National Briefs

National Briefs

Orthodontic Centers' services

violate Washington state law

Orthodontic Centers of America Inc.'s contracts to provide payroll and management support services to orthodontists violate a Washington state law barring the corporate practice of medicine, a U.S. judge in Seattle ruled.

Three orthodontists had challenged their contracts with Orthodontic Centers's OrthAlliance unit, alleging that it failed to provide the promised services. U.S. District Judge John Coughenour found that OrthAlliance was practicing medicine "through its interconnected contractual relationships" with dentists who straighten teeth.

Coughenour ruled that "the entire relationship" between OrthAlliance and the orthodontists are illegal and against public policy. Similar suits filed by the same attorneys are pending on behalf of 50 orthodontists in other states including Florida. Orthodontic Centers says it has 490,000 patients in the U.S. and in other countries.

The list of services OrthAlliance "was responsible for providing far exceeded the normal duties of an office manager, office secretary or a bookkeeper, or even of all three combined," Coughenour wrote in the March 1 opinion.

The decision "may have significant ramifications throughout the nation," said Brian Coloa, a lawyer for the Washington orthodontists.

Court: Business owners

protected by pension law

Working owners of businesses who participate in their company's pension plan are covered by a federal law that governs employee benefit plans, the U.S. Supreme Court said.

The court ruled for a Tennessee doctor who seeks to shield money in his practice's profit-sharing and pension plan from being turned over to a bankruptcy trustee. The Bush administration backed the doctor's appeal, saying a lower court ruling that denied him the law's protection would have a "significant impact" on sole proprietors and 100% shareholders.

The Employee Retirement Income Security Act, or ERISA, generally protects pension money from being transferred out of the fund. A federal appeals court ruled that because Dr. Raymond B. Yates was the sole owner of his medical practice, he couldn't be considered an employee and therefore wasn't protected by the law.

"If the plan covers one or more employees other than the business owner and his or her spouse, the working owner may participate on equal terms with other plan participants," Justice Ruth Bader Ginsburg wrote for the court, which ruled unanimously for Yates.

The case returns to a lower court to resolve other issues regarding whether the funds must be turned over to the bankruptcy trustee.

In a brief supporting Yates, Bush administration lawyers had said that exempting sole owners of businesses from ERISA coverage would give them different rights than their employees who are members of the same health care or pension plan.

For example, in a dispute over health insurance coverage, a sole owner would be allowed to sue the insurer under state law, while employees would have to sue in federal court where the federal law allows more limited remedies, government lawyers said.

"The working employer's opportunity personally to participate and gain ERISA coverage serves as an incentive to the creation of plans that will benefit employer and non-owner employees alike," Ginsburg wrote.

Internet smut law gets mixed

reception at Supreme Court

U.S. Supreme Court justices signaled they may split over the constitutionality of a federal criminal law designed to shield children from Internet pornography.

The 1998 Child Online Protection Act, which the Bush administration is defending, authorizes up to six months in jail for commercial Web site operators who display pornography and don't screen out children by requiring a credit card number or adult access code. The law, declared unconstitutional by a federal appeals court, has never been enforced.

At a hearing in Washington, Justice Ruth Bader Ginsburg questioned the Bush administration's contention that the statute is analogous to the "blinder racks" used by retail stores to prevent young browsers from looking at pornographic magazines on the shelves.

"I don't have to give my ID" to see magazines behind blinder racks, Ginsburg said. "I don't have to be concerned that someone will know that this person with this address and this credit card wants to look at this material."

Solicitor General Theodore Olson, the Bush administration's top courtroom lawyer, said Congress was offering a balanced solution to a growing problem. He said a common Internet search engine, when prompted with the phrase "free porn," called up more than 6 million Web sites.

"Internet pornography is widely accessible, as easily available to children as a television remote," Olson argued.

The law is being challenged by the American Civil Liberties Union and other organizations, including Salon Media Group Inc. and several bookstores. They say it suppresses non-obscene speech.

The law bars making available to children under 17 material that appeals to "prurient interest" and "lacks serious literary, artistic, political or scientific value for minors." The statute applies to commercial Web sites that carry pornography. E-mail, newsgroups and chat rooms are exempted.

The court is scheduled to rule by July in the matter.

Court: BCCI liquidators

entitled to bank papers

Liquidators of the Bank of Credit and Commerce International SA are entitled to Bank of England documents relating to legal advice it received over presentation of evidence to an inquiry into BCCI's collapse, ruled the Court of Appeal.

The Bank of England had sought to overturn a November ruling by Justice Stephen Tomlinson requiring disclosure of documents in which it sought or received advice from its lawyers on presentation of evidence to the Bingham inquiry in 1992.

The inquiry was private and non-statutory, the judges said. The central bank didn't have as much legal protection for its reputation as individuals criticized in an inquiry, and cited the probe into government scientist David Kelly's death, they said.

"We cannot see that in these circumstances communication between the bank and the solicitors, who were assisting in the obtaining, preparation, and presentation of evidence and submissions to the inquiry, should attract privilege, even if the bank was anxious that this assistance should enable the bank's role to be presented in the best possible light," the U.K.'s second-highest court said in its ruling.

The March 1 judgment expands on an April ruling on legal privilege, the basis of Tomlinson's decision.

SEC sues WorldCom's ex-finance

chief Sullivan for civil fraud

The U.S. Securities and Exchange Commission sued WorldCom Inc.'s former Chief Financial Officer Scott Sullivan for alleged civil fraud as Sullivan pleaded guilty to related criminal charges.

The SEC's lawsuit accused Sullivan, 42, of helping orchestrate the multibillion-dollar fraud that drove the second-biggest U.S. long-distance telephone company into bankruptcy in July 2002, according to the SEC.

Without admitting or denying wrongdoing, Sullivan partially settled the SEC allegations by agreeing to a permanent bar on his serving as a director or an officer of a public company. He also accepted a bar on acting as an accountant before the SEC and agreed to be subject to stiffer penalties if he violates securities laws in the future.

Race-based prison cell

assignments get hearing

The U.S. Supreme Court will decide whether prisons can require new inmates to be temporarily paired with a cellmate of the same race in an effort to reduce violence.

The court agreed to hear an inmate's argument that a California prison policy amounts to unconstitutional racial segregation. Prison officials say the confined nature of cells makes them "potentially more dangerous" than other areas of the prison.

In 1968, the court ruled that racial segregation in prisons violates the Constitution's guarantee of equal protection for all except when needed to maintain order.