Murray Merle Schwartz

The case concerned whether Camelot Music could deduct interest paid on policy loans used to finance its purchase of broad-based corporate-owned life insurance (COLI VIII) policies on the lives of thousands of employees. The IRS challenged the deductions, asserting that the highly leveraged policies were designed primarily to generate tax benefits rather than to provide genuine insurance or investment returns. Applying the sham-transaction doctrine, the court examined both the factual reality of the loans and dividends and the objective economic substance of the overall arrangement, including pre-interest cash flows, business purpose, and profitability projections. It concluded that the transactions lacked economic substance independent of the tax deductions and therefore disallowed the claimed interest deductions under I.R.C. § 163.

taxesbusiness & regulatory

This case involved a dispute over whether a parcel of real estate transferred by Mullins to debtor P&A remained part of the bankruptcy estate after P&A filed for Chapter 7 protection. Mullins sought a determination that the property was subject to an equitable trust in his favor and should be turned over to him rather than administered by the trustee. The bankruptcy court granted summary judgment to the trustee, and the district court affirmed. The court held that, even assuming an equitable trust could be imposed under state law, the trustee's strong-arm powers under 11 U.S.C. § 544(a)(3) as a hypothetical bona fide purchaser without notice prevailed over any unrecorded equitable interest. The decision rested on the conclusion that § 544(a)(3) applies to transfers to the debtor and that equitable trusts do not defeat the trustee's avoidance powers absent proper recording or notice.

propertyprocedure

Donald McHugh, employed as Supervisor of Transportation/Visiting Teacher by the Milford School District, sued the Board of Education, the superintendent, and a board member under 42 U.S.C. § 1983 and state law. He alleged that the board eliminated his position and declined to renew his contract in retaliation for statements he made criticizing bus contractors on safety and contract issues, violating his First and Fourteenth Amendment rights. The defendants moved for summary judgment on all counts. The court granted the motion in part and denied it in part, determining that some claims lacked sufficient evidence of protected speech or required elements while others presented genuine issues of material fact, such as potential interference with contractual relations or threats related to misconduct charges.

free speechcivil rightslabor & employment

The case involves claims by the liquidating trust of bankrupt Fruehauf Trailer Corporation and related entities against Terex Corporation and its executives for breach of fiduciary duty, negligent misrepresentation, unjust enrichment, aiding and abetting, breach of contract, and ERISA violations arising from alleged mismanagement of the company and its pension plans following a leveraged acquisition in 1989. The plaintiffs alleged that defendants engaged in self-dealing, prohibited transactions, and underfunding of pensions, including improper allocation of stock appreciation rights and reliance on flawed legal opinions. On defendants' motion to dismiss under Rules 12(b)(2) and 12(b)(6), the court denied dismissal of the majority of the claims, finding the allegations sufficient to state plausible causes of action and that personal jurisdiction existed. The court dismissed only Count 6 (breach of contract) to the extent it was based on duties of due care, good faith, and loyalty. The core reasoning focused on the adequacy of the pleadings under ERISA fiduciary standards and whether causation and other elements were properly alleged.

business & regulatorylabor & employment

The case involved a plaintiff who was stopped by a police officer for speeding while allegedly driving under the influence of alcohol; the officer did not arrest her, directed her to continue driving, and she was later injured in a collision. She sued the officer under 42 U.S.C. § 1983, claiming a violation of her Fourteenth Amendment substantive due process rights based on a state-created danger theory, along with related state tort claims. The court granted the officer's motion for summary judgment on the federal claim. It reasoned that the officer was entitled to qualified immunity because the relevant constitutional doctrine was not clearly established in the Third Circuit at the time of the incident, and the facts did not show a violation of any clearly established right.

criminal lawcivil rightsprocedure

The case involves plaintiffs, including Louis Capano and related business entities, seeking a declaratory judgment that their insurance carriers must defend and indemnify them in an underlying civil suit brought by the family of Anne Marie Fahey, which alleged torts of conversion, spoliation, intentional infliction of emotional distress, and conspiracy arising from actions after her murder by Thomas Capano. The court held that the insurers have no duty to defend the conversion and spoliation claims due to intentional act exclusions in the policies, but they do have a duty to defend the IIED and conspiracy claims. As a result, the insurers must defend the entire underlying suit until resolution of the latter claims. The core reasoning is that Delaware law allows IIED and conspiracy to be proven through recklessness rather than intent, which falls outside the policy exclusions for intentional acts.

business & regulatorytorts & liability

This case involves a Wilmington police officer, Alfred Izquierdo, who challenged the department's investigation and disciplinary process following a civilian complaint about use of force during an off-duty incident, alleging violations of his due process rights under 42 U.S.C. § 1983, conspiracy under §§ 1985 and 1986, breach of contract, and the Delaware Law Enforcement Officers’ Bill of Rights. The defendants moved for summary judgment after discovery. The court granted summary judgment on the federal claims, holding that Izquierdo received adequate notice, explanation of evidence, and opportunities to respond, present his side, and cross-examine witnesses in multiple hearings, satisfying due process, with no evidence supporting a conspiracy to violate his rights. The court then declined to exercise supplemental jurisdiction over the remaining state law claims.

civil rightslabor & employmentprocedurecriminal law

This case involves LNC Investments' attempts to enforce an approximately $8.5 million default judgment obtained in the Southern District of New York against the Democratic Republic of Congo and the National Bank of Congo by seeking discovery and asset attachment from Chevron Overseas Petroleum Inc. (COPI), a successor to a company with a petroleum concession agreement involving the judgment debtors. LNC served a restraining notice and information subpoena on COPI in Delaware and later moved to hold COPI in contempt for transferring funds allegedly owed to the debtors out of the district, while COPI renewed its motion to quash the notice. The court denied LNC's contempt motion and granted COPI's motion to quash, finding that the restraining notice was not properly supported or served under applicable federal procedural rules because the writ of execution had not been served alongside it and the notice failed to comply with requirements for restraining assets in aid of execution.

procedure

The case concerned a dispute between insurance agency Aubrey Rogers Agency, Inc. and AIG over the 1995 termination of their relationship selling credit life and disability insurance policies, including disagreements about oral agreements on commission rates, monthly experience reports, and whether AIG made misrepresentations about obtaining regulatory rate deviations in West Virginia. The court ruled on cross-motions for partial summary judgment, granted AIG's motion to deem its responses to requests for admissions timely, and amended AIG's answer to include a Statute of Frauds defense. It granted AIG summary judgment on the fraud claim regarding rate deviations but denied it on other issues, allowing to proceed only the claims for breach of an oral agreement to provide experience reports and for fraud or negligent misrepresentation tied to those reports. The core reasoning rested on the absence of genuine issues of material fact for the dismissed claims under Federal Rule of Civil Procedure 56, the integration clause in a proposed written agreement, and the nature of the surviving oral promises that could be performed within one year.

business & regulatoryproceduretorts & liability

The case involved plaintiffs FS Photo, Inc. and its executives suing PictureVision, Inc. and its directors for alleged securities fraud under section 10(b) of the Securities Exchange Act of 1934, along with state law claims of fraud, breach of contract, and breach of fiduciary duty. The defendants moved to dismiss the case or transfer it to the Eastern District of Virginia, arguing among other things that venue was improper for the individual director defendants in Delaware. The court determined that it had subject matter and personal jurisdiction over all defendants under the Exchange Act but lacked venue with respect to the individual directors, who had minimal connections to Delaware. As a result, the court transferred the entire case to the Eastern District of Virginia, which was deemed an appropriate venue with jurisdiction over all parties.

business & regulatoryprocedure

Sharon Whitfield sued Pathmark Stores under the Americans with Disabilities Act, alleging she was discharged because of a back injury that qualified as a disability and that the company retaliated against her for pursuing her claims. The district court had previously granted summary judgment to Pathmark on the ground that Whitfield was not disabled under any of the ADA's three definitions. After the Third Circuit's decision in Mondzelewski v. Pathmark clarified the meaning of "disability," the court sua sponte reconsidered its ruling and examined whether Whitfield's impairment substantially limited major life activities such as lifting or working, or whether she had a record of impairment. Applying EEOC regulations and recent precedent, the court found sufficient evidence to create genuine issues of material fact on both the discrimination and retaliation claims. It therefore vacated the prior summary judgment and ordered the case to proceed to trial.

labor & employmentcivil rights

In Brasure v. Optimum Choice Insurance, the plaintiff, covered under an ERISA health benefit plan through his employer, sued the insurer to recover benefits after it retroactively canceled his coverage due to omissions and misstatements on a risk assessment form about his prior hospitalizations and splenectomy for blood disorders. The court granted the defendant's motion for summary judgment and denied the plaintiff's cross-motion. It held that the nondisclosures were material because the underwriter would have rejected the application or required a higher premium if the information had been disclosed, allowing rescission under federal common law and Delaware state law principles requiring utmost fairness from applicants and permitting reliance on their statements.

healthcarebusiness & regulatory

The case involved a dispute over whether the executrix of an estate could recover federal estate taxes from beneficiaries of irrevocable trusts created in 1935 and 1970, which were included in the gross estate under 26 U.S.C. § 2036. The plaintiff sought reimbursement under 26 U.S.C. § 2207B, but the court granted the defendants' motion to dismiss and denied summary judgment for the plaintiff. The court reasoned that § 2207B applies only to property transferred after November 10, 1988, and interpreted 'property transferred' as referring to the lifetime transfers into the trusts rather than any transfer occurring at death. Since those transfers predated the effective date, no right of reimbursement existed.

taxes

This case involved a patent infringement lawsuit by Schering Corp. and Biogen against Amgen over U.S. Patent No. 4,530,901, which covers recombinant DNA molecules used to produce human interferon-like polypeptides. Following a Markman hearing, the district court construed key claim terms, including the phrase 'a polypeptide of the IFN-(alpha) type,' leading Schering to concede that it could not prove infringement under that construction. Schering moved for entry of final judgment of non-infringement in Amgen's favor to permit an immediate appeal of the claim construction ruling, while Amgen sought summary judgment with additional factual findings. The court granted Schering's motion, entered judgment of non-infringement against Schering, and dismissed Amgen's counterclaims for invalidity and patent misuse without prejudice as moot, reasoning that this approach would enable Federal Circuit review without unnecessary trials or expanded records.

business & regulatoryprocedure

The case involved a breach of contract claim by Deville Court Apartments against Freddie Mac arising from a Loan Modification Agreement that allowed Deville to pay off an existing loan on its apartment complex at a reduced amount if certain conditions, including personal liability on a refinanced loan, were met. Deville alleged that Freddie Mac breached the Agreement by demanding additional assurances and documentation beyond its terms after Deville presented a loan commitment from PNC Bank, leading to the commitment's termination and resulting damages. Freddie Mac moved for summary judgment, arguing it did not breach the Agreement and that any loss was not proximately caused by its actions but rather by Deville's failure to address environmental issues at the property. The court denied the motion, finding genuine issues of material fact as to whether the additional demands breached the Agreement and whether Freddie Mac's conduct or the environmental problems caused the termination of the loan commitment.

business & regulatorypropertyprocedure

This case involves a claim by Fleming & Hall, Ltd., an insurance adjustment firm, against its former employee Andrew Cope for misappropriating trade secrets under Delaware law by using confidential information to solicit the firm's clients. The action was initially filed in Delaware Chancery Court but removed by Cope to federal district court on diversity grounds, leading to the plaintiff's motion to remand and the defendant's motion to dismiss for lack of personal jurisdiction. The court decided to remand the case to the Delaware Court of Chancery, holding that it lacked subject matter jurisdiction because the defendant failed to show that the amount in controversy exceeded the $75,000 threshold required for diversity jurisdiction. The court further observed that a forum-selection clause in the parties' contract designated the Chancery Court as the exclusive forum for such disputes. The ruling was based on the strict construction of removal statutes against removal and the defendant's inability to satisfy even the lightest applicable burden of proof on the jurisdictional amount.

procedurebusiness & regulatory

Schering Corporation, as exclusive licensee of Biogen's U.S. Patent No. 4,530,901 on recombinant DNA molecules for producing human interferon-like polypeptides, sued Amgen, Inc. for patent infringement. Following a Markman hearing, the court issued a claim construction ruling on terms including 'a polypeptide of the IFN-a type' in several claims, after which Schering moved for reargument on that single aspect. The court denied the motion under Local Rule 7.1.5, holding that Schering had not demonstrated any patent misunderstanding by the court, decision outside the adversarial issues, or error of apprehension rather than reasoning, and that purported new evidence was not shown to have been previously unobtainable. The court treated the new matter prohibition under 35 U.S.C. § 132 as a question of law and found no basis to alter the prior constructions, noting Schering would appeal if reargument was denied.

business & regulatoryprocedure

StairMaster sued Procycle for infringing its reissued U.S. Patent No. Re. 34,959 on a stair-climbing exercise apparatus, and Procycle counterclaimed seeking a declaratory judgment of invalidity, noninfringement, and unenforceability. Following an earlier claim construction ruling, the court addressed cross-motions for summary judgment on literal infringement of certain claims and on whether the reissue complied with 35 U.S.C. § 251. The court denied StairMaster’s motion for partial summary judgment on infringement of Claim 9 and granted Procycle’s motion in part and denied it in part, addressing both noninfringement of Claims 1, 7, 9, and 11 and the validity of the reissue based on the adequacy of inventor and successor declarations filed during the reissue process. The reasoning centered on whether the original and supplemental declarations sufficiently identified errors in the original patent claims and whether the PTO properly allowed waivers and amendments under its regulations after the inventor’s death.

business & regulatoryprocedure

In this case, the plaintiff, as administratrix of her son's estate, sued multiple health insurance and benefits administrators, alleging that their errors in confirming enrollment and providing a psychiatric referral under an employer-sponsored health plan breached their contract, fiduciary duties, and amounted to medical malpractice, contributing to the son's suicide. The defendants moved to dismiss the state-law claims as preempted by ERISA. The court first corrected the jurisdictional basis from diversity to federal question under ERISA, then held that the claims were preempted because ERISA's civil enforcement provisions (sections 1132(a)(1)(B), (a)(2), and (a)(3)) provide the exclusive remedies for benefit-plan disputes and do not authorize the compensatory or punitive damages sought. The court therefore granted the motions to dismiss with prejudice.

healthcare

The case involved a subcontractor B&R seeking payment for labor provided on a federal construction project at Dover Air Force Base under a Miller Act payment bond after a verbal subcontract with Lane, who had been hired by prime contractor CICS. B&R filed Miller Act, breach of contract, and quantum meruit claims against Lane, CICS, and surety NSC following a default judgment against Lane. The court denied B&R's motion for summary judgment and granted defendants' motions to dismiss and for summary judgment in part, holding that the Miller Act's 90-day notice requirement is satisfied only upon receipt of notice by the contractor, not merely upon mailing. The reasoning focused on the statutory text of the Miller Act requiring notice within 90 days, principles of contract formation placing risk on the offeror, and distinctions from state notice statutes, while also addressing procedural standards for summary judgment motions.

business & regulatorylabor & employmentfederal powerprocedure