Roundup: 3rd, 5th, 9th and 10th Circuits

3rd Circuit: Court Clarifies Detrimental Reliance

On Nov. 2, 2010, in Shook v. Avaya Inc., the 3rd Circuit ruled that an employer did not violate the Employee Retirement Income Security Act (ERISA) when it sent allegedly misleading letters that led an employee's wife to retire.

Former Avaya employee Richard Shook received letters concerning his pension benefits. After calculating his expected benefits, he and his wife, Karen, decided that Karen could retire. When Shook's benefits ended up being lower than he anticipated due to a miscalculation in his net credited service, he and his wife sued. The district court granted summary judgment to Avaya.

On appeal, the 3rd Circuit determined that in order to establish a claim for breach of fiduciary duty under ERISA, an employee must have detrimentally relied on a misrepresentation made by the fiduciary in taking an action pertaining to his own retirement. Karen's retirement was a nonemployee action and did not affect Shook's retirement or benefits, so the couple could not establish detrimental reliance. The appeals court affirmed the lower court decision.

5th Circuit: Injured Worker's Suit Switches States

In Ellis v. Trustmark Builders Inc., the 5th Circuit decided Oct. 29, 2010, that Alabama law should govern a tort claim filed by an injured worker from Mississippi.

Alabama subcontractors hired Mississippi resident Robert Ellis to build apartment complexes in Alabama for Alabama-based Trustmark Builders. When Ellis sustained a job injury during the single month the subcontractors had him working in Mississippi, he applied for and received workers compensation under Alabama law, which also allows benefit recipients to sue negligent parties other than the direct employer. Ellis filed a tort suit against Trustmark.

Trustmark contended that because the accident occurred in Mississippi, the court should apply Mississippi law, which provides workers comp as the only resolution available to injured workers. The district court granted summary judgment to Trustmark.

The 5th Circuit reversed and remanded the decision. It ruled that the court should apply the law of the state with "the most significant relationship to the particular issue in dispute," and because Ellis' employment relationship was centered in Alabama, Alabama law should apply. What's more, the court discovered that Ellis actually lived in Alabama; he used his mother's Mississippi address for tax purposes.

9th Circuit: Shareholders Lose Oracle Case

On Nov. 16, 2010, the 9th Circuit upheld the dismissal of a shareholder lawsuit against software giant Oracle Corp.

In Nursing Home Pension Fund v. Oracle, shareholders claimed that Oracle misled them when it blamed a missed profit forecast in 2001 on the dot-com bubble burst. The investors alleged that the 21-percent fall in Oracle shares was because of undisclosed problems known to senior management, including software malfunctions, wrongful accounting practices and inflated sales projections. The investors also claimed that CEO Larry Ellison sold $900 million in company stock before the announcement about the low earnings.

The district court said the allegations lacked proof and dismissed the case. The 9th Circuit upheld the dismissal, saying the plaintiffs couldn't prove "that their losses were caused by the market's reaction to defendants' alleged fraud, as opposed to Oracle's poor financial health generally."

10th Circuit: Panel Attacks Campaign Contribution Limits

A Colorado law limiting small groups' campaign contributions is unconstitutional, a 10th Circuit panel ruled Nov. 9, 2010, in Sampson v. Buescher.

Six homeowners raised roughly $1,000 for their campaign opposing the annexation of their neighborhood. Annexation supporters claimed the homeowners violated the Colorado Fair Campaign Practices Act, which requires that a group of two or more people that accepts or contributes more than
$200 in support or opposition of a ballot issue must register as an issue committee, which the homeowners did not do.

An administrative court hearing resulted in a settlement with no fines or attorney fees. But the homeowners, claiming the law violated their First Amendment rights, filed suit in the district court. The court issued a summary judgment upholding the law.

A 10th Circuit panel agreed that the law violated the First Amendment and reversed and remanded the decision. The panel asserted that although it's appropriate to require the disclosure of campaign contributions supporting public officials, "there is virtually no proper governmental interest in imposing disclosure requirements on ballot-initiative committees that raise and expend so little money."

Ashley Post

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