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No new grants; ruling on tax evasion

UPDATED TO 11:20 a.m.

The Supreme Court on Monday granted no new cases, but issued two rulings in argued cases: the first a decision spelling out when a stockholder may avoid taxes on a distribution from a corporation that has no earnings and profits by treating the income as a “return of capital” (Boulware v. U.S., 06-1509).  The Court ruled that an individual who receives such a distribution and is accused of criminal tax evasion may claim return-of-capital treatment without producing evidence that either the taxpayer or the corporation intended the distribution to be a return of capital.

In a second case, the Court divided evenly, 4-4, in Warner-Lambert v. Kent, et al. (06-1498), thus upholding a Second Circuit Court ruling that permits a lawsuit in Michigan by 29 individuals or representatives of their estates, claiming injury from using a diabetes drug, Rezulin.  The lawsuit is based in part on a claim that fraud had led the Food and Drug Administration to approve the drug.  The Court heard the case last Monday, and split when Chief Justice John G. Roberts, Jr., took no part in the case.  When the Court divides that way, the result is a simple affirmance of the lower court decision at issue, without an opinion and without setting a precedent beyond that case.

Among the cases the Court declined on Monday to hear was the sixth appeal, since 2005, asking the Court to reconsider a 1985 ruling that property owners must first seek compensation in state court under state law before they may go to federal court to challenge an allegedly unconstitutional seizure of their property. The new case was Peters v. Village of Clifton (Ill.), 07-635.

The Court took no action on a government appeal seeking a ruling that use of a single vulgar word on radio and television is enough to violate federal law and regulations against indecency in broadcasting.  The Justices considered the case of FCC v. Fox TV Stations, et al., at their Conference on Friday. but Monday’s orders list contained nothing about the case.

The Court asked for the federal government’s views in two pending cases: Amschwand v. Spherion Corp. (07-841) and Harbison v. Bell (07-8521.)  The Amschwand case tests whether a participant or beneficiary in an ERISA health benefits plan may sue for the insurance benefits that would have been available but for a violation of a plan administrator’s duty. The Harbison case involves an attempt by a Tennessee death row inmate, Edward Jerome Harbison, to get the aid of a federal public defender in state clemency proceedings — an issue that has divided the Circuit Courts.  The Sixth Circuit Court on Sept. 27 denied such aid, relying on its own precedent holding that federal law does not authorize federal compensation for legal representation in state matters.  The questions presented in Harbison’s petition can be downloaded here.

Among issues the Court declined to hear Monday in other cases were these:

** Must the federal government must always give an individual accused of drug crimes notice before the trial that it will seek a longer sentence based on prior convictions (Beasley v. U.S., 07-548).

** A request to clarify when a foreign government — here, the government of Lebanon — may be sued in U.S. courts over commercial activity that has an effect inside the U.S.  (American Telecom Co. v. Republic of Lebanon, 07-721).

** Whether federal court rules allow lawsuits to be filed against unnamed individuals — “John Doe” or “Jane Doe” — if the actual individuals were not know at the time of the suit. (CSX Transportation v. United Transportation Union, 07-872).