Collapse. The Second Circuit is usually not shy to certify unclear questions of New York law to the New York State Court of Appeals. But in Dalton v. Harleyville Worcester Mutual Ins. Co. it declined to do so. The definition of what constitutes a "collapse" of a building had not been decided by the Court of Appeals, and the Second and Third Departments of the Appellate Division have taken different views. Rather than certifying the question to the Court of Appeals, the Court decided that the term was ambiguous and should be resolved against the insurer.

I would anticipate a motion for rehearing, asking that the issue be certified. The case involved the all too common occurrence of an insurance company disclaiming liability for damage that appears to be covered by the policy. Perhaps that is the reason that the Court acted as it did. The decision can be found here.

Calorie Counting. The Second Circuit has upheld New York City Health Code 81.50, which requires roughly 10% of the restaurants in New York City, including chains such as McDonlads, Burger King and Kentucky Fried Chicken, to post calorie content information on their menus and menu boards. The Court held that the statute was not preempted by federal law and did not violate the restaurants' freedom of speech.

The decision in New York State Restaurant Ass'n v. New York City Board of Health can be found here.

Champerty -- Certified Questions. In Trust for Certificate Holders of the Merrill Lynch Mortgage Investors Pass-Through Certificates Series 1999-C1, by and through Otix Capital Markets, LLC, as Master Servicer and Special Servicer v. Love Funding Corp., the Trust had sued Love Funding Corp. for breach of certain representations and warranties in a mortgage-loan-purchase agreement governing the origination of certain commercial loans held by the Trust. Love Funding asserted that the claim was champertous because the Trust had purchased the interest from USB Real Securities, Inc. for the sole purpose of suing Love Funding. After a bench trial, the District Court held that the assignment of interest from USB to the Trust was void as champertous and entered judgment for Love Funding. The Trust appealed.

The Second Circuit held that resolution of the appeal depended on significant and unsettled questions of New York law and certified those questions to the New York State Court of Appeals. The questions certified are:

1. Is it sufficient as a matter of law to find that a party accepted a challenged assignment with the "primary" intent proscribed by New York Judiciary Law 489(1), or must there be a finding of "sole" intent?

2. As a matter of law, does a party commit champerty when it "buys a lawsuit" that it could not otherwise have pursued if its purpose is thereby to collect damages for losses on a debt instrument in which it holds a pre-existing proprietary interest?

3. (a) As a matter of law, does a party commit champerty when, as the holder of a defaulted debt obligation, it acquires the right to pursue a lawsuit against a third party in order to collect more damages through that litigation than it had demanded in settlement from the assignor?

(b) Is the answer to question 3(a) affected by the fact that the challenged assignment enabled the assignee to exercise the assignor's indemnification rights for reasonable costs and attorneys' fees?

Aggravated Felony. The Second Circuit held that a state law drug conviction for a small quanity of marijuana was not an aggravated felony, warranting deportation. To make such a determination, the court looked to whether the offense was equivalent to felony drug traficking under the federal Controlled Substance Act ("CSA"). The CSA has an exception for the distribution of small amounts of mariuana without remuneration, treating it as a misdemeanor. The Court held that the petitioner in this case had not committed an aggravated felony because the crime fell within the CSA exception.

The decision in Martinez v. Mukasey can be found here.

No New Hearing. In a habeas proceeding, the district rejected the credibility determinations of the magistrate judge without holding a separate evidentiary hearing. Not a good idea. The Second Circuit vacated the ruling (granting the habeas relief) and remanded it to the district court for further proceedings.

The decision in Carrion v. Smith can be found here.

Discovery in an Arbitration. The Second Circuit held that section 7 of the Federal Arbitration Act does not authorize an arbitrator to compel pre-hearing document discovery from non-parties to the arbitration.

The decision in Life Receivables Trust v. Syndicate 102 at Lloyd's of London can be found here.

Caught in the legal recession? Well, I try not to go off topic, but when the ABA asks for help, who am I to withhold it?

The ABA Journal is surveying lawyers about the job market and the current state of the economy. Here is the link: http://www.surveymonkey.com/s.aspx?sm=9Dhw2g7bX_2bxfq4mW8eB1Cg_3d_3d

Survey results will be published in the January ABA Journal. Answers will be kept confidential and used only in combination with all other responses received.

Well you've been informed.

Diversity. The Second Circuit has held that CPLR 901(b), which prohibits a lawsuit seeking a statutory penalty from being brought as a class action, can be applied in a federal court sitting in diversity.

The decision in Shady Grove Orthopedic Associates, P.A. v. Allstate Ins. Co. can be found here.

Swastica tatoos. The Second Circuit held that it was a violation of the Confrontation Clause for a District Court to prevent a minority-group defendant from cross-examining a government witness about his swastica tatoos.

The decision in United States v. Figueroa can be found here.

Purchase Money Obligation. The Second Circuit has asked the New York Court of Appeals to construe the term "purchase money obligation" as it is used in UCC 9-103(a)(2). The Court needs the answer to this certified question so that it can determine what status in bankruptcy should be accorded to the "negative equity" that someone who trades in an old car rolls over into a new car-financing contract.

The decision in In re Faith Ann Peaslee can be found here.

Erasing a Sanction. The Second Circuit has held that parties cannot condition the settlement of an action on the District Court's vacatur of an award of sanctions against a party's attorneys. The decision in ATSI Communications, Inc. v. Shaar Fund, Ltd. can be found here

Executives. In answer to a certified question, the New York State Court of Appeals has held that an executive is an employee under the New York Labor Law, article 5, except where expressly excluded. The Court of Appeals further held that section 193 of the Labor Law did not prevent the parties from entering into a contract where a commission was not "earned" until after certain deductions were made from her percentage of gross billings.

The answers provided by the Court of Appeals worked to the detriment of an executive who, upon leaving her company, sued it for making certain purportedly unlawful dcductions.

The decision in Pachter v. Bernard Hodes Group can be found here.

KPMG Employees Off the Hook. The Second Circuit has upheld the dismissal of the indictments of eleven partners and employees of accounting firm KPMG, LLP because the government had caused KPMG to put conditions on the advancement of legal fees to the defendants. This violated the defendants’ Sixth Amendment right to counsel.

The decision in United States v. Stein can be found here.

Tolling the staute. The Second Circuit held that a application, pursuant to 18 U.S.C. 3292, to suspend the running of a statute of limitations pending a request for foreign evidence must be made before the statute of limitations expires.

The decision in United States v. Kozeny can be found here.

Certified question. In an action brought under the Individuals with Disabilities Education Act, a father brought an action seeking relief on behalf of him and his disabled son. Because he was the non-custodial parent, the distirict court held that he did not have standing to bring the action. The Second Circuit held that standing turned on an unsettled issue of New York state law and certified the question for decision by the New York State Court of Appeals. The certified question is:

Whether, under New York law, the biological and non-custodial parent of a child retains the right to participate in decision pertaining to the education of the child where (1) the custodial parent is granted exclusive custody of the child and (2) the divorce decree and custody order are silent as to the right to control such decisions?

The Second Circuit noted that two departments of the Appellate Division, New York's intermediate appellate court, have held that non-custodial parent does not retain such a right, but it "was reluctant to take that final step [considering the Appellate Division decisions as determinative] in the absence of a Court of Appeals pronouncement because the ruling has broad implications affecting the custodial relationships in New York -- a matter of paramount concern."

The decision in Fuentes v. New York City Department of Education can be found here.

Absentee Ballot. The Second Circuit reversed the District Court's decision dismissing a complaint claiming that the New York State Board of Elections violated the plaintiffs' Fifth Amendment rights by failing to provide for absentee ballots in elections for polical party county committees, while providing them for all other kinds of elections. The Court remanded the case to the District Court with instructions to enter judment in favor of the plaintiffs.

The decision in Price v. New York State Board of Elections can be found here.

Steinbeck. The Second Circuit has reversed a ruling that awarded John Steinbeck's son and granddaughter publishing rights to 10 of the author's early works, including 'The Grapes of Wrath.

The decision in Penguin Group (USA) Inc. v. Steinbeck can be found here.

DISCLOSURE: My firm represents Nancy Steinbeck in this action, although she was not a party to the appeal.

9/11. The Second Circuit has ruled that Saudi Arabia and four of its princes cannot be held liable in the Sept. 11 attacks. The Court held that the Saudi defendants are protected by sovereign immunity. It also agreed with a lower court that a Saudi banker and a charitable organization cannot be held liable.

The decision in In re Terrorist Attacks of September 11, 2001 can be found here.

Modest success. The Second Circuit has held that the district court was proper in reducing a request for attorneys' fees in a case brought under the Fair Labor Standanrds Act from $340,375 to $49,889 in light of the limited successs acheived by the attorney.

The decision in Barfield v. New York City Health and Hospitals Corp. can be found here.

Another certified question. The Second Circuit has asked the Court of Appeals for its view on another question. The certified question is:

Does New York General Obligations Law 15-301(1) abrogate, in the case of a contract where the second of two irreconcilable provisions requres that any modifications to the agreement be made in writing, the common law rule where two contractual provisions are irreconcilable, the one appearing first in the contract is to be given effect rather than the one appearing subsequent?

The decision in Israel v. Chabra can be found here.