circuit split

Chadbourne and Parke LLP v. Troice; Willis of Colorado Inc. v. Troice; Proskauer Rose LLP v. Troice

Issues

The Supreme Court has consolidated for oral argument three Fifth Circuit cases that deal with the Securities Litigation Uniform Standards Act (SLUSA). These cases address a circuit split as to the standard for determining when an alleged misrepresentation is "material" enough to the purchase or sale of a covered security to satisfy the "in connection with" requirement and thus trigger SLUSA’s preclusive effect.

 

The Securities Litigation Uniform Standards Act (“SLUSA”) precludes certain state-law class actions when a “misrepresentation” is made “in connection with the purchase or sale of a covered security.” The Supreme Court will address a circuit split over the scope and meaning of this standard; in particular, at what point an alleged misrepresentation is sufficiently related to the sale or purchase of a covered security to satisfy the "in connection with" requirement. The Court has consolidated for oral argument three state law securities class actions from the Fifth Circuit Court of Appeals. The district court, adopting the Eleventh Circuit’s test, found that SLUSA precluded the plaintiffs' claims because misrepresentations were made in connection with the sale of SLUSA-covered securities. The Fifth Circuit, adopting the Ninth Circuit’s test, reversed and reinstated the plaintiffs' state law class-actions. The Court’s ruling will implicate the scope and application of SLUSA, SLUSA's impact on state-law class actions, and SLUSA's effect on U.S. securities markets.

Questions as Framed for the Court by the Parties

Chadbourne & Parke LLP V. Troice

The Securities Litigation Uniform Standards Act ("SLUSA") precludes most state-law class actions involving "a misrepresentation" made "in connection with the purchase or sale of a covered security." 15 U.S.C. § 78bb(f)(1)(A). The circuits, however, are divided over the standard for determining whether an alleged misrepresentation is sufficiently related to the purchase or sale of a covered security to satisfy the "in connection with" requirement. The Fifth Circuit in this case adopted the Ninth Circuit standard and held that the complaint here was not precluded by SLUSA, expressly rejecting conflicting Second, Sixth, and Eleventh Circuit standards for construing the "in connection with" requirement, all of which would result in SLUSA preclusion here. 

Additionally, and also in conflict with several other circuits, the Fifth Circuit held that SLUSA does not preclude actions alleging aiding and abetting of fraud in connection with SLUSA-covered security transactions when the aiders and abettors themselves did not make any representations concerning a SLUSA-covered security. 

The questions presented are: 

  1. Whether SLUSA precludes a state-law class action alleging a scheme of fraud that involves misrepresentations about transactions In SLUSA-covered securities. 
  2. Whether SLUSA precludes class actions asserting that defendants aided and abetted SLUSA-covered securities fraud when the defendants themselves did not make misrepresentations about the purchase or sale of SLUSA-covered securities. 

 

Willis of Colorado Inc. v. Troice

The Securities Litigation Uniform Standards Act of 1998 ("SLUSA") precludes state law class actions that allege a misrepresentation or omission "in connection with" the purchase or sale of a covered security. 15 U.S.C. § 78bb(f)(1). The complaints at issue in this case plainly included such alleged misrepresentations. The district court, applying Eleventh Circuit precedent, recognized as much and dismissed the complaints. However, the Fifth Circuit disagreed and, purporting to apply the Ninth Circuit's test, found the fact that the complaints included alleged misrepresentations in connection with a covered security insufficient to invoke SLUSA because the complaints also included other misrepresentations that were not made "in connection with" a covered securities transaction. In doing so, the Fifth Circuit acknowledged that it was departing from the holding of the Eleventh Circuit and several other circuits. 

The question presented is whether a covered state law class action complaint that unquestionably alleges "a" misrepresentation "in connection with" the purchase or sale of a SLUSA-covered security nonetheless can escape the application of SLUSA by including other allegations that are farther removed from a covered securities transaction.

 

Proskauer Rose LLP v. Troice

  1. Does the Securities Litigation Uniform Standards Act of 1998 ("SLUSA"), 15 U.S.C. §§ 77p(b), 78bb(f)(1), prohibit private class actions based on state law only where the alleged purchase or sale of a covered security is "more than tangentially related" to the "heart, crux or gravamen" of the alleged fraud? 
  2. Does SLUSA preclude a class action in which the defendant is sued for aiding and abetting fraud, but a non-party, rather than the defendant, made the only alleged misrepresentation in connection with a covered securities transaction? 

In 1995, Congress enacted the Private Securities Litigation Reform Act (“PSLRA”) to curtail abusive class action litigation involving nationally traded securities. See Roland v.

Edited by

Additional Resources

Submit for publication
0

Dubin v. United States

Issues

If a criminal defendant uses someone else’s name while committing a criminal offense, can they also be charged with identity fraud?

This case asks the Supreme Court to determine whether a criminal defendant who uses someone else’s name while committing a criminal offense can also be charged with identity fraud. Petitioner David Dubin, an employee at a psychological evaluations services company, used the name of a patient on a form he filled out while committing healthcare fraud. Respondent, the United States, charged him with committing aggravated identity theft under 18 U.S.C. § 1028A(a)(1). The circuits have split over how to interpret 18 U.S.C. § 1028A(a)(1), specifically when defendants should be charged with identity fraud while committing an underlying offense. This circuit split has created tension over how broadly or narrowly the statute should be read in light of its language, the surrounding context, and congressional intent. The decision could impact the level of discretion that prosecutors enjoy when prosecuting claims under § 1028 and the extent of due process rights for criminal defendants in such cases.

Questions as Framed for the Court by the Parties

Whether a person commits aggravated identity theft any time they mention or otherwise recite someone else’s name while committing a predicate offense.

Petitioner David Dubin worked for Psychological A.R.T.S., P.C. (“PARTS”), a psychological services company that provided mental health testing services to people at emergency shelters in Texas. United States v. Dubin at 321. Williams House, an emergency youth shelter, engaged PARTS to perform testing services. Id. PARTS and Williams House agreed that PARTS would determine whether shelter residents were Medicaid-eligible.

Acknowledgments

The authors would like to thank Professor Stephen P. Garvey for his insights into this case. 

Additional Resources

Submit for publication
0

Lexmark International, Inc. v. Static Control Components, Inc.

Issues

What is the appropriate framework to determine standing in a false advertising action under the Lanham Act?

Petitioner Lexmark International, Inc., a major producer of laser printers, developed a microchip for its toner cartridges to restrict third-party businesses from replacing Lexmark cartridges. Respondent Static Control Components, Inc. replicated that microchip, thereby allowing third parties to refill and resell used Lexmark cartridges. Lexmark responded by telling businesses that the use of Static’s replicated microchips would infringe Lexmark’s patent. In a 2004 lawsuit, Static brought false advertisement claims against Lexmark under the Lanham Act. The district court dismissed those charges, concluding that Static lacked standing. The Sixth Circuit reversed that dismissal, reasoning that Static had a cognizable business interest that was harmed by Lexmark’s remarks; therefore, Static had standing and qualified for protection under the Lanham Act. The Supreme Court’s ruling in this case will resolve a circuit split over the proper framework for determining prudential standing in false advertising claims under the Lanham Act. Accordingly, this case will determine who can assert false advertising claims under the Lanham Act.

Questions as Framed for the Court by the Parties

Whether the appropriate framework for determining a party’s appropriate standing for a cause of action for false advertising under the Lanham Act is (1) the test established in Associated General Contractors of California, Inc. v. California State Council of Carpenters as used by the Third, Fifth, Eighth, and Eleventh Circuits; (2) the categorical test, allowing suits only by an actual competitor, used by the Seventh, Ninth, and Tenth Circuits; or (3) a more expansive “reasonable interest” test, applied by both the Sixth Circuit lower decision below, and also the Second Circuit?

top

Facts

Petitioner Lexmark International, Inc. (“Lexmark”) is a major manufacturer of laser printers and toner cartridges. See Static Control Components, Inc. v. Lexmark Intl., Inc., 697 F.3d 387, 394–395 (6th Cir. 2012). Typically, manufacturers like Lexmark dominate the aftermarket of toner cartridge sales, because manufacturers tend to produce printers compatible solely with their cartridges.

Written by

Edited by

Additional Resources

top

Submit for publication
0

Lozano v. Alvarez

Issues

Can a district court considering a petition under the Hague Convention for the return of an abducted child to the child’s home country toll the running of the one-year filing deadline when the abducting parent has concealed the whereabouts of the child from the other parent?

In July 2009, Diana Lucia Montoya Alvarez and her daughter fled the United Kingdom for the United States without the knowledge or consent of Manuel Jose Lozano, the child’s father. In August 2010, Manuel Jose Lozano discovered that the child was in New York and filed a petition in U.S. federal district court under the Hague Convention on the Civil Aspects of International Child Abduction, for the return of his daughter to England for a custody determination.  The United States Supreme Court must decide if equitable tolling is applicable to the one-year period where the petitioner has searched for the child but only found her after the deadline had passed. The Court’s ruling will implicate the rights of the abducted child and the left-behind parent.

Questions as Framed for the Court by the Parties

The primary purpose of The Hague Convention on the Civil Aspects of International Child Abduction (the "Hague Convention" or the "Convention") is to protect children from international abduction by returning an abducted child to the nation of habitual residence for adjudication of custody rights under that nation's laws. To further that purpose, Article 12 of the Convention mandates that an abducted child must be returned if the left-behind parent's petition for the child's return is filed within one year of the abduction. In doing so, the Convention deters international child abductions by removing the benefit an abducting parent would otherwise obtain or perceive under the laws of the nation to which he or she has abducted the child. If the left-behind parent is unable, or otherwise fails, to determine the situs of the child and meet this one-year filing deadline, the court must still order the return of the child unless the abducting parent demonstrates one of four affirmative defenses, including that the child is "settled" in her new environment. 

The circuit courts of appeal are split over whether equitable tolling may apply to the one-year period. While the Fifth, Ninth, and Eleventh Circuits all hold the one-year period may be equitably tolled, the Second Circuit held in this case that the one-year period is not subject to equitable tolling and the settled defense is still available even where, as here, the abducting parent conceals the location of the child. The Second Circuit also held the fact that the child and abducting parent lack legal immigration status is not dispositive on the issue of whether a child is settled under Article 12, but, rather, is merely one of several factors to consider. The questions presented are: 

  1. Whether a district court considering a petition under the Hague Convention for the return of an abducted child may equitably toll the running of the one-year filing period when the abducting parent has concealed the whereabouts of the child from the left-behind parent. 
  2. Whether an abducted child can be "settled" in the United States, within the meaning of Article 12, where it is undisputed that both the abducting parent and the child are residing illegally in the United States, and the abducting parent presents no evidence of a legitimate pending application or basis under existing law for seeking a change in their immigration status.

Note: The Court granted certiorari to Question 1 presented by the petition.

top

Facts

Diana Alvarez (“Alvarez”) and Manuel Lozano (“Lozano”) met in London in 2004 and began dating. See Lozano v. Alvarez, 697 F.3d 41, 45. Although they never married, the couple had a child in October 2005. See id.at 46. Alvarez and Lozano have differing accounts of their relationship.

Written by

Edited by

Additional Resources
  • Marshall Zolla, California Family Law Monthly, Lozano v. Alvarez (Nov. 2012)
  • Gabriella Khorasanee, FindLaw, Lozano v. Alvarez: Custody Dispute Raises Issues of 1st Impression (Oct. 9, 2013)

top

Submit for publication
0

M&G Polymers USA, LLC v. Tackett

Issues

In determining whether retiree health-care benefits provided under collective bargaining agreements should continue indefinitely, how should courts interpret collective bargaining agreements that are silent on the duration of retiree health-care benefits?

When interpreting a collective bargaining agreement that is silent on the duration of retiree health-care benefits, the Sixth Circuit inferred that the health-care benefits are vested (and therefore continue indefinitely). This approach, however, differs from the interpretative approach of other federal appellate courts. The Supreme Court will now resolve this circuit split. M&G Polymers USA, LLC argues that health-care benefits should terminate when the collective bargaining agreement ends unless there is a clear and explicit statement that such benefits should continue indefinitely. In opposition, several M&G retirees argue that, notwithstanding contractual silence, the parties’ intent that health-care benefits should continue indefinitely can be presumed. The resolution of this case will impact both the retention of retiree health-care benefits and the operational costs of American companies. 

Questions as Framed for the Court by the Parties

  1. Whether, when construing collective bargaining agreements in Labor Management Relations Act (LMRA) cases, courts should presume that silence concerning the duration of retiree health-care benefits means the parties intended those benefits to vest (and therefore continue indefinitely), as the Sixth Circuit holds; or should require a clear statement that health-care benefits are intended to survive the termination of the collective bargaining agreement, as the Third Circuit holds; or should require at least some language in the agreement that can reasonably support an interpretation that health-care benefits should continue indefinitely, as the Second and Seventh Circuits hold.
  2. Whether, as the Sixth Circuit has held in conflict with the Second, Third, and Seventh Circuits, different rules of construction should apply when determining whether health-care benefits have vested in pure ERISA plans versus collectively bargained plans.

In 1992, Shell Chemical Company (“Shell”) purchased a West Virginia polyester plant from The Goodyear Tire & Rubber Company (“Goodyear”). See Tackett v. M & G Polymers USA, LLC, 733 F.3d 589, 593 (6th Cir. 2013).

Written by

Edited by

Additional Resources

Submit for publication
0

Madigan v. Levin

Issues

Does the Age Discrimination in Employment Act provide the sole vehicle for age discrimination claims under federal law or are the claims covered under the Equal Protection Clause via 42 U.S.C. § 1983?

Respondent Harvey N. Levin was an Assistant Attorney General (“AAG”) for the state of Illinois until his employment was terminated in May 2006. Levin sued Illinois Attorney General Lisa Madigan and other state Petitioners under the Age Discrimination in Employment Act (“ADEA”) and the Equal Protection Clause via 42 U.S.C. § 1983. Madigan argues the ADEA precludes Levin’s § 1983 claim. Levin contends the ADEA does not preclude a § 1983 claim for age discrimination and even if the ADEA does preclude such a claim, the ADEA does not apply to him because he is not an “employee” for ADEA purposes. In contrast with four other circuit decisions, the Seventh Circuit held that the ADEA does not preempt § 1983 claims. If the lower court’s ruling stands, Levin will be able to pursue his age discrimination claim in court. The Supreme Court can decide what avenues government workers have to pursue age discrimination claims. The decision will also impact the volume of cases that states, and other levels of government, will need to defend.

Questions as Framed for the Court by the Parties

Whether the Seventh Circuit erred in holding, in an acknowledged departure from the rule in at least four other circuits, that state and local government employees may avoid the Federal Age Discrimination in Employment Act's comprehensive remedial regime by bringing age discrimination claims directly under the Equal Protection Clause and 42 U.S.C. § 1983.

Facts

In 2000, at the age of 55, Levin began working as an AAG for the state of Illinois. See Levin v. Madigan, 692 F.3d 607, 609 (7th Cir. 2012). After six years and a promotion to Senior AAG, Madigan’s office terminated Levin’s employment.

Written by

Edited by

Additional Resources

top

Submit for publication
0

McFadden v. United States

Issues

To obtain a conviction, does the government need to prove that a defendant knew that a substance he was distributing was substantially similar in chemical structure and effect to a controlled substance?

The Supreme Court will determine whether—to obtain a conviction under the Analogue Act—the government must prove the defendant had knowledge that a substance the defendant was distributing was a controlled substance analogue. McFadden claims that under the Analogue Act, the government must prove a defendant's knowledge of the illegal nature of a substance by showing that the defendant knew the substance was substantially similar to a controlled substance. The United States agrees with McFadden in that Analogue Act violations can be proven by demonstrating the defendant's knowledge of the illegal nature of a substance, but the United States counters that knowledge of illegality can be proven through circumstantial evidence. The Supreme Court’s decision will clarify a long-standing circuit split over the mens rea requirement the government must satisfy to prosecute Analogue Act violations, which will have further implications on the government’s ability to target street-level dealers under the Analogue Act. 

Questions as Framed for the Court by the Parties

Whether, to convict a defendant of distribution of a controlled substance analogue, the government must prove that the defendant knew that the substance constituted a controlled substance analogue, as held by the Second, Seventh, and Eight Circuits, but rejected by the Fourth and Fifth Circuits.

In July 2011, in Charlottesville, Virginia, Stephen D. McFadden was arrested for illegally distributing a synthetic stimulant known as “bath salts,” whose effect was similar to illegal substances such as “cocaine, methamphetamine, and methcathinone.” United States v. McFadden, 753 F.3d 432, 437 (4th Cir.

Edited by

Additional Resources

Submit for publication
0

Polselli v. Internal Revenue Service

Issues

Do the notice requirements related to an Internal Revenue Service summons on third parties apply only when the delinquent taxpayer has an interest in the records, or to all third-party summons for records?

This case asks the Supreme Court to determine whether the notice requirements of I.R.C. § 7609(c)(2)(D)(i) apply only when a delinquent taxpayer has a legal interest in the summonsed records, or if they apply broadly to summons issued for anyone’s records whenever they could be helpful in collecting a delinquent taxpayer’s liability. Hanna Karcho Polselli argues that the textual interpretation of the provision supports a legal interest requirement because such a reading gives meaning to other provisions in the statute. The Internal Revenue Service (“IRS”) counters that such a requirement is contrary to both the text of the statute and Congressional intentions when enacting the statute. The outcome of this case will determine the extent to which the privacy of the general public is protected from the government’s ability to summons information in its investigation and collection of tax liability.

Questions as Framed for the Court by the Parties

Whether the exception in I.R.C. § 7609(c)(2)(D)(i) to the notice requirements for an Internal Revenue Service summons on third-party recordkeepers applies only when the delinquent taxpayer owns or has a legal interest in the summonsed records, as the U.S. Court of Appeals for the 9th Circuit has held, or whether the exception applies to a summons for anyone’s records whenever the IRS thinks that person’s records might somehow help it collect a delinquent taxpayer’s liability, as the U.S. Courts of Appeals for the 6th and 7th Circuits have held.

The Internal Revenue Service (“IRS”) determined that Remo Polselli had underpaid his federal taxes by over $2 million throughout the course of a decade. Polselli v. United States Dep’t of Treasury-Internal Revenue Serv., at 620. After beginning an investigation to locate Polselli’s assets, the IRS determined that Polselli had used other legal entities in an attempt to prevent asset collection. Id.

Additional Resources

 

Submit for publication
0
Subscribe to circuit split