• ARBITRATION LAWS

United States Court of Appeals for the Ninth Circuit

Infuturia Global Ltd. Vs. Sequus Pharmaceuticals Inc., The Hebrew University of Jerusalem; Yechezkel Barenholz (Decided on 07.02. 2011)

Jurisdiction-Determination thereof-9 U.S.C. Section 205 -Whether, under 9 U.S.C. Section 205, a District Court has removal jurisdiction over a case where the Defendant raises an affirmative defense related to an arbitral award falling under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards-Held, an arbitration agreement or award falling under the Convention "relates to" the subject matter of an action whenever it could conceivably affect the outcome of the Plaintiff's suit - Therefore District Court has jurisdiction-Hence affirmed

Held, The language of Section 205 refers to the action being removed and "the trial thereof." The meaning of this section is clear: a Defendant may remove a qualifying State court. action to Federal Court at any time before the claims raised in the State Court action have been adjudicated. Here, the "action removed" was Infuturia's amended complaint in California state court asserting state law claims against Sequus for tortious interference and conversion. Even if the term "trial" is broad enough to include arbitration, the "trial thereof" can only refer to an adjudication of the claims asserted against Sequus in California State Court. Since Infuturia's claims against Sequus had not yet been adjudicated by the California State Court, the action was timely removed under Section 205.Because an arbitration agreement or award falling under the Convention "relates to" the subject matter of an action whenever it could conceivably affect the outcome of the Plaintiff's suit, a District Court does have removal jurisdiction over such a case.

• SECURITISATION LAWS

United States Court of Appeals for the Ninth Circuit

Richard L. Sacks Vs. Securities and Exchange Commission (Decided on 22.02.2011)

Adoption of rule-Challenged thereto-15 U.S.C. Section 78y(b)(4)-Petition for review challenging a rule proposed by the Financial Industry Regulatory Authority and adopted by the Securities and Exchange Commission that banned non-attorneys from the securities industry from representing parties in securities - Whether the rule is impermissibly retroactive-Held, On applying the two step framework to determine the retroactive effect therein , the Court granted the petition for review

Held, The Court stated that the presumption against retroactive legislation is deeply rooted in their jurisprudence. The Court therefore disfavouur retroactive laws based on concerns about fairness and elementary considerations of fairness dictate that individuals should have an opportunity to know what the law is and to conform their conduct accordingly. A Statute or Regulation is applied retroactively if there is "clear congressional intent" with regard to it. Before application of the Statute the Court stated the application of two-step framework to determine if, indeed, it has a retroactive effect. First, the Court needs to determine whether the statute or regulation clearly expresses that the law is to be applied retroactively. If not, then whether application of the regulation would have a retroactive effect by attaching new legal consequences to events completed before its enactment. If, under this second step, the statute or regulation has retroactive effect, it does not govern absent clear congressional intent favoring such a result. For the reasons above, the Court granted the petition for review and held that the SEC may not retroactively apply the rules it adopted.

• TAX LAWS

Supreme Court of United States

CSX Transportation Inc. Vs. Allbama Department of revenue et al (Decided on 22.02.2011)

Discriminatory tax scheme-Challenged against thereto-Violation of the Railroad Revitalization and Regulatory Reform Act,1976 (Act); 49 U.S.C. Section 11501(b)-Whether a railroad may invoke this statute to challenge sales and use taxes that apply to rail carriers but exempt their competitors in the transportation industry - District dismissed the the suit as not cognizable under the Act-Hence the appeal-Held, Petitioner can challenge Alabama's tax when discriminatory- Reversed and remanded

Held, Because the statute does not define "discriminates," the Court looked to the term's ordinary meaning, which is to fail to treat all persons equally when no reasonable distinction can be found between those favored and those not favored. To charge one group of taxpayers a 2% rate and another group a 4% rate, if the groups are the same in all relevant respects, is to discriminate against the latter. To say that such a tax does not "discriminate" is to adopt a definition at odds with the word's natural meaning. This Court had repeatedly recognised that tax schemes with exemptions may be discriminatory. In addition, the statute's prohibition of discrimination applies regardless whether the favored entities are interstate or local. The distinctions drawn in the statute are not between interstate and local actors, as Alabama suggests, but between railroads and all other actors. Congress enacted the Railroad Revitalization and Regulatory Reform Act of 1976 to "restore the financial stability of the railway system of the United States,". To help achieve this goal, Congress targeted state and local taxation schemes that discriminate against rail carriers. The provision of the Act at issue here, now codified at 49 U. S. C. Section 11501, bars States and localities from engaging in four forms of discriminatory taxation. Therefore it was held that the Petitioner can challenge Alabama's sales and use taxes as "taxes that discriminate against . . . rail carrier[s]" underS ection11501(b)(4). Discrimination cases sometimes raise knotty questions about whether and when dissimilar treatment is adequately justified. In the context of the Act, those hard calls can arise when States charge different tax rates to different entities in a practice the statute specifically subjects to challenge. For the reasons stated, the Court reversed the judgment of the Eleventh Circuit and remanded the case for further proceedings consistent with this opinion.

Discriminatory Tax Scheme-Determination thereof-Discrimination addressed in subsections (b)(1) through (3) can only be described as taxes that target or single out railroad property -Discrete exemptions for certain railroad competitors do not make a generally applicable tax "discriminatory-Therefore Petitioner's challenge was rightly dismissed.

Dissenting Opinion

Subsection (b)(4) should be understood to tackle the issue of systemic railroad over-taxation the same way that the other subsections do-by linking the taxation of rail roads to the taxation of businesses with local political influence. Thus, a "tax that discriminates against a rail carrier" is a tax that targets or singles out rail carriers compared to commercial and industrial taxpayers. To violate Section 11501(b)(4), a tax exemption scheme must target or single out railroads by comparison to general commercial and industrial taxpayers. That reading settles the ambiguity in the word "discriminates" by reference to the rest of the statute and gives subsection (b)(4) a reach consistent with the problem the statute addressed. Although parts of the majority's discussion appear to question this standard, the limited holding does not foreclose it. Discrete exemptions for certain railroad competitors namely, fuel exemptions for interstate motor carriers and interstate ships and barges do not make a generally applicable tax "discriminatory" under subsection (b)(4). Because CSX had not alleged that Alabama's sales and use taxes target railroads compared to general commercial and industrial taxpayers and further it could not prove facts that would satisfy that standard in this case Petitioner's challenge to Alabama's sales and use taxes was properly dismissed.

Federal Court of Australia

Commissioner of Taxation Vs. Luxottica Retail Australia Pty Limited (Decided on 23.02.2011)

Assessment of GST-Appeal from decision of Taxation Appeals Division of Administrative Appeals Tribunal - Section 9-80(2) A New Tax System (Goods and Services Tax) Act 1999 -Whether sale of spectacles a single supply- Value of actual supply not able to be determined under Section 9-80(2) - Determination of 'value' a question of fact and not law - Tribunal determined value commensurate with price - No error of law - Appeal dismissed

Held, Where a statutory method of calculating the value is prescribed, then it would be an error of law for the Tribunal to determine value other than in accordance with that method. The evidence before the Tribunal showed that the frames have increasingly become fashion accessories and not just the means of holding lenses in place. They may vary considerably in price and the ultimate cost of the spectacles will depend on the consumer's choice of frame. How a promotion is structured is a matter for the commercial judgment of the seller. In the present case it has clearly been decided that the discount offered should be applied to the price of the frames rather than the lenses. The Tribunal added that the fact that the discounted price was conditional on the purchase of the lenses "does not undermine the reasonableness of the calculation of the taxable proportion in this way". This shows that the Tribunal made a considered decision as to the value of the taxable supply based on findings of fact that it was entitled to make. Any error made by the Tribunal in determining the value would be an error of fact, not of law, and as such does not give rise to a question of law enlivening the jurisdiction of this Court. The Commissioner's position amounts to a disagreement with the factual basis of the Tribunal's decision. As a matter of fact the Commissioner would prefer that the price of the frames sold as a separate item be the basis for determining value. There is no error of law in the Tribunal adopting a different approach to this factual question. Thus the Commissioner's appeal is dismissed.

• INSURANCE LAWS

United States Court of Appeals for the Ninth Circuit

Trishan Air Inc.; Kerry Acquisitions LLC Vs. Federal Insurance Company; STARR Aviation Agency Inc.; The Buckner Company Inc.; David Witterwer ; Arlington Roe & Co., Inc. (Decided on 16.02.2011)

Insurance policy-Claim thereof-Appellants purchased an aviation insurance policy from Appellee Federal Insurance Co.-After an accident involving one of Trishan's corporate jets, Trishan filed a claim with Federal- Federal denied coverage because the copilot had not undergone the training mandated by the policy-Held, Court affirmed the District Court's summary judgment in favor of Federal

Held, California law requires strict compliance with a pilot warranty. Trishan failed to comply with any aspect of the warranty's required training for co-pilots, and no material issue of fact was raised regarding insurance coverage. Because there was a genuine question of coverage at the time the coverage determination was made, no material issue of fact was raised concerning Trishan's bad faith claims. Due to Trishan's failure to raise a material issue of fact regarding strict compliance with the pilot warranty, breach of the implied covenant of good faith and fair dealing, or bad faith the Court affirmed the District Court's summary judgment in favor of Federal . In addition, it was held that Trishan's claim for coverage under the policy was not properly raised in the District Court.

United States Court of Appeals for the Ninth Circuit

University of Washington Medical Center Vs. Sebelius (Decided on 11.02.2011)

Federal Entitlements-Exclusion thereof-Challenged against- 42 U.S.C. Section 1396ww(d)(5)(vi)(II)- Whether such individuals can be considered eligible for medical assistance under a State plan within the meaning of 42 U.S.C. Section 1396ww(d)(5)(vi)(II) if a State uses its Medicaid DSH reimbursements to indirectly fund their care-Held though the patients at issue in this case are mentioned in Washington's Medicaid plan, they are not "eligible for medical assistance" under that plan as Medicaid DSH proxy considers either those patients who are eligible for medical assistance or who qualify under the statute's definition of low-income -Hence District Court judgment affirmed

Held,a person is "eligible for medical assistance" if he or she is "capable of receiving" medical assistance. Any individual who is capable of receiving medical assistance must be included in a hospital's Medicare DSH percentage whether or not the State pays for the patient's medical care. Because the inquiry turns not on the payment of a patient's medical bills but on eligibility for "medical assistance,"it is important to understand what that term means under the Social Security Act. Nothing in the context of the Social Security Act overcomes the natural presumption that identical words used in different parts of the same act are intended to have the same meaning. Under Medicaid, "medical assistance" does not include just "any type of medical assistance. Rather, it is a statutory term that "means payment of part or all of the cost of certain enumerated categories of care and services . . . for individuals, and, with respect to physicians' or dentists' services, at the option of the State, to individuals" who meet statutory eligibility criteria. Thus, the definition of "medical assistance" has four key elements: (1) federal funds; (2) to be spent in "payment of part or all of the cost"; (3) of certain services; (4) for or to patients meeting the statutory requirements for Medicaid, Even though federal Medicaid money indirectly subsidized the medical treatment received by Washington's General Assistance-Unemployable(GAU) and Medically Indigent(MI) populations, their care still does not meet this definition of "medical assistance." The Hospital's own witnesses admitted during the administrative review process that the GAU and MI programs covered those who are not within these categories. Because the Hospitals' GAU and MI patients did not fit within the statutory classes of people, the patients were not capable of receiving medical assistance as defined by Medicaid. Finally, adopting the Hospitals' interpretation of the Medicare DSH statute would also ignore key differences between the Medicare and Medicaid DSH statutes themselves. While both provisions use proxies to measure how many of a hospital's patients are low-income individuals, the proxies are different. The Medicare DSH adjustment uses as its proxy only those patients who are eligible for federal assistance "under a plan approved under the Act . The Medicaid DSH proxy considers either those patients who are "eligible for medical assistance or who qualify under the statute's definition of "low-income." Therefore, for these reasons, the Court concluded that Washington's GAU and MI patients were not eligible for medical assistance under Washington's Medicaid plan. They were therefore properly excluded from the calculation of the Hospitals' Medicare reimbursements. Hence the District Court's judgment upholding the Secretary of the Department of Health and Human Services' exclusion of certain low-income populations from federal entitlement calculations is affirmed.

United States Court of Appeals for the Ninth Circuit

The People & c. Vs. Wells Fargo Insurance Services, Inc., et al. (Decided on 17.02.2011)

Non-disclosure of incentive arrangements-Whether breach of fiduciary duties- Violation of Executive Law Section 63(12) -Insurance brokers, including Wells Fargo, act as agents for organizations and individuals seeking to purchase insurance and advises its customers in complex insurance placements-Wells Fargo entered into a number of "incentive" arrangements with insurance companies which were not disclosed to the customers-No allegation of harm from the incentive arrangements- Held, disclosure not necessary - Thus, decision of the Appellate Division affirmed

Held, Recognizing the complexity of an insurance broker's role, several Appellate Division cases hold that such a broker need not disclose to its customers contractual arrangements it has made with insurance companies. The Court agrees that such disclosure is not normally required - and if there are exceptions to that rule, this case does not present one. The complaint does not allege that anything Wells Fargo did was contrary to industry custom. This non-disclosure may be a bad practice and indeed, it is prohibited by a recently adopted regulation of the Insurance Department, but that regulation did not exist at the time of the conduct at issue here. A regulation, prospective in effect, is a much better way of ending a questionable but common practice than what the Attorney General asked the Court here; in substance to outlaw the practice retroactively by creating a new common-law rule. Therefore, the order of the Appellate Division should be affirmed accordingly.