutionally protected and valuable right.

The court observed that under English common law, a cause of action existed to provide a father with recourse for abduction of a son or heir who was rendering services.  The court also noted that the overwhelming majority of courts in other states have allowed a cause of action for tortious interference with the parent-child relationship.  Although the General Assembly has abolished the cause of action for alienation of affections, Va. Code Ann. § 8.01-220, the Wyatt court distinguished the two torts:

"Tortious interference with parental or custodial relationship" intimates that the complaining parent has been deprived of his/her parental or custodial rights; in other words, but for the tortious interference, the complaining parent would be able to exercise some measure of control over his/her child's care, rearing, safety, well‑being, etc.  By contrast, "alienation of affections" connotes only that the parent is not able to enjoy the company of his/her child; this cause of action does not suggest that the offending party has removed parental or custodial authority from the complaining parent.

___ Va. at ___, 725 S.E.2d at 562 (internal quotation marks omitted).

The court concluded that a cause of action for tortious interference with parental rights is consistent with existing common law, and set forth its elements as follows:

(1) the complaining parent has a right to establish or maintain a parental or custodial relationship with his/her minor child; (2) a party outside of the relationship between the complaining parent and his/her child intentionally interfered with the complaining parent's parental or custodial relationship with his/her child by removing or detaining the child from returning to the complaining parent, without that parent's consent, or by otherwise preventing the complaining parent from exercising his/her parental or custodial rights; (3) the outside party's intentional interference caused harm to the complaining parent's parental or custodial relationship with his/her child; and (4) damages resulted from such interference.

Id. (internal quotation marks omitted).