Legal News in Washington: Supreme Court Faces TV Broadcasting Case, and Eric Holder Defends Attorney Generals

Legal news out of Washington DC this week ranges from the Supreme Court to the US Attorney General, and includes hot button issues like the redistribution of over-the-air television broadcasts, the rights of victims of Ponzi schemes to sue third parties, and the ongoing legal debate over state laws that ban gay marriage.

TV Broadcasters Petition Supreme Court to Block Aereo, Inc.

In oral arguments for the upcoming Supreme Court case American Broadcasting Companies v Aereo, Inc., the Justices will review an appeal by American broadcasters of a lower court’s decision to deny them an injunction against Aereo, Inc.  Aereo streams TV stations to consumers for a monthly fee without the permission of broadcasters, and the lawsuit alleges that the company is violating a provision of U.S. copyright law protects content owners from others performing their work publically.

The Supreme Court will need to decide whether or not resubmitting a broadcast of programming to thousands of paid subscribers over the internet is considered “publically performing” a copyrighted television show.  According to the broadcasters appeal, the stakes are high with Aereo’s business model threatening “the very existence of broadcast television as we know it.” Whether or not the Supremes take the broadcaster’s concerns into account remains to be seen, but it seems like Aereo’s service has shaken the industry as heavy hitters ABC, NBC, Fox, and CBS are among the companies included in the appeal. 

A lower federal court has already rejected the broadcasting company’s request for an injunction to shut Aereo down, and it will be up to the High Court to determine if the startup is infringing on copyrighted broadcasts.  Aereo argues that it is simply helping people exercise their legal right to watch over-the-air TV without paying fees charged by broadcasters.  The Supreme Court will hear the case on April 22nd, which means a decision should be available by the summer of 2014.

US Attorney General Frees States from Defending Gay Marriage Bans

As the judiciary’s assault on gay marriage bans continues, United States Attorney General Eric Holder announced this week that state attorney generals are not obligated to defend restrictions on same-sex marriages.  As challenges to gay marriage bans sweep American court rooms, six state attorney generals have refused to defend their state’s law in court, a defection that has drawn the ire of Republican lawmakers who hold that the office of attorney general has a duty to defend a state law regardless of political or moral opposition.

Mr. Holder stated that state attorney generals can, and should, conduct their own constitutional review of a law, and may refrain from defending it should they feel the law is discriminatory.   Warning attorney generals not to make the decision on political or personal beliefs, Holder held firm that there is not a blanket duty to defend state laws that are not constitutional.  Despite Mr. Holder’s insistence that the decision on whether or not to defend a law should be purely based on constitutional review, only attorney generals who have expressed political opposition to gay marriage bans have thus far refused to defend them, and it appears that politics and posturing will remain the unacknowledged hand that rocks this particularly contentious cradle.

Attorney generals across the country remain divided on the issue of the obligations of their office, but it appears that those who refuse to defend gay marriage bans have the support of the Obama administration providing they claim to have performed a diligent constitutional review before declining to take action. Whether or not Republican attorney generals use Mr. Holder’s logic in application to another issue remains to be seen.

Supreme Court Allows Stanford Victims to Sue Third Parties

In a 7-2 decision, the US Supreme Court upheld a Fifth Circuit Court of Appeals decision that allows victims of R. Allen Stanford’s $7 billion Ponzi scheme to sue law firms and other third parties by claiming they aided in the fraud.  A class action lawsuit against insurance brokers, lawyers, and investment companies who worked with Mr. Stanford face charges that they misrepresented the safety of investments, and helped the Ponzi scheme escape regulatory oversight.

At issue for the Supreme Court was whether or not the lawsuits, all of which allege violations of state securities law, were permissible.  The federal Securities Litigation Uniform Standards Act prevents state lawsuits when the alleged fraud is “in connection with” the purchase or sale of a covered security – meaning a security traded on the U.S. stock exchange.  Pointing out that none of the fraudulent security transactions were traded on the U.S. exchange, the Supreme Court determined that federal law does not preclude the lawsuits filed in state courts against Mr. Stanford’s supporting third parties.

Interestingly enough, the Court’s determination may limit federal authority to investigate this type of fraudulent transaction.  Encouraging a broad interpretation of the phrase “in connection with” the purchase or sale of covered securities, the Obama administration and the SEC argued that the Court should determine Mr. Stanford’s fraudulent activities encroached into federal jurisdiction.  While such a broad interpretation would allow the SEC to investigate fraudulent misrepresentations in cases like this, it would preclude the victims from bringing lawsuits in state courts against third party organizations due to conflict with federal law.

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