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Author: Scarinci Hollenbeck, LLC
Date: September 27, 2016
The Firm
201-896-4100 info@sh-law.comWhen the justices return to the bench for the October 2016 Term, they will consider a number of key commercial law issues. This post offers a brief summary of several business cases to watch that may interest New Jersey businesses.
In a case springing from Venezuela’s decision to nationalize its oil industry, the justices will consider how to interpret the Foreign Sovereign Immunities Act’s (FSIA) expropriation exception. It provides in pertinent part, “[a] foreign state shall not be immune … in any case … in which rights in property taken in violation of international law are in issue.”
The specific question before the Court is: “Whether the pleading standard for alleging that a case falls within the Foreign Sovereign Immunities Act’s expropriation exception is more demanding than the standard for pleading jurisdiction under the federal question statute, which allows a jurisdictional dismissal only if the federal claim is wholly insubstantial and frivolous.” Accordingly, the decision is expected to clarify when businesses may sue a foreign government in U.S. courts for seizing property located overseas but owned by a U.S. firm.
The Supreme Court will consider how to define the term “parcel as a whole” in a regulatory taking case. In Penn Central Transp. Co. v. New York City, 438 U.S. 104 (1978), the Court held that “in deciding whether a particular governmental action has effected a taking” the court should focus on “both on the character of the action and on the nature and extent of the interference with rights in the parcel as a whole…”
The lower courts are divided regarding whether the “parcel as a whole” concept created a rule that two legally distinct, but commonly owned contiguous parcels, must be combined for takings analysis purposes. The key issue in Murr — whether physically contiguous parcels that are owned by the same entity should be considered one parcel for purposes of a takings claim even if they are legally distinct — could have a significant impact on New Jersey developers.
The Court has agreed to consider federal court jurisdiction over mortgage disputes involving the Federal National Mortgage Association (“Fannie Mae”). The congressional charter of Fannie Mae grants it the power “to sue and to be sued, and to complain and to defend, in any court of competent jurisdiction, State or Federal.” The primary question before the Court is whether the phrase ‘to sue and be sued, and to complain and to defend, in any court of competent jurisdiction, State or Federal’ confers original jurisdiction over every case brought by or against Fannie Mae to the federal courts.
The case centers on the Bankruptcy Code’s order of priorities. Section 507 of the Bankruptcy Code grants payment priority to some unsecured claims, including claims for certain wages and employee benefits earned before the bankruptcy filing. These priority claims must be paid in full before other unsecured claims may be paid from estate assets. In this chapter 11 case, the debtor agreed to settle a cause of action belonging to the estate. Rather than distributing the settlement proceeds under a confirmed plan of reorganization, the debtor then sought a “structured dismissal” of the bankruptcy case.
The dismissal order provided that the settlement proceeds would be paid to general unsecured creditors, rather than to petitioners, former employees of the debtor whose claims have priority over those of general unsecured creditors under Section 507. The justices have agreed to address a circuit split regarding “whether a bankruptcy court may authorize the distribution of settlement proceeds in a manner that violates the statutory priority scheme.”
The closely-watched anti-trust case challenges the way major banks establish fees for ATM use. The Court has specifically agreed to settle a division among the federal circuit courts regarding “whether allegations that members of a business association agreed to adhere to the association’s rules and possess governance rights in the association, without more, are sufficient to plead the element of conspiracy in violation of Section 1 of the Sherman Act.”
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