E.D.N.C. Reports Circuit Split: Are Title 11 Debtor Duties Options Exclusive?

Per Coastal Federal Credit Union v. Hardiman, 2008 WL 4899529 (E.D.N.C. Oct 28, 2008):

[T]he Fourth Circuit rejected the Seventh Circuit's conclusion that the three options in section 521(a)(2)(A) were exclusive. The Fourth Circuit noted, inter alia, that the Seventh Circuit's analysis rested on another case which reasoned in part from the premise that ipso facto clauses were enforceable in that circuit. See id. at 347-18 (rejecting Edwards and its reliance on In re Bell, 700 F.2d 1053 (6th Cir.1983)).

In so holding, the Fourth Circuit chose its side in a vigorous circuit split. This circuit split persisted for over fifteen years. See Donald, 343 B.R. at 530-31. The Supreme Court never resolved whether the three options listed in section 521(a)(2)(A) were exclusive, or whether there was a "fourth option." Rather, this issue was the subject of ten different decisions of the courts of appeals. Five courts of appeals held that a debtor is not limited by the options enumerated in current section 521(a)(2)(A). Five others held to the contrary.

[FN7] In re Price, 370 F.3d 362, 379 (3d Cir.2004) (explaining that current section 521(a)(2)(A) is merely a notice provision); In re Parker, 139 F.3d 668, 673 (9th Cir.1998) ("The debtor's other options remain available...."); In re Boodrow, 126 F.3d 43, 51 (2d Cir.1997) (explaining that current section 521(a)(2)(A) "appears to serve primarily a notice function, not necessarily to restrict the substantive options available to a debtor"); Belanger, 962 F.2d at 347-18 ("Nothing in [current] section 521[a](2)(A) requires the debtor to choose redemption, reaffirmation or surrender of the property to the exclusion of all other alternatives...."); Lowry Fed. Credit Union v. West, 882 F.2d 1543, 1547 (10th Cir.1989) ("[W]e do not believe those provisions make redemption or reaffirmation the exclusive means by which a bankruptcy court can allow a debtor to retain secured property.").

[FN8] Four courts of appeals rejected the ride-through option. In re Burr, 160 F.3d 843, 849 (1st Cir.1998) ("[W]e believe that [current] 11 U.S.C. § 521 [ (a) ](2) unambiguously requires chapter 7 debtors wishing to retain property of the estate that secures a consumer debt to elect one of the retention options specified...."); In re Johnson, 89 F.3d 249, 252 (5th Cir.1996) (per curiam) ("[D]ebtors are limited to the three options set forth in the statute."); In re Taylor, 3 F.3d 1512, 1517 (11th Cir.1993) ("[W]e hold the plain language of [current] 11 U.S.C. § 521 [ (a) ](2) does not permit a Chapter 7 debtor to retain the collateral property without either redeeming the property or reaffirming the debt...."); Edwards, 901 F.2d at 1387 ("[W]e hold that [current] 11 U.S.C. § 521 [ (a)(2) ] requires a debtor to choose between the reaffirmation, redemption or surrender of property...."). Additionally, the Sixth Circuit rejected an argument that approximated ridethrough shortly before Congress amended the Bankruptcy Code in 1984 to include the language that gave rise to the ride-through dispute. See Bell, 700 F.2d at 1054-55, 1058 (rejecting argument that debtor may "redeem" property by making installment payments); see also Taylor, 3 F.3d at 1515 n. 3 ("The Sixth Circuit decided Bell the year before Congress passed the 1984 Amendments to the Bankruptcy Code.").

Circuit Split Widens on Aggravated Felony Issue

Per BNA's U.S. Law Week, 77 U.S.L.W. 1320 (Nov. 25, 2008):

A second simple possession conviction is not an aggravated felony for immigration purposes so as to make the offending alien ineligible for cancellation of removal, the U.S. Court of Appeals for the Second Circuit holds, joining the First, Third, and Sixth Circuits in a circuit split on the question. The Fifth and Seventh Circuits have held that a second simple possession offense can be considered a federal felony because it could have been prosecuted as a recidivist offense. According to the Second Circuit, however, “a second conviction for simple controlled substance possession under state law is not a felony under the Controlled Substances Act because the conviction does not proscribe conduct punishable as a felony as it does not correspond in any meaningful way with the federal crime of recidivist possession even if it could have been prosecuted in state court as a recidivist offense.” The court also made clear that its discussion in United States v. Simpson, 319 F.3d 81 (2d Cir. 2002), as to whether a simple possession conviction constitutes an aggravated felony because of a previous drug conviction was dicta. Alsol v. Mukasey, 2d Cir., No. 07-2068-ag(L), 11/14/08.

E.D. Va. Notes Circuit Split Re Whether "Unclean Hands" Doctrine Is Applicable to RICO Claims

Per Smithfield Foods, Inc. v. United Food and Commercial Workers Intern. Union, --- F.Supp.2d ----, 2008 WL 4899535 (E.D. Va. Oct 14, 2008):

The well-recognized doctrine of unclean hands prevents a plaintiff from obtaining equitable relief if the plaintiff has been "guilty of any inequitable or wrongful conduct with respect to the transaction or subject matter sued on." WorldCom, Inc. v. Boyne, 68 Fed. Appx. 447, 451 (4th Cir.2003). It is unclear, however, both nationally and in the Fourth Circuit, whether the doctrine of unclean hands applies in civil RICO claims.

The circuit courts are currently divided on this issue. The First Circuit, in Roma Construction Co. v. Russo, 96 F.3d 566, 571-75 (1st Cir.1996), suggested that the doctrine does not apply, but ultimately concluded that the plaintiffs did not have "unclean hands." The Eleventh and Seventh Circuits have opined that the doctrine may apply in civil RICO actions. See Sikes v. Teleline, Inc., 281 F.3d 1350, 1366 n. 41 (11th Cir.2002); Laborers' International Union of North America v. Caruso, 197 F.3d 1195, 1197-98 (7th Cir.1999). The Third Circuit also has applied the doctrine of unclean hands in the context of determining whether an injunction, after trial, can be denied. Northeast Women's Center, Inc. v. McMonagle, 868 F.2d 1342, 1354-55 (3d Cir.1989).

Notwithstanding the uncertainty at the circuit court level, it is persuasive that "an overwhelming majority" of district courts to consider the issue have concluded that "the defense of unclean hands is not available in civil RICO actions." Florida Software Sys. v. Columbia/HCA Healthcare Corp., 1999 U.S. Dist. LEXIS 15294, at *6 (M.D.Fla. Sept. 16, 1999); see, e.g., Local 851 of the Int'l Bhd. of Teamsters, 1998 U.S. Dist. LEXIS 3779, at *5, 1998 WL 178873, at *2 (E.D.N.Y 1998); Bieter Co. v. Blomquist, 848 F.Supp. 1446 (D.Minn.1994); In re National Mortgage Equity Corp. Mortgage Pool Certificates Sec. Litig., 636 F.Supp. 1138 (C .D. Cal 1986).

. . . .

Finally, the Supreme Court has held that the affirmative defense of unclean hands has "been rejected" in the context of statutes "where Congress [has] authorize[d] broad equitable relief to serve important national purposes." McKennon v. Nashville Banner Publ. Co., 513 U.S. 352, 357 (1995) (addressing unclean hands in the context of an AEDA claim). RICO is such a statute. See, e.g., Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 28 (1991) (RICO was "designed to advance important public policies").

The persuasive weight of authority is that the affirmative defense of unclean hands is not available in a civil RICO action and cannot be asserted by the Defendants as an affirmative defense. Of course, the existence of inequitable conduct may be pertinent in shaping equitable relief, if there is a finding of liability. See, e.g., Heldman v. United States Lawn Tennis Asso., 354 F.Supp. 1241, 1249 (S.D.N.Y.1973).

11th Cir. Identifies Split Re Whether Dist. Ct. Must Consider Each Enhancing Sentencing Factor on the Record

Per U.S. v. Santiago Moreno, 2008 WL 4787153 (11th Cir. Nov 4, 2008):

The [Sentencing] Guidelines Application Note 20 states "the court shall include consideration of the following factors" in determining whether the offense [manufacture of methamphetamines] created a substantial risk of harm to human life or the environment . . .

Although there is a circuit split on the issue, this Court has not published a case addressing whether the district court is obligated to explicitly consider each factor enumerated in [Sentencing Guidelines] Application Note 20. Application Note 20 does state that, in deciding whether to impose an enhancement under § 2D 1.1(b)(8)(B), the court "shall include consideration" of the four factors set forth in the Note. Id. Nevertheless, there is nothing in Application Note 20 that directs the court to do so on the record. See generally id. Because Application Note 20 does not provide the district court must consider on the record all four listed factors, and neither this Court nor the Supreme Court has held a district court is obligated to do so, the district court's failure to do so was not plain error.

Justices Agree to Examine Arbitration Agreement; Appeals Courts Have Split

Per BNA's Class Action Litigation Report, 11/14/2008:

The U.S. Supreme Court Nov. 7 granted review of an issue that the petitioner says has generated an “intractable divide” among the federal appeals courts: Does the Federal Arbitration Act give appellate jurisdiction over the appeal from an order denying application to stay claims involving nonsignatories to an arbitration agreement? (Arthur Andersen LLP v. Carlisle, U.S., No. 08-146, cert. granted 11/7/08).

D. Mont. Recognizes that "Whether a Walk-Away Escape is a Violent Crime Under the ACCA is the Subject" of a Circuit Split

Per U.S. v. Smith, 2008 WL 4534021 n.2 (D. Mont. Oct 09, 2008):

The issue of whether a walk-away escape is a violent crime under the ACCA [Armed Career Criminal Act] is the subject of a split of authority within the circuits. See United States v. Springfield, 196 F.3d 1180, 1185 (C.A.10 1999) ("walkaway" escape from prison honor camp is a violent felony under ACCA). Furthermore, the Supreme Court recently granted certiorari to consider whether a conviction for escape under a statute that encompasses walkaway escapes qualifies as a crime of violence under the ACCA. United States v. Chambers, 473 F.3d 724 (7th Cir.2007), cert. granted, No. 06-11206, 128 S.Ct. 2046 (Apr. 21, 2008).

9th Cir. Weighs in on Split Re Whether Protected Status of Speech is a Question of Mixed Law and Fact

Per Posey v. Lake Pend Oreille School Dist. No. 84, --- F.3d ----, 2008 WL 4570616 (9th Cir. Oct 15, 2008):

Given the factual disputes presented in the record, we must therefore determine whether the inquiry into the protected status of speech remains one purely of law as stated in Connick, or if instead Garcetti has transformed it into a mixed question of fact and law.

Our sister circuits are split over the resolution of this question. In Charles v. Grief, 522 F.3d 508 (5th Cir.2008), for example, the magistrate judge had concluded that the question whether Charles's statements were made in his capacity as a citizen or an employee presented a genuine issue of material fact requiring trial. Id. at 513 n. 17. On appeal, however, the Fifth Circuit disagreed, concluding that "even though analyzing whether Garcetti applies involves the consideration of factual circumstances surrounding the speech at issue, the question whether Charles's speech is entitled to protection is a legal conclusion properly decided at summary judgment." Id.

The Tenth Circuit has also concluded that "[all] three steps" of the inquiry into the protected status of speech, including the "determin[ation] whether the employee [has spoken] pursuant to [his] official duties," "are to be resolved by the district court [and not] the trier of fact." Brammer-Hoelter v. Twin Peaks Charter Acad., 492 F.3d 1192, 1202-03 (10th Cir.2007). There, despite a dispute among the parties, the court found at summary judgment that some of the plaintiffs' speech had been made pursuant to their employment duties and some had not. Id. at 1204.

The District of Columbia Circuit has also held, following Garcetti, that the question whether a plaintiff "ha[s] spoken as a citizen on a matter of public concern" is a "question[ ] of law for the court to resolve," and not a "question[ ] of fact ordinarily for the jury." Wilburn v. Robinson, 480 F.3d 1140, 1149 (D.C.Cir.2007) (internal quotation omitted) (going on to affirm summary judgment because, on review of the evidence of plaintiff's alleged but apparently disputed employment duties, the speech "easily" fell within the plaintiff's job responsibilities).

In conflict with the Fifth, Tenth, and D.C. Circuits, the Third Circuit has "held that 'whether a particular incident of speech is made within a particular plaintiff's job duties is a mixed question of fact and law.' " Reilly v. City of Atlantic City, 532 F.3d 216, 227 (3d Cir.2008) (quoting Foraker v. Chaffinch, 501 F.3d 231, 240 (3d Cir.2007)). In Foraker, the Third Circuit considered a First Amendment retaliation case that had already gone to trial. The court applied "clear error" review to the factual finding that the plaintiffs' speech had been "made pursuant to employment duties." Foraker, 501 F.3d at 250 (Pollak, J., concurring).

The Seventh Circuit has implicitly sided with the Third Circuit, concluding in Davis v. Cook County, 534 F.3d 650 (7th Cir.2008), that summary judgment was appropriate because "no rational trier of fact could find" that Davis's speech had been made in her capacity as a private citizen. Id. at 653. And, prior to Garcetti, the Eighth Circuit had already concluded (with respect to the second element, requiring the balancing of interests between the individual and the state) that "any underlying factual disputes concerning whether the speech at issue [is] protected should [be] submitted to the jury." Casey v. City of Cabool, 12 F.3d 799, 803 (8th Cir.1993) (citing Shands v. City of Kennett, 993 F.2d 1337, 1342 (8th Cir.1993)).

Upon consideration, we agree with the Third, Seventh, and Eighth Circuits and hold that the determination whether the speech in question was spoken as a public employee or a private citizen presents a mixed question of fact and law.