August 30, 2014

Tenth Circuit: Unpublished Opinions, 8/13/2014

On Wednesday, August 13, 2014, the Tenth Circuit Court of Appeals issued no published opinion and seven unpublished opinions.

Pena v. Hartley

United States v. Posada-Cardenas

Sandoval v. State of New Mexico

Hendrix v. Trammell

United States v. Molina Varela

D.A. Osguthorpe Family Partnership v. ASC Utah, Inc.

United States v. Beamon

Case summaries are not provided for unpublished opinions.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

Tenth Circuit: ERISA Preemption Necessitated Removal to Federal Court

The Tenth Circuit Court of Appeals issued its opinion in Salzer v. SSM Health Care of Oklahoma, Inc. on Wednesday, August 6, 2014.

Richard Salzer received medical care at an SSM facility following an accident. At the time, he was covered by a health insurance plan, and he entered into a contract with SSM in which he authorized his health insurance company to pay for his care. SSM had a provider agreement with Salzer’s health insurance company in which it agreed to accept payment from the insurance company at a discounted rate. Although the provider agreement prohibited SSM from seeking payment for covered charges from the insured, SSM billed Salzer for the non-discounted amount.

Salzer filed suit against SSM in Oklahoma state court, alleging breach of contract, violation of the Oklahoma Consumer Protection Act, deceit, and tortious interference with contract. He purported to represent a putative class of Oklahoma residents who received treatment at SSM facilities and were similarly billed in violation of provider agreements with insurance companies. Salzer sought damages and specific performance of the provider agreement. SSM removed the case to federal district court. In its notice of removal, SSM alleged that Salzer was a beneficiary of his wife’s employer-provided health plan operated by Aetna and governed by ERISA. SSM further alleged Salzer’s claims were preempted because they can be characterized as seeking to enforce rights under ERISA. Salzer moved to remove the case back to state court, but the district court denied his motion, ruling that his claims were completely preempted by ERISA.

Salzer then filed an amended complaint that reasserted his original claims and added other state law claims. SSM moved to dismiss for failure to state any ERISA claims. The district court dismissed Salzer’s complaint with prejudice, concluding that Salzer disregarded the court’s prior orders by failing to allege any ERISA claims and by continuing to argue that ERISA did not preempt the lawsuit. Salzer appealed to the Tenth Circuit.

The Tenth Circuit examined first the district court’s denial of Salzer’s motion to remand based on ERISA preemption. The Tenth Circuit looked at each of Salzer’s six claims and decided that the first five claims did not implicate ERISA and could have been remanded to state court. However, the sixth claim was indeed an ERISA claim, and the district court correctly refused to remand to the state court for determination of the ERISA claim. The Tenth Circuit found federal jurisdiction over one claim is sufficient to support removal. Because Salzer did not argue on appeal that the district court incorrectly dismissed his claims with prejudice, the Tenth Circuit affirmed the district court.

Tenth Circuit: Case Involving Interpretation of License Agreement was Contract Dispute, Not Patent Resolution Claim

The Tenth Circuit Court of Appeals issued its opinion in Cellport Systems, Inc. v. Peiker Acoustic GMBH & Co. KG on Tuesday, August 5, 2014.

Cellport, a Colorado corporation, designs technology to allow vehicle owners to connect different cell phone models to a single hands-free system through specialized “pockets.” In August 2001, Cellport entered into an agreement with Peiker, a German corporation, granting Peiker a non-exclusive license to Cellport’s intellectual property. After Cellport filed a lawsuit alleging breach of the 2001 agreement, the parties came to terms on a second license agreement in October 2004. The 2004 agreement provided that Peiker would pay Cellport royalties on products that use Cellport’s intellectual property. In 2009, Cellport filed suit in the district court in Boulder County, alleging breach of the 2004 agreement and seeking royalties for seven Peiker products. Peiker removed the case to federal district court. The district court found that Peiker owed royalties on only two products, interpreting a provision in the license agreement as a “rebuttable presumption,” and awarded Cellport prejudgment interest at the statutory rate rather than the 1.5% monthly interest proscribed in the license agreement. The district court declined to award costs, determining that neither party was a “prevailing party” as defined in the license agreement. Cellport appealed and Peiker cross-appealed.

Peiker first asserted that the Tenth Circuit lacked jurisdiction to hear the appeal, moving instead to transfer the appeal to the United States Court of Appeals for the Federal Circuit, which has exclusive jurisdiction over patent claims. The Tenth Circuit analyzed the exclusive jurisdiction provisions of 28 U.S.C. §§ 1295 and 1338 and found that they did not apply because the claims could be analyzed under contract law, not patent law. The parties’ dispute involved the language of sections 1.17(i) and 3.5 of their license agreement, which the Tenth Circuit interpreted as involving acknowledgments of the parties requiring Peiker to pay royalties on any products included in sections 1.17(i) and 3.5.

Following its analysis that section 1.17(i) requires royalties regardless of whether Cellport’s patents were infringed, the Tenth Circuit reversed the judgment of the district court and determined Peiker owed royalties on two additional products, since Peiker conceded that section 1.17(i) applied to those products. Because the district court did not rule on whether section 1.17(i) applied to the remaining product, the Tenth Circuit remanded for the district court to make further findings concerning the applicability of section 1.17(i) to that product.

Regarding its BT-PSC product, Cellport argued that royalties were due under section 1.17(i) or (iii). The contractual provisions were ambiguous, and the district court resolved the ambiguity by determining no royalties were due. The Tenth Circuit could not find clear error in the district court’s factual findings and affirmed as to the BT-PSC product.

Cellport also argued that it was due royalties for the BT-PSC product due to its ’456 patent. Because the district court only briefly addressed the relationship between the BT-PSC product and the ’456 patent, the Tenth Circuit remanded for further findings on that issue. Turning to Cellport’s contention of entitlement to royalties on the SIAB product, the Tenth Circuit could find no clear error in the district court’s determination that no royalties were owed.

Cellport next argued that it was due interest at the contractual rate rather than the statutory rate. The placement of the interest provision in the contract indicated that the interest rate would apply only to royalties due as a result of audits. The Tenth Circuit found the district court’s application of the statutory interest rate appropriate. As to Cellport’s contention that it was owed costs as the “prevailing party,” the Tenth Circuit noted that on remand the balance would shift and the cost provision should be reassessed.

Turning to Peiker’s cross-appeal, the Tenth Circuit addressed Peiker’s contention that since the ’456 patent had been revoked, it owed no further royalties. Cellport appealed the revocation and that appeal is pending. Cellport argued that Peiker’s cross-appeal is not yet ripe because Cellport’s revocation appeal is still pending. The Tenth Circuit agreed with Cellport that the issue is not ripe and vacated the district court’s judgment on the issue.

The judgment of the district court was affirmed in part, reversed in part, and remanded for further proceedings consistent with the Tenth Circuit’s opinion.

Tenth Circuit: Unpublished Opinions, 8/12/2014

On Tuesday, August 12, 2014, the Tenth Circuit Court of Appeals issued five published opinions and seven unpublished opinions.

United States v. Angulo-Lopez

United States v. West

Peel v. Joint Commission, State Survey Oklahoma Department of Health

Eldridge v. Berkebile

United States v. Walker

United States v. Angulo-Lopez

Ruiz-Giel v. Holder

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

Tenth Circuit: Forest Service’s Management Plans Did Not Violate National Forest Management Act or Environmental Protection Act

The Tenth Circuit Court of Appeals issued its opinion in Biodiversity Conservation Alliance v. Jiron on Tuesday, August 5, 2014.

Biodiversity sued the U.S. Forest Service in two separate cases involving Forest Service actions in the Black Hills National Forest. In the first case, filed in the U.S. District Court for the District of Wyoming, Biodiversity claimed the Forest Service failed to comply with various statutes and regulations. The district court denied Biodiversity’s petition for review. In the second case, filed in the U.S. District Court for the District of Colorado, Biodiversity argued the Forest Service had violated a settlement agreement and moved for relief. The district court dismissed Biodiversity’s motion. Biodiversity appealed both rulings and the cases were consolidated for appellate review.

In 1976, the National Forest Management Act (NFMA) took effect, and the Forest Service created a plan under which it managed the Black Hills National Forest. In 1992, the Forest Service decided to revise the plan, and in 1997 it issued its revised forest plan. Biodiversity challenged the 1997 plan in an administrative proceeding, and its appeal was decided by the Chief of the Forest Service in 1999. The Chief determined that although most of the plan complied with the NFMA and the National Environmental Protection Act (NEPA), there were some shortcomings, which the Chief described specifically in his ruling.

Before the Chief issued his 1999 ruling, the Forest Service began implementing its 1997 forest plan. Biodiversity administratively challenged some aspects of the plan, and eventually Biodiversity and the Forest Service entered into a settlement agreement. The settlement agreement included Phase I and Phase II plans for implementation, and the Colorado federal district court retained jurisdiction to enforce the settlement agreement. Phase I was implemented in 2001, and the Forest Service incorporated some of the Chief’s recommendations from the 1999 ruling. From 2001 through 2005, the Forest Service conducted a more detailed analysis of the Black Hills National Forest in preparation for the Phase II amendment. Also during this time, several wildfires ravaged the forest, and a mountain pine beetle infestation spread from 5,200 acres to 100,000 acres. As a result, the Phase II amendment was adjusted to address fire and insect issues.

The Forest Service considered six alternatives to implement the 1997 plan, and ultimately chose the sixth alternative even though some species would be adversely affected because the sixth plan would reduce wildfire risks and reduce the pine beetle infestation. In October 2005, the Forest Service began implementing Alternative 6 as the Phase II amendment. In 2006, Biodiversity challenged the Phase II amendment, but the Chief upheld it. In separate administrative cases, Biodiversity also challenged nine specific projects implemented as part of the Phase II amendment. The Chief denied all nine challenges, upholding the last in January 2011.

Biodiversity filed suit in Wyoming federal district court in October 2011, petitioning for agency review under the Administrative Procedures Act. In November 2012, the Wyoming court upheld the Forest Service’s action, and it denied a motion for reconsideration in April 2013. Biodiversity timely appealed.

Meanwhile, the Beaver Park litigation initiated by Biodiversity in 1999 lay dormant. After its defeat in Wyoming, Biodiversity attempted in May 2013 to reopen the Colorado case. The district court denied its motion, determining that laches barred enforcement of Biodiversity’s rights under the settlement agreement. Biodiversity timely appealed this ruling also, and the appeals were consolidated for Tenth Circuit review.

The Tenth Circuit reviewed Biodiversity’s challenges as final agency actions under the Administrative Procedures Act. Both parties agreed that each of Biodiversity’s plaintiffs established Article III standing. Biodiversity pursued review under 5 U.S.C. § 706(2)(A), arguing that the agency action was arbitrary and capricious. Biodiversity asserted violations of the NFMA and the NEPA.

The Tenth Circuit conducted a detailed analysis of each implicated section of the NFMA and NEPA. Where sections were ambiguous, the Tenth Circuit deferred to the Forest Service’s interpretation unless that interpretation was manifestly unreasonable. Regarding the population data requirement, the Tenth Circuit found that the regulation was ambiguous, and although Biodiversity raised a competing interpretation, deference was due to the Forest Service because its resolution of the ambiguity was reasonable. Regarding the Forest Service’s species viability analyses generally, Biodiversity argued that the Phase II amendment failed to ensure species viability for the Northern Goshawk, snag-dependent species, and sensitive plants. The Forest Service examined these particular species and adopted a different approach than that proposed by Biodiversity. Biodiversity failed to explain why its analysis was preferential to the Forest Service’s, however, so the Tenth Circuit deferred to the Forest Service’s scientific analyses.

Biodiversity argued the Phase II amendment failed to provide heightened protections for Research Natural Areas (RNAs) and Botanical Areas. Specifically, it alleged the Forest Service allowed livestock to graze on RNAs without specific management plans in place. However, there are no timelines for implementation of RNA management plans, and the Forest Service developed a plan as part of the 2005 Phase II implementation. Biodiversity failed to show that the Forest Service’s delay was unreasonable. As for the Botanical Areas, the Forest Service addressed these in its 1997 plan. Although Biodiversity argued the Forest Service failed to adequately monitor the well-being of the Botanical Areas, the Tenth Circuit’s APA review is narrow and examines only if the Forest Service had a rational explanation, which the Tenth Circuit found it did.

Biodiversity argued that the Forest Service failed to conduct a proper suitability and capability analysis for livestock grazing. The Tenth Circuit found no reason to conclude the Forest Service’s analysis was unreasonable, erroneous, or inconsistent with the regulation.

Biodiversity also argued that the Forest Service violated NEPA because it failed to consider no grazing alternatives in its Phase II amendment, it failed to take a “hard look” at how the amendment would affect sedimentation in Black Hills waterways, and it failed to take a “hard look” at historical grazing practices before authorizing grazing. The Tenth Circuit found no error in the Forest Service’s actions, finding instead that the Forest Service considered two no grazing alternatives, it contemplated sedimentation using Biodiversity’s proposed resources, and the Forest Service considered past grazing practices in determining that Alternative 6 was the best way to implement Phase II.

Turning to the Colorado claim, the Tenth Circuit agreed with the district court that the doctrine of laches barred Biodiversity’s assertion of the breach of settlement agreement claims. Biodiversity waited 6 1/2 years to file its suit alleging breach of the agreement, and that delay was unreasonable. The district court ruled the delay prejudiced the Forest Service, and the Tenth Circuit found no reason to disturb those findings.

The Tenth Circuit affirmed the Wyoming court’s denial of Biodiversity’s petition to review under the APA and affirmed the Colorado court’s dismissal of Biodiversity’s action to enforce the settlement agreement.

Tenth Circuit: Unpublished Opinions, 8/11/2014

On Monday, August 11, 2014, the Tenth Circuit Court of Appeals issued no published opinion and six unpublished opinions.

United States v. Meridyth

United States v. Sanchez

Watters v. Department of Justice

Salary v. United States Government

United States v. Howell

Wicks v. Colvin

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

Tenth Circuit: Habeas Petition Timely Despite Delay Because State Court Eventually Ruled on Merits

The Tenth Circuit Court of Appeals issued its opinion in Fisher v. Raemisch on Tuesday, August 5, 2014.

in January 2001, Michael Fisher was convicted of felony murder, aggravated robbery, and conspiracy to commit aggravated robbery, and in October 2001, he filed a Crim. P. 35(c) application for relief in Colorado state court. Fisher’s counsel set a notice of hearing in 2006 and the hearing was held three years later. Fisher presented evidence at the 2009 hearing and the state court denied his application on the merits. Fisher appealed, and the Colorado Court of Appeals affirmed on the merits in 2012. Fisher filed a petition for certiorari in the Colorado Supreme Court, which was denied. Fisher then filed for federal habeas relief in federal district court. The federal court determined that Fisher’s state court Crim. P. 35(c) petition was no longer pending as of October 2004, despite the state court’s rulings in 2006 and 2009, and denied habeas relief on grounds that the petition was untimely. Fisher appealed to the Tenth Circuit.

The Tenth Circuit first addressed Respondents’ argument that the one-year limitation period for habeas relief began on January 8, 2001, when Fisher’s convictions became final. Because Fisher filed an application for state court relief in October 2001, however, the limitations period was tolled while the application was pending. Fisher asserts that the period remained tolled until October 2012, when the Colorado Supreme Court denied certiorari. Respondents argue that Fisher abandoned his application by not requesting an expeditious determination. The Tenth Circuit disagreed with Respondents, ruling that an application does not stop pending at the time that it could be deemed abandoned. Because the state court eventually ruled on Fisher’s Crim. P. 35(c) application, this implied that the state courts never deemed Fisher’s application abandoned. No court has suggested that an action automatically terminates when its bringer fails to request expeditious ruling. Since the federal interpretation of “pending” indicates final resolution in state court, Fisher’s action did not terminate until the Colorado Supreme Court denied certiorari.

The Tenth Circuit found Fisher’s habeas petition timely and reversed and remanded for hearing on the habeas petition.

Tenth Circuit: Statements in Articles, When Read in Context, Revealed Nasty Employment Dispute but Did Not Constitute Defamation

The Tenth Circuit Court of Appeals issued its opinion in Hogan v. Winder on Tuesday, August 5, 2014.

Beginning in 2008, Chris Hogan worked for the Utah Telecommunications Open Infrastructure Agency (UTOPIA), a state agency charged with upgrading high-speed internet access, as a consultant under a professional services agreement. In 2011, Hogan suspected that UTOPIA’s executive director unfairly favored a bid for services from a company where the director’s brother worked. Hogan discussed his suspicions with the plant manager overseeing the contractor selection process, the plant manager discussed that conversation with the executive director, and the executive director terminated Hogan’s employment.

The day after the termination, the mayor of West Valley City, Utah, Michael Winder, requested an interview with Hogan. At that meeting, Hogan began to suspect that Winder was associated with UTOPIA. Hogan then hired an attorney who sent UTOPIA a draft complaint, alleging wrongful discharge and several contract claims. The attorney also sent UTOPIA a letter that Hogan would be amenable to settling the dispute. The attorney sent UTOPIA another letter a few days later, raising four demands for settlement and suggesting that the public scrutiny from Hogan’s lawsuit could destroy the company. UTOPIA’s attorney responded with a letter saying that the common terms for Hogan’s attorney’s demands were “extortion” and “blackmail.” Shortly after these exchanges, both parties filed suit. UTOPIA requested the state court to seal the record. Hogan filed suit in federal court and, after the Salt Lake Tribune wrote a story about the lawsuit, UTOPIA moved to seal the record in the federal suit as well. The state court denied the motion to seal, and UTOPIA voluntarily dismissed its case and its motions to seal. Five days later, an online media outlet published a story titled “Former UTOPIA contractor accused of extortion.” It was later revealed that Winder pseudonymously wrote the article. Other news outlets published condensed versions of Winder’s article. Hogan sued UTOPIA, Winder, the city, and a number of other persons he believed to be involved in the publication of the articles, alleging defamation, false invasion of privacy, intentional infliction of emotional distress, and § 1983 violations.  The district court dismissed all his claims and Hogan appealed to the Tenth Circuit.

The Tenth Circuit affirmed the district court’s dismissal, examining each claim in turn. The Tenth Circuit noted that the potentially defamatory statements were explained by the articles’ context. Examined in context, the Tenth Circuit found that any reasonable reader would realize the parties were embroiled in a nasty employment dispute and would not take the statements at face value. Likewise, Hogan’s arguments that the statements portrayed him in a false light fail, because taken in context, any reasonable reader would recognize that the statements were made during a nasty employment dispute. As to Hogan’s claims regarding intentional infliction of emotional distress, the statements do not meet Utah’s high standard requiring outrageousness, and these claims fail as well. Finally, the Tenth Circuit addressed Hogan’s § 1983 civil rights claims. The district court concluded that Hogan failed to show the officials were acting under the color of state law while publishing the articles, and the Tenth Circuit agreed.

The judgment of the district court was affirmed.

Tenth Circuit: Significant Evidence of Monopolization Precluded Summary Judgment Against Plaintiff

The Tenth Circuit Court of Appeals issued its opinion in Lenox Maclaren Surgical Corp. v. Medtronic, Inc. on Tuesday, August 5, 2014.

Lenox Maclaren Surgical Corp. manufactures bone mills, a type of instrument used in spinal fusion surgery. In 2000, Lenox began to sell bone mills to a Medtronic entity, but that Medtronic entity initiated a recall of Lenox’s products and began selling bone mills produced by a different Medtronic entity. Lenox sued the Medtronic entities for monopolization and attempted monopolization from 2007 through 2010. The district court granted summary judgment to Medtronic, and Lenox appealed on five issues: (1) foreclosure of issues due to res judicata; (2) definition of the product market; (3) Medtronic’s monopoly power; (4) Medtronic’s acquisition of monopoly power through exclusionary practices; and (5) harm to competition from Medtronic’s monopoly powers.

The Tenth Circuit first addressed Medtronic’s claim that Lenox’s suit was barred by the doctrine of res judicata, since Lenox could have raised these issues when the parties engaged in arbitration prior to the district court’s grant of summary judgment. In that binding arbitration, a panel found that Medtronic had insufficient proof to justify its recall of the Lenox bone mills and the company had taken action to clear Lenox from the market. In the action before the district court, Medtronic moved for dismissal based on res judicata, but the district court denied the motion. Medtronic did not raise the res judicata claim in its motion for summary judgment. The Tenth Circuit ruled that Lenox had no need to confront an argument not raised in the motion and declined to address the issue.

Turning to the monopolization issue, the Tenth Circuit disagreed with the district court’s grant of summary judgment, ruling that there were genuine issues of disputed fact which precluded summary judgment. In order to prevail on the monopolization claim, Lenox had to prove (1) monopoly power in the relevant market, (2) willful acquisition of this power through exclusionary conduct, and (3) harm to competition. The district court ruled that Lenox had not created a triable issue of fact on the relevant product market, monopoly power, willful acquisition, or harm, but the Tenth Circuit disagreed.

The Tenth Circuit first identified the relevant product market as the market for other bone mills, despite the fact that hand tools can be used to mill bone, because Lenox presented expert testimony regarding surgeons’ preference for bone mills, a substantial price difference exists between bone mills and hand tools, and Medtronic’s market literature identifies its competition as other bone mills. Because of potential factual disputes on this issue, summary judgment is precluded.

Next, the Tenth Circuit addressed Medtronic’s monopoly power in the bone mill market and determined that Lenox showed sufficient evidence of market share and barriers to entrance to infer that Medtronic had monopoly power in the market. Medtronic’s own literature showed that it had a majority share of the bone mill market during the years in question, with its lowest market share at 65% and its highest at 97-98%. Lenox’s expert testified as to barriers to market entrance. The evidence on market share and barriers created reasonable disputes of material fact and precluded summary judgment.

The Tenth Circuit then turned to the issue of Medtronic’s anticompetitive conduct and found that Lenox presented significant evidence from which a fact-finder could infer anticompetitive conduct. Applying the more stringent 6-factor disparagement test, the Tenth Circuit found that Lenox had alleged facts sufficient to infer anticompetitive conduct, including Medtronic’s reasonless recall of Lenox’s products and Medtronic’s statements to hospitals about the recalls, thus inducing consumers to avoid the Lenox product and causing harm to Lenox.

The Tenth Circuit ruled that Lenox presented significant evidence to support a finding on each element of its claim for actual monopolization, and this evidence precluded summary judgment to Medtronic. The district court’s judgment was reversed and the case was remanded for additional proceedings.

Tenth Circuit: Unpublished Opinions, 8/8/2014

On Friday, August 8, 2014, the Tenth Circuit Court of Appeals issued three published opinions and one unpublished opinion.

Morrison v. Kache

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

Tenth Circuit: No Speedy Trial Violation for Continuances Requested by Defendants

The Tenth Circuit Court of Appeals issued its opinion in United States v. Banks on Monday, August 4, 2014.

Defendants Banks, Barnes, Harper, Stewart, Walker, and Zirpolo operated or were associated with the entities Leading Team, Inc. (LT) and DKH, Inc. (DKH). In 2003, Defendants stopped operating LT and began operating a third entity, IRP Solutions Corporation (IRP). IRP was formed to develop computer software, and one of its software offerings was purportedly designed for sale to law enforcement to develop a nationwide database for law enforcement.

Beginning in about October 2002, Defendants began contacting various staffing agencies and soliciting payrolling services, in which the staffing agency would hire and pay Defendant’s choice of employee and then Defendant would repay the staffing agencies, plus a small increase for profit for the staffing agency. In order to convince the staffing agencies to agree to the payrolling services, Defendants claimed that their law enforcement database software was on the verge of being sold to the Department of Justice and several law enforcement agencies. Over the course of several years, Defendants received over $5 million in staffing payments from 42 different staffing companies that they did not repay.

Defendants were indicted in June 2009, and in 2011 they were convicted after a jury trial of several counts of wire fraud and mail fraud, and conspiracy to commit wire fraud and mail fraud, and sentenced to various terms of imprisonment ranging from 87 months to 135 months. They appealed, asserting four issues: (1) their speedy trial right was violated when the district court granted four continuances at Defendants’ request; (2) the district court compelled co-defendant Barnes to testify in violation of his Fifth Amendment privilege against self-incrimination; (3) the district court abused its discretion by excluding the testimony of two of Defendants’ potential witnesses; and (4) the cumulative effect of the court’s otherwise harmless errors necessitated reversal.

The Tenth Circuit first examined the speedy trial claim. Four different times, Defendants requested continuances from the district court. Defendants asserted that, due to the prolonged investigation beginning in 2004, discovery in the case was voluminous (totaling over 20,000 pages of documents), and they would not be able to adequately prepare for trial without the continuances. Each time, the district court examined the circumstances and issued findings that the ends of justice served by granting the continuance outweighed the public’s and Defendants’ interest in the speedy trial. Although the total continuance time was quite long, the Tenth Circuit determined no error in the district court’s decisions, finding instead that the unique circumstances of this case, including the high volume of discovery materials and potential witnesses, supported the district court’s decisions to grant continuances. Further, the Tenth Circuit noted that each continuance was requested by Defendants, and they could not assert prejudice from delays they requested.

Next, the Tenth Circuit turned to Defendants’ claim that Barnes was compelled to testify in violation of his Fifth Amendment privilege against self-incrimination and the district court declined to give a curative instruction to satisfy the Sixth Amendment. The Tenth Circuit found that although the district court requested the defense to call a witness, Barnes was not the only witness available to testify at that time, and he testified voluntarily at the behest of his co-defendants. Further, when offered a curative instruction, Barnes declined. The Tenth Circuit found no error in the actions of the district court.

As to the third claim regarding the district court’s denial of testimony by the two defense witnesses, the Tenth Circuit again found no error. The district court denied the testimony because Defendants failed to disclose the witnesses in violation of Federal Rule of Criminal Procedure 16 and Federal Rule of Evidence 702. Although Defendants concede that they violated Rule 16 and FRE 702, they argue that the record reflects their efforts were made in good faith and the court’s chosen remedy of exclusion violated precedent. The Tenth Circuit rejected these claims. The district court had allowed testimony similar to that proffered from the two rejected witnesses, and concluded that the testimony of those two witnesses would be cumulative. The Tenth Circuit found no abuse of discretion in this action.

Finally, the Tenth Circuit addressed Defendants’ argument that the effect of the harmless errors in their case caused cumulative error requiring reversal. The Tenth Circuit rejected this claim, noting that Defendants failed to show any error, much less error requiring reversal.

The district court’s judgment was affirmed.

Tenth Circuit: Opinions Not Enough to Trigger Liability Under Section 11 of the Securities Act

The Tenth Circuit Court of Appeals issued its opinion in MHC Mutual Conversion Fund, L.P. v. Sandler O’Neill & Partners, L.P. on Friday, August 1, 2014.

In 2009, in the immediate aftermath of the financial crisis, Bancorp sought to conduct a secondary stock offering to raise money. In its securities filings, the company informed investors that it had significant assets in mortgage backed securities and those investments had suffered badly, but advisors had predicted that the market would begin to rebound. Those predictions did not, however, pan out, and MHC, one of the investors, suffered losses as a result of Bancorp’s predictions. MHC sued under Section 11 of the Securities Act, but the district court denied its petition with prejudice, ruling that failed market predictions, without more, were not enough to trigger liability. MHC appealed to the Tenth Circuit.

The Tenth Circuit reviewed the district court’s decision for error and found none. Upon detailed review of Section 11 of the Securities Act, the Tenth Circuit determined that mere opinions are not enough to trigger liability. The offerer of the opinion must know it to be false and harm must come to the entity relying on the opinion in order to trigger liability. Because nothing in the record supported an inference that Bancorp did not believe its opinion to be true, this test was not met.

MHC also argued that by offering the erroneous opinion, Bancorp did not fulfill its requirement of due diligence. The Tenth Circuit first expressed dissatisfaction with this argument because securities offerers are not fiduciaries and should not be held to a fiduciary standard. Next, the Tenth Circuit determined that Bancorp made the necessary warnings and disclaimers to its potential investors that if its opinion turned out to be false, the company would face significant additional losses.

Finally, MHC argued that Bancorp’s assertions violated section 10(b) of the Securities Act. To show a violation of section 10(b), though, the plaintiff must prove that defendant made an untrue statement of material fact with intent to defraud or with reckless disregard for the truth. However, plaintiffs did not allege facts sufficient to make a strong showing of scienter in the Bancorp opinion.

The district court’s opinion was affirmed.