August 17, 2017

The Colorado Marijuana Industry—Legal and Accounting Advice and Compliance

Colo_MJ_IndustryTwenty years ago, the idea of legalized marijuana was laughable. Today, there are 23 states that have legalized marijuana for medicinal purposes, and four states (Oregon, Washington, Alaska, and Colorado) along with Washington, DC, that are experimenting with the legalization of recreational marijuana. The marijuana movement appears to be an unstoppable force.

We have witnessed a major shift in how the American public views marijuana. Practically all major national polls now show that a slim majority of respondents are in favor of legalizing marijuana, or share a favorable view of the drug. An even greater percentage of Americans want to see it approved for medical uses. States have also taken a markedly different approach. Once viewed with contempt, marijuana is now looked upon as a fresh tax revenue source. Revenue generated from taxing marijuana is being used to support jobs, maintain in-state infrastructure, and even support education.

The first state to officially begin selling recreation-legal marijuana was Colorado in the beginning of 2014. Colorado hit a marijuana milestone in August 2015. According to the Denver Post, August represented the first month in its short history of recreational marijuana sales that total monthly combined sales of recreational and medical marijuana topped the $100 million mark. In August, $59.2 million was sold in recreational marijuana, and another $41.3 million came from medical marijuana. In Colorado, the three taxes associated with marijuana have raised an impressive $86.7 million through just the first eight months of 2015. With $639.4 million in combined marijuana sales through August in Colorado, and Washington and Oregon both ramping up their sales, the legal marijuana business will likely total more than $1 billion in 2015 for the first time ever.

However, federal law still views marijuana as a Schedule 1 Drug. Therefore, according to federal law, it is still illegal.

This thriving industry, its tax consequences, and the resulting conflict of laws have presented our state with a unique set of challenges, which will be discussed by some of the most influential voices in the Colorado marijuana industry on November 5 at Colorado CLE’s seminar,“The Colorado Marijuana Industry – Legal and Accounting Advice and Compliance.” Barbara Brohl, the Executive Director of Colorado Department of Revenue, will give the regulatory perspective on these complex issues. Professor Sam Kamin, one of the nation’s leading experts on the regulation of marijuana, will analyze the lawsuits that have been brought against Colorado by surrounding states. Mark Mason and Deirdre O’Gorman will be at the seminar to give us the latest information about The Fourth Corner Credit Union, the only credit union constructed to serve the interests of the legalized cannabis and hemp industries and their supporters. John Walsh, the United States Attorney for the District of Colorado, will give us the federal perspective on marijuana enforcement priorities and their interaction with state priorities.

Don’t miss the panel presentation about the challenges and opportunities of owning and operating a marijuana business. Christian Sederberg, a leading practitioner in the industry, has not only represented clients, but he and his firm have helped shape the marijuana and cannabis laws and regulations. Christian will give us an update on the law. Ron Seigneur, the Program Moderator, who has over 25 years of business valuation experience and is known nationally for his expertise, will talk about investing in a cannabis business and attendant ownership and valuation issues.

CLE Program: Colorado Marijuana Industry — Legal and Accounting Advice and Compliance

This CLE presentation will take place Thursday, November 5, 2015, in the CLE Large Classroom. Click here to register for the live program and click here to register for the webcast, or call (303) 860-0608.

Can’t make the live program? Order the homestudy here: CDMP3 audioVideo OnDemand.

Dignity to All Persons: CBA-CLE to Host LGBT Law Institute

LGBTOn June 26, 2015, the United States Supreme Court decided in the landmark case Obergefell v. Hodges that the fundamental right to marry is guaranteed to same-sex couples by both the Due Process Clause and the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution. In reaching this conclusion, the majority relied on four principles and traditions that demonstrate marriage is a fundamental right under the Constitution, and applies with equal force to same-sex couples.

The first premise is that the right to personal choice regarding marriage is inherent in the concept of individual autonomy. The second principle in the Court’s jurisprudence is that the right to marry is fundamental because it supports a two-person union unlike any other in its importance to the committed individuals. The third basis for protecting the right to marry is that it safeguards children and families and thus draws meaning from related rights of childrearing, procreation and education. Finally, the U.S. Supreme Court’s cases and our Nation’s traditions make clear that marriage is a keystone of the Nation’s social order. Writing for the majority, Justice Kennedy stated:

The right to marry is fundamental as a matter of history and tradition, but rights come not from ancient sources alone. They rise, too, from a better informed understanding of how constitutional imperatives define a liberty that remains urgent in our own era. Many who deem same-sex marriage to be wrong reach that conclusion based on decent and honorable religious or philosophical premises, and neither they nor their beliefs are disparaged here. But when that sincere, personal opposition becomes enacted law and public policy, the necessary consequence is to put the imprimatur of the State itself on an exclusion that soon demeans or stigmatizes those whose own liberty is then denied. Under the Constitution, same-sex couples seek in marriage the same legal treatment as opposite-sex couples, and it disparages their choices and diminishes their personhood to deny them this right.

What is the case law, legislation and culture surrounding the Lesbian/Gay/Bisexual/Transgender journey to this holding? Attend the Colorado Bar Association CLE’s Lesbian/Gay/Bisexual/Transgender Law Institute on September 24-25, 2015, and hear not only from Colorado Supreme Court Justice Monica Marquez, but also from Colorado Senator Pat Steadman on the LGBT legal history and landscape in our State and our Nation. Learn about changes in government programs after the Windsor case, and about LGBT issues in both the employment law and immigration contexts. Also find out about how to reach out to the LGBT community and the logistics of navigating through such legal issues as changing one’s name and Social Security if you are a transgender person.

The Institute will showcase many points of view. On August 13, 2015, the Colorado Court of Appeals affirmed a finding from May 2014 from the Colorado Civil Rights Commission that the Masterpiece Cakeshop’s policy of turning away a same-sex couple’s request for a cake violates Colorado’s Anti-Discrimination Act. The speaker at the Institute will address the topic from the perspective of Masterpiece Cakeshop owner Jack Phillips, who refused to bake a wedding cake for a same-sex couple because of his religious beliefs. Learned legal scholars will also discuss the salient points from both the majority and dissenting opinions in the Obergefell case. Religious freedoms in connection with LGBT issues will also be discussed.

There are many more topics to be found when you register here. We’ll see you in the front row on September 24-25.

CLE Program: Lesbian/Gay/Bisexual/Transgender Law Institute

This CLE presentation will take place Thursday, September 24, and Friday, September 25, 2015 at the CLE offices. Click here to register for the live program or click here to register for the webcast.

Can’t make the live program? Order the homestudy here – CD • Video OnDemand • MP3

Tenth Circuit: Unpublished Opinions, 3/27/2014

On Thursday, March 27, 2014, the Tenth Circuit Court of Appeals issued no published opinions and five unpublished opinions.

Fall v. Holder

Stout v. Gyrodata, Inc.

United States v. Castillo

United States v. Escobar

SEC v. Clark

Case summaries are not provided for unpublished opinions. However, published opinions are summarized and provided by Legal Connection.

 

Tenth Circuit: Unpublished Opinions, 3/26/2014

On Wednesday, March 26, 2014, the Tenth Circuit Court of Appeals issued no published opinions and five unpublished opinions.

Davis v. Kutak Rock

Lately v. Colvin

Willess v. United States

Mann v. Turner Brothers

The Wackenhut Corporation v. Hansen

Case summaries are not provided for unpublished opinions. However, published opinions are summarized and provided by Legal Connection.

Tenth Circuit: Preliminary Injunction Enjoining Implementation of Legislation That Restricted Federal Funding to Two Kansas Planned Parenthood Facilities Vacated

The Tenth Circuit Court of Appeals published its opinion in Planned Parenthood of Kansas and Mid-Missouri v. Moser on Tuesday, March 25, 2014.

The federal government subsidizes the cost of family-planning services for low-income individuals through Title X of the Public Health Service Act, codified at 42 U.S.C. §§ 300–300a-6. Although Title X  authorizes direct federal grants to service providers, most Title X funds flow initially to state and local  governmental agencies. Nonprofit organizations function as intermediaries that distribute the funds to subgrantees who administer the programs. Kansas is one such state.

If a grantee or subgrantee materially fails to comply with any term of an award, the awarding agency may temporarily withhold payments, disallow funding to cover the cost of the noncomplying activities, terminate the award, withhold further awards, or pursue other legally available remedies.

In May 2011, Kansas Governor Sam Brownback signed into law appropriations bill § 107(l) restricting the classes of entities eligible for Title X subgrants. It limited the recipients to public entities, hospitals, and federally qualified health centers (FQHC) that provide comprehensive primary and preventative healthcare services. This restriction disqualified two family-planning clinics operated by Planned Parenthood of Kansas and Mid-Missouri (Planned Parenthood). These Planned Parenthood facilities performed abortions. Planned Parenthood sued Governor Brownback and Robert Moser, MD, in his capacity as the Secretary of the Kansas Department of Health and Environment (KDHE) for declaratory and injunctive relief, challenging the legislation on the grounds that (1) it violated Title X and was unconstitutional under the Supremacy Clause; (2) it violated Planned Parenthood’s First Amendment rights by penalizing it for associating with providers of abortion and for its advocacy of access to abortion services; and (3) it violated the Fourteenth Amendment by imposing an unconstitutional burden on the rights of women to choose abortion (a claim not raised on appeal).

Ruling that Planned Parenthood had established a likelihood of success on the merits of the first two claims and had otherwise satisfied the requirements for a preliminary injunction, the district court granted the preliminary injunction and enjoined KDHE from implementing the legislation. Accordingly, it enjoined any further enforcement or reliance on Section 107(l) and ordered Moser to allocate all Title X funding for State Fiscal Year 2012 without reference to Section 107(l).

Moser challenged the injunction in the Tenth Circuit on several grounds, most of which the Tenth Circuit did not address. As to the Supremacy Clause claim, the court held that Planned Parenthood could not  establish a likelihood of success on the merits because there was no private cause of action for injunctive relief for the alleged violation of Title X under the Supremacy Clause. The court held that when actual or threatened state action is allegedly contrary to a federal statute, the Supremacy Clause does not necessarily authorize an injunction against the state action when four conditions are all satisfied: (1) the statute does not specifically authorize injunctive relief, (2) the statute does not create an individual right (which may be enforceable under 42 U.S.C. § 1983), (3) the statute is enacted under the Constitution’s Spending Clause, and (4) the state action is not an enforcement action in adversary legal proceedings to impose sanctions on conduct prohibited by law.  The Tenth Circuit concluded that Planned Parenthood had no cause of action under Title X to enjoin the application of § 107(l). The court held Title X simply did not contemplate enforcement through private suits for injunctive relief.

The court noted that § 107(l) does not prohibit Planned Parenthood from doing anything. It does not say that all health-care providers must offer comprehensive care. It does not even prohibit those who do not offer comprehensive care from providing family-planning services. Planned Parenthood can continue to do so. The statute says only that the State will not subsidize family-planning services provided by those who do not offer comprehensive care.

As to the First Amendment claim, the court stated that the challenge would be rejected unless retaliation against the protected conduct was a substantial or motivating factor for taking the action and the official would not have taken the same action in the absence of the protected conduct. The court held that neither of these contexts was present in this case. The first was absent because nothing in § 107(l) prohibited Planned Parenthood from advocating abortion rights or associating with abortion providers. Second, the Tenth Circuit expressed reluctance to invalidate a law because of the process by which it was enacted. Planned Parenthood could not establish a likelihood of success because the legislation did not restrict the rights of speech or association of Planned Parenthood and the motives of individual lawmakers in enacting § 107(l) were irrelevant.

The court VACATED the preliminary injunction, REVERSED and REMANDED for further proceedings.

 

Tenth Circuit: Unpublished Opinions, 3/25/2014

On Tuesday, March 25, 2014, the Tenth Circuit Court of Appeals issued one published opinion and six unpublished opinions.

United States v. Braimah

United States v. Juarez-Sanchez

Drum v. Northrup Grumman Systems

Gray v. Farris

United States v. Pettigrew

Crawford v. Colvin

Case summaries are not provided for unpublished opinions. However, published opinions are summarized and provided by Legal Connection.

Tenth Circuit: Unpublished Opinions, 3/24/2014

On Monday, March 24, 2014, the Tenth Circuit Court of Appeals issued no published opinions and seven unpublished opinions.

Sanders v. Farris

Marshall v. Lombardi

Stine v. Berkebile

State of Kansas v. Price

Holt v. Newton-Embry

United States v. Mitchell

United States v. Newkirk

Case summaries are not provided for unpublished opinions. However, published opinions are summarized and provided by Legal Connection.

Tenth Circuit: Unpublished Opinions, 3/13/2014

On Thursday, March 13, 2014, the Tenth Circuit Court of Appeals issued no published opinions and one unpublished opinion.

United States v. Yazzie

Case summaries are not provided for unpublished opinions. However, published opinions are summarized and provided by Legal Connection.

Tenth Circuit: Convictions for Wire Fraud and Money Laundering Affirmed

The Tenth Circuit Court of Appeals published its opinion in United States v. Battles on Tuesday, March 11, 2014.

To finance construction of her residence, Safiyyah Tahir Battles obtained two loans totaling $377,400 from First Security Bank. In 2007, she decided to refinance her residence. She submitted a uniform residential loan application to Saxon Mortgage, Inc. (“Saxon”), but Saxon’s automated system rejected the application because her debt-to-income ratio was too high. Consequently, Ms. Battles reapplied for credit through Saxon’s “Score Plus” program, which required her to submit twelve months’ worth of bank statements, as well as information concerning her gross monthly income and assets. Among other things, Ms. Battles claimed a gross monthly income of $28,723.16 and a First Security Bank account containing $165,907.70. Saxon approved her application for a $500,000 loan shortly thereafter.

But, as it turned out, Saxon’s decision was based on a distorted picture of Ms. Battles’s financial status. Ms. Battles’s 2007 federal income tax return revealed that her adjusted gross annual income was $14,346—a far cry from the $344,677.92 extrapolated from the figures on her loan application. Similarly, the balance in her bank account on the loan’s closing day was less than $1,000. It subsequently came to light that Ms. Battles had falsified bank statements to inflate her income and improve her chances of qualifying for a loan.

A closing company prepared a settlement statement that specified that a local builder named Emmitt Wisby would receive $102,630.01 and Ms. Battles would receive $2,000. The closing company gave Mr. Wisby’s check to Ms. Battles with the understanding that she would deliver it to Mr. Wisby. Instead, Ms. Battles deposited the funds into her bank account. Ms. Battles dissipated the proceeds of the loan; she wrote checks totaling $47,700 to family members. She made no mortgage payments on the residence after July 31, 2007. When the property fell into foreclosure, Saxon sustained a significant loss from having funded the loan.

After a grand jury indictment and jury trial, Ms. Battles was convicted of one count of wire fraud and one count of money laundering. Ms. Battles was sentenced to thirty months in prison, followed by two years of supervised release. The district court also ordered her to make restitution to the victim of her crimes. Ms. Battles appealed on several grounds.

On appeal, Ms. Battles raised seven claims: (1) the government suppressed evidence that was favorable and material to her defense; (2) the district court erred by admitting testimony of a witness who intimated that Ms. Battles had destroyed documents; (3) there was insufficient evidence produced at trial to support her convictions; (4) she received ineffective assistance of trial counsel; (5) the district court erred by failing to grant a two-level sentence reduction for acceptance of responsibility; (6) the district court imposed a legally infirm restitution order; and (7) cumulative error deprived her of a fair trial and a reliable sentence.

First, the court held it did not have jurisdiction to address Ms. Battles’s Brady claim in the context of this appeal. The sole district court order that adjudicated Ms. Battles’s Brady claim was the order denying Ms. Battles’s motion for a new trial. This order was issued after the district court’s final judgment was entered and after Ms. Battles filed her formal notice of appeal challenging that judgment. The court could find no evidence in the record that, after the district court issued its motion-for-new-trial order, Ms. Battles sought within the fourteen-day period prescribed by the federal rules to file a new notice of appeal to challenge that order. Therefore, the court dismissed this aspect of the appeal for lack of jurisdiction.

Second, Ms. Battles argued that certain “other-crimes” testimony was offered not for any of Rule 404(b)’s recognized purposes,  but, rather, to incite the jury’s passions against her. The court concluded Ms. Battles did not demonstrated that any error in admitting the evidence affected her substantial rights, i.e., that the error disturbed the outcome of the proceedings.

Third, Ms. Battles contended there was insufficient evidence produced at trial to support her convictions. However, the court held there was ample evidence to support the jury’s convictions. The court was satisfied that a substantial quantum of evidence supported Ms. Battles’s wire-fraud conviction. Accordingly, under its deferential standard of review, the court would not second-guess the jury’s decision finding Ms. Battles guilty of wire fraud.

Fourth, Ms. Battles argued she received ineffective assistance of trial counsel. The Tenth Circuit concluded that the record before the district court was not sufficiently developed to address this issue. Precedent militated in favor of dismissing this claim without prejudice so that the district court could address it in collateral proceedings in the first instance.

Fifth, Ms. Battles argued the district court erred by failing to grant a two-level sentence reduction for acceptance of responsibility. The court stated it would have great difficulty viewing Ms. Battles’s statements as not reflecting in pronounced fashion her denial of fraudulent intent in connection with the Saxon loan. And this denial continued throughout her trial and sentencing. Ms. Battles failed to demonstrate that the district court abused its discretion in denying her an acceptance-of-responsibility downward sentence adjustment.

Sixth, Defendant contended the district court imposed a legally infirm restitution order. Ms. Battles asserted her view that she was unfairly surprised at sentencing when the district court named a different victim in the restitution order than that identified at trial. The district court reviewed this document at sentencing and found it clear that Deutsche Bank was taking an assignment as a trustee and custodian for Saxon and that there was no issue with respect to the identification of the victim. The court discerned no error, and certainly no clear error, in this factual finding.

Finally, Ms. Battles claimed cumulative error deprived her of a fair trial and a reliable sentence. However, Ms. Battles failed to name more than one error. A defendant who has failed to establish the existence of multiple non-reversible errors cannot benefit from the cumulative error doctrine.

The Tenth Circuit upheld the judgment of the district court and AFFIRMED Ms. Battles’s convictions and sentence. The court DISMISSED the portion of Ms. Battles’s appeal pertaining to her Brady claim for lack of jurisdiction.

Tenth Circuit: In Sexual Harassment Case, Summary Judgment For County and Judge Affirmed in Part and Reversed in Part

The Tenth Circuit Court of Appeals published its opinion in Eisenhour v. Weber County on Wednesday, March 12, 2014.

Marcia Eisenhour worked for Weber County for 24 years, serving as the Court Administrator for the Weber County Justice Court under the direct supervision of Judge Storey. According to Ms. Eisenhour, Judge Storey began acting inappropriately toward Ms. Eisenhour in early 2008. He became “touchy” and would often stand so close to her that his groin rubbed against her. In addition to the touching, Judge Storey once told her that he had a dream about her in which she was naked. Ms. Eisenhour also found a poem by Judge Storey, which revealed his romantic feelings for her. According to Ms. Eisenhour, she was also subjected to unreasonable demands about her activities away from work.

The County launched an investigation, but ultimately decided not to discipline Judge Storey. The matter was later referred to Utah’s Judicial Conduct Commission, which the Commission dismissed.

Between August and December 2009, the County Commissioners closed the Justice Court, which meant the loss of Ms. Eisenhour’s job. Ms. Eisenhour applied to the County for three vacant positions. Unsuccessful, she lost not only her job but also the potential for retirement benefits. She eventually spoke to the media about the Judicial Conduct Commission’s investigation of Judge Storey.

Marcia Eisenhour sued Weber County, three of its county commissioners, and Judge Storey. She claimed violations of Utah’s Whistleblower Act, the First Amendment, the Fourteenth Amendment’s Due Process and Equal Protection Clauses, and Title VII. The district court granted summary judgment to the defendants on all claims. Ms. Eisenhour appealed.

Ms. Eisenhour first challenged the district court’s exclusion of her testimony on disciplinary proceedings involving the judge. The Tenth Circuit affirmed. The exclusion of Ms. Eisenhour’s testimony during the disciplinary proceedings involving Judge Storey was proper, since, under the applicable Utah statute, section 78A-11-112(1), testimony taken during the course of proceedings before the Judicial Conduct Commission cannot be introduced in a civil action.

Ms. Eisenhour asserted a claim under Title VII for retaliation. The district court held that it lacked jurisdiction over the claim because Ms. Eisenhour failed to exhaust administrative remedies. The Tenth Circuit agreed. Ms. Eisenhour filed an EEOC claim for sexual harassment, but this claim did not refer to any of the retaliatory acts underlying the eventual cause of action under Title VII. As a result, the court affirmed the award of summary judgment to the County on the Title VII retaliation claim.

Next, Ms. Eisenhour invoked the First Amendment, claiming that the County retaliated against her by closing the Justice Court when she spoke to the media about the Judicial Conduct Commission’s investigation of Judge Storey. The Tenth Circuit held that triable issues of fact existed and that the district court erred in granting summary judgment to the County. When the court is faced with a First Amendment claim by a public employee, the district court must balance the First Amendment interests of that employee, speaking as a concerned citizen, with the government’s interests in promoting the efficiency of the public services it performs through its employees. The Tenth Circuit held that her comments to the media involved protected speech and that she presented sufficient evidence for a reasonable fact-finder to infer that her comments were a motivating factor in the County’s decision to close the Court. The evidence also created a genuine issue of fact about the legitimacy of the County’s explanation for closing the Justice Court.

On the First Amendment claim for retaliation, Ms. Eisenhour also sued three county commissioners in their personal capacities. This claim was based on the Commissioners’ decision to close the Justice Court. Their motivation, according to Ms. Eisenhour, was to retaliate for her comments to the media. Like the County, the Commissioners argued that Ms. Eisenhour’s speech was not protected under the First Amendment and that the County closed the courthouse because of budgetary considerations rather than a retaliatory motive. As discussed above, these arguments involved factual issues turning on the resolution of conflicting evidence, thereby preventing summary judgment for the County.

Ms. Eisenhour further alleged that the County violated Utah’s Whistleblower Act, which prohibits government employers from retaliating against employees who report employer misconduct. According to Ms. Eisenhour, the County violated the state law by closing the Justice Court and refusing to hire her. Ms. Eisenhour waited more than 180 days from the alleged violation to assert a Whistleblower Act claim, so this claim was time-barred. However, for her claim relating to the closing of the court, the claim did relate back to the original filing, so it was not time-barred.

Ms. Eisenhour argued that the County deprived her of a property interest in her job without due process of law. The district court held that Ms. Eisenhour had failed to establish a protected property interest. The Tenth Circuit agreed. For purposes of the Fourteenth Amendment’s Due Process Clause, property interests must derive from some independent source, such as state law, contract, or other understandings that give rise to a claim of entitlement. However, her employment was at-will. And at-will employees lack a property interest in continued employment.

Ms. Eisenhour asserted that the County violated her right to equal protection, and the district court granted summary judgment to the County on the ground that Judge Storey was not an official policymaker. The Tenth Circuit agreed with the district court’s decision. A municipality can be liable under Section 1983 for the acts of a municipal official only when the official possesses final policymaking authority to establish municipal policy with respect to the acts in question.

Judge Storey lacked policymaking authority to touch Ms. Eisenhour inappropriately under the County’s sexual harassment policy. Further, his monitoring of her whereabouts (when missing work) did not violate the Equal Protection Clause. As a result, the County was entitled to summary judgment on the equal-protection claim.

Ms. Eisenhour further asserted an equal-protection claim against Judge Storey. The district court concluded that Judge Storey was entitled to qualified immunity. The Tenth Circuit reversed the district court’s grant of summary judgment to Judge Storey, concluding that he was not entitled to qualified immunity and that there was a fact-issue about whether Judge Storey inappropriately touched Ms. Eisenhour.

To overcome a defense of qualified immunity, a plaintiff must show that: (1) the defendant’s conduct violated the law, and (2) the law was clearly established when the violation occurred. The Tenth Circuit held that Ms. Eisenhour made the threshold showing and that issues of fact precluded summary judgment.

For the reasons stated above, the Tenth Circuit affirmed the award of summary judgment on Ms. Eisenhour’s claims against the County under the: (1) Whistleblower Act for a refusal to rehire her, (2) Title VII, and (3) § 1983 based on a deprivation of due process and denial of equal protection. The court also held that the district court properly excluded Ms. Eisenhour’s testimony taken during the judicial-misconduct investigation. But the court agreed with Ms. Eisenhour that genuine issues of fact precluded summary judgment on: (1) her § 1983 claim against the County and the County Commissioners based on the First Amendment, (2) the Whistleblower Act claim against the County based on the court closing, and (3) the § 1983 claim against Judge Storey based on the Fourteenth Amendment’s Equal Protection Clause.

Accordingly, the case was REMANDED to the district court with instructions to VACATE the award of summary judgment on these claims.

—–

Defendant Craig Storey requested rehearing, arguing in part: (1) The panel opinion erroneously relied in part on sworn testimony before the Judicial Conduct Commission even though the testimony was deemed inadmissible; and (2) the evidence did not support Ms. Eisenhour’s claim that Defendant Storey knowingly and intentionally committed sexual harassment by telling her about a dream. On these issues, Defendant Storey also requested en banc consideration. In addition, he sought en banc consideration on the issue of qualified immunity.

The panel granted rehearing on the first issue, which involved reliance on the Commission testimony by Ms. Eisenhour. The remainder of the petition for panel rehearing was denied. In light of the partial grant of the petition, however, the panel vacated the opinion issued on December 31, 2013. The clerk was directed to substitute the amended decision above and to file it contemporaneously with this order.

Tenth Circuit: ConocoPhillips Entitled to Neither “Basis-Increase” Nor “Going-Forward Deductions

The Tenth Circuit Court of Appeals published its opinion in United States v. ConocoPhillips Company on Wednesday, March 11, 2014.

In the 1970s and 1980s, the Internal Revenue Service was embroiled in a tax dispute with multiple companies (including Phillips Petroleum Company and Arco Transportation Alaska, Inc.) that had jointly developed a pipeline system known as the Trans-Alaska Pipeline System (“TAPS”). The parties agreed to settle the dispute through a Closing Agreement. After entering the agreement, Phillips Petroleum Company (now ConocoPhillips Company) acquired Arco Transportation. In 2000 and 2001, Conoco revisited the tax implications of its acquisition and claimed “going-forward” and “basis-increase” deductions on its amended consolidated tax returns. The IRS refunded Conoco’s 2000 going-forward deductions and did not challenge them here. But the IRS disputed the remaining deductions and the parties brought the dispute to federal district court, where the district court decided the issue on cross-motions for summary judgment. The court rejected Conoco’s position and granted summary judgment to the IRS. Conoco appealed.

Conoco claimed monthly “going-forward” deductions for the additional interests in TAPS that Arco Transportation acquired from 1977 to 2000 and the additional interest that it acquired in 2001. This contention was based on alternative theories that Arco Transportation was an “owner” or “successor in interest” under the Closing Agreement. However, the court held that Arco Transportation was considered an “owner” only with respect to its 21% ownership in TAPS as of July 1, 1977. For the subsequently-acquired interests, Arco Transportation was not considered an “owner.” Because Arco Transportation did not own the additional TAPS interests on July 1, 1977, it was not an “owner” with respect to these interests. Thus, Conoco was not entitled to “going-forward” deductions for these additional interests based on the theory that Arco Transportation was an “owner.”

The court then turned to the question whether Conoco was a “successor in interest.” Under the Closing Agreement, an entity became a “successor in interest” in two ways: (1) by succeeding the owner through statutory succession, or (2) by acquiring a TAPS interest from an affiliated entity when the transferor and transferee filed a consolidated tax return. Arco Transportation did not acquire its later-acquired interests by statutory succession or by transfer from a member of its consolidated group. Thus, Arco Transportation was not a successor in interest for the additional TAPS interests acquired from 1977 to 2001; and the parent company, Conoco, was not entitled to the tax benefit of Arco Transportation’s going-forward deductions on the 2001 consolidated tax return.

Conoco also claimed “basis-increase” deductions. But Conoco’s claim to these deductions was based on a misinterpretation of the scope of the Closing Agreement. Because the Closing Agreement did not fix a restoration cost/liability or exclude it from 26 U.S.C. § 461(h), Conoco was not permitted take the basis-increase deductions before economic performance.

In conclusion, the Tenth Circuit held that Conoco was not entitled to the asserted “going-forward” or “basis-increase” deductions. The court disallowed Conoco’s going-forward deductions because Arco Transportation was not an “owner” or a “successor in interest” with respect to the additional TAPS interests acquired from 1977 to 2001. The court also disallowed the basis-increase deductions because the Closing Agreement’s allowance of a $900 million aggregate deduction did not fix a liability or provide Conoco with a blanket exemption from § 461(h) for that amount.

Accordingly, the district court’s award of summary judgment to the government was AFFIRMED.

Tenth Circuit: Collateral Order Doctrine Did Not Apply; Appeal Dismissed for Lack of Jurisdiction

The Tenth Circuit Court of Appeals published its opinion in United States v. Tucker on Tuesday, March 11, 2014.

A grand jury indicted Michael Scott Calhoun, Tommy Wayne Davis, and William Jeffrey Tucker (“Defendants”) on 60 counts of wire fraud, mail fraud, and conspiracy to commit wire and mail fraud. The indictment was based on Mr. Calhoun’s grand jury testimony in which he incriminated himself, Mr. Davis, and Mr. Tucker. Mr. Calhoun testified upon the advice of his counsel at the time, Tom Mills, who was paid by Texas Capital Bank, the alleged victim of the fraud.

After Mr. Calhoun secured new counsel, the Defendants moved to quash the indictment and suppress Mr. Calhoun’s grand jury testimony, contending the indictment was obtained in violation of the Fifth Amendment Indictment Clause, Mr. Calhoun’s Fifth Amendment privilege against self-incrimination, and Mr. Calhoun’s Sixth Amendment right to effective assistance of counsel. The district court denied the Defendants’ motion. Defendants appealed under the “collateral order” exception to the final judgment rule.

The Tenth Circuit held the collateral order doctrine did not apply and dismissed the appeals for lack of jurisdiction.

Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 546 (1949) recognizes a small class of district court orders that determine claims of right separable from, and collateral to, rights asserted in an action, too important to be denied review and too independent of the cause itself to require that appellate consideration be deferred until the whole case is adjudicated. To fall within this small class, a district court order must satisfy three requirements: it must [1] conclusively determine the disputed question, [2] resolve an important issue completely separate from the merits of the case, and [3] be effectively unreviewable on appeal from a final judgment. The Supreme Court has instructed that courts should use the exception to the finality requirement sparingly in the criminal context. Very few motions to dismiss an indictment—even if founded on a valid constitutional right—will give rise to interlocutory appellate jurisdiction.

Applying the Cohen factors, the parties agreed that the first two requirements were satisfied. The district court’s order (1) conclusively determined that (2) the indictment was substantively valid—an important conclusion that was separate from the Defendants’ guilt or innocence. The crucial question centered on the third collateral order requirement: whether the district court’s order was “effectively unreviewable” on appeal from final judgment.

The court concluded it was not. Defendants failed to demonstrate that they could not secure a remedy after trial on appeal from a final judgment. Here, Defendants could proceed to trial and, if convicted, raise the same challenges they presently brought in hopes of having their convictions overturned.

The Tenth Circuit DISMISSED the appeal for lack of jurisdiction.