Justia U.S. 3rd Circuit Court of Appeals Opinion Summaries

An Ohio resident was investigated by a county mortgage fraud task force, leading to federal charges for wire fraud and conspiracy, and state charges for related offenses. In federal court, a jury convicted him on most counts, resulting in a lengthy prison sentence. In state court, however, a jury acquitted him of all charges. During the state proceedings, a former task force employee alleged prosecutorial misconduct and was later found deceased, which further motivated the man to seek evidence of government wrongdoing.While incarcerated in Pennsylvania, he submitted Freedom of Information Act (FOIA) requests to the FBI and the Executive Office for United States Attorneys (EOUSA), seeking records related to his cases and the alleged misconduct. After the agencies failed to respond within the statutory timeframe, he filed a civil enforcement action in the United States District Court for the Western District of Pennsylvania. As litigation progressed, both agencies began producing records and provided Vaughn indexes detailing their redactions and withholdings. The plaintiff amended his complaint to add the county task force and a witness as defendants. The District Court dismissed the task force for lack of personal jurisdiction and entered summary judgment for the federal agencies, finding their searches and withholdings adequate.On appeal, the United States Court of Appeals for the Third Circuit affirmed the dismissal of the task force, holding it was not a federal agency and that the District Court lacked personal jurisdiction. The Third Circuit affirmed EOUSA’s search as adequate but found the FBI’s search lacking in scope and method regarding certain records. The court also vacated summary judgment in part, ruling that both agencies failed to sufficiently justify some redactions and withholdings under FOIA exemptions, and remanded for further proceedings consistent with its opinion. The court did not retain jurisdiction over the remanded matters. View "Viola v. US Department of Justice" on Justia Law

The case concerns a dispute over the tax characterization of a $191 million payment made in 2002 to the Charles G. Berwind Trust (DB Trust) following a complex series of corporate transactions and litigation. The Berwind Corporation, a closely held coal mining business, was owned through family trusts. In 1999, a short-form merger under Pennsylvania law resulted in the DB Trust’s shares in Berwind Pharmaceutical Services, Inc. (BPSI) being extinguished, with the DB Trust entitled to payment for its shares. The DB Trust challenged the validity of the merger and the valuation of its shares through federal and state litigation, ultimately leading to a settlement in 2002, where BPSI paid the DB Trust $191 million.After the settlement, a tax dispute arose regarding whether a portion of the settlement payment should be treated as interest (taxed as ordinary income) or as capital gains. The Internal Revenue Service (IRS) determined that part of the payment represented unstated interest under Section 483 of the Internal Revenue Code, which applies to deferred payments under contracts for the sale of property. The DB Trust petitioned the United States Tax Court for redetermination, arguing that the payment was made under the 2002 Settlement Agreement, not the 1999 Merger Agreement, and thus should be taxed entirely as capital gains.The United States Tax Court found that the sale of the DB Trust’s shares occurred in 1999 under the Merger Agreement, which constituted a contract for the sale of property. The court held that the 2002 payment was made “under” the 1999 Merger Agreement, triggering Section 483 and requiring a portion of the payment to be treated as interest. The DB Trust appealed.The United States Court of Appeals for the Third Circuit affirmed the Tax Court’s decision. The Third Circuit held that Section 483 applied because the payment was made under a contract for the sale of property, and the Merger Agreement served as the basis for the payment obligation. Thus, the interest portion of the payment is taxable as ordinary income. View "Charles G. Berwind Trust v. Commissioner of Internal Revenue" on Justia Law

Rocky Freeman was involved in a Brooklyn drug ring and was hired to kill a rival dealer, Freddie Gonzalez, in 1993. He was later arrested and charged in the United States District Court for the Eastern District of New York with drug conspiracy, the Gonzalez murder, and the unrelated murder of Augustin Sosa. At trial, Freeman was convicted of the drug and Gonzalez murder counts but acquitted of the Sosa murder. However, his presentence report (PSR) incorrectly stated that he had committed both murders. Although a judge ordered the error corrected, the PSR was not amended, and the inaccurate report was transmitted to the Bureau of Prisons (BOP). Freeman subsequently endured heightened security conditions in prison, including solitary confinement and severe restrictions, which he later attributed to the erroneous PSR.Freeman discovered the error in 2015 and pursued administrative remedies, including filing an SF-95 form alleging a Federal Tort Claims Act (FTCA) violation. He then filed a civil complaint in the United States District Court for the Middle District of Pennsylvania against the BOP, the U.S. Probation Office (USPO), his unit manager, and probation officers, alleging FTCA and Bivens claims. The District Court dismissed his FTCA claim for lack of jurisdiction and on the merits, and dismissed his Bivens claim for failure to serve the probation officers. Freeman appealed.The United States Court of Appeals for the Third Circuit reviewed the case de novo. The court held that the District Court erred in dismissing Freeman’s FTCA claim for lack of jurisdiction, finding that he had properly presented his claim to the appropriate agency. The court also held that the District Court improperly applied the Prison Litigation Reform Act’s physical injury requirement to the FTCA presentment phase. The Third Circuit reversed the dismissal of the FTCA claim and remanded for further proceedings. However, the court affirmed the dismissal of Freeman’s Bivens claim, concluding that his claim was not cognizable under current Supreme Court precedent. View "Freeman v. Lincalis" on Justia Law

A woman with a lifelong hearing impairment obtained a commercial driver’s license (CDL) in New Jersey after receiving a federal exemption from the standard hearing requirement. This exemption allowed her to drive commercial vehicles in interstate commerce but specifically prohibited her from operating passenger vehicles or school buses. Despite this, she was mistakenly issued state endorsements permitting her to drive such vehicles and worked as a campus shuttle bus driver for about eight months. When the New Jersey Motor Vehicle Commission (NJMVC) realized the error, it revoked her passenger and school bus endorsements without providing a pre-revocation hearing.Instead of seeking review in New Jersey Superior Court, the woman filed suit in the United States District Court for the District of New Jersey. She alleged violations of Title II of the Americans with Disabilities Act, Section 504 of the Rehabilitation Act, and New Jersey’s Law Against Discrimination, as well as a procedural due process claim under 42 U.S.C. § 1983. The District Court dismissed some claims and ultimately granted summary judgment to the defendants on all remaining claims, finding she was not “qualified” for the endorsements and had no property interest in them.The United States Court of Appeals for the Third Circuit reviewed the case de novo and affirmed the District Court’s judgment. The court held that the plaintiff was not a “qualified individual with a disability” under the relevant statutes because she could not meet the essential eligibility requirement of passing the hearing test for the endorsements. The court also held that, even assuming a property interest in the endorsements, due process did not require a pre-revocation hearing given the state’s strong safety interests and the availability of post-deprivation remedies. The court affirmed summary judgment for the defendants on all claims. View "Parker v. New Jersey Motor Vehicle Commission" on Justia Law

A nonprofit organization that assists individuals recovering from alcoholism and substance abuse sought to establish a group home in a New Jersey township by leasing a two-family dwelling. Before residents could move in, the township required a Certificate of Continuing Occupancy (CCO). The organization’s application for the CCO was denied by the township’s zoning officer, who stated that the intended use violated local zoning ordinances. The township’s attorney later explained that the group home was considered a “Community Residence” under state law and thus could not operate in a two-family dwelling. The organization disputed this classification but received no further response from the township.After the denial, the organization filed suit in the United States District Court for the District of New Jersey, alleging discrimination under the Americans with Disabilities Act (ADA) and the Fair Housing Act (FHA), and sought a preliminary injunction. The District Court denied the preliminary injunction, finding the organization had not shown a likelihood of success on the merits, and the United States Court of Appeals for the Third Circuit affirmed that denial. The organization then filed a First Amended Complaint, which the township moved to dismiss. The District Court granted the motion, holding that the amended complaint failed to state a claim and denied leave to amend further, reasoning that prior rulings had already provided notice of deficiencies and that amendment would be futile.On appeal, the United States Court of Appeals for the Third Circuit affirmed the dismissal of the First Amended Complaint for failure to state a claim, finding insufficient factual allegations to support a plausible inference of discriminatory intent or disparate impact. However, the court vacated the denial of leave to amend, holding that the District Court erred in concluding amendment would be futile, and remanded for further proceedings. View "Oxford House Inc v. Township of North Bergen" on Justia Law

An elderly homeowner in New Jersey was approached by a door-to-door salesman who offered her “free” rooftop solar panels. She accepted the offer after some hesitation, but was never shown or asked to sign any paperwork. Later, her son discovered that she had been signed up for a 25-year loan of nearly $100,000, with documents digitally signed in her name and sent to a fake email address created by the salesman. The solar panels were installed but were unusable due to the home’s condition. When the homeowner tried to cancel, the companies involved refused. She then sued the solar company, its CEO, and the lenders who financed the panels, alleging fraud and violations of both state and federal law.The United States District Court for the District of New Jersey dismissed her claims against the lenders, Sunlight Financial LLC and Cross River Bank, finding that she had not plausibly alleged that the salesman was acting as their agent. The court allowed some claims against the solar company and its CEO to proceed, but the plaintiff later voluntarily dismissed those remaining claims. She then appealed the dismissal of her claims against the lenders.The United States Court of Appeals for the Third Circuit reviewed the case de novo. It held that the plaintiff failed to plausibly allege an agency relationship between the salesman and the lenders, as required for vicarious liability under the New Jersey Consumer Fraud Act. The court also found that the plaintiff did not plead direct liability with the particularity required by Rule 9(b), and that the lenders’ actions in obtaining her credit report were permissible under the Fair Credit Reporting Act. The Third Circuit affirmed the District Court’s dismissal of all claims against the lenders. View "Migliore v. Vision Solar LLC" on Justia Law

An employee of a telecommunications company, who also served as a union representative, was charged with defrauding a pharmacy benefits management company by orchestrating the submission of fraudulent claims for compounded medications. The government alleged that he induced another individual to obtain medically unnecessary compounded drugs and arranged for a doctor to sign prescriptions without a medical examination or determination of necessity. The prescriptions were then used to submit claims to the company’s health plan, and the employee received a percentage of the reimbursement. The government further alleged that the employee paid the individual to participate in the scheme and later instructed him to lie to investigators.The United States District Court for the District of New Jersey granted the defendant’s motion to dismiss the superseding indictment. The court found that the indictment failed to allege any actionable misrepresentation or omission under 18 U.S.C. § 1347, did not specify how the fraudulent claims were submitted or by whom, and did not identify any false statements or omissions in the claims. The court also expressed concern about the use of the term “medically unnecessary,” finding it vague and undefined.On appeal, the United States Court of Appeals for the Third Circuit reviewed the sufficiency of the indictment de novo. The Third Circuit held that the indictment adequately alleged an implicit misrepresentation: that the prescriptions, incorporated into the claims, falsely implied medical necessity and a legitimate doctor-patient relationship. The court found that such implicit misrepresentations are actionable under the health care fraud statute. The court also determined that the indictment’s language was sufficiently clear to apprise the defendant of the charges. Accordingly, the Third Circuit reversed the District Court’s dismissal and remanded the case for further proceedings. View "USA v. Mattia" on Justia Law

Nita and Kirtish Patel operated two companies that provided mobile diagnostic medical services. To obtain Medicare reimbursement for neurological testing, they falsely represented that a licensed neurologist would supervise the tests. In reality, Kirtish, who lacked a medical license, wrote the reports, and Nita forged a physician’s signature. Their fraudulent scheme generated over $4 million, including substantial Medicare payments.In 2014, a former employee filed a sealed qui tam action in the United States District Court for the District of New Jersey, alleging healthcare fraud and asserting claims under the False Claims Act. The Patels were subsequently arrested and each pleaded guilty to one count of healthcare fraud. Their plea agreements did not address or preclude future civil or administrative actions. After their guilty pleas, the Government intervened in the qui tam action and obtained summary judgment against the Patels, relying on collateral estoppel from their criminal admissions. The District Court trebled the Medicare loss and imposed civil penalties, resulting in a judgment exceeding $7 million. Nita appealed, and the United States Court of Appeals for the Third Circuit affirmed her liability under the False Claims Act.Both Patels later moved to vacate their criminal sentences under 28 U.S.C. § 2255, arguing ineffective assistance of counsel because their attorneys did not advise them that their guilty pleas could have collateral estoppel effects in the civil qui tam action. The District Court denied their motions, finding that counsel’s performance was not objectively unreasonable and that the Patels were aware their plea agreements did not preclude civil actions.On appeal, the United States Court of Appeals for the Third Circuit held that the Sixth Amendment does not require criminal defense counsel to advise clients of collateral consequences such as civil liability under the False Claims Act. The court affirmed the District Court’s judgment, concluding that Padilla v. Kentucky’s holding is limited to deportation consequences and does not extend to civil liability. View "Patel v. USA" on Justia Law

A restaurant and bar in Pennsylvania employed bartenders and servers who participated in a tip pool, which was allegedly distributed in part to a salaried manager, contrary to federal and state wage laws. An employee who worked there from September 2021 to December 2022 filed suit in the United States District Court for the Eastern District of Pennsylvania, alleging violations of the Fair Labor Standards Act (FLSA) and the Pennsylvania Minimum Wage Act (PMWA). The claims centered on the manager’s alleged receipt of tip-pool funds intended for bartenders. The plaintiff sought damages and styled the case as a hybrid action: an FLSA collective action under § 216(b) and a Rule 23(b)(3) class action for the state law claim.The parties stipulated to conditional certification of an FLSA collective, and notice was sent to potential members, ten of whom opted in. After discovery, the parties reached a settlement agreement, proposing a Rule 23(b)(3) class settlement that would release wage-and-hour claims, including unasserted FLSA claims, for all class members who did not opt out. The District Court held a hearing focused on whether class members who had not opted into the FLSA collective could be required to release FLSA claims through the class settlement. The District Court denied preliminary approval, reasoning that § 216(b) prohibited such releases, and denied reconsideration, certifying the legal question for interlocutory appeal.The United States Court of Appeals for the Third Circuit reviewed the certified question de novo. It held that § 216(b) of the FLSA establishes only the mechanism for litigating FLSA claims, not the conditions for waiving them, and does not prohibit the release of unasserted FLSA claims in a Rule 23(b)(3) opt-out class settlement. The Court vacated the District Court’s order and remanded for a full fairness inquiry under Rule 23. View "Lundeen v. 10 West Ferry Street Operations LLC" on Justia Law

A real estate investment trust that specializes in purchasing and leasing properties to cannabis companies was defrauded by one of its tenants, Kings Garden, which submitted fraudulent reimbursement requests for capital improvements. The trust paid out over $48 million based on these requests before discovering irregularities, such as forged documentation and payments for work that was not performed. After uncovering the fraud, the trust sued Kings Garden and disclosed the situation to the market, which led to a decline in its stock price.Following these events, several shareholders filed a putative class action in the United States District Court for the District of New Jersey, alleging violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The shareholders claimed that the trust and its executives made false or misleading statements about their due diligence, tenant monitoring, and the nature of reimbursements, and that these misstatements caused their losses when the fraud was revealed. The District Court dismissed the complaint with prejudice, finding that while some statements could be misleading, the plaintiffs failed to plead facts giving rise to a strong inference of scienter, as required by the Private Securities Litigation Reform Act.On appeal, the United States Court of Appeals for the Third Circuit affirmed the District Court’s dismissal. The Third Circuit held that most of the challenged statements were either non-actionable opinions, not false or misleading, or not sufficiently specific. For the one statement plausibly alleged to be false or misleading, the court found that the facts did not support a strong inference that the statement’s maker acted with scienter. The court also rejected the application of corporate scienter and found no basis for control-person liability under Section 20(a) in the absence of a primary violation. View "Handal v. Innovative Industrial Properties Inc" on Justia Law