The Investors’ Control of Their Investment Advisers. Who Has the Final Word?

TAMAR FRANKEL

BU Law emerita professor Tamar Frankel discusses an emerging issue affecting financial advisers—when a client may exercise control over the actions of the adviser. Frankel relates the story of an investment adviser that did not follow the client’s orders to cease certain investments, at a cost of almost $5 million to the client. As Frankel explains, the Securities and Exchange Commission (SEC) got involved, resulting in the investment adviser’s settlement for a significant payment to the client and other conditions.

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Zeon Chemicals, L.P. v. United Food & Commercial Workers

Docket: 19-5703

Opinion Date: February 13, 2020

Judge: Jeffrey S. Sutton

Areas of Law: Arbitration & Mediation, Labor & Employment Law

Zeon fired Jenkins on the ground that he violated the company’s attendance policy. Jenkins had missed work because of a 30-day jail sentence based on a felony conviction. The company had refused to suspend him for 30 days, something his 22 years of service made him eligible for, because it did not want to send the message that employees could commit crimes without consequences and nd it declined to let him use vacation days for the time because other employees had already scheduled their days for the relevant weeks. Consistent with the collective bargaining agreement, the local union took Jenkins’ discharge to arbitration. The arbitrator reinstated Jenkins. In a suit under the Labor Management Relations Act, 29 U.S.C. 185(c), the district court vacated the award on the ground that the arbitrator misread the agreement and exceeded his authority in doing so. The Sixth Circuit reversed, noting the deferential standard for arbitration awards. Although the arbitrator’s merits analysis “has some eyesores,” it does not defeat the conclusion that he arguably construed the contract.

Miller v. Bruenger

Docket: 19-5763

Opinion Date: February 13, 2020

Judge: Readler

Areas of Law: Civil Procedure, Government & Administrative Law, Insurance Law

The Office of Personnel Management (OPM), manages the Federal Employees’ Group Life Insurance Act (FEGLIA), 5 U.S.C. 8705(a). Absent a valid beneficiary selection, FEGLIA provides an order of precedence for the proceeds, starting with the policyholder's surviving spouse, followed by the policyholder's descendants. FEGLIA will not follow that order if a “court decree of divorce, annulment, or legal separation, or . . . any court order or court-approved property settlement agreement” “expressly provides” for payment to someone else. The decree, order, or agreement must be “received” by the policyholder’s “employing agency” or OPM before the policyholder’s death. At the time of his death, Miller worked at Tinker Air Force Base and maintained a MetLife policy. Coleman's 27-year marriage to Donna ended in divorce in 2011. Their property settlement agreement states that “[Donna] shall remain the beneficiary of the life insurance policy.” The court ordered Coleman to assign his FEGLI benefits to Donna. Upon Coleman’s death, his only child, Courtenay, was appointed administratrix of his estate. The Air Force informed Courtenay that the court order had not been filed with Coleman’s employing office. Courtenay was paid $172,000 in proceeds and sought a declaration that she is the rightful owner. Citing lack of subject-matter jurisdiction, the district court dismissed the suit. The Sixth Circuit affirmed, noting the lack of a substantial federal question. FEGLIA does not contain an express cause of action for Donna. There is no federal agency involved.

Robinson v. Horton

Docket: 18-1979

Opinion Date: February 13, 2020

Judge: Ronald Lee Gilman

Areas of Law: Civil Rights, Constitutional Law, Criminal Law

Robinson was convicted of assault with intent to commit murder, being a felon in possession of a firearm, and possession of a firearm during the commission of a felony. Under Michigan’s complex sentencing scheme, the judge sentenced Robinson as a fourth habitual offender to “concurrent terms of 47-1/2 to 120 years’ imprisonment for the assault and felon-in-possession convictions, to be served consecutive to two years’ imprisonment for the felony-firearm conviction.” The Michigan Court of Appeals affirmed; the Michigan Supreme Court denied review. Robinson then filed a federal habeas corpus petition, which was denied. On appeal, Robinson argued that Supreme Court and state decisions postdating his sentencing have established that his sentence was imposed in violation of the Sixth Amendment. The Sixth Circuit vacated. Robinson’s sentencing claim undoubtedly has merit; the Supreme Court’s Alleyne decision clearly established the unconstitutionality of Michigan’s sentencing regime. However, Robinson did not “fairly present” his sentencing claim to the Michigan Supreme Court and failed to exhaust that claim in state court. On remand, the district court should decide whether to dismiss Robinson’s sentencing claim without prejudice for failure to exhaust or to stay the petition and hold it in abeyance while Robinson returns to state court to exhaust that claim. Stay and abeyance is appropriate only “when the district court determines there was good cause for the petitioner’s failure to exhaust his claims first in state court” and when the claims are not “plainly meritless.”