Wednesday, August 31, 2005

Iowa Atty Disciplinary Commission recommends mere suspension for attorney who embezzled client funds

Incredible: Iowa Attorney Disciplinary Commission recommended mere 3 year suspension for Council bluffs attorney who was caught embezzling a client's $100,000 settlement fund, subject however to approval from the Iowa Supreme Court. WORLD-HERALD STAFF WRITER A Council Bluffs attorney could lose his law license for three years after admitting to taking nearly $100,000 from a client. The case goes back to 2000, when Michael Reilly represented a family whose 2-year-old son was attacked by a neighbor's rooster, according to a complaint filed with the Grievance Commission for the Iowa Supreme Court. The boy's family agreed to settle the case for $137,500, the complaint says. The money was deposited into a trust account for Reilly's firm, Reilly, Petersen, Hannan and Dreismeier. After Reilly's fees and other expenses were deducted, about $100,000 was left for the boy's family, the complaint says. Over two months, Reilly withdrew the balance of the money, the complaint says. He concealed the misappropriation by falsifying his firm's records. Reilly later tried to replace the money by writing bad checks, the complaint says. He eventually made restitution to his bank. Reilly admitted to the Grievance Commission that he took the money to pay gambling debts, according to an order filed last week by the commission. Given that Reilly had been a reputable and responsible lawyer up until he took the money and that the likelihood of him committing similar acts in the future is low, the commission recommended that his law license be suspended for three years. The Supreme Court probably will decide in about four or five months whether to uphold the recommendation, said Charles Harrington, ethics administrator for the court's board of professional ethics and conduct.

Beneficiary from Holographic will loses appeal for home sale

Court finds holographic will is a patent ambiguity so extrinsic parole evidence unavailable to help beneficiary claim proceeds from home saleIn re Estate of Matthews, 13 Neb. App. 812 Filed August 30, 2005. No. A-04-022. Melissa Matthews appeals from an order construing a holographic will and determining that part of the estate passes pursuant to intestacy. The sole devise of the will stated: “I want Melissa to get all proceeds from the money that is left and from all contents in the house.” The county court determined that the will did not dispose of the decedent’s interest in real estate being purchased under contract and occupied as the decedent’s personal residence. The Court of appeals affirms Melissa also requests that we consider the extrinsic evidence adduced at the hearing. Melissa argues that a court can consider evidence outside the will, not for the purpose of interpreting the will, but, rather, for the purpose of considering the circumstances under which it was made.Melissa also requests that we consider the extrinsic evidence adduced at the hearing. Allemand v. Weaver, 208 Neb. 618, 305 N.W.2d 7 (1981) however in that case the Nebraska Supreme Court therein considered a patent ambiguity, which it resolved from within the four corners of the will and without consideration of extrinsic evidence. In re Estate of Dimmitt, 141 Neb. 413, 3 N.W.2d 752 (1942), that case concerned whether a separate document—an undelivered deed of real estate—was incorporated into and made a part of the will by specific language therein. In that case, the Supreme Court was faced with determining under what conditions an extrinsic document may be incorporated into a will. In the case before us, the will purports to be complete on its face and makes no reference to any extrinsic document.the Nebraska Supreme Court has stated that parol evidence is inadmissible to determine the intent of a testator as expressed in his or her will, unless there is a latent ambiguity therein which makes his or her intention obscure or uncertain. Scriven v. Scriven, 153 Neb. 655, 45 N.W.2d 760 (1951).a patent ambiguity,is one where the same word in a will has two meanings discernible from the face of the will itself, a latent ambiguity, is one where a word has two meanings but only when extrinsic evidence is brought to bear. Because the ambiguity in the instant case is patent, we reject Melissa’s contention that we may consider extrinsic evidence and we confine our analysis to the four corners of the will.Because we reject Melissa’s contention regarding the proper interpretation of the decedent’s will, Melissa’s assignment of error lacks merit. We therefore affirm the order of the county court.

Monday, August 29, 2005

11th Circ. upholds Judge Strom's dismissing cattlemen's suit against Tyson

Hard feelings and burning wallets remain after 11th circuit upholds decision by Nebraska Federal Judge Lyle Strom to vacate a jury's $1billion verdict against Tyson meats under the federal Packers and Stockyards Act and enter judgment in Tysons favor. 11th Circuit orders substantial costs against Plaintiffs. Court also chides Plaintiff's counsel for "emotional" arguments and weak expert witnesses. Farm and Food: Go forth and make serfs of all By ALAN GUEBERT and news of the costs judgment against the farmers Effectively killed the Packers and Stockyards Act of 1921, which is supposed to “assure fair competition and fair trade practices, safeguard farmers and ranchers, and protect consumers and members of the livestock, meat, and poultry industries from unfair business practices that can unduly affect meat and poultry distribution and prices.” Largely gutted the U.S. Department of Agriculture’s mandate to “promote fair and competitive trading practices for the overall benefit of consumers and American agriculture.” Gave agribusiness giants permission to run U.S markets like wholly-owned subsidiaries+. And it was all done in the name of “efficiency,” a word not found in either the Packers and Stockyards Act or the U.S. Constitution. How in the world did a lawsuit against Tyson Fresh Meats — in which a jury awarded $1.28 billion to cattlemen because Tyson’s use of contracted cattle cut cash cattle prices — end up granting giant meatpackers market power they could only dream of? Simple, says Roger McEowen, an ag law professor at Iowa State University. “The judges in this case created a standard that isn’t in the Packers and Stockyards Act; a standard that says ‘The PSA exists to aid efficiency so packers can compete with each other.’” Michael Stumo, legal counsel for the Organization for Competitive Markets, agrees. He participated in the original Alabama lawsuit against Tyson, (called the Pickett case for plaintiff Henry Lee Pickett), in which a jury handed Tyson a $1.28 billion lump to the head, a penalty overturned by trial judge, U.S. District Judge Lyle Strom of Nebraska. The plaintiffs appealed. “The appellate court basically changed a competition enforcement statute, the (Packers and Stockyards Act,) into an efficiency statute,” Stumo said. In doing so, the court said that if there is a “business justification”— here, efficiency — for violating the act, then no violation occurs. This standard, adds Stumo, “is not in the Packers and Stockyards Act text nor it is in antitrust law. But the 11th Circuit believes it should be no matter that a jury has already said it’s not and the actual law says it’s not.” Indeed, the decision () is remarkable for not only what it includes but also what it excludes. For example, nowhere in its 33 pages is there one reference to any of the amicus briefs submitted to the court in support of the jury’s original judgment against Tyson. Somehow, though, the court did find space — and, more importantly, a reason — to include trial judge Strom’s snide and away-from-the-jury characterization of Auburn University’s C. Robert Taylor, Pickett’s expert witness who proved to the jury that Tyson’s use of captive cattle led to 5 percent lower cash cattle prices. The remark by Strom — “I’d say, Dr. Taylor, you’re nuts.” — is not only silly, wrong and inflammatory, it’s immaterial. That’s why the jury never heard it. Also, the Aug. 16 opinion chastises Nebraska attorney David Domina, one of plaintiff Pickett’s lead attorneys in the case, for his opening statement the court characterizes as “emotional.” So what? The court’s view of Domina’s statement has nothing to do with its task: determine if the case was decided fairly and correctly under the law, not whether an attorney reaches for a jury’s heartstrings or even stands on his head in the attempt. “This is a very hostile opinion,” says Peter Carstensen, a professor at the University of Wisconsin’s law school and an antitrust specialist, “that shows a profound failure on the part of the court to understand that a legal framework is absolutely essential to make markets work.” Like McEowen and Stumo, Carstensen views the decision as a gut-splitter for the Packers and Stockyards Act and its overarching USDA agency, the Grain Inspection, Packers and Stockyards Administration. “This opinion basically creates a lawless market because it says that if a meatpacker’s conduct is consistent with some business purpose, then anything goes—even serfdom.” As such, the Packers and Stockyards Act is functionally dead, he says, and the “only thing that can salvage it is if someone pours a hardening agent into backbones at USDA so it stands up and writes tough rules on marketing contracts.” But, he adds, given the fact that USDA itself is largely a captive of meatpackers, “That’s not going to happen.” Congress can make it happen, though, by resuscitating, then updating, the Packers and Stockyards Act in the 2007 Farm Bill. Let’s start by calling it the Anti-Serfdom Act. Alan Guebert is a freelance agricultural journalist. He can be reached at or at 21673 Lago Dr., Delavan, IL 61734. ranchers must pay Tyson's expenses in federal cattle-pricing case q By staff and wire reports MONTGOMERY, Ala. — A handful of cattlemen, including two Nebraskans, their $1 billion verdict in their favor reversed in a price-fixing lawsuit against corporate giant Tyson Fresh Meats, now have to pay the nation’s largest beef packer more than $70,000 in court expenses. “They’ve thrown our industry into the Tyson meat grinder and said ’Welcome to serfdom,“’ cattleman Mike Callicrate, a plaintiff in the beef lawsuit, said Friday. The 11th U.S. Circuit Court of Appeals in Atlanta unanimously upheld an Alabama U.S. district court decision ordering five cattlemen, including Nebraskans Chris Abbott of Gordon and Robert Rothewell of Arthur, and Rothwell’s corporation, to pay Tyson, of Springdale, Ark., expenses totaling $70,198.60 for the trial conducted last year in Montgomery. The amount covers expenses such as transportation and office supplies, but does not include attorney fees. The lawsuit accused Tyson of using illegal cattle-buying practices to manipulate beef prices. Tyson countered that it used legitimate business practices that do not subvert the market principles of supply and demand. The plaintiffs were represented in the case by David Domina, an Omaha attorney. “It’s obvious we’re disappointed with the restults,” Domina said. It’s typical for the losing side in a civil case to pay the expenses of the winner, according to Domina, and the larger issue is the appeal he will bring of the case as a whole. Domina said he will appeal to the entire 13 judges of the 11th Circuit Court of Appeals, and if that effort fails, he will take the case to the U.S. Supreme Court. “These were well intentioned people trying to the right thing for their industry,” Domina said of the plaintiffs. In the ruling, the appeals court said “this case was not a close and difficult one” and noted that those who filed the suit “lost every aspect of the case and Tyson prevailed on it.” Thomas C. Green, Tyson’s lead attorney, said the appeals court decision proves that corporations have the freedom to make contracts in the agricultural sector. “I think the plaintiffs need to get a grip and relax,” Green said. “Their view of the law has always been one-sided and obviously shortsighted.” Callicrate called the court developments were an example of a complete failure of justice. “These judges are not looking at the law,” he said. “They are looking at what benefits big business.” In a separate ruling last week, the three-judge 11th Circuit panel unanimously affirmed a June 2004 ruling by the trial judge, U.S. Senior District Judge Lyle Strom of Nebraska, who threw out the jury’s finding that Tyson used contracts with a select few beef producers to manipulate cattle market prices. As part of its verdict, the jury recommended Tyson pay $1.28 billion to a class of cattlemen affected over an eight-year period. But Strom, instead of ruling on the size of the class and amount of damages, found that the cattlemen had failed to show sufficient evidence against Tyson, and reversed the verdict. In their appeal, attorneys for the cattlemen had asked the 11th Circuit to find that the jury based its decision on a reasonable review of the evidence. They said that in another case the 11th Circuit had refused to “second-guess the jury” if its action was reasonable. But the appeals court disagreed. On the matter of costs, teh appeals court said the cattlemen must pay Tyson’s expenses despite the beef packer’s wealth and their “limited financial resources.”

Saturday, August 27, 2005

8th Cir: Directed verdict in crash with parked semi sent back for trial

8th Cir holds that jury should have decided negligence of truck driver who parked on exit ramp when collision occurred with family camper; 8th concludes that passive/active negligence distinction no longer applies in Nebraska negligence cases 08/26/05 Heatherly v. Midwest Specialized U.S. Court of Appeals Case No. 03-4013 District of NebraskaCivil Case - Diversity. District court's grant of judgment as a matter of law to truck driver and his employer for parking his truck in the exit ramp because location of truck was not the proximate cause of the injuries to plaintiffs is reversed. "defendants moved for JML pursuant to Rule 50 of the Federal Rules of Civil Procedure. Taking the motion under advisement, the district court submitted the case to the jury. After the jury deadlocked, the district court declared a mistrial,granted defendants' JML motion and then dismissed the case. The district courtconcluded, as a matter of law, that Gilbertson's conduct in parking the MST truckwhere he did on the exit ramp was not a proximate cause of the Heatherlys' injuries,but merely created a condition by which those injuries were made possible throughthe negligence of Alexander." Under Nebraska negligence law, district court erred in deciding question of causation as a matter of law, as a jury issue was presented. "Under Nebraska negligence law, proximate cause consists of three elements: that (1) but for the negligence, the injury would not have occurred, (2) the injury is the natural and probable result of the negligence, and (3) there is no efficient intervening cause.3 Shelton v. Bd. of Regents of the Univ. of Neb., 320 N.W.2d 748, 752 (Neb. 1982)."[a] proximate cause is a cause that produces a result in a natural and continuous sequence, unaccompaniedby an efficient intervening cause, and without which the result would not haveoccurred." Tapp v. Blackmore Ranch, Inc., 575 N.W.2d 341, 348 (Neb. 1998)."the question of efficient intervening causation is, in essence, one of proximate causation. The concepts of negligence and proximate cause are sufficient to encompass notions of efficient intervening causation without the [separate instruction].Sacco v. Carothers, 567 N.W.2d 299 (Neb. 1997),("The issue of proximate cause, in the face of conflicting evidence, is ordinarily a question for the trier of fact.").Tess v. Lawyers Title Ins. Corp., 557 N.W.2d 696, 706 (Neb. 1997)" District court erred in concluding position of truck created a condition for, and thus was not the cause of, the fatal collision; continuing negligence theory and foreseeability of an intervening cause is proper analysis."By deciding the question of causation as a matter of law after the jurydeadlocked, a jury was not allowed–in this case, a future jury, after declaration of themistrial–to consider the evidence presented and determine from it whether theHeatherlys' injuries reasonably flowed, at least in part, from Gilbertson's negligentparking of the MST truck on the shoulder of the exit ramp. That is, the jury was notallowed to perform its duty of calibrating the limits of liability flowing from anestablished duty and breach thereof with regard to the collision between the motorhome and the negligently parked MST truck."the MST truck on the shoulder of the exit ramp may have constituted continuing negligence that was a cause of the accident, and not merely a condition.Under the facts, the present litigation is, in our analysis, better viewed in light of cases about continuing negligence and the foreseeability of an intervening cause rather than in light of, in particular, Knuth v. Singer, 116 N.W.2d 291 (Neb. 1962),. And Delaware v. Valls, 409N.W.2d 621 (Neb. 1987),, in conjunction with language from the Nebraska Jury Instructions, teaches us to proceed with caution in making the cause-condition distinction in the first place. 8ht Circuit notes that passive negligence is passe as Nebraska Jury instructions now discourage discussing the subject in jury instructions

Friday, August 26, 2005

No decisions released today Some cases on the next call of the Supreme Court: S-04-0782, Home Builders Association of Lincoln, a Nebraska not-for-profit corporation; and Hartland Homes, Inc., a Nebraska Corporation (Appellants) v. The City of Lincoln, a municipal corporation (Cross-Appellant) {Lincoln City impact fee ordinance} S-04-0609, Tanya Walters (Appellant) v. Nebraska Department of Health & Human Services and Ron Ross, Director {welfare recipient refuses to repay HHS AFDC payments} S-04-813, City of Lincoln (Appellant) v. Realty Trust Group, Inc. (Cross-Appellant) {condmenation proceeding disputed Daubert issues}

Thursday, August 25, 2005

Appeal against North Platte UnionPac observation tower may fail for lack of funds

"I see another I-80 Archway!" Plaintiffs who sued North Platte City council for levying occupation tax to finance observation tower over Union Pacific yards may have to give up fight for lack of funds. 08/24/2005 The North Platte Telegraph The fight to stop the building of the Golden Spike Tower and Visitor Center is in danger of stalling, due to a lack of funds."We have got to the point where I cannot and will not continue to fight this by myself," Leonard Hiatt said Tuesday. Hiatt has led the fight against the building of the Golden Spike, a tourism attraction that would show off the Union Pacific Railroad's Bailey Yard. Hiatt and three other men filed suit against the Spike board and the City of North Platte, challenging the attraction's financing. The proposed project is financed by an occupation tax levied against motels and hotels in the city. The suit claimed that the city violated the Nebraska Constitution by entering into an option agreement with the Golden Spike, funneling public funds through a private corporation. Article XIII, section 3 of the Nebraska Constitution provide in part: The credit of the state shall never be given or loaned in aid of individual, association, or orporation In March, District Judge John Murphy dismissed the suit brought by Hiatt, saying the group lacked standing to bring the suit. Hiatt appealed the decision, and is awaiting word from the Nebraska Court of Appeals as to whether or not the case will be heard there or go directly to the Nebraska Supreme Court. While waiting for word on the appeal, Hiatt has circulated a petition that asks the city council to reconsider the financing of the project with occupation taxes. This week, Hiatt was contacted by his attorney, Peter Burger, who has threatened to withdraw from the case if he is not paid. "I'm tired of using my own money," Hiatt said. "Any citizen that has signed the petition and said we don't need the Spike needs to step in and help. "I have worked many days on this to keep it going, and I can't continue to pay the bills myself," Hiatt said. Hiatt is disappointed by the lack of financial support, he said. "If you are interested in seeing this go forward to a conclusion, you must step forward now, or I am going to have to back out," Hiatt said. It has been the working class of the city that has supported his efforts to halt the project, according to Hiatt. "I've had doctors and lawyers tell me they are going to support this effort," Hiatt said. "But they haven't backed it up with donations." The petitions have been gathered and the process of counting signatures has begun. Hiatt intends to present the results of the petition at the next meeting of the North Platte City Council. "All people need to do is send a check to the post office box," Hiatt said. "Or walk into Wells Fargo Bank and make a donation. Step forward now, or I'm going to drop the effort."

NESCT: reprimand for Lanc County Judge Lindner

Supreme Court commission recommends reprimand for Judge's profane reaction to obstinate immigrant traffic court defendant. LINCOLN, Neb. (AP) -- A Lancaster County judge should be publicly reprimanded for allegedly using profanity in referring to a Bosnian refugee during a court appearance last year, a state judicial ethics commission said.The Nebraska Commission on Judicial Qualifications made the recommendation about County Judge Jack Lindner to the Nebraska Supreme Court in a report last month. According to a complaint signed by Supreme Court Justice John Henry, chairman of the commission, Tihomir Nikolic, 50, was charged with failing to obey a police officer on July 5, 2003. When Nikolic was leaving the courtroom with an interpreter after a hearing, Lindner allegedly used several expletives in reference to Bosnians, according to the complaint. Records said Lindner apparently misunderstood the man as saying he could not make a court date because of a business trip, and told him he could leave the room only when given permission by the judge. Nikolic later pleaded guilty and was fined $50. The court has not yet acted on the recommendation, a spokeswoman said. Lindner, 71, declined to comment to the Lincoln Journal Star through a spokeswoman on Tuesday. A person not identified in court records reported the remark to state judicial officials, prompting the commission to file a complaint against Lindner with the Supreme Court on Feb. 7. Hearings were held before a special master in April. This summer the commission conducted its own hearings and adopted the special master's recommendation that Lindner be reprimanded. The commission said Lindner's remarks were made out of irritation and frustration. The panel concluded he did not mean for his remarks to be an ethnic slur, but it said the comments went against state judicial credence that judges should not give the appearance of bias. Lindner could have faced a punishment as severe as removal from office. But the commission noted the remark was out of character for him. It also noted he had expressed regret for the statement and acknowledged he owed apologies to the man and his fellow judges.
8th Cir remands meth defendants sentencing following guilty plea under Booker. Def's petition to plead guilty, a procedure local Dist rule requires did not amount to waiving his Booker issues; however long "corn knife" police found in Def's vehicle counts for sentencing enhancement. 08/23/05 United States v. David Burling U.S. Court of Appeals Case No. 04-2693 District of Nebraska Criminal case - Sentencing Guidelines. Under the circumstances of the plea, defendant did not waive his right to appeal on a Booker issue; Booker issue was properly preserved, and the case is remanded for further sentencing proceedings pursuant to Booker.

8th Cir: dimissal proper for demoted Child Welfare Worker

Welfare worker's suit dismissed 08/23/05 Vicky Meyers v. Joyce Starke U.S. Court of Appeals Case No. 04-2770 District of NebraskaLINCOLN (AP) - A state welfare worker who said she was demoted after testifying in court cannot sue over the action, The 8th Circuit ruled. The 8th U.S. Circuit Court of Appeals ruled in the case of Vicky Meyers, a caseworker for the Nebraska Health and Human Services System in Gering from May 1998 until she quit in May 2000. Meyers was an "ongoing" caseworker, meaning she was part of a team that made recommendations to the courts for the care and treatment of foster children. During a court hearing in late 1999, Meyers told the judge that she differed with her team on the best course of action for two brothers living with a foster family. Later that month, Meyers' supervisors changed her job from handling ongoing cases to "intake" duties, which primarily involved answering the phones and referring calls and cases to other caseworkers.She was paid the same amount and kept her title, but she alleged the change in responsibilities was a demotion in retaliation for her testimony in court.Meyers found the transfer "personally demeaning, belittling and punitive" and said she was treated differently and micromanaged to a degree that forced her to resign."Meyers filed a complaint in the United States District Court for the District of Nebraska alleging violations of 42 U.S.C. § 1983 and her First Amendment right tofree speech. Meyers sued NHHS, and also sued Starke, Duncan, and Carter in boththeir official and individual capacities. Meyers alleged she had been unlawfullydemoted for exercising her right to comment on a matter of public concern– children'swelfare. She sought damages for lost wages and benefits, injury to reputation, loss of enjoyment of life, inconvenience, and embarrassment." the 8th circuit had previously heard this case following the the Pl's appeal as to whether summary judgment was appropriate on the issue of whether she had suffered an adverse employment action for her actions. However, we reversed and remanded for trial holding that disputed fact questions remained as to whether there had been an adverse employment action whenMeyers's job duties were changed. Meyers v. Nebraska Health & Human Servs., 324 F.3d 655 (8th Cir. 2003)Meyers argues that our holding in the prior appeal determined that appellees' actions were motivated by her speech on a matter of public concern that outweighedNHHS's interests. Meyers further argues that this holding was not challenged in the first appeal and cannot be challenged in this appeal. Whether Meyers's speech was protected is a question of law. Lewis v. Harrison Sch. Dist. No. 1, 805 F.2d 310, 313 (8th Cir. 1986). We have already held that Meyers's speech was protected. Meyers, 324 F.3d at 659. The magistrate judge permitted the factual issue of causation—whether appellees' actions were motivated by Meyers's speech—to go to the jury. The jury deadlocked. The magistrate judge refused to grant either party's Rule 50(b) motion on this fact issue. The magistrate did not err. Plaintiff then sought to amend her complaint to add a count of civil conspiracy, 42 usc 1985; the magistrate denied: Federal Rule of Civil Procedure 15 provides that a party may amend by leave of court which shall be freely given when justice requires. Justice does not require itin this case. Here any conspiracy claim under 42 U.S.C. § 1985(2) is barred under theintracorporate conspiracy doctrine, which allows corporate agents acting within thescope of their employment to be shielded from constituting a conspiracy under §1985. Cross v. General Motors Corp., 721 F.2d 1152, 1156 (8th Cir. 1983). We haveextended the intracorporate conspiracy doctrine to governmental entities. See RunsAfter v. United States, 766 F.2d 347, 354 (8th Cir. 1985); Richmond v. Bd. of Regents,957 F.2d 595, 598 (8th Cir. 1992). Because appellees are employees of NHHS, theyare protected by the intracorporate conspiracy doctrine. The magistrate judge did noterr in denying the motion to amend.. The 8th Circuit ruled in 2003 that there was no evidence that Meyers was forced to resign and ordered a lower court to hear her claim that she was demoted. And on Tuesday, a three-judge 8th Circuit panel upheld a ruling by U.S. Magistrate Thomas Thalken dismissing the case. The 8th Circuit said it found no evidence that HHS officials violated her free speech rights by demoting her. "In order to establish a claim for unlawful First Amendment retaliation, a public employee must show that [she] suffered an adverse employment action that was causally connected to [her] participation in a protected activity." Duffy v. McPhillips, 276 F.3d 988, 991 (8th Cir. 2002). "An adverse employment action is exhibited by a material employment disadvantage, such as a change in salary, benefits, or responsibilities." Bradley v. Widnall, 232 F.3d 626, 632 (8th Cir. 2000) (emphasis in original). "Changes in duties or working conditions that cause no materially significant disadvantage . . . are insufficient to establish the adverse conduct required to make a prima facie case." Id. (quoting Harlston v. McDonnell Douglas Corp., 37 F.3d 379, 382 (8th Cir. 1994)). "In order to establish a claim for unlawful First Amendment retaliation, a public employee must show that she suffered an adverse employment action," wrote Judge Lavenski Smith. "An adverse employment action is exhibited by a material employment disadvantage, such as a change in salary, benefits, or responsibilities." Although Meyers' title and functions changed, her salary and benefits did not, Dissenting Judge Bye wrote it was inappropriate to enter judgment as a matter of law when the Plaintiff's testimony of adverse employment action provided some evidence of a civil rights violation: -9- At trial, the jury heard Meyers testify she did not have a full workload and her job responsibilities decreased significantly. The majority dismisses this testimony as a mere scintilla of evidence, inadequate to support a jury verdict. I would not classify the plaintiff’s sworn testimony at trial a mere scintilla of evidence. A plaintiff’s testimony often provides ample evidence to support a jury verdict. See Webner v. Titan Distrib. Inc., 267 F.3d 828, 836 (8th Cir. 2001). In discrediting Meyers’s testimony the majority essentially usurps the jury’s role as factfinder. United States v. Martinez, 958 F.2d 217, 218 (8th Cir. 1992) (“It is the sole province of the jury to weigh the credibility of a witness.”). A significant number of jurors found her testimony to be compelling to the point it could not breakthe deadlock existing among them even after the announcement it could accept lessthan a unanimous verdict. I would therefore vacate the magistrate judge’s entry ofjudgment as a matter of law in favor of defendant Carter and remand for a new trial. Meyers' lawyer, Joy Shiffermiller, did not immediately return a call seeking comment.

8th Circ: recission of home loan means repayment; Truth in Lending action may proceed

Successful recission of a deceptive home loan requires repayment of loan benefits to lender; Truth in Lending Act violations not moot; Plaintiffs affidavits were sufficient to demonstrate material facts against summary judgment, though she was partially incompetent. 08/23/05 Stutzka, conservator for Gibilisco, v. McCarville, et al U.S. Court of Appeals Case No. 4-2208 District of Nebraska Blinded invalid's conservator won recission of mortgage that invalid had signed, because her companions may have used undue influence on her and the mortgage terms varied from how the lender carried out the loan."Stutzka contends that the district court erred by failing to relieve Gibilisco of the burden to make restitution for the $85,000 Popular mortgage. We review thedistrict court’s application of Nebraska law de novo, its denial of equitable relief forabuse of discretion, and its findings of fact for clear error." The dist court ordered recission as Plaintiff requested and a necessary consequence of the rescission was that the estate had to repay the benefits plaintiff's decedent received, which meant that the estate had to repay the $85,000 decedent received under the rescinded contract "an action to rescind a written instrument is an equity action. Kracl v. Loseke, 461 N.W.2d 67, 69 (Neb. 1990). Rescission is intended “toplace the parties in a status quo, that is, return the parties to their position whichexisted before the rescinded contract.” Id. at 75.; the district court erred in granting the defendants summary judgment on plaintiff's Truth in Lending Act claims as there were genuine issues of material of fact concerning compliance with the Act."Gibilisco’s signature on the documents created a rebuttable presumption that the proper disclosures had beendelivered to her. 15 U.S.C. § 1635(c). In an attempt to overcome that presumption,Stutzka submitted an affidavit signed by Gibilisco in which she stated that she “neverreceived any papers, documents, or letters of any kind regarding the mortgage.” The district court erred in equating Gibilisco’s lack of competency to close on the Popular mortgage with a lack of ability to testify to the general fact that she hadnot received the documents at the closing. This conclusion was inconsistent withgeneral evidentiary principles, see Fed. R. Evid. 601, and with the district court’sfactual findings that Gibilisco “displays good recollection of names, places, times and events.”Finally, these claims are not moot, because Stutzka may be entitled to statutory damages and attorney’s fees if he prevails on them, see 15 U.S.C. § 1640, notwithstanding the district court’s order rescinding the Popular mortgage on other grounds. See Dryden v. Lou Budke’s Arrow Fin. Co., 661 F.2d 1186, 1191 (8th Cir. 1981) (“TILA plaintiffs who are otherwise entitled to recover need not show that they sustained actual damages stemming from the TILA violations before they may recover the statutory damages provided.”)

Tuesday, August 23, 2005

NebApp scolds party to boundary dispute on Platte River for not filing proper cross appeal

Action between 2 landowners whose common property boundary ran along the Platte River between Dawson and Phelps county. Edlund v. 4-S, LLC, 13 Neb. App. 800 Filed August 23, 2005. No. A-03-1425. By a change in the channel one property owner appeared to gain land from the other, but the other landowner claimed continued ownership by adverse possession. NCA held that Defendant's admission of NPPD Platte River maps indicating the main Platte River channel conclusively established the channel location, because the adverse party admitted the map's authenticity in a request for admissions. Further the adverse party seeking to hold the lost ground to channel change by adverse possession did not file a cross appeal on that issue. The Court held that the trial court should have taken the NPPD's designation of the main channel because "the conclusive determination that the thread exists in the middle channel at the western boundary of the land at issue raises a compelling inference that the thread continues in that channel as the stream crosses the boundary and continues between the lands belonging to Edlund and to 4-S."

8th Circ rules against fird UNL employee's privacy interest in computer files

Gerald Biby v. University of Nebraska U.S. Court of Appeals Case No. 04-3878A former University of Nebraska researcher who said he was fired in a dispute over a contract with a company that bought one of the university's patents lost his appeal Monday.The 8th U.S. Circuit court of Appeals rejected claims by Gerald Biby, who sued the university in 2003. District court did not err in granting employer's motion for summary judgment on plaintiff's Fourth Amendment claim, as plaintiff failed to show he had a reasonable expectation of privacy in his workplace computer or that his employer's search was unreasonable in inception or scope; defendant had no protectable property interests in his employer's contract with a third party, nor does the agreement in question acknowledge him as an inventor of the technology or an intended recipient of royalty income. Judge Bye, concurring.Biby was employed by NU as a researcher in the Industrial Agricultural Products Center at the University of Nebraska-Lincoln, which finds non-agricultural uses for farm products.Biby helped develop a biodegradable card to replace plastic bank and telephone cards, which do not easily break down when disposed of in landfills. Biby and two other researchers applied in 1997 for a patent on the biodegradable cards, which is university policy, and were to share in any profits from their sale. Later that year, NU entered into a contract with Corn Cards International for the rights to use the new technology. But in 1998, Corn Card began discussions with Gemplus, a card manufacturer interested in using the technology in Europe. After Corn Cards threatened to file a lawsuit against the university for not approving the deal with Gemplus, Biby said NU officials sent a campus security officer to his office and removed information about the new cards from his computer in violation of school policy. NU then put Biby on administrative leave, alleging that he had misrepresented himself in his dealings with Corn Card and Gemplus as having authority to obligate the university contractually and that he had disobeyed the order not to contact Corn Card directly. He was fired in 1999. Biby denied claims by the university that he consented to the search. He said he was coerced into permitting it and that he gave in only when it became obvious he had no other choice. The appeals court rejected his claims that the school violated his right of privacy and due process, among other things. "In both versions of the university computer policy ... the computer user is informed not to expect privacy if the university has a legitimate reason to conduct a search," wrote Judge Diane Murphy. "The user is specifically told that computer files, including e-mail, can be searched when the university is responding to a discovery request in the course of litigation." Biby asked for lost wages and benefits, lost royalties from the sale of the card technology and unspecified punitive and other damages. The 8th circ further found no due process violation in the patents as pl was not a 3rd party beneficiary under Nebraska law: To have an enforceable property right as a third party beneficiary under Nebraska law, the named parties to the contract must have contemplated the third party's rights and interests and provided for them. Spring Valley IV Joint Venture v. Neb. State Bank of Omaha, 690 N.W.2d 778, 782 (Neb. 2005).Without a cognizable property interest in the TLA, Biby's due process claim must fail. Judge Bye concurring, complained the majority too easily brushed off the plaintiff's privacy claim in the university campus computer, "The University’s privacy policy created an expectation the contents of his computer are to a certain degree private. The policy specifically states “a user can expect the files and data he or she generates to be private information.” Still the University had a legitimate reason to search to computer to handle the patent dispute

Saturday, August 20, 2005

NebApp orders Bellevue policeman rehired

Fired Bellevue police sergeant gets job back The Associated Press The city of Bellevue has been ordered to rehire a police sergeant who was fired. The Nebraska Court of Appeals on Tuesday ordered the city to rehire Tim Hrbek, who lost his job after shooting a fleeing suspect in 2002.The court said Hrbek was not allowed to see all the information used against him during a disciplinary hearing. Hrbek v. City of Bellevue Civil Serv. Comm. (Not Designated for Permanent Publication)Filed August 16, 2005. No. A-04-033. The city said the shooting was among several incidents that led to Hrbek's dismissal.Those included a delayed response to an emergency call because he was having a "romantic meeting" with a dispatcher.The Bellevue Civil Service Commission upheld the firing.But a Sarpy County judge ruled the city violated Hrbek's due process rights.The District court stated"

"Hrbek was not afforded adequate due process in that he was not given all the information compiled as a result of his pre-termination internal investigation, so that he could be apprised of the nature of the complaints against him and rebut such evidence at the hearing before the City Administrator. The fact that such information was ultimately forwarded to him in advance of his appeal to the . . . Commission does not cure the due process defect that had already occurred."

The City argues that Hrbek was not prejudiced by the fact that he did not receive the entire investigative file prior to his pretermination hearing, because Hrbek received the file prior to his appeal hearing before the Commission. The law states otherwise. In Martin v. Nebraska Dept. of Public Institutions, 7 Neb. App. 585, 584 N.W.2d 485 (1998), we addressed the same argument and held that procedurally adequate posttermination of employment proceedings do not cure pretermination due process violations. Specifically, the Martin court quoted Stallworth v. City of Evergreen, 680 So. 2d 229 (Ala. 1996), cert. denied 519 U.S. 1007, 117 S. Ct. 509, 136 L. Ed. 2d 399, for the following proposition: "To hold that a procedurally adequate post-termination hearing remedies the deprivation inflicted on a discharged employee by an earlier decision based on a pretermination hearing completely devoid of due process of law would be to render the United States Supreme Court's holding in Cleveland Board of Education [v. Loudermill, 470 U.S. 532, 105 S. Ct. 1487, 84 L. Ed. 2d 494 (1985),] a nullity. Furthermore, no matter how fair and adequate the procedures at the post-termination hearing may be, the initial decision made after the pretermination hearing inevitably will have diminished significantly the employee's chances of prevailing at the post-termination hearing." 7 Neb. App. at 594, 584 N.W.2d at 491-92.

NeAG proposes stricter guidelines for Pardons Board's license reinstatements

Pardons Board standards for reinstating 15 year license suspensions had been informal, Ne AG Bruning recommends proof of sobriety and clean arrest record for at least 7 years for reinstatement consideration. By KEVIN O'HANLON / The Associated Press The Nebraska Board of Pardons wants to tighten the requirements for restoring driving privileges to people with multiple drunken-driving convictions.What we're trying to do is standardize our policy ... to help us ensure consistency," said Attorney General Jon Bruning, who serves on the board with Gov. Dave Heineman and Secretary of State John Gale.There are 6,575 Nebraskans who have had their licenses revoked for 15 years because of three or more drunken-driving convictions.60-6.197.02 State law used to allow judges to lift the suspensions if the applicant had served at least five years of the suspension, completed a chemical dependency program, abstained from excessive use of drugs and alcohol and avoided additional convictions.ß 60-6,209 (Reissue 1993)). But the state Supreme Court struck down the law and the Legislature shifted the responsibility of lifting license suspensions to the Pardons Board in 1998.State v. Bainbridge, 249 Neb. 260, 543 N.W.2d 154 (1996). Revised 60-6,209. Problem, is, Bruning said, there are no formal rules for doing so. "The law allows us to give pardons or reprieves ... for any reason or no reason," he said. "But we want to be consistent." Generally, the board has required that people not have committed a felony for 10 years or a serious misdemeanor for three years. Bruning said the board likely will change that rule to no arrests for seven years. Bruning said the board also wants to set rules on measuring whether a person has quit drinking. "We want some proof that they are on the straight and narrow," he said. Bruning said it is likely the board will require proof that a person has been sober for at least five years. The board will discuss the proposed rules Monday. Bruning stressed that the board has no intention of coddling repeat DUI offenders. "We start with the idea that we are not going to grant a reprieve except under extraordinary circumstances," Bruning said. "These people earned a 15-year suspension. Most of them have abysmal drinking and driving records. "It's not uncommon for us to see six or seven DUIs — or more," he said.

Boystown abuse lawsuit duel between repressed memory experts

Repressed memory debated at sex-abuse hearing; Douglas County Dist Court must make Daubert ruling on represssed memoryWORLD-HERALD STAFF WRITER Lawyers and experts argued Friday 8-19 in Douglas County District court whether repressed memory should play a role in a trial involving sexual abuse allegations at Girls and Boys Town. Todd Rivers of Omaha contends that he was sexually abused by a family teacher, Michael Wolf, and by the Rev. James Kelly while Rivers lived at Boys Town in the 1980s.Rivers, 36, alleges that a repressed memory prevented him from recalling the sexual abuse until three years ago. He has since sued Boys Town and Kelly. Wolf died in 1990. Kelly and Boys Town deny that any sexual abuse occurred. The two-day hearing before Douglas County District Judge Sandra Dougherty is designed to establish whether expert testimony on repressed memory will be allowed in the yet-to-be-scheduled trial. Daubert applies to Nebraska State courts. Dougherty may take the question under advisement after hearing Friday's testimony. The concept of repressed memory is generally defined as a condition in which a person cannot remember a traumatic event. Attorney James Martin Davis, defending Boys Town and Kelly, contends that repressed memory is an unproven hypothesis over which psychology experts are split. Rivers' attorney, Patrick Noaker, argued in opening statements that repressed memory is scientifically accepted and has been proved through numerous studies. "It's a theory," Davis said of repressed memory in his opening statement. "It's not reliable, and it's not valid." Davis said his experts would show that repressed memory is "just a fad.""At best, it's unproven," he said. "At worst, there's no such thing."Noaker said many studies at universities around the nation have shown that repressed memory exists and is accepted by the psychological community. The American Psychiatric Association officially took the stance that repressed memory is legitimate, he said. "It's not a theory," he said. "It's a fact, a psychiatric condition." A widely used psychiatric reference book, called DSM-IV, recognizes memory problems as a feature of post-traumatic conditions, he said. The reference books cites "dissociative amnesia," or repressed memory, as a legitimate diagnosis, he said. As to controversy surrounding repressed memory, he said, a "loud minority" has sought to debunk it. Repressed memory, he said, is recognized as real and reliable by most psychology experts. Davis' expert, Dr. Harrison Pope of Harvard Medical School, said studies endorsing repressed memory tend to lack scientific validity and sometimes confuse simple forgetfulness with repressed memory. He said DSM-IV itself notes that the concept is controversial. "It's not a hypothesis that has acquired general acceptance," Pope said.

Douglas Dist Judge Moran rules for Omaha in Elkhorn annexation fight

Municipal and Zoning law expert: "nothing will stand in Omaha's way until the State's annexation laws change." Omaha World Herald Omaha solidly won the first battle Friday, with Douglas County District Judge Gerald Moran's 34-page order in favor of the bigger city.The two cities early this year unveiled competing annexation packages on back-to-back days. Elkhorn's was designed to reach a population of 10,000 and thus escape its own forcible annexation. Omaha's was created to take Elkhorn and keep open its path for westward growth. John Fullenkamp, a prominent development and annexation attorney in Omaha, referred to a clause in Moran's ruling as especially telling. Moran wrote that the Nebraska Legislature never intended for Omaha to be "placed in a position where its orderly growth and expansion could be inhibited by a city of lesser size. Statutorily there is not, nor was there ever, a possibility that Elkhorn could tactically spring a surprise annexation on Omaha and, by doing so, successfully outmaneuver the City of Omaha."Fullenkamp said Elkhorn will struggle to win on appeal. "I think it's going to be tough," he said.He said Moran appeared to have covered every question. "It's pretty clear," he said. "He just takes them one by one."Elkhorn reisdent Eddie Ohm says he is bothered by the judge's ruling aginst Elkhorn, but he will remain in Elkhorn even if it is annexed by Omaha. Ohm, 89 moved from Saunders County to Elkhorn during the Depression some 70 years ago. He and his wife, Leola, have lived in their home 54 years. "Elkhorn is able to stand on its own," he said while repairing a retaining wall in his yard. "Omaha says Elkhorn's services would be the same, but that's impossible."Fullenkamp said a higher court would have to find that Moran erred somewhere in his ruling. Fullenkamp said Omaha leaders always have had state annexation laws on their side."Unless and until that's changed, they'll probably win," Fullenkamp said.Moran ruled for Omaha on almost every point raised. At least 12 went in Omaha's favor and two minor points went in Elkhorn's favor. Elkhorn legally tried to annex land that is adjacent to it, Moran ruled, and it didn't annex farmland, despite Omaha's claim. Moran ruled that Omaha, too, appropriately annexed land that is adjacent to it. He found that Omaha's initial meeting on annexation complied with the state open meetings law, but that Elkhorn's didn't. He ruled that Omaha's annexation of Elkhorn was properly motivated, but that Elkhorn's was hastily put together simply to push its population past 10,000.He wrote that Omaha could provide Elkhorn with city services that are equal to or better than those to which Elkhorn is accustomed. But Elkhorn's annexation package would strain Elkhorn finances and services, he wrote. "Had Elkhorn's ordinances been allowed to proceed, Omaha would have been effectively blocked insofar as any future growth to the west is concerned," Moran determined. Elkhorn leaders tried to stay upbeat Friday. They filed a notice of appeal that will be forwarded to the Nebraska Court of Appeals. The case might go directly to the Nebraska Supreme Court. Elkhorn City Attorney Duncan Young said he and other Elkhorn leaders chose not to request a retrial at the Douglas County District Court level because Omaha and Elkhorn both acknowledged all along that the case would be resolved at the appellate court level."We're not going to try to stretch it out," Young said of the matter. The town just wants a favorable ruling, he said."If that's a quick decision, that's fine," Young said. "If it's a long, drawn-out one, that's fine." Elkhorn City Administrator Don Eikmeier called Moran's ruling "only the beginning in a multiple-step process."Elkhorn residents want to retain their independence and control of their community, Eikmeier said. He expressed confidence that his town would prevail on appeal.John K. Green, another attorney with knowledge of Nebraska's annexation law, said Moran "went through every point raised by every party." Green detected one point, however, that Elkhorn conceivably could win on appeal. Elkhorn was the first to hold a meeting to present its annexation plan, on Feb. 21. Omaha followed with its initial meeting the next day. Elkhorn contends that it started first and should win on what is called the "prior jurisdiction rule." Moran determined that the rule wasn't applicable and that Omaha technically took the first valid step anyway.Green, the City of Gretna's attorney, said the Nebraska Supreme Court never has ruled on the prior jurisdiction argument in a case involving annexation.He said the appeal is the obvious next step in the fight between the two communities. "This case was always going to the Supreme Court because the stakes were so high," he said.Thirty-four years ago, the City of Omaha succeeded in annexing Millard after a long battle. The U.S. Supreme Court declined to hear the case in 1971, two years after Omaha had begun the process of annexation. The Elkhorn annexation fight is the biggest Omaha has taken on since then.

ACLU considering options after losing Plattsmouth religion case

Plattsmouth Ten Commandments monument can stay Omaha World Herald. The ACLU says it is considering its options after losing the Plattsmouth 10 commandments case, more likely it must decide if it wants to pursue the case on its own dime instead of the governments. Plattsmouth can continue to display a Ten Commandments monument in the city's Memorial Park, a federal appeals court ruled today. The Plattsmouth, Neb., display, a polished marble monument with the Ten Commandments etched on it, is in a public park. The full 8th U.S. Circuit Court of Appeals ruled 11-2 in favor of the Plattsmouth monument, reversing an earlier ruling by one of the court's three-judge panels. The court ruled that the U.S. Supreme Court's recent decision in a Texas case applied to the Plattsmouth case. "I feel great," Plattsmouth Mayor Paul Lambert said. "It reinforces my faith in this country and its legal system. . . . It makes me feel good for all our citizens." The American Civil Liberties Union, which sued the city on a resident's behalf to have the marker removed, said it was too soon to decide whether to appeal the ruling. "We're obviously disappointed by today's decision," said Amy Miller, legal director for the Nebraska ACLU. "We can't say anything further about our next step until I have had an opportunity to confer with our client and our board of directors." The Ten Commandments case, one of several around the nation involving religious displays on public property, has been an issue in Plattsmouth for the past five years. The ACLU brought the challenge on behalf of local resident Ron Larsen, a vocal promoter of atheism and a critic of organized religion. The Plattsmouth marker has stood at a tree-canopied corner along Fourth Avenue since a dedication ceremony in 1965 by local Eagles members and city officials. When the City of Plattsmouth rejected the ACLU's request that it move the monument, the organization sued the city in May 2001. U.S. District Judge Richard Kopf of Lincoln ruled in favor of the ACLU and Larsen in 2002, and a three-judge panel of the 8th Circuit voted 2-1 in 2004 to uphold that decision. The full Appeals Court heard arguments in the case last September. Since then, the U.S. Supreme Court has ruled that a 6-foot-tall granite monument on the grounds of the Texas Capitol - one of 17 historical displays on the 22-acre lot - was a legitimate tribute to the nation's legal and religious history. In today's ruling, Judge Pasco Bowman said, "The Plattsmouth monument makes passive and permissible use of the text of the Ten Commandments to acknowledge the role of religion in our nation's heritage." Bowman noted that Plattsmouth's 45-acre park is 10 blocks from the Plattsmouth City Hall. And, he said no one had objected for decades until the recent challenge. In a dissent, Judge Kermit Edward Bye said his fellow judges incorrectly applied the Supreme Court's Texas decision. He said the Plattsmouth case is different because the local Ten Commandments monument is not part of a larger display. Mayor Lambert said sentiment in the town was overwhelmingly in favor of the monument. "Everyone who I had heard from said. 'Leave it there,'" he said. "We took a stand, and it's always good when you win." The monument remained in place during the legal challenge. Lambert said some residents had placed flowers at the monument while the courts decided its fate.

Divided 8th Circ allows Plattsmouth's 10 Commandments to stand

Since monument is nearly 10 blocks from the city hall and Courthouse, the monument represents merely a passive memorial to the nation's religious heritage. 08/19/05 ACLU NE Foundation v. City of Plattsmouth U.S. Court of Appeals Case No. 02-2444 District of Nebraska [PUBLISHED] [Bowman, Author, for the Court En Banc]Like the Ten Commandments onument in Van Orden v. Perry, 125 S.Ct. 2854 (2005), the Plattsmouth monument makes passive - and permissible - use of the text of the Ten Commandments to acknowledge the role of religion in our nation's heritage, and the district court's judgment in favor of the ACLU is reversed. Judge Bye, joined by J. Morris S. Arnold, dissenting, argue calling the 10 commandments a passive statement detracts from its powerful but religious message; the monument is in a quiet area where people will think about it and get brainwashed into christianity, and it was put in a long time ago when America did not embrace diverse cultures. funny the plaintiff in the case did not belong to any religion. there are plenty of buddists, muslims, hindus in Nebraska now, none of them have objected. The District Court granted summaryjudgment in favor of the plaintiffs, finding that both Doe and the ACLU havestanding to bring suit and that the City's display of the monument violates theEstablishment Clause. On appeal, a divided panel of this Court affirmed. ACLU Nebraska Found. v. City of Plattsmouth, 358 F.3d 1020 (8th Cir. 2004), vacated and rehearing en banc granted, April 6, 2004. With the benefit of the United States Supreme Court's recent decision in Van Orden v. Perry, 125 S. Ct. 2854 (2005), we now reverse.Using the test described by the Supreme Court in Lemon v. Kurtzman, 403 U.S. 602 (1971), the District Court held that thepresence of the monument in a City park violates the Establishment Clause.The Chief Justice went on to cite recent cases in which the Supreme Court did not apply the Lemon test. See,e.g., Zelman v. Simmons-Harris, 536 U.S. 639 (2002); Good News Club v. Milford Cent. Sch., 533 U.S. 98 (2001). Chief Justice Rehnquist ultimately concluded that the Lemon test was "not useful in dealing with the sort of passive monument that Texas has erected on its Capitol grounds." Van Orden, 125 S. Ct. at 2861. Instead,he declared that Establishment Clause analysis in these circumstances was "drivenboth by the nature of the monument and by our Nation's history." Id. Explicitlyrecognizing the religious nature and significance of the Ten Commandments, id. at2863, the Chief Justice distinguished the "passive use" of the Ten Commandmentstext by the State of Texas from the impermissible use of the text by the State ofKentucky, where copies of the text hung in public-school classrooms and "confronted elementary school students every day," id. at 2864 (distinguishing Stone v. Graham,449 U.S. 39 (1980)). After discussing in some detail our Nation's history insofar asthe use of the Ten Commandments and other religious symbols are concerned, id. at2859–63, Chief Justice Rehnquist—with a fifth vote from Justice Breyer concurring in the judgment—concluded that the State of Texas did not violate the EstablishmentClause by its display of the Ten Commandments monument on its Capitol grounds,id. at 2864.Like the Ten Commandments monument at issue in Van Orden, the Plattsmouthmonument makes passive—and permissible—use of the text of the Ten Commandments to acknowledge the role of religion in our Nation's heritage.the Plattsmouth monument is located in arelatively isolated corner of Memorial Park, more than ten blocks distant fromPlattsmouth City Hall and, as far as the record shows, not close to any other buildingthat is part of City government. This fact provides further support for our conclusionthat Van Orden effectively protects the Plattsmouth monument from successful attackunder the Establishment Clause."[s]imply having religious content or promoting a message consistent with a religious doctrine does not run afoul of the Establishment Clause." Id. at 2863; BYE, Circuit Judge, with whom MORRIS SHEPPARD ARNOLD, Circuit Judge,joins, dissenting; (not only are these brillant judical scholars, they are art critics!).Pedestrians, picnickers, and others using the park, however, have an unrestricted view of the Ten Commandments as written on the monument. Nothing in the monument's surrounds suggests its religious message might notbe its raison d'etre.The monument shares its environs with trees and recreationalequipment but none of this mise-en-scéne reflects an intent to merely complement anotherwise secular setting by drawing upon one of the Ten Commandments' secular applications. Rather, the monument's stark religious message stands alone withnothing to suggest a broader historical or secular context. Shades of Jim Crow and Salem Witch Trials from barely 40 years ago! : Many earlier monuments and inscriptions appeared at a time when we "may not have foreseen the variety of religions for which this Nation wouldeventually provide a home." McCreary, 125 U.S. at 2747 (O'Connor, J., concurring)(why arent Muslims, Jews, Buddhists or Hindus joining the Snivel Liberties Union Lawsuit as Plaintiffs?) Indeed, "for nearly a century after the Founding, many accepted the idea that America was not just a religious nation, but 'a Christian nation,'" (wont be for long if those whom the 8th Circuit dissenters enable have anything to do with it, Allah is Great) In today's pluralistic America we no longer accept norcountenance such a narrow reading of the Establishment Clause.the Plattsmouth monument stands alone with nothing to recommend it but its religious message.It is not enough that Plattsmouth's monument has stood formore than thirty-five years in Memorial Park. Without the contextualizing presenceof other messages or some indicia of historical significance, there is nothing to freethe display from its singular purpose of advancing its religious message. (Maybe these Mainstream Protestan manquees are remembering their Sundays past getting that old time religion) To say a monumentinscribed with the Ten Commandments and various religious and patriotic symbolsis nothing more than an "acknowledgment of the role of religion" diminishes theirsanctity to believers and belies the words themselves. (We) respectfully dissent.

Friday, August 19, 2005

Nebraska homeowners subject to excessive closing costs

8th Circuit has held that HUD does not have authority to limit marked up closing costs under Federal Real Estate Settlement Procedures Act. Are markups illegal? Depends where you live August 19, 2005 Federal Circuits have split on whether RESPA allows lenders to charge borrowers the actual or marked up cost when closing on home loans. Ex: charging for a credit report $65, not $3 Ex: $500 for an appraisal, not $25 for one done onver the internet. HUD has interpreted the Real Estate Settlement Procedures Act to ban markups and extra fees without justification. But title companies and lending industry groups fought HUD's administrative rules, HUD Policy Statement 2001-1, 66 Fed. Reg. 53,052 (Oct. 18, 2001)Summary , and in some cases won. The 3rd Circuit Court of appeals in august sided with HUD, and became the third straight court to do so. Normally that would put the issue to rest, but not this hot potato. That's because three other federal appellate courts, covering 15 states, have ruled the opposite, sanctioning markups without limit within their jurisdictions.Santiago v. GMAC 3rd Circuit court of appeals 8-4-2005 Here's the state-by-state division: * Unlimited markups allowed: Residents of 4th Circuit: Maryland, Virginia, North and South Carolina, West Virginia, 7th Circuit: Illinois, Wisconsin, Indiana, 8th Circuit Haug et al v Bank of America : Iowa,Minnesota, Missouri, Arkansas, Nebraska and North and South Dakota have no federal legal protections against markups. No matter how little your mortgage company paid for documents, tax services, appraisals, messenger services, etc., it is free to charge whatever it thinks it can squeeze out of you. * No markups allowed: 11th Circuit Sosa v. Chase Manhattan Corp., 348 F.3d 979 (11th Cir. 2003): Residents of Florida, Georgia, Alabama, 2nd Circuit Kruse v. Wells Fargo Home Mtge, Inc. (No. 03-7665, 2nd Cir. Sept. 10, 2004). New York, Connecticut, Vermont, 3rd Circuit: Pennsylvania, New Jersey and Delaware live in the current no-markup zone. They can sue lenders and other service providers for markups and expect to prevail in the courts, based on appellate court decisions covering their jurisdictions. * Limbo zone states: If you don't live in or plan to buy property in any of the states already named, you are in a legal limbo-land when it comes to markups. HUD says its rules prevail and you cannot have fees marked up by a lender or title agency unless additional services are rendered to justify the extra costs. But no cases have been decided by the highest federal court in your area, and therefore neither you nor your loan and settlement service providers know whether markups are legal or not. The latest case, handed down Aug. 4 by the U.S. Court of Appeals for the 3rd Circuit (Santiago v. GMAC Mortgage Group Inc.), involved a class action suit against GMAC, one of the country's highest-volume home lenders. A GMAC Mortgage customer alleged that the company marked up various fees in connection with the closing of his loan, and thereby violated HUD's ban. Citing earlier federal appellate court rulings that HUD lacked statutory authority to ban markups, GMAC asked the district court to throw out the class action -- and it did. The home buyers then took the case to the appellate level, where HUD's position on markups was affirmed. A 3-3 split in circuits may lead to Supreme Court Cert.
No decisions from the Nebraska Supreme Court today.

Wednesday, August 17, 2005

8th Circ: SSDI claimant may not adjust time attorney fees are paid to avoid Worker Comp Offset

Minnesota Worker Comp law provides benefit reduction after injured worker's disability benefits exceed $25000 when worker is on SSDI; Injured worker concurrently on SSDI sought to allocate attorney fees to period of time that would reduce this offset and employer agreed; 8th Circ upholds social security administration refusal to time date of fees to a time other than when the claimant paid atty fees Sunde v. Barnhart 08/15/05 U.S. Court of Appeals Case No. 04-3164 District of Minnesota Claimant and employer could not allocate attorneys' fees to a period of time other that the period when they were incurred so as to maximize disability benefits, and the Commissioner did not err in rejecting the stipulation as inconsistent with 42 U.S.C. Sec.424a and 20 C.F.R. Sec. 404.408(d)."The (Social security) Act limits the amount of DIB an individual may receive when simultaneously receiving Workers’ Compensation (WC) benefits. See 42 U.S.C. § 424a(a); 20 C.F.R. § 404.408(a). When an individual’s combined DIB and WC benefits exceed eighty percent of the individual’s pre-disability earnings, the Actrequires a reduction in DIB – called a DIB “offset.” See 42 U.S.C. § 424a(a); Berger v. Apfel, 200 F.3d 1157, 1159 (8th Cir. 2000)."Amounts paid or incurred, or to be incurred, by the individual for legal expenses in connection with the claim foror the injury or occupational disease on which the public disability award or settlement agreement is based, are excluded in computing the reduction under paragraph (a) of this section [i.e., 42 U.S.C. § 424a(a)]20 C.F.R. § 404.408(d)The federal offset does not apply where state law allows an employer to take a “reverse offset.” See 42 U.S.C. § 424a(d). Minnesota is one such state. See Minn.Stat. Ann. § 176.101 sub. 4 (West 1993 & Supp.). After a Minnesota worker receives $25,000 in weekly permanent total disability WC benefits, the Social Security Administration (SSA) pays the full DIB amount while the employer reduces its WC payments to the injured employee, paying only enough to meet the eighty percentceiling. In this way, the federal “offset” is “reversed.”"from January 1, 1996 through November 19, 1996 became the only period during which Sunde’s DIB could possibly be vulnerable to a federal offset due to his concurrent receipt of federal DIB and state WC benefits."the Pl Sunde and his employer worker comp insurer stipulated had incurred $6,500 in attorney’s fees as a result of pursuing his WC claim. They agreed to allocate the fees to the period dated January 1 through November 19, 1996,; "Neither the text of§ 404.408(d) nor the POMS(social security program manual) actually address whether Sunde may allocate legal feesalready paid to an illusory date.""Wesee no basis for binding the SSA to the terms of an original stipulation that essentiallyincreases an individual’s maximum allowable DIB by creating an illusory payment period for attorney’s fees.""In Sunde’s case, evidence of a bare intent to evade the offset is clear. The stipulation stated unequivocally that the “settlement [was] intended to maximize the employee’s entitlement to Social Security disability benefits.”

8th Circ reverses defective carpet verdict for StatLims

Insurance company purchased carpeting for remodeled offices that wore out too quickly. Pl claimed equitable tolling excused filing suit beyond 5 year statute of limitations. Deal between 2 sophisticated parties did not indicate fiduciary relationship Employers Mutual v. Collins & Aikman 08/16/05 U.S. Court of Appeals Case No. 04-3420 Southern District of Iowa There was no fiduciary relationship between the parties in this arms-length commercial transaction, and the statute of limitations could not be tolled by the doctrine of fraudulent concealment. In Iowa To toll the statute of limitations, the plaintiff must prove 1) "the defendant affirmativelyconcealed the facts on which the plaintiff would predicate [the] cause of action," or2) "a confidential or fiduciary relationship exists between the person concealing the cause of action and the aggrieved party" combined with proof the defendant breachedits duty of disclosure. Rieff v. Evans, 630 N.W.2d 278, 290 (Iowa 2001) mere silence may be sufficient to prove the defendantbreached its duty of disclosure. Kurtz v. Trepp, 375 N.W.2d 280, 283 (Iowa Ct. App.1985).Collins argues the doctrine of fraudulent concealment does not apply because there was insufficient evidence to prove the existence of a fiduciaryrelationship between it and EMC. We agree. We conclude, in the context of this buyer/seller relationship,Collins's statements were an insufficient basis upon which to find a fiduciary relationship. Although a fiduciary relationship may arise between buyers and sellers Asa-Brant, Inc. v. ADM Investor Serv., Inc., 344 F.3d 738, 741 (8th Cir. 2003), a pl. claiming equitable tolling must prove special factors between the parties such a superior knowledge of one party and reliance by the other. In this case rather, the sole evidence of a fiduciary relationship comes from Collins's statement it would work on behalf of EMC to discover the source of the carpet problems. Acting on behalf of another may indicate a fiduciary relationship, but based on all the facts and circumstances of this case we conclude those two statements were insufficient as a matter of law to transform this arms-length buyer/seller business transaction into a fiduciary relationship.

Tuesday, August 16, 2005

River Wars: 8th circs uphold Army Corps decisions on MO River reservoir releases

8th Circs in pair of rulings hold North Dakota could not prevent water releases from Missouri River reservoir in North Dakota to maintain downstream navigation; 8th Circ also find in separate case that the Corps in charge of the MO river system did not have a legal obligation to maintain a minumum downstream flow on the river State of North Dakota v. U.S. Dept. of Army U.S. Court of Appeals Case No. 04-2204 and No. 04-2737 District of Minnesota and 08/16/05 American Rivers v. U.S. Army Corps North Dakota case: District court did not err in dismissing State's suit to enjoin the Corps of Engineers from releasing water from Lake Sakakawea to support downstream navigation on the Missouri River; North Dakota cannot enforce its state water quality standards against the Corps unless Congress has unequivocally waived the federal government's sovereign immunity from suit, and the Clean Water Act, pursuant to which the state standards were adopted, specifically states that it shall not be construed as impairing the authority of the Secretary of the Army to maintain navigation; further, allowing states to use their water-quality standards to control how the Crops balances water-use interests would frustrate the Flood Control Act of 1944. 08/16/05 American Rivers v. U.S. Army Corps U.S. Court of Appeals Case No. 04-2737 and No. 04-2994and No. 04-2878 and No. 04-2794 and No. 04-2785 and No. 04-2774 District of Minnesota Flood Control Act of 1944 does not impose a duty on the Corps to maintain a minimum level of downstream navigation independent of other interests, and the Corps' balance of water-use interests in the 2004 Master manual is in accordance with the Flood Control Act and is not arbitrary or capricious; the operation of the Missouri River reservoir system is subject to the requirements of the Endangered Species Act, and it was lawful for the Corps to consult with the Fish and Wildlife Service to produce the 2003 Amended Biological Opinion; claims based on summer low flow are moot; challenges to the Fish and Wildlife Service's decisions in producing the 2003 Amended Biological Opinion rejected; Corps' selection of the Preferred Alternative in the Environmental Impact Statements was not arbitrary or capricious; claims by the Mandan, Hidatsa and Arikara Nation were properly dismissed for lack of standing.

State v Nguth; child abuse conviction reversed

Felony child abuse conviction reversed because trial court refused to read justification and lesser included offense instructions, even though Def.wholly denied hitting the victim. State v. Nguth, 13 Neb. App. 783 august 16, 2005. No. A-04-1037. The Hall County District Court convicted John K. Nguth, an African immigrant, of Class IIIA felony child abuse § 28-707(1)(b)and the Court sentenced him to 9 months in the Hall County jail. Nguth appealed claiming the Court erred in refusing to accept his proposed instructions on justification and lesser included child abuse offenses. Nguth claimed § 28-1413, justification for force against a child, could apply to justify his conduct. The trial court denied the justification instruction because the def. denied hitting the child. However if any evidence supports the instruction , the court should include the defense instruction. State v. Kinser, 252 Neb. 600, 567 N.W.2d 287 (1997){self defense}. 28-1413 is not an excuse to the crime of child abuse, but may be a defense when evidence exists to supportit, and the adult def. is qualified to assert it. Here the Defe acted as a guardian even though he was not legally a guardian. Lesser included defenses: Nguth also alleges that the district court erred in overruling his request that negligent child abuse be nstructed as a lesser-included offense, and we take up this issue because it is likely to recur upon our remand. [A] court must instruct on a lesser-included offense if (1) the elements of the lesser offense for which an instruction is requested are such that one cannot commit the greater offense without simultaneously committing the lesser offense and (2) the evidence produces a rational basis for acquitting the defendant of the greater offense and convicting the defendant of the lesser offense.State v. Williams, 243 Neb. 959, 965, 503 N.W.2d 561, 566 (1993) The Nebraska Supreme Court has held that misdemeanor child abuse is a lesser-included offense of felony child abuse under § 28-707. See State v. Parks, 253 Neb. 939, 573 N.W.2d 453 (1998), where state of mind is an element of the offense. "one state of mind may be included ina nother" Court reverses also on lesser included offense and rules on it as it may arise in subsequent appeal; Finally the court will not resverse and dismiss, rather it will remand for a new trial. State v. Noll, 3 Neb. App. 410, 527 N.W.2d 644 (1995), overruled on other grounds, State v. Anderson, 258 Neb. 627, 605 N.W.2d 124 (2000) (if defendant appeals conviction and obtains reversal based on trial error, Double Jeopardy Clause does not forbid a retrial so long as sum of evidence offered by State and admitted by trial court, whether erroneously or not, would have been sufficient to sustain guilty verdict).

IRS Reversed course on insurance policies for the wealthy to avoid estate tax

According to reports in the Ny Times, the IRS in 1996 permitted a elderly wealthy person to purchase a large insurance policy in order to avoid estate taxes, because the insured could count as a gift a much lower insurance premium rate. I.R.S. Loophole Allows Wealthy to Avoid Taxes However just a year later the IRS reversed course and said it would disallow sizeable premiums that were desinged to aovid estate and give taxes by David Cay Johnston In recent months some of the wealthiest older Americans have been buying huge life insurance policies on themselves. Curiously, these people have shopped not for the cheapest rates but for the highest rates they can find. In some cases, they delightedly pay 10 times the lowest rates for that insurance. Why would anyone willingly pay so much? Taxes. Through a technique invented by a lawyer in New York and a chemical engineer in California, each dollar spent on this insurance can typically eliminate $9 in taxes. Spend $10 million on this insurance, avoid $90 million or more in income, gift, generation-skipping and estate taxes. "I'm not saying this is the best thing since sliced bread, but it's really good for pushing wealth forward tax free," said Jonathan G. Blattmachr, the New York lawyer who heads the estate tax department at Milbank, Tweed, Hadley & McCloy and who explained the plan in a half-dozen interviews. The technique is legal, blessed by the I.R.S. in 1996. But some leading tax lawyers, as well as some accountants and insurance agents, say it shouldn't be. They say it effectively disguises a gift to one's heirs that should be taxed like any other gift. They also say it is but one example of how a tax exemption on life insurance that was approved by Congress in 1913 to help widows and orphans has been stretched to benefit the very richest Americans. Several thousand of these jumbo policies have been sold, according to agents who sell them, all under confidentiality agreements with the buyers and their advisors. One member of the Rockefeller family took out a policy, according to people who have seen documents in the deal. The several billion dollars of this insurance already sold, much of it in the last 18 months, means that tens of billions of taxes will not flow into federal and state government coffers in the coming decade or so. In recent months, policies with first-year premiums alone of $4.4 million, $10 million, $15 million, $25 million, $32 million and $40 million have been sold by New York Life Insurance, Massachusetts Mutual Life Insurance and other underwriters, according to insurance agents, accountants and tax lawyers who have worked on these deals. The agents selling the policies find them hard to resist — they can earn millions of dollars for selling just one such policy. The technique works this way. An older person — typically someone who does not expect to live long and who has at least $10 million and usually much more — wants to avoid estate taxes, which are 50 percent with such fortunes. Under tax law, money from a life insurance policy goes at death to heirs tax free. The premium paid on that life insurance is considered a gift to those heirs. Any annual premium that exceeds $11,000 is therefore subject to the gift tax of 50 percent. Only the wealthiest Americans pay such large premiums and are subject to this tax. The new technique sidesteps the gift tax in a two-step process. First, the person who is buying the policy reports on his tax return only a small part of what he really paid in premiums. Wouldn't the I.R.S. say that is cheating? No. It's perfectly legal. The reason is that insurance companies offer many different rates for the same policy. And the buyer is allowed to declare on his tax return the insurance company's lowest premium for that amount of insurance, even if that person could never qualify for that rate because of his age and health, and even if no one has actually ever been sold a policy at that rate. A low premium means a low gift tax. But in fact the buyer has really paid the very highest premium offered by that insurer for that amount of insurance. The insurer then invests the difference between the highest premium and the lowest premium. That investment grows tax free, paying for future premiums on the policy. At death, the entire face value of the policy is paid tax free to heirs. In an example cited by one agent, a customer paid a $550,000 premium for the first year alone, the highest price offered by the insurance company, for a policy that was also offered at $50,000, the lowest price. So $550,000 can be passed on to heirs tax free. Yet the gift tax is only $25,000 — 50 percent of the lowest premium, instead of $275,000, which is 50 percent of the highest premium. The I.R.S. would not comment officially. But an I.R.S. official who specializes in insurance matters said he had not heard that so many people were exploiting this loophole. He could not say whether the issue would be re-examined. The deal gets better because of a second step. Even that $25,000 tax can be avoided by shifting the gift-tax obligation to the spouse through a trust. In 1982, Congress made all transfers between spouses tax free, so the gift tax disappears. If the policy holder continues to pay huge premiums year after year, he can pass along much or all of his fortune tax free if he lives long enough. Michael D. Brown of Spectrum Consulting in Irvine, Calif., said, many clients in their 50's and 60's, working with other agents, are now trying to do just that. By far the biggest deals have been made by two insurance agents who work together, Mr. Brown, a former chemical engineer, and Louis P. Kreisberg of the Executive Compensation Group in Manhattan. The technique was devised in 1995 by Mr. Blattmachr and Mr. Brown. Mr. Blattmachr has since expanded his idea and other estate tax lawyers have copied his methods. "In 1995 I was told that this was the stupidest idea ever by a guy who is now collecting millions in commissions from selling" such insurance, Mr. Blattmachr said. Among his peers Mr. Blattmachr is renowned for his creativity in finding ways to pass down fortunes without paying taxes and without breaking the law. He is a busy man. Recently he set off to counsel clients in eight cities over three days — a trip made possible by a client who provided him with a private jet. Afterward he spent the weekend fishing with his brother, Douglas, whose company, Alaska Trust, helps wealthy Americans set up perpetual trusts, some of them using Mr. Blattmachr's insurance plan. One buyer of an insurance plan like Mr. Blattmachr's paid $32 million in the first year for a policy that will pay $127 million tax free to the grandchildren, according to a lawyer who worked on the deal and spoke on condition of not being identified. No gift taxes were paid. Sales of such insurance soared after the Internal Revenue Service announced 18 months ago that it was considering restrictions on similar techniques, which are known as split-dollar plans. In Alaska, premiums for such insurance totaled just $1.1 million in 1999, but ballooned to more than $80 million last year, state records show. This month, when the I.R.S. issued its proposed restrictions, it did nothing to stop Mr. Blattmachr's plan. Indeed, the proposed I.R.S. rules can be read as strengthening the validity of his plan, Mr. Blattmachr and some other estate tax lawyers say. Mr. Brown said that in some cases, when the policy holder dies quickly, both the government and the heirs come out winners, at the expense of the insurance company. "This is a good deal because both the government and the heirs get 90 percent of what they could have gotten," he said. He added: "We think it is good policy to allow this because it discourages games like renouncing your citizenship or investing offshore." But many estate tax lawyers and insurance experts think that because Mr. Blattmachr's plan is similar to the plans the I.R.S. moved to stop on July 3, it should be ended as well. While the I.R.S. in 1996 approved the outlines of the Blattmachr plan, these opponents argue that the plan as sold by agents like Mr. Brown and Mr. Kreisberg stretches that ruling so far that it no longer provides protection in an I.R.S. audit. Some of them say it is the huge fees involved that are blinding their competitors to aspects of the Blattmachr plan that make it vulnerable to being banned as an abusive tax shelter. Commissions for the insurance agents run between 70 percent and 200 percent of the first-year premium when it is $1 million or so, while on the jumbo policies commissions are typically 9 percent to 11 percent, or up to $4.4 million on a policy with a $40 million first-year premium, Mr. Kreisberg said. He acknowledged that many peers in the estate tax world say that he earned $100 million in gross commissions last year, but said, "I wish it were half that." Mr. Kreisberg did not dispute a statement by someone with knowledge of payment records that his small firm's commissions this year have already reached $20 million. Lawyers who opine on the validity of the deals can also earn big fees. Mr. Blattmachr gets $100,000 for his basic opinion letter and is reported to have charged as much as $250,000. Sanford J. Schlesinger of the law firm Kaye Scholer said he passed up a chance to collect a six-figure fee for advising on one of these deals because he thinks the deals should not pass muster with the I.R.S. "My mother taught me that if something seems too good to be true, it isn't true," he said. Other leading estate tax lawyers, as well as some accountants and insurance agents, say Mr. Blattmachr's insurance technique should fail because it is wholly outside the intent of Congress in giving tax breaks for life insurance, the I.R.S. ruling on the plan notwithstanding. "If the I.R.S. understood this they would say that it relies on a disguised gift — and if you have to pay gift taxes, then Jonathan's insurance deal does not work," said an estate partner at a tax firm in New York, who like others, said they could not be identified because they have signed confidentiality agreements that are part of all such insurance deals. Another legal expert said paying 10 times too much for insurance in a plan like this reminds him of a matriarch selling the family business to her granddaughter for $10 million when it was actually worth 10 times that amount. "The I.R.S. wouldn't let a family get away with selling the business for a dime on the dollar," this lawyer said, "and they should not allow it to work in reverse through insurance." Wealthy Family Sues Famous Lawyer Over Tax Plan By Wendy Davis, Trusts & Estates contributing writer Online Exclusive, Jul 8 2003 New York real estate magnate Charles B. Benenson and his wife file suit accusing noted trusts and estates lawyer Jonathan Blattmachr of breach of contract and conflict of interest. At core, but not part of the complaint, is the reverse split dollar arrangement—a tax loophole that the IRS recently warned it will not allow Print-friendly format E-mail this information High-profile trusts and estates lawyer Jonathan Blattmachr is famous for his clever use of trusts, family limited partnerships and sophisticated insurance plans to reduce inheritance and gift taxes. But last summer a particular insurance tactic that he had employed caught the attention of the U.S. Treasury and Internal Revenue Service after it was detailed in a front-page article in The New York Times decrying the lucrative loophole for the ultra-rich. Now, a family that bought the same type of policy made notorious by the Times—and the subject of an official notice from the Service—is suing Blattmachr and his law firm, Milbank, Tweed, Hadley & McCloy LLP. The family, Charles B. Benenson, of Benenson Realty Company, his wife Jane and his son (Jane's stepson) William, claims that the plan they bought is not the one his family expected. In Los Angeles this June, the Benensons filed suit for breach of contract, malpractice and other charges. Specifically, the Benensons claim that the insurance policy, which is supposed to pay $48.5 million in death benefits, is underfunded by about $1.5 million and might lapse within the next decade. The family blames Blattmachr, a New York-based partner at Milbank, as well as husband-and-wife insurance agents Louis and Amie Kreisberg; insurance agent Michael Brown; and the insurance companies that sold the policy. These firms include: Spectrum Consulting L.P. (also called Spectrum Financial Network Insurance and Investments, L.L.C.), where Brown is a managing partner and member; Executive Compensation Group, where Louis Kreisberg is an officer; CM Life Insurance Company, a subsidiary of Massachusetts Mutual Financial Group; and Massachusetts Mutual Financial Group. The Benensons also allege that Blattmachr, who introduced them to the Kreisbergs and the other players in the deal, did not "fully disclose" that he also represented the other parties at the time of the introduction. (Louis Kreisberg is on the editorial board of Trusts & Estates magazine; Blattmachr is a contributor to the magazine.) A spokesman for Milbank, who asked not to be identified, says: "Milbank's only client in the matter…was the Benensons, and they were faithfully served." Calling the suit "baseless" and "meritless," the firm spokesman said that the lawyers "intend to defend ourselves vigorously and we fully expect to prevail." "Milbank and Mr. Blattmachr practice law," added the spokesman. "The Benensons are complaining about the insurance product that they acquired. Neither Milbank nor Mr. Blattmachr had anything to do with the client's choice of insurance products." Kreisberg says that the lawsuit is frivolous and he fully intends to defend against it. Brown and Mass Mutual declined to comment. The Benensons are asking for the approximately $1.5 million they say it will take to fund the plan, a refund of the fees and commissions they paid to Blattmachr and the insurance agents, and punitive damages. Milbank Tweed's fee, according to the complaint, was $970,000; that included the work done on the deal and a tax opinion letter. Commissions to the insurance agents and broker, according to the suit, ran to more than $4.4 million. The Benensons also agreed to keep the details of the deal confidential, says one of their current lawyers, Virginia Miller of Anderson Kill & Olick PC, the law firm where former New York City mayor Rudolph Giuliani once worked. IRS Warning The Benensons' policy, a family reverse split dollar arrangement, became a popular estate planning strategy among the very wealthy from 2000 to 2002. Armed with a 1996 IRS ruling, Blattmachr and others presented such plans as a way of passing family wealth to heirs without estate tax and with greatly reduced gift taxes on the premiums. "I'm not saying this is the best thing since sliced bread, but it's really good for pushing wealth forward tax-free," Blattmachr said, according to The New York Times article last July. The Times story noted that insurance companies had sold thousands of these policies, adding up to billions of dollars of insurance, the bulk of it issued since early 2001. Shortly after publication of the newspaper article, the Treasury Department and IRS issued a notice refuting Blattmachr's interpretation of the gift tax required on premium payments. Before that notice, purchasers of these plans believed that they did not have to pay gift taxes on the entire amount of the premium price, but instead could value the premiums based either on government tables or the insurance company’s published rates (usually lower than the amount actually paid.) The August Notice, 2002-59, changed that. It said that the donor could no longer use the government’s premium rates or lower insurance company rates if the donor, or donor’s estate, has the right to the insurance. The August notice was accompanied by a press release stating that the IRS would not respect reverse split dollar arrangements "where the parties attempt to avoid taxes by using inappropriately high current term insurance rates, prepayment of premiums or other techniques to understate the value of taxable policy benefits." The warning was loud and clear. Soon afterward, wealthy families stopped purchasing these types of plans, say insurance lawyers. But what about those families like the Benensons that already had such plans in their estates? Estate planning experts note that it is too soon for such plans to have been audited by the IRS. For now, the Benensons are not complaining in their lawsuit about the tax consequences of the plan. But the suit, filed just before the statute of limitations for a possible complaint ran out, could be amended later. The family’s lawyers say that the Times article helped spur the lawsuit in that it contributed to their disillusionment with Blattmachr and the insurance agents. "The itch that they had was scratched by The New York Times and then drew blood," says their attorney Eugene Anderson, name partner of Anderson Kill. Allegations The Benenson family alleges that Blattmachr approached them in early 2000 with a life insurance plan that he proposed would be a perfect fit for the family. Blattmachr, who had represented the family for several years, according to the Benensons' current lawyers, allegedly presented the policy as an estate-planning tool that would result in lower taxes while taking account of the Benensons cash flow needs. In 1986, New York real estate magnate Charles B. Benenson was listed in the Forbes 400 with a net worth estimated at more than $200 million. Benenson, a Yale grad, had built his father’s Bronx apartment house business into a realty empire, investing with several other New York City builders, including Lawrence Tisch and Harry Helmsley. The plan Blattmachr allegedly approved involved purchasing a $60 million life insurance policy on his wife Jane, who was 81 years old in the summer of 2000, when the deal was signed. In a complex sequence of events, the family is said to have used the Alaska Trust Company, run by Blattmachr's brother, Douglas, to create a trust to buy the insurance policy. Other parties Benenson claims were involved in the transaction include the Kreisbergs, Michael Brown and companies headed by them, with Massachusetts Mutual Financial Group the ultimate insurer. According to the complaint, the Benensons were supposed to pay about $23.5 million in premiums during the first three years of the policy, but also get back about $3.7 million in a partial surrender. Meanwhile, the policy proceeds were to decrease from $60 million in the first year to $48.5 million in year four, after which the plan was to pay $48.5 million regardless of when Jane died. To make matters even more complicated, the policy was backdated to June of 1999, when Jane was still 80 because Mass Mutual does not issue this type of policy on people older than 80. The family's current lawyers say the backdating, while perfectly legal in itself, ended up causing the confusion that led to the problems. The Benensons thought they were agreeing to pay about $10.96 million in premiums in the first year, $7.2 million in the second year and $5.6 million in the third year. The family also expected to withdraw approximately $3.7 million in the second year. But what the family says it did not realize was that the schedule of payments and withdrawals also was backdated one year. According to the Benensons, this meant that they were supposed to pay around $18 million, then receive $3.7 million back shortly upon signing the contract. Instead, they only paid around $10.9 million and never withdrew the $3.7 million. The Benensons claim they did not know anything was amiss until June of 2001, when the Kreisbergs allegedly asked for an additional $577,616. Relations between the Benensons and the defendants soon unraveled. Who Understood What? One of the steps the Benensons took was to hire Richard Harris, a New Jersey insurance agent, as a consultant. "From a life insurance point of view, in terms of all the twists and turns, this is rocket science," says Harris of the intricate deal. He alleges that the family never received all of the materials they were entitled to. Without that paperwork, he says, there is no way the Benensons could have fully understood the policy they had purchased. Harris also concludes that if the family now takes out the $3.7 million, the policy will be left underfunded and will lapse within the next 10 years, before Jane's 93rd birthday. These numbers are somewhat inexact, says Harris. Benenson attorney Virginia Miller calculates that the policy would lapse even earlier, before Jane's 91st birthday. Regardless, Harris and Miller both say that it is their understanding that the family did not realize they had to pay two years' worth of premiums upon signing. Had this been clearer, the family might not have done the deal. "If they thought they had to put up $18 million up front instead of $11 million up front, they might not have gone ahead with transaction," says Harris. This is also where Blattmachr's representation of both the insurance agents and Benensons becomes problematic, say the Benensons' lawyers. As the agents' commission was dependent on the deal going through, they had a motive to see it close. That motive, they allege, created a potential conflict of interest that was not "fully disclosed" as early as it could have been. Miller says that Blattmachr did disclose the potential conflict of interest before the family signed the deal. But, she says, the Benensons did not agree in writing to waive the potential conflict of interest, as is required by legal ethics rules in California—where the lawsuit was filed and where William Benenson, trustee of the insurance trust, lives. Miller also claims that the Benensons did not fully understand the ramifications of the potential conflict. Yet another allegation in the complaint is that Blattmachr did not disclose his relationship with the Alaska Trust Company, whose president and CEO is Jonathan's brother, Douglas Blattmachr. Even so, courts looking at the Benenson situation might not view the potential conflict as problematic, say legal ethics experts. Malpractice claims frequently contain allegations that an attorney did not disclose a conflict of interest, says legal ethics scholar John Leubsdorf, a professor at Rutgers School of Law, Newark. But, adds Leubsdorf, disgruntled clients can't prove malpractice simply because there is a conflict of interest. There also has to be a problem with the legal services received and, if the lawyer provided good representation, the conflict will not in itself be grounds for a lawsuit. The Benensons' complaint lists a variety of other matters about which they contend they were misled. For example, the Benensons believed the agents' compensation would be about $2 million to $2.5 million, but now say that the agents and their broker together received more than $4.4 million. The legal complaint does not provide an explanation for the Benensons' mistaken belief about the fees, but Harris claims that the amount was too deeply buried in the fine print. Another, related allegation is that no one discussed with the Benensons the possibility of funding the deal with private placement life insurance. Harris says that commissions are usually much lower with private placement life insurance because they are separately negotiated. "Generally, when those things become negotiated," says Harris, "the numbers are hugely different." He estimates that the commission only would have been $600,000 with private placement. An Industry Watches For all of the allegations in the complaint, the one claim that is missing—an accusation that Blattmachr gave bad tax advice—is what industry observers are most interested in seeing litigated. Even in the pre-August 2002 heyday of the family reverse split dollar plan, tax and insurance experts were divided about whether it was a legitimate way of lessening taxes. Some think that Blattmachr might yet prevail should the IRS fight the tax breaks in court. But others remark that these types of aggressive tax-lessening policies were always a train wreck waiting to happen. "Highly paid people tempt clients with ways to circumvent the intent of the tax laws," says Joseph Belth, a professor emeritus of insurance at Indiana University. But, he says, purchasers of these aggressive policies frequently don't realize the ramifications of their plans. "In most policies issued for non-traditional products, there's a great deal of risk on the policy-holder," says Belth. "The whole nature of the risks assumed by a policy-holder are not made completely clear at the time of sale."