Answer the following questions after reviewing the case study on law

Answer the following questions after reviewing the case study on law

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    After reviewing the case briefs (attached), answer the questions that follow in 500 words, or as thoroughly as possible. There are three cases, and Case Brief 5.1 is available in the textbook

CASE BRIEF 7.1 In re Yukos Oil Company Securities Litigation 2006 WL 3026024 (S.D.N.Y.) FACTS: Yukos is a Moscow-based joint-stock company whose shares trade on the Russian stock exchange. Yukos shares also trade indirectly on multiple European exchanges and over-thecounter in the United States. Allegedly, Khodorkovsky was part of a select group of Russian business leaders known as “oligarchs” who supported former Russian President Boris N. Yeltsin, but were politically opposed to current Russian President Vladimir V. Putin. The Tax Code of the Russian Federation prescribed a maximum income tax rate that incorporated two components: a tax payable to the federal budget and a tax payable to the budget of the taxpayer’s local region. For example, in 2004, the statutory maximum rate was 24%, of which up to 6.5% could be collected by the federal government and up to 17.5% by regional governments. The Tax Code also prescribed a minimum rate for taxes payable to regional governments. In 2004, that rate was 13.5%. However, the regional governments could offer tax benefits to reduce or even eliminate the regional budget liability of certain categories of taxpayers. Because of this regional variance in the effective income tax rate, taxpayers in the metropolitan regions of the Russian Federation, such as Moscow, paid higher taxes than taxpayers in remote regions, or “ZATOs.” The complaint alleges that from 2000 through 2003, Yukos grossly underpaid its taxes to the Russian Federation by illegally taking advantage of the ZATOs’ preferential tax treatment. According to the complaint, Yukos booked oil sales at “well below” market prices to seventeen trading companies, all of which were registered within ZATOs. Without taking physical possession, the trading companies sold the oil to customers at market prices and claimed the tax benefits of their ZATOs. However, the profits were “funneled … back to Yukos and Yukos paid taxes only on the initial below-market sales while reaping substantial profits from the low-tax market-price sales. The complaint alleges that the regional trading companies received the benefits of ZATO registration illegitimately because “[n]o business was actually conducted by the sham companies in the ZATOs.” This Yukos tax strategy presented enormous risk because it violated Russian law and because the Russian Federation had prosecuted other companies that had acted similarly. Nonetheless, the risk was not disclosed in any of the Yuko’s filings with the SEC. Also, what was filed with the SEC was allegedly not prepared in conformity with U.S. GAAP or other standards of financial reporting. At a secret meeting with Khodorkovsky and other oligarchs in 2000, Putin promised not to investigate potential wrongdoing at their companies if the oligarchs refrained from opposing Putin. Nearly three years later, at another such meeting, Khodorkovsky allegedly voiced his opinion that high-level officials in Putin’s government should be ousted. According to the plaintiffs, Putin reacted negatively and intimated to Khodorkovsky that the Russian Federation might investigate Yukos’ methods of acquiring oil reserves. Despite Putin’s warnings, Khodorkovsky publicly criticized Putin and financed opposition parties. On October 25, 2003, Russian Federation authorities arrested Khodorkovsky and charged him with fraud, embezzlement and evasion of personal income taxes. Days later, the Russian Government seized control of Khodorkovsky’s 44% interest in Yukos as security against the approximately $1 billion he owed in taxes. Concurrently, the Tax Ministry revealed that it had been investigating Yukos’ tax strategies. The Department of Information and Public Relations of the General Prosecutors Office then announced charges that accused Khodorkovsky and others of fraudulently operating an illegal scheme at Yukos to avoid tax liability through shell company transactions. On December 29, 2003, the Tax Ministry concluded its audit of Yukos for tax year 2000, issued a report that Yukos had illegally obtained the benefit of the ZATOs’ preferential tax treatment, and owed $3.4 billion to the Russian Federation in back taxes, interest, and penalties for tax year 2000. As a result, Yukos defaulted on a $1 billion loan from private lenders and the Russian Government confiscated Yukos’ assets, including its main production facility and billions of dollars from its bank accounts. The price of Yukos securities “plummeted” in response to these events. Shareholders in Yukos (Plaintiffs) filed consolidated class actions against Khodorkovsky and others (defendants) on July 2, 2004. The U.S. plaintiffs had purchased Yukos securities between January 22, 2003, and October 25, 2003. They allege that Yukos, its outside auditor, and certain of its executives and controlling shareholders knowingly concealed the risk that the Russian Federation would take action against Yukos by failing to disclose: (1) that Yukos had employed an illegal tax evasion scheme since 2000; and (2) that Khodorkovsky’s political activity exposed the Company to retribution from the current Russian government. The plaintiffs based their claims on the fraud provision, Section 10(b), of the Securities Exchange Act. ISSUE: Does the act of state doctrine prohibit the court from taking the case? DECISION: No. The court dismissed the case on other grounds, but found that the act of state doctrine did not prohibit the court from hearing the case. The case was not one that involved invalidating Russian actions; it was a case to decide whether the company should have been more transparent and forthcoming about the risk of its strategy as well as the political risk in Russia. Questions: 1. Describe how Yukos is alleged to have saved significant amounts in taxes. 2. Explain what act of the Russian Federation is in question. 3. What are the plaintiffs asking the court to decide? Does that decision require revisiting what the Russian Federation did, and why or why not?

CASE BRIEF 6.2 Hornbeck Offshore Services, L.L.C. et al., v. Salazar 696 F. Supp.2d 627 (E.D. La. 2010) FACTS: Hornbeck and others (plaintiffs) provide services to support offshore oil and gas drilling, exploration, and production activities in the Gulf of Mexico. Kenneth Salazar is the Secretary of the Department of Interior (DOI), a federal agency that includes the Minerals Management. Following the BP Deepwater Horizon drilling platform explosion on April 20, 2010, and the resulting devastation and unprecedented disaster, the President asked DOI to conduct a study to determine what steps needed to be taken to prevent another problem with oil rigs in the Gulf. DOI did a thirty-day study, consulting respected experts from state and federal governments, academic institutions, and industry and advocacy organizations. On May 27, 2010, DOI issued a report that recommended a six-month moratorium on permits for new wells and an immediate halt to drilling operations on the 33 permitted wells in the Gulf of Mexico. The DOI report also stated that “the recommendations contained in this report have been peer-reviewed by seven experts identified by the National Academy of Engineering.” The experts pointedly observed this statement was misleading and called it a “misrepresentation.” Although the experts agreed with the safety recommendations contained in the body of the main report, five of the National Academy experts and three of the other experts publicly stated that they “do not agree with the six month blanket moratorium” on floating drilling. They envisioned a more limited kind of moratorium, but a blanket moratorium was added after their final review and was never agreed to by them. The plaintiffs moved for a preliminary injunction against the moratorium. ISSUE: Are the plaintiffs entitled to an injunction on the moratorium because the action of DOI was arbitrary and capricious? DECISION: The court held that the experts balking at the conclusion of the report, the inconsistency of the moratorium with the report information, and the availability of alternatives made the moratorium likely to survive a challenge of the action being arbitrary and capricious and issued an injunction. Questions: 1. Why is the problem with the experts’ objections important in determining whether DOI’s moratorium was arbitrary and capricious? 2. What is the significance of the difference between the factual information in the report and the terms of the moratorium? 3. What does the court see as alternatives to the moratorium?
 case brief 5.1 FaCtS Congress passed the Patient Protection and Affordable Care Act (also known as Obama Care) in order to increase the number of Americans covered by health insurance and decrease the cost of health care. One key provision in the law is the individual mandate, which requires most Americans to maintain “minimum essential” health insurance coverage. Attorneys general from several states, along with businesses, challenged this requirement (and other provisions of the law) as being unconstitutional under the Commerce Clause. From a series of federal court decisions below, some finding the law constitutional and others not, the affected parties appealed and the Supreme Court granted certiorari. Their cases were consolidated for the court’s review. JUdICIaL OpInIOn ROBERTS, Chief Justice The Constitution grants Congress the power to “regulate Commerce.” (Art. I, § 8, cl. 3.) The power to regulate commerce presupposes the existence of commercial activity to be regulated. If the power to “regulate” something included the power to create it, many of the provisions in the Constitution would be superfluous. For example, the Constitution gives Congress the power to “coin Money,” in addition to the power to “regulate the Value thereof.” And it gives Congress the power to “raise and support Armies” and to “provide and maintain a Navy,” in addition to the power to “make Rules for the Government and Regulation of the land and naval Forces.” If the power to regulate the armed forces or the value of money included the power to bring the subject of the regulation into existence, the specific grant of such powers would have been unnecessary. The language of the Constitution reflects the natural understanding that the power to regulate assumes there is already something to be regulated. Our precedent also reflects this understanding. As expansive as our cases construing the scope of the commerce power have been, they all have one thing in common: They uniformly describe the power as reaching “activity.” It is nearly impossible to avoid the word when quoting them. The individual mandate, however, does not regulate existing commercial activity. It instead compels individuals to become active in commerce by purchasing a product, on the ground that their failure to do so affects interstate commerce. Construing the Commerce Clause to permit Congress to regulate individuals precisely because they are doing nothing would open a new and potentially vast domain to congressional authority. Every day individuals do not do an infinite number of things. In some cases they decide not to do something; in others they simply fail to do it. Allowing Congress to justify federal regulation by pointing to the effect of inaction on commerce would bring countless decisions an individual could potentially make within the scope of federal regulation, and—under the Government’s theory—empower Congress to make those decisions for him. Indeed, the Government’s logic would justify a mandatory purchase to solve almost any problem. To consider a different example in the health care market, many Americans do not eat a balanced diet. That group makes up a larger percentage of the total population than those without health insurance. The failure of that group to eat a healthy diet increases health care costs more than the failure of the uninsured to purchase insurance. Those increased costs are borne in part by failure of that group to have a healthy diet increases health care costs, to a greater extent than other Americans who must pay more, just as the uninsured shift costs to the insured. Congress addressed the insurance problem by ordering everyone to buy insurance. Under the Government’s theory, Congress could address the diet problem by ordering everyone to buy vegetables. People, for reasons of their own, often fail to do things that would be good for them or good for society. Those failures—joined with the similar failures of others— can readily have a substantial effect on interstate commerce. Under the Government’s logic, that authorizes Congress to use its commerce power to compel citizens to act as the Government would have them act. That is not the country the Framers of our Constitution envisioned. James Madison explained that the Commerce Clause was “an addition which few oppose and from which no apprehensions are entertained.” © Harper 3D/Shutterstock.com continued 03572_ch05_ptg01_139-177.indd 145 26/08/16 9:14 PM Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 146 part 2 Business: Its Regulatory Environment The Federalist No. 45, at 293. While Congress’s authority under the Commerce Clause has of course expanded with the growth of the national economy, our cases have “always recognized that the power to regulate commerce, though broad indeed, has limits.” The Government’s theory would erode those limits, permitting Congress to reach beyond the natural extent of its authority, “everywhere extending the sphere of its activity and drawing all power into its impetuous vortex.” The Federalist No. 48, at 309 (J. Madison). Congress already enjoys vast power to regulate much of what we do. Accepting the Government’s theory would give Congress the same license to regulate what we do not do, fundamentally changing the relation between the citizen and the Federal Government. [There were other issues covered in the 106-page opinion. The complicated decision resulted in the lower court decisions being both affirmed and reversed, but the individual mandate was declared unconstitutional under the Commerce Clause but constitutional as a tax.] CaSe QUeStIOnS 1. What was missing that the Court indicated was needed in order to find that the mandate was constitutional? 2. What was the purpose of the court’s discussion of a healthy diet? 3. What sources does the court rely on for constitutional interpretation?
 
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