Fmr. IRS Division Head Lois Lerner Dismissed From Targeting Scandal Lawsuit

By David Lee
February 25, 2015
DALLAS (CN) – A federal judge Tuesday dismissed former IRS official Lois Lerner from a Republican-affiliated group’s lawsuit accusing her of targeting conservative groups, for lack of personal jurisdiction over her.
Dallas-based Freedom Path sued the IRS and Lois G. Lerner, the former director of its Exempt Organizations Division, in April 2014. It claimed that its application for tax-exempt status was illegally targeted for “additional and unconstitutional scrutiny ” because of its conservative policies.
As a 501(c)(4) “issue advocacy” group, Freedom Path can raise unlimited amounts of tax-exempt money and need not disclose its donors. It has ties to the Republican Senatorial Committee, former Nevada Senator John Ensign and Utah Senator Orrin Hatch and their staff members or former staffers, according to factcheck.org.
As early as February 2010, the IRS began identifying for scrutiny tax-exempt applications from groups with names including terms such as “Tea Party” and “Patriots,” the complaint stated.
Freedom Path said the criteria were expanded to target organizations with policy positions focused on government spending and constitutional education. Public outcry and congressional criticism was furious. Lerner was placed on administrative leave in May 2013.
Freedom Path claimed the IRS tried to force it to disclose donor identities and other information unnecessary to its application.
On Tuesday, U.S. District Judge Sidney A. Fitzwater dismissed Lerner from the lawsuit. He concluded that Freedom Path did not claim Lerner took any actions in Texas that are relevant to the lawsuit, or that she directed any actions in Texas.
“In fact, Freedom Path does not even allege that Lerner had any personal involvement with its application for tax-exempt status or was even aware of the application,” the 32-page opinion states. “The fact that a federal official has supervisory responsibilities over an office in the forum state is insufficient to establish personal jurisdiction over that official.”
Lerner had argued her dismissal from the lawsuit “is the only result” that complies with due process and Texas law. She clamed that Freedom Path failed to overcome her qualified immunity because it failed to show she violated any “clearly established” constitutional right.
“The First and Fifth Amendment claims in the complaint fail to trump Ms. Lerner’s qualified immunity for at least four reasons,” Lerner’s September 2014 motion to dismiss stated.
“First, plaintiff has not alleged that Ms. Lerner purposely and personally infringed on plaintiff’s First and Fifth Amendment rights. Second, plaintiff failed to sufficiently allege a First Amendment violation. Third, plaintiff failed to adequately allege a Fifth Amendment violation. Finally, plaintiff failed to allege conduct that a reasonable person would know clearly violated plaintiff’s constitutional rights.”
Fitzwater also granted the federal government’s requests to dismiss several of Freedom Path’s claims against the IRS’ related revenue rulings, finding the group failed to plead a plausible injury that is needed to establish constitutional standing. Fitzwater refused to dismiss Freedom Path’s request for an injunction, finding that it does not restrain the assessment or collection of any tax.
IRS officials could not be reached for comment Tuesday evening.

From Courthouse News.

Lance Armstrong Takes Hits in Two Multi-Million Dollar Lawsuits Over Doping Denials

By David Lee
February 17, 2015
DALLAS (CN) – Lance Armstrong had a rough weekend, as an arbitration panel ruled he must pay $10 million in sanctions to a Dallas insurer, and a federal judge struck several of his defenses in a $100 million whistleblower lawsuit filed by his former teammate Floyd Landis.
The arbitration award was made public Monday after Dallas-based SCA Promotions petitioned in county court to confirm a three-member panel’s findings. In a 2-1 split decision, the panel said Armstrong must pay the penalties because “perjury must never be profitable.”
The dispute began 11 years ago when Armstrong and his management company, Tailwind Sports, sued SCA Promotions for refusing to pay him a $5 million bonus for winning the Tour de France in 2003, due to suspicions that he had doped.
The dispute went to arbitration in 2005 and Armstrong won, resulting in a 2006 settlement awarding him $7.5 million .
SCA sued Armstrong, his agent William Stapleton and Tailwind in Dallas County Court six years later, after the Union Cycliste International stripped Armstrong of his seven Tour de France victories and banned him from the sport for life, citing the U.S. Anti-Doping Agency’s “reasoned decision” that accused Armstrong of running the most sophisticated doping program in sports history.
Armstrong confirmed the accusations in January 2013 in a televised interview with Oprah Winfrey. The interview featured excerpts from sworn testimony Armstrong gave during his lawsuit against SCA that implied he lied while under oath.
Armstrong tried unsuccessfully in 2014 to persuade the trial judge and appellate courts to stop additional arbitration in SCA’s lawsuit and halt his inevitable deposition under oath .
In its 2-1 ruling, the arbitration panel condemned Armstrong for “almost certainly” carrying out “the most devious sustained deception ever perpetrated in world sporting history.”
“Justice in courts of law and arbitration tribunals is impossible when parties feel free to deliberately deceive judges or arbitrators,” the 25-page arbitration award states. “The case yet again before this tribunal presents an unparalleled pageant of international perjury, fraud and conspiracy. Tailwind Sports Corp. and Lance Armstrong have justly earned wide public condemnation. That is an inadequate deterrent. Deception demands real, meaningful sanctions.”
The majority consisted of Chairman Richard Faulker and SCA-appointed arbitrator Richard Chernick. The dissent was from defendant-appointed arbitrator Ted Lyon, who wrote the $10 million award “is not based on the law.”
“The final decision by the panel reminds me about the ‘do right rule,” Lyon wrote. “It doesn’t matter what the law is, let’s just do what is right. Arbitrators, like judges, don’t have that luxury, and the panel exceeded its authority by indulging itself here.”
Lyon said SCA “has been found by the panel to have engaged in the business of selling insurance in Texas without a license,” exposing SCA to possible liability for treble damages and attorney fees.
“Armstrong was seeking $10 million in damages and attorneys fees, opening SCA up to a potential liability of over $22 million,” Lyon wrote. “No party in this case came here with clean hands.”
The arbitration panel’s award is the second time Armstrong has been ordered to return money to an insurer. In November 2013, Armstrong settled a lawsuit by Acceptance Insurance over $3 million in race bonuses paid to him.
SCA’s petition came four days after Armstrong suffered a blow in Landis’ lawsuit when a federal judge in Washington, D.C. tossed several of his affirmative defenses. Landis sued Armstrong, former U.S. Postal Service Pro Cycling Team manager Johan Bruyneel and Tailwind in 2010 under the False Claims Act .
The United States joined the lawsuit in April 2013, months after Armstrong’s lifetime ban was handed down. The Postal Service sponsored Tailwind’s cycling team from 1996 to 2004, when Armstrong was the lead team rider and won six consecutive Tour titles. The agency paid $31 million in sponsorship fees between 2001 and 2004 alone.
Landis claims Bruyneel knew team members were using banned drugs and that Armstrong and Tailwind Sports, among others, knowingly flouted USPS sponsorship agreements signed in 1995 and 2000. Landis could receive up to 30 percent of any recovery as a whistleblower.
Landis was stripped of his 2006 Tour win and banned from the sport for 2 years after he tested positive for banned substances .
In response to a joint motion to strike filed by both sides, U.S. District Judge Christopher R. Cooper on Feb. 12 barred the defendants from asserting six affirmative defenses.
He was not persuaded by Armstrong’s argument that the False Claims Act requires dismissal of Landis’ claims considering a “relator convicted of criminal conduct arising from his role in the alleged FCA violation.”
“Here, Landis has entered into a deferred prosecution agreement, he has not been convicted,” the 12-page opinion states. “The possibility that Landis may be subject to conviction and that the government would choose to prosecute him falls short of Section 3730(d)(3)’s unambiguous language with respect to dismissing a relator.”
Cooper also barred the defenses that Landis’ allegations are vague, uncertain or unclear, and of failure to plead fraud under Federal Rule of Civil Procedure 9(b).
“The court previously ruled at the motion to dismiss stage that that Rule 9(b) defenses were waived by Armstrong and the non-intervened defendants,” the opinion states. “While defendants assert that they have not waived these defenses with respect to arguments that may be developed based on additional discovery, the government correctly notes that ‘[i]f a party fails to raise a Rule 9(b) objection in the first responsive pleading or in an early motion … the issue will be deemed waived.'”
Cooper also barred the defense that Landis filed the lawsuit in bad faith, which bars him from recovery anything. The judge ruled the defendants’ request for attorneys’ fees is “too early in this litigation” and not an affirmative defense – it only becomes applicable if the defendants win.
Cooper refused to strike Armstrong’s six remaining affirmative defenses, including arguments that the federal government suffered no injuries, received “full payment for services rendered” and failed to mitigate its alleged damages.
“A showing of damage is necessary to obtain treble damages, which are based on ‘the amount of damages which the government sustains because of the act of [the defendant],'” the opinion states. “Consequently, and in light of the high bar for striking a defenses and the significant discretion of the court in deciding whether to do so, the court will permit defendants to maintain these defenses at this point in the litigation.”
The judge declined to strike the affirmative defense of the federal government’s publicly disclosing its claims before the filing of the lawsuit, in violation of a sealing order in place. He concluded that doing so “at this state of the litigation is unlikely to generate significant additional efficiencies.”
Armstrong’s attorneys did not respond to requests for comment.

From Courthouse News.

Fmr. U.S. Ambassador Must Return $700,000 in Stanford Ponzi Money

February 13, 2015
By David Lee
DALLAS (CN) – Former U.S. Ambassador to Ecuador Peter Romero received more than $700,000 in fraudulent transfers from R. Allen Stanford’s $7 billion Ponzi scheme, a federal jury ruled Friday.
In a unanimous 7-0 ruling, jurors said that Romero, of St. Michaels, Md., must return the money.
Romero is one of several Stanford insiders and political figures that court-appointed receiver Ralph Janvey has taken to court over the questionable payments. Romero’s case was the first to go to trial.
Janvey’s attorneys claim that Romero – a former member of the Stanford International Advisory Board – accepted payments from at least four Stanford entities from 2004 to 2009.
“There is no evidence that Romero provided any value – much less reasonably equivalent value – in exchange for the fraudulent transfers he received,” Janvey’s Feb. 15, 2011 complaint stated. “Moreover, both this court and the Fifth Circuit have held that providing services in furtherance of a Ponzi scheme does not confer reasonable equivalent value.”
In a motion for judgment as a matter of law filed Friday morning, Janvey said that Romero provided no proof or explanation how the services he provided Stanford “could have done anything other than ultimately assist Stanford in expanding the Ponzi scheme” and selling more fraudulent certificates of deposit.
“Romero’s services to Stanford included, among other things, providing introductions and connections for Stanford, representing Stanford through public appearances and speeches, and lending credibility to Stanford by his association,” the 11-page motion states.
“Stanford’s primary product was its fraudulent CDs … Romero’s theory and evidence of the ‘value’ he allegedly provided in exchange for the transfers he received runs squarely against holdings of the Fifth Circuit.”
Stanford, 63, was convicted in 2012 in Houston Federal Court of selling phony certificates of deposit. He is serving 110 years in federal prison.
Janvey has filed approximately 50 lawsuits against Stanford money recipients since his appointment, according to the Courthouse News database.
His targets have included the Tiger Woods Foundation , the Miami Heat basketball team, Texas A&M University, the University of Miami, the PGA Tour and the ATP Tour.

From Courthouse News.

Federal Ban on Interstate Sale of Handguns Unconstitutional, Federal Judge Rules

February 12, 2015
By David Lee
FORT WORTH (CN) – A federal judge Wednesday struck down Uncle Sam’s ban on interstate sale of handguns, calling it unconstitutional and unnecessary due to the use of electronic background checks.
U.S. District Judge Reed O’Connor ruled that the ban violates the Fifth and Second Amendments.
“In short, the current statutory scheme presents less restrictive alternatives to achieve the goals that Congress identified in 1968, rendering the federal interstate handgun transfer ban not narrowly tailored,” the 28-page opinion states.
Gun dealer Frederic Russell Mance Jr. of Texas, and gun buyers Tracey and Andrew Hanson of Washington, D.C., sued U.S. Attorney General Eric Holder and Bureau of Alcohol, Tobacco, Firearms and Explosives Director B. Todd Jones in Federal Court in July 2014.
They claimed the federal ban interfered with the formation of a national handgun market, “reduces competition, raises prices and limits consumer choices.”
They pointed out that purchase and sale of rifles and shotguns across state lines is permitted by federal law, so long as the sales comply with laws of the seller’s and purchaser’s states.
Holder moved for summary judgment in November, claiming that the ban “does not impose any burden” on Second Amendment rights, and that the amendment is “silent” as to the ability to sell or buy firearms “in any particular forum.” He said the federal courts have repeatedly refused to rule the amendment protects such a right.
But O’Connor concluded that under strict scrutiny, the ban is not narrowly tailored to show the curtailment of constitutional rights is “actually necessary to the solution.”
O’Connor said the instant electronic background checks available today were not available in 1968 when the ban was enacted. He wrote that under the Brady Act of 1993, states can create a point of contact as a liaison between the National Instant Criminal Background Check System to ensure the buyer can legally buy a firearm.
“Current law therefore ensures potential purchasers can legally acquire and possess a firearm under state and federal law, and those states that desire to receive notice of firearms purchased by its citizens simply establish a [point of contact],” O’Connor wrote.
“Obviously, none of this infrastructure existed in 1968. Yet, in this case, it appears defendants rely on statistics from the 1968 Senate Report to support the continued need for an in-state [federal firearms licensed dealer] in every out-of-state handgun transaction.”
The defendants failed to provide relevant evidence that the ban is needed for compliance with state law and that the point-of-contact system is not enough to provide notice to the states, O’Connor found.
“The current law relating to rifles and shotguns provides an example of a narrowly tailored law, especially when it is taken together with instant electronic background checks, face-to-face meeting requirements, state POCs, and published compilations of state and local firearms laws,” the judge wrote.
O’Connor concluded that the ban does not survive lower, intermediate scrutiny, either.
“As law-abiding, responsible citizens, the Hansons likely do not pose the threat to public safety that motivated Congress to enact the federal interstate handgun transfer ban,” the opinion states. “Requiring that the Hansons pay additional costs and fees and wait until they return to the District of Columbia to retrieve their firearms from [another gun dealer] amounts to a regime that is not substantially related to the Government’s stated goal.”
O’Connor also denied the defendants’ motion for summary judgment, ruling that the plaintiffs have standing to sue.
He disagreed with the argument that Mance suffered no injury, finding that Mance’s inability to sell handguns to the Hansons because of the ban is a loss of sale and “clearly” an injury to him.
He also found standing for the Hansons, whose injuries of not buying a handgun locally would be redressed by a favorable ruling by the court.
The Department of Justice did not immediately respond to a request for comment Tuesday afternoon.
Plaintiffs’ attorney William B. Mateja, with Fish Richardson in Dallas, applauded O’Connor’s “tight and extremely analytical” ruling. He said the ban “makes no sense, there is no reason for it to exist.”
“We won all the way around,” Mateja told Courthouse News. “It is crazy to destroy the marketplace for handguns that Americans have a fundamental right to purchase. The lawsuit strikes at the heart of the issue ever since the creation of the National Instant Criminal Background Check System. … It makes no sense to perpetuate the ban.”
Mateja said his clients were “incredibly gratified and happy” when informed of the ruling and are “very fired up.”
“I’d be shocked if there was no appeal. Expect this to make its way to 5th Circuit, where I expect the court of appeals to affirm an incredibly sound opinion,” Mateja said. “It is chock full of great analysis and went beyond just the filings and paid attention to oral arguments which lasted over two-and-a-half hours.”
Plaintiffs’ attorney Alan Gura, with Gura Possessky in Alexandria, Va., said there “simply was no reason to differentiate” between handguns, shotguns and rifles.

From Courthouse News.

Judge: Media Has No Right to Watch Executions

February 2, 2015
By David Lee
OKLAHOMA CITY (CN) – A federal judge dismissed a media lawsuit against Oklahoma officials over the censored execution of Clayton Lockett, unpersuaded by the media’s First Amendment claims.
The Oklahoma Observer and others sued Oklahoma Department of Corrections Director Robert Patton and Oklahoma State Penitentiary Warden Anita Trammell in August 2014 in Federal Court. They claimed that witnesses to Lockett’s botched execution were deprived of the right to observe when a window shade in the death chamber was lowered.
Lockett, 38, was convicted in 2000 of raping and murdering 19-year-old Stephanie Neiman. He was convicted of shooting her with a sawed-off shotgun and watching two accomplices bury her alive.
Lockett’s execution, described as a gruesome, bloody mess by execution team members during the state’s subsequent investigation, resulted in changes to the state’s execution protocols.
The changes include visual confirmation of intravenous line placement and a substantial increase in the dosage of execution drugs.
U.S. District Judge Joe Heaton dismissed the media’s lawsuit on Jan. 9, citing his December opinion granting the defendants’ motion to dismiss.
“Plaintiff’s federal claims are dismissed with prejudice,” the dismissal order stated. “Plaintiffs’ claims under the Oklahoma Constitution are dismissed without prejudice.”
The plaintiffs claimed their qualified right to see the entirety of executions is not outweighed by a state interest. Heaton disagreed. He said the U.S. Supreme Court has treated such a right in the criminal adjudication process differently than in the “implementing” of a court’s judgment.
“That conclusion is consistent with the court’s different treatment of access issues in the prison context, where the implementation of criminal sentences normally occurs,” the 25-page opinion states. “Unlike the tradition of openness which exists as to criminal trials, the court has emphasized the closed nature of prisons. Recognizing that difference, the court has upheld limits on access to penal institutions even where serious issues as to inmate welfare have existed. This suggests the court would not take principles directed to the process of determining guilt and superimpose them in a different context – the implementation of the sentence.”
Prisons officials argued that the press has only “state-granted, qualified permission” to be at executions. They claimed the plaintiffs had no constitutional right of access to executions beyond what is extended to the general public, which has no such rights of access to prisons or executions.
Heaton found the plaintiffs “make a compelling argument” for more open access in the state. “But in the circumstances of this case, the question of the appropriate policy is just that – a policy judgment,” the opinion states. “It is therefore a matter for Oklahoma’s decision-makers, rather than one for resolution by this court.”
Oklahoma officials could not be reached for comment Sunday evening.
They resumed carrying out lethal injections this month, beginning with Charles Warner, 47, on Jan. 15. Warner was convicted in 1999 of the rape and murder of Adrianna Waller, the 11-month-old daughter of his girlfriend.
Warner’s execution was delayed for an hour as prison officials awaited word from the Supreme Court on his application for a stay. In a 5-4 ruling, the court declined to rule on whether the sedative midazolam would make him unconscious during the execution.
Warner unsuccessfully argued that the state’s replacement three-drug execution cocktail would subject him to unconstitutional pain and suffering. Several states have resorted to replacement execution drugs due to shortages of traditional drugs caused by anti-death penalty activists successfully asking large drug manufacturers to stop making them.
The high court reversed course two weeks later, granting a review of midazolam that halts further executions in the state until a hearing in April.

From Courthouse News.