Archive for February, 2012

KURNS v RAILROAD FRICTION PRODUCTS CORPORATION. Case No. 10-879. Decided February 29, 2012

Wednesday, February 29th, 2012

GLORIA GAIL KURNS, EXECUTRIX OF THE ESTATE OF GEORGE M. CORSON, DECEASED, ET AL., Petitioners v. RAILROAD FRICTION PRODUCTS CORPORATION ET AL. U.S. Supreme Court. Case No. 10-879. Argued November 9, 2011 — Decided February 29, 2012. On Writ of Certiorari to the U.S. Court of Appeals for the Third Circuit.

Syllabus

George Corson worked as a welder and machinist for a railroad carrier. After retirement, Corson was diagnosed with mesothelioma. He and his wife, a petitioner here, sued respondents Railroad Friction Products Corporation and Viad Corp in state court, claiming injury from Corson’s exposure to asbestos in locomotives and locomotive parts distributed by respondents. The Corsons alleged state-law claims of defective design and failure to warn of the dangers posed by asbestos. After Corson died, petitioner Kurns, executrix of his estate, was substituted as a party. Respondents removed the case to the Federal District Court, which granted them summary judgment, ruling that the state-law claims were pre-empted by the Locomotive Inspection Act (LIA), 49 U.S.C. §20701 et seq. The Third Circuit affirmed.

Held: Petitioners’ state-law design-defect and failure-to-warn claims fall within the field of locomotive equipment regulation pre-empted by the LIA, as that field was defined in Napier v. Atlantic Coast Line R. Co., 272 U.S. 605. Pp. 2-11.

(a) The LIA provides that a railroad carrier may use or allow to be used a locomotive or tender on its railroad line only when the locomotive or tender and its parts or appurtenances are in proper condition and safe to operate without unnecessary danger of personal injury, have been inspected as required by the LIA and regulations prescribed thereunder by the Secretary of Transportation, and can withstand every test prescribed under the LIA by the Secretary. See §20701. Pp. 2-3.

(b) Congress may expressly pre-empt state law. But even without an express pre-emption provision, state law must yield to a congressional Act to the extent of any conflict with a federal statute, see Crosby v. National Foreign Trade Council, 530 U.S. 363, 372, or when the federal statute’s scope indicates that Congress intended federal law to occupy a field exclusively, see Freightliner Corp. v. Myrick, 514 U.S. 280, 287. This case involves only the latter, so-called “field pre-emption.” Pp. 3-4.

(c) In Napier, this Court held two state laws prescribing the use of locomotive equipment pre-empted by the LIA, concluding that the broad power conferred by the LIA on the Interstate Commerce Commission (the agency then vested with authority to carry out the LIA’s requirements) was a “general one” that “extends to the design, the construction and the material of every part of the locomotive and tender and of all appurtenances.” 272 U.S., at 611. The Court rejected the States’ contention that the scope of the pre-empted field was to “be determined by the object sought through legislation, rather than the physical elements affected by it,” id., at 612, and found it dispositive that “[t]he federal and state statutes are directed to the same subject — the equipment of locomotives.” Ibid. Pp. 4-5.

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SOLYMAR INVESTMENTS, LTD. v BANCO SANTANDER S.A. Case No. 11-12515. February 28, 2012

Tuesday, February 28th, 2012

SOLYMAR INVESTMENTS, LTD., a Cayman Islands Corporation, ASTROLITE INVESTMENTS, LTD., a Cayman Islands Corporation, ETERNALITE INVESTMENTS, LTD., a Cayman Islands Corporation, SUNRAYS INVESTMENTS, LTD., a Cayman Islands Corporation, Plaintiffs – Appellants, v. BANCO SANTANDER S.A., BANCO SANTANDER INTERNATIONAL, SANTANDER BANK AND TRUST, LTD., OPTIMAL INVESTMENT SERVICES S.A., MANUEL ECHEVERRIA FALLA, et al., Defendants – Appellees. 11th Circuit. Case No. 11-12515. February 28, 2012. Appeal from the U.S. District Court for the Southern District of Florida (No. 1:10-cv-20695-FAM).

(Before DUBINA, Chief Judge, MARCUS, and FAY, Circuit Judges.)

(FAY, Circuit Judge.) At its core, this case presents a novel question about who is supposed to decide what in considering challenges to a contract containing an arbitration clause. While the Supreme Court has recently addressed this general issue in Granite Rock Co. v. International Brotherhood of Teamsters, 130 S. Ct. 2847 (2010) [22 Fla. L. Weekly Fed. S593a], it did not address the particular circumstances at issue here. Namely, whether a district court, having found a valid contract containing an arbitration clause exists, is also required to consider a further challenge to that contract’s place within a broader, unexecuted agreement. Having considered those circumstances in light of Granite Rock and other relevant precedent, we find that the district court properly construed the law regarding arbitrability in dismissing Plaintiff-Appellants’ suit. Accordingly, we affirm.

I.1
Plaintiff-Appellants (the “Holding Corporations”) are personal investment holding corporations owned by two related Panamanian shareholders. Defendant-Appellees, of which there are two distinct groups, are (1) a related group of banking corporations operating under the umbrella of Banco Santander,2 which provide banking, investment, and other financial management services; and (2) certain individual officers/employees of Santander. For convenience, we refer to Defendant-Appellees collectively as “Santander.”

The Holding Corporations invested an undisclosed sum of money with Santander. At the time of that investment, they informed Santander that they desired low-risk investments. Santander assured them that a low-risk portfolio would be tailored to their needs and that they would receive certain additional services, including comprehensive account management, investment advisory services, and other similar services directed towards ensuring their investment needs were met.

Santander invested some of the Holding Corporations’ money in a fund called Optimal Strategic US Equity Series of Optimal Multiadvisors Ltd. (“Optimal Strategic”). Optimal Strategic had engaged Bernard L. Madoff “to execute its investment strategy and had all or a substantial part of its assets deposited with and traded through Madoff Securities.” Exch. Agmnt. at 2 ¶ IV. While Santander had a policy against investing in funds managed by a single person, it continued to recommend Madoff-run funds to its clients and particularly to the Holding Corporations. Eventually, Madoff’s Ponzi scheme was exposed and the Holding Corporations’ substantial losses were revealed.3

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