CA2 (8.2.05)

Lots of opinions yesterday, concerning:  liability in a lessor/lessee/insurer relationship, immigration!, age discrimination, civil venue, attorney’s fees, and restitution. Read on, if you dare.

At the request of a few readers, I'm going to start identifying the panel members after a case's name; the authoring judge's name is underlined unless otherwise indicated (e.g., in the case of a per curiam opinion).

1. Allianz Ins. Co. v. Lerner (McLaughlin, Hall, John R. Gibson (CA8)): Says Judge McLaughlin, "This complex multi-party action arises out of a car accident in New York involving a leased vehicle. It highlights the various liability issues that often arise among a lessor, a lessee, and their respective insurers. These issues include: the vicarious liability of a lessor for the negligence of its lessee; the concomitant right of a lessor to seek indemnification from its lessee; and the separate duties of a lessee’s insurer to defend and indemnify its insured." And then I stopped reading.  But I do like the name "Allianz Insurance Co."

2. Chen v. Gonzales (McLaughlin, Straub, Hall): Another immigration case -- there seems to be one or two a day lately. In this one, the CA2 remanded to the BIA because it failed to consider evidence submitted by the petitioner. In particular, the petitioner -- who was claiming religious persecution in his native China -- submitted a State Department country report that corroborated his testimony, indicating that members of various religions were subject to beatings and torture. You can’t just go ignoring evidence like that.

3. Cross v. N.Y.C. Transit Authority (Sotomayor, Raggi, Hall): Defendants appealed from a jury verdict against them on plaintiffs’ age discrimination claims. The CA2 affirmed the judgment of liability and an award of liquidated damages, except as to one defendant, against whom the award of liquidated damages was erroneously entered. This decision is fairly fact-specific so I won’t go into any great detail, although for anyone interested in liquidated damages (i.e., lost wages) under an ADEA claim, it’s a must-read.

4. Gulf Ins. Co. v. Glasbrenner (Meskill, Jacobs, Straub): In this case, the CA2 addressed the legal standard for reviewing and deciding a Rule 12(b)(3) motion to dismiss for improper venue, in light of 1990 amendments to the civil venue statute, 28 U.S.C. § 1391. I don’t think the holding is particularly revolutionary, but here’s the operative bit:

We . . . join several other circuits in holding that the civil venue statute permits venue in multiple judicial districts as long as "a substantial part" of the underlying events took place in those districts. . . .

In doing so, however, we caution district courts to take seriously the adjective "substantial." We are required to construe the venue statute strictly. That means for venue to be proper, significant events or omissions material to the plaintiff’s claim must have occurred in the district in question, even if other material events occurred elsewhere. It would be error, for instance, to treat the venue statute’s "substantial part" test as mirroring the minimum contacts test employed in personal jurisdiction inquiries. (Citations omitted).

The court also explained that it would review 10(b)(3) dismissals using the same standard of review as in 10(b)(2) personal jurisdiction dismissal, which is to say de novo.

Basically, the case involved an insurance coverage dispute; the incident that Gulf sought to avoid coverage for took place in New Jersey, as did the underlying judgment against the insured. But the insurance contract was negotiated in New York,* as was the bankruptcy court that permitted the New Jersey action to continue. (The insured, Caldor, was bankrupt). The district court held that venue was improper in New York, but the CA2 held that venue was proper in both New York and New Jersey under the above test. It therefore vacated and remanded.

* Actually, it apparently wasn’t clear that the contract was negotiated in New York. The CA2 gave Gulf an opportunity to prove that (essentially undisputed) fact on remand.

5. King v. Fox (Calabresi, Parker, Michael B. Mukasey (SDNY)): This appeal arose from a suit between a lawyer and his former client over fees; the lawyer won on summary judgment. The CA2 agreed with the district court that Fox was not collaterally estopped in this action, primarily because there wasn’t an identity of issues between this suit and the previous one that was the asserted basis for estoppel. But the CA2 certified several state-law questions to the New York Court of Appeals concerning when and whether a client may ratify an attorney’s fee agreement, generally, and in cases of fraud or unconscionability, specifically. These are the questions:

1. Is it possible for a client to ratify an attorney’s fee agreement during a period of continuous representation?

2. Is it possible for a client to ratify an attorney’s fee agreement during a period of continuous representation if attorney misconduct has occurred during that period? If so, can ratification occur before the attorney has committed the misconduct?

3. Is it possible for a client to ratify an unconscionable attorney’s fee agreement?

I await the answers to the questions with baited breath. . . .

6.  United States v. Jaffe (Winter, Katzmann, Raggi):  The CA2 rejected a criminal defendant's challenge to an order of restitution over a litany of arguments.  Jaffe, you may remember, was a vice president at Salomon Smith Barney who was convicted of making false statements when he submitted fabricated statements of his assets to banks in order to secure multi-million dollar loans, which he would then trade in the stock market; when the market declined in 2001-ish, he was unable to repay the loans and was found out.  Jaffe pleaded guilty, but couldn't agree on a restitution schedule.  Finally, the judge set a fairly onerous schedule:  (i) $100,000 by March 19, 2004; (ii) $1.5 million by September 15, 2005; and (iii) installments of the greater of $150,000 or fifteen percent of Jaffe's post-tax annual net income, by January 31, 2006, and every successive January 31 thereafter. At the time of sentencing, Jaffe owed about $20 million in restitution, had assets of approximately $5 million, and had an annual income of approximately $200,000.

Jaffe argued principally that: (i) the court failed to consider a dependant: an adult daughter suffering from depression and cancer; (ii) he would have to sell his house in Florida to meet the payments, in violation of Florida’s homestead exemption; and (iii) he would have to dip into his pension, in violation of ERISA’s anti-alienation provision.

The CA2 rejected each argument in turn. First, the court defined "dependent" in this context as someone who the defendant has a legal obligation to support; his 43-year old daughter was not a dependant under that definition. (Although the court did allow that "extraordinary moral obligations" to support might be properly considered, in another case). The CA2 rejected the homestead and ERISA arguments because the order of restitution did not specify payment from those assets; Jaffe could pay from whatever source he pleased.

Comments

[Steve]

The King v. Fox case has to be the first time any court decision has made reference to the Strawberry Alarm Clock. Two points for anyone that can name three of their songs./

[Mary]

Jaffee case -- I wonder what the adult dependent outcome would have been (1) in a State like Califoria, where the Civil Code requires parents tp pay for incapacitated (disaled) adult children for which an adult child support can be entered, and/or (2)where the adult child is protected under community-based living anti-discirmination prohibitions against unjustified involuntary institutionalization under Olmstead v. L.C. ex rel. Zimring, 527 U.S. 581 (1999). In other words, where the failure of the parent to have enough money left to support the disabled adult child would threaten her survival and/or fundamental constitutional rights to community-based supported living.

[Mary]

Jaffee case -- I wonder what the adult dependent outcome would have been (1) in a State like California, where the Civil Code requires parents to pay for incapacitated (disabled) adult children for which an adult child support can be entered, and/or (2)where the adult child is protected under community-based living anti-discirmination prohibitions against unjustified involuntary institutionalization under Olmstead v. L.C. ex rel. Zimring, 527 U.S. 581 (1999). In other words, where the failure of the parent to have enough money left to support the disabled adult child would threaten her survival and/or fundamental constitutional right to community-based supported living.