On October 2, 2014, the United States Supreme Court agreed to review on the merits the appeal in Arizona State Legislature v. Arizona Independent Redistricting Commission, No. 13-1314. Bancroft attorneys Paul D. Clement, George W. Hicks, Jr., and Taylor Meehan represent appellant Arizona State Legislature. The question presented is whether the Elections Clause of the United States Constitution and 2 U.S.C. § 2a(c) permit the displacement of the Arizona State Legislature’s redistricting authority by an independent commission. The Court also requested briefing on the question whether the Arizona State Legislature has standing to bring this suit. Arizona voters passed Proposition 106, which amended the state constitution to remove redistricting authority from the state legislature and place it in the hands of the Arizona Independent Redistricting Commission. But the Elections Clause provides that the “Times, Places and Manner” of holding congressional elections “shall be prescribed in each State by the Legislature thereof.” In a divided decision, a three-judge district court panel held that this displacement of the Arizona Legislature’s redistricting authority does not violate the Elections Clause. The Supreme Court is expected to hear arguments is early 2015.
On September 26, 2014, Bancroft attorneys Paul D. Clement and George W. Hicks, Jr., obtained a unanimous victory in the United States Court of Appeals for the Second Circuit in Krys v. Farnum Place, LLC (In re: Fairfield Sentry Limited), No. 13-3000. In 2010, Bancroft client Kenneth Krys, the liquidator and foreign representative of Fairfield Sentry Limited, a British Virgin Islands entity, signed an agreement to trade to Farnum Place its claim on the estate of Bernard Madoff under the Securities Investor Protection Act (SIPA). Days later, the value of the SIPA claim dramatically increased due to an unrelated settlement by the Madoff estate. Krys asked the United States Bankruptcy Court to prohibit the trade under section 363 of the Bankruptcy Code as no longer financially justifiable. The bankruptcy court refused even to conduct a section 363 hearing because, in its view, the SIPA claim was not “property within the territorial jurisdiction of the United States,” as required in cross-border bankruptcy proceedings under Chapter 15 of the Code, and also out of comity to the BVI courts’ assessment of the transaction’s validity. The district court affirmed. The Second Circuit vacated and remanded with directions for the bankruptcy court to conduct the section 363 hearing. It concluded that the SIPA claim was “property within the territorial jurisdiction of the United States” and that comity did not require deferral to the BVI courts. The court also held that, in deciding whether valid business reasons for the trade remain, the bankruptcy court “must consider” the increase in the value of the SIPA Claim after the parties entered into the trade. The decision is the first by a federal court of appeals to address the interplay between two portions of the Bankruptcy Code: Chapter 15, which concerns cross-border insolvencies, and section 363, which concerns U.S. bankruptcy court approval of sales of estate property outside the ordinary course of business.
On September 17, 2014, Bancroft attorney Paul Clement presented oral argument before the United States Court of Appeals for the Seventh Circuit in United States v. Warner, No. 14-1330. The case involves the government’s appeal of a probation sentence imposed on H. Ty Warner for committing one count of tax evasion in connection with failure to disclose an offshore bank account. In a brief filed on July 9, 2014, Clement and Bancroft attorney Erin Murphy argued that the District Court acted well within its discretion in concluding that Mr. Warner’s many extraordinary acts of charity and kindness throughout his life, combined with the complete absence of any risk of recidivism and the deterrence achieved by, inter alia, the more than $50 million civil fine that he has paid, all combine to make a probation sentence—the sentence most commonly imposed in offshore tax cases—appropriate in the unique circumstances of this case.
On April 17, 2014, Bancroft attorneys Paul D. Clement and Jeffrey M. Harris secured victory for Delta Air Lines before the U.S. Court of Appeals for the Eleventh Circuit in Dennis Smith v. Delta Air Lines, Inc. et al., No. 13-15155. A former employee brought a class-action suit against Delta under ERISA after he participated in Delta’s Employee Stock Ownership Plan and lost money when the price of Delta stock declined between 2000 and 2004. The District Court dismissed the claim, and the Eleventh Circuit affirmed. The plaintiff argued that it was “imprudent” for the Plan to continue investing in Delta stock while the company was encountering financial difficulties, but the Eleventh Circuit disagreed. The court noted that it was “not at all obvious at the time” that the investments were imprudent, and that “a reasonable fiduciary could have concluded that investments in Delta stock during the class period remained appropriate.”
The plaintiffs also sought panel rehearing and rehearing en banc in light of the Supreme Court’s recent decision in Fifth Third Bancorp v. Dudenhoeffer, No. 12-751, but the Eleventh Circuit unanimously denied that petition on September 10, 2014.
On September 3, 2014, Bancroft partner Erin Murphy secured a unanimous victory before the United States Court of Appeals for the Ninth Circuit in Rivera-Gomez v. Holder, No. 12-70147, a pro bono case that she argued on behalf of a Honduran citizen seeking to reopen his removal proceedings. The court concluded that the Board of Immigration Appeals abused its discretion by denying petitioner’s motion to reopen notwithstanding compelling evidence that the persecution he faces in Honduras on account of his refusal to join a gang has significantly worsened since he was ordered removed. This is one of multiple cases in which Bancroft has successfully partnered with an immigration law clinic to provide pro bono assistance to individuals seeking asylum or withholding of removal.
On July 22, 2014, Bancroft secured a unanimous victory in the United States Court of Appeals for the Second Circuit in Asbestos Personal Injury Plaintiffs v. The Travelers Indemnity Company, No. 12-1094. Reversing a February 2012 decision by the U.S. District Court for the Southern District of New York, the Second Circuit ordered Travelers Cos. to pay more than $500 million to people who suffered from asbestos-related diseases. The settlement stemmed from Travelers’ insurance of the bankrupt Johns-Manville Corporation, an insulation manufacturer, which the plaintiffs believe exposed them to asbestos. The Second Circuit’s ruling reinstates a 2011 U.S. Bankruptcy Court decision in favor of the claimants.
On July 15, 2014, Bancroft attorneys Paul D. Clement, Viet D. Dinh, H. Christopher Bartolomucci, and George W. Hicks, Jr. secured a unanimous victory for Bancroft client Ralls Corporation in the United States Court of Appeals for the District of Columbia Circuit in Ralls Corp. v. Committee on Foreign Investment in the United States, No. 13-5315. In September 2012, the President, acting on a report from the Committee on Foreign Investment in the United States (CFIUS) and citing only unspecified “national security” concerns, issued an order under Section 721 of the Defense Production Act that prohibited Ralls’s acquisition of four small windfarms in Oregon, barred Ralls from accessing its own property, and required Ralls to destroy all items on the property. On behalf of Ralls, Bancroft brought suit claiming that the President and CFIUS had violated Ralls’s rights under the Constitution and Administrative Procedure Act. The district court dismissed the suit, but the D.C. Circuit unanimously reversed, concluding that the President’s order deprived Ralls of property without due process of law. The court held that the property interests that Ralls held at the time of the President’s order were constitutionally protected, and it held that before the issuance of such an order, a party must be informed of the official action, be given access to the unclassified evidence relied upon for the action, and be afforded an opportunity to rebut that evidence—none of which procedural protections Ralls received. The court also held that Ralls was entitled to challenge orders by CFIUS preceding the President’s order as violating the Constitution and the Administrative Procedure Act even though they had been superseded by the President’s order, because those orders were capable of repetition but evaded review.
On June 30, 2014, Bancroft attorneys Paul D. Clement and Michael H. McGinley secured a victory in the Supreme Court of the United States for the companies in Burwell v. Hobby Lobby Stores, Inc., No. 13-354, and Conestoga Wood Specialties Corp. v. Burwell, No. 13-356. The question presented in the consolidated cases was whether the Department of Health and Human Services’ contraception mandate violates the companies’ rights under the Religious Freedom Restoration Act of 1993 (RFRA) or the First Amendment. The companies’ owners operate their businesses according to deeply held religious beliefs that prohibit them from providing health care coverage for abortion-causing drugs and devices, including four out of the twenty mandated contraceptives. The Supreme Court held that RFRA protects the companies’ religious free exercise rights and that the contraceptive mandate violates RFRA.
On June 26, 2014, the New York Court of Appeals granted the motion by Bancroft client HSBC Bank USA, N.A., as Trustee for a residential mortgage backed securities (RMBS) trust, for leave to appeal from the decision of the New York State Appellate Division, First Department, dismissing the Trustee’s claim. Bancroft attorneys Paul D. Clement, Erin E. Murphy, and Stephen V. Potenza prepared the brief in support of the motion. In the lawsuit, the Trustee seeks to enforce defendant DB Structured Products’ obligation to cure or repurchase defective loans pursuant to a RMBS contract. On motion to dismiss, the trial court rejected the defendant’s arguments that the Trust’s claim is time barred under the applicable statute of limitations, but the First Department reversed. The questions accepted for review by the Court of Appeals are: (1) Whether an RMBS contract obligates the sponsor to cure or repurchase loans upon notice or discovery that the loans do not comply with the sponsor’s repurchase accrue when the sponsor fails to cure or repurchase within the time period specified by the contract, or when the contract was made; and (2) Whether this action was timely filed even if the claim for breach of the RMBS contract accrued when the contract was made. The Court of Appeals will likely hear the case in late 2014 or early 2015.
On June 25, 2014, Bancroft attorneys Paul D. Clement, Erin E. Murphy, and Barbara A. Smith secured a victory in the Supreme Court of the United States on behalf of petitioners (television producers, marketers, distributors, and broadcasters) in American Broadcasting Companies, Inc., et. al. v. Aereo, Inc., No. 13-461. By a vote of 6-3, the Court ruled against Respondent Aereo, which is in the business of capturing over-the-air television broadcasts and retransmitting them over the internet for profit to tens of thousands of public members without permission from underlying copyright holders. The Court held that Aereo “performs” petitioners’ works “publicly” within the meaning of the Transmit Clause, in violation of the Copyright Act.”