Author: Paul Richardson

Elizabeth Gallo Court Reporting’s Legal Fact of the Week is here to help you get through the work week by sharing a random fact about American History, law, and more!

EGCR’s Legal Fact of the Week: Rare Diseases Act of 2002

This act was signed into law by President George W. Bush. It was signed into law on November 6th, 2002. The act indicated authorization for the Office of Rare Diseases to be a Federal entity. This would allow the office to create an agenda regarding research, coordinate the research itself, and provide activities

Earlier this summer the United States Court of Appeals for the Third Circuit held that banks must comply with Financial Industry Regulatory Rules (FINRA) that require arbitration of all claims brought against them by customers. This most recent decision broke from two 2014 decisions issued by the Second and Ninth Circuits on the issue.

The Issue

The case concerned FINRA Rule 12200. The rule mandates that FINRA members arbitrate any dispute with a customer, upon the customer’s request for alternative dispute resolution. The Security and Exchange Act (Act) created FINRA, which is an independent self-regulatory organization established under Section 15A of the Act. FINRA was granted the authority to exercise comprehensive oversight over all securities firms that do business with the general public.

This requirement has been attempted to be circumvented by banks, broker-dealers, and other FINRA members. Many included forum-selection clauses in customer agreements and omitted mentioning the customer’s right to arbitration when a dispute arose. The Second and Ninth Circuits issued opinions in 2014 allowing FINRA members with forum-selection clauses to litigate disputes in federal court. FINRA responded by issuing a regulatory notice in 2016 reminding its members that customers have a right to arbitration.

Benefits of Arbitration

 Arbitration is one type of alternative dispute resolution that is used in an effort for the parties involved in a lawsuit to avoid the expense and length of litigation. During arbitration, the parties are encouraged to participate fully in negotiations and sometimes help to structure the resolution. For this reason, arbitration is more peaceful than litigation, which often involves a level of hostility. While both parties hire their own lawyers and must pay the arbitrator, resolving the case this way is often less expensive because it is not as complicated or costly as a lawsuit. Unlike trials, arbitration hearings can typically be scheduled around the needs and availabilities of the parties involved. The rules of procedure and evidence are much more simplified than in a court proceeding.

The Third Circuit

Taking a different approach, the Third Circuit held that the practice of using forum-selection clauses to litigate cases and avoid arbitration had been condoned by several sister circuits. The Third Circuit found the practice deprived investors of the benefits associated with using FINRA’s arbitration forum to resolve disputes. The court held that FINRA member institutions cannot avoid the arbitration requirement by contracting around the requirement with forum selection clauses that fail to mention a waiver of arbitration rights. Due to the split in the circuits, the Supreme Court of the United States may hear the issue in the future.

Earlier this summer, a federal appeals court ruled the U.S. Constitution’s Second Amendment guarantees a right to openly carry a gun in public for self-defense. The court ruled that the state of Hawaii overstepped its authority by regulating firearms possession outside of the home. The three-judge panel made the Ninth Circuit Court of Appeals the sixth U.S. Circuit court to to follow this interpretation of the Second Amendment. The split in the U.S. circuit court system could result in the issue coming before the United States Supreme Court (SCOTUS). The SCOTUS has not addressed a major gun rights case since 2010.

Hawaii’s Prohibition

Gun rights have been a hot topic in the United States, where a steady stream of mass shootings have occured over the years. In a 2-1 decision, the Ninth Circuit found the state of Hawaii infringed on the rights of the plaintiff by twice denying him a permit the state mandates in order to be able to openly carry a gun in public. In 2016, the Ninth Circuit had previously held that the Second Amendment did not guarantee a right to carry concealed firearms in public. In 2017, the SCOTUS declined to rule on that decision. The first time the SCOTUS held the Second Amendment protects an individual’s right to keep firearms for self-defense was in 2008.

Hawaii does not recognize concealed carry permits issued by other states in the nation. Hawaii requires a permit to acquire a firearm that is issued to qualified applicants by the police chief of the county. Hawaii mandates a minimum 14 to 20 day waiting period in order to receive a permit. The dissenting opinion in the Ninth Circuit’s decision noted the Constitution’s Second Amendment did not preclude the type of licensing rules used in Hawaii and other states across the country.

America’s Gun Laws

 Gun laws regarding openly carrying firearms differ from state to state and depending on the type of gun. According to the Giffords Law Center to Prevent Gun Violence (GLCPGV) the states that are the most restrictive and do not allow people to open carry any kind of firearm include: California, Florida, Illinois and the District of Columbia. The GLCPGV’s data notes that Hawaii is one of 15 states mandating a license or permit to openly carry a handgun.

The SCOTUS has struck down gun ownership bans in the past. Gun ownership bans were struck down in the District of Columbia and Chicago in 2008 and 2010, respectively. That being said, the highest court in the land has been reluctant in recent years to address the issue again and has turned away ruling on challenges on gun restrictions.

Electronic device searches at the border is a hot topic, and the Eleventh Circuit Court of Appeals has recently addressed the issue. Notably, the Court has ruled in contrast to decisions in the Fourth and Ninth Circuits, holding that a search of an electronic device at the border does not require probable cause. Nor does it, according to the Eleventh Circuit, even require reasonable suspicion for the search to be valid.

Caught at the Border in Georgia

In United States v. Touset, the defendant was caught in possession of child pornography as he crossed the border at customs in Atlanta’s airport in Georgia. The unlawful materials were found on his laptop computer as well as his external hard drive. The defendant accepted a plea deal from the government. He then appealed the district court’s denial of his motion to suppress the evidence that was gathered during the search at the airport. In Touset, the Court likened electronic devices to any other property brought in by a person across the border. Furthermore, the Court rationalized, if reasonable suspicion was not necessary to disassemble a car’s fuel tank to search for drugs, it not necessary to review data on electronic devices for child pornography either.

Eleventh Circuit Case Precedent

In its decision, the Court reasoned the circuit’s own precedent favored a finding that it was not necessary to have reasonable suspicion for a valid search. In United States v. Vergara, the Eleventh Circuit held that the search of a smartphone at the border does not necessitate a warrant, or even probable cause, even if it is involved a forensic search. In Vergara, the appellant was returning home to Florida after taking a cruise to Cozumel, Mexico. At the border, he was subjected to a luggage search which revealed three cell phones. The officer instructed Vergara to turn one on and discovered a video of two topless female minors. Department of Homeland Security investigators then took possession of all three devices for forensic analysis, which revealed two phones that held more than 100 images and videos categorized as child pornography. A grand jury later indicted Vergara.

Still Would Have Been a Valid Search

The Court pointed out that even if the search required reasonable suspicion, the facts in Touset would provided for it because the defendant had been on a “watch list” and would be flagged at the border for an electronic device search. This was because Touset had previously sent money three times within six months to a Western Union account associated with child pornography.