July 7, 2015

Tenth Circuit: Unpublished Opinions, 6/18/2015

On Thursday, June 18, 2015, the Tenth Circuit Court of Appeals issued no published opinion and four unpublished opinions.

United States v. Osborne

Santos-Mendoza v. Lynch

Martinez v. Southwest Cheese Co. LLC

Barnes v. Colvin

Case summaries are not provided for unpublished opinions.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

Tenth Circuit: Prejudgment Interest Due from Date Entitlement to Benefits Shown, Not Date of Breach

The Tenth Circuit Court of Appeals issued its opinion in Folks v. State Farm Mutual Automobile Insurance Co. on Tuesday, April 28, 2015.

Roberta Folks was injured in 1998 when, as a pedestrian, she was struck by the sideview mirror of a passing car. Ms. Folks received PIP benefits from State Farm, the driver’s insurer, until she exhausted the benefits in 2002. She joined a lawsuit seeking additional benefits in 2004, in which lawsuit she unsuccessfully attempted to certify a class three times. In response to her last failed attempt in 2011, the district court determined she failed to satisfy the requirements of Rule 23(a) and Rule 23(b)(2) and denied class certification. In 2012, a jury decided in Ms. Folks’ favor, and in 2013 the district court amended the judgment to correct errors in the damages calculation. Ms. Folks appealed, challenging the district court’s denial of class certification, calculation of treble damages for willful and wanton conduct, and calculation of prejudgment interest.

First examining Ms. Folks’ argument that the district court erred in finding Ms. Folks had not properly demonstrated relief was appropriate as to the class as a whole, the Tenth Circuit found the issue was not properly preserved for appeal. Although Ms. Folks pointed to several places in the record where she believes she sought class-wide notice, the Tenth Circuit determined that, because class-wide notice is different than notice apprising of a lawsuit, these claims were not preserved. Additionally, Ms. Folks did not show that she sought a certification ruling on class-wide notice, which waived the argument for purposes of appeal.

Turning to the calculation of damages in Ms. Folks’ individual case, the Tenth Circuit found the district court had correctly trebled only the $40,000 damage award for willful and wanton conduct under C.R.S. § 10-4-708(1.8) (now repealed). Ms. Folks argues the court should have trebled the damages and also applied the original damage award, for a total of $160,000, but the Tenth Circuit looked to prior circuit precedent and the Colorado Supreme Court to refute this claim.

Finally, the Tenth Circuit addressed the district court’s calculation of prejudgment interest, reviewing de novo the district court’s conclusion regarding the date of the breach. State Farm was obligated to pay benefits within 30 days after Ms. Folks demonstrated entitlement. The district court determined State Farm was first obligated to pay benefits on May 13, 2009, when she submitted documentation establishing she was entitled to benefits. Ms. Folks relied on the 2002 coverage exhaustion letter to establish the date of the breach, but statutorily prejudgment interest was due only from the date she established entitlement, not from the date of the original breach. The Tenth Circuit found Ms. Folks was not entitled to additional prejudgment interest.

The Tenth Circuit affirmed the judgment of the district court.

Tenth Circuit: Unpublished Opinions, 6/17/2015

On Wednesday, June 17, 2015, the Tenth Circuit Court of Appeals issued no published opinion and seven unpublished opinions.

Wideman v. Watson

Green v. Commissioner of Internal Revenue

Smith v. Global Staffing

United States v. Yepa

Ciancio v. Patton

Mata v. Jackson County Third Judicial District Court

Winston v. Martin

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

Tenth Circuit: Restitution Must Be Based on Actual Losses Suffered by Victims

The Tenth Circuit Court of Appeals issued its opinion in United States v. Howard on Tuesday, April 28, 2015.

Roger Howard pleaded guilty to three counts of wire fraud and one count of money laundering arising in his participation in three mortgage fraud schemes. The district court sentenced Howard to 108 months’ imprisonment and ordered him to pay $8,862,191.18 in restitution. Howard appealed, arguing the district court improperly increased his offense level by miscomputing the loss to the mortgage lenders and awarded restitution without evidence of the victims’ actual losses.

The Tenth Circuit first addressed Howard’s offense level argument. Under the fraud sentencing guideline, the offense level is based on the amount of loss. The district court calculated the loss based on the unpaid portion of the loan and determined it to be $8,862,191.18, which required an offense level of 20 because it was between $7 and $20 million. Defendant disputed the loss calculations, arguing the government’s evidence was insufficient to support $709,588 in losses on eight loans, the court should have reduced the loss amount by $973,935 to account for interest payments, and the court should not have included $313,261 in losses to a downstream noteholder. However, Defendant failed to raise his loss arguments below, and the Tenth Circuit evaluated for plain error. Finding none, the Tenth Circuit affirmed the district court’s offense level calculation.

As to the restitution calculation, Defendant argued the court wrongly computed the total amount due on the loans rather than the harm suffered by individual victims in calculating loss. The Tenth Circuit noted that under the Mandatory Victims Restitution Act, restitution is intended to make victims whole and cannot unjustly enrich them. By calculating restitution based on the amount due on the loans rather than the amount of loss actually suffered by victims, the district court applied an incorrect methodology. The Tenth Circuit remanded for the district court to vacate its restitution award and redetermine restitution based on actual victim losses.

The judgment of the district court was affirmed in part, reversed in part, and remanded for further proceedings.

Tenth Circuit: “Reverse Preemption” Deprived District Court and Tenth Circuit of Subject Matter Jurisdiction

The Tenth Circuit Court of Appeals issued its opinion in Western Insurance Co. v. A & H Insurance Inc. on Friday, April 24, 2015.

Western Insurance is insolvent and being liquidated in Utah state court. The liquidator brought suit against several of Western’s “affiliates” to recover funds Western had transferred to them. The defendants removed the ancillary proceeding to federal court under diversity jurisdiction, and the liquidator sought a remand, which the district court granted. Defendants appealed.

Because insolvent insurers are exempt from federal bankruptcy protection, state law governs insurer insolvency proceedings. After the defendants removed the case to federal court, liquidators argued the McCarran-Ferguson Act barred removal, as it is essentially a “reverse preemption” doctrine. The district court remanded “for the reasons stated on the record.”

The Tenth Circuit first evaluated its jurisdiction and found it could only proceed to entertain the appeal if the remand order was not based on lack of subject matter jurisdiction. In its order, the district court made several contradictory statements regarding its rationale for remand, leaving it unclear whether it relied on the McCarran-Ferguson Act’s “reverse preemption” in its remand order. However, the Tenth Circuit found that the bulk of the district court’s decision focused on the McCarran-Ferguson Act. Because the district court’s remand was based to a fair degree on lack of subject matter jurisdiction, the Tenth Circuit found it lacked jurisdiction to hear the appeal.

The appeal was dismissed.

Tenth Circuit: Mere Possession Not Enough to Support Distribution Charge

The Tenth Circuit Court of Appeals issued its opinion in United States v. Washington on Wednesday, April 22, 2015.

Two men made a car trip to McAlester, Oklahoma, and were arrested after an anonymous tipster alerted the police that their car contained drugs. In a related appeal, the Tenth Circuit found no error in co-defendant Maurice Edwards’ conviction. However, the Tenth Circuit reversed Anthony Washington’s conviction, finding the evidence insufficient to support the charges.

Police recovered roughly 7.5 kilograms of marijuana and 28 to 29 grams of methamphetamine, most of which were in a black duffel bag labeled with Edwards’ name and containing a receipt with Edwards’ signature. Drugs were also found in a red Cold-Eze box, a black bag, and a container for Green Tea Extract. Although both men were in the car with the drugs, mere presence was not enough to form the basis for Washington’s conviction. The prosecution argued that because drugs and scales were in the car, the car smelled strongly of marijuana, aluminum foil was present near Washington’s notebook, and Washington was present when Edwards borrowed the car from his mother, these facts supported an inference that he knew of the drugs and the sale.

The Tenth Circuit analyzed the evidence, and found that although Edwards’ luggage contained fourteen bricks of marijuana, there were no drugs or other incriminating evidence in Washington’s luggage. Further, there was no evidence that Washington could have seen inside Edwards’ duffel or the Cold-Eze box or Green Tea Extract bottle. As to the two scales in the car, the Tenth Circuit found they were not easily visible—one was designed to look like a regular iPhone and the other was in a black box.

The Tenth Circuit next addressed the inference from the strong marijuana smell and the aluminum foil, finding both suggested consumption and not distribution. Washington could have known about the small, personal use quantities of drugs without having knowledge that there were enough drugs in the car to sell. Because he was convicted of possession with intent to distribute or aiding and abetting that offense, mere possession was not enough to support conviction.

The Tenth Circuit addressed what it characterized as misinterpretations of evidence and testimony, and again found they did not support the distribution charge. The district court’s judgment was reversed and remanded with instructions to dismiss the indictment.

Tenth Circuit: Unpublished Opinions, 6/16/2015

On Tuesday, June 16, 2015, the Tenth Circuit Court of Appeals issued two published opinions and three unpublished opinions.

Brooks v. Board of Education Farmington Municipal Schools

United States v. Quoyah

United States v. Gaines

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

Tenth Circuit: Unpublished Opinions, 6/15/2015

On Monday, June 15, 2015, the Tenth Circuit Court of Appeals issued no published opinion and two unpublished opinions.

Mejia v. Sorenson

Mbaku v. Bank of America, N.A.

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

Tenth Circuit: Tort Claims Against Medical Supplier Preempted by Medical Devices Amendments to FDCA

The Tenth Circuit Court of Appeals issued its opinion in Caplinger v. Medtronic, Inc. on Tuesday, April 21, 2015.

Patricia Caplinger had a bone stimulator device implanted in a non-approved fashion after the Medtronic company representative encouraged her surgeon to implant it using the “off-label” approach. She suffered adverse consequences from the implantation and discovered the company knew of the risks of using the device in the way the representative had encouraged her surgeon to try. Ms. Caplinger alleged Medtronic was liable under a number of state tort theories, but the district court held the claims were either insufficiently pleaded or preempted. Ms. Caplinger appealed.

The Tenth Circuit first noted that § 360k(a) of the Medical Devices Amendments (MDA) to the Federal Food, Drug, and Cosmetics Act (FDCA) preempts “any requirement” imposed by states on manufacturers of medical equipment that differs from or adds to those found in the FDCA. Although the expansive preemption language seems to foreclose any state tort suits, Supreme Court precedent allows some tort claims. Addressing Ms. Caplinger’s claims for strict products liability, breach of warranty, negligent misrepresentation, and negligence, the Tenth Circuit found the MDA preempted all her claims. In her complaint, Ms. Caplinger failed to identify any parallel federal statutes to the state regulations. The Tenth Circuit upheld the district court’s judgment as a matter of law in favor of Ms. Caplinger. The Tenth Circuit similarly disregarded Ms. Caplinger’s argument that the off-label use contemplated by her suit insulated her claims for preemption.

The Tenth Circuit affirmed the district court. Judge Lucero wrote a thoughtful and detailed concurrence.

Tenth Circuit: FDIC Exclusively Holds Claims Against Failed Bank’s Holding Company

The Tenth Circuit Court of Appeals issued its opinion in Barnes v. Harris on Tuesday, April 21, 2015.

The Barnes Banking Company (“bank”) began engaging in risky lending practices in the 2000s, leading to its ultimate demise in January 2010. The FDIC was appointed as receiver. In January 2012, J. Canute Barnes filed a derivative shareholder complaint in Utah state court against Barnes Bancorporation (“holding company”), parent of the bank, alleging breach of fiduciary duty. Attached to the Utah complaint was a demand letter alleging the bank was the holding company’s sole asset. The initial complaint stated the defendants were sued in their capacity as officers and directors of the holding company and not the bank. The FDIC filed a motion to intervene in state court, arguing it possessed sole statutory authority under FIRREA to assert the derivative claims at issue. The FDIC then removed the case to federal court.

The district court granted a motion to amend the complaint to include two additional shareholders, W. King Barnes and Robert Jones. Plaintiffs filed a motion to remand to state court, arguing the FDIC was not a party to the case because it had not filed a pleading, which motion was denied. Plaintiffs then moved to dismiss the FDIC for failure to state a claim. The FDIC filed its own motion to dismiss, and defendants moved for judgment on the pleadings. The district court denied plaintiffs’ motion to dismiss, granted in part the motions filed by defendants and the FDIC, and dismissed most of plaintiffs’ claims with prejudice while allowing some to be re-pled. Plaintiffs’ second amended complaint attempted to re-describe the bank as the holding company’s “primary asset,” but the focus of the complaint was still the harm suffered by the bank’s failure. The second amended complaint also alleged the bank received a $9 million tax return, which should have been in part distributed to the holding company, and that the holding company misused $265,000 by paying insurance premiums and retaining counsel. Both FDIC and defendants moved to dismiss the second complaint, which the district court granted. Plaintiffs appealed.

The Tenth Circuit first considered the district court’s jurisdiction. Through FIRREA, the FDIC is deemed a party, and the case is deemed to arise under federal law. The district court therefore had jurisdiction to hear the complaints. Plaintiffs argue the FDIC lacked jurisdiction because it never filed a pleading. The Tenth Circuit found the case on which plaintiffs relied inapposite to that assertion. Because FDIC was permitted to intervene in state court, it became a party to the proceeding, and jurisdiction was exclusive in the district court under FIRREA.

The Tenth Circuit proceeded to examine the merits. Once the FDIC is appointed as a receiver, FIRREA grants it all rights, powers, and privileges of the bank with respect to the assets of the bank, including those of the holding company. The question of whether FIRREA applies to cases in which a breach of fiduciary duty suit is brought against a bank holding company’s officers after the bank has gone into receivership was one of first impression in the Tenth Circuit. The Tenth Circuit examined similar cases from other jurisdictions, as well as Utah corporate law, and determined that FIRREA applies. The majority of plaintiffs’ claims were derivative, reaching the holding company only because of the harms of the bank. Those claims belong to the FDIC.

The Tenth Circuit found similarly that the $9 million tax return belonged exclusively to the bank and therefore the FDIC was the only party entitled to the return. The tax refund due from a joint return generally belongs to the company responsible for the losses that formed the basis for the return, and due to the receivership, the entire refund belongs to the FDIC.

Finally, the Tenth Circuit addressed the claims that the holding company misused $265,000 by using the funds to pay insurance premiums and legal fees. The Tenth Circuit, like the district court, found these claims inadequately pleaded. Plaintiffs were in a privileged position and could have examined the holding company’s records to find support for their claims. Plaintiffs further failed to explain how the expenditures constituted an actionable wrong. The Tenth Circuit upheld the district court’s dismissal of this claim.

Expressing sympathy for the plaintiffs’ position, the Tenth Circuit recognized the broad scope of the FDIC’s authority in dealing with the aftermath of a bank failure, and admonished bank holding company shareholders to take action prior to the bank’s collapse to stave off the collapse and protect their assets. The Tenth Circuit affirmed the district court.

Tenth Circuit: Fish & Wildlife Service Appropriately Evaluated Environmental Impact of Rocky Flats Transportation Improvement

The Tenth Circuit Court of Appeals issued its opinion in WildEarth Guardians v. United States Fish & Wildlife Service on Friday, April 17, 2015.

WildEarth Guardians, Rocky Mountain Wild, and the Town of Superior (Appellants) challenged the authority of the U.S. Fish & Wildlife Service (FWS) to construct a parkway through the former Rocky Flats nuclear facility. Rocky Flats was formerly used to manufacture nuclear weapons, and since 1989 the Department of Energy (DOE) has been tasked with a cleanup effort to remediate the land. Under the Rocky Flats Act, Congress designated authority to the DOE to manage the central area of the Flats, which was contaminated by plutonium and other hazardous materials, and transferred the remainder of the land to the FWS to become a National Wildlife Refuge. The Rocky Flats Act further provided the DOE would transfer the remainder of the land to the FWS as soon as the cleanup was complete, and set aside a large parcel of land at the Flats’ border to be used for transportation improvements (specifically, the parkway).

The DOE transferred the remaining land to the FWS in 2007, and the FWS began considering applications for the transportation project jointly with the DOE. Prior to final approval of the land exchange and construction project, the FWS issued two opinions regarding the potential consequences to the Preble’s Meadow Jumping Mouse, a threatened species with a critical habitat in the corridor. The FWS also issued an environmental assessment pursuant to its duties under the National Environmental Policy Act (NEPA). Appellants sued in district court, arguing the FWS violated the Rocky Flats Act, the NEPA, and the Endangered Species Act. The district court rejected all three claims, and Appellants timely appealed.

The Tenth Circuit considered the appeal under the Administrative Procedures Act, evaluating only whether the FWS’s actions were arbitrary and capricious. The Tenth Circuit first addressed Appellants’ argument that the FWS lacked authority to convey the land under the Rocky Flats Act. Applying the Chevron test, the Tenth Circuit found that Congress did not directly discuss whether the FWS could convey the corridor, but by effectuating the intent of Congress and taking the statutory language in context, the Tenth Circuit determined that it was reasonable to assume Congress intended the FWS to convey the corridor for transportation purposes if it had not already been conveyed by DOE. The FWS further asserted it had authority to convey the land under the Refuge Act and Fish and Wildlife Act, and the Tenth Circuit agreed. The Tenth Circuit rejected Appellants’ argument that a catch-all clause in the Rocky Flats Act was meant only to refer to the transportation conveyance, finding that the conveyance was discussed in detail in other parts of the Act, and “Congress knew how to write ‘transportation improvements'” but did not do so in the catch-all clause.

The Tenth Circuit turned next to Appellants’ arguments that the FWS violated NEPA, specifically with respect to contaminated soils, air pollution, and the protected mouse. Appellants argued the FWS erred by issuing an environmental assessment and finding of no significant impact instead of the more formal and detailed Environmental Impact Statement (EIS). Addressing the soil contaminants, particularly plutonium, the FWS relied on a 2006 EPA certification that the soil conditions were acceptable for unlimited use and unlimited exposure. Although Appellants argued the construction workers would be at greater risk for plutonium exposure, the FWS asserted that a 2011 letter from the EPA sufficiently addressed the risk faced by construction workers. The Tenth Circuit found no impropriety in the FWS’s reliance on the certification and letter and found no NEPA violation regarding the contaminated soils. The Tenth Circuit similarly dismissed Appellants’ contention of a NEPA violation regarding air pollution. Appellants argued the FWS failed to consider 2008 air quality standards when contemplating the transportation improvement. However, the FWS’s action occurred in 2006, and the Tenth Circuit found it unreasonable to expect the FWS to comply with an act that was not yet in existence. Finally, as to the protected mouse, the Tenth Circuit found support for the FWS action because the FWS considered the mouse habitat and found it would not be significantly affected by the transportation improvement. The Tenth Circuit noted the FWS appropriately issued an incidental take statement regarding the mouse.

The Tenth Circuit affirmed the district court’s rejection of Appellants’ claims. Appellants had requested leave to file a supplemental appendix, which the Tenth Circuit denied, and it also denied the FWS’s request to file supplemental rebuttal appendix documents as moot.

Tenth Circuit: Unpublished Opinions, 6/12/2015

On Friday, June 12, 2015, the Tenth Circuit Court of Appeals issued one published opinion and one unpublished opinion.

Reyes-Garcia v. Lynch

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