Today, the Second Circuit reversed dismissal of a complaint alleging that a "group" of a corporation’s insiders — an individual and a company — must disgorge the $4.25 million in short-swing profits that the individual reaped from buying and selling the corporation’s securities within a six-month period.  The court held that the district court gave improper weight to SEC filings that denied group status.  Roth v. Jennings, No. 06-0784-cv (2d Cir. June 6, 2007) (available at www.ca2.uscourts.gov).

The decision represents one of the first, if not the first, applications of the Supreme Court’s new pleading standard in Bell Atlantic Co. v. Twombly.

You, gentle reader, may wonder why Blawgletter doesn’t always provide a direct link to Second Circuit decisions.  Wonder no more!  The Second Circuit’s website doesn’t allow direct linking; you have to go to the main page, click on Decisions, then click on Today’s under Opinions, and then click on the link to the opinion you want to read.

Barry Barnett

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Section 547(b) of the Bankruptcy Code allows a debtor (or its trustee) to set aside pre-bankruptcy transfers to "insiders" of the debtor.  The definition of insider includes companies for which an individual debtor served as a "director" when the transfers occurred.  Does "director" include a "director emeritus"?  No, the Tenth Circuit held yesterday.  Rupp v. United Sec. Bank (In re Kunz), No. 06-4014 (10th Cir. June 5, 2007).

Barry Barnett

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The Seventh Circuit today held that ERISA section 502(a)(2) allows ex-employees who cashed out their pension plan benefits to sue for losses to the plan.  The court read the statutory definition of "participant" to include cash-outs who claim that, but-for a breach of fiduciary duty, they would have gotten more cash.  Harzewski v. Guidant Corp., No. 06-3572 (7th Cir. June 5, 2007).

The case involved an imprudent investment in company stock.  The plaintiffs alleged that the plan fiduciaries knew that the market overvalued the stock (as a result of securities fraud) and therefore should have sold it.

Barry Barnett

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The law has a busy day ahead of it.  Including:

  • Scooter Libby sentencing (to 2.5 years in prison) and likely denial of bail pending appeal.  Play-by-play here, stories here and here.
  • Hubbub over Second Circuit’s bar on FCC’s new indecency ban.  Stories here and here.
  • More trouble with military tribunals for enemy combatants.  Stories here and here.
  • Bribery charges against Rep. Jefferson (D-La.).  Story here.

Barry Barnett

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A 2-1 Second Circuit today held the Federal Communications Commission violated the Administrative Procedure Act by changing its policy on profanity on television broadcasts.  The court noted that, before 2003, the FCC hadn’t classified the use of "fleeting expletives" as "profane" under 18 U.S.C. 1464.  Fox Television Stations, Inc. v. Federal Comm. Comm’n, Nos. 07-1760-ag, 06-2750-ag & 06-5358-ag (2d Cir. June 4, 2007).

The precipitating event involved the live broadcast of the Golden Globes Awards on January 19, 2003.  In accepting his Globe, musician Bono said "this is really, really, fucking brilliant.  Really, really great."  Reversing the decision of its Enforcement Bureau, the Commissioners concluded that "any use of any variant of ‘the F-Word’ inherently has sexual connotation and therefore falls within the scope of the indecency definition." 

In months that followed, the FCC applied its new policy to Cher for saying "People have been telling me I’m on the way out every year, right?  So fuck ’em."; to Nicole Richie for saying "Have you ever tried to get cow shit out of a Prada purse?  It’s not so fucking simple.""; to characters in NYPD Blue for saying "bullshit," "dick", and "dickhead"; and to a Survivor:  Vanuatu contestant for calling another contestant a "bullshitter".

The majority held that the FCC hadn’t adequately explained why it changed its policy from allowing the occasional expletive to punishing any.  The court pointed out that at oral argument lawyers used "the F-Word" many times.  But the opinion always put the "profane" words in quotation marks.

Unlike Blawgletter.  F&@k, yeah.

Barry Barnett

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Something strange happened to us in law school.  We started removing people from our thoughts.  We learned detachment, objectivity, and logical rigor.  Character and passion mattered less and less to us.  Syllogisms crowded them out.

The U.S. Supreme Court apparently has regressed.  Today, for example, it started a 5-4 majority opinion in Uttecht v. Brown, No. 06-413 (U.S. June 4, 2007), with this:

Respondent Cal Coburn Brown robbed, raped, tortured, and murdered one woman in Washington.  Two days later, he robbed, raped, tortured, and attempted to murder a second woman in California.  Apprehended, Brown confessed to these crimes and pleaded guilty to the California offenses, for which he received a sentence of life imprisonment.  The State of Washington, however, sought the death penalty and brought Brown to trial.  Based on the jury’s verdicts in the guilt and sentencing phases of the trial, Brown was sentenced to death.  His conviction and sentence were affirmed by the Supreme Court of the State of Washington.

Any guess at the outcome for Mr. Brown?

This opening resembles the same 5-4 majority’s opinion earlier this year in Gonzales v. Carhart, No. 05-380 (U.S. Apr. 18, 2007).  The majority wrote at length there about an abortion procedure, highlighting details about "killing the fetus", "crush[ing] the fetus’ skull", and "in effect decapitating it." 

Any guess at the outcome for opponents of the procedure?

Blawgletter finds judicial appeals to emotion unsettling.  The law aspires to decide cases through logic.  Stirring up passions seems an odd way to promote public confidence in the system.

Barry Barnett

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Today, the U.S. Supreme Court overturned two Ninth Circuit decisions that held insurers potentially liable under the Fair Credit Reporting Act for failing to give "adverse action" notices to customers.  The Court gave GEICO a full pardon because the company would have charged the plaintiff Ajene Edo the same premium even if it hadn’t considered his less-than-terrific credit score.  The Court thus concluded that GEICO fully complied with FCRA.  Safeco Ins. Co. of Am. v. Burr, No. 06-84 (U.S. June 4, 2007). 

In the case of Safeco, the Court decided that the company did violate the statute’s notice requirement but that "the company was not reckless in falling down in its duty."  Safeco didn’t give notice because it thought that the FCRA didn’t apply to "initial" applications for insurance.  The Court pointed to the "dearth of guidance [from the Federal Trade Commission] and the less-than-pellucid statutory text" as negating Safeco’s recklessness.

Blawgletter supposes that the Court has now made the FCRA "pellucid" for purposes of future violations.

Barry Barnett

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Gladstone
William E. Gladstone (1809-98).

The four-time Prime Minister of Great Britain said:

Liberalism is trust of the people tempered by prudence.  Conservatism is distrust of the people tempered by fear.

He also said that "justice delayed is justice denied." 

Gladstone’s political opponent, Benjamin Disraeli, called him a "sophistical rhetorician, inebriated with the exuberance of his own verbosity".

Trust or distrust?  Prudence or fear?  Justice or obloquy?

Barry Barnett

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