Fifth Circuit Declines to Weigh in on Split Re Authority to Issue Injunction Pending Arbitration

Per Janvey v. Alguire --- F.3d ----, 2011 WL 2937949 (5th Cir. July 22, 2011):

The circuit split concerns the power of a district court to issue an injunction while arbitration is pending. The Fifth Circuit acknowledged the circuit split in RGI, Inc. v. Tucker & Associates, Inc., 858 F.2d 227, 229 (5th Cir.1988), but did not enter the fray.^FN6 The Employee Defendants contend that once again we may avoid the fray and still decide the issue in their favor because both the Eighth Circuit, on one side of the split, and the Seventh Circuit, on the other side of the split, would not permit an injunction here. The Eighth Circuit held that “where the [Federal Arbitration Act (“FAA”) ] is applicable to the dispute between the parties and no qualifying language has been alleged, the district court errs in granting injunctive relief” because the judicial inquiry required to determine “the propriety of injunctive relief necessarily would inject the court into the merits of issues more appropriately left to the arbitrator.” Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Hovey, 726 F.2d 1286, 1292 (8th Cir.1984). The Seventh Circuit held that the district court may only issue injunctive relief that is effective only until the arbitration panel is able to address whether the equitable relief should remain in effect. See Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Salvano, 999 F.2d 211, 215–16 (7th Cir.1993).

. . .

The RGI Court found that “[t]he crux of the problem [in the circuit split] is whether the commands of the [FAA] require that a federal court immediately divest itself of any power to act to maintain the status quo once it decides that the case before it is arbitrable.” RGI, 858 F.2d at 228–29 (emphasis added). Here, however, the district court has not yet decided whether the case is arbitrable and thus the circuit-split cases are not applicable.
. . .

FN7. Given that the facts at issue here do not require us to enter the circuit split, we reserve for another day the issues of whether a district court divests itself of the discretion to maintain the status quo once it decides the case before it is arbitrable and, if not, what the limits of that discretion may be.

U.S. Law Week Reports Circuit Splits

Here are the circuit splits reported recently in BNA's U.S. Law Week, 80 U.S.L.W. 22
(June 2011):

Bankruptcy—Farm Debtors: United States v. Dawes (In re Dawes)
 (79 U.S.L.W. 2786)

Are income taxes flowing from the sale of a farm asset during Chapter 12 bankruptcy proceedings taxes “incurred by the estate”under Section 503(b) of the Bankruptcy Code, and are they therefore subject to downgrade and discharge? The Tenth Circuit joins the Ninth Circuit in saying “no.” It explains that “post-petition income taxes incurred during Chapter 12 proceedings are liabilities of the individual debtor and not the bankruptcy estate,”and are therefore not subject to discharge. The Eighth Circuit has held that such taxes are subject to discharge.

Schools—Disciplinary Action: Layshock v. Hermitage School District
 J.S. v. Blue Mountain School District
 (79 U.S.L.W. 2739)

Are schools allowed to punish vulgar student speech on the internet? Based on the facts before it in two separate, but similar, cases, the Third Circuit says derogatory profiles about their principals posted on MySpace by two students were protected by the First Amendment. The Second Circuit, faced with different facts, however, has allowed a school to punish vulgar internet speech by a student.

United States—False Claims: United States ex rel. Hutcheson v. Blackstone Medical Inc.
 (79 U.S.L.W. 2646)

Under the False Claims Act, may a claim made to the government be false or fraudulent for failure to meet an implied legal condition of payment that is found in a source other than a statute or regulation? The Second and Ninth circuits have held that the legal condition must appear in a statute or regulation, while the First Circuit sides with the Tenth Circuit in holding that such conditions can be spelled out in other places, such as the underlying contract.

Taxation—Limitations: Salman Ranch Ltd. v. Commissioner of Internal Revenue
 (79 U.S.L.W. 2692)

May the Internal Revenue Service extend the limitations period for issuing a final partnership administrative adjustment from three to six years where an understatement of gross income results from an overstatement of basis? The Tenth Circuit joins the Seventh and Federal Circuits in holding that Section 6501 of the tax code is ambiguous, opening the door for IRS regulation. The Fourth and Fifth circuits have held that the statute is not ambiguous, blocking agency regulation on the subject.

Fourth Circuit (splitting with other circuits) finds problem with appeal wavier demand for extra acceptance reduction

From the Sentencing Law & Policy Blog:

Hard-core sentencing fans (and perhaps only hard-core sentencing fans) should find very interesting and perhaps somewhat surprising a ruling today from the Fourth Circuit in US v. Divens, No. 09-4967 (4th Cir. July 5, 2011) (available here). Here is the start of the opinion along with an excerpt from part of the opinion spotlighting why the Fourth Circuit is splitting from its sisters on this issue:

Lashawn Dwayne Divens pled guilty to possession with intent to distribute cocaine. Divens signed an acceptance of responsibility statement but declined to sign a plea agreement waiving certain rights to appellate review and collateral attack. Solely because Divens would not waive these rights, the Government refused to move for an additional one-level reduction for acceptance of responsibility under U.S.S.G. § 3E1.1(b). Divens appeals, challenging the district court’s failure to compel the Government to move for the § 3E1.1(b) reduction. For the reasons that follow, we vacate Divens’s sentence and remand for further proceedings consistent with this opinion.....

Section 3E1.1(a) of the Guidelines provides for a two-level decrease in a defendant’s offense level if he "clearly demonstrates acceptance of responsibility for his offense."... The district court awarded Divens the two-level reduction under § 3E1.1(a), but because the Government refused to file a motion under § 3E1.1(b), the court did not award Divens the additional one-level reduction provided by that subsection. The Government makes no claim that Divens does not qualify for a decrease.... [;] the Government’s sole contention is that Divens’s failure to sign the appellate waiver justifies the Government’s refusal to move for the additional one-level reduction under § 3E1.1(b)....

[In our view], under § 3E1.1(b) the Government retains discretion to refuse to move for an additional one-level reduction, but only on the basis of an interest recognized by the guideline itself — not, as with § 5K1.1, on the basis of any conceivable legitimate interest.

We recognize that this holding does not accord with that of other circuits. See United States v. Deberry, 576 F.3d 708 (7th Cir. 2009); United States v. Johnson, 581 F.3d 994 (9th Cir. 2009); United States v. Beatty, 538 F.3d 8 (1st Cir. 2008); United States v. Newson, 515 F.3d 374 (5th Cir. 2008). Those courts have concluded that the Government may withhold a § 3E1.1(b) motion based on any rational interest. This conclusion relies heavily on cases interpreting § 5K1.1.

In our view, for the reasons explained above, the commentary to § 3E1.1(b) forecloses courts from relying on § 5k1.1 cases in interpreting § 3E1.1(b). This commentary, however, has received little attention from our sister circuits. Instead, those courts focus almost exclusively on the fact that Congress in 2003 amended § 3E1.1(b) to insert the governmental motion requirement. See PROTECT Act, Pub. L. No. 108-21, § 401(g). According to those courts, the mere fact of this 2003 amendment somehow demonstrates that Congress intended that the Government possess the wide discretion under § 3E1.1(b) that it enjoys under § 5K1.1. But nothing in the 2003 reforms evinces such an intent. After all, Congress could have amended the § 3E1.1(b) commentary so that it conformed to the commentary surrounding § 5K1.1. Congress declined to do so; it instead left unchanged § 3E1.1(b)’s mandatory commentary and inserted language suggesting that the Government’s newfound discretion applies only to the question of "whether the defendant has assisted authorities in a manner that avoids preparing for trial." U.S.S.G. § 3E1.1 cmt. 6.