Justia U.S. 2nd Circuit Court of Appeals Opinion Summaries

A medical device distributor sued a former employee, alleging that he breached a non-compete agreement, his duty of loyalty, and misappropriated trade secrets after joining a competitor. The employee responded with counterclaims and third-party claims. During the litigation, the employee filed for Chapter 7 bankruptcy, which stayed the district court proceedings. In the bankruptcy case, the distributor filed a proof of claim for damages, which the employee did not contest. The bankruptcy court allowed the claim, and the distributor received a partial distribution from the bankruptcy estate. The employee also waived his right to discharge, leaving him potentially liable for the remaining balance.After the bankruptcy case closed, the United States District Court for the District of Vermont lifted the stay. The distributor sought summary judgment for the balance of its allowed claim, arguing that the bankruptcy court’s allowance of its claim should have preclusive effect. Initially, the district court denied this request, finding that using claim preclusion offensively would be unfair. Upon reconsideration, however, the district court reversed itself and granted summary judgment to the distributor for the remaining balance, holding that claim preclusion applied.On appeal, the United States Court of Appeals for the Second Circuit reviewed the district court’s grant of summary judgment de novo. The Second Circuit held that, even if claim preclusion could sometimes be used offensively, it could not be applied in this case because it would be unfair to the employee, who had less incentive to contest the claim in bankruptcy. The court vacated the district court’s judgment in favor of the distributor and remanded the case for further proceedings. The main holding is that claim preclusion cannot be used offensively to secure a judgment for the balance of an allowed bankruptcy claim under these circumstances. View "Thermal Surgical, LLC v. Brown" on Justia Law

Two noncitizens, one from Egypt and one from Guatemala, each entered the United States in the 1990s and were granted asylum after claiming persecution in their home countries. Both later committed criminal offenses—one was convicted of stalking and child endangerment, the other of multiple driving while intoxicated offenses. As a result, the Department of Homeland Security initiated proceedings to terminate their asylum status, arguing that their convictions constituted “particularly serious crimes.” Immigration Judges in both cases terminated their asylum status and ordered their removal, but the petitioners sought to adjust their status to lawful permanent resident under 8 U.S.C. § 1159(b).In the first case, the Immigration Judge initially granted the adjustment application, reasoning that the statute did not explicitly require current asylum status. The Department of Homeland Security appealed, and the Board of Immigration Appeals (BIA) reversed, relying on its decision in Matter of T-C-A-, which held that only those with current asylum status are eligible for adjustment. In the second case, the Immigration Judge denied the adjustment application on the same grounds, and the BIA affirmed. Both petitioners then sought review in the United States Court of Appeals for the Second Circuit.The United States Court of Appeals for the Second Circuit reviewed the statutory language and the relevant context, including neighboring provisions and legislative history. The court held that 8 U.S.C. § 1159(b) requires a noncitizen to have current asylum status to be eligible for adjustment to lawful permanent resident status. The court concluded that a past grant of asylum is insufficient if that status has since been terminated. Accordingly, the court denied both petitions for review. View "Wassily v. Bondi" on Justia Law

Two fiduciaries, who managed retirement and welfare funds for a New York City law enforcement union, were found to have improperly withdrawn over $500,000 from the union’s annuity fund. The withdrawals, which occurred over several years, were facilitated by one defendant preparing false authorization forms and the other signing and submitting them to the fund’s custodian. The funds were then transferred to the union’s operating account and used for unauthorized purposes, including personal enrichment and unrelated union expenses. The defendants misrepresented the nature of these withdrawals to both the fund’s custodian and union members, and they continued the scheme even after being warned by auditors that their actions were improper.The United States District Court for the Southern District of New York presided over a joint jury trial, where both defendants were convicted of wire fraud and conspiracy to commit wire fraud. One defendant was also convicted of conspiracy to defraud the United States and multiple counts of tax evasion. The district court denied motions to sever the trials, found the evidence sufficient to support the convictions, and imposed restitution and forfeiture orders. The court also addressed government discovery errors by granting a continuance and requiring early disclosure of materials, but declined to impose harsher sanctions.On appeal, the United States Court of Appeals for the Second Circuit reviewed claims of improper joinder, insufficient evidence, prosecutorial misconduct, ineffective assistance of counsel, and errors in restitution calculation. The court held that joinder was proper because the indictment sufficiently linked the fraud and tax offenses, the evidence was sufficient to support the convictions, and the attorney’s illness did not constitute per se ineffective assistance. The court also found no abuse of discretion in the district court’s handling of discovery issues or restitution calculation, and no reversible prosecutorial misconduct. The Second Circuit affirmed the district court’s judgment. View "United States v. Wynder" on Justia Law

A pharmaceutical company challenged the federal government’s implementation of a new program created by the Inflation Reduction Act of 2022, which authorizes the Centers for Medicare and Medicaid Services (CMS) to negotiate prices for certain high-expenditure prescription drugs under Medicare. The company’s drug was selected for the program, and it signed an agreement to participate “under protest” while filing suit. The company alleged that the program violated its constitutional rights under the First, Fifth, and Eighth Amendments, and that CMS failed to follow required notice-and-comment procedures under the Administrative Procedure Act (APA) when issuing the standard agreement for participation.The United States District Court for the District of Connecticut granted summary judgment to the government on all claims. The district court found that participation in the program was voluntary, so there was no unlawful deprivation of rights. It also held that the program did not impose unconstitutional conditions on participation in Medicare and Medicaid, and that the Inflation Reduction Act expressly allowed CMS to implement the program for its first three years without notice-and-comment rulemaking.The United States Court of Appeals for the Second Circuit reviewed the case and affirmed the district court’s judgment. The Second Circuit held that, under its precedent in Garelick v. Sullivan, participation in the Medicare Drug Price Negotiation Program is voluntary, and thus the program does not effect a taking, deprive the company of property without due process, or compel speech in violation of the First Amendment. The court further held that the program does not impose unconstitutional conditions because it is designed to control Medicare spending and does not regulate the company’s private market conduct. Finally, the court concluded that the Inflation Reduction Act expressly exempted CMS from the APA’s notice-and-comment requirement for the program’s initial years. View "Boehringer Ingelheim Pharms., Inc. v. Dep't of Health & Hum. Servs." on Justia Law

A group of federally funded health centers and clinics serving low-income populations alleged that several major drug manufacturers conspired to restrict drug discounts offered through the federal Section 340B Drug Discount Program. The plaintiffs claimed that, beginning in 2020, the manufacturers coordinated efforts to limit the availability of discounted diabetes medications at contract pharmacies, resulting in significant financial losses for safety-net providers. The manufacturers, who are direct competitors in the diabetes drug market, allegedly implemented similar policies within a short timeframe, each restricting or eliminating the discounts in ways that had a comparable anticompetitive effect.After the plaintiffs filed a class action complaint, the United States District Court for the Western District of New York dismissed their first amended complaint and denied leave to file a second amended complaint. The district court concluded that the plaintiffs failed to allege sufficient parallel conduct or factual circumstances suggesting a conspiracy, and thus found the proposed amendments futile.The United States Court of Appeals for the Second Circuit reviewed the case and applied a de novo standard to both the dismissal and the denial of leave to amend. The Second Circuit held that the plaintiffs’ proposed second amended complaint alleged enough facts to plausibly infer a horizontal price-fixing conspiracy under Section 1 of the Sherman Act. The court found that the complaint sufficiently pled both parallel conduct and “plus factors” such as a common motive to conspire, actions against individual economic self-interest, and a high level of interfirm communications. The court also determined that Supreme Court precedents cited by the defendants did not bar the plaintiffs’ claims. Accordingly, the Second Circuit vacated the district court’s judgment and remanded the case with instructions to allow the plaintiffs to file their second amended complaint. View "Mosaic Health, Inc. v. Sanofi-Aventis U.S., LLC" on Justia Law

Several investment funds based in the British Virgin Islands invested heavily in Bernard L. Madoff Investment Securities and were forced into liquidation after the Madoff Ponzi scheme was exposed in 2008. Liquidators were appointed in the BVI insolvency proceedings. Before the collapse, certain investors redeemed their shares in the funds for cash, receiving over $6 billion in payments. The liquidators, seeking to recover these redemption payments for equitable distribution among all investors, initiated approximately 300 actions in the United States, alleging that the payments were inflated due to fictitious Net Asset Value (NAV) calculations based on Madoff’s fraudulent statements.The U.S. Bankruptcy Court for the Southern District of New York consolidated the actions after recognizing the BVI proceedings under Chapter 15 of the Bankruptcy Code. The bankruptcy court dismissed most claims, finding it lacked personal jurisdiction over some defendants, that the liquidators were bound by the NAV calculations, and that the safe harbor for securities transactions under § 546(e) of the Bankruptcy Code barred the claims. However, it allowed constructive trust claims to proceed against certain defendants alleged to have known the NAVs were inflated. The U.S. District Court for the Southern District of New York affirmed the bankruptcy court’s judgment, leaving only the constructive trust claims.On appeal, the United States Court of Appeals for the Second Circuit held that all of the liquidators’ claims, including the constructive trust claims, should have been dismissed under the safe harbor provision of § 546(e), which applies extraterritorially via § 561(d) in Chapter 15 cases. The court concluded that the safe harbor bars both statutory and common-law claims seeking to avoid covered securities transactions, regardless of the legal theory or proof required. The Second Circuit reversed the district court’s judgment allowing the constructive trust claims and otherwise affirmed the dismissal of the remaining claims. View "In re Fairfield Sentry Ltd." on Justia Law

A company that supplies oil and propane hired a trucking business to deliver 10,000 gallons of heating oil to its property in Putnam, Connecticut. During the delivery, the trucking company’s employee allegedly failed to monitor the filling process, resulting in an overflow that contaminated the soil and groundwater. The supplier claimed it incurred over $500,000 in remediation and related expenses due to the spill.The supplier filed a lawsuit in the United States District Court for the District of Connecticut, asserting common-law negligence and recklessness claims under Connecticut law. The complaint cited specific federal Hazardous Materials Regulations (HMRs) as evidence of the trucking company’s duties and alleged breaches. The trucking company moved to dismiss, arguing that the supplier’s claims were preempted by the federal Hazardous Materials Transportation Act (HMTA) and, alternatively, that the recklessness claim was insufficiently pleaded. The district court granted the motion, holding that the HMTA preempted the state-law claims and that the recklessness claim failed to state a claim.On appeal, the United States Court of Appeals for the Second Circuit reviewed the district court’s dismissal de novo. The Second Circuit held that the HMTA does not preempt the supplier’s Connecticut common-law claims for negligence and recklessness, so long as those claims are based on duties that are “substantively the same” as federal requirements under the HMTA and HMRs. The court found that the mental state required for negligence and recklessness under Connecticut law is not inconsistent with the HMTA’s standards for civil violations. Accordingly, the Second Circuit vacated the district court’s judgment and remanded the case for further proceedings. View "DCC Propane LLC v. KMT Enterprises, Inc." on Justia Law

Petitioner, a citizen of the Dominican Republic and a lawful permanent resident of the United States, was ordered removed after being convicted of sexual abuse in the second degree under New York Penal Law (NYPL) § 130.60(2). This conviction was deemed an "aggravated felony" under 8 U.S.C. §§ 1101(a)(43)(A) and 1227(a)(2)(A)(iii) because it constituted "sexual abuse of a minor." Approximately a year later, the petitioner moved to reopen his removal proceedings, but the Board of Immigration Appeals (BIA) denied the motion as untimely and concluded that he did not warrant equitable tolling.An Immigration Judge (IJ) initially determined that the petitioner’s conviction was an aggravated felony, rendering him removable and ineligible for asylum and cancellation of removal. The IJ also found the conviction to be a "particularly serious crime," barring withholding of removal under the Immigration and Nationality Act (INA) and the Convention Against Torture (CAT). The BIA affirmed the IJ’s decision and denied the petitioner’s motion to remand for consideration of new evidence regarding his mental health and diabetes diagnosis.The United States Court of Appeals for the Second Circuit reviewed the case. The court dismissed the petition challenging the removal order, citing its recent decision in Debique v. Garland, which held that a conviction under NYPL § 130.60(2) is categorically an aggravated felony. The court rejected the petitioner’s arguments that Debique was not binding and that the Supreme Court’s decision in Loper Bright Enterprises v. Raimondo undermined its precedential force. The court also denied the petition challenging the BIA’s denial of the motion to reopen, finding that the BIA had a reasonable basis for concluding that the petitioner failed to show due diligence for the entire period between the expiration of the 90-day deadline and the filing of the motion. View "Garcia Pinach v. Bondi" on Justia Law

Plaintiffs, including Eugene Volokh and two social media companies, challenged New York's Hateful Conduct Law, which mandates social media networks to provide mechanisms for reporting hateful conduct and to disclose policies on how they address such reports. The law defines hateful conduct as speech that vilifies, humiliates, or incites violence against groups based on protected characteristics. Plaintiffs argued that these requirements compel speech and chill protected speech, violating the First Amendment.The United States District Court for the Southern District of New York granted a preliminary injunction, halting the law's enforcement. The court found that the law likely violates the First Amendment by compelling social media networks to engage in speech and by being overly broad and vague, thus chilling users' speech.The United States Court of Appeals for the Second Circuit reviewed the case. The court noted that the constitutionality of the Hateful Conduct Law hinges on its interpretation. If the law requires social media networks to adopt the state's definition of hateful conduct, it would be subject to strict scrutiny and likely fail. However, if the law merely requires disclosure of any content moderation policy without specific reference to the state's definition, it might survive under the more relaxed Zauderer standard.The Second Circuit deferred its decision and certified three questions to the New York Court of Appeals: whether the law requires explicit reference to the state's definition of hateful conduct in social media policies, whether the reporting mechanism must specifically address hateful conduct, and whether social media networks must respond to reports of hateful conduct. The answers to these questions will determine the law's constitutionality. View "Volokh v. James" on Justia Law

Victor J. Orena was convicted in 1992 for his involvement in the "Colombo Family War," a violent power struggle within an organized crime family. The jury found him guilty of nine charges, including the use and carrying of a firearm in relation to a crime of violence under 18 U.S.C. § 924(c)(1). In 2021, Orena successfully petitioned under 28 U.S.C. § 2255 to vacate his § 924(c)(1) conviction based on the Supreme Court's decision in United States v. Davis. He sought de novo resentencing on the remaining counts.The United States District Court for the Eastern District of New York denied Orena's request for de novo resentencing. Instead, the court corrected the judgment by excising the § 924(c) conviction and its consecutive sentence but left the sentences for the remaining eight counts unchanged. Orena appealed, arguing that the district court was required to conduct de novo resentencing on all remaining counts, citing the Second Circuit's decision in Kaziu v. United States.The United States Court of Appeals for the Second Circuit reviewed the case. The court distinguished Orena's case from Kaziu, noting that the district court had recently evaluated the 18 U.S.C. § 3553(a) factors in denying Orena's motion for sentence reduction under 18 U.S.C. § 3582(c)(1)(A). The court found that the district court had thoroughly assessed the relevant factors and the changed circumstances Orena cited. The court also concluded that the fact that Orena's original sentence predated the Supreme Court's decision in United States v. Booker, which made the Sentencing Guidelines advisory, did not compel resentencing in this case. Additionally, the court found that Orena's arguments regarding alleged government misconduct were not proper considerations for resentencing.The Second Circuit held that the district court did not exceed its discretion in declining to conduct de novo resentencing and affirmed the district court's judgment. View "U.S. v. Orena" on Justia Law