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TCL > April 2004 Issue > Tenth Circuit Summaries

April 2004       Vol. 33, No. 4       Page  145
From the Courts
U.S. Court of Appeals for the Tenth Circuit

Tenth Circuit Summaries

Summaries of selected opinions appear on a space-available basis. The summaries are prepared for the Colorado Bar Association by Jenine Jensen and Catherine Campbell, licensed Colorado attorneys. The summaries of the U.S. Court of Appeals for the Tenth Circuit are provided as a service by the Colorado Bar Association and are not the official language of the Court. The Colorado Bar Association cannot guarantee the accuracy or completeness of the summaries.
Full copies of the Tenth Circuit decisions are available on the CBA website at http: // (United States Courts link to the Tenth Circuit). Call The Colorado Lawyer Editorial Offices with questions: (303) 860-1118.


Americans with Disabilities Act—Remand to State Court—Fraudulent Joinder—Independent Federal Jurisdiction—Breathing is Major Life Activity—Substantially Limits Ability—Reasonable Accommodation—Interactive Process—Failure to Mitigate

Albert v. Smith’s Food & Drug Centers, Inc., No. 02-2052, 01/29/04, D.N.M., Judge Murphy.

Plaintiff suffered from asthma, which limited her activities. She was employed by defendant ("Smith’s") for several years, but as her asthma worsened, she requested a transfer to a position that would accommodate her condition. She was not reassigned. She sued in a state court, claiming that Smith’s had violated New Mexico state law, and that two Smith’s employees had interfered with her employment relationship. Smith’s removed the case to federal court and requested that the individual employees be dismissed because they had been joined fraudulently to destroy diversity. The plaintiff then amended her complaint to add a claim under the Americans with Disabilities Act ("ADA"). Several months after suit was filed, Smith’s offered to reinstate plaintiff to a position that would accommodate her asthma, but she did not accept the offer before it expired. The district court dismissed the individual defendants and granted summary judgment in Smith’s favor on all claims.

The Tenth Circuit Court holds that the federal court had federal-question jurisdiction after plaintiff added her ADA claim. Therefore, dismissal of the individual defendants on the ground of fraudulent joinder was improper. Also, dismissing them on the merits was inappropriate because the reason for dismissing them was based on jurisdiction. Therefore, the individual defendants should have been dismissed without prejudice.

Turning to plaintiff’s ADA claim, the Tenth Circuit Court holds that her asthma substantially limits her ability to breathe, which is a major life activity. The Court also determines that plaintiff could establish her disability by evidence of her own experience, rather than in comparison to most people’s daily lives. Plaintiff’s evidence was sufficient to withstand summary judgment.

The Tenth Circuit Court also addresses whether Smith’s had reasonably accommodated plaintiff, and noted that an employee and an employer must engage in an interactive process, triggered by the employee’s request for accommodation. Neither party may create or destroy liability by causing a breakdown of the interactive process, and the determination of what efforts are sufficient is to be made on a case-by-case basis. Here, the material facts of the interactive process were in dispute, so summary judgment was improper. The Court finds that plaintiff had failed to mitigate her damages by not accepting Smith’s unconditional offer of reinstatement, even though the offer remained open for only one week. Therefore, on remand, if plaintiff were to prevail on her ADA claim, Smith’s could not be liable for damages past the date its settlement offer expired. Finally, the Tenth Circuit Court affirms the district court’s rulings on New Mexico state law. The judgment is affirmed in part, reversed in part, and remanded.

Bankruptcy—Dischargeable Debt—Intentional Fraud—Willful and Malicious Injury

Panalis v. Moore (In re Moore), No. 02-6279, 02/03/04, W.D.Okla., Judge Porfilio.

Panalis was severely injured while working for Moore, but the cause of the injuries was Panalis’s own fault. Moore falsely told Panalis that he had insurance that would cover Panalis. Panalis sued Moore in a state court and was awarded a large judgment based on Moore’s false statements about insurance coverage. Moore then filed for bankruptcy. Panalis filed an action to determine the dischargeability of his judgment. The bankruptcy court ruled that it was dischargeable, and the district court reversed.

A bankruptcy debtor cannot discharge a debt for willful and malicious injury to another. Here, the jury in the state court case found that Panalis had suffered damages as a result of Moore’s false representation. The Tenth Circuit Court rules, however, that the state court judgment could not be interpreted to mean that the damages Panalis suffered as a result of Moore’s false representation included his physical injuries. Moore intended to deceive Panalis, not to cause him to physically injure himself. Only a willful and malicious injury to Panalis’ person would render the judgment nondischargeable. Panalis was not entitled to an exception from discharge because he did not prove that Moore willfully and maliciously intended to cause his physical injury. The district court’s judgment is reversed.

Automobile Insurers—Colorado Initial-Permission Rule—Permissive User—Reasonable Attorney Fees

Allstate Ins. Co. v. Murray Motor Imports Co., No. 02-1500, 02/04/04, D.Colo., Judge Hartz.

As authorized by his employer, a Denver automobile dealership, Nelson drove a "loaner" vehicle home one evening. After stopping at a bar, Nelson collided with another car, causing damage to both vehicles. This appeal concerns the liability of two automobile insurers: (1) Allstate Insurance Co. ("Allstate") issued a personal policy for Nelson, covering him while using an automobile he did not own but driven with the owner’s permission; and (2) American Hardware Insurance Group ("American") insured anyone using a car owned by the dealership and used with its permission. Allstate filed this action for a declaratory judgment, alleging that American’s coverage was primary over Allstate’s. The district court found that Nelson was a permissive user and entered summary judgment in favor of Allstate. It also awarded Allstate all of the attorney fees spent defending Nelson against the driver of the other car and the judgment paid in that case, plus various other attorney fees incurred in sorting out coverage.

Applying Colorado law to the construction of the insurance policies, the Tenth Circuit Court holds that American’s coverage was primary because Nelson was a permissive user under the initial-permission rule. He was given permission to drive a loaner vehicle and was not required to seek express permission each time he drove one, even at night. His subjective belief whether he had permission to drive the loaner car to a bar on the night of the accident was immaterial. The Tenth Circuit Court also affirms the attorney fees awarded against American. The district court’s judgment is affirmed.

Major Fraud Act—Execution of Scheme to Defraud U.S.—Statute of Limitations—Continuing Offense—Act in Furtherance of Scheme to Defraud

U.S. v. Reitmeyer, No. 02-5151, 02/04/04, N.D.Okla., Judge Brorby. The government appeals the district court’s dismissal of its indictment on statute of limitations grounds. The indictment charged the defendant companies and company officers ("companies") with executing and attempting to execute a scheme to defraud the United States and to obtain money from the United States by false pretenses, in violation of the Major Fraud Act. The U.S. Army Corps of Engineers ("Corps") awarded a contract to North American Construction Corp., which subcontracted to other parties. There were cost overruns, and the companies submitted a claim for equitable adjustment to the Corps, seeking almost $4 million. More than seven years later, the government filed this indictment, charging the companies and their officers with executing the scheme to defraud by submitting a false claim for equitable adjustment. The district court agreed with the companies’ argument that the statute of limitations for the charged offense had expired before the indictment was returned. The court held that the statute began running when the companies filed their claim for equitable adjustment. The court granted the companies’ motions and dismissed the indictment. The government appeals.

The Tenth Circuit Court of Appeals affirms. The statute of limitations under the Major Fraud Act is seven years after the offense is committed. The companies executed their alleged scheme to defraud and obtain money from the government when they filed their claim for equitable adjustment on May 16, 1994. The statute of limitations began running on that date. The companies executed their scheme when they first placed the government at risk of financial loss by filing the claim, so the filing and subsequent actions were not a single attempt to violate the Major Fraud Act for purposes of the statute of limitations. Execution of the scheme to defraud or obtain money is not a "continuing offense" for purposes of the statute of limitations. Finally, the companies’ actions at a 1995 meeting did not constitute an independent execution or attempted execution. It was only an act in furtherance of the scheme to defraud. The district court’s dismissal of the indictments is affirmed.

ERISA—Admitted Conflict of Interest—Standard of Review—Sliding Scale—Pre-existing Condition

Fought v. UNUM Life Insurance Company of America, No. 02-2176, 02/06/04, D.N.M., Per Curiam.

Plaintiff challenged defendant’s ("UNUM") decision to deny her application for long-term disability benefits. UNUM’s policy excluded coverage for a pre-existing condition. Plaintiff had a pre-existing coronary condition for which she underwent surgery. During the surgery, the doctors discovered conditions that later prevented plaintiff’s incision from healing properly and resulted in a disabling staph infection. UNUM denied coverage on the ground that plaintiff’s disability was based on the pre-existing coronary condition. UNUM admitted that it had a conflict of interest because it was both administrator and payor. The district court entered summary judgment for UNUM.

The Tenth Circuit Court holds that where a plan acts as both administrator and payor, a sliding scale standard of review applies. Under that standard, the level of deference given to the administrator’s decision decreases in proportion to the seriousness of the conflict. How much less deference a reviewing court should afford is evaluated under a two-tier standard. Under the first tier, the plan administrator bears the burden of proving the reasonableness of its decision under the traditional arbitrary and capricious standard. Under the second tier, the court must determine whether the conflict of interest is so severe as to warrant an additional reduction in deference. Although not every conflict requires a further deference reduction, a sufficiently severe conflict exists where, as here, the third-party insurer acts as the plan
administrator and denies insurance coverage. Under these circumstances, the decision to deny coverage must be established by a preponderance of the evidence.

Relying on the Department of Labor’s regulation and the Practicing Law Institute for guidance on the scope of a pre-existing condition, the Tenth Circuit Court holds that UNUM cannot merely require that the pre-existing condition be one in a series of factors that contributes to the disabling condition; rather, the disabling condition must be substantially or directly attributable to the pre-existing condition. Applying the standards enunciated above, the Tenth Circuit Court determines that the language of UNUM’s plan does not reasonably apply to the attenuated chain of events between plaintiff’s pre-existing coronary condition and the staph infection that disabled her. Accordingly, the denial of benefits was not supported by a preponderance of the evidence. The district court’s judgment is reversed.

Sexual Battery Under Oklahoma Statute—Crime of Violence—Serious Potential Risk of Physical Injury

U.S. v. Rowland, No. 02-5190, 02/06/04, N.D.Okla., Judge Henry. Defendant appeals his sentence for possession of a firearm by a previously convicted felon. He argues that the district court erred in determining that his prior state conviction for sexual battery constituted a prior conviction for a "crime of violence" under USSG § 4B1.2(a), resulting in a base offense level of 24 under USSG § 2K2.1(a)(2) and a sentence of ninety-six months in prison.

The Tenth Circuit Court affirms. The issue is whether the felony of sexual battery in Oklahoma is a crime of violence under the Sentencing Guidelines. The term "crime of violence" in § 2K2.1 has the same meaning given to the term in § 4B1.2. The question becomes whether "sexual battery" is a crime that either has an element of use, attempted use, or threatened use of physical force against the person of another, or whether that crime involves conduct that presents a serious potential risk of physical injury to another. The Oklahoma statute arguably makes the unconsented touching of any body part a sexual battery and, therefore, a crime of violence.

This case involves sexual battery of a victim older than 16 years, encompassing the intentional sexual touching of another, with a particular mental state and without consent. This represents a particular subset of "battery." Oklahoma’s statutory definition of "sexual battery" presents the serious possibility of risk of physical injury. In summary, "sexual battery," as defined by Oklahoma law, implicates a concomitant serious risk of physical injury. The convictions and sentence are affirmed.

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