Latest 2 Cases: United States v. Holland (Criminal Law), Viet v. Le (Labor & Employment Law)

Can A City Refuse Land-Use Permits Because it Doesn’t Like the Federal Policies the Property Will be Used to Implement?

VIKRAM DAVID AMAR

Illinois Law dean and professor Vikram David Amar explains why a local government cannot constitutionally create policy discriminating against entities that do business with the feds. Specifically, Amar discusses a situation in which the city of Farland, California, is trying to prevent a privately operated state prison facility located in that city from contracting with Immigration and Customs Enforcement (ICE).

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United States v. Holland

Docket: 18-1712

Opinion Date: March 10, 2020

Judge: Raymond M. Kethledge

Areas of Law: Criminal Law, Tax Law, White Collar Crime

Holland, a songwriter, sold his song-rights to music companies, in exchange for royalty payments. Holland failed fully to report his income. In 1986-1990, the IRS levied Holland’s royalty assets and recovered $1.5 million. In 1997, the IRS informed him that it intended again to levy those assets. Holland converted his interest in future royalty payments into a lump sum and created a partnership wholly owned by him, to which he transferred title to the royalty assets ($23.3 million). The partnership borrowed $15 million, for which the royalty assets served as collateral. Bankers Trust paid $8.4 million directly to Holland, $5 million in fees, and $1.7 million for Holland’s debts, including his taxes. The IRS did not assess any additional amounts against Holland until 2003. In 2005, the partnership refinanced the 1998 deal, using Royal Bank. In 2012, the IRS concluded that the partnership held the royalty assets as Holland’s alter ego or fraudulent transferee and recorded a $20 million lien against the partnership. In an enforcement suit, the partnership sold the royalty assets. The proceeds ($21 million) went into an interpleader fund, to be distributed to the partnership’s creditors in order of priority. The government’s lien ($20 million), if valid against the partnership, would take priority over Royal Bank’s security interest. The Sixth Circuit affirmed a judgment for Royal Bank. Transactions to monetize future revenue, using a partnership or corporate form, are common and facially legitimate. Holland received adequate consideration in 1998. The IRS’s delay in making additional assessments rather than the 1998 transfer caused the government’s collection difficulties.

Viet v. Le

Docket: 18-6191

Opinion Date: March 10, 2020

Judge: Murphy

Areas of Law: Labor & Employment Law

Viet bought used copiers for Le and Le’s corporation and shipped the copiers to Vietnam for resale. After the relationship dissolved, Le sued under the Fair Labor Standards Act, 29 U.S.C. 207(a)(1), alleging that he had typically worked 60 hours each week and that Le failed to pay overtime and that Le had not reimbursed him for expenses. The Sixth Circuit affirmed the rejection of Viet’s claim on summary judgment. Even assuming that Viet was an employee covered by the Act, he offered few details and no corroboration to support his estimate of his work hours. It is not clear that Viet was an employee. Le treated Viet as an independent contractor, using a 1099 tax form; Le did not set a work schedule or keep track of Viet’s hours. Le paid a fixed rate for each copier.