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

Articles Posted in Government & Administrative Law
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The SEC investigated Gentile for his role in a penny-stock manipulation scheme in 2007-08 and civilly sued Gentile, who was indicted for securities fraud violations. The criminal prosecution was dismissed as untimely. The SEC separately investigated securities transactions through an unregistered broker-dealer in violation of the Securities and Exchange Act of 1934, 15 U.S.C. 78o(a): Traders Café, a day-trading firm, maintained an account with Gentile’s Bahamian broker-dealer, which was not registered in the U.S. The SEC issued a Formal Order of Investigation into Café in 2013. Without issuing a new Formal Order, the SEC informed Gentile that he was a target in that investigation.The SEC subpoenaed Gentile for testimony. He refused to comply. The SEC did not seek enforcement against Gentile but subpoenaed Gentile’s attorney and an entity affiliated with Gentile’s Bahamian broker-dealer, which also refused to comply. The SEC commenced enforcement actions against those entities. Gentile unsuccessfully moved to intervene; the Florida district court ordered compliance. Gentile filed suit in New Jersey, seeking a declaration that the Café investigation was unlawful, requesting the quashing of the subpoenas, and seeking an injunction to prevent the SEC from using the fruits of that investigation against him.The Third Circuit affirmed the dismissal of the suit. The APA’s waiver of sovereign immunity, 5 U.S.C. 702, includes an exception for “agency action committed to agency discretion by law,” section 701(a)(2); sovereign immunity prevents judicial review of the Formal Order of Investigation. View "Gentile v. Securities and Exchange Commission" on Justia Law

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In 2006, a McVey assisted living resident fell and suffered injuries that resulted in his death. An investigation led to a homicide charge against Geness, a permanently mentally disabled McVey resident. A judge deemed Geness incompetent to stand trial and ordered him transferred to a psychiatric hospital for assessment. Approximately 10 months after his arrest, Geness was transferred to a psychiatric facility where he was deemed incompetent with a “poor” prognosis for improvement. He remained imprisoned for years, while his case remained on the court’s monthly “call of the list.” About five years after Geness’s arrest, a second competency evaluation was conducted, at the prison. It was again determined that Geness was incompetent to stand trial and unlikely to improve. A judge released him for involuntary commitment to a Long Term Structured Residence. Geness’s case remained the monthly “call of the list.” In 2015, a judge entered a nolle prosequi order. After nine years in custody without a trial, Geness was released.Geness sued the county and city, former detective Cox, and McVey under the Americans with Disabilities Act, 42 U.S.C. 12131, and the Fourteenth Amendment, 42 U.S.C. 1983. All defendants were dismissed except Cox. Following a remand, Geness added ADA “Title II” and Fourteenth Amendment claims against the Commonwealth and the Administrative Office of Pennsylvania Courts (AOPC). The Third Circuit remanded for dismissal of AOPC. While Congress abrogated sovereign immunity for Title II claims, Geness has not stated a Title II claim against AOPC, which had no power over the disposition of his case. There is no allegation regarding how AOPC’s alleged failure to contact the Supreme Court connects to Geness’s disability. View "Geness v. Administrative Office of Pennsylvania Courts" on Justia Law

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PSBA is a non-profit association created by Pennsylvania’s school districts. Campbell energetically used Pennsylvania's Right to Know Law (RTKL) to obtain records from PSBA’s constituent school districts. In 2017, Campell sent RTKL requests to public school agencies, seeking contact information for district employees and union representatives. PSBA’s attorney advised member districts that they were required to release publicly-available information, but they did not have to provide private data and that they could simply make the results “available for pickup.” When Campbell received copies of PSBA’s legal guidance, he established a web page entitled “PSBA Horror,” mocking PSBA's Executive Director. PSBA’s counsel threatened to sue Campbell for defamation. Campbell submitted another, 17-page, RTKL request, seeking 27 types of documentation regarding the districts' relationship with PSBA.PSBA sued Campbell, alleging defamation, tortious interference with contractual relations, and abuse of process. Campbell then filed a 42 U.S.C. 1983 suit, alleging that PSBA’s state suit was motivated by an improper desire to retaliate against him for proper RTKL requests, violating his First Amendment rights. The Third Circuit affirmed the dismissal of Campell’s suit. Campbell’s RTKL requests and PSBA’s state tort claims were both protected under the Noerr-Pennington doctrine, which shields constitutionally-protected conduct from civil liability, absent certain exceptions. The district court erred in requiring a heightened burden of proof on PSBA’s motives in bringing its state court tort claims but Campbell’s civil rights claim would fail under any standard of proof. View "Campbell v. Pennsylvania School Boards Association" on Justia Law

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Sierra Club sought review of the EPA’s approval of new Pennsylvania National Ambient Air Quality Standards (NAAQS) to govern pollution output at coal-burning power plants, as required by the Clean Air Act, 42 U.S.C. 7408(a). Sierra Club argued that the standards wrongly claim to reduce pollution output at Pennsylvania’s most advanced plants while simply rubber-stamping an average of current pollution output as its supposed new gold standard and criticized the proposal’s minimum temperature threshold—a measure that allows plants to nearly quintuple their pollution output when operating below 600 degrees Fahrenheit—as unsupported and unsupportable given the technical record before the agency. Sierra Club claims that the approved standards lack enforceable reporting regulations.The Third Circuit remanded to the EPA, finding that “the regulatory regime which springs forth from these three defining characteristics is neither supported by adequate facts nor by reasoning found in the administrative record.” Given the EPA’s concession that technological advances may allow for a more environmentally friendly standard than the one approved, reliance on a study that is more than 25 years old is neither a persuasive nor reasonable basis for adopting the standard it approved. The EPA is able neither to offer a reasonable justification for failing to require a stricter standard nor to justify the standard it endorsed. View "Sierra Club v. United States Environmental Protection Agency" on Justia Law

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Two counties sued Sherwin-Williams in state court, seeking abatement of the public nuisance caused by lead-based paint. Anticipating suits by other counties, Sherwin-Williams sued in federal court under 42 U.S.C. 1983. Sherwin-Williams claimed that “[i]t is likely that the fee agreement between [Delaware County] and the outside trial lawyers [is] or will be substantively similar to an agreement struck by the same attorneys and Lehigh County to pursue what appears to be identical litigation” and that “the Count[y] ha[s] effectively and impermissibly delegated [its] exercise of police power to the private trial attorneys” by vesting the prosecutorial function in someone who has a financial interest in using the government’s police power to hold a defendant liable. The complaint pleaded a First Amendment violation, citing the company’s membership in trade associations, Sherwin-Williams’ purported petitioning of federal, state, and local governments, and its commercial speech. The complaint also argued that the public nuisance theory would seek to impose liability “that is grossly disproportionate,” arbitrary, retroactive, vague, and “after an unexplainable, prejudicial, and extraordinarily long delay, in violation of the Due Process Clause.”The Third Circuit affirmed the dismissal of the suit. Sherwin-Williams failed to plead an injury in fact or a ripe case or controversy because the alleged harms hinged on the County actually filing suit. View "Sherwin Williams Co. v. County of Delaware" on Justia Law

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Navient sells student loans to borrowers and services and collects on student loans. Its “subprime loans,” which had high variable interest rates and origination fees, benefited schools by maximizing enrollment. Student borrowers were not informed that the loans had a high likelihood of default. In 2000-2007, 68-87% of Navient’s high-risk loans defaulted. Navient allegedly steered borrowers into consecutive forbearances after they had demonstrated a long-term inability to repay their loans. Navient would sometimes place borrowers in forbearance even though they would have qualified for $0 per month payments in an Income-Driven Repayment (IDR) plan. In 2011-2015, more than 60% of Navient’s borrowers who enrolled in IDR plans failed timely to renew their enrollment, allegedly because of deficient notifications. Navient also allegedly made misrepresentations concerning releases for cosigners and misapplied payments, resulting in borrowers and cosigners being improperly charged late fees and increased interest.Pennsylvania sued Navient under the Consumer Financial Protection Act, 12 U.S.C. 5552, and the state’s Unfair Trade Practices and Consumer Protection Law. Nine months earlier, the Consumer Financial Protection Bureau and the states of Illinois and Washington had filed similar lawsuits. The Third Circuit affirmed the denial of a motion to dismiss. The federal Act permits concurrent action. The Higher Education Act, 20 U.S.C. 1001, preempts state law claims based on failures to disclose required information but does not preempt claims based on affirmative misrepresentations. View "Commonwealth of Pennsylvania v. Navient Corp" on Justia Law

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In 1998, Pennsylvania and 45 other states entered into a settlement agreement with certain cigarette manufacturers, who agreed to disburse funding to the states to cover tobacco-related healthcare costs. Pennsylvania’s 2001 Tobacco Settlement Act established the "EE Program" to reimburse participating hospitals for “extraordinary expenses” incurred for treating uninsured patients according to a formula. The Department of Human Services (DHS) determines the eligibility of each hospital for EE Program payments. The Pennsylvania Auditor General reported that for Fiscal Years 2008-2012, some participating hospitals received disbursements for unqualified claims, and recommended that DHS claw back funds from overpaid hospitals and redistribute the money to hospitals that had been underpaid. DHS followed that recommendation for fiscal years prior to 2010 but discovered methodological discrepancies and discontinued the process for Fiscal Years 2010-2012.Plaintiffs, on behalf of all “underpaid” hospitals, sued an allegedly overpaid hospital, alleging conspiracy to defraud the EE Program in violation of RICO, 18 U.S.C. 1961–1964. The plaintiffs alleged that the defendants submitted fraudulent claims for reimbursement, in violation of the wire fraud statute, 18 U.S.C. 1343 (a RICO predicate offense). The Third Circuit reversed the dismissal of the claims, finding that the theory of liability adequately alleges proximate causation. No independent factors that accounted for the plaintiffs’ injury and no more immediate victim was better situated to sue. View "St. Lukes Health Network, Inc. v. Lancaster General Hospital" on Justia Law

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A mortgage conveys an interest in real property as security. Lenders often require borrowers to maintain hazard insurance that protects the property. If the borrower fails to maintain adequate coverage, the lender may buy the insurance and force the borrower to cover the cost (force-placed coverage). States generally require insurers to file their rates with an administrative agency and may not charge rates other than the filed rates. The filed-rate is unassailable in judicial proceedings even if the insurance company defrauded an administrative agency to obtain approval of the rate.Borrowers alleged that their lender, Nationstar, colluded with an insurance company, Great American, and an insurance agent, Willis. Great American allegedly inflated the filed rate filed so it and Willis could return a portion of the profits to Nationstar to induce Nationstar’s continued business. The borrowers paid the filed rate but claimed that the practice violated their mortgages, New Jersey law concerning unjust enrichment, the implied covenant of good faith and fair dealing, and tortious interference with business relationships; the New Jersey Consumer Fraud Act; the Truth in Lending Act, 15 U.S.C. 1601–1665; and RICO, 18 U.S.C. 1961–1968.The Third Circuit affirmed the dismissal of the suit. Once an insurance rate is filed with the appropriate regulatory body, courts have no ability to effectively reduce it by awarding damages for alleged overcharges: the filed-rate doctrine prevents courts from deciding whether the rate is unreasonable or fraudulently inflated. View "Leo v. Nationstar Mortgage LLC of Delaware" on Justia Law

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In 2009, D. was delivered at Sharon Hospital by Dr. Gallagher and sustained an injury, allegedly causing her shoulder and arm permanent damage. In 2010-2011, preparing to file D.’s malpractice case, counsel requested records from Sharon and Gallagher, limited temporally to the delivery. Counsel believed that Gallagher was privately employed. Sharon was private; Gallagher was listed on the Sharon website. Counsel did not discover that Gallagher was employed by Primary Health, a “deemed” federal entity eligible for Federal Tort Claims Act (FTCA), 28 U.S.C. 1346(b), malpractice coverage. D.'s mother had been Gallagher's patient for 10 years and had visited the Primary office. In contracting Gallagher, counsel used the Primary office street address. Gallagher’s responses included the words “Primary Health.” The lawsuit was filed in 2016; Pennsylvania law tolls a minor plaintiff’s action until she turns 18.The government removed the suit to federal court and substituted the government for Gallagher. The district court dismissed the suit against the government for failure to exhaust administrative remedies under the FTCA. The case against Sharon returned to state court. After exhausting administrative remedies, counsel refiled the FTCA suit. The Third Circuit affirmed the dismissal of the suit as untimely, rejecting a claim that D. was entitled to equitable tolling of the limitations period because counsel had no reason to know that Gallagher was a deemed federal employee or that further inquiry was required. D. failed to show that she diligently pursued her rights and that extraordinary circumstances prevented her from timely filing. View "D.J.S.-W. v. United States" on Justia Law

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New Jersey and New York agreed more than 50 years ago to enter into the Waterfront Commission Compact. Congress consented to the formation of the Waterfront Commission Compact, under the Compacts Clause in Article I, section 10, of the U.S. Constitution, 67 Stat. 541. In 2018, New Jersey enacted legislation to withdraw from the Compact. To prevent this unilateral termination, the Waterfront Commission sued the Governor of New Jersey in federal court. The district court ruled in favor of the Commission.The Third Circuit vacated. The district court had federal-question jurisdiction over this dispute because the Complaint invoked the Supremacy Clause and the Compact (28 U.S.C. 1331) but that jurisdiction does not extend to any claim barred by state sovereign immunity. Because New Jersey is the real, substantial party in interest, its immunity should have barred the exercise of subject-matter jurisdiction. View "Waterfront Commission of New York Harbor v. Governor of New Jersey" on Justia Law