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

Vepuri is the de facto director of KVK-Tech, a generic drug manufacturer. He employed Panchal as its director of quality assurance. KVK-Tech manufactured and sold Hydroxyzine, a prescription generic drug used to treat anxiety and tension. The government alleges that Vepuri, Panchal, and KVK-Tech sourced active ingredient for the Hydroxyzine from a facility (DRL) that was not included in the approvals that they obtained from the FDA and that they misled the FDA about their practices.An indictment charged all three defendants with conspiracy to defraud and to commit offenses against the United States and charged KVK-Tech with an additional count of mail fraud. The district court dismissed the portion of the conspiracy charge that alleges that the three conspired to violate the Food, Drug, and Cosmetic Act (FDCA), which prohibits introducing a “new drug” into interstate commerce unless an FDA approval “is effective with respect to such drug,” 21 U.S.C. 355(a).The Third Circuit affirmed, rejecting an argument that a deviation from the approved drug application means that the approval is no longer effective. The approval ceases being effective only when it has been withdrawn or suspended. The indictment does not include any allegations that the KVK-Tech Hydroxyzine manufactured with active ingredients from DRL had a different composition or labeling than the KVK-Tech Hydroxyzine with the effective approval. View "United States v. Vepuri" on Justia Law

An Asset Purchase Agreement provided that the sellers could receive variable payments (Earn-Out Consideration) if the post-merger company (IAS) achieved specific benchmarks. Section 2.6(c) specifies that IAS had to provide the sellers with the computation for each period, to become final unless they submitted a “notice of disagreement.” Any disagreement would be settled according to Section 2.3(e),” which refers to resolution by an accounting firm. Section 11.17, however, directs the parties generally to use non-binding mediation, followed by litigation if mediation fails.IAS determined that the company did not meet its targets. The sellers claim that IAS intentionally prevented the company from hitting its targets. Negotiations failed. The sellers sued for breach of contract and tortious interference; later, they filed a notice of disagreement and sought a declaration that the lawsuit was outside the scope of sections 2.3(e) and 2.6(d). IAS sought to compel arbitration under 2.3(e). The district court held that the Agreement contained a valid agreement to arbitrate. An accounting firm subsequently determined that the sellers had no right to Earn-Out Consideration. The district court entered judgment for IAS.The Third Circuit vacated. The Purchase Agreement contains an agreement to submit narrow disputes to an accounting firm for expert determination, not arbitration. Although the statement of IAS’s financial benchmarks becomes final after the expert completes its accounting analysis, the authority to resolve legal questions—like whether IAS violated the duty of good faith— remains with the courts. View "Sapp v. Industrial Action Services LLC" on Justia Law

For 15 years, Charles ran 26 payday-lending companies, violating state criminal laws against usury, charging fees roughly equal to 780% interest per year. The companies grossed nearly half a billion dollars. Charles was convicted of 17 counts, including two for RICO conspiracy. He was sentenced to 14 years in prison, fined $2.5 million, and had to forfeit $64 million in illicit gains from the RICO conspiracy. Charles had already given some of the forfeited property to his daughter Linda. After the forfeiture orders, Linda filed ancillary claims to recover her interest in the assets.The Third Circuit affirmed the denial of her claims. For a RICO conviction, the defendant “shall forfeit” any interest in or proceeds from the conspiracy, 18 U.S.C. 1963(a). Third parties may neither intervene in that forfeiture proceeding nor bring separate suits to assert their interests. Any person, other than the defendant, asserting a legal interest in the forfeited property may bring an ancillary claim; the court can amend the forfeiture order if that party shows that she either was a bona fide purchaser for value or has an interest in the forfeited property that was vested or superior at the time of the crime. The third party cannot “relitigate” the underlying forfeiture order. View "United States v. Hallinan" on Justia Law

Rivera flew from Miami to Saint Thomas, where Customs officers selected her for extra screening and asked her to fill out a Customs Declaration Form. On the Form, and in statements to officers, Rivera claimed ownership of two suitcases that she had retrieved from the baggage claim. Later, she said she did not own one of them, although it had a baggage tag with her name on it. Rivera said the suitcase belonged to Nieves. The other suitcase had a baggage tag with Nieves’ name on it. Rivera said that Nieves asked Rivera to retrieve the bag for her. Officers searched both suitcases. Each contained six vacuumed-sealed bags of a green, plant-like substance. The bags were concealed by clothes. A DHS agent interviewed Rivera, who changed her story about who told her to pick up the suitcase. She said did not know it was in the suitcases, which were packed by someone else.The Third Circuit affirmed Rivera’s convictions for conspiracy to possess, and possession, with intent to distribute, less than 50 kilograms of marijuana. The court rejected her argument under the 2018 Farm Act, which amended the Controlled Substances Act to exclude hemp from the definition of marijuana. The Act carved out an exception to marijuana offenses: Someone with cannabis possesses marijuana except if the cannabis has a THC concentration of 0.3% or less. The government need not disprove an exception to a criminal offense unless a defendant produces evidence to put the exception at issue. View "United States v. Rivera" on Justia Law

The Culps each received $8,826.30 to settle a lawsuit and reported their payments as “Other income,” “PRIZES, AWARDS” in their 2015 tax return. In 2017 the IRS proposed to increase their taxes owed for 2015 to reflect a perceived underpayment, giving the Culps 30 days to respond and stating it would send a notice of deficiency if they failed to do so. The Culps did not respond. The IRS mailed a notice of deficiency, informing the Culps of their right to file a petition in the Tax Court within 90 days. In May 2018, the IRS sent the Culps another letter stating they owed only $2,087 in 2015 taxes, penalties, and interest—less than the amount previously assessed. Again they failed to respond. The IRS levied on their property, collecting approximately $1,800 from the Culps’ Social Security payments and 2018 tax refund.The Culps filed a petition in the Tax Court, which dismissed their petition for lack of jurisdiction, reasoning its “jurisdiction depends upon the issuance of a valid notice of deficiency and the timely filing of a petition,” 26 U.S.C. 6212, 6213, 6214. It found the petition untimely because the Culps did not file it within 90 days of the date the IRS sent the second notice of deficiency. The Third Circuit reversed. Congress did not clearly state that section 6213(a)’s deadline is jurisdictional; non-jurisdictional time limits are presumptively subject to equitable tolling. That presumption was not rebutted. View "Culp v. Commissioner of Internal Revenue" on Justia Law

Before Dante (age 2) died, his aunt, Mercado, filed a report with the Office of Children and Youth Services, which investigated Dante’s welfare. Bowie, who was dating Dante’s mother, was charged with murdering him. In criminal discovery, Bowie got documents from the investigation that were stored in a statewide database. He gave them to Mercado, who believed he was innocent. Mercado, wanting to blame Youth Services for failing to protect her nephew, started a Facebook group, “Justice for Dante.” and posted some of the documents. Bowie was acquitted. In the meantime, York County District Attorney Sunday charged Mercado with violating Pennsylvania’s Child Protective Services Law. The Law makes it a crime to willfully release or permit the release of any information contained in the Statewide child abuse database to persons or agencies not permitted to receive that information. The DA later dismissed the charge,Schrader, Dante’s grandmother, wants to publish documents generated during Youth Services’ investigation to further publicize Youth Services’ failures. She fears that she will be prosecuted if she does so. Invoking the First Amendment, she claimed that the Law is unconstitutional both on its face and as applied to her. The district court agreed with the as-applied challenge and preliminarily enjoined the prosecution of Schrader for sharing child-abuse documents concerning Dante. The Third Circuit vacated with instructions to narrow the injunction to eliminate a reference to "other documents" that may come into Schrader's possession. Under the content-focused test, the Law is likely unconstitutional as applied here. View "Schrader v. District Attorney York County" on Justia Law

Berkelhammer and Ruiz participated in the ADP TotalSource Retirement Savings Plan, an investment portfolio managed by NFP. They filed suit under section 502(a)(2) of the Employment Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. 1132, for their own losses and derivatively on behalf of the Plan. The Plan’s contract with NFP contained an agreement to arbitrate disputes between the two entities. Berkelhammer and Ruiz argued that since they did not personally agree to arbitrate, the arbitration provision did not reach their claims. The district court disagreed, holding that Berkelhammer and Ruiz stand in the Plan’s contractual shoes and must accept the terms of the Plan’s contract.The Third Circuit affirmed. Civil actions under section 502(a)(2) “for breach of fiduciary duty [are] brought in a representative capacity on behalf of the plan as a whole” to “protect contractually defined benefits.” Because the plaintiffs’ claims belong to the Plan, the Plan’s consent to arbitrate controls. The presence or absence of the individual claimants’ consent to arbitration is irrelevant. View "Berkelhammer v. ADP TotalSource Group Inc." on Justia Law

Jumper, a securities broker-dealer, arranged financing on behalf of private investors for the purchase of a Pennsylvania fire-brick manufacturer. Jumper fraudulently obtained authority to transfer the company’s pension plan assets by forging the majority stakeholder’s signature on several documents. Between 2007-2016, Jumper transferred $5.7 million from the pension plan to accounts he controlled.The SEC filed a civil complaint against Jumper for securities fraud in the Western District of Tennessee. The Department of Justice filed criminal charges against Jumper in the Middle District of Pennsylvania. The Tennessee court entered a default judgment for the SEC and ordered Jumper to disgorge $5.7 million and to pay prejudgment interest of $726,758.79. In Pennsylvania, Jumper pleaded guilty to wire fraud and agreed to make full restitution; the parties stipulated a loss of $1.5-$3.5 million.The district court considered Jumper’s request for a downward departure based on medical issues, discussed the relevant 18 U.S.C. 3553(a) factors, and denied Jumper’s requests, explaining, the Bureau of Prisons (BOP) is equipped to provide consistent, adequate medical care. The court sentenced Jumper to 78 months’ incarceration, at the bottom of the Guidelines range of 78–97 months, and ordered him to pay $2,426,550 in restitution. The Third Circuit affirmed, rejecting arguments that the sentence violated the Double Jeopardy Clause and principles of collateral estoppel and that the court improperly concluded that the BOP could treat his medical issues. View "United States v. Jumper" on Justia Law

In White Deer Township, a four-mile gap in Verizon’s wireless coverage overlays Interstate 80; Verizon customers are likely to experience “dropped calls,” “ineffective call attempts,” and “garbled audio.” The area is within Bald Eagle State Forest. A 2000 Pennsylvania moratorium prohibits the construction of cell towers on state forest land, so Verizon’s options were limited. After considering several sites and antenna configurations, Verizon decided to construct a 195-foot monopole topped with a four-foot antenna on privately owned land, comprising 1.9 acres and containing a cabin, shed, pavilion, and privy. Verizon leased 0.0597 acres, in the northeast corner of the property for the tower.The Township then permitted cell towers that complied with a minimum permissible lot size of one acre; cell towers had to be set back “from lot lines and structures a distance equal to the height of the facility, including towers and antennas, plus 10% of such height.” The Zoning Board denied Verizon’s variance applications, finding that Verizon’s alleged hardship was insufficient because it was “not a hardship connected to the capacity for the property to be used reasonably, but rather, the hardship [was connected to Verizon’s] capacity to use the property as desired.” The Third Circuit affirmed summary judgment for Verizon. The denial had “the effect of prohibiting the provision of personal wireless services,” in violation of the Telecommunications Act, 47 U.S.C. 332(c)(7)(B)(i)(II). View "Cellco Partnership v. White Deer Township Zoning Hearing Board" on Justia Law

In 2006, Mervilus, age 22, supported his mother, a cancer patient, and two younger siblings. Abreu accused Mervilus of robbing and stabbing him. Mervilus agreed to take a polygraph examination. Earlier that year, officers dismissed drug charges after a polygraph exam indicated he truthfully denied responsibility. New Jersey permitted polygraph results to be admitted at trial. The Union County Police Department’s only certified polygraph examiner, Kaminskas, conducted the exam. Kaminskas used the “Arther Method,” an “outlier in the polygraph world,” not accredited by the American Polygraph Association. The Method relies on subjective observations and assumptions, such as that certain ethnic groups do not experience any guilt when they lie. Kaminskas concluded Mervilus was deceptive. The only relevant question where Mervilus’s physiological responses signaled deception was a question for which Kaminskas insisted Mervilus change his answer. At trial Abreu failed to identify Mervilus, pointing to a different Black man. The court admitted the polygraph exam. Mervilus was convicted. In 2011, the conviction was overturned on the ground that Kaminskas’s testimony was improper and prejudicial.Mervilus sued Kaminskas, Chief Vaniska, and Union County, 42 U.S.C. 1983. The Third Circuit reversed the summary judgment rejection of those claims. Mervilus introduced sufficient evidence to try his fabrication-of-evidence claim against Kaminskas. His Monell claim against Union County is viable even if Kaminskas did not fabricate evidence; a jury might not render an inconsistent verdict if it found the County liable but Kaminskas not culpable. View "Mervilus v. Union County" on Justia Law