Articles Posted in US Court of Appeals for the Sixth Circuit

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In 2005-2006, Thompson was sued by employees and one business he hired to assist in locating a long-sunken ship and recovering its treasures. The district court entered a preliminary injunction instructing Thompson not to sell, encumber, transfer or diminish in value any gold coins he had in his possession. If the coins were not in Thompson’s possession, Thompson was to submit a declaration under oath describing the parties to whom the coins were transferred and any consideration. Thompson transferred the coins to a third-party trust and failed to provide the required information. The court scheduled a “show cause” hearing. When Thompson failed to appear, having absconded to Florida, an arrest warrant issued. Thompson, charged under 18 U.S.C. 401(3), entered into plea agreement, agreeing to assist in identifying and recovering assets. The court ordered Thompson to “submit to a debtor’s examination,” consistent with that agreement. Thompson appeared for the examination; the civil parties and receiver contended that Thompson refused to provide sufficient answers, then invoked his Fifth Amendment privilege. At a second court-ordered examination, Thompson appeared but refused to answer any questions. After a civil show-cause hearing combined with criminal-contempt sentencing, the court sentenced Thompson to two years of imprisonment for criminal contempt, held Thompson in civil contempt and ordered Thompson to “be incarcerated indefinitely until you comply.” After 18 months of incarceration for civil contempt, Thompson sought to terminate his civil-contempt sanctions, citing the recalcitrant-witness statute, 28 U.S.C. 1826(a), which limits confinement to 18 months. The Sixth Circuit affirmed the denial of Thompson’s motion. Because Thompson was required both to testify and to help recover assets by taking non-testimonial actions, section 1826 did not apply. View "United States v. Thompson" on Justia Law

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The American Jobs Creation Act of 2004 authorized the IRS to gather information about tax shelters, 26 U.S.C. 6707A. The IRS requires taxpayers and certain third parties to submit records pertaining to “reportable transaction[s]” as defined by IRS regulations, subject to significant penalties. A “material advisor” who provides material aid to a taxpayer in carrying out reportable transactions and who derives a threshold amount of gross income from that aid, faces similar penalties. A material advisor who fails to maintain a list of taxpayers that he aided in carrying out reportable transactions faces a $10,000 per day penalty. Notice 2016-66 identified “micro-captive transactions” as “transactions of interest,” a subset of reportable transactions that have “a potential for tax avoidance or evasion,” but stated that the IRS “lack[s] sufficient information” to distinguish between those that are lawful and those that are unlawful. Plaintiff, a material advisor to taxpayers engaging in micro-captive transactions, challenged the Notice under the Administrative Procedure Act, 5 U.S.C. 500, and the Congressional Review Act, 5 U.S.C. 801, arguing that it was a legislative rule that required notice-and-comment rulemaking, was arbitrary, and required submission for congressional review. The Sixth Circuit affirmed the dismissal of the complaint as barred by the Anti-Injunction Act, 26 U.S.C. 7421(a) and the tax exception to the Declaratory Judgment Act, 28 U.S.C. 2201, which divest federal district courts of jurisdiction over suits “for the purpose of restraining the assessment or collection of any tax.” The court noted that the IRS does “not have a great history of complying with APA procedures.” View "CIC Services., LLC v. Internal Revenue Service" on Justia Law

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Schier represented Capital in a state court suit filed by Longhorn. Capital was hit with a $5-million judgment and landed in bankruptcy. Its Chapter 7 proceedings stayed the Longhorn litigation with post-trial motions pending. Longhorn filed a bankruptcy claim. When Schier filed a claim for Capital’s unpaid legal fees, the bankruptcy trustee countered with a malpractice suit against Schier, which eventually settled. Schier agreed to pay the estate $600,000 and to withdraw its attorney’s fees claim. The bankruptcy court approved this settlement. Schier withdrew its claim. When the trustee filed a final report, Schier alleged that Capital’s right to appeal Longhorn’s state-court judgment qualified as an “asset” that the trustee should have administered or abandoned. The bankruptcy court overruled Schier’s objection, reasoning that Schier should have raised this issue while Schier had a pending fees request and was a “creditor” with “standing.” The district court dismissed an appeal, stating that “[i]n order to have standing to appeal a bankruptcy court order, an appellant must have been directly and adversely affected pecuniarily by the order,” a more demanding standard than Article III standing. The Sixth Circuit affirmed, noting the Supreme Court’s 2014 “Lexmark” decision, which jettisoned the label “prudential standing.” Citing “the post-Lexmark uncertainty about various standing concepts,” the court held that Schier lacked the type of standing that Lexmark did not affect: Article III standing. View "In re Capital Contracting Co." on Justia Law

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Mager alleged that he was seriously and permanently injured when he slipped on oil while he was working as a trackman at WCL’s Marquette, Michigan railway yard. Mager filed suit under the Federal Employer’s Liability Act, 45 U.S.C. 51. He was deposed and was sent notice of an independent medical examination (IME). Plaintiff’s counsel, Foley, objected because the examiner’s Appleton Wisconsin office was a substantial drive from Mager’s home in Michigan's Upper Peninsula. Defense counsel sought an order compelling the IME (FRCP 35(a)) and to delay third-party mediation. The parties agreed that Mager would submit to the IME, that WCL would pay his mileage, and that a settlement conference would be scheduled with the court in lieu of mediation. After Mager objected to completing a medical questionnaire, a Rule 35 Order was entered directing Mager to “appear at the IME ….The interview and exam shall not exceed three (3) hours.” Mager and Foley appeared for the IME. Foley recorded the proceedings without prior notice to defense counsel. Mager repeatedly declined to answer relevant questions about his condition, medications, and how the injury occurred, referring the doctor to his deposition. Mager did not allow Mager’s driver’s license to be copied. Mager submitted to a physical examination. The Sixth Circuit affirmed the dismissal of Mager’s complaint with prejudice, FRCP 37(b)(2)(A)(v), as a sanction primarily for his and Foley’s conduct at the IME, which was willful, in bad faith, and prejudicial to the defense. No other sanctions would reflect the misconduct's seriousness. View "Mager v. Wisconsin Central Ltd." on Justia Law

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A consumer paying by check usually provides identification such as a driver’s license. The merchant often takes the bank account number and the driver’s license number and sends them to companies like TeleCheck. TeleCheck runs these identifiers through its system and may recommend that the merchant refuse the check. When a customer presents two identifiers, TeleCheck records a link between them in its system. If, in a later transaction, a customer uses only one of those identifiers, TeleCheck recommends a decline if there is a debt associated with the presented identifier or the linked identifier. Huff requested a copy of his TeleCheck file (Fair Credit Reporting Act. 15 U.S.C. 1681g(a)(1)), providing only his driver’s license. The report contained only the 23 transactions in which he presented his license during the past year but stated that: “Your record is linked to information not included in this report, subject to identity verification prior to disclosure. Please contact TeleCheck.” Huff did not call. Huff’s driver’s license actually links to six different bank accounts. In addition to omitting the linked accounts, the report did not reveal checks from those accounts that were not presented with Huff’s license. TeleCheck has never told a merchant to decline one of Huff’s checks. Huff filed suit and moved for class certification. The Sixth Circuit affirmed the dismissal of the case because Huff lacked standing for failure to show that the incomplete report injured him in any way. View "Huff v. TeleCheck Services., Inc." on Justia Law

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Three years before filing her bankruptcy petition, Lane sold her residence to the Deans. They subsequently discovered mold in the basement and filed a civil complaint against her. The state court submitted the dispute to binding arbitration. The arbitrator awarded the Deans $126,895.57. A Kentucky trial court entered judgment on the award. The Deans filed their judgment lien against Lane’s current residence in May 2017. Lane filed a voluntary chapter 13 petition on July 14. The Bankruptcy Court confirmed Lane’s Plan over the Deans’ objection. The Deans did not appeal the confirmation order but filed adversary proceedings and appeals to avoid its effect. The Bankruptcy Court sanctioned the Deans, awarding Lane attorney fees for their contemptuous behavior. The Deans filed objections to the Lane’s counsel’s Interim Fee Application. The Bankruptcy Court conducted a hearing and ultimately allowed the interim fees. The Sixth Circuit Bankruptcy Appellate Panel dismissed the Deans’ appeal, finding that the interim orders are not final orders, and the record presents no grounds for granting leave to appeal under well-settled Sixth Circuit case law, even treating the pro se notice of appeal as a motion for leave to appeal under Federal Rule of Bankruptcy Procedure 8004(d). View "In re: Lane" on Justia Law

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Chase sued to recover millions of dollars under a credit agreement "between Chase and entities owned and operated by [Winget]” and obtained an award of over $425 million. Winget’s personal trust was liable for the full amount. Winget, protected by a limitation in his personal guaranty, owed Chase only $50 million, which he paid. The parties then litigated attorneys’ fees and whether Winget was personally liable for Chase’s $12.6 million in fees and expenses. The Sixth Circuit held that despite Winget’s limited personal guaranty, he “is still liable for Chase’s costs and expenses associated with collection of the Guaranteed Obligation.” The district court then entered a final amended judgment against Winget and his trust. Rather than use the trust’s assets to pay Chase, Winget transferred the assets out of his trust and filed a new lawsuit, seeking a declaration that Chase had no recourse against those assets. Chase filed counterclaims, alleging that the transfers were fraudulent conveyances. The district court consolidated the new lawsuit with the previous litigation, calling it “the functional equivalent of post-judgment proceedings,” and granted one motion, awarding Chase another $2 million for expenses from June 2015 through November 2016. The court noted that “Chase’s efforts to collect the Guaranteed Obligations are ongoing.” The Sixth Circuit dismissed an appeal for lack of jurisdiction, reasoning that the order is not a “final decision” under 28 U.S.C. 1291. View "JPMorgan Chase Bank, N.A. v. Winget" on Justia Law

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Gold Forever, a music publishing company solely owned by Holland, has agreements with various artists entitling it to half of the royalties collected for the sale and performance of those artists’ work. Holland was a Motown artist and co-wrote several famous songs. His music forms some, but not all, of Gold’s catalog. BMI and Universal license others to use Gold’s music; they collect and remit the royalties to Gold. Holland owes millions of dollars to the IRS in taxes, interest, and penalties. In 2012, the IRS served notices of levy to BMI and Universal, identifying Gold as the “alter ego/nominee transferee of" Holland and requiring the companies to remit to the IRS property and rights to property that they were obligated to pay Gold. Beginning on October 6, 2016, the companies remitted $967,140.76 to the IRS. Gold made requests for refunds to the IRS within nine months. On December 6, 2017, Gold filed a wrongful levy action for the funds remitted beginning on October 6, 2016, alleging that most, if not all, of the money belongs either to Gold or to artists other than Holland. The court dismissed the suit as untimely. The Sixth Circuit reversed. The statute of limitations for a wrongful levy action cannot begin until there has been a levy that attaches to the property at issue. Notices of levy in 2012 did not constitute levies on royalties generated after the notices were served, so the statute of limitations did not bar the wrongful levy action. View "Gold Forever Music, Inc. v. United States" on Justia Law

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Jones, a Michigan citizen, began working in Equatorial Guinea around 2007. In 2011, he started IPX to provide telecommunication services in Equatorial Guinea. IPX is incorporated and has its principal place of business in Equatorial Guinea. Jones was a shareholder, director, and employee, working as a Director-General under a contract, signed annually in Equatorial Guinea. He lived and worked there during the contract’s term. IPX decided in 2015 to open a U.S. subsidiary and sent Jones to Michigan. His work there was supposed to take six months. Jones would then return to Equatorial Guinea. After Jones arrived in Michigan, IPX learned that he may have stolen money and neglected important business relationships and suspended Jones. Jones claims that the suspension was a pretext to divest him of his stock. He sued for breach of contract in the Eastern District of Michigan. The court dismissed the complaint under forum non conveniens. The Sixth Circuit affirmed. Equatorial Guinea is an available and adequate forum; IXP is subject to process there. Most of the witnesses and key documents are in Equatorial Guinea; witnesses can be compelled to testify there. Equatorial Guinean law governs under the underlying employment contract’s choice-of-law provision. There is strong evidence that Jones is not at home in the United States, negating the assumption that a U.S. court is most convenient for him. View "Jones v. IPX International Equatorial Guinea S.A." on Justia Law

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Plaintiffs brought medical malpractice claims in Ohio state court against a doctor who operated on them and against several hospitals where he worked. The plaintiffs allege that the judge presiding over their case, Judge Schweikert, and Chief Justice O’Connor of the Ohio Supreme Court were biased against their claims. In accordance with Ohio law, they filed affidavits of disqualification against Judge Schweikert, and requested that Chief Justice O’Connor recuse herself from deciding Judge Schweikert’s disqualification. They then requested that a federal court enjoin Chief Justice O’Connor from ruling on the affidavit of disqualification pertaining to Judge Schweikert and enjoin Judge Schweikert from taking any action in their cases before the affidavit of disqualification was ruled upon. The Sixth Circuit affirmed the dismissal of the claims. The Younger abstention doctrine applies. The ability of Ohio courts to determine when recusal of a judge or justice is appropriate and to administer the recusal decision process in accordance with state law operates “uniquely in furtherance of the state courts’ ability to perform their judicial functions.” View "Aaron v. O'Connor" on Justia Law