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United States v. Pearson, 07-0142-cr (July 2, 2009)

Link to Case

Keywords: Restitution, Guilty Plea, Waiver

Panel: Miner, Katzmann, and Raggi

Opinion by: Per Curiam

Appeal from: NDNY (McAvoy, U.S.D.J.)

Appellant, who pleaded guilty to multiple counts of producing child pornography, appeals the award of $974,902 restitution. The restitution award included the estimated future medical expenses of appellant's victims.

The first question is whether appellant has waived, by his guilty plea, the right to challenge the restitution amount. The Court holds that appellant's agreement to pay restitution "in full" is not a waiver of his right to challenge the amount of restitution. Although appeal waivers are valid and enforceable, they are strictly construed against the government.

The second question is whether the victims' future medical expenses are includable in an award of restitution. The Court joins the 7th, 9th and 10th Circuits in saying they are.

The final question is whether the restitution amount is reasonable. The amount of restitution is judged under an abuse of discretion standard, and will be reversed only if it "rests on an error of law, a clearly erroneous finding of fact, or otherwise cannot be located within the range of permissible decisions." Slip Op. at 9 (quoting United States v. Boccagna, 450 F.3d 107, 113 (2d Cir. 2006)). Because the district court did not explain how it estimated the victims' future expenses, the Court vacates the award and remands "to afford the district court to adjust the award if, in providing its explanation, it determines that the original order does not accurately reflect 'full' restitution, as agreed to by the defendant." Slip Op. at 11.

Pyrrhic victory alert: The district court awarded a substantially lower amount for future medical expenses than had been recommended by the government's expert. The remand and comment about "full" restitution and flexibility may be suggesting to the district court that the restitution amount was too low.

Lafaro v. N.Y. Cardiothoracic Group, PLLC, et al., 08-4621-cv (July 1, 2009)

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Keywords: State Action Immunity, Antitrust, Sherman Act, Midcal Test

Panel: Calabresi, Wesley, and Droney (USDJ, D. Conn.)

Opinion by: Droney, USDJ

Appeal from: SDNY (Robinson, USDJ)

New York created Westchester County Health Care Corporation ("WCHCC"), a public-benefit corporation, in 1997 to operate the Westchester County Medical Center, a hospital in Valhalla, NY. In 2004, WCHCC entered into an exclusivity agreement with a group of cardiothoracic surgeons. The agreement grandfathered another group of cardiothoracic surgeons who had been providing services at the hospital, exempting them from the application of the exclusivity agreement. The grandfathered surgeons sued the WCHCC, the hospital, and the exclusive group, alleging that the exclusivity agreement violated the Sherman Act, 15 U.S.C. § 1. Among other things, they alleged that the exclusive group assigned rooms, staff, and material discriminatorily to frustrate their practices and cause them "maximum disadvantage."

The district court granted judgment on the pleadings to defendants, on the ground that they were entitled to "State Action Immunity." A state acting in its sovereign capacity is not subject to federal antitrust laws. A subdivision of the state is also entitled to such immunity, when it acts pursuant to a "clearly articulated and affirmatively expressed" state policy authorizing its actions, and under California Retail Liquor Dealers Ass'n v. Midcal Aluminum, 455 U.S. 97 (1980), such immunity also extends to a private party acting pursuant to such a policy if the state actively supervises its conduct. Absent such supervision, "there is no realistic assertion that a private party's anticompetitive conduct promotes state policy, rather than merely the party's individual interests." Slip Op. at 6 (quoting Patrick v. Burget, 486 U.S. 94, 101 (1988)).

Because the allegations of the complaint include actions by the private defendants to improve their own financial interests, in possible violation of the grandfather clause and the purpose behind the exclusivity agreement, appellants are not simply attacking the grant of exclusivity, which is subject to state action immunity. Accordingly, the judgment is vacated and the case remanded for consideration of whether the private defendants actions were consistent with the agreement and actively supervised by the state.

Buy Rite, Inc. v. Boyle, 07-4781-cv (July 1, 2009)

Link to Case

Keywords: Commerce Clause, Alcohol, 21st Amendment

Panel: Walker, Calabresi, and Wesley

Opinion by: Wesley

Appeal from: SDNY (Holwell, USDJ)

The question in this case is whether the dormant Commerce Clause (U.S. Const. art. I, § 8, cl. 3), invalidates a New York State rule that prohibits out-of-state retailers from delivering liquor directly to customers, when such deliveries are permitted by licensed New York retailers.

Although the 21st Amendment (U.S. Const. amend. XXI, § 2), which repealed Prohibition, granted states "virtually complete control over whether to permit importation or sale of liquor and how to structure the liquor distribution system," Granholm v. Heald, 544 U.S. 460, 488 (2005), state regulations are not immune from Commerce Clause analysis and will be overturned if they treat liquor produced out-of-state differently from liquor produced within the state. Id. at 489. In Granholm, for example, the Supreme Court invalidated laws in New York and Michigan that permitted in-state wineries, but not out-of-state wineries, to bypass the licensing system to sell directly to consumers.

Appellants are out-of-state retailers who want to deliver liquor directly to residents without being licensed in New York. They frame their arguments on appeal to come within the Granholm rationale, contending that New York grants privileges to in-state retailers that it does not allow to out-of-state retailers.

The Court rejects appellants' arguments that Granholm requires rejecting New York's limitation of retail delivery to licensed retailers. New York's rule is applied evenhandedly, and all sellers are required to comply with New York's three-tier licensing.

An aside about this three-tier structure: New York's licensing structure (New York Alcoholic Beverage Control Law §§ 100(1), 102(1)(a), and 102(1)(b)), applies to three tiers of distribution - the producer, the distributor/wholesaler, and the retailer. Except for wineries, all liquor produced inside or outside of New York must be channeled through distributors prior to being sold at the retail level to consumers. New York asserts that its three-tier licensing system allow the state to more efficiently and effectively collect taxes and prevent sales to minors.

The essence of appellants' argument is really a direct attack on New York's three-tier licensing scheme -- but that scheme was endorsed in Granholm as "unquestionably legitimate." 544 U.S. at 488-89. As Judge Holwell noted in his "well-reasoned" decision, Slip Op. at 4, even if Granholm's endorsement of the three-tier licensing scheme were dicta, it would be dicta "of the most persuasive kind." Slip Op. at 11 (quoting 515 F. Supp. 2d at 412).

Accordingly, the Court holds that because New York's ABC Law does not discriminate against out-of-state providers, it does not violate the Commerce Clause and is a valid exercise of the state's rights under the Twenty-first Amendment.

Judge Calabresi adds a scholarly concurrence that is part history lesson, part commentary, on the Supreme Court's evolving, increasingly narrow interpretation of the Twenty-first Amendment. The takeaway is that this narrowing, based more on rewriting constitutional meaning than principled judgment, leaves lower courts with little guidance how to rule in a particular case. Although it is clear the meaning of the amendment is changing, "it is difficult to know just how much the Supreme Court wants the amendment to evolve."

ReliaStar Life Ins. Co. of New York v. Home Depot, USA, Inc., 07-0087-cv (June 29, 2009)

Link to Case

Keywords: "Hell or High Water" Clause; Constructive Eviction, Estoppel, UCC

Panel: Jacobs, Hall (Feinberg recused)

Opinion by: Per Curiam

Appeal from: EDNY (Platt, J.)

The question in this case is whether a commercial tenant (Home Depot) may assert a claim for constructive eviction arising from a late-appearing construction defect against a good-faith assignee (ReliaStar) despite the "hell or high water" clause (usually seen in personal property leases, but here in a long-term real estate lease) and estoppel certificate executed by the tenant at the time the lease was assigned. Somewhat surprisingly (to us at least) the Court holds that the tenant may assert the claim for constructive eviction against the assignee.

The holding may be fact specific. Home Depot entered into a long term lease in 1989. The landlord built a "building pad" upon which Home Depot constructed its store. In 1993, the landlord assigned its rights to ReliaStar. Home Depot represented that landlord was not in default as of the date of the assignment, and further represented that it would pay "all rents due" under the Lease come hell or high water, without any reduction, set off, abatement, or diminution whatsoever. In late 1995, Home Depot discovered the building pad was defective, spent $750,000 attempting to repair it, and ultimately abandoned the premises and stopped paying rent. The district court entered judgment for ReliaStar on the ground that the hell or high water clause was unambiguous.

Under NY UCC § 9-403(c), a contract can be assigned free and clear of all defenses, not including fraud, duress, and the like. The Court reasons that constructive eviction is analogous to the defenses of fraud and duress, because "it goes to the very existence of the agreement, rather than a failure to perform in accordance with the terms of the agreement." Slip Op. at 6. The estoppel certificate does not bar the defense, because it does not more than express Home Depot's knowledge at the time the certificate was executed. Slip Op. at 8. Home Depot asserts it did not discover the defect in the building pad until several years later. The hell or high water clause does not bar the defense, because the clause (drafted by ReliaStar) only obligates Home Depot to pay all rents "due" under the lease. Because a meritorious defense of constructive eviction terminates the lease, the hell or high water clause does not apply if the defense is successful. Slip Op. at 10.

United States v. Mills, 07-0308-cr (June 26, 2009)

Link to Case

Keywords: Violent Felony, Armed Career Criminal Act

Panel: Kearse, Sack, and Livingston

Opinion by: Per Curiam

Appeal from: D. Conn. (Dorsey, J.)

Defendant-appellant was sentenced as an armed career criminal under the Armed Career Criminal Act, 18 USC s. 924(e) ("ACCA"), which provides enhanced sentences to persons convicted of being a felon in possession of a firearm who have three prior convictions for violent felonies. One of defendant's prior convictions was for first degree escape in violation of Connecticut law, arising from defendants failure to appear for a meeting with his community enforcement officer while on "transitional supervision" under the supervision of the Connecticut Commissioner of Correction. Defendant contends that this failure to return does not constitute a violent felony. Whether a crime is a "violent felony" is subject to de novo review.

In light of the Supreme Court's intervening decision in Chambers v. United States, 555 U.S. ___, 129 S. Ct. 687 (2009), which held that failure to report to a penal institution falls outside the ACCA's definition of "violent felony," the government concedes that the case should be remanded for resentencing without regard to the ACCA.

Mahmood v. Holder, 07-5656-ag (June 25, 2009)

Link to Case

Key Words: Immigration, Denial of Motion to Reopen
Panel: Winter, Walker, and Calabresi
Opinion by: Calabresi
Appeal from: Board of Immigration Appeals

Petitioner moved to reopen his removal proceedings based upon his marriage to a U.S. Citizen, prior to the date he had been ordered to depart voluntarily. (His first marriage to a U.S. Citizen had been ruled an attempt to evade the immigration laws). The BIA denied the motion on the grounds that the motion was untimely and that peitioner's failure to leave within the voluntary departure period made him statutorily ineligible for any adjustment in status for 10 years.

After the BIA's decision, the Supreme Court decided Dada v. Mukasey, 128 S.Ct. 2307 (2008), which provides that an alien must be permitted to withdraw a voluntary departure request before it expires, to avoid the statutory ineligibility for the adjustment. The holding in Dada seeks to avoid an unfair Catch 22 that would otherwise apply: a motion to reopen can't be prosecuted if the deportee leaves the United States, and failing to leave within the period meant the deportee would be ineligible. It is an open question whether a motion to reopen, by itself, is sufficient to stay the voluntary departure and prevent the 10-year prohibition for failing to leave within the period.

The BIA was correct that petioner's motion was untimely, and the Court of Appeals lacks jurisdiction to review the BIA's refusal to reopen removal proceedings sua sponte. However, the Board may have felt its hand were tied, not having the benefit of the Dada decision, so the Court remands to allow the BIA to consider whether it wishes to exercise its sua sponte authority.