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Legal news from Friday, July 29, 2011




Federal judge allows Lehman Brothers lawsuit to proceed
Maureen Cosgrove on July 29, 2011 12:40 PM ET

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[JURIST] A federal judge on Wednesday ruled [opinion, PDF] that most claims in a lawsuit against former Lehman Brothers Holdings [corporate website] officials could proceed. The plaintiffs, a group of investors, contend that Lehman's former officers, directors, and auditors, as well as security underwriters acted in violation of the Securities Act of 1933 and the Securities Exchange Act of 1934 [texts, PDF]. The former officers allegedly made oral statements and published materials and prospectuses containing misleading and false information about the transactions that took place at the company. The investors incurred losses when Lehman went bankrupt in 2008. US District Court for the Southern District of New York [official website] Judge Lewis Kaplan allowed a majority of the claims to proceed, but determined that the plaintiffs did not have standing to sue with respect to fifty principal protection notes (PPNs), a type of structured security. Kaplan also dismissed several of the plaintiffs' claims against Ernst & Young LLP [corporate website], Lehman's independent auditor, but rejected the defendant's motion to dismiss claims that Ernst & Young knew that Lehman was using repurchasing agreements. The plaintiffs are also seeking certification [WSJ report] as a class action.

Lehman Brothers Holdings filed suit [complaint, PDF] against JPMorgan Chase & Co. [corporate website] in May 2010 for allegedly "siphoning" off billions of dollars [JURIST report] in "critically-needed" assets days before the investment bank filed for a record-breaking bankruptcy. Former Lehman Brothers Chairman and Chief Executive Officer Richard Fuld, a defendant in the investors' lawsuit, called for a new regulatory scheme [JURIST report] for financial firms during testimony before the US House Committee on Oversight and Government Reform [committee website] in October 2008. Fuld answered questions regarding Lehman Brother's role in the financial crisis and the the high levels of executive compensation at the firm in the run-up to its Chapter 11 bankruptcy filing [bankruptcy petition, PDF; affidavit, PDF] and disputed lawmakers' suggestions that Lehman Brothers managers defrauded investors by making public statements at odds with Lehman's internal financial health.




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Canada Supreme Court rules against tobacco industry in two major cases
Julia Zebley on July 29, 2011 12:04 PM ET

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[JURIST] The Supreme Court of Canada [official website] issued rulings in two major tobacco products cases Friday relieving the federal government of liability for tobacco-related health problems and allowing the provinces to sue the tobacco industry for damages for tobacco-related health care costs. The court ruled [text; materials] unanimously on Friday in R. v. Imperial Tobacco Canada Ltd. that the federal government is not liable for any tobacco-related death or illness. Citizens filed suit against Imperial Tobacco Canada Ltd. [corporate website] for causing their illnesses by improper advertising of "light" and "mild" cigarettes as healthier alternatives. Imperial Tobacco impleaded the federal government, alleging that if tobacco companies are held liable, Canada must also be liable for allowing misrepresentation and negligent design to occur, and claimed that Canada was also a manufacturer under the Business Practices and Consumer Protection Act and the Trade Practices Act [texts]. The Supreme Court rejected these arguments:
Here, on the facts as pleaded, Canada did not owe a prima facie duty of care to consumers. The relationship between the two was limited to Canada's statements to the general public that low-tar cigarettes are less hazardous. There were no specific interactions between Canada and the class members. Consequently, a finding of proximity in this relationship must arise from the governing statutes. However, the relevant statutes establish only general duties to the public, and no private law duties to consumers. ... As for the tobacco companies, the facts pleaded allege a history of interactions between Canada and the tobacco companies capable of establishing a special relationship of proximity giving rise to a prima facie duty of care. ... Canada's alleged negligent misrepresentations do not give rise to tort liability, however, because of conflicting policy considerations. The alleged representations constitute protected expressions of government policy. Core government policy decisions protected from suit are decisions as to a course or principle of action that are based on public policy considerations, such as economic, social and political factors, provided they are neither irrational nor taken in bad faith. The representations in this case were part and parcel of a government policy, adopted at the highest level in the Canadian government and developed out of concern for the health of Canadians and the individual and institutional costs associated with tobacco-related disease, to encourage people who continued to smoke to switch to low-tar cigarettes.
Although the Canadian government had encouraged the making of light cigarettes to reduce tobacco-related illnesses, the Court rejected that as proof of culpability. Imperial Tobacco has not commented [Reuters report] on the ruling.

In the same opinion on Friday, the Supreme Court ruled [materials] in Attorney General of Canada v. Her Majesty the Queen in Right of British Columbia that individual provinces are able to sue tobacco companies for damages to offset the cost of treating tobacco-related illnesses. In 2001, British Columbia attempted to recover funds from 14 tobacco companies that the government had spent paying for medical care of those afflicted with tobacco-related illnesses. They based their claim on the Tobacco Damages and Health Care Costs Recovery Act (CRA) [text], which makes tobacco manufacturers liable to the provinces for health care costs. As Canada has national healthcare, each province bears the cost of their citizens' medical bills. In this case as well, the appealing tobacco industries alleged that Canada is also a manufacturer and supplier of cigarettes and this preempts their liability. The Court refuted this understanding.

I conclude that Canada is not a manufacturer under the Act. Indeed, holding Canada accountable under the CRA would defeat the legislature's intention of transferring the health-care costs resulting from tobacco related wrongs from taxpayers to the tobacco industry. This conclusion makes it unnecessary to consider Canada's arguments that it would in any event be immune from liability under the provincial Act.
The Court allowed British Columbia's claim against several tobacco companies to proceed, but did not rule on the merits of it. This has opened the door for suits from all the provinces worth potentially billions of dollars of damages against the tobacco industry.




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Mumbai terror attack gunman appeals death sentence
Maureen Cosgrove on July 29, 2011 10:35 AM ET

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[JURIST] Pakistani national Mohammad Ajmal Amir Kasab [NDTV profile], convicted [JURIST report] in May 2010 for murder and waging war against India for his role in the November 2008 Mumbai terrorist attacks [BBC backgrounder; JURIST news archive] that killed 166, filed an appeal Friday challenging his death sentence. Prosecutors had accused Kasab of being one of the gunmen photographed during the attacks, which were allegedly coordinated by Pakistani militant group Lashkar-e-Taiba (LeT) [CFR backgrounder]. He was sentenced to death after the prosecution sought the death penalty [JURIST reports], citing eight aggravating circumstances. In February, an Indian appeals court upheld Kasab's conviction and death sentence [JURIST report]. In January 2010, a judge denied [JURIST report] Kasab's request for an international trial after Kasab claimed that he would not receive a fair trial in India. Two alleged Indian accomplices tried with Kasab were acquitted on all charges of helping to plan the attacks. Kasab is the only surviving gunman from the Mumbai attacks.

Suspects connected to the Mumbai terror attacks continue to face arrest and prosecution. In March, US citizen and Chicago resident David Headley pleaded guilty [press release; JURIST report] to 12 counts of federal terrorism stemming from the Mumbai terror attacks and a terror incident in Copenhagen. A federal jury acquitted Tahawwur Hussain Rana [JURIST report], a Chicago resident with Canadian citizenship, of participating in the Mumbai terror attacks in June, but convicted him on two counts of planning to attack a Copenhagen newspaper after Headley testified at his trial. In December, Spanish authorities arrested seven men [JURIST report], including six Pakistanis and one Nigerian, in Barcelona suspected of aiding in the Mumbai terror attacks by allegedly stealing passports and other identification documents belonging to male tourists between the ages of 20 and 30, then sending the documents to Thailand where they would be forged and then forwarded to terrorist groups. India's National Investigation Agency (NIA) announced [JURIST report] in October that it has secured INTERPOL [official website] red notices [official backgrounder] for five Pakistani citizens, including two military officials, for their suspected involvement in the attacks.




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North Carolina Senate overrides veto on abortion waiting period bill
Maureen Cosgrove on July 29, 2011 9:30 AM ET

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[JURIST] The North Carolina Senate [official website] Thursday voted 29-19 to override a veto [roll call vote] by Governor Beverly Perdue [official website] on legislation [HB 854 materials] that would require a 24-hour waiting period before receiving an abortion [JURIST news archive]. The vote means the legislation will become North Carolina law as the House of Representatives [official website] also voted to override the veto [JURIST report] on Tuesday with a 72-47 vote [News-Record report]. The measure, known as the "Women's Right to Know Act," would require a physician to provide information to the woman regarding gestation, the risks of abortion procedures, abortion alternatives and federal medical benefits available. The law also requires women seeking an abortion to view an ultrasound of the fetus prior to the procedure. Senator Martin Nesbitt (D) called the law "draconian" [Citizen Times report] and said women seeking abortions will face dramatic changes once the law takes effect, while supporters contend that the new law will give women the opportunity to "know all the facts" about abortion. The legislation, which had originally passed the House 71-48 and the Senate 29-20, will take effect in 90 days.

The North Carolina government is one of several state legislatures to have acted recently to limit abortion rights. Both Texas and Florida [JURIST reports] have recently passed bills requiring ultrasounds before abortions. Last month, the Center for Reproductive Rights (CRR) [advocacy website] filed a lawsuit challenging the Texas law [JURIST report]. In March, South Dakota passed a law requiring a three-day waiting period [JURIST report] before an abortion—the longest waiting period in the country. That law is also facing a court challenge [JURIST report]. Multiple states have acted to ban abortions after 20 weeks, when some studies suggest a fetus can begin feeling pain, including Missouri, Indiana, Alabama, Ohio, Oklahoma, Kansas and Idaho [JURIST reports].




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New Mexico Supreme Court allows environmental groups to intervene in emissions hearing
Zach Zagger on July 29, 2011 9:29 AM ET

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[JURIST] The New Mexico Supreme Court [official website] ruled unanimously Wednesday that environmental groups may intervene in state administrative hearings over greenhouse gas emissions standards. New Energy Economy (NEE) [advocacy website], a non-profit organization working to reduce greenhouse gas emissions, sought to intervene in a hearing before the New Mexico Environmental Improvement Board (EIB) [official website] to defend regulations limiting greenhouse gas emissions. The EIB is already considering petitions from opponents of the regulations [text, PDF]. New Energy Economy, represented by the New Mexico Environmental Law Center (NMELC) [advocacy website], argued [AP report] that it was necessary to have a party to defend the law before the board to maintain the adversarial system. The court ruled [press release] that since NEE was a party to the original proceedings before the EIB it should be granted the right to defend it in this appeal. The executive director of NEE, Mariel Nanasi, lauded [press release] the decision: "We are pleased that the Supreme Court has ruled in our favor. The Court's decision upholds the rule of law against special interests and their lobbyists. We now look forward to defending the carbon pollution reduction rule based on its economic and scientific merits."

California has encountered similar difficulties passing greenhouse gas emissions standards. In March, the San Francisco Superior Court [official website] delayed the implementation of a cap-and-trade program [JURIST report] by requiring California's Air Resources Board (ARB) [official website] to further analyze alternatives. While the court's decision did not officially preclude the ARB from adopting or implementing the program in the future, it delayed the process as the ARB will now have to conduct additional research on other available options and report back as to why the cap-and-trade program is superior as well as invite public comment on the issue. Earlier this year, Texas failed for the third time in two months [JURIST report] at its attempts to block new Environmental Protection Agency (EPA) [official website] regulations governing greenhouse gas emissions. The U.S. Circuit Court of Appeals for the District of Columbia [official website] denied the state's request to block the program, which allocates greenhouse gas emission permits under the Clean Air Act [materials].




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Appeals court hears arguments over RI denial to hand suspect to federal custody
Julia Zebley on July 29, 2011 8:59 AM ET

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[JURIST] Attorneys argued [oral arguments audio file, MP3] before the US Court of Appeals for the First Circuit [official website] Thursday that Rhode Island is not obligated to turn over alleged murderer Jason Pleau to federal prosecutors in an effort to prevent him from facing the death penalty in federal court. Rhode Island has had a longstanding rejection of the death penalty. Pleau's attorneys claimed [Providence Journal report] that the federal government does not have the jurisdiction to detain Pleau after Rhode Island Governor Lincoln Chafee [official website] refused to surrender him on June 23. Federal prosecutors' ability to seize Pleau is codified by the Interstate Agreement on Detainers [text], but that law allows state governors to refuse to transfer prisoners to federal custody: "the Governor of the sending State may disapprove the request for temporary custody or availability, either upon his own motion or upon motion of the prisoner." The US District Court for the District of Rhode Island [official website] ordered Chafee to turn Pleau over to federal agents on June 30. Chafee said he would comply, but Pleau's attorneys appealed to the First Circuit, at which point Chafee filed an amicus brief [The Call report]. Donald Lockhart, for the US Attorney's Office [official website], argued that the Interstate Agreement on Detainers is pre-empted by the District Court's order, and that the Governor's office has no standing in the case. Lockhart stressed urgency and asked that the three-judge panel rule on the issue as soon as possible. Although the panel let Chafee personally argue on behalf of Pleau, they stressed that he must officially intervene to continue his role in the case. After the hearing, Chafee filed a motion to intervene [AP report], claiming that he has standing to protect his state's sovereignty. The US Attorneys Office plans to challenge this motion. Chafee has also stated that he will appeal to the US Supreme Court if necessary.

Pleau was sentenced to 18 years in prison [The Call report] for violating his probation after being accused of killing a gas station attendant in the process of a robbery. No state charges were filed [The Call report], as Rhode Island Attorney General Peter Kilmartin [official website] decided that the US Attorney's Office had jurisdiction for the crime beyond the probation violation. However, should federal proceedings not occur, Pleau has agreed to plead guilty and accept a life sentence [Boston.com report] without the possibility of parole. Rhode Island was one of the first states to abolish the death penalty, abolishing it in 1852. After becoming a state, Rhode Island has only executed seven people, including John Gordon in 1845, who Chafee recently pardoned [press release], delivering a statement on his stance on the death penalty: "John Gordon’s wrongful execution was a major factor in Rhode Island’s abolition of and longstanding opposition to the death penalty. ... as we pardon John Gordon, we also recognize and uphold that commitment."




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