A recent U.S. Court of Appeals for the Second Circuit ruling is an important decision for corporations with foreign operations. In 2011, the U.S. Court of Appeals for the Second Circuit, in Kiobel v. Royal Dutch Petroleum Co., 642 F.3d 591 (2nd Cir. 2011), held that the Alien Tort Statute (ATS) does not regulate corporate conduct because customary international law does not recognize corporate liability, and therefore the litigation against the defendant could not proceed in the federal courts on the basis of the ATS. The defendant was alleged to have violated environmental human rights in the Nigeria. That ruling was very controversial, and an appeal was made to the U.S. Supreme Court, which upheld that ruling, but on different grounds. The Court held that the ATS is subject to a presumption against the extraterritorial application of domestic statutes, and that presumption had not been overcome by the plaintiffs. Other circuit have issued rulings which disagreed with the Second Circuit, but the original Kiobel decision is still the law of the circuit.
In late April, U.S. District Court Judge Mark A. Goldsmith, in Concerned Pastors for Social Action, et al. v. Nick A. Kouri, et al., issued an interesting Order Regarding Disqualification. During an April 6, 2016 status conference in this matter, the Court to the parties “information regarding its consumption of water whose source was the Flint River, during the period of April 2014 to August 2014, a time period when its duty station was at the Flint Divisional courthouse.” On the same day, the Court issued an order instructing “the parties to file any objections pertaining to the Court’s continued participation in the matter.” At issue was Title 28 U.S.C. § 455(a), which provides that any judge “of the United States shall disqualify himself in any proceeding in which his impartiality might reasonably be questioned.”
In The “Panama Papers” and the Secret World of Shell Corporations, my colleagues Carolina Fornos, Mark Hellerer, Maria Galeno, Joseph Jean, Alexander Hardiman, William Sullivan, Nancy Fischer, Nora Burke, Danielle Vrabie, and Matthew Putorti discuss a leak of 11.5 million documents from a law firm in Panama that may implicate politicians, criminals, and celebrities in sheltering of fortunes in offshore tax havens through the use of shell companies. Financial institutions and others may need to consider whether they are implicated by these events, assess the risks and how to minimize exposure, if any, and whether insurance coverage is available.
Photo: Sellchi Kusunoki, Bunch of Papers, Taken Oct. 16, 2011 – Creative Commons
On April 1, 2016, the Texas Supreme Court, in Houston Belt & Terminal Railroad Co., et al.. v. City of Houston, et al., reviewed the implementation of the City of Houston’s 2011 drainage fee ordinance. The petitioner railroad companies were assessed substantial new annual city drainage fees of $3 million by the City’s Director of Public Works. The Director determined that all of the railroads’ properties within the City of Houston “benefitted” – a term in the city ordinance—from the City’s drainage system, and that 93 million square feet of railroad property was “impervious,” allowing storm water to runoff into the drainage system which collected and otherwise managed this runoff. The Director made his determination of assessable property on the basis of aerial images and not digital map data, as required by the ordinance. For this reason, the railroads protested this new assessment and filed a lawsuit to challenge it. The City moved to dismiss the lawsuit on the basis of governmental immunity, but the Texas Supreme Court noted that the defense “does not bar a suit against a government officer for acting outside his authority—i.e., an ultra vires suit,” citing Tex. Parks & Wildlife Dep’t v. Sawyer Trust, 354 S.W.3d 384, 393 (Tex. 2011). It recognized that “[t]o fall within this ultra vires exception,” however, “a suit must not complain of a government officer’s exercise of discretion, but rather must allege, and ultimately prove, that the officer acted without legal authority or failed to perform a purely ministerial act,” citing City of El Paso v. Heinrich, 284 S.W.3d 366, 372 (Tex. 2009) and Fed. Sign v. Tex. S. Univ., 951 S.W.2d 401, 404 (Tex. 1997). Reviewing its case law and the pleadings, the Court held that the railroads’ pleadings were sufficient to confer the trial court with jurisdiction over their claims that the Director acted in an ultra vires capacity when he determined the extent of the impervious surface area of their properties.
Pillsbury would like to congratulate the winners of the “Built by Women” contest in DC, which highlights women’s contributions to the city of Washington D.C in the areas of architecture, engineering, construction, and real estate. Categories include Civic, Commercial, Cultural, Institutional, Landscape, Mixed-Use, Residential, Transportation, Urban Design. The Built By Women initiative was started by the Beverly Willis Architecture Foundation to celebrate the contributions of women to the built environment and to support women pursing building professions.
You can view the full list of winners on the BWAF website here. Additionally, the National Building Museum will honor the winning sites in the historic Great Hall the weekend of March 19 and 20. Congratulations to all of the winning women on your accomplishments and contributions to D.C.’s built environment.
Photo: University Salford Press Office, Women in Construction – Creative Commons
On February 5, 2016, the U.S. Court of Appeals for the Eleventh Circuit, in the case of Palmer Ranch Holdings, LTD, et al., v. Commissioner of Internal Revenue, issued a long and complex ruling that largely affirms the Tax Court’s decision regarding a contested evaluation of a conservation easement that resulted in significant claimed deductions. Perhaps somewhat surprisingly, the Tax Court sided with Palmer Ranch on its valuation of the conservation easement and the Eleventh Circuit went onto voice concern that the valuation was lowered from $25 million to $21 million by the Tax Court.
A company’s ability to contest in federal court what it views as unfair oversight by a federal government regulatory committee is still subject to obstacles posed by the “standing doctrine” by which access to the courts is limited to cases and controversies actually needing resolution. A recent example of this is the case of R. J. Reynolds Tobacco Company, et al. v. U.S. FDA, et al. On January 15, 2016, the U.S. Court of Appeals for the District of Columbia Circuit reversed the district court’s ruling and summary judgment for the plaintiffs and issuance of an order dissolving the U.S. Food and Drug Administration committee and enjoining use of the FDA committee’s report on the safety of menthol cigarettes due to alleged unlawful conflicts of interest relating to three of the FDA committee’s members. The Court of Appeals vacated the district court’s order, holding that the plaintiff tobacco companies lacked standing to complain at this time because the FDA has not yet issued a final rule for regulation of the at-issue cigarettes, although it was acknowledged that three committee members had testified in lawsuits against tobacco-products manufacturers and were paid substantial fees for doing so.
In PATH Act Changes to FIRPTA, Pillsbury attorneys Brian Wainwright and Bob Logan discuss
important changes to the U.S. federal income tax treatment of U.S. real estate investments by non-U.S. persons under the Foreign Investment in Real Property Tax Act of 1980.
Additional Source: Protecting Americans from Tax Hikes Act of 2015 (the PATH Act, Division Q of the Consolidated Appropriations Act, 2016, P.L. 114-113, enacted December 18, 2015); Technical Explanation of the Protecting Americans from Tax Hikes Act of 2015, House Amendment #2 to the Senate Amendment to H.R. 2029 (Rules Committee Print 144-40)
Photo: DonkeyHotey, Taxes – Illustration – Creative Commons
In FinCEN Targets “All Cash” Real Estate Deals in Manhattan and Miami, my colleagues Carolina Fornos, Maria Galeno, Mark Hellerer, Caroline Harcourt, Amanda Senske, and I discuss the federal Financial Crimes Enforcement Network’s (FinCEN) first Geographic Targeting Orders (GTOs) of 2016 issued on January 13. The GTOs are directed exclusively at U.S. title insurance companies and their subsidiaries and agents, requiring them, for a temporary period, to identify the individuals behind any entity that is used to purchase high-end residential real estate in Manhattan and Miami-Dade County, Florida, on an “all cash” basis. We discuss the immediate impact of these GTOs on these companies and what the GTOs may mean for others.
Photo: Arturo Donate, The skyline that never sleeps… Taken July 31, 2010 – Creative Commons
In Lacey Act Lessons from the Lumber Liquidators $13 Million Settlement, Pillsbury attorneys William Sullivan, Tom Allen, and Benjamin Cote explore the ramification of Lumber Liquidators’ agreement to plead guilty to five criminal charges, including one felony, stemming from its purchase and import of certain wood products through three separate Chinese suppliers. Among other things, the plea agreement marks the first criminal conviction of a major U.S. company under 2008 Lacey Act amendments that expanded the reach of the wildlife protection statute to wood products sourced from foreign countries.