Tag: Ninth Circuit

Ninth Circuit Weighs In: Nevada “Superpriority” Law for HOA Superliens Violates Due Process

HOA superliensIn a 2-1 decision, the United States Court of Appeals for the Ninth Circuit overruled the 2014 decision from the Nevada Supreme Court about which we previously wrote. In Bourne Valley Court Trust v. Wells Fargo Bank, N.A., (August 12, 2016), the federal appellate court holds that the non-judicial foreclosure of Nevada HOA superliens cannot constitutionally extinguish a mortgage lender’s security interest.

In 2014, the Nevada Supreme Court held that, as a matter of lien priority, the foreclosure of a superlien for HOA assessments can extinguish a first mortgage. However, the Nevada Supreme Court did not address whether the provisions of Nevada state law governing notice to purported junior lienholders, including mortgagees, were constitutional.

In Bourne Valley, the home in question had a mortgage loan for $174,000 from Plaza Home Mortgage. The beneficial interest in the noted and deed was subsequently assigned to Wells Fargo, N.A. in 2011.  After the homeowner fell behind on her HOA payments, the HOA recorded a notice of delinquent assessment lien for $1,298.57 in August 2011.  In October 2011, the HOA recorded a notice of default and election to sell the home. Then, on April 9, 2012, the HOA recorded a notice of trustee/foreclosure sale against the property.  The Horse Pointe Avenue Trust then paid $4,145 for the home at a foreclosure sale, before conveying its interest in the property to the Bourne Valley Court Trust, which then filed an action to quiet title and extinguish any other junior liens.

In Bourne Valley, the Ninth Circuit panel notes that Nevada state law requires a purported junior lienholder to “opt in” before receiving notice of an HOA foreclosure sale, which the Court calls a “peculiar scheme” for providing mortgage lenders with information about when an HOA intended to foreclose on a property.  “Even though such foreclosure forever extinguished the mortgage lenders’ property rights, the [Nevada] statute contained “opt in” provisions requiring that notice be given only when it had already been requested,” the Court noted.  “Thus, despite that only the homeowners’ association knew when and to what extent a homeowner had defaulted on her dues, the burden was on the mortgage lender to ask the homeowners’ association to please keep it in the loop regarding the homeowners’ association’s foreclosure plans,” the Court continued. “How the mortgage lender, which likely had no relationship with the homeowners’ association, should have known to ask is anybody’s guess.”

Therefore, the Court concludes, Nevada’s laws violate the Due Process Clause of the U.S. Constitution.  From the Court’s decision:

Nevada Revised Statutes section 116.3116 et seq. strips a mortgage lender of its first deed of trust when a homeowners’ association forecloses on the property based on delinquent HOA dues. Before it was amended, it did so without regard for whether the first deed of trust was recorded before the HOA dues became delinquent, and critically, without requiring actual notice to the lender that the homeowners’ association intends to foreclose.

We hold that the Statute’s “opt-in” notice scheme, which required a homeowners’ association to alert a mortgage lender that it intended to foreclose only if the lender had affirmatively requested notice, facially violated the lender’s constitutional due process rights under the Fourteenth Amendment to the Federal Constitution. We therefore vacate the district court’s judgment and remand for proceedings consistent with this opinion.

The Court gets specific:

But that the foreclosure sale itself is a private action is irrelevant to Wells Fargo’s due process argument. Rather than complaining about the foreclosure specifically, Wells Fargo contends—and we agree—that the enactment of the statute unconstitutionally degraded its interest in the property. Absent operation of the statute, Wells Fargo would have had a fully secured interest in the property. A foreclosure by a homeowners’ association would not have extinguished Wells Fargo’s interest. But with the statute in place, Wells Fargo’s interest was not secured. Instead, if a homeowners’ association foreclosed on a lien for unpaid dues, Wells Fargo would forfeit all of its rights in the property.

For now, the Bourne Valley opinion is binding on all Nevada federal courts. It will also serve as strong persuasive authority (at the very least) in actions pending in Nevada state court, as well as throughout the U.S. in states with similar paradigms.

Delta, Boarding Line

“HOA liens, the elderly, and those with military service may now board.”

Copyright © 2016 Womble Carlyle Sandridge & Rice, PLLC. All Rights Reserved.

Ninth Circuit “Twists” Things Up for IP Protection in Yoga

In a recent decision, the U.S. Court of Appeals for the Ninth Circuit held that a certain yoga sequence developed by legendary yoga teacher Bikram Choudhury was not eligible for copyright protection.  The Court’s decision was based on the fundamental copyright principle known as the “idea/expression dichotomy,” which states that copyright protection is limited to the expression of ideas, and cannot extend to the ideas themselves.  The Court concluded that because the yoga sequence is an idea, process or system designed to improve health, copyright can protect only the words and pictures that are used to describe the yoga sequence (i.e. the book in which the sequence is described), but cannot be extended to protect the idea of the sequence itself.

Meditation

As a bit of interesting background, Bikram Choudhury, founder of the worldwide Yoga College of India, began his yoga career in India at the ripe age of four years old.  After he immigrated to the US in the 1970s, he opened a yoga studio and began offering classes in which a sequence of twenty-six yoga poses and two breathing exercises (known as the “Sequence”) was practiced over the course of ninety minutes in a room heated to 105 degrees Fahrenheit (intended to mimic the climate of India).  Bikram soon became a central figure in the yoga community in the US, including among the celebrity circuit and professional athletes.  In 1979 he published a book titled Bikram’s Beginning Yoga Class, in which the Sequence was described. Bikram registered the book with the Copyright Office in 1979, and in 2002 registered a “compilation of exercises” contained in the book.

The roots of the present dispute were planted in the 1990s, when Bikram introduced the “Bikram Yoga Teacher Training Course.”  The defendants in the present case completed Bikram’s course, and subsequently began offering “hot yoga” classes in their own studio, in which a style of yoga similar to the Sequence was taught.  Bikram then filed a complaint alleging that the defendants infringed Bikram’s copyright.

Of course, to prove a claim of copyright infringement, a plaintiff must first prove it has a valid copyright.  This is where Bikram did a “downward dog.”

First, the Court noted that the Sequence is a “system” or “method,” which was designed to “systematically work every part of the body, to give all internal organs, all the veins, all the ligaments, and all the muscles everything they need to maintain optimum health and maximum function.”  Thus, the Court went on, Bikram’s attempt to secure copyright protection for a healing art, or a system designed to yield physical benefits and a sense of well-being, was precluded by the idea/expression dichotomy. Essentially, the idea/expression dichotomy, which is codified in 17 U.S.C. § 102(b),

strikes a definitional balance between the First Amendment and the Copyright Act by permitting free communication of facts [and ideas] while still protecting an author’s expression.

The Court next addressed Bikram’s contention that the Sequence was entitled to copyright protection as a “compilation.”  A compilation is “a work formed by the collection and assembling of preexisting materials or of data that are selected, coordinated, or arranged in such a way that the resulting work as a whole constitutes an original work of authorship.”  17 U.S.C. § 101.  The Court noted that while a compilation may be eligible for copyright protection, it must nevertheless represent an “original work[] of authorship,” as required by Section 102. The Court held that the fact that the Sequence may possess many constituent parts did not transform it into a proper subject of copyright protection.

The Court then rejected Bikram’s argument that the Sequence was entitled to copyright protection as a “choreographic work.”  Although a “choreographic work” is a statutory category of work entitled to copyright protection, this term has not yet been defined in the copyright context by the Court or by Congress.  Nevertheless, the Court noted that defining the term was not necessary, since regardless of category, the work must meet the originality requirement imposed by Section 102.    Thus, the Court held:

The Sequence is not copyrightable as a choreographic work for the same reason that it is not copyrightable as a compilation: it is an idea, process, or system to which copyright protection may in no case extend.

As long as this case law is upheld and followed, proprietors of yoga sequences and similar matter will have a difficult time in getting past the “idea/expression dichotomy” hurdle, and may have to say “neti-neti” to copyright protection.  However, other forms of intellectual property protection may be available.  For example, in this case, the Court specifically noted that “if [the Sequence] is entitled to protection at all, that protection is more properly sought through the patent process.”  Additionally, proprietors can adopt and develop good will in a brand for the specific services associated with their sequences or similar matter (such as educational services in which the matter is taught), and rely on trademark law to prevent others from offering similar services under a similar mark.

Until the next yoga move in the IP arena, Namaste.

Article By Beth A. Seals of Squire Patton Boggs (US) LLP

© Copyright 2015 Squire Patton Boggs (US) LLP

Ninth Circuit Rules NCAA Violates Antitrust Law-Strikes Down Proposed Remedy

A three-judge panel of the Ninth Circuit Court of Appeals, in San Francisco, affirmed in part and reversed in part Judge Claudia Wilken’s August 2014 district court decision that NCAA rules restricting payment to athletes violate antitrust laws.

The Ninth Circuit agreed with Judge Wilken’s conclusion that NCAA rules restricting payment to athletes violated antitrust laws and authorized NCAA schools to provide athletic scholarships that cover the full cost of attendance. However, the Ninth Circuit rejected a key component of Judge Wilken’s decision which authorized the payment of $5,000 per year in deferred compensation for the use of individual athletes’ names, images and likenesses.

The opinion, written on behalf of the panel by Judge Jay Bybee, stated,

“NCAA is not above the antitrust laws, and courts cannot and must not shy away from requiring the NCAA to play by the Sherman Act’s rules….In this case, the NCAA’s rules have been more restrictive than necessary to maintain its tradition of amateurism in support of the college sports market.”

A more detailed analysis of the decision and its potential impact will be posted shortly.

Article By Gregg E. Clifton & Benjamin A. Tulis of Jackson Lewis P.C.
Jackson Lewis P.C. © 2015

Legal Updates for Government Entities Covering March and April 2014

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Arizona Court of Appeals

Immunity under A.R.S. § 12-820.05

Tucson Unified School District v. Gallagher, –P.3d–, 2014 WL949114 (March 11, 2014)

The Gallaghers sued TUSD and a TUSD school employee, Michael Corum, alleging that Corum sexually abused and/or exploited their developmentally challenged daughter at a TUSD school. The Gallaghers claimed that TUSD was vicariously liable for Corum’s conduct and was negligent in hiring and supervising Corum. The Gallaghers alleged that if TUSD had properly investigated Corum’s employment history they would have discovered that a prior employer recommended that he not be employed in a position that involved disabled children. TUSD filed for summary judgment, arguing that it was immune under A.R.S. § 12-820.05 because Corum had committed a felony and it had no actual knowledge of Corum’s purported propensity for such conduct. The trial court denied summary judgment, concluding that TUSD should have known of the circumstances of Corum’s previous conduct and thus the immunity statute did not apply. TUSD appealed.

A.R.S. § 12-820.05(B) provides that a public entity is not liable for losses that arise out of and are directly attributable to a public employee’s act or omission that is determined by a court to be a felony, unless the public entity knew of the public employee’s propensity for that action. The Court of Appeals held that immunity under A.R.S. § 12-820.05(B) applies unless the entity has actual, not constructive, knowledge. The Court based its decision on the plain language of the statute. When the legislature intends a standard of actual or constructive knowledge, it expressly states so. The use of the word “knew” in the immunity statute unambiguously shows the legislature’s intent to require actual knowledge rather than constructive knowledge. A.R.S. § 12-820.05(B) means exactly what it says—that immunity applies unless the public entity actually knew of the “employee’s propensity.”

Ninth Circuit Court of Appeals

Qualified immunity for warrantless entry

Sheehan v. City and County of San Francisco, 743 F.3d 1211 (9th Cir. 2014)

Sheehan suffered from a mental illness and was residing in a group home.  Her assigned social worker was concerned about her deteriorating condition, deemed her gravely disabled, and called the police to transport her to a mental health facility for a 72-hour involuntary commitment. When officers Reynolds and Holder arrived at the home, they entered Sheehan’s room, without a warrant, to confirm her mental condition and take her into custody. Sheehan reacted violently, grabbed a knife, threatened to kill the officers, and told them that she did not wish to be detained in a mental health facility. The officers retreated to the hallway for their safety and called for backup. But rather than waiting for backup to arrive, the officers drew their weapons and forced their way back into Sheehan’s room. Sheehan again threatened them with a knife. The officers shot her six times. Sheehan survived and filed a § 1983 action, claiming the officers’ entry into her room violated the Fourth Amendment and they used excessive force. The district court found the officers were entitled to qualified immunity and granted summary judgment. Sheehan appealed.

Generally, a warrantless search or seizure in a person’s home is presumptively unreasonable under the Fourth Amendment. But there are exceptions to the warrant requirement, including the emergency aid exception. The emergency aid exception applies when, under the totality of the circumstances, (1) law enforcement had an objectively reasonable basis for concluding that there was an immediate need to protect others or themselves from serious harm, and (2) the search’s scope and manner were reasonable to meet the need. Under this exception, the Ninth Circuit held that the officers’ first entry into Sheehan’s room did not violate the Fourth Amendment because they had an objectively reasonable basis for concluding that there was an urgent need to protect Sheehan from serious harm. The officers knew she was off of her medication, was not taking care of herself, had threatened her social worker, and was gravely disabled and in need of involuntary hospitalization.  Indeed, the court noted that the officers reasonably took a cautious approach to the situation and that “erring on the side of caution is exactly what we expect of conscientious police officers.”  And they carried out the search in a reasonable manner. They knocked and announced and used a pass key to gain entry. They did not draw their weapons and had no reason to believe that their entry would trigger a violent confrontation.

The court found that the emergency aid exception also justified the second warrantless entry into Sheehan’s room. The officers continued to have an objectively reasonable basis for concluding that there was an urgent need to protect Sheehan from serious harm. And because the two entries were part of a single, continuous search or seizure, the officers were not required to separately justify the continuing emergency with respect to the second entry. But the court found that fact issues as to whether the entry was conducted in a reasonable manner precluded summary judgment, and noted that Ninth Circuit case law would put any reasonable, competent officer on notice that it is unreasonable to forcibly enter the home of an armed, mentally ill subject who is acting irrationally and threatening anyone who entered, when there was no objective need for immediate entry.

Lack of resources defense/ jury instruction in § 1983 cases

Peralta v. Dillard, 744 F.3d 1076 (9th Cir. 2014)

Peralta, a prison inmate, sued a prison dentist claiming deliberate indifference under the Eighth Amendment. At trial, the court instructed the jury that “whether a dentist or doctor met his duties to Peralta under the Eighth Amendment must be considered in the context of the personnel, financial, and other resources available to him or her or which he or she could reasonably obtain.” Peralta challenged this jury instruction on appeal.

The Ninth Circuit noted that the Supreme Court has not said whether juries and judges may consider a lack of resources as a defense in § 1983 cases. But the Supreme Court has held that prison officials are not deliberately indifferent to a prisoner’s medical needs unless they act wantonly, and whether an official’s conduct can be characterized as wanton depends on the constraints facing him. See Wilson v. Seiter, 501 U.S. 294, 303 (1991). The Court has also held that even if an official knows of a substantial risk, he’s not liable if he responded reasonably. Farmer v. Brennan, 511 U.S. 825, 844 (1994). This framework makes clear that what is reasonable depends on the circumstances that constrain what actions an official can take.

Several constraints impacted and delayed provision of care for Peralta. Security concerns dictate that only one prisoner at a time can be in the exam room, and the prisoner cannot be left alone in the room because dental tools can be used as weapons. During lockdown, only emergency cases can be seen. Dentists can’t accept prisoners’ complaints at face value, as inmates often try to jump the line by exaggerating symptoms.

The Ninth Circuit noted that lack of resources is not a proper defense to a claim for prospective relief. But a claim for damages is different. Damages provide redress for something an official could have done but did not. So with respect to a claim for damages, the nature of the available resources is highly relevant to show the scope of choices that the individual defendant had. A prison medical official who fails to provide needed treatment because he lacks the necessary resources can hardly be said to have intended to punish the inmate. The court held that the challenged jury instruction properly advised the jury to consider the resources the dentist had available in determining whether he was deliberately indifferent.

United States Supreme Court

Scope of Fourth Amendment consent to search

Fernandez v. California, 132 S.Ct. 1126 (2014)

Officers responding to an assault call saw a man running through an alley and into a building.  A minute or two later, they heard sounds of screaming and fighting coming from the building. They knocked on the apartment unit from which the screams were coming. A crying woman, Rojas, answered the door. Her face was red, she had a large bump on her nose, and fresh blood was on her shirt and hand. Officers asked her to step outside so they could do a protective sweep of the apartment.  The plaintiff, Fernandez, stepped forward and told the officers that they could not enter. Believing that Fernandez had assaulted Rojas, the officer removed him from the apartment and arrested him. About an hour later, a detective returned to the apartment and requested and received oral consent from Rojas to search the premises. Police found evidence incriminating Fernandez, which Fernandez moved to suppress in his criminal case. Fernandez argued that the search was unconstitutional because his denial of consent trumped the later consent Rojas gave. The trial court denied the motion to suppress, the California Court of Appeals affirmed the denial, and the California Supreme Court denied the petition for review. The Supreme Court granted certiorari.

Consent searches are recognized as an exception to the requirement for a search warrant. In 1974, the Supreme Court held that police officers may search jointly occupied premises if one of the occupants consents. See United States v. Matlock, 415 U.S. 164 (1974).  Years later, the Court recognized a narrow exception to this rule, holding that the consent of one occupant is insufficient when another occupant is present and objects to the search. Georgia v. Randolph, 547 U.S. 103 (2006). Here, the Court declined to expand the current rule. They rejected Rodriguez’s argument that his objection to the search should have barred a later search since he was absent from the premises only because the police arrested and removed him.  The Court held that an occupant who is absent due to a lawful detention or arrest stands in the same shoes as an occupant who is absent for any other reason. The Court also rejected the idea that once an occupant objects to a search, the objection remains effective until withdrawn.

Article By:

Lisa S. Wahlin
Of:
Ryley Carlock & Applewhite, A Professional Corporation