August 24, 2019

Archives for August 29, 2013

U.S. Justice Department Announces Update to Marijuana Enforcement Policy

On August 29, 2013, the U.S. Department of Justice announced an update to its federal marijuana enforcement policy in light of recent state ballot initiatives that legalize, under state law, the possession of small amounts of marijuana and provide for the regulation of marijuana production, processing, and sale.

In a new memorandum outlining the policy, the Department makes clear that marijuana remains an illegal drug under the Controlled Substances Act and that federal prosecutors will continue to aggressively enforce this statute. To this end, the Department identifies eight (8) enforcement areas that federal prosecutors should prioritize.  These are the same enforcement priorities that have traditionally driven the Department’s efforts in this area and include preventing revenue from the sale of marijuana from going to criminal enterprises, gangs, or cartels and preventing marijuana from being diverted from a state where it is legal to a state where it is not.

For states such as Colorado and Washington that have enacted laws to authorize the production, distribution and possession of marijuana, the Department expects these states to establish strict regulatory schemes that protect the eight federal interests identified in the Department’s guidance. These schemes must be tough in practice, not just on paper, and include strong, state-based enforcement efforts, backed by adequate funding. Based on assurances that those states will impose an appropriately strict regulatory system, the Department has informed the governors of both states that it is deferring its right to challenge their legalization laws at this time.  But if any of the stated harms do materialize—either despite a strict regulatory scheme or because of the lack of one—federal prosecutors will act aggressively to bring individual prosecutions focused on federal enforcement priorities and the Department may challenge the regulatory scheme themselves in these states.

A copy of the memorandum, sent to all United States Attorneys by Deputy Attorney General James M. Cole, is available here.

Colorado Court of Appeals: Announcement Sheet, 8/29/13

On Thursday, August 29, 2013, the Colorado Court of Appeals issued three published opinions and 41 unpublished opinions.

People v. Jauch

Premier Members Federal Credit Union v. Einspahr

Hickman v. Catholic Health Initiatives

Summaries for these cases are forthcoming, courtesy of The Colorado Lawyer.

Neither State Judicial nor the Colorado Bar Association provides case summaries for unpublished appellate opinions. The case announcement sheet is available here.

Tenth Circuit: Tax Injunction Act Precluded Federal Jurisdiction in Colorado’s E-Commerce Use Tax Reporting Requirements Case

The Tenth Circuit Court of Appeals published its opinion in Direct Marketing Ass’n v. Brohl on Tuesday, August 20 2013.

Colorado imposes a 2.9% use tax on tangible goods stored, used, or consumed in the state when no sales tax has been paid. Because the dormant Commerce Clause prohibits Colorado from forcing retailers with no in-state physical presence to collect and remit taxes on sales to Colorado consumers, the state requires its residents to report and pay use taxes to the Department with their income tax returns. In 2010 the Colorado legislature enacted statutory requirements for non-collecting retailers. The statute and its implementing regulations impose three principal obligations on non-collecting retailers whose gross sales in Colorado exceed $100,000: they must (1) provide transactional notices to Colorado purchasers, (2) send annual purchase summaries to Colorado customers, and (3) annually report Colorado purchaser information to the Department.

The Direct Marketing Association (DMA) sued the Department of Revenue’s executive director, challenging the constitutionality of the state’s new notice and reporting requirements. The district court concluded that Colorado’s requirements for non-collecting retailers discriminated against and placed undue burdens on interstate commerce, in violation of the Commerce Clause and entered a permanent injunction prohibiting enforcement of the state requirements. The Department appealed.

The Tenth Circuit did not reach the Commerce Clause issue on appeal because it held that the Tax Injunction Act (TIA) precluded federal jurisdiction over DMA’s claims. The TIA provides that “district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State.”

The DMA argued that it sought to avoid notice and reporting obligations, not a tax, so the TIA did not apply. The court disagreed. “The purposes of the TIA apply both to a lawsuit that would directly enjoin a tax and one that would enjoin a procedure required by the state’s tax statutes and regulations that aims to enforce and increase tax collection.” The court also found that a plain, speedy and efficient remedy is available to retailers subject to the Colorado law.

The court remanded to the district court to dismiss DMA’s Commerce Clause claims for lack of jurisdiction and to dissolve the permanent injunction.

Tenth Circuit: Internal Corporate Policy Could not Provide Basis for Wrongful Discharge in Violation of Public Policy Claim

The Tenth Circuit Court of Appeals published its opinion in Genova v. Banner Health on Tuesday, August 20 2013.

Plaintiff, Dr. Ron Genova, was an emergency room physician for Banner Health (Banner) at a Greeley hospital. Rick Sutton was the administrator who discontinued Genova’s services, citing unprofessional behavior prior to and when Genova called him to say the emergency room should be temporarily closed to new patients because it was too busy. Genova sued Banner and Rick Sutton, alleging state law claims and retaliation against him for complaining about overcrowded emergency room conditions, and that the hospital’s conduct violated the Emergency Medical Treatment and Active Labor Act (EMTALA). The district court granted summary judgment for the defendants.

The Tenth Circuit found that the plain language of EMTALA did not provide a cause of action for Genova as it prohibits hospitals dumping patients, not holding on to too many patients.

The court also found Genova’s state law claims failed because he had a contract with Banner that expressly waived any right to sue Banner for any claims related to the termination of his medical staff membership. Genova argued the enforcement of this release violated public policy. In considering this claim, the court overlooked the fact that Genova was not an employee of Banner. The court found the two sources of public policy identified by Genova did not apply. His reading of EMTALA was incorrect and the hospital’s internal corporate policy could not provide a wrongful discharge in violation of public policy claim because they are clearly not public. The court affirmed.

Tenth Circuit: FIRREA’s Extender Statute Applies to Allow NCUA’s Cases on Behalf of Failed Credit Unions to Go Forward

The Tenth Circuit Court of Appeals published its opinion in National Credit Union Administration Board v. Nomura Home Equity Loan on Tuesday, August 27, 2013.

U.S. Central Federal Credit Union (“U.S. Central”) was the largest federally chartered credit union in the country before it failed in 2009. In 2006 and 2007, U.S. Central invested in RMBS. RMBS are created through securitization by pooling residential mortgage loans and offering prospective investors the opportunity to invest in a loan pool through purchase of RMBS certificates granting ownership of a slice of the loan pool. Investors can buy, sell, or hold RMBS certificates. When homebuyers pay back their loans, investors receive a positive return through payment of dividends and the increased value of the certificates.

U.S. Central purchased 29 RMBS certificates. When U.S. Central made these purchases, nearly all certificates were assigned the highest possible investment rating, indicating they were low-risk investments. But over the next four years, most of the certificates performed so poorly that their credit ratings were downgraded to well below investment grade. In other words, the certificates were reclassified to a credit rating commonly referred to as “junk” grade.

The RMBS of Corporate Federal Credit Union (“WesCorp”) were also highly rated at the time of purchase, but experienced a surge in borrower delinquencies and defaults, resulting in significant losses and a collapse of their credit ratings. This resulted in staggering losses for both credit unions, and losses from these failed investments contributed to the demise of both organizations.

After taking over the credit unions, The National Credit Union Administration (“NCUA”) investigated the RMBS. NCUA concluded that the offering documents contained materially false and misleading statements about the credit worthiness of the mortgage borrowers and the underwriting practices used by originators of the mortgages. NCUA claimed these materially false and misleading statements concealed underwriters’ shoddy practices and systematic disregard of the guidelines and industry standards.

NCUA placed the two credit unions into conservatorship and sued 11 defendants on behalf of U.S. Central, alleging federal and state securities violations. In a separate case, NCUA sued one defendant on behalf of U.S. Central and WesCorp, alleging similar violations.

The cases were consolidated in the United States District Court for the District of Kansas. Defendants moved for dismissal, arguing that NCUA’s claims were time-barred. The district court denied the motion, concluding that the so-called Extender Statute applied to NCUA’s claims. See 12 U.S.C. § 1787(b)(14). Defendants moved for an interlocutory appeal for the Tenth Circuit to determine whether the Extender Statute applied to NCUA’s claims.

In the wake of the savings and loan crisis of the 1980s, Congress passed the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”). FIRREA’s purpose is to strengthen government regulation of federally chartered or insured financial organizations. FIRREA contains provisions often referred to as “extender statutes,” which extend the time period for a government regulator to bring “any action” on behalf of a failed financial organization. One applies to NCUA, 12 U.S.C. § 1787(b)(14). It reads in part:

(A)     In general
Notwithstanding any provision of any contract, the applicable statute of limitations with regard to any action brought by the Board as conservator or liquidating agent shall be—
(i) in the case of any contract claim, the longer of—
(I) the 6-year period beginning on the date the claim accrues; or
(II) the period applicable under State law; and
(ii) in the case of any tort claim, the longer of—
(I) the 3-year period beginning on the date the claim accrues; or
(II) the period applicable under State law.

Further, Sections 11 and 12(a)(2) of the Securities Act of 1933 impose liability on certain participants in a registered securities offering that involves material misstatements or omissions. Section 11 applies to registration statements, and Section 12(a)(2) applies to prospectus materials and oral communications. For private litigants bringing a claim under Sections 11 or 12(a)(2), two deadlines must be satisfied. Both appear in Section 13 of the Securities Act. First, a claim must be brought within one year from the date the violation is discovered or should have been discovered through the exercise of reasonable diligence. Second, a claim is subject to a three-year limit, which provides that “[i]n no event” shall a claim under Section 11 be filed “more than three years after the security was bona fide offered to the public,” and no “more than three years after the sale” in the case of a Section 12(a)(2) claim.

Defendants made two arguments that NCUA’s claims were untimely. First, they argued that the Extender Statute did not apply to repose periods and that Section 13’s three-year period was a repose period. A statute of repose is a fixed, statutory cutoff date, usually independent of any variable, such as claimant’s awareness of a violation. In a statute of repose, the bar is tied to an independent event.

The court applied a plain meaning analysis. The Tenth Circuit concluded that the Extender Statute time periods’ application to “any action” indicated that the Statute supplanted any other time periods that otherwise would apply to NCUA claims. The court held that the Extender Statute applied to Section 13’s three-year repose period and affirmed the district court’s conclusion on this issue.

Second, Defendants argued that the Extender Statute covered only state common law claims. Under this theory, the Extender Statute would not apply to any of NCUA’s claims—all of which were statutory. The court held that applying the Extender Statute to statutory claims served the statute’s purpose by providing NCUA sufficient time to investigate and file all potential claims once it assumes control of a failed credit union. For the same reasons, statutory purpose supported the Extender Statute’s application to federal actions. FIRREA’s stated purpose includes facilitating recoveries by NCUA on behalf of failed credit unions.


Tenth Circuit: Unpublished Opinions, 8/28/13

On Wednesday, August 28, 2013, the Tenth Circuit Court of Appeals issued one published opinion and two unpublished opinions.

Alvey v. Colvin

United States v. Burciaga-Alcantar

No case summaries are provided for unpublished opinions. However, published opinions are summarized and provided by Legal Connection.