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

Hertz Corporation and its affiliates filed for Chapter 11 bankruptcy protection in May 2020 due to financial difficulties exacerbated by the COVID-19 pandemic. Despite initial bleak prospects, Hertz's financial situation improved significantly, allowing it to emerge from bankruptcy in June 2021 with a confirmed reorganization plan. This plan proposed to pay off Hertz's pre-petition debt, including unsecured bonds, but only at the federal judgment rate of interest for the bankruptcy period, rather than the higher contract rate. Additionally, Hertz did not pay certain make-whole fees, termed "Applicable Premiums," which were designed to compensate lenders for early repayment.The United States Bankruptcy Court for the District of Delaware initially ruled that the Noteholders were not entitled to the contract rate of interest or the make-whole fees, classifying the latter as disallowed unmatured interest under § 502(b)(2) of the Bankruptcy Code. The Noteholders appealed, arguing that as creditors of a solvent debtor, they were entitled to full payment, including contract rate interest and the Applicable Premiums.The United States Court of Appeals for the Third Circuit reviewed the case. The court held that the Applicable Premiums were indeed disallowed as unmatured interest under § 502(b)(2). However, it also determined that the Noteholders, as creditors of a solvent debtor, were entitled to post-petition interest at the contract rate, not the lower federal judgment rate. The court emphasized that the absolute priority rule, a fundamental principle of bankruptcy law, requires that creditors be paid in full, including contract rate interest, before any distribution to equityholders. Consequently, the court reversed the Bankruptcy Court's decision regarding the post-petition interest rate, affirming the Noteholders' right to contract rate interest and the Applicable Premiums. View "In re: The Hertz Corporation v." on Justia Law

Donna Glaesener, a black woman, has worked at the Port Authority Trans-Hudson Corporation for nearly thirty years. In April 2018, she complained to the human-resources department about a lack of diversity and alleged discrimination in promotional decisions. She subsequently applied for several promotions but was not selected. In December 2018, she filed a formal EEOC complaint alleging discrimination. In November 2019, she sued the Port Authority, claiming she was denied promotions due to her race and in retaliation for her complaints and lawsuit.The United States District Court for the District of New Jersey granted summary judgment in favor of the Port Authority. The court applied the Title VII burden-shifting framework from McDonnell Douglas Corp. v. Green and found that the Port Authority had legitimate, non-discriminatory, and non-retaliatory reasons for not promoting Glaesener. The court concluded that Glaesener failed to show these reasons were pretexts for discrimination or retaliation.The United States Court of Appeals for the Third Circuit reviewed the case de novo, considering all facts and reasonable inferences in Glaesener's favor. The court found no evidence supporting Glaesener's claims of discrimination or retaliation. For the Safety Manager position, the successful candidate had significantly more relevant experience. For the Chief Operations Examiner position, the successful candidate had a higher interview score, and the interview process was deemed legitimate and job-related. Similarly, for the Principal Programs & Training Coordinator and Superintendent of Transportation positions, the successful candidates were more qualified and performed better in interviews.The Third Circuit affirmed the District Court's decision, holding that the Port Authority's reasons for not promoting Glaesener were legitimate and not pretextual. View "Glaesener v. New York & New Jersey Port Authority" on Justia Law

In this case, Bayer U.S. LLC, a pharmaceutical company, recalled millions of dollars’ worth of Lotrimin and Tinactin spray products in October 2021 after discovering benzene contamination in products dating back to 2018. The plaintiffs, who purchased these products during the recall period, did not allege physical injuries but sought compensation for economic losses, claiming the contaminated products were worth less than uncontaminated ones.The United States District Court for the District of New Jersey dismissed the plaintiffs' complaint for lack of standing, concluding that the plaintiffs failed to sufficiently allege economic loss or harm from increased risk of future physical injury. The court found the plaintiffs' allegations too conclusory and lacking in specific facts to support their claims.On appeal, the United States Court of Appeals for the Third Circuit reviewed the case. The appellate court concluded that the District Court erred in applying a heightened standard for standing. The Third Circuit held that the plaintiffs plausibly alleged economic injury under the benefit-of-the-bargain theory, as the contaminated products were unusable and therefore worth less than the uncontaminated products they had bargained for. The court noted that the plaintiffs need not show that all products in the recall were contaminated but must plausibly allege that their specific products were contaminated.The Third Circuit reversed the District Court's dismissal of the complaint for lack of standing as to some plaintiffs and remanded the case for further proceedings consistent with its opinion. The appellate court emphasized that the plaintiffs' allegations, supported by the recall and additional testing data, were sufficient to establish standing at the motion-to-dismiss stage. View "Huertas v. Bayer US LLC" on Justia Law

In this case, the appellants, DeAndre Jackson and Quintel Martins, challenged the denial of their motions to suppress evidence obtained during a traffic stop. The incident occurred around 1:10 AM on October 2, 2019, when Officer Thayer McCauley, patrolling with an unarmed trainee, noticed a car with a broken taillight, a damaged license plate, and an expired registration. Suspecting the car might be stolen, he attempted to stop it, but the driver evaded him. About forty minutes later, McCauley spotted the car again and, after a brief pursuit, conducted a "felony stop" in a dark, secluded area. The occupants were ordered out at gunpoint, handcuffed, and frisked. A gun magazine was found on Jackson, who then admitted to having a gun in the car. A subsequent search revealed more evidence, including another firearm and items linked to recent robberies.The United States District Court for the Eastern District of Pennsylvania denied the motions to suppress, finding the stop and search lawful. The court determined that the officers' actions were justified by the circumstances, including the time of night, the high-crime area, and the suspects' evasive behavior. The court also found that the officers had probable cause to search the vehicle based on Jackson's admission about the firearm and the smell of marijuana.The United States Court of Appeals for the Third Circuit affirmed the District Court's decision. The appellate court held that the officers' actions during the stop were reasonable given the totality of the circumstances. The court emphasized that the officers were justified in taking safety precautions due to the potential danger posed by the suspects' behavior and the environment. The court concluded that the measures taken, including the use of firearms and handcuffs, were appropriate to ensure officer safety and did not violate the Fourth Amendment. View "United States v. Jackson" on Justia Law

Daniel Rutherford sought a reduction of his 42.5-year sentence for two armed robberies, arguing that he is eligible for compassionate release due to changes in sentencing laws under the First Step Act. This Act, among other things, reduced mandatory minimum sentences for certain crimes but did not make these changes retroactive. Rutherford contended that if sentenced today, his sentence would be significantly shorter due to these changes.The United States District Court for the Eastern District of Pennsylvania denied Rutherford's motion, citing the Third Circuit's precedent in United States v. Andrews. In Andrews, the court held that nonretroactive changes to sentencing laws, such as those in the First Step Act, cannot be considered "extraordinary and compelling reasons" for compassionate release. The District Court concluded that this precedent barred Rutherford's argument.On appeal, the United States Court of Appeals for the Third Circuit affirmed the District Court's decision. The Third Circuit reiterated its holding in Andrews, stating that the nonretroactive changes to 18 U.S.C. § 924(c) under the First Step Act cannot be considered as a basis for compassionate release. The court emphasized that allowing such changes to be considered would conflict with Congress's explicit decision to make these changes nonretroactive. The court also noted that while the Sentencing Commission's amended policy statement allows for consideration of nonretroactive changes in certain circumstances, this policy cannot override the clear intent of Congress as interpreted in Andrews.Thus, the Third Circuit held that the First Step Act's changes to § 924(c) cannot be considered in determining eligibility for compassionate release, affirming the District Court's denial of Rutherford's motion. View "USA v. Rutherford" on Justia Law

Kay Ellison, co-founder of a charter airline, was convicted of federal wire fraud, bank fraud, and conspiracy. The airline, Direct Air, faced cash flow issues and Ellison siphoned millions from an escrow account through fictitious reservations and falsified records. She was charged alongside Judy Tull and chose not to testify or present a defense at trial. The jury convicted her on all counts, and she was sentenced to ninety-four months in prison and ordered to pay over $19 million in restitution. Her convictions were affirmed on direct appeal.Ellison filed a motion to vacate her sentence under 28 U.S.C. § 2255, claiming ineffective assistance of counsel. She argued her attorney incorrectly advised her that if she did not testify, she could not present other evidence, which she claimed prejudiced her defense. The United States District Court for the District of New Jersey denied her motion without an evidentiary hearing, concluding that even if her counsel was ineffective, she could not show prejudice because there was no reasonable probability that the jury would have acquitted her if she had testified or presented other witnesses.The United States Court of Appeals for the Third Circuit reviewed the case and affirmed the District Court's decision. The Third Circuit applied the Strickland v. Washington standard, which requires showing a reasonable probability that the result of the proceeding would have been different but for the attorney's errors. The court found that Ellison failed to demonstrate such a probability, as her proposed testimony and that of her witnesses would not have likely changed the jury's verdict given the strong evidence against her. Thus, the denial of her habeas corpus petition was upheld. View "Ellison v. USA" on Justia Law

Several contractors and an employee, who regularly handle public works projects for PennDOT and SEPTA, challenged Philadelphia's requirement for project labor agreements (PLAs) on public projects. These PLAs mandated union recognition and membership, and set workforce diversity goals. The plaintiffs argued that these requirements violated their First Amendment rights and the Equal Protection Clause, as well as 42 U.S.C. § 1981. They were ineligible to bid on certain city projects due to their existing collective bargaining agreements with the United Steelworkers, which is not affiliated with the required unions.The United States District Court for the Eastern District of Pennsylvania granted summary judgment to Philadelphia. The court found that the plaintiffs lacked standing to challenge the union-eligibility requirement and failed to show that the diversity requirement caused them harm based on race. The court also concluded that the plaintiffs' § 1981 claim failed because race was not a but-for cause of their inability to work on city projects with PLAs.The United States Court of Appeals for the Third Circuit reviewed the case and found that the plaintiffs had standing to challenge the union-eligibility requirement under the First Amendment. The court determined that the plaintiffs suffered a concrete and particularized injury by being ineligible to bid on city projects due to the PLAs. The court also found that the plaintiffs' claims were not moot despite Philadelphia's subsequent changes to the PLAs, as the plaintiffs sought damages for past violations and prospective relief.The Third Circuit also found that the plaintiffs had standing to raise an Equal Protection claim, as they demonstrated an intent to bid on future projects covered by the PLAs. The court vacated the District Court's judgment and remanded the case for further proceedings to consider the merits of the plaintiffs' First Amendment, Equal Protection Clause, and § 1981 claims. View "Road-Con Inc v. City of Philadelphia" on Justia Law

Eric Gilbert filed for Chapter 7 bankruptcy, listing his interest in retirement accounts worth approximately $1.7 million. The issue was whether these accounts could be accessed by creditors due to alleged violations of federal law governing retirement plans. The Bankruptcy Court ruled that the accounts were protected from creditors, and the District Court affirmed this decision.The Bankruptcy Court dismissed the trustee John McDonnell's complaint, which sought to include the retirement accounts in the bankruptcy estate, arguing that the accounts violated ERISA and the IRC. The court found that the accounts were excluded from the estate under § 541(c)(2) of the Bankruptcy Code, which protects interests in trusts with enforceable anti-alienation provisions under applicable nonbankruptcy law. The District Court upheld this ruling, agreeing that ERISA's anti-alienation provision applied regardless of the alleged violations.The United States Court of Appeals for the Third Circuit reviewed the case and affirmed the lower courts' decisions. The court held that the retirement accounts were excluded from the bankruptcy estate under § 541(c)(2) because ERISA's anti-alienation provision was enforceable, even if the accounts did not comply with ERISA and the IRC. The court also dismissed McDonnell's claims regarding preferential transfers and fraudulent conveyances, as the transactions in question did not involve Gilbert parting with his property. Additionally, the court found no abuse of discretion in the Bankruptcy Court's decisions to dismiss the complaint with prejudice, shorten the time for briefing, and strike certain items from the appellate record. View "In re: Gilbert" on Justia Law

The case involves James Peperno, Jr., who was found guilty by a jury of nine counts of conspiracy to commit bribery and wire fraud, among other related charges. Peperno devised a scheme to solicit bribes from Walter Stocki, who was involved in zoning litigation with the borough of Old Forge, Pennsylvania. Peperno, along with Robert Semenza, Jr., the Old Forge Borough Council President, planned to influence the litigation in Stocki's favor in exchange for bribes. Peperno initially approached Stocki in January 2019, asking for a $20,000 upfront payment and a monthly retainer. Stocki recorded their conversations and later contacted the FBI, which led to further recorded interactions and payments facilitated by the FBI.The United States District Court for the Middle District of Pennsylvania presided over the case. At trial, Peperno was found guilty on all counts except for two counts of money laundering. The Presentence Report (PSR) recommended sentencing enhancements for multiple bribes and for the total value of the bribes exceeding $15,000. Peperno objected to these enhancements, but the District Court overruled his objections, finding the recommendations supported by the evidence. The court sentenced Peperno to 72 months’ imprisonment, considering his intent and financial motivations.The United States Court of Appeals for the Third Circuit reviewed the case. Peperno appealed, arguing that the District Court erred in denying his request for a jury instruction on entrapment and in applying the sentencing enhancements. The Third Circuit held that the District Court correctly denied the entrapment instruction, as Peperno failed to show government inducement or lack of predisposition. The court also upheld the sentencing enhancements, agreeing that the evidence supported the finding of multiple bribes and that the total value of the bribes exceeded $15,000. The Third Circuit affirmed the District Court’s judgment of sentence. View "USA v. Peperno" on Justia Law

Meghan Young was denied a mortgage loan due to an erroneous credit report prepared by Experian Information Solutions, Inc. The report falsely indicated that foreclosure proceedings had been initiated against her, despite her having paid off her mortgage in full. Following this, Young enrolled in a credit monitoring service called CreditWorks, which is affiliated with Experian. The terms of use for CreditWorks included an arbitration agreement covering disputes related to the service.Young sued Experian in the District of New Jersey for violations of the Fair Credit Reporting Act. Experian moved to compel arbitration based on the CreditWorks agreement. The District Court denied the motion without prejudice, allowing for limited discovery on the issue of arbitrability. The court applied the summary judgment standard from Guidotti v. Legal Helpers Debt Resolution, L.L.C., as the arbitration agreement was not apparent from the face of the complaint.The United States Court of Appeals for the Third Circuit reviewed the case. The court clarified that discovery is not necessary when there is no factual dispute about the existence or validity of the arbitration agreement. Since Young did not dispute the existence of the agreement but only its scope, and because the agreement delegated arbitrability issues to the arbitrator, the court held that the District Court should have granted the motion to compel arbitration without discovery. The Third Circuit vacated the District Court’s order and remanded the case for further proceedings consistent with its opinion. View "Young v. Experian Information Solutions Inc" on Justia Law