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

In 1997, the trusts acquired all shares of AIS with an aggregate basis of $5,612,555. In 1999, the trusts formed Wind River Corporation and contributed their AIS shares in exchange for all Wind River shares. Wind River designated itself a subchapter S Corporation. In 2003, Wind River elected to treat AIS as a qualified subchapter S subsidiary. Before that election, the trusts’ aggregate adjusted basis in Wind River was $15,246,099. After the Qsub election, the trusts increased their bases in that stock to $242,481,544. The trusts sold their Wind River interests to Fox. After transaction costs, the sale yielded $230,111,857 in cash and securities in exchange for the Wind River stock. The trusts claimed a loss of $12,247,229: the difference between the amount actually received for the sale and the new basis in the Wind River stock. The trusts shareholders’ 2003 tax returns showed that capital loss. The IRS determined that a capital gain of approximately $214 million had been realized from the sale to Fox, for a cumulative tax deficiency of $33,747,858. Deficiency notices stated “the Qsub election and the resulting deemed I.R.C. 332 liquidation did not give rise to an item of income under I.R.C. 1366(a)(1)(A); therefore, [the Trusts] could not increase the basis of their [Wind River] stock under I.R.C. 1367(a)(1)(A).” The Tax Court found the increase in basis and declared loss to be improper. The Third Circuit affirmed. View "Ball v. Comm'r of Internal Revenue Serv." on Justia Law

During Banks’ supervised release for a bank fraud conviction, he was arrested for conspiring to steal or create more than 75 fraudulent checks. He pleaded guilty to conspiracy to commit bank fraud (18 U.S.C. 1349), and to violating conditions of his supervised release. He stipulated to a Grade A violation of supervised release. The plea agreement stated that that the prosecution “cannot and does not make any representation or promise as to what guideline range may be found by the sentencing judge, or as to what sentence Richard Banks ultimately will receive.” Banks acknowledged his voluntary waiver of any right to challenge the sentence imposed “if that sentence falls within or below the Guidelines range that results from the agreed total Guidelines offense level of 14 and the sentence for the Violation Petition falls within or below the Guideline range set forth.” Banks substantially cooperated with the government, resulting in a number of convictions. After granting a 6-level downward departure for cooperation, the court imposed a term of 18 months for the bank fraud, but denied requests for the same downward departure, and for a concurrent term, on the supervised release violation. The court ordered 33 months’ imprisonment for the violation, to be served consecutively. The Third Circuit affirmed, rejecting an argument that the appellate waiver was inapplicable to the situation. View "United States v. Banks" on Justia Law

A postal inspector intercepted a parcel on suspicion of narcotics trafficking because the return address was fictitious. The inspector knew that drug traffickers often bring narcotics from Mexico into Arizona and mail them to the east coast. A trained narcotics canine detected the presence of narcotics in the parcel. Agents gathered information about the recipient address and obtained a warrant. The parcel contained 20 pounds of marijuana. The agents held the parcel for four days and planned a controlled delivery of a reconstructed parcel, containing a GPS locator. Golson identified himself by the false name given on the parcel’s address and accepted the package. After receiving a signal that the package had been opened, agents conducted a search of the house pursuant to an anticipatory search warrant and found several guns and ammunition, 704 packets of heroin packaged for distribution, 40 grams of raw heroin, a cutting agent, packaging material consistent with drug distribution, a heat sealer, heat sealable bags, a scale, rubber examination gloves, and masks. The district court rejected a motion to suppress. The Third Circuit affirmed, finding that there was probable cause for the anticipatory warrant, that the delay was reasonable, and that the search was a state search so that FRCP 41(b) did not apply.View "Unted States v. Golson" on Justia Law

During his time as an investor and owner of the MAAA Trust, which he established in 1992, Teo filed three false Schedule 13D disclosures and failed to file several required 13Ds. After they made a $154,932,011 gross profit on a stock sale, the SEC filed a civil enforcement action asserting violations of the Securities Exchange Act, 15 U.S.C. 78m (d) and 78j(b) and SEC rules and regulations. The district court granted summary judgment on several rule-violation claims that Teo did not challenge. A jury concluded that Teo violated Section 10(b) and Rule 10b-5, and that Teo and the Trust violated Section 13(d), Rule 12b-20, Rule 13d-1, and Rule 13d-2. The court held that the Trust violated Section 16(a) and Rule 16a-3. 7. The court ordered disgorgement of more than $17 million, plus prejudgment interest of more than $14 million. The Third Circuit affirmed, rejecting claims: of errors relating to admission of Teo’s guilty plea allocution and an exhibit; that there was insufficient evidence to prove a “plans and proposals” theory of liability; that the general verdict slip created ambiguity on the theory of liability grounding the jury’s verdict; and to the disgorgement order. View "Sec. & Exch. Comm'n v. Teo" on Justia Law

In 2011, the Department of Labor (DOL) issued a new regulation governing calculation of the minimum wage an employer must offer (prevailing wage) under the H-2B visa program, which permits U.S. employers to recruit foreign workers to fill unskilled, non-agricultural positions that no qualified U.S. worker will accept, 8 U.S.C. 1101(a)(15)(H)(ii)(b). Associations representing employers in non-agricultural industries that recruit H-2B workers, concerned about higher labor costs as a result of the 2011 Wage Rule, challenged its validity. The district court and the Third Circuit upheld the regulation, rejecting arguments that DOL lacked authority to promulgate legislative rules concerning the H-2B program and that, even if the DOL has such rulemaking authority, its violation of certain procedural requirements invalidated the Rule.View "LA Forestry Ass'n, Inc. v. Sec'y U.S. Dep't of Labor" on Justia Law

Collins, a Pennsylvania prisoner convicted in 1993 of first-degree murder, appealed the district court’s denial of his petition for habeas corpus. The court certified two questions for appeal: whether Collins was deprived of his Sixth Amendment right to effective assistance of counsel because his trial counsel “inadequately prepared for trial and completely failed to conduct any investigation, including into the ballistics evidence” and whether trial counsel’s alleged ineffective assistance, combined with alleged errors of the trial court, cumulatively caused him prejudice. The Third Circuit affirmed, while expressing “serious doubt that trial counsel conducted an adequate investigation.” In light of the uncontroverted evidence presented against Collins at trial, the state court’s determination that Collins failed to show he suffered prejudice was not an unreasonable application of the Supreme Court’s 1984 decision in Strickland v. Washington, which sets the standard for ineffective-assistance-of-counsel claims. Collins also did not exhaust his claim of cumulative error, which was, therefore, procedurally defaulted. View "Collins v. Sec'y, PA Dep't of Corrs." on Justia Law

Brownstein and Lindsay worked at LSDI, a direct mailing list company. In 1993 Lindsay began developing rules for categorizing names by ethnicity. Lindsay enlisted Brownstein to create computer programs that did everything from rewriting names into proper data format to turning the rules into computer code. The combined system of Lindsay’s rules and Brownstein’s computer code was called the LCID. Lindsay received a copyright registration for the rules in 1996, entitled “Ethnic Determinant System — Knowledge and Rule/Exception Basis,” including a copy of Brownstein’s programs as a “deposit copy” for the registration, 17 U.S.C. 407(a) and referencing associated “computer process” and “codes.” Lindsay listed herself as the only author. She gave Brownstein a copy of the registrations. He claims that he never reviewed them. Subsequently, LSDI demanded that Lindsay turnover the copyright registration. Lindsay and Brownstein left LSDI in 1997. Lindsay handled all business affairs and, over the next several years, executed several agreements to form new business entities to promote and transfer ownership of the LCID. There were several lawsuits with LSDI. In 2009, Brownstein left on bad terms, filed an oppressed shareholder lawsuit, and sought his own copyright registrations. He then sought a declaratory judgment of joint authorship of LCID under the Copyright Act. The district court found the claim time-barred and insufficient on the merits. The Third Circuit remanded, holding that an authorship claim accrues when a plaintiff’s authorship has been “expressly repudiated” and that courts have no authority to cancel copyright registrations. View "Brownstein v. Lindsay" on Justia Law

Aaroma acquired certain assets and liabilities of Emoral, a manufacturer of diacetyl, a chemical used in the food flavoring industry. The parties were aware of potential claims arising from exposure to diacetyl. Their agreement stated that Aaroma was not assuming liabilities related to “Diacetyl Litigation,” and was not purchasing Emoral’s corresponding insurance coverage. Emoral filed for bankruptcy. The Trustee and Aaroma entered into an agreement, under which Aaroma paid $500,000 and the Trustee released Aaroma from any “causes of action . . . that are property of the Debtor’s Estate.” In response to objections by the Diacetyl Claimants, the parties added that their agreements would not “operate as a release of, or a bar to prosecution of any claims held by any person which do not constitute Estate’s Released Claims.” The Bankruptcy Court approved the settlement without resolving whether the Diacetyl claims constituted “Estate’s Released Claims.” The Diacetyl Claimants filed individual complaints, alleging that Aaroma was a “mere continuation” of Emoral. The Bankruptcy Court held that the Diacetyl claims were not property of the estate. The district court reversed, finding that the claim for successor liability was a “generalized” claim belonging to the estate because a finding that Aaroma was a “mere continuation” of Emoral would benefit Emoral’s creditors generally. The Third Circuit affirmed. Because the Diacetyl claim belongs to the bankruptcy estate, it falls within the “Estate’s Released Claims.” The Diacetyl Plaintiffs have no apparent recourse against Aaroma. View "In re: Emoral, Inc." on Justia Law

Sharif, an inmate housed in the Restrictive Housing Unit, punched a corrections officer. Sharif claims that C.O. Picone punched Sharif first. Picone testified that once he was struck, he attempted to protect himself and that C.O. Potance, who was helping Picone retrieve dinner trays, attempted to restrain Sharif. Sharif asserted that once Picone began to hit him, Potance and C.O. Pinto entered his cell and joined in the attack by choking him. Following the altercation, Sharif was handcuffed and moved to a “suicide cell.” He continued to cause commotion and was moved to a restraint chair. Sharif contends that while he was in the restraint chair, he was punched repeatedly by unnamed corrections officers, observed and permitted by Lieutenant Kospiah. Sharif was charged with aggravated assault, entered a plea of nolo contendere, and was convicted as charged. Sharif filed an excessive force claim under 42 U.S.C. 1983 and moved to exclude evidence of his nolo contendere plea under Rule 410. The court admitted the evidence when Sharif took the stand and denied wrongdoing. The Third Circuit vacated and remanded, noting that Sharif’s credibility was already “suspect” and that the plea was, therefore, of minimal relevance.View "Sharif v. Picone" on Justia Law

It is a violation of the Sex Offender Registration and Notification Act (SORNA), 42 U.S.C. 16901, for individuals convicted of certain sex crimes to travel in interstate or foreign commerce and knowingly fail to register, 18 U.S.C. 2250(a). A conviction involving sex will not lead to classification as an offender under SORNA if “ [a]n offense involving consensual sexual conduct is not a sex offense for the purposes of [SORNA] ... if the victim was at least 13 years old and the offender was not more than 4 years older than the victim,” 42 U.S.C. 16911(5)(C). Brown was charged with failing to register under SORNA based on his conviction for third degree lewd molestation in Florida. He registered when he moved to New York, but failed to register when he later moved to Pennsylvania. Brown pled guilty, but the district court sua sponte expressed doubt that Brown was a “sex offender,” given that his Presentence Investigation Report indicated he was 17 years old and his victim was 13 years old at the time they engaged in the consensual sex that was the basis of the conviction. Citing “the interests of justice” the court withdrew its approval of Brown’s plea. The Third Circuit ordered the indictment reinstated, noting that Brown stipulated that he was more than 4 years older than his victim at the time of the offense. View "United States v. Brown" on Justia Law