Sixth Circuit Notes Split Re Application of Earmarking Doctrine in the Context of a Refinancing Transaction

Per In re Lee, 530 F.3d 458 (6th Cir. Jun 26, 2008):

When applying the earmarking doctrine in the context of a refinancing transaction, courts have split over whether to characterize the refinancing as a single unitary transaction or as a number of parts. Although Chase suggests that the multiple-transfer approach adopted by the First Circuit in In re Lazarus has been followed only by a small minority of bankruptcy courts, it is in fact the prevailing view. See Encore Credit Corp. v. Lim, 373 B.R. 7, 17 (E.D.Mich.2007); George v. Argent Mortgage Co. (In re Radbil), 364 B.R. 355, 358 (Bankr.E.D.Wis.2007); Baker v. Mortgage Elec. Registration Sys., Inc. (In re King), 372 B.R. 337, 341 (Bankr.E.D.Ky.2007); Peters v. Wray State Bank (In re Kerst), 347 B.R. 418, 422 (Bankr.D.Colo.2006); Gold v. Interstate Fin. Corp. (In re Schmiel), 319 B.R. 520, 528 (Bankr.E.D.Mich.2005); Scaffidi v. Kenosha City Credit Union (In re Moeri), 300 B.R. 326, 329-30 (Bankr.E.D.Wisc.2003); Strauss v. Chrysler Fin. Co. (In re Prindle), 270 B.R. 743, 746-47 (Bankr.W.D.Mo.2001); Sheehan v. Valley Nat'l Bank (In re Shreves), 272 B.R. 614, 625 (Bankr.N.D.W.Va.2001); Vieira v. Anna Nat'l Bank (In re Messamore), 250 B.R. 913, 916 (Bankr.S.D.Ill.2000). See also Goodman v. S. Horizon Bank (In re Norsworthy), 373 B.R. 194, 200 n. 3 (Bankr.N.D.Ga.2007) ("Many courts have held that the 'earmarking doctrine' is not properly applied in the case of the transfer of a security interest."). In actuality, the case upon which Chase relies, In re Heitkamp, 137 F.3d 1087, represents the minority view. As far as we are aware, the only courts that have followed it are lower courts in the Eighth Circuit, the lower courts in In re Lazarus, and the district court here.

Ninth Circuit Weighs in on Split Re Scope of Attorney's Fees under § 406(b)

Per Clark v. Astrue, 529 F.3d 1211 (9th Cir. Jun 25, 2008):

The issue presented here is one of first impression in the Ninth Circuit: Does 42 U.S.C. § 406(b) limit only the attorney's fees awarded under § 406(b) for representation before the court to 25% of the claimant's past-due benefits, or does § 406(b) limit the combined total of attorney's fees awarded under both § 406(a) and § 406(b) to 25% of past-due benefits? Other circuits that have addressed this issue have reached different results. Based on the plain text of the statute, the Sixth and Tenth Circuits have held § 406(b)'s cap on attorney's fees applies only to fees awarded under § 406(b), and does not limit the combined fees awarded under both § 406(a) and § 406(b). Wrenn ex rel. Wrenn v. Astrue, 525 F.3d 931, 936 (10th Cir.2008); Horenstein v. Sec'y of Health & Human Servs., 35 F.3d 261, 262 (6th Cir.1994) (en banc), overruling Webb v. Richardson, 472 F.2d 529 (6th Cir.1972). Based primarily on legislative history, however, the Fourth and Fifth Circuits have held § 406(b) limits the combined attorney's fees awarded under both § 406(a) and § 406(b) to 25% of the claimant's past-due benefits. Morris v. Social Sec. Admin., 689 F.2d 495, 497-98 (4th Cir.1982); Dawson v. Finch, 425 F.2d 1192, 1195 (5th Cir.1970).

Because the plain text of § 406(b) limits only the award of attorney's fees for representation of a Social Security claimant before the district court, we follow the Sixth and Tenth Circuits, and hold the district court erred in concluding § 406(b) limits the total amount of attorney's fees awarded under both § 406(a) and § 406(b).

Seventh Circuit Notes Split Re Analysis to Determine If Case is "Extraordinary" for Purposes of Sentencing

Per U.S. v. Swanson, 2008 WL 2795275 (7th Cir. Jul 21, 2008):

Still, in "extraordinary cases" both an upward adjustment (for obstruction) under § 3C1.1 and a downward adjustment (for acceptance) under 3E1.1(a) may be warranted. U.S.S.G. § 3E1.1, cmt. n. 4; Davis, 442 F.3d at 1009-10. Swanson suggests that the circuits are split on how to analyze whether a case is extraordinary, and while the circuits are indeed technically "split," this circuit's law is settled and in the company of the majority of the courts of appeals. In United States v. Buckley, 192 F.3d 708, 711 (7th Cir.1999), we joined several other circuits that had rejected the Ninth Circuit's holding in United States v. Hopper, 27 F.3d 378, 383 (9th Cir.1994). Buckley described Hopper as improperly allowing an obstructive defendant to "wipe the slate clean, and earn the acceptance of responsibility discount, just by pleading guilty and thereafter refraining from obstructing justice further."

Third Circuit Notes Split Re Treatment of Jurisdictional Attack Intertwined with Merits

Per CNA v. U.S., --- F.3d ----, 2008 WL 2801978 (3rd Cir. Jul 22, 2008):

A split among our sister courts of appeals has emerged on the proper procedure for handling situations in which jurisdiction is intertwined with the merits. In some circuits, whether a Government employee was acting in the scope of his employment for purposes of an FTCA claim must be handled as a question of the merits in order to give plaintiffs the appropriate procedural safeguards ( e.g., having a plaintiff's allegations assumed as true). See Montez v. Dep't of the Navy, 392 F.3d 147, 150 (5th Cir.2004) ("[W]e follow our general rule in holding that a jurisdictional attack intertwined with the merits of an FTCA claim should be treated like any other intertwined attack, thereby making resolution of the jurisdictional issue on a 12(b)(1) motion improper."); Lawrence, 919 F.2d at 1529 (vacating and remanding for consideration under Rule 12(b)(1)); see also Augustine, 704 F.2d at 1079 (treating the administrative claim requirement of § 1346(b)(1) as relating too closely to the merits to be handled under Rule 12(b)(1)). Yet the Second Circuit Court of Appeals recently reached the opposite conclusion on how a scope-of-employment dispute should be handled procedurally in the FTCA context. In Hamm v. United States, 483 F.3d 135, 137 (2d Cir.2007), it held that "where a waiver of sovereign immunity does not apply, a suit should be dismissed under Fed.R.Civ.P. 12(b)(1) and not Fed.R.Civ.P. 12(b)(6) for failure to state a claim."

Ninth Circuit Notes Split Re Reviewability of Remand Based on Declining Supplemental Jurisdiciton

Per California Dept. of Water Resources v. Powerex Corp., --- F.3d ----, 2008 WL 2797031 (9th Cir. Jul 22, 2008):

As DWR notes, the Federal Circuit has come to the opposite conclusion, holding that "a remand based on declining supplemental jurisdiction must be considered within the class of remands described in § 1447(c) and thus barred from appellate review by § 1447(d)." HIF BIO, Inc. v. Yung Shin Pharm. Indus. Co., 508 F .3d 659, 667 (Fed.Cir.2007). That decision, which split with several circuits, id. at 665, found support in the Supreme Court's recent statement that "[i]t is far from clear ... that when discretionary supplemental jurisdiction is declined the remand is not based on lack of subject-matter jurisdiction for purposes of § 1447(c) and § 1447(d)." Powerex Corp. v. Reliant Energy Servs., Inc., 127 S.Ct. 2411, 2418-19 (2007).

The Federal Circuit's disagreement does not give a three-judge panel in this circuit license to overrule the binding, authoritative decision of a prior three-judge panel. See Miller v. Gammie, 335 F.3d 889, 899 (9th Cir.2003) (en banc). Similarly, that the question remains unanswered by the Supreme Court does not relax our obligation to abide by stare decisis. In light of clear precedent, then, we hold that review of a district court's decision to decline an exercise of supplemental jurisdiction is not barred by § 1447(d).

Ninth Cir. Adopts "Natural Tendency Test" in Deciding "Materiality" in the Context of the False Claims Act

Per U.S. v. Bourseau, --- F.3d ----, 2008 WL 2718878 (9th Cir. Jul 14, 2008):

The Supreme Court has stated that "[i]n general, a false statement is material if it has 'a natural tendency to influence, or [is] capable of influencing, the decision of the decisionmaking body to which it was addressed.' " Neder v. United States, 527 U.S. 1, 16 (1999). Yet, circuit courts are split on how to measure materiality in the context of the FCA. See Medshares Mgmt. Group, Inc., 400 F.3d at 445. The Fourth and Sixth Circuits have adopted a "natural tendency test" for materiality, which focuses on the potential effect of the false statement when it is made rather than on the false statement's actual effect after it is discovered. Id . The Eighth Circuit has adopted a more restrictive "outcome materiality test," which requires a showing that the defendant's actions (1) had "the purpose and effect of causing the United States to pay out money it is not obligated to pay," or (2) "intentionally deprive[d] the United States of money it is lawfully due." Id. (citing Costner v. URS Consultants, 153 F.3d 667, 677 (8th Cir.1998)). We agree with the Fourth and Sixth Circuits that the natural tendency test is the appropriate measure for materiality because it is more consistent with the plain meaning of the FCA. Id.

D.R.I. Notes Split Re Automatic Divestiture of Jurisdiction Following Interlocutory Appeal of the Denial of a Motion to Stay & Compel Arbitration

Per Narragansett Elec. Co. v. Constellation Energy Commodities Group, Inc., --- F.Supp.2d ----, 2008 WL 2467008 (D.R.I. Jun 18, 2008):

In this case Judge Woodcock reviewed the authority regarding interlocutory appeals of the denial of a motion to stay and compel arbitration under the FAA, and concluded that such an appeal "divests the district court of the power to proceed with the aspects of the case on appeal." Id. at 142. Therefore, he granted the defendant's motion to stay discovery pending appeal of its motion to stay and to compel arbitration. Id.

As Judge Woodcock noted, on this issue, a split exists among the circuits. Id. at 143; see Ehleiter v. Grapetree Shores, Inc., 482 F.3d 207, 215 n. 6 (3d Cir.2007) (expressing agreement with "the majority rule of automatic divestiture where the Section 16(a) appeal is neither frivolous nor forfeited"); McCauley v. Halliburton Energy Servs., Inc., 413 F.3d 1158, 1162-63 (10th Cir.2005) (finding automatic divestiture of trial court jurisdiction unless appeal is frivolous or forfeited); Blinco v. Green Tree Servicing, LLC, 366 F.3d 1249, 1251 (11th Cir.2004) (finding automatic divestiture unless appeal is frivolous); Bombardier Corp. v. Nat'l R.R. Passenger Corp., No. 02-7125, 2002 WL 31818924, at *1, 2002 U.S.App. LEXIS 25858, at *2 (D.C.Cir. Dec. 12, 2002) (denying a motion to stay as unnecessary because the circuit court has "exclusive jurisdiction to resolve the threshold issue whether the dispute is arbitrable, and the district court may not proceed until the appeal is resolved"); Bradford-Scott, 128 F.3d at 505 (endorsing automatic divestiture rule, reasoning that "[c]ontinuation of proceedings in the district court largely defeats the point of the appeal and creates a risk of inconsistent handling of the case by two tribunals"); but see Motorola Credit Corp. v. Uzan, 388 F.3d 39, 65 (2d Cir.2004) (finding no automatic stay); Britton v. Co-op Banking Group, 916 F.2d 1405, 1412 (9th Cir.1990) (finding no automatic stay).

Judge Woodcock concluded, based on his reading of the First Circuit's decision in Lummus Co. v. Commonwealth Oil Refining Co., 273 F.2d 613 (1st Cir.1959), that the majority view favoring an automatic stay of those issues involved in the appeal is the better view.