June 22, 2017
Under 15 U. S. C. §1052(a), the USPTO may deny registration of a trademark that may “disparage . . . or bring. . . into contemp[t] or disrepute” any “persons, living or dead.” In the Supreme Court case of Matal, Interim Director, United States Patent And Trademark Office v. Tam (U.S. Ct, June 2017), No. 15–1293, 2017 WL 2621315, Simon Tam, lead singer of the rock group “The Slants,” chose this moniker for his band to “reclaim” the term and drain its denigrating force as a derogatory term for Asian persons. Tam sought federal registration of the mark “THE SLANTS” and per 15 U. S. C. §1052(a), the USPTO denied registration. Tam contested the denial of registration through the administrative appeals process, to no avail. He then took the matter to federal court, where the en banc Federal Circuit Court found the disparagement clause facially unconstitutional under the First Amendment’s Free Speech Clause. The United States Supreme Court affirmed the Federal Circuit’s judgment.
By Greg Johnson
June 5, 2017
Paine Hamblen is proud to announce that partner, Keith Trefry, was selected to judge the first annual Eastern Washington University Center for Entrepreneurship’s Eagle’s Nest Business Pitch Competition, which took place on Thursday, May 18th. The Competition began last November with a total of 35 student teams entering. After advancing through two preliminary rounds, seven student teams remained to compete for over $5,000 in prize money, with the top team taking home $2,500! The teams pitched their ideas to a panel of judges from the local Spokane business community, which included Paine Hamblen partner, Keith Trefry. The Director of the Center for Entrepreneurship, Bruce Teague, PhD, and his staff are excited with the results of the competition’s inaugural year and hope to have 100 new business ideas competing next year. For more information on the program, go to: https://sites.ewu.edu/entrepreneurship/pitch-contest/.
May 31, 2017
Paine Hamblen is proud to announce that two of its partners; Fred Emry and Kathryn McKinley, have been selected to the 2017 Super Lawyers list. The Super Lawyers list is issued by Thomson Reuters. A description of the selection methodology can be found at: http://www.superlawyers.com/about/selection_process.html.
Fred Emry’s practice areas include Estate Planning & Probate, Tax and Elder Law. Mr. Emry has been a selected to the Super Lawyer’s list every year since 2003. Kathryn McKinley’s practice areas include Real Estate, Banking and Creditor Debtor Rights.
April 12, 2017
The Tax Court in Greenberg, David B., 147 T.C. No. 13 (2016), held that an attorney who had represented a taxpayer in an administrative proceeding was not a proper party to file a petition seeking an award of attorney’s fees for the representation, in part because he did not “incur” the costs. Rather, he was to be the recipient of any fees. Because the attorney was not a party to the underlying proceeding, he could not be a prevailing party under I.R.C. § 7430. Therefore, the attorney was not the proper party to file a claim under § 7430, and the Tax Court lacked jurisdiction.
The attorney sought the award of administrative costs (his attorney’s fees) with respect to an earlier administrative proceeding in which he represented a taxpayer (his client) before the I.R.S. pursuant to a power of attorney. His client’s matter was eventually resolved. The attorney was owed fees for this representation that remained outstanding, and his client agreed that the attorney would receive any administrative fees awarded under § 7430. The attorney filed his petition with the Tax Court arguing that he was the real party in interest because he was contractually entitled to any award of administrative costs to his client, and as such, had a right to claim administrative costs on this own behalf.
Under § 7430, in any administrative or court proceeding brought by or against the U.S. Government in connection with the determination, collection, or refund of any tax, interest, or penalty, the prevailing party may be awarded reasonable litigation and administrative costs. § 7430(f)(2) grants the Tax Court jurisdiction over petitions filed to contest a decision denying administrative costs. An I.R.S. decision denying a taxpayer’s request for reasonable administrative costs in whole or in part is subject to review by the Tax Court.
The court held that the attorney was not the proper party to file a § 7430 claim, and thus, it did not have jurisdiction over the case. The court considered a line of cases that construed fee awards under § 7430 and 28 U.S.C. § 2412, which is a fee-shifting statute under the Equal Access to Justice Act that similarly provides that a prevailing party may seek judgment for attorney’s fees. The court found that cases applying both laws have required the prevailing party to actually be a party to the underlying proceedings based on the plain, unambiguous language of the term. Also, the case law found that attorneys lack standing to apply for fees thereunder on their own behalf.
Further, § 7430(a) refers to administrative costs “incurred by” the prevailing party, which means that under its most natural reading, costs paid, not charged, by the prevailing party. The attorney did not “incur” these fees; rather, he was their intended recipient. The court said that this position was also supported by United States v. McPherson, 840 F.2d 244, 245 (4th Cir. 1988), in which the court denied § 7430 recovery to an attorney who represented himself, and thus, did not “incur” any fees for legal services. In addition, § 7430’s legislative history supported the court’s conclusion that only a party to an underlying action may pursue an award.
February 9, 2017
By: Tricia D. Usab
On July 7, 2016, the Washington Supreme Court handed down a decision in Jordan v. Nationstar Mortgage, 185 Wn.2d 876 (2016), that directly impacts a lender’s ability to exercise standard provisions found in many mortgages and deeds of trust recorded throughout the state of Washington. Many mortgages and deeds of trust contain provisions that allow a lender to enter into a borrower’s real property for the purpose of securing it after an event of default, but prior to a foreclosure. The provisions usually allow the lender to change the locks, winterize structures, or take other steps necessary to protect the value of the real property.
In Jordan v. Nationstar Mortgage, the Court held that provisions in a deed of trust or mortgage that allow a lender to enter into real property and change the locks, prior to a foreclosure are an exertion of physical control by the lender, and that such physical control exercised by the lender amounts to possession of the real property. The court examined various definitions of the word “possession” and determined that possession is an exertion of control over property. In Washington, an act of possession of real property by a lender prior to a foreclosure is prohibited by law. RCW 7.28.230, states “a mortgage of any interest in real property shall not be deemed a conveyance so as to enable the owner of the mortgage to recover possession of the real property, without a foreclosure and sale according to law.” In other words, a lender or mortgagee has a right to place a lien on the real property and to foreclose upon that lien, but the lender does not have a right to possess the property prior to the foreclosure. Accordingly, the court held that provisions in a deed of trust or mortgage that allow a lender to enter into a property for the purpose of changing the locks to secure it, prior to a foreclosure are prohibited by Washington law, as an act of possession by the mortgagee prior to a foreclosure.
The Court reasoned that a lender changing locks on a borrower’s real property is similar to a landlord changing locks on a tenant’s real property, and in Washington, the act of a landlord changing the locks on a tenant is deemed an exertion of control over the real property and an unlawful eviction against the tenant. The Court applied this rule to lenders and borrowers, even though the lender in the case thought the real property was abandoned and the borrower was provided with a telephone number to obtain access to the property.
After this decision, it difficult to know what a lender may do prior to a foreclosure sale, in order to protect or secure the real property pledged to the lender as collateral following an event of default under the loan. Clearly a lender may not enter into the real property to change the locks, even if the lender believes that the real property is abandoned and the lender provides a means of contact to the borrower for future access. Moving forward what acts will constitute an exertion of control by the lender under Washington law? Is winterizing without changing the locks an exertion of control over the real property? What about transferring payment of the electricity bill to the lender, in order to ensure that payment and services are continued in the winter months to avoid pipes from freezing?
According to the Spokesman Review, Washington appears to be the first state in the nation to invalidate these types of provisions, so we are venturing into new territory. The Spokesman Review article may be found by following the link below:
February 3, 2017
On January 20, 2017, the Ninth Circuit Court of Appeals issued a ruling in a case that has broad effect, potentially impacting your organization.
In the case of Syed v. M-I, LLC, Case No. 14-17186 (2017), the Court ruled that a prospective employer violates the Fair Credit Reporting Act when it procures a job applicant’s consumer report after including a liability waiver in the same document as the statutorily mandated disclosure. The Ninth Circuit Court of Appeals is the very first Court in the nation to rule on this particular issue. The Court also found that given the statute’s requirement that the disclosure document consist solely of the disclosure, a prospective employer’s violation is “willful” when the employer includes terms in addition to the disclosure, such as the liability waiver, before procuring a consumer report or causing one to be procured.
If your organization utilizes consumer reports when making business decisions, including hiring of employees, you should review your written disclosure statements issued to prospective employees to ensure that they comply with the Ninth Circuit’s ruling.
February 1, 2017
By: Tricia D. Usab
On October 6, 2016, the Washington Supreme Court handed down a decision in Whatcom County v. Hirst, 186 Wash. 2d 648 (2016), that directly impacts the development of land with permit-exempt wells in counties such as Spokane, that are subject to the Growth Management Act. The Growth Management Act is legislation that reinforces conservation goals, discourages sprawling low-density development patterns, and encourages future growth in urban areas. Permit-exempt wells allow a withdrawal of groundwater for domestic use in an amount not exceeding five thousand gallons per day without any water permit requirement, provided that the groundwater withdrawals do not infringe upon any senior water rights. The Court held that the Growth Management Act places an independent duty on counties within Washington to ensure that groundwater appropriations will not infringe upon any senior water rights, including minimum stream flows prior to allowing land development. The result is that counties can no longer rely upon the contention that water is presumptively available for permit-exempt wells provided that the county’s comprehensive plan is consistent with certain rules issued by the Department of Ecology. Prior to this ruling, counties regularly allowed owners of land with permit-exempt wells to obtain building permits without the applicant providing any evidence that water is legally available, or actually available on the land. Counties only confirmed that the well did not fall within one of the boundary areas identified by the Department of Ecology, as an area where water for development does not exist.
The Court stated in its analysis that the trend in the law is to retain sufficient water in streams and lakes in order to sustain wildlife, recreational, and navigational opportunities. The Court noted that the Growth Management Act shifted some of the obligation to protect local environments to local governments, instead of solely relying upon the Department of Ecology. The Court’s decision relied upon Washington’s precedent of protecting minimum instream flow rights, which are the minimum streams necessary for fish and other wildlife. The Court reasoned that since the adoption of the Department of Ecology rules in 1985, the understanding and methods of determining hydraulic continuity and the effect of groundwater withdrawals on surface water have changed. The Court noted that when the minimum instream flow rules were adopted, the Department of Ecology did not believe that withdrawals from deep contained aquifers impacted stream flows, but now it is well recognized that groundwater withdrawals can have a significant impact on surface water flows. Additionally, the rules issued by the Department of Ecology that Whatcom County and other counties have followed allow a permit-exempt well to appropriate water from an otherwise closed basin, unless the basin is closed to all future appropriations. Accordingly, in addition to holding that counties must consider the effect on senior water rights before approving building or subdivision permits, the Court held that if there is a conflict between the Growth Management Act and the Department of Ecology rules, the Growth Management Act controls.
Currently there are no systems in place for counties to analyze a well’s effect on senior water rights, since prior to this ruling, counties relied upon the Department of Ecology’s rules specific to each water basin. Justice Stephens, in her dissenting opinion, stated the practical result of this holding is to stop counties from granting building permits that rely on permit-exempt wells. Justice Stephens stated that the majority’s holding misinterpreted the phrase adequate water supply in the building code, to mean legal availability, not just actual presence of water. Justice Stephens reasoned that the Department of Ecology was tasked with developing and implementing the comprehensive state water resource program and water resource inventory areas, which Whatcom County and other counties across the state have relied upon prior to this decision. Justice Stephens opined that the building codes implemented by local governments should be aligned with the water resource areas, allowing counties to integrate the Department of Ecology’s water determinations into their comprehensive plans and rely upon them when reviewing building permit applications. According to Justice Stephens, the majority’s opinion assigns applicants who are otherwise exempt from obtaining a water permit, to obtain hydrogeological studies to determine complex effects on surface water from the use of a given well, that are difficult, if not impossible, to measure.
It is hard to know what a permit-exempt landowner will need to produce to obtain a building permit from a county governed by the Growth Management Act moving forward, but this case makes one point very clear, water is being classified as a limited commodity, and there is a trend toward increasing regulation that all users will be forced to navigate. In the wake of this decision, Spokane County has adopted an emergency county ordinance prohibiting any well to be drilled within 500 feet of an existing well. According to the Spokesman Review, Spokane County officials believe this ordinance complies with the controversial decision, but prevents a moratorium on building and reduces the burden of proof placed on an applicant with a permit exempt well. I will continue to monitor this issue for further developments and for more information on Spokane’s emergency ordinance, please follow the link below:
January 5, 2017
By: Paul S. Stewart
The Idaho Supreme Court in Hoffer v. Shappard, 160 Idaho 870, 380 P.3d 681 (2016), held that attorney fees available to a prevailing party under I.C. § 12-121 will be awarded in any case when “justice so requires.” This is a departure from precedent based on I.R.C.P. 54(e)(1), which, until now, only permitted attorney fees under I.C. § 12-121 when a party prevailed against frivolous claims. The Court announced that its new interpretation of I.C. § 12-121 will go into effect March 1, 2017. Two dissenting justices characterized the majority’s decision as “a prominent step toward adopting the English Rule of attorney fee awards, whereby the losing party must pay for the prevailing party’s attorney fees.” The result, according to the dissent, would “inhibit access to justice” and “chill litigation.” The dissent further noted the “when justice so required” standard does not provide any direction to trial courts and makes it difficult for effective appellate review of attorney fee awards.
The new rule announced by the Idaho Supreme Court marks a significant departure from Idaho precedent. Although the dissent’s concerns about the new rule inhibiting access to justice and chilling litigation are reasonable, they may not be fully justified. The Court’s decision may, in fact, work against corporate defendants.
The rule change will shift Idaho courts’ attorney fees determinations from considering solely the merits of plaintiffs’ claims/defendants’ defenses to considering the totality of the circumstances. While Idaho courts will still consider whether litigants’ claims and defenses are frivolous, they will also be able to consider other factors, the most obvious being the financial positions of the parties. If the prevailing party is a large corporation or insurance company and the losing party is a low-income individual, a court may be reluctant to make the individual pay the corporation/insurance company’s attorney fees, even if the losing party’s claims/defenses were meritless.
This is the reality in Alaska, the only United States jurisdiction that adheres to the English Rule on attorney fees. Alaskan legal commentators have recognized that Alaska’s rule on attorney fees works as a “one-way street” whereby defense attorneys are unable to collect fee awards from losing plaintiffs.
In sum, the Hoffer decision signifies a new approach regarding awards of attorney fees in Idaho. But the effects of the decision may not be as momentous as argued by the dissenting justices. As evidenced by the experience of Alaskan courts, adherence to the English Rule on attorney fees does not necessarily result in a “chill” on litigation; in fact, the rule may act more to the detriment of corporate defendants than to poor plaintiffs.
For additional coverage of this topic, see a recent news article available at http://www.spokesman.com/stories/2016/dec/18/new-loser-pays-rule-over-idaho-court-system-could-/. We will continue to monitor judicial and legislative treatment on this issue.