LJN Newsletters

On Jan. 12, 2005, the Supreme Court in United States v. Booker ended months of speculation as to what was to become of the Federal Sentencing Guidelines after the Court's June 2004 decision in Blakely v. Washington, and held that the guidelines were unconstitutional. To remedy the unconstitutionality, the Court excised portions of the Sentencing Reform Act that required the sentencing judge to sentence within the guidelines range and that set the standard of appellate review of sentences.

On July 27, 2005, a Seattle federal judge sentenced the so-called "Millennium Bomber," who was convicted of conspiring to bomb Los Angeles International Airport during the 2000 New Year's holiday season (and who cooperated with the government for a period of time and then stopped), to 22 years in prison. The government had sought a 35-year sentence for the 38-year-old defendant.

Recent rulings of interest to you and your practice.

Recent rulings of interest to you and your practice.

Last month, we discussed Sherwood Partners, Inc., Assignee for the Benefit of Creditors of International Thinklink Corporation v. Lycos, Inc., 394 Fed11198 (9th Cir. 2005). In that case, the Ninth Circuit Court of Appeals, by a divided court, held that a state statute authorizing an assignee for the benefit of creditors to void a preferential transfer is preempted by the federal Bankruptcy Code. This month, we discuss the ruling in depth.

Last month, we discussed how to handle the non-profit workout/bankruptcy with an analysis of one of the largest not-for-profit bankruptcy cases even filed -- In re: the National Benevolent Association of the Christian Church (Disciples of Christ) et al., (Bankr. W.D. Texas), Case No. 04-50948 (RBK). As we explained, the National Benevolent Association of the Christian Church (Disciples of Christ) (NBA) was founded in 1887 as a Missouri-based nonprofit corporation. Its mission was to provide services to disadvantaged families and others. Prior to bankruptcy, the NBA was the parent company of approximately 25 affiliated nonprofit entities that owned and operated 11 senior care facilities, four children's care centers, and three special care facilities in 12 states, among other things. We presented a great deal of analytical background on the nonprofit corporation and its path toward bankruptcy. This month, we discuss the bankruptcy case itself.

In the race between a debtor and a third party to recover the proceeds of a directors' and officers' insurance policy (a "D&O Policy"), it is critical that the debtor employ the correct strategy for the applicable jurisdiction in order to enjoin its competitor from reaching the proceeds first. Choosing the wrong strategy could mean the difference between collecting tens of millions of dollars and obtaining a judgment not worth the paper upon which it is written. Indeed, the proceeds of the D&O Policy ("D&O Proceeds") may be the largest asset of the estate. As a result, a successful reorganization could depend upon filing in the right jurisdiction and implementing the correct litigation strategy.

In MGM Studios, Inc. v. Grokster, the Supreme Court decided that the defendants could be held liable for copyright infringement perpetrated by the users of their respective software. Rather than clarifying the "significant non-infringing use" standard from Sony Corp. of America v. Universal City Studios, Inc., to determine whether the defendants could be held liable for distributing a product with knowledge that it could be used to infringe, the Court utilized an alternative approach of finding liability. Turning to common law precedent and patent law, the unanimous Court held that liability may be based on purposeful, culpable expression under an inducement theory of secondary infringement. While some of the potential implications of this decision can be predicted, the full effect will not likely be clear for some time.