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Legal news from Tuesday, January 11, 2011




National Commission on BP Deepwater Horizon oil spill releases final report
Eryn Correa on January 11, 2011 5:48 PM ET

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[JURIST] The National Commission on the BP Deepwater Horizon Oil Spill[official website] released its full final report [text] on Tuesday, tracing the deeper root causes of the spill and recommending steps to avoid future incidents. The report highlights mistakes made by British Petroleum (BP), as well as its partners Haliburton and Transocean [corporate websites], as the starting point that allowed the spill to take place, and finishes with recommendations based on those oversights. The recommendations include instituting fees for off-shore drilling leases that would help to fund a safety agency within the Department of the Interior (DOI) [official website] for the regulation of off-shore drilling. In addition, the commission advises the creation of a safety institute lead by the oil industry that can more closely regulate those practices. The commissioners conceded that they can not prevent another oil spill from occurring, "but when exploration occurs, particularly in sensitive environments like the Gulf of Mexico or the Arctic, the country has an obligation to make responsible decisions regarding the benefits and risks". Several law-makers have stated that they will commence legislation based on these recommendations. Halliburton has rejected [press release] the report's findings, saying that the commission had "selectively omitted information provided to it" by the company and had relied on false assumptions about cement testing.

The report comes as another count against BP's practices leading up to the spill. In December, The US Department of Justice (DOJ) [official website] filed suit [JURIST report] Wednesday against units of (BP) and several other companies over the April Deepwater Horizon oil spill [BBC backgrounder; JURIST news archive]. The government's lawsuit is one of hundreds filed against BP and other companies in connection with the oil spill. In August, the US Judicial Panel on Multidistrict Litigation [official website] selected Judge Carl Barbier [FJC profile] to hear [JURIST report] more than 300 such lawsuits. Also that month, BP and the DOJ announced the completion of negotiations over the implementation of a $20 billion fund [JURIST reports] to aid victims of the oil spill. The report recommends that 80% of these funds collected go to restoration efforts in the Gulf of Mexico.




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China fails to deliver on human rights promises: HRW
Julia Zebley on January 11, 2011 1:12 PM ET

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[JURIST] China has failed to achieve the goals it set out in its first national human rights plan, Human Rights Watch (HRW) [advocacy website] declared in a report [text] released on Tuesday. In its assessment of the government's National Human Rights Action Plan of China (NHRAP) [text], HRW decried China's continued use of torture, illegal detentions, and the government's overuse of the death penalty. HRW also noted China's lack of commitment in cooperating with the international human rights community, as well as a number of human rights issues not slated for improvement in the NHRAP. The rights group did praise China for working to eradicate poverty, although conceded that further steps should be made.
At the same time as the Chinese government has pointed to the NHRAP as evidence of its commitment to human rights, the government has systematically continued to violate many of the most basic rights the document addresses. It has taken unambiguous steps to restrict rights to expression, association, and assembly. It has sentenced high–profile dissidents to lengthy prison terms on spurious state secrets or 'subversion' charges, expanded restrictions on media and internet freedom as well as tightened controls on lawyers, human rights defenders, and nongovernmental organizations. It has broadened controls on Uighurs and Tibetans, and engaged in increasing numbers of enforced disappearances and arbitrary detentions, including in secret, unlawful detention facilities known as 'black jails.'
The report also cited China's reaction to Nobel peace prize winner Liu Xiaobo [BBC profile; JURIST news archive] as a prominent concern. In a position paper [press release] published in September 2010, the Chinese government claimed to have increased human rights [JURIST report] by heightening Internet freedoms and improving civil and political rights.

China has had a well–known struggle with international criticism of its human rights record [JURIST news archive]. In April 2009, the Information Office of the State Council [official website] published the NHRAP [JURIST report], which aimed to protect ethnic minorities, promote gender equality, guarantee suspects the right to an impartial trial, and prohibit illegal detentions and the use of torture to extract confessions from suspects. China also sought to provide basic nationwide health care, slow its greenhouse-gas emissions, and protect "normal religious activities." In February 2009, the Chinese delegation to the UN Human Rights Council (UNHRC) [official website] defended [JURIST report] China's human rights record while presenting a report [text, PDF] in compliance with the UNHRC's Universal Periodic Review (UPR) [official website] process. Ambassador Li Baodong said that China has been taking steps to improve its legal system, promote democracy, and encourage non-governmental organizations.




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Supreme Court denies tax exemption for medical residents
Sarah Posner on January 11, 2011 1:11 PM ET

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[JURIST] The US Supreme Court [official website] on Tuesday ruled [opinion, PDF] 8-0 in Mayo Foundation for Medical Research v. United States [SCOTUSblog backgrounder] that medical residents are not classified as students for the purpose of federal tax exemption. The Mayo Foundation for Medical Education and Research [official website] had sought to exempt stipends paid to doctors during the residency portion of their medical training from the taxes on wages for employees required by the Federal Insurance Contributions Act (FICA) [text]. The US Treasury Department [official website] argued that the Social Security Act does not treat medical residents as students, and therefore they should not be eligible for tax exemptions under FICA. The court found that the government's interpretation of the two statues was reasonable:
We do not doubt that Mayo's residents are engaged in a valuable educational pursuit or that they are students of their craft. The question whether they are "students" for purposes of [FICA] § 3121, however, is a different matter. Because it is one to which Congress has not directly spoken, and because the Treasury Department's rule is a reasonable construction of what Congress has said, the judgment of the Court of Appeals must be affirmed.
The case was decided by a unanimous ruling in which Justice Kagan took no part, as she was the US Solicitor General during parts of the case's history.

Medical students working for the Mayo Clinic in Rochester, Minnesota, receive stipends from the foundation and the University of Minnesota [academic website] for the medical and patient care services they provide. The district court ruled that residents qualify for the exemption and ordered the US Treasury Department to refund FICA taxes paid during the second quarter of 2005 to both Mayo and the university. The US government appealed the district court's ruling to the US Court of Appeals for the Eight Circuit. The circuit court reversed [opinion, PDF] the lower court's holding, concluding that the judiciary must "defer to the regulation limiting this exception to students who are not full-time employees because it is a permissible interpretation of the statute."




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New York high court dismisses case against bond insurer
John Paul Putney on January 11, 2011 1:00 PM ET

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[JURIST] The New York Court of Appeals [official website] on Tuesday dismissed [opinion] a lawsuit against bond insurance company MBIA [corporate website] alleging breach of contract brought by several of the world's largest financial institutions. The lawsuit challenged the break-up of MBIA into two separate lines of bond insurance. MBIA, historically the largest guarantee insurer of municipal bonds and other public entity securities, sought to separate its municipal bond obligations from its structured finance obligations, including mortgage-backed securities and collateralized debt obligations. Major financial institutions including JPMorgan Chase, Citigroup, Bank of America, Morgan Stanley, Merrill Lynch, Barclays, Wachovia, UBS, and HSBC [corporate websites] challenged the split on the contractual grounds, arguing that it amounted to a fraudulent conveyance and left the divided MBIA undercapitalized and unable to pay on the structured-finance product policies [CNBC report] written by MBIA. The court dismissed the lawsuit, concluding:
For their breach of contract claim, plaintiffs allege that MBIA Insurance breached an implied covenant of good faith and fair dealing in its insurance policies. Plaintiffs do not claim that MBIA Insurance has failed to make any payment due under the policies, but instead contend that the company has frustrated an implicit purpose of obtaining the policies, namely "to enhance the value and credit rating" of the covered structured finance products. However, since this alleged purpose is nowhere reflected in the policies, it cannot serve as the basis for a claim of breach of contract or breach of the implied covenant of good faith and fair dealing. ... In effect, plaintiffs seek an advisory opinion premised on future events that are beyond defendants' control and thus are speculative.
There are currently two other lawsuits challenging the split that have yet to be resolved.

Financial institutions, as well as both private and municipal issuers, have recently faced securities-related enforcement actions. In August, the Securities and Exchange Commission (SEC) [official website] charged [order, PDF] the state of New Jersey with securities fraud for failing to disclose to municipal bond investors that it was underfunding two of the state's largest pension plans [JURIST report]. Also in August, a federal judge rejected a $75 million settlement [JURIST report] reached between Citigroup and the SEC to resolve charges of misleading investors [JURIST report] about Citigroup's exposure to sub-prime mortgage-related assets. In July, Goldman, Sachs & Co.. [official website; JURIST news archive] agreed to a $550 million settlement [text, PDF] with the SEC to resolve charges [press release] that they marketed a subprime mortgage product and made misleading statements and omissions to investors in early 2007.




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Supreme Court limits Chapter 13 bankruptcy deductions in first Kagan opinion
Zach Zagger on January 11, 2011 11:30 AM ET

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[JURIST] The US Supreme Court [official website] on Tuesday ruled [opinion, PDF] 8-1 in Ransom v. FIA Card Services, N.A. [SCOTUSblog backgrounder] that debtors who apply for Chapter 13 bankruptcy cannot use a car payment as a deduction from their repayment plan if the debtor has paid off the automobile. The opinion was the first authored by Justice Elena Kagan [JURIST news archive], who joined [JURIST report] the court in August after serving as solicitor general in the Obama administration and as Dean of Harvard Law School. The case dealt with Chapter 13 bankruptcy under 11 USC § 1301 [text] where a debtor repays creditors according to a court-approved plan. The US bankruptcy code [11 USC § 707(b)(2)] uses a statutory formula called the "means test" which allows debtors deduct "applicable" monthly expenses from their monthly income to determine a disposable income to repay creditors. The debtor in this case, Jason Ransom, had attempted to mark as a deduction the maximum amount allowed for car payments for a car that he owned outright. In the opinion of the court, Kagan interpreted the term "applicable" in the bankruptcy code to mean a deduction is allowed "only if that deduction is appropriate for him" preventing Ransom from marking the car as a deduction since he was no longer making payments on it.

The court's opinion upholds the decision of the US Court of Appeals for the Ninth Circuit, which ruled [opinion, PDF] that the bankruptcy court may not allow such deductions. The Supreme Court heard oral arguments [transcript, PDF; JURIST report] in October. Counsel for Ransom argued that, "[i]n 2005 when Congress passed the Bankruptcy Act, it made a policy decision to limit judicial discretion on a case-by-case basis in the area of reasonable and necessary expenses." Counsel for the respondent argued that, "[t]he Bankruptcy Code precludes an above-median income debtor like Petitioner from shielding from his creditors $471 a month for a car payment that he does not have." The US government argued as amicus curiae on behalf of the respondent.




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Rights group asks court to resume consideration of 'Don't Ask Don't Tell' appeal
Ashley Hileman on January 11, 2011 11:00 AM ET

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[JURIST] The Log Cabin Republicans [advocacy website] on Monday urged the US Court of Appeals for the Ninth Circuit [official website] to resume proceedings in their lawsuit against the military's "Don't Ask, Don't Tell" (DADT) policy [10 USC § 654 text; JURIST news archive]. The advocacy group filed a response [text, PDF] to a motion to delay that was recently filed by the Obama Administration [JURIST report] in US v. Log Cabin Republicans [case materials]. In its response, the group argues that the court "should reject the government's constant attempts at delaying and avoiding the issues" and calls the motion "another effort by the government to avoid filing a brief attempting to defend the indefensible." Log Cabin Republicans Executive Director R. Clarke Cooper said that the government would like the case to simply disappear [press release]:
The Obama administration’s continued defense of this failed and unconstitutional policy is a mystery. ‘Don’t Ask, Don’t Tell,’ was rejected by Congress, by the Joint Chiefs of Staff, and most notably by the American people. It is time for the President to stand by his commitment and end this policy of discrimination, removing the threat and specter of discharge from thousands of patriotic servicemembers.
The group said that it would have been willing to agreed to a delay in the proceedings if the government, in return, agreed to stop investigations and discharges during that period, but that gay servicemembers continue to be dissuaded from making their sexuality known.

The Don't Ask, Don't Repeal Act of 2010 [HR 2965 materials] was signed into law [JURIST report] in December. However, DADT remains in effect until the president, secretary of defense and chairman of the Joint Chiefs of Staff certify that the necessary policies and procedures are in place within the military to implement the repeal. After receiving certification, the full repeal must take effect within 60 days. The Obama administration had been pushing Congress to repeal DADT as courts have also been weighing in on the issue. Earlier in December, three former service members discharged under DADT filed a complaint against the Department of Defense seeking reinstatement [JURIST report] and the declaration that their discharges under the statute, and the statute itself, are unconstitutional. Additionally, in November, US Air Force Major Margaret Witt, who was discharged under DADT, became the first openly gay person to serve in the US military after the Obama administration did not pursue a stay of a previous federal court decision ordering her reinstatement [JURIST reports]. Since the enactment of DADT in 1993, approximately 13,000 servicemen and women have been discharged from the armed forces as a result of the policy.




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US trial begins for anti-Castro militant
Zach Zagger on January 11, 2011 10:30 AM ET

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[JURIST] The trial [court materials] of anti-Castro Cuban militant Luis Posada Carriles [BBC profile; JURIST news archive] began Monday on charges of lying to federal immigration officials that could carry a sentence of up to 60 years in prison. He is charged [Miami Herald report] before the District Court for the Western District of Texas [official website] with two counts of perjury and nine counts of making false statements regarding his involvement in the bombing of tourist attractions in Havana [Washington Post report] in 1997 and the 1976 bombing of a Cuban airliner [ASN backgrounder]. Declassified documents show that Posada, who has a history [AFP report] of anti-Fidel Castro activism, worked for the CIA [NYT report] between 1965 and 1976. Venezuela and Cuba have sought Posada's extradition under the International Convention for the Suppression of Terrorist Bombings and the Convention for the Suppression of Unlawful Acts against the Safety of Civil Aviation [texts] on charges related to the bombings. Posada denies having any involvement with the airline bombing but has equivocated about his involvement in the Havana bombings.

In January 2009, Venezuela renewed its extradition request [JURIST report] in hopes that the Obama administration would be more open to it. Posada was convicted in Panama for the attempted assassination of Fidel Castro but was pardoned [Miami Herald report]. Citing the UN Convention Against Torture [text], the US has refused to extradite Posada in the past [JURIST report], saying that he cannot be sent to either Venezuela or Cuba because he is likely to be tortured if extradited to either country. Citing Abu Ghraib and Guantanamo Bay [JURIST news archives], Cuba countered that claim during a November 2008 UN Security Council meeting [press release], saying that while the likelihood of torture in Cuba is speculative, the likelihood of torture in the US is not.




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DeLay receives three-year sentence for money laundering and conspiracy
Matt Glenn on January 11, 2011 9:37 AM ET

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[JURIST] A judge for the 331st Criminal District Court [official website] of Texas sentenced former US House Majority Leader Tom DeLay (R-TX) [JURIST news archive] to three years in prison and ten years of probation Monday following DeLay's November conviction [JURIST report] on money laundering and conspiracy charges. Judge Pat Priest sentenced DeLay to prison [WP report] on the conspiracy charge and gave DeLay probation in lieu of a five-year prison sentence for money laundering. The charges stemmed from $190,000 donated by corporate interests to DeLay's political action committee (PAC) during the 2002 midterm election, which was allegedly funneled through the Republican National Committee (RNC) [party website] for use in state elections. The RNC then distributed the money to seven legislative candidates at DeLay's direction in order to circumvent a state election law [Tex. Elec. Code § 253.094] forbidding corporate contributions to political campaigns, according to prosecutors. DeLay, who denies wrongdoing and claims his prosecution was politically motivated, secured his release by posting a $10,000 bond and plans to appeal [Austin American-Statesman report] his conviction.

In August, DeLay's lawyer confirmed that a US Department of Justice (DOJ) criminal probe into DeLay's association with lobbyist Jack Abramoff [JURIST news archive] had been dismissed without charges being filed [JURIST report]. The investigation lasted six years and included grand jury testimony from former aides as well as a review of more than 1,000 documents and e-mails from DeLay's office. In August 2008, a Texas appeals court allowed the money laundering indictment [JURIST report] against DeLay's associates to stand. In 2007, a Texas appeals court ruled against reinstating a charge of conspiracy to violate the state's election law against DeLay and his two associates. After he was indicted, DeLay stepped down as House majority leader and later resigned from Congress [JURIST reports].




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HRW urges greater efforts to close Guantanamo
Aman Kakar on January 11, 2011 8:03 AM ET

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[JURIST] Human Rights Watch (HRW) [advocacy website] on Monday urged [press release] President Barack Obama make greater efforts to close Guantanamo Bay [JURIST news archive] despite congressional opposition. In the press release, issued on the eve of the facility's ninth anniversary in operation [JURIST This Day at Law report], HRW recommended that Obama should escalate efforts to prosecute Guantanamo detainees in federal court or return and resettle them in order to meet US obligations under international law. The rights organization recognized Obama's commitment in closing the facility, but cited the continued practices of indefinite detention, use of military commissions [JURIST news archive] instead of federal courts, insufficient efforts to repatriate or resettle detainees and not acting forcefully enough to overcome obstacles from Congress as failures of the administration. HRW argued:
Closing Guantanamo is as essential today as it was when President Obama took office in 2009. But Obama can't keep hoping that a political consensus will form and Congress will make it easy - he has to act to make it happen. Obama still has the authority he needs to bring Guantanamo detainees to justice in US courts or to send them home. If he truly believes that Guantanamo is a scar on America's reputation, he should assert his authority now.
The press release went to outline the actions and policies already taken by the Obama administration to close Guantanamo but noted that they had not been fully carried out. These included the missed January 2010 deadline to close the facility, failed efforts to relocate detainees to a prison in Illinois, the continued use of military commissions to try detainees and the limited use of federal courts [JURIST reports] despite a stated preference for them.

As noted by HRW, Obama's efforts to close Guantanamo have faced ongoing opposition from Congress. On Friday, Obama signed a bill barring the transfer of Guantanamo detainees [JURIST report] to the US for trial. The legislation authorized funding for defense interests abroad, military construction and national security-related energy programs and barred the use of funds to transfer detainees into the US and limited funds available for transfers to foreign countries. The administration plans to seek the repeal of these restrictions and opposes the extension or expansion of them in the future. In June 2009, the US House of Representatives denied an Obama administration request for $60 million [JURIST report] to fund the closure of the Guantanamo Bay detention facility, and required the president to submit a detailed plan to Congress documenting the costs and risks of transferring a detainee to the US for trial or detention at least two months before the detainee is to be transferred. The number of detainees at Guantanamo has been significantly reduced as the administration continues to transfer detainees to a growing list of countries including Germany, Italy, Spain, Maldives, Georgia, Albania, Latvia, Switzerland, Slovakia, Somaliland, Palau, Belgium, Afghanistan and Bermuda [JURIST reports]. There are currently 178 detainees awaiting transfer from Guantanamo.




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